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September 18th, 2014
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News Israel Hadassah: Hospital Debt Fault of Administrators Excessive Spending

Hadassah: Hospital Debt Fault of Administrators Excessive Spending

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An aerial view of Hadassah Medical Center in Israel, who blames the hospital’s rising debt on a culture of excess spending.As a court recently gave Israel’s Hadassah Medical Center a 90-day reprieve from both creditors and appointed trustees to develop a bailout plan, the hospital’s owner Hadassah, the Women’s Zionist Organization of America, blamed the facility’s debt on administrators who were not forthcoming.

“We were not getting full disclosure,” insisted Marcie Natan, Hadassah’s national president told The Jewish Week. “We would ask the questions and we were not getting a full response.”

She told the publication that the hospital’s deficit began in 2006 and that its administrators did not reveal it despite being asked numerous times.

Janice Weinman, executive director of the Manhattan-based women’s organization, said: “We can’t assume they were concealing it — we don’t know that for a fact.”

When the Jewish Week pressed her as to whether her organization’s leaders had failed to ask hospital administrators the right questions, Weinman replied: “We don’t know why we didn’t get the information. We asked the questions but did not get the answers.”

“Natan recalled that at one board meeting, trustees appointed by the women’s organization — which holds a majority of the board seats — inquired about the hospital’s finances and “the board chair said it would be looked into. But at the end of the board meeting, we did not have a clarification.”

“After three years of mounting debt, Natan said her organization hired outside auditors who discovered the extent of it,” the Jewish Week reported.

“They were using available funds to cover it and were reporting an amount that included those funds,” Natan said. “Our consultant showed us the real cash flow deficit before funds were transferred to cover it. Both sets of numbers were legitimate, but ours showed a red flag.”

Natan said the debt currently totals $350 million, and cites the administrators’ carefree attitude towards expenses, as well as viewing the women’s organization as a cash cow that could cover shortfalls, as the reason for the debt.

“The director general would come to the board of HWZOA and say I need more money and our board would say, ‘How much?” Natan recalled. “So we have a hospital with a culture of — instead of trying to be fiscally conservative, prudent, it felt it could just come back to HWZOA and say how much was needed and what it was needed for. We were told the MRI needs to be replaced or the computer system needed to be replaced and we gave them the money. …

“It was a hospital that was run without worrying. If they could buy a pen for $1.50 or pay hundreds for a pen, they would pay hundreds and say it was needed. … We allowed it and they benefitted by it. There came a point that our organization could not allow the hospital to continue spending without a high level of fiscal responsibility. So we now find ourselves with a significant deficit.”

Natan added: “We do not believe any funds were ever used for personal gain; everything was used for the benefit of the hospital -- not even a shekel was misappropriated.”

But money flowed like water, according to Nehemia Shtrasler in the Israeli newspaper Haaretz: “The result was a large personnel surplus and absurdly high salaries. A stock keeper earned a monthly salary of 20,000 shekels [$1 equals 3.5 shekels], a worker in the housekeeping department earned 27,000 shekels, a supply worker earned 17,000 shekels and a cleaning supervisor earned 19,000 shekels. …

“When the Hadassah women’s organization got into an argument with [Director-General] Shlomo Mor-Yosef and tried to dismiss him in 2010, the workers took his side and stopped it from happening. Of course they did. Who wouldn’t want a manager like that?”

Mor-Yosef could not be reached by The Jewish Week for comment.

Israeli Prime Minister Benjamin Netanyahu accused Hadassah management of a “serious failure” and said the public would pay and “we must ensure that the deficit will not return.”

And Health Minister Yael German weighed in as well, blaming the problem on inflated manpower, bloated salaries and the failure of the hospital’s private medical services to generate substantial revenues.

Asked if there was any hint of financial problems before the outside audit was conducted, Natan, who became president in 2011, replied: “Before there was any crisis our internal investment committee said, ‘Ladies, you cannot continue to operate this way. If you continue along this same path, you will spend your endowment out of existence. You must reign in expenditures.’ We had been giving them millions of dollars from our unreserved funds. That has been the culture for at least 20 years.”

In the last nine years, she said, the women’s organization has given the hospital $875 million. In the last several years, the hospital has operated with an annual deficit of nearly $100 million.

Asked about reports that some of the hospital’s more than 850 doctors had been earning salaries in excess of $1 million a year, Natan replied: “I have never seen the actual salaries of our physicians.”

Dan Brown, editor of eJewishPhilanthropy, told the Jewish Week that he is troubled that the women’s organization isn’t “willing to admit they have any responsibility for anything that’s happened in the past.”

“I think their mistake is that they were allowing things to happen under their watch,” he said. “It was bad management on their part. Ultimately, as owners and bosses, they’re responsible.”

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