Thursday, July 28, 2011

Executives Get Rich Despite Ethical and Legal Questions about For-Profit Hospices

We recently posted about some shocking allegations suggesting that the for-profit corporations that now dominate hospice care may prey on vulnerable patients to increase their revenues, and may specifically recruit patients who are not terminally ill for hospice, and then neglect to attend to their treatable medical problems.  The post was based on a Bloomberg investigative report.

The Bloomberg report focused on two large for-profit hospice providers, Vitas, a subsidiary of Chemed, and VistaCare, a subsidiary of Gentiva. We have repeatedly seen a pattern in numerous other health care organizations, non-profit as well as for-profit: despite questionable corporate behavior that appears to violate the values of health care professionals, executives receive rich compensation overseen by complacent corporate stewards. So, using publicly available information, I compared and contrasted the two for-profit hospice corporations' health care missions, behavior with respect to core values, executive compensation, and board composition.

Stated Mission

Chemed (including Vitas Hospice Care)

Vitas Mission and Values
VITAS Values
Patients and families come first.
We take care of each other.
I’ll do my best today and do even better tomorrow.
I am proud to make a difference.

VITAS Mission
We are a growing family of hospices providing the highest quality human services, products and case management to terminally ill and other appropriate patients and their families with measurable advantages for the patient, the family, the medical community, the employee and the stockholder.

Gentiva (including VistaCare, part of Odyssey Healthcare)

Gentiva's "about us" web page declares:
We are committed to clinical excellence and determined to continually raise the bar in home healthcare by setting new industry standards for quality care and personalized service. That’s why thousands of patients every day choose us for their home healthcare needs.

Gentiva's hospice website declares:
Our hospice services allow patients to make the most of each day, at home surrounded by friends and family in a familiar, comfortable environment. Because at Gentiva, we believe that every moment matters.

So both organizations affirmed "warm and fuzzy" commitments to put patients first and to quality of care.



The Bloomberg article noted that the Vitas subsidiary of Chemed is being sued for elder abuse and wrongful death based on allegations that the company put a patient who did not appear to be terminally ill in hospice care, and then failed to adequately treat the infection that appeared to eventually cause her death.

In addition, the 2010 Chemed Annual Report noted that the company is now the subject of two ongoing investigations.

The first involves:
In May 2009, VITAS received an administrative subpoena from the U.S. Department of Justice requesting VITAS deliver to the OIG documents, patient records, and policy and procedure manuals for headquarters and its Texas programs concerning hospice services provided for the period January 1, 2003 to the date of the letter.

In addition,
In February 2010, VITAS received a companion civil investigative demand ('CID') from the state of Texas Attorney General’s Office, seeking related documents. In September 2010, it received a second CID and a second administrative subpoena seeking related documents.

The second involves:
In April 2005, the Office of Inspector General ('OIG') for the Department of Health and Human Services served VITAS with civil subpoenas relating to VITAS’ alleged failure to appropriately bill Medicare and Medicaid for hospice services.

This is still active,
In March 2009, we received a letter from the government reiterating the basis of their investigation.


The Bloomberg article noted that VistaCare, part of Odyssey Healthcare, which is a Gentiva subsidiary, is being sued by a former employee who alleged that her job was to entice patients who did not have terminal conditions into hospice, and that the company used other unethical tactics to enroll more patients.

Also, according to the 2010 Gentiva Annual Report, the company's Odyssey subsidiary is currently operating under a corporate integrity agreement:
On July 6, 2006, Odyssey entered into a five-year Corporate Integrity Agreement (“CIA”) with the Office of Inspector General of Health and Human Services. The CIA imposes certain auditing, self-reporting and training requirements that Odyssey must comply with. If Odyssey fails to comply with the terms of its CIA, it could subject us to substantial monetary penalties and/or suspension or termination from participation in the Medicare and Medicaid programs.

There are also numerous ongoing investigations and regulatory actions ongoing, including:
On February 14, 2008, Odyssey received a letter from the Medicaid Fraud Control Unit of the Texas Attorney General’s office notifying Odyssey that the Texas Attorney General was conducting an investigation concerning Medicaid hospice services provided by Odyssey, including its practices with respect to patient admission and retention, and requesting medical records of approximately 50 patients served by its programs in the State of Texas.

On May 5, 2008, Odyssey received a letter from the DOJ notifying Odyssey that the DOJ was conducting an investigation of VistaCare, Inc. ('VistaCare') and requesting that Odyssey provide certain information and documents related to the DOJ’s investigation of claims submitted by VistaCare to Medicare, Medicaid and TRICARE, from January 1, 2003 through March 6, 2008, the date Odyssey completed the acquisition of VistaCare. Odyssey has been informed by the DOJ and the Medicaid Fraud Control Unit of the Texas Attorney General’s Office that they are reviewing allegations that VistaCare may have billed the federal Medicare, Medicaid and TRICARE programs for hospice services that were not reasonably or medically necessary or performed as claimed. The basis of the investigation is a qui tam lawsuit filed in the United States District Court for the Northern District of Texas by a former employee of VistaCare. The lawsuit was unsealed on October 5, 2009 and served on Odyssey on January 28, 2010. In connection with the unsealing of the complaint, the DOJ filed a notice with the court declining to intervene in the qui tam action at this time. The Texas Attorney General also filed a notice of non-intervention with the court. These actions should not be viewed as a final assessment by the DOJ or the Texas Attorney General of the merits of this qui tam action.

On January 5, 2009, Odyssey received a letter from the Georgia State Health Care Fraud Control Unit notifying Odyssey that the Georgia State Health Care Fraud Control Unit was conducting an investigation concerning Medicaid hospice services provided by VistaCare from 2003 through 2007 and requesting certain documents

On February 2, 2009, Odyssey received a subpoena from the OIG requesting certain documents related to Odyssey’s provision of continuous care services from January 1, 2004 through February 2, 2009. On September 9, 2009, Odyssey received a second subpoena from the OIG requesting medical records for certain patients who had been provided continuous care services by Odyssey during the same time period.

On February 23, 2010, Odyssey received a subpoena from the OIG requesting various documents and certain patient records of one of Odyssey’s hospice programs relating to services performed from January 1, 2006 through December 31, 2009.

In April 2003, the Company received a subpoena from the OIG. The subpoena sought information regarding the Company’s implementation of settlements and corporate integrity agreements entered into with the government, as well as the Company’s treatment on cost reports of employees engaged in sales and marketing efforts. In February 2004, the Company received a subpoena from the U.S. Department of Justice ('DOJ') seeking additional information related to the matters covered by the OIG subpoena. In early May 2010, the Company reached an agreement in principle, subject to final approvals, with the government to resolve this matter. Under the agreement, the Company will pay the government $12.5 million, of which $9.5 million was recorded as a charge in 2010 with the remaining $3 million covered by a previously-recorded reserve.

On July 13, 2010, the SEC informed the Company that the SEC had commenced an investigation relating to the Company’s participation in the Medicare Home Health Prospective Payment System, and, on July 16, 2010, the Company received a subpoena from the SEC requesting certain documents in connection with its investigation. Similar to the Senate Finance Committee request, the SEC subpoena, among other things, focused on issues related to the number of and reimbursement received for therapy visits before and after changes in the Medicare reimbursement system, relationships with physicians, compliance efforts including compliance with fraud and abuse laws, and certain documents sent to the Senate Finance Committee.
In addition to the allegations detailed by the Bloomberg article, there are an impressive number of investigations going on.  In addition, Gentiva has already recently settled apparently two different legal actions.  Thus, many questions have been raised about the companies' ethics, and the extent that they really uphold the warm and fuzzy values portrayed by their marketing.

Executive Compensation and Board Composition


Based on the 2011 Chemed proxy statement, the company CEO, K J McNamara, got $5,848,230 total compensation in 2010. The four other most highly paid executives got from just over $1 million to over $2.5 million. Mr McNamara's compensation included over $150,000 for use of company aircraft. Other executives had use of the aircraft, of a company apartment, and of a company car, and company paid golf club memberships, and one got over $64,000 in housing costs. None apparently has any background in direct health care.

Of the "independent" directors, one, Andrea R Lindell, is now the retired Dean and Professor of the College of Nursing at the University of Cincinnati, and retired Associate Senior Vice President of the Medical Center. She retired in 2011, but has been director of Chemed since 2008. None of other directors apparently has any direct health care background. They include five who are currently or were formerly in financial services, and one attorney. The majority hold or held executive positions at least at the Senior Vice President level for a variety of organizations.The independent directors generally got somewhat over $100,000 in compensation in 2010.


Based on the 2011 Gentiva proxy statement, the company CEO, Tony Strange, got $5,472,327 in total compensation in 2010.  Three senior vice presidents and "C" level officers got over $1.3, $2.1, and $3.1 million respectively.  One, the Chief Clinical Officer, has a nursing diploma and nursing experience (see management biographies here.)  No others have apparent experience in direct clinical care.

Of the "independent" directors, one, Dr Sheldon M Retchin, is a physician, and is now CEO of the Virginia Commonwealth University Health System and Vice-President for Health Sciences at Virginia Commonwealth University.  None of other independent directors apparently has any direct health care background. The majority hold or held chief executive positions at a variety of different kinds of firms. The independent directors generally got somewhat over $145,000 in compensation in 2010.

Thus, despite the fact that the two companies provide direct clinical care to the most vulnerable of patients, their top leadership has very little background in direct patient care.  Only two directors, one of each company, are involved in health care, but their involvement may involved conflicts of interest.  Despite the apparent contrast between the companies' high-minded missions and the ethical questions besetting them, their top executives are compensated at a level sufficient to make them quite wealthy.


The pattern repeats again.  Not only has the compensation given to health care leaders got so large that it is per se a cause of increased health spending, but also, and more importantly, such compensation often provides perverse incentives that perpetuate mismanagement, raising costs and lowering quality. This situation appears to be enabled by governance by individuals who are often fellow members of the CEOs' club, and hence who may feel more sympathy with the executives they are supposed to supervise than the stockholders whose financial interests they are supposed to protect, or the public whom the companies' products and services are supposed to benefit. Moreover, these individuals often have conflicts of interest which may mitigate against objective scrutiny of the executives they are supposed to oversee. Finally, these individuals often may come from corporate cultures which do not espouse the values that we in health care are supposed to uphold. (See this post and its links for other examples of the sorts of people who are supposed to provide stewardship to health care organizations.)

So to reiterate-

I strongly believe that there needs to be much more investigation, academic, journalistic, and perhaps legal, of the identity, nature, and culture of the leaders of health care, and their relationships. A few bloggers cannot do it all. Obviously, the anechoic effect mitigates against medical and health care academics looking into their own leaders. However, failing to understand who is leading our march to the brink of health care failure ought not to be something such academics would want on their conscience.

Finally, and obviously, health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research.

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


Steve Lucas said...

Mission and Value statements were all the rage when I was in graduate school. There was also a wink and a nod that they were marketing tools used to paint a happy face on the organization. We have watched, what should be a good idea, being perverted into some type of mantra to be learned by the work force and used as a shield by company executives.

It then becomes the outsider’s responsibility to prove that the company is not all warm and fuzzy and every case brought forward is treated as on exception. Declare a company to be unscrupulous and the company has to prove it is fair and above board. Talk about one case and the company has to only defend, what they will claim, are the actions of an employee who acted alone.

Business plans, have like wise, taken on a life of their own. People are enamored with these long detailed plans forgetting that a business plan is figure out what product to make, make the product, and sell the product.

I recently visited the store of a struggling regional office supply chain. The clerks were all happy happy wearing children’s backpacks with radio ear plugs so as to serve you better. The reality is I can go down the street and buy pens and paper at a fraction of the cost at Wal-Mart.

The same is true of medicine. Big grand mission and value statements back by detailed business plans. They just forgot that the product is protecting human health, or at the very least not letting the profit motive prevent a certain level of health care.

We need to drop the rose colored glasses and understand; these people do not care as long as they make their numbers.

In reading the previous post on this issue I was shocked that we had reached such a low in our treatment of those unable to care for themselves.

Steve Lucas

Afraid said...

This behavior is akin to what we see today in the legal process. Litigants "take positions" which don't have to do anything with reality but instead depend on playing the game by rules made up by the system.

Some evidence, potentially very valuable in determining the truth, is suppressed or simply not revealed. The "decision" is made by uninformed folks who can be swayed through lots of tactics. Say anything for money experts battle between these positions. How "informed consent" is validated not by what the individual was really made aware of but instead what small print was passed before their eyes.

So much of the world is like being in court and if you have ever been there you know how little of the truth is discussed.

So the same for our politics, media, etc etc.

The problem we face is that the court has become a twisted version of what it was meant to be and everything else has become an imitation.

The legal system has become a way to hide the truth, not a way to find the truth.