Thursday, June 29, 2017

A $1.7 Million/ Year CEO of a Safety Net Hospital - Alleged to Have Hired a Dangerous Surgeon, Paid Unethical Bonuses, and Associated with Organized Crime

We have long contended that a major reason for health care dysfunction is perverse incentives, including those that allow top health care leaders to become rich by putting money ahead of patient care.  We have presented case after case supporting this point, most recently including a collection of generously compensated top executives of non-profit hospital systems whose pay seemed disproportionate to their personal achievement, and unrelated to their hospitals' clinical outcomes or quality of care.

Such cases, with their recitations of monetary amounts and repeated public relations talking points, can be rather dry.  So this week we present another case which is a bit more colorful.

The Reliably High Pay of the CEO of Bronx-Lebanon Hospital

The CEO of the Bronx-Lebanon Hospital in New York City has long been criticized for receiving millions from a hospital which mainly serves the poor.

In 2009, the New York Post published an article entitled "Sickening Bonuses" about how

hospital presidents and CEOs ... collect fat bonuses and 'incentive payments,' even as health-care systems cry poverty,...

In particular it noted that presumably pre the 2008 global financial crisis:

A $1.2 million bonus went to Miguel Fuentes Jr., CEO of the 958-bed Bronx-Lebanon Hospital. His $4.8 million package included $878,024 in salary and an $858,000 pre-retirement payout. He’s also set to get $1.8 million in retirement cash next year.

In 2013, after the great recession, the New York World reported on a measure proposed by New York Governor Andrew Cuomo to cap salaries at hospitals that receive significant amounts of money from Medicaid.  It stated:

The hospitals that will be targeted by Cuomo’s salary cap sit in poorer neighborhoods and serve large volumes of patients who depend on Medicaid. They include Bronx-Lebanon Hospital Center,...

At that time it was known that Mr Fuentes still was making a lot of money, although less than before:

Bronx-Lebanon Hospital Center ... President and CEO Miguel Fuentes made more than $1.7 million in 2011, according to tax records....

In 2014, Modern Healthcare published an article that questioned whether hospital CEO pay was justified by their or their hospitals' performance.  In particular, it quoted a JAMA Internal Medicine article that:

found no association between CEO pay and very important benchmarks, including a hospital's 'margins, liquidity, capitalization, occupancy rates, mortality rates, readmission rates, or measures of community benefit.'

Researchers found wide variation in what trustees chose to pay the CEOs of their not-for-profit hospitals.

It also noted

One community hospital is a perennial on the list [of those with highly paid executives]. Bronx-Lebanon Hospital Center's Miguel Fuentes Jr. has spent decades at his institution, and arguably needs no retention pay. His $1.8 million package includes about $200,000 in a supplemental retirement plan payment.

So what does a CEO have to do to earn millions at a safety-net hospital? Hospital boards and public relations officials often justify high CEO with standard talking points: their CEOs are brilliant, and such brilliant people must be paid well to be recruited and retained (look here).  However, I found no published record of any attempt to probe justifications for this particular CEO's pay.  Mr Fuentes does seem to have won an award from the local YMCA for "outstanding leadership" (look here).   In a 2015 news release about an affiliation between the Mount Sinai Health System and Bronx-Lebanon, the hospital was described as

a remarkable institution that has shown leadership through its commitment to delivering high quality care to patients and the communities in the Bronx

But I could not find anything in public about the particulars of this outstanding leadership.

Allegations of Organized Crime Ties

On the other hand, in June, 2017, the New York Post published two articles suggesting that Mr Fuentes' leadership might be a bit more dubious than advertised above.

The first article, published June 4, 2017, included allegations of shady dealings between the hospital and organized crime:

The mob turned taxpayer-backed Bronx-Lebanon Hospital expansion into its own piggy bank.

Construction expenses at the hospital’s new nine-story outpatient center ballooned by some $5 million — with cash allegedly ending up in the pockets of the Lucchese crime family and hospital executives, The Post has learned.

Lucchese underboss Steven 'Wonder Boy' Crea Sr. and associate Joseph Venice were charged with wire and mail fraud in connection with the project at 'a major New York City hospital,' according to a federal indictment unsealed last week in a major mob takedown. But the document didn’t identify the hospital or reveal the scheme’s dirty details.

No Bronx-Lebanon executives were named in the indictment, but the federal probe, which began four years ago, is ongoing, and focused on hospital honchos whose palms may have been greased.

Crea, 69, had close ties to Sparrow Construction, the Bronx firm in charge of building the $42 million annex at Bronx-Lebanon. He was a regular visitor to the firm’s offices while the center was under construction, a source told The Post.

Crea worked for Sparrow before he was busted in a 2000 state racketeering case. At that time, he was considered the acting boss of the Luccheses.

Work began on the outpatient center in 2009 and was supposed to take 19 months. But the Health and Wellness Center wasn’t finished until 2014 and was plagued with cost overruns.

Sparrow was the general contractor and billed the hospital $26 million for only $21 million worth of work, sources told The Post.

The heating and ventilation system cost $2.3 million to install. Yet 'the hospital still paid somebody $5 million' for it, the source said.

The alleged scheme was carried out through falsified invoices and change orders, the source said.

'The hospital didn’t question one change order,' the source said.

The bulk of the project was paid for through the sale of $36 million in state Dormitory Authority bonds. The hospital is paying back the Dormitory Authority over 25 years.

At the end of the article we found that Mr Fuentes' compensation has remained large, and stable.

Longtime CEO Miguel Fuentes’ total compensation came to $1.7 million in 2015, according to its latest tax filings.

But it added that he has had a lifestyle to match:

Fuentes lives a luxury lifestyle with a condominium on the Upper East Side and a Southampton retreat with a pool.
Allegations of Unethical Conduct to Enhance Revenue

A second article published June 24, 2017, raised further questions about Mr Fuentes' management.  First, it questioned his direct appointment of a chief of orthopedic surgery.

Hospital CEO Miguel Fuentes hired [Dr Ira] Kirschenbaum as a division chief without consulting Dr. John Cosgrove, who was then chief of surgery and would have overseen him, Cosgrove told The Post.

Cosgrove said he did not have a chance to vet Kirschenbaum.

The article suggested  that Dr Kirschenbaum was hired to push "moneymaking surgeries such as hip and knee replacements."  


The hospital lavished six-figure bonuses to its chief of orthopedics, Dr. Ira Kirschenbaum, despite brass being told of four deaths after he arrived in 2008 and about others patients who suffered serious complications, according to sources.

Kirschenbaum received a $314,210 bonus in 2014 and a $180,940 bonus in 2015, according to Bronx-Lebanon’s tax filings. The extra pay came on top of his $851,000 salary.

Seven hospital employees, who identified themselves as doctors, nurses and technicians, sent The Post a copy of a letter they said they presented to a state medical disciplinary panel to complain about patients more recently injured under Kirschenbaum’s care — including one who allegedly lost a leg.

The letter was sent anonymously, and the state Health Department would not comment on any complaints to the Office of Professional Medical Conduct.

Furthermore, Dr Cosgrove, who appears to have become a whistleblower, alleged dodgy payments to hospital employed physicians at the behest of Mr Fuentes, apparently to increase patient volume.

Cosgrove also said he saw another troubling practice at the hospital: bonus payments of up to $60 paid to doctors for each visit made to the institution’s clinics — in order to tout that it treated 1 million patients annually. The hospital realized that number in 2012, according to the MD.

'Seeing a patient in the clinic is your obligation as a hospital physician and that should not be incentivized,' Cosgrove said. 'Mr. Fuentes said at many meetings he wanted to hit a million-visit mark at their 55-or-so outpatient clinics.'

Doctors were already paid salaries by Bronx-Lebanon, and the clinic bounties came from the Medicaid reimbursements, according to Cosgrove.

Such an incentive system was ripe for abuse because it could entice doctors to schedule additional, and possibly unnecessary, visits, he said.

'It’s really counter to what we as doctors stand for,' said Cosgrove, who left the hospital in 2013 and is now chief of surgery at Eastern Long Island Hospital.

Finally,the article reiterated Mr Fuentes' total compensation of $1.7 million in 2017, but added that

He has a car and a driver — and a source described a $20,000 glass-and-tile shower for his office bathroom. The shower was removed because of concerns over how such an amenity might appear, the source said.


Fred Miller, a hospital lawyer, said Bronx-Lebanon doctors were not paid clinic bonuses, only salaries, and that compensation was 'consistent with Medicare/Medicaid principles.'

Miller acknowledged that a shower had been installed, but called it 'modest' and disputed its cost.


So the CEO of Bronx-Lebanon Hospital has been paid more than a million a year since at least 2008 (and much more than that in 2008 before the great recession), without any apparent public explanation for this pay, and particularly without any apparent attempts to  justify it based on quality of care or clinical outcomes.  Yet recently there have been allegations that the CEO was directly involved with efforts to increase revenue regardless of ethical or patient safety concerns.  Worse, there have also been allegations that organized crime has been allowed to create a "piggy bank" out of the hospital, perhaps in ways also benefiting top executives, although none of this has been proven in a court of law.

Nonetheless, it seems that high executive pay in health care, particularly at non-profit institutions serving the poor, should be justified by more than lack of proof that the executives broke the law. In fact, how could anyone justify paying the CEO of a non-profit hospital that primarily serves the poor using government money unless that person had a sterling record of accomplishment promoting the quality of clinical care at his or her institution, accompanied by integrity and accountability?

Instead, we get questions of mob influence and $20,000 showers.

So here we go again....

We will not make any progress reducing current health care dysfunction if we cannot have an honest conversation about what causes it and who profits from it.  True health care reform requires publicizing who benefits most from the current dysfunction, and how and why.  But it is painfully obvious that the people who have gotten so rich from the current status quo will use every tool at their disposal, paying for them with the money they have extracted from patients and taxpayers, to defend their position.  It will take grit, persistence, and courage to persevere in the cause of better health for patients and the public. 

Thursday, June 22, 2017

Follow the Money: Non-Profit Hospital CEOs Quietly Collect Their Millions While US Health Care Reform Battle Rages

In Washington, DC the health care policy wars continue, with a few Republican senators working behind closed doors on a bill to "repeal and replace" Obamacare, aka the Affordable Care Act, and Democrats decrying their secrecy.  Just as during the era in which Obamacare was enacted, there is constant discusison of how US health care costs continually rise, driving up insurance premiums, and how access to health insurance is continually in peril.

However, while the current Republican process to write new legislation seems strikingly opaque, in neither era has there been a frank discussion of why US health care costs are so amazingly high, and disproportionate to our mediocre health care outcomes. In particular, there has hardly been any discussion of just who benefits from the rising costs, and how their growing wealth may impede any real cost-cutting measures.

Extreme Compensation for Top Managers of Non-Profit Hospitals

An obvious example is the gravity defying pay given to top health care managers, particularly the top managers of non-profit hospital systems.

Such systems provide much of the hospital care to Americans, and most have declared their missions to be providing the best possible care to all patients, or words to that effect.  Many explicitly include care of the poor, unfortunate and vulnerable as a major part of their missions.  As non-profit organizations, their devotion of mission provides some rationale to their freedom from responsibility for federal taxes.

As we last discussed in detail in May, 2016, we have suggested that the ability of top managers to command ever increasing pay uncorrelated with their organizations' contributions to patients' or the public's health, and often despite major organizational shortcomings indicates fundamental structural problems with US health, and provides perverse incentives for these managers to defend the current system, no matter how bad its dysfunction.

In particular, we have written a series of posts about the lack of logical justification for huge executive  compensation by non-profit hospitals and hospital systems.  When journalists inquire why the pay of a particular leader is so high, the leader, his or her public relations spokespeople, or hospital trustees can be relied on to cite the same now hackneyed talking points.

As I wrote in 2015,  and in May, 2016,

It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they are talking points, possibly crafted as a public relations ploy. We first listed the talking points here, and then provided additional examples of their use. here, here here, here, here, and here, here and here

They are:
- We have to pay competitive rates
- We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).

Yet as we discussed recently, these talking points are easily debunked.  Additionally, rarely do those who mouth the talking points in support of a particular leader provide any evidence to support their applicability to that leader.

But since May, 2016, we have steadily accumulated more stories about million-dollar plus pay for CEOs and other top managers of non-profit hospitals and hospital systems.  The reports may be shorter than they used to be, as journalism comes under economic and other attack, and as more journalistic resources go to cover the current president.  Here are some examples, in chronologic order per the date of the published article, rather telegraphically.

Examples of High Executive Pay

Boston, Massachusetts area, August, 2016 (Per the Boston Business Journal)

Brigham and Women's Hospital CEO Dr Elizabeth Nabel, total compensation $5.5 million in 2014, 20% higher than 2013.  Talking points =  brilliant: "committed to retaining a team of top professionals," per Edward Lawrence, Chair, Partners Board of Trustees

Tufts Medical CEO Dr Michael Wagner, $1.1 million, 82% increase.

UMass Memorial Medical Center CEO Dr Eric Dickson, $1.6 million, 74% increase, Patrick Muldoon, President UMass Memorial Center's biggest hospital, $1.2 million, 67% increase

West New York State, August, 2016 (Per the Buffalo News)

Catholic Health System CEO Joseph D McDonald, $1.4 million.

Roswell Park Cancer Institute CEO Candace S Johnson, $1 million

Kaleida Health CEO Jody L Lomeo, $1 million:

Talking points = brilliant "few executives have the required skill set and experience to fill these posts"

New Jersey, September, 2016 (Per NJ Advance Media)

Top 10 hospital CEOs received total compensation from $1.94 million to $4.7 million

New Orleans, Lousisiana, September, 2016 (Per the Times-Picayune)

Ochsner Health System former CEO and board chair Dr Patrick Quinlan, $3.3 million in 2014, current CEO and board member Warner Thomas, $1.49 million.  Talking points = competitive rates and brilliant: "we must compete nationally to recruit top talent"

Touro Infirmary CEO James Montgomery, $1.3 million

Children's Hospital Inc Chief Medical Officer Alan Robson, $1.26 million

General talking points = competitive rates: "you're looking to attract hospital executives from Californai or New York where they're paid a lot of money"

Gastonia, North Carolina, February, 2017 (Per the Gaston Gazette)

CaroMont CEO Doug Luckett, $1.03 million in 2015.  Talking points = retain and brilliant "paying what it takes to ensure they attract and retain top-level talent that can help provide premiums health care"

Dayton, Ohio, March, 2017 (Per the Dayton Daily News)

Kettering Health System CEO Fred Manchur, $1.65 million in 2015, former president Terri Day, $1.23 million, current president Roy Chew, $1.07 million

Premier Health former CEO James Pancoast, $1.42 milllion (excluding retirement payments) in 2015. Talking points = brilliant "you've got one person at the top who's trying to provide oversight, direction, and strategy.  At the same time, health care continues to grow in scope, complexity, regulation, and compliance."

York County, Pennsylvania, April, 2017 (Per the York Daily Record)

WellSpan Health president Kevin Mosser, $1.6 million in 2014.  Talking points = competitive rates Forrest Brisco, associate professor, Penn State Smeal College of Business, "nonprofit hospitals are competing with for-profit hospitals"; brilliant: "If you are at the top of a health care organization, you're going to have pay that's higher than many members of the organization. The the skill and knowledge to understand and interact with surgeons and physicians can command a high salary" [ed note: which often seems higher than those of some surgeons and physicians, though]; also brilliant: Robert Batory, senior vice-president and chief human resources officer, Wellspan, "Kevin has 24/7 responsibility for Wellspan."

Ephrata Community Hospital (WellSpan subsidiary) CEO  and WellSpan Medical Group (WellSpan subisidiary) CEO  "more than $1 million"

Winston-Salem, North Carolina, May, 2017 (Per the Winston-Salem Journal)

Novant Health Inc CEO Carl Armato, $1.31 million in 2015.  Talking points = retain and brilliant "high compensation levels are necessary to recruit and retain executive to run a 'very complex organization'"

Tri-Cities region, Tennessee and Virginia, June, 2017 (Per WJHL)

Wellmont Health System CEO Bart Hove, $1.4 million in 2015.  Talking points = competitive rates: Wellmont board of trustees chair Roger Leonard, "we have to compete on a national level and we're competing not just with other non-profits, but we're competing with other for-profits"

Mountain States Health Alliance CEO Alan Levine, $1.3 million in 2015. Talking points = competitive rates: HSHA board of trustees chair Barbara Allen, "make sure CEO pay is comparable to similarly sized facilities across the country with similar complexities"; retain and brilliant, "we want to attract the best talent ... and be able to retain him."

Connecticut, June, 2017 (Per the Connecticut Post)

Yale New Haven Health System CEO Marna Borgstrom, $3.8 million in 2015.  Nine other employees paid over $1 million, including Bridgeport Hospital CEO William Jennings, $1.5 million, Greenwich Hospital CEO Norman Roth, $1.3 million.  Talking points = brilliant: Yale senior vice president of public affairs, "Yale New Haven Health is the largest and most complex health system in the state."

Also, a total of 39 people, including the above, received over $1 million in 2016.

General talking points = brilliant: "there are a limited number of executives experienced enough to guide a state-of-the-art hospital and growing healthcare system in an increasingly competitive and complex industry"; competitive rates: "pay and benefits for such executives need to be comparable to what they could receive at another leading national hospital system or another industry"  
Summary and Conclusions

The current inflamed discussion of "Obamacare" and Republican attempts to "repeal and replace" it focuses on the costs of care and how they affect individual patients.  Examples include concerns about health insurance premiums that are or could be unaffordable for the typical person; insurance that fails to cover many costs, and thus may leave patients at risk of bankruptcy due to severe illness; poor people unable to or who might become unable to obtain any insurance, and perhaps any health care.  Yet there is little discussion of what really drives high and ever increasing health care costs (while quality of health care remains mediocre).

That may be because those who are benefiting the most from the status quo want to prevent discussion of their role.  There are many such people, but top management of non-profit hospitals provide a ready example.  Their institutions' mission is to provide care to sick patients.  Many such hospitals specifically pledge to provide care to the poor, vulnerable, and disadvantaged.  Non-profit hospitals have no owners or stockholders to whom they owe revenue.

Yet these days the top executives of non-profit hospitals receive enough money to become rich.

See the examples above. 

The justification for such compensation is pretty thin.  Consider the talking points above.  Apparently hospitals are extremely concerned about paying top management enough to recruit and retain them.  Yet there is much less evident concern about paying a lot of money to recruit and retain the health care professionals who actually take care of patients to fulfil the hospitals' mission.  Hospital CEOs are frequently proclaimed to be brilliant, visionaries, or at least incredibly hard workers with very complex jobs.  I wonder if those who make such proclamations have any idea what it takes to be a good physician or a good nurse.  Yet such health care professionals' hard work, long training, devotion to duty, and ability to deal with trying situations and make hard decisions rarely inspire hospitals to shower them with money.

Furthermore, hospital CEO compensation is almost never justified in terms of their ability to uphold and advance the fundamental hospital mission, taking care of sick people.  The articles above do not contain any justifications of generous CEO compensation based on hospitals' clinical performance or health care outcomes.  At best, hospital executive pay seems to be justified by the hospitals' financial, not clinical performance.

So why do non-profit hospital CEOs get paid enough to become rich?  Apparently, because they can.

As we discussed here, there is a strong argument that huge executive compensation is more a function of executives' political influence within the organization than their brilliance or the likelihood they are likely to be fickle and jump ship for even bigger pay.  This influence is partially generated by their control over their institutions' marketers, public relations flacks, and lawyers.  It is partially generated by their control over the make up of the boards of trustees who are supposed to exert governance, especially when these boards are subject to conflicts of interest and  are stacked with hired managers of other organizations.

Furthermore, such pay may provide perverse incentives to grow hospital systems to achieve market domination, raise charges, and increase administrative bloat.  As an op-ed in US News and World Report put it about executive pay in general,

But the executive pay decisions made inside corporate boardrooms have an enormous impact in the outside world. Outrageous pay gives top executives an incentive to behave outrageously. To hit the pay jackpot, they'll do most anything. They'll outsource and downsize and make all sorts of reckless decisions that pump up the short-term corporate bottom line at the expense of long-term prosperity and stability.

So I get to recycle my conclusions from many previous posts....

We will not make any progress reducing current health care dysfunction if we cannot have an honest conversation about what causes it and who profits from it.  In a democracy, we depend on journalists and the news media to provide the information needed to inform such a discussion.  When the news media becomes an outlet for  propaganda in support of the status quo, the anechoic effect is magnified, honest discussion is inhibited, and out democracy is further damaged.

True health care reform requires publicizing who benefits most from the current dysfunction, and how and why.  But it is painfully obvious that the people who have gotten so rich from the current status quo will use every tool at their disposal, paying for them with the money they have extracted from patients and taxpayers, to defend their position.  It will take grit, persistence, and courage to persevere in the cause of better health for patients and the public. 

And for our musical interlude, the beginning of "For the Love of Money," sung by the O'Jays, used in the official intro of season 2 of guess what show?

Wednesday, June 14, 2017

Health Care Corruption No Longer a Taboo Topic?

We have been going on about the ruinous effects of health care corruption, the role of impunity in enabling worsening corruption, our lack of good ways to challenge these problems, and our ongoing inability to even discuss what amounts to taboo topics (which we dubbed the "anechoic effect.") But as  corruption, and crime are increasingly linked to the most powerful leaders in the US, it becomes harder to deny that we have a huge problem with corruption in general, and thus maybe it becomes harder to deny we have a huge problem with health care corruption (see also our posts on conflicts of interest, crime, and specifically bribery, extortion, fraud, and kickbacks in health care.)

US Governmental Corruption in the Headlines

Last month we noted that mainstream media are now beginning to discuss how the US has a history of not adequately investigating corruption, and has developed a culture of impunity that is fostering corruption.

Yesterday, the Washington Post reported that 200 US Representatives (all Democrats) filed a lawsuit charging the President of the US with accepting emoluments (payments or gifts meant to influence him, that is, the moral equivalent of bribes) from foreign governments, and charged that this violated the US Constitution.  While there is controversy about whether these lawmakers have the "standing" to pursue this lawsuit, at least some legal scholars insisted that it is corruption that is at issue:

Legal scholars consulted by the congressional plaintiffs said their complaint is distinctive because of the special standing granted to Congress.

'The Framers of our Constitution gave members of Congress the responsibility to protect our democracy from foreign corruption by determining which benefits the president can and cannot receive from a foreign state,' said Erwin Chemerinsky, the incoming dean of the law school at the University of California at Berkeley.

'When the president refuses to reveal which benefits he is receiving — much less obtain congressional consent before accepting them — he robs these members of their ability to perform their constitutional role,' Chemerinsky said. 'Congressional lawmakers . . . have a duty to preserve the constitutional order in the only way they can: by asking the courts to make the President obey the law.'

The same article noted that this is just the latest lawsuit on this matter:

News of the lawsuit emerged less than 24 hours after attorneys general in the District and Maryland, both Democrats, filed suit alleging that payments to Trump violated the Constitution’s anti-corruption clauses. In another lawsuit filed against Trump by business competitors, the Justice Department recently defended Trump’s actions, arguing that he violated no restrictions by accepting fair-market payments for services.

That article also explained that the lawsuit was about corruption, albeit not in so many words.

The conflicts created are so vast, Frosh said, that Americans cannot say with certainty whether Trump’s actions on a given day are taken in the best interest of the country or that of his companies.

'Constituents must know that a president who orders our sons and daughters into harm’s way is not acting out of concern for his own business,' Frosh said. 'They must know that we will not enter into a treaty with another nation because our president owns a golf course there.'
Recall that Transparency International (TI) defines corruption as

Abuse of entrusted power for private gain

In response to these lawsuits, today an op-ed in the Guardian asserted
We’re now witnessing kleptocracy on an unprecedented scale in America. And there’s barely even a fig leaf of cover. Trump has openly enmeshed his private financial interests in national policy. To say that this creates an appearance of corruption would be far too polite. This is the real deal: sketchy dealings all the way down.
Health Care Beginning to be Characterized by the Taboo Word "Corruption"  

Meanwhile, much more quietly, people in health care are starting to talk more openly about the possibility that health care corruption is as real a problem as government corruption.  Last November, I attended the first academic conference explicitly about health care corruption, albeit in Canada.  In May, I was on a panel at a plenary session entitled "Corruption and Patient Harm in the Medical-Industrial Complex" at the Lown Institute/ RightCare Conference in the Boston area (agenda here).

Late in May, the leaders of the Lown Institute and RightCare (Vikas Saini and Shannon Brownlee) published an article in the Huffington Post entitled, "Corrupt Health Care Practices Drive Up Costs And Fail Patients." The authors asserted:

'Corruption' is not a term most Americans would probably apply to what goes on inside American health care. But if corruption is defined as persons or institutions wielding power for their own gain, then our health care system is riddled with it. And it is not only costing us billions of dollars, it is harming untold numbers of patients like Ralph Weiss. Examples abound.

Also late in May, the Hastings Report included an article entitled "Closed Financial Loops: When They Happen in Government, They're Called Corruption; in Medicine, They're Just a Footnote" by Kevin De Jesus-Morales, and Vinay Prasad. The authors accused the medical profession from hiding true corruption in the guise of manageable conflicts of interest, per the abstract:

Many physicians are involved in relationships that create tension between a physician's duty to work in her patients’ best interest at all times and her financial arrangement with a third party, most often a pharmaceutical manufacturer, whose primary goal is maximizing sales or profit. Despite the prevalence of this threat, in the United States and globally, the most common reaction to conflicts of interest in medicine is timid acceptance. There are few calls for conflicts of interest to be banned, and, to our knowledge, no one calls for conflicted practitioners to be reprimanded. Contrast our attitudes in medicine with public attitudes toward financial conflicts among government employees. When enforcement of rules against conflict of interest slackens in the public sector, news organizations investigate and publish their criticism. Yet even when doctors are quoted in the media promoting specific drugs, their personal financial ties to the drug maker are rarely mentioned. Policies for governmental employees are strict, condemnation is strong, and criminal statutes exist (allowing for corruption charges). Yet the evidence that conflict is problematic is, if anything, stronger in medicine than in the public sector. Policies against conflicts of interest in medicine should be at least as strong as those already existing in the public sector.

I will just ignore the irony presented by our apparent inability so far to actually affect what appears to be massive corruption affecting the current US government.


We live in perilous times, but at least people are starting to recognize some perils, rather than hiding them with euphemisms or treating their very mention as taboo.  If the US republican experiment survives, at least maybe we can learn from the experience to address conflicts of interest, crime, and corruption in spheres outside of government, particularly health care.

 So to repeat an ending to one of my previous posts on health care corruption....  if we really want to reform health care, in the little time we may have before our health care bubble bursts, we will need to take strong action against health care corruption.  Such action will really disturb the insiders within large health care organizations who have gotten rich from their organizations' misbehavior, and thus taking such action will require some courage.  Yet such action cannot begin until we acknowledge and freely discuss the problem.  The first step against health care corruption is to be able to say or write the words, health care corruption.

Wednesday, June 07, 2017

Trumping Up a Health Care Charity - Trump Organization Received Increasing Revenue from a Children's Cancer Care Charity

While health and health care are clearly not central interests of the current US President, Donald J Trump, we have noted some disturbing stories about the effects of his leadership on health care.  Most importantly, prior to the election, a story appeared alleging that Mr Trump licensed his name, and actively supported the Trump Network, which sold dodgy vitamin supplements to gullible consumers based on the results of urine tests of unproven, at best, accuracy (look here). While Mr Trump is controversial, to say the least, on multiple levels, never in modern history can I recall a president who was alleged to have been a major player in what appears to be a health scam.

Moreover, since Mr Trump was elected we have noted his proposed and actual appointments to positions of power over health and health care people with severe conflicts of interest, sometimes with no or limited experience in and knowledge of health and health care, and sometimes who had acted against the values of health care professionals  (look here, here, here, here, here, here, here, here, and here ).  (Please note that since while our focus in health care dysfunction, we emphasize cases that are not extensively reported in the media and/or medical and health care literature.  So this list is hardly exhaustive.)

Now we have in the public arena a case in which Mr Trump apparently subverted the good intentions of a charity designed by his son to benefit children with severe illness, resulting in apparent private gain for Mr Trump.

The Beginnings of the Eric Trump Foundation and its Support of St Jude Childen's Research Hospital

An article in Forbes published this week recounted how Eric Trump set up a charity whose main goal was to support children's cancer care, and which would channel the maximum amount of money raised directly to reputable health care organizations.

Eric Trump set up his foundation as a public charity, a classification that allows it to raise most of its money from outside donors. In 2007, when he was 23, the first Eric Trump golf tournament took place, raising $220,000. A compelling sales pitch evolved--the free golf course and the donated goods and services assured donors that every penny possible went to charity. The Eric Trump Foundation employed no staff until 2015, and its annual expense ratio averaged 13%, about half of what most charities pay in overhead. His original seven-person board was made up of personal friends, an innocuous lot who helped sell tournament tickets, which last year ranged from $3,000 for a single all-day ticket to $100,000 for a pair of VIP foursomes.

For the first four years of the golf tournament, from 2007 to 2010, the total expenses averaged about $50,000, according to the tax filings. Not quite the zero-cost advantage that a donor might expect given who owned the club but at least in line with what other charities pay to host outings at Trump courses, according to a review of ten tax filings for other charitable organizations.

That is all admirable, to say the least. But apparently it was not to continue.

Donald Trump Demands His Pound of Flesh

Eric Trump's plans to minimize his charity's overhead soon collided with the wishes of his father, Donald J Trump, then CEO of the Trump Organization, now President of the United States.  Per Forbes, 

But in 2011, things took a turn. Costs for Eric Trump's tournament jumped from $46,000 to $142,000, according to the foundation's IRS filings. Why would the price of the tournament suddenly triple in one year? 'In the early years, they weren't being billed [for the club]--the bills would just disappear,' says Ian Gillule, who served as membership and marketing director at Trump National Westchester during two stints from 2006 to 2015 and witnessed how Donald Trump reacted to the tournament's economics. 'Mr. Trump had a cow. He flipped. He was like, 'We're donating all of this stuff, and there's no paper trail? No credit?' And he went nuts. He said, 'I don't care if it's my son or not--everybody gets billed.''

Katrina Kaupp, who served on the board of directors at the Eric Trump Foundation in 2010 and 2011, also remembers Donald Trump insisting the charity start paying its own way, despite Eric's public claims to the contrary. 'We did have to cover the expenses,' she says. 'The charity had grown so much that the Trump Organization couldn't absorb all of those costs anymore.' The Trump Organization declined to answer detailed questions about the payments.

Furthermore, the amount of money demanded by the Trump Organization rapidly increased.

The cost for Eric's golf tournament quickly escalated. After returning, in 2012, to a more modest $59,000--while the event brought in a record $2 million--the listed costs exploded to $230,000 in 2013, $242,000 in 2014 and finally $322,000 in 2015 (the most recent on record, held just as Trump was ratcheting up his presidential campaign), according to IRS filings. This even though the amount raised at these events, in fact, never reached that 2012 high.

The Forbes article alleges this occurred despite Eric's protestations to the contrary.

Remember, all those base costs were supposedly free, according to Eric Trump. The golf course? 'Always comped,' he says. The merchandise for golfers: 'The vast majority of it we got comped.' Drinks: 'Things like wine we were normally able to get donated.' And the evening performances from musicians like Dee Snider of Twisted Sister and comedians like Gilbert Gottfried: 'They did it for free.'

The Trump Organization Takes Over the Eric Trump Foundation

The move to claw back increasing amounts of charitable proceeds from the Eric Trump Foundation as payments to the Trump Organization seemed to coincide with a shift in the governance of the Eric Trump Foundation. Per Forbes,

In 2010, the year the economics of the tournament suddenly pivoted, four of the seven original board members, who were personal friends of Eric, left. Those 4 were eventually replaced by 14 new board members, the majority of whom owed all or much of their livelihoods to the Trump Organization. Six of them were effectively full-time employees, including Trump lawyer Michael Cohen and executive vice president Dan Scavino Jr., who both serve in political roles for President Trump. Another owns a company that billed the Trump campaign $16 million. Add in Eric himself, as well as his wife, Lara, and 9 of the 17 Eric Trump Foundation board members had a vested interest in the moneymaking side of the Trump empire. The foundation had become a de facto subsidiary of the Trump Organization.
'They were wearing two hats,' says Langan, the former director of golf, who says he sat in on meetings where he couldn't tell where the business ended and the charity began. 'You're dealing with people talking about the event and the charity who also at the same time are thinking about it as a corporation and as a business. It's a for-profit club. You know, they're trying to make money.'

Why this happened, and who orchestrated it were not clear. However, it does suggest that at best, the charitable nature of the Eric Trump Foundation was diluted, to the point that it conceivablye became a de facto part of the for-profit Trump Organization, a company whose majority owner was, and still is Donald J Trump.

Eric Trump Launches an Ad Hominem Attack Against Critics of His Charity

Within a day of the Forbes article, Eric Trump was interviewed by the British Tabloid, the Daily Mail. Its headline was:

Eric Trump says critics of his children's charity are 'sick' and 'disgusting' after news report clobbers him for paying his company $100K for expenses – and he insists there was 'zero profit' to his family

To make a long story short, Mr Trump perseverated about the total amount of money his charity brought to St Jude, and fixated on the amount of a single payment made by the Trump Organization to the charity of $100,000 supposedly to offset the bills sent to the charity from the Trump Organization.

But $100,000 in one year's revenues for his family's company pales in comparison to the millions the foundation raises each year for child cancer research.

He maintained that

none of the money resulted in actual profit to the Trump organization - only reimbursements for costs that couldn't be paid through specific donations.

However, the Daily Mail article included no discussion of the escalating payments after 2011, allegedly reaching as high as $322,000 in 2015, and no justification that these were required only to cover costs.  Calling critics "sick" or "disgusting" was an ad hominem attack.  However, Mr Trump never did contradict the rising unexplained payments made by his foundation to his father's company. 


Eric Trump ought to be commended for his original goal, to benefit pediatric cancer care through a charity which had minimal overhead expenses.  While he apparently was able to maintain this mission for several years, it appears that his father, Donald J Trump, CEO of the Trump Organization and now President of the United States, was able to siphon increasing amounts of money from the charity back into his family-owned corporation, and to position his cronies as trustees of his son's charity.

While the Eric Trump Foundation seems to be continuing to raise substantial money for pediatric oncology care, his claims that the organization has virtually no overhead, and his own control of the foundation now appear dubious.  His father's ability to convert donated money into corporate revenue appeared at the least to compromise the stated mission of the Foundation

to support St Jude Children's Research Hospital

In the last few years its mission also appeared to be to support the revenue of the Trump Organization. Thus the transformation of the Eric Trump Foundation seems to fit the ethical definition of corruption per Transparency International

the abuse of entrusted power for private gain

albeit that the Eric Trump Foundation was entrusted to support St Jude at minimal overhead cost, and that the gain accrued privately not to Eric Trump, but to the Trump Organization and presumably its principal owner at the time, Donald J Trump.

This case, of course, just adds to many others in which non-profit health care organizations threaten their own missions at the apparent behest of and/or for the apparent benefit of their leaders, and in this case, their leaders' relatives.  So I could simply again point out that we need leadership of health care organizations that puts mission, and patients' and the public's health ahead of all other considerations, including revenue enhancement, and particularly ahead of the leaders' enrichment.

This is a special case, though, because the person who seemed to gain the most benefit from the machinations was not just another corporate CEO, but the future president.  Now, as president, Donald J Trump is the de jure leader of the entire government health care apparatus, including the Department of Health and Human Services, and all its associated agencies, and is the de jure leader of the entire government law enforcement apparatus, including the Department of Justice.  The leader of the US Internal Revenue Service, which enforces the laws and regulations about non-profit organizations, incidentally also answers to the President.

Thus as an advocate for more functional health care, disquieting is far too polite a term to describe the presidency in the hands of someone who apparently so cavalierly re-engineered for his personal benefit a charitable foundation meant to help sick children, who so cavalierly supported conflicted and ill-informed leadership of government health care agencies, and who so cavalierly licensed his name to a sketchy vitamin sales scheme.    

Friday, June 02, 2017

"The Most Complicated Piece of Health Care is the Revenue" (Say What?) - The Shameless Managerialism of a Hospital CEO


Managerialism, in my humble opinion, is one of the major reasons why the US health care system is so dysfunctional.  We have long discussed how people whom we first called "generic managers" have taken over health care.  Increasingly, health care organizations, including hospitals, pharmaceutical companies, health insurance companies, government agencies, etc are now led by people with management training, but not necessarily with any training or background in medicine, biomedical research, epidemiology, public health, or health care policy. We began noting how such generic managers often prioritize short-term revenue over all other concerns, presumably based on the shareholder value dogma taught in business schools (look here).  Worse, generic managers may be ignorant of, misunderstand, or be frankly hostile to the core values of health care professionals.  (See our posts on mission-hostile management.)

More recently, we found that our observations could be better described as aspects of "managerialism."  We noted an important article that in the June, 2015 issue of the Medical Journal of Australia(1) that made these points about managerialism:
- businesses of all types are now largely run by generic managers, trained in management but not necessarily knowledgeable about the details of the particular firm's business
- this change was motivated by neoliberalism (also known as economism or market fundamentalism)
- managerialism now affects all kinds of organizations, including health care, educational and scientific organizations
- managerialism makes short-term revenue the first priority of all organizations
- managerialism undermines the health care mission and the values of health care professionals

Many health care professionals mutter under their breath about the behaviors of their managerialist leaders, but there has been little open discussion of managerialism, and no organized movement against it.

Last week, I found an excellent example of how managerialism has become the norm in health care.

A UPS Executive Becomes a Hospital Executive

An article in the Buffalo News on May 26 recounted how one Mr Martin Boryzak ascended to the the position of CEO of Sisters Hospital and its St Joseph Campus.

His Highest Degree was an MBA

Per his Linked In page, from St Bonaventure University.

He Ascended to Hospital Management without Any Medical or Health Care Background

Per the Buffalo News,

The Buffalo native was working for the package delivery company in Philadelphia in 2009 when Catholic Health recruited him after his mother, a nurse in the hospital system, slipped his resume to management unbeknownst to Boryszak.

He joined 290-bed Sisters that year as director of finance and was also named vice president of operations at 123-bed St. Joseph Campus in 2012. In 2014, he rose to chief operating officer at Sisters.

He Believes He Has No Need for Health Care Background, Because It is All About the Revenue

Per the Buffalo News, first

Martin Boryszak, the new president and chief executive officer of Sisters Hospital and its St. Joseph Campus in Cheektowaga, came to health care from what seems like an unusual route – UPS.

The differences in the businesses are not as great as you might think. As Boryszak sees it, they both adhere to basic business principles.

Q: Does it matter whether you have an academic background in health care?

A: It depends on the person. The most complicated piece of health care is the revenue. And, in that respect, it's not unlike any other service industry. The best way to maneuver through that is not that unique. When half your revenue comes from the government and the other half is influenced by what the government does, it's a difficult thing to navigate. Once you figure that piece out all other business principles are applicable.


Q: What keeps a hospital CEO up at night?

A: Where is your revenue coming from....
According to Mr Boryszak, hospitals are just another business.  Keep the money coming in, and everything will be fine.

What About the Hospital Mission, the Care of Patients, the Values of Health Care Professionals?

The closest Mr Boryszak got to any of these issues was in his reflections, if that is the word, about his career at UPS.

I liked what I did, but wanted a balance with some type of calling. I wanted to feel that I was making a difference. It wasn't a function of UPS because it has great people and is a great company. I enjoyed every minute there but felt as though there was something more. I was recruited and never really thought about health care, but what better industry to drive change

He said not a word about what hospitals actually do.  He could not even define the "sort of calling," the sort of "difference" he might make, the kind of change that should be driven. 


There you have it in a nutshell.  Here is an MBA running a hospital that feels not the slightest need for training or experience in medicine, biomedical research, epidemiology, public health, or health policy. He wanted to do something involving a "calling," and would "drive change,"  but expressed precisely nothing about the nature of the calling in the hospital setting, or the sort of change to be driven.  He thinks the most complicated issue in health care is "revenue."  Presumably he feels revenue is more complicated than determining a difficult diagnosis, managing an acutely ill patient, counseling a patient with chronic illness, or consoling a patient who is dying, if he even understands that those are some of the things that go on in a hospital.  Furthermore, he seems to feel entirely comfortable issuing orders to health care professionals who need to take on such tasks, and more.

Thus has managerialism been normalized, or maybe I should say thus has deviancy been defined down.

As an aside, the reporter interviewing Mr Boryszak also seemed entirely comfortable with the notion of an MBA without health care experience or training, and apparently without understanding of health care professionals' values running hospitals, and entirely comfortable with the notion that the most complicated thing about health care is generating revenue.  The reporter never even slightly challenged any of this.

Thus has managerialism been normalized.

So as we have said endlessly,...  

We need far more light shined on who runs the health care system, using what practices, to what ends, for the benefits of whom.

True health care reform would enable transparent, honest, accountable governance and leadership that puts patients' and the public's health over ideology, self-interest, and self-enrichment.

Can that happen in a world in which the business CEO is viewed as the highest form of life? 


1.  Komesaroff PA, Kerridge IH, Isaacs D, Brooks PM.  The scourge of managerialism and the Royal Australasian College of Physicians.  Med J Aust 2015; 202: 519- 521.  Link here.