Wednesday, November 17, 2010

Making a profit as a non-profit.

In 1997 the powers that be in the Commonwealth of Kentucky state government and the powers that be in medicine in Louisville Kentucky got together and formed the Passport Health Plan. The organization is non-profit and has a board of directors made up of representatives from the medical practices and hospitals who originally organized the company.

The idea was to make sure indigent and the working poor got good preventative and chronic disease medical treatment and to save money while doing that. Since then the state has been awarding an annual contract which is now at $800 million. By treating a person for minor health problems or routinely for a chronic disease you keep them out of the emergency room and you keep them out of the hospital.

That saves money and everyone agrees on that.

Beyond this point the operation of Passport Health Plan for the benefit of the poor is murky!
This past spring a State Senator Tim Shaughnessy asked State Auditor Crit Luellen to look into the operation of Passport. It took a while to get her hands on the records. Although Passport gets all its funding from the state, they denied her their files. Finally the audit was done. Her report covering the period 2007-2010 was published. The report revealed reason for concern.

Before I go further let me tell you that I question whether Sen. Shaughnessy would have brought this to Mrs. Luellen's attention if he didn't have a divided loyalty. Shortly before his concern was voiced he was laid off from his job as an executive for one of the hospitals involved in setting up Passport. I like to think he would have requested an audit because of his fiduciary responsibility as a State Senator. Some suggest it was revenge for being laid off.

Now, let's turn back to the findings in the report.

Over a million dollars was spent on public relations and to lobby the state legislature. As far as I know there were no other competitors for the state contract. The percentage increase in the contract funding from one year to the next was well below the general increasing health care costs for the community. The question is why spend a million of your state contract funds to lobby those giving you the contract if you don't have a competitor or get increased funding?

The public relations expense included a large balloon version of SpongeBob SquarePants for the Kentucky Derby Pegasus Parade and a contribution to an annual Kentucky Senate cocktail party! The Governor was upset about the cocktail party funding. The President of the Senate David Williams, who hopes to be governor next year, said he didn't understand why the governor was so concerned about the cocktail party. It is Mr. Williams' party by the way and those attending are lobbyists.

Executives of Passport traveled to medical meetings held in lovely spa locations. They used limos and ate lavish meals while staying in palatial hotel rooms. These travel expenses as well donations, holiday gifts and flowers having nothing to do with health care, totaled over $616,000.

Salaries and bonuses to these executives are in the mid six figure range. Despite raking in huge income from Passport some executives have divided loyalties. For example the executive director received compensation from sub-contractors. The Chairman and CEO is an executive at one of the hospitals involved.
The thing that supposedly got Sen. Shaughnessy going however was the distribution of reserves. Thirty million dollars of excess reserves amassed by Passport were distributed not back to the state but were divided amongst the hospitals and medical practices that set up the organization in parts equal to their original participation. In essence this was a distribution of profits from a non-profit organization funded totally by the state.

While there is much ranting and raving about the horrible cost of treating the poor the rest of the story is that setting up and running a non-profit contract to help these most vulnerable is treated as a blank check by the management.

It will be said that this is what you get when you "give" money to the poor. I can almost hear the strident harangue by the resurrected moral majority that everyone should pull their own weight. To paraphrase the Son of God in Matthew 26:11, "the poor shall always be with us." I don't think Jesus wanted us to increase the numbers of poor or steal the most basic of support from them. A self-righteous person thinks they are good but proving that means helping not stealing from the least of us.


  1. This makes me angry as hell.
    Thanks for this post.

    I have no health insurance now. Both downsized. Started a business and can't afford it. it was obsence the amount we paid every month. We wouldn't be considered poor but we are in that middle that lost jobs and are lost in the system.

  2. I had thoughts but the top of my head blew off and my brain is on the ceiling.

  3. I work at a "non-profit" hospital meat to serve the public good but it is in no way ran that way. The management types receive huge bonuses while equipment, that I have to repair, is still being used long past its normal operational life. Was told by one parts supplier that they no longer make replacement parts for a model of sterilizer we still use everyday.

  4. We just elected a governor here in Florida that takes an anti-government stance on most issues including, healthcare. The company that he was CEO was fined the largest penalty in the U.S. history for medicare fraud. He spent 75 million dollars of his own money (made by feeding at the troughs of government) for a $130,000 a year job as governor ( we know there is a lot more perks but, just saying).

  5. Margaret (Peggy or Peg too): It makes me angry when we pay a non-profit to provide a much needed service for the poor and they use that contract to be pampered. You have a lot of company; about 48 million Americans are uninsured.

    Robin: I have days like that!

    Beach Bum: IF the non-profit hospital was spending their money on innovative processes, better trained staff or such, it would be practical to use equipment that might be old but working. When the hospital spend their money on ever increasing compensation for management or for lavish expenses, it is wrong. It is my belief that all health care should be non-profit, but I mean real non-profit and if a company or organization is going to get the tax advantages of not being for profit, all funds should be paid for the care of the patient. And that includes non-profit insurance companies.

    Velva; Yes, I am familiar with Mr. Scott. I wrote an essay on this site right before your primary about him. He made a pass through Louisville back in the '90's and was the darling of local society until he decided to move the corporation to Nashville, where he repeated his methods there. I wonder after he'd governor there for a while if he will move on to another state. We do have 50 states in the US after all. SMILE

  6. I read this piece, and it made me angry but not surprised.

    In the NHS, they make cutbacks all of the time and it is the patient who suffers always. I find it amusing to see how many men there are working for the NHS who wear suits and drive nice cars; who never enter a hostpital ward and yet command huge salaries.

    Too many chiefs and not enough injuns.

    Ho Hum.........

  7. So Sen Shaughnessey had a bad dose of sour grapes then? I wonder if he could have got treated for it for free?

    The whole thing stinks, but since human nature is evil and greedy there should have been clauses to stop all of this from happening. What about the board with it's auditors and etc etc...? Were they all 'on the take' in some form or another, and it's OK because it's non profit??

    In the NHS they make cutbacks on patient care all of the time, and yet there are men in suits driving around in nice cars commanding huge salaries, and not a single one of them will ever enter a hospital ward.

    You never see what they actually do, and it makes you wonder since the NHS is visibly going further down the nick by degrees.

  8. I'm a first-time visitor to your site. I linked through from LL's.

    Anyway, this was a fascinating post. Many states are looking into the world of non-profit organizations for this very same reason.

    In some cases that I've read about, the perks that employees and even "volunteers" in these organizations are getting are unbelievable.

    And then on the other side, there are the companies that are non-profit that shouldn't be. LOL. Hello...Cleveland Clinic.

    Very enjoyable blog. I'll be back to visit more often.

  9. For some reason, yours is the only blog I read with a content warning on it. I keep coming here expecting to see some Japanese woman on woman action. Imagine my disappointment.

  10. Man oh man, I just started working for a non-profit as their event planner.

    It's been a couple of months and by will to continue to beg for growing dim....

  11. Stealing or withholding from the least of us? which is more insidious?

  12. The CEO of my own employer, a not for profit health system, earns north of 2.5 million dollars a year. Farther down the ladder are the rest of us who kill ourselves to make do with subpar equipment, supplies and a shadow of the staffing we used to have.

    The medical profession and the greed surrounding it are disturbing. It's over the top when medicine and politicians mix it up at cocktail parties.

    Great post!

  13. Sara: It is the black hole known as middle management. There are the execs and the skilled workers. The middle managers are the ones who facilitate between the two groups. What is so wrong about this whole Passport thing is the executives are 2 and the board is 10. All the management of the organization is sub-contracted to another organization that is profit. The 2 paid execs were receiving money from that company in the form of kick backs.

    It is important that the definition of non-profits be changed and if tax dollars go to one of these that they be audited frequently and completely, and I don't mean the usual CPA audit.

    The Constant Complainer: Thanks for the visit and the comment!

    Grant: I am sorry to disappoint you about the Japanese women. I guess I put the warning there to be sure adults are the ones reading.

    Charmaine: Hey, good luck with that new job!

    Annoying Joe: It's a crime.

  14. I can't even tell you how this effects me...So many times I have seen mothers bring in their very sick kids to the ER and i would say why didn't you call the his Doctor...they said I didn't want to wait...I don't have to pay for it...I said yeah but I do

  15. Just telling it like it is: Which is why in 1997 many local hospitals and medical practices teamed up to form Passport. It is the reason the state let an almost $800 million annual contract. Which is working if you can keep the staff from using the organization as their blank check!

  16. the republicans in texas are talking about ceasing the texas medicaid..if they do? I'm fucked.

  17. YELLOWDOG GRANNY: Now all those Republican politicians are good Christians, right? Surely they will contribute from their personal funds to help care for the old and poor! Cough. Cough.

  18. My capacity for surprise is exhausted. Gosh, do you think that make me a cynic? The inventors of the term "Obamacare" were public relations people working for the coalition of big hospitals, insurance companies, and the AMA in their campaign against the Healthcare Reform Act. I've spent too much time around for-profit medical care to doubt their avarice. Healthcare costs were too high because profits were too high. Your well-written expose makes me feel sick.

  19. I hate to hear that but am not surprised. When, when, when will we see the light and just provide health care to all of us?

  20. You may know that I am not a real political girl. Honestly, I'm not the sharpest tool in the shed when it comes to this stuff, but what I do have is common sense and a child with autism. Stuff like this just makes my blood boil! UGH! They're rolling in the $$ and wasting $$ on expensive hotel rooms, when my son can't even get the therapy that is proven to work for him because insurance and Medicaid/TEFRA don't cover it. It's infuriating!

  21. I saw your Snopes. Now please read this:,15240,222915,00.html?

  22. Very well said - you bring an important subject to light - that of the deceptions perpetrated by some who are supposedly 'helping' others when a good chunk of it goes instead to help themselves.

    It's the hardest thing about giving to charity.

    I think there is a link someowhere that shows statistics for which charities spend the most on their own salaries versus actually give it to who it is intended for, but I can't remember the link right now.

    Happy healthy Thanksgiving to you tomorrow.

  23. Wow Charlene, outstanding post!
    I'm Canadian, but always curious about the health care debates in the US. This was very informative.

  24. Hey, you. Thank you for the great comments you've been leaving on my blog. I've finally pulled myself out from under the black dog and come to see you and wow! What an informative post.

    Like Charmaine, I used to do special events for not for profits (as an employee), but those weren't charities or helping organizations. They were trade associations and personal membership organizations.

    I had to pinch pennies. While other Boards stayed at the Ritz Carlton, we opted to take more people and stay at the less expensive places. We had to because it was by attending those conferences that our members really became connected with the organization and became loyal, long-term and active members. A different thing altogether.

    Once in a while, I'd have a Bd president who was a big spender. Those were interesting years.

    Using money from the state tax coffers meant to help the needy get health care? How do those people sleep at night?

    Another great example of socializing the risk and privatizing the profit.

  25. Charlene, you do good work, and on important subjects. I'm proud of you.

  26. Nance: What I find shocking is how the fact the unholy alliance of insurance, hospitals and physicians spent about a trillion dollars to fight the Reform Act does not get us excited. Instead of working against them we fight people who want to change that to the benefit of citizens.

    Secret agent woman: When we stand up and work for it.

    FrouFrouBritches: Being a smart tool is not all that useful. It seems the country is a tool to those who look at the citizen as a profit center.

    KrippledWarrior: If you are wanting "me" to read your link, e.mail is the best method.

    Loving Annie: I know about that link. That's why when we give we need to take the time to know who we are giving to, and after that making sure the money is used for what it was intended.

    Sandra: Thank you.

    Lisa: It is interesting what volunteer boards of directors expect to spend time sitting on boards for non-profits.

    Life 101: Thanks Rick.

  27. So frustrating that these kinds of programs are so mismanaged. There seems to be no consequences except for the ones that needed the programs in the first place. It just seems wrong to profit from the poverty of others, but I guess it is a proven formula.

  28. I found you through Robin's blog, which I love. I am now following this site, and I invite you to follow my blog as well.

    The Disconnected Writer

  29. Unknown Mami: I think people who rip off the poor should be given the opportunity to live with the poor, as a poor person.

    JJ: Nice compliment and promotion effort. Comments to me is a comment on the essay I wrote.


Comments are encouraged.