Thursday, April 12, 2007

What the Student Loan Scandal Says About the Milieu in Which Medical Schools Operate

We have posted frequently about problems with the leadership of academic medicine in the US. For example, most recently we discussed how American medical schools seem to value faculty members' ability to bring in money from external sources, by clinical billing, or from research grants, over any other criteria of faculty performance. We have also frequently discussed how many medical school leaders, and the university leaders to which they report, have significant conflicts of interest, and that some even serve on the boards of directors of, and hence have ultimate fiduciary responsibilities for the management of major health care companies.

US medical schools operate within larger universities, and now it seems that the universities in which they operate have similar leadership issues. For example, the latest scandal to rock American universities has to do with how they make student loans. An investigation has shown a variety of financial ties among university officials and companies which make loans to their students. Particular examples involving universities that also have medical schools include:

- Several financial aid officers at major universities allegedly held positions in the securities of a loan company, and at least one made a considerable profit from such securities, according to the Associated Press (via Forbes):
The University of Texas put it's financial officer, Lawrence Burt, on paid leave and the University of Southern California did the same with it's financial aid officer, Catherine Thomas. Columbia University had already placed it's associated dean of student affairs, David Charlow, on leave while it investigates Cuomo's claims.
SEC records show Charlow owned 7,500 shares of Education Lending Group's stock and owned 2,500 stock warrants at the time of the stock prospectus. Cuomo's office said Charlow sold the 7,500 shares for about $9.50 each and in 2005 sold more of the securities for a total profit of more than $100,000. Investigators said Charlow bought the securities for $1 a share in 2001. Cuomo's office believes others also got similar deals.

- The Chancellor of the State University of New York (SUNY) system, including 64 campuses and several medical schools, was on the board of directors of a loan company, again per the AP

John Ryan, chancellor of the 64-campus State University of New York system, serves on CIT's board of directors.

Ryan, who announced last month that he will step down at the end of May, has been a director at CIT since July 2003, according to the company's Web site. A company SEC filing shows Ryan earned about $146,000 last year in cash, stock and options for his service on the CIT board. He is paid $340,000 a year as chancellor.

Student Loan Xpress is also listed as a preferred lender at SUNY Maritime College, where Ryan served as president after retiring from the Navy and the Naval Academy in 2002.
- A financial aid officer at Johns Hopkins University "received about $65,000 in consulting fees since 2002 from Student Loan Xpress," according to the Baltimore Sun.

This is the milieu in which medical schools must operate, a milieu in which conflicts of interest seem rampant, and in which university officials may be putting their personal profits ahead of their ostensible mission.

It does increasingly appear that some of society's major institutions, institutions which the public trusts, are increasingly run by people who use their positions of entrusted power to fatten their wallets or further their ideological agendas. Thus the problems afflicting health care leadership may be part of an even larger problem afflicting many of society's important institutions.

As Merrill Goozner put it,
A century ago, the progressive era gave rise to a professional class whose values and ethics arose from the need to mediate the power of newly ascendant corporations on behalf of a public that didn’t have the time or expertise to protect itself from unsafe products and monopoly power. Today, each of the institutions created or empowered in that era to act as counterweights to that power – non-profits and universities, the Fourth Estate and the regulatory agencies – have been subverted by incestuous financial ties with the corporations they’re supposed to influence and oversee.
It's not a pretty picture, but now that the public is increasingly aware of this problem, maybe some of us professionals can show the way towards its solution.

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