Monday, July 17, 2006

How Hospital CEOs Get Paid Tens of Thousands to Advise Hospital Suppliers

The New York Times just reported on the activities of an organization called the Healthcare Research and Development Institute (HRDI).

Despite its name, HRDI is a "for-profit company owned by about three dozen hospital executives, but underwritten by 40 or so of its handpicked corporate members, all suppliers to hospitals." These "executives benefit from payments made by companies their hospitals do business with." HRDI industry members are limited to "only two competing companies in any specific field."

The purpose of the organization is apparently to give hospital suppliers access to the CEOs of large not-for-profit hospitals. "Last May, more than 130 representatives from 40 health care companies were scheduled to attend confidential consulting sessions at the Broadmoor, a Colorado Springs hotel. When not attending the sessions, hospital chief executives and suppliers mingled at company-sponsored tennis, golf and social events. Each year, H.R.D.I. holds two gatherings like the one in Colorado, where each corporate member gets a meeting of up to three hours with five or six chief executives, according to [HRDI CEO]Mr. Mecklenburg." "'The typical organization is paying $40,000,' Mr. Mecklenberg said. 'It can be more, but that would not be typical.' Additional access to hospital executives and their institutions can cost companies $55,000 a year or even more. For example, a special two- to three-day visit to a specific hospital costs $2,000 a person, according to H.R.D.I., which says most of that money is eventually passed on to the hospital."

"It is unclear exactly how much hospital executives, who are the shareholders of the healthcare institute, earn annually for consulting at the two conferences. Asked to verify a report that some members earned as much as $50,000, Mr. Mecklenberg initially denied it. 'Our observation and recollection is $20,000 to $30,000 a year,' he said. 'It may be more than that but we don’t have data in front of us, but it’s certainly not $50,000.'

Mr Mecklenberg himself has an interesting history. He is "a former chairman of the American Hospital Association, the industry’s largest trade group." Furthermore, now he "not only runs a large nonprofit hospital, Northwestern Memorial in Chicago, but he also serves on the board of Becton, Dickinson and Company, a major supplier of medical devices to hospitals around the world, including his own. Becton, Dickinson pays the institute for marketing advice, and the institute pays Mr. Mecklenburg $50,000 a year, mostly for participating in two national conferences, according to the group."

HRDI is now under the scrutiny of Connecticut Attorney General Richard Blumenthal, who "is investigating whether the organization allows certain vendors to buy access to hospital leaders who are in a position to influence what supplies or services their institutions purchase. As a result, Mr. Blumenthal said, hospitals may not be getting the best deals, either in terms of cost or quality. 'At the very least it suggests insider dealings — an insidious, incestuous, insider system,' said Mr. Blumenthal...." He is also investigating whether the limitation on HRDI membership to only two companies from each sector violates anti-trust regulations. Mr Blumenthal recently testified that HRDI is a "secretive" network of "ethically questionable business arrangements." Note that until recently, the organization did not allow public access to its web-site, and did not list its members, although its current membership list and list of corporate sponsors are currently on the web.

The Times' investigative reporting has opened yet another window on the pervasive web of conflicts of interest that entangles health care. The report reveals problems at multiple levels:
  • Hired leadership of not-for-profit hospitals seem to be personally profiting from their positions of trust
  • Hospital leaders not only have cozy relationships with at least some suppliers, but are paid handsomely by these same suppliers for their supposed market advice, raising questions about how effectively their hospitals will negotiate with these suppliers
  • The leader of the organization that makes these cozy relationships possible is simultaneously a not-for-profit hospital CEO and a member of the board of directors to a major hospital supplier, and hence has a fiduciary duty to that organization that seemingly clashes with his duty to his main employer
You just can't make this stuff up.
And people wonder why health care is so expensive? And think that the only solution to the rising cost of health care is to keep cutting physicians' fees for "cognitive services?" (See post here.)
Note that the well-publicized article by Brennan et al that castigated physicians for accepting so much as a coffee mug with a company logo from a drug or device company would have put academic medical center administrators in charge of enforcement of this stringent policy, the same administrators who may personally get paid tens of thousands of dollars to sit give market advice to the companies whose logos are on the coffee mugs. LOL. (See post here.)
Instead, as we have said before, there needs to be a broad, impartially enforced policy that bans major conflicts of interest affecting all decision makers in health care.
And we need some of leaders of large health care organizations, not just pharma and device companies, but also managed care organizations and insurance companies, hospitals, academic medical centers and health care systems, and medical schools and universities, to to look in the mirror to see who has been dodging responsibility for rising costs, declining access, stagnant quality, and demoralized providers.


Anonymous said...

I absolutely agree that conflicts of interest are a major problem in healthcare.

Take a look at who testified in Washington during the hearings on the non-profit hospital/charity care issue...

"HFMA takes pride in its history of providing balanced, objective healthcare finance technical expertise to Congress, HHS, and advisory groups."

How "balanced and objective" can HFMA be in the healthcare arena, especially with regards to the charity care controversy, when members in leadership positions over at the First Illinois HFMA...

also run companies that have patient collections divisions (look at the list of top execs at this company and see if you recognize anyone from First Illinois HFMA)?

HFRI is a privately owned, for-profit company that has a collection agency division (I think it is called Recovery Resources, Inc.) as part of the parent company.

Do you seriously think that anyone with HFMA membership who also runs a collection agency is giving balanced and objective opinions to Washington? Think about it!

This is like a massive politically incestuous soup!! The sooner the conflicts of interest get cleaned up within the industry, the better.

Judith Nudelman said...

When you're "in the trenches" taking care of patients despite the increasing obstacles, to discover corruption of this magnitude is both strangely affirming--I knew the whole system was both broken and stacked against us, and simultaneously completely horrifying. I'm thankful that the Connecticut AG is prosecuting this: why isn't it a Federal case?

Anonymous said...

Our AG announced an investigation into not for profit hospitals in our state. The investigation will cover income, salaries of top administrators, and business practices. All of the hospitals in our area have made substantial income except one.

Administrators and senior staff are compensated in a manner that far exceeds their educational and experience levels in other local industries.

Two business issues being reviewed are: The per person payment to an insurance brokerage firm to sign up new clients for a for profit insurance plan. Another hospital had built two health clubs in direct competition with existing commercial businesses. Both of these were funded with not for profit dollars and justified as reaching out to the community.

It seems this whole system is built on increasing co-pays by patients and decreasing reimbursements for PCP's. On top of this another doctor was found to have financial ties, he did not disclose, to a product reviewed in an article he wrote. Plus, a biotech analysis is giving up due to the constant harassment of the firms he gives a negative review.

I guess it is all in the spin.

Steve Lucas

Roy M. Poses MD said...

Steve -
to what state do you refer? Can you give us a media citation for the AG's investigation?

Anonymous said...


The AG story came from the July 19th Akron Beacon Journal in Ohio.

The other two articles appeared in the July 19th Wall Street Journal. Evan Sturza is the analyst. Charles Nemeroff was found to have finacial ties, he did not disclose, to a product he reviewed.

Steve Lucas