Tuesday, October 27, 2015

The Corporate Physicians' Dilemma - Three Hospital Systems Settle Cases Alleging Pressure on Employed Physicians to Refer Patients Within the System

Physicians are sworn to provide the best possible care to each individual patient.  Yet in the US, physicians increasingly practice as employees of large organizations, sometime for-profit corporations.  Physicians may be in a bind when their bosses pressure them to make patient level decisions so as to increase revenue, regardless of their effects on the patients.

In particular, physicians' oaths may suggest that patients who require referrals for consultation, diagnosis or treatment should go to the professionals and facilities best suited to their particular problems.  However, physicians bosses may want physicians to refer patients within their organizations.

Three recent cases illustrate this sort of bind for corporate physicians.  All cases involved large monetary settlements by hospital systems of allegations that they paid physicians incentives to refer patients within the system, apparently without regard to patients' needs.  They are discussed in roughly   chronological order of media coverage.

Broward Health  (North Broward Hospital District)

The reports of the settlement appeared in mid-September, 2015.

The Actual Settlement

According to the Miami, FL, Sun-Sentinel,

Broward Health, the taxpayer-financed system of hospitals and health care facilities, will pay $69.5 million to settle federal charges that it made illegal payments to staff physicians, using a secret compensation system that rewarded doctors for patient referrals and penalized them for accepting charity cases.

In addition, according to the Miami Herald,

Broward Health Chief Executive Dr. Nabil El Sanadi signed a 46-page Corporate Integrity Agreement with the Department of Health and Human Services (HHS) that requires the district to establish a compliance program. Among other things, the agreement imposes new duties on both commissioners and staff to monitor, report and certify that its financial arrangements with physicians and vendors meet federal requirements.

Note, however, that the Adventist system admitted only to "oversights."

Physicians' Incentives

According to the Sun-Sentinel, the filing by whistle-blower Dr Michael Reilly stated,

the hospital district maintained secret compensation records called Contribution Margin Reports for cardiologists, oncologists and orthopedic surgeons, who collected salaries of $1 million and higher. These records rewarded physicians for referrals to hospital services, such as radiology and physical therapy, and penalized them for taking on low-paying charity cases. Tying compensation to referrals could raise medical costs by generating unnecessary work and could compromise patient care, the lawsuit stated.

In one case, the lawsuit stated, orthopedic surgeons expressed concern about the quality of the hospital district's radiology and MRI services and tried to refer patients to outside providers. But they were pressured by the district's financial officials to keep the referrals within the district.

'Broward Health's scheme to overcompensate physicians in exchange for referrals over the last eight years has been a deliberate strategic plan to boost hospital admissions and outpatient visits for all paying patients, including patients with Medicare and Medicaid coverage,' the lawsuit states. 'Broward Health's financial strategists have personally profited from bonus payments based in part on hospital revenues.'

Furthermore, according to a later Sun-Sentinel article,

The title of medical director brought salary increases to several cardiologists at Broward Health, topping off pay packages that often went north of $1 million.

But according to a whistleblower's lawsuit that led to a $69.5 million settlement with the federal government this week, these doctors did little work for their extra compensation from the tax-supported hospital system.

The medical directors' contracts provided hourly compensation for work done in that position and required them to submit time records. One physician counted his personal exercise routine as his medical director's time, according to the lawsuit. Another double-dipped by counting time spent performing medical procedures that would have been performed anyway. Such 'medical director' jobs, the lawsuit said, were 'largely sham arrangements designed to boost physician compensation with little or no substantive work required in return.'
 Failure of Oversight

Also according to the Sun-Sentinel,

Reilly said he first learned of the compensation agreements when he considered taking a job with the district. When his lawyer saw the proposed contract, he told him to tear it up and stay away from such compensation schemes.

He said he brought up the issue in two public meetings and in a private conversation with the district's then-CEO, and was brushed off. He blamed 'the ignorance that made them interpret the law to fit their financial interests and the arrogance to think they could get away with it.'

Adventist Health System

This case came to light a few days later, as reported by the Orlando Sentinel, and was conceptually similar,

The Actual Settlement

In what's considered one of the largest health-care-fraud settlements involving physician referrals to hospitals, Adventist Health System is paying the U.S. government and four states, including Florida, a $118.7 million settlement.

A large portion of the settlement amount — $47 million — is based on allegations involving Florida Hospital Medical Group, which is owned by Adventist, and nearly three dozen Florida Hospitals in the state. That includes the Florida Hospitals in Orlando, Altamonte, Apopka, Celebration, east Orlando, Kissimmee and Winter Park.

Physicians' Incentives

Again from the Orlando Sentinel,

The complaints allege that Adventist initiated a corporate policy that directed its hospitals to purchase physician practices and group practices or employ physicians in their surrounding areas in order to control all patient referrals in those locations.

'To convince doctors to sell their practices to Adventist hospitals or to become hospital employees, Adventist hospitals allegedly provided excessive compensation, perks and benefits to the physicians,' according to the Phillips & Cohen complaint. 'The hospitals were willing to pay doctors more compensation than considered fair market value and absorb persistent losses in those deals because of the revenue the doctors' stream of referrals generated for Adventist from government healthcare programs and elsewhere.'

The complaint listed a number of ways Adventist allegedly rewarded doctors, including leasing a BMW and a Mustang for a surgeon; a $366,000 base salary for a family physician because of his high level of referrals for X-rays and blood tests; and a bonus of $368,000 for a dermatologist who worked only three days a week.

 To conceal this and avoid refunding payments, the health system then falsely said that the services identified in its annual cost reports were in compliance with the federal law, the lawsuits allege.

Failure of Oversight

Sherry Dorsey, who joined Adventist in 2012, was a corporate vice president whose responsibilities included oversight of physician compensation, and she found widespread problems with how the nonprofit health system compensated doctors who referred patients to Adventist hospitals, according to a statement by Marlan Wilbanks of Wilbanks & Gouinlock in Atlanta who represented Dorsey.

She complained to top health-system officials 'to no avail,' said Wilbanks.

More details  about the goings on at the local Adventist owned Park Ridge Hospital were reported by the Asheville (NC) Citizen-Times,

Hospital executives knew about serious billing and miscoding problems on Medicare and Medicaid cases, as well as overcompensation of doctors, and one executive even expressed concerns about possible jail time, terming as 'insane' the amount of money Park Ridge would owe the federal government if overbilling came to light.

Tuomey Healthcare System

This case has been in the works for years, but an apparently final outcome was announced in October, 2015.

The Actual Settlement

 As reported by the Charleston (SC) Regional Business Journal,

The Justice Department said it has resolved a $237 million judgment against Sumter-based Tuomey Healthcare System for illegally billing the Medicare program for services referred by physicians with whom the hospital had improper financial relationships.

Under the terms of the agreement, the United States will receive $72.4 million....

Unlike the other two cases, this one involved a jury finding of guilt,

On May 8, 2013, after a month-long trial, a South Carolina jury determined that the [hospital's contracts with physicians]  ... violated the Stark Law. The jury also concluded that between 2005 and 2009 Tuomey had submitted 21,730 false claims to Medicare with a total value of $39,313,065.

On Oct. 2, 2013, the district court trebled the actual damages and assessed an additional civil penalty under the False Claims Act in favor of the United States for a total of $237 million.

The United States Court of Appeals for the Fourth Circuit affirmed the judgment on July 2.

Having to pay the $237 million fine would force it to file for bankruptcy, Tuomey officials said.

The Physicians' Incentives

 The case arose from a lawsuit filed on Oct. 4, 2005, by Michael K. Drakeford, an orthopedic surgeon who was offered, but refused to sign, one of the illegal contracts.


 The government argued that Tuomey, fearing that it could lose lucrative outpatient procedure referrals to a new freestanding surgery center, entered into contracts with 19 specialist physicians that required the physicians to refer their outpatient procedures to Tuomey and, in exchange, paid them compensation that far exceeded fair market value and included part of the money Tuomey received from Medicare for the referred procedures.

Failure of Oversight

The government argued that Tuomey ignored and suppressed warnings from one of its attorneys that the physician contracts were 'risky' and raised 'red flags.'


In the US, physicians increasingly practice medicine as employees, often of large organizations, rather than as individual professionals or within professional groups.  Such employed practitioners must answer to leaders who are now usually generic managers rather than health care professionals.

In three recent legal cases, there was evidence that a hospital system provided financial incentives for employed physicians to refer patients within the system, apparently without regard to the appropriateness of such referrals to individual patients.  In several cases, hospital management ignored physicians' protests, or lawyers' or even their own middle managements' warnings.  In one case, hospital middle managers seemed to acknowledge the problematic nature of physician's incentives, but seemed powerless to protest to higher managers.   In one case, there was a jury finding of violation of US law.

These three cases, all announced within a few weeks, suggest that US hospital system management may frequently push employed physicians to keep referrals within the system , regardless of  individual patients' conditions or needs.  The reason may be to increase system revenue, and sometimes to increase the managers' own compensation.

This is another reason to think that the corporate practice of medicine, which was once banned in the US, is an increasing threat to physicians' values and an increasing cause of health care dysfunction.

Dr Arnold Relman reminded us that physicians used to shun the commercial practice of medicine (look here).  Physicians and other health professionals who sign on as full-time employees of large corporate entities have to realize that they are now beholden to managers and executives who may be hostile to their professional values, and who are subject to perverse incentives that support such hostility, including the potential for huge executive compensation

Neoliberals promised us that treating health care like a business, and an unregulated one at that, would lead to a new golden age.  The age has been golden, but mainly for the top managers of corporate medicine. 

The recent flurry of cases alleging that corporate physicians may be pushed by management into inappropriate referrals to make more money for their employees is another reason to rethink whether corporate practice of medicine should again be banned

Tuesday, October 20, 2015

"The Scourge of Managerialism" - Generic Management, the Manager's Coup D'Etat, Mission-Hostile Management Rolled Up, as Described by Some Men from Down Under

I just found an important article that in the June, 2015 issue of the Medical Journal of Australia(1) that sums up many of ways the leadership of medical (and most other organizations) have gone wrong.  It provides a clear, organized summary of "managerialism" in health care, which roughly rolls up what we have called generic management, the manager's coup d'etat, and aspects of mission-hostile management into a very troubling but coherent package.  I will summarize the main points, giving relevant quotes.

Recent Developments in Business Management Dogma Have Gravely Affected Health Care

Many health practitioners will consider the theory of business management to be of obscure relevance to clinical practice. They might therefore be surprised to learn that the changes that have occurred in this discipline over recent years have driven a fundamental revolution that has already transformed their daily lives, arguably in perverse and harmful ways.

These Changes Have Been Largely Anechoic

these changes have by and large been introduced insidiously, with little public debate, under the guise of unquestioned 'best practice'.

See our previous discussions of the anechoic effect, how discussion of facts and ideas that threaten what we can now call the managerialist power structure of health care are not considered appropriate for polite conversation, or public discussion

Businesses are Now Run by Professional Managers, Not Owners

The traditional control by business owners in Europe and North America gave way during the 19th century to corporate control of companies. This led to the emergence of a new group of professionals whose job it was to perform the administrative tasks of production. Consequently, management became identified as both a skill and a profession in its own right, requiring specific training and based on numerous emergent theories of practice.

These Changes Were Enabled by Neoliberalism (or Market Fundamentalism, or Economism)

Among these many vicissitudes, a decisive new departure occurred with the advent of what became known as neoliberalism in the 1980s (sometimes called Thatcherism because of its enthusiastic adoption by the Conservative government of Margaret Thatcher in the United Kingdom). A reaction against Keynesian economic policy and the welfare state, this harshly reinstated the regulatory role of the market in all aspects of economic activity and led directly to the generalisation of the standards and practices of management from the private to the public sectors. The radical cost cutting and privatisation of social services that followed the adoption of neoliberal principles became a public policy strategy rigorously embraced by governments around the world, including successive Liberal and Labor governments in Australia.

Note that this is a global problem, at least of English speaking developed countries.  The article focuses on Australia, but we have certainly seen parallels in the US and the UK.  Further, note that we have discussed this concept, also termed market fundamentalism or economism.

Managerialism Provides a One-Size Fits All Approach to the Management of All Organizations, in Which Money Becomes the Central Consideration

The particular system of beliefs and practices defining the roles and powers of managers in our present context is what is referred to as managerialism. This is defined by two basic tenets: (i) that all social organisations must conform to a single structure; and (ii) that the sole regulatory principle is the market. Both ideas have far-reaching implications. The claim that every organisation — whether it is a mining company, a hospital, a school, a professional association or a charity — must be structured according to a single model, conforming to a single set of legislative requirements, not so long ago would have seemed bizarre, but is now largely taken for granted. The principle of the market has become the solitary, or dominant, criterion for decision making, and other criteria, such as loyalty, trust, care and a commitment to critical reflection, have become displaced and devalued. Indeed, the latter are viewed as quaint anachronisms with less importance and meaning than formal procedures or standards that can be readily linked to key performance indicators, budget end points, efficiency markers and externally imposed targets.

Originally conceived as a strategy to manage large and increasingly complex organisations, in the contemporary world, no aspect of social life is now considered to be exempt from managerialist principles and practices. Policies and practices have become highly standardised, emphasising market-style incentives, devolved budgets and outsourcing, replacement of centralised budgeting with departmentalised user-pays systems, casualisation of labour, and an increasingly hierarchical approach to every aspect of institutional and social organisation.

We have frequently discussed how professional generic managers have taken over health care (sometimes referred to as the manager's coup d'etat.)  We have noted that generic managers often seem ill-informed about if not overtly hostile to the values of health care professionals and the missions of health care organizations.

Very Adverse Effects Result in Health Care and Academics

In the workplace, the authority of management is intensified, and behaviour that previously might have been regarded as bullying becomes accepted good practice. The autonomous discretion of the professional is undermined, and cuts in staff and increases in caseload occur without democratic consultation of staff.   Loyal long-term staff are dismissed and often humiliated, and rigorous monitoring of the performance of the remaining employees focuses on narrowly defined criteria relating to attainment of financial targets, efficiency and effectiveness.

The principles of managerialist theory have been applied equally to the public and the private sectors. In the health sector, it has precipitated a shift in power from clinicians to managers and a change in emphasis from a commitment to patient care to a primary concern with budgetary efficiency. Increasingly, public hospital funding is tied to reductions in bed stays and other formal criteria, and all decision making is subject to review relating to time and money. Older and chronically ill people become seen not as subjects of compassion, care and respect but as potential financial burdens. This does not mean that the system is not still staffed by skilled clinicians committed to caring for the sick and needy; it is rather that it has become increasingly harder for these professionals to do their jobs as they would like.

In the university sector, the story is much the same; all activities are assessed in relation to the prosperity of the institution as a business enterprise rather than as a social one. Education is seen as a commodity like any other, with priority given to vocational skills rather than intellectual values. Teaching and research become subordinated to administration, top-down management and obsessively applied management procedures. Researchers are required to generate external funding to support their salaries, to focus on short-term problems, with the principal purpose being to enhance the university's research ranking. The focus shifts from knowledge to grant income, from ideas to publications, from speculation to conformity, from collegiality to property, and from academic freedom to control. Rigid hierarchies are created from heads of school to deans of faculties and so on. Academic staff — once encouraged to engage in public life — are forbidden to speak publicly without permission from their managers.

Again, we have discussed these changes largely in the US context.  We have noted how modern health care leadership has threatened primary care.  We have noted how vulnerable patients become moreso in the current system, e.g., see our discussions of for-profit hospices.  We have discussed attacks on academic freedom and free speech, the plight of whistle-blowers, education that really is deceptive marketing, academic institutions mired in individual and institutional conflicts of interest, and the suppression and manipulation of clinical research.  We have noted how health care leaders have become increasingly richly rewarded, apparently despite, or perhaps because of the degradation of the health care mission over which they have presided.

The Case Study

The article provided a case study of the apparent demise of the Royal Australasian College of Physicians as a physician led organization, leading to alleged emphasis on "extreme secrecy and 'commercial in confidence," growth of conflicts of interest, risk aversion on controversial issues.  When members of the organization called for a vote to increase transparency and accountability, the hired management apparently sued their own members.

Authors' Summary

Whether the damage done to the larger institutions — the public hospitals and the universities — can be reversed, or even stemmed, is a bigger question still. The most that can be said is that even if the present, damaging phase of managerial theory and practice eventually passes, its destructive effects will linger on for many years to come.

My Summary

I now believe that the most important cause of US health care dysfunction, and likely of global health care dysfunction, are the problems in leadership and governance we have often summarized (leadership that is ill-informed, ignorant or hostile to the health care mission and professional values, incompetent, self-interested, conflicted or outright criminal or corrupt, and governance that lacks accountability, transparency, honesty, and ethics.)  In turn, it appears that these problems have been generated by the twin plagues of managerialism (generic management, the manager's coup d'etat) and neoliberalism (market fundamentalism, economism) as applied to health care.  It may be the many of the larger problems in US and global society also can be traced back to these sources.

We now see our problems in health care as part of a much larger whole, which partly explains why efforts to address specific health care problems country by country have been near futile.  We are up against something much larger than what we thought when we started Health Care Renewal in 2005.  But at least we should now be able join our efforts to those in other countries and in other sectors.   

ADDENDUM (30 October, 2015) - This post was republished on the Naked Capitalism blog.  See the comments, which are particularly interesting and important.  


1.  Komesaroff PA, Kerridge IH, Isaacs D, Brooks PM.  The scourge of managerialism and the Royal Australasian College of Physicians.  Med J Aust 2015; 202: 519- 521.  Link here.

Musical Diversion

We have to leaven this dismal post with the 1980 live version of "Down Under" by Men at Work

Thursday, October 15, 2015

Phooled Again - More Settlements Suggesting Bad Behavior by Big Pharma/ Biotech

Once again, here is a roundup of cases showing big multi-national pharmaceutical and biotechnology companies are up to their usual tricks.

Presented in alphabetical order...

Bristol-Myers Squibb Settles Charges of Bribery of Chinese Hospitals.

The best version of this I could find was in USA Today, in early October, 2015,

Pharmaceutical manufacturer Bristol-Myers Squibb has agreed to pay more than $14 million in fines to settle charges that its joint venture in China paid cash and other benefits to state-owned hospitals in exchange for prescription sales, the Securities and Exchange Commission announced Monday.

After its investigation, the SEC found that the New York-based company violated the Foreign Corrupt Practices Act in its dealings with Chinese hospitals and doctors and 'reaped more than $11 million in profits from its misconduct.'

Bristol-Myers Squibb neither admitted nor denied the findings, the SEC said.

The details, such as they were:

Chinese sales representatives at BMS China, the Chinese joint venture that is majority-owned by Bristol-Myers, paid bribes — including cash, jewelry, meals, travel, entertainment, sponsorships and other gifts — to health care providers between 2009 and 2014 to generate more sales. And Bristol-Myers Squibb 'failed to respond effectively to red flags' indicating such practices, the SEC said.

Apparently, some lower level Chinese employees were fired, although it is not clear whether they were involved in bribery, or in whistle-blowing about it, but top company management did not look too hard to see who might have authorized or directed the bad behavior,

Several BMS China employees who were fired by the company made claims that faked invoices, receipts and purchase orders were widely used to bribe health care providers. But Bristol-Myers Squibb did not investigate their claims, the SEC said.

Bristol-Myers Squibb was aware of improper payments as early as 2009, when an internal audit highlighted the problem. But the company was 'slow to remediate gaps in internal controls' over dealing with Chinese health care providers and monitor payments to them, the SEC said.

Needless to say, no one who might have authorized or directed the bad behavior, and who conceivably might have personally gotten bigger bonuses based on the revenue it brought it, suffered any negative consequences. Despite the settlement, of charges of bribery, no less, company public relations produced the usual,

We have resolved this matter with the United States Securities and Exchange Commission, and are committed to the highest standards of business integrity, vigilance and ethics across our organization.

Well then, that clears it up.

I cannot find any information about what BMS allegedly bribed the hospitals to do, and hence can draw no conclusions whether patients may have been harmed by receiving inappropriate medications.

UK Judge Found Pfizer Threatened Health Professionals

The most thorough coverage of this was, amazingly, in a medical journal, namely the British Medical Journal (Kmietowicz A. Pfizer loses UK patent for blockbuster pain drug after threats to doctors.  Brit Med J 2015; 351: h4918.  Link here.)  The background was,

The patent for the use of Lyrica for epilepsy and generalised anxiety disorder expired in July 2014, and manufacturers of generic versions already have licences for these two indications. But the manufacturer, Warner-Lambert (a subsidiary of Pfizer), holds a 'second medical use' patent for the use of pregabalin to treat peripheral and central neuropathic pain, which expires in July 2017. A second medical use patent is one that relates to a new medical use for a known compound.

Lyrica is one of Pfizer’s most successful products, with global sales in 2013 of some $4.6bn (£3bn; €4.1bn).

So apparently Pfizer set out to scare physicians away from prescribing generic pregabalin [generic Lyrica].

In his 174 page ruling Mr Justice Arnold said, 'Since late September 2014, Pfizer has taken extensive steps to try to ensure that generic pregabalin is neither prescribed nor dispensed for the treatment of pain.' This included sending a letter to the BMA and pharmacists stating that doctors and pharmacists risked infringing the patent if they supplied generic pregabalin for the pain indication and that this would be an unlawful act.

A letter sent to clinical commissioning groups in December 2014 was described by Arnold as 'calculated to have a chilling effect on the sales of Lecaent [the version of pregabalin made by Actavis].'

These letters would be seen by the recipients as a threat, said Mr Justice Arnold.

The Justice ultimately "overturned Pfizer's UK patent for pregabalin for pain control," in part because the "company made 'groundless claims' that its patent for Lyrica would be infringed if doctors did not specify Lyrica as opposed to a generic alternative when prescribing...."

This case was apparently only about the patent (and is subject to appeal), so it appears no one who apparently tried to authorize, direct or implement apparent intimidation of health care professionals with "groundless threats" will suffer any negative consequences.

This case does not seem to involve any obvious harms to patients.  However, "groundless threats" to health care professionals could have obviously demoralized them and clearly challenged their autonomy and professional values.

Sanofi Again Settles Charges of Misbranding Seprafilm

We discussed the first civil settlement the company made of this case in 2014 here.  A relatively clear summary of the new settlement was given by Reuters in September, 2015.

Genzyme Corp agreed to pay $32.59 million, admit wrongdoing and enter a deferred prosecution agreement to resolve U.S. criminal charges over its marketing of the surgical implant Seprafilm, the Department of Justice said on Thursday.

The biotechnology unit of French drug company Sanofi SA (SASY.PA) was accused of two misdemeanor counts of violating the federal Food, Drug and Cosmetic Act from 2005 to 2010 by allowing Seprafilm to be adulterated and misbranded while being sold. Sanofi bought Genzyme in 2011.

Seprafilm is a clear film used to reduce abnormal internal scarring that can cause organs and tissues to stick together following pelvic and abdominal surgeries known as laparotomies.

But the Justice Department said some sales representatives taught surgeons how to turn Seprafilm into a 'slurry' for use in increasingly popular laparoscopic surgery, even though U.S. regulators had never approved the film for that use.

According to papers filed with the federal court in Tampa, Florida, Genzyme admitted and accepted responsibility for the facts underlying the two criminal counts.

The two-year deferred prosecution agreement calls for improved oversight, and steps to halt Seprafilm sales for off-label uses. If Genzyme complies, the government will dismiss the charges.

Note that at least in this case, there was some admission by the company of the truth of the facts charged, and no protestation that "we adhere to the highest standards of integrity," or some such.

It seems possible that the use of the Seprafilm slurry in patients without clear evidence of its safety or effectiveness may have lead to patient harms, but I cannot find clear discussion of this.


So while big health care corporations, especially large drug and biotechnology companies, are always protesting how their main goal is to benefit patients, and how they support health care professionals, here are more cases in which it appears they at best set out to manipulate patients and health care professionals to maximize revenue.

Note that this is hardly the first time any of these companies have apparently misbehaved.  See our previous posts on BMS, on Genzyme (now a Sanofi subsidiary), and on Pfizer.  Note that our last discussion of the ever troubled Pfizer was only one month ago.

We have discussed endlessly how the march of legal settlements and other legal rulings affecting big health care corporations has raised questions about whether they are in it for patients and health care professionals, or just for the money.  That almost none of these legal actions has resulted in any real consequences for the individuals within the corporations who profited most from the misbehavior has allowed health care corporate managers' continued impunity, and has suggested how cozy health care corporate managers and goverment regulators and law enforcement officials have become, partially through the mechanism of the revolving door.

While these latest three cases have appeared, the mainstream media have begun to feature more discussion about how widespread managerial and corporate misbehavior is fueling the decline of the global economy, and perhaps of global society.  For example, as discussed in srticles in The Guardian, and more recently in the New York Times, Nobel Prize winners Robert Shiller and George Akerlof's new book, Phishing for Pfools: The Economics of Manipulation and Deception, suggests that widespread bad behavior in supposedly "free," and mainly unregulated markets can cause all sorts of evil.  In the Guardian, Shiller used the examples of how

 Most of us have suffered 'phishing': unwanted emails and phone calls designed to defraud us.  A 'phool' is anyone who does not fully comprehend the ubiquity of fishing.  A phool sees isolated examples of phishing, but does not appreciate the extent of professionalism devoted to it, nor how deeply this professionalism affects lives.  Sadly, a lot of us have been phools - including Akerlof and me, which is why we wrote this book

As Shiller wrote in the NYT, while he is a "free market advocate,"

we both believe that standard economic theory is typically overenthusiastic about unregulated free markets. It usually ignores the fact that, given normal human weaknesses, an unregulated competitive economy will inevitably spawn an immense amount of manipulation and deception.

Shiller and Akerlof believe that various kinds of manipulation and deception are enabled by technological advances, and that they are contagious,

When you realize that your competitor has used sophisticated and effective marketing tricks, then you will fall behind if you don’t follow suit.

This is really not a new idea,

In 1918, Irving Fisher, the Yale economist, argued that what people maximize in their actions is something that could better be described as 'wantability' rather than utility, for they are subject to temptation and mistakes in the vast array of purchases they make, leading profit-maximizing marketers to take advantage of them on a systematic basis.

In the first half of the 20th century, such critiques were of general interest. But they are little discussed today.

In the Guardian, Shiller warned that failure to address this problem in the financial sector could lead to "a new Dark Age." I fear that we are already close to a dark age for health care.

Similarly, in the Wall Street Journal, of all places, Charles Moore, the authorized biographer of Margaret Thatcher, and former editor of the conservative UK Daily Telegraph, wrote:

The relationship between money and morality, on which the middle-class order depends, has been seriously compromised over the past decade.  Which means that the mass bourgeoisie (a phrase that Marx and Engles would have thought a contradiction in terms) start to feel like the new proletariat.


To the extent that people cheat in markets, they are not real markets, any more than antifreeze labeled 'wine' is real wine.  Too many advocates of markets have allowed themselves to be suborned into becoming apologists for business.  And too many businesses now operate as if their responsibilities are only to themselves and not to consumers.

See the above examples, and all we have written about bribery, kick-backs, fraud, other crime, and corruption to show how prevalent cheating is in health care.

Shiller concluded,

Marx did have an insight about the disproportionate power of the ownership of capital. The owner of capital decides where money goes, whereas the people who sell only their labor lack that power. This makes it hard for society to be shaped in their interests. In recent years, that disproportion has reached destructive levels, so if we don’t want to be a Marxist society, we need to put it right.

I would add that if we do not put these things right in health care, ending up with a Marxist system will be the least of our worries.

So as a start, to quote Shiller, we need more

heroic effortsw of campaigners for better values, both among private organizations and advocates of government regulation

Who will step up?

Our musical diversion, "Won't Get Fooled Again," the Who, 1978 live version:

Tuesday, October 06, 2015

Fatal Fraud? - More Settlements by Commercial Hospices of Allegations They Enrolled Non-Terminal Patients

Introduction - Commercialized Hospices

We have occasionally written about the rise of the commercialized hospice industry, and concerns that commercialized hospices may not be providing the compassionate care they promise.  As we have discussed before, the hospice movement began with small, non-profit, community based organizations meant to provide compassionate palliative care to the terminally ill.  However, in the US, the hospice movement has been co-opted by commercial hospices, often run by large corporations, which may put profit ahead of compassion.

In the Washington Post series "Aging in America," Peter Whoriskey explored problems affecting the contemporary "industrialized" model of hospice.  He noted in August, 2014,

The hospice industry in the United States is booming and for good reason, many experts say. Hospice care can offer terminally ill patients a far better way to live out their dying days, and many vouch for its value.

In the US, hospice care is funded by Medicare, and the funding at times may seem generous. As more hospices are taken over by for-profit corporations, that money may be irresistible. Whoriskey noted,

But the boom has been accompanied by what appears to be a surge in hospices enrolling patients who aren’t close to death, and at least in some cases, this practice can expose the patients to the more powerful pain-killers that are routinely used by hospice providers.

Whoriskey presented a case in which a non-terminally ill patient was admitted to hospice, and died possibly due to aggressive use of narcotics.

Clinard 'Bud' Coffey, 77, a retired corrections officer, did the crossword in The Charlotte Observer after breakfast every morning, pursued his hobby of drawing cartoons, talked seven or eight times a day to his son Jeff and, just two weeks before his death, told a pal that he still felt 'like a teenager.'

He did, however, have some chronic back pain, and in late March he was enrolled in hospice care 'essentially for pain management,' his doctor said. Over a two week period, he received rising doses of morphine and other powerful drugs, grew sleepy and disoriented, and stopped breathing, dying peacefully at home, according to his family and medical records they provided.

While hospices tend to use very aggressive pain management strategies, they also by design do not attempt to cure patients who develop new acute problems. So if a non-terminally ill patient enters hospice, such a new acute problem could be fatal. For example, we discussed a case in which a person admitted to a commercial hospice for "debility" but apparently not defined terminal illness, died from untreated sepsis. It is possible that timely use of antibiotics could have contained her initial infection, or possibly even cured her sepsis.

Yet evidence continues to accumulate that modern industrialized hospices, especially those owned and run by large for-profit corporations, may enroll patients who are not terminally ill to increase revenue. The regulatory response to such behavior continues to be spotty, and seems focused on enrollment of non-terminal patients as a form of fraud, not as a danger to patients.

So far in 2015 two commercial hospice chains settled charges that they enrolled patients who were not terminally ill.

Good Shepherd Hospice

Early in 2015, there was very abbreviated news coverage of the settlement made by Good Shepherd Hospice. A Department of Justice press release noted,

Today, Good Shepherd Hospice Inc., Good Shepherd Hospice of Mid America Inc., Good Shepherd Hospice, Wichita, L.L.C., Good Shepherd Hospice, Springfield, L.L.C., and Good Shepherd Hospice – Dallas L.L.C. (collectively Good Shepherd) agreed to pay $4 million to resolve allegations that Good Shepherd submitted false claims for hospice patients who were not terminally ill. Good Shepherd is a for-profit hospice headquartered in Oklahoma City which provides hospice services in Oklahoma, Missouri, Kansas and Texas.

The press release specifically stated,

The government alleged that Good Shepherd knowingly submitted or caused the submission of false claims for hospice care for patients who were not terminally ill. Specifically, the United States contended that Good Shepherd engaged in certain business practices that contributed to claims being submitted for patients who did not have a terminal prognosis of six months or less, by pressuring staff to meet admissions and census targets and paying bonuses to staff, including hospice marketers, admissions nurses and executive directors, based on the number of patients enrolled. The United States further alleged that Good Shepherd hired medical directors based on their ability to refer patients, focusing particularly on medical directors with ties to nursing homes, which were seen as an easy source of patient referrals. The United States also alleged that Good Shepherd failed to properly train staff on the hospice eligibility criteria.

However, it suggested that the behavior was fraudulent, not dangerous,

'Health care fraud puts profits above patients, and steals from taxpayers,' said U.S. Attorney Tammy Dickinson of the Western District of Missouri. 'In this case, company whistleblowers alleged that patients received unnecessary hospice care while Good Shepherd engaged in illicit business practices to enrich itself at the public’s expense.'

Note that as is usual in cases of health care fraud, Good Shepherd Hospice did not admit wrongdoing, and no individual who authorized, directed or implemented the alleged bad behavior suffered any negative consequences. The minimal media coverage of this case did not discuss the possibility of any risks to patients. (For example, look here.)

Good Shepherd Hospice is part of a for-profit corporation. I could find nothing about its ownership, who its leaders are, or its financial status.  So who particularly benefited from the alleged behavior was not clear.

Guardian Hospice and AccentCare, Owned by Oak Hill Capital Partners

In early October, 2015, a brief news item in the Atlanta Journal Constitution described the settlement by Guardian Hospice.

A Georgia hospice company has agreed to pay $3 million to resolve allegations it billed taxpayers for patients who were not terminally ill,...

In particular,

Guardian Hospice set aggressive targets to recruit and enroll patients it knew were not in the last months of their lives so it could collect Medicare payments, the federal government alleged.

The article noted the settlement arose from a whistle-blower law suit, and that the whistle-blowers

alleged they routinely saw non-terminal patients being treated but were told it was necessary to keep the hospice’s 'census' up,...

The AJC article did quote their attorney as saying,

the practice was 'doubly cruel' because when unqualified patients are put on hospice, they are forced to forego regular medical care that could help cure their illness.

But it provided no further detail. The official news release only quoted an agent of the Department of Health and Human Services (DHHS) Inspector-General's office:

Hospice care is only medically appropriate – and reimbursed by Medicare – for terminally ill patients who are in the last months of their lives

Again, there were no admissions of culpabality, and no actions taken against any individuals.

The $3 million penalty seems paltry, given that we do know something about the owners of Guardian Hospice and the depth of their pockets.  One brief news article about a June, 2015, settlement made by Guardian Hospice for underpaying its nurses, did mention that Guardian Hospice is owned by AccentCare.  A little more digging found this press release from 2010 made by Oak Hill Capital Partners, a large private equity firm.

Oak Hill Capital Partners announced today that following the closing of their acquisition of AccentCare, Inc. ('AccentCare'), a premier provider of home healthcare services, including nursing and attendant care services, they intend to combine it with Guardian Home Care Holdings, Inc. ('Guardian'), a leading homecare and hospice service provider in the Tennessee, Georgia and Texas markets. The terms of the transaction were not disclosed.

The combination of AccentCare and Guardian creates one of the largest operators in the industry, with an expanded geographical footprint and highly diversified service offerings. The new company will operate over 130 branches across 10 states, serving more than 30,000 patients.

Since private equity firms have minimal reporting requirements, we do not know who owns Oak Hill Capital Partners, and hence who owns AccentCare and Guardian Hospice. We do know from the Oak Hill Capital Partners web-site that their portfolio is prodigious.

Summary and Discussion

There are more cases being reported in which hospices, particularly those owned and run by for-profit corporations, have enrolled patients who were not terminally ill.  These enrollments may be motivated by the desire for more money, but they put patients at risk.  Hospice patients may receive large doses of psychoactive drugs and narcotics, which may lead to adverse effects up to and including death.  Hospice patients may not, however, receive treatments for new acute problems, even if those problems are potentially curable.  Therefore, hospice patients may die from untreated infections that otherwise might respond to antibiotics.  Aggressive pain medication and withholding treatment of infections make sense as part of palliative care for terminally ill patients, e.g., those with terminal cancer.  But they make no sense for patients with longer life expectancy.

Nonetheless, such abuses by hospices get little press coverage, seemingly are ignored by health care regulators and law enforcement, and are almost completely anechoic in the health care, medical and health policy literature.

If a measure of society is how it cares for the most vulnerable patients, the US laissez faire approach to for-profit hospices suggests a society in decline.

To repeat what I wrote the last time for-profit hospices were (barely) in the news for enrolling the wrong patients,...

 In my humble opinion, we should return control of direct patient care, especially of the most vulnerable patients, to health care professionals and if necessary small non-profit community organizations.  We ought to give strong consideration to banning corporate hospices, and banning all forms of the corporate practice of medicine and corporate health care "delivery."

Given how many insiders make so much money from the current version of laissez faire capitalism in health care, however, I would expect strong resistance should such apparently "radical," but actually conservative proposals actually get any mainstream attention.