Longform

Death and Profits

Page 8 of 12

Gordon, who retired from the senate last year, accepted the position with the Hospice Foundation while still a member of the committee that oversaw all legislative issues relating to health care. He explains Westbrook's job offer this way: "When you have a part-time, citizen legislature, every one of us has to work some place. And it's part of the understanding that you are going to run into situations where your knowledge of a certain subject is going to be helpful in finding employment." Lucrative employment. Gordon's foundation salary was set at $100,000 per year, a figure he says is not out of line considering the work he performs: delivering lectures and leading seminars for hospice industry groups, initiating new programs, and setting overall policy for the foundation, which last year raised $1.5 million in donations and grants. (By contrast, Ruth Shack, president of the Dade Community Foundation, earns a salary of $87,000. The Community Foundation administers assets of nearly $30 million and does not employ any other executive administrator. Board members are not compensated.)

David Abrams's compensation as executive director is more modest: $58,000. (Before Gordon and Abrams were hired, the foundation was run by Westbrook's wife, Carole Shields, who was not paid a salary.) A former savings and loan executive, Abrams says he learned of the job opening through his brother, the state representative. Mike Abrams acknowledges he talked to Westbrook about hiring David, but that he didn't ask Westbrook for any special favors. "If I went to Hugh Westbrook and said, 'Give my brother a job,' he would take my head off," Abrams laughs. "On the other hand, if I heard about it from Hugh and it seemed like a good fit for David, clearly I would have said, 'Hey, why don't you talk to David?' When you've got friends and brothers, there is little you wouldn't do. But I'm sure in the final analysis, Hugh made a business decision, because that's just the way he is. I'd like to think my brother is competent and he won it on the merits. But it would be silly to think I didn't facilitate the introduction."

After Gordon and Abrams were hired, Westbrook and the foundation's other board members stepped down. "We asked the entire board to resign," Abrams says, "because Jack Gordon wanted an independent board. We don't have any relations with them [Westbrook's company] any more."

Abrams, however, remains uncertain about the nature of the foundation's earlier connections to the for-profit HCI and the nonprofit Hospice Inc. Records, he says, were not well maintained. "I have never understood the corporate relationships," he admits. "I had them explained to me during my orientation and I couldn't grasp it. I found it too complicated."

But Abrams is aware of one specific connection between the Hospice Foundation and the for-profit HCI. Until this past fall, the foundation maintained a reserve of money for a program called "special needs grants." HCI patients would often develop emergency financial needs (for example, rent payments or money for food) that would not be covered by Medicare or Medicaid. Under the program developed with the foundation, HCI would write emergency checks to cover the patient's immediate needs. HCI offices nationwide would then be reimbursed by the foundation through the special-needs grants. In the last three years, HCI was reimbursed a total of $250,000 from this fund.

Westbrook contends the program was dropped because HCI decided to cover the emergency costs and free the foundation to direct its money elsewhere. But David Abrams has his own recollections. "It was discontinued because we were never really sure of the legal status of it," he says. "We had concerns. [HCI] had concerns. They were concerned that that kind of a program could be construed A now let me get the phrase right A as a charitable supplement to a for-profit company. There was a lot of concern about that."

Some people find it difficult to understand how a company like HCI can be so profitable, especially when the bulk of its income derives from Medicare and Medicaid claims designed to barely cover the costs of proper health care for the terminally ill.

The financial success of HCI (now known as VITAS) can best be described with one word: volume. "That's the only way you can make a profit in hospice," laments Bernice Wilson, executive director of the Ohio Hospice Organization, who watched Westbrook's company expand into Cincinnati earlier this year. "You have to have a very large 'census' [of patients]. It's sort of the McDonald's philosophy applied to dying. You're not going to make very much profit on each item, so you have to sell a lot of items."

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Jim DeFede
Contact: Jim DeFede