Mitt Romney took a turn for the folksy in Iowa on Friday, telling an audience that, like many people, he didn’t fully understand what Medicaid did until late in life.
“You know, I have to admit, I didn’t know the differences between all these things until I got into government,” Romney said. “Then I got into it and I understood that Medicaid is the health care program for the poor, by and large.”
It’s a bit of an odd claim considering that Romney, while at Bain Capital, led a $311 million buyout of a huge hospital business that drew its income primarily from health care entitlements. From the January 25, 1989 New York Times:
American Healthcare Management Inc., a hospital company that has been in bankruptcy for nearly two years, said today that its board had endorsed an buyout offer of about $311 million from Bain Capital and Merrill Lynch Capital Markets.
The offer includes about $194 million in cash, $16 million in subordinated debt, $10 million worth of preferred stock and the assumption of approximately $91 million in subsidiary debt.
If its proposal is successful, Bain Capital, a unit of the Boston-based Bain & Company, would have a majority of the equity.
Based in Dallas, American Healthcare operates 23 hospitals between Florida and California. In the last year, the company has had average occupancy rates of about 33 percent of its 2,753 licensed beds. About half of the company’s income comes from Medicare and Medicaid.
”It’s a good, solid company with a continuing opportunity to get better,” said Mitt Romney, the managing general partner and founder of Bain Capital.
In general, the whole Iowa statement on Medicaid stands out as a strange one. Romney has two masters degrees from Harvard and his father, George Romney, was a governor and presidential candidate around the time Medicaid was passed and implemented. So not the kind of guy you’d expect to be unacquainted with basic civics. Perhaps Romney is pulling a bit of an “unfrozen caveman lawyer” here?
Update: According to the Romney campaign, the candidate meant that he didn’t understand the detailed particulars of each program during his 1994 Senate run.
Second Update: Peter Suderman notes that Romney cited his work as a health care consultant in the 1970s in his book No Apology as evidence that he understood how to deal with entitlements.
“When I was a young consultant to a health-care company in the late 1970s,” he wrote, “I predicted that health care would reach 20 percent of the GDP by 2050.”
Third Update: Romney wrote in No Apology that he had to learn the health care business on the fly as a consultant too. According to his account:
“So there I was at Morristown Memorial Hospital in New Jersey. It was 1983. My job was to find millions of dollars in hospital savings, identify ways to improve patient care, convince doctors, nurses, and administrators to take the steps we suggested, and share what we learned with other hospitals around the country. But there was one small problem: I didn’t know anything about health care–and that fact was more than a little unnerving for me and for the hospital’s CEO. This wasn’t the first time I’d been hired as a consultant to do a job in a business I didn’t know much about.”
Ultimately, however, he and his colleagues figured it out:
“After setting up our team at each of the hospitals, we began gathering data. We looked in minute detail at the costs of a number of procedures that we selected as examples, from triple-bypass surgery and gall bladder removal to suturing a minor laceration. We counted big things such as nursing hours, operating-room time, and pharmaceuticals, as well as little things such as Q-Tips, gauze pads, and the custodial time spent mopping the floors of patients’ rooms. We weren’t the only ones surprised by what we discovered–the differences in cost for the same procedure done in separate hospitals were large, sometimes by as much as 100 percent. Quality and outcomes also differed. One hospital, for example, had averaged much better recovery rates and half the length of stay for hip-replacement surgery than the other three. Differences like those pointed us toward changes that would yield meaningful cost and quality improvements. We also thought they might be of great interest to the patients getting hip replacements. We took those innovations we developed at Morristown Memorial nationwide. Bain & Company was ultimately engaged by nearly one hundred hospitals.”
