Addressing threats to health care's core values, especially those stemming from concentration and abuse of power - and now larger threats to the democracy needed to advance health and welfare. Advocating for accountability, integrity, transparency, honesty and ethics in leadership and governance of health care.
Now there is another reason for Americans who aspire to medical careers to be concerned about applying to offshore medical schools.
Admission to US medical schools is increasingly difficult. So many who seek medical careers may be tempted to apply to schools outside the US. In the last 30 years, American entrepreneurs have opened offshore medical schools, mostly in the Caribbean, that cater to US students. They teach in English, and do not require immersion in an unfamiliar culture, so may be more attractive than medical schools in other countries whose mission is to educate physicians to practice in those countries. In 2010, Eckhert documented that the number of offshore medical schools,
"for-profit institutions whose purpose is to train U.S. and Canadian
students who intend to return home to practice," but not to train
physicians to practice in the countries in which these schools are
located, was rapidly growing.(1) By 2010, there were 33 such schools,
20 of which were new since 2000.
Such offshore medical schools exist in a grey area. The small countries or colonies in which they are located usually do not seek to regulate them, since the physicians they produce are going to practice elsewhere. There is no requirement that these offshore medical schools be accredited in the US. Such accreditation is currently not required for individual graduates
of such schools to be admitted to US house-staff programs or
for US licensure. So perhaps it is not surprising that little is known about these schools.
How they choose students, the qualifications or even names of their
faculty, their curriculum, how they supervise clinical training (which
is mostly done by affiliated North American hospitals), and what happens
to their graduates are obscure. Eckhert attempted to describe what is
known, but noted "variability exists in the availability of information
on faculty; where data exists, it is noted that most of the permanent
on-site basic science faculty are internationally trained, many have no
documented medical education experience in the United States, and it is
not uncommon for them to be OMS [offshore medical school] alumni."
Such information as is available about these schools comes from the schools themselves.
On Wednesday, the Federal Trade Commission sued DeVry, which operates three Florida campuses, including one in Miramar, for 'deceptive' recruiting practices. The company is one of the nation’s largest for-profit colleges, with 50-plus U.S. campuses, and more than 41,000 students. In addition to the disputed 90 percent number [of graduates who found work in their chosen field], the FTC alleges DeVry also falsely advertised that its graduates 'earn 15% more than graduates from other colleges and universities.'
The allegations were that DeVry rigged the statistics:
The FTC suit alleges that DeVry fudged the numbers on its 90 percent job placement rate by leaving out some out students who weren’t finding jobs. This was done by classifying the students as not actively seeking employment, even though that wasn’t the case, the FTC says.
According to the FTC, DeVry also boosted its job placement numbers by counting students as placed in their field even when that clearly wasn’t accurate. Examples of DeVry’s 'in field' placements cited in the lawsuit include:
▪ A graduate from the technical management degree program working as a mail carrier.
▪ A business administration graduate working as a waiter at the Cheesecake factory.
▪ A business administration graduate working as a secretary at a prison.
▪ A technical management graduate working as a sales associate at Macy’s.
The Miami Herald reporter found at least one more example,
One former student at DeVry’s Miramar campus told the Herald that the school’s recruiter made it seem like his project management degree would lead to guaranteed employment. But after graduating in 2011, the student, who asked to be identified only by his first name, Luis, said he never got a callback from the more than 50 job postings he applied for.
Luis said he has $30,000 in student loans, and is working the same type of job he had before enrolling at DeVry, as a medical device technician.
A blog post on the Republic Report included two more examples,
graduates who majored in technical management working as unpaid volunteer positions at medical centers;
a business administration graduate with a health care management specialization working as a car salesman.
Not surprising, the corporate leadership of DeVry University denied the claims, and dismissed the evidence as "anecdotal examples that exaggerate the allegations but do not prove them." They focused on the overall numbers, claiming that "there is no national standard for calculating employment statistics...."
Yet they did not challenge the particular anecdoes, all of which seemed to be examples of unsuccessful placements claimed by the University
to be the opposite.
Adding to Previous Concerns about DeVry Owned Offshore Medical Schools
In 2013, we posted about a Bloomberg investigative article about the two DeVry owned medical schools, at the American University of the Caribbean and Ross University. The article focused on multiple issues:
- high attrition rates of students compared to those in US based schools
- inability of many students to complete clinical training in the customary two years
- low rates of students matching to US residencies compared to US graduates
- high costs for students, presumably a cause of their high levels of debt
Keep in mind that some of these concerns were based on statistics supplied by DeVry. Yet now there is a new reason to be doubtful about their statistics. Furthermore, while Eckhert wrote in 2010 that the increasing presence of offshore
medical graduates in the US "obligates U.S. medicine to take a closer
look at these educational programs," no such scrutiny has occurred since
Outsourcing US medical education to offshore schools that largely escape regulation in the US, and in the countries in which they are located is another outstanding example of how the US has applied hyper market based solutions to health care. While more US students are attending such schools, and often paying a high price and incurring high indebtedness for the privileges of doing so, there are many reasons to be doubtful about the quality of the education they may receive, and the likelihood of their long-term success as physicians.
Yet health care, and particularly the quality of education received by those who practice medicine in the US, could be viewed as a public good. Dubious training of US doctors affect not only the doctors themselves, but their patients' and the public's health. Outsourcing this education could put a lot of people at risk.
However, it does provide an attractice opportunity for the managers of the outsourced system to make money. Per the DeVry Education Group 2015 proxy statement, CEO received $5,343,407 in total compensation that year, and owned over one million shares of stock (currently valued at just under $20 million). Four other named officers each received at least $1 million.
So, we see another aspect of the US health care system in which money seems
to trump mission, facilitated by an unseemly alliance between wealthy
corporate executives and bad US government policy. We need to reexamine
our fascination for "market based" approaches to health care, when
almost nothing about any part of health care resembles, or could
resemble a free market. We need to make health care
more transparent, and shine more sunshine on the nooks and crannies,
like off-shore but US corporate owned medical schools. We need to
facilitate health care leadership and governance that puts patients' and
the public's health first, way ahead of the personal enrichment of the
As long as the US continues its light touch regulation of the outsourced offshore system which now educates increasing numbers of US doctors(2), Americans who want to become doctors ought to be very skeptical about the futures they may face if they choose to go to such offshore schools.
1. Eckhert NL. Private schools of the Caribbean: outsourcing medical education. Acad Med 1010; 85: 622-630. Link here.
2. Eckhert NL, van Zanten M. U.S.-citizen international medical graduates - a boon for the workforce? N Engl J Med 2015; 372: 1686-7. Link here.
Medical journals are supposed to promote professional values
– scientific, social, and ethical. Quality matters, in each of these domains. Lately,
however, highly ranked journals are failing in respect of ethics
commentaries. Some editors seem happy to publicize or even to
co-author commentaries that are dismissive of current ethics initiatives – like
transparency of data reporting and disclosure of conflicts of interest (COI).
That’s one way for journals to jump the shark in the race for ratings. They
surely get attention and applause in some quarters – but those stunts are net
negatives for the journals. Here is one example.
Last fall, JAMA went
splashy with a sappy Viewpoint article
on conflict of interest by Anne R. Cappola and Garret A. FitzGerald. Anne
Cappola is also an associate editor of JAMA
– what a coincidence! The article was a Pollyanna piece by these two professors
at Penn, promoting pushback on perceived pharmascolds, but really just papering
over the problem of COI. The sappy formula? They declared conflict of interest to
be a pejorative term that should be replaced by confluence of interest. This casuistry was backed up by wishful
thinking and hortatory hand waving, weakly argued. Mostly, it gave the
impression that the authors, presuming to speak for investigators generally,
were offended by the increasing regulations for managing COI. Those
developments have occurred at the Federal, institutional, and publication
levels. Worse, the authors ignored the reality of recent corruption that led to
those new regulations. That uncomfortable fact was airbrushed out of their
discussion. In response, one critic of confluence
of interest, writing on the COI
blog, aptly raised a comparison to Wall Street: “The phrase also reminds me of a statement by then
king-of-the-hill securities analyst Jack Grubman: “What used to be a
conflict is now a synergy.” (Three
years later Grubman was fined $15 million dollars and barred from the industry for
life for what were apparently still considered COIs.)”
The Viewpoint article appeared
on-line September 24, 2015, and four days later I sent a critical reply to JAMA. The printed
version of the Viewpoint article appeared November 3, 2015, and on 4 December, 2015 I was notified
that JAMA chose not to publish my
letter to the editor. During the following six weeks, now nearly five months
since it appeared, JAMA published no replies
whatsoever to the Viewpoint article. Could it be that JAMA has deep sixed all the responses? That’s one way to manage bad
publicity, but it is inconsistent with the standards we expect of a journal
like JAMA. Here is the text of my letter
to the editor of JAMA. Keep in mind
that there is only so much one can say within a limit of 400 words and 5
LETTER TO EDITOR, JAMA 09-28-2015 Text word count 389
TITLE: CONFLICT OF INTEREST
In their recent Viewpoint (1), Anne
Cappola and Garret FitzGerald recommended replacing the term conflict of
interest (COI) with confluence of interest, declaring a pejorative connotation
of the term conflict. A better suggestion would have been competing interest, which already is in wide use (2) and which does
not paper over the problem. The authors did not frankly acknowledge the gravity
of recent COI scandals that led to the situation they decry. Sadly, there are
real, common, serious, and unacceptable conflicts of interest. Boundaries are
needed, and the authors’ effort to weaken the boundaries is misguided.
Their case for re-framing COI more
benignly as a confluence of interests is weakly argued. For instance, they
warned of concern that current policies on COI “… might restrain innovation and delay translation of basic discoveries to
clinical benefit.” (1) They produced no evidence for that speculative
assertion, though they said it was a key reason for their endeavor. Moreover,
COI policies do not demonize collaboration with industry. We once had an
honorable tradition of interacting with industry while retaining our integrity
as clinical scientists. That tradition broke down when academic investigators
in many specialties were coöpted as key opinion leaders (KOLs) by the marketing
departments of corporations. There followed an era of corruption in corporate-funded
and KOL-managed continuing medical education and journal supplements; of
experimercials disguised as KOL-initiated clinical trials (3); of rampant,
biased ghostwriting, commissioned by corporations and often with cynical
honorary KOL authorship; and of selective analyses of clinical trials data
designed to exaggerate benefits, minimize harms, and maximize markets (4). We
can readily agree with the Viewpoint authors that these practices had the
effect of “biasing the interpretation of
results, exposing patients to harm, and damaging the reputation of an
institution and investigator” (1). Inevitably, those practices and
individuals were exposed, which led to Congressional action and to staggering
legal penalties (over $3 billion in the case of GlaxoSmithKline) (5). In
response, COI policies were strengthened at the Federal and institutional
levels and, of course, they now inconvenience everybody. Such is the way of
bureaucracies. As we survey the aftermath, we should direct our annoyance to the
many opportunistic investigators who entered into those compromised
relationships with industry. It makes no sense now to shoot the messengers or
to use sophistry in an attempt to define the problem away.
The author declares no competing financial interest or other
conflict of interest.
AR, FitzGerald GA. Confluence, not conflict of interest: Name change necessary.
September 24, 2015. doi:10.1001/jama.2015.12020.
A, Horton R, Collingridge D, McConnell J, Butcher J. The Lancet's policy on
conflicts of interest––2004. Lancet. 2004; 363 (9402):2-3.
BJ. Sertraline and the Cheshire cat in geriatric depression. American Journal
of Psychiatry. 2004; 161(6): 1145-1146.
J, Nardo JM, Healy D, Jureidini J, Raven M, Tufanaru C, Abi-Jaoude E. Restoring
Study 329: efficacy and harms of paroxetine and imipramine in treatment of
major depression in adolescence. BMJ. 2015;351:h4320.
So, yes, Virginia, there is real COI and there is real
corruption in medical science. You cannot make them go away by wishing them
away. And, JAMA, if you allow your
editors to promote divisive, weak, and problematic ethics positions, at least
have the decency to allow debate.
The ever increasing compensation of top managers of health care organizations provides incentives to continue business as usual. We have frequently discussed executive compensation for top health care leaders that seems wildly disproportionate to their contribution to their organizations' health care mission.
Furthermore, not only does executive compensation seem to have anti-gravity properties, rising even at institutions facing financial challenges, or while other employees face salary cuts and job loss, but it continues even after the lack of justification for it has been called out.
Herein we discuss two examples of continuing anti-gravity compensation that occurred at institutions we have previously cited for similar problems. These are discussed in the order of their appearance in the media.
In 2011, we first noted
that executives of Novant Health, headquarted in
Winston-Salem, NC, were getting raises while they were laying off more lowly employees. Then in
2014, we posted about more raises going to Novant executives, again while more lowly employees had their pay cut.
Carl Armato, chief executive and president of Novant Health Inc., received a 14.4 percent jump in salary during fiscal 2014 to $1.19 million.
Armato is in his fourth year as the system’s top executive. His salary has risen 70.9 percent since he took over as the top executive Jan. 1, 2012, following the retirement of Paul Wiles.
Armato’s incentive compensation increased less than 1 percent to $919,738. Altogether, Armato’s core compensation was $2.59 million.
Other top executives also did very well,
Jeff Lindsay, chief operating officer, received $709,856 in salary, $382,813 in bonus and incentive pay and overall core compensation of $1.23 million. Lindsay, former president of Forsyth Medical Center, was not listed among Novant’s top executives in fiscal 2013.
For the 27 listed current executives, as of Dec. 31, 2014, on Novant’s Form 990 filing with the Internal Revenue Service, the system spent $12.17 million on salaries and $8.73 million on bonuses and incentive pay.
Seven other listed Novant Health Inc. executives received at least $442,000 in salary and core compensation of at least $517,000 for fiscal 2014.
* Fred Hargett, chief financial officer, received a 15.9 percent raise in salary to $708,924, bonus and incentive pay of $565,120 and overall core compensation of $1.54 million.
* Jesse Cureton, chief consumer officer, received a 14.2 percent raise in salary to $573,683, bonus and incentive pay of $472,173 and overall core compensation of $1.07 million.
* Jacqueline Daniels, chief administrative officer, received a 3.9 percent raise in salary to $565,283, bonus and incentive pay of $518,631 and overall core compensation of $1.13 million.
* Sallye Liner, former chief clinical officer, received a 2.9 percent raise in salary to $516,171, bonus and incentive pay of $474,991 and overall core compensation of $1.05 million.
* Dr. Thomas Zweng, chief medical officer, received $470,217 in salary, bonus and incentive pay of $282,014 and overall core compensation of $790,191.
* John Phipps, president of Novant Medical Group, received $459,024 in salary, bonus and incentive pay of $377,219 and overall core compensation of $873,015.
* Peter Brunstetter, chief legal officer, received $442,116 in salary, bonus and incentive pay of $45,000 and overall core compensation of $517,765.
The hospital system trotted out some of the usual talking points used to justify very high pay for top executives.
Novant, like most health care systmes serving North Caroling, says high compensation levels are necessary to recruit and retain executives to run 'a very complex organization.'
Novant, as do most not-for-profit health-care systems serving North
Carolina, stresses high compensation levels are necessary to attract
executives to run 'a very complex organization.'
Furthermore, the system's board of trustees say
bonuses and incentives are based on annual and three-year goals that 'focus on the quality and safety of health care, improving the patient experience, transforming to an electronic health record, financial stewardship and providing community benefit.'
To put that in perspective, the 27 top executives are about 0.1% of the system's total workforce of "about 25,000." The $20.9 million used for their salaries, bonuses, and incentive pay (but apparently not retirement benefits and other perks) amounted to 0.55% of the system's total revenue (of about $3.79 billion) and approximately 1% of the approximately $2 billion the system spent on all employee salaries and benefits (according to the Novant 2014 financial statement).
Novant Health has reached a preliminary settlement with a group of current and former employees over handling of their retirement plans, with the health system agreeing to pay $32 million and make changes going forward.
The proposed settlement has been agreed to by Novant and the seven plaintiffs, which include a variety of doctors, nurses and other health care workers,...
The point of the litigation was
what plaintiffs claim are excessive fees associated with the system's retirement plan along with 'kick-backs' to a Triad businessman with a long-standing relationship with the health system.
The complaint alleged that during a three-year period starting in 2009, the plan paid excessive compensation of close to $18 million to Colorado-based Great-West Life & Annuity Insurance Co. and brokerage firm D.L. Davis & Co., based in Winston-Salem and operated by CEO and President Derrick Davis.
Along with the allegations of excessive fees, the plaintiffs claimed that entities owned or controlled by Davis benefited from real estate and development deals with Novant Health.
The agreement would also bar Davis and his companies from being involved in the management of Novant Health retirement plans and would prohibit Novant from entering into any new real estate deals or business relationships with Davis and his companies for at least four years.
As is customary in such cases, a Novant statement said its leadership "do not agree with the claims in the lawsuit," but agreed to the large settlement and other stipulations apparently to avoid "a long and costly legal battle." But if the complaint was unfounded, how would it be good stewardship not to contest it? Of course, were it to be true, then there would be even more evidence of poor stewardship.
In fact, for full disclosure, I got to add my skepticism about how Novant recompenses its managers in the text of Mr Craver's December, 2015, article,
'Each organization seems to have their own set of metrics, often frequently adjusted, and that somehow always make their own executives seem good,' Poses said.
'Every organization thinks their executives are above average,' Poses said. 'There are no overseers willing to question executive pay, since boards are mainly executives of other organizations; and executives are always compared only with other executives.'
Somehow, I doubt that any Novant executives or board members would care about what I said, or that Novant executive pay will not continue to climb, unless push comes to shove.
Cape Cod Healthcare
In January, 2015, we blogged about how the former CEO of Cape Cod Healthcare had been collecting severance pay for 3 years, totaling more than $3 million, after he abruptly left his and after being sanctioned by the state medical board for faulty prescribing abusable psychoactive drugs (which he allegedly took himself) ; and it was revealed that there were concerns about financial mismanagement at the health care system which he formerly ran. While CEO of Cape Cod he also presided over multiple layoffs, some of which were of clinical personnel. At that time, of course, the system board of trustees defended his leadership because they said it improving system finances.
No, on January 14, 2016 the Cape Cod Times reported,
For the fourth year since abruptly leaving Cape Cod Healthcare, former CEO Dr. Richard Salluzzo pulled in a hefty paycheck, according to new financial reports filed with the state attorney general’s office.
Since parting ways with the nonprofit corporation in November 2010, Salluzzo has taken in about $3.5 million, including $407,371 for the most recent year on file, fiscal 2014.
In many ways, this report doubled down on the previous 2015 version. Dr Salluzzo did not merely preside over layoffs, but
During his tenure Salluzzo presided over what he called the largest job cut in Cape Cod Healthcare’s history, a layoff of about 200 employees, in addition to bringing about improvements such as better billing.
The chairman of the system's board of trustees did not merely defend Salluzzo's financial results, but
'The actual performance was just phenomenal,' [Chairman William] Zammer said. 'We have a healthy, vibrant health care system.'
The Cape Cod Times suggested that observers outside the hospital system begged to differ,
But a professor of business ethics at Bentley University in Waltham questioned the extent of Salluzzo’s 'golden parachute,' while the spokesman for a nurses union called it 'outrageous.'
'These post-employment payouts must have been in his initial contract,' said W. Michael Hoffman, executive director of the center for business ethics at Bentley.
'It does sound crazy and wrong given the amount of his golden parachute,' Hoffman said in an email.
'It’s unconscionable we’re still paying someone who left under questionable circumstances,' said David Schildmeier, spokesman for the Massachusetts Nurses Association.
Schildmeier said the money would be better spent on patient care, especially since Cape Cod Healthcare draws a large percentage of its patient revenue from taxpayer-funded Medicare and MassHealth programs.
Dr Salluzzo is gone, but I doubt that the board of trustees is listening to these critics, and again unless push comes to shove, I suspect the new CEO will find his position to be very remunerative.
As I said in 2015,...
As health care organizations have become increasingly big and
influential, their leadership has been increasingly in the hands of generic professional managers, not health care professionals. These hired managers have commanded generous and ever increasing pay,
which has been justified by the common talking points: managers have
extremely hard jobs and are brilliant, and high pay is necessary in a
competitive market to attract and maintain top leaders.
Yet none of the boosters of high pay for health care managers, who
mainly seem to consist of the legal, marketing, and public relations
personnel who answer to them, and occasionally the board members who
also are hired manager, answer the obvious questions:
What is the evidence that managers are brilliant and their jobs are so
hard, especially when compared to the highly-trained health care
professionals at their own institutions?
Is their really a free market in hired managers, and why is it so
isolated from the market for health care professionals and other people
employed by health care organizations?
These justifications seem particularly ridiculous when managers whose
results are obviously not brilliant, e.g., marked by deficits, losses,
and lay-offs, are getting huge and increasing pay. They also seem
ridiculous when the "market" apparently dictates salary cuts and
lay-offs for all employees other than the managers of a particular
Instead, it seems likely that hired health care managers make more and
more because of the influence they have on their own pay. This
influence is partially generated by their control over their
institutions' marketers, public relations flacks, and lawyers. It is
partially generated by their control over the make up of the boards of trustees
who are supposed to exert governance, especially when these boards are
subject to conflicts of interest and are stacked with hired managers of
other organizations. Furthermore, per the dogma of pay for
performance, their pay may be heavily tied to short-term financial
results, rather than fulfillment of the patient care or academic
Thus, as in the larger economy, non-profit hospital managers have become "value extractors."
The opportunity to extract value has become a major driver of
managerial decision making. And this decision making is probably the
major reason our health care system is so expensive and inaccessible,
and why it provides such mediocre care for so much money.
So to repeat, true health care reform would put in place leadership
that understands the health care context, upholds health care
professionals' values, and puts patients' and the public's health ahead
of extraneous, particularly short-term financial concerns. We need
health care governance that holds health care leaders accountable, and
ensures their transparency, integrity and honesty.
So push needs to come to shove. I just posted that generic management/ "managerialism" just drove physicians who are corporate employees of one big health care system to unionize and contest their working conditions and other outcomes of generic management. I submit that to get true health care reform, physicians, health care professionals, and members of the public concerned about our ever more expensive, yet constantly declining health care system need to do more than just read angry blog posts.
But until they do, I guess I will have an infinite number of follow-up posts, like this one, to write.
We have posted about the plight of the corporate physician. In the US, home of the most commercialized health care system among developed countries, physicians increasingly practice as employees of large organizations, usually hospitals and hospital systems, sometimes for-profit. The leaders of such systems meanwhile are now often generic managers, people trained as managers without specific training or experience in medicine or health care, and "managerialists" who apply generic management theory and dogma to medicine and health care just as it might be applied to building widgets or selling soap.
We have also frequently posted about what we have called generic management, the manager's coup d'etat, and mission-hostile management.
Managerialism wraps these concepts up into a single package. The idea
is that all organizations, including health care organizations, ought to
be run people with generic management training and background, not
necessarily by people with specific backgrounds or training in the
organizations' areas of operation. Thus, for example, hospitals ought
to be run by MBAs, not doctors, nurses, or public health experts.
Furthermore, all organizations ought to be run according to the same
basic principles of business management. These principles in turn ought
to be based on current neoliberal dogma,
with the prime directive that short-term revenue is the primary goal.
Now there are a few signs that the physicians are getting fed up with having to answer to generic management and managerialism.
I found two stories, perhaps somewhat related, about physicians unionizing to stand up to their new often managerialist overseers. The most prominent was in the New York Times on January 9, 2016, provocatively titled "Doctors Unionize to Resist the Medical Machine." It tells the story of how the hospitalists at PeaceHealth Sacred Heart Medical Center in Springfield, Oregon, formed a union de novo. The second started with a brief article in the Seattle Times on December 27, 2015, about how housestaff at the University of Washington (UW) revived a housestaff association and turned it into a union.
Managerialism as the Stimulus at PeaceHealth
The long article about PeaceHealth showed that managerialist leadership of the hospital system was the chief stimulus for unionization.
Managerialist Tactics: Outsourcing
The NYT article opened with
in the spring of 2014, when the administration announced it would seek bids to outsource its 36 hospitalists, the hospital doctors who supervise patients’ care, to a management company that would become their employer.
The outsourcing of hospitalists became relatively common in the last decade, driven by a combination of factors. There is the obvious hunger for efficiency gains. But there is also growing pressure on hospitals to measure quality and keep people healthy after they are discharged. This can be a complicated data collection and management challenge that many hospitals, especially smaller ones, are not set up for and that some outsourcing companies excel in.
Outsourcing is a now familiar entry in the managerialists' playbook. It is seen more in manufacturing than in health care. Although touted as improving economic "efficiency," it also may reduce the accountability of the managers of the organization that does the outsourcing.
Pursuit of Economic Efficiency
In this case,
Outsourced hospitalists tend to make as much or more money than those
that hospitals employ directly, typically in excess of $200,000 a year.
But the catch is that their compensation is often tied more directly to
the number of patients they see in a day — which the hospitalists at
Sacred Heart worried could be as many as 18 or 20, versus the 15 that
they and many other hospitalists contend should be the maximum.
was the idea that they could end up seeing more patients that prompted
outrage among the hospitalists at Sacred Heart, which has two facilities
in the area, with a total of nearly 450 beds. 'We’re doctors, we’re
professionals,' Dr. [Rajeev] Alexander said. 'Giving me a bonus for
seeing two more patients — I’m not sure I should be doing that. It’s not
safe.' (A hospital representative said patient safety was 'inviolate.')
A constant theme of managerialism, and the neoliberalism that underlies it, is economic efficiency. The usual narrative is that efficiency means providing better goods and services at lower costs. Instead, managerialism and neliberalism may mean decontenting goods and services so as to lower costs to the organizations providing them, but not necessarily providing more value to consumers. In health care terms, managerialism and neliberalism may lead to less accessible, more mediocre health care that increase revenue to the organizations providing it, as implied by the physicians' comments above. Making the US the most commercialized, managerialist run, and
arguably neoliberal health care system among the developed countries
has not led to lower costs, better access, or better health care
The backstory for the outsourcing emphasizes that managerialism, and the resulting economic efficiency was indeed the goal of PeaceHealth...
In 2012, Sacred Heart’s parent, PeaceHealth, a nonprofit health care system, installed an executive named John Hill to adapt its Oregon hospitals to the latest trends in health care. Mr. Hill, in an effort to rein in the budget and improve the efficiency of a hospital that administrators said was lagging in key respects, including how long the typical patient stayed, eventually concluded that the hospitalists at Sacred Heart should be outsourced.
Centralization of Control
The hospitalists also chafe at the way the administration has tried to centralize decisions they used to make for themselves. This might include hiring fellow doctors or the order in which they see patients on any day. They also complain of being loaded down with administrative tasks.
'We’re trained to be leaders, but they treat us like assembly line workers,' said Dr. Brittany Ellison, a hospitalist in the group. 'You need that time with the patient,...'
A major feature of managerialism is the concentration of power within (generic) management. To quote Komesaroff(1),
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.
We're Only In It for the Money
Also, the negotiations that started once the PeaceHealth physicians formed their union demonstrated a central tenet of managerialism
Even starker than the divide over these questions are the differences
in worldview represented on opposite sides of the table. During a
bargaining session last fall, the administration proposed increasing the
number of shifts a year. Hospitalists now earn about $223,000 a year
for 173 shifts and are paid extra for working more. The hospital offered
$260,000 for a mandatory 182 shifts, and up to $20,000 in bonus pay for
hitting certain medical performance targets. The hospitalists work
seven days on and seven days off, so this would have effectively
eliminated any time off for sick days or vacation.
the doctors pointed this out, the administration responded that if they
missed a few days, it would make sure they got extra days to hit the
required number of shifts for full pay.
hospitalists assured the administration negotiators that their concern
had nothing to do with money — that none of this had ever been about
money. They preferred to work less and make less to avoid burnout, which
was bad for them and worse for patients. At which point the
administration responded that money was always the issue, according to several people in the room. (The hospital declined to comment.)
it dawned on the doctors why they had failed to break through, Dr.
Alexander said. 'Imagine Mr. Burns,' the cartoonishly evil capitalist
from 'The Simpsons,' 'sitting across the table,' he said. 'There’s no
way we can say, 'This isn’t what we’re talking about. We’re not trying
to get the bonus.''
Again, managerialism is based on neoliberalism, and neoliberal view is that the market rules. The market is the arbiter of success, and money is the only outcome that matters. As Komesaroff put it(1),
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.
carry on the healing mission of Jesus Christ by promoting personal and
community health, relieving pain and suffering, and treating each person
in a loving and caring way.
Ostensibly, this is accompanied by core values, such as,
choose to serve the community and hold ourselves accountable to
exercise ethical and responsible stewardship in the allocation and
utilization of human, financial, and environmental resources.
We build and evaluate the
structures of our organization and those of society to promote the just
distribution of health care resources.
We have frequently discussed how leadership of contemporary health care organizations often seem to act contrary to the organizations' stated mission, that is, mission-hostile management.
Finally, while managerialism is ostensibly concerned with economic efficiency, whose efficiency matters. When managers address physicians' efficiency, they seem to look at
amount of work done divided by the cost to the hospital of paying
physicians. However, they never seem to look at their own costs, the
costs of management, as being a negative.
The PeaceHealth 2014 form 990,
the latest available, states that the then CEO, Mr Alan Yordy (whose
highest academic degree was an MBA, according to his LinkedIn page) had
total compensation in 2013 of $1,366,742, and 11 other managers had
total compensation greater than $250,000, with 9 having total
compensation greater than $500,000. Those figures should be compared to
the highest compensation offered the hospitalists, a maximum of
$280,000 for 182 shifts a year, eliminating all vacation and sick leave. So if it is all about the money, the managers are making the most of
We have discussed ad nauseum the ridiculous compensation
of the leaders of health care organization, even non-profit
organizations. Value extraction by top management has become a central
feature of the US and global economy (look here).
The NYT article did not discuss whether the upset hospitalists knew about their bosses' compensation. I suspect they did.
Forming a Functioning Union at the University of Washington
The media coverage of the UW housestaff unionization was less detailed. It does appear, though, that a stimulus was the pursuit of economic efficiency by UW management through squeezing the pay of housestaff, as described in the December article in the Seattle Times. In it the house staff said,
account for about one-fifth of King County’s doctors and they want
higher pay, new child-care benefits and free parking. Some UW residents
and fellows earn so little that they qualify for welfare programs like
Temporary Assistance for Needy Families and the Seattle City Light
Utility Discount Program, according to the UWHA [University of
Washington Housestaff Association.]
association has proposed that residents and fellows earn at least the
same salary as the UW’s lowest-paid physician assistants. Because the
doctors in training work very long hours, they sometimes earn less than
Seattle’s minimum hourly wage, the UWHA has said.
council members, in their letter to Cauce, called the situation
shocking. And based on information from the UWHA, they wrote that some
residents and fellows qualify for welfare programs like Temporary
Assistance for Needy Families (TANF).
articles noted that the UW housestaff may earn from just over $53,000 to
just under $70,000 a year. Keep in mind, however, that under current
rules, house staff may work up to 80 hours a week. So $53,000 for
someone working those hours translates into $13.25/ hour, under what many
people now claim is the living wage. That could be considered exploitation of workers with doctoral degrees working in often
highly stressful situations where lives may be on the line. Whether there were issues other than money (and
the respect it implies) involved at UW was not apparent based on the
minimal press coverage.
So it appeared that the hospitalist physicians working for PeaceHealth, and most likely the housestaff of the University of Washington were pushed to unionize to counteract the managerialism of their hospital leaders.
The Results of Unionization So Far
In my humble opinion, similar stories to those at the PeaceHealth hospital about managers pushing physicians to increase productivity and efficiency, seemingly with little regard for the effect that might have on patient care and physicians' professionalism can be found at many hospitals and health systems. Housestaff may be paid at little more than minimum wage rates at many training institutions. However, employed physicians have rarely effectively resisted up to now. Perhaps one reason is that at many institutions, each employed physician has his or her own contract, and may feel little power to negotiate his or her working conditions independently. Housestaff physicians obviously might feel they have even less leverage. But at PeaceHealth Sacred Heart, the physicians had other ideas:
Amid the groaning, a relatively new member of the group named Dr. David Schwartz observed, 'They can’t fire all of us — there are unions.' This was a bit of a stretch: While there are hospitals around the country whose doctors are unionized, there did not appear to be a union anywhere composed of a single group of specialists. But Dr. Schwartz, a barrel-chested man with close-cropped hair and a bushy beard who would not look out of place at a graduate English seminar, thought unionizing might be worth a try.
At the time, it was only one of several options the doctors considered. They talked of forming an independent hospitalists group, of forming an alliance with an outsourcing firm of their choosing. But the alternatives gradually fell away for a variety of practical reasons, and the doctors were growing increasingly bitter.
Dr. Littell developed a riff, which the other hospitalists appropriated, about how the situation was like having your spouse of several decades announce he or she was going to play the field. 'You’ve been great, you’ve always been there,' he would joke. 'I just heard there could be better spouses out there.' The kicker: 'The good news is, you’re in the running, too!'
Amazingly, the unionization at PeaceHealth Sacred Heart was at least partially successful,
By March 2015, the PeaceHealth leadership, whatever its interest in efficiency gains, was apparently not pleased that one of its hospitals had a white-collar labor insurrection on its hands. The company announced that it would not outsource the hospitalists, a move it later said was always a possibility. Mr. Hill, who declined to comment, left in May.
The union did defeat the outsourcing tactic. But otherwise results have not been so quick to appear,
Noting that the negotiations with the hospital administration have dragged on for roughly a year, Dr. Schwartz said, 'It’s pretty obvious that they don’t want to get a contract done.' He says the administration worries that if it essentially rewards the hospitalists with a contract, it encourages other hospital workers to unionize too.
The housestaff at UW used a slightly different set of tactics, but still managed to form a real union. Per the earlier Seattle Times article,
Established in 1964, the UWHA was mostly dormant during the 1980s and 1990s, according to the association’s website. It became active again starting in 1999. In 2013, members proposed making it a state-recognized collective-bargaining unit.
The UW petitioned the state Public Employment Relations Commissionto block the move, arguing that the residents and fellows were students paid stipends rather than employees paid salaries. But the commission sided with the residents and fellows, who last year voted to unionize.
The housestaff association has succeeded in negotiating. But as did the PeaceHealth doctors, they have not yet been able to secure their positions, per the later article.
University of Washington brass say they’re committed to providing the UW’s medical residents and fellows with decent compensation and benefits, but they insist the newly unionized doctors in training are asking too much in contract negotiations.
Talks have been stalled for some time but are set to resume this month with a mediator assigned by the state Public Employment Relations Commission.
The two sides 'remain far apart in the area of compensation,' Joyner wrote in his letter.
Parenthetically, unexplored in any of the press coverage is whether the parallels between what is going on at PeaceHealth and the University of Washington have to do with explicit ties between the organizations. In 2013, per Beckers' Hospital Review, the news broke that the two institutions signed a letter of intent to create a "strategic alliance." In 2014, an article in the Seattle Times noted the ongoing concerns of housestaff and students at UW that the alliance could be diminishing their educational opportunities.
In one sense, it is amazing that physicians are now starting to unionize as a response to the managerialism of their leaders. It was not all that long ago when the majority of physicians worked as solo practitioners or in small group practices, and fiercely defended their autonomy. The last thing they would have thought about was unionization. Since physicians were their own bosses, with whom could their unions have negotiated? In addition, in the US, independent physicians and physician practices could not legally unionize. Practices that discussed such issues as fees were liable to anti-trust prosecution. And with what bosses could they have conceivably negotiated.
Yet now physicians are increasingly corporate employees, hence corporate physicians. At the moment, unionizing may be one of the few effective tactics health care professionals can use to halt the march of managerialism/ generic management and partially relieve the plight of the corporate physician (and health care professional.) However, in the long run, as long as people who care more about money than about patients' and the public's health run health care, even unions will not be able to make that much progress, and not without adverse effects.
It would take true health care reform to address the larger problems with health care and society that is now leading to physicians unionizing. In my humble opinion, hospitals, health care systems, and other "provider organizations" should seek better patient care, not growth. Should they not voluntarily downsize (an almost comical idea in the current context), anti-trust enforcement, and probably new legislation would be needed to stop their pursuit of market dominance and return them to responsible community organizations. The now much smaller hospitals, and provider organizations should not be run for profit, and the commercial practice of medicine should again be illegal. Most physicians should go back to being private practitioners as individuals or within small groups. Leaders of hospitals and provider organizations should be accountable for putting patients' and the public's health first, upholding professional values, and should not expect to get rich doing so. But I dream on....
To lighten things up, if only a little, here is the YouTube video version of the full third album by the Mothers of Invention, led by the incomparable Frank Zappa, "We're Only In It for the Money."
I've written a number of posts on the Orwellian-named "Meaningful Use" experiment with electronic health records systems, imposed upon United States physicians by the Department of Health and Human Services through its Office of the National Coordinator for Health Information Technology (ONC).
In these posts and others I expressed significant skepticism about the 'Meaningful Use' scheme.
But what did I know? Our betters in government and academia knew far better how to seriously annoy physicians, make more burdensome (and hence more dangerous) the already onerous task of EHR use, and waste the tax money we hard-working Americans pay to an increasingly bloated bureaucracy that acts as if money grows on trees (the U.S. debt has doubled in recent years to almost $19 billion, see http://www.usdebtclock.org/).
Andy Slavitt, acting administrator of the Centers for Medicare & Medicaid Services, told investors attending the annual J.P. Morgan Healthcare Conference that CMS is pulling back from the health care IT incentive program in the coming months.
“The meaningful use program as it has existed will now be effectively over and replaced with something better,” Mr. Slavitt said. Without providing full details, he said that March 25 would be an important date as concerns the rollout of the new health IT initiatives.
The waste of resources and time, and the alienation of physicians by this grand(-ly foolish) experiment is significant:
“We have to get the hearts and minds of physicians back. I think we’ve lost them,” Mr. Slavitt said.
No foolin'. Ya think?
This was predictable by anyone with half a brain about healthcare information technology reality. (It's a real loss that hyper-enthusiast health IT geniuses responsible can't be fired and banned from the domain of healthcare - for life.)
Perhaps the officials at HHS got their first clue about clinician unhappiness via a long January 2015 letter from about 40 medical societies, including the AMA, American College of Physicians, American College of Surgeons, and numerous others that they did not exactly love these systems and the MU experiment. See my January 28, 2015 post "Meaningful Use not
so meaningful: Multiple medical specialty societies now go on record
about hazards of EHR misdirection, mismanagement and sloppy hospital
computing" at http://hcrenewal.blogspot.com/2015/01/meaningful-use-not-so-meaningul.html and the letter itself at http://mb.cision.com/Public/373/9710840/9053557230dbb768.pdf.
He noted that, when the meaningful use incentive program began, few physicians and practices used electronic health records and concerns were that many would not willingly embrace information technology. Now that “virtually everywhere care is delivered has a computer,” it’s time to make health care technology serve beneficiaries and the physicians who serve them, Mr. Slavitt said.
The revealing nature of this candid statement is breathtaking. He's admitting that 1) many physicians, rightfully reluctant to not "willingly embrace" IT, had the technology imposed upon them by government (due to its "concerns") via penalties for non-adopters and 2) with the systems in the physicians' faces at the cost of hundreds of billions of dollars that could have been better spent on healthcare itself (e.g., for those subject to 'disparities", i.e., the poor), now it's time to make the systems serve patients and physicians.
The cost, however, was too high, Mr. Slavitt said. “As any physician will tell you, physician burden and frustration levels are real. Programs that are designed to improve often distract. Done poorly, measures are divorced from how physicians practice and add to the cynicism that the people who build these programs just don’t get it.”
The 'cynicism' (def: inclination to believe that people are motivated purely by self-interest; skepticism) that the builders of these programs don't "get it?" It's not cynicism. It's a rational conclusion arrived at via empirical observation.
I also recall in the not-so-distant past that physician complaints were dismissed as the complaints of "Luddites." I've heard this at Informatics meetings, at medical meetings, at
commercial health IT meetings (e.g., Microsoft's Health Users Group, and
at HIMSS), at government meetings (e.g., GS1 healthcare), and others.
It's rewarding to finally have government officials admit those charges were, to be blunt about it, lies or delusions.
Soon, CMS will no longer reward health care providers for using technology, but will instead focus on patient outcomes through the merit-based incentive pay systems created by last year’s Medicare Access and CHIP Reauthorization Act (MACRA) legislation.
Perhaps that's a move in the right direction; time will tell. However, I'm sure physicians have GREAT confidence in how well that will work out, yet another government experimental project.
In addition to asking physicians to work with health care IT innovators to create systems that work best according to their practice’s respective needs, CMS is calling on the private sector to create apps and analytic tools that will keep data secure while fostering true and widespread interoperability.
This is in the realm of delusion. Physicians "asked" to "work with" (for free?) the same "innovators" (i.e, health IT companies) whose "innovation" led to the massive disaffection for today's health IT, and the burdens that technology has placed on the medical profession, nurses and other clinicians as well? Further, it's actually believed that the companies will listen, when they've failed to do so for several decades running? My head spins.
Anyone seeking to block data transfer will find CMS is not their friend. Mr. Slavitt said. “We’re deadly serious about interoperability. Technology companies that look for ways to practice data blocking in opposition to new regulations will find that it will not be tolerated.”
And who, exactly, is going to enforce that edict on proprietary systems, which health IT companies view (correctly, from the business perspective) as giving them a competitive edge? I'm sure the health IT companies, who now hold medicine captive, are shaking in their boots.
Dr. James L. Madara, CEO of the American Medical Association, echoed Mr. Slavitt’s comments on the current, negative impact of EHRs on physicians’ practices. He noted that many physicians are spending at least 2 hours each workday using their EHR and may click up to 4,000 times per 8-hour shift.
Dr. Madara outlined three AMA goals to help restore the physician-patient relationship. The first is to restructure the medical school curriculum, which he said essentially is the same as it has been for 100 years. New generations of physicians should be taught how to deliver collaborative care that includes telemedicine, more ambulatory care, and home care. Community-based partnerships, he said, would become key to treating chronic diseases like diabetes and would have to be factored into reimbursement models. The AMA also seeks to improve health outcomes and ensure thriving physician practices.
Central to the AMA’s plan for the future: Helping physicians restructure practice via technology. He announced that the AMA is a founding partner in the Silicon Valley (Calif.) based Health2047, a company focused on supporting health IT and other entrepreneurs in their efforts to provide physicians with digital tools that improve patient outcomes, among other innovations.
What is needed, as I have repeatedly written, is not to have physicians "restructure" practice to adopt to IT, rather to restructure IT (the systems themselves, the developmental methodologies, the backgrounds of the industry leadership, the industry itself) to match the needs of physicians and patients.
In the early 1950s, about 75% of US physicians were AMA
members. That percentage has steadily decreased over the years. In June,
at the annual meeting of its policy-making body, the House of
Delegates, the AMA announced that it lost another 12 000 members last
year. That brings total membership below 216 000. Up to a
third of those members don’t pay the full $420 annual dues, including
medical students and residents. Not counting those members, somewhere in
the neighbourhood of 15% of practising US doctors now belong to the
Hair-brained schemes to "restructure practice via technology" will likely drop those numbers further.
It is my hope the death of "meaningful use" heralds the death of the equally wasteful and ill-thought-out National Program for health IT in the HHS, a.k.a. HITECH, and a return to recognition of the truth: that health IT is experimental, that it (and its subjects) must be treated with that in mind, that its progress cannot be mandated, and that the technology, as any other IT, needs to be approached with great skepticism e.g. per this article:
Pessimism, Computer Failure, and Information
Systems Development in the Public Sector. (Public
Administration Review 67;5:917-929, Sept/Oct. 2007, Shaun Goldfinch, University of Otago,
New Zealand). Cautionary article on IT that should be read
by every healthcare executive documenting the widespread nature of IT
difficulties and failure, the lack of attention to the issues responsible, and
recommending much more critical attitudes towards IT. link
Slides from the workshop entitled Defense Against the Dark Arts - Understanding and Challenging Health Care Corruption given by Dr Roy Poses and Dr Wally Smith at the Physicians for a National Health Plan (PNHP) meeting, October, 2015, in Chicago, IL, US, are now online here. There also is a link to the slides on our Past Meetings and Events page.
Background: There is widespread agreement that the full potential of health information technology (health IT) has not yet been realized and of particular concern are the examples of unintended consequences of health IT that detract from the safety of health care or from the use of health IT itself. The goal of this project was to obtain additional information on these health IT-related problems, using a mixed methods (qualitative and quantitative) analysis of electronic health record-related harm in cases submitted to a large database of malpractice suits and claims.
Methods: Cases submitted to the CRICO claims database and coded during 2012 and 2013 were analyzed. A total of 248 cases (less than 1%) involving health IT were identified and coded using a proprietary taxonomy that identifies user- and system-related sociotechnical factors. Ambulatory care accounted for most of the cases (146 cases). Cases were most typically filed as a result of an error involving medications (31%), diagnosis (28%), or a complication of treatment (31%). More than 80% of cases involved moderate or severe harm, although lethal cases were less likely in cases from ambulatory settings. Etiologic factors spanned all of the sociotechnical dimensions, and many recurring patterns of error were identified.
Conclusions: Adverse events associated with health IT vulnerabilities can cause extensive harm and are encountered across the continuum of health care settings and sociotechnical factors. The recurring patterns provide valuable lessons that both practicing clinicians and health IT developers could use to reduce the risk of harm in the future.
Note the statement at pg. 5:
... The actual incidence of harm cannot be reliably estimated from this
data; nonetheless, it is generally agreed that safety events represented
in malpractice claims are the ‘tip of the iceberg', insofar as the vast
majority of cases, even cases that involve harm, do not result in
I've heard claims that up to 95% of potential meritorious medical malpractice suits never make it to the lawsuit stage due to difficulties in, and costs of, prosecution. Anecdotally, the latter observation corresponds to my own family's
experience; several attorneys would not take my mother's EHR-related
medical malpractice case initially, due to her age and concerns about
I note at my post today "Repeated crushing by alligators and crocodiles: ICD-10 has you covered. Harmed by bad health IT? No codes for that" at http://hcrenewal.blogspot.com/2016/01/repeated-crushing-by-alligators-and.html that repeated attacks and crushings by creatures of Order Crocodilia are well-covered by ICD-10, but health IT harms do not appear to be covered by the same mandatory coding system. My view is that this is likely by design, not due to lack of knowledge of these events by ICD-10 experts involved in creating this coding system.
... In the past two years, we [FDA] have received 260 reports of
HIT-related malfunctions with the potential for patient harm – including
44 reported injuries and 6 reported deaths. Because these reports are
purely voluntary, they may represent only the tip of the iceberg in
terms of the HIT-related problems that exist.
HIT Errors 'Tip of the Iceberg,' Says ECRI
Cheryl Clark, for HealthLeaders Media , April 5, 2013
Healthcare systems' transitions from paper records to electronic ones
are causing harm and in so many serious ways, providers are only now
beginning to understand the scope.
... Karen Zimmer, MD, medical director of the institute, says the
reports of so many types of errors and harm got the staff's attention in
part because the program captured so many serious errors within just a
nine-week project last spring. The volume of errors in the voluntary
reports was she says, "an awareness raiser."
"If we're seeing this much under a voluntary reporting program, we know
this is just the tip of the iceberg; we know these events are very much
Your government at work, spending your tax dollars and making your doctors want to retire early due to increasing bureaucratic busywork.
The new ICD-10 coding system they must now use has codes like these, in
case you get attacked by a crocodile or alligator.
It even has codes
for repeat crushing by the critters...
Notably missing: there are no codes
for harms caused by defective, mis-designed or badly implemented
electronic medical records/ordering/lab review systems, which are occurring as documented in numerous posts on this blog. (My mother would comment, but she is deceased from ICD-10 code ...uh, oh wait, no code for that...)
W58.01XA Bitten by alligator, initial encounter
W58.01XD Bitten by alligator, subsequent encounter
W58.01XS Bitten by alligator, sequela
W58.02XA Struck by alligator, initial encounter
W58.02XD Struck by alligator, subsequent encounter
W58.02XS Struck by alligator, sequela
W58.03XA Crushed by alligator, initial encounter
W58.03XD Crushed by alligator, subsequent encounter
W58.03XS Crushed by alligator, sequela
W58.09XA Other contact with alligator, initial encounter
W58.09XD Other contact with alligator, subsequent encounter
W58.09XS Other contact with alligator, sequela
Haven't searched ICD-10 for "abduction and experimentation by Roswell Greys" yet.
We have frequently posted about what we have called generic management, the manager's coup d'etat, and mission-hostile management.
Managerialism wraps these concepts up into a single package. The idea
is that all organizations, including health care organizations, ought to
be run people with generic management training and background, not
necessarily by people with specific backgrounds or training in the
organizations' areas of operation. Thus, for example, hospitals ought
to be run by MBAs, not doctors, nurses, or public health experts.
Furthermore, all organizations ought to be run according to the same
basic principles of business management. These principles in turn ought
to be based on current neoliberal dogma,
with the prime directive that short-term revenue is the primary goal.
One Explanation - Finance Leaders Ascendant on the Boards of Health Care Non-Profits
I just found a useful article that provides one explanation for the rise of managerialism in health care non-profit organizations. It postulated that the increasing prevalence of leaders of finance firms on the baords of trustees of such organizations led to increasingly managerialistic leadership.
Thanks to a link from Naked Capitalism to a post on ShadowProof that led to an article in the Stanford Social Innovation Review by Garry W Jenkins, entitled, "The Wall Street Takeover of Nonprofit Boards."
It described a study of the membership of the boards of 23 of "the
nation's leading private research universities," most of which have
medical schools and academic medical centers, and all of which have
major biomedical and/ or health care research operations, as well as
leading liberal arts colleges and large New York City non-profit
organizations, including a few hospitals. (We will restrict our
discussion of the quantitative results to the former group of leading
The most important result was that 40%
of trustees of the universities in 2014 "had a substantial professional
career in finance," up from 19% in 1989. Futhermore, in 2014, 56% of
university board leadership positions were held by people from finance,
up from 26% in 1989. The author noted that the prevalence of people
from the finance sector on university boards was far bigger than their
prevalence in the population. Only 6% of the private non-farm workforce
in the US was in finance in 2012.
The author summarized his findings:
the past twenty-five years the compostion of the boards at some of
America's most important nonprofit organizaI I has dramatically
changed. Without much notice, a legion of Wall Street executives
(investment bankers, hedge fund managers, and others) has taken a
growing number of seats in nonprofit boardrooms. Not only that, they
hold a disproportionate share of the leadership positions on these
He then linked the increasing dominance of
non-profit governance to the increasing tendency of these organizations
to be run like for-profit businesses, that is, the rise of
Scholars and practitioners have
documented various pressures placed on nonprofit organizations by donors
and private foundations to adopt business approaches.
some of the pressure to adopt business approaches has come from
external forces, it may also be true that the concepts and norms of
philanthrocapitalism are also now carried into nonprofit organizations
by the directors of public charities themselves.
He then provided a much more detailed discussion:
financiers come to dominate the boards of leading nonprofits, it is not
surprising that their approaches and priorities have made their way,
very explicitly and fundamentally, into the governance of the nonprofit
sector. Practices such as data-driven decision-making, an emphasis on
metrics, prioritizing impact and competition, managing with three- to
five-year horizons and plans, and advocating executive-style leadership
and compensation have all become an essential part of the nonprofit
Nonprofit leaders regularly hear about these
finance practices from board members and donors whose native habitat is
the financial services world. Moreover, nonprofit managers have come to
accept them as reasonable principles upon which donors base their
giving. More often than not, organizations are also expected to
incorporate these principles in the management of the not-for-profit
enterprises for which managers and boards share responsibility.
many of these business approaches may strengthen nonprofit capacity, we
should also be mindful of the ways in which these same tools can morph
into pathologies, ignore the costs or trade-offs associated with
extending business thinking to the charitable sector, or distort
organizational priorities. Numerous critics have written thoughtfully
about the ways in which market-based thinking and approaches applied to
the nonprofit sector provide false promise, with the potential to dilute
charitable values, undermine long-term mission focus, incentivize
small, incremental goals, and threaten shared governance and other forms
of participatory problem-solving.
Beyond leading to
the borrowing of financial concepts and tools in the boardroom, the rise
in the number of nonprofit directors with ties to finance may also
contribute to deeper changes in the underlying institutional values and
motivations, a trend that economic sociologists refer to as the
financialization of the nonprofit sector.
describes a spread of financial logics, influence, and strategies into
new fields and organizations in ways that transform the culture,
policies, and values of institutions. Indeed, wealthy nonprofits-like
colleges, universities, and museums-have long engaged with financial
markets as endowment investors, but the scope and scale of today's
nonprofit borrowing, aggressive debt financing, securitization
transactions, and complex real estate transactions is unprecedented.
Such shifts may affect the organization's strategic direction and
orientation in a number of ways, including directing board and
management attention to debt service, incentivizing organizations to
invest resources on activities that return higher profit margins to
cover debt service, elevating the centrality and importance of financial
managers in strategic planning and decision-making, and increasing the
need for and power of senior staff well versed in complex financial
The list of practices above and the description of financialization sound very much like standard operating procedures of generic management which we have previously described. The discussion of pathologies above sounds similar to our discussions of how managerialism distracts from or undermines the mission.
The one quibble I have with Jenkins' discussion is that it puts almost the entire onus on the financial leaders on the boards of trustees, rather than the top managers of the organizations. It may be that increasingly financialized boards hire increasingly generic managers, but there may be a symbiosis between the two groups.
So Jenkins' conclusion seems reasonable:
if boards are to operate as designed, and if they are to be maximally effective, then the composition of nonprofit boards must be more diverse and not dominated by financiers.
But the problem of financial sector domination of health care non-profit boards may be even worse than that Jenkins describes.
The Dark Side of Finance
Even though Mr Jenkins is concerned about excess of influence of too many financially oriented people on the boards of non-profits, he is quite respectful of those in the finance field. "Individual finance professionals do bring skills, wisdom, and other positive attributes to nonprofit boards." He also wrote, "This is not to say that finance professionals care less (or more) about a nonprofit organization or its mission. Nor do I believe that all finance professionals think alike." Many finance professionals may be very well-intentioned, of course. But Jenkins seems to thus ignore the dark side of finance's recent history.
Finance firms are certainly known for the use of "financial logics, influence and strategies," and the employment of specific practices. However, after 2008, they were also known for dangerously slipshod, if not unethical, sometimes corrupt management.
In 2008, the global financial collapse/ great recession reshaped the global economy, and has been linked to the stagnation of the middle class and growth of plutocracy. There have been numerous discussions of the role of the leadership of financial organizations in these events. The blog Naked Capitalism has been covering these issues from the global financial collapse to the current day. Some of the very many excellent sources on this era include the movie Inside Job,
A chapter in Predator Nation was entitled "Crime and Punishment: Banking and the Bubble as Criminal Enterprises. In it, Mr Ferguson noted the following list of
prosecutable crimes committed during the bubble, the crisis, and the aftermath period by financial services firms ...
Securities fraud (many forms)
Accounting fraud (many forms)
Honest services violations (mail fraud statute)
Perjury and making false statements to federal investigators
Sarbanes-Oxley violations (certifying false accounting statements)
RICO offences and criminal antitrust violations
Federal aid disclosure regulations (related to Federal Reserve loans)
Personal conduct offenses (many forms: drug use, tax evasion, etc)
Most of these never led to prosecution in an era of the revolving door and exceedingly lax law enforcement of actions by big corporations ("too big to jail") Yet Ferguson argued for investigation of possible illegal acts by many large companies, and specifically named Citigroup, AIG, Lehman Brothers, Goldman Sachs, JP Morgan Chase as worthy of investigation.
Many of these organizations' leaders also were on the boards of health care organizations. Since 2008, we began noting that the governance of prominent health care non-profits was often dominated by finance firms, including those implicated in the 2008 collapse, although our observations were case-based, not quantitative. The concern was not simply that health care organizations were being led into generic management and "managerialism," but that that the incompetence, unethical behavior, and corruption in the finance sector could cause equally bad problems in health care. We have no systematic proof of that, but consider some of our more colorful cases, which include leaders of the financial firms named by Mr Ferguson...
Hedge Fund U - Bernie Madoff, the supposed finance wizard who went to jail for a huge Ponzi scheme was on the board of Yeshiva University. The chairman of the board's finance committee was Ezra Merkin, a hedge fund operator who ran a "feeder" operation for Madoff's Ponzi scheme.
A "Very Well Paid Boob" on the Harvard Corporation? - the university's governing board included one of the architects of the overgrowth of Citigroup, which had to be bailed out, and also of the deregulation of finance which allowed the company to be too big to fail.
Yet outside of a few grumpy bloggers, the continuing presence of leaders of too big to fail, too big to jail, often bailed out financial firms on the boards of some of our most notable health care organizations and universities has attracted almost no comment, and less concern.
The continuing dysfunction of US health care, with ever rising costs, stagnant quality, and still inadequate access, is well known. There is constant loud argumentation over "Obamacare." (Congress just passed a repeal of it, which the president has threatened to veto.) Yet there is little in depth discussion or inquiry about what is really going wrong. The really unpleasant issues rarely surface in polite discussion. We have called this aversion to direct discussion of big problems the anechoic effect.
So I hope that there is more discusison of who gets to lead health care organizations, and who gets to sit on the boards that exercise stewarship over them. We need far more light shined on who runs the health care system, using what practices, to what ends, for the benefits of whom.
True health care reform would enable transparent, honest, accountable governance and leadership that puts patients' and the public's health over ideology, self-interest, and self-enrichment.