The American Hospital Association, a trade group focused on the enrichment of its member CEOs, last week began priming the PR pump for another taxpayer bailout. The group held a press call to discuss the dire projections of an industry consulting firm called Kaufman Hall, which show that hospital margins in 2022 could plummet between 37 percent to 133 percent lower than what the industry recorded in 2019.
Brace yourself, things supposedly are really, really, bad.
“In either case hospitals stand to lose billions of dollars in 2022,” Therese Fitzpatrick, senior vice president at Kaufman Hall was quoted as saying. “It will be the worst year since the start of the pandemic.”
I’m sure Fitzpatrick is a mighty fine person, and her bio indicates she is an extremely interesting one. In addition to holding a PhD from the University of Wisconsin in urban studies, she has a master’s degree in nursing from DePaul University and was inducted into the American Academy of Nursing in 2016. Fitzpatrick is an assistant clinical professor of public health at the University of Illinois at Chicago.
Fitzpatrick is hardly an objective source, as she has a vested interest arguing that U.S. hospitals are performing badly. Fitzpatrick’s bio says she specializes in “performance improvement,” and her focus is “providing consultation to hospitals and health systems across the country in assessing their clinical and operational performance and developing effective strategies to enhance efficiencies and optimize staffing.” One hopes that hospitals retaining Fitzpatrick will only suffer margin declines on the lower end of her projections.
But let’s be charitable and let the AHA expand on their “the sky is falling” message. The trade group on the media call reportedly trotted out three hospital CEOs representing healthcare systems of varying size and focus. One was Jack Lynch, president and CEO of Main Life Health, a five-hospital nonprofit system serving Philadelphia and its western suburbs.
“The numbers are all going in the wrong direction, and I’m concerned we’re going to see more healthcare providers close as a result of the current financial reality, which will impact access to care,” Lynch warned reporters. “In my 35 years as a healthcare leader, this is the most fragile I’ve ever seen the American healthcare system.”
Let me share some info about Lynch and Main Life Health that the AHA didn’t share with reporters.
In November last year, a jury awarded a former Main Life nurse named April Nitkin $120,000 in punitive damages and $20,000 in backpay, finding in favor of her retaliation lawsuit. Nitkin alleged she was fired after she reported a doctor for making inappropriate sexual comments at work.
According to a report in The Legal Intelligencer, the judge overseeing the case rejected Nitkin’s claims that she faced a hostile work environment and wrongful termination, but allowed a jury to decide on her retaliation claims. The publication said it’s rare for punitive damages to be awarded in a retaliation suit.
Is it any wonder why nurses are quitting in droves, resulting in a nationwide shortage?
Lynch, a former governor of the American College of Healthcare Executives, has served as president and CEO of Main Line Health since 2005. Seven years into Lynch’s tenure, Main Line Health agreed to a $1 million settlement for allegedly submitting improper Medicare claims. Submitting improper Medicare claims is pervasive in the U.S. healthcare industry; the Department of Health and Human Services estimated that in fiscal 2020 alone, $26 billion in submitted payments were improper.
In fiscal 2020, Lynch was rewarded $1.7 million in compensation, plus $612,000 “from the organization and related organizations.” That was a nice chunk of change considering industry leaders like John Fox, former Beaumont Health CEO and erstwhile chair of the Michigan Health and Hospital Association, were publicly warning as late as March 2020 that U.S. hospitals were in danger of imploding “faster than people expect and could cripple the core of America’s hospital systems.”
Lynch looks like a piker compared to Fox, who received $6.42 million in compensation in 2020 for running an eight-hospital system whose once vaunted reputation he destroyed. Fox earlier this year pawned off Beaumont to Tina Freese Decker, CEO of Grand Rapids-based Spectrum Health who also is a past chair of the Michigan Health and Hospital Association. Spectrum recently reported that Beaumont racked up nearly $100 million in losses since the company took over the suburban Detroit-based health system in February, nearly double what Freese Decker was expecting.
There’s reason to believe that Fox received a golden parachute of $30 million or more, despite Beaumont’s seeming financial troubles. Rest assured, Freese Decker received a big bump in compensation for taking over Beaumont’s troubled operations, which resulted in her firing 400 employees despite earlier promises the acquisition wouldn’t result in any layoffs.
The AHA’s members have been pulling off their con driving up healthcare costs to enrich themselves virtually unchallenged for quite some time, but there’s some ominous storm clouds rolling in that could derail their compensation bonanzas, particularly their lucrative golden parachutes resulting from mergers.
One group that’s on to the AHA and its members is called the National Alliance of Healthcare Purchaser Coalitions, a feisty nonprofit dedicated to “driving health and healthcare value” across the country. The NAHPC has put together a “playbook” impressively summarizing all that’s wrong with the U.S. hospital industry and how best to make things right. The AHA is cooked if the playbook finds its way to American consumers.
The HAHPC charges that U.S. hospital pricing is “indefensible” and “unsustainable” and cites studies from RAND Corporation showing that employers routinely pay two to five times what Medicare pays for hospital care. The HAHPC essentially argues that U.S. hospitals are poorly managed and that “relatively efficient hospitals can be financially viable” charging prices that are close to Medicare payment levels.
The HAHPC says that hospital mergers drive up the cost of hospital services by 6-18 percent.
“Taken together, all the data collectively demonstrates that many hospitals are charging too much to employers and other plan sponsors and that such charges cannot be justified (emphasis theirs) by uncompensated care, subsidies required for public program shortfalls, case mix, quality performance, or even their current cost structure,” the HAHPC argues.
Another group that’s on to the AHA’s members is a philanthropic organization called Arnold Ventures, which is funding a federal class action lawsuit alleging that Advocate Aurora unfairly used its power as the largest health care system in Wisconsin to raise prices for employers. The lawsuit alleges that Milwaukee residents pay more for hospital care than New York City residents and 44 percent above the national average for medical care.
“Supporting employers and workers suing hospitals for price gouging and anticompetitive contracting is one way to overcome the imbalance of power in the market,” Erica Socker, vice president of health care for Arnold Ventures, told the Wall Street Journal.
Advocate Aurora resulted from the 2018 merger of Chicago-based Advocate Health Care and Milwaukee-based Aurora Health Care. The deal was orchestrated by Advocate CEO Jim Skogsbergh, who is regularly cited as one of the highest paid nonprofit executives in the country. He is a former chair of the AHA and served as chair of the association’s Political Action Committee from 2019 through 2021 at the height of the pandemic.
In 2020, Skogsbergh cut a deal with former Beaumont CEO John Fox to take over the Detroit-area hospital network, but the terms were so controversial they were forced to abandon their plans.
Other possibly formidable AHA opponents are nurses’ unions whose bargaining power has increased substantially given the nationwide shortage of nurses. A poll conducted on behalf of the Minnesota Nurses Association revealed that more than 50 percent of Minnesota voters have an unfavorable view of hospital executives and CEOs, while just 11 percent said they viewed hospital executives favorably. By comparison, 84 percent of those polled said they viewed nurses favorably.
Most Minnesotans said hospital executives are paid too much money, while 62 percent said nurses make too little.
The AHA has some of the best Congresspeople money can buy on both sides of the aisle, but the activities of the association’s members aren’t unanimously supported on the state level. Maine’s Democratic legislative leaders last April sent a scathing letter to Maine Medical Center, the state’s biggest hospital network, protesting the hiring of union busters who allegedly intimidated nurses to vote against joining the California Nurses Association. The letter, signed by Maine’s Senate president, the Speaker of the House and 75 other legislators, demanded the hospital “fire the (union busting) consultants” and respect nurses’ federally protected right to organize.
Even in Congress, the AHA could face the furor of a “progressive” beloved by the media. That would be Minnesota Rep. Ilan Omar, who very publicly supported striking Minnesota nurses last week.
With inflation rising and nearly half of Americans functionally uninsured, hospital CEOs face some formidable challenges continuing to manage U.S. healthcare as their personal ATM machines. Here’s to hoping their jig is up.