Comment: Charity scandal shows Providence ignoring its mission

Ordered to forgive $157 million it charged the poor, the hospital system needs better oversight of officials.

By Tim Little / For The Herald

The Providence Health & Services hospital system — which includes Providence Regional Medical Center Everett and Swedish Edmonds — spans 51 hospitals with more than 220,000 employees in the Western U.S.

Current CEO Rod Hochman likes to remind his audience that the name and mission derives from the stalwart, selfless Sisters of Providence, foundationally headed by Mother Joseph who with a tiny cadre of devotes arrived at the mouth of the Columbia River in 1856. Canvasing aggressively for donations, with arduous collective work, and Sister Joseph’s phenomenal architectural skills, the Sisters built a cherished system of health care in the Northwest region over the decades. A statue of Mother Joseph stands in a small garden outside the head office in Renton.

The now vast nonprofit’s mission statement is prominently displayed in all capitalized letters in its annual IRS filings as, “As expressions of God’s healing love, witnessed through the ministry of Jesus, we are steadfast in serving all, especially those who are poor and vulnerable.”

How then could the very same institution recently be ordered by the state of Washington to forgive or rebate $157 million for willfully and abusively charging the poor and vulnerable who qualified for charity care? The hospital system harangued sick patients in the emergency departments and inappropriately sent more than 54,000 patients to debt collection. While this was going on Providence was hoarding $300 million in cash set aside in Providence Ventures to lend out for high-risk investing in hopes of raking in more profits.

State Attorney General Bob Ferguson prides himself on being a chess player. But when he came calling on Providence in a lawsuit alleging abuse of the poor he never really got close to the game’s king. The lieutenant chief executive, Dr. Guy Hudson, who was in charge of most of the sued hospitals including Swedish Edmonds and Providence Everett quietly left in the middle of the legal process. But, he was just a mid-level player. Ferguson had sued multiple subsidiary organizations but never Providence St. Joseph Health, the roughly 17-person nonprofit that controls the rest.

This cocooned “leadership” team raked in some $57 million dollars in “management” fees in 2021 for supervising the operational organizations below it. The members seemed to engage in no mission-related activity on their own. Since none of them were frontline clinically active health care workers or hospital staff, they had no direct operational knowledge of the often bloody and tense reality of acute medical care on the ground. Indeed the corporate structure it had chosen succeeded in keeping it at arms length from patients in overcrowed acute care venues.

There are no public records that suggest compensation penalties to the Providence upper management, and the executive certainly did not loose his job. So, if the Providence CEO did not answer to the state attorney general, who does he answer to now?

In a for-profit public company the shareholders can act through a board of directors to discharge the CEO, but Providence’s nonprofit has no shareholders. What about the Catholic Church’s influence? Providence is careful to wrap itself in the vestments of the church but usually only two or three Sisters sit on the Providence governing board of 11. As is the case for many boards, the CEO himself sits on his own governing board. A review of the backgrounds of the other board members does not suggest any reason to hope for overt loyalty to a nonprofit mission, nor an obvious reason that ruthless business practices wildly antithetical to the mission statement would bother any of the secular directors. (If that is not the case, now would be the time for them to pleasantly surprise the poor and the vulnerable.)

CEO Hochman, ensconced for over a decade, has has been well paid and some day will take his considerable compenstion and ride into the sunset. The problem is the enduring governance structure he has created will still be ripe for the miscarriage of the charity mission after he leaves. Part of this is due to the profoundly hierarchical structures that the Catholic Church is fond of building or at least condoning.

There are however two things that could be done to reduce the risk of mission-related disaster.

1. Frontline workers need to serve on the subsidiary boards and on the board of the parent Providence St. Joseph Health. Otherwise the rest of the board members will be at the mercy of only what the executive tells them about the actual delivery of health care; if he or she knows anything operationally useful at all.

2. The executives, especially the CEO, need to have their compensation incentives prominently based on concrete, defined and measured community health metrics that are grounded in the mission statement. (At the time of this was written, peer-reviewed studies suggest little difference between the level of charity care delivered by large nonprofits versus for-profits. Here is the opportunity for nonprofits to actually prove their worth to the vulnerable).

There is one more Byzantine wrinkle to this sad story.

Unlike a regular corporation, there is one little-known layer of governance that sits atop even the Providence board of directors. This outfit is called the Sponsors Council which seems in theory to exist to represent the purest intent of the Catholic Church. They have unconditional firing authority over the CEO and even members of the board of directors. Yet, despite the council’s power, less than half of its members are religious officials. Certain other of the Sponsors Council have no obvious mission-related ties at all.

For example, Shannon Dwyer is an attorney who previously served as “special adviser to the CEO,” and in 2019 was the highly paid in-house counsel serving at the pleasure of the CEO. One article describes her approach to include “creative expansion of revenue sources well outside the traditional hospital model.”

As the national supply of Catholic clergy dwindles it remains a mystery how the church can responsibly supervise ever more complex health care systems. There simply may not be enough of them to prevent profit seekers from infiltrating the void.

One can only wonder when the members of the existing Sponsors Council will be ready to ask themselves this question, “What would Mother Joseph have thought of all this and what would she have done?”

Dr. Tim Little is a physician, diplomate of the American Board of Internal Medicine and Gastroenterology, former faculty member at the UW School of Medicine and staff physician at Swedish Edmonds for 22 years, now retired.

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