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Key Senator to Hold Hearing on Allina Spending
By Bill Catlin, Minnesota Public Radio
March 22, 2001
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Sen. Doug Johnson (seated, right) flanked by Sen Linda Berglin and Sen. Dallas Sams. Johnson announced plans to hold hearings in his Senate Finance Committee.
A powerful DFL lawmaker says he will hold a hearing on the spending practices of Allina Health System, one of the state's biggest health-care firms. Sen. Doug Johnson, DFL-Tower, said lucrative consultants contracts, golf and resort outings, and massages outlined in a complaint filed by Attorney General Mike Hatch are "outrageous and driving up health insurance premiums." Allina defends its administrative expenses and says the attorney general's report is "riddled with inaccuracies. "

STATE ATTORNEY GENERAL MIKE HATCH has sued Allina, seeking more financial documents from the non-profit. Hatch alleges the organization spent millions of dollars on questionable items ranging from golfing trips to lobbying and consulting fees.

A day after Hatch's filing, Sen. Doug Johnson, promised to hold hearings on the allegations.

"When you think of a charitable organization, they are supposed to be for the benefit of the people they are serving. What's happening with health care costs and these dramatic increases in administrative costs, I don't think is meeting the test of that law," Johnson said.

Johnson and other critics seized on the reports finding that some Allina officials spent money on massage therapists for employees while Allina's HMO Medica denies coverage for them.

Dr. Al Anderson of the Minnesota Physician Patient Alliance told a news conference that physicians have been pressured to limit health-care costs even as the Hatch report suggests executives went on a spending spree.

Minnesota Attorney General Mike Hatch Hatch alleges Allina spent millions of dollars on questionable items ranging from golfing trips to lobbying and consulting fees.
"I've got a patient that has severe muscle problems; she's a widow, she's an older lady, she gets a great deal of benefit from massage therapy. None of the HMOs pay for massage therapy. She happens to be under Medica and it angered me to see that the executives get massage," Anderson said.

Allina officials say massages were for staff, not executives. Hatch alleges nearly half of the health-insurance premiums flowing to Allina, went to to administrative expenses, not patient care. Hatch says he's suing for more information because Allina hasn't provided all the documents he requested. Hatch says his review has found symptoms of extravagant expenditures.

"Got a million dollars being spent on a consultant, not only paying $850,000, but everything from the condominium to the car to the first-class trips; I think it's every week back to California," Hatch said.

Hatch stresses he is not conducting a criminal investigation, but an effort to determine whether Allina is in compliance with Minnesota charities and non-profit laws.

For its part Allina, says Hatch's allegations are riddled with inaccuracies, and at odds with the conclusions of recent comprehensive audits by the IRS and state Department of Commerce. Executives say the company's management is responsible, and many of the situations Hatch highlights are employee incentives or rewards or other costs normally incurred in a competitive industry.

CEO Gordon Sprenger disputes any contention that administrative costs are driving up health-care costs, saying they are the result of other factors like rising pharmaceutical costs - issues, he says, Hatch isn't asking about.

"He has yet in this audit to ask for one patient bill. It's been highly focused around sensationalizing some administrative expenses. When taken out of context, you don't understand the motivation behind it or what it's purpose is," he said.

Sprenger says Allina's administrative expenses are 10 percent, lower than the national norm of around 15 percent. He says the company welcomes a full airing of the issues.

MPR's Morning Edition host Cathy Wurzer spoke to Attorney General Mike Hatch and Allina CEO Gordon Sprenger on March 22, 2001.
  • Listen to the Hatch interview.
  • Listen to the Sprenger interview.
    "We're very interested in having these kinds of discussions, not only with the attorney general. Our books are open to the public. We feel very accountable to the public and are anxious for this process to move on ahead," Sprenger said.

    This is not the first investigation to cast doubt on the company's spending. Last year, a report from U.S. Department of Health and Human Services auditors questioned expenses at Medica, including crystal vases for executives and a box at the Target Center. Allina officials say the company no longer leases the box.

    In the interest of full disclosure, Allina's Chief Operating Officer David Strand chairs the Minnesota Public Radio Board of Directors.