No Wonder Our Hospitals Are a Disaster -- People with Marketing Degrees Are Running Them

This article originally appeared on Health Beat.

In 1970, a Fortune magazine cover story warned the nation: "Much of U.S. medical care, particularly the everyday business of preventing and treating routine illnesses, is inferior in quality, wastefully dispensed, and inequitably financed." That year, a Fortune editorial declared: "The time has come for radical change. ... The management of medical care is too important to leave to doctors who are, after all, not managers to begin with."

This was the beginning of the revolution Paul Starr described in his Pulitzer prize-winning 1982 book, The Social Transformation of American Medicine. In his final chapter, "The Coming of the Corporation," Starr expressed his concern that "those who talked about 'health care planning' in the 1970s now talk about 'health care marketing.' Everywhere one sees the growth of a kind of marketing mentality in health care. And, indeed, business school graduates are displacing graduates of public health schools, hospital administrators and even doctors in the top echelons of medical care organizations.

"The organizational culture of medicine used to be dominated by the ideals of professionalism and voluntarism which softened the underlying acquisitive activity," Starr wrote. "The restraints exercised by those ideals now grow weaker. The 'health center' of one era is the 'profit center' of the next."

In this brave new world of the 1980s, corporate executives would become both the wealthiest and the most powerful actors on the new cultural stage. Hospital CEOs would haul home salaries that made neurosurgeons look like pikers. In health care, as in other industries, CEOs, not physicians, make the decisions, and their goal, Starr suggested, would no longer be better health, but rather, "the rate of return on investments."

Earlier in the 20th century, many hospitals were run by physicians. Today, the vast majority are, as Starr predicted, run by MBAs and other businessmen. Some CEOs have studied hospital administration. Some do a fine job. The very best work well with the doctors in their hospitals.

Rogue CEOs

But today, it is too easy for someone who knows little about medicine -- and cares less -- to take charge of a hospital. Over at Health Care Renewal, Dr. Roy Poses offers a striking example:

Add this to our series of failed health care leaders, from the South Florida Sun-Sentinel:

A top Memorial Regional Hospital administrator caught up in a fraud investigation in the Virgin Islands resigned this week after admitting he spent time in a military prison and lied about it.

Rodney E. Miller, 36, who came to the Hollywood hospital less than a year ago as chief operating officer and a rising star, never disclosed he spent time in a Navy brig on theft charges, Frank Sacco, chief executive of the South Broward Hospital District, said Thursday. Sacco said when he confronted the man he hoped would one day succeed him, Miller admitted his lie and quit the $370,000 job on the spot Tuesday.

Details of Miller's past emerged in a series of stories published this week by the Virgin Islands Daily News that outlined widespread alleged financial abuses by Miller and others at Schneider Regional Medical Center in the Virgin Islands. The newspaper, and an audit by the U.S. Inspector General's Office, found that more than $1 million was improperly diverted to Miller's personal accounts between 2002 and 2007. Also, he received $3.8 million in salary over several years while patients went without basic needs for a lack of money, the newspaper reported.

But it was Miller's failure to disclose a "bad conduct" discharge from the Navy that led to his departure from Memorial Regional, Sacco said. Miller stole another serviceman's credit cards in 1995 and went on a spending spree, then concocted an elaborate scheme to cover his tracks, the Daily News reported. He left the service in 1996 and his discharge, after appeals, became official in 2000.

The information, including terms of his 10-month prison sentence and allegations that he submitted fraudulent documents to investigators, came from Miller's service records, which are public under federal law. No one from Memorial Regional or an independent search firm ever verified Miller's service, Sacco said. ...

Miller served as Schneider's chief executive officer for five years before accepting the job as head of the adult hospital at Memorial Regional in October. The inspector general's report was finished two weeks before Miller was hired in Broward, but not released until Monday.

The audit, conducted jointly by the Inspectors General of the Virgin Islands and the U.S. Interior Department, details an "alarming depth of mismanagement" at the hospital by Miller, his top executives and the board charged with overseeing their operations. Miller received more than $1.3 million above his contracted pay scale.

Investigators were met with "secrecy and a deliberate concealment of financial records" that forced them to seek subpoenas, according to the audit.

In a story in the Miami Herald, CEO Sacco was quoted, "we thought we had a rising star."

Not exactly.

If this were merely the story of an outlaw CEO somewhere in the Virgin Islands, I would not be so concerned. But the recent history of some of the largest U.S. hospital chains offers a rogue's gallery of top executives, particularly (but not exclusively) at for-profit hospitals. Time and again these CEOs have been able to make the numbers Wall Street is looking for only by making them up. To meet earnings expectations, some medical centers bilked taxpayers by overcharging Medicare. Others bribed doctors to "put heads on beds." Still others overcharged insurers and gulled investors. In the most harrowing instances, health care providers resorted to kidnapping patients.