A $1.7 Million/ Year CEO of a Safety Net Hospital - Alleged to Have Hired a Dangerous Surgeon, Paid Unethical Bonuses, and Associated with Organized Crime

We have long contended that a major reason for health care dysfunction is perverse incentives, including those that allow top health care leaders to become rich by putting money ahead of patient care.  We have presented case after case supporting this point, most recently including a collection of generously compensated top executives of non-profit hospital systems whose pay seemed disproportionate to their personal achievement, and unrelated to their hospitals' clinical outcomes or quality of care.

Such cases, with their recitations of monetary amounts and repeated public relations talking points, can be rather dry.  So this week we present another case which is a bit more colorful.


The Reliably High Pay of the CEO of Bronx-Lebanon Hospital

The CEO of the Bronx-Lebanon Hospital in New York City has long been criticized for receiving millions from a hospital which mainly serves the poor.

In 2009, the New York Post published an article entitled "Sickening Bonuses" about how

hospital presidents and CEOs ... collect fat bonuses and 'incentive payments,' even as health-care systems cry poverty,...

In particular it noted that presumably pre the 2008 global financial crisis:

A $1.2 million bonus went to Miguel Fuentes Jr., CEO of the 958-bed Bronx-Lebanon Hospital. His $4.8 million package included $878,024 in salary and an $858,000 pre-retirement payout. He’s also set to get $1.8 million in retirement cash next year.

In 2013, after the great recession, the New York World reported on a measure proposed by New York Governor Andrew Cuomo to cap salaries at hospitals that receive significant amounts of money from Medicaid.  It stated:

The hospitals that will be targeted by Cuomo’s salary cap sit in poorer neighborhoods and serve large volumes of patients who depend on Medicaid. They include Bronx-Lebanon Hospital Center,...

At that time it was known that Mr Fuentes still was making a lot of money, although less than before:

Bronx-Lebanon Hospital Center ... President and CEO Miguel Fuentes made more than $1.7 million in 2011, according to tax records....

In 2014, Modern Healthcare published an article that questioned whether hospital CEO pay was justified by their or their hospitals' performance.  In particular, it quoted a JAMA Internal Medicine article that:

found no association between CEO pay and very important benchmarks, including a hospital's 'margins, liquidity, capitalization, occupancy rates, mortality rates, readmission rates, or measures of community benefit.'

Researchers found wide variation in what trustees chose to pay the CEOs of their not-for-profit hospitals.

It also noted

One community hospital is a perennial on the list [of those with highly paid executives]. Bronx-Lebanon Hospital Center's Miguel Fuentes Jr. has spent decades at his institution, and arguably needs no retention pay. His $1.8 million package includes about $200,000 in a supplemental retirement plan payment.

So what does a CEO have to do to earn millions at a safety-net hospital? Hospital boards and public relations officials often justify high CEO with standard talking points: their CEOs are brilliant, and such brilliant people must be paid well to be recruited and retained (look here).  However, I found no published record of any attempt to probe justifications for this particular CEO's pay.  Mr Fuentes does seem to have won an award from the local YMCA for "outstanding leadership" (look here).   In a 2015 news release about an affiliation between the Mount Sinai Health System and Bronx-Lebanon, the hospital was described as

a remarkable institution that has shown leadership through its commitment to delivering high quality care to patients and the communities in the Bronx

But I could not find anything in public about the particulars of this outstanding leadership.

Allegations of Organized Crime Ties

On the other hand, in June, 2017, the New York Post published two articles suggesting that Mr Fuentes' leadership might be a bit more dubious than advertised above.

The first article, published June 4, 2017, included allegations of shady dealings between the hospital and organized crime:

The mob turned taxpayer-backed Bronx-Lebanon Hospital expansion into its own piggy bank.

Construction expenses at the hospital’s new nine-story outpatient center ballooned by some $5 million — with cash allegedly ending up in the pockets of the Lucchese crime family and hospital executives, The Post has learned.

Lucchese underboss Steven 'Wonder Boy' Crea Sr. and associate Joseph Venice were charged with wire and mail fraud in connection with the project at 'a major New York City hospital,' according to a federal indictment unsealed last week in a major mob takedown. But the document didn’t identify the hospital or reveal the scheme’s dirty details.

No Bronx-Lebanon executives were named in the indictment, but the federal probe, which began four years ago, is ongoing, and focused on hospital honchos whose palms may have been greased.

Crea, 69, had close ties to Sparrow Construction, the Bronx firm in charge of building the $42 million annex at Bronx-Lebanon. He was a regular visitor to the firm’s offices while the center was under construction, a source told The Post.

Crea worked for Sparrow before he was busted in a 2000 state racketeering case. At that time, he was considered the acting boss of the Luccheses.

Work began on the outpatient center in 2009 and was supposed to take 19 months. But the Health and Wellness Center wasn’t finished until 2014 and was plagued with cost overruns.

Sparrow was the general contractor and billed the hospital $26 million for only $21 million worth of work, sources told The Post.

The heating and ventilation system cost $2.3 million to install. Yet 'the hospital still paid somebody $5 million' for it, the source said.

The alleged scheme was carried out through falsified invoices and change orders, the source said.

'The hospital didn’t question one change order,' the source said.

The bulk of the project was paid for through the sale of $36 million in state Dormitory Authority bonds. The hospital is paying back the Dormitory Authority over 25 years.

At the end of the article we found that Mr Fuentes' compensation has remained large, and stable.

Longtime CEO Miguel Fuentes’ total compensation came to $1.7 million in 2015, according to its latest tax filings.

But it added that he has had a lifestyle to match:

Fuentes lives a luxury lifestyle with a condominium on the Upper East Side and a Southampton retreat with a pool.

Allegations of Unethical Conduct to Enhance Revenue

A second article published June 24, 2017, raised further questions about Mr Fuentes' management.  First, it questioned his direct appointment of a chief of orthopedic surgery.

Hospital CEO Miguel Fuentes hired [Dr Ira] Kirschenbaum as a division chief without consulting Dr. John Cosgrove, who was then chief of surgery and would have overseen him, Cosgrove told The Post.

Cosgrove said he did not have a chance to vet Kirschenbaum.

The article suggested  that Dr Kirschenbaum was hired to push "moneymaking surgeries such as hip and knee replacements."  

However,

The hospital lavished six-figure bonuses to its chief of orthopedics, Dr. Ira Kirschenbaum, despite brass being told of four deaths after he arrived in 2008 and about others patients who suffered serious complications, according to sources.

Kirschenbaum received a $314,210 bonus in 2014 and a $180,940 bonus in 2015, according to Bronx-Lebanon’s tax filings. The extra pay came on top of his $851,000 salary.

Seven hospital employees, who identified themselves as doctors, nurses and technicians, sent The Post a copy of a letter they said they presented to a state medical disciplinary panel to complain about patients more recently injured under Kirschenbaum’s care — including one who allegedly lost a leg.

The letter was sent anonymously, and the state Health Department would not comment on any complaints to the Office of Professional Medical Conduct.

Furthermore, Dr Cosgrove, who appears to have become a whistleblower, alleged dodgy payments to hospital employed physicians at the behest of Mr Fuentes, apparently to increase patient volume.

Cosgrove also said he saw another troubling practice at the hospital: bonus payments of up to $60 paid to doctors for each visit made to the institution’s clinics — in order to tout that it treated 1 million patients annually. The hospital realized that number in 2012, according to the MD.

'Seeing a patient in the clinic is your obligation as a hospital physician and that should not be incentivized,' Cosgrove said. 'Mr. Fuentes said at many meetings he wanted to hit a million-visit mark at their 55-or-so outpatient clinics.'

Doctors were already paid salaries by Bronx-Lebanon, and the clinic bounties came from the Medicaid reimbursements, according to Cosgrove.

Such an incentive system was ripe for abuse because it could entice doctors to schedule additional, and possibly unnecessary, visits, he said.

'It’s really counter to what we as doctors stand for,' said Cosgrove, who left the hospital in 2013 and is now chief of surgery at Eastern Long Island Hospital.

Finally,the article reiterated Mr Fuentes' total compensation of $1.7 million in 2017, but added that

He has a car and a driver — and a source described a $20,000 glass-and-tile shower for his office bathroom. The shower was removed because of concerns over how such an amenity might appear, the source said.

Yet,

Fred Miller, a hospital lawyer, said Bronx-Lebanon doctors were not paid clinic bonuses, only salaries, and that compensation was 'consistent with Medicare/Medicaid principles.'

Miller acknowledged that a shower had been installed, but called it 'modest' and disputed its cost.

Summary

So the CEO of Bronx-Lebanon Hospital has been paid more than a million a year since at least 2008 (and much more than that in 2008 before the great recession), without any apparent public explanation for this pay, and particularly without any apparent attempts to  justify it based on quality of care or clinical outcomes.  Yet recently there have been allegations that the CEO was directly involved with efforts to increase revenue regardless of ethical or patient safety concerns.  Worse, there have also been allegations that organized crime has been allowed to create a "piggy bank" out of the hospital, perhaps in ways also benefiting top executives, although none of this has been proven in a court of law.

Nonetheless, it seems that high executive pay in health care, particularly at non-profit institutions serving the poor, should be justified by more than lack of proof that the executives broke the law. In fact, how could anyone justify paying the CEO of a non-profit hospital that primarily serves the poor using government money unless that person had a sterling record of accomplishment promoting the quality of clinical care at his or her institution, accompanied by integrity and accountability?

Instead, we get questions of mob influence and $20,000 showers.

So here we go again....

We will not make any progress reducing current health care dysfunction if we cannot have an honest conversation about what causes it and who profits from it.  True health care reform requires publicizing who benefits most from the current dysfunction, and how and why.  But it is painfully obvious that the people who have gotten so rich from the current status quo will use every tool at their disposal, paying for them with the money they have extracted from patients and taxpayers, to defend their position.  It will take grit, persistence, and courage to persevere in the cause of better health for patients and the public.