Minnesota Attorney General Lori Swanson stands up for patients at their most vulnerable.
Benjamin Braddock, the clueless graduate of The Graduate, had it better than kids today. When the smarmy Mr. McGuire leaned to say, “Just one word…Plastics,” it was grim enough. Today that word might be “Collections.”
Two recent disclosures of collection practices in Minnesota highlight how high the fortunes of the industry have risen—and the depths to which it has sunk in monetizing misery.
One case is the Bloomberg News disclosure that Educational Credit Management Corporation [ECMC], a Minnesota-based student loan guarantor paid one debt collector, Joshua Mandelman, the astonishing amount of salary and bonus pay totaling $454,000 in a single year for dunning ex-students in default on their loans. Reporter John Hechinger wrote that while Mandelman made off like a bandit, the few real debt counselors employed by the corporation—those who advised student prior to default— were paid a paltry $40,000 a year.
ECMC CEO Richard Boyle earned $1.1 million in 2010 at the helm of the company that bills itself as “one of the country's top 10 guaranty agencies and the U.S. Department of Education's designated provider for student loan bankruptcy services.” Four additional senior managers earned more than $400,000. But here is the kicker: ECMC is a nonprofit organization. Its targets are among the nation’s most beleaguered college graduates. By way of context, Harvard University president Drew Faust earned a measly $822,000 in 2008-09, and that included benefits and allowances. Disgusted yet?
Monetizing Medical Misery—at your Bedside!
How about a debt collection company that bullies prospective patients in an ER Waiting Room to collect outstanding debts—and prepayment of prospective fees? How about a debt collection company that states in on-the-record emails:
· Opportunity: Labor and Delivery represents excellent opportunity to increase cash collections
· It’s noon and we are only at $5,000…not so very good for where we are typically.
· Any free time…should be spent rounding with staff and making sure they are…asking for money from EVERY patient they can!
Then, when hospital executive Joline Storla questions the consulting firm’s methods, collection executive Peter vanRiper replies, “…we’ll continue with it as-is. Our experience is that collections performance just doesn’t get to target performance without this level of rigor.”
The hospital chain? Fairview Health Services, in Minneapolis. They even operate the University of Minnesota’s flagship hospital. They are “my” hospital. The collection agency? Chicago-based Accretive Health Inc. Remember that name. They may be after you at some point in the future. Just how stupid was the hospital? They turned collections over lock, stock, and barrel to a company owned by a Wall Street hedge fund. They gave—and this truly is astonishing—the power to hire and fire hospital workers to the outside firm. “We’ve started firing people that aren’t getting with the program,” wrote Accretive employee Andrew Cook to the hospital’s management team in 2010. Fairview severed its ties with Accretive in April.
Gutsy Attorney General Takes on the Bad Guys
This material is all part of a six-part report by Minnesota Attorney General Lori Swanson, the result of a thorough, exhaustive investigation by her office. It is a refreshing change to be able to access the report first hand and learn the real dirt about this little shop of horrors. The response to the report has been varied. The weirdest moment was when Chicago mayor Rahm Emanuel wrote to Swanson saying, “I request that the parties cease efforts to publicly prosecute this matter and rather try to resolve the matter privately…I also request that there should be no further contact between your Office and the company's clients pending the outcome of the meeting. Please confirm to me that is the path we are on. ” Emanuel buttresses his points by pointing out what a health care big shot he used to be and implying that Accretive, despite its methods, is a force for good in Chicago. Talk about being bullish on bullies.
Yesterday the Minneapolis Star Tribune wrote a sidebar that revealed a bunch of Emanuel’s former colleagues are willing to sully their names by advising Accretive on proper collection methods as part of a "policy study panel." They include: Michael Leavitt, former secretary of Health and Human Services, Donna Shalala, former HHS secretary; Tom Daschle, former U.S. senator from South Dakota; William Frist, a physician and former U.S. senator from Tennessee, whose family founded the for-profit Hospital Corporation of America [HCA]; and Jamie Gorelick, former deputy U.S. attorney general under President Clinton. Leavitt showed his hand early by intoning, “in order to assure hospitals remain financially viable ... they must assist these same patients in making financial arrangements for payment.'’ In the present context, that verb, “assist,” is insulting. Accretive's operatives, by the way, were called "financial counselors." Clearly, this panel was assembled with Emanuel’s help. It is folly on their parts to participate in a panel run by the offending company. Meanwhile, Accretive’s stock price is tanking.
And what of Fairview? They have jeopardized their nonprofit 501(c)3 status on a number of fronts, the most egregious of which is the dilution of what must be an entirely charitable purpose by turning over the day-to-day management and functionality of some of their most sensitive operations to enrich Wall Street investors. This represents no less than a fundamental abrogation of mission. Never mind that Dr. Dave Moen, president of Fairview Physician Associates, a 1,300-physician network within the hospital, had a stake in Accretive and his son had a good job there, or that the son of Fairview President and CEO Mark Eustis also works for Accretive. At least they won’t be hunted down by student loan collectors from ECMC.
According to Professor David Shultz, a lawyer and expert in business ethics and governance of nonprofits at Hamline University, “the conflicts were severe and not defensible simply because they were disclosed,” according to the Minneapolis Star Tribune. "This is a pretty bad one,'' he added.
And oh, I forgot…Accretive lost an unencrypted laptop containing medical data—these are bill collectors, mind you—for 23,500 Minnesota patients. The sensitive data included HIV status, mental health status, a “frailty” measure, and an identification of patients classified as “outliers,” e.g., prime targets for hardball persuasion. All this was reported here by Attorney General Swanson.
What does all this represent? More than a measure of a loss of decency, this is a portends a measure of things to come in a potential wave of impending deregulation, the likes of which we have yet to fully comprehend, if the Republicans win in Washington this fall. (And Rahm, by the way, that was pathetic behavior.) The reason: as an industry collections could be bigger than gas. It could be bigger than North Dakota oil. It’s bigger than you think and it’s growing by the day. Who needs plastics or petroleum when plain old muscle will do?
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UPDATE: On May 24, the board of Fairview Health Services voted not to renew the contract of CEO Mark Eustis, 61, who subsequently announced his retirement.
UPDATE July 31, 2012: Attorney General Lori Swanson announced a settlement with Accretive Health whereby the company is banned from doing business in Minnesota for six years unless it receives the AG's permission and pays $2.5 million to a fund to compensate patients. Accretive Health did not admit wrongdoing. The company announced that 100 jobs would be lost in Minnesota. It is presently unknown how many of those jobs were dedicated to harassing patients.