Friday, November 08, 2013

"Engaging Excellence" while Engaging Secret Paychecks - The Rise and Fall of the Upstate Medical University President

Yet another leader of a big health care organization seems to have acquired the excessively entitled CEO syndrome.

Another Brilliant, Fearless Leader

When Dr David R Smith was appointed President of Upstate Medical University, a part of the State University of New York (SUNY) system located in Syracuse, he got the usual rave reviews from the school's board of trustees, according to a university press release:

'David Smith rose to national prominence through his leadership ability, experience in children’s medicine, public health policy, and as the chancellor of the Texas Tech University system. We are very pleased to have a one of the country’s foremost educators and health-care professionals lead Upstate Medical University,' said Board Chairman Thomas F. Egan. 'The State University of New York continues to enjoy an excellent record of success in attracting top academic and administrative talent from all over the country.'

'My colleagues and I are very impressed by Dr. Smith’s tremendous record of success and pleased that the Upstate Medical University search committee and University Council have brought Dr. Smith to New York. I am confident that Dr. Smith will excel as the next president of Upstate Medical Center,' said Ryan.

By 2012, Dr Smith's official presidential biography on the university web-site trumpeted,

Since coming to Central New York, Dr. Smith has reenergized the Upstate campus in a time of dwindling State resources with an aggressive program of patient revenue and research growth.

The Upstate campus has emerged as one of the true economic engines of the region. There are now over 9,200 State, research and contract jobs on campus and an all-funds budget that exceeds $1.3 billion. Dr. Smith has built upon a vigorous expansion and renewal of campus facilities with 'The Upstate Initiative' which is achieving $600 million worth of bricks-and-mortar projects. Included in that is a long-awaited repurposing of several neglected properties within the City of Syracuse.

At the start of his presidency, Dr. Smith launched the Engaging Excellence campaign as his invitation to the entire SUNY Upstate community to achieve and recognize work of the highest standard. The centerpiece of Engaging Excellence was the development of a 10-year strategic plan for purposeful campus growth.
They must have used a thesaurus to generate all those superlatives.

As we have mentioned in discussions of the outsize compensation now routinely given to the leaders of big health care organizations, the boards of trustees or directors that govern such institutions almost always seem to think their presidents and CEOs are brilliant, or at least, like the children of Lake Woebegone, above average (look here for recent example).  Such leaders usually command public relations teams whose job is to continually reinforce impressions of their brilliance.  Of course, anyone who starts an "excellence" campaign has to be excellent, doesn't he?

Yet not every leader can be above average, much less excellent or brilliant.  In fact, the need for such leaders to have public relations apparati constantly touting their excellence suggests the opposite.  

Secret Paychecks

In any case, Dr Smith thus seemed to be collecting all the usual accolades acquired by top health care leaders, and appeared poised to take on an even bigger position when it all came to a crashing halt. As reported first by the Albany (NY) Times-Union,

The president of the State University of New York's upstate medical campus ruined his chance to become the 18th president of Pennsylvania State University and has been placed on leave after SUNY leaders learned he has been padding his state pay without authorization, two state officials familiar with the matter said.

SUNY headquarters is reviewing all sources of compensation for SUNY Upstate Medical University President David R. Smith and is threatening more severe measures, according to a letter obtained by the Times Union on Tuesday.

Smith, who is based in Syracuse, was put on paid leave Tuesday.

Penn State trustees were close to announcing that Smith would be the next president at the home of the Nittany Lions, according to the people familiar with the search.

Instead, the public announcement planned for last Friday was canceled after questions about Smith's compensation in New York arose.

A search firm working for Penn State, which also works for SUNY, found out about extra pay Smith arranged through outside companies linked to his school, the people familiar with the situation said. The search firm contacted SUNY officials about Smith's additional income.

Several members of his executive team at Upstate Medical — the biggest employer in the Syracuse region — may also have been receiving unapproved extra pay from the outside companies, according to the sources.

Smith, a pediatrician, became president of Upstate Medical in 2006 after five years as chancellor of Texas Tech University. SUNY pays Smith $625,000, including $315,000 in salary plus a $60,000 housing stipend approved by the SUNY trustees, plus $250,000 from the SUNY Research Foundation. Smith is a member of the Research Foundation's board of directors.

However, in addition to that

Smith's outside money has been coming from two companies during recent years that are linked to SUNY Upstate: Medbest Medical Management Inc. and Pediatrics Service Group LLP.

Officials with the companies did not respond to emails and calls on Tuesday.

Smith's unapproved arrangements added substantially to his pay, according to a Nov. 1 letter to Smith from SUNY Chancellor Nancy Zimpher. In the letter, she alerts Smith to a recent review of his income and says he accepted $349,295 from the outside sources without Zimpher's approval.

I could not find a web-page for the Pediatric Services Group LLC. Medbest did not list Dr Smith as a member of its administrative team.

A Conflict of Interest?

As reported by the Syracuse Post-Standard, it does not appear that the interests of Upstate are precisely aligned with those of at least one of the companies that was paying Dr Smith on the side, Medbest.

Susan Kent, president of the New York State Public Employees Federation, which represents 1,430 workers at Upstate, said Upstate has been hiring non-union nurses employed by MedBest to fill jobs traditionally filled by union nurses. 'It's being done in a very sneaky backdoor fashion,' Kent said. 'We see it as their (Upstate's) way of trying to drive down wages and not use public sector workers.'

MedBest, headquartered at 251 Salina Meadows Parkway in Liverpool, provides billing and other practice management services for doctors affiliated with Upstate. It also provides staffing. On its website, the company says it employs more than 500 people.


Bobbi Stafford, a registered nurse and PEF representative at Upstate, said Upstate has been filling positions formerly held by union nurses with MedBest nurses in outpatient clinics to save money on retirement costs and other benefits. 'It's just a matter of time before they (MedBest employees) weasel their way into the hospital,' she said.

Kent said using MedBest may not be a savings to Upstate if the intent of the arrangement is to increase the pay of Upstate administrators.

The implication is that while outsourcing nursing services may cut how much the university pays nurses, the financial gain may be used as a rationale to increase payments to administrators, and not, for example, to decrease costs to patients..

Thus the revelations about the Upstate Medical University President's sources of income raise not only questions about his honesty, since he did not see fit to reveal these payments until the search firm found them, and about whether they are conflicts of interest.

Ending the "Distraction"

Supposedly to end the "distraction" causes by pondering such questions, Dr Smith just announced he will resign his executive position, according to the Albany Times-Union,

To avoid further distraction for the University from its important mission, I intend to submit my resignation as president of SUNY Upstate Medical Center, so that this great institution can move on to even greater success.


This case provides another reason to be very skeptical of the hype now that constantly emerges from health care organizations' public relations and communications departments about their managements', particularly their top managements' brilliance. Consider waiting for real results before believing in the next Excellent program to Excellently Promote Excellence.  

Furthermore, I wonder if Dr Smith had come to believe all the hype about him.  Top leaders of big organizations often seem to exist in a bubble created by people who keep telling them what they want to hear, and protect them from anything that might discomfit them.  Many of the bubble keepers are dependent on the leaders for their own exalted administrative pay.  Other bubble keepers who are members of governing boards supposedly entrusted with stewardship of the organization may want to bask in the reflected glory of a brilliant leader renowned for encouraging "excellence," and also certainly to do not want to be seen as supporting an average or mediocre leader.

In this bubble, it must be very hard not to take on a sense of entitlement.  I can only speculate that such a sense of entitlement may lead to feeling entitled to receive enough money from whatever the source to get close to the magic $1 million a year figure that CEOs now seem to regard as the minimum acceptable.

How many more examples do we need of the currently "toxic" culture that surround the leadership of health care organizations  (to borrow a term from Prof Alan Sager, look here) to motivate action to change this culture, and how such organizations are lead.  Breaking up market dominant organizations, and thus dispersing the power of their leadership, and finding ways to make leaders accountable for putting patients' and the public's health first would be true health care reform. 

Hat tip to University Diaries.


Judy B said...

Bravo again! Even with all this information coming out with regard to excessive compensation and outright corruption, I despair that anything will change as the special interests seem to have too much power!! Does the whole system have to come crashing down before any change is made?

Steve Lucas said...

My wife has run into a new to us concept of do what you want; it is easy to apologize later. There seems to be a lot of that going around of late.

Steve Lucas

Anonymous said...

Shocking thatbit took Penn State so long tp find out, but at least they did, before the double whammy.

They are not too capable of judging character,it seems, in central Pa.

Superb coverage here.

Anonymous said...

This is a widespread practice, but BODs demur, how can we keep good leadership?

Anonymous said...


Thanks to both you and Scot (article above) for keeping us informed.


Michael S. Altus, PhD, ELS said...

A distinction between this example of outsized compensation and the previous ones is that the official received unauthorized and unapproved pay, whereas in the previous ones, the official received authorized and approved pay. A distinction worth a difference.

Anonymous said...

Authorized and approved pay = LEGAL theft (authorized by like-minded power-elite);
Unauthorized and unapproved pay = ILLEGAL theft.
Ask the patients (consumers), employees and shareholders if this distinction is 'worth a difference.'