Taxpayers help pay for organ donor groups' parties, Rose Parade expenses
By Andrew Conte and Luis Fábregas
Published: Saturday, Oct. 19, 2013, 10:30 p.m.
Executives at one nonprofit organ procurement organization charter a plane to travel fewer than 150 miles for a training session on leadership.
Another nonprofit pays out thousands of dollars a year for a Rose Bowl parade float, though auditors determine it's not a proper expense.
Yet another nonprofit honors its CEO with a $19,000 retirement party.
Each time, the organ procurement organizations bill part of the cost to taxpayers through Medicare.
If not for that, the public might never know how groups that make millions from recovering organs and tissues for transplantation sometimes operate behind the scenes. Federal law prohibits donors and their surviving families from receiving a penny.
Clearly, Medicare money cannot go for Rose Bowl tickets, lavish parties or golf tournaments, said Lloyd Jordan Jr., CEO of Carolina Donor Services in Greenville, N.C.
“For a cost to be allowable, it should be reasonable,” said Jordan, a certified public accountant and former Medicare auditor. “The provider should ... make sure that the cost doesn't exceed what a prudent and cost-conscious buyer would do.”
The Tribune-Review found multiple incidents of improper and undocumented spending by some of the nation's 58 organ procurement organizations. The newspaper reviewed 2011 federal tax filings and audits by the Department of Health and Human Services' Office of Inspector General since 2010.
“It's every taxpayers' dollar,” said Kent Holloway, president-elect of the Association of Organ Procurement Organizations, a national trade group. “The litmus test is to sort of look back in and say, ‘Would this feel right to me if I were looking in from the outside?' ”
The Trib found:
• The California Transplant Donor Network in Oakland, Calif., spent more than $167,000 that was improper or poorly documented as taxpayers' expenses, according to federal auditors. In 2007, the nonprofit threw a retirement party with 300 guests for former CEO Phyllis Weber. The organization billed $9,600, or about half of the cost, to taxpayers.
Weber's successor, CEO Cindy Siljestrom, said that seemed reasonable “based on the length of service and the role this executive played in founding this organization.”
Separately, the group spent $12,000 on banquet charges for a staff meeting in a Berkeley, Calif., hotel and $10,500 to sponsor a minor league baseball team. It paid $5,000 to sponsor a jazz show gala with gourmet food and exotic drinks.
Taxpayers shouldn't have paid for alcohol, Siljestrom said, and her group could have better documented expenses. But she defended spending on community outreach.
• When five board members of Life Connection of Ohio needed to get from their headquarters in suburban Toledo to Dayton, 146 miles away, the group paid $3,900 for a private plane and billed $2,100 to taxpayers.
The officials made the trip to meet with a lawyer about board responsibilities and training, spokeswoman Kara Steele told the Trib.
Having offices and board members in both cities makes “logistics for meetings challenging,” she said.
Life Connection employed family members of its executives, 2011 tax records show. The daughter of CEO Michael Phillips made $91,654, and the daughter-in-law of paid board Chairman Kenneth Kropp received $47,000 — slightly less than he did.
Life Connection does not allow nepotism, Steele said. One relative cannot directly supervise another, and anyone hired must be the best candidate for the position, she said. Phillips' daughter no longer works for the nonprofit.
• OneLegacy, the organ procurer in Los Angeles, spent more than $500,000 on unallowable or poorly documented items, a federal audit found.
Even after the inspector general faulted the nonprofit for spending money on Rose Bowl festivities, the group continued to submit a portion of its $75,000 per year float-sponsorship expenses to Medicare, CEO Thomas Mone said.
OneLegacy in 2006 spent $327,000 on the bowl game and parade, including float design and framework, football tickets, hotel rooms, limousines and flowers. Of that, $150,000 was improper, auditors said in a 2010 report, leading to a Medicare overpayment of $85,000.
Mone said the Rose Parade float generates TV, radio and newspaper stories worth more than $500,000, resulting in increased donations and donor registration rates.
After the audit, OneLegacy established a foundation so it could use private donations to pay for most of the float-related costs. Other procurers contribute to the float costs but use private money.
The Center for Organ Recovery & Education, the O'Hara-based organ procurer for Western Pennsylvania, most of West Virginia and a part of New York, paid about $5,000 to include an organ donor's face on the Rose Bowl float — but it used donations, CEO Susan Stuart said.
“We stand by our belief that the (float) is a highly effective donation education program and that it is an allowable cost,” Mone said.
The inspector general disagreed about the Rose Bowl costs, saying they exceeded what a “cost-conscious buyer would pay for public education.”
The Centers for Medicare & Medicaid Services refused to count subsequent sponsorships as an allowable expense for three years. The nonprofit has appealed.
• OneLegacy spent $32,000 on a three-day, beachfront retreat and $150,000 in credit card bills, including $8,400 at a New Orleans hotel. The nonprofit could not say where $26,000 went.
Mone recalled that the 2006 retreat was held at Montage, a five-star resort in Laguna Beach, Calif., where every room has an ocean view. It was “probably the only hotel large enough, in that southern part of our region,” he told the Trib, adding that OneLegacy claimed only allowable expenses as Medicare costs.
Auditors, however, said the nonprofit did not document the need for a retreat or demonstrate that the costs were reasonable.
“Conducting these retreats at locations that are conducive to uninterrupted education and discourse has helped to make these gatherings productive,” Mone said.
Mone said OneLegacy produced receipts for the credit card bills and the New Orleans tab paid to host officials from a dozen Southern California hospitals at a National Learning Congress.
Sponsorships for dinners and golf outings, he added, go through the foundation unless they are directly related to donor education.
Officials at the agency that oversees Medicare spending are tight-lipped about their oversight of organ procurement nonprofits. An agency spokesman initially declined to answer questions, then was unavailable because of the government shutdown.
Nonprofit administrators said the agency traditionally has paid little attention to them because they represent a small part of overall Medicare spending.
Organ donation can be a tough message to sell to the public, said Dr. Mark Fox, who serves on the ethics committee of the United Network for Organ Sharing, a national nonprofit that oversees organ allocation. A heavily watched event such as the Rose Parade, could generate awareness about donation and prompt people to become donors.
“Trying to find creative ways to bring message to an audience is challenging,” Fox said. “If you get three organ donors from watching the Rose Parade, that's a win all the way around. What on the surface might look like lavish spending could be creative genius.”
At the same time, the cost of losing donors because of spending missteps is high, said Stuart, CORE's CEO and president of the Association of Organ Procurement Organizations.
“If we lose the trust,” she said, “more people will die.”
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