Friday, January 26, 2007

HRDI Settlement Disbands "Anticompetitive, Secret Society"

Last summer we posted about the Healthcare Research and Development Institute (HRDI). HRDI is a for-profit owned by a number of the top executives of some of the US best known hospital systems and academic medical centers. According to an article in the NY Times, HRDI gives a limited number of drug, device, and biotechnology companies access to these executives, for a stiff fee.

According to yesterday's NY Times, the Connecticut Attorney General, Richard Blumenthal, just obtained a settlement from HRDI that calls for the company to pay a $150,000 fine, and disband as a for-profit company. A digest of the story, edited and re-ordered, is below:

Under pressure from the Connecticut attorney general, a consulting group owned by some of the country’s most influential hospital executives agreed yesterday to stop selling marketing advice to vendors who do millions of dollars in business with nonprofit hospitals across the nation, including their own.

Known as H.R.D.I., the group is owned by about three dozen hospital executives, but it is underwritten by 40 or so of its handpicked corporate members who sell drugs, medical devices and financial services to hospitals.

H.R.D.I.’s owners are among the most influential members of the hospital industry. They have included executives of group purchasing organizations, which negotiate millions of dollars in supply contracts on behalf of nonprofit hospitals across the country.

Despite its elite membership, H.R.D.I. has maintained a low public profile. Its meetings were not open to the public or to vendors who were not members. According to H.R.D.I. rules, only two vendors in any product line could belong to the group.

Last summer, The New York Times reported on an H.R.D.I. meeting in May at the Broadmoor, a Colorado Springs resort, where 40 health care companies sought advice from hospital executives. Market leaders like Eli Lilly, Johnson & Johnson, Morgan Stanley and Citigroup attended, along with many smaller companies.

The companies paid the travel expenses for hospital officials and their spouses and sponsored golf and tennis outings, among other events.

H.R.D.I.’s rules prohibited vendors from using its meetings to sell products. In one instance, the group expelled a company for violating that rule. But over all, state investigators said, the rules were either ineffective or not enforced.

Suppliers, for example, lobbied H.R.D.I. employees for consultations with executives at hospitals where they wanted to make sales, Connecticut officials said. One vendor, after consulting with an H.R.D.I. hospital executive, went from zero sales at the executive’s hospital to $3.6 million in annual sales, investigators said.

'Various vendors identified membership in H.R.D.I. as an important, if not their most important, ‘relationship builder’ in the health care industry,' the agreement states.

According to a settlement agreement signed by H.R.D.I. and the state attorneys general in Connecticut and Florida, hospital members may no longer accept consulting fees and free trips to resorts from hospital suppliers. The agreement did not include any admission of wrongdoing by H.R.D.I. or its owners.

H.R.D.I., which was founded five decades ago as an educational group, will change from a profit-making company into a nonprofit group financed only by hospitals or their executives. Supply companies may not initially join the new group, called the Health Education Network, nor will they be permitted to have any financial links to it.

Based in Pensacola, Fla., H.RD.I. has long maintained that its sole purpose was to improve products and services in health care.

'H.R.D.I. never has and does not now buy, sell or encourage the purchase or sale of products or services,' said Diane Appleyard, the group’s president and chief executive. 'After more than 23 months of investigation, no wrongdoing was found and no charges were filed.'

As reported by the Times, and in two Connecticut newspapers, the Hartford Courant and the New Haven Register, Blumenthal had some choice words to describe HRDI and his settlement with it.

[The agreement] shatters an anticompetitive, secret society, an elite and exclusive club of premier hospital executives and select hospital supply businesses that restrained competition to the detriment of patients and providers. [Times]

These practices threatened to inflate health care costs to patients and taxpayers - stifling competition in almost every health care supply and services market. [Courant]

[HRDI was an] exclusive club, [better named] Healthcare Titans of America — an organization where the most powerful vendors and hospital CEOs enjoyed lucrative marketing opportunities, and lavish accommodations. [Register]

HRDI claimed to offer health care consulting services to industry players. In reality, it was an exclusive network that shut out potential competitors in various health care markets — everything from pharmaceuticals, syringes, medical devices and financial and consulting services. [Register]

Given Blumenthal's scathing words, it is reasonable to ask just who are the members of HRDI's "exclusive club?" The list is on the HRDI web-site:

It will be interesting, if that's the word, to see if there will be any discussion about and any repercussions for the participation of the leaders of these distinguished organizations in what one well-known state Attorney General called "an anticompetitive, secret society, an elite and exclusive club." Unfortunately, our previous observations of the anechoic effect suggest that there will be little response and no repercussions. In healthcare, leaders of revered organizations often seem to be able to hide under the cloak of their organizations' reputations, even if they have conducted themselves in ways that contradict their organizations' missions.

But this is one striking and broad demonstration about how the leadership of large health care organizations' threatens physicians' and other health care professionals' core values. This case, along with many others that have appeared on Health Care Renewal, suggest we need a major overhaul of the governance of US (and other countries') health care organizations if we really want to improve access, costs, and quality.

WHAT CAN BE DONE? - If you live in a community served by one of the health care systems above, or if you have any relationship with one of the systems, push to make the story of HRDI public, and then push for more transparent, accountable, and ethical governance of that health care system.


Unknown said...

Thanks for following this important case, and letting those of us who don't see the local sections of the New York Times know about it.

InformaticsMD said...

Stunning. Simply stunning.

H.E.Butler III M.D., F.A.C.S. said...

"Donations of Professional Services" is the tax-credit law for charity-care in Virginia, applicable to doctors, dentists, and lawyers who help indigent patients and clients. It is available online: Isn't such a law worth extending to the I.R.S.?

Medical ethics begins with our choice of "teaching-hospitals": What are some teaching when they claim to be "not for profit" but then sue doctors' indigent patients? Senator Charles Grassley cited such a hospital outside his own state of Iowa, in Missouri, and was duly praised for his concern for hospital-honesty; Dr. Karen Summar is now in his Washington office. Call her pro re nata: 202-224-4515.

I have written this message in memory of Dr. Verner S. Waite who founded the Semmelweis Society in California. See his work online by searching Semmelweis Society. Please write if you are interested in continuing Dr. Waite's work: At the end of the day, we are all patients...

H.E.Butler III M.D., F.A.C.S.
Commander, U.S.N.R., Fleet Reserve
757 377 7775 cell phone