Who Owns, and Who is Accountable for the New US For-Profit Medical Schools?

Yves here. Bad enough that there’s an infestation of for-profit medical schools. Their secretiveness raises even more red flags.

By Roy Poses, MD, Clinical Associate Professor of Medicine at Brown University, and the President of FIRM – the Foundation for Integrity and Responsibility in Medicine. Originally published at Health Care Renewal

Mysteries still abound in the not so wonderful world of health care dysfunction, so once again, quick, the game’s afoot…

The current mysteries involve beneficial ownership.  Beneficial ownership questions are important to anti-corruption campaigners.  Beneficial ownership simply refers to “anyone who enjoys the benefits of ownership of a security or property, without being on the record as being the owner.” (per Wikipedia). Concealing who really owns a company enables concealing sources of funds (as in money laundering), market power (when the owner also owns competitors), and sources of political influence, and enables those benefiting from the actions of the company to escape responsibility for their consequences.

We recently discussed the mystery of the beneficial ownership of a local pharmaceutical company, an issue that became more interesting when it was revealed it was owned by the Sackler family, the owners of the now somewhat infamous Purdue Pharma.  A while back we discussed the mysteries surrounding the ownership of several offshore medical schools (look here and here).

I was recently involved in a conversation about the rise of onshore, that is US based for-profit medical schools, four of which are now known to exist.  It turns out that their ownership is also rather unclear.

That for-profit medical schools now exist in the US is not widely known.  The best, and nearly only public discussion of the topic appeared in a 2017 article in JAMA [Adashi EY, Krishna GR, Grappuso PA. For-profit medical schools – a Flexnerian legacy upended.  JAMA 2017; 317: 1209-10.  Link here.]  It listed four such schools that were operating or in development.

Rocky Vista University College of Osteopathic Medicine

Rocky Vista was the first for-profit to open.  Its President is Clinton E Adams DO.  The university website is silent on its ownership.  Some searching reveals, however, that it, along with St Georges University in Grenada, is owned by Medforth Global Healthcare Education, whose CEO is Dr Andrew Sussman, who was “most recently Executive Vice President of Clinical Services at CVS Health.”

However, who owns Medforth, and hence to whom Dr Sussman reports, is unclear.  We do know that in 2014, “Canadian private equity firm Altas Partners LP and pan Asia firm Baring Private Equity Asia have acquired a substantial stake in St George’s University,” per Reuters.  A reference on the financial website Mergr suggested that Atlas and Baring targeted Medforth per se.  Who, in turn, actually owns Atlas and Baring, and to whom at those firms the leadership of Medforth, and thus ultimately the leadership of Rocky Vista report, is unclear.

Ponce Health Sciences University

The President of Ponce Health Sciences University is Dr David Lenihan.  According to his welcome statement,

Ponce was acquired by University Ventures Corporation in September 2014, to operate Ponce Health Sciences University and appoints Dr. David Lenihan. Dr. David Lenihan is used to taking risks. It is evidenced by his academic training in neuroscience, chiropractic and law. Also, his foray into the administrative side of science education. Recently, the greatest risk it has taken is the acquisition and transformation, through Arist Medical Sciences University, of the Ponce Health Sciences University. As the main academic officer of Arist, Lenihan guided the process of purchase and evolution of the School, a widely recognized institution with around 40 years of training professionals of excellence in the field of health in the south of Puerto Rico.

According to Bloomberg,

Arist Medical Sciences University, Public Benefit Corporation was founded in 2014. The company’s line of business includes the operation of colleges and universities.

Arist Medical Sciences University is apparently part of Arist Education System.  Its website states

Arist Education System is an investment of Bertelsmann — a global media, services and education company.

Furthermore, it claims

Bertelsmann stands for entrepreneurship and creativity. This combination promotes first-class media content and innovative service solutions that inspire customers around the world. Bertelsmann’s supply of capital will support innovative graduate and professional health and human sciences programs that are making a positive impact.

So it appears that Ponce is now owned by Bertelsmann.  What a diversified global media company is doing running a medical school is not clear.

Nor is the identity to the person at Bertelsmann to whom the leadership of Arist, including Dr Lenihan, reports.  Although the Bertelsmann website lists the company’s top executives, and the top managers of the Bertlesmann Education Group, the chain of command for the US for-profit medical school is not apparent.

California Northstate University College of Medicine

According to the university website, the president is Alvin Cheung, Pharm D.  The university has a board of trustees, but does not provide their biographies or explain their role.

The website provides no information about the ownership of the university, although a 2016 Sacramento Bee article stated “Backers raised more than $50 million to fund the school.” I can find business listings for a California Northstate University LLC, eg here, stating it is a privately held business, but containing no information about ownership or if the business leadership is the same as the listed medical school leadership. Thus the ownership of California Northstate University LLC, and thus presumably of the medical school, is entirely opaque.

Burrell College of Osteopathic Medicine

The President is John Hummer MHA.  There is a board of trustees, chaired by Robert V Wingo, with biographies provided but whose role is not explained.

An article in the Las Cruces Sun-News from 2016 called it “a first-of-its-kind, privately funded U.S. medical school.”  An Albuquerque Journal article from 2015 stated.

Burrell is entirely financed by private investors, led by Santa Fe businessman Dan Burrell in partnership with the Rice Management Co., which oversees Rice University’s $5.6 billion endowment fund.Although most public attention has centered on Burrell, a well-known real estate mogul, Rice Management is actually the majority investor in the project, estimated to cost a total of $105 million,

Other investors were not named.  Thus only some of the investors in, presumably therefore the owners of Burrell are known.  The rest are anonymous.

Discussion

The ownership of three of the four new US for-profit medical schools is unclear.  One is a private LLC whose ownership is entirely opaque.  One is partially owned by two private equity firms, whose investors are anonymous.  It may also have other, again anonymous owners.  One is owned by a group of investors, some local, some named, and some anonymous.

Anti-corruption campaigners have pushed to reveal the beneficial ownership of all corporate entities.  Transparency International’s report on the problem of anonymous beneficial ownership (look here) states:

In the vast majority of countries, it remains legal for companies to hide the identity of their beneficial owners. Embezzlers use anonymously owned companies to move, launder and spend tainted money in the global financial system without being detected. Documents in the Panama Papers, for example, show how kleptocrats and their families used anonymous companies to secretly control state assets and purchase global real estate. Criminals including terrorists, human traffickers, sanctions-busters, drug dealers and tax evaders also use anonymous companies for the same reasons.

Thus anonymous ownership of any US medical school is highly troubling.  Physicians swear oaths to practice with honesty and integrity.  The institutions they train in should be above suspicion of wrong doing and corruption.  Hence medical schools should avoid practices associated with money laundering, fraud, and corruption.

Medical students, faculty, patients and accrediting boards should not trust medical schools who keep their ownership secret.

The people accountable for all four new for-profit medical schools’ conduct and operations are likewise unclear. While the schools’ hired managers cannot escape responsibility, it is the owners who are ultimately accountable.  But since some of the owners of three of the four new for-profit US medical schools are anonymous, some of the people actually accountable for those schools are also anonymous.

Maybe Sherlock Holmes could help…

but in his absence, medical students, faculty, patients and accrediting boards should not trust medical schools who keep the identity of those accountable for them secret.

Finally, a note about the one school which is apparently now a subsidiary of a publicly held German-based corporation.  Ultimately, the board of directors and top management of that corporation should be held accountable for that school.  However, even in this case, it would inspire more confidence of the exact lines of reporting from medical school to corporate leadership were more clear.

As Adashi et al noted, “the very notion of a for-profit medical school, anathema to generations of medical educators, is still the subject of mixed reviews.”  The authors were optimistic that the higher standards for medical schools put in since the Flexner report led to the abolition of proprietary medical schools, and perhaps the supposed greater transparency of the modern era would make it possible for the new proprietary medical schools to educate students well.

However, the current for-profit schools’ opacity should lead to great skepticism.  Flexner wrote:

[I]t is universally conceded that medical education cannot be conducted on proper lines at a profit, – or even at cost

His words may very well still be right.

Finally, what we now know about the new for-profit US medical schools suggests we must reexamine our fascination for “market based” approaches to health care, when almost nothing about any part of health care resembles, or could resemble a free market (see this post).  We need to make health care more transparent, and shine more sunshine on the nooks and crannies, like for-profit, anonymously owned US medical schools.

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16 comments

  1. Felix_47

    Doctors need to be on salary with no productivity bonus and no patient rating bacause patients often really don’t know what is good for them…..and they are subject to a sales job for surgery or other treatments. We need tort reform in medicine and malpractice a quality issues need to managed by doctors. They argue that if it is not fee for service the doctor will not work hard to save the patient. However the most critical time for patients by far is emergency care. When you call 911 you get paramedics who are well trained who stabilize you, hydrate you, give you medications and do cardiopulmonary rescusitation if indicated. They bring you to the hospital and when you hit the swinging doors all of a sudden it is fee for service. What changed medically as you went through the doors. What fee for service guarantees is the doctors will work hard to make money and the surgeons will dream up an operation to fit your complaints even if there is minimal evidence it will help. The for profit schools are filling a need for upper middle class jobs for kids that may not have the strongest grades or test scores. I wonder if there are government guaranteed loans for the for profit schools.

    Reply
    1. Code Name D

      We need tort reform in medicine and malpractice a quality issues need to managed by doctors.

      Yes, because we can then sue our way to a better healthcare system. I frequently see “tort reform” thrown up as a means of DEFENDING the current system,rather than an argument for serious change. I also doubt Felix even read the article, instead throwing up this cut-n-paste argument that is compactly out of context. If we do not know who owns a medical school, then how in the world can one press charges against the owner? I also have to wonder what, if anything, the owner would be liable for. As long as they are not making off with corpses and selling them to underground anatomy labs (something that hasn’t been a problem sense the 17th century), there may not be much you can sue them for.

      Reply
    2. hoonose

      What this leaves out, and a common quandary, is that the surgeon has to be on call. It is commonly a heck of a lot more complicated than a simple reimbursement. One that might not vary by time of day, stress and life disruption potential. So an ER might have a new and hungry surgeon. But as soon as he or she banks, it gets progressively more difficult to fully service the ER.

      Reply
  2. Christopher Herbert

    It’s the same old corruption that has infested every sinew of the global economy. Acquire fast and then hide the cash from the public. A worldwide kleptocracy. Cleaning it all up may require some fighting.

    Reply
  3. Sam Adams

    From Law skools to medical skools…. it’s all about the owners cash withdrawals and the weight hung around the students necks for the rest of their lives.

    Reply
  4. Synoia

    California Secretary of State’s records:

    Entity Number: 201136410073
    Date Incorporated 12/29/2011
    Status: ACTIVE
    Entity Name: Name CALIFORNIA NORTHSTATE UNIVERSITY, LLC
    Jurisdiction: DELAWARE
    Agent for Service: C T CORPORATION SYSTEM (C0168406)

    I don’t know how one tracks it through Delaware’s Secretary of State. A way to get it’s attention is to mail the Agent for Service.

    California’s SOS web site url is: SOS.CA.Gov

    Reply
    1. lb

      Continue searching from the string “C T CORPORATION SYSTEM (C0168406)” via relatively naive google searches and sift the results. There seem to be many associated “CT Corporation System” entities or similarly-named entities registered in many states attached somehow to the Delaware (parent) entity, and if you look at each of those you can find the names of the officers of some of them, addresses… and it seems like you eventually end up here:

      https://ct.wolterskluwer.com/sop-locations

      “Wolters Kluwer is a global provider of professional information, software solutions, and services for clinicians, nurses, accountants, lawyers, and tax, finance, audit, risk, compliance, and regulatory sectors.”

      CT Corp is essentially an obfuscating middleman.

      Reply
  5. rjs

    if you want Medicare for All, you need to address the shortage of health care professionals more than you need to address funding it…

    Reply
    1. DukeForest

      How does Medicare for All change the demand for quality health care?
      Are you implying that if MD’s don’t get a chance to make a $Million a year, they will choose to work on Wall St. That’s OK–I don’t want to be treated by a doctor with that mentality, and I think they take an oath to the effect that they help others regardless of monetary rewards. Canadian MDs salaries are fine.

      Reply
      1. hoonose

        No such oath. An oath to ‘do no harm’.

        But you must understand there has to be some sensible low side limits here. Most docs are dedicated, but few can survive working at a loss. So as it becomes financially more difficult for docs to stay independent, we find more and more are being employed by hospitals. And then with a different set of potential moral hazards.

        Reply
  6. Jeremy Grimm

    I could only partially recall Kenneth Arrow’s definition of the characteristics of a perfectly competitive market — my professor tossed out the definition without attribution. This post provides a link which states Arrow’s definition and applies it to Health Care:
    “How the Fallacy of the “Perfect” Health Care Market Undermined Professionalism and Caused Health Care Dysfunction”
    https://hcrenewal.blogspot.com/2010/08/how-fallacy-of-perfect-health-care.html

    “The crucial characteristics of a perfectly competitive market are (1) that all of the quality dimensions of the good or service traded in that market are accurately understood by buyer and seller; (2) that potential buyers have full transparency on the price they will have to pay per unit of that good or service; (3) that it is easy and relatively costless for potential sellers to enter and exit this market; (4) and that there are so many potential buyers and sellers that none individually can affect the market price of the thing being traded.”

    Seeing this definition again also recalls a quip I believe was attributed to Thorstein Veblen, who was asked why though he claimed to be an economist he never wrote about Markets like other economists: “Markets? I’d write about them — except I don’t believe I’ve ever run across one.”

    Reply
  7. Susan the other

    I don’t think medicine should be a guessing game. Diagnostics are spectacular, easy and quick these days. Spit on a stick, give a vial of blood, a cup of urine – run it through some kinda spectroscope, and all the information you need about your physiology becomes a printout. Doctors have become computer jockeys. Why not just go straight to the computer for general health needs? What could be cheaper? I doubt anything could be more honest.

    Reply
    1. hoonose

      Of course way over simplified. Especially as it pertains to seriously acute medicine/surgery. Experience, and being able to place all the data into the most useful treatment plan in a timely manner for the individual patient, is a much more complex endeavor.

      Reply
  8. PKMKII

    I did a quick Google search on Burrell, and found this detailed article from the Bozeman Daily Chronicle, owing to him being rumored to open another such school in Bozeman, Montana, although it appears that never came to fruition. Some of the more pertinent bits of his backstory:

    Today his dad, Chet Burrell, is president and CEO of CareFirst, the dominant BlueCross BlueShield health insurer in the Washington, D.C., area, where in 2013 he earned a salary and bonus of $2.5 million, according to the Atlantic Information Services report.

    After high school Dan went to Washington, D.C., to earn a bachelor’s degree in government from Georgetown University. He spent his last year of college as an intern in the Clinton White House, the Albuquerque Journal reported.

    Burrell worked for the unsuccessful presidential campaigns of Democrat Al Gore in 2000 and John Kerry from 2003 to 2004. Burrell described Kerry as “an incredible mentor.”…

    In 2006, Rosemont Capital, a private equity firm, was co-founded by Chris Heinz, Kerry’s stepson and an heir to the H.J. Heinz ketchup fortune. Another co-founder was Heinz’s college roommate, Devon Archer, an advisor to Kerry’s 2004 campaign, co-chair of Kerry’s national finance committee and a trustee of the Heinz Family Office. They and Burrell are all Yale graduates.

    Rosemont Capital created Rosemont Realty, and Burrell was dispatched as architect of the real estate startup. In 2009 Burrell was about 32 when he first went to New Mexico, according to the Albuquerque Business First journal. In 2010 Rosemont Realty purchased the state’s largest commercial real estate company, BGK Group, which had been hit hard by the recession and seen its $3 billion portfolio lose roughly half its value.

    So obviously nothing definitive, but hints at who the other investors may be, or at least where the six degrees of separation start.

    Reply
  9. Tomonthebeach

    Not to discount any concerns regarding profit universities, but to practice medicine, one still needs to get a state license and that is contingent on residency requirements. Incompetent MDs and DOs cannot get insurance, and thus have to make a living hustling snake oil supplements.

    Med schools, even state ones, make money even if nonprofit. It is not clear what difference it makes to public health and safety if a med school is publically or privately (even secretly) owned. Granted, that such organizations can be used as pass-throughs for avoiding monitoring for criminal activities is disturbing. Nevertheless, until the public feels at risk of these schools, it is unlikely that Congress, or the half-dozen or so agencies that might have a regulatory interest, is likely to act.

    Reply
  10. KFritz

    Re: Ponce Health Sciences University

    There’s something intrinsically pernicious about locating a for-profit medical school on Puerto Rico, which has been asset-stripped by United States capitalism, and grotesquely under-supported by the United States government during its ongoing natural calamities.

    Reply

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