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Thursday, July 16, 2009

The Inside Story of Do No Harm

Back in 2004, there was a documentary that was supposed to change the direction of an election. That documentary was Fahrenheit 911 and while it made loads of money for it's film maker, Michael Moore, it had absolutely no effect on the election. In 2010, another documentary may also have a real effect on another election. This time, in an ironic twist of fate, this documentary may wind up being seen by absolutely no one. The name of the documentary is Do No Harm and the election is the election for Attorney General in the state of Georgia. Here is a Lisa Madigan, Attorney General of Illinois, introducing the film in Chicago.

For now, that's all anyone will see of this movie. That's because a local television station, WALB, from Albany, Georgia has filed a cease and desist order against the filmmakers and so for now the film isn't being shown anywhere. The cease and desist order stems from footage used in the film that originated in news broadcasts by WALB. Since they aired originally on WALB, the station has licensing rights to the footage. When the filmmakers asked for permission to use footage first broadcast on WALB, the station denied their request because they have a strict policy that disallows rebroadcast of their footage by any non news entity, like a documentary film. So, for now at least, the movie isn't being shown anywhere.

The topics explored in the film are very relevant to debates today. The two principles in the film, surgeon John Bagnato and accountant Charles Rehberg, investigated the tax returns of hundreds of non profit hospitals. They found that most of these non profits, which enjoy tax exempt status, were in fact flush with cash. Often, they were charging their patients exorbitant fees, and while their non profit status mandated that the hospitals give back to the community at large, Dr. Bagnato and Mr. Rehberg found that many times these hospitals were lining their own pockets. In other words, the purpose of their tax exempt status is to allow them to use their tax savings to give back to the community in the form of affordable health care especially for the poor. Many times these non profit hospitals charged very large fees, enjoyed hundreds of millions of dollars of yearly profits, and their top level managers enjoyed very comfortable salaries. (in fact, I separately discovered one example of this sort non profit in the Washington area) This is relevant because thousands of non profits save hundreds of billions yearly in taxes, and if they are acting as for profit hospitals, then the government can find all the money it needs for universal health care by simply taxing them in the manner they are acting.

The story starts in 2001. That's when Dr. Bagnato, a general surgeon, first attempted to open up a clinic for ambulatory surgery along with other general surgeons in his work group. He found out that according to Department of Community Health rules general surgeons weren't allowed to open up clinics. The so called "logic" for this rule was that general surgery is not a specialty. After all, the title GENERAL implies a broad scope. Dr. Bagnato found this rule peculiar and so he investigated. He found out that one hospital in particular was responsible for swaying the DCH into instituting this rule, Phoebe Putney. Phoebe Putney was the one massive hospital in Albany and one could say they had an effective monopoly in the area.

At this point, Dr. Bagnato felt he he was unraveling a much bigger story. As such, he reached out to his account, Charles Rehberg. He and Rehberg began examining the tax records of not only Phoebe Putney but hundreds of non profits all over the country. The non profit status of hospitals mandates that they file the IRS tax form 990 which is then made public. What they found was a disturbing pattern of non profits charging unreasonably high fees, often being flushed with cash in the hundreds of millions and even billions, and quite often their top brass were paid very handsomely for their services. With regard to Phoebe Putney, they found that not only was the hospital charging high fees but they were able to hide these charges through a series of very complicated accounting maneuvers that even accountants themselves have difficulty understand. Here's how Dr. Bagnato described what Phoebe Putney did to me.

All hospitals have a charge master, it's a list of all services, devices, drugs etc that it sells. This chargemasteris hugely inflated, enough to make a corrupt defense contractor blush. So when the hospital sits down to contract with a payer (insurance company) it will give discounts off of chargemaster prices, just like the oriental rugstore that raises prices just before it is forever going out of business.Discounts off charges is the main way hospitals negotiate contracts, they may call it something else, but it always goes back to that calculation.Costs to the consumers are, therefore not related to the unrealistic chargemaster prices, but really related to the degree of the discounts hospitals give to insurance companies. These costs are not published, can not be located in any database, but are costs that are absorbed into the local economy. Here in Albany, the non-profit, Phoebe, has 85 to 90% of the market share because it has the CON for OB and cardiac. No insurance company can have much of a product without Phoebe. So Phoebe has no need to discount and gives piddling low discounts. As a result, when we pooled the local industry data on their health care cost outlays, theirs was the highest in their entire North American operations, that in a small southern town where the costs should be lower.

(A 2007 report by watch dog group, Georgia Watch, confirmed what Dr. Bagnato was stipulating about Phoebe Putney)

In fact, Dr. Bagnato pointed out that one reason why it was so difficult to notice just how well Phoebe Putney is doing, along with many other non profits, is precisely because all of these things are so complicated. (The implication here is massive because if you believe Dr. Bagnato, you may have yourself a microcosm of an explanation for why our health care costs are so out of control) Once they discovered just how much the hospital was making, they decided to take the next step. Sometime in 2004, Charles Rehberg anonymously blasted faxes to local businesses and politicians summarizing what they figured out about the cost structure that Phoebe Putney was creating to insurance providers.

Soon enough, Phoebe Putney caught wind of the anonymous faxes. At this point, they reached out to the local district attorney, Ken Hodges. Phoebe Putney was prepared to file civil charges against whoever it was that sent out the faxes. Keep in mind that at this point this was all a civil matter. As such, the District Attorney should have absolutely no jurisdiction of the matter. Not only did Hodges begin to investigate who the sender of the faxes were but he even eventually subpoenaed phone records under the guise that a grand jury was created in order to file criminal charges. This was of course non sense since this was still a civil matter. Furthermore, private phone and email records of Charles Rehberg were then sold by Hodges' office to Phoebe Putney.

In the meantime, Bagnato and Rehberg reached out to class action lawyer Dick Scruggs. (who himself later found trouble with the law) They convinced Scruggs to file a class action lawsuit against non profit hospital on behalf of the uninsured. At this point, the media attention of Bagnato and Rehberg's actions caught the attention of the filmmakers at the Kindling Group. The idea for the film Do No Harm was born. While Rehberg and Bagnato investigated hundreds of hospitals, the film turned it's focus mostly on Phoebe Putney. (it should be noted that the film maker characterized the film as one sided but that's because Phoebe Putney refused to cooperate with its making)

The surest way to contain a whistle blower is to discredit them. Nothing discredits the credibility of anyone, especially a whistle blower, more than the specter of criminal charges, indictments, and convictions. Over the next two plus years, that's exactly what D.A. Ken Hodges attempted to impose on Rehberg and Bagnato. Both were arrested, fingerprinted, and filmed. Both were eventually charged with burglary, aggravated assault, and stalking. They were each charged multiple times. All the charges were totally bogus and eventually thrown out. In fact, according to court records Hodges took an investigation out of the local police department because, according to him, there were problems in the police department. Then, Hodges and his chief investigator, James Paulk, began an investigation into an alleged robbery of the home of Dr. James Hotz by Charles Rehberg. The only witness to testify at the grand jury for all crimes related to this burglary was Paulk. In fact, Rehberg had never been to the home of Dr. Hotz. Dr. Hotz never filed any police report of any burglary. Furthermore, Paulk eventually admitted under oath that he never gathered any evidence indicating that there was a burglary. In other words, according to these court documents, all subsequent criminal charges filed by D.A. Hodges against both Rehberg and Bagnato were bogus and nothing more than an orchestrated smear by the D.A. against these two whistle blowers.

Now, we've reached present day. In the last two weeks, the watch dog group, Georgia Watch, was promoting a screening of the film, Do No Harm. They recently also received a cease and desist order. The order was filed by Lin Wood, a friend and campaign contributor of Ken Hodges. The cease and desist order was filed on behalf of Phoebe Putney. It related to Georgia Watch's use of the word CORRUPTION. The word corruption was actually used by the filmmakers in describing the film for promotional purposes, and Georgia Watch was merely using the film's tag line. Still, the word has since been taken down from all promotional material related to the film.

Furthermore, for about the last year, Ken Hodges has worked at Baudino Law Group in Atlanta. In fact, the campaign is being run out of that office. The law group didn't have an Atlanta office until Hodges arrived there, and their main, and possibly only, client is Phoebe Putney. Also, the proprietor of the Baudino Law Group is facing ethics charges from the legal authority back in Des Moines where the group has its main office.

Finally, a source informed me that the television station, WALB, didn't act on its own in filing the cease and desist order. In fact, the campaign of Ken Hodges contacted the station prior to them filing it and suggested as much. It should be noted that Hodges wife, Melissa, (who works under her maiden name Kill) worked for WALB. I attempted to confirm this revelation with both the Hodges campaign as well as WALB and repeated phone calls and emails were not returned. The film continues to be in limbo. Ken Hodges continues to run for Attorney General of Georgia. Both Dr. Bagnato and Mr. Rehberg continue in their chosen employment and they both have civil law suits currently making their way through the court system against, among others, Ken Hodges.

Update: Tom at SWGA Politics (Southwest Georgia) reports that the wife of Jim Wilcox, station manager at WALB, contributed $500 to Ken Hodges campaign. Furthermore, Hodges wife, upon leaving WALB, took a job at Phoebe Putney Memorial Hospital.

After this piece was originally published, Jim Wilcox, station manager at WALB, contacted me via email to categorically deny that anyone from the Hodges campaign was in contact with them regarding the cease and desist order. He made clear that this was strictly a matter of copyright. It should be noted that the station is well within their rights to protect their copyrights, and no one doubts that the station is well within their legal rigths to protect its trademark.


Anonymous said...

Not only does Mrs. Hodges not work for WALB, she works for Phoebe Putney. Further, for the fiscal year ended July 31, 2008, Phoebe Putney paid the Baudino Law Firm close to $9 MILLION!! It's no secret, it's information contained in their Form 990 on their own website. There is a nasty web been woven.

Mitch said...

Very nicely written. Though I don't believe it's an indictment against all non profit hospitals, as I've been at many that have been struggling (health care finance consultant), I do know that there are many hospitals where you look at what they charge and their activity and wonder why they're doing badly. I hope this movie comes out, and I hope Hodges gets his in the long run.

mike volpe said...

I agree that there are plenty of non profits that serve their function. Unfortunately, in this situation, it's likely that the industry as a whole is indicted. I do believe, however, that the tax payers get fleeced for hundreds of billions yearly from the ones that take advantage of the system.

Tom said...

It's worth noting that Phoebe isn't the typical non-profit hospital. Many non-profits struggle to break even because they aren't focused on the money.

Phoebe Putney, however, is an exception. They operate as a for-profit operation, but then refocus "profits" into purchases that are questionable. They bought an old middle school that was right across the street from the hospital with no public bidding for the building. They have pressed for eminent domain to seize the house of an old lady so they could open a day care for their employees (probably justified under Georgia law because they also offer a state-funded pre-kindergarten program as well). They have even pressed employees to take political action that the hospital saw as advantageous.

Phoebe isn't the typical non-profit, so I easily argue that this isn't an indictment against non-profits in general. However, it is worth looking at to ensure that your non-profit is doing what they were originally tasked to do.

mike volpe said...

All of this is true, however, while the movie focuses on Phoebe Putney, Rehberg and Bagnato looked at the financials of hundreds of non profits. Dr. Bagnato told me that he was stunned by the pattern of non profits being flushed with cash. Like I said, I found something similar in Washington state.

Again, I don't want people to think that every non profit is operating in a way that they shouldn't but I do believe far too many of them do.

Mitch said...

I'm in New York state, and I know that many hospitals are struggling, to the point where there's either a lot of mergers or closings. Then again, maybe a part of it is if hospitals have to compete with for profit hospitals, which we don't have here.

mike volpe said...

There is something to do that as well. Often, non profits have trouble competing because the poor wouldn't be able to come to the for profit hospital and so the non profits wind up having all sorts of patients with little ability to pay.

I know that Senator Grassley has a major investigation, in part as a result of the movie, about the manner in which these non profits operate.

I definitely agree with you Mitch that there are plenty that struggle. I think if you try and hold to your mission then it's very difficult to survive as a non profit hospital.