Death and Profits

When Hugh Westbrook pioneered hospice care, his organization saw to the needs of the dying. Fifteen years later nothing has changed -- except the politics and the profit margins.

Westbrook, though, had a vision of the way things were going to be. No matter what difficulties he was experiencing in attracting profit-minded investors, he would eventually succeed in marketing hospices across the country. And he wouldn't let his nonprofit obligations in Miami stand in the way. So he made a pivotal decision. It was a straightforward proposition: either Hospice Inc. A the nonprofit corporation he created A would begin paying his new for-profit company a management fee, or he and Esther Colliflower would resign from the corporation's board of directors. (While Florida law prevented profit-making businesses from owning hospices, it did allow them to manage hospices for a fee.) It was also a defining moment in Hugh Westbrook's life, when his calling to bring hospice to the people turned from a simple mission of mercy to a far more complicated and calculating fusion of piety and profit.

Today Westbrook unabashedly contends that it was a "great business decision" for the nonprofit Hospice Inc. At the least it certainly wasn't a very difficult decision. After all, Westbrook and Colliflower had formed the nonprofit organization. Westbrook was chairman of its board of directors; his wife, Carole Shields, was also a voting board member. And the remaining directors had been invited by Westbrook to sit on the board with him. "It was us," he acknowledges when pressed to clarify the decision-making process. "I guess we could have quit and they could have tried to hire other people, but we started the whole enterprise." With the two founders threatening to walk away, the full board agreed to pay Westbrook and Colliflower's for-profit company, HCI, $140,000 in management fees.

Westbrook's search for investment capital finally led him to a California group willing to put up $3.5 million to open for-profit hospices in Dallas, Atlanta, and New Orleans. The hospice program in Dallas was opened in 1984, but soon thereafter the investors grew skittish and wanted to pull out. Plans for Atlanta and New Orleans were scrapped.

By the end of the year Westbrook received a memo from his chief financial officer informing him the company was technically bankrupt and that he should shut it down, take whatever cash was still available, and divide it among the executives as part of a lucrative severance package. "That was his last act," Westbrook recalls. "I fired him."

Slowly the company rebounded. Don Gaetz attributes that revival, and a large measure of HCI's eventual success, to a special law he and Westbrook ushered through Congress in 1986. Before that time, hospices had been required to seek reimbursement from the federal government only after they had provided services to Medicare and Medicaid patients. Many cash-starved hospices went out of business while waiting to be paid, which could take three months or more. To avoid suffering the same fate at HCI, Gaetz says, he and Westbrook lobbied for advance payment based on the projected number of patients a hospice would serve. "We were able to get Congress to add this in 1986," Gaetz says proudly. "I can't overestimate the importance of this." After the measure was signed into law, HCI, well versed in its intricacies, was the first hospice in the nation to take advantage of it. "We were able to get a leg up on some of the other hospice programs," Gaetz adds. Today hundreds of hospices use the advance-payment system.

By the end of the 1980s, with advantageous federal legislation propelling them, Westbrook and his partners had opened additional hospice programs in Houston, Fort Worth, Chicago, and Boston. "There were a lot of people who started hospices back when we did who aren't around any more," Westbrook boasts. "It wasn't that they didn't have a good idea, they had a great idea just as we did. But they were the kind of people who couldn't organize a two-car funeral." In a more restrained moment, Westbrook elaborates: "One of the fortunate things, frankly, for the movement is that the first for-profit, national, rapidly growing, professionalized chain of hospices wasn't a bunch of guys who went out and raised a bunch of money trying to figure out a way to start a business so they could become wealthy. Instead it was movement people who very successfully took an idea and made it work very well."

As Westbrook's company grew, so did the management fees he charged his own South Florida nonprofit, Hospice Inc. Within five years the annual rates soared from $140,000 to $2.3 million in 1989 and $2.6 million in 1990. Westbrook defends the increases and argues that for a number of years he lost money providing more services than the management fees covered. (Only later would an independent appraiser, hired by Westbrook himself, determine that he had overcharged the nonprofit by more than a million dollars.)

Despite growing business from the nonprofit, Westbrook says he was frustrated. He was in the business of owning hospices, not managing them for a fee. The solution, he decided, was to transform his nonprofit South Florida program into a profit-making business, like his other hospice operations around the country. But how? Florida law -- the very one he had so earnestly forged years earlier -- banned for-profit hospices throughout the state. Reverend Westbrook found the answer: You ask a neighbor for help.

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