The winter trade show of the American Correctional Association in Nashville, Tenn., on Jan. 18 and 19 included a new arrival in the market for government contracts for inmate services. St. Barnabas Hospital, a small Bronx facility, had its own booth, and glossy handouts to tout its St. Barnabas Hospital Correctional Health Services Inc.
Administrators back in New York, however, were churning out literature of a different kind. The hospital recently had to ship extra copy machines to Rikers Island so its staff could duplicate copious documents to comply with subpoena requests. The Manhattan District Attorney, in conjunction with the State Attorney General and the State Department of Health, is examining whether St. Barnabas committed criminal negligence, diverted funds or falsified medical records while providing health care to city jail inmates.
The investigation caps nearly two decades of controversy over St. Barnabas and its president, Dr. Ronald Gade. Interviews by The Observer with more than four dozen former and current colleagues, community activists and local political leaders unfolded a contentious history, even in the high stakes and cutthroat world of New York medicine.
At the center of most of the animosity is Dr. Gade, a radiologist who dresses plainly and whose deadpan expression is due, in part, to a bout with Bell’s palsy. His 15 years at the helm of St. Barnabas has transformed it from a tiny, not-for-profit, money-hemorrhaging third-tier health provider to a major city player. In 1997, the 453-bed St. Barnabas came out $23 million in the black.
In making St. Barnabas a success, Dr. Gade has acquired a personal financial portfolio that includes a $1.29 million salary, one of the highest for hospital executives in the city; income from a radiology corporation run by his wife that provides services to St. Barnabas’ network of three hospitals, four clinics, a nursing home and the city’s jail system; a $3 million waterfront home on five and a half acres in Sands Point, L.I., and over the years, a financial interest in at least four corporations with links to St. Barnabas and its patients.
A long-running investigation by the Attorney General into the hospital and its administrators frequently focused on Dr. Gade’s financial affiliations. Investigators never substantiated a steady stream of allegations.
Under Dr. Gade’s leadership, St. Barnabas has taken control of nearby Union Hospital, turning that moribund facility into one of its satellites, and won a $94 million, three-year city contract to provide care at Lincoln Medical and Mental Health Center in the South Bronx.
It then parlayed its record into a winning bid for the $342 million Rikers contract-the largest yet awarded in the burgeoning $1 billion correctional health industry.
The managed-care contract for St. Barnabas Hospital Correctional Health Services-its first effort at jail care-allows the hospital to keep any funding it does not spend in caring for the 130,000 inmates who cycle each year through the jails. In its first year, St. Barnabas made millions in profit, in part by reducing inmates’ hospital visits, for which it is required to pay.
The stakes in the contract’s success are huge for St. Barnabas, which got into the jail business in 1997 with the hope of eventually taking it’s jail business public, said a former senior employee.
But they are enormous for the city and Mayor Rudolph Giuliani. With a health care agenda focused on lowering costs, even if it means limiting services, the city found the perfect partner in St. Barnabas. And in Dr. Gade, the Mayor found a health administrator after his own heart-tough, cost-cutting and unafraid to shake up the status quo. Described as a visionary reformer by supporters, as treacherous by enemies, Dr. Gade has proven he’s successful at riding the shifting winds of the nation’s health care market to financial success.
Investigators, however, are looking at whether St. Barnabas’ drive to cut costs and reap profits resulted in inadequate medical care for some Rikers inmates.
Since December, three more names have been added to the list of inmates whose care is in question, The Observer has learned. On Dec. 15, Raphael Flores, 42, was found dead on the floor of a holding pen; he had been awaiting transfer to another unit for a tuberculosis evaluation, sources said. Andre Grant, 34, was admitted on Dec. 9 and died en route to Elmhurst Hospital three days later, a relative said. Lourdes Gonzalez, 45, died on Dec. 15 at the Rose M. Singer Center.
Sources said the District Attorney is also looking at a so-called “white paper” drawn up by St. Barnabas last October to report on its activities in the city’s jails. At issue is the paper’s similarity to a glowing report put out on Nov. 5 by the city’s Health and Hospital Corporation. Both documents are 15 pages long and tout a reduction of inmate mortality and improved health services.
The city’s watchdog Board of Correction denounced the H.H.C. report as blatantly incorrect. Acting board chairman John R. Horan said it was “little more than a puff piece-a public relations effort to exaggerate the accomplishments of St. Barnabas Hospital under the contract. It claimed that nonexistent specialty clinics were operating on Rikers Island. In fact, three of the four ‘new’ on-Island specialty clinics still have not opened. Other ‘improvements’ such as dialysis were actually in place long before St. Barnabas Hospital took over the contract. [H.H.C.'s] Correctional Health Services should have known its claims were false and therefore deceptive.”
H.H.C.’s spokesman Jane Zimmerman said, “We didn’t simply accept information from one source. We corroborated it. We’re very confident about the report’s validity.”
Dr. Gade declined to be interviewed. However, through his public relations adviser, Gerald McKelvey, of Rubenstein Associates, he denied that the city’s report was a clone of St. Barnabas’ white paper.
Asked to what he attributes St. Barnabas’ success under Dr. Gade’s leadership, Mr. McKelvey wrote: “What Dr. Gade accomplished at St. Barnabas, and what he is trying to put in place at Lincoln, Union and Rikers, is a health care model that focuses on the quality of care, using the best doctors to practice the best medicine.” Mr. McKelvey said that the “greater efficiency … in turn leads to lower costs.”
“Dr. Gade’s No. 1 goal,” he added, “is quality of care.”
Dr. Gade’s Rise to Power
In 1980, when Dr. Gade arrived, St. Barnabas was little more than a health care afterthought. Sitting on 10 grassy acres behind a high stone wall, adjacent to the Bronx’s Little Italy, the hospital was so badly run that it had become the object of neighborhood superstition: Residents of nearby Arthur Avenue griped that relatives would disappear over the wall at Third Avenue and 183rd Street, and never re-emerge.
Dr. Gade, who had studied medicine in the Bronx, left a private radiology practice on Long Island to return to the borough as St. Barnabas’ radiology chairman. Some 16 others had turned the job down, he said. Now in his early 50′s, he is publicly unassuming. A supporter described him strolling awkwardly down the hallway, hands in pockets, wearing a white coat. “You couldn’t tell whether he was a lab tech or the president of a hospital.” But from nearly the moment of his arrival at St. Barnabas, Dr. Gade moved forcefully to change the temperament of the failing institution and position himself at its helm, other doctors said.
The board of trustees heeded Dr. Gade’s call to reinvigorate the staff by recruiting young doctors and giving them leadership positions. “[Dr. Gade] gave you a free hand and a decent salary,” recalled one of them, Dr. Richard Kaplan, who became chairman of St. Barnabas’ psychiatry department at age 32. “I was young and idealistic and it was quite a plum. It was an opportunity to do a little bit of good in a community that was badly medically underserved.”
Even those who have since become critics praise Dr. Gade for his early reforms. Bob Greenwald was one of two former radiology partners who sued Dr. Gade on claims he had hidden income from him; Dr. Greenwald said he won a six-figure settlement. But Dr. Greenwald said, “In his defense, [St. Barnabas] was a madhouse. He was crusading for real improvement in the way the hospital ran.”
But since 1982, when Dr. Gade was elected president of the 175-member medical staff, he moved to consolidate power, said former colleagues and administrators. Elections for medical staff positions were indefinitely suspended. Dr. Gade said hospital trustees suspended the elections.
Numerous staff changes followed. “All the old-timers were replaced by New York Hospital-certified doctors who provided better quality care with better credentials,” said former St. Barnabas neurologist Dr. Hal Gutstein, a self-proclaimed fan of Dr. Gade.
While directing the services of radiology, nuclear medicine and computed tomography (C.T. scanning), Dr. Gade benefited from a lucrative fee-for-service contract, allowing him to collect income for reading X-rays and CAT scans of hospital patients as a partner in St. Barnabas Radiology Associates, said former administrators. His reach was extended when his wife, Marie Ferrante Gade, joined the group in late 1982.
The State Attorney General would eventually investigate-with no finding of wrongdoing-allegations that Dr. Gade capitalized on the fee-for-service arrangement, by allowing staff to freely order CAT scans and other radiology work-ups for patients, including those brought in from the nearby Kings Harbor nursing home. “They were bringing every single elderly patient in and scanning them,” said Dr. Kaplan, the psychiatrist. “It was a way of milking the system. I was kind of disgusted by it.”
Psychiatrist Arthur Lieber recalled the St. Barnabas CAT scan operating “night and day. If there were 26 patients in the clinic, all 26 went for CAT scans.” The work-ups-which often included an electrocardiogram, or EKG; electoencephalogram, or EEG; CAT scan and three consultations-came to be known as the “neurological six-pack.”
But Dr. Gade’s supporter, Dr. Gutstein, who acknowledged making “a ton” of money as a St. Barnabas radiologist, said, “He could have pumped up the volume, but he ran the radiology group in a professional way. We were dealing with sick patients and most people did whatever was medically necessary.”
One hospital administrator, James La Salle, said that when he called for a re-examination of the financial terms of Dr. Gade’s partnership’s radiology contract, Dr. Gade influenced the then-president of the hospital, Eugene Battenfeld, to prevent it. “I was shut out from this negotiation, and anything else whatsoever,” Mr. La Salle said.
Soon, however, Mr. Battenfeld was gone. Dr. Gade denies feeding damaging information about him to trustees, as other doctors and administrators alleged. In June 1983, Dr. Gade became acting president.
However, even as trustees searched for a permanent replacement, state health official Joseph Shuckerow received a letter from board chairman Charles Bliss proposing that Dr. Gade become permanent president. The letter stated that Mr. La Salle highly recommended Dr. Gade for the job. Mr. La Salle said he only learned of the letter when Mr. Shuckerow called to follow up. “I went downstairs to Ron Gade. I said, ‘Bliss may have signed that letter, but you wrote it,’” Mr. La Salle told investigators in July 1987. Dr. Gade continues to deny he wrote the letter.
In 1984, the trustees hired former Lenox Hill Hospital administrator William Lockom to be president, returning Dr. Gade to his posts as radiology chairman and medical staff president. “From that point until the end, it was clearly a struggle where Gade orchestrated an attack [to regain control of the hospital],” former hospital counsel Michael Singer recalled. “We got petitions from the medical staff that [Mr. Lockom] was incompetent.”
Mr. Lockom told investigators he felt he was in an alien culture, where those with political clout expected favors. Concerned by patronage, allegations surrounding the CAT scan operation and the Gades’ radiology deal, Mr. Lockom hired accounting firm Ernst & Whinny in April 1985 to investigate “certain management practices and financial systems and contracts,” according to a memo sent by the hospital board chairman Leonard Lief. But Mr. Lockom told investigators he learned a lesson: “if you crossed Ron Gade, your days were numbered.”
In 1985, the medical board voted on a resolution to fire Mr. Lockom. As Dr. Kaplan recalled, “Gade came into my office one day. He said, ‘We’re getting rid of Bill tomorrow.’ And I said, ‘You and who else?’”
The very Ernst & Whinny audit Mr. Lockom had commissioned blamed him for problems at the hospital and Mr. Lockom was forced out. Dr. Gade was installed as hospital president.
“It was a minor blood bath,” recalled Mr. Lief. “They got rid of everyone who was anti-Gade.”
“By Monday morning, I was gone,” said Mr. La Salle, the administrator who had called for the review of Dr. Gade’s contract. “As soon as I got the call, I walked into Ron Gade’s office and said, ‘If I hear that you have interrupted my ability to get a job, I’ll come back and wring your neck with my own hands.’”
Inside the St. Barnabas Machine
In 1986, St. Barnabas established a raft of for-profit subsidiary corporations to oversee physician billing and hold real estate assets. These corporations allowed St. Barnabas to expand while retaining its tax-exempt status.
St. Barnabas was no longer just a community hospital. It was a launching pad for a growing network, directed by Dr. Gade, chief financial officer John Maher and a few senior doctors.
Revolving around them were a pack of politicians, their associates and relatives. Complaints were made to the Attorney General about rampant patronage, but no actions were taken.
Meanwhile, in a borough where a little money can go a long way, the not-for-profit hospital became a focal point for campaign contributions. Campaign finance records show that Bronx Borough President Fernando Ferrer, a Democrat, received $28,500 on Jan. 11, 1997, from 25 St. Barnabas attending physicians and related medical practices, and $55,150 altogether between 1994 and 1997.
Since 1997, State Senator Guy Velella, Bronx County Republican Party chairman, received at least $45,250 from clinicians and practices associated with the hospital. At a time when many communities were battling to prevent the state from shutting down their inpatient maternity units, Mr. Velella helped St. Barnabas get state permission to open one. His father’s law firm, Velella, Basso & Calandra, has also been hired by the hospital to perform legal work, said a former St. Barnabas administrator. Mr. Velella did not return calls for comment.
Mr. Ferrer said the major Bronx hospitals have been generous contributors because they like his policies and he has shown no favoritism. “I am Switzerland to them. What they prize above all else is someone who listens to all of their concerns in terms of the health care marketplace.”
Nonetheless, at least one former hospital employee said the staff felt pressured by some high-level St. Barnabas doctors to give. “When your senior person asked you, ‘It’s that time of year again,’ it was not easy to say No.” Mr. McKelvey defended Dr. Gade’s practice of holding fund-raisers at his home and inviting staff: “Whether they elect to attend or to contribute funds is entirely their decision.”
Part of Dr. Gade’s power derived from the widespread view that he could control medical licenses, said a number of former St. Barnabas physicians. In the early 1980′s, Dr. Gade befriended Dr. Maynard Guest, then the executive secretary of the Office of Professional Medical Conduct, an arm of the state health department that investigates poor medical practice and can revoke doctors’ licenses. The highly secretive OPMC strikes terror into doctors’ hearts: Its protracted investigations can cost doctors thousands of dollars to save their licenses. Yet the names of those who report doctors remain anonymous.
The Observer obtained OPMC records showing that between 1990 and 1993, Dr. Gade reported at least nine physicians, a high number in a profession where colleagues tend to circle the wagons. Investigators on these cases questioned Dr. Gade’s motivation in making some of the complaints, said a former state health official who requested anonymity.
Mr. McKelvey acknowledged that Dr. Gade has a professional acquaintance with Dr. Guest and confirms that he “from time to time … reported to the appropriate authorities doctors that he believed were providing substandard care.”
During these years, Dr. Gade’s salary rocketed. Trustee Haliburton Fales defended it. “He was worth many times that to move the hospital from a state close to insolvency, and he was entitled to it because he was a doctor who held the respect of all the other doctors.
“He had no perks other than his salary. He doesn’t have a hospital car, he doesn’t have an apartment maintained by the hospital, he doesn’t have an executive dining room with a large wine cellar. What you see is all that there is.”
But in fact, Dr. Gade drew revenue from a host of health care businesses. From 1987 through 1994, he also served as medical adviser to Group Health Insurance, making $100 an hour to help audit patient claims, according to G.H.I. spokesman Jay Stock. In 1995 Dr. Gade’s rate increased to $200 an hour.
Other enterprises involving Dr. Gade included directorship of an upscale medical group, ownership of a laboratory business and a consultancy with a medical testing firm that provided services to the hospital, records show.
In August 1987, investigators wrote in a transcript of their interview with Mr. Lief, “[Dr. Gade] had all kinds of deals going.” Yet numerous complaints about Dr. Gade, financial officer John Maher and other colleagues of Dr. Gade were investigated and dropped.
Mr. Fales said Dr. Gade always disclosed his various business relationships. “Having dealt with people who didn’t level with the board, my experience with Dr. Gade is that he is somebody whose word you can trust, who plays with the cards straight up.”
Mr. McKelvey said every one of Dr. Gade’s business relationships “were disclosed to St. Barnabas’ board of trustees. The board concluded that there was no conflict of interest.”
By 1990, Dr. Gade had achieved prominence as a turn-around artist. And so, in December of that year, the state health department placed Union Hospital, a debt-ridden facility several blocks away, under St. Barnabas’ fiscal management, while leaving Union with an independent governing board.
What began as a creative solution for a destitute community hospital where the quality of care had plummeted turned into a war for control that pitted Dr. Gade’s trustees and Wall Street lawyers against community activists and sole practitioners.
The takeover made the infighting at St. Barnabas seem mild, with charges of racism, overspending and multiple legal actions flying about. What’s clear is that without the intervention of St. Barnabas, Union would have closed. But the techniques employed in the revival-a board takeover and bankruptcy filing that allowed Union to be reorganized as a St. Barnabas satellite-heightened Dr. Gade’s reputation for hardball.
Since the Lincoln deal in 1997 and the Rikers takeover last year, the complaints against Dr. Gade have shifted. Where once he was criticized for allowing others to practice too much medicine to jack up bills, charges now focus on whether St. Barnabas’ cost-cutting has denied patients essential care.
In the wake of negative publicity, St. Barnabas has reinvested approximately $7.5 million into medical services at the jail. And Dr. Gade has softened his management style: Each worker at Rikers received a $20 Pathmark gift certificate to purchase a Thanksgiving turkey, and a $100 Christmas bonus. “I never had an employer who gave me anything before,” one clerk marveled.
Two different views persist of Dr. Gade and the hospital he built. “I think like all medical men, [Dr. Gade] thinks that he’s right, that he’s doing this for the good of humanity. He’s just destroyed so many lives,” said former St. Barnabas administrator La Salle.
But Dr. Gutstein insisted that Dr. Gade’s success has made him a target of animosity. “He’s ruthless in the sense that he wasn’t afraid to take an action to hurt someone if he felt it was in the best interest of the hospital. We used to joke, ‘Jeez, Ron. Why don’t you go take over Columbia Presbyterian, or one of these other hospitals that can’t make money.’”
With Gabriel Snyder.
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