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Saturday, June 13, 2009

Dr. Andrew Agwunobi Strikes Again II

Nearly two months ago, I featured a story about Dr. Andrew Agwunobi. I have been tracking Dr. Agwunobi for nearly two years and much of it has not been flattering. He's trekked through the medical system and he's recently wound up as the CEO of the Eastern Washington region of the Providence Health Care System. The Providence health care system is a non profit hospital system. That means it enjoys tax exempt status. It also means that there are no shareholders. To earn this tax exempt status the hospital must provide a benefit for the community. Here the law becomes murky because that's something that's difficult to define.

Dr. Agwunobi wasted no time in settling into his new role. Within months, he announced that there would be staff cuts within his portion of the system.

We as a system have experienced significant investment losses; the state budget cuts to hospitals and health care will be drastic; and, in keeping with our Mission, it is inevitable that we will treat many more uninsured and under insured individuals in the months ahead. What you may not be aware of is that Providence Health Care is already experiencing significant financial challenges year-to-date in 2009. At this point, we are $9 million behind budget and this gap is increasing monthly. The economic recession is part of the cause, but we also have some productivity and expense overruns that have contributed to our poor financial performance.

As such, in addition to curtailing as many non-mission critical expenses as possible, we have made the difficult decision to implement some level of staff reductions in the Spokane hospitals during the months of April and May. As a faith-based organization, we consider any action that impacts our employees as an extremely serious step and, therefore, a great deal of work is being done to ensure that we minimize the number of people who will be directly affected. At this point we do not know how many staff will be impacted, but we will keep you informed as our internal analysis and that of the Wellspring consultants continues.

Following my initial report, this was posted the hospital board of Sacred Heart Hospital, (hit download attachment) one of the hospitals Dr. Agwunobi is responsible for. It addressed my previous post as well as my reporting on Dr. Agwunobi in general. The posting in the hospital refers to my reporting as "untrue" and refers to me as a "disgruntled former medical student". I am of course not now nor have I ever been a medical student. (I would agree with the characterization of disgruntled but I would call that a lucky guess) While they characterize my reporting as untrue, the post never refutes any of the specifics in any of my pieces on Dr. Agwunobi. Let's put that to the side for a minute.

Dr. Agwunobi characterizes the region of Providence Health Care that he controls as being in dire financial straits and that's why he will have to make significant staff cuts. According to the financial statements filed by Providence Health Care system itself, the hospital had an operating profit of $288 million year ended December 2008. They carried a net loss but that came mostly from losses on investments (almost exclusively bonds and stocks). Given how poor the equity markets performed in 2008, that was to be expected. Furthermore, the hospital was still sitting on $1.95 BILLION in investments as of December 31, 2008. (page 21 of the financial statement) Does this sound like a hospital in dire financial straits?

This is all not merely semantics. While they were able to carry a loss, exclusively from investments, in 2008, in 2007 they made just over $305 million in net operating profits. Had they been classified as a for profit hospital their tax bill would have been just south of $100 million.

So, the question much be asked. Why is a hospital system that made $288 million in operating profits last year and sitting on just south of $2 billion in investments, in need of cutting staff anywhere. Furthermore, Dr. Agwunobi is playing word games when he proclaims that Providence Health Care is "$9 million behind budget" year to date in his email. While that maybe true, all that means is that they are $9 million behind their projections. It certainly doesn't necessarily mean that they are in dire financial straits. Furthermore, if administration wanted to justify making budget cuts, they could easily set budget projections that couldn't be made in order to use the eventual shortfall as a reason to justify those very cuts.

So, why is a non profit hospital that just made under $300 million on their operations and sitting just under $2 billion just in investments in need of cutting staff? Only those making the cuts can say that. This brings me back to Dr. Agwunobi. This article refers to Dr. Agwunobi as "well travelled". I would say so. Here's a quick rundown of his work history. From 2001 through mid 2003, he was CEO of South Fulton Hospital, a fairly small hospital in Atlanta that treats mostly the poor. He left Fulton to become the CEO of Grady Hospital also in Atlanta. Grady Hospital is one of the largest hospitals in the world and also primarily serves the poor. He stayed there for about a year when he also left. He moved to St. Joseph's in California, a conglomerate of 14 hospitals, and became it's COO. He stayed there for about a year and then left to serve on the board of WellCare. He stayed at WellCare for about six months. He then moved on to head Florida's Agency for Health Care Administration (AHCA). The department within Florida's Department of Health that is primarily responsible for providing health care for the poor. He stayed there for about a year when he moved into his current position at the beginning of 2009. If you're keeping track, that's six high profile jobs on both coasts in about eight years.

There's more. When Dr. Agwunobi first took over at South Fulton, the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) issued this report. The report gave South Fulton marginal but passing grades. The first report issued following Dr. Agwunobi's in 2004, however, denied South Fulton its JCAHO accreditation. Following about a year at Grady Hospital , the Department of Health and Human Services also issued a report that concluded that

there is a serious and immediate threat to the health and safety of the patients

at Grady Hospital. Dr. Agwunobi was terminated following this report. He moved to the West Coast to stay as COO of St. Joseph's. He left for reasons not known to me. He moved onto be on the board of WellCare. He stayed on the board for only about six months. He cashed out about a million dollars worth of stock options. Then, he moved onto AHCA where his first move was being one of several state agencies and the FBI to raid his former employer WellCare. Following the raid the price of the stock tanked and made the very same options that Dr. Agwunobi cashed in months earlier then nearly worthless. He stayed on at AHCA for about a year more before arriving at Providence.

Now, he's determined that a NON PROFIT hospital system that routinely makes somewhere in the neighborhood of $300 million yearly in operating profits, is sitting on nearly $2 billion in investment, is now in such dire financial straits that it needs to cut staff.

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