Part 1: The Outrage: Money, money everywhere but just a drop for health care
New Jersey has a handful of trauma hospitals. For two decades my mother worked in the morgue of one of them. Between 1980 and 2000, if you knew someone who was crushed to death, blown to smithereens, caught in a self-locking walk-in freezer, or picked out of the murky waters of the Schuylkill, chances are my mom expertly documented their demise.
As an employee of these nonprofit hospitals, mom was the proud guardian of “The Morgue Book” (which I’d imagined was akin to Grandpa Munster’s dusty, spider-web-laden book he turned to for resolution). This book immortalized every soul who passed through.
Mom’s workplace stories were gruesome, devastating, and enlightening: The funeral directors who charitably buried stillborn infants of poverty, grief-stricken mothers, the inconsolable children of murdered parents choosing between burial costs or rent, or a father’s heartbreaking collapse while asking for his late child’s meager belongings.
(I remember one Sunday afternoon in particular. It was the mid-1990s and it happened to be a day off from work for mom. About midnight the night before, a teenager had fallen about 60 feet to his death from an amusement park ride. While shopping with mom at J.C. Penney, she was repeatedly overwrought with emotion and concern about who at the hospital would implement this young man’s final record of existence.)
It might seem ironic, but after death, the risk for loss is still very much alive.
Mom dealt with the bereaved every day and her attention to the smallest detail, helping them make arrangements in the midst of their sorrow, meant the world to loved ones.
For her dedicated service mom earns a small pension and, thanks to the safeguard of Social Security, she’s able to live above the poverty level.
I think about her work every time I read about another hospital closing or filing for bankruptcy or trimming its workforce.
In order to operate as a nonprofit, the organization must make application and be approved by the IRS. Involved in this process is an in-depth, articulated mission statement including a dedicated corporate organizational structure. Nonprofits are subject to specialized accounting policies and procedures. The entity’s purpose, which cannot discriminate, must serve a charitable purpose, advancing the welfare of the public. No part of a nonprofit’s net earnings shall benefit any private shareholder or individual.
Such organizations, known as 501(c)(3) entities, in addition to being exempt from sales, income, and property taxes, are allowed to issue bonds (for capital improvements, equipment purchases, etc.) where the bondholders receive special tax treatment on the interest as well.
Boston Medical Center
In 2010, Boston Medical Center laid off 119 workers to “cope with a projected $175 million loss triggered by dramatic changes in Medicaid reimbursements.” (Associated Press 9/13/10). Those layoffs followed 250 who got pink slips in 2008 for which the hospital projected savings of $10.5 million.
In 2009, nonprofit Boston Medical Center filed a lawsuit against the State of Massachusetts over the cost of providing care to its thousands of indigent residents under the Massachusetts Health Plan, enacted in 2006 by then Governor Mitt Romney, which mandated insurance coverage for all residents (a prototype to the national program, the Patient Protection and Affordable Care Act). To pay for the cost of this Plan, the state rearranged its budgeting priorities reducing reimbursement to hospitals. Boston Medical Center said the law was “forcing the hospital to cover too much of the expense of caring for the poor” (The New York Times 7/16/2009):
“We filed this suit more in sorrow than in anger,” said Elaine Ullian, the hospital’s chief executive. “We believe in health care reform to the bottom of our toes, but it was never, ever supposed to be financed on the backs of the poor, and that’s what has happened in Massachusetts.”
When the reporters and cameras left, Ms. Ullian returned to her office at Boston Medical where she earned the handsome sum of $4,785,038, her concern over the backs of the poor notwithstanding (Form 990 fiscal year ended 9/30/09, Schedule A, Part III).
In fact, for fiscal year ended 9/30/09, Boston Medical Center paid out over $6 million to the top 3 and almost $10.5 million to the top 12 employees. Wait a minute; wasn’t the hospital “forced” to let go 250 the year before in order to save that same amount? By the way, $10.5 million divided by 250 results in an average employee cost of $42,000 or less than one percent of Ms. Ullian’s earnings the following year.
Boston Medical also paid out $1.5 million in severance to one former executive VP, and it handed out bonuses of $1.3 million to another eleven. Note the average employee’s salary was $50,800 (Form990 fiscal year end 9/30/10, Part VII and Schedule J, Part II).
Surplus fund balance topped $1 billion (Form 990, fiscal year ended 9/30/10, Page 1), equivalent to the hospital’s average annual revenue for the past few years – meaning, in theory, Boston Medical could operate without any income for a year relying solely on their surplus – which if you recall must be used to further their stated purpose.
Results of operations showed the hospital pulled in $25 million in surplus revenue for its stated purpose to “provide consistently excellent and accessible health services to all in need of care regardless of status and ability to pay” (fiscal year ended 9/30/10 Program Service Revenue $974 million less program service costs of $949 million equal $25 million in excess revenue).
Oh boy, and one other note: After all the hoopla and complaining about being under-reimbursed for providing services to those needing care, total payments received from Medicare – not Medicaid yet still a federally-funded program (paid through a progressive payroll tax for those predominantly over age 65) was $185 million (Form 990 fiscal year ended 9/30/10, Schedule H, Section B, line 5) and that exceeded total Medicare allowable costs (Schedule H, Section B, line 6) by nine million dollars.
Cape Cod Healthcare
Because of the enactment of the Massachusetts Health Plan, the state saw its share of lawsuits from hospitals over reimbursement for caring for the poor. According to CapeCodOnline (12/1/09), Cape Cod Hospital “had to” lay off 160 employees last year:
“By law the commonwealth was supposed to cover the costs of treating low-income patients on Medicaid, also known as MassHealth, said Dr. Richard Salluzzo, CEO of Cape Cod Healthcare, the parent company of Cape Cod and Falmouth Hospitals. ‘It hasn’t happened.’…Cape Cod Healthcare is expecting to make a $7 million profit in fiscal 2010 Salluzzo said but that’s because the hospitals have tightened their belts and reduced costs.”
That CEO’s compensation at Cape Code Healthcare, according to Form 990s filed with the IRS:
Fiscal year ended 9/30/2008 $385,000
Fiscal year ended 9/30/2009 $668,848 (74% increase)
Fiscal year ended 9/30/2010 $938,194 (36% increase)
Ironically, the local paper quoted Dr. Salluzzo in a phone interview as saying,
“We want a little fairness in distribution of the money [the state] is spending.”
A former CEO of Cape Cod Healthcare received $621,225 (fiscal year ended 9/30/2008) and $2,136,547 (fiscal year ended 9/30/2009, Schedule J, Part II), an increase of 244%.
Now, remember, they are tightening their belts.
Of course, there’s always more.
Bonuses handed out were:
Fiscal year ended 9/30/2009 $250,000
Fiscal year ended 9/30/2010 $445,000
Here’s a sweet deal: One of the senior executives received a severance payment of $89,572 and:
“The arrangement provides for continued payment of the individual’s salary and benefits for a period of twelve months plus one month for every year of service up to eighteen months. In the event the individual is reemployed at any time during the period, the agreed upon severance payments will be offset by other employment income, severance benefits or unemployment.”
(Form 990 fiscal year ended 9/30/2010, Schedule J, Part III)
The year before, another top executive received $504,352 severance and salary continuation for 15 weeks (Form 990 fiscal year ended 9/30/09 Schedule J, Part III)
Housing allowances, tax indemnification (contractual arrangement for reimbursement of income taxes should there be questions from the IRS as to the propriety of said compensation), companion travel, golf club memberships, and grossed up payments are the norm – at nonprofit hospitals.
I wonder if the 160 employees who lost their jobs in 2008 received comparable compensation from Cape Cod Hospital.
From 2008 to 2010, Cape Cod Healthcare’s surplus (the managing entity of Cape Cod and Falmouth Hospitals) increased by forty five percent. As of 9/30/2010, this nonprofit entity had “managed” these nonprofit hospitals’ money by accumulating more than three times their average annual revenue for the past 3 years.
Public Relations Is Greater Than (not equal to) Bullshit
Nonprofit hospitals employ public relations specialists to churn out sound bites frightening employees, patients, and entire communities, threatening to close down or privatize (thereby allowing the invisible hand of the market to “correct” any price gouging. Of course, this begs the question: If the invisible hand works so well, why does less than 1 percent of the population own at least 60% of the wealth?).
The list of abusive, disproportionate, and grossly questionable payments made by nonprofit hospitals to consultants, highly compensated individuals, perks, special deferred compensation plans (while rank and file employees accept 15 or 20 cents on the dollar from financially-drained, closing hospitals), insurance, related entities, etc. is endless. In fact, I’ve written a report about it: Sticker Shock: A Rip-off Report, which examines how nonprofit hospitals purposely confuse, confound, and obscure the true costs of services rendered, ultimately leaving patients, taxpayers, and communities dumbed-down, dumbstruck, and dumped upon to pay the bill.
Hey! They’re nonprofit. As taxpayers, we are already subsidizing them by making up the difference for what they don’t pay in income, sales, and property taxes.
Hello? Isn’t this double jeopardy?
See how after death, the risk for loss is still very much alive?
Last year the US spent over $2.3 trillion on health care – costs which are rising (conservatively) by at least 5 percent annually. Those least able to afford paid the most, some with their lives:
“Nearly 45,000 annual deaths are associated with lack of health insurance…The study, conducted at Harvard Medical School and Cambridge Health Alliance, found that uninsured, working-age Americans have a 40 percent higher risk of death than their privately insured counterparts, up from a 25 percent excess death rate found in 1993.”
Harvard Gazette 5/24/12
If the Occupy movement is synonymous with Democratize, then we need to inform, educate, and arouse the masses to take control of our nonprofit hospitals…other than just bailing them out after they’ve been used as ATM machines by those in charge.
Next month: Part 2: Inside the Basically Bogus (?) Bankruptcy of Hoboken University Medical Center, Hoboken, NJ