The Cape Coral Hospital is now the famous “merger gone awry.” This nonprofit facility which opened in 1977 became this coastal town’s largest employer and favorite charity, attracting many volunteers who even had to pay to be volunteers. The town’s most prominent citizens were on its board. In 1994, this profitable nonprofit hospital was on the brink of failure, losing $1 million a month putting it in danger of defaulting on its bonds. The administrator suggested that these were hard times and they would have to merge like other hospitals all over the country… Same story, but this time a different verse.
It turns out the hospital administrators were using hospital funds to build luxury homes, buy diamond rings, pay for golfing trips to Scotland, and buy an island resort and a strip mall. Soon the hospital directors participated in shady deals. One even billed his insurance company for medical care he obtained free from the hospital. This would all have gone unnoticed had it not been for one director who became suspicious and suggested hiring an outside firm to examine the hospital finances. The hospital administrators all resisted. The suggested examine finally passed by a vote of 7 to 6. With one less vote, the hospital administrators and involved directors would have made off with half-million dollar homes and millions of assets that were stashed away.
Think this is bad? The IRS agent in charge of tax exempt organizations said that exploiting charitable assets for personal gain isn’t extraordinary in the inbred world of nonprofit hospitals. The corruption of business leaders with doctors makes things ripe for this to happen. He said that cases linked to health care fraud are up 60 percent this year. So, when your hospital says they can’t make it in this competitive world, just ask for an outside audit. There’s plenty of money in the health care industry if it’s focused to patient care.