Blog on the Run: Reloaded

Thursday, June 20, 2013 7:24 pm

Hospital layoffs are bad, but some things are even worse


Back in ’06 or ’07, I was sitting in an office with senior Moses Cone Health System officials here in Greensboro. They were telling me how much growth they expected and how much hiring, particularly of nurses, they were going to be doing. Regardless of what the rest of the economy was doing, they said, the aging of the Baby Boom was likely to keep the health-care industry growing for quite a while.

Obviously, many things have happened since then, including the Little Depression, the Affordable Care Act and, at flagship Moses Cone Hospital, a new tower. But this week, Cone Health said it would be cutting 300 positions, or 3 percent of its work force, and half of those cuts would be through layoffs, at an expected overall savings of $3 $30 million annually. I say this with nothing but sympathy for both the soon-to-be-jobless employees and the larger organization. I and every member of my immediate family have had multiple experiences with various parts of  Cone Health, and certain billing aggravations aside, I have nothing but good things to say about the organization, its employees and the care we got.

I don’t know whether the layoffs are the right or wrong thing to do in this case. But Cone Health is a not-for-profit organization. Imagine how bad things could get if our monopoly local health system were for-profit.

That’s not rhetorical. Go on, imagine it. I’ll give you a second.

OK, now read this:

A surgeon at Chicago’s Sacred Heart Hospital cut a hole in Earl Nattee’s throat on Jan. 3, the day before he died. It’s not clear why.

The medical file contained no explanation of the need for the procedure, called a tracheotomy, according to a state and federal inspection report that quotes Sacred Heart’s chief nursing officer as saying it happened “out of the blue.” Tracheotomies are typically used to open an air passage directly to the windpipe for patients who can’t breathe otherwise.

Now, amid a federal investigation into allegations of unneeded tracheotomies at the hospital, Nattee’s daughter, Antoinette Hayes, wonders whether her father was a pawn in what an FBI agent called a scheme to defraud Medicare and Medicaid.

“My daddy said, ‘They’re killing me,’” Hayes recalled, in reference to the care he received at the hospital.

Based in part on surreptitious tape recordings, an FBI affidavit lays out allegations that a Sacred Heart pulmonologist kept patients too sedated to breathe on their own, then ordered unneeded tracheotomies for them — enabling the for-profit hospital to reap revenue of as much as $160,000 per case.

The Sacred Heart case is unusual because of the troubling nature of some of the allegations, said Ryan Stumphauzer, a former federal health care fraud prosecutor in Miami who reviewed the affidavit. “A typical indictment might allege phantom billing or improper coding,” he said. “This complaint alleges the hospital and doctors were performing unnecessary invasive surgery to justify false billing.”

It’s also unusual to have recordings from cooperating witnesses, he said, “but it is always very difficult to challenge a physician’s judgment.”

The government has already charged Sacred Heart owner Edward Novak, his chief financial officer and five physicians with Medicare fraud, in a criminal complaint alleging that they gave or received kickbacks in return for patient referrals.

A physician and two Sacred Heart administrators worked with federal investigators, secretly taping conversations with other hospital staff members, according to the complaint. The 90-page FBI affidavit includes a quote attributed to Novak saying tracheotomies were the hospital’s “biggest money maker.” The hospital’s pulmonologist, or respiratory specialist, is quoted as saying during an April conversation that Novak asked him “to provide two more tracheotomy cases for the hospital soon,” before inspectors — who had visited the hospital in March — returned.

It’s like the script for a bad conspiracy thriller (or a Michael Crichton novel, but I repeat myself). And it apparently was going on at for-profit, and ironically named, Sacred Heart. Real doctors who had sworn the Hippocratic oath were cutting unnecessary holes in living human bodies for six figures a pop, and some of those patients died from it.

Fraud charges are good, but they’re really only a good start. If we’re going to have a death penalty, these are the people who should be getting it. They’re going to have eternity to talk shop with Josef Mengele, so we shouldn’t waste any time letting that conversation begin.

Thanks to Jeff Sykes for catching a rather significant typo.

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3 Comments »

  1. http://projects.propublica.org/nonprofits/organizations/581588823

    Must be nice being a non profit with a 45 million dollar net income

    Comment by Triadwatch — Friday, June 21, 2013 12:05 am @ 12:05 am | Reply

  2. I worked in cost control for a major health insurance company in the area, many years ago, and at that time, Charter Hospitals were popping up everywhere. We knew all were for-profit and watched them closely when they admitted insureds of ours. The psych case manager in our department worked up a good relationship with one of the employees at a Charter in Texas. Charter ran ads that showed mopey teens and would show worried parents, while asking “Does your teen stay isolated? Does he avoid conversation? Is she subject to sudden outbursts?” The ad insinuated typical teen behaviors were an indication of drug addiction or psychosis. Parents would call Charter for more info, a rep would go to the home, get the parents to sign waivers, and cart the kid to the hospital. Treatment was minimal, but they sucked the benefits dry (usually $10K for a 30-day stay) and discharge the kid who was suddenly cured. While this went on at other Charter hospitals as well, the one in Texas was unique because the head administrator thought he was Zorro, and would actually don a cape and mask and run up and down the halls. Oh yeah – the patient’s running the mental asylum is not just a legend, but fact. And Charter Hospitals caused their own extinction – greed gets you nowhere.

    Comment by Iris Carter — Friday, June 21, 2013 1:47 am @ 1:47 am | Reply

  3. George, given the level of capital investment necessary for a regional health system to stay current on facilities and equipment, I would hope that all such systems are showing healthy operating surpluses. It’s what they do with those surpluses that matters. If they’re increasing the quality and/or quantity of care in the face of a demonstrated or reliably projected community health need, I have no problem with an eight-digit operating surplus. If they’re just padding executives’ compensation, well, then we have a problem. Not having looked at Cone’s 990s in at least five years, I cannot say whether they’re using their surpluses wisely (and, thus, also cannot begin to say whether the layoffs are a good or bad call).

    At any rate, we’ve wandered a bit afield of my larger point. Public health is a public need and a public good; accordingly, per classical economic theory, it is best addressed via the public and/or nonprofit sectors, not the for-profit sector. Sacred Heart is a macabre example of why, and Iris’s example is another. As you may recall, Charter had a unit here until it screwed up big-time, ended up on “60 Minutes” and got shut down.

    Comment by Lex — Friday, June 21, 2013 8:34 am @ 8:34 am | Reply


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