The Risks of Attending an Offshore Medical School: Students at Offshore Medical Schools Killed or Injured by Gas Explosions

US and Canadian medical education has a peculiar gray zone.  A substantial proportion of US and at least some Canadian doctors have received their medical degrees from offshore medical schools.  These are medical schools located in other countries, mainly the Caribbean, that exist only to train students for North American practice.  They are often owned by for-profit US or Canadian based companies, have little accountability to their host countries' governments, or to the US or Canada, and have generally flown under the radar despite being an important component of North American medical eduction..

Many questions have been raised by the quality of training received by students at such offshore schools.  We have recently discovered new risks to offshore medical students, in particular, that of dangerous living conditions.  We were alerted to two cases since 2018.


Gas Explosion Injured Two Medical University of the Americas (MUA) Students, Both Fatally, on Nevis in 2018

As reported by WINN FM on November 15, 2018

At around 8:00 pm on October 3, an explosion rocked the medical university and sent two American students to the hospital with severe burns across their bodies. The two students were subsequently flown to the United States for treatment.

On Wednesday (Nov 14) Acting Commissioner of Police, Hilroy Brandy disclosed that a faulty knob on the stove caused the explosion. He said one of the injured females was the actual occupant of the apartment and a female friend had come over to study. One of them lit a cigarette which ignited the gas.

That explosion eventually proved fatal to one medical student, as reported again by WINN FM on November 21, 2018:

One of the students who sustained major burns in an explosion and fire on Nevis in October has succumbed to her injuries.

28-year-old Nada Magdy Khalil of East Brunswick, New Jersey was one of two female students of the Medical University of the Americas (MUA) in Nevis inside the apartment when it exploded on Oct 3.

WINN FM confirmed that Khalil died on Sunday, November 18 in Florida where she had been receiving treatment.

The other student was very severely injured

The other victim is 31-year-old Gayane Borisovna Balasanyan from San Francisco; she is still hospitalized in Miami, Florida with burns across 90% of her body.

According to her GoFundMe page, Ms Balasanyan died in January, 2019.


There is no other publicly available  information on this explosion. Importantly, there has never been a public response from MUA, or its owners:

Since the explosion, the medical university has not issued a statement on the matter.

Gas Explosion Severely Injured Two Saba University School of Medicine (SUSOM) Students in 2019

There was an unnervingly similar case one year later, as reported by Saba News on October 15, 2019:

Saba’s emergency services were rushed to a dormitory building on Thais Hill Road in The Bottom around 7:30am Saturday, for a gas explosion that left one man severely burned.

A loud crack was heard throughout The Bottom that morning and a large plume of white smoke was seen coming out of the building and drifting into the sky. Several village residents also reported feeling the explosion’s aftershocks, which prompted them to call the Caribbean Netherlands Police Force KPCN and the Saba Fire Department.

Police, firefighters and the Ambulance Department were then dispatched to the building.

The dormitory is a privately-owned building that mainly houses students of Saba University School of Medicine (SUSOM).

Again, two students were injured:

One student was severely burned in the incident and was taken to A.M. Edwards Medical Center for treatment. He was later flown to Miami, Florida, for further medical attention.

A second victim was treated for smoke inhalation and was admitted at A.M. Edwards Medical Center for observation. She was released several hours later.

There is a GoFundMe page which is apparently for the student most seriously burned in this explosion.  It was created 3 days after the explosion, but I could find no other followup information on the explosion or the student.  Again, I could find no public response from SUSOM.

Who Should be Accountable?

These cases have been uncannily anechoic.  While the students injured were from the US, their fate has received no coverage in the US media.  Nor have the cases received recognition in the US health care literature, particularly the medical education literature.

The silence from the medical schools involved is quite unsettling.  That immediately leads to an obvious question.  Just who at these schools might be responsible for their students' physical safety?  Who currently runs and is accountable for both Caribbean schools is not glaringly obvious.

The website for the Medical University of the Americas lists an Executive Dean, but no President or CEO, or Board of Directors.  Its Wikipedia page states:

Medical University of the Americas (MUA) is a for-profit medical school in Saint James Windward Parish, Saint Kitts and Nevis.

Buried in the MUA 2018 catalog, however, is this statement:

Medical University of the Americas is a foreign profit corporation owned by R3 Education Inc. which is registered with the Florida Department of State, Division of Corporations to do business in Florida as Medical University of the Americas.

Saba University School of Medicine has a President, Dr Joseph Chu, according to its website. Its Wikipedia page does not state whether it is non-profit or for-profit.  However, like that  of MUA, the SUSOM 2018 catalog states

Saba University School of Medicine is a foreign profit corporation owned by R3 Education Inc.  which is registered with the Florida Department of State, Division of Corporations to do business in Florida as Saba University School of Medicine.

R3 Education Inc turns out to have a remarkable history, which we  discussed back in 2013.   To summarize what we found then...

The couple who founded two Caribbean medical schools which catered almost entirely to US and Canadian students ran into significant legal trouble.  Founder David Leon Fredrick and his wife, Dr Patricia Lynn Hough were indicted for tax evasion for failing to report income from the two medical schools they allegedly owned, and later sold.

The schools were Saba University School of Medicine, on Saba, and the Medical University of the Americas, on Nevis.  The initial legal proceedings revealed that while Saba University School of Medicine was apparently first set up by a non-profit foundation (or NGO) run by the couple, somehow it became for-profit owned by Mr Fredrick and Dr Hough, and Saba and the Medical University of the Americas were subsequently sold to a private equity group, Equinox Capital.  R3 Education Inc, owned by Equinox Capital, appears to have been given responsibility for running the schools, along with St Matthew University.

Before jury selection started, Mr Fredrick disappeared.  Dr Hough was eventually convicted of defrauding the US Internal Revenue Service, and income tax evasion, after trial testimony to the effect that the couple concealed money in a Swiss bank, got $36 million from the sale of the schools, and bought an airplane, two houses, and a condominium.

Left mysterious at that time were Mr Fredrick's whereabouts, where the money that the couple received from the sale of the medical schools went, and how a school that began as a non-profit organization run by the couple became a for-profit corporation owned by them.  The case should have lead to some concerns about the leadership and governance of the off-shore medical schools that now train increasing numbers of would be US and Canadian physicians.

In 2014 we provided something of an update. Mr Fredrick and Ms Hough made more than $35 million from the sale of the schools.  Ms Hough eventually went to prison.  Mr Fredrick's whereabouts remained unknown.  My internet searching in 2019 failed to produce any new information about him.


Now in 2019 we do not know much more about who is really accountable for MUA and SUSOM.  According to the Bloomberg corporate information website,

R3 Education Inc. operates as a holding company that acquires and manages for-profit educational institutions such as Saba University School of Medicine, the Medical University of the Americas, and St. Matthew's University. The company was incorporated in 2007 and is based in Devens, Massachusetts.

According to his LinkedIn Profile, the CEO and Chairman of R3 Education is Steven Rodger, of Greenwich, CT. For 23 years he has also been Managing Partner, Equinox Capital.

The Equinox Capital website make it clear that it still owns three Caribbean medical schools:

Saba University: Since its founding in 1993, more than 1,500 physicians have earned their M.D. at Saba University (www.saba.edu). Saba University School of Medicine has been accredited by the Accreditation Commission on Colleges of Medicine (ACCM) and its program has received approvals from licensing boards in New York, California and Florida. The campus is on Saba, which is located very near St. Maarten.

Medical University of the Americas: Since its founding 1998, Medical University of the Americas (www.mua.edu) has awarded approximately 500 M.D.’s. The MUA program is accredited by the Accreditation Commission on Colleges of Medicine (ACCM) and its program has received approvals from the licensing board in New York. MUA is located on Nevis, near St. Kitts.

St. Matthew’s University (www.stmatthews.edu) offers both a medical and a veterinary program. Since 1997, almost 1,500 students have obtained their M.D. and D.V.M. degrees from St. Matthews. The program is accredited by the Accreditation Commission on Colleges of Medicine (ACCM). St. Matthews is located in the Cayman Islands.

Who are the leaders of MUA and SUSOM who are accountable for what happens to their students, including their physical safety?  What allegiance do they owe their for-profit, private equity owners?  Who is responsible for the governance of the schools?  What responsibility does the private equity firm that owns the schools bear? All these questions remain unanswered.

The Perils of Offshore Medical Schools

US and Canadian medical students are promised a lot on the flashy websites (eg for MUA and SUSOM) for offshore medical schools. They may depend more on their medical schools for basics like housing than would students at American and Canadian schools. Yet they end up in physical environments with which they may be unfamiliar, and which may expose them to unexpected perils.

We should not forget that the US invasion of Grenada in 1983 was rationalized by the physical risks to US medical students at St George's University School of Medicine. The school was then a private for-profit owned by its founder Dr Charles R Modica and partners (but now partially owned by a private equity firm, Atlas Partners, per their news release.)   As the New York Times reported at the time, some students

told of bullets crashing through their dormitory rooms, of fears of being taken hostage, of a week of campus confinement under the Government's 'shoot to kill' curfew, of soldiers pointing guns at them

In particular,

Many of the students said that supplies of food and water began running low Tuesday after a weeklong curfew had been imposed by Grenada's military leaders following the slaying of Prime Minister Maurice Bishop on Oct. 19. Under the terms of the curfew, people on the street were to be shot on sight, the students said.

'I saw soldiers with guns during the curfew,' said Miss Nelson, 'and while none of them ever threatened me, several of my friends told me guns had been aimed at them, and they were terrified.'

[US Department of Defense image, Grenada invasion, 1983, via WikiMedia]


In the 21st century, the risks may be of gas explosions in accommodations more basic. and risky than students may have expected.    Yet who is ultimately accountable for disclosing and mitigating the risks?  In the case of MUA and SUSOM I cannot tell.

For would-be medical students trying to cope with the vagaries of medical school admissions in the US and Canada, the apparently easier accessibility of off-shore medical schools may be attractive.  Yet such accessibility may come with costs, and risks.  Until more is known about the risks, caveat emptor.


While Eckhert wrote in 2010(1) that the increasing presence of offshore medical graduates in the US "obligates U.S. medicine to take a closer look at these educational programs," no such scrutiny has occurred since then.  While offshore medical schools account for the training of an increasing proportion of US (and presumably Canadian) physicians, we know next to nothing about their leadership and governance.  This seems to be just another part of the decreasing accountability of the leadership of US health care, and the increasing opacity of the governance and stewardship of US health care organizations.  True US health care reform would make leadership transparent and accountable.

 Reference

1.  Eckhert NL.  Private schools of the Caribbean: outsourcing medical education.  Acad Med 2010; 85: 622-630.  Link here.

The Mystery of the Ownership of the Trinity School of Medicine

Trinity School of Medicine Vice President Boasts that It Is "Not the Same" As Most Offshore Medical Schools

A post promoting the Trinity School of Medicine just appeared on the KevinMD blog. It was entitled "Addressing the 'ugly truth' about Caribbean medical schools: Why they’re not all the same." Its purpose seemed to be to persuade the reader in particular that the Trinity School of Medicine, (located conveniently in St Vincent and the Grenadines, "high on a hillside in the Ratho Mill district of Kingstown, the capital of St. Vincent and the Grenadines," conveniently near the Young Island Resort and "Living the Dream" sailboat cruises, per Google) is not the same as, and in fact is superior to other offshore medical schools.

In particular, Stacy Meyer, Vice President for Enrollment, asserted that the school would address the problem of huge attrition rates at offshore schools by embracing "a principle of mutual support," seek out faculty who would actually spend time with students, and would actually have "office hours," and provide tutoring and an "Academic Progress Committee." She promised to provide good housing with "privacy, a full kitchen, air conditioning and high speed internet."  She stated that the school would deal with the stress of medical training by providing "on-campus access to professional help and a culture of openness." She concluded with "better support, better quality of life for the students?  It will only mean better doctors."

It sounds nice, but her post was remarkable for what it left out.  Does that extras "support" translate into an attrition rate lower that other comparable schools?  Is there any data that the doctors produced are "better?" What about the school's curriculum, the quality of its faculty, and the accountability of its leadership?


In fact, review of the school's website provides little hard information.  While the school aims to attract US and Canadian students, I could not find a single member of its regular faculty who has a medical degree from a US or Canadian school.  Its faculty is tiny, 22 regular faculty members plus 3 deans and a chancellor, much smaller than the faculty of a conventional US or Canadian school.  Information about its curriculum is fragmentary.  The school claims an 85% match rate, but provides no information about attrition, and hence the denominator for that rate.

What Is Trinity School of Medicine?  Who Runs It?  Who Benefits From It?

Even more curious, I could find very little information, and that which I found was rather contradictory, about who actually is accountable for the operations of Trinith School of Medicine, and who, if anyone, owns it.

The school's website, including its "about" page, say nothing about the nature of its organization, basically whether it is a for-profit company, or not for profit organization. Wikipedia simply says the school is "private."  Although the school is located in St Vincent and the Grenadines, its website lists its address as 925 Woodstock Road, Suite 200, Roswell, GA 30075.  On the other hand, the Manta database says the school is located in Alpharetta, GA, and is a "single location business" with 10 employees.

The school's website"administration" page has a headline next to a picture of Steven R Wilson stating he is "CEO and President."  However, accompanying text states that he is the president and CEO of "Trinity LLC."  I can find no further explanation on the website of "Trinity LLC."  (Note that the website has no search function.)

There is a Hoover's profile on a Trinity LLC located in Atlanta GA, listed as a private company, but it appears to be a "site preparation contractor." 

Mr Wilson apparently is a businessman who

served as President and CEO of several highly regarded institutions over the past 22 years. Prior to Trinity School of Medicine, Mr. Wilson was President of TSYS Loyalty, Inc., a wholly owned subsidiary of TSYS, TSS on the NY stock exchange from 2003 until 2006 when he left to pursue the start-up of Trinity School of Medicine. Prior to TSYS, Mr. Wilson was President and CEO of Enhancement Services Corporation from 1998 to 2003, an institution that provided loyalty transaction processing and fulfillment services to the world's largest financial institutions. Mr. Wilson was also the President and CEO of Business Travel, Inc. from 1986 to 1997.

Although his background seems to have no relevance to biomedical science, medicine, or health care, his official profile states

Mr. Wilson's background and experience are a vital element in Trinity's success as it endeavors to become one of the finest Caribbean medical schools available to students from North America and around the globe.

The Trinity website includes a listing of the members of its "board of trustees." Non-profit institutions generally have boards of trustees whose role is be stewards of the organizations.  However, Trinity appears to be a privately held business.  Such businesses may have "boards of directors," but the power of such boards in closely held private businesses may be negligible. 

The website does not explain the actual relationship of the "board of trustees" to the school. The board has only four members, one of whom is a physician, and three of whom are business people.  There qualifications to be stewards of a medical school, if that in fact is their role, are not evident.

So what exactly is the Trinity School of Medicine?  Who is accountable for how it operates? Who, if anyone,exterts stewardship over it?  Who benefits from its operation?  Given its opacities, is it a shell company?  These are all mysteries.

We need Sherlock Holmes.

Why Should We Care?

As we have said a few times before, most recently here, this is not just about the leadership, governance and ownership of the Trinity School of Medicine.  It is about off-shore medical schools, and ultimately about the leadership and governance of health care in the US.

As we most recently noted here,

Admission to US medical schools is increasingly difficult.  So many who seek medical careers may be tempted to apply to schools outside the US.  In the last 30 years, American entrepreneurs have opened offshore medical schools, mostly in the Caribbean, that cater to US students.  They teach in English, and do not require immersion in an unfamiliar culture, so may be more attractive than medical schools in other countries whose mission is to educate physicians to practice in those countries. In 2010, Eckhert documented that the number of offshore medical schools, "for-profit institutions whose purpose is to train U.S. and Canadian students who intend to return home to practice," but not to train physicians to practice in the countries in which these schools are located, was rapidly growing.(1)  By 2010, there were 33 such schools, 20 of which were new since 2000.

Such offshore medical schools exist in a grey area.  The small countries or colonies in which they are located usually do not seek to regulate them, since the physicians they produce are going to practice elsewhere. There is no requirement that these offshore medical schools be accredited in the US.  Such  accreditation is currently not required for individual graduates of such schools to be admitted to US house-staff programs or for US licensure.  So perhaps it is not surprising that little is known about these schools.

How they choose students, the qualifications or even names of their faculty, their curriculum, how they supervise clinical training (which is mostly done by affiliated North American hospitals), and what happens to their graduates are obscure.  Eckhert attempted to describe what is known, but noted "variability exists in the availability of information on faculty; where data exists, it is noted that most of the permanent on-site basic science faculty are internationally trained, many have no documented medical education experience in the United States, and it is not uncommon for them to be OMS [offshore medical school] alumni."

As we also noted, most recently here,

 Even less is known about who leads these schools, who if anyone is responsible for their stewardship, and even who owns them.

For comparison, most US schools provide extensive information about their leadership.  Just as an example, see the introductory page on the Dean of the University Washington medical school.

Many US medical schools have their own boards of trustees who are supposed to provide stewardship. For example, the UW board is here.  Their membership is generally known.  Furthermore, most US medical schools report to university leadership, again whose identity is known, and are subject to governance by a university board of trustees.  We have certainly criticized the leadership and governance of US academic medicine.  At least, however, it is possible to find out the names of the people responsible.

While Eckhert wrote in 2010 that the increasing presence of offshore medical graduates in the US "obligates U.S. medicine to take a closer look at these educational programs," no such scrutiny has occurred since then.  While offshore medical schools account for the training of an increasing proportion of US (and presumably Canadian) physicians, we know next to nothing about their leadership and governance.  This seems to be just another part of the decreasing accountability of the leadership of US health care, and the increasing opacity of the governance and stewardship of US health care organizations.  True US health care reform would make leadership transparent and accountable.

This case also illustrates why we must reexamine our fascination for "market based" approaches to health care, when almost nothing about any part of health care resembles, or could resemble a free market (see this post).  We need to make health care more transparent, and shine more sunshine on the nooks and crannies, like off-shore but US corporate owned medical schools. 

Finally, as an aside, in this day and age, the possibility that Trinity School of Medicine is actually owned by an anonymous LLC is particularly alarming.  Such anonymous shell companies have been implicated in global corruption.  Transparency International says this about shell companies

A shell company or corporation is a limited liability entity having no physical presence in their jurisdiction, no employees and no commercial activity. It is usually formed in a tax haven or secrecy jurisdiction and its main or sole purpose is to insulate the real beneficial owner from taxes, disclosure or both.

We really need Sherlock Holmes.

Who Guards the Guardians? - From DeVry at a Time of Alleged Fraud to Anti-Fraud Enforcement for the Department of Education

There seems to be another fox ready to guard the already flustered educational, including medical educational hen house.

Dr Julian Schmoke to Lead Student Aid Enforcement Unit

According to Politico on August 30, 2017, the new head of enforcement for the Department of Education will be one Dr Julian Schmoke Jr,

The Trump administration has tapped a former for-profit college official to lead the Education Department unit that polices fraud in higher education.

Julian Schmoke Jr., who previously directed campus operations at West Georgia Technical College and served as a dean at DeVry University, will be the department’s new chief enforcement officer, according to an internal email obtained by POLITICO.

Schmoke will lead the Student Aid Enforcement Unit, which was established by the Obama administration to more aggressively combat fraud and deceptive practices at colleges and universities.

The unit has been without a permanent leader since the departure earlier this year of Robert Kaye, a former top consumer protection attorney at the Federal Trade Commission.

'Julian possesses over 16 years of experience in higher education leadership with extensive knowledge in the development and implementation of strategies for achieving student success, higher education policy and evaluation of academic programs,' the head of the Federal Student Aid Office A. Wayne Johnson wrote in an internal email last week.

Dr Schmoke's Work for DeVry University, and its Previous Fraud Settlements

Left unsaid by Department of Education officals was that Dr Schmoke had a significant role in DeVry University.  However, per Politico

Schmoke worked in various roles at DeVry University between October 2008 and April 2012, including as an associate program dean, according to his LinkedIn page.

DeVry’s parent company, which has since rebranded as Adtalem Global Education, last year agreed to pay $100 million to resolve allegations by the Federal Trade Commission that the for-profit college company misled students about their job and salary prospects.

The company also separately reached a settlement with the Education Department over similar allegations. Obama administration officials cited those cases against DeVry as they announced the formation of the Student Aid Unit last year.

The unit Schmoke will oversee is also responsible for processing debt relief claims filed by federal student loan borrowers who say they’ve been defrauded by their college. DeVry students had 1,872 'borrower defense to repayment' claims pending before the department, according to a July 7 letter from acting Undersecretary of Education James Manning.

A bit more about the fraud settlements made by DeVry appeared in the Atlanta Journal Constitution:

In December, the Federal Trade Commission announced a $100 million settlement with DeVry Education Group, parent of DeVry University. Under the settlement, DeVry will pay $49.4 million in cash to be distributed to qualifying students who were harmed by the deceptive ads, as well as $50.6 million in debt relief. The debt being forgiven includes the full balance owed —$30.35 million— on all private unpaid student loans that DeVry issued to undergraduates between September 2008 and September 2015, and $20.25 million in student debts for items such as tuition, books and lab fees, according to the FTC.

In 2016, we hadposted even more detail about the settlement here.

While Dr Schmoke had left DeVry by the time the settlement was made, he was there at the time DeVry was taking the actions that led to the lawsuits. Per the Wonkette blog,

Dr. Schmoke was a dean at DeVry between 2009 and 2012. During that time, the Federal Trade Commission sued the school for claiming that 90% of its graduates were employed in their field within six months of graduation. In fact, the real number dipped as low as 52%. Per WaPo,

According to the FTC lawsuit, DeVry counted graduates as working in their field when they were not, in order to boost its employment outcomes. A 2012 graduate who majored in business administration was working as a server at a restaurant, while another with a degree in technical management was working as a rural mail carrier.

Yet the creation of the unit of the Department of Education that Dr Schmoke is going to lead seems to have been inspired by the sorts of abuses that his former company, DeVry, was alleged to have committed, (see report by National Public Radio in 2016).

Discussion - In General

We could start a discussion of conflicts of interest, and even the revolving door, but,...

Thus, as an opinion piece in the Atlantic asserted, the appointment of Dr Schmoke "provoked complaints from critics who pointed out that DeVry recently settled several claims brought against it by regulators alleging it had engaged in some of the very abuses the unit is charged with eliminating."  A writer for Gizmodo put it  more bluntly,

the new student protection bureau of the federal government just hired a guy who worked at the same company whose malicious practices inspired the creation of that new student protection bureau. It’s like hiring one of Al Capone’s henchman to run the FBI!

Of course, the appointment was made by an administration headed by the man for whom Trump University was named, the same bogus university which also settled fraud allegations (see the New York Times story from November, 2016 here, and our post here).

The issue is no longer laxity or timidity in the protection of the public from fraud and deception.  The issue seems to be that the fraudsters are now to be in charge of the public's protection.  This has dire implications for the country.

Discussion - Implications for Off-Shore Medical Education

But we are focused on health care dysfunction, and this particular case also seems to have dire implications for medical eduction.

DeVry University, as we have posted, most recently here,  owns American University of the Caribbean School of Medicine, and Ross University School  of Medicine. These are off-shore medical schools that cater to US and Canadian students who wish to go back to the US and Canada to practice. However, they are located in various small Caribbean countries, and since they do not train doctors to practice in those countries, essentially operate without much regulation.

As we have said before,

Admission to US medical schools is increasingly difficult.  So many who seek medical careers may be tempted to apply to schools outside the US.  In the last 30 years, American entrepreneurs have opened offshore medical schools, mostly in the Caribbean, that cater to US students.  They teach in English, and do not require immersion in an unfamiliar culture, so may be more attractive than medical schools in other countries whose mission is to educate physicians to practice in those countries. In 2010, Eckhert documented that the number of offshore medical schools, "for-profit institutions whose purpose is to train U.S. and Canadian students who intend to return home to practice," but not to train physicians to practice in the countries in which these schools are located, was rapidly growing.(Eckhert NL.  Private schools of the Caribbean: outsourcing medical education.  Acad Med 2010; 85: 622-630.  Link here.)  By 2010, there were 33 such schools, 20 of which were new since 2000.

Such offshore medical schools exist in a grey area.  The small countries or colonies in which they are located usually do not seek to regulate them, since the physicians they produce are going to practice elsewhere. There is no requirement that these offshore medical schools be accredited in the US.  Such  accreditation is currently not required for individual graduates of such schools to be admitted to US house-staff programs or for US licensure.  So perhaps it is not surprising that little is known about these schools.

How they choose students, the qualifications or even names of their faculty, their curriculum, how they supervise clinical training (which is mostly done by affiliated North American hospitals), and what happens to their graduates are obscure.  Eckhert attempted to describe what is known, but noted 'variability exists in the availability of information on faculty; where data exists, it is noted that most of the permanent on-site basic science faculty are internationally trained, many have no documented medical education experience in the United States, and it is not uncommon for them to be OMS [offshore medical school] alumni.'

Since I wrote that, several anecdotes about life as an off-shore medical student have appeared (in February, 2017, and in March, 2017, in KevinMD).  Both stressed that the modus operandi of these schools is to have relatively lax entry criteria, make a lot of money from the tuition of the students initially enrolled, and then ruthlessly weed out the weakest, who may nonetheless be left with tremendous debt.  Furthermore, the March, 2017 post noted further signs of poor quality, including "mandatory lectures are nearly pathetic. There are so many mistakes made by the inexperienced professors, and the lecture becomes confusing and muddled."  Further, students who have any "emotional distress/burnout/sickness" are left to sink or swim, as the "staff is disconnected and said either repeat the term after you seek medical attention or just quit."    

Given that there are no widely accepted ways to measure the quality of medical schools, there are thus even more reasons to worry about the quality of the education received in off-shore medical schools than in US and Canadian schools. 

Things are likely to get much worse, though, if those in charge of US government agencies that are supposed to protect the public in general, and patients' and the public's health in particular are run by people who previously were involved in predations upon the public. 

It seems silly for me to go on about true health care reform at a time when crooks can be recruited into the police department.  

DeVry Education Group, Owner of American University of the Carrbbean and Ross University Schools of Medicine, Settles Allegations of Deceptive Marketing

The parade of legal settlements made by large health care organizations just keeps stepping along.  The latest entry in it was DeVry Education Group, which owns two for-profit offshore (from the US and Canada) medical schools: American University of the Caribbean School of Medicine, and Ross University School  of Medicine.

The Case

In early 2016, we first discussed the deceptive marketing charges against DeVry University and DeVry Education Group here.  The charges have now been settled. The lede of the AP story about the settlement (via ABC News) was:

DeVry University and its parent company are paying $100 million to settle a federal lawsuit alleging the school misled students through deceptive ads.

The allegations that led to the settlement were:

The lawsuit focused on two marquee ad claims that DeVry used for years but dropped in October in a settlement with the U.S. Education Department.

Since at least 2008, the chain had advertised that 90 percent of its graduates who actively sought employment landed jobs in their field within six months of graduation.

But federal investigators found that DeVry was counting students who found jobs outside the fields they studied, and who already had jobs before they enrolled.

Included in the statistic was a graduate who studied in the health care field but found work as a restaurant server and another who worked as a car salesman, according to the FTC lawsuit.

The commission also challenged a claim that DeVry graduates earn 15 percent more than alumni at other schools a year after graduation.

So these were relatively straightforward allegations of deceptive marketing. The penalties included fines for the company as a whole.

Under the settlement, DeVry agreed to pay more than $49 million to the FTC, which says it will distribute the money to students 'harmed by DeVry's conduct.'

The chain also agreed to forgive more than $30 million in loans issued before September 2015, and $20 million in debt owed by former students.

Also,

Going forward, DeVry has promised not to misrepresent job and income prospects of potential students, and not to count jobs that students found more than six months before graduation.

That seems a bit strange, because

officials for Devry, which is based in Downers Grove, Illinois, denied all wrongdoing but said they are 'pleased this matter is reaching resolution.'

If there was no wrongdoing, why did they need to pledge no further wrongdoing? In fact, if there was no wrongdoing, why did company management agree to pay $100 million? It seems to me that if there was no good evidence supporting the charges, the company could have defended the suit for a lot less than that.

Of course, the managers knew that the settlement would be paid by other peoples' money. As is usually the case nowadays, it did not include any negative consequences for any company managers who might have enabled, authorized, directed or implemented any deceptive marketing.

The Implications

So once again we have an example of a legal settlement involving a large, US based health care related - at least in part - organization.  The settlement involved allegations of unethical behavior that likely harmed students.  Yet the amount of the settlement amounted to a slap on the wrist for a corporation with over $1.8 billion in revenue (2015-2016, per Yahoo).  Furtheremore, the nature of the settlement demonstrated the continued impunity of managers of large health care organizations, none of whom in this case had to suffer any negative consequences, yet some must have enabled, authorized, directed or implemented the deceptive marketing. 

This case also raises even more questions about the American (and to some extent Canadian) reliance on offshore, for-profit medical schools to train many of their physicians.  As we have frequently discussed, (most recently here),...

 Admission to US medical schools is increasingly difficult.  So many who seek medical careers may be tempted to apply to schools outside the US.  In the last 30 years, American entrepreneurs have opened offshore medical schools, mostly in the Caribbean, that cater to US students.  They teach in English, and do not require immersion in an unfamiliar culture, so may be more attractive than medical schools in other countries whose mission is to educate physicians to practice in those countries. In 2010, Eckhert documented that the number of offshore medical schools, "for-profit institutions whose purpose is to train U.S. and Canadian students who intend to return home to practice," but not to train physicians to practice in the countries in which these schools are located, was rapidly growing.(1)  By 2010, there were 33 such schools, 20 of which were new since 2000.

Such offshore medical schools exist in a grey area.  The small countries or colonies in which they are located usually do not seek to regulate them, since the physicians they produce are going to practice elsewhere. There is no requirement that these offshore medical schools be accredited in the US.  Such  accreditation is currently not required for individual graduates of such schools to be admitted to US house-staff programs or for US licensure.  So perhaps it is not surprising that little is known about these schools.

How they choose students, the qualifications or even names of their faculty, their curriculum, how they supervise clinical training (which is mostly done by affiliated North American hospitals), and what happens to their graduates are obscure.  Eckhert attempted to describe what is known, but noted "variability exists in the availability of information on faculty; where data exists, it is noted that most of the permanent on-site basic science faculty are internationally trained, many have no documented medical education experience in the United States, and it is not uncommon for them to be OMS [offshore medical school] alumni."

Concerns about how offshore medical schools are run, and how well they educate their students can only be heightened by the settlement of the latest DeVry case.

The DeVry statement about the settlement included the assertion that "at no time has the academic quality of DeVry University education been questioned."  This is a bit disingenuous.  The case was brought by the Federal Trade Commission, which has no particular role overseeing educational quality, and was specifically about deceptive marketing.

One wonders, however, what sort of education might be provided by a large corporation whose corporate culture did not recoil from what appeared to be grossly deceptive marketing.

That statement also specifically only mentioned DeVry University, which is one of many for-profit "educational" organizations under the Devry umbrella (look here).  It said nothing about how such a corporate culture might affect educational quality at the other subsidiaries. 

It certainly did nothing to help answer questions that were previously raised about the two DeVry owned and operated for-profit medical schools.  In 2013, we posted about a Bloomberg investigative article about the two DeVry owned medical schools, at the American University of the Caribbean and Ross University.  The article focused on multiple issues:
-  high attrition rates of students compared to those in US based schools
-  inability of many students to complete clinical training in the customary two years
-  low rates of students matching to US residencies compared to US graduates
-  high costs for students, presumably a cause of their high levels of debt

Keep in mind that some of these concerns were based on statistics supplied by DeVry.  Yet now there is a new reason to be doubtful about their statistics, and any other information coming out of DeVry about its medical education offerings.  Furthermore, while Eckhert wrote in 2010 that the increasing presence of offshore medical graduates in the US "obligates U.S. medicine to take a closer look at these educational programs," no such scrutiny has occurred since then.

So, we see another aspect of the US health care system in which money seems to trump mission, facilitated by an unseemly alliance between wealthy corporate executives and bad US government policy.  We need to reexamine our fascination for "market based" approaches to health care, when almost nothing about any part of health care resembles, or could resemble a free market.  We need to make health care more transparent, and shine more sunshine on the nooks and crannies, like off-shore but US corporate owned medical schools.  We need to facilitate health care leadership and governance that puts patients' and the public's health first, way ahead of the personal enrichment of the participants.

This may be a pipe dream in 2016, since the US at least just voted in what seems to be the most market fundamentalist, plutocratic administration yet.  As the AP article noted, "some for-profit colleges see President-elect Donald Trump as a champion of the private sector who could spur a rebound for the [for-profit education] industry.  In the weeks after Trump's election, sharing in DeVry's parent company surged 30 percent."
 
Thus, as long as the US continues its light touch regulation if, or even further deregulates the outsourced offshore system which now educates increasing numbers of US doctors(2), Americans who want to become doctors ought to be very skeptical about the futures they may face if they choose to go to such offshore schools.

References

1.  Eckhert NL.  Private schools of the Caribbean: outsourcing medical education.  Acad Med 2010; 85: 622-630.  Link here.
2.  Eckhert NL, van Zanten M.  U.S.-citizen international medical graduates - a boon for the workforce? N Engl J Med 2015; 372: 1686-7.  Link here.

Whom Can You Trust? - FTC Charges DeVry University, Sister School of American University of the Caribbean and Ross University Medical Schools, with Deceptive Marketing

Now there is another reason for Americans who aspire to medical careers to be concerned about applying to offshore medical schools.

Introduction

Admission to US medical schools is increasingly difficult.  So many who seek medical careers may be tempted to apply to schools outside the US.  In the last 30 years, American entrepreneurs have opened offshore medical schools, mostly in the Caribbean, that cater to US students.  They teach in English, and do not require immersion in an unfamiliar culture, so may be more attractive than medical schools in other countries whose mission is to educate physicians to practice in those countries. In 2010, Eckhert documented that the number of offshore medical schools, "for-profit institutions whose purpose is to train U.S. and Canadian students who intend to return home to practice," but not to train physicians to practice in the countries in which these schools are located, was rapidly growing.(1)  By 2010, there were 33 such schools, 20 of which were new since 2000.

Such offshore medical schools exist in a grey area.  The small countries or colonies in which they are located usually do not seek to regulate them, since the physicians they produce are going to practice elsewhere. There is no requirement that these offshore medical schools be accredited in the US.  Such  accreditation is currently not required for individual graduates of such schools to be admitted to US house-staff programs or for US licensure.  So perhaps it is not surprising that little is known about these schools.

How they choose students, the qualifications or even names of their faculty, their curriculum, how they supervise clinical training (which is mostly done by affiliated North American hospitals), and what happens to their graduates are obscure.  Eckhert attempted to describe what is known, but noted "variability exists in the availability of information on faculty; where data exists, it is noted that most of the permanent on-site basic science faculty are internationally trained, many have no documented medical education experience in the United States, and it is not uncommon for them to be OMS [offshore medical school] alumni."

Such information as is available about these schools comes from the schools themselves.


DeVry Accused of Deception


Yet now there is reason to be more suspicious about the information the schools choose to reveal.  This week, media reports documented that the US Federal Trade Commission (FTC) is suing DeVry University for allegedly "deceptive" recruiting practices.  DeVry University is a subsidiary of DeVry Education Group.  DeVry has two offshore medical schools as subsidiaries, the American University of the Caribbean School of Medicine, and Ross University School of Medicine.

Here is a summary from the Miami Herald,

On Wednesday, the Federal Trade Commission sued DeVry, which operates three Florida campuses, including one in Miramar, for 'deceptive' recruiting practices. The company is one of the nation’s largest for-profit colleges, with 50-plus U.S. campuses, and more than 41,000 students. In addition to the disputed 90 percent number [of graduates who found work in their chosen field], the FTC alleges DeVry also falsely advertised that its graduates 'earn 15% more than graduates from other colleges and universities.'

The allegations were that DeVry rigged the statistics:

The FTC suit alleges that DeVry fudged the numbers on its 90 percent job placement rate by leaving out some out students who weren’t finding jobs. This was done by classifying the students as not actively seeking employment, even though that wasn’t the case, the FTC says.

According to the FTC, DeVry also boosted its job placement numbers by counting students as placed in their field even when that clearly wasn’t accurate. Examples of DeVry’s 'in field' placements cited in the lawsuit include:

▪ A graduate from the technical management degree program working as a mail carrier.
▪ A business administration graduate working as a waiter at the Cheesecake factory.
▪ A business administration graduate working as a secretary at a prison.
▪ A technical management graduate working as a sales associate at Macy’s.

The Miami Herald reporter found at least one more example,

One former student at DeVry’s Miramar campus told the Herald that the school’s recruiter made it seem like his project management degree would lead to guaranteed employment. But after graduating in 2011, the student, who asked to be identified only by his first name, Luis, said he never got a callback from the more than 50 job postings he applied for.

Luis said he has $30,000 in student loans, and is working the same type of job he had before enrolling at DeVry, as a medical device technician.

A blog post on the Republic Report included two more examples,

graduates who majored in technical management working as unpaid volunteer positions at medical centers;

a business administration graduate with a health care management specialization working as a car salesman.

Not surprising, the corporate leadership of DeVry University denied the claims, and dismissed the evidence as "anecdotal examples that exaggerate the allegations but do not prove them."  They focused on the overall numbers, claiming that "there is no national standard for calculating employment statistics...."

 Yet they did not challenge the particular anecdoes, all of which seemed to be examples of unsuccessful placements claimed by the University to be the opposite.

Adding to Previous Concerns about DeVry Owned Offshore Medical Schools

In 2013, we posted about a Bloomberg investigative article about the two DeVry owned medical schools, at the American University of the Caribbean and Ross University.  The article focused on multiple issues:
-  high attrition rates of students compared to those in US based schools
-  inability of many students to complete clinical training in the customary two years
-  low rates of students matching to US residencies compared to US graduates
-  high costs for students, presumably a cause of their high levels of debt

Keep in mind that some of these concerns were based on statistics supplied by DeVry.  Yet now there is a new reason to be doubtful about their statistics.  Furthermore, while Eckhert wrote in 2010 that the increasing presence of offshore medical graduates in the US "obligates U.S. medicine to take a closer look at these educational programs," no such scrutiny has occurred since then. 


Summary

Outsourcing US medical education to offshore schools that largely escape regulation in the US, and in the countries in which they are located is another outstanding example of how the US has applied hyper market based solutions to health care. While more US students are attending such schools, and often paying a high price and incurring high indebtedness for the privileges of doing so, there are many reasons to be doubtful about the quality of the education they may receive, and the likelihood of their long-term success as physicians.

Yet health care, and particularly the quality of education received by those who practice medicine in the US, could be viewed as a public good.  Dubious training of US doctors affect not only the doctors themselves, but their patients' and the public's health.  Outsourcing this education could put a lot of people at risk.

However, it does provide an attractice opportunity for the managers of the outsourced system to make money.  Per the DeVry Education Group 2015 proxy statement, CEO received $5,343,407 in total compensation that year, and owned over one million shares of stock (currently valued at just under $20 million).  Four other named officers each received at least $1 million.

So, we see another aspect of the US health care system in which money seems to trump mission, facilitated by an unseemly alliance between wealthy corporate executives and bad US government policy.  We need to reexamine our fascination for "market based" approaches to health care, when almost nothing about any part of health care resembles, or could resemble a free market.  We need to make health care more transparent, and shine more sunshine on the nooks and crannies, like off-shore but US corporate owned medical schools.  We need to facilitate health care leadership and governance that puts patients' and the public's health first, way ahead of the personal enrichment of the participants.  

As long as the US continues its light touch regulation of the outsourced offshore system which now educates increasing numbers of US doctors(2), Americans who want to become doctors ought to be very skeptical about the futures they may face if they choose to go to such offshore schools. 

References

 1.  Eckhert NL.  Private schools of the Caribbean: outsourcing medical education.  Acad Med 1010; 85: 622-630.  Link here.
2.  Eckhert NL, van Zanten M.  U.S.-citizen international medical graduates - a boon for the workforce? N Engl J Med 2015; 372: 1686-7.  Link here.

The Continuing Mystery of the Fugitive Founder and Missing Money - What it Says About the Opacity of Offshore Medical Schools

The next chapter in the bizarre tale of the fugitive founder of an off-shore (from the US and Canada) Caribbean medical school, and his now convicted spouse, do not solve any mysteries, but raise larger concerns about the accountability, or lack thereof, of leaders of important health care organizations.

Introduction: the Fugitive Founder and Convicted Spouse

As we posted in October, 2013, drawing an amazing for us number of comments, the couple who founded two Caribbean medical schools which catered almost entirely to US and Canadian students ran into significant legal trouble.  Founder David Leon Fredrick and his wife, Dr Patricia Lynn Hough were indicted for tax evasion for failing to report income from the two medical schools they allegedly owned, and later sold.

The schools were Saba University School of Medicine, on Saba, and the Medical University of the Americas, on Nevis.  The initial legal proceedings revealed that while Saba University School of Medicine was apparently first set up by a non-profit foundation (or NGO) run by the couple, somehow it became for-profit owned by Mr Fredrick and Dr Hough, and Saba and the Medical University of the Americas were subsequently sold to a private equity group, Equinox Capital.

Before jury selection started, Mr Fredrick disappeared.  Dr Hough was eventually convicted of defrauding the US Internal Revenue Service, and income tax evasion, after trial testimony to the effect that the couple concealed money in a Swiss bank, got $36 million from the sale of the schools, and bought an airplane, two houses, and a condominium.

Left mysterious at that time were Mr Fredrick's whereabouts, where the money that the couple derived from the sale of the medical schools went, and how a school that began as a non-profit organization became a for-profit corporation owned by the couple.  The case should have lead to some concerns about the leadership and governance of the off-shore medical schools that now train increasing numbers of would be US and Canadian physicians.

However, after Dr Hough was convicted, there was little public discussion of these issues, at least until Dr Hough's recent sentencing.  (There were some interesting comments made on our blog post, many from anonymous erswhile defenders of Saba University and/or Mr Fredrick and Dr Hough.  While they expressed some interesting opinions, in my humble opinion they did not add any substantive facts to the discussion.)

Latest Developments in the Case

In the past few weeks the case got a little more public notice in terms of reporting of the legal proceedings leading to the sentencing of Dr Hough   They brought to light some additional contentions by the prosecution, which deserve some attention because after all, they won their case.

The Amount of Money the Couple Made


As reported by the Sarasota (FL) Herald-Tribune,  Dr Hough was sentenced to two years in federal prison, three years of supervised release, and to repay $15 million to the IRS.  In addition,

 Prosecutors say Hough and Fredrick sold the schools and associated real estate in April 2007 for more than $35 million. An IRS agent testified last Thursday that Hough also made more than $12 million in income from the two schools from 2003 until 2007.

How much Mr Fredrick made was not discussed since it was not relevant to Dr Hough's sentencing. 

The Effort that Went into the Plot

According to Bloomberg,

'Hough’s crimes were neither impulsive nor isolated but required sophisticated transactions, coordination with foreign bankers, annual lies to the federal government, and by her own admissions, trips to Switzerland,' prosecutors wrote in a sentencing memo on April 14. 'Hough made calculated decisions to cheat, over and over again.'

Also,

Prosecutors accused the couple of crafting their scheme with UBS AG (UBSN) banker Dieter Luetolf and Swiss financial adviser Beda Singenberger, both unindicted co-conspirators.

Singenberger, who was separately charged with helping 60 U.S. clients hide $184 million in offshore accounts, hasn’t responded in federal court in New York.

In more detail,

Prosecutors said the couple used an array of accounts in the names of businesses to hide their money and employed 'e-mails, telephone calls and in-person meetings to instruct Swiss bankers and asset managers to make investments and transfer funds from their undeclared accounts at UBS.'

The Mysteries Remain



Where Did the Money Go?

As noted above, the sale of the two medical schools netted Mr Fredrick and Dr Hough about $35 million.  Where that went is still unclear.

How Did Mr Fredrick and Dr Hough Become Owners of a Previously Non-Profit Medical School?

As noted above and in our previous post, Saba University School of Medicine began as a non-profit managed by Mr Fredrick and Dr Hough.  Somewhere along the way, the couple assumed ownership of the school.  There seems to be no record and no discussion of how this happened.  In the US, a conversion of a substantial non-profit, like a medical school, to a for-profit, ordinarily would require some regulatory approval and public discussion.  Furthermore, in most cases, non-profit conversions to for-profit would require some sort of protection of the assets of the former non-profit, often leading to a spin-off of a new non-profit foundation.   None of this apparently happened in this case (which admittedly did not occur in the US.)  How did Mr Fredrick and Dr Hough just take over a non-profit, sell it, and keep all the money involved?

Where is Mr Fredrick and Why did He Flee?

We need Sherlock Holmes for this. 


What Does This Case Say About the Leadership and Governance of Offshore Medical Schools?

So the latest details revealed suggest a fairly intricate plot by the American couple who founded two Caribbean medical schools.  The plot allegedly netted them millions, and now resulted in one of the couple remaining a fugitive, and the other convicted of federal crimes.

The biggest issue raised by this case, in my humble opinion, is not about financial crimes, tax-evasion, or the hiding of assets in Swiss banks.  It is about the leadership and governance of offshore Caribbean medical schools, and by extension, of academic medicine and health care.  In 2010, Eckhert documented that the number of offshore medical schools, "for-profit institutions whose purpose is to train U.S. and Canadian students who intend to return home to practice," but not to train physicians to practice in the countries in which these schools are located, was rapidly growing.(1)  By 2010, there were 33 such schools, 20 of which were new since 2000.

These offshore medical schools are not accredited in the US or Canada, and such accreditation is currently not required for individual graduates of such schools to be admitted to US house-staff programs or for US licensure.  So perhaps it is not surprising that little is known about these schools.

How they choose students, the qualifications, or even names of their faculty, their curriculum, how they supervise clinical training (which is mostly done by affiliated North American hospitals), and what happens to their graduates are boscure.  Eckhert attempted to describe what is known, but noted "variability exists in the availability of information on faculty; where data exists, it is noted that most of the permanent on-site basic science faculty are internationally trained, many have no documented medical education experience in the United States, and it is not uncommon for them to be OMS [offshore medical school] alumni."

Even less is known about who leads these schools, who if anyone is responsible for their stewardship, and even who owns them.  The current case suggests that Saba University School of Medicine was run by couple who mysteriously assumed ownership of the school after leading it as a non-profit organization, then sold it to private equity for millions in a transaction that eventually left one a convicted criminal and the other a fugitive.  Yet none of this came to light until the federal government launched an investigation not of offshore medical schools, but of offshore money laundering and happened to catch the couple in the investigational web. No regulatory process, no watchdog organization in the US or Canada, or on Saba apparently found this out until it was revealed in an investigation by the US federal government that had nothing specifically to do with health care or offshore medical schools.  This suggests that offshore medical schools now can be lead and run by anyone, qualified or not, honest or criminal, without any oversight or accountability.  

For example, even today little is known about the leadership of Saba University School of Medicine.  The school currently provides only minimal biographical information on its administration.  Its President is listed as Joseph Chu MD MPH, who appears to have the same educational credentials (MD from Georgetown, MPH from University as Washington) as one Joseph Chu who is apparently a Clinical Associate Professor of Epidemiology at the University of Washington.   Dr Chu's specialty and previous experience are not apparent.  Whether the Dr Chu at University of Washington is the same as the President of Saba is unclear.  If they are the same, how Dr Chu holds down these two jobs is not clear.

For comparison, most US schools provide extensive information about their leadership.  Just as an example, see the introductory page on the Dean of the University Washington medical school.

Even less is known about the stewardship or governance of Saba University School of Medicine.  Many US medical schools have their own boards of trustees who are supposed to provide stewardship. For example, the UW board is here.  Their membership is generally known.  Furthermore, most US medical schools report to university leadership, again whose identity is known, and are subject to governance by a university board of trustees.  We have certainly criticized the leadership and governance of US academic medicine.  At least, however, it is possible to find out the names of the people responsible. 

However, while Saba University School of Medicine is still apparently owned by Equinox Capital according to the latter's website, to whom Dr Chu reports at Equinox Capital is unclear.  Whether Saba has a board of trustees, or any such similar stewardship mechanism, is unclear.  So who is ultimately accountable for Saba is unclear.  Probably just as unclear is who leads, who stewards, and who is accountable for the leadership of most other offshore medical schools.

While Eckhert wrote in 2010 that the increasing presence of offshore medical graduates in the US "obligates U.S. medicine to take a closer look at these educational programs," no such scrutiny has occurred since then.  While offshore medical schools account for the training of an increasing proportion of US (and presumably Canadian) physicians, we know next to nothing about their leadership and governance.  This seems to be just another part of the decreasing accountability of the leadership of US health care, and the increasing opacity of the governance and stewardship of US health care organizations.  True US health care reform would make leadership transparent and accountable.         

Reference
 1.  Eckhert NL.  Private schools of the Caribbean: outsourcing medical education.  Acad Med 1010; 85: 622-630.  Link here. 

The Mystery of the Fugitive Founder (and Longterm President of an Offshore Medical School for US Students)

We recently wrote about for-profit medical schools located offshore from the US, but catering to American students, not students from the countries in which they operate.  Now some new media reports raise further questions, if not mysteries about another set of such schools.  

Two Bloomberg articles on a trial underway focused on the alleged use of offshore accounts to avoid US taxes.  These accounts were connected to the former long-term President and founder of two offshore medical schools, and his spouse, a dean at one of the schools.  


The first Bloomberg article opened thus:

Patricia Hough, according to her lawyers, is an altruistic psychiatrist who helped her husband build two Caribbean medical schools. To prosecutors, she is a tax cheat who used offshore accounts to avoid paying taxes on millions of dollars from the schools’ sale.

Jury selection began today in federal court in Fort Myers, Florida, where Hough, 67, is accused of using accounts at UBS AG, the largest Swiss bank, and elsewhere to hide assets and income from the Internal Revenue Service, including almost $34 million she and her husband made when the schools were sold in 2007. 

The Bloomberg article asserted,

 At the heart of the case is whether she misused accounts associated with the Saba University School of Medicine Foundation.

The main question to me is not whether Dr Hough is guilty or innocent, which I cannot tell.  There are more intriguing  mysteries raised by this case.

How Did Non-Profit Medical Schools Become For-Profit?
 
According to Bloomberg,

  Hough’s lawyers say she helped [her husband, David] Fredrick build Saba University School of Medicine, on the island of Saba in the  Netherland Antilles, and the Medical University of the Americas, or MUA, on Nevis in the West Indies.

To do so,

 Through the Saba foundation, which they first funded in 1988, according to a government trial brief filed Oct. 3, the couple opened the Saba University School of Medicine in 1993. Fredrick served as president and a foundation director. Hough was associate dean for clinical medicine. 

Also,

In 1999, Fredrick and Hough began the Medical University of the Americas, a for-profit school on Nevis in the West Indies, according to the government filing.

There seems to be no question that the schools were started by a foundation based in the Netherland Antilles.  A report of a site visit of the Saba University School of Medicine by the Division of Licensing of the Medical Board of California in 2004 summarized this history,

In 1986, the government of the Netherlands Antilles proposed to a group of American educators that a medical school be established on the small island of Saba, N.A.  It was to be relatively small, of high quality and established for the dual ppurpose of benefiting the economy of the island (of only 1500 population) and attracting N.A. citizens to medical careers in the N.A.

A committee of Dutch citizens from Curacao, the seat of the N.A. government, approved the preliminary plans and the school was founded as a non-profit foundation under Dutch law....

The Saba University website still states that the school is accredited in the Netherlands,

Saba University School of Medicine’s Doctor of Medicine (M.D.) program is accredited by the NVAO (in Dutch: Nederlands-Vlaamse Accreditatieorganisatie). The NVAO is the Accreditation Organization of the Netherlands and Flanders. This organization was established by international treaty and ensures the quality of higher education in the Netherlands and Flanders.

So apparently Saba University was started as a non-profit organization meant to focus on medical education for the Netherlands Antilles, and thus accredited there.  But then, somehow,  according to Bloomberg.

Equinox Capital, a private-equity firm based in Greenwich, Connecticut, bought the Saba school and MUA for $36 million in 2007. The transaction included $34 million for land held in the name of Fredrick’s daughter from an earlier marriage, according to prosecutors.

Hough and Fredrick didn’t tell the IRS about most of the proceeds of the sale and transferred money among various undeclared accounts to buy the plane and real estate, make gifts to family members and pay personal expenses, prosecutors said.

There also seems to be no question that Equinox Capital did buy the schools.  The summary of a 2007 press release from the company stated,

 Equinox Capital III, L.P. announced that it has completed the recapitalization of Saba University School of Medicine B.V. ('Saba'). Founded in 1986, Saba is a leading for-profit university that awards four-year graduate degrees in Doctors of Medicine (M.D.). 

A statement from Prairie Capital, which is now an investor in the schools, noted that now

 R3 Education is a Massachusetts-based holding company that controls The Saba University School of Medicine ('Saba'), The Medical University of the Americas ('MUA') and St. Matthew University ("SMU").

After,

 Prairie Capital partnered with Equinox Capital to acquire the three universities.

It is enough to cause some dizziness.  Let me recap.  Mr Fredrick and Dr Hough somehow founded two medical schools apparently under the auspices of a foundation, the Saba University School of Medicine Foundation, which the couple ran.  The goal of the foundation was to attract Netherland Antilles citizens to medical careers in the NA.   However, the Saba University school became an off-shore facility for US medical students.  The two schools were later acquired by Prairie Capital and Equinox Capital, and they are now run as for-profit operations by R3 Education.

So somehow Saba University transitioned from being a non-profit meant to serve the medical education needs of the Netherlands Antilles to a for-profit owned by US private equity firms (and apparently now focused on serving Americans.)

How did that happen?  What was the rationale for the change?  Did any Dutch authorities consider the implications for their country?  Did any American organizations concerned with the quality of education and credentials of US physicians consider the implications?

Where Did the Money Go?

According to Bloomberg, US prosecutors made some striking allegations,

Both the foundation and MUA failed to tell the IRS about accounts held at UBS, Liechtenstein Landesbank and other banks, the U.S. charges.

Singenberger and Luetolf helped the foundation and MUA move money through British Virgin Islands or Hong Kong entities they controlled called Top Fast Finance Ltd., Ample Dynamic Trading Ltd., New Vanguard Holdings Ltd. and Apex Consultants Ltd., according to prosecutors.

'Hough and Fredrick were the beneficial owners of and had signatory authority over all over these accounts and owned and controlled each of them,' prosecutors said in their brief. 

The prosecution also alleged that Mr Fredrick and Dr Hough spent the money they allegedly got from selling the two medical schools rather lavishly.  Per the second Bloomberg article,

[Prosceutor] Kessler said Hough and her husband used the proceeds of the school sales to buy a $1.6 million airplane, a $1.1 million house in Asheville, North Carolina, a $590,000 house in Greenville, North Carolina, and an $800,000 condominium in Sarasota, Florida. She said they also gave money to relatives.

The prosecutors charged that the money the private equity firms paid went to Mr Fredrick and Dr Hough.  But while Mr Fredrick was President of Saba University, and apparently ran the foundation that was supposed to support it, he did not own either.  So why would the money go to him, and his wife?  If the money did not go to them, where did it go?

As the trial continued, as documented in a second Bloomberg article, Dr Hough's lawyer denied that she got the money,

Dan Saunders, an attorney for Hough, said his client never believed the money held at UBS AG (UBSN), the largest Swiss bank, and in other offshore banks belonged to her. Rather, he said, she thought it belonged to the foundation that ran the schools.

'It wasn’t her money, and she never believed it was,' Saunders said in his opening statement. 

If that is true, however, why is money that supposedly belongs to a foundation sitting quietly in a Swiss bank?

Dr Hough's lawyer said,

 Saunders said the accounts did serve a business purpose: to protect the assets of their nonprofit foundation from people attempting a hostile takeover.

Hostile takeovers of publicly held corporations do occur, of course.  However, how could a hostile takeover of a foundation occur, and who would possibly want or be able to do so?

So thus far, no one has offered a rationale explanation for how the schools were sold, why they were sold, and where the money resulting from the sale went.

Where in the World is Mr Fredrick?

So far, while the defendant is Dr Hough, the role of her husband, Mr Fredrick, apparently the President of Saba University from its founding at least until 2007, seems key.  Yet little of the coverage focused on Mr Fredrick.  The reason for that suggests the next mystery, per  the first Bloomberg article,

Fredrick vanished after the indictment, leaving Hough to face trial alone. U.S. District Judge John Steele, who is overseeing the trial, has declared Fredrick a fugitive.

So why did Mr Fredrick flea, and of course, where did he go?

Obviously, the fact that Mr Fredrick, who was the President of Saba University for many years, chose not to defend himself against charges that he hid the money he somehow obtained from the sale of that and another medical school, but rather fled, suggests that he may not have had a very good defense against those charges.  What does that say about the leadership of these medical schools?

 Summary

So the coverage of this intriguing trial, when added to some other publicly available information, suggests a wealth of mysteries about the founding, current nature, and leadership of two Caribbean medical schools which currently are run as for-profit firms and owned by US private equity firms, and whose student bodies come almost exclusively from the US.

So the really big mysteries are those about the implications for the medical education these schools provide, the students they attract, the physicians who graduate from their programs, the US patients of such physicians, and the US government which largely provides the loans which paid for these students' education (look here).

Despite the extraordinary nature of this case (again, involving the longterm president of an offshore medical school that sought to educate a substantial number of US physicians, and who is now a fugitive from justice), the only interest in it so far seems to be its implications for US prosecutions of hidden offshore accounts.

This case illustrates why we must reexamine our fascination for "market based" approaches to health care, when almost nothing about any part of health care resembles, or could resemble a free market (see this post).  We need to make health care more transparent, and shine more sunshine on the nooks and crannies, like off-shore but US corporate owned medical schools.  We need to facilitate health care leadership and governance that puts patients' and the public's health first, way ahead of the personal enrichment of the participants.  




ADDENDUM (29 October, 2013) - Dr Hough was convicted of defrauding the IRS and income tax evasion, see the Bloomberg article.  So far I see no response, certainly no apology or disavowal, by the current managers and owners of the medical school. 

Some Conflicts Grow in Brooklyn

From the New York Daily News, here is a new twist on the conflicts of interest story. This is about two leaders of Wyckoff Medical Center in my hometown of Brooklyn, NY, the hospital's chief of surgery, Dr Addagada Rao, and its CEO, Rajiv Garg.

It turns out that Dr Rao has another position, this one far away at Spartan Health Sciences University, a medical school located on the Caribbean island of St Lucia:

The $400,000-a-year chief of surgery at Brooklyn's Wyckoff Heights Medical Center heads a Caribbean medical school that hopes will funnel medical students - and their money - back to New York, the Daily News has learned.

The surgeon, Dr. Addagada Rao, is the president of Spartan Health Sciences University in sunny St. Lucia. Last year he became one of a handful of owners in hopes of bringing third- and fourth-year medical students to Wyckoff to train - and to aid its ailing coffers.

'My association with Spartan is to fulfill my lifelong goal to educate all who are able and willing to pursue a career in medicine...' Rao is quoted on the medical school's Web site.

Mr Garg also has a role at Spartan,

Garg, 49, has been Wyckoff's $500,000-per-year CEO since November and is also an investor in Spartan. He told The News he stepped down as Spartan's chief operating officer after he got the top job at Wyckoff.

Meanwhile, the Daily News alleged:

Rao, 67, is in a position to make hundreds of thousands of dollars from the dual relationships.

The ability to train in New York is a big draw for offshore medical schools - especially if the school has an established connection with a hospital, experts said.

The state has approved Spartan students to do only 12-week stints in New York hospitals. Students pay between $4,000 and $5,000 for the training.

Wyckoff - and Rao - could make far more money if the state okays a pending request for Spartan students to do their full two years training at New York hospitals.

Dr Rao was asked about these relationships, and responded,

he saw nothing wrong with having outside financial interests.

'I disclosed this to the hospital,' he said, but declined to offer further details.

Asked if the hospital's board of trustees, of which Rao and Garg are members, approved the arrangement, he said: 'That was not necessary.'

It is still a little hard for me to understand how someone could be chief of surgery at a NY hospital and simultaneously the president of a Caribbean medical school, but setting that aside...

This story illustrates another twist on conflicts of interest affecting the leaders of not-for-profit health care organizations. Many of the smaller not-for-profit hospitals, of which there are thousands in the US, may have minimal conflict of interest policies, which may be minimally enforced, without much transparency or accountability. The coziness of the leadership culture of such smaller institutions may preclude anyone within the culture from asking tough questions. The results may be total confusion as to whose interests particular leaders are serving. In particular, the interests of each hospital's patients may get lost in the shuffle. In this case, the interests of medical students may also get lost in the shuffle. Although the institutions involved may be small, and hence the conflicts may seem small in terms of their monetary value, they aggregate to contribute to the moral miasma that now is the atmosphere of health care.