Sunday, April 13, 2008
There is no question that Pittsburgh and Western Pennsylvania are richly blessed to have one of the top ten academic medical centers and associated hospital systems in the United States. Last year I observed with wonderment the acquisition of two intercontinental jets to fly the imperious leadership of UPMC to visit their international assets. So far we have been informed that UPMC operates a transplant center in Palermo, Italy; two cancer centers in Ireland and a partnership to provide emergency care in Qatar.
On February 29 it was reported that UPMC is now under contract to manage a hospital in Ireland. This strikes me as odd. As an Irish-American, like most of my kin, I would do anything for Ireland but live there. Notwithstanding, why is it necessary for UPMC to devote one scintilla of time and attention to manage a hospital in Ireland?
With the accounting systems unique to American hospitals, UPMC now has free cash per annum somewhere between $650 MM and $1 Billion per year. Okay, I may be off $100 MM here or there. However, every single dollar that has been paid to UPMC, directly or indirectly, was paid by the citizens of Pittsburgh and Western Pennsylvania.
The last time I checked, UPMC is a not-for-profit, tax exempt organization. This is a marvelous advantage in the market place. It is an advantage not extended to organizations like Alcoa, Heinz, National City Bank or the local barber. Why? The tax exemption is awarded to charitable organizations to improve the health status and the quality of life in their immediate communities.
There is a related, but somewhat different argument for the University of Pittsburgh, School of Medicine. There is an unwritten convention that medical science, as it is expanded, is to be shared freely for the benefit of all mankind. Jonas Salk did not sell the polio vaccine when it was developed at the University of Pittsburgh. It was a gift to the entire world.
No, my concern is on the hospital delivery side of UPMC. Is it in their mission to manage, build or buy hospitals outside the United States? If UPMC wants to extend its expertise outside the United States, why not focus those talents where it is needed most, the third world. I think we know the answer. It is the responsibility of the U.S. State Department and the related U.S. A.I.D. Program, the United Nations, the World Bank and other international agencies and religious organizations to improve the fragile health care delivery system around the world.
For many years the community benefited from a beautiful restaurant on the top of the U.S. Steel building. My understanding is the restaurant finally reached the point they could not afford the rent. Mr. Jeffrey Romoff is the current occupant of the top floor of the U.S. Steel building. UPMC seems to be able to afford anything. They can afford to build a transplant hospital in Italy, cancer centers in Ireland, manage a hospital in Ireland, provide emergency services in Qatar and international jets to flit around the world and God knows what else they are involved in.
Here is a challenge to the Board of Directors of UPMC. Rather than revel in its top ten status (U.S. News and World Report) how about investing excess cash to be the number one health system in the United States? For all of the television advertising, billboards, international investments and profligate spending, in what categories is UPMC truly number one. Is it patient safety and error free care? Could UPMC invest further in the University of Pittsburgh, School of Medicine to enrich the education and research infrastructure? The answers to these questions are above my pay grade. One thing is certain, if UPMC was the greatest and not just great, every dollar would be invested in Pittsburgh.
Emblematic of these concerns are current events reported in the Pittsburgh Tribune-Review. In a previous generation of leadership at UPMC, Dr. Thomas Detre, was successful in recruiting Dr. Thomas Starzl, perhaps the greatest solid organ transplantation surgeon in history to Pittsburgh. Dr. Detre was based in Oakland at the University of Pittsburgh. He did not have international jets at his disposal, he was not distracted by a health insurance company, nor did he have a transplant hospital built in Italy with Pittsburgh money. The solid organ transplant program at UPMC and the University of Pittsburgh, School of Medicine was the envy of the world.
A board member of UPMC said to me recently, “You have to hand it to Jeff Romoff. He really recruits first rate talent.” Is that so? UPMC and the School of Medicine attempted to replace a nearly retired Dr. Starzl with a transplant surgeon of questionable personal and professional qualities from a “B” level academic medical center (University of Rochester). The solid organ transplant program is now in a state of disarray. The University of Pittsburgh went from the number one solid organ transplantation center in the world to some lower level. This has occurred in an era in which UPMC has the money to be number one in every medical and surgical category in the United States. Is it possible that the Board of Directors of UPMC is anesthetized to clearly discern the extant circumstances? To an outsider, it appears that the focus to be the very best has been lost. Dr. Detre was not pampered in an aerie atop the U.S. Steel Building. He was in Oakland. He was focused on bringing international respect to the University of Pittsburgh and UPMC in Pittsburgh, Pennsylvania.
I do not criticize Mr. Romoff. He derives his authority from a board of directors that governs UPMC in ways that are startling. To quote an anonymous community leader, not invited to serve on the UPMC Board, “It is like they have turned the monkeys loose to run the laboratory.” What are they thinking? Would Dan Rooney build a football stadium in Beijing just for fun? I believe he is on the board of directors of UPMC and it appears that he keeps his investments pretty close to home. The same could be said for the other directors of UPMC. Does PPG build unneeded glass factories in Italy or Ireland or Qatar on a whim? I think not. Does National City Bank build banks in Europe just to see how they might do abroad? These questions seem just so silly. Not silly to UPMC. They seem to have more money than good sense. The Board of Directors gathers periodically and approves projects that will eventually draw attention like a bright light on the appropriateness of their tax exempt status. By the time the Justice Department and/or the Pennsylvania Attorney General catch up to this nonsense, Jeffrey Romoff will be retired and giggling.
You do not have to look far to find a hospital that missed the mark with respect to their primary responsibilities. The Hamot Medical Center in Erie, Pennsylvania lost their tax exempt status in 1989 for trying to improve the community by developing housing in downtown Erie. The episode dragged the organization through hell and back before they could have their tax exempt status restored. Excuse me, but their adjudicated malfeasance seems rather tame to the multi-national ambitions of UPMC.
It is altogether possible that when Mary Beth Buchanan, United States Attorney for the Western District of Pennsylvania finishes chasing every petty criminal in Western Pennsylvania she may turn her attention to more serious issues, like this one.
UPMC made a $100 million contribution to the Pittsburgh School Board. Wow. Now that is hard to criticize. On the other hand, is it the responsibility of UPMC to fund public education in Pittsburgh and Western Pennsylvania? Some, perhaps more cynical than necessary, thought the gift was a ploy to avoid paying UPMC’s fair share for fire safety, law enforcement, public works and other services in lieu of property taxes.
The way the organization is being governed is going to bait an enterprising elected official or law enforcement agency to raise the following question. Maybe UPMC should lose its tax exempt status if they can dabble in the international for-profit hospital market? Maybe UPMC has run out of ideas regarding the improvement of the health status of Pittsburghers and the other residents of Western Pennsylvania.
Beyond doubt, UPMC has paid good money to one or more of the best law firms in the United States to “paper the file” that everything they have done has been done in accordance with prevailing law. However, when the Justice Department pulls into town with an army of salaried attorneys, that “advance legal wall of defense” will go limp like a wet piece of white bread. There are several cases being litigated around the United States far less interesting than the extant circumstances at UPMC.
Someone asked me, “How does Jeff Romoff get away with such shenanigans?” Here is the answer. He is allowed to. It is like the question, “Why do people steal?” The answer is that they do not get caught . . . at least for a while. Sooner or later there is always a day of reckoning. Clarity of thought will catch up to the UPMC Board of Directors. It might come from Senator Grassley, R-Iowa (deeply concerned about tax-exempt abuses), or it might come from the Internal Revenue Service or it might come from the Justice Department or it might come from somewhere else. Have no doubt. The development of hospitals outside of the United States and corporate jets with dollars contributed to UPMC by the citizens of Pittsburgh and Western Pennsylvania will be stopped. When these reforms come, people will say, “How did this happen in the first place.” Here is the answer. No one got caught . . . at least for a while.
Of course, these are merely my opinions. You may have a completely different point of view. Let me know.
Jan R. Jennings
Thursday, March 27, 2008
Healthcare leaders have been predicting universal healthcare insurance for at least the past twenty-five years. It has been a long vigil and it we will probably wait longer. It was only in the last few months that the forces that will propel us into universal healthcare insurance have become clear, at least to me.
1. The economic pressure of caring for the uninsured – Some of our best clients are now caring for up to 15 percent of their patients in a category known as “self pay.” This is a euphemism for uninsured or under-insured. These so-called “self pay” patients can equate to less than one percent of cash receipts to a hospital or health system. To provide an example assume a hospital provides identical care to 100 patients. 15 of those patients pay less than one percent of the cost to care for the entire 100 patients. We see many hospitals and health systems installing the most elaborate management systems to squeeze every nickel out of hospital budget in an effort to breakeven from hospital operations. These are hospitals that have historically shown four to six percent of revenue in excess of operating expenses. At the moment, this trend is highly variable from one community to another. To the extent that this trend increases and becomes a national norm, the hospital industry will be emboldened to scream for help in a manner never experienced in our history.
2. The Federal Budget - One of my favorite hospital CEO’s is a Marine Corps Officer. He recently said to me, “No one could question my patriotism, but our $9 trillion national debt and $ 12 billion per month for the war is going to eventually have to be paid for and you know where Congress will look first?” For all of our protestations regarding the Balanced Budget Act of 1997, the medical and hospital industry survived. It is not clear to the public or the members of Congress that Medicare and Medicaid cuts might be harmful to the healthcare industry. It is just a matter of time before the healthcare industry will face a Federal Balanced Budget Act II or Act III or Act IV. Eventually, the bone marrow of the healthcare industry will be ruptured and lead to the third and most disturbing force for change.
3. Elevated Quality Standards will Fail –We have all read about one medical disaster or another. In the past, each of these errors has been attributed to medical errors or the most elemental human mistakes. Many of these errors have occurred at our nation’s finest medical institutions. During the past twenty years there has been an explosion of interest in elevating quality of care standards. People like Dr. Donald Berwick have convinced us that we can avoid human error and improve the care provided within the American hospital. This ethos is under-girded by one simple assumption: the healthcare delivery system has adequate money. I am a believer. However, it is altogether possible that an under-funded medical and hospital system will begin reporting medical disasters on a par with the national “death-o-meter” of wartime statistics. What will the public reaction be if fifteen years from now the American Hospital Association begins issuing a weekly report with headlines like the following, “Last week 93 people died in American hospital emergency rooms due to excessive waiting times.” It is altogether possible that an under-funded healthcare system will voluntary ration elective surgeries as life threatening cases have to be handled first. Will the life threatening cases be handled in a timely manner? Of course, there will continue to be wide variability with respect to which hospitals are most adversely affected.
As these three trends fully mature, there will be period of placing blame. When American people are being injured or worse in American hospitals, regardless of their insurance status and despite the best efforts of physicians, nurses and hospital leaders, it will be hard to argue against a level playing field for all Americans. If the American hospitals are uniformly under-funded, the problems that emerge will not be isolated to St. Smither’s by the Swamp Medical Center in Broken Arrow, Oklahoma. Under-funding any complex system does not discriminate on any basis. An engine without oil will destroy a new Lexus just as fast as a used Yugo.
I asked my most trusted reviewer of my articles to review this one. He openly wondered if I was being a little melodramatic predicting that medical and hospital care is going to fall off a cliff or “was I just having a bad day.” Well, you tell me. I see these changes coming with the speed of a turtle and immutable. My adverse vision is way off in the future. I have no idea how long it will take for routine crashes in American hospitals to occur. I would ask the informed reader this simple question. Do you see a single countervailing force to reverse any of the three trends suggested above?
At the moment, five out of six American people have some form of health insurance. When that number gets to four out of six or three out of six and the Federal budget chisels the life, literally, out of the American hospital, medical disasters will become normative. No pun intended, the American public will not take this lying down. We are likely to see a state experiment that works. Currently, we are watching the “Massachusetts experiment” carefully. The early signs are not promising. Stay tuned. Many innovative proposals are out and about.
Our universal healthcare system is likely to be extremely private. The Federal and state governments will continue to contribute to a system that is competitively bid among private health insurance companies. We will likely catch up to world powers like Mexico and competitively bid our pharmaceuticals when public dollars are involved. Ironically, it is from the politically ambitious that we are likely to find the champions for universal healthcare insurance. When people die routinely and unnecessarily in American hospitals it will be expedient to be a legislative hero.
Wednesday, January 30, 2008
On this last day of January, 2008, I was tasked with the pickup up a prescription for a dear old friend. It could not have come at a worse time. I was struggling to meet a timetable to catch an airplane out of town.
I stood at the “prescription pickup” station at the pharmacy and I waited and I waited. When I inquired, “what is the problem”, it was revealed that the pharmacy computer was having difficulty chit chatting with the health insurance computer and approving partial payment for the medications prescribed. Finally, I asked if I could pay cash for the medication and let the computers fight it out in the days to come. Well, nothing speeds up a transaction like cash. The bill for thirty pills was $159.95. I was a little surprised at the price and asked the pharmacy technician if she ever had patients show up with a prescription without insurance and when faced with the price, turned down the medication. She looked at me straight into my eyes and said, “Mr. Jennings, every morning, every afternoon and every evening.”
Upon further questioning she shared with me that patients routinely turned down insulin to battle diabetes, diuretics to fight congestive heart failure and routine medications to control high blood pressure, to name a few. Of 300 million U.S. citizens, nearly 50 million have no health insurance. One in six Americans face choices the majority of us find unthinkable. Who are these people?
We provide Universal coverage for streets and highways. All 300 millions Americans have access to our road system. It is considered a public utility. Even if you do not have an automobile, you can walk along the highways and byways of America. We have chosen as a society not to refer to this reality as socialized highways. Our society views highways as a service that all citizens should have made available to them and road construction companies compete for the business and are paid to build and re-build these highways for our individual and collective benefit.
Would it not make sense for America and Americans to find a way to pay pharmaceutical companies to provide medications that promote life, health and improve the quality of life for all of our citizens? For American business, would this not improve productivity, reduce lost work days and serve the interests of business and industry. There is someone out there in cyberspace that will read this and accuse me of being in favor of socialized medicine, a new expletive in our lexicon.
Rotary International provided universal access to polio vaccine to every person in the world. They raised the money on their own and developed a distribution system for polio vaccine to essentially eradicate polio throughout the world. If you have ever attended a Rotary meeting, you would not come away from the experience thinking of these men and women as wide eyed flaming liberals or socialists. They saw an opportunity to improve public health throughout the world and filled a long standing international leadership void.
Where will the leadership come from to provide healthcare to our citizens as a public utility? I have no interest in socialized medicine. I am not even certain what that term means. It strikes me that our friends throughout Western Europe have found numerous models to finance medical care in ways that are universal and at the same time extraordinarily private. This subject frequently causes people to start yammering about the Canadian Healthcare System. I can honestly say that in almost forty years of service to the American healthcare delivery system I have never met one person advocate that America follow the lead of Canada in anything but hockey.
My guess is that the leadership will emerge to bring common sense to this issue. It is not American for many of our best citizens to be embarrassed in American pharmacies; to shrink away in embarrassment because they cannot afford a simple medication to enrich or extend their lives.
Jan R. Jennings
Friday, November 23, 2007
Resistance to Change
The human impulses related to change are probably as old as our knuckle dragging ancestors. Presented only as English literature, there is an interesting 2,000 year old story in the New Testament Book of Mathew. The setting for this story is the village of Gadarenes. Theologians only agree that the town was on the eastern coast of the Sea of Galilee. Because the villagers were herding pigs, it is thought the villagers were Greek, or possibly Roman. As Jesus entered the town, he was threatened by two mentally disturbed men. The response of Jesus was to heal the two men of their mental illness. It seems like good news; maybe not. Jesus was promptly asked to get out of town. Yes, the status quo had been altered. The villagers had accommodated themselves to their mentally ill villagers. People hate change; resist information that will lead to change; even when that change might lead to a new and more favorable set of conditions. In two thousand years, nothing has changed.
Our firm had a short misadventure representing a nationally recognized group purchasing organization (GPO) in a small geographic territory. What a waste of time, money and effort.
Yes, we went from hospital to hospital proclaiming the good news. We were evangelists for cost savings. We did not ask our audience to accept our message by faith. We were armed with eighth grade math. The numbers used are only an example:
• GPO # 1 – 32,000 items times an Average Cost of X = Total Supply Spend = $ 37,342,334
• GPO # 2 – 32,000 items times an Average Cost of Y = Total Supply Spend = $ 32,123,654
• St. Smithers by the Swamp Medical Center Savings . . . . . . . . . . . . . . . . . . . . $ 5,218,680
Yes, we represented GPO # 2. The message was largely unwelcome. The most interesting, if frightening example was a female supply chain executive who reviewed the “facts and figures” and came out of her office screaming at the top of her lungs, “We are not interested in changing GPO’s, I don’t care what the savings are, get out of our hospital.” She was “bug-eyed”, her face was red as a tomato and we estimated her blood pressure at 200 over 120 (stroke range).
Most stories were less interesting. One CEO said they were not going to change GPO’s because his hospital system makes decisions based on “facts and figures” and that was the basis of his discriminating determination. We found this to be an odd response. One step in the process the CEO scrupulously avoided was the review of the “facts and figures.” Go figure. As it turns out, this CEO was ingratiating himself to his staff by supporting their recalcitrance.
One of the executives related to GPO # 2 provided me with a window into one understandable reason to resist switching GPO’s. There is a one time cost in time and effort, however small, to switch from one GPO to another.
There are other reasons not to change:
• The supply chain executive is generally not given any incentive to recommend a change that would lead to thousands or millions of dollars of hospital savings. It just sounds like a lot of extra work. Further, it may be well understood internally that the CEO is “drinking the “Kool-Aid” from the resident GPO.
• The hospital “supply chain” operations are, perhaps, the least intensely managed department of the American hospital. This is rooted in a deep tradition of not wanting to be tagged with the responsibility.
• GPO’s are extraordinarily solicitous of their existing customer base to lock in undeserved loyalty. Strategies and tactics include meetings (away from the hospital grind) with outside speakers, golf, tennis, tickets to professional sports events, lavish luncheons and dinners and on and on. In 1970, folk rocker Stephen Stills captured this phenomenon best with his song, “Love the One You’re With.”
• Notwithstanding my eight grade math example, GPO’s morph in ways that make them somewhat difficult to compare. Difficult but not impossible. More work with no reward for the effort. Each GPO is laden with bells and whistles that are intended to differentiate themselves from alternate GPO’s or obfuscate meaningful comparisons.
It would be disingenuous not to acknowledge that our firm may not be very good evangelists for change. We speak truth to power. There are many hospitals that do seek meaningful solutions to existing challenges. There is little time to suffer hospital leaders willing to squander scarce hospital resources for all the wrong reasons. Yes, some things never change.
Friday, August 24, 2007
Nicholas Jacobs, President and CEO, Windber Medical Center
Over the past thirty-five years I have met so many great healthcare leaders. I will avoid mentioning twenty or thirty of them because I would be neglecting twenty or thirty others. Some of these great leaders have been close working partners; others have been ruthless competitors. Some have been dear friends; others have been nominal acquaintances. I never thought I would know one healthcare executive that stood tall above the rest. That has changed.
In 1999 I attended a family gathering in a little hamlet outside of Johnstown, Pennsylvania. At the time I was working as a healthcare consultant. I was introduced to a fellow by the name of Nick Jacobs and was told he was the CEO of a rural hospital in the area: Windber Medical Center. I never heard of it. We talked about his activities and his hopes and dreams for his 80 bed rural hospital. Some of what he said was so “fantastic” I wondered if he was completely bolted down. There was no bragging or horn blowing; he just talked about his quest to make healthcare better than it had ever been before.
Several years later I had the opportunity to serve Jefferson Regional Medical Center in Pittsburgh as President and CEO. The culture of Jefferson Regional Medical Center was strikingly like every hospital I had ever served. It was all about diagnosis, treatment, throughput, science, new technology, finances and quality management. It was not the best hospital I had ever served and it was far from the worst. Like most hospitals, it was decidedly “vanilla.” There was one program referred to as the “Spiritual Life Department” that was truly special. It reminded me of my year’s earlier discussion with Nick Jacobs.
I was motivated to pick up the telephone and call Mr. Jacobs for an onsite appointment at the Windber Medical Center. I was unprepared for what I found. While Nick Jacobs is committed to the humanities, he embraces the medical sciences in every conceivable way. How many rural hospitals have the following?
• The Windber Medical Center owns and controls a research facility that is at the cutting edge of genetics research in affiliation with the Walter Reed Army Medical Center and the Genome Project. Dozens of scientists at the M.D. and/or Ph.D. level have been recruited to a facility larger than the hospital to advance genetics research and improve the future of diagnosis and treatment. Of the 126 U.S. academic medical centers in the United States, there are few that have research facilities on a par with those supported by the Windber Medical Center.
• In a separate building is a Breast Care Center designed by and for women. The center has every conceivable technological advantage available to women. More interesting is the attention to detail to the humanities. The dedication to privacy and the emotional health of the patients is striking. The facilities are breathtaking. Over its short history, Windber Medical Center has amassed the largest inventory of breast tissue through biopsy in the United States enabling the potential to advance diagnosis and treatment of breast disease more rapidly than any facility on the face of the earth.
• Mr. Jacobs became concerned about the conditions that confound patients and family at the time or near the time of death. He appealed to the citizens of the little coal town of Windber and the money was raised to build a seven suite inpatient hospice with facilities that would rival any Ritz Carlton or Four Seasons Resort.
• Concerned about the quality of life in Windber, Mr. Jacobs spearheaded the construction of a building that houses one of the most beautiful fitness centers in the United States. There is an integrated pool for therapies best suited for water therapy and a Dean Ornish Program designed to reverse coronary artery disease. The success stories from the Dean Ornish Program would bring tears to your eyes.
• Windber is a coal town, but has little coal. The population is largely elderly and the community is economically challenged. The elderly residents previously congregated in a worn and sad senior citizens center. Through a real estate and financial transaction that would make your head spin, Nick Jacobs found a way to build a new senior citizens center with the best facilities that money can buy and make it available with free parking to all senior citizens of the area.
• By the way, the Windber Medical Center has an eighty bed hospital. You will not be surprised that they have a 16 slice PET/CT, a 3.0 Tesla MRI, 4D Ultrasound, hotel styled hospital rooms and other technologies rarely found in a rural hospital.
More remarkable than the technical mumbo-jumbo, the Windber Medical Center lifts your spirits the moment you walk in the door. The hospital was one of the early affiliates of Planetree, an organization committed to introduce the humanities into the hospital and its surrounds.
Here are a few of the accomplishments of the Windber Medical Center. Volunteers bake bread on the nursing units and serve it to the staff and patients. There is a sense of “home” when you stroll through the hospital. On an entirely optional basis, patients and staff have access to the following:
• Stress reduction programs
• Massage Therapy
• Pet Therapy with the “Golden Girl Retrievers”
• 24 hour visitation hours
• Musicians perform in the hospital on a regularly scheduled basis funded by the Pennsylvania Council of the Arts
• Yamaha music programs (every nursing unit has a piano)
• Double Beds in the OB Suites for overnight stay by the spouse
• Meditation Garden Behind the Breast Center
• Walking trails on the hillsides
• Birdfeeders in view of each hospice guest
• The kitchen is “trans-fat free”
• Numerous fountains inside and outside the hospital
• An Inter-faith Spiritual Healing and Meditation Program
• A Greenhouse for patients and visitors
My editor worries when my articles are too long. This is but a small window into the soul of the Windber Medical Center.
I will stop. Before I close, I want to make sure I stay in touch with reality. Nick Jacobs has faced challenges and adversity, both personally and professionally. But when you meet with Nick Jacobs you know you have stood in the presence of humility and greatness. You will not be surprised to learn that FierceHealthcare recently honored the Windber Medical Center with the “2007 Hospital Innovators Award.” FierceHealthcare is an internationally renowned digital daily newsletter published by FierceMarkets: www.fiercemarkets.com.
The greatest miracle is that his Board of Directors has been able to keep Nick Jacobs in Windber, Pennsylvania and the search firms of the United States have not been able to turn his head with money or fame. Nick, God Bless You.
Reprinted with permission of Western Pennsylvania News
Tuesday, June 12, 2007
Why do two-thirds of American Hospitals Lose Money or Barely Break Even at the Operating Line?
Through my long career I have observed the divergence of American hospitals into the prosperous and the “have not’s.” Why? On occasion it is clear. There are two subsets of hospital failure easy to understand. Some hospitals simply should not be open. When the St. Francis Hospital of Pittsburgh closed in 2002 . . . it was barely mentioned in the local newspaper. At one time it was the largest hospital in Pittsburgh with over 1,000 beds. It simply worked itself out of being needed. It was sad, but inevitable. And, of course, there are those hospitals in communities that are very poor and, yet the hospital is desperately needed. Many of these hospitals are rural and their loss would be devastating to a needy community. What about the remaining hospitals that fail to thrive?
The answer to the puzzling question of hospital failure is becoming clear. Many hospital board members and hospital executives reach into the jaws of victory and find failure with fundamentally poor judgment and decision making.
I have made my own share of terrible decisions in my career, but have normally been supported by boards of directors to avoid disaster through good oversight and internal controls. It turns out that all hospitals are not as fortunate.
Recently, I received a phone call from a young lady in our research department and advised that she had stumbled upon a small multi-hospital system blowing approximately $4,000,000 per annum right out the window through a simple error that could be easily corrected by making a small change. As it turned out, I happened to nominally know the CEO of the hospital system. I called him on the phone and suggested we meet. At my own expense and time, I flew 1,100 miles, rented a car and drove to a restaurant to meet him. He was absolutely delighted at this revelation. His little system is suffering seven figure operating losses on a monthly basis. Four million dollars would go a long way. He was going to rush back to the hospital and share this great news with his flagship hospital CEO.
I will admit that my motivations were not derived entirely from the cup that holds the milk of human kindness. In healthcare consulting, sometimes if you do something “good” for a hospital or health system, it will be remembered when consulting services are needed.
Well, what happened in this situation? Finally a phone call came and it went something like this: “Jan, I checked in with my Hospital CEO and he does not want to make this change at this time and I support my people.” I was more than a little surprised. I said, “But Fred (name changed for obvious reasons), there is no cost, the numbers are not in dispute and your hospital system will lose $4,000,000 on a recurring annual basis. How could you possibly not do this, there is no downside and you receive four million dollars annually without any pain?” His reply went like this, “Well, my style is to show my people support by supporting their decisions . . . even when they are wrong.” My colleagues, this kind of “decision making” takes your breath away.
I am reminded of the American novel, The Grapes of Wrath, by John Steinbeck. In a novel that documented the tragedy of drought and famine in America’s heartland in the 1930’s, there is an exchange between the agent of The Shawnee Land and Cattle Company and a farmer who is having his farm repossessed. The farmer, Muley, said to the agent, “Do you know who owns The Shawnee Land and Cattle Company?” The agent said, “It ain’t nobody. It’s a company.”
The farmer’s son said, “They got a President, ain’t they?” The agent said, “Oh son, it ain’t his fault, because the bank tells him what to do.”
This kind of circular reasoning leads to decisions that are not in the best interests of America’s hospitals, and other organizations for that matter.
In another circumstance we offered a 10:1 ROI to a struggling hospital in the Pacific Northwest. Yes, it sounds too good to be true. So, to demonstrate confidence, we offered a money back guarantee. The hospital CFO thought it was too expensive. Wait a minute. How could it be too expensive if there is a money back guarantee and a 10:1 return on investment? How could that be too expensive? You know what is coming. The CEO told me he supports his people and they really appreciate his support. My opinion is they REALLY appreciate his support.
Facing a similar dilemma some twenty years ago at the Millard Fillmore Health System in Buffalo, New York, I shared with a group of board members that I wanted to support my management team, but I just could not stomach a recommendation being forwarded to me for an affirmative decision. The former Chairman and CEO of the Dunlop Tire and Rubber Company put his arm around me and whispered these words in my ear. “Jan, you are running a university affiliated hospital with lots of research laboratories. Would you turn the laboratories over to the monkeys? Sometimes you have to grab the steering wheel and follow your best experience and instincts. There is no upside in blindly supporting stupid decisions.” It is a lesson many hospital leaders and hospital board members need to learn.
These are only two data points in hospital and health system decision making. Notwithstanding, there is an indisputable pattern of poor decision making in many of America’s hospitals. The rules of the road, reimbursement methodologies (public and private) are so similar and yet the results among hospitals and health systems are so different. Success is rooted in good decision making. Failure is rooted in poor decision making. I have a keen perception of the obvious.
Republished with permission of Atlanta Hospital News
Sunday, May 13, 2007
Hubris Seems to be Flying High at UPMC
The Trib reported last Sunday (May 6, 2007) that the University of Pittsburgh Medical Center has leased a second corporate jet. The second jet is a Bombardier Global Express valued at between $30 million and $50 million with a monthly lease payment estimated at $280,000.
A UPMC spokesman said it is needed because it "can carry more people and avoid refueling." The jets are going to be used to take staff to UPMC operations in four foreign countries -- a high-profile hospital in Italy, cancer centers in Ireland and England and an emergency care center in Qatar.
The Trib also offered a tortured detailing of how much it would cost to fly commercially to all of these foreign locales. The bottom line was not convincing that a corporate jet is necessary, appropriate or cost-justified.
UPMC now is the largest private employer in Pennsylvania. And when it came time to gather quotes from the business and civic community about this issue, it seemed like knees went to jelly. Cliff Shannon, president of SMC Business Council, said he would question the use only if the physicians and workers are being transported to engage in activities that aren't related to patient care. Shannon continued: "If there are patients at the other end who need their timely attention, I don't know that I could criticize that." Cliff Shannon has been vocal on issues that affect health-care costs and affordability of health insurance.
Please spare us this nonsense. When the Trib queried three other academic medical centers with care centers abroad -- Mayo Clinic, John Hopkins International and M.D. Anderson Center -- it was learned that all of their physician and executive officials fly on commercial aircraft. Anyone with a wit of understanding regarding the needs for moving academic physician and executive personnel around the world knows that commercial aviation is quite satisfactory.
When former President Clinton was asked why he got involved entertaining the sexual ministrations of Monica Lewinsky in the Oval Office of the White House, he gave one of the clearest answers possible: I did it for the most arrogant of all reasons -- because I could.
You cannot blame UPMC President and CEO Jeffrey Romoff for these excesses; this sort of thing has to be approved by the board of directors. Indeed, the genesis of this idea to lease $30 million to $50 million jets may have originated somewhere else in the organization. It was done for the most arrogant of all reasons: They could.
When Mr. Romoff survived moving a $10 million book of advertising business out of Pittsburgh and giving the contract to a company in which his brother serves as a principal, it was obvious that there was nothing the board of directors would not do to keep Romoff happy.
The Trib article stated the following:
"Private jet firms say leased and chartered jets are popular among business executives who want to avoid the hassles of flying commercial. Travelers can take off on relatively short notice, avoid long security lines and have room to conduct meetings or sleep, said Dan Stainer, director of marketing for Voyager Jet Center, a West Mifflin-based firm. 'You arrive at your destination refreshed,' Stainer said. 'You can go to a meeting, and we can have you back in time for dinner at home.'"
God forbid that anyone at UPMC would have to endure the same indignities that the consuming Pittsburgh public faces daily at Pittsburgh International Airport.
I wish I could think of a word more apt than absurd. I cannot. Here are three reasons UPMC should not be leasing corporate jets:
1. UPMC is a community treasure. Romoff and his mentor, Dr. Thomas Detre, are both strategic geniuses. They took UPMC and the affiliated medical school from obscurity to national prominence. One of their greatest assets in achieving these great heights was the tax-exempt status available to them to serve the eleemosynary requirements of a grateful community. Sen. Charles Grassley has been fishing for a good reason to take away the tax-exempt status of hospitals; this is the "poster child" of abuse that he has been looking for and it was so avoidable.
2. There is a dubious mathematical and financial equation for determining whether or not a corporate jet is justified. Let's just assume UPMC passed this test. Pittsburgh is still a conservative town with people who will never understand why the gentry of UPMC need a jet to squire them around the world. Those who are inside the industry know that there is no "patient care" justification for corporate jets. In mathematical terms, this is hubris squared.
3. What kind of message does this send to "Joe Six-pack" who cannot afford health insurance or can barely meet his co-insurance and deductibles for medications and visits to his primary care physician? It demonstrates a lack of judgment and sensitivity to the people who pay the bills that have turned UPMC into a corporate giant. It might benefit the consciousness of Jeff Romoff and his minions if they flew commercial and sat next to their customers and sought their advice and counsel with respect to the issues that worry the consuming public.
Do not expect this situation to change. According to the Trib article, some models of the Bombardier Global Express "can seat 19 passengers and feature personal DVD players, a separate conference area and plush leather seats that can be converted to beds."
Tonight when UPMC officials streak across the Atlantic like Greek epicureans opening bottles of champagne and the attendants serve gourmet cuisine, many of Pittsburgh's citizens will be going through the drive-thru at Wendy's picking up a small chili without cheese and a small Diet Coke trying to cut corners to face their co-pays at the Eckerd pharmacy later in the evening.
There will be a day of reckoning. This is the kind of excess that the "average Joe" can understand. He may not be able to do anything about it but someone in a position to do so will. It cannot come a day too soon.
Have you ever had that sick, sinking feeling when you are embarrassed for someone else because he does not have the good sense to be embarrassed for himself? Well, when we look up in the sky and see UPMC officials disappear into the sunset in their Bombardier Global Express, many of us will be embarrassed for them; for they do not seem to have the self-awareness to be embarrassed for themselves.
Republished with Permission from the Pittsburgh Tribune-Review