EHR recall: Use of this affected product may cause serious adverse health consequences, including death

Here is another example of a grossly defective health IT product, this from last year but only posted by FDA publicly on 3/14/2014 at http://www.fda.gov/Safety/MedWatch/SafetyInformation/SafetyAlertsforHumanMedicalProducts/ucm389356.htm:

"There was an occurrence where the patient case data did not match the patient data when the case was recalled in the Anesthesia Care Record (ACR) in that it included data from another case. Use of this affected product may cause serious adverse health consequences, including death."

One wonders why problems like this are found in the field when real patients are involved, not in the testing lab...could it have to do with lack of regulatory oversight?

Other examples of recalled bad health IT that I know of, including FDA-initiated recalls, are here:  http://hcrenewal.blogspot.com/2012/07/health-it-fda-recall-philips-xcelera.html, http://hcrenewal.blogspot.com/2011/12/fda-recalls-health-it-software-because.html , http://hcrenewal.blogspot.com/2013/08/a-good-way-to-cynernetically-harm-or.html.

Also note the FDA advisory:  Health care professionals and consumers may report adverse reactions or quality problems they experienced using these products to MedWatch: The FDA Safety Information and Adverse Event Reporting Program either online, by regular mail or by FAX:

http://www.fda.gov/MedicalDevices/Safety/ListofRecalls/ucm389328.htm 

McKesson Technologies, McKesson Anesthesia Care – Patient Case Data May Not Match Patient Data

Recall Class: Class I 

Date Recall Initiated: March 15, 2013 

Product: McKesson Anesthesia Care 

Use: The device is a computer-based system which collects, processes, and records data both through manual entry and from monitors which are attached to patients, such as in an operating room environment. The system provides clinical decision support by communicating potential adverse drug event alerts proactively during the pre-anesthesia evaluation and at the point-of-care. The system is generally indicated in the anesthetizing environment when the anesthesia provider decides to perform a patient assessment, to generate a paper and/or electronic record of the administration of anesthesia to a patient, and to document care. 

Recalling Firm:
McKesson Technologies, Inc.
5995 Windward Parkway
Alpharetta, Georgia 30005 

Reason for Recall: There was an occurrence where the patient case data did not match the patient data when the case was recalled in the Anesthesia Care Record (ACR) in that it included data from another case. Use of this affected product may cause serious adverse health consequences, including death.

Public Contact: Customers with questions may contact McKesson Customer Support at 1-800-442-6767 (option 3). For questions regarding this recall, call 404-338-3556. 

FDA District: Atlanta District Office 

FDA Comments:
On March 15, 2013, the firm initiated a Clinical Alert which was distributed to potentially affected customers. Phone calls were placed to each customer, followed up by an email. The firm provided their customers with written copies of the communication and Clinical Alert; and obtained acknowledgement that they read and understood the issue and preventive action to take.

Customers with questions were instructed to contact McKesson Customer Support at 1-800-442-6767 (option 3). For questions regarding this recall, call 404-338-3556.

Class I recalls are the most serious type of recall and involve situations in which there is a reasonable probability that use of these products will cause serious adverse health consequences or death. 

Health care professionals and consumers may report adverse reactions or quality problems they experienced using these products to MedWatch: The FDA Safety Information and Adverse Event Reporting Program either online, by regular mail or by FAX.

I encourage clinicians to take advantage of MedWatch with regard to bad health IT, anonymously if necessary to avoid internal repercussions or retaliation from executives who've spent hundreds of millions of dollars on the IT, and whose bonuses and promotions might be tied into its "success."

-- SS

The 2011 Best Paid US CEO's Company's Latest Legal Settlement

Yet another legal settlement illustrates the contrast between rewards given to the hired managers of large health organizations and their organizations' performance. 

The New Settlement

The legal settlement in question was simple, as reported by Reuters,

McKesson Corp, one of top U.S. drug wholesalers, has agreed to pay more than $190 million to settle claims that it had violated the federal False Claims Act by reporting inflated pricing information for many prescription drugs, causing Medicaid to overpay for them.

The settlement was announced Thursday by U.S. Attorney Paul Fishman in New Jersey.

According to the government, McKesson reported inflated pricing data to First DataBank, a publisher of drug prices that most state Medicaid programs use to set payment rates for pharmaceutical products.

The government accused McKesson of marking up prices on a variety of drugs by 25 percent between Aug. 1, 2001, and March 31, 2005.

It said McKesson's conduct had caused the United States and individual states to pay inflated reimbursements on Medicaid claims submitted between Aug. 1, 2001 and Dec. 31, 2009.

'We have no tolerance for those who take advantage of that system to bring in more business by falsely increasing reimbursements to retailers,' Fishman said in a statement.

As is typical, the company denied doing anything wrong:

McKesson was not immediately available to comment.

According to settlement papers, McKesson 'expressly denies' the government's charges, as well as those of a whistleblower, David Morgan, in a related civil lawsuit filed in New Jersey federal court. The San Francisco-based company did not admit liability or wrongdoing in agreeing to settle.

It was hardly McKesson's first ethical problem.

McKesson's Track Record

This is just the latest in a long series of legal problems for this company.

The Depression-Era Scandal

Way back in 1938, there was the McKesson & Robbins scandal, one of the major scandals of the depression era. The company had been taken over by one Philip Musica, an accused bootlegger, who committed suicide before a trial (see this post).

In this century, there were:

The Securities Fraud Case

As we posted in 2009, five former executives pleaded guilty, the former CEO and Chairman Charles McCall was convicted of fraud in 2009. The company settled investor lawsuits in 2005 for $960 million.

The First Pharmaceutical Pricing Case

As the Wall Street Journal reported in 2009,

McKesson Corp., a giant drug-wholesale and -distribution company, agreed to pay $350 million to settle cases in which it was accused of helping to increase drug prices in 2001 and 2002. The money will go to health plans that pay for drugs and consumers who paid co-pays for their medicines.

The San Francisco-based company said the settlement, which is subject to court approval, includes 'an express denial of liability of any kind' but that it decided to settle the cases to avoid the uncertainty of litigation

In addition, as we noted here, the company settled with the state of Connecticut for "illegal and deceptive" pricing practices for a mere $15 million.

These settlements appear to be precursors of the just announced one.

The Propofolol Punitive Damages

As we noted here, McKesson was one of three companies to collectively pay $162 million in punitive damages in a case involving allegations that the companies sold propofolol, an injectable anesthetic, in reusable containers that were susceptible to contamination with the hepatitis C virus.

The Best-Paid CEO in America

All these legal issues notwithstanding, late in 2011, McKesson leadership made headlines for a different reason. Based on one method of computation, the company's CEO was the best-paid of an exceedingly well-paid 2011 CEO class. An article in the Daily Beast noted:

John Hammergren, [is] the CEO of the McKesson Corp., a giant medical-supply company in California. Hammergren is the $145 million man, top dog on the latest listing of the country’s highest-paid chief executives.

The details of the compensation package included,

Yet last year McKesson contributed more than $13 million just to Hammergren’s pension, according to company documents. Among the other perks he enjoys: a chauffeur to drive his company car, free use of the corporate jet for personal travel, and an extra $17,000 a year to pay for a financial planner because handling all those hundreds of millions is no doubt complicated stuff.

Also,

Then there are the assorted perks he gets each year at an annual cost of $1 million or so. Choose the perk that makes you the most jealous. Maybe it’s this line found in McKesson’s most recent proxy statement: 'For security, protection, and privacy reasons, the Board has directed our CEO to use the corporate aircraft for both business and private travel.' Or maybe it’s the bounty that awaits Hammergren on the other side of his retirement. The company discontinued its pension program for ordinary employees in 1997 but not for top executives. If Hammergren quit tomorrow, according to company filings, he would receive a pension valued at $125 million.

The party won’t stop once the 52-year-old Hammergren retires. Among his lifetime benefits: a personal assistant and office, which the company figures will cost more than $200,000 a year, and the services of a financial counselor—a perk that will eat up $350,000 in profits, according to company estimates. The goodies keep coming even after he dies. If his wife survives him, she will continue receiving his base salary for six months and will also get $2 million in cash. That cash bonus would actually cost the company nearly twice that amount, as it's promised to cover the widow’s cost of paying taxes on that money.

And then there’s a provision so outsize it’s drawn the attention of corporate-governance watchdogs like GMI, the research group that put Hammergren in the top spot of its latest survey of CEO salaries. If Hammergren loses his job due to a change in ownership, he receives an immediate $469 million payout, GMI found—giving him perverse incentive to see it happen.

Although Mr Hammergren has not been the best paid CEO every year, the Daily Beast article showed how much he has made over the years:

Hammergren’s annual total compensation payouts, taken from the company’s public filings with the Securities and Exchange Commission: $46 million in 2011; $55 million in 2010; $37 million in 2009; another $41 million in 2008. Hammergren hadn’t founded the company. Wall Street analysts covering McKesson can tell you of the disappointments and miscues that have marked his tenure. But his haul in the 13 years he has been running McKesson? More than $500 million, according to data provided by Equilar, an executive-compensation data firm.

It then contrasted this consistent largess, spiced with the 2011 results, with the company's long-term financial performance. After the scandal that eventually resulted in crimincal convictions for some McKesson executives:

'They had to give the CEO job to somebody, and basically he was the last man standing,' said an analyst who has been covering McKesson and its competitors since the 1990s. Many in the industry had never heard of Hammergren when he took over as president and co-CEO in 1999, this analyst said, 'but I guess it’s better to be lucky than good.' Hammergren became sole CEO in 2001.

McKesson’s stock had hit a high of just under $95 a share but fell below $20 after the scandal broke. Hammergren deserves credit for stabilizing the company—some might even say he rescued McKesson—but a long-term shareholder could be forgiven for feeling that the company’s board of directors has been overly generous to its chief executive. As of Friday, the stock was trading at $78 a share—still off its 1998 high. Factoring in the regular dividends the company has paid over the years, a shareholder’s investment would be worth slightly more than it was 13 years ago.

Summary

So Mr Hammergren's corpulent compensation is vastly out of proportion not only to the company's woeful ethical performance, but also to the long-term wealth created for its owners, that is, its shareholders.

So McKesson provides just the latest example of how the top hired leaders of health care organizations seem to monumentally prosper no matter how badly their organizations fare in terms of ethical performance, good done for patients and health care, or long-term financial performance. (See recent examples here and here, and our posts on executive compensation here.)  As we quoted a McGill economics professor who was writing about the global financial collapse, "all this compensation madness is not about markets or talents or incentives, but rather about insiders hijacking established institutions for their personal benefit."

To truly reform health care, we must stop this compensation madness. We must make health care leaders accountable for their organizations' effects on patients' and the public's health, and make sure they get reasonable, not royal compensation reasonably related to their organizations' performance, including ethical performance.

Another Month, Another Set of Legal Settlements, Deferred Prosecution Agreements, and Jury Findings Adverse to Large Health Care Corporations

Another month, another series of adverse legal rulings suggesting misbehavior by large health care organizations.  In alphabetical order,...

Baxter, McKesson, Teva Pay Punitive Damages

As reported by Bloomberg,

A jury said Teva Pharmaceutical Industries Ltd. unit and two other drugmakers must pay $162.5 million in punitive damages for selling the anesthetic Propofol in a way that led three colonoscopy patients to develop Hepatitis C.

Jurors in state court Las Vegas ordered Teva Parenteral Medicines Inc., Baxter Healthcare Corp. and McKesson Corp. to pay so-called punishment damages over sales of the anesthetic in vials large enough to be reused by doctors. Anne Arnold, Richard Sacks and Anthony Devito contend they contracted Hepatitis C from reused vials during colonoscopy procedures. They had sought more than $700 million in damages.

It’s the second punitive award against Baxter and the unit of Petach Tikva, Israel-based Teva over a 2008 hepatitis outbreak in Nevada tied to Propofol. The first case resulted in a punitive verdict of more than $500 million against the drugmakers. Teva has agreed to cover all damage awards arising from the Nevada cases on behalf of Baxter and McKesson.

In particular,

The patients’ lawyers allege Teva intentionally sold Propofol in jumbo-sized vials to encourage doctors to reuse them, even with the risk of spreading blood-borne diseases such as hepatitis, an incurable liver disease.

So the allegations are that the company intentionally put financial gain ahead of the safety of patients.

Boston Scientific Settles Over-Billing Allegations

Again per Bloomberg:

Boston Scientific Corp.’s Guidant LLC unit will pay $9.25 million to settle a whistleblower’s claim that the company over-billed the U.S. and private hospitals for heart pacemakers and defibrillators.

The details:

Guidant allegedly reneged on credits owed to the U.S. Department of Veterans Affairs for replacement of units still under warranty and is accused of over-charging hospitals for the devices, causing them to over-bill Medicare, according to an e-mailed statement from the Justice Department.

Note that we have quite a extensive files on Boston Scientific, and on Guidant, now its subsidiary.

Hil-Rom Settles Fraud Allegations

Reported by the Knoxville News-Sentinel:

Federal prosecutors announced Tuesday a $41.8 million civil fraud settlement in a 'whistle-blower' lawsuit against international medical equipment supply company, Hill-Rom Company Inc.

The results also were that

As part of the settlement, Hill-Rom has entered into a five-year 'corporate integrity agreement,' in which the firm will face close scrutiny by federal officials, Killian said.

The allegations were:

'Hill-Rom submitted false claims for medical equipment for patients who did not qualify for the equipment, including patients who had died, were no longer using the equipment or had been moved to nursing homes,' [US Attorney Bill] Killian said.

In particular,

The lawsuit alleged the firm was ripping off Medicare with its faulty billing practices. According to the lawsuit, unsealed Tuesday, Hill-Rom offered its sales representatives $200 gift certificates and 42-inch televisions as reward for boosting billings and, in 2001, laid off the lion's share of staff dedicated to ensuring compliance with Medicare rules.

Note that this suggests a pattern of providing incentives to employees who "make their numbers," no matter how they do so. We have seen how making the financial numbers seems to take precedence over all else, including patients' well-being, in many contemporary health care organizations.

Maxim Healthcare Settles Fraud Allegations

In a story in the Baltimore Sun,

A Columbia-based health care firm has agreed to a $150 million settlement with the federal government and 43 states to resolve criminal and civil charges that it submitted claims for millions of dollars of work that it did not perform and operated offices that were not properly licensed, officials said Monday.

A five-year federal investigation found that Maxim Healthcare Services Inc., one of the country's largest providers of home healthcare services, submitted $61 million in false claims for services to the federal government's Medicaid and Veterans Affairs health programs over an 11-year period from 1998 to 2009.

Investigators said managers and workers at Maxim repeatedly modified time sheets and documents to cover up the fraud, creating a culture in which submitting false claims became 'common practice.'

The settlement was of criminal as well as civil charges:

The settlement includes a $20 million criminal fine and $130 million in civil settlements.

It will also involve a deferred prosecution or corporate integrity agreement:

In addition to the fines, Maxim also has been charged criminally with conspiracy to commit health care fraud. But the company could avoid conviction if it meets requirements outlined in the settlement.

Unlike many such cases, this one involved criminal charges for and guilty pleas by some people involved in the wrong-doing, in this case, middle managers:

Several regional account managers, a home health aid and a clinical services director also pleaded guilty to criminal charges, government officials said. They could face as much as $250,000 in fines and jail time for their roles in the fraud.

Another atypical result was that the CEO who presided over the misbehavior actually suffered some consequences, although he did not have to pay fines for face criminal charges,

Maxim officials said they take full responsibility for the violations. The company said it hired a new CEO in 2009 and changed its business practices to protect against a repeat.

ProPublica published an article at the same time which noted that Maxim's practices had come into question before,

A different set of problems involving Maxim came up during a ProPublica investigation into the oversight of registered nurses in 2009. We identified several nurses who were hired by the Maryland-based company despite having a record of problems.

Although that previous article did not mention the company's name:

The articles focused on how regulators across the country did little to scrutinize troubled nurses who crossed state lines to continue working. Our earlier stories did not identify Maxim by name.

We have noted that organizations which misbehave once are likely to misbehave again. This may stem from an organizational culture that puts revenue ahead of ethics and patients' and the public's health, and the lack of negative consequences that people who respond to the resulting positive financial incentives are likely to suffer.

Medicis Settles Shareholder Class-Action Lawsuit

Noted by the Arizona Republic,

Medicis Pharmaceutical Corp. and its auditing firm, Ernst & Young, have agreed to pay $18 million to settle a shareholder class-action lawsuit stemming from the pharmaceutical company's financial statements.

The shareholders alleged that Medicis was not honest about its financial affairs:

The shareholders' lawsuit stems from Medicis' announcement in September 2008 that it would restate earnings from 2003 through the first half of 2008.

Shareholders alleged that Medicis offered its wholesale customers generous return policies for prescription drugs as part of an effort to inflate the company's revenue. Medicis would accept returned products that were expired or about to expire at either no cost or substantial discounts to the wholesale customers, according to the lawsuit.

Summary

The constant march of legal settlements by, jury verdicts against, and in some cases criminal convictions of or guilty pleas by large health care corporations indicate how common misbehavior by such organizations has become. Since it is likely that much misbehavior does not lead to publicly announced legal actions, what is published can only provide a floor for an estimate of how common it is. The march, which we have been documenting since starting Health Care Renewal, shows how sleazy and often corrupt health care has become, and how that sleaziness and corruption is prevalent not just among small players, but among the biggest and richest health care organizations, and their top leaders.

One reason the situation continues to be so bad is that while the unethical behavior does sometimes result in pontificating by the civil authorities, and fines that may only be costs of doing business, it rarely leads to meaningful negative consequences for those who authorized, directed or implemented it. This was noted in the reporting of the Maxim Healthcare case above. For example, in the Baltimore Sun article we found,

One watchdog group called the penalty a drop in the bucket for a company that had $2 billion in reimbursements from 2003 to 2009.

'That is hardly crippling,' said Joe Newman, a spokesman for the Project on Government Oversight, which tracks government contractors. 'It is certainly something that stings Maxim's pocketbook, but they will be fine after that.'

'They won't be barred from the Medicaid program. That would hurt them.'

Also, Sun columnist Jay Hancock wrote:

Corporations are happy to be treated as people under the law, as we know from recent court decisions. They can own property. They can seek redress in Congress and the courts. They can make huge political contributions.

But when it comes to being penalized for cheating the government, corporations quickly abandon their personhood and go back to being abstract blobs.

'I don't know about you, but if I hired a contractor to work on my house and he charged me a ton of extra money for work he didn't do, I wouldn't use that contractor again,' Minnesota Sen. Al Franken said in Congress a few months ago. 'And I would make sure my friends knew not to use them either. It seems like the same should be true of government contractors.'

But that is often not the case. For years, government agencies have not vigorously enforced the law when doing so might inconvenience big corporations and their well-paid executives. Maybe this lenience stems from the loony philosophy of former Chairman of the Federal Reserve Alan Greenspan, who was once regarded as some sort of economic genius, who seemed to think that fraud cannot occur in his idealized idea of a free market, because somehow all bad actors would become widely known and therefore all counter-parties would avoid them. In an article in Stanford Magazine,

The influential Greenspan was an ardent proponent of unfettered markets. Born was a powerful Washington lawyer with a track record for activist causes. Over lunch, in his private dining room at the stately headquarters of the Fed in Washington, Greenspan probed their differences.

'Well, Brooksley, I guess you and I will never agree about fraud,' Born, in a recent interview, remembers Greenspan saying.

'What is there not to agree on?' Born says she replied.

'Well, you probably will always believe there should be laws against fraud, and I don’t think there is any need for a law against fraud,' she recalls. Greenspan, Born says, believed the market would take care of itself.

For the incoming regulator, the meeting was a wake-up call. 'That underscored to me how absolutist Alan was in his opposition to any regulation,' she said in the interview.

It is a measure of the insanity of recent years that one of the chief leaders of government economic policy did not believe there was any need for laws against fraud.

It appears that this daft idea has carried over to and still influences how many in government and out deal with health care. However, as we have ddiscussed, health care is not and probably cannot ever be an ideal free market. Also, in health care, most of the bad actions remain anechoic, and in many cases it may be hard for counter-parties to avoid bad actors because they may dominate the market. Also, it may be those that make decisions about whether to deal with particular organizations may be executives, and sometimes health care professionals who have become indifferent to the ethical issues.

As I have said again and again, pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction.

So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue.

History Repeats, and Repeats: McKesson Settles

Here a settlement, there a settlement, everywhere a settlement....  And the march continues, as reported by the New London (CT) Day,

Pharmaceutical distributor McKesson Corp. will pay Connecticut $15 million for 'illegal and deceptive practices' that inflated drug costs for both individual consumers and state-funded programs, Attorney General Richard Blumenthal announced Tuesday.

The settlement calls for $9 million to be used for reimbursing Connecticut's Medicaid program and $3 million for ConnPace, a state program that provides drug coverage for seniors. In addition, $2.3 million will be paid as a civil penalty and $700,000 will go into the state's drug-assistance program for AIDS patients.

Blumenthal had charged in a lawsuit that San Francisco-based McKesson conspired with First DataBank - which publishes average wholesale prices of drugs - to increase the amounts Connecticut paid for brand-name remedies by about 25 percent over usual wholesale costs. Previously, the prices had been 20 percent above wholesale.

McKesson used the increase to sweeten the 'spread' - the amount of profit - that could be taken by pharmacies, thereby increasing its share of the market, he said.

'McKesson manipulated the drug market - conspiring to inflate costs for hundreds of drugs and exploiting public programs that serve our most vulnerable citizens,' Blumenthal said in a statement.

Having been posting on this blog for nearly five years, it is interesting that viewed over time, patterns emerge suggesting that certain organizations have chronic problems with bad behavior. Last year, we noted that a former McKesson Chairman of the Board was convicted of five counts of securities fraud arising from actions occurring in the early part of the 21st century. Five former McKesson executives had already pleaded guilty to related crimes. Last year, Bloomberg called this scandal "one of the largest white-collar crimes."

This pattern may go back a lot longer that the turn of the last century.  Amazingly, the same company, McKesson, was involved in one of the biggest frauds of the great depression era. From the Wikipedia entry,

The McKesson & Robbins, Inc. scandal of 1938 was one of the major financial scandals of the 20th century. The company McKesson & Robbins, Inc. (now McKesson Corporation) had been taken over in 1925 by Phillip Musica, who had previously used Adelphia Pharmaceutical Manufacturing Company as a front for bootlegging operations. Musica, a twice-convicted felon, used assumed names to conceal his true identity in taking control of the two companies: Frank D. Costa at Adelphia Pharmaceutical and F. Donald Coster at McKesson & Robbins. Although he was successful in expanding the company’s legitimate business operations, Musica recruited three of his brothers, also working under assumed names, one outside the company and two inside it, to generate bogus sales documentation and to pay commissions to a shell distribution company under their control. Eventually, McKesson & Robbins treasurer Julian Thompson discovered the distribution company was bogus. It was eventually determined that about $20 million of the $87 million in assets on the company’s balance sheet were phony.

In December 1938, the Securities and Exchange Commission (SEC) opened an investigation and Musica was arrested. Only after he was booked, fingerprinted and released on bond did the authorities realize that 'Coster' was in reality Musica. His bond was revoked and he committed suicide before he could be rearrested.

The McKesson & Robbins scandal led to major corporate governance and auditing reforms. The SEC required that public companies have audit committees of 'outside' directors and that the appointment of auditors be approved by the shareholders. The American Institute of Accountants (now the American Institute of Certified Public Accountants) adopted audit standards requiring that auditors verify accounts receivable and inventory.

So I guess in some ways it should not be a surprise that a company involved in one of the biggest financial scandals of the depression era, and then one of the biggest white-collar crime of the early 21st century, should now be involved in a comparatively small settlement involving allegations of over-charges for drugs.

Given that in this latest case, the settlement was small, and there were no negative consequences for any individual who authorized, directed, or implemented the alleged market manipulation, it seems doubtful that it will have any lasting effect on corporate leadership of the corporate culture.

McKesson's long and chequered history suggests some sort of chronic affliction of its corporate culture.  It also suggests a rationale for requiring heath care organizations to have ongoing, active organizational ethics policies.  

Former McKesson CEO and Board Chairman Convicted of Fraud

Continuing with our annals of health care crime, Bloomberg.com reported a new verdict on a very old case:

Former McKesson Corp. Chairman Charles McCall was convicted in a second trial of participating in a fraud 10 years ago that cost investors $8.6 billion, one of the largest white-collar crimes at the time.

A federal jury in San Francisco yesterday found McCall guilty of five of six counts of securities fraud and circumventing accounting rules. He was acquitted of falsifying records. Sentencing is set for March 2. Ex-McKesson General Counsel Jay Lapine was found not guilty of three charges.

McCall and Lapine were accused of hiding backdated sales contracts from auditors and other conduct that improperly inflated revenue figures at San Francisco-based McKesson, the biggest U.S. drug distributor, and HBO & Co., a software maker led by McCall that was acquired by McKesson in 1999.

The McCall verdict was a victory for prosecutors who lost a 2006 trial of the ex-chairman. Assistant U.S. Attorney David Anderson told jurors in the three-week trial that McCall learned of the practices a few months before HBO was to be acquired.

Instead of blowing the whistle, McCall covered up the fraud and was named chairman of the merged company, Anderson said.

When McKesson disclosed in April 1999 that sales had been prematurely booked, leading to a restatement, the shares lost 47 percent of their value. McCall and Lapine were fired that year.

A federal investigation followed, and five former McKesson executives pleaded guilty. McCall and Lapine were indicted in 2003. McKesson, which wasn’t named in the U.S. criminal cases, agreed to pay $960 million in 2005 to settle investor lawsuits.

On Health Care Renewal, we often seem to get caught up in the details of the moment. This case is a reminder that the problems we have been discussing have been going on for a long time, certainly long before we started to use the new-fangled medium of a blog to write about them.

The case also is a rare example of health care leaders actually suffering negative consequences for bad behavior.  We have noted many examples (see some here) in which bad behavior by health care organizations results only in a penalty for the organization as a whole, whose impact may be diffused among employees, stock-holders, and customers or clients.  Those who authorized, directed, or implemented the behavior often suffer no negative consequences.  In the current case, some of the responsible leaders have already paid a penalty, and now the most senior responsible leader also appears to be on the verge of also paying a penalty. 

On the other hand, it took 10 years from the time the bad behavior was recognized for the penalty to be decided.  Meanwhile, Mr McCall likely continued to enjoy the wealth he had amassed in his position of leadership.  The 1999 McKesson HBOC proxy statement, which included a statement that McCall was forced to resign his positions as Chairman of the Board and employee, noted that Mr McCall had already received a salary and bonus of greater than $2 million (in 1999 dollars) that year, and was the proud possessor of 2,879,677 shares of common stock, more than 1% of shares outstanding, after his resignation. 

I say again, meaningful health care reform is unlikely unless we deal with the problem of conflicted, unethical, and sometimes corrupt leadership of health care organizations.

A Wide Web of Healthcare Data: He Who Controls The Data, Controls the Playing Field

In posts such as here and here, it's become apparent that "Evidence Based Medicine" (EBM), while perhaps reasonable in theory, is probably unreasonable in practice with the ethics of healthcare in 2008.

One cannot have evidence based rules for anything, let alone healthcare, if the evidence is tainted.

Think clinical research and the drivers of "publish or perish" are the only domains where this evidentiary taint can occur?

Think again.

From a medical colleague, a talented ER physician:

Did anyone see that Wolters Kluwer (a leading multidomestic multimedia company with corporate office in Amsterdam) plans to buy electronic medical platform Up-To-Date?

Correct me if I am off track on the issue of the "full-circle web" of information exchange - an exchange that starts with the sanctity of the private physician patient relationship.

OK, I have a private relationship with my patient, but the perverse laws say that our relationship and the information ‘collected’ is no longer sacred. It may be used without consent under the guise of 'Treatment, Payment or Healthcare Operations' (TPO).

From the Miller School of Medicine Privacy & Data Protection project glossary:

HIPAA bundles a large number of functions into the term "health care operations." This expansive list is important for many reasons, most notably because HIPAA requires no permission from patients for uses and disclosures of protected health information (PHI) for "treatment, payment or health care operations (TPO)."

Covered entities may obtain a consent for TPO-related uses and disclosures, but the practice is optional under HIPAA. (It may nonetheless be required by state law.)

Additionally, the prescription information ‘exception’ from that sensitive relationship is fair game for the data-miners to sell to Pharmacy Benefit Managers (PBMs) and the like.

The so-called ‘Publishing’ company, Wolters Kluwer, who by the way unashamedly writes friend of the court briefs supporting the data merchants and miners (e.g., Amicus Briefs supporting the plaintiffs; IMS and Verispan), is now buying one of the most widely used point of care "Evidence based medicine" tools, Up-to-date.  This is a software application for physicians to practice ‘evidence’ base medicine.

Verispan is a subdiary of one of the largest EHR vendors, McKesson. Without sounding like a nut-case full of crazy conspiracies ...

Is not this bizarre web not only destroying the trust between the patient and the physician, but additionally eroding the trust of what actually is ‘evidence’ based medicine?

I thought the rigor of science was supposed to be the driver and best influence of my decision making process for my patients, not the pull of ‘Pharma and Friends’ puppet stings.

I guess as a physician I am just marginalized to an assembly-line worker for big Pharma.

As an aside:

1. the direct to patient(consumer) marketing expenditures of Pharma – est. $30 billion / year.
2. the entire NIH budget $28 bil/yr.

So, it seems, evidence based medicine is not only threatened by commercial taint of clinical trials and research, it's also potentially threatened by the drivers and behaviors of the Data Merchant component of the healthcare IT ecosystem.

Who polices them, I ask?

-- SS

Ballooning Pension Obligations for Health Care Companies' CEOs

A new Wall Street Journal article (now available here without a subscription from the Pittsburgh Post-Gazette) describes how large corporations, including some well known in health care, in addition to giving their top executives lavish current compensation, also are liable to pay them pensions so large as to be a significant drain on the companies' earnings. (Since the article is available by subscription only, I will quote extensively,)

This is the pension squeeze companies aren't talking about: Even as many reduce, freeze or eliminate pensions for workers -- complaining of the costs -- their executives are building up ever-bigger pensions, causing the companies' financial obligations for them to balloon.

Companies disclose little about any of this. But a Wall Street Journal analysis of corporate filings reveals that executive benefits are playing a large and hidden role in the declining health of America's pensions. Among the findings:

• Boosted by surging pay and rich formulas, executive pension obligations exceed $1 billion at some companies. [For example,] Pfizer Inc. (about $1.1 billion ...).

• Benefits for executives now account for a significant share of pension obligations in the U.S., an average of 8% at the companies above. Sometimes a company's obligation for a single executive's pension approaches $100 million.

• These liabilities are largely hidden, because corporations don't distinguish them from overall pension obligations in their federal financial filings.

• As a result, the savings that companies make by curtailing pensions for regular retirees -- which have totaled billions of dollars in recent years -- can mask a rising cost of benefits for executives.

• Executive pensions, even when they won't be paid till years from now, drag down earnings today. And they do so in a way that's disproportionate to their size, because they aren't funded with dedicated assets.

One reason executive pensions have grown so large is that they are linked to ballooning overall executive compensation. Companies often design retirement payouts to replace a percentage of what a person earns while active.

But for executives, the percentage of pay replaced is itself higher. Compensation committees often aim for a pension that replaces 60% to 100% of a top executive's compensation. It's 20% to 35% for lower-level employees.

In percentage of pay replaced, Pfizer's chairman and CEO, Henry McKinnell, does best of all. His future $6.5 million-a-year pension will replace 100% of his current salary and bonus.

Even as executives' pensions grow, many companies are curtailing those for the rank and file.

Some employers have added pensions for executives at about the same time as they limited those for others. McKesson Corp. established a special pension plan for its executives in 1995 and froze those of other workers two years later. McKesson didn't respond to requests for comment.

The promise of any pension becomes a corporate obligation. Although the payments are in the future, the promise means the company has a liability now. And a number can be put on it.

Pfizer's promise to pay Mr. McKinnell $6.5 million a year for life in retirement equals an $83 million liability for Pfizer today, federal filings by the drug maker show. Pfizer defends Mr. McKinnell's pension as fair.

UnitedHealth Group Inc. Chairman and CEO William McGuire will get a $5.1 million annual pension after he retires, plus a further $6.4 million at retirement. The result is a UnitedHealth liability of about $90 million, according to two actuaries. UnitedHealth declined to comment on their estimate. In the wake of recent criticism of Dr. McGuire's pay -- which includes $1.6 billion in unrealized stock-option gains as of the end of last year -- the managed-care company has capped his pension benefit, a spokeswoman said.

A result of these trends is that executive pensions make up a significant portion of total pension liabilities at many companies: 12% at Exxon Mobil and Pfizer....

Companies' retirement liabilities for their executives have also grown through another little-noticed trend: Over recent years, an increasing portion of executives' pay has been postponed, via pension and deferred-compensation plans, rather than given in current paychecks.

Even if a company's liability for executives' pensions totals hundreds of millions of dollars, its employees and shareholders may never know. Companies don't have to report this obligation separately in federal financial filings. A few specify it in a footnote, and some provide clues that make it possible to derive the figure.

The minimal disclosure dates from the late 1980s, when companies first were required to report pension liabilities but were allowed to aggregate all of them. At the time, distinguishing executive pensions was less of an issue because they were smaller. When they ballooned along with executive pay in the 1990s and 2000s, the rules didn't change. Most employers have continued to blend pension figures together.

Perhaps the most significant effect of the limited disclosure is to make it difficult, or impossible, to evaluate company statements about their retirement burdens and the need to cut benefits.

Pension plans, whether for executives or for others, are obligations to pay. In other words, they're debts. And like any debt, they have what amounts to a carrying cost. That carrying cost is part of a company's pension expense.

In the case of pensions for regular employees, the expense is partly or wholly offset by investment returns on money the company set aside in the pension plan when it 'funded' it.

Executive pension plans are different. They're normally left unfunded. They have no assets set aside in them. That means there is no investment income to blunt the expense. The result is that obligations for executive pensions create far more expense for an employer, dollar-for-dollar, than pensions for regular workers.

In summary, note that the obligations UnitedHealth Group Inc. has to pay its current CEO Dr William McGuire's pension, and Pfizer Inc. has to pay its current CEO Henry McKinnell are substantial protions of the companies' total pension obligations and constitute an important drain on the companies' earnings.

Further note that both companies withstood share-holder revolts this year inspired by the staggering amounts of compensation given to these CEOs. In the case of UnitedHealth, although the company was doing well financially, the focus was on the $1.6 billion that CEO McGuire had received in stock options (see our post here). In the case of Pfizer, the focus was on the size of McKinnell's compensation package compared with the relatively poor performance of the company's stock (see our post here). Now we discover that both CEOs will also receive amazingly luxurious pension benefits, so large as to constitute a significant drain on their companies' earnings.

UnitedHealth Group's CEO McGuire's lavish salary and benefits (including his pension) should be contrasted with the company's mission statement which includes the goal to "make health care more affordable."

Pfizer Inc. CEO McKinnell's rising salary and lavish pension should be contrasted with the company's stated mission to "greater access to healthcare for people," and "global leadership in corporate responsibility."

Health care in the US (and globally) is afflicted with rapidly increasing costs, declining access, stagnant quality, and demoralized health care professionals. Could health care organizations more focussed on rewarding their top executives then fulfilling their missions have something to do with it? It's not a topic often discussed in health care research and policy circles - but the explanation seems increasingly plausible where I sit.