For Whom Does the Center for the Protection of Patient Rights Advocate?

We have occasionally discussed the cases of  some patient advocacy organizations which seem to be influenced by substantial financial support from the health care industry.  For example, look here and here.  Related are "astroturf" organizations, which promote policies that may be favored by their industrial sponsors (e.g., here.)

Background on the Center for Protection of Patient Rights

The topic of this post is the Center for Protection of Patient Rights, which may have started out as something like an astroturf organization, but seems to have become something even more interesting.  The Center, which, by the way, seems not to have a web-site, was the subject of an investigative report in the Los Angeles Times in May, 2012.  Here is the article's description of how the Center began,

The Center to Protect Patient Rights was created in April 2009, just as the debate over the healthcare bill was heating up. The group's mission was to 'protect the rights of patients to choose and use medical care providers,' according to its corporate paperwork, filed in Maryland.

While never surfacing publicly, the center sent more than $10 million in its first year to groups such as Americans for Prosperity, which took a lead in protesting the measure.

'I think they saw what we were doing and liked it,' said Tim Phillips, president of Americans for Prosperity, which got $4.1 million. He said he did not know the source of the center's funding and declined to comment on whether it still supports his group.

So this group supported an advocacy position about health care reform, so perhaps it could be considered an astroturf organization, were we to know it was funded by the health care industry.  Many astroturf organizations do reveal support from particular corporations.  However, at the time the Los Angeles Times published the report, the source of the Center's funding was unknown. 

Secretive Leadership

Furthermore, while astroturf organizations may be eager to get more public notice, presumably so they can further their advocacy, the Center seemed oddly secretive.  Its executive director and president is one Sean Nobel.  However, as the LA Times article noted,

Noble did not respond to repeated phone calls and emails. Courtney Koshar, a Phoenix anesthesiologist and the organization's only other director, did not respond to requests for comment. And a Phoenix doctor who once sat on its board said he couldn't remember who asked him to join.

'I honestly played very little role,' said Dr. Eric Novack, who headed an organization called the US Health Freedom Coalition that received nearly its entire budget — $1.7 million — from the center to help pass a state ballot measure that aimed to block President Obama's healthcare overhaul.

Support for Political Organizations, not Health Care Advocacy

Even more curiously, despite its name, the most of the Center's spending was not for advocacy about health care reform, but went to organizations that  seemed to have little or nothing directly to do with health.  As the Times reported,

During the 2010 midterm election, the center sent more than $55 million to 26 GOP [Grand Old Party, that is, Republican Party] -allied groups, tax filings show, funding opaque outfits such as American Future Fund, 60 Plus and Americans for Job Security that were behind a coordinated campaign against Democratic congressional candidates.

It seemed that these grants were used for nothing that directly related to health.  For example,

The largest share of the center's money went to American Future Fund, a Des Moines-based group started by onetime GOP congressional aide Nick Ryan. The fund, which ran campaigns against two dozen Democrats in the 2010 election cycle, spent $23 million that period, tax filings show, with nearly $13 million coming from the center.

Its biggest target was an up-and-coming Iowa Democrat, Rep. Bruce Braley. In August 2010, American Future Fund launched an ad falsely claiming that Braley supported building a mosque at the former World Trade Center site in New York — the beginning of a $2-million fusillade that included radio ads, robo-calls and nine mailers.

A list of the recipients of the Center's 2010 grants was also publised in the LA Times here.

Where Did the Center Get its Support?

Just before this week's US election, the plot thickened.  The LA Times reported that because of the Center's obviously political activities in California, an effort was made to determine its source of funding, but that came up short.

After a frantic court battle, state election officials succeeded Monday in forcing an Arizona group to disclose the identities of contributors that provided $11 million to a California campaign fund.

But the revelations added little clarity for voters. The mystery donors turned out to be other nonprofits, whose individual contributors remained secret.

The money started with the Virginia-based Americans for Job Security and was transferred to a group called the Center to Protect Patient Rights. Over the course of a few days in October it was sent to the Arizona group, Americans for Responsible Leadership, and then transferred again to California.

Finding the source of the money 'becomes daunting,' said Derek Cressman of Common Cause, an activist organization that filed the original complaint about the donation. 'How many layers can you drill through?'

Note that in 2010, the Center for Protection of Patient Rights gave money to the Americans for Job Security, but in 2012, the latter organization gave money to the former - curiouser and curiouser. 

Allegations of Illegalities, Including Money Laundering

It turns out the Americans for Job Security has been in trouble before for activities that seemed contrary to state election law:

Americans for Job Security, one of the nonprofits involved in the $11-million donation, was investigated by Alaskan officials for its role in a 2008 mining referendum.

Authorities concluded that the organization's 'sole purpose is to allow individuals and corporations to financially support various causes without having to disclose that financial support.'

That investigation showed how a wealthy landowner sent $2 million to the group, which then funneled most of it back to Alaska to try to fend off construction of a mine near the landowner's property.

Americans for Job Security agreed to a settlement, paying a $20,000 fine and pledging 'not to engage in similar activity' again in Alaska.

In addition, the Mercury News reported allegations that the fund transfers by the Committee for the Protection of Patient Rights were illegal.

two conservative groups, Americans for Job Security and the Center to Protect Patient Rights, are part of a tangled web of so-called dark donors who operate largely out of public view, shielded by their status as nonprofit advocacy groups that are supposedly not involved primarily in politics.

While the groups have been identified, however, individual donors who have bankrolled them remain a mystery.

But 'this isn't going to stop here,' said Ann Ravel, chairwoman of the Fair Political Practices Commission, the state's political watchdog. 'They admitted to money laundering. We agreed to do this without an audit because we wanted to get information to the public before the election. But we in no way agreed this would preclude further action.'

The FPPC determined that the Arizona group, Americans for Responsible Leadership, had violated California campaign law.

Money laundering -- sending money through multiple sources to conceal the original donor -- is a misdemeanor. But a conspiracy to commit money laundering is a felony. It was not clear Monday whether the FPPC or the state Attorney General's Office will pursue criminal charges.

Summary

So the answer to the question posed in the title of this post is unknown.  At this point, there is nothing public that indicates for whom the Center for Protection of Patient Rights advocates.  However, it is hard to conceive that its advocacy is for patients. 

So rather than merely being an astroturf organization (a health care policy advocacy group funded by industry money), the benignly named Center for the Protection of Patient Rights appears to be a dark money group whose goals may have allegedly included money laundering to facilitate vast monetary influence on political campaigns by people and organizations whose identities remain secret.

We have often discussed the role of deception in health care, including stealth marketing, stealth public policy advocacy, and stealth lobbying.  Now we see health care being used as a vehicle for political deception, stealth political campaigns being disguised as stealth public relations campaigns.  The convolutions of the deceptions induce dizziness. 

Of course, this is the opposite of the sorts of transparency health care professionals and academics ought to support, and patients and the public ought to demand.  How will we ever improve health care when health care organizations are used to hide layer upon layer of deception?

Real improvements in health care require health care leadership dedicated to transparency, honesty, and accountability. 

How Big Health Care Charities Rely on Lying Telemarketers

A modern day Diogenes searching for an honest organization in health care would have a very hard time.  Close to the "you can't make this stuff up" category is a new investigative report from Bloomberg on deceptive - to use a polite word - practices at some of the US' biggest health care charities.

Using Commercial Telemarketing Firms that Keep Nearly All Money Raised

The report showed how major US health care charities use privately held for-profit telemarketing firm InfoCision Management Corp to raise money, but most of the money raised went back to InfoCision.  The opening example was of a particular telemarketing call:

A woman named Robin said she was representing the American Diabetes Association.

Robin didn’t ask for money. She asked Patterson to stamp and mail pre-printed fundraising letters to 15 neighbors. Both of Patterson’s parents and one grandmother had been diabetic, so she agreed to do it, Bloomberg Markets magazine reports in its October issue.

'I thought since it does run in the family, it wouldn’t hurt for me to help,' says Patterson, 64, a retired elementary school teacher. She guessed, based on what she knew about charity fundraising, that about 70 to 80 percent of the money she brought in would be used for diabetes research.

The truth was almost the exact opposite. The vast majority of funds Patterson, her neighbors and people like them throughout the country would raise -- almost 80 percent -- would never be made available to the Diabetes Association. Instead, that money collected from letters sent to neighbors would go to the company that employed Robin and an army of other paid telephone solicitors: InfoCision Management Corp.

Just 22 percent of the funds the association raised in 2011 from the nationwide neighbor-to-neighbor program went to the charity, according to a report on its national fundraising that InfoCision filed with North Carolina regulators.

So while some American health care charities boast that most of the money they receive goes to programming, not management or fund raising, in this case, the opposite was true.

Many of the Biggest US Health Care Charities Were Involved

As the article stated,

Many of the biggest-name charities in the U.S. have signed similarly one-sided contracts with telemarketers during the past decade. The American Cancer Society, the largest health charity in the U.S., enlisted InfoCision from 1999 to 2011 to raise money.

Also,

In the past decade, many of the nation’s biggest health charities have hired InfoCision, including the American Heart Association, American Lung Association, American Society for the Prevention of Cruelty to Animals, March of Dimes Foundation and National Multiple Sclerosis Society.

Note that the Bloomberg article was focused on InfoCision. I suspect that if one were able to look at arrangements with similar telemarketing firms made by all US health care charities, the results might be even more extreme.

The Fund Raisers and the Charities Lied

The article contained instances in which the telephone callers lied about who they were or about where the money they were trying to collect would go.

First, regarding who the callers were:

The ruse begins with the name that flashes on your caller ID when a telemarketer is phoning on behalf of a charity. It’s the charity’s name that often shows up, not that of the telemarketing firm.

The misrepresentation can continue on the call itself. Solicitors in recordings obtained by the Ohio Attorney General’s Office sometimes identify themselves to potential donors as 'volunteers.' They’re not; they’re paid employees of InfoCision.

Second, regarding where the money would go:

The bigger lie telemarketers tell is what they say about how much money will go to the charities they’re working for.

According to documents obtained through an open records request with the Ohio attorney general, the Diabetes Association approved a script for InfoCision telemarketers in 2010 that includes the following line: 'Overall, about 75 percent of every dollar received goes directly to serving people with diabetes and their families, through programs and research.'

Yet that same year, InfoCision’s contract with the association estimated that the charity would keep just 15 percent of the funds the company raised; the rest would go to InfoCision.

This deception appears to be sanctioned by the leaders of the charities for whom InfoCision worked,

[American Diabetes] Association Vice President [Richard] Erb offers no apologies for the script, saying the association runs many fundraising campaigns and, overall, about 75 percent of the money goes to its programs. He acknowledges that the contract with InfoCision estimated that the telemarketer would get to keep 85 percent of the funds it raised.

Erb also says he isn’t happy that volunteers are upset upon learning the truth.

'Obviously, if people feel betrayed or that we’re not being honest with them, it doesn’t make me feel well,' he says.

The American Cancer Society similarly seemed to sanction deceptive fund raising practices.

The Cancer Society, in a Sept. 1, 2009, contract with InfoCision, estimated that the charity would get 44 percent of the amount the company collected in the following fiscal year.

The telemarketer script for the same year approved by the society for InfoCision asks solicitors to say something different: 'Overall, about 70 cents of every dollar received goes to the programs and services that we provide.'

Predictably, an executive for the society dodged responsibility for such lying:

[Greg] Donaldson, the society’s senior vice president, declined to comment on the contradiction between the contract and the script, saying the society doesn’t provide 'proprietary competitive information regarding individual programs.'

The Telemarketing Firm Stonewalls

While the Bloomberg reporters were able to get some health care "charity" executives to respond to the issues, InfoCision was not even slightly forthcoming. The best they could do was get an InfoCision executive to protest the company's importance for charity:

InfoCision Chief of Staff Steve Brubaker says his company is vital to the success of charity fundraising. Many nonprofits have stayed with InfoCision for more than 20 years, proving the firm offers value and integrity, he says.

'We’ve developed that high level of trust by being good stewards of their money and mission,' he says. Campaigns to develop new donors are more expensive than those seeking money from previous supporters, he says. He declined to answer specific questions, saying such information is proprietary to the company or its clients.

He turned down a request for interviews with Taylor and InfoCision executives.

Previously, the company owner had taken on the mantle now familiar in the current US election campaign, "job creator,"

[InfoCision founder Gary] Taylor was an outspoken opponent of efforts by the Federal Trade Commission in 2003 to begin the National Do Not Call Registry, allowing people to block calls from for-profit solicitors. In an interview with Customer Interaction Solutions, a trade journal, he said:

'The most pressing issue, without a doubt, is excessive governmental regulation. It seems that the politicians and regulators are ignoring the significant benefits we provide through job creation, economic growth and the goods and services we cost-effectively market for our clients.'

Keep in mind that the article documented how much of those jobs are minimum wage, and they may involve lying.

Note further that Taylor "got his start raising money for evangelical preachers." The company also " did fundraising for Citizens United, the conservative group best known as the plaintiff in the Supreme Court case that allowed unlimited independent spending by corporations and unions on behalf of political candidates."

Health Care Charities are Really Just "Businesses"

Underlying all this seems to be the transformation of health care from a calling to a business. While US health care charities have reputations as organizations out to do good, one executive, the American Diabetes Soceiety's Mr Erb, admitted that doing good was no longer really the focus,

'But the thing is, we’re a business. There has never been a time or a place where we said, 'Most of this money is coming to us.''

An expert the Bloomberg reporters interviewed said that the fund raising tactics these organizations used meant they were no longer charities. Per Ken Berger, "who runs Glen Rock, New Jersey- based Charity Navigator, the nation’s largest nonprofit watchdog group,"

'These organizations were created to provide public benefit,' he says. 'The fact that the vast majority of money is instead lining the pockets of telemarketers defies the whole reason behind the very creation of these charities.'

The Experts Say It's Fraud

Bloomberg reporters interviewed several experts on philanthropy and law. They were not amused. One suggested that the fund raising tactics described in the article were fraudulent:

Charities should be held accountable for deceptive fundraising done in their name, says James Cox, a professor at the Duke University School of Law in Durham, North Carolina, and co-author of 'Cox and Hazen on Corporations' (Aspen Publishers, 2003).

'If that’s what they do systematically, then they’re obtaining money under false pretenses,' he says. 'I don’t just think it’s incredible. I’d be surprised if it isn’t criminal.'

Another labeled the practices "deceitful."

Bloomberg cited a 2003 US Supreme Court decision:

While telephone solicitors have no obligation to volunteer what the firm’s cut is of each donation, they don’t have a constitutional right to lie, the court ruled in a 2003 Illinois case.

'States may maintain fraud actions when fundraisers make false or misleading representations designed to deceive donors about how their donations will be used,' the court said.

Summary

This horrendous story illustrates how the mission of health care has been undermined by the last 30 years' push to turn health care organizations into businesses at a time managers were indoctrinated that they only thing that matters is short-term revenue (that is, they have become "financialized," look here). Here we see ostensibly charitable organizations that solicit donations from the public supposedly to aid patients and support medical education and research willing to do whatever it takes to raise money, including deception, and what might be fraud. This is just disgusting.

In my humble opinion, patients, health care professionals, and the public should insist that health care non-profit organizations disclose their fund-raising tactics, and abandon any that are dishonest. Law enforcement should investigate to see if prosecutions for fraud or related crimes are warranted. Organizations that refuse to change their ways should lose their tax exempt status.

Meanwhile, I would suggest that everyone should be extremely skeptical of fund raising by major health care charities. In no instance should anyone give money solely based on telephone solicitations.

If we, health care professionals, patients, the public do not take our heads out of the sand and realize how dishonest health care has become, we will have only ourselves to blame when it collapses.

When Does Lavish Executive Compensation Become "Embezzlement?"

A single article in the Miami Herald raises the question of when is excessive executive compensation in health care too excessive.  To set up the question, I will be quoting from the story in an order quite differently from how the story was presented.

Background

The story is about the executives of the Miami Beach Community Health Center, described thus:

Headquartered on Biscayne Boulevard in North Miami, the Miami Beach Community Health Center is one of the oldest and most well-respected public health clinics in Florida. It opened more than three decades ago, and now includes four locations, three on the Beach, including two sites that care for people with mental illness. The center employs more than 280 people, with a monthly payroll of around $1.2 million.

The health center’s annual budget is about $36 million — about one-third of which comes from private insurance, Medicaid, the state and federal health insurance for needy people, Medicare, the federal insurer for elders, and private payments.

The CEO's Compensation

Previous stories, and public records suggested that the Center's CEO, Kathryn Abbate, was very well compensated. First,

an October 2010 Miami Herald business story ..., relying on federal tax documents, reported Abbate’s compensation package as $824,000 in 2008. In the article, Abbate said the compensation package was inflated by cashed-out sick time, vacation time and a retirement account.

She did even better in subsequent years,

The Miami Beach Community Health Center’s federal tax report for 2010 indicates Abbate’s base salary was $261,165 — but includes an additional $956,584 in 'bonus and incentive' dollars that pushed her total compensation to more than $1.2 million. The center’s IRS disclosure for the prior year reported Abbate’s base salary as $970,532, and total compensation of $987,902. In 2008, Abbate’s total reported compensation was $824,686, records show.

The CEO got very generous compensation given the size of her organization.  This compensation was documented on forms the organization submitted to the IRS that were in the public domain.

However, as we have discussed many times before (look here), many leaders of health care organizations, including non-profit organizations, have been collecting very generous compensation.

The Role of the Board of Trustees

As we have discussed before, e.g., here, exceptional compensation for top hired managers is often justified by the governing boards, that is, boards of trustees or directors, to whom the hired managers nominally report.  These governing board members often seem to be working off a common set of "talking points." 

In this case, there was a difference. The Herald reported that the Centers board of trustees "never agreed to pay Abbate more than $300,000, [Center Chief Medical Officer Dr Mark] Rabinowitz said."

The board seemed totally unaware of what their organization was paying its CEO.

Rabinowitz and a health center spokeswoman, Alia Faraj-Johnson, said that board members they spoke to had not seen the [2010] newspaper story [about the CEO's 2008 compensation]until just recently, and acknowledged its content would have raised significant red flags.

'That would have tripped everybody’s light,' Rabinowitz said.

Why the board had never thought to look at the organization's own reports (990 forms) to the US Internal Revenue Service which detailed the executives' compensation, reports that were in the public domain, and are easily available online (look here), is unknown.

The article implied that the board was somehow not up to this task even though it has fiduciary responsibilities to oversee the top hired managers, oversee the overall budget, and try to maintain both the organization's mission and fiscal stability did not seem up to the task. The article noted,

board members remained unaware until last spring. Under federal law, at least half of the board members of federally subsidized health centers such as Miami Beach’s must be consumers of the clinic, and some of the clinic’s board members were simply ill-equipped to detect what the center calls a sophisticated financial crime.

The board members seemed to think that it was the job of the CEO's subordinates to keep tabs on her compensation,

'One of the sad things about this, regrettably, is that if the gatekeeper in this case, the chief financial officer, had done his job, a large portion of this would have been discovered a long time ago,' said Bill Dillon, a Tallahassee-based healthcare lawyer who is advising the center.

The Chief Financial Officer contended that he would not have been able to successfully blow the whistle:

[CFO Stanley] DeHart, who lives in Coral Springs, said he was aware of many of Abbate’s activities, but declined to alert the board of directors. 'The board of directors was very close to her, and I really thought they would not believe me,' DeHart said. 'They held her in very high esteem.'

DeHart and members of his staff 'discussed whistle-blowing,' he said, but they all agreed taking such an action was more likely to result in their firing than Abbate’s. 'I felt at the time, and I still feel, that I had no proof that the board of directors would accept.'

And, DeHart added, blame for the scandal should include outside auditors, who failed to raise any objections when Abbate wrote dozens of checks to herself for 'community development' — a department that regularly generated an enormous amount of 'abnormal activity.' DeHart said he told auditors he suspected something was amiss in the community development department.

'The external auditors had to have known about this,' DeHart said, 'because I laid it out to them in plain view. I did not hide anything.'

In fact, the CEO's total compensation, plus a variety of other payments she seemed to direct to herself, were not made clear until

May, after a routine audit required by federal funders turned up irregularities, said Mark Rabinowitz, an obstetrician and gynecologist who is the center’s chief medical officer. Abbate had written a check for $5,000 to herself, and cashed it, labeling the expenditure a 'community development' expense....

Only after that,

Calling the actions of their former administrator an 'outrageous betrayal of trust,' authorities with the Miami Beach Community Health Center are investigating what they call the theft of almost $7 million in taxpayer money by the center’s longtime chief executive.

Members of the health center’s board of directors fired Chief Executive Officer Kathryn Abbate, saying she diverted the nearly $7 million in money intended to provide healthcare for the needy to her personal use beginning in 2008.

Summary

So let me backtrack a bit. The board of a moderately big, non-profit community health center seemed to make no attempt to monitor the organization's finances, did not even review the organization's own filings with the US government, and therefore had no idea what they were paying their CEO. Nonetheless, they seemed to assume that the organization's finances would be kept in order by an executive who reported to that same CEO. When an audit ordered externally ordered revealed that the CEO was being paid much more than the board had assumed, they charged "embezzlement," again even though a good chunk of such payments were in the form of compensation reported to the US government.

The real distinction between this case and many other cases of huge executive compensation we have discussed is that in this one the board seemed to be trying to maintain "plausible deniability" of any knowledge of the CEO's compensation, even though supervising that compensation was its direct responsibility. In other cases, board seem fully aware of enormous compensation, but blithely dismissive of any concerns about it. 

So does this case could represent "embezzlement, " why were all the other cases of hired managers lavishly compensated not so regarded, even when their compensation was completely out of proportion to their known accomplishments, their organizations' financial performance, much less their organizations' fulfillment of their missions and positive impact on patients' and the public's health?  In many of those cases, the money paid out in executive compensation was also partially derived from taxpayers, and also was partially meant to "provide healthcare for the needy."

As I have said many times before,...  Health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research.


If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

A Camel Through the Eye of a Needle - at Non-Profit Health Insurers

It is time to drag out that well-worn phrase,...  sometimes you just cannot make this stuff up. 

Recently, the New York Post reported about executive compensation at some non-profit health maintenance organizations/ health insurance companies in New York.  To wit,

FidelisCare

At one Catholic-run health insurer for the needy, charity starts in the executive suite.

Mark Lane, the CEO of the Fidelis Care/New York State Catholic Health Plan, receives a $1.1 million salary plus another $864,000 in retirement pension and other benefits, The Post has learned.


His total compensation comes to nearly $2 million.

Fidelis is a tax-exempt, not-for-profit HMO serving 750,000 patients throughout the city and state who mostly qualify for Medicaid, the public insurance program for the needy. That means nearly all of Fidelis’ revenues come from taxpayers.

Meanwhile Fidelis’ executive vice president and chief operating officer, the Rev. Patrick Frawley, an ordained Catholic priest, is paid $587,249.


Frawley received more than $900,000 in other retirement and deferred benefits — raising his total compensation to $1.54 million, according to IRS filings.

That’s a lot of pennies from heaven.

'It’s shocking to me,' said a source familiar with Catholic health charities.

Amazingly, the justification that was trotted out in this case was just of the "our CEO is brilliant" variety, but in this case, provided by a Bishop:

Fidelis defended the salaries of its top officers, who oversee a $3 billion operation.

Bishop Joseph Sullivan, a member of Fidelis’ board of trustees who formerly served as chairman, called the compensation 'generous but fair.'


He said the goal is for salaries to be at the '75th percentile' of rivals.


“Our ability to continue to grow is based on the quality of leadership. You get what you pay for. Lane and Father Frawley are worth every penny,” Sullivan said.

Fidelis also issued a statement explaining that Frawley, after serving in pastoral roles for 25 years, was granted release from his priestly assignment to pursue a career in health care.

So much for a vow of poverty, even at a non-profit providing health care mainly to the poor.

EmblemHealth

On the other hand, executives of secular, but still non-profit health insurers do even better,

Anthony Watson, CEO of EmblemHealth, gets a compensation package of $8.5 million — about half in salary and bonuses and the rest in retirement and deferred benefits, according to IRS filings.

Two other EmblemHealth executives also snagged multimillion-dollar compensation packages.

Summary

We have noted before how the "peer benchmarking process," setting executive (but not necessarily other) compensation based on a comparison with compensation at other, often highly selected organizations, coupled with the "Lake Wobegone Effect," the belief that one's own executives are always above average, will lead to inexorable rises in executive pay, regardless of performance, or whatever else is going on in the world. The Bishop's assertion that Fidelis' executive compensation should be at the seventy-fifth percentile, because of the "quality of leadership," not further described, is a perfect example of these phenomena.

It is striking to see these phenomena at a non-profit organization whose mission is:

to ensure that every resident, regardless of income, age, religion, gender, or ethnic background, has access to quality health care, provided with dignity and respect.

So, ad infinitum, I repeat.... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

Being a Non-Profit Hospital CEO Means Never Having to Say You Are Sorry

When my arm was twisted heartily to see the movie "Love Story" a very long time ago, I could never understand why so many audience members sighed upon hearing that immortal line, "love means never having to say you're sorry."  I could not understand it then, and still cannot.

However, it seems that for reasons that are not any more clear, being the CEO of a not-for-profit hospital or hospital system also means never having to say you are sorry, as shown in some recent stories from the media.

Not Sorry for Leaving

Originally published in the Fargo (ND) InForum:

The merger 1½ years ago of Sanford Health and MeritCare created a new entity that doubled in size and covers a service area of more than 130,000 square miles.

But the unified health care giant needed only one top executive, and the departing chief administrator received a $1 million contract buyout, according to documents obtained by The Forum.

Dr. Roger Gilbertson, a neuroradiologist who had served as MeritCare’s top executive since its founding 17 years earlier, received a 'separation payment' provided by his contract of $1,000,920, according to a report Sanford filed with the Internal Revenue Service that recently became available.

Not only did Dr Gilbertson not have to say he was sorry for leaving, he collected what amounted to a million dollar plus bonus just for going out the door.

Not Sorry for Leaving Amidst Financial Losses

A long story in the Atlanta Journal Constitution discussed compensation for a number of Atlanta area hospital and hospital system CEOs.  For example,

Edward Bonn of Southern Regional Health System, which operates Southern Regional Medical Center and two affiliated facilities, made $2,610,175 in fiscal 2009. Bonn left the system that year and received his pay of $421,822 plus $2.2 million from a retirement plan. Hospital CEOs commonly receive extra pay from retirement plans when they leave.

Bonn did not receive a bonus because the hospital system lost $12 million that year, the hospital said.

Mr Bonn apparently did not need to say he was sorry for collecting over $2 million when that amount was equal to about one-sixth of his system's yearly loss.

Not Sorry for Financial Losses Plus a "Culture of Entitlement"

This story was in the Peterborough (NH) Examiner:

Former Peterborough Regional Health Centre CEO Paul Darby was given at least $340,126 plus benefits as a financial package after his retirement in December 2009.


He didn't work a single day or offer a single service in 2010 while earning the second top salary at PRHC, just behind current CEO Ken Tremblay.

'The compensations with Paul were in line with similar arrangements with other CEOs and other public hospitals which include support to the executive following the employment period,' board chairwomen Barb Cameron said. 'It is important that we are able to make transitions between leaders smoothly and these kinds of arrangements with the executive allow us to do that.'

Darby retired before a whirlwind of controversy hit the hospital last year including a scathing peer-review report blaming hospital top brass for a 'culture of entitlement' leading to spiraling, cumulative debt.


When Darby left, the hospital faced a growing deficit of just under $25 million.

He was paid $364,275 in 2009, $310,983 in 2008 and $269,419 in 2007.

At least his severance package was less than one-sixth of the deficit.
Not Sorry for Not Even Revealing One's Salary

Here is a local Rhode Island story reported by WPRI:

The nonprofit group that runs three Rhode Island Hospitals including Women & Infants won’t say whether its new chief executive will receive a seven-figure pay package that matches his predecessor’s.

Care New England tapped Cambridge Health Alliance CEO Dennis Keefe as its new president and CEO this week. He will succeed John Hynes, who is retiring, in August.

Care New England spokeswoman May Kernan said the organization would not release details about Keefe’s compensation. 'Other than complying with public reporting requirements as part of the federal [IRS] 990 forms, we do not disclose personal salary information,' she told WPRI.com in an email.

Hynes’ compensation totaled $1.5 million in 2008-09, up from $873,332 in 2007-08, tax records show.

Note that the hired executives of big for-profit corporations also are increasingly uncomfortable about public discussion of their compensation (see this post).
Where All CEOs Are Above Average

The rationales presented for such apparently exceptional treatment given non-profit hospital CEOs (and other hired health care managers) are those we have heard before.

The most prominent rationale for exceptional treatment of an individual CEO is that he (or rarely she) was such an exceptional leader. This would be more believable if it was not used so often, suggesting that those who defend these leaders, often including the boards of trustees who are supposed to supervise them, believe all hospital CEOs, like the mythical children of Lake Woebegone, are above average.

For example, the InForum article provided this explanation of Dr Gilbertson's compensation:

The only comment Sanford provided The Forum was a statement about Gilbertson’s contributions to MeritCare over his long tenure.

'Dr. Gilbertson’s gift to this region is invaluable – 30 years in medicine and 17 years as President/CEO of MeritCare only glance the surface,' said Andrew Richberg, a Sanford executive vice president. 'His vision for health care integration, medical knowledge and dedication to patients made him a pillar in our industry.'

Gilbertson’s legacy, Richberg added, is 'strong, safe and sustainable health care for all people, in their hometowns, all across the region.'

While the article did not suggest Dr Gilbertson's leadership was poor, it is hard to believe that he alone was responsible for "strong, safe and sustainable health care for all people ... all across the region." I am sure there are many other health care professionals in North Dakota who have worked for many years, and who have a strong vision, good medical knowledge, and dedication to patients.  I am sure almost none got $1 million severance packages.  If health care in North Dakota is really that good, is that not because of a lot of hard work by a lot of health care professionals?

The rationale of exceptional treatment for exceptional individuals would also be more believable if it was not used to defend CEOs whose organization performed poorly under their leadership. For example, in the Peterborough Examiner:

'I would like to acknowledge that these are big salaries, but they are big positions in a large hospital involving large responsibilities and requiring unique skills,' [hospital board of trustees chairwoman] Cameron said,....

Would not having the large responsibility for a large deficit argue against a large severance package?

The Market Made Us Do It

Despite substantial evidence and strong arguments (see here) that health care cannot approach being an ideal free market, another favorite rationale for CEO exceptionalism is that the market made us do it. For example, per the AJC:

The number of people who can manage these facilities is limited and recruitment is competitive, [Georgia Hospital Association President Joseph] Parker said.

Qualified leaders will gravitate to other fields over time if compensation for nonprofit CEOs is decreased, [executive search consulting company Mercer Inc partner Jose] Pagoaga said. The 'substandard leadership' that replaces them will degrade the quality of medical care for the community.

There’s debate on the issue.

It’s hard to believe that people who choose the field of charitable medical care would leave because they make only $800,000 a year instead of $1.5 million, said Mark Rukavina, executive director of the Access Project, a Boston patient advocacy organization.

But Pagoaga said nonprofit hospitals cannot count on their charitable duty to attract and retain the best administrators.

'Yes, it’s a social mission, but this is not the priesthood and these people have not taken a vow of poverty,' he said. 'You can’t discount the views of people that look at this as an altruistic mission and think that pay should therefore be limited. All I’m saying is there is an entirely different point of view based on free-market principles.'

In the real world, of course, poverty would hardly be defined as an income less than $1 million a year. Mr Pagoaga never explicated the point of view based on "free-market principles," but I wonder if it can be summarized as "greed is good?"  It would be interesting to see how Mr Pagoaga could explain how health care is like unto an ideal free market.  

Non-Profit Organizations are Not Very Different from For-Profit

Perhaps the most intriguing argument was found in the AJC article:

Pay in excess of $1 million a year may seem high for an organization subsidized by taxpayers, but hospital executives and industry representatives said the public should think of these hospitals not as charities, but as complex, billion-dollar organizations.

Georgia hospitals report to 27 state and federal agencies and engage in multimillion-dollar building projects. The larger hospital systems have billions in revenue and are among the largest employers in their communities. Many also operate for-profit subsidiaries.

'You can’t lose sight of the fact that it’s not an ice cream shop on the side of the street,' said Joseph Parker, president of the Georgia Hospital Association.

Note that currently US non-profit organizations do not have to report much data on their for-profit subsidiaries.  The above argument suggests they deserve considerably more scrutiny.
Of course, that last explanation begs the question of why the compensation of for-profit hired executives should be even higher, with CEO compensation often well more than two orders of magnitude, that is, hundreds of times higher than that of the lowest paid also hired employees (see this post).

Summary

I submit that non-profit hospitals and hospital systems do have a "social mission," which ought to be upheld by their leadership. Despite the rationales supplied above, the leaders ought to be accountable, which may sometimes mean having to say they are sorry.

As I have repeated endlessly,... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

What Is to Be Done?

Based on our ever enlarging file of cases on compensation of the top hired managers of non-profit health care organizations, let me make some concrete suggestions, based on my humble opinion.

A step forward would be to make the finances and compensation arrangements of health care non-profit organizations at least as transparent as those of large public for-profit organizations. So my big idea is:

- Non-profit health care organizations above a reasonable threshold size should provide prompt, public, annual reports analogous and very similar to the reports required by the US Securities and Exchange Commission of public, for-profit companies.

These reports should include, at a minimum, a summary of financial and operational status, an audited financial report, an explanation and accounting for any for-profit subsidiaries and any interlocking non-profit organizations, the compensation given to the CEO and some minimum number of the top-paid officers and employees, a detailed explanation and rationale for the pay of these individuals, and a listing of other affiliations and all conflicts of interest affecting them.

If need to supply such information causes non-profit health care organizations' hired executives and boards of trustees some cognitive dissonance, that would be a good thing. 

"Living High Life on Money to Treat the Poor"

Here is another story that has developed over the last week about questionable goings on at a not-for-profit health care organization.  The organization in question this time was the not-for-profit, but state government supported Medicaid managed care organization/ health insurer for the Louisville, Kentucky region.  The details came from a Louisville (Kentucky) Courier-Journal article about a state auditor's report on the Passport Health Plan:

The organization providing Medicaid services in Jefferson and surrounding counties has spent lavishly on such things as travel, meals, salaries, bonuses and lobbying in recent years, the state auditor’s office said in a report released Tuesday.

The scathing report, which Gov. Steve Beshear described as 'disheartening,' said two Passport Health Plan officials — Executive Vice President Shannon Turner and Associate Vice President Nici Gaines — were paid well, ate well and traveled extensively.

'Lodgings were often luxury spas and resorts,' the report said. 'The executives used limousine services and dined at expensive restaurants. While these types of expenditures may be routine for many private, for-profit companies, they should not be typical in nonprofit, health care organizations.'

The report also said Passport made extraordinary efforts to burnish its public image and gain political support by spending $1 million since 2007 on lobbying and public relations, as well as $423,000 in donations and sponsorships.

Many of the donations had no connection with health care, the report said — including $600 to sponsor a reception for the Senate Republican majority in 2009, $10,000 to sponsor an 'inflatable character' for the Kentucky Derby Festival's Pegasus Parade, and contributions to the Boy Scouts, Kentucky Opera, Volunteers of America and others.

Here are some more specifics about amounts spent:

Travel: Passport spent $106,722 on more than 36 trips including trips to conferences at resorts in New Orleans, Key West, Las Vegas, Seattle, Philadelphia, Tucson, Washington and Coeur d'Alene, Idaho.
Meals: Spent $72,994 on 753 meals for groups large and small. These were mostly at Louisville restaurants but included tabs at some famous restaurants outside Kentucky, such as Emeril's and Commander's Palace in New Orleans.
Limo services: Five uses of limos totaling $3,996.
Lobbying and public relations: Spent $1 million.
Donations and sponsorships: Spent $423,000, some with no connection to health care, including $10,000 to be an “Inflatable Character Sponsor” for the Kentucky Derby Festival.
Gifts: Spent $9,311 for 95 gifts, which included flowers and Christmas gifts.
Salaries: Paid salary and bonuses of $303,750 to Executive Vice President Shannon Turner and $156, 000 to Associate Vice President Nici Gaines in most recent year.

Here are more specifics about conflicts of interest:

Conflicts of interest: Both Turner and Gaines received additional compensation in contracts with subcontractor they were overseeing, AmeriHealth Mercy. Also, Larry Cook, Passport's chairman and CEO, had divided loyalties because he serves as an executive vice president of U of L. He also was reimbursed $1,717 by AmeriHealth for expenses for a trip to Ireland in 2007.
Grants: Many grants were made by Passport to groups with ties to staff and/or board members

The organization also was charged with distributing additional funds to area health providers based on their initial investment in the not-for-profit managed care organization, but not on the amount of care they were providing to Medicaid patients:

[State Senator Tim] Shaughnessy was particularly concerned about distributions of $10 million in excess funds in late 2008 and again in and 2009 to the large Jefferson County health-care providers that formed Passport.

These distributions were reported to the Kentucky Department of Insurance as grants to cover indigent care costs incurred by Passport's provider partners — University Medical Center, University Physician Associates, Norton Healthcare, Jewish Hospital and St. Mary's Healthcare, and the Louisville/Jefferson County Primary Care Association.

But the auditor’s report said the money was distributed based on the percentage of the providers' initial investments to create Passport — not the amount of indigent care they provided. And the report said this money was placed in the general funds of these providers 'rather than specifically set aside for uncompensated indigent care.'

Finally, it appears that Passport tried to block disclosure of important information, including the compensation of its executives, even though it is a not-for-profit organization entirely funded by the government:

Early this year The Courier-Journal filed a request under the state open records law seeking Passport records on compensation of its executives and minutes of its board meetings. But Passport refused to release them, claiming that the law did not apply.

The attorney general's office disagreed, saying that Passport is 100 percent publicly funded and must release the records. But Passport again refused and took the matter to Jefferson Circuit Court, where it is pending.

So again we have the same tiresome features of leaders who apparently regard their organization as their own personal sandbox: lavish compensation, given the context, luxuries supplied the leadership out of organizational funds, conflicts of interest that apparently increased further the leaders' personal gains, and attempts to keep the whole thing secret. As a Lexington (Kentucky) Herald-Leader editorial ("Living High Life on Money to Treat the Poor") noted, given the mission of the organization, this sort of sleaze is particularly unfortunate:

In one way, though, Passport's profligacy deserves special condemnation. Every dollar Passport executives spent on their own pleasurable pursuits, on lobbying to insure tax money kept flowing their way, on buying goodwill in the Louisville area or on any other unnecessary expense was a dollar taken away from providing Medicaid services to the most vulnerable, needy members of society.

This case resembles one we discussed previously, that of the non-profit community health agency in Florida whose leaders again seemed to regard their job as an opportunity for personal enrichment.  It seems that even leaders of non-profit organizations whose mission is to help the needy may seem to put their own needs before those of their disadvantaged constituents.  Of course, given they may have seen leaders of not-for-profit universities and hospital systems making millions, and leaders of for-profit pharmaceutical, device, and especially managed care organizations/ health insurers making tens of millions, and conclude that their six-figure salaries and occasional luxuries were barely adequate compensation.

As we have noted before, the "executives take all" mentality of an era economically dominated by financiers as aristocrats seems to have infected health care.  Somehow we have to restore the idea that executives and managers  like doctors and nurses, should regard their work as calling meant to put the needs of patients and public health first, rather than a quick way to get rich. 

A University President on Commission

The Miami Herald reported on the latest thing in executive compensation for leaders of academia (and academic medicine):

Florida State University's new president will have a larger salary than his predecessor, T.K. Wetherell, and stands to make even more in bonuses as a reward for big-time fundraising.

FSU trustees chairman Jim Smith confirmed Monday that Eric Barron has signed a contract that includes a base salary of $395,000 a year in state and private dollars, plus the chance to earn annual bonuses of $100,000 for every $100 million in private donations raised. He'll also get free housing and a car, Smith said, as well as a retention bonus of $200,000 after a few years.

Housing and car allowances have become standard fare for university president contracts, and in recent years Florida's university presidents have ranked among the top in the country for salary and compensation packages. But the bonus provision in Barron's five-year contract is a signal that the trustees want to see FSU's $447-million endowment grow by $1 billion over the next five years.

'We said $1 billion in five years, and we're serious about that,' Smith said Monday. FSU's trustees gave him the authority to negotiate with Barron, 58, and sign a contract.

Note that Florida State University is the parent institution for the Florida State University College of Medicine.

We have all heard jokes that university presidents now need to spend more time fund raising than doing anything else. Also, we have all heard the phase "no margin, no mission" too many times. However, in this case, the search for margin seems to have completely trumped the mission. As the article implied, I have not previously heard of a university president who gets bonuses only according to how much money he or she raises. I also have not previously heard of such bonuses being based simply on a percentage of the money raised. Thus effectively, the new president is being paid on commission, the commissions being based purely on fund-raising.

The problems are obvious.  First, structuring a bonus so that it is only a function of fund-raising raises fund-raising above upholding the university's mission.  Yet the board of the university has a duty of obedience, which  "requires board members to be faithful to the organization's mission. They are not permitted to act in a way that is inconsistent with the central goals of the organization."  Making the university president's bonus solely dependent on the dollar amount of funds raised would seem to violate that duty.

Second, structuring a bonus so that it is only a function of fund-raising suggests that where or how the funds are raised is no longer important.  Fund-raising done wrong can lead to conflicts of interest, obligations to unsavory people, or other ethical or legal issues.  Yet the proposed bonus would apparently be paid according to the amount paid, no matter what.

Perhaps in this era of "greed is good," such a brutal reminder that academics are now expected to care more about revenue that teaching and research should not be a surprise.  But if the only incentive the university president has is fund-raising, what sort of academic institution do we expect will result?

Non-Profit Health Care Organization Executives: Pay Them Millions or Lose Them?

CareSource is a US not-for-profit managed care organization for Medicaid patients.  This week, the Dayton (Ohio) Daily News ran an investigative series on its leadership and governance which may provide a larger lesson on the disconnect between the high ideals and high costs of the dysfunctional US health care system. 

The main issue uncovered by the investigation was CareSource's generosity to its CEO.  As reported in "CareSource CEO's compensation grew faster than revenues at nonprofit,"

From 2005 to 2008, CareSource more than doubled its total revenues — from $770 million to $1.8 billion.

It’s now the nation’s third largest nonprofit Medicaid HMO.

But CareSource’s phenomenal revenue growth was no match for the increase in total compensation for Chief Executive Pamela Morris, whose pay more than tripled — from $877,000 in 2005 to $2.9 million in 2008, according to IRS filings.

Did Pay Buy Performance?

Not only did the CEO's pay grow much faster than the organization she lead, it also seemed disproportionate to what ratings of the organization's performance are available.

In America’s Best Health Plans for 2009-2010 — a survey conducted by U.S. News & World Report and the National Committee for Quality Assurance (NCQA) — CareSource ranked 72nd in patient satisfaction and quality of care among 82 HMOs participating in the study. It was the lowest ranking among the four participating Ohio Medicaid plans.

"We Don't Want to Lose Her"

The chair of the organization's Board of Directors claimed that such pay was necessary to secure the CEO's loyalty, per the Daily News,

Ellen Leffak, chairwoman of the CareSource board, said a separate committee of the board sets the top executive salaries with the help of a consultant. The committee monitors what is being paid at both for-profit and non-profit competitors.

Leffak said Morris is worth her multimillion-dollar compensation.

'We don’t want to lose her' to another HMO, Leffak said. 'She has provided outstanding service to the organization and we think she should be adequately compensated.'

The implication, which perhaps Ms Leffak did not mean to openly convey, was that Ms Morris' dedication to the organization and its not-for-profit mission were less important than her desire for a multi-million dollar paycheck.  (Parenthetically, Ms Leffak also failed to specify how Ms Morris' service was determined to be "outstanding,")

Furthermore, The Daily News also reported:

CareSource officials say Morris’ pay hike, which included a $1.2 million incentive payout in 2008 from her supplemental retirement plan, is in line with salaries paid top executives with similar experience at its for-profit competitors. Morris is 61 and has been with CareSource for 24 years.

The newspaper provided a table of CEO compensation at such for-profit competitors. The best-paid CEO in the table was Heath G Schiesser of Wellcare Health Plans, who received $8,077,718. The article did not mention that not onlyh is Wellcare for profit, but it claims to be a "nation-wide" operation.  It also did not mention that in August, 2009, Wellcare paid a fine for findings, which it did not contest, that it paid political contributions in Florida that violated state law (see post here).  Also, in May, 2009 we posted about WellCare's submission to a deferred prosecution agreemeent based on charges that it defrauded state programs by inflating its expenses. In 2007, we posted about how the state of Connecticut stopped WellCare from running a plan for poor children after the company refused to reveal what it was paying physicians, and why it was failing to pay for particular services. So WellCare has paid three penalties for three different kinds of unethical behavior in the last two years.

To be clear, it was the newspaper that stated Wellcare ought to be a standard of comparison, not Ms Leffak, Ms Morrison, or any CareSource official.  However, the choice of comparison further suggests how money may trump mission.

Competing Against Stock Options
Meanwhile, the Dayton Daily News published another article ("Critics question hospitals' CEO on CareSource board) which suggested that the governance of CareSource may have resonated with the notion that the leadership of not-for-profit health care organizations may be more motivated by money than mission.

Since the HMO’s inception in 1983, Tom Breitenbach, chief executive of Premier Health Partners, has had a hand in shaping CareSource. He continues today on the governing board of its parent, CareSource Management Group Services.

But in recent months, health care officials and providers have raised questions about whether the head of the region’s largest hospital system should sit on the board of the parent organization of the region’s largest source of Medicaid payments.

'How can that not be a conflict of interest?' said Dr. Larry Litscher, a Dayton area urologist. 'They (the CareSource board members) have to determine the reimbursement levels' for hospitals and doctors providing service to CareSource patients. 'How can that not be interpreted as a big advantage for the hospitals?'

But beyond the issue of conflict of interest, last year, the Dayton Daily News reported on Mr Breitenbach's own incentives:

In 2001, as Premier Health Partners Chief Executive Tom Breitenbach neared age 55, he was given an executive investment plan in addition to his supplemental retirement benefits that paid him nearly $9 million from 2002 to 2007. The requirements were that Breitenbach assume the risk of the investment and stay on as head of Premier until age 60.

In 2001, MedAmerica Health Systems Corp., the parent company of Premier Health Partners and six smaller for-profit subsidiaries, found a novel way to help keep Breitenbach at the helm — they invested some of the supplemental retirement benefits he had accrued over 25 years into an executive option plan of mutual funds, in which Breitenbach assumed all risk. Breitenbach cashed out $6.7 million from the plan in 2003, another $660,000 in 2006 and a final payment of $1.5 million in 2007, for a total of $8.9 million, IRS documents show.

Also, according to the MedAmerica Health Systems 2007 Form 990 (available through Guidestar), Mr Breitbach's total compensation was $4,044,915.

Again, the reason to pay so well seemed to be the fear that in the absence of for-profit levels of compensation, executives of not-for-profit organizations would quit to seek higher recompense in the for-profit world.

In setting compensation levels, local hospital officials say they must compete with for-profit enterprises that can offer top executives hefty stock options, country club memberships and other perks that nonprofits can't. 'For-profit or nonprofit, it really has to do with attracting and retaining talent,' said Pete Luongo, who sits on the compensation committee of Kettering Adventist Healthcare, the parent of Kettering Health Network and its six hospitals.

The implication is that not-for-profit health care organizations can and should hire people who care more about the level of compensation offered than the not-for-profit organizations' lofty missions.

In this case, CareSource Says its mission is:

to make a difference in the lives of underserved people by improving their health care.

At CareSource, our mission is one we take to heart. In fact, we call our mission our 'heartbeat.' It is the essence of our company, and our unwavering dedication to it is a hallmark of our success.

Our Vision is to be an innovative leader in the management of quality public-sector health care programs.

Premier Health Partners says its mission is:

We will build healthier communities with others who share our commitment to provide high-quality, cost-competitive health care services.

What cognitive dissonance is created by an organization dedicated to serving the "underserved" and another which espouses "cost-competitive" health care lead by CEOs who can only be retained by making them multi-millionaires. 


Summary and Conclusions
Leaders of not-for-profit organizations, starting with their boards of trustees, are supposed to subscribe to the duty of  obedience, "to be faithful to the organization's mission,"  and the duty of loyalty, " give undivided allegiance when making decisions affecting the organization." Presumably, that can be extended to the requirement that the top hired executives of not-for-profit put the mission ahead of their own personal gain.  Thus, boards of trustees who feel that they can only retain hired CEOs by pay so high that they will not be tempted by offers from for-profit corporations have failed in their duty by hiring CEOs who put their personal financial interests ahead of the mission. 

I believe that the compensation given to CareSource and Premier Health Care CEOs, and the rationale for it, are not anomalies.  There have been many other reports about leaders of not-for-profit health care organizations compensated enough to make them multi-millionaires, justified mainly by the need to provide pay "competitive" with that available from for-profit corporations  (e.g., see posts here and here).  Yet not-for-profit CEOs mercenary enough so that they can only be retained by for-profit levels of pay seem to be exactly the sort of people who should not be running what are supposed to be mission-oriented organizations.  Of course, the problem is only amplified when the same mercenary CEOs sit on each others' boards.

When money becomes the only value for health care leaders, the health care system will cost a lot, but provide neither health nor care.  The only way to improve health care is to give it leadership that values health and caring for it more than money.    

"Organisational Ethics Policies; A Primer"

I regret that it took me so long to find an essay on "Organisational Ethics Policies" by Howard Whitton, available from the European U4 Anti-Corruption Resource Center. While it was written with international non-governmental organisations (NGOs) who "administer aid programs" in mind, it seems applicable to all kinds of NGOs and not-for-profit organizations, including those in health care. In the US, most medical schools and their parent universities, most hospitals and academic medical centers, essentially all medical societies and disease advocacy groups, and some insurance companies and managed care organizations are not-for-profit.

The main points of the paper are its summaries of the basic elements of "effective ethics policies."

First, such a policy

- must first have unequivocal authority and the endorsement of boards and senior management, and must be:
o founded on the organisation’s core values, mandate, and ethical principle
o developed in consultation with those affected by it
o realistically achievable
o written in plain language, coherent with other policies, and easily available
o clearly understood by staff, and by other stakeholders
o consistent with the organisation’s policies on rewards and sanctions
o regularly reviewed and evaluated with all stakeholders
o universally applied, and transparently enforced.

The main content areas might include such "major areas of ethical risk" as:

o financial management and accountability standards
o internal and external audit processes
o professional ethics, conduct, and conflict of interest standards
o fair treatment rules for staff and clients
o processes for the prevention of fraud and other abuse of trust
o integrity mechanisms governing proper decision-making
o provision of transparent information to stakeholders
o complaints and whistleblower disclosure processes
o principled policy dispute processes
o transparent and objective evaluation mechanisms.

So, specific policies should include the following functional elements:

o a code of conduct/ethics based on the organisation’s core values
o professional practice standards interpreting the code’s principles
o procedures for managing conflict of interest situations (including the registration of relevant interests and assets of decision makers)
o procedures for offering and accepting gifts and business courtesies
o criteria for the proper use of organisational assets and authority
o prohibition of harassment and discrimination in the workplace
o criteria for protected reporting of unethical or illegal behaviour
o rights of clients to obtain service, including complaint procedures for failure to meet standards
o obligations for accountability and transparency,and information provision
o standards for dealing with confidential and privileged information
o constraints on ancillary and post-separation employment
o standards for providing reasons for administrative decisions.

Also the policies should include:

• A commitment to training staff in the full range of ethics-related activities. Training will improve personal awareness and strengthen the ability to define and manage improper conduct, whether by co-workers, managers, or external stakeholders.
The range of training themes should include the organisation’s integrity system, specific anticorruption measures, harassment-free workplaces, non-discrimination principles, financial management and audit, integrity in procurement practices, donor relations, personal and institutional conflict of interest, accountability, responsibility, procedural fairness, and strategic problem-solving.

• Policies and procedures for regular management reporting to boards and executives, in particular to enable monitoring of matters which may be of particular concern from time to time.

• Independent, external scrutiny of policies provide an important resource for boards and executives for ensuring that espoused core values and actual behaviours are aligned, and to identify areas of policy and management practice requiring
improvement.

• Policies and procedures for protected reporting of improper conduct, both to enhance worker and stakeholder confidence in the integrity of an organisation, and to provide avenues for early detection of inappropriate behaviour. Genuine
whistleblowing must be effectively endorsed, and effectively protected, to ensure the organisation’s credibility.

• Procedures for the sanctioning of improper conduct and failure to meet relevant standards by staff, structured so as to enhance management’s capacity to deal effectively with ethical issues in the workplace.

Such policies cannot be considered ethical panaceas, but in my humble opinion (and based, I believe, on at least a little cognitive psychology), visible, reasonable, clear ethics policies could reduce the sort of bad behavior that Health Care Renewal often discusses on the part of leaders of major health care not-for-profit organizations and NGOs.

So, those of you who work for or are otherwise affiliated with a not-for-profit university, medical school, hospital, academic medical center, medical organization, disease advocacy organization, or insurance company/ managed care organization might want to go through the exercise of answering these questions:
1 - Does your organization have anything that resembles an ethics policy?
2 - If so, which of the characteristics listed above does it have?
3 - Which of the content areas listed above does it include?
4 - Which of the functional and additional elements listed above does it include?

If much is missing, is there an obvious reason for what was omitted? If the policy seems poorly characterized or incomplete, why should it not be improved? Would you feel comfortable suggesting improvements? If not, why not, and what does that say about the organization?