Obama's Katrina

The White House's David Axelrod on Friday rejected any comparisons of the Obama oil spill response to Bush's slow Hurricane Katrina intervention. He told ABC that such comparisons were:

“always the case in Washington whenever something like this happens.”

A 51 year old Louisiana kayaker, Valerie Gonsoulin, clearly saw the looming disaster. The AP quoted Valerie:

"I go out in the marshes three times a week. It's my peace and serenity," she said. "I'm horrified. ... I've been sitting here watching that NASA image grow and it grows. I knew it would hit every place I fish and love."

As for Deepwater Horizon-Katrina, compare for yourself:

Deepwater Horizon

4-20-10 Rig explodes from a blowout
4-29-10 White House promises an "all out" response.
4-30-10 Two Air Force C-130s were sent to Mississippi and awaited orders to start dumping chemicals on the oil spill.
5-1-10 Thad Allen put in charge of emergency response

Hurricane Katrina

8-29-05 Katrina strikes, levees fail
9-2-05 Bush gets riot act from Louisiana officials on Air Force One
9-2-05 Military gets orders to aid evacuations
9-5-05 Thad Allen put in charge of emergency response

Human misery multiplied during Bush's slow response. His investigative report was hapless, omitting the hospital with the highest death toll and not addressing patient priority under mass evacuations.

I can hear already hear Axelrod's claims of "unprecedented disaster." Only they aren't unprecedented, given an Australian rig blowout in August 2009. The Montara spewed oil, natural gas and gas condensate for over two months.

FEMA drilled on Hurricane Pam striking the Big Easy the year before Katrina struck. Yet, no one could imagine the damage Katrina caused. Conversely, there is no failure in imagination when defending slow responses to "unprecedented" disastrous events. This leaves citizens to do they best they can with tools they have, until Uncle Sam decides to arrive.

Update: A BP representative beat David Axelrod to the "unprecedented" punch. "The sort of occurrence that we've seen on the Deepwater Horizon is clearly unprecedented," BP spokesman David Nicholas told The Associated Press on Friday. Please, tell me Frances Townsend is consulting with BP. 

Update 7-16-11:   Documents from the British Embassy indicate the U.S. Military went to work on the BP Oil Spew on 4-30-10.  

Gulf Rig Blowout Follows Australian Debacle

On August 21, 2009 the Montara Well off Western Australia blew out. Oil, natural gas and gas condensate spilled until November 1, when the fourth attempt to intersect the well succeeded. The well had a state of the art platform and drilling rig. The image above projects a Montara sized oil spill on the East Coast of the United States.

The Obama team knew this when it pushed for deepwater drilling off the East Coast and Florida's Gulf Coast. When White House Press Secretary Robert Gibbs said "accidents happen," was he referring to the Australian experience?

The question remains, how large with the DeepWater Horizon spill get? How many months will oil flow unchecked in the Gulf of Mexico? What happens when hurricanes or tropical storms pass through the area?

While the Obama response looks rather Bush-like, they've changed position from full speed ahead on deepwater drilling. Where's Sarah Palin when you need her? The Alaska Governor successfully knocked down the Exxon Valdez spill from 11 million gallons of crude to 11,000 gallons of fuel in a CSPAN interview. The power of words.

Fun Facts about Health Reform

WonkRoom published several facts about health reform. The first deals with the practice of rescissions:

Federal law has required insurers to end rescissions since Congress passed the Health Insurance Portability and Accountability Act (HIPAA) in 1996. That law gave states the authority to enforce the rescission ban, but permitted the federal government to take over if states failed to adequately protect consumer interests.

Over the last 14 years, insurers have been able to take advantage of weak state regulations to purge their rolls of costly patients without triggering a response from the federal government. What’s still unclear is how or if the federal government will enforce the rescission requirement under health reform. The new law restates the rescission prohibition and leaves enforcement of the rule to the states. The federal government is again the regulator of last resort.

Health reform institutes the same structure that worked so poorly for 14 years? It gets better. Insurance companies "medical costs", a key part of the medical loss ratio, will be defined by an industry group.

The health care law tasks the National Association of Insurance Commissioners — a private body not subject to federal transparency rules and largely funded by the insurance company — with defining the standard definitions, “subject to the certification of the Secretary.”

Couldn't Congress find any accountants or actuaries to craft operational definitions? For-Profiteers win again.

Obama's Bush-Like Emergency Response

The Deepwater Horizon oil rig exploded on April 20th. Nine days later, the White House weighed in:

The Obama administration pledged an all-out response Thursday to the massive oil spill now expected to reach the Gulf Coast within a day and dispatched top officials to the region to help coordinate defenses against the potential environmental disaster. "We are being very aggressive and we are prepared for the worst case," Coast Guard Rear Adm. Sally Brice-O'Hara said at the White House.

It sounds remarkably like President Bush after Hurricane Katrina. Will President Obama hire James A. Baker's law firm, Baker Botts, to conduct the investigation? Might the firm work on behalf of BP, Transocean, Halliburton or Cameron?

In either case, Frances Townsend could influence the report. She wrote an abysmal report on the Federal Response to Hurricane Katrina. Her Lessons Learned flotsam omitted the hospital with the highest patient death toll. It didn't address patient evacuation priorities. What might she leave out regarding Deep Horizon?

Update: The White House ordered Interior Secretary Ken Salazar to submit a report on the disaster within 30 days. There's no word on whether it will conducted in house or contracted out. Meanwhile the federal government is "fully prepared" to deal with the disaster.

Clinton Blames Nixon's Dropping the Gold Standard, Not His Repeal of Glass-Steagall

Bob Schieffer interviewed President Bill Clinton at the Peter G. Peterson Foundation's Fiscal Summit. During Clinton's rambling answer to a question about the SEC's civil suit against Goldman Sachs, Bill said:

I think there's a bigger problem here. Too much of our growth in the last decade was in finance. And ever since we went off the gold standard, which was necessary for economic management purposes. If you look at it, we had a global financial economy before we had a global trade economy, and certainly before we had any global environmental and labor safeguards. Ever since then economic inequality has increased.

In a shameless, face saving move, Bill blamed huge speculative growth in the financial sector the last decade on President Nixon (R), who cut the final gold-dollar tie in 1971. Clinton failed to mention his 1999 signing of Graham-Leech-Bliley, which repealed Glass-Steagall protections, opening the floodgate for Wall Street excesses.

The clip showed Pete Peterson in the audience, the founder of the Institute bearing his name. Peterson made his billions from The Blackstone Group, a private equity underwriter (PEU). Clinton has his own PEU ties, as do many ex-politicians. PEU's epitomize global greed. They've hung on their preferred carried interest taxation due to the largess of both political parties.

Global finance brought junk products and a near meltdown of the financial system. Bill Clinton doesn't want to walk back globalism, he wants the slower parts to catch up. That's why Glass-Steagall won't comeback. It's why private equity and sovereign wealth funds get a free pass under financial reform. Global finance could care less about global inequality. They chase the have's, not the have not's.

America witnessed the campaign style kickoff of Obama's deficit commission, financed in part by the Peter G. Peterson Foundation. PEU Peterson wants lower taxes and cuts in entitlement spending, while Bill Clinton's predilections towards privates is well known. Even "bubble blower" Alan Greenspan made an appearance.

The gun sounded on the Deficit Commission. Let the conflicts of interest begin!

Frist Fortunes Under Health Reform

Dr. William H. Frist noted the private sector nature of Obama's health reform on CSPAN's Washington Journal in October 2009.

What the Obama administration is doing is not socialized medicine. Socialized medicine is where the government owns the hospitals. They own the doctors and they decide how much people are getting paid. And that’s not what’s in these bills.

The former Senator Majority Leader indicated he could vote for the bill. Now that it's passed, how might the Frist family benefit?

Dr. Frist has been a partner with Cressey & Company since 2007. Cressey's website states:

Cressey & Company, with offices in Chicago and Nashville, is a private investment firm focused on the healthcare industry. The principals of the firm have been active healthcare investors for nearly three decades and have invested in a wide range of healthcare businesses. Cressey & Company seeks to invest in high-potential segments of the U.S. healthcare market.

Cressey describes the Senator's role:

Senator William H. Frist, MD is a Partner and Chairman of the Executive Board responsible for acquisitions, divestitures and oversight of portfolio companies.

Cressey joins legions of private equity underwriters (PEU's) salivating over the profit potential of health reform. Carlyle co-founder David Rubenstein sees 30% annual returns coming from health care. How might the Obama plan deliver?

First, it postpones covering most of the uninsured until 2104. This creates tremendous pressure on safety net hospitals. I opined such facilities might sell out on the cheap to their for-profit brethren. No sooner did the words hit the page, a Detroit nonprofit system inked a deal with Blackstone's Vanguard Health System. Within a week, the largest nonprofit community hospital system in New England, Caritas Christie Health System found itself in the jaws of hell hound Cerberus Capital Management.

Four years from now coverage expansion will kick in. Uncle Sam will foot 100% of state Medicaid expansion and subsidize individual health insurance for millions.

This fits well with Cressey's time horizon for new investments, "3 to 7 years, average approximately 5 years." What's on the investment plate, given the bill's passage? The private sector loves growing its federal book of business. Dr. Frist sits on the board of URS, an infrastructure firm with 45% of its revenue from Uncle Sam.

Second, health reform provides government subsidies, $1 billion in tax credits or direct Treasury loans for "innovative health care companies."

Should Uncle Sam not be a financier, Cressey's portfolio includes companies likely to benefit from reform. The range covers Medicare home health, hospice, acute care hospitals, dialysis, institutional pharmacies, specialty hospitals, infusion services and behavioral health.

The private sector stands to win big. Dr. Bill Frist knows it, as does his family. Frist's brother and nephews benefit from HCA's recent dividend payment and upcoming independent public offering (IPO). Dr. Frist's son works for The Carlyle Group, with its twisted eye on health care.

A toast to the Frist's, the first family of for-profit health care.

Update: Bill Frist is on the board of Accolade LLC, which helps employers cut the cost of employee health care. Frist is also on the board of Select Medical Holdings, Aegis Sciences Corporation, the Millennium Challenge Corporation and formerly mentioned URS.

DateLine Shocks: Journalistic Malpractice?

The shocking experiments of Stanley Milgram in the 1960's raised ethical questions regarding human experimentation, later reinforced by the disturbing Stanford Prison Experiment.

Journalists are apparently exempt from such standards in a race to the bottom via "reality entertainment."

France lowered the bar first with The Game of Death.

France is reeling from a documentary about a psychological experiment disguised as a game show. Researchers staged a fictitious reality show to see how far people would go in obeying authority, especially if television reinforces that authority.

The disturbing results have alarmed the French.

The fictitious game show had all the trappings of a real TV quiz show, including a beautiful and well-known hostess, and a raucous audience.

Dateline followed suit with What a Pain!

Get ready for something different from Chris Hansen. It's an all-new reality show, called "What a Pain!" - and it's totally fake! The idea is to test reality-wannabe contestants. Would they deliberately hurt someone else just because they're told do? Or, how about this: An enclosed room fills with smoke. Would people bolt for the door or sit tight? Watch clips here.

What were they not thinking? The harm of authority driven win/lose structures is well established. Why put people through damaging "entertainment," be they French or American?

Is the media's goal to desensitize the public to violence?

The French version combines Milgram's use of authority with the power of live television. He says the result in the French experiment — a higher percentage of participants willing to shock the subject — shows that the manipulative power of television further increases people's willingness to obey.

Footage (shows) Pasanau pumping 460 volts of electricity until the actor pretending to be electrocuted seems to keel over dead.

In the footage, the game show hostess yells: "And you've won!"

Who knew old movies would be so prescient? Shocking television reeks of The Running Man. News journalism is now the dark comedy of Network. Anything for a Q rating...

P.S. Where does a strong authority system intersect with a punishment and cameras? In enemy combatant detention and interrogation centers, i.e. Abu Ghraib, CIA secret prisons & Guantanamo Bay. A few loose cannons don't waterboard someone 183 times. Oddly, much of the footage went missing. Might it reappear in a reality show?

Last Shot Oils Obama

President Obama netted two of three "events" in pushing his public policy. The first swish came from health insurers raising premiums by exorbitant amounts. This resumed health reform, widely thought to be on life support.

The second "bank shot" came from the SEC's civil fraud case against Goldman Sachs. This fed the administration's weak kneed, financial reform effort.

The clanger came from a Gulf of Mexico explosion, eventually sinking a deep water drilling platform. It caused a severe oil spill, now 400 square miles in area. Inclement weather is hampering the cleanup and pushing the spill toward Louisiana and Mississippi.

Despite the accident and growing spill, President Obama will not halt his push for drilling off the East Coast and Florida's Gulf Coast. White House Press Secretary Robert Gibbs said "accidents happen." Gibbs is known for his oiliness. President Obama continues swimming in dirty water.

Update: Submersible robots will try to activate the leaking well's blowout preventer. Why wasn't it activated? The spill is now 1,800 square miles.

Cutter to Work Health Care Magic for White House

Stephanie Cutter, a senior Democratic operative, will oversee White House health care messaging for the 2010 elections. The job is short term in nature, with Stephanie returning to her media consulting firm, Cutter Media Group, in the near future.

Stephanie has her hands full with messaging inside Health & Human Services. She'll need to coach Dr. Don Berwick, Centers for Medicare/Medicaid Chief nominee. Dr. Berwick believes Obama's signature solution for cutting health care costs, pay for performance, is a "toxic daisy chain" and "a blunt instrument." Berwick knows well the losses caused by extrinsic motivation systems.

Cutter will need to reign in pesky Medicare actuary Richard S. Foster, the man who caused an uproar under President Bush by challenging his Prescription Drug benefit projections. It seems politicians' definition of "lower costs" is different from that of actuaries. Foster says PPACA will increase federal health care costs, that includes drastic physician fee cuts likely to be reversed by Congress.

What will be lower in absolute numbers is the number of Americans with employer sponsored health insurance. In 1998 168.5 million had workplace coverage. By 2019 it's 162 million, only the U.S. will have over 40 million more people.

Designers of the two major federal health initiatives in the last decade, Tom Scully and Nancy-Ann DeParle, never testified before Congress. However, they lined up plenty of conflicted testifiers. "Will anyone not on the board of a health care insurance company please raise your hand? Let the record show..."

Foster said hospitals could be in trouble under reform. CBS News reported:

The report projected that Medicare cuts could drive about 15 percent of hospitals and other institutional providers into the red, "possibly jeopardizing access" to care for seniors.

Mr. Foster missed the spate of hospital buyouts announced around the passage and signing of PPACA. Private equity underwriters (PEU's) are buying safety net facilities. Converting nonprofit community hospitals to for-profit is on Nancy-Ann DeParle's resume, alongside her PEU stamp of approval.

President Obama loves PEU's, seeing private investment as the answer to many of America's problems, banking, infrastructure, health care and education. PEU's expect 30% annual returns, load up companies with debt and interest expenses, set aggressive profit targets, bleed affiliates by dividend distribution, and employ the "toxic daisy chain" of pay for performance.

Private equity got a free pass under financial reform. They likely have another year breather on taxing carried interest like income, despite Obama's 2008 campaign promise.

Stephanie has her work cut out for her, but the Obama White House isn't new to running coordinated campaigns. The for-profit hospital lobby participated in a campaign style effort directed by the White House's Jim Messina. After an initial beating, the group rallied to pass PPACA.

It's a good thing she has a compliant media. How can she get them to push her lipstick coated close? Which corporations can she get to buy ads for the Blue Team? Maybe a PEU affiliate or two?

Update 4-3-22:   The average health insurance premium more than tripled for a family plan since PPACA passed in 2010.  Cost curve bent but in the wrong direction.  Concave went convex.  

Health Care Language Devolves: Nonprofit Hospitals in Play

The health reform bill renames nonprofit community hospitals, calling them "private tax exempt facilities." PPACA's provisions include "accountable care organizations," formerly health maintenance organizations. and "bundled payment," previously known as capitation. HMO's and capitation drove a frenzied buyout period in the mid 90's as health systems evolved.

Deal making is back, with new players ready to strike. Private equity underwriters (PEU's) believe health reform is ripe for deals producing 30% annual returns. As a result, nonprofit hospitals are now in play. Financially stressed safety net hospitals should be available on the cheap, as major health insurance expansion doesn't kick in until 2014.

Less than a week after my post detailing the plight of nonprofit hospitals, Caritas Christi Health System inked a deal with hell hound Cerberus Capital Management. Cain Brothers LLC advised Caritas on "monetizing" the largest nonprofit community hospital system in New England. Caritas wasn't saved by three years experience under Massachusetts health reform.

The Blackstone Group's Vanguard Health Systems will buy Detroit Medical Center and its eight hospitals. Like the Cerberus deal, no new money will go into area foundations, a common feature of prior nonprofit hospital sales. All capital goes into the asset they're acquiring.

Blackstone's Stephen Schwarzman was a frequent White House visitor, meeting with major health reform architect Peter Orszag. Vanguard paid its owners a $300 million dividend, paltry compared to HCA's $1.75 billion. HCA borrowed to finance their dividend to PEU owners.

How many nonprofits will sell out by 2017, three years into Obama's major coverage expansion? How many will be bought out by PEU's?

Cain Brothers stands ready to help other struggling nonprofit hospitals monetize their assets. An infamous Cain killed his brother. Today's language points to a similar death, that of safety net, nonprofit community hospitals.

D.C. Center of Knowledge Management?

A WaPo piece on D.C.'s fortunes noted "the next great burst of business in Washington." It stated:

There is a new wave of government activism underway, and with it, new opportunities for the private sector: Cutting down on paperwork in the health-care system, developing greener energy supplies, making information more secure, overhauling education.

Carlyle Group co-founder David Rubenstein is the great tea leaf reader. He presciently spoke of a monstrous stimulus plan from Seward's Folly. The private equity underwriter (PEU) stood ready to cash in on any Obama stimulus.

Rubenstein recently interviewed White House OMB Director Peter Orszag at the Economic Club of Washington. They talked health care, where Peter confessed the government did not know how to pay for quality. It would "throw stuff against the wall, and see what sticks." Unfortunately, the interview is not posted on the Club's website.

The Carlyle Group has two affiliates specializing in health care cost management, MultiPlan & recently acquired Viant. How much will Peter pay them to sling things against the "health care cost" wall?

Peter suggested health care research should move toward econometrics, i.e. clinical modeling, and away from double blind clinical trials. Econometrics provided Wall Street with "no lose models" for packaging investment junk, stuff that sticks on the wall when you throw it. The odor is similar to a PEU.

Insurance companies are happy to sell their billing databases to D.C. knowledge workers for manipulation. Expect Quants to do for health care what it did for securitizations.

As for education, Carlyle made an initial cash payment for Phoenix based Western International University's move to Apollo Global, Carlyle's joint venture with The Apollo Group. MarketWatch reported:

Western International University will collaborate with BPP, a leading provider of education and training to professionals in the financial services and legal industries in the United Kingdom and Europe; UNIACC, an arts and communications university in Chile; and ULA, a communications, business, and medical university in Mexico.

Carlyle also owns Wall Street Institute, a language education firm, and TOPIA Education, a Korean tutoring firm. They show BlackBoard, Catapult Learning and SchoolNet current investments.

One Carlyle division, huge government consultant Booz, Allen, Hamilton, is likely to drive many federal initiatives. It can serve as the prime integrator of government desires and private sector talent. How might it steer federal dollars to Carlyle affiliates?

America's version of knowledge is ignorance in the eyes of the world's foremost quality guru, Dr. W. Edwards Deming. A generation of mean and greedy leaders has taken its toll on our economy and the American spirit.

It can't end fast enough, but change won't come from our hallowed halls of government or teak lined corporate board rooms. Profound knowledge involves an understanding of systems, variation, knowledge and psychology and their interactions. It is sorely lacking.

Without it, leaders can make things worse. Incentive laden solutions for education and health care match Wall Street's extrinsic pay-gasm the past decade.

Wall Street banks stuffed bad loans and bad loan packages into even more complex packages--including synthetic CDOs--to disguise problems and continue to earn bonuses.

It's a bad trajectory as incentives distort.

Add HCA & Community Health Systems to Arthur Jensen's List

CCA Board Chair Arthur Jensen's world of business needs updating. When Network came out in 1976, HCA was a fledgling for-profit hospital company, trying to do for hospitals what Holiday Inn did for lodging. Community Health Systems (CHS) didn't exist.

In several profit-gasm iterations, HCA went private, then public. HCA's current owner is KKR, a private equity underwriter (PEU). KKR is planning HCA's fourth independent public offering (IPO). This comes after borrowing to pay $1.75 billion in dividends to PEU investors, mostly KKR.

CHS purchased Triad Hospitals, financing the deal with debt. The two buyouts added over $2 billion in interest expense to America's expensive health care system.

How influential are America's for-profit hospitals? A parade of politicians pandered at their annual trade gathering. None mentioned the cost of special dividends, management fees or interest expense. HHS Secretary Sebelius said:

Hospitals know the cost of delaying health reform, and “your leaders have seen the connection between quality and cost,” she observed. She also thanked the FAH and its members for being advocates for fixing the health system, adding that the FAH has “great credibility” when speaking out for health reform.

The man with great credibility is Chip Kahn, FAH's CEO. Chip created the Harry & Louise ads that destroyed health reform in the 90's. Partnering with the devil is a fractal in Obama's health reform, modeled after the Massachusetts experiment.

After three years under the Massachusetts system, Caritas Christi Health System will join Chip's camp. The largest Catholic nonprofit community hospital system in New England will sell out to hell hound Cerberus Capital Management. Chip will add heavy hitters, John Snow & Dan Quayle, to his dark political stable. Other PEU's see health reform as a windfall.

Should they do a remake of Network, add HCA, CHS and PEU's to the AT&T's and Exxon's. The Carlyle Group would not be mentioned in an effort to keep their good name. Arthur Jensen's prescient speech notes the movement of dollars through corporations in a country-less world. Anything else is theater for the masses.

P.S. The parade of pandering politicians included HHS Secretary Kathleen Sebelius, Sen. Bob Corker (R-TN), House Majority Leader Steny Hoyer (D-MD), Sen. Ben Nelson (D-NE) and Sen. Evan Bayh (D-IN)
 

The Curious Case of Caritas Christi's Sellout to Hell Hound Cerberus

The largest nonprofit community hospital system in Massachusetts fought before it switched to Cerberus Capital Management in a proposed sellout. The battle of consultants started in 2008. The skirmish pitted Massachusetts Attorney General Martha Coakley's Health Strategy Solutions vs. Caritas Christi's Accretive Health and Wellspring Partners.

Coakley made her report public. Caritas Christi tried to spin it positively, but their reply read acrimony between the lines. Caritas blamed insurance companies for not sending patients their direction. They cited storied teaching hospitals as monopolistic competitors. Caritas would be a market leader, if accountable care organizations were in place . Against the recommendations of the Coakley report, Caritas announced Carney Hospital would remain full service.

Caritas' 2008 990 shows a $33 million payment to Accretive Health for consulting services (source: Guidestar). The distinguished George P. Schultz, former Secretary of Treasury and Secretary of State, sits on the Accretive board as it readies for an independent public offering. Their top three shareholders are two private equity underwriters (PEU's) and the largest Catholic hospital system in America, Ascension Health. Who knew nuns were in bed with the PEU boys prior to the Cerberus deal? Caritas Christi planned to merge with Ascension Health in 2007, but the deal never consummated.

In 2009 Caritas backed out of an insurance joint venture with CeltiCare, due to Catholic teachings. CeltiCare is a division of Centene Corporation, which has Tommy Thompson and Dick Gephardt as board members. A major Centene shareholder is BlackRock. A week before Caritas backed out of the Centene/CeltiCare deal, the state stopped automatically assigning low income residents who hadn’t chosen a plan to the lowest price option, CeltiCare.

Oddly, Catholic ethics prevented Caritas from putting capital into an insurance company, but allowed the sell out of the whole system. Similarly unusual, the state Attorney General spent millions on consultants to reorganize a nonprofit healthcare system. Did Martha have a role in pulling the plug on automatic assignment to CeltiCare, a looming partner for Caritas?

The week before the merger announcement, Caritas CEO Dr. Ralph de la Torre told state officials:

Without proper reform, a wave of consolidation is likely to hit the health sector, given long-standing distortions in pricing and insurance reimbursement.

Nearly three years of Massachusetts reform couldn't save Caritas Christi health system. As most Obama reforms don't start until 2014, expect more sellouts. Private equity underwriters salivate over the prospect of 30% annual returns in the health arena.

Cerberus' new division will be called Steward Healthcare Services LLC. How did Caritas' current stewards shepherd the deal? News report mention an "extensive process to identify, evaluate and select a capital investor."

Will Caritas senior management or board members receive an equity stake in Steward Healthcare? Surely ex-Treasury Chief John Snow and Vice President Dan Quayle will hold a chunk. How will leaders be compensated in the future, i.e. what promises were made on executive and board compensation?

Nonprofit community hospitals are a public asset. Many prior sales created well funded foundations that benefit the community in their absence. The Carney Foundation is listed as an exempt subsidiary, one of 52 Caritas corporations (12 of which are taxable). What will happen to it?

The announcement said Cerberus would provide $400 million in capital improvements. Projects listed include:

• Increasing the size of our overcrowded EDs (originally built between 1954 and 1972)
• 60% of all inpatients come through the ED
  
  • 103 ED treatment bays serving 150,000 patients per year (an increase of 22 bays)

Wasn't health reform supposed to decrease Emergency Room utilization? Certainly, Massachusetts wouldn't need a 20% increase in ED bays, now that citizens have a medical home. Investing millions in the "most expensive avenue of care" fits with PEU's.

Despite management's angelic pronouncement, it's not clear how those served by Caritas Christi's facilities will benefit from the sale to hell hound Cerberus.

Martha Coakley's office will have to decide. Will a Coakley fundraiser at the home of Caritas' CEO have an impact?

P.S. Martha Coakley's Health Strategy Solutions is now advising First Lady Michelle Obama's employer. Accretive Health's founder sits on the University of Chicago board of directors. It's a cozy, but contentious bunch.

Update 11-14-10:  Martha Coakley and the Vatican approved Caritas Christi's sellout. 

Update 1-26-24:  American Prospect summarized the damage Cerberus and Steward Healthcare did to Massachusetts hospitals.  Steward hired a restructuring advisor and may be headed to bankruptcy. 

Caritas Christi Health System Selling Out to Cerberus Capital

Six days after my post "Will Nonprofit Community Hospitals Make it to 2014?" a large Catholic hospital system in Massachusetts sold out to Cerberus Capital Management, a private equity underwriter (PEU). Note two years under Massachusetts health reform did not help Caritas Christi Health Care, comprised of six nonprofit community hospitals and 13,000 employees.

Caritas will shift to for-profit status. They will pay $7 million a year in property taxes on their two Boston hospitals.

Commenting on the deal is Stuart Altman, health economist and White House adviser on health reform. Stuart is consistent in failing to declare his conflicts of interest.

Turning the system around and making a profit for investors will be a challenge, said Stuart Altman, professor of national health policy at Brandeis University in Waltham, Massachusetts.

Altman clearly stated Cerberus' aim in the deal. Will John Snow, Dan Quayle and the rest of the Cerberus team expect 30% returns like their peer, The Carlyle Group?

A consumer advocate said. “People are often reluctant to turn over their health system to a set of stockholders that are not part of the community.”

White House health reformer Nancy-Ann DeParle has such activity on her resume. Reform is stacked in favor of For-Profiteers, which explains PEU's salivating over health care deals.

What clue did the media miss indicating nonprofit community hospitals were in trouble? The bill renames them "private tax-exempt facilities." Enough to chill your pre-bypass heart.

Caritas has 3,000 employees under the auspices of the Service Employees International Union. SEIU President Andy Stern raised Cain over Carlyle's purchase of huge nursing home provider, ManorCare. His union's 2007 concerns proved hollow.

That fits with Stern's 2006 position that employer sponsored health coverage was "dead and not coming back." How might he partner with Cerberus in shedding that pesky benefit? Dumping responsibility to the individual is clearly part of Obama's health reform.

What Cerberus did for Chrysler, it can do for hospital care. Expect poor quality and lack of innovation. How fast can Caritas bleed dividends back to the parent? How many millions will it charge Caritas in annual management fees? How much will health care costs go up to pay interest on deal debt or taxes as a for-profit entity? How many employees will be shed or benefits cuts as operations are streamlined?

Warning: Sharks are in the waters of safety net providers.

Update: Moody's upgraded Caritas Chriti's bonds in February 2010 citing improved profit margin, debt coverage and cash flow. They noted $235 million in unrestricted cash and investments at the of FY2009. While much can change in six months, this flies against the "cash poor" rationale for the sellout.

Rick Perry "Say No to Washington"

Texas Governor Rick Perry delivered a firebrand speech as the Southern Republican Leadership Conference in New Orleans. He said:

"It's going to take principled leadership. It's going to take men and women going to Washington, D.C. and saying no."

Funny, Perry can't say no to 1001 Pennsylvania Avenue, corporate offices of The Carlyle Group. The Governor adjusted Texas Enterprise Fund contracts with two Carlyle affiliates, Vought Aircraft and Authentix, after both failed miserably on their employment promises.

Vought's failure to provide the promised 3,000 jobs to Texas was compounded by their abysmal record in delivering quality 787 fuselages to Boeing. That was a multi-year failure.

In 2009 Vought estimated it would owe Texas $2.1 million. Their annual report stated:

We reclassified $2.1 million related to the Texas grant to the Accrued and Other Liabilities caption in our Consolidated Balance Sheet due to a potential repayment of grant funds in 2010 based on the agreement.

After Rick Perry rewrote the agreement, Vought paid back a mere $900,000. That's 25% of the original principal at zero interest over 6 years. Perry said we needed to "take care of the job creators," only he's taken care of employment ghost providers. What principle is that?

Perry spoke of a 2003 budget crisis in Texas, one he solved with principles. The state balanced the budget on the back of 200,000 kids who left CHIP. When he granted the $35 million to Vought in March 2004, over 100,000 kids no longer had children's health insurance coverage. Whatever principle this is, it should haunt the cocksure Governor.

Perry spoke about the RSLC host city, a city with ghosts of its own.

"It's been five years since the one two punch of Hurricanes Katrina and Rita."

Hurricane Katrina was the impetus for Carlyle's other abdication, this one by affiliate LifeCare Hospitals. Their New Orleans facility lost 25 patients in the storm's toxic aftermath, the highest death toll of any hospital. This fact was omitted from the White House Lessons Learned report.

LifeCare's corporate offices are in Dallas, as are Vought's. Parent Carlyle charges the two millions in annual management fees. Thus, they have a role in corporate strategy and decision making.

The irony comes from LifeCare's defense in wrongful death lawsuits. They claim patients became wards of the federal government as soon as FEMA evacuation teams set up in New Orleans. This means "say yes to Washington when it means a transfer of losses or liability."

Governor Perry's theatrics are for public consumption. Behind closed doors, he serves his landed friends well. That includes the Carlyle Group brand of Washington, D.C.

Bush League Intelligence with Frances Townsend

Frances Townsend spoke at the Bipartisan Policy Center. C-SPAN televised the intelligence gathering. At the 22:15 mark she said:

The nation understood there was an intelligence failure in 9-11. The nation understood that part of that is we didn't share the information that we had actually collected. The nation chose to forgive its government for that failure, but it had a right to expect it not to make the same mistake again. So, information sharing is really important.

Frances omitted the hospital with the highest patient death toll in her Katrina Lessons Learned report. That was four years after 9-11. She didn't share the information that she had actually collected. Memorial Medical Center lost 35 patients as patients and clinicians suffered in hellish conditions. It's a horrific story with political intrigue.

Citizens had a right to expect government not to make the same mistake again. While Fran spouts platitudes, she didn't live them. It seems to have paid off.

Governor Perry's Texecutive Privilege

Texas Governor Rick Perry proudly announced a $35 million grant to Carlyle Group affiliate Vought Aircraft Industries in February 2004. His press release stated:

"Wiith this commitment in Texas Enterprise Fund money, we are doing our part to leverage a major economic expansion by a valuable Texas employer that will bring 3,000 new jobs to Texas, attract additional employers to our state, and provide the revenue we need to sustain important public investments in areas like education and health care.”

The $35 million check arrived in April 2004. Vought viewed that as a down payment, wanting a bigger deal with the Texas General Land Office. The reported $65 million deal never materialized.

In 2005 the company reneged on plans to shift jobs from Nashville and Stuart, Florida to Texas. The next year Vought laid off 600 Texas workers.

Rather than add 3,000 jobs by 2009, Vought cut 35 positions. That's $1 million in Texas taxpayer money per job lost.

Vought reclassified Texas grant money from "operating" to "financing" activities. Lone Star funds were used to add jobs in South Carolina, the Palmetto State. Vought's 2005 10-Q indicated state grants as a source of capital for 787 Dreamliner production, slated for Charleston.

Vought's major economic expansion happened elsewhere. Funds for important public investments in education and health care weren't generated, despite Perry's promise. The TEF contract obligated Vought to pay back $33 million of the original $35 million under an absolute failure scenario.

The clock ticked past judgment day. Vought's just released 10-K stated:

As of December 31, 2009, we employed approximately 5,900 people.

That's 400 short of its 2009 Texas commitment. Vought stood to refund Lone Star taxpayers $3.3 million plus interest.

Governor Perry rode to the rescue, using Texecutive privilege to lower the bar for 11 companies. Two are Carlyle Group affiliates, Vought and Authentix.

Vought returned $900,000 to the state, roughly 25% of principal at zero interest. It's also 9/10th of a laid off Vought worker. That leaves 34.1 to go. Texas public education and health care could use $35 million in a difficult funding environment.

Instead Vought will hold up to $35 million for 15 years, a sweet deal for a firm whose parent's track record is 30% annual returns. While Governor Perry rails against Washington, D.C., he enriched a D.C. based private equity underwriter (PEU) with public funds. The Carlyle Group's political connections shine once again. The privileged have each other's back. The public con continues.

Update: Rick Perry has competition from the Connecticut Governor, who cut his sweet deal with Carlyle without the legislature. It's Texecutive vs. Conectutive privilege.

Carlyle Group's Vought Aircraft Refunds Texas $900,000

Governor Rick Perry proudly announced a grant of $35 million to Carlyle affiliate Vought Aircraft Industries in 2004. Vought's 2009 10-K states:

As a result of our failure to maintain the required employment levels, we repaid $0.9 million to the Texas Enterprise Fund in 2010. Our failure to satisfy these commitments in the future could result in the requirement to repay some or all of the remaining portion of $35 million grant over the next nine years.

For details on the agreement's history and Vought's abysmal record under TEF, go to PEU Report.