UMass Fined 520K by Attorney General for Bone Marrow Scam One Day After Announcing Cut to Staff and Services
MNA Sees Obscene Link Between Two Stories
One day after the hospital announces massive layoffs and the sell-off of key services, we now know one of the real reasons why they have made these decisions. We were appalled when the hospital’s bone marrow scam was first exposed in 2010, but we are even more disgusted to learn that they are now paying a half-million dollar judgment as a result of that activity, and at a time when they are slashing staff and services that provide care people in our community need. In another article with the Worcester Business Journal, CEO John O’Brien admitted that the performance of the patient care services at our hospitals were on target. It was their poor investment decisions and their risky business practices that got them into trouble. And now patients and staff must pay the price for their bad decisions. It’s nothing short of obscene.
Thursday, February 2, 2012
This Oct. 28, 2010, photo shows model Natasha Smahlei at the Caitlin Raymond International Registry booth at the New England Business Expo in Worcester. (T&G Staff File Photo/PAUL KAPTEYN)
TELEGRAM & GAZETTE STAFF
CONCORD, N.H. — A bone marrow registry affiliated with UMass Memorial Health Care that hired fashion models to help increase donor registration, and provided financial incentives to employees who enlisted potential donors with health insurance, will pay $520,000 as part of a final judgment, Attorney General Martha Coakley announced today.
“Efforts to increase bone marrow donor registration cannot be built on unfair and deceptive practices that increase the cost of health care for all of us,” Ms. Coakley said in a statement released this morning. “No health care provider should be allowed to use gimmicks and free gifts to increase the volume of services covered by health plans for their own financial gain.”
According to the district attorney's complaint, filed in Suffolk Superior Court today with the final judgment, Caitlin Raymond International Registry and UMass Memorial Health Ventures Inc jointly engaged in improper marketing by paying fashion models to help recruit potential registrants for the National Marrow Donor Program during donor drives at local malls, festivals and sporting venues including Gillette Stadium.
John G. O'Brien, president and CEO of UMass Memorial Health Care said: “We accept full responsibility for the mistakes and errors in judgment that were made. We are pleased to have reached a resolution with the Massachusetts Attorney General that validates the important work of the Caitlin Raymond International Registry.”
Meantime, New Hampshire prosecutors will announce developments in their investigation into the health agency's use of models to recruit bone marrow donors in that state.
Under the terms of the final judgment in Massachusetts, the registry will:
- Pay full restitution to Massachusetts consumers for any out-of-pocket payments they previously made for donor testing;
- Not charge health plans more than $175 over the next five years for donor testing;
- Pay the Commonwealth $500,000 for initiatives designed to improve health care services for Bay State residents and to combat unlawful marketing practices;
- Pay an additional $20,000 for the cost of the AG's investigation.
UMass Memorial, in a statement, denied that any of its practices violated any laws or caused harm to any person. It said it has voluntarily agreed, as stated in the Consent Judgment, “to discontinue certain practices and to adopt others in order to advance the important mission of expanding the number of potential bone marrow donors for patients requiring a potentially life-saving bone marrow transplant.”
“We recognize that although these rates were fairly negotiated, the rates charged were perceived as inappropriate and going forward we have agreed to a reduced rate for these tests for all payers,” said Douglas Brown, senior vice president and general counsel.
Return to telegram.com for more on this story.
Market Pressures Hit UMass Memorial
Leaders weigh changes after disappointing fiscal year
By Matt Pilon
Worcester Business Journal Staff Writer
The financial performance of UMass Memorial Health Care Inc., the largest employer in Central Massachusetts, fell well below expectations in its recent fiscal year, raising the possibility of layoffs and cost-cutting in 2012.
John G. O’Brien, the system’s CEO and president, acknowledged that the results have him and his executive team analyzing the business model, a process that could include the elimination of some full-time positions, shedding of some ventures and pursuing changes to employee pension plans.
He said there are no immediate plans for layoffs and executives are just beginning to evaluate pension options (any change must be worked out with 20 bargaining units). But he acknowledged that UMass must evolve to stay sustainable in the face of declining reimbursements, steeper competition and pressure from payers.
UMass remains in the black, posting a surplus of $27.9 million in the fiscal cycle that ended Sept. 30. But that’s well below the $85.6 million surplus it had in 2010 and lower than tempered expectations of $62.6 million for the 2011 fiscal year.
The system averaged an annual surplus north of $81 million between 2007 and 2010, so the recent performance could be a troubling sign for one of the region’s largest economic drivers. UMass employs more than 13,000 and generates more than $2 billion in annual revenue.
The declining surplus comes at a time of major transition in the health care industry.
Dr. Andrew Epstein, a Needham-based consultant with Navigant, a services and consulting firm with offices around the world, said hospital executives face an uncertain future for their business models.
With major public and private payers pushing for a slowdown of quickly rising health care costs, the solutions could leave hospitals facing fiscal challenges as the focus shifts from expensive hospital stays and the fee-for-service model and toward prevention and tracking of health outcomes.
“It de-emphasizes the hospital, to be quite honest,” Epstein said. “I think what really concerns many hospital executives and health system executives is what does the health care picture of the future look like and how many hospital beds of what types do we really need?”
Hospitals also face a contraction in reimbursement rates that once showed consistent growth, as well as economic conditions that are causing some patients to put off health care decisions.
One big wild card will be the aging “baby boom” population, Epstein said. It’s not clear to what extent the health care needs of that age demographic (those who are around 50 to 65 years old) will offset margin-squeezing shifts in the industry.
Though hospitals are facing pressure from insurers, government and businesses to reduce costs, the UMass system’s five hospitals were not the problem in 2011. For the most part, they met or slightly exceeded revenue projections while trimming spending on expenses and supplies.
UMass Medical Center in Worcester accounts for more than half of the system’s revenues. And while it posted its lowest surplus in years, it met budget projections.
For UMass, the problem was a $29.7 million swing in its investment portfolio, which ended the year down $10 million the first such loss in years combined with a deficit in its formerly profitable health ventures arm. UMass Memorial Health Ventures provides lab testing, imaging and other services to hospitals and medical groups in several states, O’Brien said.
Partnerships with Fairlawn Rehabilitation Hospital, imaging centers and other facilities are a part of the ventures portfolio, which earned $27.8 million for the system in 2010, but lost $1.1 million in 2011.
O’Brien said UMass had been able to command premium prices for such ancillary services, but that recent scrutiny of price variations among providers has put pressure on the venture arm.
“What’s happening with some of the ancillary services, like lab and imaging, you’re seeing that the business community and insurers no longer want to pay that premium,” O’Brien said.
O’Brien said he understands that sentiment, but said profits from the venture arm helped subsidize operations such as the system’s behavioral health division, which barely broke even on $57 million in revenues in 2011.
“If everyone paid equitably for services, if public payers paid their fair share, if people paid for behavioral health services what it actually costs us, you wouldn’t have this cost-shifting game,” O’Brien said.
He added that competition for ancillary revenues from for-profits and other providers, such as Quest Diagnostics and LabCorp, has also created a challenge for UMass. O’Brien said private companies are realizing they can offer some of those services more competitively than large hospitals, which have a more burdensome cost structure.
Todd A. Keating, the UMass system’s CFO, said the ventures arm is sure to change in the coming years.
It has changed before, he noted, shedding three nursing homes in the past five years when they were no longer profitable for UMass to run.
He said system executives will evaluate new business models in the coming year to look for opportunities, potentially even as partners with for-profit clinics.
“The ventures won’t go away per se, it will evolve,” Keating said.
Keating said UMass is aiming for a surplus this fiscal year of between $58 million and $60 million, a number that falls between the previous two years’ results.
While the side businesses have taken a hit, O’Brien said it wasn’t a big surprise. Administrators could see the changes coming and tempered expectations as a result, just not low enough.