Friday, December 09, 2011

The Center for Medicare and Medicaid Services' Quiet Coziness with Wall Street

An article from the Project on Government Oversight (POGO) reveals a new aspect of the growing coziness between the US government and big corporations with obvious relevance to health care.

CMS' Coziness with Leaders of the "Capital Markets"

Here is the introduction and the example most relevant to health care:
Nearly a dozen senior staff at the Centers for Medicare and Medicaid Services (CMS), the giant agency that administers hundreds of billions in federal health care dollars, had been called to a meeting. After a discussion with five Wall Street professionals that lasted nearly two hours, one senior CMS analyst filed an ethics complaint that later went to the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS).

His beef: that a handful of deep-pocketed investors had won a private hearing to probe whether the agency would allow Medicare reimbursement for specific medical devices manufactured by companies in which they already held a stake or might put new money. The market for one device, already approved for Medicare, was rapidly heading toward $1 billion annually; the agency’s impending decision to reimburse competing devices could have major market impact, a shift potentially worth hundreds of millions of dollars.

'This meeting forced agency staff to redirect their attention toward a select group from Wall Street, when neither competing investors nor patient-oriented stakeholders were present,' the whistleblower told the Project On Government Oversight (POGO). 'They got to probe us for hours in private about what we planned to do and how we approached procedures for reimbursing medical devices, the mechanics and psychology of CMS decision-making, in general and with respect to these specific devices.'

The meeting was set up by a former CMS employee working for the Marwood Group, an asset manager that counsels big health-care industry investors, the whistleblower says. The firm’s president is Edward 'Ted' Kennedy Jr., son of the late Massachusetts senator and a major supporter of President Obama’s health care reforms, and includes Kennedy cousins Robert F. Kennedy, Jr. and Stephen E. Smith, Jr., as senior advisors. The firm’s website highlights its staff recruitment among Congressional aides, the Executive Office of the President and CMS. One CMS veteran who joined Marwood after the 2009 meeting with Wall Streeters is Barry Straub, the agency's former Chief Medical Officer, who is also an expert on Medicare reimbursement, the website says. A company spokesman had no comment.

A supervisor at CMS’s Coverage Advisory Group, which decides which services the agency will pay for, also helped organize the session with investors. The whistleblower says he was told by a supervisor that such get-togethers are 'a routine practice at CMS.' At the time, in 2009, CMS’s top administrator had an aide with the title, 'capital markets advisor,' tasked with tracking investment community activity in Washington and elsewhere.

At the investor meeting, Wall Streeters asked a range of questions 'about confidential CMS information.' The whistle blower says he does not believe they received illegal disclosures, though they peppered CMS analysts with queries about the agency’s decision-making process and other sensitive matters which, if answered, could have violated the law or related regulations that bar the sharing of internal deliberations and decisions.

The whistleblower first filed his complaint in April 2009. He was terminated in 2011 for being disloyal to the agency mission after he made a series of internal protests, including the objection to what he calls a pattern and practice of unfettered access to CMS staff by Wall Street investors. He says he is currently fighting his dismissal through all available legal and administrative channels.
Implications and Summary

As the POGO article put it,
CMS does have a set of 'Open Door' policies and affords a variety of avenues for public access. The disclosure of payments to physicians and teaching hospitals by pharmaceutical companies and other interests are required under President Obama’s health reform. In practice, however, the public, not to mention competing investors and stakeholders, rarely get the kind of information and insight available in meetings like the whistleblower described.

In general,
A balance is necessary between the danger of too much insider access, and imposing excessive limitations. Indeed, the biggest problem with special access for Wall Street insiders is not just that they seem to get meetings and acquire information that may be privileged and non-public, but that others, including other investors, do not get a crack at the same material.
The activities above have all the usual elements of excess corporate - government coziness.  These include enhanced access for corporate leaders beyond what any ordinary members of the public might achieve; the revolving door between government service and corporate leadership; the participation of well-connected inside the beltway types, etc, etc. 

It also includes the apparent formalization of representation of corporate interests, e.g., the "Capital Markets Advisor," with no parallel formalization of the public's or patients' interests.  Even more worrisome is that an effort to make this all less anechoic resulted in alleged intimidation of a whistle-blower.

So, let's see, CMS, the Center for Medicare and Medicaid Services, the US Department of Health and Human Services (DHHS) branch which controls the Medicare and Medicaid programs, the government run single-payer programs for the elderly, the disabled, and the poor, does not seem to be able to afford to figure out in-house how to pay physicians for specific services.  Instead, it has effectively farmed out this task to a private committee, the American Medical Association's RBRVS Update Committee (RUC).  As we have discussed many times, this obscure and secretive committee likely had a major role in structuring the financial incentives that favor procedures and disfavor primary care. leading to excess costs, declining access, and degrading quality.  However, CMS can afford to have a "Capital Markets Adviser" and to use up staff time briefing wealthy investors and hedge fund types.  What is wrong with this picture?

In my humble opinion, government health care agencies ought to put the public's and patient's health first. They should not give special consideration to the rich, the powerful, the well-connected, whom some now call the one percent. Yet in the US we seem to have an increasingly corporatist state in which government and the plutocrats work together for their mutual interests, regulatory capture writ large.

We need to restore government, and our health care agencies to being of the people, by the people, and for the people.  Obviously, true health care reform would start with the government and its officials putting patients' and the public's health first, way ahead of the financial comfort of corporate leaders.


Steve Lucas said...

Of interest may be this from CNN:

E-mails questioned huge contract for firm with ties to Obama administration

By David Fitzpatrick and Drew Griffin, CNN Special Investigations Unit


Political connections.

No bid contract.

180% ROI.

Steve Lucas

Afraid said...

The CMS emplyees who set up these meetings should be fired immediately. Of course they would simply get to have their higher pay reward at the investment house.

Judy B said...


Anonymous said...

Donnie Berwick, MD was the man...what a leader! What a man!

Roy M. Poses MD said...

Anonymous -

As is noted in the article I quoted, these practices apparently pre-dated, perhaps for a long time, the brief tenure of Donald Berwick MD as leader of CMS. It makes no sense to blame him for them.

Anonymous said...

Interesting defense of Berwick, Roy.

Did Berwick stop them or out them or stop the practices? How many would be whistleblowers did Berwick fire?

He would have established more credibility if he had cleaned the corrupted house

To what extent did these or other businesses influence Berwick to declare a 1% cut in Medicare payments to docs who did not purchase equipment to e-prescribe, even though said or similar equipment causes thousands of errors and is not approved by the FDA?

Roy M. Poses MD said...

Anonymous -

Since you have addressed me by my first name, would like to do me the courtesy of telling me your name?

I have no inside information on what goes on in CMS, and on this blog, we do not do original reporting. We comment on what is already public. The article by POGO did not provide the answers to your questions, and therefore neither can I.

Note that Dr Berwick was not even nominated to head CMS until 2010. The acting administrator of CMS during most of 2009 appears to be one Charlene Frizzera (see this: However, the POGO article did not mention her, not say anything about what role she or previous acting administrators played in the practices discussed above.

Seven Signs said...

Regulatory capture is inevitable. Dependance on humans resisting the self-interest path can not work no matter how well a regulatory policy is implemented.

Lets assume that 25% can not resist the temptation to convince themselves they are doing good while doing bad. As the other 75% get sick watching it and leave, get eaten for standing up for right, or simply passing away, the 25% take over the wheel.

So as long as we provide for the temptation to legally stroll through the revolving door this problem will exist. A regulator can be legally rewarded with a triple salary increase without any promised quid pro quo because the industry has made it common practice to hire those regulators who helped them.

They "understand the industry well" is the value that justifies a couple hundred percent salary increase.

Somewhere along the line, we all understand that very large percentage salary increases are a very often a sign of a problem.


Afraid said...

As if on demand now this news comes from Pittsburgh, a 1000% salary increase:

Highmark making Onorato a top exec

Responsibilities will include public, corporate relations

Saturday, December 17, 2011

By Len Barcousky, Pittsburgh Post-Gazette

Allegheny County Executive Dan Onorato will join health-insurance giant Highmark Inc. as one of its top executives when he leaves office next month.

His multi-part title will be executive vice president, chief external affairs and communications officer. He will begin his new job Jan. 3, the day Rich Fitzgerald will succeed him as county executive.

Mr. Onorato will report to Ken Melani, Highmark's president and chief executive officer.

The appointment was announced Friday.

A company spokesman declined to reveal what Mr. Onorato's salary will be. The man he is following in the position earned more than $1 million annually during the three most recent years for which compensation information is available.

Mr. Onorato was paid $90,000 annually as county executive. In January he will complete his second four-year term in the top county job.


Highmark is not alone in adding former politicians to its executive team. Former state Sen. Sean Logan was hired last year by UPMC for a new post, vice president of community relations. Mr. Logan resigned from the Senate in August 2010 after spending 10 years representing Monroeville and other communities in the eastern suburbs.


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