The New York Times in recent days posted an article that should be a watershed moment in U.S. healthcare, a tipping point where Americans have a collective bejesus moment and demand the dismantling of the Mafia-like cartel that’s forcing millions into debt and bankruptcy because they had the misfortune of needing some medical care. Even those of us accustomed to reading about pervasive corruption and dishonesty in U.S. healthcare were taken aback by the repulsive behavior the Times uncovered and impressively documented.
The article was about Washington State-based Providence, one of America’s biggest “nonprofit” hospital chains, with 52 hospitals and 1085 clinics in seven states. Providence’s revenue last year exceeded $27 billion, on which it paid no taxes. The chain has a $10 billion reserve and a venture capital fund. Founded by nuns in 1856, Providence’s mission statement says, “As expressions of God’s healing love, witnessed through the ministry of Jesus, we are steadfast in serving all, especially those who are poor and vulnerable.”
Providence’s declared values: Compassion, Dignity, Justice, Excellence, Integrity.
As I’ve hopefully educated readers of this blog, most often there is an inverse relationship between the loftiness of a corporation’s declared values and its actual business practices. It therefore should come as no surprise that in April the Department of Justice announced that Providence agreed to a $22.7 million settlement “to resolve allegations that it fraudulently billed Medicare, Medicaid, and other federal health care programs for medically unnecessary neurosurgery procedures” at the chain’s St. Mary’s Hospital in Walla Walla, Washington state.
According to the DOJ, Providence provided a couple of unnamed surgeons a financial incentive to perform “more procedures of greater complexity,” and the docs rose to the occasion.
Defrauding Medicare and Medicaid is a pervasive hospital industry practice, which is perhaps why the Times neglected to mention Providence’s recent DOJ settlement. Instead, the publication focused on Providence’s revenue acceleration program called “Rev-Up,” which turned patient-facing caregivers into aggressive bill collectors, targeting even poor people who were eligible for free medical care.
Soliciting money “is part of your role. It’s not an option,” according to training materials obtained by the Times.
Hospitals failing to provide sufficient charity care and community investment to justify their tax-free status isn’t news. The Lown Institute documented this in an April 22 report, and academics Ge Bai and David Hyman reached the same conclusion a year earlier. However, knowingly billing and aggressively pursuing patients who qualify for free medical care and then unleashing aggressive bill collectors on them is a new industry low, a practice that Providence didn’t concoct all by its lonesome.
Providence was abetted by the storied consulting firm McKinsey & Company.
That McKinsey would engage and promote such ethically challenged practices is consistent with its modus operandi, particularly in healthcare. We’re talking about a firm that last year agreed to pay nearly $600 million to settle investigations into its role in helping “turbocharge” opioid sales, a rare instance of McKinsey being held publicly accountable for its work with clients. Investigation documents made public revealed that McKinsey had its consulting tentacles in all aspects of pharmaceutical narcotics sales, ranging from the harvesting of the raw materials to devising sophisticated marketing strategies on how to enlist doctors to become narcotics prescribers.
As the opioid crisis progressed, McKinsey also advised U.S. agencies on how to mitigate the fallout, while simultaneously advising its pharmaceutical clients on how best to deal with those agencies.
McKinsey, quite simply, is an unscrupulous company with no shame.
What’s dumfounding is that McKinsey possibly thought Providence could get away with its recommendation to aggressively fleece patients, including poor people. Whistleblowing, particularly at U.S. hospitals, is a highly profitable pursuit and one must be awfully naïve to think that persons who chose to go into the business of caregiving aren’t going to have issues being coerced into business practices they know to be wrong and possibly illegal.
Indeed, that’s how the DOJ got wind of the needless back and spine surgeries the Providence hospital in Walla Walla were performing. The hospital’s former Medical Director of neurosurgery was responsible for alerting the feds.
Underscoring just how low McKinsey stoops, the materials it prepared for Providence employees invoked a famous line from a speech by the Rev. Dr. Martin Luther King Jr.: “If it falls your lot to be a street sweeper, sweep streets like Michelangelo painted pictures.” I’ve previously weighed in about disingenuous hospital executives who gratuitously invoke the memory of the civil rights leader to justify their corporate profiteering behaviors.
Melissa Tizon, a spokeswoman for Providence, shamefully told the Times that Rev-Up aimed “to provide patients with greater pricing transparency.” For Tizon’s sake, let’s hope she’s merely passing on a statement drafted by an attorney, rather than showcasing her crisis management skills.
Notably, Tizon threw McKinsey under the bus.
“We recognize the tone of the training materials developed by McKinsey was not consistent with our values,” Tizon said.
While I’m certain McKinsey’s materials were consistent with Providence’s management values, there’s likely some truth that they weren’t consistent with the values of many, if not most, of Providence’s caregiving staff.
That’s understandable. McKinsey only actively recruits from the top-tier business schools, graduates who likely can’t relate to a nurse earning $80,000 a year who finds life meaningful and fulfilling caring for the infirm and working for such a paltry sum compared to what MBAs from elite universities immediately command upon graduation. Turning the nurse into a bill collector makes perfect sense to a McKinsey consultant, who believes that increasing corporate revenues is doing God’s real work.
The Times said that Providence in 2019 paid McKinsey “at least” $45 million, according to the company’s tax filings. That’s what really kills me.
When I had my public relations firm, I had a colleague named Jackie who had a knack for drafting HR communications and training materials that without exception dazzled our clients, often with just one draft. Jackie could establish an authoritative voice without HR jargon and cliches, and she understood the importance of authenticity, meaning she had the good sense not to invoke MLK in corporate directives that disrespected employees. MLK was a big supporter of unions and worker rights.
We’d likely have charged Providence about $50K to draft materials similar to McKinsey’s, but no doubt of a much higher quality. Admittedly that was nearly a decade ago, so let’s adjust the fee 20-fold to account for inflation and other insanity, and say we’d charge Providence $1 million today.
That’s still $44 million less than what Providence paid McKinsey!
But Providence would never have considered, let alone hired, our firm. Why? Because we steadfastly advised clients that they should never engage in activities or put into writing anything that would be embarrassing if it appeared on the front page of the New York Times.
McKinsey clearly doesn’t share that concern, which explains why the company has been embroiled in a myriad of controversies, ranging from the $20 million it received from Immigration and Customs Enforcement for such cost saving moves as cutting back the amount of food served to detainees to a major political scandal in South Africa. Here’s a primer on some of the controversies McKinsey sparked on behalf of its clients. And let’s not forget that McKinsey’s former CEO and a former partner went to jail for insider trading.
Admittedly, some CEOs and CFOs hire McKinsey to serve as their useful idiots, providing cover to pursue activities they already planned. If things turned south, the CEOs and CFOs could show their board members McKinsey’s detailed reports showing the wisdom of the wayward business effort.
But there’s evidence that McKinsey consultants are way out of their depth in some industries, particularly media. Axios reported that McKinsey advised CNN on the disastrous subscription launch of CNN+, which was shuttered within a month, costing the network millions in addition to the millions it likely paid McKinsey.
While McKinsey’s advice often gets its clients into hot water or causes them considerable controversy and embarrassment, the firm’s Californian Rhodes Scholar leader says the organization is learning to develop a thicker skin and become oblivious to criticisms of its business practices.
“Look, the world is a critical place,” Bob Sternfels, McKinsey’s global managing partner told the Financial Times. “We’re going to do things that have outsized impact, and we’re OK if you don’t agree with us.”
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