Friday, August 06, 2010

Despite Scandal, Former UnitedHealth CEO was Ninth Best Paid CEO of the Decade

A little while ago, the Wall Street Journal reported on the highest paid US corporate CEOs of the past decade.  One name stood out for those interested in  health care: Dr William W McGuire, the former CEO of giant health care insurance company/ managed care organization UnitedHealth Group.  Dr McGuire was number 9 on the list, with a total realized compensation of $469,300,000. 

We started discussing the disconnect between Dr McGuire's corpulent pay and his company's failure to uphold its stated ideals back in 2005, when he was reported to have received more than $124 million to lead a company which championed "affordable" health care.  Later, it turned out that much of Dr McGuire's compensation came in the form of back-dated stock-options, and the resulting scandal was followed by his resignation.  Later, Dr McGuire was forced to give back some the options.  The final settlement of the fiasco cost UnitedHealth $895 million, and Dr McGuire $30 million and the cancellation of 3.6 million stock options.

Meanwhile, UnitedHealth was compiling an unenviable record of ethical lapses:
  • as reported by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."
  • UnitedHalth promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post here);
  • UnitedHealth's acquisition of Pacificare in California allegedly lead to a "meltdown" of its claims paying mechanisms (see post here);
  • UnitedHealth's acquisition of Sierra Health Services allegedly gave it a monopoly in Utah, while the company allegedly was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post here)
  • UnitedHealth frequently violated Nebraska insurance laws (see post here);
  • UnitedHealth settled charges that its Ingenix subsidiaries manipulation of data lead to underpaying patients who received out-of-network care (see post here).
At the same time, UnitedHealth continues to boast that:

Our mission is to help people live healthier lives.

* We seek to enhance the performance of the health system and improve the overall health and well-being of the people we serve and their communities.
* We work with health care professionals and other key partners to expand access to quality health care so people get the care they need at an affordable price.
* We support the physician/patient relationship and empower people with the information, guidance and tools they need to make personal health choices and decisions.

Dr McGuire certainly expanded his access to money, which doubtless empowered him.   

And as we noted here, his successor, Mr Stephen J Helmsley, seems to be going down the same path.  In 2009 his total compensation was $8.9 million, and he sold stock options obtained from previous compensation packages for $98.6 million.  Mr Helmsley was a top leader (President and Chief Operating Officer [COO]) of UnitedHealth during Dr McGuire's reign as CEO, so should be viewed as having some responsibility for the excesses of the McGuire years.

Despite recent attempts to reform health care, or at least health insurance, it seems that the health insurance industry still leads the way in providing its leaders perverse incentives while failing to hold them accountable for their organizations' unethical behavior and subversion of their stated missions.  Is it any wonder that these organizations continue to act unethically, and that the costs of the goods and services they provide rise continuously?

If we truly want health care that is accessible, of high quality, at a fair price, and more importantly, if we want health care that is honest and focused on patients, we need to provide health care leaders with clear, rational incentives in these directions, and make them fully accountable for their actions, and the courses of their organizations under their leadership.


Anonymous said...

One of my on going issues with medicine is the failure to verbalize and acknowledge that it has, in many ways, become a predatory industry. Everything in medicine is designed to feed the monster, not care for the patient.

Week after week we find not only ethical lapses but legal issues in all areas of medicine.

While I believe are many front line physicians regret their part in this fiasco, I also believe the system is designed to elicit the most financial gain over those who are in need. We don’t ask questions when we are having a heart attack about staff compensation.

The disjointed nature of medicine has allowed each community hospital and doctors office to operate without any oversight or industry input. The result has been those in the industry with something to sell have taken advantage of this to further their financial goals at the expense of patients and the institutions they are pledged to protect.

Drug and device manufacturers use KOL’s to sell off label uses of their products. Hospital staff game the system by using consultants that will give ever increasing salary packages in ever decreasing markets. Insurance companies are constantly raising premiums to consumers, while cutting doctor compensation, all in a dance that enriches hospitals that have the ability to construct a system designed to maximize income, while minimizing doctor compensation.

Unlike the defense industry, which has its excesses, where a few major players can set the tone medicine operates in a vacuum. Regulation will not work. You simply cannot monitor all of the medical offices, hospitals, device/drug companies, and insurance companies to assure compliance.

What is needed is stronger enforcement of existing laws with meaningful penalties that will cost the executive his/her career. Stronger boards with outside directors who have the ability to have an impact on the organization. Medical societies that have not become part of the industry through products they sell, or have become political entities that reflect a position that may not best represent their members, or patients, interest.

What we need most of all are good people who are not pushed aside in the quest for money, power or position. I really do not see this happening with the amount of money we see in compensation packages, board seats, medical society income, or political pandering.

We do have a medical elite, but it is not one person, company, or organization, it is all of those who control medicine in the smaller markets across the country.

Steve Lucas

JPB said...

Bravo, Dr. Poses! Keep up the pressure on this issue. In my opinion, until we get the profit issue out of medical care and medical insurance, nothing is going to change. There's simply too much money to be made from sickness...

Anonymous said...

JPB_"There is too much money to be made from sickness..." And, it is going in to the pockets of white collar criminals.

The new wave of such criminals are the legions of white collar HIT vendors, HIMSS, CCHIT,and others who are sucking funds away from patient care with their illegally sold devices.

Anonymous said...

"healthcare was never meant to exist in a for profit system because the interest of insurance companies are fundamentally at odds with patients and doctors." Dr Andrew Weil/Larry King live CNN