Wednesday, September 25, 2019

Private and Commercial Interests Raise More Dander, but Here's a Salve

What raises more of our dander in these pages than anything else? Recent posts, occasionally mine but especially those from FIRM's President and blogueur extraordinaire Roy Poses MD, suggest the answer's a no-brainer: shareholder-favored large-scale commercial interests in health care. Not even creeping disruption. Galloping. So much so, maybe the take-over's now complete and fold our tents. But wait. Turns out there's a sure "what if" in that statement, in a newly appeared book. I'll come to that in due course.

For those of us who pay attention enough to write about it, this blog's subject--worrisome departures from integrity and responsibility in medicine--has converged with the larger issues roiling American society at large, becoming one and the same. In recent years that convergence has become an increasingly persistent and central topic of private discussion for our bloggers.

Just look at two of the recent subjects on which Poses has focused. I'd written a bit about the demise of Hahnemann and fading of its owner Tenet a while back. Now Dr Poses has just gone back there to decry the use of that hospital's residency program as another commercial pawn in the institutional bankruptcy game. Why did a bankruptcy judge let this happen? Well, you can read the post, but essentially it was a variant on the too-big-to-fail argument, too much money at stake.

Whose money? Why, of course, private equity's, and for the hell of it let's add hedge funds'. Behind so many events in the private and especially the public sectors--add in K Street's and lobbyists' doleful effects--loom these investors who must at all costs be protected at everyone else's expense. No different than with rapacious banks a decade earlier: "when the music's playing, you have to get up and dance." (Chuck Prince, Citigroup.)

So throw the hapless young docs under the bus. (And a lot at Hahnemann are FMGs: so why not say the hell with them?!?) To see such young trainee physicians, USMGs as well as FMGs, all of whom uproot themselves and devote scores of extra hours weekly to obtain certification, on an auction block like enslaved bodies--this is a pitiful and egregious sight. Yet there's a certain ugly logic to it, which will only start to change when corporate actors in their planning start to consider more than investors. But wait again! That's maybe already started to happen! In a recent leader, in no less than that left wing (not) rag The Economist, an editorialist usefully and eloquently ponders "what companies are for."

The leader writer argues that companies need, and not out of altruism, "to adapt to society's changing preferences." A decline in firms' ethics and the inevitable counter-reaction combine to push for a major shift, which may in fact already be under way, away from interpreting the 19th century Anglo-French introduction of limited liability as license to privilege the investor above workers and other stake-holders. And who cares if this is premonitory self-cleansing? Health care needs such a readjustment, above almost every other sphere with the probable exception of the need for blunting climate change.

And meanwhile the private equity beat goes on: despite overwhelming support for a curb on "surprise medical billing," Dr. Poses reports still more recently, private equity hides behind white coats, who are either powerless, complicit, or both. Here the white coats are employed specialist groups, backed by corporate entities, opposing a more rational approach to the reimbursement of emergency costs. Radiology and emergency medicine are particularly susceptible to this sort of manipulation, and ought to be equally susceptible to rational planning. Those specialties, being quite remunerative, won't just empty out because someone came in and capped or arbitrated their charges.

Here the problem is a lot like pharmaceutical costs, where increasingly rationality flies out the window when the profit motive runs amok. In some ways PhRMA is in fact even more retrograde, with some notable (mostly non-US) exceptions, than ER staffing companies or for-profit hospitals. The sky's the limit both for price increases and the alibis (research!) used to justify them.

The Economist leader draws to a conclusion by citing bigness and lack of accountability as the real roots of these organizations' problems They point out that large scale and anti-competitive motives are exacerbated by the rise of the digital economy, and argue that effective government's needed to counter such trends and restore competition. Amen. (Or just read any major newspaper of late--same anticipatory kumbaya pronouncements from an awful corporate leadership.) Praise the Lord and pass the ammunition.

But another sort of amen, and a comparative international view of some of these challenges, recently came across my desk in a new book that may have escaped some in this blog's readership. After some late-60s and '70s studies at Harvard and Mount Sinai, physician and New York native Susan Levenstein moved to Rome. She's been there ever since and now emerges as today's most prominent, and probably most eloquent, expatriate practitioner. Levenstein seems to've stuck out her overseas gig for both personal and ideological reasons, admiring the equal-access and public-health features of the Italian health system.

In her book Dottoressa, a new memoir from the estimable publishing house Paul Dry Books, Levenstein spares no criticism of what she sees as that system's flaws, observed over more than four decades of practice in the Eternal City. (I furnish the first link above, Amazon's, for its several useful reviews.)  Replete with rich anecdote--some of her Roman clerics and college-abroad students will stick with me forever--Dottoressa gives us lots of information on what makes the Italian health system one this next wave of US health policy wonks ought to take a look at.

Not that Italy does it all right. The public system's chronically underfunded, she freely admits. (Indeed she was forced early on to shunt her own practice mostly to the private realm because of classic bureaucracy and nepotism.) But in key areas including urgent care (free) and access to medication (cheap), she points out how they get it right. She notes that National Health's attempts to claim some cause-and-effect between public access and the nation's vaunted longevity is rather suspect. She points instead to nutrition, ample time for relaxation and stress relief, and the social compact, as reasons for Italy's number-two (after France) rating for health in the EU.

I hope at some point to have a conversation with this author. But I haven't yet. So I'm not sure whether she'd consider it a direct extension, or something of an extrapolation from her arguments, to suggest the message of Dottoressa could be particularly useful to those engaging in current Democratic Party circular-firing-squad discussions around health care. Italy has a lot that's good about privately funded care. And in complementary fashion, it has a lot that's good about the public side. The key variables are--in a lot of ways like Switzerland--the universality of coverage and the availability of some robust government controls on key costs. Current US proposals to eliminate private insurance don't play in in either country, and the heterogeneity is seen by many as a net good.

Levenstein's new book is therefore a tonic for general readers. (I'll not dwell on the delicious speziatura of her personal story as a New York Jew serving patients in a Catholic country, not to mention tending to the embassy set.) But it should particularly be read by those among the policy army advising Democratic candidates on matters of health.

It's amazing to imagine a government, despite its own extreme dysfunction in so many realms, still managing to keep health care accessible. It helps that (to use one piccante example) an anal-pinworm medicine in Italy costs the patient what it actually costs to make--maybe a euro--with perhaps un po' of profit. Not the hundred-plus-fold multiplier to which some private equity investors leaned on the CEO to jack the US price.

At least in its northern half (many southerners choose to travel north to get what they perceive as optimal care), Italy, like Switzerland, does not suffer from more primitive care in its major referral centers. With provincial referral regionalization and a robust ambulance service (now fully equipped thanks to the EU and charity), one can observe extraordinary results despite the bilge that lobbyists in the US choose to disseminate about "socialized medicine."

This system, in its public hospitals, is vastly admired by the best and brightest of US physicians, including surgeons and cardiologists. Coronary patients were getting radial-artery catheterization routinely before we were. Emergency neurology and other specialized attending consultants in Italian public hospital ERs have rotated through the best services in the US and elsewhere in the world, including of course Italy itself.

Our public hospitals mostly withered on the vine a long time ago. So let's not go overboard criticizing an Italian one that's low on bathroom paper towels.

Why do these physicians, those who train partly abroad come back to Italy to live? They could stay in the US and make the big bucks. Well, some admittedly don't come back. But most do--and why? Go back and re-read the paragraph above that starts "not that Italy does it all right."

Bottom line: Italy does an awful lot right right now. It's likely to improve further with ongoing EU standardization.  In the US, right now, we don't do enough right. That's pretty scandalous, especially since today's Congress has so many physicians in it. But for sure, some of that lot seem to've forgotten their professional roots.

Sunday, September 22, 2019

Who Advocates For Surprise Medical Billing? - Private Equity Hides Behind Physicians' White Coats

Background: Mysterious Advocacy of Surprise Medical Bills

The issue of surprise medical bills has gotten a lot of public attention in the last year or so.  Surprise medical bills are consequences of the complex US system for financing health care through private, usually commercial insurance.  Insurance companies typically have networks of hospitals, physicians, health care facilities etc.  Patients who receive care from "in-network" physicians or facilities typically pay lower out of pocket costs, such as co-pays and deductibles.  Surprise bills are usually generated when a patient goes to an in-network facility, like a hospital, but then receives care from some out of network entity or person at the facility, and hence incurs higher out of pocket costs.  In the last year, the US congress has struggled with what to do about surprise bills, which have become notorious.

One odd aspect of this struggle has been the identity of advocates who oppose most proposed solutions for the problem, that is, who de facto appear to support surprise medical bills.  Some of these advocates appear to be physicians.  On one hand, as Axios reported briefly in October, 2018, there are those with obvious reasons to allow surprise billing to continue, such as emergency physicians.  The article noted

Two weeks after a handful of senators introduced legislation to curtail surprise medical bills, the American College of Emergency Physicians hired new lobbyists to handle the issue.

Axios further explained:

Emergency doctors obviously want their seat at the table, because they stand to lose a lot of money if their ability to do balance billing vanishes or becomes limited.

Of course, the new lobbying effort might make the emergency physician group look bad, since it seemed to be emphasizing its financial interests over those of patients, who have to pay the unexpected out of pocket charges:

At least the ACEP was somewhat open about what they were doing.

However, more recently, more mysterious advocates for surprise bills appeared.  For example, Bloomberg reported in August, 2019:

A shadowy group has spent more than $13 million since July advertising in states with vulnerable senators to oppose legislation that would rein in medical bills that take patients by surprise.

The campaign by a group calling itself Doctor Patient Unity, playing out on television, radio, and on social media in more than 20 states, is helping muddy the congressional debate over how to combat surprise medical bills and could make it harder to pass legislation this year, congressional aides familiar with the issue said in interviews, speaking on condition of anonymity.

The ad buys represent the most-expensive campaign on any health-related topic Congress has taken on this year, according to data from Advertising Analytics and Federal Communications Commission filings.

The name of the wealthy group buying advocacy advertising implies it represents doctors, but it was not clear who was really behind it.  Thus it appears to be our newest example of dark money in health care.

Who is ultimately paying for these ads is shrouded in secrecy. The television ads are known as 'issue ads' and therefore don’t require Federal Election Commission disclosure.

The ads are all being bought either by Del Cielo Media of Alexandria, Va., or its parent company, Smart Media Group, also of Alexandria, according to FCC filings. Both companies didn’t return repeated messages seeking comment.

Del Cielo has been linked to Republican campaigns. The group bought ads for political action committees opposing Democratic candidates such as Phil Bredesen, the former Tennessee governor who lost a Senate bid to Republican Marsha Blackburn in 2018, according to FCC filings. Del Cielo got more than $1.2 million from a political action committee favoring President Donald Trump, according to filings with the Federal Election Commission.

Doctor Patient Unity was formed as a corporation in Virginia by a limited liability company with the same address as the firm Holtzman Vogel Josefiak Torchinsky, according to state business filings. The law firm provides 'strategic counsel and compliance advice' to entities involved in political and policy affairs, according to its website.

Here on Health Care Renewal, we worry about threats to physicians' core values.  Physicians swear to make the care of individual patients their first responsibility.  Since caring for patients involves caring for whole patients, deliberately pushing for methods to subject patients to surprise bills which can  cause anxiety, financial instability, and probably discourage access to future care seems to be an example of physicians violating their core values.  Physicians who do so should be called out. However, at least it is possible to call out identifiable physician groups defending surprise billing.    When mystery groups with deep pockets do so, the threat may be harder to counter.   

The first step to address it would be to figure out who was behind Doctor Patient Unity. As usual, the key is to start by asking the question cui bono?  Who benefits?

Private Equity Firms Own Physician-Staffing Companies Which Benefit from Surprise Billing

The answer turns out to be private equity firms. On September 11, Kaiser Health News reported,

Often led by doctors with the veneer of noble concern for patients, physician-staffing firms — third-party companies that employ doctors and assign them out to health care facilities — have opposed efforts to limit the practice known as balance billing. They claim such bans would rob doctors of their leverage in negotiating, drive down their payments and push them out of insurance networks.


In the past eight years, in such fields as emergency medicine and anesthesia, investors have bought and now operate many large physician-staffing companies. And key to their highly profitable business strategy is to not participate in insurance networks, allowing them to send surprise bills and charge patients a price they set — with few limitations.

So it may not be that physicians in general support surprise bills.  Instead, it seems to be that some corporate physicians, that is, physicians employed by for-profit corporations, do so.  Moreover, these physicians are not employed by for-profit hospitals, but by physician-staffing companies, entities with which most patients, and even some physicians are likely to be unfamiliar.

Furthermore, these physician staffing firms are often owned by financial firms,

'We’ve started to realize it’s not us versus the hospitals or the doctors, it’s us versus the hedge funds,' said James Gelfand, senior vice president of health policy at ERIC, a group that represents large employers.

More precisely, it may be "us versus private equity."

The two largest staffing firms, EmCare and TeamHealth, together make up about 30% of the physician-staffing market.

That’s where private equity comes in. A private equity firm buys companies and passes on the profits they squeeze out of them to the firm’s investors. Private equity deals in health care have doubled in the past 10 years. TeamHealth is owned by Blackstone, a private equity firm. Envision and EmCare are owned by KKR, another private equity firm.

Private equity firms are focused on making as much money as possible in the short-term.  And they have no allegiance to physicians' core values.  In particular,

Research from 2017 shows that when EmCare entered a market, out-of-network billing rates went up between 81 and 90 percentage points. When TeamHealth began working with a hospital, its rates increased by 33 percentage points.


'These physician-staffing companies are benefiting tremendously from the ability to bill out-of-network,' said Zack Cooper, an associate professor of public health at Yale, who has studied physician-staffing firms and balance billing. 'It’s a small but profitable sliver of the health care system that these firms are using to make pretty significant amounts of money.'

Cooper said the business models are built on the ability to get profits from balance billing.

'Private equity firms are buying up physician practices that allow them to bill out-of-network, cloaking themselves in the halo that physicians generally receive and then actively watering down any legislation that would both protect patients but affect their bottom line,' Cooper said.

So while some physicians may financially benefit from surprise billings, employers of such physicians may benefit even more, and now private equity firms are positioned to benefit a lot.

Private Equity Firms Funding Stealth Advocacy Campaign for Surprise Billing with Dark Money

And the plot thickens.  Since private equity now seems to be the main beneficiary of surprise billing, it is no longer surprising that they have been running a stealth advocacy campaign to support it.

On September 13, the New York Times reported on who funds Doctor Patient Unity.

in late July, a mysterious group called Doctor Patient Unity showed up. It poured vast sums of money — now more than $28 million — into ads opposing the legislation, without disclosing its staff or its funders.

Trying to guess who was behind the ads became something of a parlor game in some Beltway circles.

Now, the mystery is solved. The two largest financial backers of Doctor Patient Unity are TeamHealth and Envision Healthcare, private-equity-backed companies that own physician practices and staff emergency rooms around the country, according to Greg Blair, a spokesman for the group.
It took some effort to discover this.

Like all so-called dark money political action groups, Doctor Patient Unity is not legally required to reveal the names of its supporters and, in fact, appears to have worked hard to obscure its identity.

The bread crumbs were scant. Filings by the group to the Federal Communications Commission for purposes of advertising listed the name of a treasurer who works for a firm that often fills such roles for Republican political groups. The group’s corporate filing in Virginia lists an agent who is common to more than 150 other political action groups. Neither the treasurer, the named partners in her firm, the advertising firm or the lawyer associated with the corporate entity responded to calls or emails. An email to the address on the group’s bare-bones website went unanswered for weeks until the group’s statement on Friday.

Representatives of both companies confirmed Friday that they had funded the group....

Note that Doctor Patient Unity has used a number of the social media tools often used for various propaganda  and disinformation.

Doctor Patient Unity has also spent hundreds of thousands of dollars on Facebook and Google advertising, and has been sending direct mail to voters in dozens of congressional districts. In some cases, the group describes the legislation as the 'first step toward socialists’ Medicare-for-all dream.'

And they clearly use the current language of ideological insults.

Whether any of the people behind Doctor Patient Unity were actually doctors, particularly doctors who were not full time employees of corporations owned by private equity, is unclear.  The examples of the ads run by Doctor Patient Unity in the NYT article did not seem informed by the viewpoint of health care professionals.

In one ad, an ambulance crew arrives with a patient, only to find the hospital dark and empty.


in heavy rotation in early August, featured a woman standing in front of a blank background urging voters to call their senators to stop a practice she calls "government rate setting." She warned the policy could affect patients’ access to doctors in an emergency.

However, anyone seeing the ads without knowing who was paying for them might assume that they represent the viewpoints of doctors in general.

By the way,  in an almost off-hand manner, the Kaiser Health News article adds a little explanation of how advocacy efforts around billing by one prominent medical society could be tied to private equity:

Even the groups that appear to represent independent doctors are tied to private equity and staffing firms. Out of the Middle consists of trade organizations for specialty doctors, like the American College of Emergency Physicians (ACEP) and the American Society of Anesthesiologists and many others. It’s mostly run by ACEP, whose immediate past president, Dr. Rebecca Parker, was also a senior vice president at Envision.

We thus see the latest version of a conflict of interest affecting the leadership of a medical society.


We have long been concerned about how health care has been increasingly commercialized, as hospitals and other "provider" organizations get bought out by for-profit corporations, and as physicians are increasingly employed by such corporations to provide care to individual patients, becoming corporate physicians.

Even more concerning is the intervention of private equity.  We first discussed the perils of private equity takeovers of hospitals here in 2010, and of physicians providing direct patient care as employees of corporations owned by private equity here in 2011.   The private equity business model seems particularly unsuitable for organizations which provide patient care, as we discussed in some detail in 2012.

For a quick modern summary of why it is bad to have private equity involved in direct patient care, see Merrill Goozner writing in Modern Healthcare, September 5, 2019,

The private equity business model in healthcare parallels other industries: Use highly leveraged private capital to roll up a number of small firms into one entity, with the private equity firm providing collective management. In addition to hefty fees for arranging the transaction (generally 1% to 2% of the purchase price), the private equity firm typically demands a 20% return on its investment after paying interest on the debt.

After three to seven years, assuming all goes well in achieving the promised efficiencies, the private equity firm and its junior partners (who are the specialty physicians in this latest wave of takeovers) earn a windfall by taking the company public or flipping it to another set of private equity investors. If things don’t work out as planned, the firm cuts its losses and declares bankruptcy (most of its capital will have been recouped through the 20% annual returns).

The management company has two paths to achieve its financial targets. It can either reduce costs sharply or look for ways to increase revenue.
Clearly the focus is not on the quality of the firm's products or services, and in this case, not on providing good quality, accessible, affordable patient care.  As Goozner stated,

Anyone who doubts private equity takeovers can financially harm patients and subvert cost control should take a closer look at the balance-billing fiasco. Most of the 'out of network' services that lead to large balance bills emanate from the nation’s emergency departments, which in many areas of the country have been taken over by private equity-owned firms.
So during my medical career we have gone from physicians practicing as individual professionals or in small professional groups, to physicians employed by non-profit organizations, to physicians employed by publicly traded for-profit corporations, to physicians employed by corporations owned by private equity.  Each new group of employers seems less likely than the last to uphold physicians' core values, and more likely to put short-term revenue ahead of patients, and ahead of good quality, affordable, accessible care.

Now private equity has upped the ante further by hiding behind its physician employees' white coats while promoting practices that increase revenue by harming patients.

We all need to look behind the spin, propaganda, and disinformation to learn cui bono, who benefits from our current dysfunctional health care system. Physicians in particular need to speak up for patients, and shrink from all efforts to use them as useful idiots in support of the plutocrats running the system.

Saturday, September 14, 2019

Broken Trust: the Adulteration of Ranitidine Revealed

Adulterated Ranitidine, and Before that, Valsartan, Irbesartan and Losartan

Another case of drug adulteration has just been made public.  Per the New York Times, Sept 13, 2019,

The Food and Drug Administration said on Friday that it had detected low levels of a cancer-causing contaminant in samples of heartburn medicines containing the drug commonly known as Zantac.

Zantac, the brand-name version of the drug, is sold by Sanofi, but generic versions [ranitidine] are widely sold. The F.D.A. has not identified any specific products that were affected.

The contaminant is one that has been seen before.

The contaminant, a type of nitrosamine called N-nitrosodimethylamine, or NDMA, is the same one that was found in some versions of valsartan, a blood-pressure drug carrying the brand name Diovan.

In the current case, its source is not yet apparent,

NDMA can form during manufacturing if the chemical reactions used to make the drug are not carefully controlled and monitored, the F.D.A. has said.

Jeremy Kahn, an agency spokesman, said Friday that the agency is still investigating contamination of the heartburn drugs, and that it is unclear how many companies’ products are affected and how the problem originated.

Based on the recent case of adulterated valsartan and other angiotensin receptor blocker (ARB) drugs, tt is likely that manufacturing of the drug, at least the "active pharmaceutical ingredient" in it, was outsourced.

The valsartan recalls have renewed questions about the safety of the American drug supply, particularly of generic drugs, composed of raw ingredients that are frequently manufactured in countries like China and where F.D.A. oversight has lagged.

Note that,

The source of the contaminated valsartan was a Chinese manufacturer, Zhejiang Huahai Pharmaceutical Company. Major Pharmaceuticals, Teva Pharmaceutical Industries and Solco Healthcare, which is owned by Huahai Pharmaceutical, sold it in the United States.

The same type of impurities were later found in two other blood-pressure drugs, irbesartan and losartan, in the same [ARB] class as valsartan. Two more nitrosamines — nitrosodiethylamine, or NDEA, and N-Nitroso-N-methyl-4-aminobutyric acid, or NMBA — were found in the drugs. Lists of the affected products are posted on the F.D.A. website. 

Furthermore, the FDA may not yet be on top of the problem with ranitidine:

The agency’s announcement came on the same day that an online pharmacy, Valisure, petitioned the F.D.A. to request a recall of all products containing ranitidine, because it said its own tests had revealed high levels of NDMA, above the F.D.A.’s acceptable daily limit. The Valisure petition speculated that the source of the NDMA was the result of the 'inherent instability' of the ranitidine molecule, which can degrade under certain conditions, such as when it is digested, to create NDMA.

'Our feeling is that this is extremely troublesome,' said David Light, the chief executive of Valisure, which is based in Connecticut. 'We took it off our formulary right away.'

21st Century Cases of Drug Adulteration

Moreover, we should have been warned that these cases were coming.  The cases of adulterated ranitidine and ARBs are not the first important cases of drug adulteration in the 21st century.  In 2008, we wrote aabout the case of toxic adulterated heparin from pigs in China.  We later summarized of that case was:

Baxter International imported the 'active pharmaceutical ingredient' (API) of heparin, that is, in plainer language, the drug itself, from China. That API was then sold, with some minor processing, as a Baxter International product with a Baxter International label. The drug came from a sketchy supply chain that Baxter did not directly supervise, apparently originating in small 'workshops' operating under primitive and unsanitary conditions without any meaningful inspection or supervision by the company, the Chinese government, or the FDA. The heparin proved to have been adulterated with over-sulfated chondroitin sulfate (OSCS), and many patients who received got seriously ill or died. While there have been investigations of how the adulteration adversely affected patients, to date, there have been no publicly reported investigations of how the OSCS got into the heparin, and who should have been responsible for overseeing the purity and safety of the product. Despite the facts that clearly patients died from receiving this adulterated drug, no individual has yet suffered any negative consequence for what amounted to poisoning of patients with a brand-name but adulterated pharmaceutical product.

In 2010, we noted a report by the U.S. China Economic and Security Review Commission on the perils of outsourced drug manufacturing in China.

In 2012 we documented the continuing problems with outsourcing of drug manufacturing.  We noted that at least 70-80% of the "active pharmaceutical ingredients" (APIs) that made up drugs sold in the US were actually manufactured overseas, the majority in China and India.  The regulation of manufacturing in these countries, particularly China, is extremely lax.  In China, APIs are considered chemicals, and the regulation of chemical manufacture is virtually non-existent.  There is evidence that the manufacturing processes in China, particularly at those companies that make the cheapest drugs, are sloppy or worse.  Furthermore, US pharmaceutical companies may buy drugs through brokers, further obscuring who actually made them.

In 2013, we discussed adulteration of  generic drugs made in India by Ranbaxy, a subsidiary of Daiichi Sankyo, and sold in the US.

Summary: Broken Trust

The latest cases of adulterated drugs sold in the US are disgraceful.  Patients ought to be assured that  the medications they take have not been adulterated.  Patients entrust pharmaceutical corporations to  supply pure drugs in the correct dosage.  The purpose of the first major US law to regulate drugs, the US Food and Drug Act of 1906, was to assure that drugs were pure and their dosage was accurate. The presence of adulterated drugs on pharmacy shelves is a major breach of trust, and shows a major failing of the involved pharmaceutical manufacturers and US drug regulation.

If anything, the NYT article understates the problem,

 'I think this is another good example of how our regulations need to change,' said Dinesh Thakur, a drug-safety advocate who exposed widespread quality problems as a former executive at the Indian drug maker Ranbaxy Laboratories. He said the F.D.A.’s testing is too lax. 'Things like this will never get caught, unless somebody is actually actively looking for stuff.'

Since 2008 we have had warnings that outsourced drugs may be dangerous, and that foreign and US regulation is insufficient. Yet, the warning have largely been anechoic and no major action has ensued.  Will the new cases make waves?    Will there be action this time?  Who knows?

For what it's worth, let me resurrect my thoughts from 2016:

In our rush to market fundamentalism, we seem to have deregulated, at least de facto, most aspects of health care.  We now cannot trust the drugs we take to have been made by the companies whose labels they bear, or to be pure.  We now cannot trust that regulators will find that out, or having found that out, will do anything about it in a timely manner. 

To repeatedly reiterate, as long as the leaders of health care organizations are not held accountable for the results of their decisions on health care quality, cost, and access (even in such extreme quality violations as those resulting in multiple patient deaths), we can expect continuing decisions that sacrifice quality, increase costs, and worsen access, but that are in the self-interest of the people making them.

To really reform health care, we must hold health care organizations and their leaders accountable (and not blame all the problems on doctors, other health care professionals, patients, and society at large).

Sunday, September 08, 2019

"Overshadowed by the Large Amount of Money in Play" - Sale of Hahnemann Residency Program as a Financial Asset Approved by Bankruptcy Judge

Introduction: the Bankruptcy of Hahnemann, the Selling of the Residency Program, Including Residents, as an Asset

As we discussed here, the storied Hahnemann University Medical Center was recently declared bankrupt by the private equity firm that bought it.  Staff were left jobless. Patients, including many who were vulnerable or chronically ill, were set adrift. Nearly 600 medical house-staff were set adrift.

The end of the medical center was a long time coming.  It had barely survived the previous bankruptcy of Allegheney Health Education and Research Foundation (AHERF), a nominally non-profit vertically integrated health system led by a charismatic, but ultimately criminal CEO (look here).  Hahnemann then became part of Tenet, a for-profit hospital system with a not always savory reputation (look here for a summary).  Tenet complained of Hahnemann's chronic deficits, although whether these losses were due to creative accounting is unknown.  Tenet eventually sold the hospital to a private equity group, Paladin Healthcare, and made it part of their American Academic Health System LLC. It took Paladin less than two years to decide that the hospital's continued losses were unsustainable and declare it bankrupt.  The rapidity of the hospital's collapse raised the suspicion among some that Paladin had never intended to continue operating the hospital, but bought it only so it could sell off its valuable underlying real estate assets (look here).

The Sale of the Residency Program as an Asset Approved by a Bankruptcy Judge

The fate of the hospital's physician trainees was then left up to a bankruptcy court.  The Paladin Healthcare plan was to auction off the residency program, apparently including its US government funding and its residents, as a financial asset (look here).  On September 5, the Philadelphia Inquirer  reported the results of that plan,

U.S. Bankruptcy Judge Kevin Gross on Thursday approved the sale of Hahnemann University Hospital’s medical residency programs to Thomas Jefferson University Hospitals Inc. for $55 million, a decision criticized as setting a dangerous legal precedent.

The decision was protested by the US government:

The federal regulator, the Centers for Medicare and Medicaid Services (CMS), considers the sale illegal and warned that the bankruptcy judge’s decision could result in residency slots at distressed hospitals being considered as valuable assets available for sale. Arguably, private equity owners could seize on the ruling as a way to increase the return on their investments.


U.S. Department of Justice Attorney Marc S. Sacks, who represented CMS, asked for a longer-term stay of the ruling, suggesting that Gross’ ruling could inspire struggling rural hospitals to sell resident slots to wealthier areas. 'This could open the door to that nationwide,' Sacks said. 'This is a serious, significant issue with nationwide implications.'

While some of the Hahnemann residents had protested that in some sense, they too were being sold as assets(look here), yet the Inquirer article stressed that was likely not the primary concern of the decision maker in this case

Gross, as a bankruptcy judge primarily concerned with making sure there is as much money as possible available to pay creditors, overruled Sacks, as he did repeatedly while going over details in the order Gross will issue allowing the sale to happen. Gross called the increase in the price for the residency program from an initial $7.5 million bid to $55 million 'a stunning success' for Hahnemann.

It was all about the money

In response to the judge's decision,

'We’re very disappointed to see Jefferson and an unelected bankruptcy judge finish what Joel Freedman started and shutter an important safety-net hospital,' said a spokesperson for the Pennsylvania Association of Staff Nurses and Allied Professionals, which represented 800 Hahnemann nurses. 'We hope the federal government will appeal to prevent this from establishing a truly dangerous precedent.'

The judge's decision may well be appealed by CMS.  Nevertheless, it seems that the Hahnemann residency program for years was tossed on the waves of a commercialized, financialized health care system, caught up in the financial manipulations of an empire-building CEO, sold to a commercial hospital chain, then to a private equity group, and finally sold again by the decisions of a bankruptcy judge whose biggest concern was the price.  Once again,

'It seems that the provision of quality patient care and quality of physician education is being over-shadowed by the large amount of money in play,' said Katharine Van Tassel, a visiting professor of law at Case Western Reserve University in Cleveland.

Summary: How Doctors Came Under the Rule of Money

We have frequently warned of the dangers of an increasingly commercialized health care system.  We noted how Dr Arnold Relman warned in 2007 of the threats arising from "the growing commercialization of the US health care system."(1) This has been abetted by physicians who accept "the view that medical practice is also in essence a business." Thus, "the vast amount of money in the US medical care system and the manifold opportunities for physicians to earn high incomes have made it almost impossible for many to function as true fiduciaries for patients."

Now "the large amount of money in play" seemingly has suceeded in turning one group of trainee physicians and their faculty into financial assets to be manipulated, like some sort of modern-day serfs.  Yet even in the face of such an outrage, the silence was deafening.  Where were the adults in the chambers of medicine?

Particularly quiet were leaders of some of the august organizations that are supposed to uphold the values of medicine and medical education.

A few did make statements sympathizing with the residents and offering them personal help, e.g., here by the AMA, and here by the ABIM.  Apparently, the American Association of Medical Colleges (AAMC) did dispatch "Lauren Macksound, a lawyer" to "advocate on behalf of the residents" in court  (per Bloomberg, July 22, 2019).

However, I could  find no evidence of any statement by such leaders deploring the larger situation, criticizing any of the responsible parties, or more importantly suggesting changes in law, regulation, policies or practices to address underlying causes.  In particular, I found no such statments by leaders of the American Medical Association (AMA), or the American Association of Medical Colleges (AAMC), or, representing my specialty, internal medicine, by leaders of the American Board of Medicine (ABIM), the American Board of Medical Specialties (ABMS), or the American College of Medicine (ACP), or the American College of Cardiology (ACC).

Then again, when AHERF went bankrupt, no major professional society or other group ostensibly devoted to patient welfare, health care education, or physicians' professional values made much of a fuss, much less pushed for new laws, regulations, policies or practices to prevent another such bankruptcy.

There may be many explanations for this silence.  One has to do with the march of neoliberalism, (or market fundamentalism) especially its dogma that:

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(2)

It appears that professional societies have been cowed by neoliberal economists and lawyers who launched campaigns starting in the 1970s to restore the power of huge corporations.  They seemed to take offense at the notion that professional notions of ethics could stand in the way of corporate economic power. So neoliberal economist (and architect of the Viet Nam War body count as a measure of battlefield success) Alain Enthoven advocating breaking up physicians "guilds" to decrease their ostensible economic power, and hand power over to business managers (look here).

Particularly important in the attack on professional self-regulation was an effort to turn anti-trust law on its head.  Writing in ProMarket, Sandeep Vaheesen explained

As conservative attacks on the New Deal gained traction starting in the mid-1970s, antitrust was an early target. Corporate executives resented how antitrust law and New Deal regulations in general restricted their freedom of action. For the corporate class seeking to overthrow these public rules, Robert Bork, a law professor at Yale, would be a savior. He had been concocting the theories by which corporations would overthrow the antitrust fetters of the postwar period.

Bork offered a radical reinterpretation of antitrust law. Inventing a legislative history out of whole cloth, he argued that Congress enacted the Sherman Act only to protect 'consumer welfare' and not to control the broader economic and political power of corporations. Further, based on hypotheses with little or no empirical support, he asserted that mergers and trade restraints allowed businesses to lower costs and improve services and thereby benefit consumers.

Bork did believe in one antitrust prohibition. He argued that collusion among rivals should be aggressively prosecuted. His conception of collusion swept broadly and did not differentiate, for example, between pharmaceutical companies conspiring to raise prices on prescription drugs and public defenders banding together to obtain a living wage.

In the 1970s and 1980s, corporate attorneys, citing and quoting Bork on behalf of their clients, found increasingly receptive audiences in the federal courts and agencies. The Supreme Court, starting in the Nixon years, and the Department of Justice and Federal Trade Commission, beginning with Reagan, were eager to read the theories of Bork into case law and policy. (In 1982, Reagan appointed Bork as a court of appeals judge and gave him the opportunity to directly rewrite antitrust doctrine.)

So, after a 1975 Supreme Court decision that held that learned professions (like medicine) were engaged in "trade or commerce," and hence were subject to anti-trust law, the American Medical Association abandoned its prohibition on commercial practice of medicine (look here).  Then, as discussed in Slate in 2009,

after Ronald Reagan became president, there was a paradigm shift. Where once government had sought to police the health care sector mainly to protect patients, now it sought to police it mainly to protect a competitive health care marketplace. A thriving health care bazaar, it was assumed, would serve patients’ interests.

And central to making the markets "competitive" was preventing professional organizations from upholding any standards of ethics, or principles meant to put patients ahead of market concerns.  

So now professional organizations and other non-profits supposedly devoted to patient care and medical education seem afraid to make any criticism of neoliberal or market fundamentalist dogma, those who espouse it, or the commercial firms that it enabled to run health care.

To prevent the next bankruptcy, and the next group of physicians to be sold off as assets, health care professionals will have to muster the courage to speak up against our gilded age masters.  Further, we will need to join other voices to renew the legacy of the trust busters, and disrupt the new gilded age before we all become serfs. 


1. Relman AS. Medical professionalism in a commercialized health care market. JAMA 2007; 298: 2668-2670. [link here]

 2.  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.