LOADED FOR BEAR

"You guys clearly want blood," said Governor Howard Dean in summing up his whenever-he-is-in-town press conference which occurred August 1. The press was between aggressive and full howl. The fifth floor Pavilion conference room was packed with reporters, even two from the Associated Press. There were also lawyers whose firms represented the Fletcher Allen Hospital Nineteen and those who represented other players. Also included were a lobbyist, a senator, Auditor of Accounts, cabinet members, staff, and the Attorney General. A big crowd always comes out for a lynching.

Whose blood will they get? Clearly their sights are on Chief Executive Officer William Boettcher who had been placed on "paid administrative leave" at Wednesday's board meeting. They are also out after Board Chairman Phillip Drumheller. They had little patience for anyone else who might have misbehaved.

TWILIGHT ZONE

Both Dean and Sorrell denied that the press reports had anything to do with the timing or content of their investigation even though Sorrell admitted that he did not crank up his investigation until "this week." The press has been on this case for all of this week and last.

Sorrell then says that his office is going to jointly question the suspects and non-suspects alongside the investigative panel put together yesterday by the Board of Fletcher Allen. The witnesses will not be under oath. He has been assured that there will be no shredding of documents. He has been assured that all relevant personnel will be made available. He will be talking to the people "with no preparation as witnesses." Who is he kidding? If you are among the guilty, is it not possible that you would have kept counsel with your counsel? Is it not possible that if you are not guilty that you would want to be prepared not to somehow misspeak in a way which could come back to haunt you?

Then to put off the rapid fire, unrelenting, hostile questioning by some in the press, Dean steps to the microphone to say that they have recently learned of even more allegations in this case but he will not discuss or characterize them. So now the phone lines are buzzing with every press member contacting every source they have who might know more.

Sorrell went on to say that the federal government is running their parallel investigation also. However, US Attorney Peter Hall could not participate because of a conflict. Wonder how those bonds financing the expansion are doing?

ROOT ROOT ROOT FOR THE HOME TEAM

The Fletcher Board appointed a panel to investigate with three "outsiders." The board is made up mostly of the "boys", as is the panel. To call David Coates or Edwin Colodny an outsider is like saying that you don't mind the heat. That Louise McCarren is head of the panel and not a male does not mean that she is not one of the boys. She hangs with the boys, skis with the boys, runs with the boys, drinks with the boys, and serves on board with the boys. This panel is sort of like the catcher investigating the pitcher or Bert investigating Ernie.

There are lots of qualified non-Chittenden County Mafia types who could join the panel. Take John McClaughry, indebted only to the truth. Or take retired businessman Harry Holland who after Tuck School worked for years in an accounting firm, and is not a member of the interlocking board crowd. Or maybe the Reverend Jane Dwinell, retired registered nurse who went through UVM's nursing program and a perpetual doubter of any inside group. Geez, throw Peter Freyne on the case, as if he isn't already, and the truth will out. But no, call on the boys to circle the wagons, find a scapegoat, and go back to business as usual.

THE CRIME

What is this all about? If there is not a bombshell such as accusations of personal enrichment, it is about gaming the permitting process, a not so uncommon sport in Vermont. In the socialist mentality of the governing crowd of the 1980's and the 1990's, you must have central state control. You must apply for and receive a CON; Certificate of Need, granted by BISHCA, Vermont's Banking, Insurance, Securities and Health Care Administration (Title 18, Chapter 221, section 9434), to build or add on to your hospital. (Statute here: http://www.leg.state.vt.us/statutes/fullsection.cfm?Title=18&Chapter=221&Se ction=09434 )

It seems that Boettcher and his allies figured out that the quickest and cheapest way to a Certificate of Need was to combine misrepresentation and slight of hand to overcome the long, expensive and doubtful regulatory process. Recently, the Central Vermont Hospital went like lambs to the slaughter to BISHCA after having raised the funds to add on to their hospital, only to be turned down.

It appears that the Fletcher Allen crowd said that their hospital was a $116,00,000 process where in fact it is over a $225,000,000 process. Their parking garage was to be a $13,000,000 process which grew to a $55,000,000 process. Had they gone in with the actual figures would they have received their Certificate of Need? Doubtful. According to Dean, one of the main reasons for the CON process is to control health care costs. Clearly a $225,000,000 hospital expansion will raise costs more than a $116,000,000 addition.

In a bold stoke, the Fletcher Allen cabal appeared to decide to play a game of blind man's bluff with the board at BISHCA. They would start their garage without a permit, claim that they did not need one, and then pay a fine if caught. If caught would the Board require them to tear down the garage? Not likely, that would only drive up health care costs further.

They were caught, argued their case, lost and agreed to a $320,000 fine. That is a pretty cheap price for a permit for a $55,000,000 facility. Look at the Stowe Mountain Resort. President Hank Lunde decided to do it right, engage the community, negotiate with the potential naysayers, and move judiciously. His reward is that they are over four years in the process and over $2,000,000 in costs with no acceptable permit in sight. It appears that Fletcher decided to game the system, had no time in process as building continued and only a $320,000 cost. Boettcher and his group might have expected a manager of the year award.

THE OTHER SHOE DROPS

Chief Financial Officer David Cox took exception to the end run, said so, and was soon looking for a new job. He seemed to keep his own counsel, but when subpoenaed, told the story as he knew it in April. Fletcher's strategy was to intentionally game the system. Though both Sorrell and Dean were appraised of his testimony, but being on the road to the White House, took no action. Once the press got onto Cox's story and obtained the actual deposition, Sorrell and Dean had heard enough and sprang into action.

SIR GALAHAD TO THE RESCUE

According to the world of presidential aspirant Howard Dean, only he understands what is driving up health care costs and only he is honest enough to talk about it. "It" is that "when any family member becomes ill, we all want every treatment possible and expect our insurance to pay."

It is reported that over fifty percent of all health care costs occur in the last six months of life. So perhaps there is another reason. Often it takes a living will or strident family members to make the hospital stop treating an aged family member. Often it takes this action to stop the extraordinary efforts by the medical establishment to gain another day. Often it takes family members to allow the patient to go home and die with dignity, not in some strange hospital room with tubes coming out all orifices. It is here that the hospital is making money.

Dean's system rewards doctors and hospitals when their patients are sick, not well. When sick, they can operate, inject, transfuse, and intervene, all of which earns them big money. If the system rewarded doctors and hospitals whose patients were well instead of sick, the cost would come down. But then doctors would not become millionaires and hospital CEO's would not make a half a million a year in little old Vermont.

Because of the power of the process, many people take their health for granted, believing that pills or surgery will save them, so they do not have to discipline themselves to help themselves.

TWILIGHT ZONE REDUX

Dean went on to say that "anyone who misrepresents himself in the permit process would be denied a permit." According to a local attorney, a judge once told him and the opposing attorney in chambers prior to a the beginning of a case, "let the perjury begin." Everyone misrepresents in the process. The opponents say the sky is falling when it clearly isn't. The proponents say that the development will cause no environmental degradation when almost any development causes some by its very nature.

When asked if the system failed, Dean said no. He said further that no review of the process need take place. Clearly in this case, grown men decided not to give their consent to the rules of the government. Whenever otherwise wise men decide that the rules are so unfair or uncertain that the risks of breaking the law outweigh the consequences, one should review the process.

Will the institution pay or just the men? Time will tell, but it is unlikely that the outcome of the actual construction will change, that the government will try to further increase the cost of the hospital, and that they will do their best to make examples of the alleged culprits.

KATIE BAR THE DOOR

As soon as questions at the press conference moved on to unimportant issues like the budget, laying off state employees, and state revenues, the room emptied. The press had its story, the lawyers their story, the lobbyist his story. In the end Dean was talking only to the television camera of record, Channel 17 of Burlington, a few stalwarts from the press, and a couple of aides.

For the few who may be interested, Dean said that in twelve days he will announce his budget and personnel cuts. He does expect "small" layoffs. It would be hard to cut $38,000,000 without a few. 

HERE'S MY STORY, SAD BUT TRUE

A year back, we ran a series on Permit Hades in hopes of prodding the legislature to begin to reform the permitting process. The house responded but the senate stymied. Here are two new and unbelievable tales of woe.

HI YO SILVER

In East Dorset, the Vermont Summer Festival horse show has attracted over 4,000 folks to Bennington County to spend up to two weeks having fun and leaving money and tax receipts all over the county. This year the organizers improved the venue by bringing in marble chips, graveling driveways, digging wells, and improving drainage.

As a reward, the commissar of the District 8 Act 250 Commission sent an unwelcome letter stating, "since improvements to your land have been made, an Act 250 permit is now required." The horse show coordinator and owner of the Beebe Farm responded by saying in an interview with the Bennington Banner, "Maybe we should go somewhere that Act 250 isn't."

WHEN IS ENOUGH ENOUGH?

The Times Argus chronicled a tale of woe. The Meritts owned some property on the Calais/East Montpelier line. They decided to subdivide the land, sell it, and use the money to develop their apple orchard and cider business. As they had fewer than ten lots, they needed only a local permit which they received. When the lots did not sell, they auctioned them off. They received a letter from the assistant coordinator of the District 5 Act 250 Commission stating that "the owner did not need a permit."

Some nineteen months after the sale, the commissar himself, one Edward Stanak, wrote saying that they did need a permit and must retroactively apply even though they did not own the land. Thousands of dollars later, they are issued a permit but with such onerous conditions, such as protecting the deer, that some owners could not build and wanted their money back. That there are so many deer in Vermont today that the whole herd's health is in question did not seem to impress Commissar Stanak. Not surprisingly, the Merritt's now say, "We may as well pick up and move somewhere they like business. We are looking for a site on the other side of the Connecticut River." 

THEN WAS THEN, NOW IS NOW, Continued...

The ostensible purpose of Dean's press conference was to announce the receipt of a $2,400,000 award to the state for being one of the top ten states in moving parents from welfare to work. Lieutenant Governor Douglas Racine was not present to accept the award. You may recall that he was the leading senator in moving to eliminate the very legislation that has been so successful that Vermont received an award.

But, in a continuing series of re-inventions, Racine is now for welfare reform. Just ask him. Even the mild mannered Bob Kinzel asked incredulously when interviewing Racine this week on VPR's Switchboard Program, "My memory might be faulty...but didn't you have reservations or even opposition to welfare reform...?" Racine said, "...I'm very proud of what we have done..."

Back in 1992 when the legislature was trying to pass welfare reform, the Burlington Free Press wrote on April 4th, "Douglas Racine, D-Chittenden, a sharp critic of the workfare proposal, said that the measure would not be approved by the Senate because of philosophical concerns..." 

IN A DOGS' AGE

When was the last time the GOP fielded a full slate of candidates for the seven statewide offices up this year? Not in living memory; until 2002. Not all will prevail, but hats off to those who worked to fill the slate. There are good chances for the GOP in the governor and lieutenant governor races, lesser to no chance in the other races. But it is important to fill every slot. It keeps them more honest, it makes them raise a little money and worry a little, and it keeps them from helping as much in other races.

While most observers consider continuing GOP control of the house a lock, it will be much harder to win control of the senate. Assuming that they win the lieutenant governor's race, they need only pick up one seat and persuade any RINOs to stay home.

But looking at the senate recruitment results, they will have trouble defending the open seats in Franklin and Bennington Counties and will have close races in Addison and Orange Counties. It will be hard to pick up seats in Chittenden, Grand Isle, Washington, Windsor, or Windham. Not impossible but hard. Their best chance is in Lamoille. Rutland, Essex, Orleans, and Caledonia should stay the same. 

MONKEY BUSINESS 

Ah that great ship still plies the waters of Vermont politics. And where will the Democrats vote in this primary? We know that they monkeyed around in the GOP primary in the last two primary elections, drumming out Pat Leahy challenger Jack McMullen in 1998 and trying to upset Ruth Dwyer in 2000.

Rumor has it that the Progressives are going to have to stay home to vote in Cindy Hill for attorney general and not the hated Boots Wardinski. This should help Jeb Spaulding in his race with Ed Flanagan for the Democrat nomination for treasurer. Will the GOP wander into the Democrat primary to help Spaulding? Naw, the Republicans were well brought up.

But look for Flanagan to pullout all stops, whatever they may be. If he loses here, it will be three times and out for power obsessed Ed. 

IS THE FAT LADY WARMING UP?

IBM has been an essential part of Vermont for four decades. It has made Chittenden County the political and economic power house. But can those in the government continue to rely on those jobs and its accompanying tax revenue? Better yet, should they or should they not begin to cut their loses and move on?

According to the August edition of PC Magazine, "IBM is going to be out of the hard drive biz soon, and PC's too. Some 20,000 people are expected to be laid off in piecemeal fashion..." A high tech newsletter states, "IBM's only decent business now in terms of profitability is software. The absolute, rock bottom clunker is mainly the semiconductor division which lost a cool $1,000,000,000 during the last quarter." The Burlington Free Press ran a front page story, IBM profits down 97 percent. "IBM executives laid the blame for the poor performance mainly on its microelectronics division which includes the company's plant in Essex Junction." An email arrived from a former employee of IBM: "When I left IBM in 1993, my manager said that Essex has ten years before it dies. Looks like he was on the mark. This may have even been their ten-year plan."

Today's Free Press had a big article about the Fishkill, NY plant's opening. But that was not as telling as the previous day's story that IBM has spent $3,5000,000,000 to acquire the consulting and technology services arm of Price Waterhouse Coopers. They have made the statement of where they are headed and it is away from a commitment to Essex Junction. 

HOW IS YOUR PARK?

According to the July issue of Expansion magazine, Vermont is one of only nine states which does not have a "university research park." 

IMAGINE IF HE WAS A REPUBLICAN... 

"NBC News refuses to identify James Traficant as a Democrat...in a story lasting over two minutes, the NBC Nightly News managed to avoid even once listing the Democratic Party affiliation of Traficant. Upon Traficant's convictions in federal court in April, neither the NBC Nightly News or MSNBC's The News with Brian Williams mentioned his party affiliation." -- Media Research Center 7/19/02. For details: http://www.mediaresearch.org/cyberalerts/2002/cyb20020719.asp#4

On the home front, Wednesday's (7/31) Burlington Free Press included an edited version of an AP story on Traficant's sentencing. Missing from the article? The paragraph indicating that the convicted congressman is a Democrat.

Full AP story here: http://www.boston.com/dailynews/211/nation/Traficant_gets_eight_years_in_:.shtml 

WHO IS EDITING OUR NEWS? 

It’s been an interesting week to compare AP stories in the Burlington Free Press with the original versions on-line. The following example from Thursday’s (8/01) paper is a blatant example of partisan editing. The third paragraph (in italics below) was simply cut:

... "The stalemate virtually assures the Medicare prescription drug issue will influence the November midterm elections... Republicans and Democrats quickly began blaming each other.

"'Republicans can try to run from this issue, but Democrats are not going to let them hide,' said Sen. Edward Kennedy, D-Mass., chairman of the Senate Health, Labor and Education Committee. 'If Republicans won't vote for a prescription drug program worthy of the name in September, the American people will vote for a Congress that will do the job in the elections in November.'"

Read the full AP article here: http://www.boston.com/dailynews/212/wash/Senate_rejects_fourth_Medicare:.shtml

Related article: Political Malpractice: Do Senate Democrats want a prescription plan or an issue? http://www.opinionjournal.com/columnists/pdupont/?id=110002030 

DOUBLE STANDARD? 

»» Howard Dachs: I didn't connect Doug Racine to "Willie Racine Jeep" before reading Martin Harris' note on 6/28. Years ago when I was in the car business I used to buy parts from Racine's, until I found I was being charged about 25 to 30% above retail. When I called about this, I was told that they use "matrix pricing" (whatever that means). It sure looks to me what the left calls "corporate greed". Or is that only when others do it? 

MOONLIGHT OR STARVE - SOME STATISTICS 

»» Eric Freeman: Your item on the ranking of Vermont per household income reminded me: http://www.bls.gov/news.release/annpay.t02.htm shows we appear to be 32nd in annual per capita wages. However hourly wages may well be worse compared to national rankings. Vermont household income is increased because more of us work more hours.

I have not found a good source for ranking hourly wages for non-farm income, but the 1990 data showed that Vermont households have more wage earners, particularly women. The old story. Moonlight in Vermont or starve.

It will be interesting to see statistics in Vermont for end of August when us IBMers in the latest batch will have become officially unemployed (August 5th is the final date but unemployment is not official until vacation wages are used up). I think the main issue at IBM as far as the job losses is not what is in place now, but what was in place when the last expansion decision was made: High cost electricity, poor transportation, uncertainty of permits, uncertainty of housing added workers and no tax breaks. In New York they had permits in hand, cheap power, and $750 million in tax breaks. A company would be nuts (or negligent) to turn down that kind of discount. I for one hope to find work someplace more business friendly. 

DISAGREEMENT ON DRUG COMPANIES 

»» Stewart Ledbetter, Manchester: You've got it all wrong on "Those Greedy Drug Companies"! Merck did not restate its earnings. Merck did not overstate its earnings. According to those who disagreed with their treatment of a small portion of Merck-Medco revenues, Merck did overstate, over a number of years, their revenues -- and in the process, understated their profit margins. Interestingly, one of the reasons the Merck-Medco subsidiary is being spun off because it lowers Merck's overall profit margins! The important thing is, was and will be, earnings were not affected.

»» Ray Schneider, West Dover: In my opinion, Merck made an error in judgment regarding its accounting treatment of patient "co-pays." But they did not overstate their profits, and therefore did not have to re-state them downward by your figure of $12.4 billion. The "phantom" revenue was simultaneously booked as an expense (go figure), so it was bogus revenue in, bogus expense out, net profit unchanged. Other, but not all, companies in the pharmacy benefits management business also do the same thing. Had this been discovered a year and a half ago, it would have barely hit the radar of financial news reporters. But with Enron, Worldcom, Adelphia, etc, etc coming to light as accounting fraud on a massive scale, Merck's shareholders have suffered, but not because of a re-statement of earnings downward. The stock has suffered because even the whiff of impropriety in the current paradigm is anathema to investors. But Merck's profits were not one dime less because of this accounting gimmick. 

LOOKING FOR THAT REPORT WE PAID FOR... 

»» Roger Hussey, Warren: What's the easiest way for me to get a copy of that secretly famous O'Neal Report on Vermont business climate?

Editor's reply: The O’Neal Report can be found here: http://www.thinkvermont.com/publications/pdf/brand_study.pdf 

BUT IS HE ON CABLE? 

»» Brad Broadwell, Burlington: Glad to see you back reporting on happenings on the home front. I get a sense that the local media is beginning or is on the verge of becoming consumed with Howard Dean's run for the Presidency. I rarely read any local news reporting looking at our Governor's run with a critical eye, not surprising I guess, maybe its early, maybe the excitement is too much for them, or maybe the idea of a favorite son in the race and following his progress is just too much not to support or quite possibly something else. Anyway before people get to excited about Howard's appearance on "Meet the Press" and AP news stories written by Michael Glover of the Des Moines Register suggesting he is making inroads, don't be fooled unless Howard begins to get cable news coverage and plenty of it. Unless he can break into the largest source for most American's, he will forever be playing on the margins. 

THEY LIKE US 

»» Fran Rice, Phoenix, AZ: Your newsletter is my first mouse click each time I scan my email. I so enjoy your commentaries, more than enjoy actually, I relish them! Thanks. 

ELECTION YEAR ECONOMICS 

"Good news: The Dow Jones Industrial Average closed at 8711.88 on Monday, up 447.49 points! Reportedly, many Democrats are perched on ledges preparing to leap to their deaths..." -- Anonymous Wall Street reporter 

ANOTHER AUDITING SCANDAL 

"The underlying problem is that most education standards are set, tests administered and scores reported not by objective outsiders but by those running the education system itself or with a stake in how it looks. In other words, there's no meaningful external audit." --Chester E. Finn, Jr., The Education Gadfly http://www.edexcellence.net 

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