Some Dare Call It "Corruption" - the Massachusetts Blue Cross Blue Shield Golden Parachute Scandal Continues

We have discussed many cases of health care organizations' leaders reaping rewards disproportionate to any concept of their performance, and especially to any concept of the effect of their conduct on patients' or the public's health.  Most of these cases have been pretty anechoic, but for some reason, the case of the huge golden parachute given to the outgoing CEO of Massachusetts Blue Cross Blue Shield despite a tenure  marked by financial losses and no particularly brilliant advances in patients' care or outcomes, (see this post) continues to generate responses. 

One editorial suggested that should the non-profit health insurance company continue to pay so lavishly, it should lose its tax exemption.  Another noted that the company should start putting its stakeholders, defined as its policy-holders "first and its funding of overly generous compensation packages to board members and outgoing CEOs somewhere far below."  Finally, an editorial in the local Providence Journal used the "c" word, "corruption," to define the company's and its CEO's behavior.

So it should not be surprising that defenders of the company have appeared.  The Boston Globe published an article which featured attempts to minimize the importance of the CEO's golden parachute. Further analysis of the points are in order.

Executive Salaries are a Minimal Component of Cost

The article quoted an expert who asserted executive salaries are not themselves a big component of cost:

The outcry grew big enough to force Blue Cross board members to vote to suspend their own payments and to lead the insurer to make promises to curb excessive payouts to executives. There’s just one problem: Those steps will do little to fix soaring health care costs.

'I have the same outrage,' Stuart H. Altman, a national health policy professor at Brandeis University, said about Blue Cross’s payments. But, 'We need to put executive pay and board salaries in perspective. It is not the major force, or even close to the major force, in driving up health care costs.'

My comment is that just because administrative costs are not the largest component of health care costs does not mean they do not drive health care costs.

As I have argued before, the biggest problem created by excess compensation for health care organizations' leaders is not the amount of money they get, per se.  The problem is the effect of the perverse incentives created by the money.  One concern is that people paid that much may make decisions that support their pay in the short-term, but damage the organizations' mission in the long-term.  Another is that the sorts of people attracted by the possibility of big pay packages are those least likely to uphold the mission in the first place.  Another is that the huge disparity between the pay of the top leaders and of everybody else is demoralizing for the relatively poorly paid staff who actually must do the work.

Finally, it may be worth quoting the former President of Princeton University, just interviewed about what academic leadership was like in the days before giant pay packages:

I’m not a fan of huge salaries for presidents of academic institutions. These are hard jobs. But people don’t really do them for the money. What kind of message do you really want to convey concerning the nature of the institution and its leadership? I always thought that it was important to convey a message of we’re all in this together. If you as president earn so much more than everyone else, it’s hard to argue that we’re all in this together.

Focusing on Executive Compensation Distracts from the Real Issues

The final argument in the Boston Globe piece was that huge executive compensation just is a distraction from the real issues:

Yet [current Massachusetts Blue Cross Blue Shield CEO Andrew] Dreyfus said he is concerned that the focus on executive and director pay will distract insurers, providers, and policy makers from addressing factors driving health care costs higher. Those factors range from an aging population to increases in obesity to expensive tests, drugs, and treatments that cure diseases and prolong lives.

'If you had a dozen health economists sitting in this room and you asked them what’s driving health care [costs], you know executive and board compensation wouldn’t be at the top of the list,' he said. 'It would be chronic illness and prices of hospitals and doctors and medical advances and discoveries and technology.'

That list of the "real" drivers of health care costs sounds very familiar.

Wendell Potter's Deadly Spin, is an expose of how how insurance and managed care corporations' public relations departments used deception, propaganda, and outright disinformation campaigns to make sure health policy supported the companies' interests.

Potter wrote (p.110) about how PR campaigns were designed to distract the public and policy makers from the industry's responsibility for health care dysfunction:

Rather than admit responsibility for the failures, insurance executives pointed the finger of blame at their customers, the 'consumers' of health care, and, of course, the providers of care. In introducing the concept of their new silver bullet - consumer driven health care - insurance executives claimed that the 'real drivers of health care costs' (one of my CEO's favorite expressions) were the people who sought care when they really didn't need it and the doctors and hospitals who were all too willing to provide this unnecessary care. Sure, the aging population and expensive new technology were also factors, but the main culprits were people who just didn't realize how expensive health care had become.

I color coded the factors listed by the current Blue Cross CEO as the real "drivers" of health care using the same colors with which I coded Mr Potter's list the specific distractors created by insurance company executives to deflect attention from the companies' inability (and probable) disinclination to control costs.
So it appears that Andrew Dreyfus is working from the same playbook that Wendell Potter described, down to the "drivers of health care costs" terminology. 

Summary

The Massachusetts Blue Cross Blue Shield kerfuffle seems to be enlarging into a good case to teach about what health care dysfunction is really all about.  It shows how the leaders of large health care organizations seem to be putting their self-interest ahead of the missions they are supposed to uphold.  Without governance structures that hold them accountable for upholding these missions, they have set up perverse incentives to pay themselves very well regardless of the effects of their actions on patients' or the public's health. 

So it appears, as the Providence Journal editorial asserted, that the leadership of health care organizations is increasingly corrupt, at least using the Transparency International definition of corruption, abuse of entrusted power for private gain. 

True health care reform would make leaders of health care organizations accountable for upholding their missions, and for patients' and the public's health.  Leaders of health care organizations ought to get reasonable incentives for improving health, but not incentives so large as to demoralize the people who actually do the work and take care of the patients. 

Post Script: More Undisclosed Conflicts of Interest

It is obvious why Andrew Dreyfus, the new CEO of Massachusetts Blue Cross Blue Shield might quote the health insurance industry public relations party line about drivers of health care costs that conveniently do not include insurance company practices and executive compensation. 

It was not obvious when reading the Boston Globe article why Professor Altman might be susceptible to that party line.  Perhaps his conclusions were only based on his scholarship.

However, the Boston Globe article failed to disclose Prof Altman's part-time jobs.  As per this 2010 proxy statement, he is a member of the board of directors of Lincare, a company that provides respiratory care services, including disease management, and of Aveta Inc, a privately held health insurance company.  Prof Altman's total compensation from Lincare in 2009 (per the latest proxy statement available, i.e., that issued in 2010), was over $1.7 million.   Note that corporate directors, as we have discussed previously, have a fiduciary duty to exhibit "unyielding loyalty" to the stockholders of the company and their interests  [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.].  Given Prof Altman's membership in the board of directors of a health insurance company, and his towering compensation as a director of a health care company that may need to maintain good relationships with health care insurers, it would seem that he has multiple financial relationships that could lead to sympathy with the health insurance industry's public relations party line.

So it seems that regardless of the intent of the reporter who wrote it, the latest Boston Globe article about the Massachustts Blue Cross Blue Shield CEO golden parachute scandal ended up being an apologia for excess compensation of health care insurance executives that followed the script written years ago by health care insurance corporate public relations.

So I need to add another conclusion.  The discussion of health care policy needs to be informed by disclosure of the financial interests of those participating, particularly those participating as experts in the media.   True health care reform would lead to such disclosure.  However, in our currently dysfunctional health care environment, be very skeptical about the interests of "health policy experts" who seem eager to support the powers that be.

The Massachusetts Blue Cross Blue Shield CEO's Golden Parachute - "'Have's' Greasing One Another's Pockets"

We have frequently discussed the kind of compensation now frequently given to leaders of health care organizations.  Although often even the most disproportionately outrageous compensation only attracts transient interest, a recent regional story in this genre has really gotten legs.

How Big the Golden Parachute?
The story was about the severance package given to one Cleve L Killingsworth, the former CEO of not-for-profit health care insurance company Massachusetts Blue Cross Blue Shield.  While first reported as being worth $8.6 million,(1) the estimate of his total severance was soon raised to $11 million.(2)

This is a Way to Control Costs?

Immediately, that amount was contrasted with the supposed emphasis of the company on controlling costs, and its recent poor performance:

Killingsworth’s tenure at Blue Cross, which has nearly 3 million members, was marked by efforts to address skyrocketing medical costs by launching a 'global payment' pilot program, under which health care providers are given an annual budget and incentives to keep patients healthy and out of the hospital.

'Without Cleve’s leadership, we wouldn’t be where we are today in shifting from fee-for-service to global payments,' said senior vice president Jay McQuaide.

But the insurer stumbled financially in recent years, recording back-to-back operating losses totaling nearly $215 million in 2009 and 2010 as the economy weakened and state regulators acted to limit premium increases for policies covering small businesses and individuals.(3)

Then focus shifted to the company's board of trustees, which lead to recognition of some more striking contrasts. First, some prominent members of the board which approved the huge golden parachute had been vocal supporters of controlling health care costs:

Key members of the Blue Cross Blue Shield board that gave the nod to then-CEO Cleve Killingsworth’s controversial $11 million severance have been public advocates for trimming soaring health-care costs — even as they sat on a panel that quietly approved the departing chief’s golden parachute.

Greater Boston Chamber of Commerce President Paul Guzzi has crusaded to lower health-care costs in his day job representing the interests of local businesses, many of which struggle under the burden of rising premiums for their employee health plans.

'Advancing payment reform to bring health-care costs under control' is one of the Greater Boston Chamber of Commerce’s top policy agenda items, Guzzi said in a statement in January. Guzzi made $84,463 as the Blue Cross board chairman at the time of the Killingsworth vote.

Robert J. Haynes, president of the Massachusetts AFL-CIO who made $72,700 as a Blue Cross board member in 2010, has championed health-care cost reduction for the thousands of union members he represents.

'Unions stand ready to be part of the solution to the health-care cost crisis in which we all find ourselves,' Haynes said in an AFL-CIO statement in January. 'The only way to ensure we are part of the solution is to guarantee that we have a voice and meaningful role in how cost savings are achieved.'

Bentley University president Gloria Larson, who earned $76,400 as a Blue Cross board member last year, helped organize a confab of business, labor and political leaders in Ashland in January that addressed rising health-care costs. Those who planned to attend reportedly included two other Blue Cross board members — Haynes and former Suffolk District Attorney Ralph C. Martin II.(4)

Why Pay a Non-Profit's Trustees?

Also, as the quote above pointed out, it appears that the board members were themselves paid fairly well for a very part-time job, even though in general trustees of not-for-profit organizations serve as unpaid volunteers. However, it was soon revealed the paying board members is common practice for all Massachusetts non-profit health insurance companies.(5)

Some Blue Cross board members tried to defuse the issue by minimizing the impact of their pay on the organization's total budget:

Robert J. Haynes, president of the Massachusetts AFL-CIO and a critic of excessive corporate pay, was questioned about his role on the board following a State House news conference he held on a union-backed plan aimed at lowering health care costs. He said he would not give up his $72,000 annual payment from Blue Cross until the issue was reviewed by the company, and said the money given to board members does not play a role in rising health care costs.

'The cost of health insurance is not affected very much,' Haynes said. 'It’s about $1 million that board members get paid. On $13 billion in revenue, it’s like pennies a year.' (6)

What Should the New CEO Be Paid?
However, soon the board felt the need to suddenly stop paying itself.(7) The current Blue Cross CEO noted how little he would be paid:

Dreyfus emphasized that he has taken 'rock-bottom-of-the-market' compensation levels -- $800,000 in base pay with the opportunity for $1.6 million in severance – for comparable positions in the insurance industry.

'I will be one of the lowest paid Blue Cross executives in the country,' he said.... (8)

Things are tough all over.

What is Mr Killingsworth Now Up To?

Meanwhile, Mr Killingsworth seems to be weathering the storm. An enterprising reporter attempted to interview him in his house in New York, described as "a sprawling clapboard monstrosity with the charm of an assisted-living facility." However, "Mr Killingsworth was nowhere to be found," and Mrs Killingsworth "slammed the door" on the reporter.  (See picture in cited article.)  (9)

Possibly, Mr Killingworth was away tending his other responsibilities, which include serving on the Boards of Directors of The Traveler's Company and TIAA-CREF, and apparently despite their apparently competitive nature, on the boards of the Harvard Medical School and Boston University.

The Reaction

There were plenty of reactions, mostly vigorously unfavorable, to the contrast between the company's non-profit status, supposed commitment to reducing costs, and financial performance, on one hand, and the compensation given to executives, and board members:

"undermines the credibility of insurers when they say they're serious about bringing down the cost of care" Deidre Cummings, President of the Massachusetts Public Interest Research Group (3)

"If you lose $149 million and then you get paid $11 million for doing it, it is very clear to people where their health-care dollars are going.  And it is not to health care." - Ethan Rome, Health Care for America Now (2)

There were also judgments that health care had become the sandbox for wealthy and well-connected insiders, at the expense of everyone else:

"What we have here today is yet another enraging story of the 'haves'greasing one another's pockets while the 'have-nots' slip beneath the waves." Margery Egan, columnist for the Boston Herald(10)

"Therein lies the problem with boards.  They're supposed to provide oversight, but too often it's the same people tossing money at each other to serve on the boards of each other's companies, the operative word always being 'Yes!'" Brian McGrory, Boston Globe columnist (5)

Most pessimistically:

"If Massachusetts is the model, then national health care reform is ultimately doomed." Derrick Z Jackson, Boston Globe columnist (11)

I am actually now more optimistic.  The coverage of this story really shows that the anechoic effect may be fading .  There is starting to be frank discussion of the role of bad leadership of health care organizations as a cause of health care dysfunction.  If we start to admit these problems, maybe we can figure out solutions.

I will add just one opinion to those expressed in these articles.  The clear problem here is again perverse incentives.  The issue with how much this CEO was paid, and how his board members were paid was not mainly the diversion from direct health care of the funds involved.  Instead, the concerns ought to be: what sorts of people do these payments attract?  Are they the sorts of people who will uphold the organization's mission?  Once attracted, what sorts of incentives do the prospects of these payments supply for what sorts of decisions?  Do these sorts of incentives lead to decisions that uphold the mission in the long-term?

In this case, these concerns are underlined by the Blue Cross trustees' cavalier attitude to their own pay, and the new CEO's belief that $800,000 a year is "rock-bottom." 

I hope that the amount of discussion this case provoked might actually lead to some needed regional changes.

More globally, as we have said before, far too often the leaders of not-for-profit health care institutions seem more interested in padding their own bottom lines than upholding the institutions' missions. They often seem entirely unaware of their duty to put those missions ahead of their own self-interest. Like the financial services sector in the era of "greed is good," health care too often seems run by "insiders hijacking established institutions for their personal benefit." True health care reform would encourage leadership of health care who understand health care and care about its mission, rather than those who see a quick way to make a small fortune.

References


1.  Gil G. Former Blue Cross CEO got $8.6m last year.  Boston Globe, March 1, 2011. 
2. McConville C. Ex-Blue Cross CEO walks away with $11M. Boston Herald, March 2, 2011.
3. Weisman R. Blue Cross CEO got $8.6m in exit deal. Boston Globe, March 2, 2011.
4. McConville C, Chabot H. Trio publicly crusade against rising health costs: behind the shield. Boston Herald, March 3, 2011.
5. McGrory B. Such health pay, it's sick. Boston Globe, March 4, 2011.
6. Levenson M, Weisman R. 2 Blue Cross directors justify stipends. March 8, 2011.
7. Crimaldi L, Dwinnell J. Blue Cross board suspends pay, CEO perks cut. Boston Herald, March 8, 2011.
8. Cheney K. Amid outrage, Blue Cross chief fights to 'reclaim' company's standing. Enterprise News, March 10, 2011.
9. Gelzinis P. Cleve Killingsworth's New York castle not shielded from bad taste. Boston Herald, March 11, 2011.
10. Egan M. You call this health care? - it's nauseating.  Boston Herald, March 3, 2011.
11.  Jackson DZ. No wonder health costs are so high.  Boston Globe, March 5, 2011.

Bigotry Against the Obese by Leaders of Massachusetts General Hospital and Blue Cross and Blue Shield of Massachusetts?

I am amplifying a post by Roy Poses entitled "Why Pretend An Advertising Executive and Chamber of Commerce Leader Are Public Health Experts?".

In that post, Dr. Poses noted a lack of relevant professional credentials in executives making profoundly misinformed and indeed cruel statements about the obese:

Obesity as a public health problem has been the subject of considerable discussion. So that luminaries from the prestigious Partners Healthcare system and Massachusetts Blue Cross Blue Shield would weigh in on the issue at a public meeting should surprise no one. But see this report by the Boston Herald:

When asked about rising health-care costs, Jack Connors - chairman of the Partners chain, which includes Mass. General and Brigham and Women’s hospitals - said yesterday, 'Taking care of yourself starts at home.'

'What happened to individual responsibility?' Connors said at a Greater Boston Chamber of Commerce breakfast at the Westin Boston Waterfront. 'Why is obesity such an epidemic (when) we all know that a big part of being healthy is exercising and eating the right food?'

Blue Cross Blue Shield Chairman Paul Guzzi echoed Connors’ attitude yesterday.

'What is the responsibility of the individual?' said Guzzi, who as the chamber’s chief executive hosted Senate President Therese Murray’s speech on health care yesterday, despite his dual role as Blue Cross chairman.

Dr. Poses then went on to point out the lack of these executives' appropriate credentials to be making such statements.

In a Dec. 2009 post I'd addressed related issues:

Diversity Nightmare And Federal Antidiscrimination Laws: Cleveland Clinic CEO Delos M. Cosgrove Would Proudly Discriminate Against Fat People

The following stunning quote appeared in the Nov. 27, 2009 Newsweek article "The Hospital That Could Cure Health Care" about the Cleveland Clinic:

[Cleveland Clinic president and CEO Dr. Delos M. Cosgrove, a former cardiac surgeon] has even taken on the most intractable driver of American health-care costs: Americans. Having already banned the hiring of smokers (a dictate enforced by urine tests for nicotine), Cosgrove declared this year that if it weren't illegal under federal law, he would refuse to hire fat people as well. The resulting outcry led him to apologize for "hurtful" comments. But he has not backed down from his belief that obesity is a failure of willpower, which can be attacked by the same weapons used to combat smoking: public education, economic incentives, and sheer exhortation.

My thoughts come from the perspective of a former fitness-for-duty evaluator and drug testing officer (Medical Review Officer) for the regional transit authority in a very large city, and a hiring manager in the hospital and pharmaceutical sectors. I find a profoundly discriminatory statement that a hospital CEO would "refuse to hire fat people" if he could get away with it, and that he refuses to hire smokers and forces people (presumably candidates) to take a urine nicotine test, totalitarian and highly abhorrent.

The attitudes of these executives show a near-complete ignorance of this disease and its causes and treatment.

The attitudes also seem to show simple bigotry.

In Connors' case, his statements also show ignorance of his own hospital, Mass General.

From the website of the MGH Weight Center, realistic and compassionate attitudes about obesity:

Obesity, or excess body fat, is a serious medical problem now affecting one-third of all American adults and 20% of American children and adolescents. Even mild obesity increases a person's risk of having diabetes, heart disease, respiratory disorders, liver disease, arthritis, certain cancers, and other medical conditions. Overweight people have tried hundreds of ways to lose weight, from expensive commercial programs and risky drugs to unusual diets and exercise regimens.

"Recent discoveries about the genetic and physiological causes of obesity, along with the rapid development of pharmacological opportunities, have generated hope and excitement among patients and their families, their physicians and the scientific community. Massachusetts General Hospital has assembled the resources and outstanding professionals so that we can provide state-of-the-art treatment and work to find a cure for this challenging medical problem."

Lee M. Kaplan, MD, PhD Director

Overweight and obesity, like many other chronic medical problems, require specialized treatment. We believe that weight disorders must be treated by compassionate and knowledgeable professionals who take advantage of the latest scientific developments and tailor treatment to each patient's individual needs.

In that regard, I wrote Dr. Kaplan an email:

Sent: Wednesday, May 12, 2010 7:52 AM
To: kaplan@helix.mgh.harvard.edu
Cc: Miriam@cswd.org; Lynn@cswd.org; billfabrey@amplestuff.com

Re:  Bay State hospital and insurance heavies blames
fat-slob consumers for heath problems

Dear Dr. Kaplan,

I am a physician and advocate for the best healthcare, in my case through excellence in health IT. However, I am also an advocate for another cause - antidiscrimination against the obese.

As my colleague Roy Poses of Brown wrote at the blog of the Foundation for Integrity and Responsibility in Medicine, Heathcare Renewal:

Why Pretend An Advertising Executive and Chamber of Commerce Leader Are Public Health Experts?

Obesity as a public health problem has been the subject of considerable discussion. So that luminaries from the prestigious Partners Healthcare system and Massachusetts Blue Cross Blue Shield would weigh in on the issue at a public meeting should surprise no one. But see this report by the Boston Herald:

When asked about rising health-care costs, Jack Connors - chairman of the Partners chain, which includes Mass. General and Brigham and Women’s hospitals - said yesterday, 'Taking care of yourself starts at home.'

'What happened to individual responsibility?' Connors said at a Greater Boston Chamber of Commerce breakfast at the Westin Boston Waterfront. 'Why is obesity such an epidemic (when) we all know that a big part of being healthy is exercising and eating the right food?'

Blue Cross Blue Shield Chairman Paul Guzzi echoed Connors’ attitude yesterday.

'What is the responsibility of the individual?' said Guzzi, who as the chamber’s chief executive hosted Senate President Therese Murray’s speech on health care yesterday, despite his dual role as Blue Cross chairman.

It seems Connors and Guzzi are calling obese people irresponsible, in effect, lazy slobs. Roy also noted that both your Chairman Connors and Guzzi lack healthcare credentials and therefore any understanding of the causes and challenges of treating obesity.

I had addressed this issue in a Healthcare Renewal post of my own, in my Dec. 2009 post "Diversity Nightmare And Federal Antidiscrimination Laws: Cleveland Clinic CEO Delos M. Cosgrove Would Proudly Discriminate Against Fat People"

As a physician who has been up and down the scale myself, and discriminated against when on the heavy side, I am quite tired of such attitudes.

I note more realistic attitudes at http://www.weightcenter.org/ .

I believe a statement from you on this matter would be appropriate.

I am CC'ing this message to cswd.org and amplestuff.com, two groups with whom I communicated in the past.

It is a sad day indeed when the Chairman of one of the finest hospitals in the world, Massachusetts General, talks stupidly and discriminatorily out of the distal gastrointestinal orifice about how much people put in the proximal end of their GI tracts.

-- SS

Why Pretend An Advertising Executive and Chamber of Commerce Leader Are Public Health Experts?

Obesity as a public health problem has been the subject of considerable discussion.  So that luminaries from the prestigious Partners Healthcare system and Massachusetts Blue Cross Blue Shield would weigh in on the issue at a public meeting should surprise no one.  But see this report by the Boston Herald:

When asked about rising health-care costs, Jack Connors - chairman of the Partners chain, which includes Mass. General and Brigham and Women’s hospitals - said yesterday, 'Taking care of yourself starts at home.'

'What happened to individual responsibility?' Connors said at a Greater Boston Chamber of Commerce breakfast at the Westin Boston Waterfront. 'Why is obesity such an epidemic (when) we all know that a big part of being healthy is exercising and eating the right food?'

Blue Cross Blue Shield Chairman Paul Guzzi echoed Connors’ attitude yesterday.

'What is the responsibility of the individual?' said Guzzi, who as the chamber’s chief executive hosted Senate President Therese Murray’s speech on health care yesterday, despite his dual role as Blue Cross chairman.

Jack Connors is currently chair of the board of Partners Healthcare.  A quick biography is here:

John M. Connors, Jr., 67, Chairman Emeritus of Hill Holliday (formerly Hill, Holliday, Connors, Cosmopulos, Inc). (full service marketing and communications company) since 2006. Chairman of Hill, Holliday, Connors, Cosmopulos, Inc. from 1995 until 2006, during which time Mr. Connors also served as President and Chief Executive Officer until 2003. Mr. Connors was a founding partner of Hill, Holliday, Connors, Cosmopulos. Director of Covidien Ltd. Mr. Connors’ 40 years of business experience includes cofounding and developing one of the top advertising and marketing communications firms in the United States, advising many of the top branded companies in the world, and serving on the boards of dozens of entities, including public companies, private companies, hospitals and colleges. (Biographical Information as of 4/16/10)

Although Mr Connors did once run a medical education and communications company (see this post), he has no obvious direct experience or training in biology, epidemiology, public health, or medicine.

Similarly, here is biography of Paul Guzzi:

Paul Guzzi is president and chief executive officer of the Greater Boston Chamber of Commerce, one of the region’s leading business associations.

Mr. Guzzi brings extensive experience in both business and government to his work at the Chamber. A former Massachusetts secretary of state and chief secretary to the Governor, as well as a member of the management teams of two Fortune 500 companies; he is a leading advocate for economic development and job creation.

Prior to leading the Chamber, Mr. Guzzi was vice president of state and community affairs for Boston College. Previously, he was a consultant for Heidrick & Struggles, an international recruitment and consulting firm. Mr. Guzzi also served as a vice president at Data General Corporation and as a senior vice president at Wang Laboratories. During his tenure at Wang, he worked closely with Dr. An Wang to oversee the restoration and transformation of what is now the Wang Theatre.

Mr. Guzzi began his public service career as a state representative from Newton in 1970. He was elected Massachusetts secretary of state in 1974. Mr. Guzzi served as a chief of staff for Governor Edward King and chief administrator of the Board of Regents of Public Higher Education.

A graduate of Harvard University, Mr. Guzzi holds a Bachelor of Arts degree in government. He completed the Harvard Business School Management Development Program. He was also an officer in the U.S. Marine Corps Reserve.

Again, Mr Guzzi has no obvious training or experience in biology, epidemiology, public health, or medicine.

So maybe it should be no surprise that the Boston Herald article chronicled some skepticism about these worthies' public health pronouncements.

Calling the pair’s comments 'pure smoke blowing,' Boston University public health professor Alan Sager said, 'Sure individual responsibility matters, but the responsibility for efficient, affordable, high-quality health care for all Americans falls on everybody who works in health care.'

By the way,

Connors said a major reason for rising health-care costs is that a high percentage of people who leave the hospital are later readmitted, because they don’t follow their doctors’ directions. He owns a company, Dovetail Health, that makes money by helping elderly patients readjust to life after hospitalization, including staying on their medications.

Every week I get piles of notices of "healthcare" conferences at which most of the speakers are health care organizational executives with no obvious expertise or experience in actual health care, or in biology, epidemiology, public health or medicine. I think I dimly remember a time when most people who gave public remarks on health care actually knew something about health care, not just about making money (often personally in large amounts) from the health care "industry."

Note that while the Herald was able to find people who were skeptical about these health care leaders' remarks, there was no report that their audience (presumably made up mainly of business people) roared with laughter at their efforts to talk about controversial topics which they did not seem to really understand.

We need to ask why we have become so deferential to leaders of large (and and least heretofore prestigious) health care organizations that we treat them like true experts on biology, epidemiology, public health or medicine when they have no obvious expertise, or even knowledge in these areas?

Thanks to one of our anonymous scouts for a tip on this item.

A Health Care CEO Who Didn't Put His Own Pay First

We recently posted about executives at two different not-for-profit health care insurance companies/ managed care organizations whose pay seemed to keep levitating, despite organizational financial losses, and commented on how the compensation of top executives of health care organizations seems always to go up, regardless of the financial fortunes, or quality of the products or services provided by their organizations. (Posts here and here.)

Today's Boston Globe, however, provided a contrast. The background is that the Beth Israel Deaconess Medical Center (BIDMC), a renowned Harvard teaching institution, is facing a budget shortfall.

Paul Levy, the guy who runs Beth Israel Deaconess Medical Center, was standing in Sherman Auditorium the other day, before some of the very people to whom he might soon be sending pink slips.

In the days before the meeting, Levy had been walking around the hospital, noticing little things.

He stood at the nurses' stations, watching the transporters, the people who push the patients around in wheelchairs. He saw them talk to the patients, put them at ease, make them laugh. He saw that the people who push the wheelchairs were practicing medicine.

He noticed the same when he poked his head into the rooms and watched as the people who deliver the food chatted up the patients and their families.

He watched the people who polish the corridors, who strip the sheets, who empty the trash cans, and he realized that a lot of them are immigrants, many of them had second jobs, most of them were just scraping by.

And so Paul Levy had all this bouncing around his brain the other day when he stood in Sherman Auditorium.

He looked out into a sea of people and recognized faces: technicians, secretaries, administrators, therapists, nurses, the people who are the heart and soul of any hospital. People who knew that Beth Israel had hired about a quarter of its 8,000 staff over the last six years and that the chances that they could all keep their jobs and benefits in an economy in freefall ranged between slim and none.

'I want to run an idea by you that I think is important, and I'd like to get your reaction to it,' Levy began. 'I'd like to do what we can to protect the lower-wage earners - the transporters, the housekeepers, the food service people. A lot of these people work really hard, and I don't want to put an additional burden on them.'

'Now, if we protect these workers, it means the rest of us will have to make a bigger sacrifice,' he continued. 'It means that others will have to give up more of their salary or benefits.'

He had barely gotten the words out of his mouth when Sherman Auditorium erupted in applause. Thunderous, heartfelt, sustained applause.

The editorialist's conclusion was:

Paul Levy is trying something revolutionary, radical, maybe even impossible: He is trying to convince the people who work for him that the E in CEO can sometimes stand for empathy.

Note that Levy is one of the few health care CEOs who blogs, and he appears to write his blog on his own, unfettered by public relations flacks or risk-averse lawyers. His discussion of his revolutionary plan is here.

Further note the context in which he is working. While his medical center does not seem to receive particularly payments from insurance companies and managed care organizations, a previously secret agreement between the previous CEO of Partners Healthcare, another renowned, but competing Harvard-affiliated medical system and the previous CEO of Blue Cross and Blue Shield of Massachusetts, the state's biggest, and not-for-profit health care insurer/ managed care organization awarded much higher payments to that health care system (see posts here and here). And the current CEO of that Blue Cross and Blue Shield of Massachusetts just received (see this post) a substantial raise, enough to make him the best paid health care CEO in the state, while his organization's revenues and membership decreased.

This case shows it is possible for a health care CEO to put the organization's mission, and the welfare and morale of its hard working staff ahead of his own remuneration. If only this example were not so rare.

A $4.3 Million Dollar CEO for a Not-For-Profit Health Care Insurance Corporation

The US stock markets are at lows unseen for more than 10 years, unemployment is rising, around the world national deficits are increasing, and times are tough for ostensibly not-for-profit Blue Cross and Blue Shield of Massachusetts, the state's largest health care insurer/ managed care organization. Per the Boston Globe:

Blue Cross-Blue Shield's business was affected by the stock market decline, the recession, and the increasing cost of medical care.

Membership at the state's largest health plan declined about 40,000 to just over 3 million.

'The decline in membership had an impact on results,' said chief financial officer Allen Maltz. 'In addition, many of our customers changed their benefits plans to products that have much lower margins.'

Blue Cross-Blue Shield insures employees of national companies that have locations outside Massachusetts, Maltz said, and those customers accounted for some of the drop-off in membership.

Maltz said Blue Cross-Blue Shield aims for a profit margin of between 1.5 and 2 percent. Last year's margin was almost zero. The firm had operating income from its medical claims business of just $1.6 million.

A new state assessment on reserves lowered income by $21 million, Maltz said. Revenue was flat at $6.7 billion, and medical claims were also unchanged at $6 billion.

Like most health insurers, Blue Cross-Blue Shield also relies on investment income, which fell 28 percent to $111 million. Maltz said the firm managed to avoid losses in the market by investing primarily in bonds and avoiding derivative securities that have declined precipitously in value.

Well, things are tough all over. But they are apparently not so tough for Blue Cross Blue Shield's CEO:

The salary and bonus paid to Cleve L. Killingsworth, chairman and chief executive of Blue Cross and Blue Shield of Massachusetts, increased 26 percent last year, to $3.5 million, even though the health insurer's membership declined and its net income fell 49 percent.

Based on previous years' retirement benefits - which Blue Cross-Blue Shield did not report for 2008 - Killingsworth's total pay package was likely about $4.3 million, making him by far the highest paid healthcare executive in Massachusetts.

And what was the justification for Killingworth's stellar pay?

Salaries at Blue Cross-Blue Shield were inflated by a complex executive bonus plan in which senior officials get bonuses based on a rolling average of the previous three years.

'These executives and the company performed and exceeded our expectations,' said Jay McQuaide, a Blue Cross-Blue Shield spokesman. 'They earned these incentives.' The key metrics in the incentive plan are membership and net profit, he said.

The company's board of directors did not do badly either. Unlike most boards of not-for-profit corporations, this one was paid:

The insurer's board members also received a 33 percent increase in base pay, from $30,000 a year to $40,000. Most earn far more because of payments for attending meetings and serving on committees.

Finally, according to the Boston Herald, other executives did quite nicely too:

Bay State health insurance bosses continued to rake in multimillion-dollar compensation packages last year as the state and its taxpayers struggled to pay ever-increasing health-care costs.

Data filed yesterday with the state’s Division of Insurance shows that Blue Cross Blue Shield of Massachusetts, the state’s largest HMO, doled out million-dollar pay packages to five executives, while Harvard Pilgrim Health Care paid its two highest-ranking executives a total of $2.7 million.

Blue Cross’ top earner is Peter Meade, who retired last spring as executive vice president of corporate affairs. Meade took home $4 million, a sum that includes retirement benefits accrued during his 12 years at the HMO.

It's just amazing that with all their talk about "pay for performance," top executives of health care organizations seem to make huge sums year in and year out, regardless of their organization's performance. (As an aside, how could someone say that the company's pay for performance "main metrics" were membership and net profit, when both fell, yet the CEO's pay rose?)

There was a brilliant discussion of the culture that lead to this sad state of affairs in the Times (UK) by Minette Marrin. It was about British bankers, but it just as well could have been about American health care executives:

The filthy rich, as Peter Mandelson affectionately calls them, are different. It is not just that they’re rich but that there’s something about being extremely rich that blurs ordinary perspective in all but the most exceptional people. Power may corrupt, but extreme wealth blinds and deafens.

I first came across the filthy rich just after I was married and went to live in Hong Kong in the 1970s. Leaving poverty-stricken Britain, my husband and I joined a gold rush of bankers and brokers to what was then still a crown colony. What we saw was wealth and conspicuous consumption beyond the wildest dreams of avarice.

Though we weren’t extremely highly paid, we spent a lot of time with people who were. Some were entrepreneurs and others were employees of banks and trading houses that, as today, offered them ways of making megabucks. Soon it became obvious that being very rich is like catching an insidious virus. Some people are able to resist it, but with most people the super-riches virus burrows into your nervous system for life. It blurs your perspective, weakens your grasp on reality and changes your identity into someone who is entitled to be very rich.

Ms Marrin's description of "plutocratic blindness" seems to apply to a CEO of a so-called not-for-profit organization who could claim more than $4 million in a year in which the global economy collapsed, and his own organization did rather badly by any financial measure.

This passage by Ms Marrin seems applicable to the Blue Cross Blue Shield Board who approved this disproportionate pay package:

But I do know things are done quite differently on the parallel planet inhabited by the filthy rich. Remuneration boards unselfconsciously award each other astonishing packages, wrapped up in euphemism.

The lack of selfconsciousness in this case may have been driven by the board's familiarity with how things used to be done in the American financial sector. A quarter of the board's members are leaders in that sector (see post here).

Let me close with Ms Marrin's suggested solution:

The filthy rich culture that has developed in the past 20 years is sick. It needs strong medicine, fresh air, open windows. Above all, what’s needed is a cold dose of fear – fear of failing, of being sacked and of losing the lovely money. Here is an excellent antidote to greed.

"A Level of Self-Interest Here That is Unusual"

We recently posted about the seeming inability of US managed care organizations to effectively bargain down the prices of drugs. Although the whole point of basing health care funding on managed care was to control costs, managed care has not been very successful in keeping down the costs of drugs, devices, or hospitalization. The health care research literature has provided few explanations of these failings.

The Boston Globe reported on an "unusual alignment of forces," as one friend used to say, in the regional health care scene that may help explain this phenomenon.

In a scene right out of the days of the Vault, the secretive group of Boston business executives that for decades influenced public policy, Jack Connors, chairman of Partners HealthCare, convened a March 1 meeting of local powerbrokers to deal with a crisis in the healthcare industry.

Sweeping legislation to expand health coverage and set aside hundreds of millions of dollars in new payments for Massachusetts hospitals appeared near death, a casualty of conflicting agendas and egos on Beacon Hill. It was up to these business leaders to forge a compromise.

"There were a number of us in the business community and in the healthcare field who wanted to be sure that we didn't miss this opportunity," said Peter Meade, executive vice president of Blue Cross and Blue Shield of Massachusetts, and one of the select few invited to the meeting at Connors's advertising agency, Hill Holliday.

''This reflects the transformation of Boston's economy. The biggest players are not the banks and insurance companies, but the hospitals," said Jeffrey M. Berry, a professor of political science at Tufts University.

Business groups say the healthcare executives' intervention in the bill was not a one-time show of muscle. The industry is deeply embedded in the state's economic structure and its political influence probably will continue, they said.

Formally called the Coordinating Committee, the Vault, which disbanded in 1997, consisted of 25 powerful executives who operated in secret and developed a policy agenda for the business community. It first met in a basement vault of Boston Safe Deposit & Trust Co.

But the healthcare power brokers differ from the Vault executives in important ways, Berry said. First, they represent enormous nonprofit institutions instead of for-profit companies. Second, he said, their focus in this case was on complex legislation to benefit their industry -- not on charting broader overall growth and employment strategies.

"There was a level of self-interest here that is unusual in Massachusetts politics," Berry said.

Partners and Blue Cross executives denied their interest in healthcare legislation was motivated exclusively by business concerns. They said they have for years urged expanded access to healthcare through universal insurance coverage.

To make their case, Partners and Blue Cross together spent $850,000 on lobbying and advocacy advertising in 2005. Leading the squad of lobbyists for Partners and Blue Cross is John R. Sasso, who was chief of staff in the administration of governor Michael S. Dukakis. The $109,200 in fees paid last year to Sasso's firm, Advanced Strategies, were split down the middle by the two nonprofits, according to state disclosure reports.

Business groups that were not in on the deal had mixed reactions. For instance, the Massachusetts High Technology Council accused healthcare executives of cutting a deal to enhance their own revenues.

"It appears that the motivation, for certain segments of the healthcare industry, was all about increasing reimbursement," said Christopher Anderson, the council's president.

The US now depends on the managed care model to control health care costs. Managed care is expected to control costs by limiting utilization of services, and the prices paid for particular goods and services. Doing so effectively requires that managed care organizations stay at arm's length from providers and supplies.

Many physicians will attest that their relationships with managed care organizations are certainly at arm's length, if not downright hostile.

Yet this article documents a very cozy relationship between one state's dominant not-for-profit insurer and managed care organization, and its largest and most powerful hospital system.

So how likely is it that Blue Cross will really pressure Partners to reduce utilization or prices?

And if these two organizations are so comfortable, what other organizations that our pseudo-competitive health care system expects to be at arm's length are actually much cozier with each other? Once again, inquiring minds want to know.

Another Multi-Million Dollar Managed Care CEO to Retire

It seems that whenever the CEO of a large health care organization is about to step down, the news media opens a tiny, but revealing window into how such organizations work.
The Boston Globe reports on the impending retirement of Blue Cross of Massachusetts CEO William C. Van Faasen. The interesting parts are that Van Faasen's qualifications to be CEO were an MBA degree from Michigan State. His "hand-picked" successor, Cleve L. Killingsworth, at least has a MPH from Yale. It is not clear, however, whether he ever directly worked in health care. His previous position was CEO of the Health Alliance Plan in Detroit.
The article also revealed Van Faasen's current compensation, most recently a cool $2.4 million a year, "making him by far the highest paid chief executive of any of the state's major health insurers." (Recall that the CEO of Harvard Pilgrim only makes a paltry $1 million a year, as we mentioned earlier.)
It's funny that with all the concerns about the rising costs of health care, few question whether managed care CEOs with little health care background and million dollar plus salaries are the best qualified people to figure out how to control health care costs without further impacting quality and access.

BC/BS employs non-credentialable person to do their credentials

I couldn't invent a better story.

BC/BS of Mass,( and many other health plans across the country) use a credentialing service for radiologists called: Radiology Management Sciences, LLC. Finding them is difficult as they operate in stealth mode, but the are apparently located in Menlo Park, Calif.

They are ? owned by, and certainly run by, one Stephen Bloch, MD.

Bloch has his bio on the net on the website of his venture capital firm, www.canaan.com/team_bloch.html . Bloch is listed as someone who "was a practicing radiologist".

Going to the website of the Mass Medical Board, one finds from his profile that Dr. Bloch is NOT board certified in radiology. It is odd that someone would complete the Mass General program in radiology and not get boarded, isn't it? Maybe he didn't finish? I don't know.

I phoned Dr. Bloch, after he signed a letter of denial for credentials for radiology for my office (we employ boarded radiologists to read our films, but BC/BS wants me to apply for credentials, which they won't grant since I'm an internist). I caught him in his Connecticut VC office, busily doing VC work. Guess what, Bloch never read my letter of appeal from their rigid rules. We have quality films, done in a state-licensed facility, done by licensed techs, and read by boarded radiologists. The issue was how to bill for this service without making the patients jump through hoops. Bloch didn't even see my letter, yet he sent a letter to me denying my appeal.

Another gem I gleaned from Bloch's bio is that the he founded TeleRad, a teleradiology services company.

I guess that means he might compete with those he credentials (or doesn't).

I suppose one might conclude that he might have a bit of a conflict of interest.

Bloch and Co. wrote a paper in Radiology in 1999 where they indicated that they save 2% of total radiology costs by denying credentials to some people. They claim this is all for quality, but don't show how quality was affected by their denial. Thus, the health plans must like Dr. Bloch, and Dr. Bloch noted in his paper that the cost of his program is only 20% or so of the savings. Thus, the health plans save 1.8% on radiology costs by employing him. Measured across all the radiology expenses this is a large number.

I'm all for quality measures and ensuring quality. But should it be on the backs of doctors like me who are trying to do the right thing, but just don't fit the box BC/BS wants to keep us in.

Last time I checked we still had free speech in this country. If anything I've written is not factual I will be happy to correct it upon presentation of evidence that I am incorrect.

These are the opinions of:

Robert S. Baratz, MD, PhD, DDS