Clarian Corporate Practices & the Myth of "Local Control"

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There are many unanswered questions about the Clarian takeover of Bloomington Hospital that should have been addressed before the June 16 vote that gave away our community's greatest opportunity to influence the question of a move. The only facts so far made public have been those provided by the hospital. According to two of its own directors, the Local Council of Women board did no independent research about Clarian, the takeover or the move. They allowed no time for the public to do any investigations before the vote and, even if they had, they allowed no one to present any evidence at the meeting that might argue against the takeover.

Clarian Corporate Practices & the Myth of "Local Control"

1. For-Profit vs. Not-for-Profit (Follow the Money)

Bloomington Hospital and LCW PR about the takeover of our hospital by Clarian emphasizes that Clarian is a not-for-profit organization. Clarian is a private, not-for-profit corporation but acts much like the kind of for-profit hospital corporation that Bloomington doctors and LCW members rejected in 1996. It owns for-profit hospitals in Carmel and Avon. It owns a private, Medicare Advantage company, Senior Smart Choice (http://www.mplan.com/pdf/SSC.member.letter.pdf) which, like other such programs, is intended to lead to the privatization of Medicare.

Clarian also owns a venture capital firm, Clarian Health Ventures, which seeks to patent research by Clarian partners (leading to income for Clarian but higher health care costs for others) and to invest in high risk medical business ventures, 90% of which are likely to fail. The Indianapolis Business Journal reported in July, 2007, that "Clarian has hired R. Matthew Neff, an old friend of Clarian CEO Dan Evans, to run the fund. They were partners at the Baker & Daniels law firm in the 1980s. Evans became chairman of the Federal Housing Finance Board under President George H. W. Bush, and Neff served as his deputy. After Evans and Neff left government, they teamed with former Vice President Dan Quayle and Indianapolis businessman Al Hubbard to create Circle Investors Inc. Quayle chaired the board and Neff ran the company, which bought up four life insurance companies. They sold the company in 1997, reportedly for $50 million. Neff has spent nearly the last decade starting and growing Senex Services Corp., which buys bad debt from hospitals, including Clarian." (http://www.ibj.com/html/detail_page.asp?content=3102).

Clarian's corporate culture is similar to that of for-profit firms. Its board members are paid and represent other corporations and large institutions, not the communities served by Clarian hospitals. "We decided against a strictly representative board [because] hospital boards in today's atmosphere, says John D. Walda, board chairman of Clarian Health Partners, need to be cut out of the corporate mold…We’re running a billion-dollar-plus organization…and constantly expanding, hopefully picking up market share and marketing new products….It’s pretty naïve to think that a bunch of lay people can bring that kind of perspective to the table.” (Trustee, Vol. 51, Issue 3, p.14+, March, 1998).

While Clarian executives earn over a million dollars a year ("Clarian Exec Pay", Westfield Forum Mar 12, 2008, http://www.topix.com/forum/city/westfield-in/T5CO97PHRATF32LFG), it threatened in 2008 to dock employee salaries each month for having high blood pressure, being overweight, or smoking ("Being Unhealthy Could Cost You—Money Clarian Health is taking a novel approach to reducing health-care costs: It's penalizing workers for indicators of poor health," Business Week August 2, 2007, http://www.businessweek.com/bwdaily/dnflash/content/aug2007/db2007081_804238.htm) and only withdrew this threat when told that this would be illegal ("Can Scrooge Dock Your Wages?", http://terraextraneus.com/index.php/archives/category/employment-law/).

Clarian pursues aggressive, profit-seeking actions that have not only NOT led to cost containment but may have actually increased costs ("Continued Hospital Expansions Raise Cost Concerns In Indianapolis", HSC Community Report, No. 2, June 12, 2005, http://www.hschange.com/CONTENT/749/). Bloomington Hospital CEO Mark Moore refused to answer when asked by a City Council member on June 4 how the cost/benefit ratio of Bloomington Hospital compared with that of Clarian hospitals.

2. Local Governance (Follow the Money)

Hospital and LCW PR on the takeoever emphasized that there would be strong local governance of the hospital. But, as indicated above, Clarian’s model of governance is nonrepresentational boards of directors. The long-term goal of Clarian is to become the primary health care system in the state of Indiana, creating a system with monopoly clout that will benefit large scale employers such as IU and health care providers. "We are actively negotiating with hospitals all over the state to join Clarian Health, says Walda. As the system grows, the influence any one hospital or constituent group will have over decision making will be diluted." In line with its nonrepresentational model, Clarian now “appoints 3 of the 11 members of the Bedford Regional Medical Center’s board and ratifies the rest” and “Bedford does not send a rep to the Clarian Board”. (Trustee, Vol. 51, Issue 3, p.14+, March, 1998).

The truth is that the takeoever will involve the creation of a self-perpetuating hospital board dominated by Clarian appointees in which 75% of the members must live "somewhere in the 10 county area" and in which the six existing representatives appointed by Monroe County Commissioners are eliminated. Similarly ignored is the fact that LCW gave up its membership's veto power over future projects -- retaining only the requirement that three of the seven LCW-appointed hospital board members support a 70% majority authorizing any future property sales and construction.

3. Financial Rationale for Takeover (Follow the Money)

Only four years ago, in 2004, representatives of the LCW, Bloomington Hospital, and the hospital Foundation went before the Bloomington City Council to plead that Monroe Hospital be barred from opening within city limits. BH Board president Jerry Neely argued at that meeting that there was no need for more hospital capacity and stated in a February 12, 2004 Herald Times guest column that the motives of "the investors in the proposed 'for-profit' enterprise . . . are driven by individual greed rather than community need", arguing that, with Bloomington "hospital's much-needed recently completed expansion as well as the existence of other numerous outpatient centers in town, there is more than enough choice, capacity and access for a community of our size." (http://www.heraldtimesonline.com/stories/2004/02/12/digitalcity.0212-HT-A8_RSZ13351.sto). Millions of dollars were poured into the remodeling and expansion of the existing hospital.

Only two years later, in 2006, the hospital went from believing that our area had adequate medical services to buying 85 acres of land at the intersection of 37 and 46, in Crider's North Park. By November, 2007, it had decided that the current hospital needs more space for private rooms (= higher health care costs) and parking ("Hospital may partner with Clarian: Bloomington Hospital CEO says such a deal could help hospital stay competitive, develop North Park campus", Herald-Times November 9, 2007, http://www.heraldtimesonline.com/stories/2007/11/09/news.qp-0829123.sto) and that, for the first time in its 100+ years of existence, it needs a big partner to provide it with $70 million for expansion. (The last remodeling of the hospital involved around $40 million.)

This time, hospital officials did not approach the City Council to discuss their needs. It was only after a member of the Council heard at IU what was being planned and insisted that hospital officials talk to the Council that a presentation was made at the June 4, 2008 Council meeting. During the presentation by hospital CEO Mark Moore at that meeting, and in the discussion that followed, it was clear to many of those attending, as well as to Council members themselves, that the decision to move the hospital out of town had already been made without serious consideration of expanding on site and improving existing road connections.

Hospital officials also ignored the County Council, but, according to Moore, did talk three times with County Commissioners in meetings whose time and place you could only learn by personally visiting the Courthouse. We asked two of these Commissioners what was discussed at those meetings. Both refused to say what transpired and no minutes were kept.

The takeover would involve the County Commissioners giving up all direct appointments to the hospital board and hence all of its power to influence hospital governance. To keep this from happening, they would have had to convince the hospital and the LCW that this is not in the interest of Monroe County citizens, but they do not seem to have taken any steps to do so, nor, as far as we know, did they consult their constituents or even inform them that this was an issue.

4. The Link between the Takeover and the Move (Follow the Money)

The trend throughout the United States is for city hospitals to move to the suburbs, quickly followed by doctor's offices and other medical facilities as healthcare providers seek to maintain or grow profits while squeezed by decreasing reimbursements ("Hospitals go where the money is: Amid building boom, concern over the effects on health costs", USA Today January 3, 2006; "Construction Activity in U.S. Hospitals", Health Affairs, May/Jun2006, Vol. 25 Issue 3, p783-791, http://www.hschange.com/CONTENT/840/?topic=topic04). Bloomington doctors are already said to be buying up land near the North Park site in anticipation of the hospital’s move.

While healthcare providers often claim, as does Bloomington Hospital, that these moves will make the delivery of services more cost effective, the abandonment of existing buildings does not seem to enter into their calculations, nor do the economic effects on the cities they abandon. Fort Wayne is a nearby example. When Lutheran Hospital moved outside the city to a medical park on I69 in 1992, its buildings weren't transformed into other businesses that would attract people to the downtown and generate tax revenues. They were torn down, leaving a blighted area (Lutheran Hospital Ft Wayne Empty Lot & Parking Google Map Link for Old Location :2929+Fairfield+Ave+Fort+Wayne,+IN+46807).

The hospital, county government and developers stand to gain if the hospital moves. The hospital will become an anchor for area development and no doubt profit by selling or leasing part of its 85 acres to medical businesses. The county will get new, tax-paying businesses and jobs. But what will the cost be? One of the deals the County made with the developers of North Park was to make the area a TIF (Tax Increment Financing) district. TIFS were created to help cities attract businesses to blighted urban areas (among other things fighting urban sprawl). Our County government is using TIF designations such as North Park to CREATE blighted urban areas, in this case the area around the current hospital (Gregory Travis, "CIVITAS: Economic Pornography", Bloomington Alternative, June 29, 2008, http://www.bloomingtonalternative.com/articles/2008/06/29/9376).

Most of all, how will all this wheeling and dealing cut or contain the cost of health care in our area? Tearing down the current hospital after millions of dollars in renovations would hardly seem to contribute to cost containment. Turning it over to the City for housing social service organizations (suggested to our Mayor by hospital officials) would cost City taxpayers a lot in taxes for remodeling and would not replace the income lost as people visiting the hospital no longer patronize downtown businesses. And what, the Mayor asked recently during a radio interview, would the City do with all the existing buildings that currently house social services?

Hospital officials have stated repeatedly that the current hospital is land-locked, making it difficult for the hospital to become a regional health care facility. City Council members familiar with the land around the current hospital questioned this at the June 4 meeting, and Mayor Kruzan’s staff has put together a list of the many properties that the hospital owns or that are marked as healthcare-related at the current site ("Bloomington City Council Hospital move questioned at budget hearing", Herald-Times July 24, 2008, http://www.heraldtimesonline.com/stories/2008/07/24/news.qp-1373979.sto and "City wants hospital to stay put: Officials seek ways to encourage expansion at current site rather than moving", Herald-Times July 27, 2008, http://www.heraldtimesonline.com/stories/2008/07/27/news.qp-2136696.sto).

On June 4, Council members also offered to help the hospital with traffic patterns and negotiating with adjacent neighborhoods to allow expansion at the current site. Improving access to Rt. 37 along Second St. was also discussed. Hospital CEO Moore didn’t appear to be interested.

5. Local Taskforce (Follow the Money)

In response to public opposition to the takeover and move of the hospital and the threat that the vote on June 16 might go against it, the hospital board agreed to appoint a local taskforce that would look into the issue of moving the hospital. The taskforce will have 12 months to make a report to the hospital board, but the rules of engagement were not spelled out and many questions remain about how it will function and whether it will be taken seriously. Will the taskforce have access to planning documents and data used by the hospital? Will it have access to minutes of board discussions? Will it have the ability to question hospital representatives for information gathering purposes? Will it be given clerical and research support for its investigations? Why is it being given only 12 months when the hospital has said that the planning regarding a new hospital will take at least 5 years? Will taskforce members be able to share their findings with the public? Notably missing on the taskforce is much representation of the city’s interests, with only one City Council member to be appointed but two from County government.

There is little reason to think that the taskforce will have any significant effect on hospital planning, especially since the hospital made it clear, in the packet supplied to LCW members before the June 16 meeting, that the decision to build a new hospital would be based on the needs of the region, not Bloomington. Growth in corporate profits are not in Bloomington but in the surrounding area, which is precisely why the hospital was so keen to remove the one significant public power over the hospital on June 16. The hospital needed to enter into its negotiations with Clarian being able to deliver a hospital free and clear of any significant public control. LCW’s veto power over disposition of hospital property was the last public stumbling block to Clarian’s domination of this part of the Indiana health care market.

What You Can Do

Let’s not let the last bit of community influence on our health care system die.

Prior to, during, and following the June 16 meeting, the LCW violated its own bylaws and ignored the rights those bylaws give LCW members. It allowed the hospital and its attorney to set the rules for and dominate a meeting that was to decide the legal relationship between the two institutions. It has refused to allow LCW members to attend board meetings or read the minutes of those meetings. It communicates with members only through its attorney.

Whether or not you are in favor of the takeover, the LCW is still the only organization that the public can join that appoints members of the hospital board. If the LCW board is permitted to act as a secret society, the public will have no information about what the hospital is doing and no voice in its decisions. It is therefore extremely important that LCW members demand that meetings be held where members are free to discuss these important issues, as LCW bylaws outline. The attached petition calls for such a meeting to open a dialog with the board. It may not succeed in overturning the vote but it would send a strong signal to the LCW board that, for the LCW to be a voice for the community, it must talk to its members. I hope that you will consider downloading this petition and sending it to the address indicated.

If you are a member of the Local Council of Women, please send in your petition demanding a meeting to discuss this important issue. Click here to download the petition.

If you are not a member, please join and send in a petition. Click here to download a membership form.

Click here to download an extensive, annotated list publications about these issues.

Mark T. Day, marktday@gmail.com

Jean Umiker-Sebeok, jean.sebeok@gmail.com

July 31, 2008