Do hospital chief executive officers extract rents from Certificate of Need laws?

Prior research suggests that Certificate of Need (CON) laws reduce competition in the hospital services industry. As a result, this study empirically investigates if not-for-profit hospital chief executive officers (CEOs) are able to extract rents from CON laws in the form of higher compensation. A sample of 256 not-for-profit hospital CEOs in states with and without CON laws and data for 2007 are used in the empirical analysis. The study considers the endogenous nature of a CON law and allows such a law to indirectly affect CEO compensation through its impact on the number of hospitals and beds. The multiple regression results indicate that special and public interests both motivate the decision of a state to maintain a CON law. CON laws are shown to reduce the number of beds at the typical hospital by 12 percent, on average, and the number of hospitals per 100,000 persons by 48 percent. These reductions ultimately lead urban hospital CEOs in states with CON laws to extract economic rents of $91,000 annually.

Guilty in Rhode Island. Conviction of hospital executives in Roger Williams case strengthens the argument that stronger oversight needed

The conviction of two former Roger Williams Medical Center executives in Rhode Island is sure to keep up the heat for more vigorous oversight of hospitals. Robert Urciuoli and Frances Driscoll were both convicted of fraud. "It's not to say that directors should be running these organizations," says attorney Patrick Coffey, left. "But it is their function to hire qualified people (who) won't ever tarnish the reputation of their institution".

Scrushy plots a comeback. As HealthSouth works hard to put a fraud scandal in the past, its acquitted founder studies how he can regain the company

The jury ruled that Richard Scrushy is not guilty. So now HealthSouth's deposed leader wants to reclaim the company he founded, even if current management and investors don't want him. "I have a hard time believing he's going to get back in there," says Larry Scanlan, left, of Navigant Consulting. Others are more blunt: "We have less than zero support for his return," says a principal at the largest single owner of HealthSouth shares.

A higher standard. Report tells Congress to let regulators strip tax-exempt status and go after boards that approve unreasonable executive pay

It's time to give regulators the power to strip the tax-exempt status from charities that offer unreasonable executive compensation. That's the word from the Panel on the Nonprofit Sector's report to Congress. The report's 120 recommendations come amid increasing scrutiny of not-for-profits, and a spokesman for Sen. Chuck Grassley, left, says the Iowa lawmaker hopes to introduce legislation on the matter soon.

Executive defensive. As the Scrushy case finally goes before an Alabama jury, the Sarbanes-Oxley Act and its impact are also on trial

With the trial of Richard Scrushy, left, finally under way in Alabama, it isn't just the former HealthSouth executive being scrutinized. It's the first courtroom test for the Sarbanes-Oxley Act of 2002, which holds CEOs accountable for false financial statements. Scrushy's defense attorneys have already begun laying the groundwork to blame underlings for the 2.64 billion dollar accounting fraud.

Expanding the scope of fiduciary duties to fill a gap in the law: the role of nonprofit hospital directors to ensure patient safety

In the wake of the patient safety movement, there is a glaring disconnect between the increasing responsibilities placed on hospital board members and the limited accountability for those board members if they fail to meet their responsibilities. This Article discusses how the effectiveness of new patient safety laws is diminished by the lack of accountability of nonprofit board members. The Article suggests that an expanded notion of corporatefiduciary duties, enhanced by shifts in social norms, would contribute to patient safety reform.

Contribution retribution. Health system, CEO must pay excise taxes after pressuring workers to help fund state association's PAC through payroll deductions

The IRS wants not-for-profit health systems to remember to keep their distance from politics--it's taxing the payroll contributions at one system that went to a state hospital association's PAC. Kenneth Robbins, left, says hospitals should always be conscious of activities that could jeopardize their tax-exempt status. "It's an issue we've been concerned with as long as I can remember," he says.

HealthSouth's most wanted. Founder and former chairman and CEO Richard Scrushy is indicted for 85 counts of conspiracy, fraud and money laundering

Wake-up call for the industry or an isolated case of corporate chicanery? Healthcare experts are divided on the import of Richard Scrushy's indictment on 85 counts last week in connection with the financial scandal at HealthSouth Corp. The indictment alleges the company founder relied on electronic and telephone surveillance, threats and intimidation to control his accomplices.

Steer clear. Medical group, hospital physician-recruiting violations can have dire consequences

Hospitals and medical groups can and often do make amicable partners in physician recruiting. However, violating the rules of such partnerships can have serious ramifications for the group, the hospital and newly recruited physicians.

No contest for ex-AHERF chief. Sherif Abdelhak defends himself, stating he intended to keep the healthcare system open for patients and employees

AHERF was barreling toward bankruptcy before Sherif Abdelhak allegedly raided its charitable endowments, according to prosecutors. His futile attempt to save the system not only failed, but the ensuing bankruptcy compromised the hospital markets in Pittsburgh and Philadelphia, and landed him up to 23 months in jail after pleading no contest in this courtroom.

Crime and punishment. Instead of a slap on the wrist, crooked healthcare executives now are being sentenced to prison thanks to a crackdown on white-collar crime

Lawmakers wondering how to handle white-collar crime might look to the healthcare industry, where crooked executives are being held criminally accountable for shady business dealings and corrupt practices that previously may have resulted in quiet dismissals. A confluence of factors has driven the crackdown, from escalating whistleblower lawsuits to a decade-long effort to halt Medicare and Medicaid fraud.