At AVH, a history of warnings, failed audits | AspenTimes.com
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At AVH, a history of warnings, failed audits

Aspen Times writer

By Eben Harrell

Aspen Times Staff Writer

When Aspen Valley Hospital board members John Sarpa, John Jellinek and Elaine Gerson were elected by a record number of voters in May 2002, there was expectation of far-reaching changes at AVH.

The changes, most prominently the dismissal of the CEO and chief financial officer, have only recently been implemented.

The board has been criticized, both privately and publicly, over its presumed reluctance for change. Recently the hospital announced nearly $12 million in losses under former CEO Randy Middlebrook and CFO Verna Bartlett. And many have speculated that board actions in 2002 might have prevented the losses.

Many hospital workers have warned for years of poor management. As far back as October 2000, two former employees warned of losses due to poor billing at a board meeting.

But during board members’ first two years, they received several reports from independent consulting firms that failed to raise any red flags over AVH’s health, and even praised the competency of the management.

“Over quite a long period of time [after the election], while we were gathering our own information about management and the hospital, there were a number of times when positive things were given to us about the hospital’s leadership,” board President John Sarpa said. “So although we took actions early on including making changes in the [information technology] department it was not until last fall that we understood the depth of the problems.”

BKD

The hospital’s independent financial auditing firm, BKD in Boulder, provided certified audits on the financial numbers provided by Middlebrook and Bartlett.

Hospital treasurer and board member John Jellinek said in an April 10 interview that BKD’s oversights made it difficult for the board to determine the scope of the financial problems.

“Everything was given the stamp of approval. It’s becoming my judgment that like other corporate disasters, the auditors look the other way,” Jellinek said. “Due diligence by the auditors was simply not done.”

Officials from BKD said they could not comment on audits performed at AVH because of confidentiality agreements.

“I would like to be able to talk to you but our ethical standard requires us to maintain client confidentiality,” said BKD partner Brenda J. Smith.

JCAHO

In May 2002, less than a month after the election, the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) sent a team of three surveyors, a nurse, a physician and an administrative expert, to tour AVH.

The independent, not-for-profit organization evaluates and accredits more than 16,000 health care organizations in the nation. JCAHO evaluations, given every three years, are considered “the gold seal of approval,” according to one Healthcare administrator.

Among the surveying team’s tasks at AVH was to report on the “responsibility of the CEO and the executive management.” Out of a five-point rating system, JCAHO gave Randy Middlebrook and his management team a mark of “one,” its highest rating.

A JCAHO spokesman defended the report, arguing that JCAHO accreditation focuses on patient care, not financial well-being.

JCAHO spokesman Mark Forstneger said the organization focuses on “quality” audits, not accounting audits.

“It wasn’t part of our task to make sure the CEO and CFO were keeping good books,” he said.

Accord

In 2003, a year after the JCAHO report, the president of Accord, a Chicago-based independent health care consulting firm, spent two weeks at AVH assembling a three-year strategic plan for the hospital. Among its recommendations was to keep Middlebrook and Bartlett in their positions for an indeterminate trial period.

“[Middlebrook and Bartlett] seemed to know what the problems were and were up to the task of fixing them,” said Ed Kazemek, president of Accord. “There was no way for anyone to know for sure whether they were hiding problems or were unaware of problems. This was a new board dealing with a very senior management team.

“So we put together a plan that set very measurable criteria to hold [Middlebrook and Bartlett] accountable. That’s why when Randy left a year later, it didn’t come as a terrific surprise.”

***

Taken together, the reports of the three consulting firms provided a strong stamp of approval of Middlebrook and Bartlett’s management. Kazemek believes the board acted prudently to continue questioning management’s competency even after the reports.

“If the management was hiding problems, purposefully or not, and if the auditing firm was asleep at the switch or cozy with management and not doing proper digging, this kind of sudden financial problem can easily happen,” Kazemek said.

“But could the board have smelled it coming? No.”

Eben Harrell’s e-mail address is eharrell@aspentimes.com


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