The Financialized Medical Center - Executives of Non-Profit Wake Forest Baptist Medical Center Make an "Investor Call," but Have no Investors

We recently discussed the uncomfortable situation of Wake Forest Baptist Medical Center, the non-profit health system/ academic medical center of Wake Forest School of Medicine.  The organization suffered acute monetary losses after a problem plagued roll out of its new electronic health record.  Presiding over this mess were some extremely well paid executives who had been hailed as "visionaries" by their own public relations people. (Look here and here.)

An Even Bigger Financial Loss

The resourceful Richard Craver, writing in the Winston-Salem Journal, just documented that the financial losses due to this cybernetic chaos now seem even bigger,

The center said Monday in a report submitted to bond agencies that it had a $62.8 million operational loss and an overall loss of $3.2 million in the third quarter of fiscal year 2012-13, which ended March 31.

Stock investment gains of $54.6 million helped offset much of the operational revenue loss.

Still, the operational loss was $13.2 million higher than the $49.6 million it reported Dec. 31. At that time, the center reported $7.4 million in overall excess revenue because of investment gains.  

A Call to Non-Existent Investors
 
That, however, was not the big news.  Mr Craver further noted,

Wake Forest Baptist chief executive Dr. John McConnell and chief financial officer Edward Chadwick held an investors call on Monday to discuss the financial performance. It is the third such presentation of the fiscal year, according to the Municipal Securities Rulemaking Board’s www.emma.msrb.org website.

Mr Craver noted that there was something distinctly odd about this. 

The investor call represents a potential blurring of the lines between how not-for-profit hospitals and corporations operate, which also includes executive compensation as a hot-button topic.

Analysts said the call is comparable to an earnings warning that corporations provide when they try to soften the negative reaction from a poorer-than-projected financial performance.

Wake Forest Baptist did not comment when asked how long has it made investor calls and who receives notifications of the presentations. According to emma.org, the center did not have investor calls listed prior to the first quarter of the current fiscal year.

A search of Wake Forest Baptist’s public website did not find any references to investor calls or quarterly and annual financial reports. Spokesman Chad Campbell said the quarterly financial calls are in the public domain.

While US publicly traded for-profit companies usually do schedule quarterly conference calls with investors to inform them about recent developments, Wake Forest Baptist Medical Center is clearly not a publicly held for-profit company.  It is a non-profit organization.  Non-profit organizations do not have investors or shareholders,

For-profit corporations also may do periodic calls with bondholders.  Wake Forest Baptist Medical Center does have bondholders.  But the posted notice for the call discussed above clearly refers to an "investor call," not a bondholders call.  One can now listen to the call (+1 855 859 2056, conference ID 90279604), and when I did, I heard the call was introduced by the operator, and by the Wake Forest Baptist Medical Center CFO as an "investor call."  

A Financialized Mindset?

So what in the world is going on here?  So why would its CEO and CFO make a quarterly call to "investors?"  The idea is absurd on its face. 

Mr Craver was able to find one person to comment, who seemed to assume that the calls were truly "investor calls," not mislabeled calls to bondholders:

Ken Berger, president and chief executive of Charity Navigator, said a not-for-profit hospital holding an investors call 'is the antithesis of why a nonprofit exists.'

'Nonprofits are not supposed to be trying to maximize shareholder value, but maximize their benefit to the communities they serve,' Berger said. 'Transparency is great, whether corporation or nonprofit, for shedding light on financial performance.'

'In this instance, the investor call doesn’t represent full transparency, but only represents more morphing of a not-for-profit into a for-profit organization where only a select few investors are chosen to have access to pertinent current information.'

My guess is that Mr Berger got it right.  It may be that the top executives of Wake Forest Baptist Medical Center have the mindsets of executives of a big for-profit corporation in an era of financialization. 

In the New York Times Economix blog, Bruce Bartlett, an economist who has served in the administration of two Republican Presidents, Ronald Reagan and George HW Bush, and has worked for two Republican legislators, Jack Kemp and Ron Paul, cited financialization as the big largely anechoic reason for the global economic malaise.  He wrote,

 According to research by the economists Jon Bakija, Adam Cole and Bradley T. Heim, financialization is a principal driver of the rising share of income going to the ultrawealthy – the top 0.1 percent of the income distribution.

Research by the University of Michigan sociologist Greta R. Krippner supports this position. She notes that financialization exacerbates the well-known problem of corporate ownership and control: while corporate assets are owned by shareholders, they are controlled by managers who often extract an excessive share of corporate profits for themselves.

 As we have discussed, for a generation business schools have taught managers that there primary goal is to maximize shareholder value, which has been interpreted to mean short-term financial performance.  Large corporations now give top managers tremendous incentives to maximize such performance, such that top managers have become rich, often the richest members of society.  Many top managers of health care organizations now come from a business background, and health care managers, even of non-profit organizations, also get large incentives. 

Note also that the two executives on the "investor call" both had outsize compensation in 2011, the latest year for which the non-profit Wake Forest Baptist Medical Center has released the disclosure form (990 form) required by the US government.  The CEO, Dr McConnell, received over $2 million, while the CFO, Mr Chadwick, received just short of $1 million. (Look here.)  So it looks like they have a good reason to continue to operate a financialized organization so they can keep extracting sufficient revenue to make themselves rich.

Clearly, though, if we want our health care organizations to preserve and protect patients' and the public health, we need them to be lead by leaders who care much more about health care than about short-term revenue and making themselves rich.


As we have said endlessly,  true health care reform would put in place leadership that understands the health care context, upholds health care professionals' values, and puts patients' and the public's health ahead of extraneous, particularly short-term financial concerns. We need health care governance that holds health care leaders accountable, and ensures their transparency, integrity and honesty.

Executive Compensation as "Legal Corruption" - and the Continuing Example of the Troubles of Wake Forest Baptist

"Legal corruption" was the description of current executive compensation practices appearing, of all places, in the Wall Street Journal.  The arguments, by Henry Mintzer of the Desautels Faculty of Management at McGill University, apply to health care, and provide a counterpoint to the usual talking points that are trotted out whenever a top health care manager, or his cronies, feels the need to justify his or her compensation. 

A Rigged Game with Other Peoples' Money

Prof Mintzer's arguments start with the assertion that executive bonuses are hopelessly rigged in favor of the managers who receive them.  In particular:

•  They represent gambling with "other people's money," in this case, "the stockholders [of large public corporations] not to mention the livelihoods of their employees and the sustainability of their institutions"

• Bonuses are given just based on the appearance of winning, for example, when a company's stock goes up short term, regardless of long-term results.

• Bonuses are given even when the company may lose, for example, the "golden parachute," or severance package that even executives forced to resign or retire may receive.

• Bonuses are given for actions that at best only provide potential gains for the company, for example prior to a merger, but before it is known that the merger will be successful

• Bonuses are given just for showing up, that is, "retention bonuses."

Thus he contended that bonuses inspire executives to be gamblers in a game rigged in their favor.

Based on False Assumptions

Furthermore, he argued that the current system of executive compensation is based on false assumptions.  These include:

"A company's health is represented by its financial measures alone - even better, the price of its stock." 

However, as Prof Mintzer noted:

Companies are a lot more complicated than that. Their health is significantly represented by what accountants call goodwill, which in its basic sense means a company's intrinsic value beyond its tangible assets: the quality of its brands, its overall reputation in the marketplace, the depth of its culture, the commitment of its people, and so on.  

I would note that this applies especially in health care, and more especially to organizations that provide direct patient care.  No hospital system, for example, could function at all without a corps of dedicated health professionals, physicians, nurses, therapists, etc. 

Furthermore, Prof Mintzer wrote,

All too often, financial measures are a convenient substitute used by disconnected executives who don't know what else to do—including how to manage more deeply.  Or worse, such measures encourage abuse from impatient CEOs, who can have a field day cashing in that goodwill by cutting back on maintenance and customer service, 'downsizing' experienced employees while others are left to 'burn out,' trashing valued brands, and so on. Quickly the measured costs are reduced while slowly the institution deteriorates 

This is obviously particularly pernicious in health care, a field in which institutions are complicated, and dependent on the efforts of some very highly trained and specialized people well beyond the management suite. 

"Performance measures, whether short or long term, represent the true strength of the company." 

Prof Mintzer pointed out the lack of accurate measures of the overall performance of a company or organization. 


"The CEO, with a few other senior executives, is primarily responsible for the company's performance."  

Prof Mintzer asked,

In something as complex as the contemporary large corporation, how can success over three or even 10 years possibly be attributed to a single individual? Where is teamwork and all that talk about people being 'our most important asset?'

More important, should any company even try to attribute success to one person? A robust enterprise is not a collection of 'human resources'; it's a community of human beings. All kinds of people are responsible for its performance. Focusing on a few—indeed, only one, who may have parachuted into the most senior post from the outside—just discourages everyone else in the company.

Again, this is obviously particularly the case in health care organizations, especially those that provide direct patient care.

Leading to the Worst Possible Leaders and Leadership

Finally, Prof Mintzer argued that the current system is designed to promote the worst possible leadership, leading likely to the worst possible outcomes.  He opened with

 Executive bonuses—especially in the form of stock and option grants—represent the most prominent form of legal corruption that has been undermining our large corporations and bringing down the global economy. 

Our argument has been that the current leadership of health care is similarly bringing down our health care system.

He later noted that current compensation practices mainly function to select out the worst possible leaders:

 executive compensation these days reinforces a class structure within the enterprise that is antithetical to its effective functioning. Because of its symbolic nature, executive compensation as currently practiced sends out the worst possible signal to everyone in the enterprise.

Furthermore,

bonuses can serve one purpose. It has been claimed that if you don't pay them, you don't get the right person in the CEO chair. I believe that if you do pay bonuses, you get the wrong person in that chair. At the worst, you get a self-centered narcissist. [Or even a full-fledged, if non-violent, psychopath, as noted here - Ed] At the best, you get someone who is willing to be singled out from everyone else by virtue of the compensation plan. Is this any way to build community within an enterprise, even to foster the very sense of enterprise that is so fundamental to economic strength?

Accordingly, executive bonuses provide the perfect tool to screen candidates for the CEO job. Anyone who insists on them should be dismissed out of hand, because he or she has demonstrated an absence of the leadership attitude required for a sustainable enterprise.

Of course, this might thin the roster of candidates. Good. Most need to be thinned, in order to be refilled with people who don't allow their own needs to take precedence over those of the community they wish to lead.

It will be interesting to see if anyone attempts a logical refutation of Prof Mintzer's arguments.  My guess is that we will see little response, based on the usual public relations dictum that it is best not to acknowledge one's detractors, even if they are right.  Furthermore, I predict that what responses there are will partake heavily of logical fallacies.

Finally, it is worthwhile to think about Prof Mintzer's points when assessing the arguments made in favor of particular executives' outsized remuneration. 

An Example - Continued Riches for Wake Forest Baptist Executives

Outsize Executive Compensation Continues

A few weeks ago, we noted that the leaders of this large medical center, while previously proclaimed as visionaries, and enjoying enlarging compensation, seemed to have lead the institution to a financial crisis due to difficulties with a poorly chosen or implemented electronic health record system. 

One follow up story updated compensation information and provided the official management rationale for the ongoing largess.  The redoubtable Richard Craver wrote in the Winston-Salem Journal,

Wake Forest Baptist Medical Center provided its top executive, Dr. John McConnell, an 11.9 percent raise in salary during 2011 to $983,777, although his total compensation dropped 18 percent, the center reported Wednesday as part of an annual regulatory filing.

McConnell was paid $2.04 million in total compensation, compared with almost $2.5 million for 2010. Although Wake Forest Baptist operates on fiscal years that end on June 30, the pay for its top executives is required to be listed on a calendar-year basis.

The main difference between the 2010 and 2011 compensation totals for McConnell was $461,575 he received as a one-time payment that replaced the retirement benefits he forfeited upon leaving the University of Texas Southwestern Medical Center in Dallas. McConnell was required to work at Wake Forest Baptist for two years to receive the one-time payment.

Keep in mind that in 2008-9x, Dr McConnell made a total of just over $700,000, so his compensation in 2011 was about three times that.

The benevolent board of the medical center saw to it that Dr McConnell got money for all sorts of reasons:

McConnell received $384,203 in bonus and incentives in fiscal 2010-11. The center said the amount reflects the achievement of clinical quality, academic and financial goals set by the board of directors. The bonus was down $115,797 from fiscal 2009-10 primarily because the center reduced the potential percentage of the incentive compensation from 75 percent of his base salary to 53 percent.

McConnell received $38,511 in other reportable compensation, which the center listed: as $8,797 in annual dues for Forsyth Country Club and Rotary Club membership, defined as for business purposes; $16,500 qualified deferred compensation; $3,612 in after-tax life-insurance deduction; and $9,602 in an automobile allowance.

 He also received $619,002 in contributions to retirement plans, including a supplemental executive retirement plan solely for McConnell’s benefit.

One wonders why, given his salary and bonus, Dr McConnell could not afford to pay dues to the country club and rotary on his own, or for his own car expenses, or to provide for his own retirement, for that matter?

Other executives also continued to do very well:

Donny Lambeth, former president of N.C. Baptist Hospital, received $2.47 million in total compensation. Lambeth served as president of Davie County Hospital and Lexington Medical Center before retiring last year. He is now serving as an N.C. House representative.

Lambeth’s $495,595 in base salary represented an 8 percent decrease related to his reduced job responsibilities. His bonus and incentive compensation was down 2 percent to $181,988. The bulk of Lambeth’s compensation was $1.62 million related to a fully vested deferred compensation upon his retirement.

Dr. Thomas Sibert, president of Wake Forest Baptist Health and chief operating officer, received a 14 percent increase in total compensation to $1.13 million, including $631,297 in salary (up 15.7 percent) and $234,540 in bonus and incentive compensation (up 41.3 percent). Sibert took over his role in September 2010.

Edward Chadwick, chief financial officer, received a less than 1 percent increase in total compensation to $979,420. His salary rose 4.6 percent to $527,216, while his bonus and incentive compensation fell 5 percent to $189,929.

Russell Howerton, chief medical officer, was paid $295,714 in salary, $300,786 in bonus and incentive compensation and $657,025 in total compensation. Doug Edgeton, former president of Piedmont Triad Research Park (recently renamed as Wake Forest Innovation Quarter), received $490,485 in salary, $162,367 in bonus and incentive compensation and $710,729 in total compensation.

The Chief Information Quietly Departs, with Some More Money

Meanwhile, Mr Craver also reported the quiet departure of the executive who presided over the troubled implementation of the EHR,

The chief information officer for Wake Forest Baptist Medical Center is stepping down, effective May 31, the center confirmed Friday.

Sheila Sanders has served in that role, as well as vice president of information technology, since being hired in 2009 to direct the center’s overhaul of its IT system.

She is leaving at a time when the center is struggling financially and operationally with implementing the Epic electronic health records system — one of the largest overall projects Wake Forest Baptist and most health care systems have undertaken in recent years.

Note that Ms Sanders was well rewarded for her questionable efforts,

Sanders was paid $333,961 in salary, $89,145 in bonus and incentive compensation and $464,543 in total compensation in 2011, according to a regulatory filing that Wake Forest Baptist made public Wednesday. The center’s executive-compensation data typically is about 18 months old when released.

In terms of salary, Sanders ranked sixth among the center’s 27 listed management officials. 

It was clear that Ms Sanders ought to have been directly responsible for the EHR implementation,

 The center said Sanders’ duties included clinical information, administrative, business, academic and research support systems, as well as core IT functions that include a central IT help desk, email, computer desktop support, IT security and telecommunications.

Nonetheless, the extremely well-paid top leadership did not seem to have hard feelings.

Dr. John McConnell, the center’s chief executive, said in a statement that Sanders decided in January to take 'a brief career break' after completing major portions of the overhaul. He said Sanders is relocating to Florida to spend more time with her family.

Wake Forest Baptist spokesman Chad Campbell stressed it was Sanders’ decision to leave her positions, and it was not related to Epic, which went live in September on the center’s main campus.

Also,

'We are deeply grateful to Sheila for her numerous contributions that will serve the medical center for years to come,' McConnell said. McConnell said senior IT officials will manage day-to-day IT operations with his oversight while the center conducts a national search for her replacement.

But to reiterate,

 The center said May 2 it had launched another round of 'multi-million dollar' cost-cutting measures that will last through at least June 30, the end of its 2012-13 fiscal year, related to fixing Epic revenue issues.

 Perhaps any attempt to saddle the chief information officer with responsibility would point out the lack of responsibility imposed on even higher level and better paid executives for apparently approving and authorizing her previous work.

The Usual Talking Points

Instead, the official statement from hospital system management about top executives' compensation trotted out the usual talking points in defense of all this lavish pay,

Wake Forest Baptist said in a statement explaining its executive compensation packages that as an academic medical center, it requires management with 'a special set of skills and experience to manage relationships with physicians and researchers, the university, its patients and community. … It takes proven talents possessed by a small group of health care executives.'

'Compensating executives, as we do all of our employees, competitively and appropriately, is crucial to the success of Wake Forest Baptist and to Northwest North Carolina.'

In addition,

 Baptist said its executive compensation is based primarily on comparisons with 32 academic medical centers, including Duke University Hospital and UNC Hospitals. 

With regard to Dr McConnell's special retirement plan,

'This is a common benefit for executives at academic medical centers and health systems to encourage retention and provide competitive retirement benefits,' the center said in its statement.

We first listed the talking points here, and then provided additional examples of their use here, here and here.   The official administration discussion above does seem to include: 
- We have to pay competitive rates
-  We have to pay enough to retain at least competent executives, given how hard it is to be an executive
-  Our executives are not merely competitive, but brilliant.

Left out was any evidence about the executives' performance, much less their degree of responsibility for their institution's performance.  Why the few top paid executives should continue to get credit for the institutions' supposed, but unspecified successes, while escaping any accountability for its failures (including the looming problems with its commercial health care information technology) was of course not mentioned. 

So here is a great, current example of how top health care executives are gambling with other peoples' money, in a game rigged so that they always win.  As long as we continue such perverse incentives in health care, they will continue to inspire leaders to line their own pockets at the expense of our health care institutions, and ultimately to the detriment of patients' and the public's health. 

Conclusion

So let me conclude with Prof Mintzer's conclusion,

All this compensation madness is not about markets or talents or incentives, but rather about insiders hijacking established institutions for their personal benefit.

Too many large corporations today are starved for leadership—true leadership, meaning engaged leadership embedded in concerned management. And the global economy desperately needs renewed enterprise, embedded in the belief that companies are communities. Getting rid of executive bonuses, and the gambling games that accompany them, is the place to start.

Clouded "Visionary" Leadership - Wake Forest Baptist Medical Center's EPIC "Business Cycle Disruptions"

A typical excuse for the multi-million dollar compensation now enjoyed by many leaders of health care organizations is these leaders' supposed brilliance.

For example, in 2011 we noted  that the total compensation of Dr John McConnell, the CEO of Wake Forest Baptist Medical Center, a non-profit teaching hospital, rose from over $700,000 in 2008-2009 to over $1.6 million in 2009-2010.  Other top executives in the system made nearly one million a piece.  An official statement from the hospital system claimed that this level of compensation was needed to "retain skilled executives and visionary leaders for the medical center."  Furthermore, in 2012 we noted that in 2010-2011 Dr McConnell's compensation had grown to nearly $2.5 million, while other top executives received from over $900,000 to over $1.1 million. 

Recent events, however, suggest that the "visionaries" may need new glasses.

An EPIC Challenge

Last month, the Winston-Salem Journal reported that Wake Forest Baptist Medical Center is facing some unexpected fiscal challenges, especially from its new electronic health record (EHR):

Wake Forest Baptist Medical Center’s struggles to implement its Epic electronic records system contributed to additional costs and lost revenue during the first half of its fiscal year 2012-13.

The center provided the information in a second-quarter financial report submitted to bond agencies in which it also reported a $49.6 million operational loss and a gain of $7.4 million in overall excess revenue.

That is interesting.  There have been many criticisms of EHRs, particularly for how they may impede, rather than help health professionals, and more importantly for their risks of causing adverse effects affecting patients, in the absence of clear data from controlled clinical trials that they provide benefits that outweigh their potential harms to patients.  Some of these problems may stem from design and implementation that prioritizes benefits to managers and institutional finances over effects on patients and doctors.  As InformaticsMD noted, even the AMA now admits that

 As the healthcare industry moves to EHRs, the medical record has essentially been reduced to a tool for billing, compliance, and litigation that also has a sustained negative impact on doctors' productivity, according to Steven J. Stack, MD, chair of the American Medical Association’s board of trustees.

Yet in this case, a well known commercial EHR did not even help out the hospital system's finances.

Furthermore,

Wake Forest Baptist said it spent as of Dec. 31 about $13.3 million directly on the Epic electronic-record system, which went live in September.

And,

 The center also cited $8 million in 'other Epic-related implementation expense' that it listed among 'business-cycle disruptions (that) have had a greater-than-anticipated impact on volumes and productivity.' Also listed was $26.6 million in lost margin 'due to interim volume disruptions during initial go-live and post go-live optimization.'

Note that InformaticsMD frequently criticizes proponents of commercial health care information technology for glossing over potentially bad effects on patients and practice with management-speak (e.g., as "glitches," or "hiccups.").  Here is a great example of an attempt to gloss over bad effects on finance with management-speak.

Bond Downgrades and Furloughs, Wage Reductions, Hiring Freezes, Retirement Contribution Reductions, and Bonus Eliminations

As a consequence,

 On March 20, Moody’s Investors Service downgraded the center’s long-term debt rating below the lowest level of high-grade investment quality. The downgrade to A1 from Aa3 affects $597.2 million of rated debt outstanding.

The rationale was clear,

 Moody’s said the A1 rating 'reflects the unexpected decline in financial performance through the first half of fiscal 2013, largely due to the installation of a new information technology platform (Epic), encompassing 95 percent of all revenue components of the enterprise.'

You know when you see bond downgrade by rating agencies that  financial matters are really going badly.  

By May, 2013, month, the problems were evidently still not solved, and the hospital was forced to take more drastic measures.  As again reported by Richard Carver writing for the Winston-Salem Journal,

The workforce at Wake Forest Baptist Medical Center is paying a paycheck price to make up for the financial shortcomings to date of its Epic electronic records system.

The center said in a statement Thursday it has begun another round of cost-cutting measures that will last through at least June 30, the end of its 2012-13 fiscal year.


The measures include attempts at volunteer employee furloughs and hour-and-wage reductions, a hiring freeze, a reduction in employer retirement contributions, and elimination of executive incentive bonuses for 2013.

Management made clear that the cuts were in response to the Epic debacle,

Even though management said Thursday the center is making progress with fixing the Epic revenue issues, it acknowledged it 'will not meet projected financial targets for the current fiscal year.'

'Wake Forest Baptist has identified immediate multimillion-dollar savings with a series of short-term measures that impact personnel,' according to the statement.

To give credit where it is due, at least the cuts will apparently not affect line clinical employees:

 Those primarily affected by the volunteer furloughs and hour-and-wage reduction requests are nonclinical full-time employees, including administrative staff. They can volunteer to work as few as 30 hours a week with no loss of health or dental benefits for May and June. In the memo, management said employees can volunteer to continue the reduced-hour work week into fiscal year 2013-14.

However, it seems likely that they will affect many employees, including some proportion who likely had not responsibility for the problems with Epic.

When in Doubt, Lobby the Government

What the hospital system did not seem to be cutting was lobbying and public relations.  Perhaps this was a response to its unexpected inability to manage its own commercial health care information technology?  What bad management can lose, maybe government can supplant.  Once again Richard Carver had the story for the Journal:

Stung by a series of unusual setbacks at the General Assembly, the North Carolina hospital industry is launching a public relations campaign aimed, in part, at protecting revenues and staving off competition from lower cost surgery centers.

In a social media initiative targeted at lawmakers and their constituents, the N.C. Hospital Association says hospitals are 'fighting for their economic survival.' [It was not said whether they were fighting in part because they had already managed to shoot themselves in their economic feet - Ed]


The association and some of the state’s bigger hospitals also are hiring more GOP lobbyists to make inroads with the Republicans who control the state House, Senate and governor’s mansion.

The hospital association recently began promoting a new website — www.healthyhospitalsnc.org — that describes an array of financial threats.

Wake Forest Baptist is a big part of this initiative:

When asked about its lobbying efforts, Wake Forest Baptist spokeswoman Paula Faria said last week that the center’s Office of Government Relations monitors proposed legislation and regulations at both the federal and state levels.

'It informs North Carolina’s congressional delegation, members of the General Assembly and their staff about how proposed language could impact the day-to-day operations of the medical center.'

Maybe they should be first worrying about the impact of badly chosen, designed, or implemented commercial health care information technology on "day-to-day operations of the medical center" first.

 Summary

So the top executives of Wake Forest Baptist Medical Center have seen compensation rising at a rate greater than inflation and than the general public's income over the last few years.  In particular, the CEO has seen his compensation go up three and one-half times in three years!  The hospital system administration has justified this extraordinary increase by referring to supposedly "visionary" leadership.  Yet over this time frame these "visionaries" decided to implement an EHR whose first effects were to lose the hospital system a lot of money.  Based on previous anecdotes about the Epic system, it is quite possible it had other adverse effects.  For example, InformaticsMD discussed a case in which an EPIC system apparently lead to a large disruption in patient workflow and hence large increases in waits for acute care, and lead to errors that could have adversely affected patients.  So this underscores some important lessons:

So beware that "visionary" behind the curtain. As we have noted repeatedly, top health care managers can now easily make themselves rich.  They, their boards of directors (who may be their cronies), and their public relations flacks often justify their exorbitant compensation by their supposed brilliance, if not visionary status.  Such claims are rarely further explained, and mostly seem be be humbug, for want of a better term.  It seems that most top leaders of health care organizations have participated in the managers' coup d'etat, and become at least manager nobility, if not manager-kings  At least, the public should know that their compensation is what they can grab, and its justification is often nonsense. 

Note that contrary to a red herring argument often made, outrageous compensation is important not so much because of how much money it drains out of health care, although that can be large in the aggregate.  It is important because it reflects a system that is no longer accountable, and leaders who follow perverse incentives.

Such management compensation is almost never revisited to determine whether it turned out to be justified.  Instead, the public, watchdog organizations, health care professionals, and even politicians ought to demand accountability of health care management, good  justification for their compensation, and rationality for the incentives they are provided.  True health care reform would encourage well-informed, competent, mission-focused, honest, responsible, accountable and transparent management, leading organizations of manageable size.  But as long as things stay the same, expect the craziness to continue.