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The Troubles at Cooper Continue, Lately Gruesomely, But Will Its Leadership and Governance Change This Time? – Part II: the History since 2005
Wednesday, April 01, 2015
In our most recent post, we noted the latest tragic, and gruesome development at Cooper Health System, the largest hospital system in southern New Jersey. Months after the system CEO, John F Sheridan, and his wife Joyce were found dead after a fire in their home, local law enforcement concluded that Mr Sheridan murdered his wife, set fire to the house, then committed suicide. It turns out this is just the latest, albeit possibly most tragic and grisly, troubling news from that health care system.
Our last post summarized the history from 1978, including:
– Seven people, including the hospital system chief financial officer, confessed to and/or found guilty of participating in an embezzlement scheme that cost the hospital more than $21 million
– An internal investigation was suppressed for years, but later revealed several severe management problems
– The media revealed multiple conflicts of interest affecting the system’s board of trustees, including members of the committee that performed the investigation
– One member of the board of trustees who participated in the internal investigation was later convicted of arranging his wife’s murder
– Resulting financial losses caused layoffs and service reductions, some of which affected the hospital system’s charitable mission
– The stories received little attention outside the region, and apparently did not result in any fundamental changes in governance or the structure of leadership.
Since 2005, there have been other troubles at Cooper.
Conflicts of Interest Involving Local and State Politics
Board Chairman George E Norcross III
In 2006, the Philadelphia Inquirer found close ties between NJ politicians and hospital leaders (see this post). In particular, the story noted “the board of South Jersey’s major hospital, Cooper University Hospital in Camden, is chaired by the region’s most powerful political figure, Democratic power broker George E. Norcross III.”
In 2012, as we posted here, Mr Norcross’ relationships became more evident. The New York Times reported that a story about his conflicts of interest had been held from publication by the Inquirer because Mr Norcross was part of a business group seeking to purchase that newspaper. When the Inquirer story finally came out, it stated firms with financial relationships to the hospital under Norcross had donated generously to Norcross’ political allies, and that Norcross had influenced the creation of relationships with these firms. It suggested that Norcross’ political influence had resulted in an unusual level of state financial support for the hospital system. It noted that the law firm for which Cooper CEO John F Sheridan had previously worked did lobbying for the hospital. It noted that the hospital did millions of dollars of business with firms tied to hospital trustees, including Mr Norcross.
Trustee Emeritus Peter Driscoll
Recent reporting after Mr Sheridan’s death suggested the rehabilitation of former board chairman Peter Driscoll under Chairman Norcross. Mr Driscoll was the former board chair who resigned in 1999 after the embezzlement scandal report and revelations about conflicts of interest affecting the board were finally made public, and the hospital system was in financial difficulty. However, by 2014, he was identified by the board as a “trustee emeritus.” Per the Philadelphia Inquirer, after the fire at the Sheridan house was attributed to arson,
‘If they had died because the house was on fire, that would be a terrible, terrible tragedy,’ said Cooper Health System trustee Peter E. Driscoll, a senior member of the Haddonfield law firm of Archer & Greiner. ‘. . .I don’t know what to make of it. I can’t imagine anybody that would want to do something like this.’
New Vice President Kevin O’Dowd and his Family
Also after Mr Sheridan’s death, the hospital system hired a new top manager with his own extensive political connections and conflicts of interest. Per the Inquirer,
Gov. Christie’s chief of staff, Kevin O’Dowd, will step down this month to work for Cooper University Hospital in Camden, nearly a year after the governor named O’Dowd his pick for attorney general.
O’Dowd, whose selection as attorney general never moved forward after controversy arose over lane closures on the George Washington Bridge, will serve as senior executive vice president and chief administrative officer at Cooper, where he will focus on business development, Christie officials said. He will start at Cooper in January.
The conflict was
O’Dowd’s wife, Mary, serves as commissioner of the state Department of Health.
A NJ.com story made that more explicit,
State Health Commissioner Mary O’Dowd will refrain from making decisions that would directly affect Cooper University Hospital in Camden after her husband accepted a senior management job there, officials said Friday night.
The move was made to avoid any conflicts of interest as the state Department of Health licenses and inspects hospitals, and doles out money to compensate them for treating uninsured charity care patients. Cooper will receive $37.3 million in charity care payments from the state this year, the fifth highest amount in the state.
A story in the NJ Spotlight suggested that would not solve the problem,
The question that the O’Dowds will have to face is whether they can overcome even the perception of a conflict of interest when their jobs so pervasively present opportunities for such a situation.
‘It’s a very, very tenuous situation,’ said William Schluter, a former longtime member of the State Ethics Commission and state senator.
He noted that nearly everything that senior hospital executives do in their jobs is influenced by state regulations.
‘It’s a situation that I sure as heck wouldn’t want to be in,’ said Schluter, adding that he expects second-guessing in the media and by elected officials as the state handles issues affecting Cooper.
Just to ice the cake for Mr O’Dowd, the Courier-Post noted that Mr O’Dowd’s job at Cooper could be considered an example of the revolving door, albeit delayed,
O’Dowd, previously the governor’s deputy chief counsel, also worked under Christie at the U.S. Attorney’s Office for New Jersey.
During seven years as an assistant United States attorney, O’Dowdoversaw a securities and healthcare fraud unit. He also prosecuted cases ranging from child pornography distribution, cybercrime and drug trafficking.
O’Dowd served earlier as a state Deputy Attorney General, where his responsibilities included providing legal counsel to the state Department of Health.
As US Attorney, Christie, possibly with the aid of Mr O’Dowd, pursued a deferred prosecution agreement for UMDNJ, then Cooper’s primary academic affiliation, for a complicated set of allegations that we discussed extensively in the past (look at this post and follow links backward).
Late CEO John F Sheridan and Family
Apparently only after Mr Sheridan’s death did the media report extensively on his political connections. The earliest report I found was in the Philadelphia Inquirer from September 28, 2014. He served
on Gov. Christie’s health-care transition subcommittee in 2010.
The statement said he was New Jersey commissioner of transportation under Gov. Thomas H. Kean and served as New Jersey deputy attorney general and assistant counsel for the New Jersey Turnpike Authority, and was counsel for the New Jersey Senate majority.
his son Mark – a prominent lawyer … has represented Christie in the Bridgegate scandal
John Sheridan Jr., the CEO of Cooper University Health System … previously spent 40 years in New Jersey government
He has held positions on Gov. Thomas Kean’s cabinet as transportation commissioner and chairman of the New Jersey Transit board, as well as held roles on transition teams for Gov. Chris Christie and Gov. Christine Todd Whitman.
Earlier in his career, he served as Deputy Attorney General of the State of New Jersey, Assistant Counsel to Gov. William T. Cahill, General Counsel to the New Jersey Turnpike Authority and Counsel to the New Jersey Senate Majority.
Finally, his son
Mark Sheridan, a partner at Squire Patton Boggs, acts as general counsel for the New Jersey Republican State Committee.
So, in the years since conflicts of interest at the board of trustees level were noted as part of the investigation after the management embezzlement scandal at Cooper, many more apparent conflicts affecting top managers and board members have appeared, most recently in late 2014.
Settlement of Allegations of Kickbacks
In 2013, the media reported that Cooper settled federal allegations that it gave kickbacks to doctors to induce referrals. As reported by the Inquirer,
The Cooper Health System in Camden has agreed to pay $12.6 million to settle a whistle-blower lawsuit alleging that it made improper payments to doctors in an effort to build its cardiology business, the U.S. attorney for the District of New Jersey said Thursday.
From October 2004 through 2010, local doctors were paid $18,000 to attend four meetings of the Cooper Heart Institute Advisory Board in any given year under ‘consulting’ and ‘compensation’ agreements, in possible violation of antikickback laws, state and federal law enforcement officials contended.
The whistle-blower was South Jersey cardiologist Nicholas L. DePace. He attended an advisory board meeting in 2007 and was convinced that the board’s purpose was not to provide advice to Cooper, but to be a source of patient referrals to the Heart Institute, according to a lawsuit he filed in 2008.
‘He was invited to be a member of the advisory board. He attended a meeting and it quickly became apparent to him what the advisory board really was. It was sitting and listening to lectures and not providing advisory services,’ said Michael A. Morse, a partner in Pietragallo, Gordon, Alfano, Bosick & Raspanti L.L.P. in Philadelphia, one of DePace’s lawyers.
As is typical of legal settlements involving prominent health care organizations,
Cooper admitted no liability.
‘After more than three years of extended discussions with government lawyers, we decided, in the best interests of Cooper, to settle our dispute without the admission of wrongdoing to avoid the burdens and uncertainties of a protracted litigation,’ Cooper president and chief executive officer John P. Sheridan Jr. said. ‘This allows us to focus our full energies on serving our community.’
In a note to Cooper employees, Sheridan said the board was established to ‘improve the quality and responsiveness of our cardiac programs’ and ‘was reviewed by outside legal counsel before it began operations.
However, given that the Inquirer reported that “the $12.6 million penalty is financially significant for Cooper,” one wonders why it was made if hospital leadership felt that the case against it was poor.
So years after the embezzlement scandal, another scandal involving allegations of illegal behavior was settled. This time, there was no trial, but since the settlement was financially burdensome for the hospital, it is plausible that it resulted from managers’ realization that they would not have a good defense against the charges at trial.
The Death of the Sheridans
Mr Sheridan became CEO of Cooper in 2008. As noted in the Gloucester County Times,
On Feb. 7 John P. Sheridan Jr., was appointed president and chief executive officer of The Cooper Health System by the Cooper Board of Trustees. Sheridan joined Cooper as senior executive vice president in July 2005 and has served as president of Cooper University Hospital since September of 2007.
‘Cooper has grown dramatically in recent years and is positioned as the academic medical leader of South Jersey,’ said George E. Norcross III, chairman of the Board of Trustees at Cooper. ‘John Sheridan is a proven leader. He has the skills required to build-out our $500 million health care campus in Camden, implement our suburban strategy and achieve our vision of creating the premier academic health care system in South Jersey and the Delaware Valley.’
As of early 2014, he was getting substantial compensation typical for a hospital system CEO, per NJBiz, “John T. Sheridan Jr. (of the $913 million Cooper Health System) received $963,433.”
In late September, 2014, Mr Sheridan and his wife were found dead in a house fire. Initial reports suggested the fire was accidental. Then it was declared to be arson. Then Joyce Sheridan’s death was found to be the result of a homicide. Finally, as we posted here, law enforcement declared that Mr Sheridan killed his wife, set the fire, and then committed suicide.
That news was so horrendous that it dumbfounded Cooper insiders. As reported by the Inquirer,
‘It’s not something I can imagine,’ said Peter Driscoll, a Cooper Health System trustee emeritus and a senior member of the Haddonfield law firm Archer & Greiner.
In a brief statement, Cooper University Health Care called the prosecutor’s findings ‘unfathomable to us.’
I can only hope that they will get over their shock and realize that the institution really has some big problems.
Since 1978, there have been multiple stories about mismanagement, conflicts of interest affecting managers and board members, and crimes committed or alleged to have been committed by management and at least one trustee at Cooper Hospital/UMC which then became Cooper Health System. Despite these often lurid stories, there is no indication that there has been a fundamental change in the governance of the institution. While managers have come and gone, sometimes under difficult circumstances, there is no indication that how managers were hired has changed. Since the early 1990s, there has been no obvious effort made by management or board members to change, at least not one announced publicly. There has been no outside investigation.
Given that the hospital system has long enjoyed a cozy relationship with state government, including both the legislative and executive branch, maybe it has been easy to go along to get along. More cozy relationships, including some with ownership of the news media, may have helped to keep this story anechoic outside of the region.
Yet the cumulative story is so striking that it should prompt national attention, and inspire some real hard thought about how health care leadership and governance has gotten so bad.
To repeat what I have said all too often, and I admit with little impact so far….
True health care reform requires governance that is accountable, transparent, true to the organization’s mission, and honest, ethical, and without conflicts of interest; and leadership that understands health care, upholds its values, is honest, ethical, and without conflicts of interest, is transparent and open, and is willing to be accountable and subject to appropriate incentives.