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Friday, October 23, 2009

The Merger that Wasn't

In the Spokane area, there appears to be a very high stakes confrontation between CEO's of two competing local hospitals.

Providence Sacred Heart Medical Center’s chief executive charged Rockwood Clinic’s leaders with bad-faith dealings and ethical lapses the day after Rockwood stunned Spokane’s medical community by announcing it would align with Sacred Heart’s main rival.

“It is clear to us that the interim leadership of Rockwood is leading the Rockwood physicians down a very dangerous path fueled purely by profit motive,” said Sacred Heart CEO Dr. Andrew Agwunobi.

Rockwood will be purchased by Community Health Systems Inc., which bought Sacred Heart rival Deaconess Medical Center last year. Agwunobi accused Rockwood interim president Dr. Craig Whiting and others of gaming Sacred Heart months ago when they initiated talks to “strengthen partnerships” – going to the point of having Sacred Heart officials sign confidentiality agreements to keep a lid on the discussions while Rockwood said it needed to finish leadership changes and complete an internal analysis

The salty language used by Providence CEO, Dr. Andrew Agwunobi (known as Dr. Andy) has gained him some notoriety, but what is much more curious is the set of events that lead to this broken deal. Dr. Agwunobi took over at Providence in the winter of 2009. Here's a piece of an email that he sent to the staff within weeks of his arrival.

Dear Providence employee,

I am writing to inform you about some difficult decisions that will be made
over the next two months to address current financial challenges and to ensure
that our Providence ministries in Spokane and Stevens counties can continue to
weather this serious economic recession. I know you are aware from previous
communications that the financial outlook is challenging.

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 underinsured 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.

So, back in the winter of this year, the same hospital system that was now attempting multi hundred million dollar buyout of its competitor was telling its employees that their financial situation was so dire that there would need to be employment cuts.

In June, the same system was denied its plan to expand its beds by 152.

State officials have rejected Providence Sacred Heart Medical Center’s plans to add 152 patient beds.

The decision by the Washington state Department of Health puts an end to a $175 million construction project that was expected to span several years and employ as many as 700 people.

“We’re surprised, disappointed and, quite frankly, saddened at this decision,” said Dr. Andrew Agwunobi, chief executive of Providence Health Care, “because we know the Department of Health is very objective. We also know, of course, that we need the beds.”

So, at the beginning of 2009, the system was in such dire financial straits that they needed to lay people off. In June, the same system was trying to apply for an expansion that was going to cost them $175 million. Dr. Agwunobi, and management, explained this dichotomy by claiming that the money to be used for the expansion would come from long term bonds, which presumably they couldn't provide to keep people at work.

In fact, the whole thing is nonsense. As of December 2008, this system sat on just under $2 billion in investments and cash. Their financial position was just fine. In fact, in 2008, the system had operating profits of $288 million. The system lost significant amounts of money on investments however even after those losses they still had $1.94 billion in cash and investments. It's still unclear why the cuts were announced but to blame it on finance is disingenuous if not simply a flat out lie.

As for Dr. Agwunobi, it's fair to characterize his term, now near one year, as a total disaster. Multiple sources within the hospital have characterized the environment at the hospital since he arrived as much more stressful, full of fear, and and a hospital divided. In fact, management took great pains to remove my own articles about Dr. Agwunobi and some hospitals in the system went so far but to block access for google searches of Dr. Agwunobi.

This latest episode is the latest in a string of embarrassments. The incident in June "surprised, disappointed, and saddened" Dr. Agwunobi. Now, a major merger was pulled out from underneath Dr. Agwunobi and he went into an irate rage to a member of the media.

It's important to review Dr. Agwunobi's history prior to arriving at Sacred Heart. I first tracked him to South Fulton Hospital in Atlanta, Georgia. He was the CEO there. He arrived there in 2001. At the time, South Fulton had recently finished a review by JCAHO (Joint Commission for the Accreditation of Hospitals Organization). That review was equivalent to roughly a C. He left South Fulton about two years later. Right after he left, JCAHO finished another review and failed South Fulton and put them on probation. They have since turned themselves around. He then went to Grady Hospital, one of the largest hospitals in the world. He left Grady about a year later following the release of an investigation by the Center for Medicare and Medicaid Services that concluded

Grady presents an immediate and serious threat to the health and safety of the patients

He then moved across country to St. Joseph's medical system and became its COO. He left there about a year later for reasons that are still unclear. He moved to Florida and served on the board of WellCare. About six months later, he cashed out about a million dollars worth of stock options and moved to the Florida's Association for Health Care Administration, within the Florida Department of Health. His first official move as head of AHCA was to investigate his former employer, WellCare. Following a raid lead by AHCA along with nearly a dozen other agencies, the stock price of WellCare tanked. Wellcare eventually went under, but Dr. Agwunobi had long cashed out. Within a year, he left AHCA and moved to the Spokane area. As such, he's had six high level jobs on both coasts in the last eight years. He always seems to leave under suspicious circumstances. Frankly, it's not entirely clear why he continues to get work.


Anonymous said...

Merger of two Washington hospitals? Have you been watching Grey's Anatomy or something?

Anonymous said...

It's really no surprise why this guy continues to get work. The not for profit hospital administration industry rewards people like this for their ability to engage in doublethink and doubletalk. As you allude to, the trick in the not for profit hospital system is to plead poverty locally, and brag about wealth globally...thus, the hospital portrays itself as a near bankrupt waif to it's community and raise money (and prices) for health care services. It claims credit for charity care by marking up the actual cost of the care provided by 100-200%. Then, it tracts investors by amassing a huge cash portfolio (in this case, near 2 billion bucks) and goes to Wall Street as an institutional investor.

Of course, these not for profits also borrow money to build facilities...usually, they borrow the money cheap and sit on it for years before investing. Do they invest in bringing new services...especially low reimbursed psychiatric, drug rehab, etc services most communities are in dire need of?

Nope...they build gold plated private hospital rooms and new operating rooms, buy new scanners, etc...because that's where the money is.

This Dr. Andy will likely survive awhile, cash out, and move to even more lucrative gigs.

Anonymous said...

Well will you look at that...he did just that. Now Dr. Andy works for a company as an expert witness. Justice is blind?