Friday, July 12, 2013

A "Simply Outstanding," "Superb" Hospital CEO Cops a Plea to Two Felonies

In all the discussions of what is wrong with US health care, very rarely is the quality of the leadership of health care organizations questioned.  In fact, no major US health care organization seems to have leadership that is anything short of brilliant.  The amazing brilliance of these leaders serves as a rationale for the ever increasing compensation that they receive.  Yet while subordinates, friendly members of boards of trustees, and hard working public relations flacks may stress their leaders' wondrous qualities, there rarely is an opportunity to compare their proclamations with results.

A few small items in the New York media provide us one case study of how these proclamations may not square with reality.


In 2005, the CEO of New York's renowned Hospital for Special Surgery announced his retirement.  In a hospital news release, we find these pronouncements about outgoing President and CEO John Reynolds,

HSS board Co-Chairman Aldo Papone said, 'John's guidance and devotion to the Hospital for Special Surgery these last two decades have been simply outstanding. Under his watch, the quality of care, fiscal health and scope of treatment for musculoskeletal disease at the hospital have reached the highest level in its history.  While we regret his decision, we can only offer a most grateful expression of thanks...'

Also, HSS board Co-Chairman Dean R. O'Hare said,

He is a superb leader and we appreciate his thoughtful approach to succession which is emblematic of his service to HSS.

I cannot find anything on the internet about Mr Reynolds' compensation prior to his retirement, but in 2006, after he took on the position of Co-CEO during the transition, a copy of the hospital's 2006 990 form filed with the US Internal Revenue service, (and still available here, note though that rather confusingly, the Hospital still files under its archaic original name, "The New York Society for the Relief of the Ruptured and Crippled,") showed that Mr Renynolds' total compensation was $1,310,603

The CEO as Crook

Nothing publicly appeared to challenge the notion that Mr Reynolds' leadership was less that "outstanding" and "superb" until a Bloomberg article in September, 2012,

John R. Reynolds, former chief executive officer of New York's Hospital for Special Surgery, was charged by federal prosecutors with taking $1.4 million in a decade-long illegal-kickback scheme.

Reynolds, 63, was arrested at his home in Massachusetts this morning, according to a statement from the office of U.S. Attorney Preet Bharara. An indictment unsealed today in Manhattan federal court charges Reynolds with racketeering and making false statements to the government. He faces as long as 25 years in prison if convicted.

Prosecutors claim that, from 1996 to 2007, Reynolds took money from at least two hospital vendors, a hospital employee and an unidentified health-care organization in the U.K.


 The government claims Reynolds took a total of $420,000 in kickbacks from at least two hospital vendors, from 1996 to 2002, in exchange for steering hospital business to them. From 2000 to 2005, he extorted an additional $298,500 from a subordinate at the hospital after negotiating an annual bonus for the employee, according to the charges. Reynolds also received $670,000 for approving a clinical partnership between his hospital and the U.K. health-care organization, prosecutors claim.

Reynolds is also charged with lying in 2008 to an agent of the U.S. Department of Health and Human Services inspector general’s office.

'By allegedly exploiting his position at the helm of a world renowned hospital for his own personal gain, John Reynolds tarnished the hospital’s reputation and did a disservice to its employees,' Bharara said in the statement.

Not surprisingly,

 'Obviously, it was a shock to us,' said Deborah Sale, a hospital spokeswoman, referring to the charges.

Of course, in the US, people accused of crimes are assumed to be innocent until proven guilty.  So I am now writing about this case because yesterday Bloomberg published the follow up story,

The former chief executive officer of New York’s Hospital for Special Surgery, charged by federal prosecutors with taking $1.4 million in kickbacks, pleaded guilty to two felonies. 

John R. Reynolds, 64, today pleaded guilty to wire fraud and making false statements, admitting that he took payments from a hospital employee and lied to investigators about it.

He will be subject to a stiff fine, although less than what he was charged with extracting through his scheme, and may be imprisoned,

 Under a plea agreement with the government, Reynolds will forfeit $718,500. Both sides agreed that federal sentencing guidelines, which are advisory, call for him to serve 27 to 33 months in prison.

The story so far has also been covered briefly by two tabloids, the New York Post, and the Daily News.  To date, the Hospital for Special Surgery has not issued a news bulletin on this.


So yet another "outstanding," "superb" multimillion dollar CEO turned out to be something rather less, in  fact, to be a criminal.

We have frequently discussed how the leaders of large US health care organizations are often hailed as brilliant, and compensated hugely for their brilliance, but rarely publicly subject to any objective assessment of their performance.  In many cases, they seem unaccountable for leadership that may be ill-informed, hostile to the health care mission, or even criminal or corrupt.

 The good news is that this criminal was eventually caught.  The bad news is that it only happened 18 years after he began acting criminally, hardly an example of swift justice.  One wonders how many other brilliant health care leaders will years later turn out not to be so, and how many others' performance will never be publicly assessed.  

While we breathlessly await the rigorous prospective study that assesses public assessments of the leaders of large health care organizations against objective results, we are stuck with case studies as a means to do so.  This case study shows a particularly stark contrast between the public relations puffery and the sordid reality. 

Instead of "brilliant" leaders paid like royalty, we would do better with competently collegial leaders rewarded reasonably as part of a team all focused on the health care mission, which puts service to patients first.  As long as health care organizations appear to be a path to riches for their leaders, expect the people who want to lead them to be more interested in their own fortunes than patients' and the public's health.  As long as health care professionals, policy makers and the public assume that those who lead health care organizations are fully qualified, fairly paid, and always do what is right, expect the insiders to continue to run things for their own profit. 

The qualifications of those who would lead health care, how much they are paid, what they are doing and what the results of their work are ought to be publicly known and publicly discussed.  Health care professionals, policy makers, and the public should demand nothing less.  . 


Anonymous said...

"Instead of "brilliant" leaders paid like royalty, we would do better with competently collegial leaders rewarded reasonably as part of a team all focused on the health care mission" --- Fat chance of that.

Roy M. Poses MD said...

If we don't seek change we won't get change.

Cynicism and learned helplessness will just yield worsening dysfunction.

Note that this case was not entirely hopeless. It looks like this particular crooked CEO will go to jail, just very late.

If health care leaders faced a chance of real consequences for misdeeds, fewer misdeeds would occur, and fewer people prone to misdeeds would end up leading health care organizations.

Anonymous said...

Today no "leaders" face real consequences for their misdeeds, healthcare, business, government etc etc.

Rarely in history have they, and when they do, its normally due to an uprising.

To fix medicine, you simply have to take the money out and the psychopaths will go elsewhere.

Basically, the only way to do that is socialized medicine. -- Fat chance of that.

When America wakes up and votes for someone other than the corrupted two parties now with a stranglehold on power, we have a chance.

So the goal is a political movement apart from the existing mainstream parties.

Roy M. Poses MD said...

Anonymous of 13 July,

I agree that corruption - using the Transparency International definition of abuse of entrusted power for private gain - has been a serious problem ever since humans began entrusting power in anyone.

However, IMHO the US suffered less corruption in the 20th century once major reforms started occurring, first in response to the Gilded Age, then especially after the Great Depression. Only after the market fundamentalists started succesfully pitching deregulation as a panacea did corruption start returning to its old dominance.

I agree that now health care corruption is just a subset of wider corruption in society. I do think that US health care could be markedly less corrupt if we were to:
- Ban the commercial practice of medicine (as we once did)
- Follow the recommendations of the IOM conflict of interest report and ban the most severe forms of conflicts
- Only allow non-profit hospitals (and other "care delivery" organizations) and health insurance
- Vigorously regulate the health care industry, prosecute people who break the law, and hold leaders of health care organizations accountable
- Break up excesive concentration of power in health care

Gene Uzawa Dorio, M.D. said...

While this was going on for 18 years, why didn't someone say anything about it?

Where are the whistleblowers?

Anonymous said...

Dr Uzawa Dorio, the entire management of HSS was complacent from the Director of Accounting- Himanshu Pandya to the junior management. They are all crooks trying to say their own over-inflated egos and compensation.