Big Conflicts of Interest Alleged at Small Massachusetts Hospital

The Boston Globe reported on the travails of tiny Hubbard Regional Hospital in Webster, MA, allegedly brought on by mismanagement.
The 76-year old, 24-bed hospital was run for over 10 years by Quorum Helath Resources, which says it "provides management support services, consulting, education and training programs to independent hospitals and health systems nationwide." Quorum billed the hospital $500,000 a year for its services. The hospital lost money in nine of the last 10 years.

The Globe article suggests that the hospital's management during this time suffered from important conflicts of interest:

• In 2003, the hospital sold a medical office building for $450,000 to a real-estate company owned by three directors of Hometown Bank. The Bank was a major creditor of the hospital. The bank's CEO, Matthew S. Sosik, was on the hospital's board of directors. The hospital leased back space in the building, but allegedly paid $3250/month for 3000 square feet while it was only using 1200.
• In 2004, the hospital sold a house for $250,000 to a real estate trust controlled by Daniel B. Flynn, a real estate developer, who was also a borrower from Hometown Bank. Legal work for Flynn was handled by Michael L. Jalbert's law firm. Jalbert was the hospital's board chairman. Again, the hospital leased back the property at $1700/month.
• In 2001, Flynn had leased land from the hospital for $2000/month, and built a building on it in which the hospital rented space for $7500/month. The firm that surveyed this property was owned by Jalbert's father.
• Jalbert's law firm also handled legal work for the hospital, at the same time he handled legal work for Hometown Savings, and another hospital creditor.

Last year, the hospital's entire board resigned. A new board terminated Quorum's contract, and hired Christopher Rich, a lawyer, to be the new CEO. Rich had no experience in health care. Among his early decisions were hiring Joseph J. LaFratta as security director, and Arnold E. Benson as chief operating officer for th hospital. He had to fire LaFratta when it became public that LaFratta was convicted in 2000 of stealing $42,000 in donations from Tufts University School of Medicine. Rich admitted the decision to hire LaFratta was "very stupid." Benson is still working, even though it turned out he had pled guilty of tax evasion in 2001. Rich's comment was "why not give Arnie a second chance?"
One former Hubbard nurse, who was born in the hospital, called the events "a slap in the face." A member of the Hubbard Regional Hospital Guild, an auxiliary fund-raising organization, was more graphic, "The hospital was gradually being raped by various entitities."
Even small community hospitals in the US are not safe from leadership by the inept and the conflicted.

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