Serving the People by Serving the Wealthy?

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What does it mean for a nonprofit hospital’s charitable purpose if it keeps an “A list” of preferred customers who receive better treatment than all others? The context, of course is one in which ordinary people must struggle to maintain adequate health care coverage.

Robert Riggs of KTVT in Dallas, Texas got interested in this issue when he discovered that UT Southwestern provided a concierge-like preferential treatment for the rich and celebrities. Meanwhile, this hospital’s total of “bad debt charges” and “charity charges” amounted to only 4.6 percent of gross patient revenue. Like many low charity care nonprofit hospitals, UT Southwestern benefits from the proximity of Dallas’s Parkland Memorial, the truly public hospital serving the poor in the county and counting a 40 percent charity care number. There’s no question that nonprofit hospitals get away from maximizing their care for the poor when there is a true public hospital nearby to take responsibility for the poor but that does not stop them from making full use of their exempt status.

While this should raise eyebrows and the interest of Texas lawmakers, , UT Southwestern’s assertion that this is common practice amongst nonprofit hospitals should give other investigators, including those at the Senate Finance Committee, for example, a wide toehold in pursuing the critical question of what being nonprofit really means in the healthcare sector.

So what did Riggs find?

Riggs reported the existence of an “A-list” of wealthy and famous people from Texas who, if they wanted, could get special treatment at the hospital. The UT system maintains that everyone coming to the hospital, rich or poor, gets the same quality of medical care, but the A-listers had 24/7 access to a team of doctors on call to answer their questions, got jumped to the head of the line for anything whenever they showed up, and got special (purportedly non-medical) treatment by hosts and hostesses to make their use of the UT system a memorably pleasant experience.

Someone (described by the hospital as “a disgruntled former employee”) had slipped Riggs the list of these favored souls, with codes signifying potentially wealthy donors, friends of important people, or just socially prominent. The list—with hundreds of names—had the A-listers medical record numbers and Social Security numbers. The UT Southwestern people tried to downplay the importance of the list, so Riggs announced the confidential phone number that A-listers were able to call for special services and suggested that his listeners try to see if they get the same 24/7 doctors’ help and institutional indulgences. Showing some chutzpah of his own, Riggs noted that one of the A-listers was one of his own station’s news anchors who had, at that time, declined to comment on his appearance on the list or the special services for which he qualified.

Who else merited special attention from this nonprofit hospital?

Vice President Dick Cheney and his wife, Lynne; Republican Senator Kay Bailey Hutchinson; Democratic Congresswoman Eddie Bernice Johnson; owner of the Dallas Stars and Texas Rangers (and former baseball team-owning partner of George W. Bush) Tom Hicks; the publisher and the editor of the Dallas Morning News; developer Trammel Crow; hedge fund impresario T. Boone Pickens; and business tycoon and former third party presidential candidate H. Ross Perot—and 6,400 others.

To be fair to those in this auspicious company, the UT Southwestern list apparently included famous, important, wealthy people in general, whether or not they had donated to the hospital. Many contacted by the TV station said that they had no idea how their names—and their Social security numbers!—had ended up on the UT Southwestern list, even though the hospital said that “no one’s name was placed on that list without their permission.

As one interviewee put it, the UT Southwestern policy amounted to socialized medicine for the rich.

Eventually, the KTVT investigation also revealed another long list, this time of highly questionable expenditures and financial practices. A few of the more intriguing examples:

  • Over $160,000 in purchases of luxury wines, some instances of rare auctioned wines, for use as donor appreciation gifts, though the university denied having (or being able or willing to produce receipts for the purchase and shipping of the wines or a list of the richly thanked donors receiving the wines)
  • More than $33,000 for dues for the UT Southwestern’s CEO for various service organization memberships ($5,000 a year in 2005, 2006, and 2007 for membership in the Dallas Museum of Art, $5,000 in December 2006 for dues as a board member of the Dallas Opera; $3,000 in 2005, $3,000 in 2006, and $3,500 in 2007 for dues to the Dallas Symphony and so on).
  • Having the spouse of the CEO accompany him on foreign travel, ostensibly to meet with alumni and donors in Europe (London, Paris, Milan Nice, Illhauesern (France), and elsewhere in Europe (including Austria and elsewhere), charging her travel costs (she somehow got appointed to an official UT Southwestern position) to the medical center, the CEO ten reimbursing UT Southwestern for the travel expenses but taking the reimbursements as charitable donations to the hospital

The UT Southwestern defense is not out of kilter. As studies from the General Accounting Office and the Congressional Research Service show, these nonprofit indulgences are frequently standard operating practice. The hospital has dismissed all criticisms by pointing out that UT Southwestern’s fundraising and expenditure patterns are right in line with nonprofit hospital practices nationally, including the proportion and nature of expenditures on fundraising including gifts for donors. They further suggest that donors to the UT Southwestern foundation fundraising arm know full well that their donations—classified as unrestricted—will be used for expenses that aren’t particularly focused on medical care or research, but for the CEO’s club memberships, upscale dinners and gifts for donors and bigwigs, and flower arrangements sent to the CEO’s home. Therein may be the real issue, not that UT Southwestern is behaving out of the norm, but that it is exactly within the mainstream of big nonprofit hospitals. And no one seems all that put out, because this is what is expected of big corporate institutions, for-profit, nonprofit, hospitals, universities, corporations, it really doesn’t matter all that much.

Judge for yourself. Read the KTVT and other coverage, read the texts of the very tough and angry responses from UT Southwestern, and let us know what you think about what’s appropriate, what’s inappropriate, what strikes you as the right things to do, what if anything might be practices that all of us in the nonprofit sector should reconsider.

For those wanting to dig further:

    • The latest KTVT expose of UT Southwestern expenditures, including spreadsheets and copies of the top administrators’ credit card expenditures;
    • UT Southwestern expenditures drawn from the one of the hospital’s various donor-advised funds;

       

 

    • The expose of the hospital’s wine expenditures (listed at $125,000 in this report, corrected to $160,000 in a later report);
    • A health care blog posting examining the nonprofit hospital practice of VIP lists, noting UT Southwestern’s similarities to and differences from its nonprofit hospital peers;
    • One of UT Southwestern’s formal statements [pdf] to KTVT CBS-11 News;
    • CBS11’s report on the A-list of VIPs (the actual list used to be posted with the story, but it seems to be inaccessible now), but do click on the video link as well:
    • UT Southwestern’s most recent response to the news expose with reference to the alleged “experts” (including the editor of CR);
    • The mission statement of the UT Southwestern medical center;
    • The state’s report on charity care provided by Texas hospitals, 2005;
    • The recent GAO report [pdf] documenting nonprofit hospitals’ practices re CEO compensation, including club benefits and other indulgences:
    • IRS report [pdf] on paucity of charity care provided by nonprofit hospitals.