Wednesday, September 24, 2008

Failed "Masters of the Universe" Running a Renowned Teaching Hospital

The Wall Street Journal Health Blog recently reported about some New York City hospitals worried about the current financial/ economic crisis, but for interesting reasons:


To give you a sense of how the crisis on Wall Street is affecting New York hospitals, we need only provide the names of some financial execs who are on the board and donor list of of New York-Presbyterian Hospital.

The chairman of the board is John Mack, Chairman and CEO of Morgan Stanley — you know, that big investment bank that just scrapped its business model? Serving alongside him was Richard Fuld, CEO of Lehman Brothers, the one that’s now reorganizing under bankruptcy protection. Another board member is John Thain, CEO of Merrill Lynch, which is selling itself to Bank of America. The hospital’s chairman emeritus is Maurice “Hank” Greenberg, former chairman and CEO of AIG, the insurance titan effectively taken over by the government.

Hospital execs worry that now just might not be the time to call their friends on Wall Street to ask for donations.

I will make a bet that if one were to get lists of the top current and recent former leaders of all the financial corporations that have just failed, one way or the other, in particular, Bear Stearns, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, and AIG, you would find quite a few who also have leadership positions (often as board members) of important health care organizations, both for-profit and not-for-profit. For example, we noted that the former CEO of Fannie Mae, James A Johnson, who was forced out after an accounting scandal that presaged the current plight of the company, was also a board member of UnitedHealth, and had approved the outlandish compensation given to now prematurely retired UnitedHealth CEO Dr William McGuire.

But the board members of a not-for-profit teaching hospital are not just supposed to be a group of the largest contributors. The board of directors or trustees of a not-for-profit institution provides the highest and final layer of oversight for the organization. Hospital executives are supposed to answer to, and are hired and fired by the board. The board has ethical, and in some states legal responsibilities to uphold the mission of the organization, and when making decisions for the organization, to put the mission and the interests of the organization ahead of personal interests.

So it seems reasonable that all the board members of not-for-profit hospitals should be devoted to the mission of the hospital, and the values that underlie it. Furthermore, it seems reasonable that all board members should at least either have substantial knowledge about the health care context, and/or have considerable intelligence and leadership abilities.

However, the board of this one illustrious teaching hospital included four corporate executives who had no particular knowledge of health care. They have now been shown to have lead spectacularly failed corporations, corporations whose failures have contributed to what some people now call the biggest economic crisis since the great depression. This is not a great testament to the intelligence and leadership abilities of these former "masters of the universe," although it is perhaps a testament to their ability to promote themselves.

So whoever is now responsible for leading the hospital, and beyond that, all those who are concerned about the reputation of the hospital and its ability to fulfill its mission should be wondering why in the world these people were on the board? Furthermore, they should be wondering what was and is wrong with the process that appointed such leaders to this level?

We have frequently discussed how leaders of health care organizations have often proved to be autocratic and "imperial," ill-informed about health care, indifferent to the values of health care, isolated and insulated, self-interested, conflicted, or even corrupt. We have contended that such bad leadership is a major, but rarely discussed cause of what has gone wrong with health care.

That arrogant and over-paid CEOs of some of the most spectacularly failed financial corporations of this century were also leading one of the country's (formerly?) great teaching hospitals says something major about what has gone wrong with the leadership of health care.

ADDENDUM (24 September, 2008) - the US Federal Bureau of Investigation (FBI) is now investigating four of the above firms, Fannie Mae, Freddie Mac, Lehman Brothers, and AIG, according to the New York Times.