A Texas Scandal Raises Questions About Nonprofit Hospitals

Robert S. Riggs, an intrepid reporter for the CBS affiliate station in Dallas, ruffled a lot of feathers among Dallas’s social and financial elite with his investigative coverage of fund-raising and management controversies at the University of Texas’s Southwestern Medical Center.

He and three of his colleagues lost their jobs last month in layoffs the station said it made primarily for financial reasons. His departure leaves behind an investigation that discovered disturbing allegations but had not yet been completed.

In uncovering questionable activities at the Southwestern Medical Center, Mr. Riggs raised some important questions about the ways nonprofit hospitals operate, the oversight role of boards at any major nonprofit institution, the appropriateness of spending large sums to entertain donors, and the responsibility of community leaders to speak out when questions are raised about the accountability of a powerful organization.

The medical center, meanwhile, says it is acting appropriately and that Mr. Riggs misled viewers by broadcasting segments containing “serious misrepresentations of the truth.” What’s more, the center said, the “voluminous series of inquiries from this media-entertainment outlet” has “significantly detracted from the time we are able to commit toward serving the public.”

Mr. Riggs, along with The Dallas Morning News, reported in November of last year that the Southwestern Medical Center maintained a list of important people — wealthy people, donors, would-be donors, government officials, politicians, and celebrities — who were eligible to receive favorable attention, free valet parking, and special access to a medical team over weekends.

People on the list were able to call an unlisted number to make appointments and reach doctors on weekends and after hours. The list included about 6,200 people, some of whom did not know they were on the list.

The two-tiered system raised some eyebrows among a few health officials, who questioned the ethics and propriety of such practices at an institution that receives much of its support from the state and federal governments.

A few other hospitals in Texas contacted by The Dallas Morning News said that they offered no special perks to wealthy or favorably connected patients.

The Southwestern Medical Center’s officials, including its president, Kern Wildenthal, and John McConnell, its executive vice president for health-system affairs, defended the center’s policies and practices. They insisted that, although “friends” of the university and hospital received special attention, such as the parking assistance and unlisted phone number, they did not get preferential medical treatment or free care.

Paul M. Bass, a prominent Texas businessman and chairman of the Southwestern Medical Foundation, which raises money for the hospital complex, said in an interview that the so-called VIP register was not an exclusive one but was composed of all sorts of people, including a diverse group of former patients. What he didn’t answer was why such a list was needed if the same attention and care were available to everyone.

The revelations about the VIP list comes on the back of a lawsuit by Larry Gentilello, a professor at the Southwestern Medical Center, who says the center’s system treats wealthy and poor people differently, sending affluent people to private hospitals and clinics and needy people to Parkland Hospital, a county public institution.

Both Dr. Wildenthal, who is resigning from his position in September, and Dr. McConnell, who is rumored to be in line for the president’s job, said that the Southwestern Medical Center’s practices did not differ from those of many other large nonprofit hospitals throughout the country. If they are correct, the Senate Finance Committee, which has already been raising questions about whether hospitals deserve tax-exempt status, may have some more work to do. Clearly, there is a need to survey the nonprofit hospitals in the country to assess how many of them are operating a two-tiered system of access and care.

Mr. Riggs’s investigations also revealed that over the past two years more than $500,000 was charged to the credit cards of Dr. Wildenthal and Cynthia Bassel, the center’s vice president for external relations.

These expenditures included $160,000 for expensive French wines, $13,000 for tulip arrangements sent to donors on Valentine’s Day for two years running, more than $30,000 for gifts of Velvet Creme Popcorn to donors, and $2,029 for custom-made sugar cookies for a ceremony to honor Bill Clements, the former governor of Texas. More than $20,000 in 2007 went toward Dr. Wildenthal’s memberships in cultural and civic organizations. Several thousand dollars went to similar groups for Ms. Bassel’s memberships.

Equally troubling was the nearly $6,000 the foundation spent for so-called business lunches over two years at a local Mexican restaurant for some of Dr. Wildenthal’s highest-paid executive staff members, money that should have come from their own pockets.

Dr. Wildenthal has refused to answer Mr. Riggs’s questions about his expenditures. The medical center’s spokesmen have defended all of the spending as “legal, ethical, and appropriate.”

What’s more, they note, money for such items did not come from government funds but from charitable contributions to the center. They fail to recognize that tax-deductible donations are, in part, tax money and therefore publicly accountable.

They also say that such expenses are common among similar institutions but that Southwestern’s expenditures are “unusually small” for an institution that has one of the lowest ratios of money spent on fund raising compared with charitable contributions raised.

Indeed Dr. Wildenthal, who earned $1,166,582 last year, has been a phenomenal fund raiser over the past 20 years, raising $166-million last year and expanding the endowment to more than $1.4-billion.

He and his wife have given and pledged more than $1-million of their own money to the center. Many nonprofit directors in Dallas are envious of his prowess. One executive director of a health organization said, “I wish I could raise that sort of money. So what if he incurred lavish expenses in doing his job? The good outweighs the bad.”

When asked how he could justify some of Dr. Wildenthal’s fund-raising expenditures, Mr. Bass commented that, just as in business, the bottom line is what matters.

Next to the more than $1-billion raised by Dr. Wildenthal, the questionable expenses listed by the CBS investigations were trivial, he said. In addition, he added, donors who received the very expensive bottles of wine were grateful for such gifts and did not consider them a misuse of their donations.

But not all donors felt that way.

Money from the Jesse Brittain Memorial Fund, which had been created to further the professional development of the center’s business staff, was spent on entertainment, parties, and meals. Ron Brittain, the nephew of the fund’s founder, was irate, saying that “I’m sure he [Jesse] would be quite upset knowing the extravagance of the spending. It’s just wasteful.”

Dr. Wildenthal’s fund-raising expenses from charitable donations raise a number of practical and ethical questions:

• Are such expenditures a necessary part of fund raising?
• Wouldn’t wealthy donors have given their money without receiving an expensive bottle of wine or other costly gift?
• Is it right to use tax-deductible contributions for what might be called excessive and, sometimes, unnecessary gifts and entertainment, especially when donors believe their money is supporting essential programs?
• Are there and should there be limits to such expenditures?
• Who should approve and monitor these fund-raising expenses? Is that the job of nonprofit boards, professional associations, or the state attorney general’s office?

In the case of the Southwestern Medical Foundation’s board of directors and the regents of the University of Texas, nobody seems to have objected either to the expenses incurred by Dr. Wildenthal or to the existence of a VIP list. In fact, neither board has said much about the matter.

What has been particularly interesting about the CBS investigation is the reaction and response of civic and nonprofit leaders in Dallas.

With the exception of Mr. Riggs’s continuous coverage and a couple of initial articles in The Dallas Morning News in November, the news media — both traditional and alternative publications — have said nothing so far. Over the past five months, reporters from the Morning News have been working on an investigation, but the newspaper has so far published nothing.

When I placed calls to more than 20 groups in the Dallas area, I mainly received two types of responses, either “I don’t know anything about what’s going on” or “I can’t comment on the matter.”

Several of my calls, which left a message about their purpose, were not returned.

The local United Way, the Communities Foundation of Texas, the Conference of Southwest Foundations, the League of Women Voters, and other established organizations were willing to say they did not know enough to provide any opinion.

A few organizations, however, were publicly critical of the center’s practices. Through its Web site and blog, the Texas Faculty Association, a small group of professors, gave ample coverage of the investigations.

Fred Lewis, director of Advocates for the Indigent, an Austin group that lobbies to help the poor, called the leaders at Southwestern arrogant and unconcerned about the concept of equal treatment for patients. He said people were afraid to talk because they did not want to offend the city’s power structure. He added, “People who know about it don’t want to talk about it, and those outside Dallas don’t know about it.”

The seeming absence of advocacy or watchdog groups that might have focused on issues of nonprofit accountability and taxpayer-subsidized expenditures raises a serious question about civil society’s ability to serve as a check against government intrusion, corporate power, and malfunctioning nonprofit organizations.

And now CBS’s decision to lay off one of its award-winning reporters and cut its investigative unit from four reporters to one leaves the city even more vulnerable to the potential corruption of powerful institutions. Cutbacks like the one in Dallas are depriving news outlets nationwide of their ability to investigate nonprofit organizations, government agencies, and businesses.

Mr. Riggs has been maligned by many people in Dallas for raising questions about Southwestern Medical, but he deserves praise for keeping the tradition of investigative journalism alive there. After all, it is our journalists who, in the absence of other effective forces, are sustaining the spirit of transparency and public accountability at institutions that are supposed to serve society.

Pablo Eisenberg, a regular contributor to these pages, is senior fellow at the Georgetown University Public Policy Institute. His e-mail address is pseisenberg@verizon.net.