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This is my 100th column for Health Forum Journal. Thanks so much for listening all these years.

Life Cycle

by Emily Friedman

First published in the Summer 2003 issue of Health Forum Journal

The CEO of the hospital looked up from the scrapbook she was perusing and stared at the clock. The board meeting was taking a long time. She had attended the first part, during which many topics were discussed, from the budget to the upcoming centennial celebration of the hospital, but then the board wanted to discuss her salary and a couple of confidential matters in executive session, so she had excused herself and was now back in her office, awaiting news from the meeting.

While she was waiting, she had pulled out the old scrapbook that told the story of the hospital. As she was co-chairman of the centennial celebration committee, she thought she should bone up on its history.

It had been founded in the early days of the 20th century as St. Persephone Hospital by members of a religious order. These women, whose black-and-white photos looked serenely back at the CEO from the scrapbook, had endured much hardship in the hospital's first years. As Catholic sisters in a largely Protestant community, they had experienced both suspicion and discrimination, and the hospital probably would have failed if there had been another source of care for the townspeople. But back then St. Persephone was the only game in town.

Community attitudes changed dramatically during the influenza pandemic of 1918-1919, which hit the town hard. The sisters, who were also nurses, went to the homes of the sick and tended them, as well as caring for them at St. Persephone. Their heroism and sacrifice--three sisters died of the flu while caring for its victims--transformed local perception of the hospital, and community support began to strengthen. A letter of thanks in the scrapbook, from the mother of a child whose life was saved by the sisters, attested to how suspicion had turned to respect and affection.

The Good Years

For years afterward, St. Persephone was the beneficiary of both philanthropy and volunteerism. Donations and fund raising allowed the sisters to ride out the Depression, and by the 1940s, when a new physical plant was needed, the community rallied to obtain the funds, even with a war on. The townspeople held bake sales and car washes and raffles, implored the wealthy to give money and asked their congressman for help. The growth in private insurance aided things enormously, of course, and when Hill-Burton funds became available at the end of the decade, the hospital was able to erect a new building.

The CEO smiled at the photos from the groundbreaking, in which beaming sisters and serious-looking town fathers shared the shovel as it turned over the first loads of earth.

The 1950s and early '60s were good for St. Persephone. The new building attracted more physicians, and the hospital grew in both size and utilization. It opened a school of nursing, which meant that a ready supply of new nurses was available to assist the aging sisters, some of whom were now retired, with more planning to do so. A noted philanthropist made a handsome donation that allowed the hospital to erect another building, named, of course, for him. New technology was easy to acquire, which made the medical staff happy, although they often fought with then-CEO Sister Mary Joseph over how much charity care they had to provide. She would always smile beatifically and reply, "As much as is needed, Doctor, as much as is needed." The CEO giggled at a photo of the annual medical staff dinner, where Sister Mary Joseph, smiling innocently, was seated next to an obviously uncomfortable chief of staff.

Times of Change

But the mid-1960s brought turbulence to St. Persephone, just as they did almost everywhere. The hospital, which did not offer reproductive services other than childbirth, was targeted by the emerging local women's movement as an enemy of equal rights.

Students at the nearby university staged a sit-in at the hospital, demanding more high-level jobs for minorities. They pointed out that there were no African-Americans on the medical or nursing staffs or in executive positions. And the younger physicians complained that the older members of the medical staff were too focused on money and not on social issues that should be commanding their attention.

It did not seem likely that another hospital could be built; where would the funding come from? Then Medicare and Medicaid were passed in 1965, and it seemed that there would be enough of both money and patients to support two hospitals. When local activists convinced the planning board that the town had grown enough to justify the expense, the forces that had been criticizing St. Persephone were more than willing to join the effort. This time the money was secured more from bonds and loans than from philanthropy and small community donations, but Memorial Hospital was soon a reality. For the first time since its founding, St. Persephone had a competitor--one that was located in the fastest-growing part of town, near the emerging suburbs.

Memorial, of course, lured away some of the medical staff, especially the younger ones, a few of whom were St. Persephone's top revenue producers. Memorial also sought, sometimes successfully, to lure away the older hospital's patients as well, especially those who were angry about issues of reproductive rights and patient self-determination.

The newly enfranchised elderly patronized both institutions, although the newly enfranchised Medicaid population tended to be concentrated at St. Persephone. The sisters also noticed that Memorial had little interest in the uninsured poor, which it almost always "referred" back to St. Persephone. That was fine with the sisters, said the new CEO, Sister Angelica; after all, care of the poor was their mission.

Besides, the federal government had ruled that hospitals participating in Medicare and Medicaid must also be governed by the Civil Rights Act of 1964. Wincing at the pictures in the scrapbook of civil rights protests and police retaliation, the CEO remembered that Memorial was one of 400 hospitals that had sued to remain racially segregated; St. Persephone, on the other hand, had opened its nursing school to African-Americans and had added three minority physicians to its medical staff. The sisters believed this would stand them in good stead with their immediate community, which was downtown and increasingly dominated by minority groups.


With federal and state money flowing, both hospitals prospered and expanded, erecting new buildings, establishing clinics and adding new services and technologies. However, at St. Persephone there were troubles on the horizon. The sisters had been unable to attract younger women to their ranks, and the order now had far more retired members than active ones. Sister Angelica was due to retire, and the next CEO would have to be a lay person. The school of nursing was becoming an increasingly untenable expense as its graduates moved on to better-paying jobs elsewhere. And Medicaid payments, which at the beginning had been generous, were being cut as the state faced the first of many budget crises--whether real or manufactured was a matter of debate around town.

Still, the main problem was who the next CEO would be. Once Sister Angelica announced her retirement, there were many applicants. The selection process was hard for the sisters, but they finally decided on a man with a master's degree in health administration from a prestigious business school. Although he made it clear that he saw health care as a commercial enterprise, he promised that he would fulfill the sisters' mission through more efficient management of the hospital and its assets.

He was true to his word when it came to efficiency. He made significant cuts in staffing, which particularly angered the nurses; he told the medical staff that they need not provide charity care; he closed the nursing school; and he instituted a policy of determining a patient's insurance status in the emergency room and of requiring seemingly endless waits for the uninsured, who would usually give up and go home. He also acquired badly needed technology for billing, labs and other areas, and updated the physical plant. What he could do little about was the hospital's location, which was in what had become the poorest part of town.

Meanwhile, Memorial, which was now enjoying a suburban trade that was largely absent at St. Persephone, continued to "dump" the uninsured on its competing institution, as well as to lure physicians away with temptations such as free office space and golf club memberships. Memorial was getting richer while St. Persephone was getting poorer. Almost all of the sisters were now retired, and the hospital was losing the goodwill that their presence had long inspired.

And so it came to pass that when the for-profit hospital firm Enterprise Empire Community Healthcare, or EECH, came to town, offering top dollar for St. Persephone, the CEO encouraged the remaining sisters on the board to listen. EECH would continue to fulfill the sisters' mission, he said; furthermore, the sale would provide a handsome endowment for a foundation that would serve both the hospital and the community, and their religious order would receive enough money to pay for the care and protection of the now numerous retired sisters.

What he failed to mention, of course, was that he had a promise from EECH of a "signing bonus" of $5 million if he convinced the sisters to sell.

Looking at a bleak bottom line and a community that was being deserted by its middle class, and realizing that they were likely the last of their order to work in health care, the sisters agreed to the sale.

It worked for a while. More staff were cut, and the emergency department was basically closed to the uninsured, who then had nowhere to go, as Memorial didn't want them, either. A new CFO was brought in, who was expert in both accounting and billing manipulation. Physicians were lured back from Memorial with deals involving cut-rate shares of EECH stock in return for referrals to the hospital. A great deal of money was made.

A Death

And then one Christmas morning, an uninsured three-year-old girl with severe asthma was brought to St. Persephone, having been "referred" by Memorial, which had closed its asthma center as well as its burn center because they tended to attract low-income, uninsured minority patients. Her name was Hope, and as she and her family waited while their financial status was checked out, she had a major asthma attack. The short-staffed emergency department personnel did not hear her parents' calls until it was too late. Hope was dead.

The outraged editorials and news stories were all carefully pasted into the scrapbook. Sister Angelica probably did that, the CEO thought.

Hope's death was the last straw. The infuriated sisters and their supporters sued EECH, seeking to get the hospital back. That effort failed, but they succeeded in convincing the company to remove the hospital's original name, and St. Persephone became EECH Medical Center.

What eventually happened became part of town lore. EECH Medical Center did quite well for a while, bringing in massive Medicare and private insurance reimbursement and instituting services such as a "concierge wing" for its most well-heeled patients and selected orthopedic and cardiac services for Medicare and privately insured, non-HMO patients. The CEO who had sold St. Persephone to EECH went on to the corporate level and became a multimillionaire, with stock options and a seven-figure salary.

Then it all blew up in their faces. An employee in the hospital's finance department, conducting a normal audit, found that at least three things were wrong. First, EECH was defrauding Medicare with false claims reports. Second, two of the medical center's cardiac surgeons were performing completely unnecessary surgery on healthy patients. Third, the hospital's books were being faked to make it look more profitable than it was, with the complicity of its outside auditor.

It took the employee a long time to gain the courage to do what she knew had to be done. But she kept thinking about the little girl who had died on Christmas day, and one afternoon she picked up the phone and called the Medicare fraud hot line.

By the time federal inspectors were swarming over the hospital, the former CEO and his money were in the Cayman Islands, along with most of the executive leaders of EECH and their millions.

A temporary CEO was hired and the hospital remained open. The physicians promised to mend their ways. But when what was left of EECH announced that it was going to close the hospital unless the community came up with $5 million to buy it back, most observers assumed that the medical center would close in a matter of weeks.

A Rebirth

And then something remarkable happened. Members of the immediate community started holding bake sales and raffles and car washes. Former patients, now living in the suburbs, offered money. The children of the philanthropist who had paid for one of the hospital's buildings made a handsome donation. A clever attorney was able to get what was left of the hospital foundation's money (most of which had disappeared) directed toward the repurchase of the institution.

The story made local television, of course, and was then picked up by the national news media. Former patients, physicians and nurses sent money from all over the country and sometimes from abroad; most of the notes accompanying the donations spoke of the hospital's heritage and mission of conscience, regardless of its recent history.

Many of those letters were in the scrapbook. And now, thought the CEO, we go forward. In the coming weeks we and our community will have to decide if we will be a district hospital or a private nonprofit; oddly, in these difficult economic times, even the county has suggested that perhaps it could take the hospital under its wing. But however it turns out, this town will have this hospital--and its history, its heritage and its pride. The centennial celebration is likely to be quite a party.

Her assistant came into her office and said, "They're still meeting, but they wanted you to know about this." The CEO unfolded the paper. On it was a simple statement: "In honor of the 100th anniversary of this hospital, and because it needs a new name, we wanted you to know that henceforth it will be known as Hope Medical Center."

After she wiped a tear or two away, the CEO smiled and pasted the note in the scrapbook.

This article first appeared in the Summer 2003 issue of Health Forum Journal

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