The 1998 implosion of the 14-hospital Allegheny Health, Education and Research Foundation in Pittsburgh shattered the hospital marketplace in Pennsylvania's two largest cities and left the municipal bond market for private, not-for-profit hospitals shellshocked because of the sweeping ramifications of the system's collapse. AHERF's $1.3 billion bankruptcy, one of the largest failures in not-for-profit healthcare, is largely blamed on the foundation's acquisition-crazed CEO Sherif Abdelhak, enabled in large part because of a board of directors that was widely acknowledged to be asleep at the wheel or had conflicting interests. The bankruptcy set the stage for a new era in accountability in hospital governance. Long before Congress enacted the Sarbanes-Oxley Act to rein in freewheeling accounting practices at publicly traded companies, AHERF tested the patience of the Securities and Exchange Commission, which rebuked AHERF's executives and auditors for misleading bond buyers.
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