How Can a $101 Million a Year CEO Help "People Get the Care They Need at an Affordable Price?"

In 2005, we entitled a post, "How Can a $124.8 Million a Year CEO Make Health Care More Affordable?"  At that time, we contrasted the enormous compensation given to the then CEO of UnitedHealth, Dr William McGuire, with the stated mission of his corporation.  Since then, we have traced the travails of UnitedHealth and its leadership.  Dr McGuire was eventually accused of receiving backdated stock options (which at one time raised his personal fortune to over $1 billion), and was pushed into retirement.  UnitedHealth was accused of a variety of management and ethical lapses.  The rather sorry story as of April, 2010 was summarized here.

The more things change, the more they stay the same.  The Minneapolis Star-Tribune just reported:

Stephen Hemsley, a serious and studious man, is known for his marathon-like work schedule, which regularly includes Saturdays and Sundays, in his role as chief executive of Minnetonka-based UnitedHealth Group.

Now, he also is known as the highest-paid CEO in Minnesota with a 2009 pay package totaling $101.96 million, six times the amount paid to the next CEO in the Star Tribune's annual survey of the state's 100 highest-paid chief executives at publicly traded companies.

But Hemsley's big pay package is also a vestige of the company's former practice of loading executive compensation heavily with stock options, a practice that changed in the wake of a crippling backdating scandal four years ago.

Those options, granted under a different regime of board directors, accounted for $98.6 million of Hemsley's income in 2009.

The attempts company officials made to minimize Hemsley's outsized compensation were almost funny:

UnitedHealth officials assert that Hemsley's 2009 pay package minus the 10-year-old options was $8.9 million, far less than the compensation paid to CEOs in other health insurance organizations.

But Hemsley did exercise the options, so he did receive the additional $98.6 million.

Hemsley also seems on target to get gargantuan compensation this year too:

Nonetheless, Hemsley has already put up good compensation numbers for 2010 with the exercising of additional options granted after 1999 worth $21 million. He also controls 6 million exercisable and unexercisable options, half of which are underwater or below the stock's current value.

The cringe-inducing contrast is with UnitedHealth's high-minded mission statement:

Our mission is to help people live healthier lives.

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

Hemsley's compensation could have provided "care they need" to quite a few people at an affordable price.

More to the point, it is hard to imagine that a company that feels the need to pay so much to its CEO, and a CEO that can accept such riches, have the slightest understanding or interest in providing people "the care they need at an affordable price."

In this cynical age, I doubt many people credit the UnitedHealth mission statement with being more than advertising fluff. Nonetheless, I suspect most people believe that our society should try to provide as many people as possible with "the care they need at an affordable price," but realize that we are far from doing so. Health care insurance companies/ managed care organizations that see fit to make their hired leaders extremely rich seem to be part of the problem, not the solution.

"Smoke Detector" - Medical Center Leader (and Former Biotech CEO) Outed as Tobacco Investor

Last year we posted about the seemingly incongruous choice of a wealthy biotechnology executive with little academic or practice experience to run the prestigious University of California - San Francisco, a health oriented university housing a respected medical school.  We wondered whether her corporate background would make it difficult to uphold the university's academic and patient care missions.

In line with our concerns, Duff Wilson, writing in the New York Times, reported:

When Dr. Susan Desmond-Hellmann was named chancellor of the University of California, San Francisco, last summer, she took over a medical institution focused on world health generally and tobacco control in particular.

But she forgot one thing in adjusting to her new role: personal stock holdings listed last year in the range of $100,000 to $1 million in Altria, owner of Philip Morris USA, the maker of Marlboro cigarettes. Altria has been blamed for thousands of deaths and repeatedly criticized by the Center for Tobacco Control Research and Education at the university.

Last week, a day after The New York Times inquired about the Altria stock, Dr. Desmond-Hellmann and her husband, also a doctor, ordered it to be immediately sold and imposed 'values screening' on their personal investments.

Experts on tobacco control were aghast:

Dr. Stanton A. Glantz, director of the university’s tobacco control center, said he was unaware of Dr. Desmond-Hellmann’s Altria stock, which was contained in a university filing but not made public until now, after a public records request by a former student who passed it on to The Times.

“I do find that kind of shocking, but at least she got rid of it,” Dr. Glantz said on Monday, adding that Dr. Desmond-Hellmann had been very supportive of the center.

Dr. Kenneth E. Warner, dean of the school of public health at the University of Michigan and a national antitobacco leader, said, “I find it frankly a bit appalling that the chancellor of a major medical center would have held such stock. It strikes me as unthinking, frankly.”

We should give Dr Desmond-Hellmann credit for selling her Altria stock as soon as its connotations were made plain to her. (And at least she was not on the board of a tobacco company, to our knowledge, as was one former president of a university and large health sciences center.)

However, this little incident underlines the clash between the culture that dominates large health care corporations and the mission of medical schools and academic medical centers. In the last 30 years, academic medicine has rushed to embrace the reigning corporate culture, not to mention corporate money. I submit that this embrace has been at the peril of the fundamental academic and patient care missions.

Academic medical leaders need to promote better patient care, and honest, responsible teaching and research. To do so, they may have to give up some of the glitz, glamor, and cash proffered by industry. If they do not make this sacrifice, they risk losing the trust of an increasingly skeptical, if not cynical public.

Insel Admits His Statements "May be Viewed as Misleading"

Dr Bernard Carroll has posted several times, most recently here, about shenanigans by "key opinion leaders" in psychiatry whose apparently academic writing and speeches have conveyed messages in line with the marketing agendas of drug and device companies, while they downplayed or concealed their financial ties to these companies.  Lately, Dr Carroll noted how the current director of the US National Institute for Mental Health (NIMH), Dr Thomas Insel, has defended Dr Charles Nemeroff, whose recent move to the University of Miami let him shed sanctions imposed by Emory University for his failure to disclose conflicts of interest while he was there. Dr Carroll wrote, "For the past three months, Insel has been trying to put some distance between himself and Nemeroff, but the public isn’t buying it. I have called his statements disingenuous...."

Dr Carroll is on vacation, so in his absence, I note the following from a brief article in the Chronicle of Higher Education:

The director of the National Institute of Mental Health, Thomas R. Insel, has softened his denial of a mutually helpful relationship with Charles B. Nemeroff, a university researcher found to have repeatedly collected undisclosed corporate payments. In an update to his official blog posting, Dr. Insel said his initial denial of job assistance from Dr. Nemeroff 'may be viewed as misleading,' and acknowledged that Dr. Nemeroff served in key positions related to Dr. Insel's hiring by Emory University.

This seems to corroborate Dr Carroll's skepticism. I wonder what other statements by Dr Insel, or Dr Nemeroff for that matter, ought to be "viewed as misleading?"

We have said repeatedly that commercially sponsored "key opinion leaders" are really part-time drug marketers disguising themselves as academics or distinguished practitioners. The deceptions inherent in these roles seem to lead to a certain habitually elastic approach to the truth.

Medical academics and practitioners will need a renewed commitment to honesty and transparency if they want to regain the respect of an increasingly skeptical, if not cynical public.

BLOGSCAN - Deceptive Pharmaceutical Marketing

Perhaps in honor of the recently concluded meeting organized by Dr Adriene Fugh-Berman and her colleagues at PharmedOut.org on the pharmaceutical industry and its influence on continuing medical education, three significant posts appeared this week about deceptive pharmaceutical marketing practices. 
On the Health Business Blog, David Williams analyzed how a former pharmaceutical and biotechnology executive spun the Vioxx case, blaming it all on the public's risk aversion. 
On the Hooked: Ethics, Medicine and Pharma Blog, Dr Howard Brody summarized two significant articles by Kalman Applbaum on complex psychological campaigns, really versions of disinformation campaigns, used to to market pharmaceuticals. 
On the Carlat Psychiatry Blog, Dr Daniel Carlat published a letter about life at a medical school department lead by Dr Charles Nemeroff, one of the "key opinion leaders" most lavishly paid by pharmaceutical companies to help them market questionable drugs for questionable reasons, and giving observations on Dr Nemeroff's new career.

WellPoint: Don't Know Much About Computer Programming; Aetna: Don't Know Much About Mathematics

Big US based health care insurance companies have not been covering themselves in glory in the last week.

Aetna's Math Errors

First, there was the case of Aetna's mathematical prowess, e.g., as reported by the Los Angeles Times:

A second insurance company in California has killed plans for double-digit rate hikes for individual policyholders because of errors in its filing that would have inflated premiums, state regulators said Thursday.

Connecticut-based Aetna Inc. had sought an average 19% increase in rates for its 65,000 individual customers, but pulled back after multiple math errors in its paperwork were found by its own staff and by an independent consultant working for the state.

Aetna's decision follows a similar move by Anthem Blue Cross, which canceled a rate increase of as much as 39% for many of its 800,000 California policyholders in April after the state consultant found calculation errors in its filing with the California Insurance Department.

Of course, Aetna tried to minimize the story:

An Aetna spokeswoman said the company found 'a miscalculation not previously detected' when it conducted a third round of internal reviews.

'This was a simple human error,' said spokeswoman Anjanette Coplin, who did not elaborate.

However,

'There were multiple errors … in the way [Aetna] annualized premiums and in the compounding of the rate increase,' said state Insurance Department spokesman Darrel Ng.

Of course, somehow the errors all were in Aetna's favor:

Even with the new disclosure requirements, regulators have limited authority to block rate increases. They can do so only if insurers fail to spend at least 70% of their premiums on medical claims.

In Aetna's recent rate filing, the insurer said its plan met the 70% minimum. But once the errors were identified, medical-claim spending fell below the 70% requirement. The proposed rates were higher than they should have been, officials said.

WellPoint's Computer Errors

A few minutes ago, the Associated Press reported:

WellPoint Inc. has notified 470,000 individual insurance customers that medical records, credit card numbers and other sensitive information may have been exposed in the latest security breach of the health insurer's records.

The Indianapolis company said the problem stemmed from an online program customers can use to track the progress of their application for coverage. It was fixed in March.

Spokeswoman Cynthia Sanders said an outside vendor had upgraded the insurer's application tracker last October and told the insurer all security measures were back in place.

But a California customer discovered that she could call up confidential information of other customers by manipulating Web addresses used in the program. Customers use a Web site and password to track their applications.

Note that this security breach was potentially serious:

WellPoint's security breach doesn't crack the top 10 in terms of number of people who may have had information exposed, said Paul Stephens, the [Privacy Rights Clearinghouse]organization's director of policy and advocacy. Even so, he labeled the breach 'very serious' because it possibly involved both financial and medical information.

This is not the first time WellPoint's computers and software have violated the privacy of its applicants or customers:

Two years ago, WellPoint offered free credit monitoring after it said personal information for about 128,000 customers in several states had been exposed online. In 2006, backup computer tapes containing the personal information of 200,000 of its members were stolen from a Massachusetts vendor's office.

Summary

Of course, everyone makes mistakes.  However, one would expect that at least health insurance companies/ managed care organizations ought to be able to do the math necessary to support their rate proposals correctly, and keep their policy-holders' and applicants' personal information confidential.  These would seem to be fundamental competencies that such organizations ought to display.  Of course, one can find other examples of lack the lack of competency (and worse) displayed by both Aetna and WellPoint. 

Furthermore, anyone can make mistakes, but in the real world, those who preside over such mistake-prone enterprises often do not do too well.  However, in the bizarre world of large health care organizations, the executives who preside over the ongoing bumbling just make more and more money, under the pretense that their continuing brilliant leadership just leads to one triumph after another. 

As we noted here, WellPoint CEO Angela Braly's total compensation increased in 2009 to an outsized $13.1 million, with the executives just underneath her paid proportionately well.  Per its 2010 proxy statement, WellPoint's

Total Rewards compensation program is designed to attract, engage, motivate and retain a talented team of executive officers and to appropriately reward those executive officers for their contributions to our business and our members. We seek to accomplish this goal in a way that is closely aligned with the long-term interests of our shareholders and the expectations of our members and health care providers.

I suspect that WellPoint's members' expectations did not include the three computer security breaches noted above.

Similarly, according to its 2010 proxy statement, Aetna CEO Ronald A Williams' total compensation in 2009 was a mere $18,058,162. Other top executives made proportionate amounts, from more than $1 million to more than $12 million. The rationale underlying executive compensation includes:

We seek to implement a pay-for-performance philosophy by tying a significant portion of our executives’ compensation to their achievement of financial and other goals that are linked to the Company’s business strategy and each executive’s contributions towards the achievement of those goals.

To me, avoiding mathematical errors in calculating policy premiums ought to be part of the company's goals linked to its business strategy.

An old rock song that starts with "don't know much about history," may have a certain charm.  Health insurance companies that cannot accurately calculate premiums or protect the confidentiality of policy-holders' computerized data has none. 

As long as "imperial CEOs" can continue to get extremely rich while presiding over incompetence and stupidity, if not worse (see here), we can expect the foolishness to continue.  Meanwhile, the foolishness drives up costs and drives down quality of health care for the poor suffering patients, let alone the physicians and other health care professionals who must deal with it.

To really reform health care, we need to provide incentives for competent, honest leadership, and make that leadership accountable for its shortcomings.

Professional Integrity for Sale? “Sure,” Says Medscape!

Some chiropractors also practice homeopathy. According to Frank King, D.C., many more should be doing just that:

Homeopathy is an energetic form of natural medicine that corrects nerve interferences, absent nerve reflexes, and pathological nerve response patterns that the chiropractic adjustment alone does not correct. The appropriate homeopathic remedies will eliminate aberrant nerve reflexes and pathological nerve responses which cause recurrent subluxation complexes.

Not only does homeopathy correct nerve interferences, it empowers the doctor of chiropractic to reach the entire nervous system. What this means is that we can now better affect the whole person, and all of the maladies that affect us. Homeopathy’s energetic approach reaches deep within the nervous system, correcting nerve interferences where the hands of chiropractic alone cannot reach. Homeopathy is the missing link that enables the chiropractor to truly affect the whole nervous system!

But that’s not all:

Financial Rewards

Homeopathy means a multiple increase in business. Personally, I have been able to see and effectively help more patients in less time. The additional cash flow from broadening your scope of practice, increasing your patient volume and selling the homeopathic remedies is a wonderful adjunct. Better yet are the secondary financial benefits:

• Homeopathy is like an extension of you that the patient can take with them to apply throughout each day in between visits. The actual therapeutic benefits of homeopathy along with the inner comforts of the patient as they connect you with each dose they take.
• The dynamic broadening of your effective scope of practice multiplies the number of patients you can help and the multiple problems that each patient usually has. As you correct one set of problems, there are commonly other problems most patients don’t even tell their chiropractors. This doesn’t have to be the case anymore. Homeopathy empowers the chiropractor to correct conditions ranging from allergies to warts with incredible effectiveness!
• Obviously, the rule of multiples will exponentially increase when a homeopathic procedure is properly implemented into your practice. Many of the conditions people are suffering with have no viable solution without the dynamic duo of chiropractic and homeopathy.
  

You can be the doctor people will seek out, travel long distances to see, and pay cash for your valuable services. Take it from someone who has experienced it first hand, it’s a great position to be in.

This is no surprise. Most chiropractors relinquished whatever ethical integrity they might have had when they bought into the “subluxation” myth, and the field as a whole has a fine tradition of “practice building.”

Naturopaths, likewise, don’t mind winking at practice ethics in order to make an extra buck. Nor do MD quacks, of course. Hey, it’s getting harder and harder to make a living just by slogging through the morass of needy patients, onerous third-party billing requirements, diminishing payments, increasingly cumbersome practice guidelines, next-to-impossible-to-keep-up-with (nothing to say of tedious and technical!) medical literature, and all the rest. Why not sprinkle your practice with a little ‘diagnostic’ sugar that will appease those clingy patients—for a while, anyway—and that you won’t have to find billing codes for (because there aren’t any)? Heck, why not check out this offering from “bio-pro, inc. Amazing Anti-Aging Solutions (Healthier Patients, More Patients)”:

HOWW TOOOO ….

The “must do” seminars for those who own or are managing a Complimentary [sic]Medicine Practice.

Three day course teaches you:

How to relate to the patient, evaluate, test and diagnose

How to use solutions, mixtures, methods, supplies and equipment

How to protocol administration for Chelation, Oxidation, Chelox, TriOx, Ascorbates, UVBI

How to design and organize your office

How to hire and fire staff and to computerize

How to use public relations and marketing

How to manage compliance with Medicare, State Medical Boards and governmental regulatory agencies

Manuals included…

Each attendee receives one set of training materials, including:

Protocol Manual

Physicians Manual

Office Procedure Manual

Forms Book

Marketing Manual

Patient Results Manual

Employee Manual

Audio tapes

and other related material.

Bio-pro was founded in 1978 by the late Charles H. Farr, MD, PhD, the self-styled “father of oxidative medicine,” who was also a founder of the American College for Advancement in Medicine, the Mother of All Pseudomedical Pseudoprofessional Organizations (PPO). But none of this is surprising, right? After all, quacks quack.

What may have come as a surprise to beleaguered physicians who still play by the rules was this offering, just a few days ago, from Medscape Business of Medicine:

Six Ways to Earn Extra Income From Medical
Activities

You’re chasing after claims but watching reimbursement sink.

It’s a common story, and primary care doctors and even specialists are keeping their ears to the ground for other ways to boost their bottom line. Luckily, doctors have some fairly lucrative options that can help them maintain their income — and perhaps even increase it.

We looked at 6 avenues that physicians have taken to earn extra revenue. None of these activities require a tremendous amount of time. Participating in just 1 or 2 activities can put enough money in your pocket to allow you to breathe a little easier when the bills come in.

So what are those ‘6 avenues’? Let’s see:

• Work with Attorneys
• See Nursing Home Patients
• Serve as a Medical Director
  

So far, so not necessarily bad…

• Team Up with Pharmaceutical Companies
  

What??! Team up with pharmaceutical companies? Couldn’t that mean, like, just doing legitimate research and trying like hell to do it right? Uh, nope:

Drug and device companies spend billions of dollars each year to discover and promote new medicines and treatments, and they rely heavily on doctors to participate in these endeavors whether through clinical trials or serving as a speaker or consultant. It’s not uncommon for physicians to earn a minimum of 5 figures a year either speaking or doing clinical studies within their medical practice. Some doctors make in excess of $100,000 annually — on top of their income from seeing patients.

O’course, you gotta watch out for those pesky ethics killjoys, warns Medscape:

Although some extra money is nice, too much can turn heads — and not in a good way. In late January, The Boston Globe reported on an allergy and asthma specialist who was issued an ultimatum by his hospital, the prestigious Brigham and Women’s Hospital (Boston, Massachusetts): Stop moonlighting on behalf of pharmaceutical companies or resign from your staff position.

What it all comes down to is this:

Pros: With typical payments running about $1500-$2500 for a single talk, there’s substantial opportunity to supplement your regular income…

Cons: These arrangements are coming under increasing scrutiny from hospitals, legislators, regulators, and the media. In fact, some of the doctors whom we contacted for this article declined to talk about their involvement with drug companies.

Uh, no kiddin’. Funny that the “increasing scrutiny” doesn’t seem to come from organized medicine, medical schools, mainstream medical journals, state medical boards, or doctors in general. A couple of years ago I lamented the publication of a couple of book reviews, in the lofty New England Journal of Medicine, that celebrated trendy pseudomedicine. Shortly thereafter I received this from an emeritus editor:

I think the incursion into the bastions of medicine has to do with the fact that everything nowadays—absolutely everything—has become a market. If quackery appeals to the readers of the NEJM, it will be there. ”Is it true?” is no longer the question anyone asks, but “Will it sell?” And I think that applies to the editors of most major journals, as well.

True, dat. As for Medscape, this isn’t its first ethical gaff, and I agree with Bernard Carroll that it seems to have “a right hand – left hand problem.”

Oh yeah: what were the other 2 “avenues”? Those would be:

• Become a Media Personality
• Consult for Wall Street

Slouching, or "Moving Towards ... Oligopoly"

A report by Bloomberg on a prediction that the US attempt at health care reform will lead to more concentration of power among health insurance companies.

U.S. health insurers are 'moving towards an oligopoly,' a process that this year’s health-care overhaul will accelerate, the investor-relations chief at WellPoint Inc. said today.

New regulations on administrative spending and premium increases will push some independent insurers out of business or into deals with bigger rivals, said Michael Kleinman, vice president for investor relations, at a Wells Fargo & Co. conference in Boston.

In addition,

The insurance market is becoming an oligopoly, a market where supply and pricing are dominated by a few companies, 'and health-care reform is going to move us in that direction more quickly,' Kleinman said. 'There are going to be smaller insurers that are not going to be able to survive in this marketplace.'

Wellpoint is not likely to suffer from a move to fewer, larger insurance companies:

Led by WellPoint, 12 health plans cover two-thirds of the enrollment in the U.S. commercial-insurance market, said Ana Gupte, a Sanford C. Bernstein & Co. analyst....

So, it is not that Mr Kleinman has any regrets about this. Far from it:

Indianapolis-based WellPoint, the country’s biggest health plan with 33.8 million members, has the scale to prosper from the overhaul, which is expected to add another 34 million to the ranks of the insured, he said.

Mr Kleinman might argue that WellPoint's increasing size and prospects for market domination are good for society as well as the company, and its top executives.  We have heard endless arguments in the last 30 years that larger hospital systems and larger insurance companies lead to more efficiency and lower costs.  However, the evidence is in the other direction.  There is plenty of reason to worry that increasingly dominant companies will extract higher prices, and the money they make will benefit their top leaders first, maybe their stockholders second, and patients and ordinary employees a very distant third, if at all.  So look for WellPoint CEO Angela Braly to make even more than $13 million a year in the future.

So it would have  been more reassuring if the response from the US executive branch included some opposition to the notion of a more concentrated market.  Instead,

Asked to comment today, Nicholas Papas, a spokesman for President Barack Obama, referred in an e-mail to the president’s remarks on June 22 touting the health-care overhaul.

The law 'will put an end to some of the worst practices in the insurance industry,' such as canceling policies when patients get sick or imposing lifetime limits on coverage, Obama, a Democrat, said at a White House ceremony.

The changes 'will make America’s health-care system more consumer-driven and more cost-effective and give Americans the peace of mind that their insurance will be there when they need it,' Obama said. 'Insurance companies should see this reform as an opportunity to improve care and increase competition.'

And rather than worrying about the government's response,

Angela Braly, WellPoint’s chairman and chief executive officer, was among a group of insurance chiefs who met Obama June 22. While Democrats have attacked the company for its premium increases, the relationship is improving, Kleinman said.

'The Obama administration understands that we need to work in partnership, that in order to make health-care reform work, the carriers need to be able to charge appropriate rates and make an appropriate margin,' he said. 'Hopefully, a lot of that bad rhetoric is behind us.'

If the increasing concentration of power in health insurance does not meet a more effective challenge, we will need a lot more than rhetoric, good or bad, to save health care.

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

The Second Coming (Slouching Towards Bethlehem), by W B Yeats

Edwin Lee on the Tiger We Are Now Riding

Some insights about why the leadership of large health care organizations has gone so wrong may be found on a blog I just discovered entitled "Dismounting Our Tiger," written by entrepreneur Edwin Lee. In particular, this post, triggered by the miserable results produced by BP in response to the gulf oil spill, posits the series of steps by which people become leaders of most big organizations, presumably including health care organizations:

1.They always followed orders and met the cultural expectations of their organization. They went along to get along. Early in their careers they were faced with a choice: they could make a difference or get promoted; they chose to get promoted. (Those who attempt to make a difference make waves for senior management and fellow workers who then deal with them as disloyal; troublemakers, heretics, or whistle blowers)
2.They were tapped for greatness (fast-tracked) by more senior persons early in their careers.
3.They carefully accumulated 'status' symbols like degrees, awards, medals, etc.
4.They avoided collecting demerits by taking risks and failing.

And here are the outlooks and capabilities they share:

1.They are culturally conditioned to administer their organizations as they are, not to deal with major changes either inside the organization or in the outside world. Their sole power structure comes from those who report to them and their boards of directors, who expect behavior consistent with past behavior. Should top executives initiate major changes, control of their companies becomes less certain and more difficult. (More importantly it risks their personal compensations). Leaders can’t operate in isolation, they need loyal power bases.
2.They see the world from the tribal perspective of their organizations. (Even after they go elsewhere as in the case of Larry Summers and Robert Rubin whose pro Goldman Sachs tribalism has helped to undermine real financial reform)
3.They rightly understand that relative size a marketplace is the dominant factor for survival and for growing profits. They focus almost entirely on that aspect of their business. (Much as a beautiful woman might rely solely on her beauty rather than develop her mind or personality)
4.They consider their leadership positions to be appropriate rewards for years of loyal service.
5.Their first order of business (as CEOs) is to gain control of their Boards of Directors.
6.They manipulate their Boards into paying inflated salaries, providing expensive perks, agreeing to golden parachutes and rewarding them with extravagant bonuses for last year’s performance.. (Over the last 50 years entire industries have been thus manipulated so that Boards now justify such parasitic compensation as 'competitive').

Does it all sound familiar? Does it sound like a description of many health care leaders we have discussed?

As Edwin Lee summed it up:

We, the public, are foolish for relying on these executives to plan for disasters or to care about the 'little people' either inside or outside their organizations, or to expect their boards of directors or stockholders to make essential corrections.

But in health care, we have been relying on our imperial CEOs, and woe unto us when the disasters start to occur.

When a Key Opinion Leader Questions the Hand That Fed Him: from "Master Teacher to Someone Who Didn't Know What He Was Doing"

We just posted an update on the ongoing cozy relationship with medical device companies, in particular, those that make prosthetic hip and knee joints, and some orthopedic surgeons.  Some surgeons, including many prominent academic leaders and practitioners, have been paid huge amounts, and have often failed to make more than the most minimal disclosure to their patients, or to the audiences of their talks or the readers of their ostensibly scholarly articles.  Deferred prosecution agreements with device companies shed light on these payments, but did not curtail them.  Yet the surgeons and the companies who paid them defended the payments as legitimate consulting agreements, and royalties for worthy innovations. 

Now the New York Times has reported on a dispute between a well-paid consultant and an artificial joint manufacturer that provides new insights into these financial relationships. To summarize,

IT was a long, fruitful medical marriage that is fast becoming an angry public divorce, one that offers a rare look at a clash between a top-shelf consultant and his corporate patron over patient safety.

For years, Dr. Richard A. Berger designed surgical tools and artificial joints for Zimmer Holdings, trained hundreds of doctors to use its products and talked it up wherever he went. In return, Zimmer, an orthopedic implant maker, helped enrich Dr. Berger, portraying him as a master surgeon and paying him more than $8 million over a decade.

Those days are gone. Dr. Berger started complaining to Zimmer a while back that one of its artificial-knee models was failing prematurely, and he went public recently with a study that he says proves it. Zimmer told him that the problem was not the artificial knee, but his technique, and pointed to data overseas indicating that the knee was safe.

Last year, Zimmer did not give Dr. Berger a new contract. The company says it routinely rotates consultants.

'I trained hundreds of doctors for them and made them tens of millions,' Dr. Berger said in interview here, in which he also lambasted Zimmer executives as dissembling, out-of-touch bureaucrats. 'So was this just a coincidence? Maybe it was. Maybe it wasn’t.'

In more detail, here is how Dr Berger's relationship with Zimmer began:

The surgeon, a tall, balding man with a boyish manner, was finishing his fellowship at the Rush University Medical Center in Chicago at the time, one of the country’s top centers for joint replacement. The center has had long ties to Zimmer, whose headquarters is about two hours away, in Warsaw, Ind., and the young surgeon quickly came to the company’s attention.

'Rich has a very clever set of hands, and because of that he is enabled with the ability to innovate surgical techniques,' said Roy Crowninshield, who was Zimmer’s chief scientific officer.

Dr. Berger’s skills matched Zimmer’s marketing strategy. To distinguish itself from competitors, the device maker had started promoting minimally invasive surgery, a technique that uses smaller incisions than traditional surgery. Zimmer trained doctors in the procedure, using its device.

Soon, Dr. Berger, who was then pioneering a type of small-incision surgery that allowed patients to leave the hospital on the day of surgery, became a linchpin of Zimmer’s efforts. In 2002, he was prominently featured in a press release about Zimmer’s plans to build a training facility for minimally invasive surgery.

'We are clearly excited about Dr. Berger’s data,' J. Raymond Elliott, the company’s chairman and chief executive at the time, stated in the release.

Over the next few years, the physician estimates, he helped train hundreds of surgeons on Zimmer’s behalf.

And in more detail, here is how things went wrong: 

As he tells it, his relationship with Zimmer frayed over a version of a widely used Zimmer knee, known as the NexGen. The model at issue, called the NexGen CR-Flex, is designed to provide a greater range of motion than the standard NexGen.

Most surgeons implant an artificial knee using a cement-like adhesive to bond the thigh bone to the portion of the device that bends. But some specialists, like Dr. Berger, try to avoid adhesives because the cement can break down and cause device failure. So Zimmer also sells an uncemented version of the CR-Flex that relies instead on the bone naturally fusing with the implant.

Dr. Berger says that he gave the device, which is supposed to last about 15 years, to about 125 patients in 2005, the first full year he used it. But by early 2006, some X-rays showed lines where the implant met the thigh bone, an indication that the device was loose and had not fused completely. Patients could walk, but they were reporting pain, apparently a result of the loose joint.

He says he soon brought the problem to the attention of Zimmer officials, including the company’s new top scientist, Cheryl R. Blanchard. Zimmer executives pointed to the success of the NexGen, but the company did not have separate test data on the uncemented flexible model because the F.D.A. had not required the company to study it in patients before selling it.

Later, as more patients complained about the device and Dr. Berger had to replace some of them, he spoke to Ms. Blanchard again, he said. This time, he said, she and other Zimmer officials suggested that his technique was the problem because no other surgeon had complained.

'Suddenly, I went from someone who was their master teacher to someone who didn’t know what he was doing,' he said.

BY 2007, Dr. Berger, although still a Zimmer consultant, had stopped using the device and had learned, he said, that several other surgeons had also experienced problems with it. But unlike Dr. Dorr, the physician who sent out the alert about Zimmer, Dr. Berger said he initially had hoped to avoid a public showdown with the company. So he followed a more traditional route by performing a study with another Rush surgeon, Dr. Craig J. Della Valle, who was also having to replace the Zimmer knee.

Dr. Berger and Dr. Della Valle first presented their study at a medical meeting last fall and again this year at a national meeting of the American Association of Orthopedic Surgeons. They found that the uncemented Zimmer knee failed early in about 9 percent of some 100 patients studied. Also, the knee exhibited signs of looseness in about half of all patients and has since been replaced in some of them, Dr. Berger said.

But Zimmer was unswayed. In a filing with the Securities and Exchange Commission, Zimmer made note of the study but also pointed to the knee’s very positive results in a large database of orthopedic patients in Australia. Officials there confirmed the low failure rate. The company also said that the cement-free CR Flex accounted for only a small fraction — about 2 percent — of its overall knee sales.

The most striking lesson of this case is that Dr Berger was only valued as a consultant as long as his work completely followed the marketing party line.  As soon as he questioned the company's product, or the executives who were promoting it, he became "someone who didn't know what he was doing."  Of course, a truly valued consultant should be respected, if not sought for honest advice, whether or not it fit  preconceived notions or marketing strategies.  Thus, how Dr Berger was finally treated suggested he really was hired to market product.  "Consultant" was just a pretty title.. 

We  (and many others) have discussed (e.g., here) how pharmaceutical, biotechnology, and device companies cultivate "key opinion leaders" who really are nothing more than salespeople with fancy academic titles or well-known practices.  The case of Dr Berger suggests that apparently distinguished academics and practitioners hired as "consultants" by such companies ought to be regarded as salespeople until proven otherwise.  Physicians who are wooed by company marketers to take on such consulting roles, often with praise for their ability to "innovate," "excite," or become a "master teacher," may want to consider whether those flattering them merely want to hire another high-profile part-time salesperson.  They may further may want to think about how they would look should this relationship be revealed for what it really is.  If something goes wrong, they should think about what it would be like to deal with "dissembling, out-of-touch bureaucrats."  Sometimes there is a price to pay for taking all that money.

I hope that Dr Berger will consider donating the $8 million he made to the cause of more honest teaching and research about orthopedic devices. 

Meanwhile, patients and physicians should be extremely skeptical about the pronouncements of paid consultants and key opinion leaders who work for corporations marketing health care goods and services.  We all should demand at least that those paid by such vested interests reveal such financial arrangements in detail if they expect us to listen to their spiels, take their advice, and particularly be subject to their decisions.  

Deferred Prosecution Agreements End, So Let the Payments Grow

Starting in 2007, we posted (here, here, here, here and here) about the payments, often huge, that five manufacturers of prosthetic joints (Biomet, DePuy Orthopaedics (a unit of Johnson & Johnson), Stryker Orthopedics,a unit of Stryker Inc, Zimmer Holdings, and Smith & Nephew) revealed they made to orthopedic surgeons and various academic and other organizations. These revelations were the results of deferred prosecution agreements made in 2007 between four of the companies and the US Department of Justice after the latter charged Biomet, DePuy, Zimmer, and Smith and Nephew with giving surgeons kickbacks, disguised as consulting fees, to promote their products.  Stryker entered into a voluntary compliance agreement (see post here). 

We also noted that some of the leadership of the major orthopedic societies have received substantial amounts from these companies, as have the societies themselves. A 2008 post on this subject noted the minimal disclosure some of the surgeons receiving these huge payments made when writing scholarly articles on related topics.

Now in 2010, Bloomberg News reported on the results, such as they were, of these ballyhooed agreements:

The government declared last year that it had overhauled the financial relationships between surgeons and the biggest makers of knees and hips, saying the threat of criminal prosecution for 'kickbacks' had forced them to slash payments to physicians. Results of the crackdown were 'truly extraordinary,' said Christopher Christie, a former U.S. attorney for New Jersey who is now governor, in testimony to Congress in June 2009.

It was too good to be true. Compensation ended up being higher after the September 2007 deferred prosecution agreement because payments were postponed, according to data compiled by Bloomberg and interviews with seven surgeons.

'It’s back to business as usual' says Charles D. Rosen, president of the Association for Medical Ethics, who is a spine surgeon in Irvine, California. 'Nothing will change until someone goes to jail. It’s a big game.'

Apparently, while during the course of the agreements the companies decreased payments to surgeons, they made up for it later:

Prosecutors in the New Jersey U.S. Attorney’s Office, which headed the case, reported a 'satisfactory completion' in March 2009 of the probe of Biomet Corp., Johnson & Johnson’s DePuy unit, Smith & Nephew PLC, Zimmer Holdings Inc. and Stryker Corp. Payments in 2008 fell to $105 million from $272 million the year before, the Justice Department lawyers said.

The companies increased doctor compensation for 2008 to about $300 million, according to the data compiled by Bloomberg from reports posted on the device makers’ websites. Fees for 2008 were delivered in 2009, the surgeons say.

Payment delays were 'a common happenstance,' says Teresa Ford, a Seattle attorney who represents 150 doctors who have consulting or royalty agreements with orthopedic device makers. “None of them had significant changes in their relationships.”

Also,

A month after the government closed its case, Zimmer CEO David Dvorak told analysts on a conference call that the action didn’t result in a 'material change' to what it pays surgeons.

Attempts by Bloomberg reporters to find out more did not reveal much:

Since the agreement, payments to surgeons have been appropriate and for legitimate purposes, according to spokespeople for the five companies. Wright says on its website that it adheres to industry ethical standards in its dealings with consultants.

As for 2008 fees that weren’t delivered until 2009, three of the companies say they froze payments while monitors were reviewing contracts with surgeons to ensure they were proper. Spokesmen for Stryker and Smith & Nephew declined to comment. Three of the court-appointed monitors say they’re barred from talking about the details of their work. The two others, including former U.S. Attorney General John Ashcroft, didn’t return telephone calls. The department declined to release reports the monitors filed.

We have repeated often (e.g., here) the argument that limiting punishments of health care organizations for wrong-doing to corporate fines and deferred prosecution agreements has not deterred further wrong-doing.  Most of the cases which we have discussed involved pharmaceutical and biotechnology companies, and sometimes health insurers.  It seems that the argument also applies to device manufacturers. 

To underline the lack of a deterrence effect, others payments by other device companies to other surgeons have also recently come to light. In 2008, we discussed payments made by Medtronic revealed in various court filings. Medtronic just started voluntarily revealing more information. For example, as reported by the St. Louis Business Journal, Dr Larry Lenke helped Medtronic develop a spinal surgery system, so

In the first three months of 2010, Lenke earned $832,000 in royalties from Medtronic, putting him on track to top $3 million in royalties this year.

Lenke received between .5 percent and 1 percent of sales of the system in royalties.

'The royalties are very small, but the sales are large,' he said. Lenke is cho-chief of adult and pediatric spinal, scoliosis and reconstructive surgery and the Jerome J. Gliden professor of orthopedic surgery at the Washington University School of Medicine, the director of spinal surgery at Shriners Hospital for Children, and a spine consultant to the St. Louis Rams and Blues.

Like the surgeons we discussed in 2008, neither Dr Lenke nor Washington University seemed to make an effort to reveal his multi-million dollar relationship with Medtronic.

Dr Lenke's official web-page at Washington University does not reveal financial ties to, much less multi-million dollar royalties from Medtronic. A quick review of a few of Dr Lenke's published articles reveal such vague disclosures as:

One or more of the author(s) has/have received or will receive benefits for personal or professional use from a commercial party related directly or indirectly to the subject of this manuscript: e.g., honoraria, gifts, consultancies, royalties, stocks, stock options, decision making position.

[Bridwell KH, Glassman S, Horton W, Shaffrey C, Schwab F, Zebala LP, Lenke LG, et al. Does treatment (nonoperative and operative) improve the two-year quality of life in patients with adult symptomatic lubmar scoliosis: a prospective multicenter evidence-based study. Spine 2009; 34: 2171-78.]

The most specific disclosure I could find was:

Dr Lenke was a consultant for Medtronic until January, 2009, and is a patent holder with Medtronic.

[Silva FE, Lenke LG. Adult degenerative scoliosis: evaluation and management. Neurosurg Focus 2010; 28: 1-10.]

So the more things change, the more they stay the same. Device companies are still paying royalties, sometimes enormous sums, to the surgeons who helped them develop lucrative devices. Many of these surgeons are in practice, and some are prominent academics. The surgeons, and their academic institutions when applicable, do not seem to be going out of their way to reveal these sometimes massive financial relationships to patients, many of whom end up implanted with the very devices that generate these enormous payments. While some of the surgeons and influential academicians and prolific authors, they do not seem to go out of their way to reveal these sometimes massive financial relationships to their audiences and readers, even while touting aggressive, procedure-oriented, device-centric approaches to manage orthopedic problems.

So although the "Sunshine Act" was made part of the US health reform legislation, there is not yet much sunshine out there.  In my humble opinion, at a minimum, physicians should reveal, in detail, all financial relationships that might appear to have a probability of influencing their clinical decision making to the patients for whom such decisions are made.  Physicians should also reveal, in detail, all financial relationships that might appear to have a probability of influencing any related teaching or research. 

Furthermore, as an Institute of Medicine's report on conflicts of interest, which as received strikingly little attention, recommended:

researchers should not conduct research involving human participants if they have a financial interest in the outcome of the research, for example, if they hold a patent on an intervention being tested in a clinical trial.

Also, the report said we need

to develop a new system for funding high-quality accredited continuing medical education that is free of industry influence.

These idealistic recommendations seem a long way from the reality of our currently money-focused system of medical education and research.

INSEL and NEMEROFF - WHAT SANCTIONS?

INSEL and NEMEROFF – WHAT SANCTIONS?

Thomas Insel, Director of NIMH, has another posting in his own defense on his official blog today. He has been widely criticized lately for the appearance of cronyism in his relationship with Charles Nemeroff. For the past three months, Insel has been trying to put some distance between himself and Nemeroff, but the public isn’t buying it. I have called his statements disingenuous here and here. Dr. Insel’s statements today are equally disingenuous. Negative reactions are already appearing from those familiar with Nemeroff’s history.

There is no argument that Nemeroff was instrumental in Insel’s move to Emory in 1994, that Nemeroff was Insel’s department chairman at Emory, that Nemeroff helped Insel again when Insel’s initial term as director of the Yerkes laboratory at Emory was not renewed in 1999, or that Nemeroff lobbied for Insel’s appointment as NIMH Director in 2002. There is no argument that Insel and Nemeroff have given glowing public recommendations of each other, or that they have a record of cozy personal communications. There is no doubt that Pascal Goldschmidt at Miami sought and received a recommendation from Insel before hiring Nemeroff last year or that Insel went out of his way to put a personal gloss on the official NIH position regarding Nemeroff’s eligibility for grant funding if he left Emory. These are matters about which Dr. Insel prevaricates today in his blog.

Continuing his prevarication, Dr. Insel today also avoids confronting the issue of Nemeroff’s continuing service on NIMH review committees under Insel’s watch during the period that he was under sanction by Emory University, and banned from participating in NIH grants – before he relocated to Miami. Nemeroff’s curriculum vitae on the U Miami website states that he is a member of the NIMH Review Group, Interventions Committee for Adult Mood and Anxiety Disorders (ITAV), 7/1/2006 - 6/30/2010. This means Insel allowed Nemeroff to continue in that peer review role even though he was banned by Emory from association with NIH grants. The question is why? And what does that tell us about Insel's judgement?

It gets worse. During the period that Nemeroff was at Emory and under sanction vis à vis NIH grants, he continued to function as operational director of a NIMH-funded program administered by the American Psychiatric Association (APA). It is inconceivable that Insel was not aware of this arrangement. The APA program is known as Research Colloquium for Junior Investigators, and it is funded through NIMH project # 5R13MH064074-10. For the past few years Nemeroff, as Chair of the APA Committee on Research Training, has directed this program. The nominal Principal Investigator is Darrel Regier, who is the Executive Director of the American Psychiatric Institute for Research and Education (APIRE). At the session in New Orleans during the annual APA meeting last month, one of the featured speakers was Bruce Cuthbert, PhD, one of Insel’s principal lieutenants. In God’s name, why is the APA fronting the compromised Nemeroff as a role model to junior investigators, and why does NIMH/Insel allow this unsavory arrangement to continue? Could it be that Nemeroff’s crony Alan Schatzberg, the outgoing president of the APA, ran interference for his friend? And what will the new APA president Carol A. Bernstein do about it?

And then there is the issue of Nemeroff’s appointment to two new NIMH review committees just recently. Dr. Insel prevaricates again about his awareness or approval of those actions. As reported by Paul Basken in the Chronicle of Higher Education, “An NIH spokesman, John T. Burklow, answering written questions about the matter, confirmed Dr. Nemeroff's full eligibility for agency activities and said he will begin serving this coming week on two scientific panels that review NIH grant applications.” Here again, Dr. Insel seems to be trying to help his crony Nemeroff to get back into circulation after his fall from grace at Emory.

Emory University went through the wringer to discipline Nemeroff, at long last, in 2008. The actions of Insel in running interference for Nemeroff’s rehabilitation must leave Emory perplexed. Are Dr. Insel’s statements today disingenuous? You bet. Isn’t it time for the adults at NIH to step in and end this farce?

More Hospitals Hiring CEOs' Children, Doing Business with Board Members' Firms

As we predicted (here), the new reporting requirements imposed on US not-for-profit organizations are beginning to yield interesting results about the coziness of the leadership of some health care organizations. 

Western Pennsylvania

For example, we start with an article in the Pittsburgh Tribune-Review about hospitals in western Pennsylvania.

Board members at Western Pennsylvania hospitals have provided legal, real estate, insurance and advertising services to their organizations, according to IRS reports examined by the Tribune-Review.

The reports, which cover the fiscal year ending June 30, 2009, are the first under new reporting requirements imposed on nonprofit hospitals by the IRS. Still more requirements will kick in next year.

Details of the filings by the two largest area health care firms, UPMC and West Penn Allegheny, were made public last month. UPMC reported $10 million and West Penn reported $5 million in dealings with board members or top executives.

Five other major nonprofit health care providers reported business dealings with board members and, like UPMC and West Allegheny, cited in-place reporting and monitoring systems to avert or minimize any conflict of interest.

The specifics include this about Ohio Valley General Hospital:

At Ohio Valley General Hospital, the tax return shows two relatives of the chief executive officer are on the payroll.


Dr. David Provenzano, son of CEO William F. Provenzano, was paid $613,781 in salary and benefits. The CEO's daughter-in-law, Dr. Dana Dellapiazzo, was paid $130,525.


David Provenzano is the medical director of the hospital's pain center. Dellapiazzo is an anesthesiologist.

About Excela Health:

At Excela Health, which operates the Westmoreland Regional Hospital and two other hospitals, a company part owned by CEO David Gallatin was paid $253,835 for direct mail services.

Excela spokeswoman Robin Jennings said Mailing Specialists 'processes our mail in preparation for sending to the post office with appropriate bar coding.'

Excela reported payments of $683,250 to Westmoreland Emergency Medicine, which employs board member Dr. Robert Whipkey.

About Washington Hospital:

At Washington Hospital, board member Thomas Northrop's Observer-Reporter newspaper was paid $212,071 for advertising services. The hospital paid $308,185 in premiums to the Campbell Insurance Agency, where board member John Campbell is an owner.

About Jefferson Regional Medical Center:

Jefferson Regional Medical Center in Jefferson Hills, according to its report, paid $151,940 in legal fees to the law firm of board member Gregory Harbaugh. It paid $331,280 in real estate commissions to the firm run by board member Kevin Langholz.
The hospital paid $75,035 to the Thorpe Reed law firm where board member Anne Mulaney works.

About St. Clair Hospital:

At St. Clair Hospital in Mt Lebanon, a radiology firm that employs Dr. Donald Orr, who is a board member, was paid $1.95 million for providing medical services, according to the hospital's filing.

The hospital paid $80,000 for insurance related services to the HGH Group headed by hospital board member Bryan Hondru.

New Hampshire

The New Hampshire Union-Leader reported on Catholic Medical Center:

The head of Catholic Medical Center, whose salary is being questioned by the Attorney General's Office, has two offspring and two step-children employed or in one case recently employed there, the hospital acknowledged.

A hospital official defended its hiring practices, saying no favoritism is shown and that of the 11 members of senior CMC management, seven have relatives who either work or have worked at the hospital, some on a per-diem basis.

Executive Vice President Ray Bonito said his own son held a per-diem job during college. Offspring of trustees can also work at the hospital, he said.

Alyson Pitman Giles has been CMC president and chief executive officer since 1999. Her bid to intertwine CMC with Dartmouth-Hitchcock Health has been stalled by the New Hampshire attorney general, who deemed it an acquisition of CMC and said it violates state law and would need court approval.

CMC provided the following information on Giles' four relatives.

-- Son Seth Pitman has worked per-diem over the past several years. Late last month, the hospital said he was working as a project writer in the marketing office. But last week, the hospital said he is not actively employed there.

-- Daughter Sarah Pitman manages a primary-care physician practice. The hospital has not said when she started at that job. She was a hospital volunteer from June 1999 to January 2001, when she started working per-diem.

Two Giles stepchildren are also employed at the West Side hospital.

-- Stepdaughter Megan DeSantis is a physician assistant at Surgical Care Group, where she was hired six years ago. CMC acquired the group in May 2009.

-- Stepson William Giles is a physician recruiter. He started as a program analyst with the IT department in June 2000 and received several promotions over the last 10 years, CMC said.

Summary

The defenses for hiring top leaders' relatives, and doing business with top leaders' firms were similar in both locations. For example, in western Pennsylvania,

All reported that any dealings with connected firms individuals were 'at arm's length' with prices set at 'fair market value.'

In New Hampshire,

'It's not just a question for hospitals,' Bonito said of hiring relatives. 'It's a question for all companies.'

What's important, he said, is that a strict process be followed.

'Everyone goes through the same process. I don't care whose kids they are,' said Bonito. 'Everyone gets treated the same. We hire the most qualified candidate.'

It all smacks of an excess of coziness.  One wonders if there was any effort made to find other candidates when the CEO's family members showed up, or to find any other vendors when the board members' firms were available. Maybe they could have found writers, physician recruiters, and even physicians other than the immediate family members of the hospital CEO. Maybe they could have found direct mail companies, advertising agencies, and law firms available where no relatives of the CEO work, and which were not run by hospital trustees.  However, rejecting a CEO's child, or a board member's firm may require an independence of spirit rarely found in today's bureaucratic health care environment.  Instead, it may be easier to "go along to get along."

Once hired, furthermore, even when there are "processes and procedures" in place, it may become all to easy to treat the CEO's relatives differently than run of the mill employees, and to treat the trustees' firms differently than the usual vendors.  That is where the real conflicts of interest set in.  The sort of coziness that allows hiring leaders' relatives and doing business with leaders' firms could soon lead to confusion between leaders' interests and the institutions' mission.  However, leaders of hospitals and other not-for-profit health care organizations have a duty to put the mission of the organization ahead of their personal interests. 

In my humble opinion, this sort of coziness, this sort of fuzziness at the boundaries of institutional duties and personal interests, may be a fundamental reason that our current health care system has become so solicitous of the interests and prerogatives of its leaders, and so cold to the needs of patients and the values of professionals. 
The need for more transparent, accountable leadership of health care who explicitly are subject to clear ethical rules was never more apparent. 

Stay tuned as more and more cases like this appear....

Finding Out About Health Care Bureaucracy the Hard Way

A persistent theme for Health Care Renewal has been how concentration and abuse of power in health care trap patients and heath care professionals in a maze of bureaucracy, perverse incentives, deception, and conflicts of interest.  To anyone who has to make the transition from person to patient, some of these problems become immediately obvious.  Consider, for example, this account of "going into a hospital for a minor procedure":

The very idea of being a patient is anathema. To people of my generation -- the 'me' generation -- who like to be in control, the experience begins with loss of control. First the paperwork -- three or four times paperwork has to filled out and given to a succession of strangers. Then they take all of your belongings, they tell you to take your clothes off, and make you put on a gown that leaves you nearly naked, put in you in very small room, bring you inedible food according to a schedule they determine.

And if you try to sleep, they leave lights on, and do everything they can to make sure you can't. At the end, if you are lucky, they deign to discharge you. Those of us who are boomers, entering a period where we will be drawing the biggest healthcare expenditure, will not put up with this.

This description of health care in the real world may not seem surprising to readers of Health Care Renewal. When health care is run by business people with no experience or training in actual patient care, and controlled by a proliferation of managers and bureaucrats (whose numbers increased by a factor of 8.26x from 1983 to 200), usually with similar business backgrounds, all motivated by short-term financial incentives to "make the numbers" at all costs, what other result would one expect?

Of course, many people outside of health care may not appreciate these problems until they become patients themselves. The person who wrote the description above apparently had avoided in-patient hospital care until the events he described, so on that basis his surprise can be excused.  On the other hand, his outrage was understandable.

But wait - the above is actually a quote by a speech to the Innovation Forum by no other than Jeffrey Kindler, Esq, the current CEO of Pfizer, the world's largest pharmaceutical company.

So his apparent surprise at what he found when he became a patient is ample evidence how unfamiliar he had been with real health care on the ground until this experience.  In fact, that the CEO of the world's largest drug company was so unfamiliar with the real world of health care until he had to become a patient ought to prompt some outrage too. 

I am not recommending that all executives of health care organizations undergo procedures. However, making sure that no one gets to a top leadership position in a health care organization without some real world health care experience might lead to some salutary changes in how health care is run.

Also, we noted here that Mr Kindler had been rewarded last year by his board of directors for his "constructive participation in the US legislative process to advance Pfizer's goals of achieving a more rational operating environment...." Maybe had he had his minor procedure earlier, he might have also wanted to advance the goal of making health care less bureaucratic and more focused on the patients.

Hat tip to Jim Edwards' blog on BNet.

Guest Post: A Hospital Passing "That Low Cost Onto the Community" - By Secret Payments to Insurance Brokers to Sign Up Policy Holders?

Health Care Renewal presents a guest blog by Steve Lucas, a retired businessman who formerly worked in real estate and construction who has a long standing interest in business ethics, and has long observed the health care scene.

We have a verdict in the largest legal suit, $110M, ever brought before the court in Stark County, Ohio. The issue at hand has been the payment of fees by a nonprofit hospital (Aultman) through its for-profit insurance subsidiary (AultCare) to switch clients to this hospital's insurance plan. Aultman is the only in program hospital in our area.

Confidentiality agreements have kept this practice in place for a total of 12 years, with knowledge of the arrangement only recently becoming public.

First the back story: What is today Mercy Medical Center is owned by The Sisters of Charity. This hospital had popular community and business support. Wishing to get away from the business of running a hospital and focus on philanthropy, half of the hospital was sold to Columbia Health in 1996.

Columbia traded on the name and community support and followed a common course of action of reducing staff and maintenance in an effort to maximize profit. Realizing their mistake, the Sisters entered into another partnership with a nonprofit in 1999 and have recently been able to regain total control of the facility.

During this time Aultman Hospital, owned by The Aultman Health Foundation, was able to leverage this discontent into a massive expansion of both its physical plant and position in the community.

Unknown to the community at large this growth was being driven by questionable business practices:

The case revolves around allegations by Mercy that Aultman 'bribed' brokers with extra payments – in some cases, as large as $1 million – to persuade employer groups to switch to Aultman’s insurance plans, AultCare and McKinley Life Insurance.

These payments weren’t disclosed to the brokers’ clients or on federal tax forms that non-profits must fill out to maintain their tax-exempt status, lawyers told jurors in court.(1)

The point of contention was the payment of to a select group of brokers of what amounted to a kick-back, without notifying their customers of the additional payments.

We then find:

The leader of Aultman Health Foundation on Tuesday defended the nonprofit’s practice of using tax-exempt money to fund confidential payments to select insurance brokers. (2)

I guess it is ok as long as nobody knows, and the 65,000 people covered under this scheme should be happy.

We then find that Mercy’s CEO:

... said he first learned of Aultman’s program that gave extra payments to select brokers who switched clients from other insurance companies in a 2004 Akron Beacon Journal article. (3)

The Aultman CEO responded:

Roth said those payments were part of a business strategy to save area businesses money by sharing the results of Aultman Hospital’s cost cutting measures since the 1980’s.

'We want to pass to pass that low cost onto the community,' Roth said. (4)

It is interesting to note that Aultman changed the structure of its agreements with doctors to allow for them, the doctors, to receive co-pays directly. It was also revealed Aultman was paying at least one large medical group direct payments for exclusive referrals.

So now we come to the jury’s decision: $6.1M for Mercy, both sides claim victory. Mercy feels it will change the way Aultman does business.

Aultman plans to continue business as usual and won’t make any changes as a result of the verdict, President and Chief Executive Edward Roth said. (5)

In our small market, the dollars are so large in health care that a multi-million dollar settlement will not change behavior. The use of tax-exempt funds to pay kickbacks and bribes is ignored and there is no public out cry, only Aultman filing another suit to have the verdict set aside.

Altman claimed it needed the payments to be competitive with Columbia. This, win at any cost business attitude, has taken over great parts of medicine reducing what was once a proud profession into a simple process of number crunching.

Aultman focused time and time again during the trial on its size, the largest employer in Stark County, and its position in the community. This is no excuse for corrupt behavior.

Has health care become so corrupt, the dollars so large, that a little corruption is ok, as long as it does not hurt the bottom line?

Follow on radio reports made it very clear Aultman would suffer no financial hardship due to the verdict and there would be no change in services. Business would continue as usual.

References


(All from The Akron Beacon Journal)
1. April 3, 2010. Canton hospital exchange charges in court.
2. April 14, 2010. Aultman executive defends payments.
3. April 23, 2010. Mercy CEO testifies in court.
4. May 5, 2010/ Aultman defends “unique” incentives.
5. June 9, 2010. Jury awards Mercy $6.1 million.

Public Trust at NIMH?

Public Trust at NIMH?

The NIMH Director, Thomas Insel, MD, is under siege for his problematic relationship with Charles Nemeroff. In his own defense, Insel placed a remarkable new post today on his official blog. It signals that Insel and NIMH just don’t understand the current controversy. Since the story appeared in The Chronicle of Higher Education 2 days ago, it has reverberated on Health Care Renewal, on Pharmalot, on University Diaries, on the Nature blog, on the Science blog, and on Drug Monkey, to name just a few. The authors on these sites have been uniformly critical of Insel and of NIMH, as have almost all the comments.

What does Dr. Insel say in his defense today? Mainly, he demonstrates that he doesn’t get it. The very way in which he frames the issue tells us that. First he says it is about financial conflicts of interest. It isn’t. It is about the corruption of academic psychiatry. Financial conflicts of interest are just a part of that problem. Second, he says it is about whether the bad boys and girls in psychiatry were badder than those in other medical specialties. It isn’t. It never was. Third, he says he is surprised by criticism that he and NIMH have not taken firm action against the bad boys and girls, then he spends the rest of his column evading that issue. This degree of sophisticated indirection is achieved only in the highest echelons of bureaucracies.

Instead of a frank discussion of the real issues, we get a self serving description of the ways in which NIMH has taken steps to preserve the integrity of the research that it funds (starting after the scandal about the bad boys and girls broke within the Senate Finance Committee in 2008 – a detail not included by Dr. Insel. Where were they before?). By the time one makes it through this glossed-up history and the new promissory notes, it is easy to lose sight of what provoked the controversy this week.

It’s about the appearance of hypocrisy, with Insel assisting the compromised Nemeroff to land a new job at Miami while he is co-chairing a NIH effort to revise ethics guidelines.

It’s about consistency of discipline. After Emory University went through the wringer to discipline Nemeroff, at long last, and to ban him from involvement with NIH grants for 2 years, doesn’t NIH have a responsibility to make the discipline stick? After all, NIH deferred to Emory in the investigation of Nemeroff to begin with. What message does it send for Insel, a well known crony of Nemeroff, to blithely assure Pascal Goldschmidt at Miami that Nemeroff is “absolutely in fine standing” with NIH and that he “not only could begin applying for NIH grants as soon as he arrived in Coral Gables, but that he could also continue to serve on the NIH's expert panels that help decide on which grant applications win federal financing?” As Drug Monkey said, “It’s about optics, NIH. This doesn’t look good.” It looks instead like cronies exploiting the gaps and inconsistencies in administrative oversight between academic centers and NIH.

It’s also about common sense and administrative propriety. Let us perhaps grant that Insel could not prevent or discriminate against Nemeroff in applying for new NIMH funding. There is weasel wording to cover Insel if he chose to take such a position. But does that mean Insel has no discretion over whether Nemeroff is invited onto two new NIMH review panels? Nemeroff has no entitlement to claim a place on these peer review panels. Whatever possessed Insel to extend this privilege to a compromised individual like Nemeroff? The answer plainly is that Insel doesn’t recognize the compromise and corruption of his crony Nemeroff. The appearance is that Insel is setting out to help Nemeroff get back into circulation after his fall from grace at Emory.

By his own blog posting today Insel tells us that he lacks the grasp of nuanced issues that his position requires. He doesn’t get the big picture in this controversy or, if he does, he wants to evade it. Either way, NIMH deserves better.

Bernard Carroll.

"A Kind of Blackmail": A Not-for-Profit Health Insurance Company CEO's Salary So Large It "Had Broken the Law"

Here is another case in the annals of over-paid executives of not-for-profit health care organizations, this time from the Burlington (VT) Free-Press,

Blue Cross and Blue Shield of Vermont overpaid its former chief executive officer by $3 million over an eight-year period and has been ordered to pay the money back to its subscribers by 2012 in the form of reduced premiums, a top state regulator said Wednesday.

The action by the state Banking, Insurance, Securities and Health Care Administration Department follows last year’s disclosure that William Milnes, the nonprofit firm’s former CEO, received a $7.2 million payout when he stepped down in 2008.

Furthermore, note that

[Commissioner of the Banking, Insurance, Securities and Health Care Administration Department Paulette] Thabault said her department had concluded Blue Cross had broken the law by paying Milnes more money than necessary to perform his functions as head of the nonprofit health-benefits provider.

The Department's review found obvious flaws in how Blue Cross Blue Shield set its former CEO's pay:

The department’s review found that Milnes’ salary package while at Blue Cross was excessive, and in some years, he was paid more in bonuses than he received in base pay. In 2005, for example, Milnes was paid $425,000 in salary and $489,800 in bonuses.

'Other health insurance or managed care organizations of a similar size to the Vermont company compensate their chief executive officers at a level of about 45 percent to 50 percent less than the compensation levels set by the company for Mr. Milnes,' the department order said in part.

The department said Blue Cross used a 'peer group' study to justify the pay it gave Milnes, but regulators concluded the study was flawed because it put Milnes’ position on the same level of chief executive officers of much larger Blue Cross sister companies.

'The peer group ... used in 2007 included 14 companies, all but one of which were substantially larger in terms of annual gross premiums,' the department’s order said. 'Nine of the 14 companies had gross premiums in excess of $1 billion.' Blue Cross gross premiums for 2007 were $590 million.

This story is striking because it seems that the overpayment of a not-for-profit health care organization's executive this time seemed to rise to the level of crime. However, current Blue Cross leaders seemed unconcerned.

'The company accepts the findings of the department, and it just wants to move on at this point,' [Blue Cross and Blue Shield spokesman Kevin] Goddard said.

Somehow, whenever a health care organization's conduct is publicly revealed to be shameful, the response is not sorrow or apology, but let's just "move on." Moving on, of course, minimizes the accountability of those initially responsible for the bad behavior.

Furthermore, do not expect corporate leadership to acknowledge anything wrong with how the pay for the top hired corporate executive was determined.

Goddard said the company thought the peer group numbers it was using were sound.

'Our board used a comprehensive analysis to come up with a compensation package for Bill,' he said. 'We relied on what we thought was professional information.'

One begins to feel a little sorry for the poor spokesman who is obligated to mouth these sorts of sentiments. Whether the analysis was rational, or the "professional information" was relevant or correct seems not to have bee anyone's concern.

In addition, although Blue Cross and Blue Shield is now obligated to reimburse its policy-holders for former CEO Milnes' excessive pay, do not expect the money to come out of his pocket:

None of the $3 million the company has to pay back will come from Milnes. Blue Cross asked Milnes, through his attorney, if he would give back some of the money but was rejected, according to documents in the case made public Wednesday.

'He has made it quite clear that Mr. Milnes is not willing to make a voluntary repayment of any portion of the Supplemental Executive Retirement Program distribution,' Christopher Gannon, a Blue Cross vice president, wrote in a letter to Thabault’s department Jan. 21.

One would think that the current company management would be so upset about its new $3 million obligation, that it would aggressively try to recover the money from the person who benefited from it. However, it seems that all the current Blue Cross and Blue Shield management was willing to do was politely requesting that Mr Milnes return it. Suing a former CEO, of course, is just something that is not done. Perhaps it would be too disturbing to  the cozy atmosphere now prevailing among top executives and the boards of trustees who are supposed to be supervising them. This seems to make clear that no one at Blue Cross and Blue Shield ever really was responsible for what Mr Milnes was paid.

As an editorial in the Rutland Herald put it:

On its face, it was an outrage. Blue Cross is a nonprofit corporation that insures about 150,000 Vermonters. That a nonprofit with a mission of providing health care coverage should be a source of extravagant personal profit was an affront to all Vermonters, including those struggling to pay escalating premiums, those struggling to find adequate care, or those with no coverage at all.

The usual excuse from companies is that big money is necessary to attract big talent. It's a marketplace. But this excuse is really a kind of blackmail that allows corporate executives to collude in the inflation of their own worth.

So the notion of the "imperial CEO" who can virtually set his or her own pay, unencumbered by any real accountability to a board of trustees who would dare not ruffle the imperial feathers has now been imported even into relatively small health care organizations in New England states once famed for their common-sense and frugality.

So here we go again.... We have discussed numerous examples of compensation of health care organizations' leadership that seems orders of magnitude above that which would be rationally justified. These latest examples of the wealth being accumulated by leaders of supposedly mission-centered not-for-profit organizations are a product of the current management culture that has been infused into nearly every health care organization in the US. That culture holds that managers are different from you and me. They are entitled to a special share of other people's money. Because of their innate and self-evident brilliance, they are entitled to become rich. This entitlement exists even when the economy, or the financial performance of the specific organization prevents other people from making any economic progress. This entitlement exists even if those other people actually do the work, and ultimately provide the money that sustains the organization.

Although the executives of not-for-profit health care organizations generally make far less than executives of for-profit health care corporations, collectively, hired managers of even not-for-profit health care organizations have become richer and richer at a time when most Americans, including many health professionals, and most primary care physicians, have seen their incomes stagnate or fall. They are less and less restrained by passive, if not crony boards, and more and more unaccountable. In a kind of multi-centric coup d'etat of the hired managers, they have become our new de facto aristocracy.

Or as we wrote in our previous post, executive compensation in health care seems best described as Prof Mintzberg described compensation for finance CEOs, "All this compensation madness is not about markets or talents or incentives, but rather about insiders hijacking established institutions for their personal benefit." As it did in finance, compensation madness is likely to keep the health care bubble inflating until it bursts, with the expected adverse consequences. Meanwhile, I say again, if health care reformers really care about improving access and controlling costs, they will have to have the courage to confront the powerful and self-interested leaders who benefit so well from their previously mission-driven organizations. It is time to reverse the coup d'etat of the hired managers.

An Attempt to Hold Health Care Leaders Accountable for Their Organizations' Bad Behavior?

We have frequently noted how health care organizations accused of kickbacks, fraud, and other unethical and sometimes illegal behavior involving how they produce or market health care products or services often are allowed to settle the charges only with a fines to the companies, and sometimes with corporate integrity agreements.  Almost never are the people who authorized, directed, or implemented the unethical behavior required to pay any sort of penalty.  We recently commented on a case in which an executive of a medical device company accused of exaggerating the performance of a diagnostic test in development was charged, not with misleading doctors or patients by the US Food and Drug Administration (FDA), but with misleading investors by the US Securities and Exchange Commission (SEC).  That executive lost her job, and will be barred from leading any public company.

So up to now, a corporate executive responsible for misleading doctors or patients about issues that could affect clinical decisions or outcomes likely would never pay a penalty, but one responsible for misleading  investors about similar issues could lose his or her job and livelihood.

Now, per an article in Fortune, it appear the situation may be changing,

The federal government is fed up with the amount of fraud, especially recurring fraud from the same companies, happening in the pharmaceutical industry. So regulators have decided that when it comes to punishments, it's time to get personal.

From now on, individual executives risk being ejected from their jobs -- and perhaps even barred from the industry -- for fraud their companies commit, even if they did not participate or even know about the crimes.

Furthermore,

The new approach, emerging from the unusually powerful Inspector General's office in the Department of Health and Human Services, reflects frustration with corporate recidivism even in the face of ramped-up fines, penalties and disgorgements.

'We are going to start to use that authority in the appropriate circumstances to get high level executives out of companies, so that the company has a better shot at changing its behavior, so that it does not become a recidivist,' explains Lewis Morris, chief counsel to the Inspector General.

The article noted some cases in which even large fines and corporate integrity agreements seemingly failed to deter future bad behavior by the companies which paid these penalties. For example,

In the government's most recent major settlement -- in which AstraZeneca agreed to pay $520 million -- the fine represented 16.5% of the $8.6 billion income (between 2001-2006) from U.S. sales of Seroquel, a powerful anti-psychotic. AstraZeneca (AZN) turned this narrowly approved drug into a cash cow by marketing it for much wider use, including by the elderly and children, even though they are particularly vulnerable to 'serious and debilitating side effects.'

All the while, AstraZeneca was operating under a corporate integrity agreement (CIA) with the Inspector General, imposed after a 2003 off-label marketing case.

We discussed the AZ settlement here in October, 2009. We asked then, "Does anyone really still believe that integrity agreements, and settlements assessed against huge corporations deter such profitable bad behavior?"

Another example:

Drug company Pfizer (PFE, Fortune 500), which was fined $2.3 billion just last September, is now on its third CIA. Steeper fines and harsh individual penalties should help put more teeth into these agreements and keep companies from flouting them.

We discussed the repeated lack of effect of settlements by Pfizer here in September, 2009. We concluded, "So will even a $2,300,000,000 settlement and yet another corporate integrity agreement make Pfizer or any other health care corporation act more ethically? I doubt it."

The Fortune article quoted Peter Rost, former Pfizer executive turned whistle-blower and ethics advocate (and to whose blog I offer a hat tip for first mentioning the Fortune article), on aspects of corporate culture and corporate incentives that foster repeated unethical behavior by management,

'Usually by the time someone becomes a senior executive they are very aware of the pitfalls in the organization, and they have become masters at not doing something wrong or not getting caught doing something wrong,' explains Peter Rost, a former senior Pfizer executive turned industry gadfly.

Incentive-based compensation systems -- typically 40% to 50% of salespeople's income comes from hitting their numbers -- are one weak point. 'They are going to work real hard to increase those numbers and do whatever it takes, and if they think somebody gave them a wink about doing this or that, they are going to run with it.' says Rost.

Booting senior executives out for any fraud under their watch might end the wink-and-nod system, giving hope to critics.

In my humble opinion, the government's new approach looks like real progress. Giving corporate executives personal impunity was a recipe for increasing unethical, and sometimes criminal behavior. The sorts of marketing fraud they authorized or directed certainly lead to increasing costs, and overuse of unnecessary and sometimes harmful tests and treatments. While there have years of complaints about health care's increasing costs and decreasing quality in health policy circles, it is just amazing that until now, there has been so little action against the bad behavior that was undoubtedly responsible for much of these problems.

So three cheers for making health care organizations' leaders accountable for the bad behavior of their organizations.

After cheering, however, there ought to be some serious inquiry about why they were not held accountable much sooner.  It turns out that there has been legal justification for holding leaders so accountable available for a long time:

All that's required for the government to flex this remarkably broad authority -- embedded in the Responsible Corporate Officers Doctrine -- is that the executives were in a position to have stopped the fraud that resulted in a criminal conviction or plea.

Note that the Responsible Corporate Officers Doctrine apparently derives from a US Supreme Court case about the selling of misbranded or adulterated drugs into interstate commerce under the US Food and Drug Act, decided in 1943.

However, it looks like in the hyper laissez faire climate of the last 20 or more years, no one wanted to bother to invoke it. After all, the formerly highly regarded leader of the US Federal Reserve believed there was no need for regulators to punish fraud, because the magic of the market would take care of it. US health care has paid a heavy price for such breathtaking naivete (see the PBS Frontline show, "The Warning." )