The Remarkable Case of the CEO of the Brigham and Women's Hospital Who Renounced a Major Conflict of Interest

Introduction; a Conflict of Interest Affecting the Trial of Moderna COVID-19 Vaccine

On July 17, 2020, the Brigham and Women's Hospital, a prestigious teaching hospital in Boston, announced it would be a major center for the randomized controlled trial of Moderna's mRNA based vaccine for COVID-19.  This would be the first of several eagerly awaited major RCT's of newly developed vaccines for this dangerous pandemic.  The press release noted that the hospital would be:

a clinical research site as part of the COVID-19 Prevention Network (CoVPN), funded by the National Institutes of Health. In addition, Lindsey Baden, MD, an infectious diseases specialist at the Brigham and an expert in vaccine development for viral diseases, will serve as co-principal investigator for the study.

The press release also included this disclosure:

Dr. Betsy Nabel, the president of Brigham and Women’s Hospital, has been a member of the Moderna Therapeutics Board of Directors since 2015 and has a financial interest in the company. Since its inception, this personal relationship has been reviewed and approved in accordance with Mass General Brigham conflict of interest policy and procedure, including a recent review in connection with the Phase 3 Study, and has been disclosed to the NIH/NIAID.

Although Dr Nabel would not directly participate in the trial, Dr Baden would apparently indirectly report to her as hospital CEO even though she would simultaneously be a board member of the company whose vaccine the trial was assessing. 

Another Example of What Was Once a "New Species of Conflict of Interest"

Thus Dr Nabel appeared to have a severe conflict of interest, the latest example of what we once called "a new species of conflict of interest."

In 2006, we first noticed that leaders of academic medicine also were serving as board members of large for-profit health care corporations.  The first example we discussed was that of Marye Anne Fox, Chancellor (equivalent to president) of the University of California - San Diego, and hence the person to whom the University of California, San Diego School of Medicine and its academic medical center report. The conflict was between this position, and her service as a member of the board of directors of Boston Scientific, a medical device manufacture, and the board of directors of Pharmaceutical Product Development Inc., a contract research organization.

Later in 2006, we discussed a "new species of conflict of interest." 

Medical schools and their academic medical centers and teaching hospitals must deal with all sorts of health care companies, drug and device manufacturers, information technology venders, managed care organizations and health insurers, etc, in the course of fulfilling their patient care, teaching, and research missions. Thus, it seems that service on the board of directors of a such public for-profit health care company would generate a severe conflict for an academic health care leader, because such service entails a fiduciary duty to uphold the interests of the company and its stockholders. Such a duty ought on its face to have a much more important effect on thinking and decision making than receiving a gift, or even being paid for research or consulting services. Furthermore, the financial rewards for service on a company board, which usually include directors' fees and stock options, are comparable to the most highly paid consulting positions. What supports the interests of the company, however, may not always be good for the medical school, academic medical center or teaching hospital.

As Robert AG Monks put it, board members must "demonstrate unyielding loyalty to the company's shareholders" [Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.]  (Of course, after the global financial collapse of 2008 made us sadder and a little wiser, we realized that many board members actually seem to have unyielding loyalty to their cronies among top management.).

Dr Nabel's position on the board of directors of Moderna appears to be another example of this "board-level" conflict of interest.

Dr Nabel Does the Right Thing

On July 30, in the Boston Globe, Jonathan Saltzman reported that Dr Nabel had renounced her board position:

Dr. Elizabeth Nabel, president of Brigham and Women’s Hospital, said Thursday she was resigning from the Moderna board of directors after the Globe inquired about whether her position at the Cambridge biotech company conflicted with her hospital’s leadership role in a large study of Moderna’s experimental COVID-19 vaccine.

In fact Dr Nabel made the announcement while Mr Satzman was in the final stages of writing his article.  I know this because he had interviewed me about her conflict of interest earlier in the day.  So I got to unexpectedly make a new comment:

She did the right thing, It eliminates one issue that could have led to unfounded skepticism about this trial, and this is a trial where people have to trust the results.

In fact, this is the only case I can recall in which a top leader of a academic health care institution resigned from a for-profit health care corporate board after the conflict of interest presented by board membership was publicly pointed out.

Furthermore, the Globe article noted:

After Nabel announced her resignation, the Globe asked Brigham and Women’s whether she intended to keep the $6.5 million she collected in the recent sale of her Moderna stock.

Erin McDonough, a hospital spokeswoman, said, 'Dr. Nabel is considering a number of options, including charitable contributions.'

As we had previously discussed on Health Care Renewal, board level conflicts of interest can be extremely lucrative.  A typical board member of a large health care corporation makes hundreds of thousands of dollars in salary, and can collect stock options and other financial instruments worth millions.  Such compensation is obviously  a strong incentive to continue the conflict of interest.  Yet here a board member is quitting, and at least  considering giving away millions of dollars worth of stock to nullify her conflict.  That is truly remarkable.

Perhaps in this age of a dangerous pandemic, and its continuing reckless mismanagement by the US president (for example, look here), health care leaders are thinking more about what is really important. As Mr Saltzman wrote:

Medical ethics experts said it was worrisome that the head of the Harvard-affiliated teaching hospital had a financial stake in the vaccine, particularly given that many people are already skeptical of vaccines. Recent public opinion polls show up to half of Americans are reluctant to get a COVID-19 vaccine when one is approved.

'Anti-vaxxers, critics, and kooks will use any appearance of financial conflict to undermine trust in vaccines,' said Dr. Arthur Caplan, a professor of bioethics at New York University Langone Medical Center. 'It’s just hyper-dangerous now.'

So it seems that Dr Nabel recognized the danger to the public, and to reduce it was willing to take action which would involve at least some degree of personal sacrifice.

We can only hope that others will follow her.  

 

Are You Ready for Some (Political) Football? - the NFL, Concussion Research, the NIH, and the Revolving Door

Probably because it involved the favorite American sport, the controversy about the risk of concussions to professional National Football League (NFL) players, and how the NFL has handled the issue is very well known.  A recent article in Stat, however, suggested that one less well known aspect of the story overlaps some issues to concern to Health Care Renewal.

Allegations that a Prominent Physician and NFL Official Tried to Influence the NIH Grant Review Process

The article began,

Dr. Elizabeth Nabel, president of Boston’s Brigham and Women’s Hospital [BWH] and one of the nation’s most prominent medical executives, was part of a National Football League effort to 'steer funding' for a landmark concussion study away from a group of respected brain researchers, according to a congressional committee report that was sharply critical of the league.

The report found that the NFL 'inappropriately attempted to influence' the National Institutes of Health’s [NIH] grant selection process.

Dr Nabel, in fact, not only runs the BWH, a renowned teaching hospital and major component of Partners Healthcare, but also serves as the "chief health and medical advisor" to the NFL. Anyone who has followed even a bit of the media coverage about the NFL and concussions affecting football players knows that the NFL could be negatively affected by any more research that associates playing professional football, concussions, and the adverse effects of concussions. 

The Stat article chronicled the intricate communications between Dr Nabel and the NIH as documented by a report from the Democratic staff of the House Committee on Energy and Commerce.

 It cited a series of communications between NFL representatives, including Nabel, and officials of the NIH, and a foundation that accepts gifts from private donors to support NIH research. The discussions began after the NIH decided last year to award a $16 million grant to a research team led by Dr. Robert Stern of Boston University — but before the award was publicly announced.

The money for the grant was to come from a donation pledged by the NFL to the Foundation for the National Institutes of Health, and league officials say they were concerned about aspects of Stern’s group and the proposed study.

Research by Stern’s team and BU colleagues has helped establish a link between football and chronic traumatic encephalopathy, long-term brain damage that’s been observed in a growing number of athletes, including former NFL players, who suffered repeated head injuries.

The implication seems to be that this research group might be counted on to fearlessly pursue research even if the outcomes suggested that playing football might lead to adverse medical effects, which might not be so good for the NFL's interests.  So,

Nabel, who knows the NIH well from her 10 years working as a high-level manager in the agency, sent two emails to Dr. Walter Koroshetz, director of the National Institute of Neurological Disorders and Stroke [NINDS], according to the report. That’s the NIH branch that was awarding the grant.

In one email on June 23, 2015, she wrote, 'I am taking a neutral stance here,' while noting a concern about a potential conflict of interest: members of the NIH grant review panel had coauthored papers with two researchers that she had heard might be receiving the grant — Dr. Ann McKee and Dr. Robert Cantu of BU.

Later that day, she wrote Koroshetz that 'a Dr. Stern, who may also be with this group, has filed independent testimony in the NFL/Players Association settlement.'

Indeed, Stern was critical of how the settlement would be administered, pointing out flaws with the neuropsychological tests that the league proposed using to determine how to compensate injured players.

 Notwithstanding that Dr Nabel had an obvious conflict of interest herself: she worked for the NFL.  In any case,  

'I hope this group is able to approach their research in an unbiased manner,' Nabel’s email continued, the report says.

Nabel sent Stern’s testimony to Koroshetz, according to the report.

'My sole objective,' Nabel said in her statement, was to ask her former NIH colleagues to 'ensure there were no conflicts of interest among grant applicants.'

The NIH found no conflicts involving the grant review panel and stuck with its decision to award the grant to the Stern group. It ended up using internal funds, not the NFL money, to pay for the grant.

The NIH told STAT it agrees with the 'characterization of events in the report.'

An Affront to the Sanctity of the Grant Review Process?

Although Dr Nabel and the NFL asserted that they acted appropriately at all times, neither the committee staff nor one very prominent ethicist agreed,

The committee report said that Koroshetz disagreed ..., and said he was aware of no other instance where a donor raised objections to a grantee prior to the issuance of a notice of grant award.'

'The NFL’s characterization of the appropriateness of its actions suggests a lack of understanding of the importance of the NIH’s independent peer review process,' the committee report states.

Nabel’s spokeswoman said Koroshetz never told Nabel her actions were inappropriate. 'In fact, all of their interactions were very collegial and cordial,' she said.

I will interject that the question was not whether Dr Nabel was hostile or bullying, but was whether she tried to inappropriately influence the grant review process.  So also,

Arthur Caplan, a professor of bioethics at New York University, said Nabel’s actions, as described in the report, risk harming Nabel’s reputation and that of the Brigham. 'When she did anything to try to shape the selection of investigators or challenge the objectivity' of the grant selection process, he said, 'she had to know that that was 100 percent inappropriate, 100 percent unacceptable.'

Having served on numerous NIH and Agency for Healthcare Research and Quality (AHRQ) review committees (known as "study sections"),  let me add some context at this point.  Study section members must meet rigorous standards for freedom from conflicts of interest.  They also fiercely guard their independence.  The grant reviews they construct are supposed to be entirely about the scientific, clinical and public health merit of the proposals, and the scores they give proposals are the most important determinants of whether it gets funding.  Funding decisions are actually made by agency staff and advisory boards, but are supposed to depend only on the reviews and the general priority of the proposals' topics.  Nobody - I repeat, nobody - outside of this process is supposed to influence the funding decisions.

So the notion that big wigs from big outside organizations with vested interests in how a particular research project might turn out were communicating with top NIH officials about grant proposals, and that the officials allowed them to continue to communicate, and allowed even the chance they would be influenced by their communication strikes this old reviewer, to quote Dr Caplan, as "100 inappropriate, 100 percent unacceptable."

Did the Revolving Door Enable the Attempt to Influence NIH Grant Review?

Not directly discussed in the Stat article, however, was why Dr Koroshetz, director of NINDS, was willing to accept, if not agree with Dr Nabel's communications.  The article did note that Dr Nabel was a former "high-level manager" at the NIH.  In fact, according to her official Brigham and Womens' Hospital biography, Dr Nabel was director of the US National Heart, Lung and Blood Institute from 2005-2009.  She became CEO of the BWH in 2010.  Thus, she was a former top NIH leader who once held a rank commensurate with that held by Dr Koroshetz.

But wait, there is more.  Also according to her official BWH biography, Dr Nabel's husband is one  Gary Nabel, now the chief scientific officer at Sanofi.  Dr Gary Nabel, in turn, was Director of the Vaccine Research Center at the National Institute for Allergy and Infectious Diseases (NIAID), another NIH institute, through 2012, but then according to Science, became chief scientific officer at Sanofi. So Dr Nabel's husband was also a high-ranking NIH leader, although apparently not as high-ranking as his spouse and the NINDS director with whom she communicated. 

Thus it appears that maybe Dr Nabel had outsized influence at the NIH and on the NINDS director because she was a former NHLBI director, and the spouse of a former high-ranking NIAID leader.  Her attempts to influence the NIH grant application process therefore appear to be a possible manifestation, albeit delayed, and partially at one spousal remove, of the revolving door pheonomenon.

We have noted that the revolving door is a species of conflict of interest. Worse, some experts have suggested that the revolving door is in fact corruption.  As we noted here, the experts from the distinguished European anti-corruption group U4 wrote,

The literature makes clear that the revolving door process is a source of valuable political connections for private firms. But it generates corruption risks and has strong distortionary effects on the economy, especially when this power is concentrated within a few firms.

  This case suggests how the revolving door may enable certain of those with private vested interests to have excess influence, way beyond that of ordinary citizens, on how the government works.

Worse, this case also suggests how it seems that the country is increasingly run by a cozy group of insiders with ties to both government and industry.  In fact, just a little more digging reveals that a key player in this case has even more ties to big private health care organizations.  According to ProPublica, in the last three months of 2014, Dr Elizabeth Nabel received $26,070 from Medtronic, mainly for food, travel and lodging, but which included $8572 for "promotional speaking/ other."  In 2015, she was appointed to the board of directors of Medtronic, despite not having previously owned any Medtronic stock, according to the company's 2015 proxy statement.  Also in 2015, she was appointed to the board of directors of Moderna Therapeutics.    Her husband, as noted above, now works as chief scientific officer for Sanofi.

So, as we have said before.... The continuing egregiousness of the revolving door in health care shows how health care leadership can play mutually beneficial games, regardless of the their effects on patients' and the public's health.  Once again, true health care reform would cut the ties between government and corporate leaders and their cronies that have lead to government of, for and by corporate executives rather than the people at large.

Video addendum: the beginning of "League of Denial" from PBS Frontline



ADDENDUM (29 May, 2016) - This post was republished on the Naked Capitalism blog.

There They Go Again - the New England Medical Journal Publishes another Rant, this Time about Power Morcellation

In 2015, we noted (here and here) that the New England Journal of Medicine seemed to have been reduced to publishing rants about "pharmascolds" who are paranoid about conflicts of interest. Now there they go again....

Background

The sad story about the risks of power morcellation for the treatment of fibroids has received considerable media attention.  The state of play through July, 2014 was described in a series of articles in the Cancer Letter of July 4, 2014. (Look here.)

Uterine fibroids are a common affliction of women.  Their preferred surgical management had changed from open surgery to minimally invasive surgery, sometimes robotically performed, and often incorporating a device called a power morcellator to pulverize the fibroids, allowing the use of small incision.  However, after a patient at the Brigham and Womens' Hospital (BWH) in Boston, part of the Partners Healthcare system, was found to have disseminated sarcoma post power morcellation, most likely because the machine spread tumor cells throughout her abdomen, the US Food and Drug Administration (FDA) issued an advisory against using the procedure morcellation, and despite some controversy, the procedure is now uncommonly used.

The patient so severely affected was Dr Amy Reed, an anesthesiologist at the BWH.  Her husband, a cardiothoracic surgeon at BWH, launched a campaign to reduce the use of power morcellation.  His pursuit of this campaign underlined an important part of the history, 

The use of power morcellation was effectively allowed by the FDA in the absence of any controlled trials meant to assess its safety or efficacy in this context.  The device was deemed moderate risk and approved through the 510(k) process because it appeared similar to previously allowed devices, even though older devices were not used to remove fibroids.  The Cancer Letter quoted Dr David Challoner, who was on a relevant Institute of Medicine (IOM) committee, saying allowing the device on the market was 

one more example of the clearance of a device for a use, not approval, based on predicates already in the market, that is, prior morcellators for other uses

The New England Journal of Medicine Weighs In - with a Special Pleading

Once again, NEJM national correspondent Dr Lisa Rosenbaum had a contrarian view(1).  As we discussed here and here, last year Dr Rosenbaum wrote three commentaries suggesting the importance of conflicts of interest in health care had been overblown, especially with respect to medical journals.

This time, she argued that the FDA overreacted to the tragic case of  Dr Amy Reed. In particular, she was afraid that the risks of power morcellation were exaggerated, and based on poor quality data,

Several experts argued that these risk estimates were too high and that it was riskier to expose 100,000 or so women per year to open procedures rather than laparoscopic ones. Since the rarity of LMS precludes a randomized trial, however, risk estimates had to be based primarily on retrospective case series of varying rigor. Some studies were poorly stratified for risk factors such as age, and others spanned decades during which diagnostic criteria for LMS had changed.

Dr Rosenbaum failed to mention that the lack of good data about the risks of power morcellation stemmed from the lack of any large, well designed randomized controlled trials done to assess its benefits and harms. Of course, since the device's use was allowed by the FDA 510(k) process without any requirement for trial data, there was no incentive for device companies, at least, to do such trials.

Nonetheless, Dr Rosenbaum also argued the benefits of power morcellation were downplayed. 

the benefits of morcellation are largely invisible and thus 'unavailable.' Who sees the women who undergo a minimally invasive procedure, recover quickly, and avoid losing income? What does a pulmonary embolus, a wound infection, or a hemorrhage that didn’t happen look like? You can’t post pictures of these nonevents on social media. But their nonoccurrence is why we ought to be celebrating.

A March 18, 2016 article asked my opinion about Dr Rosenbaum's use of the clinical evidence.

'She talks about the data concerning the possible harms of power morcellation and argues that that data comes from relatively low-quality studies, not randomized, controlled trials, and that it is hard to tell the actual rate of harms, in particular, the dissemination of cancer. On the other hand, Dr. Rosenbaum implies that the benefits of power morcellation are well known.'

'She writes initially that power morcellation allows the treatment of fibroids to be ‘done more efficiently and effectively,’ she later implies that power morcellation is less invasive, leads to quicker recovery, avoids income loss, and furthermore, reduces the likelihood of pulmonary embolus, wound infection, or hemorrhage.'

'However, she doesn’t provide any data about these ostensible benefits. A quick search suggested that there are no good randomized, controlled trials that assessed benefits. Her argument that we have abandoned a beneficial treatment based on poor quality and perhaps exaggerated the data about its harms—that does not seem to be supported by any clear data about its benefits.'

I rendered that opinion on March 18 before I read a Cochrane Collaboration review of minimally invasive surgery versus open surgery for fibroids(2).  However, that review does not seem to contradict my statements above.  The review included some patients who were treated using power morcellation, but apparently did not find any studies that assessed patients treated only with power morcellation with those treated only with an alternative.  Even so, it only included nine studies that enrolled a total of 808 patients.  Thus, I think it is reasonable to say that there have not been any large, well-done randomized controlled trials of power morcellation versus other treatments of fibroids.  Even so, while the review found some advantages for minimally invasive surgery versus open surgery in terms of short-term post-operative pain and length of hospital stay, it did not address pulmonary embolus, wound infection, or hemorrhage directly.  So while Dr Rosenbaum was right to say that the evidence from clinical research about the magnitude and nature of harms of power morcellation was relatively weak, the evidence about its benefits is also weak. Thus, Dr Rosenbaum's argument that the harms have been exaggerated while the benefits were overlooked was based on a logical fallacy, special pleading. 

This special pleading seemed the basis for her claim that

women may suffer more from its [power morcellation's] disuse.

So, as I was quoted by the Cancer Letter,

'The NEJM is perhaps the most prestigious, most highly regarded English-language medical journal in the world,' Poses said. 'It is, in many cases, viewed as the standard for scholarly medical journals. I am a bit surprised that it published a commentary by its own national correspondent that appears to make an argument—about benefits and harms of treatment and policymaking about treatment—that does not have a clear discussion of the data that support or fail to support either the benefits or the harms of the treatment.'

More Arguments, Less Justification

Dr Rosenbaum insisted that her concerns were about the question,

How do you use data to clarify tough trade-offs when the most compelling narratives paint evidence-based reasoning itself as an anathema?

However, she did not demonstrate an approach to policy making on power morcellation that was more evidence-based than what has transpired so far.

In addition, Dr Rosenbaum decried challenges to health care innovation from "the power of tragic stories," and the title of her commentary ("N-of-1 policymaking") suggested that the the FDA approach to power morcellation was based on a single tragic story.  Yet an FDA spokesperson insisted in the March 18, 2016 Cancer Letter article,

The FDA evaluated the available data at the time and determined that it was of sufficient quality and reliability to support our November 14, 2014 decision.

Furthermore, Dr Rosenbaum expressed concerns that power morcellation met its "demise" because of unwarranted concerns about the "greedy corporation," "medicine's corruption," and "industry greed."   Yet she ignored arguments that these concerns were not unreasonable.    

First, the commentary ignored claims that power morcellation procedures were very lucrative, e.g., those in the 2014 Cancer Letter article

'This is a very lucrative procedure.'  [Dr] Noorchashm, [Dr Reed's husband] said.  'The procedure itself bills $30,000 to $50,000, depending on the center.'

Nor did she argue against the assertion in the same article that device companies used political influence to promote their very expensive product,

There is a very strong pressure from the device industry to get into the market quickly.

The device companies have been able to make [the 510(k) process that allowed power morcellation] survive politically over the ensuing 40 years.

Also, Dr Rosenbaum's NEJM commentary failed to counter the assertion by Dr Noorchashm that the device manufacturers concealed the risks of power morcellation.

Device manufacturers clearly knew of the cancer risk.  You can see warnings about malignant tumors in the Ethicon and Karl Storz user manuals.  Clearly, their lawyers had warned them to put them there to avoid liability.  The bottom line is that these manufacturers knew of this hazard, but neither reported it back to the FDA, as would have been the safe and responsible thing to do.(3) 

Finally, according to the March 18, 2016 Cancer Letter article, while Dr Reed has apparently sued the BWH, and Dr Rosenbaum admitted she is on "faculty" at the BWH, neither she, the NEJM, nor the BWH will say whether she is currently being paid by the BWH.  Particularly,

the hospital declined to provide information on Rosenbaum's title and whether she is a full-time faculty member, citing personnel policies.

My response (in the Cancer Letter article) was

'I can see that the hospital would not want to reveal her salary, if in fact she has one, and that has privacy implications,' Poses said. 'But I don’t understand why the hospital would not be able to simply tell you whether or not she is employed there and in what capacity.'

Thus, the latest commentary in the New England Journal of Medicine by National Correspondent Dr Lisa Rosenbaum used special pleading to argue for an expensive medical device with dubious benefits but which no more dubious evidence suggests may cause cancer.  The commentary also decried the device's critics as unreasonably concerned about "greed" and "corruption," even though the device is clearly expensive, there are at least creditable allegations that the device makers used political influence to promote it and concealed its risks, and ironically the commentary itself obfuscated whether Dr Rosenbaum has a major financial relationship to the hospital that is being sued in connection with use of that device there.

Thus, this latest New England Journal of Medicinearticle, like those by the same author in the same journal which we have discussed before (here and here), seems more like a rant in a political blog than a scholarly article in the US' and perhaps the world's most prestigious scholarly medical journal.  What is going on at the NEJM? What has happened to its editorial standards?  Why should it continue to inspire such trust?    

ADDENDUM (22 March, 2016) - See also comments in the 1BoringOldMan blog. 


References

1.  Rosenbaum L.  N-of-1 policymaking - tragedy, trade-offs, and the demise of morcellation.  N Engl J Med 2016; 374: 986-990.  Link here.
2.  Chittawar PB, Franik S, Pouwer AW et al.  Minimally invasive surgical techniques versus open myomectomy for uterine fibroids. Cochrane Library 2014. Link here.
3.  Dyer O. US surgeon who campaigned against potentially dangerous device receives legal threat.  Brit Med J 2014; 349: g5577.  

More Hospitals Settle, But Not for Much

In late February, there have been several notable legal settlements made by more or less prominent hospitals, discussed in rough order of size.

United Regional Health Care System

Per the Cypress Times,

The Department of Justice announced today that it has reached a settlement with United Regional Health Care System of Wichita Falls, Texas, that prohibits it from entering into contracts that improperly inhibit commercial health insurers from contracting with United Regional’s competitors. The department said that United Regional unlawfully used these contracts to maintain its monopoly for hospital services in violation of Section 2 of the Sherman Act, causing consumers to pay higher prices for health care services.

Note that this appears to be the first settlement involving the Sherman Anti-Trust Act that included a hospital system, or any health care organization which we have discussed. As the Times article mentioned,

This is the first case brought by the department since 1999 that challenges a monopolist with engaging in traditional anticompetitive unilateral conduct.

Here is more detail about the alleged offenses:

According to the complaint, United Regional is by far the largest hospital in Wichita Falls. Its share of general acute-care inpatient hospital services is approximately 90 percent, and its share of outpatient surgical services is more than 65 percent. It is the region’s only provider of certain essential services such as cardiac surgery, obstetrics and high-level trauma care. In Wichita Falls, United Regional’s average per-day rate for inpatient hospital services sold to commercial health insurers is about 70 percent higher than its closest competitor for the services that are offered by both hospitals.

The department said that in order to maintain its monopoly in the provision of inpatient hospital and outpatient surgical services, United Regional systematically required most commercial health insurers to enter into contracts that effectively prohibited them from contracting with United Regional’s competitors. United Regional’s contracts required these insurers to pay significantly higher prices if they contracted with a nearby competing facility. Since United Regional is a must-have hospital for any insurer that wants to sell health insurance in the Wichita Falls area, and because the penalty for contracting with United Regional’s rivals was so significant, almost all insurers offering health insurance in Wichita Falls entered into exclusionary contracts with United Regional. As a result, competing hospitals and facilities could not obtain contracts with most insurers and were less able to compete, helping United Regional maintain its monopoly in the relevant markets and raising health-care costs to the detriment of consumers.

As far as I could tell, however, for this apparently severe offense there will be no actual penalty. The settlement only appears to provide for a promised change in future behavior by the hospital:

The proposed settlement, which if accepted by the court would be in effect for seven years, restores lost competition by prohibiting United Regional from using agreements with commercial health insurers that improperly inhibit insurers from contracting with United Regional’s competitors. In particular, United Regional is prohibited from conditioning the prices or discounts that it offers to commercial health insurers based on whether those insurers contract with other health-care providers and from inhibiting insurers from entering into agreements with United Regional’s rivals. United Regional is also prohibited from taking any retaliatory actions against an insurer that enters into an agreement with a rival provider.

So if a hospital engages in actions that restrain competition and results in a de facto monopoly, all the hospital leaders must fear is that at some point it may have to change its monopolistic behavior, according to this settlement.

Catholic Healthcare West

Per the San Jose Business Journal,

Catholic Healthcare West, parent company to local Mercy hospitals, has agreed to pay $9.1 million to settle allegations that seven of its hospitals submitted false Medicare claims, U.S. Attorney Benjamin Wagner announced late Friday.

Here is more detail about the alleged offenses:

The hospitals include Community Hospital of San Bernardino, St. Bernadine Medical Center in San Bernardino and St. Elizabeth Community Hospital in Red Bluff.

The settlement also included allegations that O’Conner Hospital in San Jose, Seton Medical Center in Daly City and St. Joseph’s Hospital and Medical Center in Phoenix submitted inflated costs for their home health agencies and were overpaid. The agreement also resolves allegations that St. Joseph’s overstated how much was owed in disproportionate share funding for indigent patients.

CHW no longer owns O’Conner Hospital or Seton Medical Center.

The settlement resolves allegations that St. John’s Regional Medical Center in Oxnard was overpaid for treating a high percentage of patients with end-stage kidney disease for several years, including two when it was not eligible.

Note that while the amount of the payment assessed appears substantial, it will be made a very long time after the alleged bad behavior occurred:

All of the problems occurred in the 1990s. Federal investigators began looking into the matter in 2001, but it took years to compile evidence and reach a settlement. All of the hospitals had set aside money in a reserve account should they have to pay funds back to the government.

So if a hospital submits false claims to the US government, hospital leaders need not fear paying anything back for more than 10 years, according to this settlement.

By the way, this was not the first such settlement that Catholic Healthcare West has had to make:

In 1998, a whistleblower at Woodland Healthcare disclosed instances of alleged fraud by two medical groups affiliated with local Mercy hospitals, Woodland Clinic Medical Group and Medical Clinic of Sacramento.

Following an extensive investigation, former U.S. Attorney John Vincent announced a $10.25 million settlement in May 2001. The allegations included false claims to inflate reimbursement from Medicare, Medi-Cal and military health insurance programs.

Massachusetts General Hospital (Partners Healthcare)

Per the Boston Globe,

Massachusetts General Hospital has agreed to pay the federal government $1 million to settle potential violations of patient privacy laws, which occurred when an employee commuting to work lost patient records on the T’s Red Line two years ago.

Here is more detail about the alleged offenses:

Health information for 192 patients in Mass General’s Infectious Disease Associates outpatient practice was lost in the incident, including that of patients with HIV/AIDS. The documents included a patient schedule containing names and patient medical record numbers, as well as billing forms containing the name, birth date, medical record number, health insurer and policy number, diagnosis, and name of providers for 66 of those patients.

Note that Massachusetts General Hospital is not independent, but part of Partners Healthcare, which reported net patient service revenue of $1.5 billion in the most recent quarter, again per the Boston Globe. So this settlement amounted to about 0.00167% of the system's patient revenue.

So if a hospital engages in actions that violate the trust patients have that their information will be kept confidential, all hospital leaders have to fear is that their institution will eventually have to pay something much less than round-up error of their revenue, according to this settlement.

Summary

Again, the volume of participants in the ongoing march of legal settlements is a reminder of how pervasive bad behavior is in the US health care system. Remember that these settlements are in some sense the tip of the iceberg. They only indicate behavior that inspired legal action which was in turn was publicized. It is likely that for each behavior that eventually leads to a settlement, there are many behaviors that go unreported, or that cause no reaction.

It is interesting that sorts of bad behavior that formerly caused no official reaction are now leading to settlements. As noted above, there had been no recent legal actions against concentration of power in health care up to the United Regional Health Care System settlement.

However, like many of the settlements we have previously noted, the latest crop seem to have little deterrent power. The United Regional Health Care System settlement seemingly involved no monetary penalties whatsoever, only a promise of not to do it again. The Catholic Healthcare West settlement's monetary penalties were so delayed, occurring over 10 years after the actions in question, their deterrent power is highly questionable. The Massachusetts General Hospital (really the Partners Healthcare) monetary penalty was infinitesimal compared to the size of the institution's budget.

Furthermore, as in nearly every other case we have reported, no person who authorized, directed or implemented the actions in question had to pay any penalty, or suffer any negative consequence, or was even identified.

So while there seems to be some increased interest in addressing some kinds of bad behavior, like monopolistic practices, that heretofore generated no official reactions, regulatory authorities still seem loathe to even slap the wrists of the people whose aggregated actions are making our health care so expensive, so inaccessible, and probably of such mediocre quality.

Thus, in recent years, health care leaders, like leaders of financial service companies, seem to have impunity,  Up to now, they have been able to preside over all sorts of bad behaviors that help support their exorbitant remuneration without fearing any personal penalties.  As Charles Ferguson, the director of Inside Job, said when accepting his Academy Award last night, per MarketWatch,

Forgive me, I must start by pointing out that three years after a horrific financial crisis caused by fraud, not a single financial executive has gone to jail — and that’s wrong

After a slow-motion health care train wreck over the last 30 years, hardly any health care executives have even had to pay a fine, much less go to jail.

So I repeat, and repeat, and repeat: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

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.

Investigations, Indictments and Guilty Pleas at Famous US Teaching Hospitals

Some of the US most prestigious academic medical centers have been receiving unusual scrutiny lately.

Mount Sinai Medical Center and New York - Presbyterian Hospital.

As reported first by the Wall Street Journal,

Federal prosecutors are investigating allegations that bid rigging and fraud at Mount Sinai Medical Center and New York-Presbyterian Hospital resulted in the hospitals awarding contracts worth tens of millions of dollars to outside contractors.

Purchasing officials at the hospitals, two of the city's largest and most prestigious, are alleged to have gotten more than a million dollars in payments from companies that were then given lucrative contracts to perform work such as re-insulating pipes and removing asbestos, according to documents filed in the Southern District of New York.

Nine contractors are involved in the case. So far, eight people and three companies supplying the hospitals have pleaded guilty to charges including bid-rigging, mail fraud and tax fraud. Three more people have been indicted on similar charges.

The Federal Bureau of Investigation and Internal Revenue Service have been investigating and the Justice Department's Antitrust Division is prosecuting the allegations in the case.

Some relevant specifics:

The most recent indictment, handed up by a federal grand jury April 6, involved the alleged awarding of more than $195,000 in maintenance and insulation contracts. Mario Perciavalle, associate director of plant services at Mount Sinai, is accused of taking at least $20,500 in cash from a Long Island City company in 2004 and 2005 in exchange for the company, unnamed in documents, winning the deals.

Prosecutors also are pursuing a case involving a former official at New York-Presbyterian, Salvatore Scotto-DiVetta, a supervisor at the hospital's Facilities Operations department. He pleaded guilty in March to rigging bids for re-insulation contracts, the Department of Justice said.

The next day, the Journal reported:

Two New York-Presbyterian Hospital officials and two contractors who did business with the prestigious hospital were indicted on fraud charges Tuesday in the latest cases stemming from a federal investigation into bid-rigging and fraud.

The indictment alleges that the hospital officials—Santo Saglimbeni of Armonk, N.Y., and Emilio Figueroa, whose hometown wasn't given—received payments and gifts in exchange for awarding contracts to certain companies.

And already the box score for this investigation increased:

As a result of the investigation, a total of five hospital employees, 10 people outside the hospitals and six companies have either pleaded guilty or face charges.

The comments by hospital officials had a familiar ring to anyone who has been following the hearings in Washington on the global financial collapse. From the first article:

A Mount Sinai spokesman said the hospital notified the Justice Department 'about the possibility of impropriety immediately after it was identified in an internal audit' and is cooperating with the investigation. The spokesman said the hospital dismissed the employee under investigation and instituted tougher contracting systems.

From the second:

New York-Presbyterian was an 'unknowing victim of these alleged crimes,' a hospital spokeswoman said. She also said that the staffers named in the indictment no longer work at the hospital, and it is cooperating with the investigation.

Partners Healthcare System

Just out today in the Boston Globe:

The US Department of Justice has opened a civil investigation into possible anticompetitive behavior by Partners HealthCare System Inc., the region’s most powerful hospital and physician network.

In a letter sent to Partners and the state’s three largest health insurers on April 19, investigators from the Justice Department’s antitrust division demanded documents relating to Partners’ 'contracting and other practices in health care markets in Eastern Massachusetts.'

The letter, obtained by the Globe, said the probe sought to determine whether the practices violated the Sherman Antitrust Act, which bars companies from using their market power to limit trade or artificially raise prices.

The background is:

Boston-based Partners has been under growing scrutiny because of its market power and ability to draw high prices from insurers. The company employs about 5,500 physicians and operates a half dozen smaller hospitals, in addition to their prestigious Harvard-affiliated Boston teaching hospitals, Mass. General and the Brigham.

Earlier this year, Attorney General Martha Coakley issued a report documenting that Massachusetts insurance companies pay some hospitals and doctors, including those in the Partners network, twice as much money as others for essentially the same patient care. The report pointed to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs.

A 2008 Globe Spotlight Team series focused on the Boston market found that hospitals such as Mass. General and the Brigham typically are paid 15 to 60 percent more for essentially the same work as other hospitals.

Soon after that series, Coakley launched her investigation into whether Partners and Blue Cross-Blue Shield, the state’s largest health insurer, may have illegally colluded to increase the price of health insurance statewide over the last decade, according to several legal and government sources.

And again, the official response had a familiarly evasive ring:

Partners spokesman Rich Copp yesterday noted that the hospital network already has supplied similar information to investigators from the state attorney general’s office, which launched its own review of Partners’ contracting practices last year. He noted in Partners’ defense that it vies with other providers in the area’s 'highly competitive' health care market.

'The Department of Justice has requested the same information that we have provided to the attorney general’s office,' said Copp. 'We will continue to cooperate with both government agencies during this ongoing analysis of health care in Massachusetts.'

Summary

So there it is.  Multiple indictments for and guilty pleas to charges of bid-rigging and fraud at two New York academic medical centers, and state collusion and federal anti-trust investigations of a Massachusetts hospital system.  The issues involve four of the most prestigious teaching hospitals in the US.

Of course, not all the indictments may result in convictions, and the investigations may not result in charges.  But this involves some institutions that at one time would have appeared beyond reproach.  The lack of clear denials from the inevitable official spokespeople, and attempts to deny responsibility for the actions of employees elsewhere identified as "officials" do not provide much reassurance.

Of course, readers of Health Care Renewal would have known that questions could be raised about leadership and governance of these once-revered institutions.  Questions could be raised about the incentives implied by the huge compensation given to the top hired executives at New York - Presbyterian, awarded by a board of trustees that includes some of the leaders of the more prominent failed finance corporations involved in the global financial collapse.  Questions could be raised about the dominant presence of finance leaders and possibly conflicted individuals on the Partners board, and apparent interlocks among Partners leadership and the leadership of the largest health insurer in Massachusetts, which was willing to pay that system so much.

Maybe, instead of lecturing the more lowly among us about our responsibilities to improve health care, the leaders of our previously most august health care institutions need to introspect more about their own responsibility to address the metastasis of "greed and incompetence" in health care from the financial sector.

A "Very Well Paid Boob" on the Harvard Corporation?

The ongoing investigation of the global financial collapse may also shed some indirect light on what has gone wrong with health care.  Consider the recent testimony by two leaders of the nearly failed, then bailed out global financial giant Citigroup, as reported by the New York Times. One of the leaders was Robert Rubin,

Robert E. Rubin, the former Treasury secretary, faced withering questions from the panel, the Financial Crisis Inquiry Commission, for his spare expressions of remorse. Repeatedly playing down his role as chairman of the executive committee of Citigroup’s board, he was met with anger and disbelief.

'You were either pulling the levers or asleep at the switch,' Philip N. Angelides, the committee’s chairman, told him.

Mr. Rubin stopped short of accepting personal responsibility. He grudgingly conceded that a few savvy investors saw the crisis coming, asserting that nearly everyone in the financial services industry had failed to see a dozen powerful forces — from excessive debt levels to trade imbalance — come together in a perfect storm.

'We all bear responsibility for not recognizing this, and I deeply regret that,' Mr. Rubin said.

Mr. Rubin’s stance left several members of the panel angry. Mr. Rubin earned more than $100 million during a decade at Citigroup.

Mr. Angelides, a former California state treasurer and a fellow Democrat, did not buy it. 'You were not a garden-variety board member,' he said. 'I think to most people chairman of the executive committee of the board of directors implies leadership. Certainly $15 million a year guaranteed implies leadership and responsibility.'

Attempts by Mr Rubin (and to some extent, former Citigroup CEO Charles O Prince III) to disavow responsibility met with more derision. For example, yesterday, see a New York Times editorial:

The latest public hearings of the Financial Crisis Inquiry Commission, held last week, made headlines for eliciting more apologies from financiers who presided over the market collapse.

You may recall a similar flurry last year, when Lloyd Blankfein, the chairman and chief executive of Goldman Sachs, was widely credited for having apologized for his firm’s role in the financial crisis.

We did not buy it then; Mr. Blankfein never said what he was sorry for or to whom he was apologizing. And we are not buying it now.

Mr. Prince says he 'could not' foresee the impending collapse, when he could have and should have seen it coming. Certainly, others did. Mr. Rubin has said that under his employment agreement, he was not responsible for the bank’s operations. But he was a towering figure at Citi, a source of its credibility and prestige. That implies responsibility, no matter what his contract said. Add all that to the 'I wasn’t the only one' context of both men’s comments, and their regret translates as, 'We feel bad about an accident we were powerless to prevent.'

Except that the financial crisis was not an accident and they were not powerless. The crisis was the result of irresponsibility and misjudgments by many people, including Mr. Prince and Mr. Rubin. Citi, under their leadership, epitomized the financial recklessness that ruined the economy.

A Seattle Times columnist was even more harsh, calling Rubin a "very well paid boob," and:

Rubin was barely contrite and went back to his meme of 'who knew?,' adding the unintended comedic line about how leaders shouldn't be responsibility for the 'granularity' of little things -- such as $40 billion in essentially fraudulent collateralized debt obligations. Rubin was being paid more than $100 million as a senior adviser to Citi while it headed toward collapse and a $45 billion taxpayer rescue. So 'granularity' is in the eye of the beholder.

Commission vice chairman Bill Thomas said, 'Apparently you get to the top without having had to experience anything the people underneath you do. You don't have a comprehension. You're not informed, but you get to make all this money on the upside, but there's no downside.'

Indeed. Rubin and Citigroup epitomize the public policies and the corporate practices that brought the economy to the brink of a new depression.

As Bill Clinton's Treasury Secretary, Rubin championed financial deregulation and the financialization of the economy as manufacturing was hollowed out. Among other things he helped keep derivatives from being regulated and encouraged the creation of 'too big to fail' institutions such as Citi. Rubin led the battle to dismantle Glass-Steagall, so Citi and its giant siblings could gamble in investment banking, while also doing commercial banking and insurance. An alum of Goldman Sachs, Rubin was fine with big compensation for executives, even if their leadership wrecked the bank (Prince walked away with $120 million). Funny how Rubin was offered the lucrative Citi position after he left such 'government service.'

So what does this tell us about health care? As we noted before, while Robert Rubin is no longer on the board of Citigroup, he has been a member of the Harvard Corporation since 2001. The Corporation is ultimately responsible for the US' oldest and most prestigious university, its equally prestigious medical school and teaching hospitals. Yet under Rubin's stewardship, Harvard's endowment has fallen a prodigious amount, and Harvard and its Partners Healthcare hospital system have faced charges of conflicts of interest and various sweetheart deals. Perhaps this is to be expected when the ultimate steward may be a "very well paid boob."

While Rubin's impressive resume and wealth in 2001 may have provided a rationale for his appointment to the Corporation, what would be the rationale for his continuing service?

As we have pointed out, as the world economy was driven to near ruin by "masters of the universe," some of the same also became leaders of academia and academic medicine in their spare time. Maybe this made sense 10 or 20 years ago, but why does it still make sense? On the other hand, now that we understand how bad the leadership of finance really was, it is a little easier to understand why the leadership of health care has become so bad.

One Small Step Towards Reducing Conflicts of Interest Affecting Academic Medical Leaders

Two articles, one in the New York Times by Duff Wilson, the other in the Boston Globe by Liz Kowalczyk, brought the issue of the conflicts of interest generated by leaders in academic medicine sitting on the boards of health care corporations to wide attention.  The news was that Partners Healthcare, the large hospital network that includes two of Harvard University's main teaching hospitals, for the first time is limiting the role its leaders can take on such boards of directors.  As written by Duff Wilson,

The owner of two research hospitals affiliated with the Harvard Medical School has imposed restrictions on outside pay for two dozen senior officials who also sit on the boards of pharmaceutical or biotechnology companies. The limits come in the wake of growing criticism of the ties between industry and academia.

Medical experts say they believe the conflict-of-interest rules at the institution, Partners HealthCare, go further than those of any other academic medical center in restricting outside pay from drug companies. The rules, which became effective on Friday, impose limits specifically on outside directors who guide some of the nation’s biggest companies.

Senior officials at the two hospitals, Massachusetts General and Brigham and Women’s Hospitals in Boston, must limit their pay for serving as outside directors to what the policy calls 'a level befitting an academic role' — no more than $5,000 a day for actual work for the board. Some had been receiving more than $200,000 a year. Also, they may no longer accept stock.

The proper pay for time spent on board meetings under the new policy was calculated at $500 an hour for a 10-hour day, said Christopher Clark, a senior lawyer at Partners and director of a new office for interactions with industry. Stock and options were banned because they tie the director’s fortunes to company profits.

As far as I know, this policy is the first instance of a US not-for-profit academic medical institution limiting the role its leaders and/or faculty may take as directors of for-profit health care corporations. So it is an important step. Furthermore, also as far as I know, the coverage this news item received on Sunday is the first time this issue has been discussed openly in the mainstream media.

A New Species of Conflicts of Interest

On the other hand, we first discussed the conflicts posed by leaders of academic medicine sitting on the boards of for-profit health care corporations in 2006 on Health Care Renewal, calling it a "new species of conflict of interest" at that time.  Since then, we have found many other examples of such conflicts.  We noted that sitting on a corporate board is a particular problem for an academic medical leader because a corporate director has a legal obligation to advance the profits and financial fortunes of the corporation he or she serves. As Robert AG Monks put it, corporate directors are supposed to "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.]  This legal requirement ties a corporate board member far more tightly to the interests of the corporation than do the obligations of, for example, a consultant to the corporation. 

Moreover, some have charged that many for-profit corporate board members are just cronies of the top corporate leaders.For example,

Tthe cronyism of major corporate boards, especially those in the finance area, has become legendary. Rubber-stamp directors who rarely buck the chairman or challenge the CEO are unfortunately all too common. These boards did not serve either their companies or shareholders well.

[per Ritholtz B. Bailout Nation.  Hoboken, NJ: John Wiley & Sons, 2009. pp. 198-199.]

In that case, this would only makes things worse, tying board members to the personal interests of top managers of health care corporations, rather than to the interests of the entire stockholder population.

A (Baby) Step in the Right Direction

Given the potential severity of board of directors level conflicts of interest for academic medical leaders, any step that reduces them deserves applause.  That being said, Partners Healthcare's restrictions on these conflicts are at best baby steps in the right direction.

Note that the new policy only affects a small number of people.  Liz Kowalczyk wrote, "the policy affects roughly 25 vice presidents, clinical department heads, and other top executives...."  So it neither affects lower ranking clinical leaders, or Partners' own board.

The policy's limit on directors' compensation ($500/ hour, or $5000/ day, assuming a 10-hour day, which would annualize to $1,040,000 per year assuming an 8-hour day, and $1,300,000 assuming a 10-hour day), might be comparable to the current exaggerated earnings of top Partners' executives, but substantially exceeds the compensation of most practicing physicians or medical academics, and hence does not seem to be a very significant limitation.  Requiring payments be made in cash rather than stock options might be regarded as an improvement rather than a restriction. 

The policy does not restrict the number of boards a Partners leader may sit on.

Finally, the policy does not do anything substantial to manage to conflicts generated by board members' legal obligations to their companies and stockholders, nor their tendency to become cronies of top corporate management. 

Are Conflicts of Interest Even a Problem?

While acknowledging the new, slightly restrictive policy, top Partners leaders did not seem to want to acknowledge that there is any downside to academic medical leaders sitting on health care corporations' boards.  For example,

'We thought it was a very good idea to have institutional officials serve on boards, but we did not want to have personal enrichment,' [former Partners Chief Academic Officer and current Professor] Dr. [Eugene] Braunwald said.
[NY Times]

Note that for most people, $500/hour appear to be personally enriching.  

Also,

'These relationships also have significant benefits,' ... [Christopher Clark, director of Partners Office for Interactions with Industry] said. 'They give us some insight into how the companies work and how they are doing, and making sure the companies are aware of the academic perspective.'
[Boston Globe]

Mr Clark did not note the many other ways to see how companies work and to communicate the academic perspective to them which do not involve academic leaders being paid by these companies.

Dr Dennis Ausiello, chief of medicine at Massachusetts General Hospital, said

Pfizer and other companies were crucial to translate academic research into drugs that benefit patients. At Partners, he has oversight of a research, ventures and licensing office that seeks to commercialize the hospitals’ intellectual property.

'I’m very proud of my board work,' he said. 'I’m not there to make money. I certainly think I should be compensated fairly and symmetrically with my fellow board members, but if my institutions rule otherwise, as they have, I will continue to serve on the board.'

While drug companies do make products that are good for society, could they not continue to do so without academic leaders on their boards? If Dr Ausiello did not care about his compensation, why did he continue to accept it?

So it is hardly clear that Partners Healthcare's leadership even now would credit Harvard Professor Emeritus and Editor Emeritus of the New England Journal of Medicine Dr Arnold Relman's point of view,

I think that’s a gross conflict for an official of an academic medical center to be on the board of a pharmaceutical company.

It’s happening more and more around the country. If it isn’t stopped, I think the academic institutions are going to lose the confidence of the country and the government and they will no longer deserve the tax exemption or anything else. They will be part of industry itself.

Indeed. But at least now, the issue may be apparent to more people than just the dedicated readers of Health Care Renewal.  The more it is discussed, the more academic medical leaders may realize how much credibility they would gain if they were seen as impartial experts and dedicated physicians, rather than the protectors of corporate stockholders, or worse, the cronies of corporate bosses.

ADDENDUM (4 January, 2010) - see also comments by Professor Margaret Soltan on University Diaries, Merrill Goozner on the GoozNews blog, and Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.

ADDENDUM (6 January, 2010) - see also comments by Dr Daniel Carlat on the Carlat Psychiatry Blog.

"Man's Best Hospital," Run by the Boss of a MECC (Medical Education and Communications Company)?

In January, 2009 we posted about how the CEO of Blue Cross Blue Shield (BCBS) of Massachusetts and of Partners HealthCare, made a secret oral agreement that BCBS would pay Partners at a higher rate than that given to other hospitals.

Why BCBS would want to pay so much to this one hospital system was never clear. Partners does include some extremely prestigious hospitals, including the Brigham and Womens Hospital, and the Massachusetts General Hospital, ("Man's Best Hospital" in the House of God), but there are some other very prestigious teaching hospitals in Boston that were not blessed by BCBS' largess.

We speculated about one possible cause: the leadership of the two organizations may have felt they had more in common with each other than with the constituencies of their own organizations. A few leaders of each organization had direct ties to the other. Many leaders of both organizations were simultaneously leaders of finance, the same sector that has brought us what is now called the Great Recession. Leadership of both organizations had conflicted loyalties. The organizations' CEOs at the time, and many members of their boards had divided loyalties and apparent conflicts of interest. For example, Jack Connors, the chair of the Partners HealthCare board, is also the Chairman Emeritus of marketing communications company Hill, Holliday, Connors, Cosmopoulos Inc, whose clients include pharmaceutical and pharmacy benefits manager CVS / Caremark, and is also a member of the board of directors of Covidien, a medical device company.

The Boston Globe just published a report that Mr Connors had even more intense conflicts that had not heretofore been made public.

He's chairman of New England's largest healthcare company, and that position atop Partners HealthCare has tested the limits of Jack Connors's considerable corporate dexterity.

Though he has no background in medicine, Connors has been Partners' chief overseer, champion, and its most public face for 13 years.

[One board member] is the cofounder and chairman emeritus of Partners' advertising firm. That would be Jack Connors. And that potential point of conflict has been disclosed....

But to the chagrin of some former board members, never brought up for board review was Connors's stake in a leading medical education firm whose sale in 2004 made Connors a very wealthy man.

Nor has the board notified public officials of Connors's ownership of a fledgling home healthcare firm that has directly solicited Partners' hospitals for business.

Connors and top Partners officials defended the decision not to publicly disclose Connors's potential conflicts, saying that because Partners did not directly contract with either of Connors's firms there were no conflicts to report. Connors also defended his right to be an entrepreneur in the healthcare business while also chairing Partners' board, and strongly denied ever using his position for personal or financial advantage.

The larger company, M/C Communications, grew to become the biggest commercial provider of continuing education to physicians in the decade between its inception in 1994 and when Connors sold it in 2004. It profited hugely from an exclusive commercial relationship it maintained with Harvard Medical School, whose faculty teach at seminars the company holds. Partners' signature institutions, Massachusetts General Hospital and Brigham and Women's Hospital, are major teaching affiliates of Harvard Medical School.

In addition, M/C Communications benefited financially from millions of dollars in sponsorship revenue paid it from major pharmaceutical firms eager to play to this professional audience.

Connors said he was under no obligation to disclose his ownership of M/C Communications to the Partners board. He said that while there is an 'affiliation' between Harvard Medical School and the two Partners hospitals, there is no formal contract between them.

Connors said he informed Partners executives of his ownership of M/C Communications, and that they determined it did not warrant disclosure to the full Partners board.

'There is no contract between Partners and Harvard,' Partners said in a statement to the Globe.

Connors made a name for himself as an executive with Hill, Holliday, Connors, Cosmopulos, the Boston advertising company that he helped found and guided throughout a long career. Less well known is that he made most of his fortune from M/C Communications, which he sold to Bain Capital for $450 million in 2004.

The sale was the largest of a private healthcare-related company in Massachusetts that year, according to TM Capital Corp., an investment banking company. Connors, who led an investor group that bought the firm outright for $13 million in 2000, made about $250 million from its sale.

After his 2004 windfall, he founded a company that helps elderly patients readjust to life at home after a hospitalization.

That company, Dovetail Health, has - Connors acknowledged - solicited business from hospitals owned by Partners. And Connors confirmed that after Dovetail executives failed to convince Blue Cross Blue Shield of Massachusetts to contract with the firm, he personally spoke to the giant insurer's president, Cleve L. Killingsworth, on Dovetail's behalf. Partners and Blue Cross Blue Shield regularly negotiate over $2.5 billion worth of medical business a year.

Connors acknowledged in an interview that it might have appeared 'inappropriate' to some for him to pitch Killingsworth. But he said the conversation stemmed from a shared belief that new ways must be found to reduce frequent return trips of elderly patients to the hospital. More recently, however, he said he does not believe his approach to Killingsworth was inappropriate.

So let's try to recap this.

While Jack Connors has been chairman of the board of Partners HealthCare, the largest and most prestigious hospital system in Massachusetts, he also ran an advertising agency that did business with Partners, and has been on the board of Covidien, a medical device company. Both of these relationships he disclosed to his fellow board members, although no one seemed troubled by them.

However, while a Partners board member, Connors was also the founder, and ultimately profited very handsomely from the sale of M/C Communications. M/C Communications apparently begat M/C Holding Corporation, which in turn owns M/C Communications and Pri-Med Institute LLC. M/C Communications now describes itself as " established in 1994 and has become a leading provider of medical education event management solutions for health care professionals and others around the globe." M/C Communications runs Pri-Med, which is described thus: "Pri-Med is a platform for science and medicine that includes meetings, resources, online, and new media tools designed to meet the information and education needs of today’s practicing physician." Pri-Med markets itself to industry, presumably the pharmaceutical, biotechnology, and device industry, "Sixty percent of doctors’ offices restrict rep access, making it more challenging than ever to get in front of your customers. But with Pri-Med, you get to meet clinicians in a professional environment where they seek you out. More than 66% of attendees say they come to Pri-Med events to meet you, industry representatives." So Connors' company was a medical education and communication company (MECC), which provided what appeared to be educational programs to physicians that in fact were also sold to the health care industry as marketing opportunities.

So Partners HealthCare, which includes two of the world's most prestigious teaching hospitals, has been run by the boss of a MECC? Say it ain't so.

Not only did Connors own a company that had an exclusive contractual relationship (as described above) with the Harvard faculty who staff the main Partners HealthCare hospitals, that company was engaged in marketing the products of sponsoring drug and device companies disguised as education. Finally, Connors denied that this presented any kind of conflict of interest, because Partners HealthCare has no explicit contract, just an "affiliation" with Harvard Medical School.

Finally, just to ice the cake, Connors' latest venture is a home health care company that did business with Partners, and tried to do business with BCBS, spearheaded by Connors' direct conversations with the BCBS CEO.

Jack Connors thus seems to have just become the latest poster boy for leaders of health care organizations who put their personal financial interests ahead of their responsibilities to those organizations, and function as a power elite whose collective interests trump those of the constituents of the organizations they run.

Quoting from BoardSource, the main duties of the leader of any US not-for-profit are:

Duty of Care

The duty of care describes the level of competence that is expected of a board member, and is commonly expressed as the duty of 'care that an ordinarily prudent person would exercise in a like position and under similar circumstances.' This means that a board member owes the duty to exercise reasonable care when he or she makes a decision as a steward of the organization.

Duty of Loyalty

The duty of loyalty is a standard of faithfulness; a board member must give undivided allegiance when making decisions affecting the organization. This means that a board member can never use information obtained as a member for personal gain, but must act in the best interests of the organization.

Duty of Obedience

The duty of obedience requires board members to be faithful to the organization's mission. They are not permitted to act in a way that is inconsistent with the central goals of the organization. A basis for this rule lies in the public's trust that the organization will manage donated funds to fulfill the organization's mission.

By leading companies that did direct business with Partners and its staff, and failing to disclose that he was doing so to his fellow Partners board members, Connors appeared to have violated the Duty of Loyalty.

By running a MECC that helps drug and device companies market to physicians in the guise of education, using faculty from the academic teaching hospitals that he lead, Connors seems to have mocked the mission of the academic hospitals within Partners, and thus appeared to violate the Duty of Obedience.

This episode certainly does suggest that health care, and the organizations involved in this case, are lead by an "old-boy network," as one person interviewed for the Globe article suggested. More than just an old-boy network, they seem to be lead by chummy members of the power elite whose collective personal interests supersede the missions of the organizations they are supposed to steward. When this happens, is it any surprise that health care becomes less accessible, more expensive, and of lower quality?

Yet challenging the power elite that are increasingly revealed as controlling much of health care seems to be something that one cannot talk about when discussing health care reform. However, failing to address this problem will likely doom any effort, no matter how well intentioned, to improve health care.

Hat tip to and see comments by Alison Bass on the Alison Bass Blog.

ADDENDUM (3 June, 2009) - See also comments by Dr Daniel Carlat on the Carlat Psychiatry Blog.

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.