Monday, April 17, 2006

"Mismanagement" in Another Rhode Island Health Care Organization

Here is a local Rhode Island story, reported by the Providence Journal, with all too familiar elements.

Rhode Island's dominant workmens' compensation insurer is Beacon Mutual Insurance Co, a not-for-profit corporation chartered by the state to provide affordable insurance. After a whistle-blower made the first ever call to the company's 1 1/2 year old hot-line last year, the company's auditor began to raise questions about the conduct of a firm, Temporary Manpower Services, owned by Beacon Mutual's former Board Chairman, Sheldon Sollosy. Beacon Mutual then commissioned an outside review. According to the Providence Journal, among its findings were:
  • "Beacon executives maintained a VIP list of about a dozen companies, some of which received favorable treatment resulting in lower workmens' comp rates. Beacon's president, Joseph A Solomon, denied the list's existence... but then told another Beacon executive to delete it from his computer."
  • Beacon paid some favored insurance agents at a higher rate than called for by their contracts.
  • Chairman Sollosy resigned in February after "refusing to provide the insurer with payroll records for the company he owned, Temporary Manpower Services. His refusal, 'ignored' by Beacon management even though it violated Beacon policy, made it imposssible to determine whether Sollosy's company paid the rate it should have."
  • " Beacon's president Solomon had granite countertops installed in the kitchen of his East Greenwich house by a company that received undocumented breaks on its workers' comp insurance. An executive of the stone-working company told investigators that the $10,000 Solomon paid for the kitchen work didn't cover the total cost."
  • "Solomon and three Beacon insurance agents used Beacon funds to help pay for a trip to the exclusive Carnegie Club at Skibo Castle in the Scottish highlands three years ago. Solomon said in an interview that Beacon spent $19,000 on the trip. "
  • Beacon seemed to deal with some other corporations in a particularly favorable way. For example, "he report also questioned Beacon's due diligence in checking the payrolls and job classifications at Lifespan [the state's largest hospital system], by far its largest policyholder, with nearly $5 million in premiums last year. Lifespan's three-year guaranteed rate was 'highly unusual and not customary,' the report said. "
  • "The report also explored, but came to no definitive conclusion about, various financial dealings between Beacon and political operative Guy Dufault. Dufault's Cornerstone Communications, a Beacon consultant that occupied a rent-free office in Beacon's Warwick headquarters, charged Beacon $90,000 from 2001 to 2005 for "special projects" that lacked adequate documentation, the report said. "
After the report was released, again per the Journal, RI Governor Donald Carcieri called for a "complete overhaul" of Beacon Mutual's management. "Carcieri said the report was 'replete with examples of mismanagement more than sufficient to justify these actions,' and he was 'particularly concerned' by allegations that Solomon 'attempted to obstruct the board's very own internal audit.' He said the board members who have 'presided over this mismanagement' -- since 1994, in some cases -- should resign voluntarily, regardless of how much they actually knew about the alleged abuses. 'As directors for over a decade, they were either complicit in the abuse or they were incompetent in not stopping it. Either is reason enough for their removal,' Carcieri said."
The next day, the Journal reported that Beacon Mutual's board accepted the resignation of one member, and suspended CEO Joseph A Solomon and the Vice President for Underwriting David Clark. Stay tuned for more developments.
Again, this case has all too familiar elements: a not-for-profit health care corporation whose management seemed to play favorites, grant itself special perks, pay local political figures for undocumented work, and then seek to conceal some of these practices. In little Rhody, this case follows on recent scandals at Roger Williams Medical Center, (see this post and earlier ones) and Rhode Island Blue Cross (see this post and earlier ones) , and the punishment of Brown University and Memorial Hospital of Rhode Island faculty member David Kern for refusing to suppress his research on a new occupational disease (see this post).
This again demonstrates the needs to push health care non-profit corporations to more transparent and accountable governance, and to put mechanisms in place that encourages management to behave ethically.

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