No Questions Asked - Journalist Parrots the Talking Points in Support of Hospital Executive Compensation

The problem of ever rising, amazingly generous pay for top health care managers is a frequent topic for Health Care Renewal.  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 last year,  and last week,

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.

Bit at least most journalists who inquire into hospital executive compensation make an attempt to be "fair and balanced" by also quoting experts who question the talking points.

Hospital Executive Compensation in Central Pennsylvania

However, we just found an ostensibly journalistic survey of local hospital executive compensation in the Reading (PA) Eagle which seemed designed to encourage the public to welcome their ever more highly paid corporate health overlords.  This started with its title:

Nonprofit health care organizations pay for the best executives

And its opening paragraph

At first blush, the leaders of area hospitals are handsomely compensated. But a Reading Eagle analysis finds that their compensation is in line with hospital administrators in other areas.

The author was not shy about documenting the munificent pay of local hospital executives, seven of whom received more than $1 million as documented by their organizations' most recent financial reports.

 Harold Paz, CEO of Hershey Medical Center (Penn State University) topped the list in 2014, at $1.57 million.
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Second was Thomas E. Beeman, former president and CEO of Lancaster General Health, at $1.5 million.
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Third was Clint Matthews, president and CEO of Reading Health System, at $1.44 million in 2014, the most recent year information was available.

Then,

Fourth place in total compensation went to Ronald W. Swinfard, trustee and CEO of the Lehigh Valley Health Network, at $1.32 million in 2014.

Fifth place in total compensation was Kevin Mosser, director and CEO, WellSpan Health at Ephrata Community Hospital, at $1.29 million.

Sixth place was Rod Erickson, former president, Hershey Medical Center, Penn State, $1.28 million.

Seventh place was Richard Seim, president, WellSpan Specialty Services, WellSpan Health, $1.01 million.

In eighth place was Michael F. O'Connor, CFO. WellSpan, Ephrata Community Hospital, $993.618.

Ninth was Charles Chodroff, president, South Central Preferred, WellSpan Health, $906,582.

Tenth was Rodney Kirsch, senior VP, development, Hershey Medical Center Penn State, $860,445.

Eleventh was John Morahan, chair, president and CEO, Bornemann Health Corp. and St. Joseph Regional Health, at $841, 246. Bornemann is an affiliate of St. Joseph Regional Health, and compensation came from Catholic Health Initiatives.

Parroting the Talking Points

But the public should fear not, because, as the talking points say....

We have to pay competitive rates

This was invoked early in the article.

The Reading Eagle review also found that leaders of hospitals in Berks County are compensated in line with their counterparts at other medical centers in Pennsylvania.

Also,

Overall, the compensation of medical nonprofit leaders in Berks County is on par with leaders of similar locations elsewhere, said Chester Mosteller, founder and president of Mosteller and Associates, a human resource professional services firm in Reading.

We have to pay enough to retain at least competitive executives

To support both the first and this talking point, the article cited a local expert,

 Nonetheless, people are sometimes surprised at high compensation levels at nonprofit hospitals, said Tish Mogan, standards for excellence director at the Pennsylvania Association of Nonprofit Organizations in Harrisburg. But, Mogan noted, if the leaders of nonprofit hospitals were not well compensated, they could be poached by for-profit medical centers.

'They have to be competitive,...

Doubling down, the article also cited  "Anna Valuch, director of marketing for Reading Health System," whose CEO, her boss, pulled down $1.44 million. She said

the system's board of directors takes seriously its responsibilities in terms of creating an executive compensation plan that is fair, competitive and consistent with the system's mission to provide the highest quality health care.

Later, the reporter quoted Ms "Cindy Bergvall, co-owner of accounting firm Bee Bergvall and Co in Bucks County and its affiliate, the Catalyst Center for Nonprofit Management," as saying

nonprofit health care organizations are competing with for-profit organizations for talent, so they must offer competitive wages.

Our executives are brilliant

Ms Morgan immediately segued into a claim that executives

have to make sure that somebody's in charge that has the capability to make sure that, if I'm on that procedure table, things are in place to take care of me,

Mr Mosteller had a different version of the brilliance argument.

'It's been extremely challenging with the Affordable Care Act and Medicare, and that all results in some very big challenges within the health care arena,' he said. 'It is by no means an easy nonprofit to run and manage. It's become increasingly complex to operate and fulfill your mission in those environments.'

Similarly, "J Andrew Weidman, chairman of the board of directors for Penn State Health St. Joseph," put all three talking points into one sentence,

'To be in the best position to recruit and retain vital and talented employees, we must pay competitive wages,' Weidman said.

So did "Brian Downs, director of media relations for Lehigh Valley Health Network," who worked for CEO Ronald W Swinfard, who pulled down $1.32 million,

'To attract and retain the highest caliber health care professionals needed to sustain the quality of care LVHN provides to our community, and to oversee the operation of a nearly $2 billion organization, we must offer compensation that is competitive with organizations we compete with for talent in the job market,' Downs said.

Note that several of these experts/ commenators worked directly for the very well compensated hospital system CEOs of interest, and the others apparently worked for firms that got financial support from these CEOs' hospital systems. 

No Questions Asked

While the Eagle quoted multiple proponents of high executive pay repeating all the talking points, the reporter apparently did not challenge any of them to justify any of the talking points in the context of interest.  In particular, no one provided any evidence that any of the particular executives are so brilliant, or as the article implies, why ALL local executives are brilliant.  How can there not be a single average one in the bunch?

In fact, a quick Google search reveals reasons to questions the brilliance of at least some of them.  For example, Hershey Medical Center, whose CEO was the highest paid of the group, has proposed a controversial merger which is the subject of strong opposition by the US Federal Trade Commission (FTC).  (See articles in Modern Healthcare and PennLive.  Per Modern Healthcare, the FTC is claiming that the merger would lead to "higher prices and diminished quality [of care]." Especially given that the FTC seemingly has a high threshold to challenge a hospital system merger, its opposition certainly suggests questions about current hospital management.  Also, Lancaster General Health, whose CEO was the second best paid of the group, had to pause a big expansion project because of cost overruns (see this article in Lancaster Online), and suffered a major outage of its electronic health record (EHR) system (see this article in Lancaster Online).  

Yet the Reading Eagle reporter did not raise these incidents, nor question anyone about the supposed brilliance of the leaders at the institutions that suffered them.

Furthermore, many of the points made on behalf of high executive pay raised obvious questions that were not asked.  For example,  Ms Morgan was not asked whether any executives actually have been recently "poached."  Ms Bergvall was not asked to name the for-profit organizations with which the hospital systems was competing for talent.   Strikingly, Ms Bergvall also was not asked to justify the assertion that it is the responsibility of hospital managers, not physicians, to make sure that "when I am on the procedure table, things are in place to take care of me."

Even more strikingly, Ms Bergvall was apparently not questioned further after she suggested that CEOs may command more pay simply because  they may feel entitled to a big dollop of all the money flowing throught he health care system

when nonprofit organizations bill for services, like hospitals do, they usually have the financial resources to compensate people well.  

'In the health care industry, you have an income stream that allows you to pay better,' Bergvall said.

Of course, many of the media reports on high executive compensation in health care do not report any cross-examination of its supporters.  Perhaps these advocates refused to respond to such questions, or the reporters felt too intimidated to challenge them.

But nearly all articles that try to delve into executive compensation at all at least quote some experts who are skeptical of current practices.  And there are real reasons to be skeptical.  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 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. 

This article included no such attempts at balance.  So it ended up more like propaganda for managers' current privileged position in health care than journalistic inquiry.  It is sad to see reporting about important health policy issues devolve into propaganda to support the status quo, and those who personally profit the most from it.  But perhaps those who work at the Reading Eagle hesitate to offend those who are making the most from the current system.  It appears that the newspaer is owned by the Reading Eagle Company, and this, in turn is owned by the Barbey family, which according to Politico also

controls the publicly-traded lifestyle clothier VF Corporation (Nautica, Jansport, Wrangler, Timberland, Lee, Vans, etc.) and is ranked no. 48 on Forbes' list of America's richest families.

Discussion

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 ending the anechoic effect, exposing the web of conflicts of interest that entangle health care, 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. 

Being a Health Care CEO Means Never Having to Say You Are Sorry - (Michael) Covert Edition

Physicians and other health care professionals are increasingly subject to various measures of their quality, productivity, and "value," and beholden to administrators, managers and bureaucrats.  The notion of health professionals being primarily accountable to patients and to professional standards has become old school.  Instead, the business school dogma of  "pay for performance" reigns. There is little evidence that putting health care under the control of administrators, managers and bureaucrats has been good for anyone but administrators, managers, and bureaucrats, but the burdens they have imposed seem to be a major reasons for increasing professional burn-out.

While health care professionals are thus subject to increasingly burdensome oversight by managers and administrators, it is not clear that those managers and administrators are taking their own medicine.  At best, they seem only accountable to each other.  And thus, their pay and power seem disconnected from any rational notion of their performance.

I recently stumbled upon a story illustrating how top health care managers can repeatedly get hired again and again despite major questions about previous performance.

A New CEO Position for Michael Covert

In June, 2014, the Houston Chronicle announced Mr Michael Covert as the new CEO of the Catholic Health Initiatives (CHI) St Luke's Hospital System,  and a new Senior Vice President of CHI.  It included the typical praise from top CHI leaders and stewards.

'Michael has the qualities, skill and professional background to help lead CHI through the many dramatic changes occurring today in health care,' Michael Rowan, Catholic Health Initiatives' president of health systems delivery and CEO, said in a written statement.

Leonard Tallerine, [apparently the former CEO of GoldKing Energy, which is currently in bankruptcy] chairman of the CHI St. Luke's Health board of directors, agreed.

'Michael's depth of experience has honed two key skills: communication and collaboration,' Tallerine said in a written statement.

I confess I missed that article, but I did see an article from mid-September, 2014, in the Chronicle documenting a rather uncritical interview with Mr Covert.  He did manage to boast of his previous success:

Q. What makes you the right guy ...?

A. It's because of my past experience. I've worked in an academic setting. I've worked in a Catholic hospital setting. I have run systems. I've worked for physicians. I've been doing it for a while. And I've had the fortune of some good success.

He also decried excess regulation in California ("we were so regulated");  promised to "develop relationships with our physicians that are strong"; promised "It's not going to be all about buildings"; boasted about "teams I've created"; and proclaimed "it's important for us to be strong on our quality, our finance, our patient engagement, our employee engagement."


So far, here we have yet another new top hospital system manager who seems to be a fount of excellence, at least according to those to whom he is supposed to be accountable.

However, the name Michael Covert rang a bell, and quick search of Health Care Renewal, plus Google revealed that his record is not quite as pristine as portrayed above. 


The Covert Record

Million Dollar Plus Compensation  Questionable Celebrity Endorsements, Quality Problems

Mr Covert first lit up the Health Care Renewal radar screen in 2010 because of his relatively large compensation, greater than $1 million per year, for the CEO of a not very large, nominally public hospital system, Palomar Pomerado.  At the time, the usual explanations were provided by the hospital district chairman, who happened to be a former hospital executive.  It later turned out that Mr Covert was the second most highly paid public official in the state of California.


As Mr Covert's pay became the subject of wider discussion, the hospital nurses' union weighed in with charges that Mr Covert had irresponsibly spent money on celebrity endorsements, particularly from a well known athlete who soon left California for New York. (Look here.)


Also, in 2011 the San Diego Union-Tribune reported that the two hospitals Mr Covert lead had been fined for significant errors/ quality problems in 2010, and had been fined before for such problems.

These facts did not seem aligned with the claims by the district hospital board that Mr Covert was a "phenomenal," "excellent" or "top" leader.  They also seemed to belie Mr Covert's recent discussion of being responsible about finance, employee engagement, or quality.  On the other hand, one can see why he dislikes regulation.

Alleged Obstructed Investigation of Murderous Fake Doctor in the 1980s

Later in 2011, a little big of digging on the internet suggested that Mr Covert had a long history of issues.  In 2008, the local Community Paper did an extensive investigation into his past.  We summarized it here.  First, the article charged that in the 1980s, as a top manager at the Ohio State University Hospital System, Mr Covert impeded the investigation into Michael Swango, a fake doctor working at that institution, who was ultimately convicted of murdering three patients.

At that time, Mr Covert seemed not so interest not merely in regulation, but in the laws of the land.

Illegally Revoked a Physician's Hospital Privileges in the 1990s

The Community Paper also found that the Sarasota Memorial Hospital illegally revoked a physician's privileges.  At the time, Mr Covert was CEO of that hospital.  The Community Hospital also alleged that Mr Covert's testimony at that trial was "thoroughly impeached."

What was that about strong relationships with physicians?  

Alleged Misrepresentation of Facts About Hospital Bond Issue

The Community Paper reported in 2007 that Mr Covert misrepresented facts in his advocacy for a large bond issue to support building a new hospital for the Palomar Pomerado Health District.

Responsible about finance? 

Dictatorial Management Style

The Community Paper interviewed multiple health professionals at Palomar Pomerado uncovering multiple charges that Mr Covert was a manipulative, egotistical and dictatorial leader.

Was this a way to develop wonderful teams? 

Another Lawsuit Claiming Improper Termination of a Physician's Privileges

Later in 2008, the Community Paper noted a lawsuit filed against Palomar Pomerado by a staff physician who also alleged that the hospital had improperly terminated his privileges.  I cannot find any record of how this was resolved.

Again, what was that about relationships with physicians? 

Palomar Pomerado Left in Debt

Mr Covert resigned from Palomar Pomerado in mid-2014 to head to his new position as CEO of Catholic Health Initiatives St Luke's Health System in Houston.  At that time, the San Diego Union-Tribune reported that after building an expensive new facility, Mr Covert would be leaving a hospital system deep in debt and with substantially worsening financial results.

Moody’s Investors Service, the bond rating agency that warned twice in two years of Palomar’s declining financial health, most recently in March. 'PH’s debt measures are among the weakest in Moody’s portfolio of rated public and not-for-profit health care organizations (debt measures exclude GO debt),' the agency said.

Palomar Health’s hospitals and clinics run at a loss; operating margin was negative 4.2 percent in the first half of fiscal year 2014, an improvement from minus 12.2 percent in the same period in 2013.

Worse, the district has cash problems. While improving, it’s still violating a bond covenant to keep enough cash for 80 days.

Didn't Mr Covert say something like it's not about the buildings?  Again, what happened to that emphasis on strong finance? 

And in general, looking at the whole section above, what did Mr Covert think was his "good success?"

Summary

The bureaucrats and managers to whom Mr Covert reported as CEO of Palomar Pomderado, and those to whom he will report as CEO of CHI St. Luke's thought he was brilliant.  Mr Covert proclaimed that he would engage employees, collaborate with physicians, and focus on quality and responsible finance, among other issues.  Yet Mr Covert seemed to leave in his wake as former leader of multiple hospital systems allegations of dictatorial leadership, irresponsible management of finances, deceptions, and opacity (even in the face of investigations of criminal behavior).  Mr Covert's previous hospitals paid fines for quality violations, went into severe debt, terminated physicians' privileges once allegedly improperly, and once illegally as found by a jury, and in one early case harbored a homicidal fake doctor.

Were the people who recruited and vetted Mr Covert bamboozled by his charm, to the point that they did not even bother to check the public record of his past performance?  Or were they, as managers and administrators, not apt to question a fellow member of their guild?

By the way, why did no one in the Houston media think to actually ask some hard questions about the latest star on the local health care management scene?

So why should we as health care professionals, or members of the public ever believe the managers and administrators who have taken over health care? Especially when they promise to improve quality and control costs by making everyone else responsible to them?

True health care reform would make health care leaders accountable for putting patients' and the public's health ahead of personal gain.  Generic managers following business dogma may not be the people to do this. 

ADDENDUM (29 September, 2014) - Thanks to the comment by Dr Howard Brody below, I corrected the statements about that Michael Swango was a fake doctor.  He did in fact have a real MD degree.