Who Cares if The Patients Die? - Apparently Not Some Hospice Marketers

An article in USA Today suggests that marketers for hospices are pushing even more aggressive measures to recruit patients, regardless of the consequences.

Marketing Hospice to Prevent Re-Admission

Per USA Today,

Hospice marketers, exploring possibilities for new revenue to help continue the industry's remarkable growth, are looking to exploit a provision in the 2010 health care law by persuading hospitals to send Medicare patients into end-of-life hospice care instead of readmitting them to the hospital.

Such a move, the hospice marketers say, will enable hospitals to avoid paying the Medicare penalties required by the new law when hospitals discharge patients and then have to readmit them within 30 days: Instead of readmitting the patients, hospitals should send them to hospice care, which also is covered by Medicare, according to a USA TODAY analysis of marketing materials.

Patients with severe heart problems and pneumonia tend to decline quickly and often move in and out of hospitals, said hospice marketing specialist Rich Chesney, who proposed the idea.

It might be better, Chesney said, if a hospital CEO hired people to talk to family members about hospice, instead of a doctor, who is more focused on not losing a patient. Chesney made his proposal recently at a conference sponsored by the National Hospice and Palliative Care Organization, an industry trade group. [Chesney is apparently the President of Healthcare Market Resources, whose slogan is "growing bottom lines with information." - Ed]

'If (hospices) make that part of their business and their revenue stream, that's sound business,' said Stan Massey, chief marketing officer for Transcend Hospice Marketing in Holland, Ohio. Massey recently wrote a blog recommending hospice marketers talk to hospital CEOs instead of the doctors who usually decide who is eligible for hospice care. Those conversations, he wrote, 'must be framed heavily in terms of financial benefit.'

Ignoring the Hospice Mission

Lost in the marketers' thinking seems to be any notion of the hospice mission. Hospices are supposed to provide compassionate palliative care to patients at the end of life who do not want any further aggressive intervention. Good hospice care is likely to make the last days of such patients more tolerable.

However, generally hospices intentionally do not provide any care beyond palliation, such as, for example, antibiotics for acute infections, transfusions in the case of acute blood loss, or surgery for acute trauma. Should a patient who is not at the end of life be erroneously admitted to hospice, and then suffer some new acute problem, that patient is at risk of bad outcomes, including death because of denial of the sort of care available in acute care settings. Thus, admitting patients to hospice who are not at the end of life or have not given truly informed consent for hospice care may lead to patients dying prematurely, or suffering suffering preventable complications of treatable diseases and injuries.

Aggressive marketing of hospice, particularly pushing hospice for patients just because they seem likely to be re-admitted to a hospital, especially by having marketers try to go around patients' own physicians, risks admitting patients to hospice who should not be in hospice. Thus such aggressive hospice marketing may lead to needless, and wrongful deaths of, injuries to, and morbidity for patients who should have received more aggressive treatment.

The USA Today article did note:

Health care analysts and ethicists, however, say such proposals are contrary to the intent of the health care law, which is to provide better care, not to put more patients into hospice care for which they are not ready.

The proposals warp the 'whole idea behind hospice,' said Josh Perry, a business and ethics professor at Indiana University.

In addition,

Good hospices have been working with hospital CEOs for years, said Carolyn Cassin, president of the National Hospice Work Group, a coalition of the 25 largest not-for-profit hospice organizations. But the goal, she said, was to make sure patients received the care they needed. She said she was surprised to hear it characterized as a marketing approach to cut costs.

While hospice care costs less than hospital care, at $151 a day for Medicare patients, it's meant for people who are going to die. In hospice care, patients agree not to seek care to improve their health, such as more surgeries, hospitalizations or chemotherapy. After a doctor certifies that he expects a person to die within six months, Medicare covers hospice care.

Experts say they fear patients will be sent to hospice before their time and miss the proper care that could restore their health. Penalties, Perry said, are a 'good thing' to hold hospitals accountable. 'This isn't about extending hospice.'

Summary

We have previously discussed, most recently here, allegations that specific for-profit hospice corporations were admitting patients who were not at the end of life just to make more money. The current USA Today article suggests that the phenomenon of hospices enrolling inappropriate patients just to enhance revenue could be more widespread than previously appreciated. The more often hospices enroll patients who are not at the end of life, and/or have not given true informed consent for hospice care, the more patients are likely to suffer needless and wrongful morbidity and injuries, and the more patients are likely to needlessly, and wrongfully die prematurely.

It seems to me that unexpected morbidity of, injuries to, or premature death of hospice patients who were not obviously already at the end of life could lead to civil litigation, and even criminal investigation.

Furthermore, the realization that hospices, once considered the most humane of health care institutions, are more frequently run for profit, and may put profit ahead of their mission should provoke re-examination of our haste to encourage more and more patient care to be given by for-profit organizations in an era of "greed is good."

If we really want better health care, we will have to change policies, practices, and laws so that leaders of health care organizations are motivated more by the desire to help patients than by the desire to become rich.

The Case of the Vanishing Graduate Medical Education Funds

While primary care falters in the US, those who teach it seem to feel increasingly poverty stricken.  Now it appears that one reason for this is an amazing example of multiple failures of transparency and accountability.  Let me work through it, begging your pardon for a little bit of "inside baseball," medical education style.  The results suggest how we desperately need some medical disciples of Sherlock Holmes.

Background

My personal experience and increasing data suggests that most medical school faculty believe that their teaching is not valued by their institutions because teaching brings in no external funds.  In 2004, Dr Catherine DeAngelis, then the editor of JAMA, wrote "few medical schools provide adequate, if any, reimbursement for teaching time."(1)  (See this 2005 post.)   This seems absurd on its face, since what are medical schools for if it is not to provide teaching. 

However, there is evidence of this mission-hostile behavior.  In 2007, we quoted from a revealing interview with Dr Lee Goldman, Executive Vice President for Health and Biomedical Sciences at Columbia University,(2) who stated that "taxpayers," faculty who "generate more [money] than they cost," are valued most, and implied that faculty who focus on teaching are regarded as "welfare recipients," who bring in less external funding, and are valued least.  In 2010, we noted the results of a large-scale survey presented by Dr Linda Pololi in which 51% of faculty felt that the administration only valued them for the money that they brought in, and half felt that their institutions did not value teaching.(3)

Yet while faculty seem to believe that educational institutions receive little if any money to pay for teaching, it is not clear why the believe something so counter intuitive, and it is less clear what money actually goes to pay for medical education.

US Government Funding for Graduate Medical Education

However, several recent publications affirm that actually a lot of money goes towards one important form of medical education, yet the specifics of the money flows are shrouded in secrecy.  In the May, 2012, SGIM Forum, Dr Mark Liebow and colleagues summarized some of what is known about federal support of graduate medical education, that is, education of interns, residents, and other house officers.(4)  There are two streams of money that flow from Medicare to US hospitals:

Direct GME (DGME) payments help hospitals pay the salaries of residents, teaching faculty, and support staff. DGME is the product of three numbers: a per resident amount that varies by hospital, adjusted annually for inflation; the number of residents in the hospital (capped for each hospital at 1997 levels); and the fraction of discharges from the hospital that are Medicare beneficiaries. The Indirect Medical Education (IME) payment is a percentage amount added on to each DRG payment. The percentage is calculated via a complex formula (the only US statute containing an exponent!), where the key factor is the ratio of interns/residents to beds (IRB ratio).

These two streams are of considerable size:

Of the $9.2 billion Medicare paid for GME in 2010, $3 billion was for DGME and $6.2 billion for IME. The money is paid to hospitals sponsoring training programs rather than to the training programs or other hospitals where training occurs. While about 1,100 hospitals receive GME payments, 66% goes to the 200 hospitals that have the largest numbers of residents.

So, the 200 largest hospitals get about $2 billion in direct GME money (and presumably about another $4 billion in indirect money). This averages then to about $10 million DGME and $20 million indirect GME per hospital.

Thus, teaching, at least the teaching of interns, residents, and other house-staff does pay, and much more than trivial amounts. (Note that these amounts are not for teaching of medical students, which ought to be supported by other funding streams.)

Why then do faculty think that teaching does not bring in any money?

The GME Money Vanishes

An article by Dr Saima I Chaudhry and colleagues in the American Journal of Medicine begins to explain, although the explanations are found between the lines.(5)

First of all, while the graduate medical education money is paid by the government to the hospitals, the government does not publish what it pays to individual hospitals:

It has been previously reported that the amount of GME funding individual hospitals receive is not publicly reported by the Centers for Medicare and Medicaid Services,....

The government also does not hold the hospitals accountable for how they spend this money, nor for the quantity or quality of education they supply in exchange for it.

Remarkably, Chaudhry et al imply that that the people who run graduate medical education teaching programs also may not know how much money their hospitals receive from the government to fund their programs. The introduction to their article noted:

It is unclear how much program directors know about the amount and flow of DME funds to their programs. Program directors' beliefs about the transparency of funding to their programs, or their desire to influence how funds are distributed to them, also are unknown.

The article reported on a survey of internal medicine residency program directors which asked about "their knowledge of D[G]ME funding for their programs, the transparency with which funds are distributed to them, and their desire to influence this disbursement." The researchers sent surveys to 372 member programs, representing 97.1% of all US internal medicine residencies. They got 268 responses, a 72.0% response rate.

The main results were that only 159/268 (59.3%) of program directors had tried to find out how much DGME money their programs received, and of those, only 84 (52.8% of those enquiring, but only 31.3% of all respondents) actually knew how much money their programs got.

Of the 92 program directors who did not even try to discover how much money their programs received, approximately 21% said that "no one would tell me," 21% said that the "information would be inaccurate," 14% said they "don't know who to ask," and 2% were "afraid to ask."

Summary

US medical school faculty, especially those in primary care, increasingly feel pressured to perform activities that they perceive brings in money from external sources. They tend to believe that their own teaching somehow does not bring in any money, and that their careers will fail if they do not put more emphasis on other activities that the institution views as more profitable.

However, literally billions of US government dollars go to support the education of house staff, including the salaries of faculty who teach interns and residents, who probably are the majority of physician faculty. Faculty probably do not know this, because the government does not publish the amounts given to individual hospitals, nor demand of the hospitals any accountability for how they spend the money they receive.

Presumably, the top executives of each hospital know how much money the government gives them. Nonetheless, the majority of physician leaders of residency programs are never told these amounts, apparently because their hospital executives kept the amounts secret. Many of those educators who have tried to find out the figures were unsuccessful. Some did not even try to find out based on beliefs that their attempts would be unsuccessful, any amounts they discovered would be inaccurate, the people who knew the amounts were hidden, or that it would be dangerous to their careers to even try.

Thus billions of dollars of money flowing from the government to fund graduate medical education seems to have vanished in an amazing example of widespread deficiencies in accountability and transparency.

There are many people who blame government for many social ills. In this case, one can blame the US Congress for not writing a law that akes the money flows transparent and hospitals accountable for providing good educational value for the money provided. One can also blame the executive branch, particularly the Center for Medicare and Medicaid Services (CMS) of the US Department of Health and Human Services (DHHS) for not making the money flows and the values received for them transparent.

There are a few people, including this author, who also blame the leadership of health care organizations for many of the problems besetting health care. In this case, one can blame top leadership, presumably CEOs and chief financial officers (CFOs) of hospitals for hiding the amounts of money they receive from Medicare to finance graduate medical education. One can also blame the physician leaders of residency programs for not insisting that they know the true sources of financial support for their programs, obtain budgets that reflect this support, and recognition that their faculty really do bring in external funds for their teaching of house staff (and are thus valuable "taxpayers" in Dr Goldman's parlance.)

It is amazing that such amounts of money have been flowing for years mostly in secret. The secrecy has fueled incorrect, and in retrospect, bizarre ideas about the funding of medical education, and the value of medical educators to their institutions. This secrecy, in tuurn, has helped suppress the morale of medical educators, support the control of managers of health care professionals, and distort the flow of money within academic institutions and to compensation for certain favored individuals.

Would our dysfunctional health care system not be better off if we demanded transparency and accountability from its leaders?  In particular, the US government should make payments to hospitals for graduate medical education completely transparent, and develop a system to hold these hospitals accountable for how they spend the money.  Meanwhile, top leaders of hospitals receiving this money should make the amounts transparent, first to the people who are supposed to be doing the education that the money pays for, and to the public at large.  This would allow those running the relevant educational programs to develop reasonable and realistic budgets, to treat their faculty with respect, and to demonstrate what value they provide for the money received. 
The ongoing anechoic effect, and related deception and secrecy fostered by leaders in health care are major reasons our health care system is so dysfunctional, that costs are so high, and access and quality so poor.  True health care reform would ensure health care leaders put the mission before their personal enrichment, and act ethically with accountability, transparency, and honesty. 
References
1.   DeAngelis CD. Professors not professing. JAMA 2004; 292: 1060-1.  Link here.
2.  Goldman L, Halm EA.  A view from the top: general internal medicine from the perspective of a chair and dean.  SGIM Forum, April, 2007.  Link here.
3.  Pololi L, Ash A, Krupat E.  Faculty Values in the Culture of Academic Medicine: Findings of a National Faculty Survey. Link here.
4.  Liebow M, Jaeger J, Schwartz MD. How does Medicare pay for graduate medical education? SGIM Forum, May, 2012.  Link here.
5. Chaudhry SI, Khanijo S, Halvorsen AJ, McDonald FS,Patel K. Accountability and transparency in graduate medical education expenditures. Am J Med 2012; 125: 517-522. Link here.

The CEO as False Messiah

Why is the leadership of health care organizations so bad?  An important explanation of one part of the puzzle appears on InformationWeek's Brainyard blog written by Venkatesh Rao. 

The Visionary, Charismatic, or Messianic Leader

In "The Fall of the Messiah Leader," Rao described the rise of the concept of "visionary" leadership:

we'll look at the rise in the 1980s and impending fall of the idea of 'Leadership' as a pop business construct. The role of visionary leader emerged to make up for the apparent failure of the manager mind, but it evolved into something very different, illustrated in the picture below: a role dedicated mainly to creating and maintaining an illusion of control in the markets interspersed with occasional Big Bold crisis management moves that generally fail.

Rao suggested that the first example of the messianic organizational leader was former General Electric CEO Jack Welch:

Welch was the first modern example of 'charismatic leadership,' and his was the first widely recognized business name since the robber barons. I challenge you to name, off the top of your head, one "celebrity" business name between Rockefeller and Welch that the average man on the street would have recognized.

Rao described the charismatic, or visionary leader in truly messianic terms:

one savant-like figure can intuitively read market conditions, spot brilliant strategic opportunities, create clarity of purpose in pursuit of that opportunity, and steer by an innate sense of True North, without a compass.

Oh yeah, and while performing this miracle routinely, the leader also models virtues and values that would put saints to shame. This idealized leader sparks a pursuit of corporate greatness with a brilliant strategic insight every few years, and he ensures that the pursuit is conducted in accordance with values so noble you feel like writing epic poems in his honor.

These charismatic figures are supposed to be capable of intuitively cutting through complexity and producing visionary decisions that make the managers' jobs tractable again.

In case this description of supposedly messianic leaders of recent years sounds far-fetched, recall the example of the failed, then eventually jailed CEO of what was once the Allegheny Health Education and Research Foundation (AHERF), one of the largest vertically integrated health care systems of the 1990s. (Currently, we call such organizations accountable care organizations, or ACOs.) Abdelhak was described in an American College of Physicians publication as a "visionary." (See the summary beginning on p 5 here.) Abdelhak had previously been called a "visionary" or a "genius" in the media. [Gaul GM. Creator of a cross-state health system despite personal and financial questions, Sherif Abdelhak has boldly expanded from Pittsburgh to Philadelphia. Philadelphia Inquirer, March 4, 1991. P. D1. Gaul GM. The new prescription for health care: Hahnemann’s merger dwarfs - and frightens - many local rivals. Philadelphia Inquirer, November 21, 1993. P. E1.]  For more recent examples of how health care leaders may be described in messianic terms, look here, here, and here.

The False Messiahs

Just as Abdelhak proved to be not a messiah, but a criminal, most messianic leaders are anything but. As Rao put it,

Do these Messiahs actually do the job required of them--relieve beleaguered mere-mortal managers and steer the company toward greatness? Nine out of 10 times, they do nothing of the sort. What they do is convince people that they're in control.

His main point is that the "messiahs" are just people playing at that role, supported by public relations, if not propaganda and disinformation:

Heroic, charismatic leadership in the context of large public companies is mostly a myth. What makes it a myth isn't that such figures don't exist (there have been a handful, such as Welch himself, Jobs, and Bezos), but the idea that the phenomenon can be studied in general terms, codified, and turned into a teachable skill.

True leaders are born, not manufactured. And they're quite rare. What the leadership cottage industry can manufacture are false leaders: People who can act like leaders. That theater has two audiences: the media and Wall Street.

The psychological allure of 'leadership' as a concept is almost entirely due to its profitability as a business-writing cottage industry, which in turn is based almost entirely on appealing to the vanities of wannabe-Messiahs. On the other side, there's an entire shadow world devoted to manufacturing perceptions of Messianic capabilities, by 'proving' claims to charismatic leadership using hagiographic narratives.

Rao claimed that the rise of such falsely messianic leadership was due to the ability of such leaders to bewitch investors:

The de facto job of a leader is to manage perceptions on Wall Street and thereby manage the stock price. Projecting an image of charismatic leadership is the easiest way to do that. Managers fight fires out of sight, creating a perception of corporate normalcy and control, and the Glorious Leader uses that blank canvas of apparent normalcy to spin tales that mesmerize Wall Street.

Who Else Benefits

Rao wrote mainly in the context of understanding the stresses and challenges of managers (who he sees as distinct from leaders in the context above). Thus he may not have written about other factors in the etiology of falsely messianic leaders.

I hypothesize that such leaders are not only good at bewitching investors, but bewitching other constituencies and stakeholders. Most health care organization now must deal with government agencies. Non-profit health organizations must deal with groups that are interested in their ostensibly charitable missions. Having a apparently messianic leader makes it possible to bewitch these groups.

Furthermore, I hypothesize that falsely messianic leaders greatly benefit two groups within their organizations. The first is obviously their apostles, often the top layers of organizational executives just below the CEO. Such positions are now almost as personally remunerative as are CEO positions. The second is obviously the spin-doctors, that is mainly the public relations and sometimes the marketing people who help produce the theatre that creates the perception of messianic qualities.

The Final Common Pathway

Rao suggests that falsely messianic leaders are likely to lead their organizations to a bad end, even if they themselves may escape the consequences:

Charismatic theater-leadership is about to die a messy death, like Qadaffi, because the sheer amount of chaos converging in a bottom-up torrent to the CEO's office will become unmanageable very soon. The theater will become increasingly hard to sustain.

Leaders fail when their managers fail to keep up with the fire-fighting. Once the fires become visible externally, the apparent normalcy necessary for the leader to manage perceptions is gone.

At this point, the leader is an impossible situation, but the theater must continue. And so we're treated to the grand finale of the tenure of a CEO: the Big Bold Move, the Bet The Company moment.

The Big Bold Move is usually a Big Dumb Move--deciding to go after large new markets, taking on bold new product initiatives costing hundreds of millions of dollars, making major acquisitions. It's a high-stakes game with a billion-dollar ante.

And usually these moves fail because charismatic leaders are forced to make them at terrible times, with bad data, when growth has stagnated or is plummeting, and there's a need for an 11th hour business model shift to replace hundreds of millions of dollars of collapsing revenue streams. A case of too much, too late.

The leaders who fail are sacked, land safely with golden parachutes, and proceed to loudly blame 'culture' (read: 'incompetent middle management') for the failure.

Rao is writing for a general business audience. The outcomes of such failures when the falsely messianic leader is in charge of a health care organization can obviously be even worse, leading to rising health care costs, declining access and quality, and threats to patients' and the public's health.

Summary

We have seen many health care leaders praised for their brilliance and paid royally despite leadership resulting in financial distress, threats to the organizations' health care missions, poor patient care, unethical behavior, or even crime. (The most recent example as of the time this was written was here. For other examples look here.)   Yet health care CEOs are just people, sometimes smart, but almost never brilliant.  Promoting them as messianic to bewitch key constituencies, justify the remuneration of other top managers, and the hiring of more public relations flacks is likely to lead to the sort of organizational disasters and system-wide dysfunction we discuss on Health Care Renewal.  The rise of the falsely messianic leader may allow the entry of the most dangerous false messiahs, the psychopathic ones.  (We discussed the likelihood that some health care leaders are actually psychopaths here.)

Rao's theory of falsely messianic leadership (and related, and also religiously allusional theories of the "divine rights of CEOs," look here and here), suggest that the better paid the CEO, and the more expansive the descriptions of the CEOs talents, the more skeptical we ought to be. 

In the secular occupation of health care, we ought not to yearn for messiahs, but hope for reasonable leadership that draws on the collective knowledge and values of health care professionals rather than dubious "visions," and that show accountability, integrity, transparency, honesty, and ethics.

From Serving the Poor to Paying Executives Millions - Carolinas HealthCare System

A striking contrast between a large health care organization's historic mission and its current practices appeared in a series published by the Charlotte News-Observer called "Prognosis: Profits" about the Carolinas HealthCare System.

A Historical Mission to Serve the Poor

The system evolved from a public hospital meant to serve the poor.  In particular,(1)

Only 30 years ago, it was a charity hospital called Charlotte Memorial – a crowded, dreary place that lost money every year because most of its patients couldn’t pay their bills.

The hospital system is actually "a public, tax-exempt entity called a hospital authority". Because of this special status, it has the power of eminent domain, the ability to seize property albeit with compensation, and its employees have "more privacy protection that those of other public agencies."

However, in the "greed is good" 1980s, the hospital began a transformation,

The board hired [Harry] Nurkin in 1981 to revamp Charlotte Memorial’s image, attract paying patients and avoid the fate of struggling public hospitals in Atlanta and Chicago.

Until then, patients with insurance mostly chose Presbyterian Hospital or Mercy Hospital, with stately buildings at the edge of Myers Park.

With a vision of building one of the Southeast’s finest medical centers, Nurkin paid attention to details, such as wallpaper, plants and furniture. And he put the hospital in the black by improving collections from patients and insurers.

In 1983, when Nurkin unveiled the hospital’s first long-range plan, some board members sat in wonder at a slide show that accompanied his bold outline, according to 'A Great Public Compassion,' a book by writer Jerry Shinn.

The plan called for a heart institute, a doctors’ building and an 11-story, $40 million tower that would replace a 1940s wing. All of that came true – and more.

Now a Huge Hospital System

From those humble origins, Carolinas HealthCare System has now become(2)

a juggernaut. It’s now the country’s second-largest public hospital system, behind only the nationwide system of Veterans Affairs hospitals.

One of the benefits of that growth is access to quality medical care. Carolinas HealthCare offers one of five organ transplant programs in the state and operates the region’s most comprehensive trauma center, where accident victims frequently arrive via medical helicopter. Five-year-old Levine Children’s Hospital has brought new pediatric specialties to Charlotte, and Levine Cancer Institute has recruited specialists from such respected institutions as the Cleveland Clinic.

With nearly $7 billion in annual revenue, Carolinas HealthCare runs about 30 hospitals and owns more than $1 billion worth of property in Mecklenburg County alone. It has more than $2 billion in investments.

In the five-year period ending in 2011, it spent $1.8 billion on capital projects.

Forgetting the Mission: Suing Poor Patients

However, as the system grew, its mission seems to have been forgotten.

In particular, Carolinas HealthCare seems to now have a penchant for suing poor patients who cannot pay its bills. A Charlotte Observer article documented that while the hospital does not refuse poor patients care, it may later pursue them if they cannot pay. The article noted the case of a woman who was assured that the hospital had funds to pay for patients like her, but who then faced a lawsuit for $34,000 and a lien on her house. In general(3)

most N.C. hospitals are tax-exempt – a distinction that saves them millions each year. In exchange, these nonprofits are expected to provide financial help to those without the means to pay.

But thousands of times a year, hospitals are suing patients instead, an investigation by the Charlotte Observer and The News & Observer of Raleigh found.

An in-depth look at some of those cases suggests most of the patients were uninsured, and that a significant number of them should have qualified for free hospital care.

Critics contend those hospitals are financially ruining people they could afford to help. Carolinas HealthCare System, the multibillion-dollar public enterprise that owns CMC-Mercy, has generated average annual profits of more than $300 million over the past three years.

During the five years ending in 2010, N.C. hospitals filed more than 40,000 lawsuits to collect on bills.

Most of those suits were filed by just two entities: Carolinas HealthCare and Wilkes Regional Medical Center in North Wilkesboro. Each filed more than 12,000 suits over the five-year period, according to state courts data. Wilkes Regional, which is managed by Carolinas HealthCare, appears to be the state’s most litigious individual hospital.

In addition,

Often, the lawsuits hit people who are among those paying the highest rates for hospital care: the uninsured. Bills for uninsured patients are usually higher because they don’t have insurance companies to negotiate discounts on their behalf.

It’s unclear how many of the patients sued in North Carolina lacked health insurance and substantial income or assets. But in interviews with 25 of those patients, the newspapers found 17 of them were uninsured; 10 said they were never told about the hospitals’ financial assistance programs.

An editorial summarized the contrast between Carolinas HealthCare historic mission and its current practices(4)

Carolinas HealthCare, once a small, struggling operation, has become one of the top hospital systems in the country. Novant Health, owner of Presbyterian Hospital, has grown into a powerful and respected health care provider. Their successes have come thanks to an aggressive philosophy of accumulation and growth, which has led to patients in the Charlotte region having access to the latest in medical technology and research, as well as top doctors in a diversity of medical fields.

But that accumulation has contributed to the high cost of health care in North Carolina, and that growth has caused the hospitals to stray at times from their non-profit charitable mission. A Charlotte Observer and News & Observer investigation that begins today details how a hunger for money and power has caused the two hospitals to sometimes lose their way, contributing to the region’s health care cost woes and leaving thousands of patients with financially crippling bills.

Opaque, Unaccountable Governance

While the Charlotte Observer did not provide opinions about the reasons that this large health care organization appears to have forgotten its raison d'etre, its reporting suggests some familiar elements.

The governance of the organization may have been appropriate for a small, struggling public hospital, but as the system grew, lack of accountability and transparency may have become more important. It is easier to lose one's way when no one is observing one's actions.(1)

Most hospital business gets done quietly – until there is a well-planned announcement.

The system’s self-perpetuating board includes top community and business leaders whose nominations get approval from the Mecklenburg commissioners’ chairman.

Quarterly hospital system board meetings, at 7 a.m., are polite and scripted. Votes are unanimous on everything from building new hospitals to borrowing millions of dollars. Questions are worked out in private discussions, closed-door committee meetings or executive sessions.

Meetings aren’t widely publicized. Except for a couple of newspaper reporters, only board members and hospital officials attend. Future meeting dates are provided to those who attend board meetings or call the system’s main office.

State law requires public organizations with websites to post meeting times. Carolinas HealthCare had not been doing that until last week, after an Observer reporter asked about it.

The board’s agenda sets no time for public comment.

While operating so quietly, the board appears to have become a very cozy little group,

The 1943 hospital authority law intentionally kept elected officials and politics out of operations. The link is that the commissioners’ chairman must sign off on hospital board nominees.

It has been a rubber stamp.

County officials remember once in 30 years that a proposed board member was rejected. That was in 2008 when nominees included Gloria Pace King, who had been ousted as CEO of the United Way of the Central Carolinas because of public outcry over her $2 million pension package.

In December 2008, the board renominated King for a new term. But hospital officials say Roberts, then commissioners’ chairwoman, objected, and King wasn’t reappointed.

Over the years, the board has included city leaders, such as bank CEOs Hugh McColl and Ed Crutchfield, and Stuart Dickson, the retired head of the company that owns Harris Teeter. His father, Rush S. Dickson, was an original board member whose name is on the entrance to what is now Carolinas Medical Center.

Lavish CEO Compensation

As noted earlier, not only are the actions of the hospital system's governing body kept secret, but up to recently, compensation paid to all employees, including top executives was also secret.(1)

State law gives its employees more privacy protection than those of other public agencies.

For example, salaries of all state, county and city government employees are public. That’s not true for public hospital employees.

Until a 2009 change in state law, Carolinas HealthCare had for years refused to make public the total compensation for top executives. They said state law precluded them from disclosing more than basic salary.

As a result, the public hospital system wasn’t disclosing as much detail as its private counterpart, Novant Health, does in publicly available reports to the IRS.

At the urging of the Observer and other state newspapers, legislators broadened the law in 2009 to require disclosure of total compensation for top executives at public hospitals.

So it should not be any surprise that an opaque, unaccountable board run by a cozy group of insiders saw fit to allow its friends in the management make some money, a lot of money. The Charlotte Observer reported that there were nine hired managers with total compensation greater than $1 million in 2011.(5)

Michael Tarwater
CEO, Carolinas HealthCare System
Total 2011 compensation:
$4,236,305
Percentage increase over prior year:
14.10%

Joseph Piemont
President/Chief Operating Officer,
Carolinas HealthCare System
Total 2011 compensation:
$2,536,792
Percentage increase over prior year:
19.70%

Greg Gombar
CFO, Carolinas HealthCare System
Total 2011 compensation:
$1,751,798
Percentage increase over prior year:
8.90%

Laurence Hinsdale
Executive Vice President, Carolinas HealthCare System
Total 2011 compensation:
$1,693,314
Percentage increase over prior year:
44.10%

Paul Franz
Execttive Vice President, Carolinas HealthCare System
Total 2011 compensation:
$1,575,927
Percentage increase over prior year:
-1.30%

Dennis Phillips
Executive Vice President, Carolinas HealthCare System
Total 2011 compensation:
$1,351,138
Percentage increase over prior year:
12.20%

John Knox
Chief Administrative Officer, Carolinas HealthCare System
Total 2011 compensation:
$1,197,528
Percentage increase over prior year:
11.80%

Roger Ray
Chief Medical Officer, Carolinas HealthCare System
Total 2011 compensation:
$1,080,159
Percentage increase over prior year:
No data for prior year

Russ Guerin
Executive Vice President, Carolinas HealthCare System
Total 2011 compensation:
$1,060,931
Percentage increase over prior year:
3.00%

Should it be surprising that executives who can become so rich, and who are subject to so little oversight, are more interested in preserving the hospital system's operating margin which supports their wealth than in providing the care to poor people that was the hospital system's original reason to exist?

Summary

As the local NAACP pointed out, the hospital system should better uphold its mission(6)

'The Bible says we’re not supposed to burden the poor and the sick and the afflicted. We’re supposed to lift them and help them and heal them,' NAACP President the Rev. William Barber said during the Charlotte stop of a statewide tour designed to bring attention to the struggles of low-income people. '(Carolinas HealthCare) is a group with money hounding people who are just trying to make it.'

However, I submit that restoration of this organization's mission will require more than exhortation. The governance of this organization, like that of many others we have discussed, needs to regain accountability, transparency, integrity, and ethics. It must insist that the leaders it hires uphold the mission ahead of other concerns, particularly personal enrichment. It must provide these leaders with realistic incentives based on how well they uphold this mission, not on revenue or operating margin.

Until such changes are accomplished, expect this hospital system, like many other health care organizations, to contribute only to our ever rising prices, declining access, and stagnating health care quality.

References

1.  Garloch K, Alexander A. Carolinas HealthCare System's evoluation: public hospital with private attitude.  Charlotte Observer, April 21, 2012.  Link here.
2. Alexander A, Garloch K, Neff J. Nonprofit hospitals thrive on profits. Charlotte Observer, April 21, 2012. Link here.
3. Alexander A, Raynor D. Hospital suits force new pain on patients. Charlotte Observer, April 23, 2012. Link here.
4. Anonymous. Money over mission at non-profit hospitals. Charlotte Observer, April 22, 2012. Link here.
5. Anonymous. Million-dollar hospital executives in North Carolina. Charlotte Observer, April 21, 2012. Link here.
6. Alexander A. Stop suing patients, NAACP tells Carolinas HealthCare System. Charlotte Observer, May 2, 2012. Link here.