Tuesday, May 31, 2011

Fresenius Fined $82 Million for False Claims

We open the week with yet another story of a large health care organization found by the judicial process to have misbehaved. Here is the story, courtesy of the Kansas City InfoZine:
The United States Attorney’s Office announced that a federal judge has entered a judgment of $82,642,592 in favor of the United States in a 'whistleblower' lawsuit originally filed in the federal district court in St. Louis in 2005, and then transferred to the federal district court in Nashville, Tennessee. The lawsuit claimed that Renal Care Group, Renal Care Group Supply Company and Fresenius Medical Care Holdings, Inc. recklessly disregarded federal law when billing the Medicare program for home dialysis supplies and equipment during 1999-2005.

The judge's reasoning was apparently based on some colorful facts,
The Court's orders in this case discuss the concerns of multiple Renal Care Group employees who complained about the operation and Medicare billing activity of the Renal Care Group Supply Company, including one regional manager who wrote, 'I do not wish to go to jail,' and felt the company 'was not in the best interests of patients' after receiving a corporate directive about converting patients into the Renal Care Group Supply Company. The Court further noted that Renal Care Group failed to heed the advice of the company's lawyers when operating the supply company and also discussed an internal audit of the supply company that found that one hundred percent of the company's files were missing information that Medicare required for billing.

Renal Care Group ('RCG') was a publicly traded for-profit corporation and dialysis provider until it merged with dialysis industry competitor Fresenius Medical Care ('FMC'). RCG had its principal place of business in Nashville, Tennessee, and had locations throughout Missouri, including multiple facilities around the St. Louis metropolitan area. RCG Supply Company ("RCGSC") was a Tennessee corporation that was owned and operated by RCG.

Note further the allegations of the mechanics of the misbehavior, as alleged by the government prosecutors:
The Government's complaint alleged that between January 1999 and December 2005, RCGSC submitted claims to the Medicare program for home dialysis supplies provided to ESRD patients for reimbursement of the supplies and equipment. All of these claims, as well as related claims for support services rendered by RCG dialysis clinics were false because the defendants were prohibited from and not qualified to bill Medicare for these home dialysis patients. Under federal law, the Medicare program pays companies that provide dialysis supplies to ESRD patients only if the companies that provide the supplies are truly independent from dialysis facilities and the ESRD patient chooses to receive supplies from the independent supply company. Defendants set up a sham billing company, RCGSC, that was not independent from RCG. Further, RCG interfered with ESRD patients' choice of supply options, requiring patients to 'move' to RCGSC. Even after RCG employees raised concerns and industry competitors closed their supply companies, RCG kept RCGSC open because of the illicit revenue it created.

Note further that we discussed an earlier judgment in this case, which has now been superseded, here.

So here we go again: yet more misbehavior, yet another multi-million dollar fine, but no real live person suffers a negative consequence.   Almost daily, there are stories about criminal convictions for relatively small scale health care fraud, kickbacks, bribery, etc that often result in the perpetrators going to jail or paying potentially bankrupting fines. However, when misbehavior, including fraud, kickbacks, bribery is on a big scale, almost never does an individual pay a penalty. We have seen lots of stories of big corporations paying big fines like this (e.g., look here.)  However, in a world where those who authorize, direct, or implement misbehavior that makes the company money can get big pay, do we really expect that fines assessed against the company itself, whose costs can be passed on to the employees at large, customers, and shareholders will have any deterrent power?

It is interesting that this latest case occurred around the same time that yet another breathless story appeared in the media about how the US government is about to get tough with executives whose companies misbehave.  The Associated Press ran a story claiming:
Previously, if a company got caught, its lawyers in many cases would be able to negotiate a financial settlement. The company would write the government a check for a number followed by lots of zeroes and promise not to break the rules again. Often the cost would just get passed on to customers.

Now, on top of fines paid by a company, senior executives can face criminal charges even if they weren't involved in the scheme but could have stopped it had they known. Furthermore, they can also be banned from doing business with government health programs, a career-ending consequence.

It included a quote by one government official with which I would agree.
'When you look at the history of health care enforcement, we've seen a number of Fortune 500 companies that have been caught not once, not twice, but sometimes three times violating the trust of the American people, submitting false claims, paying kickbacks to doctors, marketing drugs which have not been tested for safety and efficacy,' said Lewis Morris, chief counsel for the inspector general of the Health and Human Services Department.

'To our way of thinking, the men and women in the corporate suite aren't getting it,' Morris continued. 'If writing a check for $200 million isn't enough to have a company change its ways, then maybe we have got to have the individuals who are responsible for this held accountable. The behavior of a company starts at the top.'

I agree with the concept.  However, the AP story provided no evidence of a get tough policy newer than the case of the proposed "disbarment" from dealing with the government of the elderly CEO of Forest, which we discussed here.  Although a year ago we discussed threats by the US government to hold health care leaders accountable using the "Responsible Corporate Officer Doctrine," which has been available since 1943, so far there is no evidence that this concept has been made operational.

So the march of legal settlements, and corporate convictions for bribery, fraud, and kickbacks continue, but the problem does not go away. 

In 2006, we wrote, "It all is becoming so familiar, almost wearisome, yet the questions remain. Why do the mainly monetary penalties seem mainly to come out of the hides of stock-holders and consumers, rather than the people who actually made the decisions that lead to the offenses? And after all the indictments, prosecutions, settlements, and convictions involving large health care organizations, when will academics, policy makers and politicians, much less company CEOs and other organizational leaders admit we have a systematic problem here?"

In 2008, we wrote, "As long as health care leaders can shrug off the consequences of unethical behavior merely as acceptable costs of doing business, absent any serious attempts to get health care organizations to enforce internal codes of ethical behavior or to avoid hiring ethically challenged leaders, the procession will likely continue. The effects will be continually rising costs, declining quality, shrinking access, and rising numbers of demoralized health professionals."

I wonder what we will write about this in 2012?

Friday, May 27, 2011

Medical Societies Paid To Do Corporate Public Relations


Last year we posted about how two medical societies which received funding from a drug manufacturer tried to persuade the US Food and Drug Administration (FDA) to deny approval of a generic competitor to one of that company's products.  The medical societies were the Society of Hospital Medicine (SHM) and the North American Thrombosis Forum (NATF).  The company was Sanofi-Aventis and the product involved was its anti-coagulant derivative of heparin, Lovenox. 

At the time, we noted that the SHM CEO denied the need to specifically disclose funding from Sanofi-Aventis in the letter to the FDA, since he asserted the letter was about "providing the best, most effective care to the hospitalized patient." If so, I wondered why the SHM had not raised concerns about the case of the deadly contaminated heparin which was sold by another company from which it received support.  I noted that as long as medical societies accepted money from companies that made drugs or devices their members might prescribe or use, there would be "suspicion that such societies may use their considerable influence to serve the corporations', not patients' interests, and so undermine the professional values of the societies' members."

The Senate Report

Now the US Senate Finance Committee has reported on their investigation of this incident, and the concerns it raises go beyond just suspicions.  As reported by Alicia Mundy in the Wall Street Journal,
The Senate report, 'Sanofi's Strategic Use of Third Parties to Influence the FDA,' said the company enlisted medical experts to conduct 'independent interaction' with the FDA to hold on to Lovenox's market.

Between 2007 and 2010, the company contributed more than $2.6 million to the Society of Hospital Medicine; more than $2.3 million to the North American Thrombosis Foundation, which studies blood clots; and more than $260,000 to Dr. Tapson, the report said.

Sen. Max Baucus (D., Mont.), chairman of the Finance Committee, said: 'Pharmaceutical companies simply cannot be allowed to spend millions of dollars to buy medical opinions that claim objectivity but instead favor their products.'

The Society of Hospital Medicine was initially reluctant to write the letter, according to emails released by the committee. The society's director told Sanofi in a June 2008 email that his group 'has no history of making similar comments to the FDA' and might not have 'the expertise or knowledge to say much about' the issue.

However, the email added, 'we want to give any issue that is important to our partner careful consideration.'

Two months later, the society sent its letter to the FDA. A Sanofi public-relations representative later cited the letter in an internal email as a 'key accomplishment.'

The report itself made clear why Sanofi wanted the FDA to delay or deny approval of the generic version of Lovenox:
According to a 2009 Sanofi slide presentation on its 'Lovenox Patient Safety Strategy,' a core issue faced by Sanofi was the 'imminent threat to [Sanofi’s] Lovenox franchise' posed by 'generic alternatives.'

It also made clear how much financial impact Sanofi had on the SHM:
SHM received $2,675,850 from Sanofi from January 2007 through August 11, 2010 for conference exhibits, sponsorship, and grants. Sanofi’s payments to SHM totaled $1,132,500 between July 1, 2007 and June 30, 2009, accounting for 8 percent of SHM’s total revenue during those 2 years.

It made clear that the letter the SHM wrote to the FDA resulted from its interactions with Sanofi:
Internal Sanofi communications indicate that SHM consulted with the American College of Chest Physicians and Dr. Tapson about sending a letter to the FDA after 'a very positive meeting' with Sanofi officials.

So let us just walk through this again. Sanofi wanted to keep generic Lovenox off the market. Sanofi pushed two medical societies to which it provided considerable funding to try to persuade the FDA not to approve generic Lovenox, without revealing their financial ties to Sanofi or that Sanofi had instigated their protests. At the time, at least one of the societies' leaders denied that its attempt to persuade the FDA had anything to do with its relationship to Sanofi.

Note that Sanofi's use of two medical societies and a "key opinion leader" to try to influence public policy without disclosing the company's causal role was an example of what Wendell Potter called a "third-party" tactic (see this post).  While Mr Potter outlined a series of tactics used by public relations department of health insurance corporations to further their policy objectives, often in such deceptive and systematic ways as to constitute disinformation campaigns, there has not been such a broad description of these these tactics used by other kinds of health care organizations.  Now it looks like drug companies' PR departments are also users of these techniques.  Most likely they have been deployed throughout the health care sphere to promote policies that benefit particular companies, often at the expense of health care professionals, patients, or the public at large.

On a personal note, I am a general internist who spent some time as an academic hospitalist.  The SHM is the main society for hospitalists, and is allied with the Society for General Internal Medicine (e.g., see here), to which I belong, and which I have served in a variety of capacities.  Thus I am very sad about the hole into which the SHM leadership has apparently fallen. 

The SHM and NATF leadership have apparently become stealth health policy advocates, and actively tried to change government policy on behalf of a corporation that had funded them.  Thus, these medical societies acted more like public relations or lobbying firms.  In doing so, they appeared to subverted their own missions, and their members' values.

A short time ago, we noted the cases of two medical societies that got substantial funding from drug and device companies, and thus seemed to function more like marketing firms that professional associations.  Now we have two cases of medical societies that seemed to function more like public relations and lobbying firms than professional associations.

So all the organizations which ought to have upheld health care professionals' values against the onslaught of laissez faire commercialized medicine, now medical societies as well as academic medical centers, medical schools and their parent universities, and medical and health care foundations, seem to have been systematically sold out to big health care corporations' marketers and public relations flacks. 

What Is To Be Done?

If we health care professionals really want to improve patient care and the public health, we could start by exercising extreme skepticism about the funding and leadership intentions of our own professional associations.  If these societies appear as dependent on industry for money as they are dependent on their own members, and/or if they appear to be acting more like marketing, public relations or lobbying firms, why do we continue to enable such behavior?  Why should we pay dues to marketing, public relations or lobbying firms?  We need to have our medical societies uphold their own missions, or we need to get new medical societies. 

Hat tip to the Project on Government Oversight (POGO) blog.

Healthcare Renewal Cited in Pittsburgh Post Gazette on Health IT Issues

Healthcare Renewal was cited in the Pittsburgh Post Gazette today on health IT issues.

Specifically, regarding issues I raised at my May 25, 2011 post "Transplant Team at UPMC Missed Hepatitis Result - Suspicious for Health IT Failure?"

I have several additional amplifying comments.

Doctor, nurse disciplined by UPMC
Failed to detect hepatitis C in kidney donated for transplant
Friday, May 27, 2011
By Jonathan D. Silver and Sean D. Hamill, Pittsburgh Post-Gazette

A surgeon and a nurse were disciplined by UPMC for their roles in missing a positive hepatitis C test result in a kidney donor earlier this month that might have stopped the transplant, the hospital system said Thursday.

The surgeon was demoted and the nurse suspended, though neither has been identified.

In addition, after a discussion with federal officials, the hospital system voluntarily suspended its live-donor liver program as a precaution, three days after shutting down its live-donor kidney program on May 6, following the transplant error. Both programs remain closed.

But while UPMC has taken action against the two staff members, health care technology experts say UPMC's information technology might have played a role in the incident.

"Checking for all types of hepatitis is so ingrained in the culture of doctors," said Scot Silverstein, a medical informatics expert and adjunct professor at Drexel University in Philadelphia. "If they didn't check for hepatitis C, that means they didn't check for hepatitis A or B either, and that means they didn't check for anything."

"That just isn't credible," said Dr. Silverstein, who explored the possible ways the technology played a role in the kidney transplant error in the blog Health Care Renewal.

"There are two possibilities," he said. "Either you have a dozen or more people on that transplant team who are just stupid, or, more plausibly, when they looked at the record the hepatitis C record was just not there or it was incorrect when they saw it."

The incident first came to light May 6, when UPMC notified the Centers for Medicare and Medicaid (CMS) as well as the United Network for Organ Sharing, that it had detected an error in a recent kidney transplant.

It was a living kidney transplant between a woman and a man who are a couple, sources have told the Post-Gazette. The woman did not know she was hepatitis C positive, and she was tested, but the test results were somehow missed by people on the transplant team, and the transplant went forward.

... Because of the error, UPMC had decided on its own on May 6 to shut down the living donor kidney program.

Then, on May 9, when UPMC officials were discussing the situation with the U.S. Health Resources and Services Administration, they mutually decided to shut down the living donor liver program, too, said Michele Walton, a CMS spokeswoman.

Read the entire article.

I strongly feel there is much more going on here than a careless surgeon and nurse. Closing down these transplant programs for now is a major, major step that actually endangers patients on waiting lists. As per an anonymous comment received in my aforementioned May 25 post (link to full comment):

I surely hope they get this figured out soon as there are MANY lives on the line here. A very good friend of mine is on the list there and has myself as a willing paired donor and another mutual friend of ours as a perfect match donor that has one test to be done and then it is a go. With all of the testing that we both have had to go through - and by the way, myself now a second round as it has been more than a year since the original testing and no paired match has been located as of yet, that these things are known as soon as the tests are ran. I would have to agree that this must be beyond human error.

... This needs to be addressed and corrected like YESTERDAY. We have many out their literally dying on the lists.

I was also cited as follows later in the Post Gazette article:

... Dr. Silverstein and other experts say the current electronic health records systems that highly wired hospitals like UPMC have in place routinely flag test results for everyone connected to a surgery to see.

But those systems have been known to cause the same kinds of errors they were designed to prevent over the old-fashioned paper records. [E.g., as per the FDA internal memo on HIT risk I described at this Aug. 2010 post; see tables 4 and 5 - ed.]

I do think the reliability of existing alerting systems has been over-represented. "Flagging" a test result awaiting someone to note the flag amidst a sea of screens, icons and clutter, and setting off aviation-like stall alarms and other fail-safes that nobody can miss, are two different matters.

For the hundreds of millions of dollars spent on health IT by organizations like this, and the hype proffered about this technology, events such as the post-facto discovery of a tainted transplanted organ should truly be considered "cybernetic 'never' events."

One might also wonder if the informational issues, whatever their source, occurred more than once: that is, if prior transplant recipients who participated in these programs need to be checked for tainted organs.

That the Post-Gazette article was published on the one-year-to-the-day "anniversary" of my own mother being cybernetically turned into a train wreck due to the toxic effects of HIT -- in an ED where I once worked in the paper era where I do not recall EOT mistakes of the kind that nearly killed my mother ever happening -- is ironic.


If health IT is indeed implicated in the UPMC error, and if UPMC knew of system unreliabilities that could have caused the clinical errors, both patients and affected clinicians can likely raise charges of criminal negligence on the part of those responsible for these IT systems.

Politics and an overall 'lawlessness' (per Hoffman & Podgurski) in the health IT sector needs to be replaced with the scientific and regulatory methods of medicine, such as intensive pre-marketing evaluations, clinical trials and post marketing surveillance of these systems.

Perhaps some jail time for the cavalier would remind people these are not toys, gaming computers, or slot machines, and that the subjects of health IT systems are human beings, not lab rats.

-- SS

Addendum May 27, 2011:

A reader reminded me of my 2009 post "UPMC as Proving Ground for IT Tests On Children: Pioneers in Health IT, or Pioneers in Ignoring the Past?"

-- SS

Wednesday, May 25, 2011

Twelve Hour Health IT "Glitch" at Allegheny General Hospital - But Patients Unaffected, Of Course...

At "Transplant Team at Univ. of Pittsburgh Medical Center Missed Hepatitis Result" I wrote about a kidney transplant gone bad at UPMC that may have been due to a computer "glitch."

Now Allegheny General Hospital in Pittsburgh has suffered a "glitch" that shut down their entire health IT system for approximately 12 hours:

Allegheny General Hospital's records system back online

By Pittsburgh Tribune-Review
Wednesday, May 25, 2011
Last updated: 10:26 pm

Allegheny General Hospital's electronic medical records system was online Wednesday afternoon after a morning shutdown caused by a glitch in a vendor's computer software, a spokesman [Dan Laurent] said.

... The hospital's system underwent a routine upgrade during the weekend, Laurent said. Staff shut down the system about 5 a.m. Wednesday after noticing it was running too slow. New Jersey-based software vendor Allscripts made repairs, and the system was online by 5 p.m., he said.

One might think the vendors of mission critical hospital systems would check their upgrades better before roll out to hospitals teeming with real, live, sick patients.

Of course, patient care was unaffected. It never is when a "glitch" occurs, despite the massive inconvenience to doctors who actually have patients to care for, and the need for backloading paper data - with inherent opportunity for error - after the computer system is resuscitated.

At a Jan. 2011 post "Orderless in Seattle: Software glitch shuts down Swedish Medical Center's medical-records system" I observed:

There's that word "glitch" again that I see so frequently in the health IT sector when a system suffers a major crash that could harm patients. Why do we not call it a "glitch" when a doctor amputates the wrong body part, or kills someone? ... the shutdown likely affected about 600 providers, 2,500 staffers and perhaps up to 2,000 patients, but no safety problems were reported.

As I've noted at this blog before, it is peculiar how such "glitches" never seem to produce safety problems, or even acknowledgments of increased risk.

Same in this Allegheny General Hospital case:

... [spokesman] Dan Laurent said staffers took drug and lab orders on paper forms, and that patient care was not affected by the shutdown.

If patient care is never affected by shutdowns even as long as an entire working day, one wonders why the tens or hundreds of millions of dollars spent on these systems is needed in the first place...

I have a solution.

Cloud computing!

-- SS

Million Dollar Plus Hospital CEO Compensation: "It Is What It Is" or What the Board Says It Is?

Health care leaders' compensation has again been in the news. Below are highlights from stories about four medical centers, emphasizing the magnitude of executive compensation, how it is related, or not to hospital and executive performance, and whether and how the organizations' boards chose to justify it. The medical centers are in alphabetical order.

University of Pittsburgh Medical Center

According to the Pittsburgh Post-Gazette:
In tax documents released Friday, Jeffrey Romoff, president and CEO of the University of Pittsburgh Medical Center, received $4.01 million in salary, bonuses and benefits that year.

Other top earners at UPMC include neurosurgeons Ghassan Bejjani, $2.37 million in salary and benefits, and Richard Spiro, $2.23 million; cardiothoracic surgeon James Luketich, $1.96 million and executive vice president Elizabeth Concordia, $1.88 million.

In summary, UPMC has a four plus million dollar CEO, and a nearly two million dollar executive vice president.

Hospital/ Executive Performance

None of the articles I found on these executives' pay juxtaposed information on their or their institutions' performance.

A Pittsburgh Business Times article summarized the medical center's recent financial results:
Strength in outpatient revenue, insurance premiums and hospital admissions helped drive operating income to $313 million for the third quarter at the University of Pittsburgh Medical Center, a 75 percent increase from $179 million a year earlier, according to financial results released Friday.

UPMC’s operating margin still trails the 4.1 percent of other institutions with an AA bond rating....

However, there have been recent concerns about ethics and quality at the institution.

Another Post-Gazette article revealed how relatives of top leaders seem to gain well-paid positions within the system:
particularly at UPMC, gainful employment extends to other branches of the family tree.

Mr. Romoff's daughter, Rebecca Kaul, was paid $388,659 in fiscal year 2010 for her work as president of UPMC's Technology Development Center. The center "is helping develop the next generation of information technology at UPMC," said spokeswoman Susan Manko.

Ms. Kaul's salary jumped from the $264,274 reported for the fiscal year ending June 30, 2009, an increase that Ms. Manko said was the result of a sale of a computer-assisted coding product joint venture 'at a substantial return on investment at which time Ms. Kaul received certain compensation based on the terms of the sale of the company.'

She added that, 'Mr. Romoff was not involved in the decisions pertaining to this transaction.'

According to the tax document, Mr. Romoff's former son-in-law by another daughter, Scott Gilstrap, was paid $236,347. He worked with grants and services contracts before leaving UPMC in December 2009.

Kathleen Pietragallo, sister-in-law of UPMC board member and attorney William Pietragallo, received $88,646 working in a laboratory at UPMC Presbyterian Hospital. Mr. Pietragallo's brother, Louis Pietragallo, is a medical oncologist for UPMC who was paid $613,082, according to the tax return.

And Scott Cindrich, son of UPMC's former chief legal officer, Robert Cindrich, received $138,618 as legal counsel for UPMC, according to Ms. Manko.

Also listed on the UPMC return is Anna Roman ($288,696), senior vice president for the University of Pittsburgh Physicians, who is the wife of University of Pittsburgh Physicians board member and UPMC pathologist George Michalopoulos.

The University of Pittsburgh Physicians is a multispecialty practice plan that employs UPMC physicians who are on the faculty of the Pitt School of Medicine and also care for patients and train residents in UPMC facilities, Ms. Manko said.
Note that we discussed questions of favoritism towards relatives of top leaders at UPMC here.

Also, Dr Scot Silverstein just posted on a major quality problem at UPMC, the transplantation of an organ from a hepatitis C positive donor.

To summarize, the medical center is making a lot of money, but its operating margin may not be has high as some of its peers. There are questions about nepotism amongst the leadership, and there is a current serious concern about the medical center's transplant program.

The Board's Justification

There was no recent reporting on this.

Valley Medical Center

This hospital is in Renton, Washington.


Per King5 News:
The chief executive officer of the hospital, Rich Roodman, is the highest paid public employee in the state of Washington. Last year he made a base salary of $615,000. He also collected a bonus of $201,201 for meeting performance goals. On top of that he was paid $263,335 in a retention payment.

In total, Roodman earned $1,134,837 in 2010 to run Valley Medical Center, which is part of King County Hospital District No. 1.

Note that
Roodman makes about 40 percent more than the chief executive officer of University of Washington Medicine and more than double what the executive director of the University of Washington Medical Center earns.

The reporters found it's not just the CEO, but all top managers at Valley Medical Center who pack home healthy paychecks.

Paul Hayes, the executive vice president, made $588,249 last year, which included a bonus of $154,275 for meeting performance goals.

The senior vice president of medical affairs, Kathryn Beattie, made $489,479. Those figures outpace the top boss at renowned Harborview Medical Center, which is also funded by tax dollars.

The in-house attorney for Valley Medical Center, David Smith, pulled in $352,196 in 2010, which makes him the highest paid public lawyer in the state. Smith makes about two-and-a-half times what Attorney General Rob McKenna is paid.

In summary, the CEO of a relatively small, public hospital made over $1 million, and several executives made over $350,000.

Hospital/ Executive Performance

Controversy over money isn't new to Valley Medical Center. Four years ago the Washington State Public Disclosure Commission (PDC) fined CEO Roodman $120,000 after they found the hospital illegally spent tax dollars on mailings, postage and consultants to sway voter opinion on ballot measures in 2005 and 2006.

The PDC called it the biggest case ever involving a public agency misusing taxpayer dollars for a campaign. Valley Medical Center called it a misunderstanding.

In 2009 the Washington State Auditor’s Office found Roodman collected a troubling $1.7 million retirement payment that year, on top of the $900,000 salary he earned in 2009. The auditor found the commissioners authorized this payment 'without explanation or public benefit.' The auditor also recommended Valley Medical Center should 'avoid including similar provisions in future contracts.'

State authorities have questioned the ethics and legality of actions apparently authorized by the hospital's top leadership.

The Board's Justification

Board president Sue Bowman did speak with KING 5 by telephone. She said the compensation levels are important to stay competitive. They don’t want to lose top talent to other hospitals.

'I don’t know why Rich’s [CEO] pay is an issue? Commissioner Hemstad brings it up over and over again. I told him, 'Anthony, it is what it is,'' said Bowman. 'I don’t think the five-member board needs to keep focusing on compensation. What are we doing for the community? That’s what’s important.'

Bowman also said the board carefully considers research presented to them by outside consultants and attorneys before voting on CEO compensation. Milliman, a healthcare compensation consulting firm, provides the hospital with a full analysis of market comparative data every other year. They consistently find Valley Medical Center’s pay structure is right on target.

John Hankerson, principal and strategic rewards practice leader of Milliman, wrote a memo about his findings to Roodman and Bowman dated February 9, 2011.

'We have consistently found that base pay and total cash compensation have been well aligned with [hospital goals] and that the magnitude of the incentive plan is consistent with other healthcare organizations that are striving to improve performance and quality patient care,' wrote Hankerson.

'We defined the appropriate market [comparable salaries] as ‘where VMC [Valley Medical Center] might recruit executive talent from or where it might lose executive talent to.’ In that light we have included such local organizations as Evergreen, Overlake, Virginia Mason to name just a few,' wrote Hankerson. 'In our opinion, the current levels of incentives used at VMC are appropriate and consistent with best practice as well as smart management.'

However, note that:
Senator Cheryl Pflug, the ranking minority on the Senate Health & Long-Term Care Committee, doesn’t think public hospitals should be basing salaries on what non-profit and for-profit institutions pay.

'They pick and choose who they compare themselves to. A much more appropriate comparison would be the University of Washington,' said Pflug.

Note that the chair of the hospital board first tried to give the impression that the executives' compensation was a natural phenomenon ("it is what it is,") rather than set by the board. Then it appeared that the compensation was set partially by referring to pay at clearly dissimilar institutions which generally pay more than public hospitals. Finally, although the implication was that high levels of compensation were justified by the performance of the executives, no specifics about that performance was provided, and certainly the recent questions about the ethics and legality of the executives' decisions were ignored.

Wake Forest Baptist Medical Center


The Winston-Salem Journal reported:
Dr. John McConnell, the system's chief executive, was paid $1.68 million in total compensation for fiscal 2009-10, compared with $764,797 for fiscal 2008-09. McConnell took over as chief executive — a new position — in October 2008.

McConnell was paid $831,288 in salary for fiscal 2009-10, as well as $266,667 in bonuses and incentives, and $115,661 in other reportable compensation. He also received $441,589 in retirement and other deferred compensation.

In fiscal 2008-09, McConnell was paid $133,333 in salary, $140,000 in bonuses and incentives, $38,564 in other compensation and $440,105 in deferred compensation.

Donny Lambeth, the president of N.C. Baptist Hospital, had a 29 percent increase in total compensation to $849,521. His salary was raised 20 percent to $604,495, while his bonus and incentive compensation decreased 37 percent to $70,030. He had $136,459 in retirement and other deferred compensation.

Edward Chadwick, the system's chief financial officer, received $734,282 in total compensation, including $294,218 in salary and $350,000 in bonus and incentive compensation. He took over in his role in July 2009.

Besides McConnell, the top executives listed for Wake Forest University Health Sciences were Dr. William Applegate, president of the division and dean of its medical school; Dr. Thomas Sibert, its president and chief operating officer; and Doug Edgeton, president of the Piedmont Triad Research Park.

Applegate, who is retiring from both posts June 30 to focus on his geriatrics practice and research, received a 38 percent increase in total compensation to $996,706. His salary was raised 4 percent to $534,843 in salary, while his bonus and incentive compensation rose from $115,000 to $378,900.

Sibert received $974,188 in total compensation, including $266,654 in salary, $550,000 in bonus and incentive compensation and $112,390 in other reportable compensation. Sibert took over his role in September 2010.

Edgeton received a 44 percent increase in total compensation to $906,202. His salary was raised 7 percent to $491,391, while his bonus and incentive compensation rose from $102,200 to $361,600.

In summary, the CEO made over $1.5 million, and other leaders made from just under three-quarters to just under $1 million.

Hospital/ Executive Performance

There was nothing in the article above or in the news media about the performance of the executives or the hospital.

The Board's Justification

Per the Winston-Salem Journal:
Wake Forest Baptist said in a statement that it has a 'very rigorous system' to determine and approve its executive compensation packages. It has an external compensation consultant provide comparable data from similar health-care institutions, such as Duke University Health System, UNC Health Care and the University of Chicago Medical Center.

The Wake Forest Baptist system said that as one of 130 academic medical centers in the United States, 'there are few executives with the required skill set to manage and provide leadership for an integrated (center) such as ours.'

'Wake Forest Baptist's executive-compensation packages are fiscally responsible, appropriate for the marketplace and an essential part of the effort to recruit and retain skilled executives and visionary leaders for the medical center,' the statement said.

According to the Triad Area Business Journal:
'Recruitment and retention of the capably skilled executives is key to keeping Wake Forest Baptist fiscally sound and appropriately managed so we can continue to be a primary medical resource for patients in our community and our region,' the health system said in a prepared statement.
Again, much was made of process that compared the executives' compensation to that of other institutions. Their compensation was apparently based on the assertion that they were all "skilled and visionary," without any specifics provided to back it up.

West Penn Allegheny Health System


Again, according to the Pittsburgh Post-Gazette
Christopher Olivia, ... at West Penn Allegheny Health System, received total compensation worth $1.91 million.
At West Penn, neurosurgeon Hae Dong Jho received $1.39 million in compensation in 2009 and Roy Santarella, executive vice president and chief administrative officer for the health system, received $1.25 million.

In summary, the CEO received nearly $2 million, and the executive vice president $1.25 million.

Hospital/ Executive Performance

Per the Pittsburgh Tribune-Review:
The region's No. 2 hospital network is losing money, but West Penn Allegheny Health System's board of directors gave its CEO a 40 percent bonus, according to tax documents released on Friday.

More specifically,
West Penn Allegheny Health System reported an operating loss of $89.9 million in the fiscal year that ended June 30. From July to December, it lost an additional $26.8 million, a drop officials attributed to $12 million in employee severance packages, extra consulting fees and falling inpatient volumes.

In a bid to improve its financial position, the system is consolidating many of its services at Allegheny General Hospital in the North Side. Last year, it shut down its emergency room at Suburban General Hospital in Bellevue and plans to do the same at West Penn Hospital in Bloomfield on Dec. 31.

The system's officials have said they expect to lay off up to 400 workers this year.

In summary, the hospital is losing a lot of money, and likely will be laying off a lot of workers.

The Board's Justification

Kelly Sorice, a hospital system spokeswoman, declined to comment on the bonus.


CEOs at even small medical centers in the US can now expect to receive more than $1 million a year in compensation.  Those at larger institutions may get several millions a year.  Other top executives can now expect proportionately high compensation.  Thus, being a top executive at a medium or large hospital now practically guarantees becoming rich. 

Worse, there seems to be no correlations among compensation and performance of the executives or the hospitals.  Executives at hospitals that are losing money, having quality problems, or criticized for unethical behavior still can make this much.

The boards that are supposed to exercise stewardship over these institutions do not seem to feel the need to justify the money they hand to executives in any detail.  They almost never seem to feel that their own executives are anything less than above average, despite facts that might cast doubt on this assumption, and almost always seem to feel that their executives are entitled to be paid at least as well as their peers.  This suggests at best a lack of critical thinking by board members, and at worst, crony capitalism.

Making hospital leaders feel entitled to make more and more regardless of their or their institutions' performance seems to be a recipe for "CEO Disease," leading to disconnected, unaccountable, self-interested leaders.  The increasing prevalence of CEO disease in health care may explain why costs keep increasing, access keeps declining, and quality and safety are stagnant. 

So, as I have said before,.... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

Transplant Team at UPMC Missed Hepatitis Result - Suspicious for Health IT Failure?

A story suspicious for EMR malfunction appeared in the Pittsburgh Post Gazette:

Transplant team missed hepatitis result

Kidney donor, recipient unaware of virus' presence
Saturday, May 21, 2011

This hepatitis-C fiasco to my eye seems a likely case of IT error of omission or transmission (EOT, see Tables 4 and 5 at the FDA internal memo I cached at http://www.ischool.drexel.edu/faculty/ssilverstein/Internal-FDA-Report-on-Adverse-Events-Involving-Health-Information-IT.pdf).

It's inconceivable to me experienced transplant personnel, used to checking for data such as HIV, hepatitis status of donor and recipient, and other blood abnormalities would just miss this.

I would believe the hepatitis status, e.g., Hepatitis A, B, C, would be presented on the same screen. (If not, that's a design flaw itself.) That the Hep-C value could be missed by more than one person [possibly many people; see addendum below -ed.] seems very unlikely - even if the presentation screen(s) were cryptic and poorly organized.

A more plausible explanation to me is that a positive result simply wasn't present at the time when it was needed, e.g., due to a Laboratory Information System (LIS)-Hospital Information System (HIS) interface problem, or a HIS data erasure or misidentification error after the data was correctly received.

Another issue:

For the hundreds of millions of dollars spent on computers at this medical center, I wonder why their "system" in critical areas such as transplantation (as it would appear from the reports) is entirely dependent on two people looking at data.

After all, the IT is "supposed" to reduce error by infallibly calling attention to critical abnormalities such as this. The EMR alerting systems should have been going off like cockpit stall warnings at the data combination of "transplant" and "hepatitis C". That's not rocket science.

This further supports my hypothesis of a health IT malfunction, as does what I read about their "shutting down the living donor transplant program" for now - an extreme measure if this medical error were merely the result of a person or persons simply forgetting to check a data screen or sheet.

More generally, in a nutshell: commercial health IT from the current sellers is a fiasco. It alone among medical devices is unregulated under the FD&C Act even though FDA admits it is a medical device, it is unsafe, the literature shows its benefits grossly exaggerated, it probably cannot be made to work considering the current HIT "ecosystem" and its pathologies and incompetents, and has only captured the market through the purveyors "controlling the channel" of information and memes through their massive trade association HIMSS and political connections to HHS.

Think tobacco circa 1940's-1950's.

Yet UPMC could get away with this debacle scot-free:

Despite the way it occurred, UPMC will probably not be found in violation of any federal guidelines for the failure of the transplant team to review the positive hepatitis C test [or failure of the health IT system to properly transmit it, if that is indeed what occurred - ed.]

That's because while current guidelines from the United Network for Organ Sharing, the organization that oversees the nation's transplant centers and could suspend or shut a program down for deficiencies, do cover deceased donor transplants, they do not specifically cover living donor transplants, except in a limited way.

Emily Blumberg, an infectious disease specialist at the University of Pennsylvania, said that it is because live donations are still a relatively new medical advancement compared to cadaver donations.

"What has happened is that live donations in the United States have really taken off in the last decade, and there's only been a push to standardize live donation processes recently," said Dr. Blumberg.

In other words you're supposed to test dead people and their organs for disease before transplanting them, but live people get a pass? This is the height of absurdity.

One of the factors driving the push to finally address guidelines for living donor transplants is the rapid emergence of so-called paired kidney donation networks. In the networks, a willing living donor, who isn't a match to a friend or relative who needs a kidney, gives their kidney to someone else in the network. That recipient then has a friend or relative give a kidney to someone else, and so on.

Over the last five years, the rise of such networks have allowed hundreds of people to get kidney transplants from people they previously did not know, including a chain involving 32 donors and recipients -- 16 of whom got new kidneys -- that UPMC was part of earlier this year.

"Everybody is [testing for viruses] but it would be helpful if we could all be doing it the same way -- especially with paired donation networks," said Dr. Blumberg, who also chairs UNOS's disease transmission advisory committee.

This seems a smokescreen for this error. Missing a positive hepatitis C test has nothing to do in my mind with "everyone testing for viruses in the same way." The issue is being aware of the results.

Through that committee, UNOS is now beginning to craft new guidelines that are specific to live donation transplants. A conference in July in Baltimore that Dr. Blumberg is helping to organize will act as a public forum on the proposed new guidelines that will address everything from which viruses should be tested for, to which tests should be used, to how the results are communicated and other issues.

Non-communication of results will surely be forbidden.

The guidelines that do exist now don't spell out how information about a test is to be conveyed and confirmed by people on the transplant team, which are protocols that are left to each individual hospital to establish.

This is entirely absurd. "Protocols" are needed to check the most fundamental of tests in a mission critical medical area? Why does this process have to be "spelled out?" In other areas such as blood transfusion, isn't the precess of someone actually looking at test results very straightforward? I did it as a medical student....

Those same guidelines -- which were written for the more common deceased donor transplants -- also don't explicitly require testing of living donor organs for viruses like hepatitis C, though, as a rule, transplant centers like UPMC do so anyway. "I can tell you every transplant center in the country already screens donors for things like hepatitis C or other infections that would affect our use of that organ," Dr. Blumberg said.

That's great, as long as the information doesn't end up in '/dev/null', a.k.a. the bit bucket.

The rest of the Gazette article discusses the obvious regarding a simple issue of testing and reporting prior to sticking an organ into someone else's body.

I believe if this incident was indeed related to a computer error:

  • UPMC needs to reveal this publicly ASAP per Joint Commission Safety Standards, as similar flaws could affect other medical centers (such flaws that cause intermittent data erasure are known to exist; see Dr. Jon Patrick's study here on a Cerner system, for example.)
  • Repeats of episodes like this could reflect criminal negligence (not of clinicians, but of the administration for installing faulty medical devices), or may already represent criminal negligence if the health IT systems in use were known to have bugs causing intermittent data loss.
-- SS

Addendum May 25, 2011:

It occurs to me that hepatitis is a rather routine type of lab test.

Everyone who looked at the electronic chart, usually a cornucopia of people in an academic medical center, had opportunity to review tests like that. They range from medical students, to interns and residents, to fellows to attendings, nurses, and other allied health professionals, not just a few specific people on the transplant team.

In my mind the most likely explanation for so many people missing such a crucial piece of data is that it was simply not there.

-- SS

Addendum May 27, 2011:

A reader reminded me of my 2009 post "UPMC as Proving Ground for IT Tests On Children: Pioneers in Health IT, or Pioneers in Ignoring the Past?", where UPMC made claims it was a "proving ground" for experimental health IT development.

-- SS

Monday, May 23, 2011

Quest Diagnostics Settles, Version 2

And the latest entrant in the parade of legal settlements is a medical laboratory company, as reported by the Los Angeles Times:
Quest Diagnostics Inc., the biggest provider of medical lab services in California, has agreed to pay $241 million to settle a whistle-blower's lawsuit that accused it of overcharging the state Medi-Cal program.

This was not only about financial misbehavior, but about paying physicians and health care providers to influence their decisions in favor of the payer, but not necessarily their patients:
The lawsuit also alleged that the Madison, N.J., company paid illegal kickbacks to doctors, hospitals and clinics that sent patients their way.

As usual, despite the allegations above, the company issued the de rigeur denials:
Quest acknowledged the settlement in a statement but denied any wrongdoing.

'Our laboratory testing services for Medi-Cal were priced appropriately, and we deny all allegations in the complaint,' said Michael E. Prevoznik, Quest's senior vice president and general counsel.

Quest said it settled 'to put the lawsuit behind us.'

Of course, lawyers are expensive. But it is awfully hard to believe a trial would cost more than a small fraction of the amount paid out. So it is very hard to believe that the company paid nearly a quarter of a billion dollars just to avoid the expense and inconvenience of going to court.

That the company paid so much to avoid contesting an action that alleged such kickbacks seems at odds with the company's earnest "corporate citizenship" statement:
Honesty and integrity are the cornerstones of our corporate philosophy. We strive to do the right thing when it comes to caring for our patients, dealing with our business partners and working alongside our fellow employees. We never forget that we’re in the business of caring for people. Every day, we work hard to earn your trust and maintain our reputation for providing unsurpassed diagnostic insights and innovation.

What does not contesting allegations about kickbacks to doctors and hospitals have to do with "honesty and integrity," doing "the right thing," or "earn[ing] your trust?"

That would be a particularly good question to put to certain members of the Quest Diagnostics board of directors who have roles that ought to suggest they might have a certain level of discomfort with not  contesting allegations of giving kickbacks to physicians and hospitals, e.g.:
  • John C Baldwin MD, the surgeon who is "Senior Advisor for Health Affairs to the Texas Tech University System,"
  • Jenne K. Britell, Ph.D.,"a trustee of the Fox Chase Cancer Center,"
  • Rosanne Haggerty, "the founder and President of Common Ground Community, a not-for-profit organization that develops strategies to end homelessness,"
  • Surya N. Mohapatra, Ph.D., CEO and Chairman of the Board, also "a Trustee of Rockefeller University," and
  • Gail Wilensky Ph.D., a well-known health policy expert who has been vocal in health care reform discussions, and is "a Senior Fellow at Project HOPE."
Of course, as the parade of legal settlements continues, it has been markedly unusual for any of the board members of the organizations involved, no matter how distinguished their credentials in the health arena, to have anything to say about them.

Also, as is tediously usual in such cases, I could find nothing to suggest any negative consequences for any individual who might have authorized, directed, or implemented the bad behavior, and specifically, that might have had anything to do with the kickbacks that were alleged to have occurred.

The continuing march of legal settlements now seems to have included most of the previously well reputed commercial health care firms in the US. The length of this march is an indication of how pervasive is bad behavior by such health care organizations, especially when the marchers were accused of behavior that appeared clinically, not just financially unethical.

I assert again that pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction.

As we have said repeatedly, even large monetary penalties paid by corporations are unlikely to do anything other than somewhat increase their costs of doing business.  (Note that this is the second settlement by Quest Diagnostics we have discussed on Health Care Renewal.  The first settlement, for over $300 million, was in 2009 and involved felony misbranding charges by a Quest subsidiary.  In that case too no actual persons suffered any negative consequences.)

So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable.    As long as they are not, expect the bad behavior to continue. 

(We said that in 2009 about the first Quest Diagnostics settlement, and now it seems to have been a good prediction.  You heard it here first on Health Care Renewal.)

Friday, May 20, 2011

Key lesson from the NPfIT - The Tony Collins Blog


Key lesson from the NPfIT - The Tony Collins Blog

Listening to critics is critical to the success of big projects. But has this lesson been learnt?

Published 07:56, 20 May 11

A US doctor Scot Silverstein, who has an expertise in clinical IT design, says of the NAO report on the NPfIT that the initials should stand for: "National Programme of Failed IT.”

He says on the blog Health Care Renewal:

"Perhaps the NPfIT (National Programme for IT in the NHS) should be renamed the "National Programme of Failed IT in the NHS." No new acronym will be needed.

Read the entire ComputerWorldUK piece by Tony Collins. Some of the excuses and rationalizations described during this programme are simply stunning.

This idea, though, I find fascinating:

One of the lessons that emerges from disastrous business decisions, as recorded on the excellent BBC2 series "Business Nightmares" with Evan Davis, is that expensive new ideas should be tested, and repeatedly tested, by the harshest critics of those ideas.

-- SS

"Running Away from the Problem" of Health Care Corruption

Despite its likely importance, the very concept of health care corruption remains highly anechoic. 

Last week's Lancet, however, actually mentioned it, albeit indirectly and ironically.(1)  The context was Richard Horton's discussion of a press conference on the final report of the UN Secretary-General's Commission on Information and Accountability for Women's and Children's Health. It appears that accountability, which we consistently advocate, was central to the report:
The big conclusion is that a huge accountability gap exists - we have incredibly weak mechanisms to make sure that the billions spent on women's and children's health are delivering the results we expect.

The report listed "ten commandments of women's and children's health, [which] aim to fill that accountability gap."

While the press conference went on, something unusual happened, as Richard Horton discussed somewhat ironically:
In truth, meetings such as these may not always produce the most exciting moments in the history of health (but this one did). Yet they can produce episodes of raw undiplomatic honesty which make the long waits and dull protocol worthwhile. [Secretary General of the International Telecommunication Union Hamadoun] Toure has a reputation for being blunt and outspoken. He surpassed himself last week. At the end of the first day, he suddenly began a riff of denunciation that left us all speechless. 'There is more corruption in the G8 countries than in the whole of Africa,' he declared with conviction. 'We are just running away from the problem.'

There you have it, one of the few mentions of health care corruption in the medical and health care literature, and one of the very few mentions of health care corruption afflicting developed, not just developing countries.

Interestingly, Horton then documented an immediate attempt by some very important people in global health care to paper over the unpleasantness raised by Toure's honest assessment:
President [Jakaya] Kidwete [of Tanzania] and Margaret Chan, WHO's Director-General, did well to pull their colleague back from the brink of professional suicide. 'This is a partnership effort,' affirmed Kikwete. He wanted no one think the generosity of international donors did not count. 'They are critical for development,' he said. Dr Chan stepped in to assert that 'development money works.'

So there you have it again. Stating that health care corruption is an important problem in developed countries is "professional suicide," even for the Secretary General of the International Telecommunications Union.

Yet Dr Horton, was willing to go a little further, maybe risking his own "professional suicide,"
The President and DG are right. But Toure had a point too. And most of us in the room knew it.

We have noted before that health care corruption is the great unmentionable.  The corruption that is mentioned is that afflicting developing countries.  Hardly anyone seems willing to say that health care corruption is just as big a problem in developed countries, including those that provide most of the funding for health care development in the developing countries.  As we see above, we now have an acknowledgement in one of the most influential medical journals that mentioning health care corruption in the developed world is "professional suicide." 

That is the anechoic effect writ large.  Left unsaid is why this is so.  Presumably, the reason is that corruption is wide-spread.  The corrupt have made a lot of money and become very powerful.  So it is very unwise to offend them.  That, of course, just lets corruption flourish, and so health care gets increasingly expensive, inaccessible, and bad for patients and the public.

If we really want to improve health care in our own countries, and to improve global health, we will all have to be as brave as Mr Toure.

See below for a repeat of our previous summary of the issue of health care corruption.


Many people more distinguished than yours truly have been warning about health care corruption for years. In particular, in 2006, Transparency International's Global Corruption Report asserted in its executive summary, "the scale of corruption is vast in both rich and poor countries." It also noted how diverse is health care corruption:
In the health sphere corruption encompasses bribery of regulators and medical professionals, manipulation of information on drug trials, the diversion of medicines and supplies, corruption in procurement, and overbilling of insurance companies. It is not limited to abuse by public officials, because society frequently entrusts private actors in health care with important public roles. When hospital administrators, insurers, physicians or pharmaceutical company executives dishonestly enrich themselves, they are not formally abusing a public office, but they are abusing entrusted power and stealing precious resources needed to improve health.
It further stated how serious the consequences of corruption may be:
Corruption deprives people of access to health care and can lead to the wrong treatments being administered. Corruption in the pharmaceutical chain can prove deadly....

The poor are disproportionately affected by corruption in the health sector, as they are less able to afford small bribes for health services that are supposed to be free, or to pay for private alternatives where corruption has depleted public health services.

Corruption affects health policy and spending priorities.
On this blog, our limited resources make us focus mainly on the US, and sometimes other English-speaking countries. Yet we now have in our archives some amazing stories that document various forms of corruption, including numerous allegations of corporate misbehavior ending in legal settlements, and examples of outright fraud, bribery, kickbacks and other crimes. Also, as we have noted before, the US Institute of Medicine has defined conflicts of interest
Conflicts of interest are defined as circumstances that create a risk that professional judgments or actions regarding a primary interest will be unduly influenced by a secondary interest.
Given that Transparency International's definition of corruption is
abuse of entrusted power for private gain
One can easily argue that in health care, conflicts of interest defined as above create risks of abuse of power by health care professionals influenced by the private gains provided by their secondary interests. On Health Care Renewal, we have provided a massive set of examples of individual and institutional conflicts of interest. There is evidence that about two-thirds of medical academics(2) and academic leaders(3) have significant conflicts of interest. The huge prevalence of conflicts suggests the enormous risk of major corruption.

So what we all should be shocked, shocked about is how little has been done to fight health care corruption, whether in Mozambique or the US.

However, one can find very few significant efforts to discuss, teach about, or research ways to fight corruption, or to promote accountability, integrity, transparency, honesty and ethics by academic health care institutions. (See this post for how difficult it was to find academic institutions' initiatives to resist conflicts of interest.) One can count the conferences, meetings, symposia, and courses on such topics on one's fingers. When I last looked, I could count only a single course on fighting corruption at any US medical or public health school (at Boston University, by Prof Taryn Vian).

Given the scope of corruption, we should be shocked, shocked at how anechoic it is, and how our respected health care institutions, particularly academic institutions and health care charities have ignored the problem.

Given the scope of corruption, we should be shocked, shocked at how anechoic it is, and how our respected health care institutions, particularly academic institutions and health care charities have ignored the problem.

Of course, one reason we started Health Care Renewal was to make these issues less anechoic. So hear we go again.

PS - If anyone in our vast audience does know about any additional anti-corruption or conflict of interest, or pro-accountability, integrity, transparency, honesty and ethics initiatives, courses, meetings relevant to health care, please let me know and I will do my best to disseminate the information.


1.  Horton R. Offline: ten commandments, G8 corruption, and OBL. Lancet 2011; 377: 1638.  Link here.
2. Campbell EG, Gruen RL, Mountford J et al. A national survey of physician–industry relationships. N Engl J Med 2007; 356:1742-1750. Link here.
3. Campbell EG, Weissman JS, Ehringhaus S et al. Institutional academic-industry relationships. JAMA 2007; 298: 1779-1786. Link here.

Thursday, May 19, 2011

A Severance Package to an Un-Severed CEO - A Manifestation of "CEO Disease?"

The latest jaw-dropping story about executive compensation in health care has been unfolding in California, but at least now I have a diagnosis for this syndrome. 

A Generous Retirement Package, Paid Before Retirement

In April, the Los Angeles Times reported about the generous retirement package given to an outgoing public hospital district CEO in California:
When he turned 65 two years ago, Samuel Downing received a $3-million retirement payment from a public hospital district in Salinas, Calif., where he serves as president and chief executive.

But Downing continued working at his $668,000-a-year job for another two years, and after he retires this week, he will receive another payment of nearly $900,000. That comes on top of his regular pension of $150,000 a year.

Note that not only was this pension package large in an absolute sense, but it was provided before the CEO actually retired. This compensation was clearly out of the ordinary:
The payments amount to one of the more generous pension packages granted to a public official in California and come amid growing debate about 'supplemental' pensions that some officials receive on top of their basic retirement benefits.

Though Downing's case is extreme, it follows the disclosure of extra pension benefits received by employees in municipalities including Bell and San Diego. Earlier this year, a state watchdog group called for stricter pension rules, saying California's retirement plans are 'dangerously underfunded, the result of overly generous benefit promises, wishful thinking and an unwillingness to plan prudently.' Seventy percent of Californians support a cap on pensions for current and future government workers, according to a recent Los Angeles Times/USC Poll.

Furthermore, there was a disconnect between the size of the pension payments and the hospital district's financial situation:
But the $3.9 million in supplemental retirement payments to Downing has come during a period of cutbacks at the hospital, including the reduction of 600 positions through layoffs and attrition.

Hospital representatives said the cuts were mainly a response to recent economic conditions. The hospital has faced declining revenues and patient admissions and has been burdened by construction costs of a state-mandated retrofit project, they said.

Hospital district apologists had the usual excuses: the pensions reflected the market, and the CEO is brilliant:
Officials at the Salinas Valley Memorial Healthcare System defended the payouts, saying they need to pay private-sector-level benefits to retain top talent. They described Downing as a gifted and experienced administrator.

'I think I've earned it,' Downing said in an interview. 'I've stayed here out of my commitment to try to build a great hospital.... I worked for this institution and gave them my heart and soul.'

As usual, left unsaid were how the CEO's "brilliance" was justified, other than by his own assertion, and why the CEO deserved so much credit for the performance of a hospital system that employed many other people.

A Generous Severance Package, Paid to Someone Still Employed 

Yesterday, it turned out that there was even more to Mr Downing's compensation. As again reported by the Los Angeles Times,
A Salinas public hospital district, already under fire for granting its outgoing chief executive $3.9 million in retirement payments, also gave him nearly $1 million as part of an unusual severance agreement, according to records obtained by The Times.

The payment fattened what was already considered one of the more generous public pensions ever given in California. Its disclosure prompted the state Assembly earlier this month to order an audit of the hospital district's finances.

The Salinas Valley Memorial Healthcare System board gave Samuel Downing a cash payment of $947,594 in 2008, according to a hospital report on his compensation. The money came from a special severance fund set aside for when Downing ended his employment with the agency.

But the board decided to award him the money while he was still CEO.

By the time Downing retired last month, he had received a series of supplemental retirement benefits totaling $3.9 million, in addition to the severance payment. He will also be paid a regular pension of $150,000 a year. He earned about $670,000 in base salary during his final years of employment, along with other benefits such as a car allowance and paid time off.

The details of how the CEO became entitled to this severance agreement, and how a severance payment was made to someone whose employment was not severed was sketchy:
Salinas Valley officials said the severance payment stemmed from a handshake agreement in the 1980s between Downing and a previous president of the board of directors. In 2000, the hospital's board agreed to a contract in which Downing would be paid 18 months' salary upon the end of his employment. In 2008, the board voted to give Downing that money, which totaled nearly $948,000.

It's unclear exactly why the board of directors decided to grant Downing the cash-out. The five board members, who are elected at-large by residents of the hospital district, didn't return calls seeking comment.

Mr Downing, of course, once again asserted he deserved the money:
Downing said he felt he deserved the pay after a long and successful career at the hospital, where he started in 1972.

'It sounds like a lot of money to everybody … but I know what the industry is and I know the board did an independent study,' he said. 'The board did an excellent job. They made sure we had competitive salaries.'

Once again, a hospital district public relations person went to bat for him, by blaming previous board members:
A hospital district spokeswoman released a statement Wednesday saying the current hospital directors were 'obligated by a previous board' to pay out Downing's severance.

At least no one so far is claiming that this part of Mr Downing's compensation was determined by the almighty "market." In fact,
But several outside experts said it is unusual for an entity to award severance to someone who remains an employee.

Typically, they said, severance is promised to employees only in the event that they are pushed out of their jobs. Downing's severance was also atypical because he was entitled to it even if he retired of his own accord rather than being forced to leave.

'It's absolutely outside of the industry standard to pay a severance upon retirement,' said Jeff Christenson, a compensation consultant at the firm Integrated Healthcare Strategies. 'The theory of severance pay is to protect an executive or an employee from an unforeseen termination.'

And of course the severance was not even paid on retirement, but paid while Mr Downing was still working.

Summary - A Manifestation of "CEO Disease?"

Once again we see how top health care leaders are different from you and me.  Despite the fact that executives are paid employees, they seem to be entitled to special treatment far beyond that afforded other employees.  While the modern treatment of health care executives as minor deities seemed to start in the private health care sector, it seems to be extending even into government.

It turns out, over 20 years ago, the BusinessWeek cover story was entitled "CEO Disease."  It summarized the pathology that now seems to be the major cause of health care system dysfunction.  Yet the warning still goes largely unheeded:
Pampered, protected, and perked, the American CEO can know every indulgence. The executive who finally reaches the top of a major corporation enters an exclusive fraternity. The CEO's judgment and presence are eagerly sought by other captains of industry and policymakers. CEOs zip around the world in private jets and cash the heftiest personal paychecks in industry. They take home 85 times what the average blue-collar worker makes, unlike their counterparts in Japan, where the ratio is closer to 10 to 1 (page 60). [That was in 1991.  For larger US companies, the ratio was 343 in 2010.  See this link. -Editor]

It is a job that can easily go to one's head--and often does. 'Too many people treat CEOs as some kind of exalted, omnipotent leader,' says John Sculley, CEO of Apple Computer Inc. 'The real danger is that you start believing that stuff.' Sculley took a sabbatical in 1988 as a way of "reacquainting myself with the fact that I'm a mere mortal."

Many chief executives come to believe that they are much more than that. The perquisites and deferences create a protective cocoon--if not a full-fledged fantasy world--for the chieftains of some of the nation's largest companies. 'Many CEOs take on a level of self-importance that goes way beyond reality,' says Douglas D. Danforth, former CEO of Westinghouse Electric Corp. and now a director at several large corporations. 'They view the company as their own . . . . Some people's personalities change completely. If you're not careful, you can be seduced.'

Call it CEO Disease. The symptoms are all too familiar: The boss doesn't seem to understand the business anymore. Decisions come slowly, only to be abruptly changed. He (there are only two women CEOs in the BUSINESS WEEK 1000) feels he can do no wrong and refuses to concede any mistake. He begins to surround himself with sycophants in senior management and on the board.

TELLTALE SIGNS. Increasingly, the boss may seem out of touch--spending too much time away from the job, playing the role of statesman for the sake of personal recognition. He may even compete with industry counterparts over how much money he makes, how big the headquarters building is, or how many corporate jets are parked on the landing strip. And when it's time to leave the job, the boss just hangs on, often by undermining potential successors.

In 1991, the BusinessWeek article suggested some ways to prevent CEO disease. In 20 years, these suggestions have been largely ignored in health care corporations, and in the larger health care system and the surrounding economy:
A few fairly simple reforms would go a long way toward preventing many cases of CEO Disease, at least in its most virulent form. One obvious answer is to disperse decision-making. An advantage of this approach is that it focuses attention on a group of executives, not just the CEO.

The prevalence of the problem also makes an overwhelming case for more involvement at the board level. To be effective, boards must be composed of a sizable percentage of outside directors who have the time to learn enough about a company and its management to make informed decisions about its leadership.

If the boss isn't receptive and problems mount, a responsible director has no choice but to press for change. On four separate occasions since he started serving on boards, Jewel's Perkins says, 'I've sat down with the CEO and said: `In my judgment, you've made the contribution you can to this organization.' Three CEOs took early retirement.

Ultimately, the power to prevent, and if necessary, cure CEO Disease rests with the shareholders. They have the right, and the duty, to insist on a board of competent and aggressive outsiders. At least, they do in theory. In reality, shareholders are often either passive, indifferent, or only invested in the stock on a short-term basis.

CEO disease would seem to be an explanation for why a public hospital district gave an outlandish retirement package and a severance payment to a CEO who was still in office. CEO disease would describe much of the bad management we have described on this blog.

So, as I have said before,.... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

We need to launch a crash program to prevent CEO disease and cure existing cases, before it kills off our health care system.