[Pen-l] MBA's running hospitals?

[Louis Proyect <lnp3@xxxxxxxxx>]

Marc Bousquet compared the American university today to HMO's. Here's 
more evidence of how "non-profit" institutions are adopting the 
business model of the for-profit corporation.

No Wonder Our Hospitals Are a Disaster -- People with Marketing 
Degrees Are Running Them
By Maggie Mahar, Health Beat
Posted on August 15, 2008, Printed on August 16, 2008
http://www.alternet.org/story/94797/

This article originally appeared on Health Beat.

In 1970, a Fortune magazine cover story warned the nation: "Much of 
U.S. medical care, particularly the everyday business of preventing 
and treating routine illnesses, is inferior in quality, wastefully 
dispensed, and inequitably financed." That year, a Fortune editorial 
declared: "The time has come for radical change. ... The management 
of medical care is too important to leave to doctors who are, after 
all, not managers to begin with."

This was the beginning of the revolution Paul Starr described in his 
Pulitzer prize-winning 1982 book, The Social Transformation of 
American Medicine. In his final chapter, "The Coming of the 
Corporation," Starr expressed his concern that "those who talked 
about 'health care planning' in the 1970s now talk about 'health care 
marketing.' Everywhere one sees the growth of a kind of marketing 
mentality in health care. And, indeed, business school graduates are 
displacing graduates of public health schools, hospital 
administrators and even doctors in the top echelons of medical care 
organizations.

"The organizational culture of medicine used to be dominated by the 
ideals of professionalism and voluntarism which softened the 
underlying acquisitive activity," Starr wrote. "The restraints 
exercised by those ideals now grow weaker. The 'health center' of one 
era is the 'profit center' of the next."

In this brave new world of the 1980s, corporate executives would 
become both the wealthiest and the most powerful actors on the new 
cultural stage. Hospital CEOs would haul home salaries that made 
neurosurgeons look like pikers. In health care, as in other 
industries, CEOs, not physicians, make the decisions, and their goal, 
Starr suggested, would no longer be better health, but rather, "the 
rate of return on investments."

Earlier in the 20th century, many hospitals were run by physicians. 
Today, the vast majority are, as Starr predicted, run by MBAs and 
other businessmen. Some CEOs have studied hospital administration. 
Some do a fine job. The very best work well with the doctors in their 
hospitals.

Rogue CEOs

But today, it is too easy for someone who knows little about medicine 
-- and cares less -- to take charge of a hospital. Over at Health 
Care Renewal, Dr. Roy Poses offers a striking example:

    Add this to our series of failed health care leaders, from the 
South Florida Sun-Sentinel:

    A top Memorial Regional Hospital administrator caught up in a 
fraud investigation in the Virgin Islands resigned this week after 
admitting he spent time in a military prison and lied about it.

    Rodney E. Miller, 36, who came to the Hollywood hospital less 
than a year ago as chief operating officer and a rising star, never 
disclosed he spent time in a Navy brig on theft charges, Frank Sacco, 
chief executive of the South Broward Hospital District, said 
Thursday. Sacco said when he confronted the man he hoped would one 
day succeed him, Miller admitted his lie and quit the $370,000 job on 
the spot Tuesday.

    Details of Miller's past emerged in a series of stories 
published this week by the Virgin Islands Daily News that outlined 
widespread alleged financial abuses by Miller and others at Schneider 
Regional Medical Center in the Virgin Islands. The newspaper, and an 
audit by the U.S. Inspector General's Office, found that more than $1 
million was improperly diverted to Miller's personal accounts between 
2002 and 2007. Also, he received $3.8 million in salary over several 
years while patients went without basic needs for a lack of money, 
the newspaper reported.

    But it was Miller's failure to disclose a "bad conduct" 
discharge from the Navy that led to his departure from Memorial 
Regional, Sacco said. Miller stole another serviceman's credit cards 
in 1995 and went on a spending spree, then concocted an elaborate 
scheme to cover his tracks, the Daily News reported. He left the 
service in 1996 and his discharge, after appeals, became official in 2000.

    The information, including terms of his 10-month prison sentence 
and allegations that he submitted fraudulent documents to 
investigators, came from Miller's service records, which are public 
under federal law. No one from Memorial Regional or an independent 
search firm ever verified Miller's service, Sacco said. ...

    Miller served as Schneider's chief executive officer for five 
years before accepting the job as head of the adult hospital at 
Memorial Regional in October. The inspector general's report was 
finished two weeks before Miller was hired in Broward, but not 
released until Monday.

    The audit, conducted jointly by the Inspectors General of the 
Virgin Islands and the U.S. Interior Department, details an "alarming 
depth of mismanagement" at the hospital by Miller, his top executives 
and the board charged with overseeing their operations. Miller 
received more than $1.3 million above his contracted pay scale.

    Investigators were met with "secrecy and a deliberate 
concealment of financial records" that forced them to seek subpoenas, 
according to the audit.

    In a story in the Miami Herald, CEO Sacco was quoted, "we 
thought we had a rising star."

    Not exactly.

If this were merely the story of an outlaw CEO somewhere in the 
Virgin Islands, I would not be so concerned. But the recent history 
of some of the largest U.S. hospital chains offers a rogue's gallery 
of top executives, particularly (but not exclusively) at for-profit 
hospitals. Time and again these CEOs have been able to make the 
numbers Wall Street is looking for only by making them up. To meet 
earnings expectations, some medical centers bilked taxpayers by 
overcharging Medicare. Others bribed doctors to "put heads on beds." 
Still others overcharged insurers and gulled investors. In the most 
harrowing instances, health care providers resorted to kidnapping patients.

In one case, a chain of psychiatric hospitals kept its beds full by 
setting targets for its hospital executives. They in turn targeted 
the patients they needed: adolescents who had sought help from school 
counselors, clergy and parole officers for emotional problems.

National Medical Enterprises (NME) paid the counselors, clergymen and 
parole officers bounty fees of as much as $2,000 to "recruit" 
patients who were then hospitalized, often against their will, until 
their insurance ran out. One 17-year-old was pinioned to his bed for 
months. His only "mental health problem" -- before he landed in the 
hospital -- was that his girlfriend had jilted him and he was 
depressed. By 1993, some 130 patients had brought suits against the 
NME, and it faced 14 separate federal and state investigations. But 
Richard Eamer, the entrepreneurial businessman who founded the chain, 
never went to jail. Instead, he walked away with a lump sum of $2.66 
million and the promise of retirement payments of more than $500,000 a year.

As for NME itself, an investment banker who was a friend of the 
founder took over the business in 1994. He had no hospital 
experience, but he knew how to merge and acquire. Before long NME 
became the $2 billion Tenet Healthcare Corporation, boasting 116 
hospitals in 17 states.

Then, in 2002, came the FBI raid. Ultimately, Tenet would pay the 
government $54 million to settle charges that the Redding Medical 
Centers had billed Medicare and Medicaid for thousands of cardiac 
procedures, including angioplasties and open-heart surgeries that, 
according to an FBI affidavit, were in many cases completely 
unnecessary. In the affidavit other cardiologists charged that in an 
estimated one-quarter of the cases, the hospital's rainmakers were 
operating on patients who had no serious heart problems whatsoever.

Some of those patients did not survive. Others were crippled. All 
suffered some form of psychological trauma. Tenet admitted no wrongdoing.

Redding had a sterling reputation. In 2002 its cardiac treatment 
center received a five-star rating from HealthGrades, the 
Colorado-based health care information company, for the fifth year running.

According to the FBI's affidavit, local cardiologists had tried to 
raise a red flag at Redding. One said he warned Steve Schmidt, who 
was the hospital's chief executive at the time, of a "serious 
problem" with unnecessary heart procedures as far back as 1998. 
Another physician alerted Schmidt's successor, Hal Chilton, during 
the summer of 2001. He quoted Chilton's response: "We have heard 
that, but we're not sure how to handle it."

Neither Schmidt nor Chilton were physicians; nor did they have a 
degree in public health.

Jeffrey Barbakow, the investment banker CEO who had created the Tenet 
chain, did not go to prison. Instead, he left with his pockets 
well-lined: $111 million that he had collected when he cashed in his 
stock options, plus $1.3 million in severance and another $585,000 in 
pro-rated salary for the year when the hospital system went down.

This brings me back to blogger-doctor Poses, who reminds his readers 
that he has argued, in the past, for "developing a licensure process 
for leaders of health care organizations. Licensing doctors and 
health professionals has been going on for a long time. But now 
leaders of health care organizations, from hospitals to drug 
companies, have as much if not more influence over health care, and 
hence the health and safety of patients as do doctors. Yet," Poses 
points out, "there are no requirements that leaders of health care 
organizations have any particular educational background, knowledge, 
commitment to health care values, or, for that matter, that they have 
not committed crimes. Given the scope of bad leadership discussed on 
Health Care Renewal, maybe a licensing process for health care 
executives would at least ensure that they have not served time in 
the brig for theft."

This would be an excellent start.

In an article titled "Physician as Hospital Chief Executive Officer" 
published in Vascular and Endovascular Surgery earlier this year, 
Robert E. Falcone, M.D., and Bhagwan Satiani, M.D., MBA, go a step 
further, suggesting that perhaps the management of medical care is so 
important that it should be left to doctors -- or at the very least, 
they should be involved.

"As the pendulum swings back from lay leader to clinician leader, 
there is a strong and appropriate opportunity for physicians to 
reinsert themselves into a leadership role," write Falcone and 
Satiani, who both hail from the Ohio State University School of 
Medicine. "In fact, the time has perhaps never been more appropriate 
than today. In a health care system that is complex, troubled, and 
challenging, the physician CEO brings a unique set of skills to the 
business of medicine. The successful physician leader, however, must 
understand the business of medicine as well as or better than he or 
she understands the practice of medicine. Training, developing, and 
equipping our future physician leaders with the necessary skill sets 
will be one of medicine's many challenges as it expands into the 21st century."

Should either an M.D. or a degree in public health be a requirement 
for becoming a hospital CEO? Probably not. There are many fine 
hospital executives who possess neither degree. But I do think that 
all CEOs should be required to work closely with a panel of the 
hospital's physicians, focusing on how they can collaborate to 
improve patient safety and health. Physicians also should have a say 
in how hospitals invest their surpluses: Should they add on to the 
new wing and install whirlpool baths in the maternity wards, or put 
the money into an infection control program?

And I agree with Poses: Hospital CEOs should be licensed. 
Electricians are licensed. Accountants are licensed. Common sense 
dictates that someone running a hospital should be required to pass 
exams showing that he or she knows something about "management and 
administration" and has a solid grounding in what matters to patients 
-- how to reduce errors and lift the quality of care.

Maggie Mahar is a fellow at the Century Foundation and the author of 
Money-Driven Medicine: The Real Reason Health Care Costs So Much 
(Harper/Collins 2006). 

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