Some Call it "Tyranny" - Top Leaders of University of California (Including Leaders of Academic Medicine) Demand Bigger Pensions for Themselves

The state of California, and its flagship university system, the University of California, have been under extreme financial pressure lately. 

The 36 Executives' Demands

However, that apparently has not decreased the University's hired managers' and executives' sense of entitlement.  They are threatening to sue if their pensions are not increased.  As reported by the San Francisco Chronicle,

Three dozen of the University of California's highest-paid executives are threatening to sue unless UC agrees to spend tens of millions of dollars to dramatically increase retirement benefits for employees earning more than $245,000.

'We believe it is the University's legal, moral and ethical obligation' to increase the benefits, the executives wrote the Board of Regents in a Dec. 9 letter and position paper obtained by The Chronicle.

'Failure to do so will likely result in a costly and unsuccessful legal confrontation,' they wrote, using capital letters to emphasize that they were writing 'URGENTLY.'

Their demand comes as UC is trying to eliminate a vast, $21.6 billion unfunded pension obligation by reducing benefits for future employees, raising the retirement age, requiring employees to pay more into UC's pension fund and boosting tuition.

The fatter executive retirement benefits the employees are seeking would add $5.5 million a year to the pension liability, UC has estimated, plus $51 million more to make the changes retroactive to 2007, as the executives are demanding.

The executives fashioned their demand as a direct challenge to UC President Mark Yudof, who opposes the increase.

'Forcing resolution in the courts will put 200 of the University's most senior, most visible current and former executives and faculty leaders in public contention with the President and the Board,' they wrote.

Background to the Case
Here is the relevant background:

The roots of the pension dispute go back to 1999, five years after the IRS limited how much compensation could be included in retirement package calculations. But even after the IRS granted UC's waiver in 2007, nothing changed.

University executives were having troubles of their own that year.

President Robert Dynes resigned in 2007 after it was discovered that UC was awarding secret bonuses, perks and extra pay to executives. State auditors also found that UC's compensation practices were riddled with errors and policy violations.

UC officials also had become aware of another big problem: UC's pension obligations were about to outstrip its ability to pay retirees. Neither UC nor its employees had paid into the fund since 1990.

It took until this year for UC to act. In September, a retirement task force offered Yudof several options for closing the $21.6 billion gap - and one to widen it: increasing executive pensions.

Health Care Executives Included

Note that in addition to a bunch of finance officers and portfolio and asset managers, the demanding executives included quite a few leaders of the medical schools, and academic medical centers, including:

UC System's Central Office
Dr. Jack Stobo, senior vice president, health services and affairs

UCSF
Dr. Sam Hawgood, vice chancellor and dean, School of Medicine
Ken Jones, chief operating officer, medical center
Mark Laret, CEO, medical center
Larry Lotenero chief information officer, medical center
John Plotts, senior vice chancellor

UC Davis
William McGowan, CFO, health system
Dr. Claire Pomeroy, CEO health system, vice chancellor/dean, School of Medicine
Ann Madden Rice, CEO Medical Center

UCLA
Dr. David Feinberg, CEO of the hospital system; associate vice chancellor
Dr. Gerald Levey, dean emeritus
Virginia McFerran, chief information officer of the health system
Amir Dan Rubin, chief operating officer of the hospital system
Dr. J. Thomas Rosenthal, chief medical officer of the hospital system; associate vice chancellor
Paul Staton, chief financial officer of the hospital system

UC San Diego
Dr. David Brenner, vice chancellor for health sciences; dean of the School of Medicine
Tom Jackiewicz, CEO, associate vice chancellor of the health system
Dr. Thomas McAfee, dean for clinical affairs

UC Irvine
Terry Belmont, CEO, Medical Center

The Outraged Reaction
The executives' demands sparked anger on campus.

Dissenting members of the task force said it would be unseemly' to expand executive pensions. Tuition had just been increased by 32 percent this fall, and the regents were poised to raise it another 8 percent for fall 2011. They also voted to shift more money into the retirement fund from employees' pockets, as low-wage workers worried about retiring into poverty.

'I think it's pretty outrageous that this group of highly compensated administrators of a public university are challenging the president and the chair of the Board of Regents, said Daniel Simmons, chairman of UC's Academic Senate and a law professor at UC Davis.

'What outrages me the most is that these 36 people are blind to the fact that this is a public entity in dire straits,' said Simmons, who also served on the retirement task force and opposed the higher pensions.

The demands prompted outrage from politicians and editorialists. A few choice samples:

- The executives are "tarnishing the university's name with greed," editorial (UCLA) Daily Bruin.

- "Very out of touch," by Governor Elect Jerry Brown; "truly living in an ivory tower...." while "people are suffering in the rest of the state and losing their homes," by Assemblyman Jerry Hill, D- San Mateo (per the San Francisco Chronicle)

- "Uncaring and divisive," "undercuts public support for one of California's most treasured institutions," "sending out its own special-interest message: what's in it for me," - editorial, San Francisco Chronicle.

- "despicable threat," the California Regents (UC board of trustees) should not "claim that lavish pension may be needed to recruit good people to UC. Good people don't threaten lawsuits against a cash-strapped sate to enrich themselves." editorial, Sacramento Bee.

- Governor-Elect B4rown should issue an executive order "to eliminate any position in the University of California system paying $245,000 a year or more," (thus effectively firing all the 36 complaining executives); "free taxpayers and students alike from the tyranny of those whose main objective during any time - tough or otherwise - is to keep milking the state for every penny the can squeeze out," editorial, Manteca Bulletin.

Summary

We have posted frequently about hired managers and executives of health care organizations receiving compensation and benefits out of all proportion to their apparent performance. The case of the demanding University of California executives is just one of many. However, what is really remarkable about this case is the reaction to it. We are hearing top leaders, including many of the top leaders of the state's medical schools and academic medical centers, called uncaring, greedy, and despicable by well-known politicians and in newspaper editorials, and we are hearing calls that they be fired, en masse.

Maybe we are at a tipping point.

Of course, hired health care managers and executives are not entitled to line their own pockets while patients and their other constituencies suffer during the great recession. They are not entitled to continually drive health care costs up while they enrich themselves.

However, apathy, learned helplessness, and the anechoic effect have let them promote themselves into a de facto new aristocracy (just like the hired managers and executives of some other non-profit organizations, for-profit corporations, and especially financial service corporations have turned themselves into the rest of that aristocracy.)

If we do not reclaim health care from these new oligarchs, we will all end up not just with expensive, difficult to access, mediocre health care, but under their tyranny.

Post-Script

This is just the latest example of the sense of entitlement displayed by the hired managers and executives of the University of California. Outrageous pay and benefits unjustified by any measure of performance for University of California's hired managers and executives has been grist for the Health Care Renewal mill since 2005.  A few samples:
-  The ranks of those paid more than $200 K rose much faster than those paid less, while lower paid employees endured a pay freeze, and the university cut its budget.  Managers got bonuses for extra work, while faculty did not.  Managers got housing allowances, and other perks.  (November, 2005) 
- UC-Irvine managers were paid lavishly while presiding over debacles involving transplant services  (liver transplants, November, 2005; bone marrow transplants, January, 2006; kidney transplants, January, 2006)
- UC - San Diego Chancellor was paid $359 K plus a bonus of $248 K for supposed full time work while serving on ten for-profit corporate and non-profit boards, including directorships of for-profit health care corporations that were conflicts of interest with her role overseeing the medical school and medical center.  This was the first case of what we later called the "new species of conflicts of interest" posted on the blog.  (January, 2006)
- UC - Irvine managers got bonuses while its medical center failed an inspection (January, 2010), as did managers at other UC campuses (January, 2010).

Maybe if these older stories produced more outraged, the current situation would not have occurred.

You heard it first on Health Care Renewal

Hat tip to Prof Margaret Soltan on the University Diaries blog.

Did a Yakuza Boss Pay "A Million Dollars for One Liver?"

One of the more bizarre stories to appear on Health Care Renewal just resurfaced.  To summarize, in June, 2008, we posted about the strange case of four Japanese men, allegedly affiliated with Yakuza criminal organizations, who received liver transplants from the UCLA Medical Center, apparently with some alacrity. All likely paid full list prices for their procedures, and two later donated $100,000 each to the medical center. The case raised concerns by several notables (including Senator Charles Grassley, and Professor Arthur Caplan) about the integrity of the transplant system. Presumably these concerns were based on suspicions that the four may have received a higher priority than others on the list. More concerns should have been raised after it was revealed that shadowy characters threatened a reporter who started to investigate the case in Japan, and the reporter's family (see post here).  Later, the Chancellor for Medical Sciences and Dean of the David Geffen School of Medicine's public response to the case side-stepped all the important concerns while deploying a series of logical fallacies (see post here).

Then, despite all the colorful details and ethical concerns presented by this story, it faded from view for a year and a half. 

Last night, the US investigative reporting television show "60 Minutes" aired a follow-up on the Yakuza transplants, following closely on the publication of a book, Tokyo Vice, by Jake Adelstein, the reporter who first broke the story.

The web-based version of the 60 Minutes story reprised the main points, but added emphasis to a few of interest to Health Care Renewal. 

First, the 60 Minutes piece raised suspicions that the Yakuza members paid a premium to jump the UCLA liver transplant priority list:

Getting into the U.S. was one thing, but getting a liver transplant at a leading American medical center like UCLA was something else altogether.

'What's the average waiting time for someone in California waiting for a liver transplant?' [CBS correspondent Lara] Logan asked California attorney Larry Eisenberg.

'It's probably realistically three years. And it could be much longer,' he replied.

Not for Tadamasa Goto, who got a liver in just six weeks. Eisenberg finds that surprising, especially since Goto was number 80 on the waiting list.

'It should not be possible that an unsavory character from out of the country, with ties to organized crime, comes into the United States and gets a priority and obtains a transplant,' Eisenberg said.

Two families, Eisenberg's clients, both lost loved ones waiting for livers at another transplant center in the same area: Salvador Ceja was number two on the waiting list; John Rader was number five.

'Do you think, for one second, that this was legitimate? That they stood in line and waited just like your husband did?' Logan asked Rader's widow Cheryl.

'Absolutely not,' she replied. 'No. Because nobody gets a liver that quickly.'

'I think they were playing God,' Yolanda Carballo, Ceja's stepdaughter, added. 'Now, I think they were picking and choosing who they wanted to give a liver to.'

'So, in your minds, what was this about?' Logan asked.

'Money,' Rader said. 'Spoke loud and clear. And they listened.'

'That's what it was all about. Money,' Carballo agreed.

Three of Goto's Yakuza cronies also got liver transplants at UCLA. For them, money was no object. UCLA says each of their transplants cost about $400,000 dollars; the Yakuza all paid cash.


The hospital also acknowledged Goto and another Yakuza each made $100,000 donations to the transplant center.


Adelstein says Goto paid even more. 'According to police documents and sources, a million dollars for Goto. A million dollars,' he told Logan.

'A million dollars for one liver?' she asked.

'A million dollars for one liver,' Adelstein said.

Second, 60 Minutes emphasized the risk Mr Adelstein faced after he drew attention to the story of the Yakuza liver transplants at UCLA:

Tadamasa Goto returned to his life of crime as a Yakuza godfather and it all stayed hidden until Adelstein was tipped off. It took him years to piece together the details for a newspaper story. Then, when word got out that Adelstein knew, the Yakuza tried to buy his silence, offering him half a million dollars.

Asked if he was tempted by the cash offer, Adelstein said, 'Of course I'm tempted. You know? When someone offers you half a million dollars not to write something, but then again, you know I don't want to be owned by organized crime the rest of my life.'

Adelstein wrote the story for 'The Washington Post' and it eventually made its way back to Japan. The news infuriated the Yakuza bosses. For Goto, it was a humiliating blow from which he would never recover.

'I heard from someone very close to him that as he was leaving and getting in his car he said, 'That goddamn American Jew reporter, I wanna kill him,'' Adelstein said.

Japanese and U.S. law enforcement agents took Goto's threat seriously.

Adelstein now lives alone, under Tokyo police protection; his wife and children are in hiding.

'Are you concerned that there is an American citizen here whose life is at risk?' Logan asked the U.S. Embassy's Mike Cox.

'Very much so. I mean, we think the Japanese police are doing what they can to make sure that no harm comes to Mr. Adelstein. I mean, we certainly don't want to see anything happen to him,' Cox said.

'What do you have to do in your daily life to stay alive?' Logan asked Adelstein.

'You have to keep your rooms shuttered, because you don't want a sniper to pick you off across from somebody’s house,' he said.

Asked if he lives in darkness, Adelstein said, 'When I'm up in my room typing, yes. All the rooms are shuttered. You gotta be very careful on rainy days. Because when Yakuza take people out, they like to do it on rainy days, because fewer people are on the streets and the rain washes away trace evidence.'

Even in disgrace, Tadamasa Goto still has a small army of loyal soldiers and a hit out on Jake Adelstein. The Yakuza say he will never be safe.

'When someone does something that causes them (Yakuza) to lose face, they will use any means possible, legal or illegal, to crush the person who has gotten in their way, who has humiliated them,' the disguised Yakuza boss told Logan.

Finally, 60 Minutes found that the UCLA Medical Center continued to be uncooperative, cloaking its refusal to categorically refute allegations that it sold a liver for a million dollars in concerns with patient confidentiality:

Asked if UCLA knew who these people were, Adelstein said, 'When you see guys with lots of tattoos, missing fingers, wouldn't it occur to you, like, 'Oh, this guy is a gangster.' I can't believe they didn't know.'

Attorney Eisenberg says transplant rules require extensive background checks on every patient. Yet, UCLA insisted to federal investigators they had 'no knowledge' that Goto or his cronies had ties to Japanese organized crime.

UCLA declined all of 60 Minutes' requests for interviews. The only thing the medical center will say on the record is that their program has been reviewed and found to be in 'total compliance' with liver transplant rules.

The hospital told us, 'state and federal patient confidentiality laws prohibit UCLA from responding to the…issues raised by 60 Minutes.'

'In my opinion, the medical center has a moral and ethical obligation to determine the source of those funds,' Eisenberg said.

'A moral and ethical obligation, but apparently no legal obligation?' Logan asked.

'Well, it's not addressed in the rules specifically,' Eisenberg said

As I wrote in my first post on this case, you just can't make this stuff up...

However, the colorfulness of the case should not distract from its very serious implications.  We have written a lot in this blog about the anechoic effect, how cases with important implications about ethics, governance and leadership in health care often fail to attract the attention they deserve.  We have opined that academics and professionals have realized that it is simply "not done" to discuss cases which might offend the powerful leaders of health care organizations.  We have written about whistle-blowers who have lost jobs or been theatened with lawsuits.  But in this case, the journalist who wrote about the case allegedly has received death threats and lives in hiding under police protection.  This may be the most serious case of the anechoic effect known.

Furthermore, we have written a lot in this blog about how leaders of health care organizations ought to uphold their organizations' mission and the core values to which physicians and other health care professionals have sworn devotion.  The continued disinclination of UCLA leadership to respond to charges that its medical center accepted $1 million to put Japanese gangsters at the head of the liver transplant list may reflect fear of gangsters who also allegedly threatened the life of the journalist who reported the case.  But by failing to rebut such charges, the leadership leaves the impression that they cannot claim to be better than the moral equivalents of gangsters.  Institutions that aspire to join "the ranks of the nations [sic] elite medical schools" ought also to aspire to have leaders that have better ethics than Yakuza bosses.  

Transparency International has suggested that health care corruption is a global scourge that costs lives.  Serious health care reform cannot ignore health care corruption as a cause of excess costs, denied access, and poor quality.  Health care organizations ought to be held to a higher standard of ethics, and be less prone to corruption than, for example, garbage hauling firms.  Health care organizations ought to subscribe to rigorous codes of ethics, impartially enforced, which apply to all within the organizations, including top leaders.  While the accused need to be afforded due process, whistle-blowers must also be protected.  In my humble opinion, true health care reform requires so confronting health care corruption.  Maybe the leadership of the Gefen School of Medicine might want to consider setting an example in this regard. 

Note: Jake Adelstein's book is available here, and it was reviewed by Reuters here and by the AP (via the Canadian Press) here.