What Explains It: The Cost of Medical Supplies

Published in Vermont Business Magazine (print edition)

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If you’ve heard that Tylenol in a hospital may cost 100 times more than it would if you bought the pills yourself, you heard right.

If you’ve read that hip replacements or cardiac surgery cost more at some hospitals than the procedures would at others, you read that right, too.

And if you know that private insurers pay more for services than Medicare or Medicaid, and that uninsured patients (except those on charity care) pay even higher rates for the same treatments, this may aid your understanding of the Tylenol phenomenon, which plays out in different ways on virtually every facet of health care costs.

Alternately referred to as cost-shifts or cross-subsidizations, the transactions leave charges for health care, including medical supplies, all but untethered from their line-item costs. Like a prism spinning in a window on a sunny day, what shows after financial models are applied to medical services looks like anything but the surface costs they’re comprised of. What’s refracted, instead, is a menagerie of ever-shifting, oddly shaped rainbows — but much, much less pretty.

Cost shifts and cross-subsidization

1chart_salnonsalThe so-called “cost shift” at the heart of much debate over health care reform typically refers to disparities among different kinds of payers. The theory is that private payers (mostly insurance companies, on behalf of their subscribers) reimburse hospitals at higher rates than Medicaid and Medicare, to make up for the government payers’ lower rates.

Not all economists buy the cost-shift theory of price variation among payers. Some studies in recent years indicate that wildly divergent reimbursement rates are more a function of marketplace competition and negotiating prowess, and less about private burdens amplified by government underfunding. Reimbursement rates, after all, vary not just between public and private payers, but also among different insurance companies servicing the same market.

But whatever the reason, one thing is clear: Different payers pay different rates for the same service.

A related transaction that’s undisputed, if not widely understood, is when hospitals up-charge for basic procedures to recover their losses from more complicated care. Such “cross-subsidization,” as it’s known, extends beyond services to the gamut of medical supplies, from pills to gauze pads to knee braces.

Amy Vaughan is Director of Revenue, Finance and Reimbursement at the University of Vermont Medical Center. When asked to explain the relationship between a hospital’s costs and the charges passed along to patients, she laughed.

“Well, it’s —,” she stopped and tried again. “That’s complicated,” Vaughan said.

Vaughan explained that medical supplies get marked up not just to cover the regulatory overhead associated with each one, but also to help make up for what the other cost shifts and cross-subsidizations don’t.

In the case of the Tylenol phenomenon, made notorious in the 2013 TIME Magazine article “Bitter Pill” by Steven Brill, the drug costs patients outrageously more than it costs hospitals not only because there’s a lot of work and red tape associated with administering it. The hospital also up-charges one patient’s Tylenol, for example, because it’s losing money on another patient’s psychiatric services. 

Specific profit-drivers and loss-leaders vary from hospital to hospital, and their algorithms are far more complicated than to imply a one-to-one ratio anywhere within the mix. But the concept is simple: Hospitals mark up medical supplies to help make up for losses elsewhere in their business models. This rings true in profit- and non-profit facilities, alike.

Cory Gustafson, Director of Government and Public Relations for Blue Cross and Blue Shield of Vermont, said it takes a paradigm shift to understand the proposition.

“It doesn’t make sense when it’s lined up against our own common sense of supply and demand,” Gustafson said. But pricing in a highly regulated environment like Vermont isn’t determined by classical free market principles, he said. This is, in part, because hospitals are obliged to provide complex services on-demand, even when the demand for those services is not sufficient to sustain the business. 

A small hospital’s emergency room is a good example, Gustafson said. “The community needs that ER, so (the hospital) ends up needing to make revenue in other places to subsidize it,” he said.

This is why BCBSVT, in its rate negotiations with hospitals, doesn’t fixate on how much it’s asked to pay for a knee brace, for example. The insurer agrees to pay the price it does because it knows the knee brace is carrying part of the facility’s overall financial weight, he said. Making sure the hospital is adequately funded is the insurer’s way of making sure the whole health care system is there when members need it.

Cross-subsidization: seen, not touched

2chart_nonsalcats-revised2The fact that you can’t hold a rainbow doesn’t make it any less real. Likewise, cross-subsidization is a very definite part of the health care cost equation, though its exact size and shape are all but impossible to quantify.

Vaughan said she doubts the UVM Medical Center could even figure out how much of its hospitals’ revenues are comprised of reimbursements for medical supplies, because reimbursement for services is so divorced from any system of line-item charges. 

The UVM Medical Center and Central Vermont Medical Center, the health network’s two hospitals in Vermont, are both designated by the Centers for Medicare & Medicaid Services as “prospective payment system” hospitals. This means billing — at its most basic level for inpatient care — is based not on the cost of specific services provided to any particular patient, but on that patient’s diagnostic code. (Reimbursement works somewhat differently for some of Vermont’s smaller, more rural hospitals.) 

For example: Imagine if two patients, we’ll call them Ginger and Fred, both had the same health care plan with the same insurer, and were admitted to UVM Medical Center for an appendectomy the same day. Ginger stays only three days, while Fred stays six (but with no complicating factors that result in a second diagnostic code). Ginger and Fred’s insurance company would pay the hospital the same amount for both patients, even though clearly more medical supplies (and labor) would have been used in the process of caring for the patient who stayed twice as long. 

Vaughan cautions that such an example is an oversimplification, but it gets the point across: The hospital may clear a profit from Ginger’s payment, but lose money on Fred’s treatment. Either way, its budgetary goal is not for each service to pay for itself, but for all payments to cover the cost of all services, with some left over to reinvest in the organization’s people, programs and facilities. 

“We look at it in totality,” Vaughan said. “We’re looking at covering (our costs) at the global level, not from a line-item level. We’re not saying whenever we do X procedure, we need to cover X cost.”

The Green Mountain Care Board, with regulatory authority over hospital budgets, likewise focuses on the forest, not the trees. Mike Davis, GMCB Director of Health System Finances, said the board’s priority in hospital budgeting is to curb overall cost growth, not to micromanage spending.

“Whether medical supplies are going up 15 percent or down 15 percent, we don’t try to manage at that level,” Davis said. However hospitals piece together their budgets to stay within certain targets for overall growth is up to them, as long as quality of care is maintained, Davis said. 

The Green Mountain Care Board collects categorized spending projections from all of Vermont’s hospitals, so the rough outline of each facility’s equation is visible. Medical supplies, including pharmaceuticals, account for almost 10 percent of Vermont hospitals’ overall budgets. At individual hospitals, that proportion ranges from less than one percent at Mt. Ascutney Hospital and Health Center, a rural Critical Access Hospital, to 13 percent at the UVM Medical Center, a Level 1 Trauma Center. Davis cautioned that these numbers are a good place to start, but reporting nuances among hospitals complicate direct comparison.

Among the complications: Different hospitals have different overhead and different payer mixes to compensate for. Plus, the Board’s reporting instructions include general definitions for medical or surgical supplies sold, drugs sold, and other related expenses — as granular as it gets, he said. But each hospital may apply these definitions somewhat differently, and the Board has never conducted a reporting audit, he said.

Teasing apart the dollar value of cross-subsidized medical supplies also is complicated by a proprietary veil: Each hospital and insurance company negotiates reimbursement rates separately, and privately. Insurance companies get a discount off the full-price charges, but neither hospitals nor insurers want their competition to know how much (or how little) it’s worth.

The art of the bargain

3chart_medsuppercenttotalIt’s up to the Green Mountain Care Board to make sure hospitals and insurance companies set fair rates that keep health care reliable, hospitals solvent and health insurance affordable. Inside the hospitals, it’s up to supply chain managers to find good deals. 

Charlie Miceli, C.P.M., Vice-President and Network Chief Supply Chain Officer at the UVM Health Network, said medical supplies procurement has evolved from a back-office function to an integral part of the network’s financial strategy. 

“It’s not just three bids and a cloud of dust anymore,” Miceli said. “In the old days, you just went for the lowest bid. You were on a hamster wheel of repetitive, non-critical processes.” 

Today, Miceli said, physicians and nurses are pulled into the procurement process and even into bargaining sessions, both to get them invested in savings and for their expertise. He said in some cases, “procurement stiffs” can only get negotiations so far, but practitioners who work with the supplies in question can push a good deal across the finish line.

The UVM Health Network also has signed on with several “third-party decision support providers.” Miceli said the cost of these contracts is more than offset by the savings they facilitate through specialized consulting, analytical tools and group purchasing power. 

The UVM Medical Center buys about 30 percent of its medical-surgical supplies through a consortium of 116 academic medical centers that comprise about $52 billion of annual buying power. The University HealthSystem Consortium’s benchmarking data show that UVM Medical Center just makes it into the top one-third of all academic medical centers for price competitiveness on med-surge supplies. Miceli said the benchmarking data help his team identify where they could be getting better deals by giving them a sense of the prices being paid by others in the hospital’s peer group. 

And with four hospitals under its umbrella, the UVM Health Network claims a group purchasing power of its own. 

“We’ve taken over $6 million out of the system,” Miceli said, just by contracting together for a few high-ticket items, including cardiology, orthopedic implants, imaging services and pharmaceutical distribution. 

Miceli said the network is about two years away from having all its supply chain management aligned on one computer system, and that it’s already taken over supplies ordering and delivery for almost all its primary care clinics, as well. 

“Maybe you can get two more appointments in per week, because you don’t have to count sutures or supplies to order,” he said. Their strategy with supply chain management is not just to save money, but time. “It’s the time that’s even more scarce,” he said. 

The health network’s growing heft also helps when it gets into procurement negotiations with medical supply companies, many of which are undergoing their own rounds of consolidation that let them throw new weight around the bargaining table. But it can only get them so far. Case in point: One of the only major national suppliers of IV solution, Hospira, was recently bought out by Pfizer. Not interested in leveraging the product as a loss leader, as Hospira had done, the new owner — with a mandate for shareholder return, not affordable community health — is making up for lost profits. 

“I understand what they’re doing,” Miceli said. But he said the hit to UHC members alone is about $600 million from the Hospira acquisition and a change in another company’s distribution of key cancer-fighting drugs. “(A)t the end of the day, we’ve got to figure out something else. That’s why supply chain management has risen from a back-office function like it was when I started in the ’80s,” he said.

Mike Del Trecco, Vice-President of Finance at the Vermont Association of Hospitals and Health Systems, said the health care system is complex partly because of such shifting market forces as any business faces, but also because hospitals negotiate those market forces while delivering extremely specialized care to individuals with unique situations. The best way to manage that complexity, he said, lies in current efforts to reform health care delivery away from a fee-for-service system.

“You come up with an aggregate approach for paying for that population,” Del Trecco said. “The status quo is gone from our mind. It’s not even an option.”

Again, it’s a paradigm shift. One that’s already underway, where the concept of services comprised of line-item charges may mean even less than it does today.

Three Years After Irene, Waterbury Complex Stretches for Higher Ground

751 words / VTDigger.org

On Aug. 28, 2011, Tropical Storm Irene began flooding state employees out of their Waterbury offices and psychiatric patients out of their beds.

Three years after eight feet of floodwater forced the state out of its historic complex in Waterbury, Vermont’s largest ever capital construction project is well underway to bring the workers back. Photo by Hilary Niles

Three years later, steel beams three stories tall with cross bars at the top prop up faded brick walls from a courtyard. A mason from Irasburg fills ground-level windows with oversized granite bricks. A Monarch butterfly rests on a swaying stalk of tall grass that sprouted next to an oak tree circled in chain link fence.

The $95 million project — $125 million with design fees and other project costs factored in — started with demolition of 15 buildings a year ago.

Low-lying land near the Winooski River, where office buildings and a boiler plant once stood, now is sloped for stormwater runoff and has been seeded with grass. Pickup trucks, cranes and cement mixers track a dirt lane that soon will be built into a paved road about six feet higher.

Project manager Mike Stevens said on a tour of the site Tuesday that when the decision was made to rebuild at the same location, architects reconfigured the sprawling facility. New construction will be built closer to the quarter-mile long historic corridor, and on higher ground, to withstand a 500-year flood.

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Jay Peak loses trust of first EB-5 investors

2651 words / by Anne Galloway and Hilary Niles / VTDigger.org

A group of immigrant EB-5 investors are incensed that Bill Stenger, president and CEO of Jay Peak Resort, seized ownership of the Tram Haus Lodge and turned their half-million dollar equity stakes in the property into IOUs.

Investors had no knowledge of Stenger’s actions until five months after they were executed.

Bill Stenger (foreground, right), president and CEO of Jay Peak Resort, presides over the ribbon-cutting ceremony at the immigrant-funded Stateside Hotel and Baselodge. Photo by Hilary Niles / VTDigger

Stenger and his partner at Jay Peak, Miami-based Ariel Quiros, dissolved the company on Aug. 31, 2013, turned the investments into unsecured loans and “waived” investors’ legal rights, according to documents obtained by VTDigger. Stenger says he sent an email to investors with the promissory note on Jan. 24 of this year, but he did not mail official, paper copies until May.

After the investors sent letters of complaint to Stenger and the state, Jay Peak agreed to change certain terms of the IOU in a take-it-or-leave-it offer earlier this month.

In an interview, Stenger said he did not need to consult with the 35 limited partners in Jay Peak Hotel Suites, LP, before he dissolved the company, because Jay Peak had the legal right to do so under the limited partnership agreement with the investors.

Stenger said he regrets not communicating better with both investors and state officials, and he takes full responsibility for the “big mistake.”

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Analyst, economist weigh potential of IBM sale to Globalfoundries

1348 words / VTDigger.org

If IBM were to sell its computer chip-making unit to California-based Globalfoundries — patents and all, as the company is widely rumored to be considering — would the new owner of Vermont’s largest manufacturing plant even want to keep it?

Probably not, according to Len Jelinek, a semiconductor manufacturing industry analyst for the global information firm IHS.

IBM is Vermont’s largest private employer, with about 4,000 workers, and anxiety about the impact of the plant’s sale and potential closure is palpable.

Despite these feverish efforts to keep IBM in the Green Mountain State, there is little the state can do to prevent a potential closure of the plant. Global trends are driving behind-the-scenes negotiations between powerful industry players.

Job losses of IBM’s magnitude are easier to absorb over time, economist Art Woof acknowledged. Still, he said, the area’s financial engine is diversified and resilient enough that even such a “worst case scenario” would not kill the economy.

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Study shows 40 percent of Vermont children are not ready for Kindergarten

769 words / VTDigger.org

A new report on the health of Vermont’s children shows that 40 percent of the state’s children were deemed “not ready” for kindergarten in 2012-13. Almost one-third of third-graders read below grade level — a figure that jumps to 45 percent for children living in poverty.
The report, “How are Vermont’s Young Children?” published annually by Building Bright Futures, the state’s early childhood education advisory council, analyzes key factors that affect children’s health and academic success.

Children sang and played at the launch event for Let’s Grow Kids, a statewide public education campaign about the importance of early childhood experiences. Photo by Hilary Niles/ VTDigger

Vermont’s infant mortality and premature birth rates are very low, while the proportion of children with medical insurance is high, according to the report.

But two out of five Vermont kids under age 6 live in low-income households. And the number of children placed in protective state custody has increased 17 percent since 2002.

“Any business leader that does not think this is a huge business issue, candidly, they just haven’t done their homework,” Green Mountain Power president and CEO Mary Powell said Friday morning. She was speaking at Burlington’s Main Street Landing Performing Arts Center for the launch of a three-year, statewide public awareness campaign about early childhood development.

Q Empire: The man behind the Northeast Kingdom’s biggest plan

3332 words / VTDigger.org

Ariel Quiros is the entrepreneurial force behind Jay Peak ski resort and the $600 million Northeast Kingdom Economic Development Initiative – one of the largest development projects ever attempted in Vermont.

Though the project is high profile, Quiros is not. The international tycoon, though sometimes seen, is seldom heard.

Ariel Quiros whispers to Gov. Peter Shumlin during a press conference at Jay Peak’s Stateside Hotel and Baselodge. Photo by Hilary Niles/ VTDigger

The first generation American stands out at press conferences for his mystique: When he’s not got the ear of the governor, Quiros is most often seen standing uncomfortably before a crowd with pursed lips, staring silently and expressionless, at nothing in particular, through ice blue eyes.

Quiros quietly presides over an integrated set of projects that together constitute the largest private investment Vermont has ever seen: expansions at Jay Peak, development of the newly renamed Q Burke Mountain ski area, the mixed use Renaissance Block planned for downtown Newport, the future site of a biotech firm in the same town, and the promise of a new and improved Newport State Airport in Coventry.

“I make the vision,” he says quietly, a touch of gravel in his voice after 20-plus years of smoking.

His accent, clearly from New York, is also infused with the Puerto Rican and Venezuelan accents of his mother and father, respectively. He speaks three languages and his English borrows sometimes a tense from Spanish or a cadence from Korean, his wife’s native tongue.

He just sees things, Quiros says. He gets a vision for what can be, ignores all obstacles, and surrounds himself with people who can make it happen.

And they do, which is why Quiros likes to keep to himself. Business risk is thrilling, but trust is a precious commodity for a millionaire. Quiros is generous with friends, but says he hasn’t fought for all he’s built to give it away, much less have it taken.

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Community fears history will repeat itself at Q Burke Mountain

3310 words / VTDigger.org

It’s the day before Q Burke Mountain opens for the winter, and Ary Quiros could just as well be preparing for battle as for business.

The new CEO is opening the ski resort for the first time since he started at the mountain the previous winter, and he’s amped. If Quiros, 36, can turn this chronically failing but beloved ski area into a stable business, he will succeed where prior, much wealthier, owners have failed.

The arc of history and local expectations give him long odds. But Quiros — and his staff — are determined.

Wearing a weathered, Army green jacket and frequently checking a watch face practically the size of his wrist, Quiros shuttles from one outpost of operations to another to check on his troops: snowmaking, ticket sales, kitchen, pub and cafeteria. Finances. Marketing. Housecleaning.

“It’s like being in the Army again,” Quiros says. The 12-year veteran of the wars in Iraq and Afghanistan is now a captain with the Vermont National Guard. He relishes intensity in the field, clarity of mission, camaraderie, and he applies his military leadership experience to Q Burke Mountain operations.

Ary Quiros served in the Army’s 101st Airborne Division in Iraq and held other posts in Afghanistan and South Korea before taking over as CEO of Q Burke Mountain ski area in Vermont. Photo by Hilary Niles/ VTDigger

“You take care of them,” Quiros says about both his military units and staff. “They watch your back, and you move forward.”

The responsibility to provide for and protect his staff weighs heavily on Quiros, perhaps even propels him.

And his military analogy for mountain operations is echoed by his father, Ariel Quiros, who purchased Burke Mountain in 2012.

Ariel Quiros says half a dozen buyers before him couldn’t close the deal because of the mountain’s high-profile history and reputation with banks and investors: Bankruptcies dating back to the 1980s. A bounced tax check to the town for $97,374.30. More bankruptcies. A public auction. Ginn Companies’ $675 million default with Credit Suisse bank.

“Boom boom boom, bombs away,” Quiros says. “Everybody’s shelling the mountain, all the banks, doesn’t wanna fund it. All the businessmen failed.”

Some of them, Quiros notes, possessed or managed wealth that far exceeds his own, built from international trade since the 1980s. Bernd Schaefers was a German movie producer who made “The NeverEnding Story” and “In the Name of the Rose.” Donald Graham founded investment firms that collectively manage upwards of $7 billion. Developer Bobby Ginn presided over real estate transactions across the country that also measure in the billions.

None of their business plans at Burke held. Some went down in flames.

And plans now are as grand as ever: to brand the mountain as year-round training grounds for elite athletes. Buildout is expected to cost about $108 million and will include four hotels, an aquatic center, tennis facility and indoor mountain biking park.

But this time, even more is at stake.

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Should Vermont loggers be licensed?

3041 words / VTDigger.org

Beverly Grout suspects a neighbor may have told the loggers that she and her husband Fred would be in the market to sell some timber.

She said the loggers, Ken Bacon Jr. and Ken Bacon Sr., knocked on the door of their home on a hill overlooking Barre back in June. Within days, the Grouts signed a contract.

“We didn’t realize who they were,” she said.

Fred, Beverly and Luke Grout (left to right) forced loggers off their property, and now must repair the damage that was left. Photo by Hilary Niles/ VTDigger

Left with 20 acres of damaged forestland and a blocked stream in Barre Town the Grouts wish they had known more about the Bacons’ track record.

The father and son logging team have a long legal history with Vermont environmental and criminal courts. Both men are under order to notify the state of when and where they’ll be cutting, but officials were not informed they were working at the Grout property.

“Unfortunately, they didn’t clean up thoroughly when they left,” Barrett said. Now two stream crossings are blocked, landings and fields that weren’t properly seeded are muddy, and knee-high ruts from machinery further contribute to soil erosion.

Attempts to reach the Bacons were not successful. A woman who declined to give her name, but identified herself as their secretary, said in a phone interview Thursday night that the father-son team from Barton are loggers who want to do the best timber management possible.

After asking the Bacons to leave several times, the Grouts say, they finally called the police in late August to force them off the property.

The Grouts say the Bacons harvested timber they weren’t supposed to, didn’t pay for all the loads they took and improperly dammed a stream with skidder bridges, which they subsequently left in place. The Grouts are left to clean up the mess or pay someone to do it — prospects they hardly can afford.

The Bacons’ secretary says the Grouts had initiated the relationship — not the other way around — but never informed the Bacons that the land was in Current Use. She says the men did nothing that wasn’t agreed to, paid the Grouts for every load, can’t be blamed for not completing a job they were kicked off, and are preparing to sue the Grouts for breach of contract for not being allowed to finish.

The Department of Environmental Conservation has launched an investigation.

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Determined Columbia residents give and receive rides to polling places

789 words / The Columbia Missourian 

COLUMBIA — Karin Davis rolled into Oak Towers on Tuesday morning after getting a ride from Columbia Paratransit to the polling location.

“I’m in a wheelchair, and if I can vote, everybody else damn well can, too,” she said.

The 65-year-old is not shy with her opinions — and she is grateful for the ride.

Davis has relied on Columbia Paratransit for most of her transportation needs for about five years. She is one of 30 or more people who, by mid-Tuesday afternoon, had received help getting to the polls.

The Boone County Republican and Democratic parties, Grass Roots Organizing, the National Association for the Advancement of Colored People, MU’s Legion of Black Collegians and Economy Cab Co. all provided free rides to voters.

Columbia Transit has extended bus operations until 8:45 p.m.; Columbia Paratransit and Services for Independent Living also chipped in, but rides for passengers with special needs had to have been scheduled in advance.

One woman learned this the hard way when she called on her husband’s behalf to Boone County Democratic headquarters Tuesday afternoon. Harry Feirman, a member of the Democratic Central Committee who was staffing the office at the time, had to tell her that none of their volunteers were equipped to help.

Other callers without special needs fared well. One woman called for a ride and, within minutes and between several other phone calls, Feirman had dispatched a driver. As of about 2:45 p.m., he said they had given about 10 rides.

But most of the calls he had taken were from people unsure of where to vote. Feirman, stationed at a desk facing Walnut Street, entered their names into the Boone County Clerk’s voter information page to look up their polling locations and provide directions if needed.

A more unusual call came on behalf of a Korean War veteran at Truman Veterans Hospital: He needed to vote from the hospital. In keeping with protocols, a Democratic volunteer and the veteran’s wife, a Republican, paired up to help him. The two rode to Boonville to pick up the man’s ballot, turned around to drive it to him in Columbia and waited while he filled it out. At least two hours later, the two were en route back to Boonville to submit the ballot to polling officials.

Marion Mace Dickerson was one of the drivers who called in for duty at Democratic headquarters. This is the second time the retired Veterans Affairs social worker has volunteered to drive.

“It’s kind of fun,” she said, “and it gives me a good feeling to help someone.”

Mace Dickerson said that although many older people lose their ability to drive, it’s nonetheless important that they get the chance to vote.

This resonates with the sentiment expressed by John French. On a short lunch break with NAACP volunteers at the Second Baptist Church, he recalled growing up in northeast Arkansas at a time when his parents had to pass an exam to vote. The business development specialist was a teenager when they returned from their first attempt, defeated.

In the church gathering room, French sported a bright yellow shirt emblazoned with “NAACP VOTER PROTECTION” in black letters. Around him, about two dozen other volunteers, similarly clad, finished a hot lunch of spaghetti with meat sauce, hot dogs with onions and a bounty of chips and crackers. A giant television was wheeled to the front of a riser, election-day news replacing the view of a large wooden cross on the wall. Streamers hung in coils from the tongue-in-groove wooden ceiling, and spirits were high.

The crew had been out on the damp, gray day canvassing neighborhoods around Columbia — Douglass Park, Elleta Boulevard, Indian Hills and others. They used colored markers on a wall map to keep track of where they had been. They were heading out again for more, and French was on his way to a phone bank.

His civic involvement was partly inspired by witnessing the ways integration changed the mainstream. He noticed new issues being introduced into political dialogue and a new interest in people from minority communities once they became eligible voters.

“Things changed,” French said. “But at that time, it was still a struggle.”

Karin Davis also recollects the days of the country’s civil rights evolution.

“I remember watching it on TV, the guys crossing the bridge, with the dogs and hoses being turned on them,” she said.

Like French, she was a teenager at the time. She saw people being knocked off their feet by the force of the water. “If I’d have been a couple years older, I’d have been down to fight with them.”

“People died so you can vote,” she said. “So get off your (butt) and go vote.”

Schaefer brings tenacity, ambition to second state Senate campaign

1962 words / The Columbia Missourian

COLUMBIA — Kurt Schaefer doesn’t mind giving advice, but he’d rather be the one making decisions.

The incumbent 19th District senator learned this about himself after advising countless legislators and policy makers as a prosecutor in the Missouri Attorney General’s office.

“After a while, it could get frustrating to see them not taking our advice, especially on policy issues,” Schaefer said. In 2007, he decided to fix that. He’d try to make the laws himself.

Schaefer, a Republican, ran for state Senate in 2008 and beat the incumbent Democrat, Chuck Graham, whose favorability sank after his drunken driving arrest the previous October.

Now Schaefer, who has become chairman of the Senate Appropriations Committee, is running for re-election against Democrat Mary Still, a two-term 25th District representative in the Missouri House.

It is rare for a Republican to represent the Senate district that includes Columbia, which politically leans to the left. Schaefer, who won by fewer than 400 votes in 2008, was the first Republican to take the district since at least 1979. If he wins in November, it would be the first time a Republican would serve two terms in the 19th District seat, he said.

Self-reliance

“My wife told me she’d leave me if I ever ran for office,” he said with a grin last week from his corner office at Lathrop and Gage, the Jefferson City law office where he is a partner. Schaefer left his post as a state prosecuting attorney to join the firm, which is based in Kansas City, with offices around the country.

Schaefer passed a rainbow-colored plastic slinky back-and-forth from hand to hand. The Lathrop and Gage logo is wearing off the side of the prop he often uses to keep his hands moving while he talks.

He and his wife, Stacia Schaefer, joke about her ultimatum now, but running for office was a big decision at the time. Stacia Schaefer had grown up in Jefferson City and gone to school with one of the daughters of former Missouri governor and U.S. attorney general John Ashcroft. She saw firsthand how life could get complicated for family members of public figures.

“But I don’t think it has to be that way,” Kurt Schaefer said. After much discussion, they agreed that he would run, and they would turn the experience into a learning opportunity for their three children: Max, 14; Wolf, 11; and Lena, 7.

Kurt Schaefer reasoned that their kids could learn a lot more about how government works by watching their dad than they could from school. So far, he’s pleased with how it’s worked out.

“We put age-appropriate expectations on the kids. I think they’re very mature for their age,” Schaefer said.

The family lives in a modest red ranch-style home they had built two years ago on the south side of Columbia, on 11 acres at the corner of the historic Douglass Farm. Abby, their 9-year-old mutt, circles the hilltop field every morning and shies away from the coyotes they frequently hear at night.

The Schaefer couple lived in an updated slave cabin on the farm when they first moved back from Vermont. It was small but fully modernized, and having lived in rural New England, the farm’s atmosphere suited their pace.

But the cabin felt too small after their first child was born. The Schaefers moved to a more modern development in Columbia and kept in touch with the Douglass family, from whom they eventually bought the land where their current house was built.

On an autumn Friday evening, Max and Wolf pack for an overnight scouting trip they’ll take the next day, and Lena turns white tissues into Halloween ghosts that she tapes onto the walls around the open-concept living area. An online music station featuring Herb Alpert and the Tijuana Brass, not too loud, pipes lounge music from the living room, where wide windows offer a view of the autumn leaves in the surrounding woods.

Schaefer grew up the youngest of five siblings near St. Louis, in Town and Country. He describes his parents as both “great” and “fairly eccentric.” They traveled extensively as a family — Schaefer had been to all 48 continental states plus Canada and Mexico by the time he was 18.

Ambition

Schaefer took up bass guitar at 13 and continued to play through college at MU. His band, Third Uncle (named after a Brian Eno tune), performed original songs in clubs around Columbia in the mid- to late-1980s.

“Our music was kind of comparable to the Smiths, or Echo and the Bunnymen. But I like all kinds of music,” Schaefer said.

He said he thinks Columbia’s music scene has changed a lot over the years. “Back then, we’d form a band just for the sake of an opening gig, to play something like all 1950s country covers,” he said.

The Blue Note was still at its original location on Business Loop 70 when Schaefer started working there. By the time he left town for law school, he had worked his way from doorman to bartender to manager.

“It was so narrow behind the bar that there was really only room for three or four of us at a time,” Schaefer said. But customers would line up five or six deep. “You’ve got to be able to do multiple things at once,” he said.

Richard King, the owner, would tell them all to never make an empty-handed trip.

“If you’re going to the one end of the bar to get a bottle of beer, you better have something in your hands on the way down,” Schaefer remembered. It’s a lesson well-suited for someone with a constant need to move.

King described the scene as “one big happy family” in the Blue Note’s early days. “We all believed in the music,” he said. But he was not surprised when Schaefer left town to attend Vermont Law School.

“That’s what ambitious people do. They move on,” King said. The friends kept in touch, and they reconnected when Schaefer returned to Columbia.

If Schaefer’s move into law didn’t surprise King, his shift to politics did.

“I was stunned,” King said. He recalled the Christmas party in 2007 when Schaefer shared his intention to run for Senate as a Republican.

“But you’re not a Republican!” King remembered saying. The revelation underscored what their relationship had been, and would continue to be, about: Music. Friendship. Not politics.

Schaefer, unfazed by his friend’s surprise, asked him to put up a yard sign with his name on it. King agreed without hesitation.

“But that does mean I’ll have to put up an Obama sign right next to yours,” he warned. As long as his own name was up there, Schaefer said, he didn’t mind a bit.

Schaefer said he always has been fiscally conservative, and he has long held an interest in politics. After taking a year off from college to backpack through Europe, he returned to MU to study geopolitics. But the professor he had hoped would become his mentor retired, so Schaefer shifted to physical geography, instead. This eventually led to his interest in environmental law.

While in college, Schaefer met Stacia Wyrick. He eventually traded the Blue Note for law school and music for love. He sold his last guitar — a Rickenbacker 4001 — to buy an engagement ring, a square diamond from Betz Jewelers on Broadway. Soon after, the two were bound for Vermont.

Stacia Schaefer got into design at a small, elite publishing house. Kurt Schaefer earned a juris doctorate in 1995 and a master’s in environmental law, magna cum laude, in 1996.

Politics & policy

In many ways, Schaefer’s path of career and family provided the tempo for his evolving political identity.

“Lawyers deal with the law, which is just codification of public policy. They’re all amateur political experts. And every lawyer thinks they know how to run a campaign. And they don’t, by the way,” he said.

But he would learn this later. First, he had another surprise in store.

Schaefer had taken a job with the attorney general’s office, assuming he’d be placed in the environmental division. Instead, they placed him — over much protest — in criminal prosecution, which he was sure he wouldn’t like. Within two months, Schaefer was converted.

“You’re in court all the time, and it’s you and a judge and a jury, and you’re on your own,” he said. “I like the adrenaline. I like the fact that everything is live and spontaneous.”

The Schaefers started their family while he was working at the attorney general’s office, and as their children grew, he began to look at public policy in still another way. Their children attended a magnet school where the curriculum for each student was built around an Individually Guided Education plan, or IGE. If a kindergartner already understood math, he could study with the first-graders, for example.

“But with MAP testing and No Child Left Behind, that took away some of that flexibility,” Schaefer said. “Instead, all third-graders have to be operating on the same page. It makes you wonder whether it’s a good idea,” he said. “And it’s not.”

Rather than protest educational regulations, Schaefer wanted to be in a position to change them.

He likens his role as a senator to that of a prosecuting attorney: “You just have to learn the facts, remember them and craft that into an argument,” he said.

To learn those facts, Schaefer tunes his ear.

Kristin Sohl has worked with Schaefer and other legislators in her role as a child health advocate. She is a pediatrician and medical director of MU’s Thompson Center for Autism and Neurodevelopmental Disorders. She also created a program called Community Advocacy Through Resident Education, or CARE, which connects medical residents with legislators to talk about child health in Missouri.

“Legislators have said to me that plumbers unions have better advocacy in the statehouse,” she said. And when doctors do talk to lawmakers, she said, it tends to be about reimbursements or tort reform instead of health.

“The idea is to break the ice, to keep doctors from being nervous about talking to legislators down the road,” she said. Running the program keeps Sohl in touch with legislators, too.

She asks each legislator to meet about four times a year with one resident. Most of the time, she said, they’ll spend up to an hour. Schaefer has participated from the start, as have Chris Kelly and Stephen Webber, both Democratic Missouri House representatives for Boone County. Still also participated in the program early on, Sohl said.

“Kurt Schaefer has always been an absolute advocate for children,” Sohl said. “He meets with us, and is always willing to step up. He listens to residents and helps us navigate the Capitol and the legislative process.”

Strategy

Schaefer enjoys better name recognition now, as an incumbent, than he did in 2008.

At that time, he said, while he had plenty of connections in Jefferson City from his work at the attorney general’s office and at Lathrop and Gage, the people who knew him in town were mostly bar and restaurant owners. It wasn’t a bad group of people to know, he pointed out, because between them all, they know everybody else. Nevertheless, he had a lot of work to do.

At first, he couldn’t get funding from the Senate Majority Fund, so he raised about $100,000 himself from friends and family, he said. He eventually did get some financial backing from his party, but Graham’s campaign still outspent him.

“It’s not a good position to be in, because you don’t have the resources to get your message out,” he said. “And I don’t plan on finding myself in that position again anytime soon.”

It is certainly not a disadvantage Schaefer suffers this year. His campaign has brought in nearly $1 million as of the most recent campaign filings, compared to less than $250,000 by his opponent.

Money isn’t all that’s changed since 2008. Schaefer did some of his own canvassing then, going door-to-door to introduce himself and ask for votes in person. This year, he said, he has little time for it, between his law practice and ongoing work as the Senate Appropriations Committee chair.

Most legislators are done with state work when the session ends, but Schaefer stays in contact with the committee staff every day. He’ll often stop by the Capitol three times a week to consult on revenue and spending estimates or to get updates on interest rates for potential future bond issues, for example.

This level of involvement is a good match for Schaefer’s interests.

“Most senators are the political people, and their chief of staff is a policy wonk,” Schaefer said, but his relationship with Yancy Williams, his chief of staff, is just the opposite.

“I’m the policy person, and he’s the political person,” he said. Williams is on hiatus from Schaefer’s staff during the election in order to consult for the campaign.

If Schaefer wins re-election, term limits automatically would make his second term his last in the Senate. But that may not make this his final campaign.

“I’m just going to get through this election — knock on wood and don’t jinx it,” he said. “But I always like to do new things. So win or lose, I’m sure I’ll look at other things. We’ll see.”