Lucrative inside deals and seven-figure salaries at a publicly funded hospital reveal how self-enrichment drives up healthcare costs, not providing care for patients
STEPHEN JANIS The resignation of Mayor Catherine Pugh after The Baltimore Sun revealed she used her position as a board member of a hospital system to sell hundreds of thousands of books for profit, has also revealed a deeper, even more systemic issue with healthcare in this country. Not only has it exposed a whole variety of self-dealing by board members of a partially publicly-funded hospital system but has also shed light on another less often acknowledged truism— the American healthcare system is a spigot of cash for those who know how to work it. In fact, the spiraling costs of healthcare are not the result of having the best healthcare system in the world as some argue, but possibly the greediest— and I’m not talking about doctors and nurses. A recent study by The Harvard Business Review found that nearly 95 percent of the growth in healthcare spending since the 90s, 75 percent went to adding administrators. In fact, that study found that there are currently ten administrative personnel for every doctor, or a whopping $823,000 in labor costs per physician. All this amid rising deductibles and premiums and continued efforts by Republicans to roll back even the most rudimentary healthcare safety net.
To help me talk about this issue are two people who know much about it. Luke Broadwater is an Investigative Reporter for The Sun who broke the story on the University of Maryland Medical System scandal. Jeff Singer is a former President of Healthcare for the Homeless and current Professor of Social Work at the University of Maryland. Thank you both for joining us. I appreciate it.
JEFF SINGER Thanks, Stephen.
STEPHEN JANIS So, Luke, let me start with you because it just seems like every week there’s a news story. Now, just so people know, Luke was the person who broke the story about Mayor Catherine Pugh, who was our mayor, who was selling books to the University of Maryland Medical System, making money. She made about $800,000 or something over that time period, but she wasn’t alone, right? I mean, this was like, basically if you’re a board member, it was almost a given that you would get something in return. How sprawling was this business of making money off the hospital?
LUKE BROADWATER Right. Well, so one— the University of Maryland Medical System Board of Directors, one-third of them had deals with the hospital in that work that they’re supposed to oversee, in which they were enriching themselves or their private companies. There was an executive with M&T Bank, for instance, whose bank gets about $3 million or $4 million worth of work every year from the medical system. Former Senator Frank Kelly’s insurance company has made about $16 million since 2010 with the system. Obviously, the Mayor Catherine Pugh received $500,000 for her self-published children’s books. So just within this board alone it was quite pervasive, but then it’s also a practice that we looked at with the affiliate boards and even with other hospitals, but much of the focus and attention has been on this single board because some of the deals there were—
STEPHEN JANIS Right. Were so extreme.
LUKE BROADWATER Yeah were what many people see as very egregious.
STEPHEN JANIS So Jeff, you were one of the pioneers who brought healthcare to homeless people through the Healthcare for the Homeless organization, but do board members in your board—Is this a common practice to like, let’s cash in on being a board member? What’s your take on this practice?
JEFF SINGER It’s actually the converse. We want to have wealthy board members who bring money to us.
STEPHEN JANIS But that’s the point, right? You’re wealthy and you donate, right?
JEFF SINGER Yes. That’s generally the way it works.
STEPHEN JANIS So no one was going on big vacations or billing?
JEFF SINGER No, alas, we didn’t have the means to support that.
STEPHEN JANIS So were you surprised by this scandal?
JEFF SINGER No. Not at all, not at all. I had been opposed to the privatization of University Hospital in 1984 when it happened. The same thing was true of Bayview, what used to be Baltimore City Hospital on the east side. It was also privatized. Privatization generally has a negative outcome for everyone, except the people who enrich themselves.
STEPHEN JANIS Interesting. Now, Luke, you know, there has been some talk of reform that past legislation has made, but what was the root of the scandal? What gave people the opportunity to do this because you really uncovered this, and what wasn’t happening in this particular system that gave people the opportunity to make these kinds of deals?
LUKE BROADWATER Well, I think there was a lack of oversight and accountability. You had—And we’re still waiting for the final investigative report to come out on this, but from speaking with people in the know, a lot of these deals were sort of cut one-on-one. People did not, the wider public wasn’t fully-informed about what was going on here. So there was a culture in which people felt entitled on the board to go ahead and go into the president or the CFO or whoever and say, “Don’t you think that I should get some money for my company to provide these services?” And we’re still waiting to hear whether there was competitive bidding for some of this stuff.
STEPHEN JANIS Oh. So they don’t even know yet if there was competitive bidding.
LUKE BROADWATER Well, we know that some were not competitively bid—
STEPHEN JANIS Right. Like there aren’t going to be other—Just for example, the mayor, as Luke pointed out, wrote these books called Healthy Holly. There wasn’t really another Healthy Holly book that could have been printed, right? So we know that wasn’t—
LUKE BROADWATER Right. Well. But, you know, for instance, if the medical system had wanted to put out a children’s book, if they said this is what we want to do, they could’ve had a process where they had authors come in and submit samples and commission a book— not just look around the board and say, “which of our powerful friends wants to make some money,” which is what the accusation in this case is.
STEPHEN JANIS But it does show you a culture of covert profiteering off what we consider to be a somewhat public institution because, just so people understand, the University of Maryland Medical System does get public funding, correct?
LUKE BROADWATER That’s right. Yeah. So it obviously started as a public hospital. It was privatized in 1994 and it has expanded greatly since then into about 14 different healthcare facilities. Last year, in last year’s budget, they received $65 million in the capital budget and they reported more than $30 million in grants from the government.
STEPHEN JANIS So, Jeff, is this a problem with healthcare that it’s kind of like become this pot of money that isn’t scrutinized, that people who are smart, or maybe not so smart but devious, can take advantage of and, kind of, create this idea that we’re spending all this money but really, people are just profiting off it?
JEFF SINGER Well, it’s an enormous problem in the United States in general. In most civilized countries, people have a right to healthcare. There are different ways of providing it, but it’s the use value of the healthcare, not the exchange value of the healthcare that’s most important.
STEPHEN JANIS Meaning what?
JEFF SINGER Meaning that a health care system ought to be set up in such a way that as many people as possible get the best healthcare they can with the best outcomes. We don’t use those kinds of calculations when we’re calculating the budgets for our healthcare system, or the structures of our healthcare system.
STEPHEN JANIS And speaking of— before we started, you kind of gave us a little bit of background on, you know, our outcome versus our spending, which is extreme in this country. We’ll show a graphic up on the screen, but could you talk a little about that because we have one of the worst bangs for the buck, I guess you could say, in the world, right?
JEFF SINGER We have the least efficient healthcare system in the world among advanced industrial countries. We’re ranked number 37 in terms of outcomes— life expectancy, infant mortality, maternal mortality, and those sorts of things— but our spending, we spend 25 percent more than the next closest country, which is Switzerland. You’d have to go all the way down the list of advanced industrial countries and put all their healthcare budgets together, and you wouldn’t get to the United States healthcare budget.
STEPHEN JANIS Well, Luke, let me ask you a question of your perspective looking at the healthcare system. You know, you have uncovered a lot of corruption during your illustrious career. Did it surprise you at all when you finally started, this story started unfolding, and you’re seeing how lucrative this was? Was this proportionately surprising to you?
LUKE BROADWATER Yeah. I think, I was, I was. I would say I was very surprised. You know, I’ve spent a lot of time in my career digging into government and law enforcement. I hadn’t really, sort of, peeled back the onion into the hospital world and in health care. And seeing a lot of the bonuses, and the salaries, and the—
STEPHEN JANIS Like the CEO makes, was making $4.4 million—
LUKE BROADWATER $4.3 million a year.
STEPHEN JANIS $4.3 million. Was he a baseball player?
LUKE BROADWATER [laughs] That’s a middling salary actually for that, for a hospital president.
STEPHEN JANIS Really?
LUKE BROADWATER Yeah. You know, a hospital president makes seven, eight, nine million dollars, so that’s not—
STEPHEN JANIS See. I just, to me, when did it become being a hospital CEO is like being a hedge fund manager? I mean, when did we make this equation that they deserve all this money? But go ahead. So you were—
LUKE BROADWATER Right. You know, I’ve often said that I was surprised by how once we published these stories, all the impact. I mean, if you look at Bob Chrensik who had to resign this $4.3 million, there were just resignations last week. One of the chiefs there made over a million dollars. Their lawyer made, I think, 700-some thousand dollars a year, so there’s all these big salaries for top executives there and, you know, a lot of these people are losing their jobs as a result of this scandal.
STEPHEN JANIS And meanwhile, you know, we have the Republicans hammering away at Obamacare, you know, making it seem like there’s some crazy thing going on in healthcare when it’s these people being greedy. I mean, is it based on what Luke has reported, what he’s uncovered? Is it far-fetched to say greed is a bigger problem than any other type of cost? I mean, you know, when you talk about healthcare CEOs making $4.4 million—I mean, seriously?
JEFF SINGER I’m not sure that greed actually is the issue as much as the systematic structures that we’ve created. A few years ago, the staff at Hopkins were organizing, went on strike because they weren’t earning enough money to pay for the healthcare insurance that Hopkins was offering its employees and 25 percent of them were getting food stamps. That’s how poorly they were paid, but Hopkins had six chief administrators making over a million dollars a year— a nonprofit organization. They had another thirteen who were making over $500,000 a year. And this kind of structure of compensation is true with the University of Maryland as well. Their staff are not unionized either and I don’t have the details. I haven’t been able to get them, but I’m betting that a lot of them can’t afford the health insurance. And by the way, we would have had public health insurance if it were still a public hospital.
STEPHEN JANIS And, as we talked about at the top of the show, you know, that Harvard study showed that there’s been an increase mostly in just administrators, not doctors. How does this administrative bloat happen? It sounds like what we were talking about before, classic neoliberalism. [laughs] I mean, is this administrative bloat a problem?
JEFF SINGER Well, as I mentioned earlier, the fourth principle of thermodynamics in politics is if you can make a profit, you must make a profit. And in the healthcare world, that’s a pretty easy thing to do given that almost 20 percent of our entire gross domestic product is spent on healthcare.
STEPHEN JANIS Wow. Now, Luke, you know, the University of Maryland Medical System has asked for an increase in rates of 5 percent, I think, this year. Now, has anyone reacted to that given that all this scandal, that they printed up $500,000 books, the salaries, the profit? Has that elicited any response down in Annapolis where you cover, which is our state capital?
LUKE BROADWATER Yeah. I mean, I think people are very upset about this. I mean, when you look at right in the middle. I mean, you couldn’t talk about worse timing, right? We’re in the middle of this scandal unfolding and they come, and they ask for the largest ratepayer increase at the University of Maryland Medical Center I think in some time. Maybe more than a decade or so. A 5 percent rate hike. You know, some of the reactions we’ve gotten are outrageous, egregious. People see the unfairness of this, and it affects them viscerally. So I think that this rate increase will be scrutinized in a much more intense way than previous ones.
STEPHEN JANIS I mean, do you think there’s going to be any legislative pushback in terms of saying okay, we have this horrible system where we’re supporting this hospital. All these inside deals and now they want to increase, or is it just outside the scope of the legislature to do anything with that?
LUKE BROADWATER Well, I do think we’ll see legislative action about the self-dealing. We already saw that.
STEPHEN JANIS Well, we already saw that.
LUKE BROADWATER We already saw that, and I think there will be more tougher legislation that expands further and is more tougher, but I don’t know about capping the fee increases. There have been some work about prescription drug costs this past session. One of those bills is becoming law, but they’ve had a hard time getting at the private sector. They were able to cap the costs of what the government’s willing to pay, but they have not been—And as these hospitals have become privatized, in some ways, it’s moving them outside of what is easily regulated.
STEPHEN JANIS I mean, Jeff, what’s your reaction as someone who has been in healthcare, been on the frontlines of trying to deliver healthcare to the people who need it the most, but can’t get access to it? To ask for a rate increase when you’ve been caught with your hand in the proverbial cookie jar? I mean, did it stun you or is it more endemic of what’s happened to American healthcare in general?
JEFF SINGER Precisely that. Unfortunately, it didn’t stun me, but these hospitals which have been privatized, not only are they doing all this self-dealing and making large amounts of money for board members and other people associated with them, but what’s even worse is we’ve created in Maryland an essentially all-payer system for hospitals. The hospitals don’t lose money in Maryland and yet, some of them, Bayview notably right now, are suing their patients who can’t afford to pay for their healthcare, and so—
STEPHEN JANIS Oh, right. So they’re suing indigent, just so people know, they’re suing indigent patients for like four, five, six million dollars in back hospital bills.
JEFF SINGER Yes, and each bill isn’t four or five million dollars. Each bill might be $800, so they’re suing poor people who can’t afford to pay $800 for their healthcare while their executives are making millions of dollars.
STEPHEN JANIS Wow, but one thing is clear from your reporting that these hospitals know how to work the system in Annapolis, which is our state legislature. The healthcare industry has a lot of power and a lot of lobbying, so they can get their way a lot of times, right? I mean, this is not a force not to be reckoned with.
LUKE BROADWATER I mean, almost all of them have highly-paid chief lobbyists on staff.
STEPHEN JANIS Like staff lobbyists, right?
LUKE BROADWATER Yeah, and multiple lobbyists who spend all their time, you know, in addition to making good salaries down in Annapolis and trying to influence things, you know, when we talk about the Catherine Pugh issue, as she was getting these books, she was introducing bills making it harder for aggrieved patients to sue over medical malpractice.
STEPHEN JANIS Wait, so when she was getting paid to print these Healthy Holly books, she was actually introducing legislation to make it more difficult to sue a hospital?
LUKE BROADWATER Yeah. She introduced eight bills along those lines.
STEPHEN JANIS That’s pay for play. I mean, there is no—
LUKE BROADWATER So that’s, you know, and that’s the type of things that I think they want to cultivate in politicians. And so, whether that’s through campaign donations, or donations to inaugural balls, or in this case, outright payments for these books, which I think people think crosses the line in a way that some of those other things maybe don’t ethically, but—
STEPHEN JANIS And at this point, I mean, a lot of this is under investigation by the Maryland State Prosecutor’s Office and the FBI, correct?
LUKE BROADWATER Yeah. I think we’ve counted seven different investigations between federal, state, and city.
STEPHEN JANIS So we don’t know how it’s going to play out. I mean, to me it sounds to a certain extent like a bribe, but that’s obviously up to law enforcement to determine that, but there are elements there. So just let me ask you a question then. I mean, this is going to sound a little—I don’t know. But how do we get our health care system back? I mean, it sounds like someone else owns it and we’re paying for it. Like, we’re renting, we’re paying for the luxury suite that they’re renting. You know, like they got the penthouse, we’re paying for it, and we’re on the first floor. How do we get it back? I mean, what do we do?
JEFF SINGER Well, I think we can’t just do it in healthcare. It was like Frederick Engels said in 1872 about housing, you can’t reform the housing system alone. It won’t work. You have to reform or revolutionize all of these systems. Instead of the principal being “where can we make a profit,” the principle ought to be “how can we best serve people’s needs?”
STEPHEN JANIS Can you inject that back into this system at this point? I mean—
JEFF SINGER Well, we have to keep trying. Whether it will succeed or not is another matter.
STEPHEN JANIS Right. And, Luke, just to wrap it up. You know, where is this story headed? I mean, it seems like every time you think it’s over, someone else resigns. I mean, do you think there’s going to be more fallout from this scandal?
LUKE BROADWATER I do. You know, with the several investigations going on as we’ve mentioned, I expect there’ll be more legislation in Annapolis. And I think a lot of maybe what’s happening here is people are starting to look at the healthcare system and say, what is the point of all this? Is it to actually provide good healthcare and make people better, or is it to enrich the wealthy in the hospital network? And so, as people are wrestling with that question, I expect to see more fallout.
STEPHEN JANIS Interesting. Well, Luke, let me thank you on behalf of the people of the state of Maryland for exposing this scandal. You’ve done a great service to all of us.
LUKE BROADWATER Thank you.
STEPHEN JANIS And, Jeff, you’ve been great in advocating for healthcare and your work still has impact today.
JEFF SINGER Well, kind of you, but I want to thank Luke as well.
STEPHEN JANIS Yes. I think we should all thank Luke. You know, journalism has a purpose. Journalism does great things for very little money. We should realize that there is an efficient system, right?
JEFF SINGER Yes.
STEPHEN JANIS Journalists get paid nothing and yet, what Luke exposed probably saved taxpayers who knows how much. Anyway, and I want to thank you for joining us. My name is Stephen Janis. I’m a reporter for The Real News Network. And thank you.