Showing posts with label Steward Health Care. Show all posts
Showing posts with label Steward Health Care. Show all posts

Thursday, April 02, 2020

During the Pandemic, Follow the Money: Hospitals and Health Care Provider Organizations Put Money Ahead of Clinician and Patient Safety, Public's Health

As the coronavirus pandemic continues its relentless course, we see many examples of selflessness and courage. They come from huge numbers of people keeping their social distance, to those in essential work, including primary care and public health professionals, facing long hours and increased risk, to first responders and hospital based doctors, nurses and other health professionals facing even longer hours, more risk, and the sorrows of sick and dying patients.  We also see economic hardships to many, including layoffs, lost wages, and closed small businesses. 

However, in the commercialized and dysfunctional US health care system, whose theme, like that of The Apprentice, should be "For the Love of Money," we see some stark contrasts. 


[For the Love of Money, the O'Jays]

So to understand why things keep going so wrong, we need to follow the money.  Let us consider some recent cases, roughly in order of when they came to light.


Hospitals Fail to Order Ventilators for Predicted Surge in Coronavirus Patients

As reported by the Washington Post on March 18, 2020, the background is now all too familiar:

Mechanical ventilators, which help patients breathe or breathe for them, are considered critical to the nation’s effort to contain the worst effects of the pandemic and avoid a crisis like the one Italy is facing. Depending on how bad the coronavirus pandemic gets in the United States, individual cities could come up thousands of ventilators short as patients flood hospitals, researchers say.

However,

Orders have not flooded in, she said, because most hospitals can’t afford to increase inventory of expensive equipment for what could turn out to be a short-term event.

'The risk is that they’ll never be used, and hospitals can’t eat the cost,' she said. 'Most hospitals in this country are not profitable.'

And why do hospitals not have any extra ventilators in case of a surge in demand?

Keeping backup ventilators is impractical for most hospitals because of the need to service and maintain them and train additional staff during rare events when they are needed, said Lewis Kaplan, a trauma surgeon at the University of Pennsylvania and president of the Society of Critical Care Medicine.

'It’s like taking military planes out of your boneyard,' he said. 'There can be a variety of economic disincentives to be prepared for the worst thing that can happen.'

Left unsaid is how the dollars saved might be balanced against any lives that could be lost were backup ventilators unavailable. Left also unsaid is whether the hospital could have bought the ventilators by using money earmarked for other purposes, like public relations, marketing, or increasing the compensation of top executives.   

Note that these comments came from early March, before US hospitals were overwhelmed.  They suggest that hospital leadership was not willing to sacrifice the short-term bottom line to be better prepared for a catastrophic event, despite, the mission of the hospital that should place the care of patients first, way ahead of short-term financial issues.

The reason is likely that most hospitals, like other health care organizations, are in the grip of managerialism.  Per an article from the June, 2015 issue of the Medical Journal of Australia (look here):
- businesses of all types are now largely run by generic managers, trained in management but not necessarily knowledgeable about the details of the particular firm's business
- this change was motivated by neoliberalism (also known as economism or market fundamentalism)
- managerialism now affects all kinds of organizations, including health care, educational and scientific organizations
- managerialism makes short-term revenue the first priority of all organizations
- managerialism undermines the health care mission and the values of health care professionals

The dangers of managerialism are becoming more apparent in this era of the pandemic.

Hospitals Still Allowing Elective Procedures, Despite Use of Resources that might be Needed for Pandemic Preparation, and Risks of Disease Transmission

An anonymous post on the KevinMD blog on March 24, 2020 suggested that hospital managers are pressuring doctors to do elective procedures, despite guidelines suggesting such procedures should be on hold during the pandemic:

Despite the guidelines issued from the American Society of Anesthesiologists, The Anesthesia Patient Safety Foundation, The American College of Surgeons, and the Center for Disease Control, many hospitals are continuing with elective cases during the COVID-19 crisis. Or worse, they are hiding behind the facade of canceling or postponing elective cases. At many hospitals, a tiered system of urgency allows leeway to surgeons or family to manipulate or distort the urgency by overplaying symptoms.

Furthermore,

For many of you, your hospital administration has forced your hand to continue operations or made examples of you if you disagree. There is pressure from your chiefs who are also likely being intimidated at the risk of losing their jobs.

The author noted that continuing elective surgery has risks, and gets in the way of pandemic preparedness

In addition to gambling on my very existence, every case you participate in that is not absolutely necessary right now is putting your community at risk. We do not have the luxury of practicing social distancing in our job. Every family that comes into the hospital is a potential vector for this virus, and we have no choice but to do the cases and then potentially spread this to our patients or our own family. We are sending mixed messages to our family by encouraging them to stay home in every aspect except this one. Every case you leave on the board requires us to use gloves, gowns, masks for all parties in the operating room. In addition, we must use anesthesia circuits, airway interventions, and medication that will be critically important in the coming days. As I alluded to earlier, even cases that do not typically require intubation might require it. In the same vein, intubation does not guarantee extubation. You must consider that your patient may need postoperative ventilation.

The implication is that the hospital managers are putting short-term revenue ahead of patient and health care professional safety, and using intimidation to do so.  Why? See the comments on managerialism above.

Within days, specific examples of the pressure by hospital management to continue performing elective procedures have appeared.

For baseball fans: on March 31, 2020, NJ.com reported:

On March 19, the Boston Red Sox learned ace Chris Sale needed Tommy John surgery. Five days later, New York Mets right-hander Noah Syndergaard found out he needed Tommy John surgery as well. Syndergaard went under the knife two days later. Sale had his operation on Monday, according to the Boston Globe.

There was no question both procedures were elective

When Red Sox chief baseball officer Chaim Bloom announced Sale’s impending surgery, he admitted the southpaw’s operation was elective. 'Obviously something we’re mindful of,'

Syndegaard's surgeon tried a little spin:

One of Syndergaard’s doctors said the right-hander’s operation was completely justified. According to the Mets, Dr. Neal ElAttrache gave Syndergaard a second opinion and defended Syndergaard going under the knife because the 27-year-old pitcher’s 'livelihood is at stake.'

The teams apparently set up the procedures to avoid hospitals and states where they were discouraged.

Each state has its own standards for medically-necessary procedures. Syndergaard went to Florida for his operation because at the time, the Sunshine State was allowing such operations whereas New York was becoming the epicenter of the coronavirus fight.

The Boston Globe reports Sale went to California for his operation because of the state’s lack of restrictions on procedures. His operation was performed by Dr. ElAttrache, who as we said, sees no problem with these surgeries.

In the modern sports world, team owners have shown they are in it for the money.  However, the physicians and doctors who collaborated to provide obviously elective surgery on wealthy, high-profile athletes also seemed to be putting money ahead of the public's health.

Some hospital systems seemed particularly cavalier about elective procedures. On April 1, USA Today reported,


This month, nearly 300 University of Pittsburgh Medical Center medical staff members – the majority of them residents and anesthesiologists – signed a seven-page letter outlining concerns about elective surgery and routine visits. It was sent to the health systems' management March 21, but some elective procedures have continued, according to two doctors who asked to remain anonymous.

Employees reported backlash from management because of the letter, one of the doctors said.

A second example,

Facilities allowing nonemergency surgeries include Steward Health Care. The more than 30-hospital chain, which operates in states including Texas and Louisiana, said in a statement that it will 'continue to support all scheduled surgeries and procedures, and we will leave the decision on whether it is appropriate to proceed now to our physicians and their patients.'

Steward said it is 'committed to preserving access to scheduled procedure time for as long as possible.' Steward did not respond to a request for comment Tuesday.

Just to reiterate,

Doctors and hospital staff 'have been put in a situation of deliberate sacrifice and are told to put our personal safety aside for monetary reasons,' said [Dr Nivedita] Lakhera, who has written two books on mental health and healing. 'When hospitals do nonemergency procedures, we see them as being OK with our death over their greed about short-term revenue. We resent that, but we are powerless, and we are forced to be there anyway.'

Note that UPMC is something of a poster child for managerialism in health care.  We have frequently discussed the hospital system management's ethical misadventures, led by a business-trained generic manager who has received outlandish compensation.  Our most recent round-up of the troubles at UPMC was in 2015.  

Furthermore, note that Steward Health Care is actually a for-profit hospital system owned by a private equity group, Cerberus Capital Management.  Thus it exemplifies another feature of the US commercialized health care system, financialization.  Steward Health Care, as run by Cerberus, was one of the earlier leaders in hiring corporate physicians, whom it pressured to avoid "leakage" of patients to other hospitals and doctors, even if some might question whether the care provided elsewhere might be better for those patients (look here).  The multimillion dollar a year CEO of Steward suggested the health care had become a commodity, objectionable to those who thought that health care should be a mission-based calling (look here). A 2016 summary of Steward's operational misadventures is here. As an aside, Steward was caught up in a dodgy scheme called World Health Networks to sell travelers quick analyses of their health via kiosks.  The scheme involved shady foreign participants, and a number of associates of ... Donald Trump (look here). 

Despite their sometimes dark pasts, both UPMC and Steward have remained major hospital systems, so maybe it should be no surprised that they are now seen as involved in ethically dubious activities that are hampering coronavirus preparedness, and possibly putting patients and health care professionals  at risk.


Hospitals Cutting Pay of Frontline Health Care Professionals Who Are at Personal Risk from Coronavirus

On March 27, 2020, the Boston Globe reported:

Emergency room doctors at Beth Israel Deaconess Medical Center have been told some of their accrued pay is being held back. More than 1,100 Atrius Health physicians and staffers are facing reduced paychecks or unpaid furloughs, while pay raises for medical staff at South Shore Health, set for April, are being delayed.

In particular, at the Beth Israel Deaconess Medical Center,

the physicians group announced that effective April 1, it is suspending employer contributions to the retirement plan for doctors in the group, as well as at an affiliated group that staffs many other hospitals in the state, Associated Physicians of Harvard Medical Faculty Physicians at BIDMC. There are 1,600 doctors in both groups, and the majority of them are affected by the cutback, according to a company spokesperson.

The physicians group also told ER doctors this week that it is withholding and deferring half of their quarterly 'bonuses' scheduled for March 30, according to another e-mail shared with the Globe. Those payments, which can reach tens of thousands of dollars per quarter, are based on extra shifts or additional patients the ER doctors took on months earlier, according to the doctors.

'The bonus is just pay we’ve earned,' [ED Doctor Matt] Bivens explained. 'It’s analogous to re-branding ‘overtime pay’ as ‘your bonus.’' Meanwhile physicians in other specialties in the group will not be receiving bonuses at all on March 30, according to the e-mail.

However,

'This is at a time when many of us have moved out to live like lepers separate from family to prevent spreading infection, and have already been working huge extra hours trying to scrape together [personal protective equipment] and otherwise brace for COVID-19,' said Dr. Matt Bivens, an ER doctor at Beth Israel Deaconess Medical Center and St. Luke’s Hospital in New Bedford.

What was the rationale? The need to preserve short-term revenue, of course:

'Like many other health care and physician organizations, the economics of the care we provide has changed quickly and dramatically,' wrote Dr. Alexa B. Kimball, chief executive of the Harvard Medical Faculty Physicians group practice at Beth Israel Deaconess Medical Center

I could find nothing in the article suggesting that the hospitals were cutting the pay of management personnel, however.  It seems particularly egregious to cut the pay of the health care professionals working the hardest and exposed to the most risk from coronavirus, while leaving the pay of already extremely well-compensated managers intact (if that is, in fact, the case).  But that's how the managerialist cookie crumbles....

Private Equity Owned Physician Staffing Company Cutting Pay of Front-Line Health Care Professionals Who Are at Personal Risk from Coronavirus

On March 31, 2020, ProPublica reported:

Most ER providers in the U.S. work for staffing companies that have contracts with hospitals. Those staffing companies are losing revenue as hospitals postpone elective procedures and non-coronavirus patients avoid emergency rooms. Health insurers are processing claims more slowly as they adapt to a remote workforce.

'Despite the risks our providers are facing, and the great work being done by our teams, the economic challenges brought forth by COVID-19 have not spared our industry,' Steve Holtzclaw, the CEO of Alteon Health, one of the largest staffing companies, wrote in a memo to employees on Monday.

The memo announced that the company would be reducing hours for clinicians, cutting pay for administrative employees by 20%, and suspending 401(k) matches, bonuses and paid time off. Holtzclaw indicated that the measures were temporary but didn’t know how long they would last.

In a follow-up memo sent to salaried physicians on Tuesday night, Alteon said it would convert them to an hourly rate, implying that they would start earning less money since the company had already said it would reduce their hours. The memo asked employees to accept the change or else contact the human resources department within five days “to discuss alternatives,” without saying what those might be. The memo said Alteon was trying to avoid laying anyone off.

'It’s completely demoralizing,' said an Alteon clinician who spoke on the condition of anonymity. 'At this time, of all times, we’re putting ourselves at risk but also putting our families at risk.'

So many ED physicians are neither private practitioners or hospital employees, but work for medical staffing companies, to whom hospitals have outsourced ED functions.  Presumably, hospital managers did this based on management dogma favoring outsourcing as a way to increase financial efficiency, thus improving the hospitals' revenue.  Here we see managerialism in action once again.

But wait, there is more.... It is not merely that the ED physicians in this case are employees of an organization led by managers with business training, but no health care background.  In fact, they work for for-profit companies owned again by private equity firms:

Private equity investors have increasingly acquired doctors’ practices in recent years, according to a study published in February in JAMA. TeamHealth was bought by Blackstone Group in 2016; another top staffing firm, Envision Healthcare, is owned by KKR. (The staffing companies have also been implicated in the controversy over 'surprise billing.')

What about Alteon?

Alteon and its private-equity backers, Frazier Healthcare Partners and New Mountain Capital, didn’t immediately respond to requests for comment.


ED clinicians now faced with pay cuts while they work harder, face more hardships, and are subject to more risks, were not happy.

'It’s completely demoralizing,' said an Alteon clinician who spoke on the condition of anonymity. 'At this time, of all times, we’re putting ourselves at risk but also putting our families at risk.'

So,

'I’ve completely lost trust with this company.'

The big question is why that clinician ever thought a private equity company would put patient care, and patient and clinician safety ahead of its own revenue?

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

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


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

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

The management company has two paths to achieve its financial targets. It can either reduce costs sharply or look for ways to increase revenue.
A private equity firm running a hospital is likely to be even more focused on putting short-term revenue ahead of all else, including patient's and the public's health, and ahead of health care professionals' safety and welfare.

Summary

We have been ranting about the perils of the US commercialized, dysfunctional health care system for a long time, unfortunately often with little effect.  But expect these perils to loom very large when the health care system and the nation's public health are under a deadly threat, like that from a pandemic.  I hope most of us will survive this pandemic.  When it is over, we have to rethink our societal devotion to neoliberalism, (or market fundamentalism) (look here).

We could start by banning the commercial practice of medicine, as we did in the past, and banning for-profit corporations from owing hospitals, or providing direct care to patients.

Until we do, we will continue to live in a dystopic version of The Apprentice.

 

Thursday, July 27, 2017

The Mysterious Demise of World Health Networks - Fugitive Kazakhs, the Trump Organization, Dodgy Visa Applications, Oh My

A common justification for a market fundamentalist approach to health care is the promise of innovation.  Providing market-based incentives will inspire generations of entrepreneurs who will bring out new and wondrous health care products and services, or so the story goes.  So we are now daily bombarded with media coverage of the latest innovations by such entrepreneurs.  But after the initial hype these entrepreneurs and their innovations often seem to fade away.

I stumbled on a recent media story that suggests the outer limits of what may go wrong with such innovations.  Let me try to tell the story chronologically.

World Health Networks and the Airport Promotion of Healthy Behaviors

In 2013, Masslive reported on the newest innovation, kiosks providing health evaluations:

Holiday travelers passing through Boston's Logan International Airport can now get an impromptu health report while waiting for their flights.

Four new health stations that include detailed walking paths through the airport and a machine that measures blood pressure, body mass index and weight, were installed Wednesday in three terminals.

The intervention was the product of collaboration between various commercial health care corporations.

For-profit hospital system Steward Health Care is sponsoring the stations for one year as part of a new health and wellness initiative at the airport.

Nic Denyer, executive vice president of machine manufacturer World Health Networks says next year, people may be able to test for diabetes and glaucoma in the future.

A press release from nLIVEnHealth included promises of "potential life-saving services" from the CEO of World Health Networks:

'The core objective of our partnership is to tackle heart disease through easy access, early detection, education and empowerment of individuals,' says Lon von Hurwitz, President & CEO of World Health Networks. 'We provide this service free of charge to both airports and passengers through associated sponsorships. Airports will therefore be able to offer their customers potential life-saving services.'

Furthermore, Mr von Hurwitz said,

Individuals can begin to take more control of their own personal health and wellness, and airports/airlines can also benefit their employees with this service on site. The sponsorship of the health stations allows prominent companies engaged in the healthcare industry to impart information about meaningful health products and services to a vast user base. It is expected that over 1 billion air passengers will have access to the health stations when fully deployed in the next two years. This audience also provides the enormous and dynamic opportunity for mobile applications and the portability of personal health records that will be subscriber supported.


The press release noted the involvement on nLIVEnHealthalong with Airport Marketing Income (AMI) too:

With successful installations already at JFK’s Jet Blue Terminal, Houston George Bush Intercontinental and Mineta San Jose International, WHN has teamed up with nLIVEn & Airport Marketing Income (AMI) to provide a unique advertising platform for one of Massachusetts’s leading Health Care providers, Steward Health Care System at Boston Logan International.

Little Known About the Intervention's Effects

So here was an intervention apparently meant to empower people to a healthier life style in a way that could "tackle heart disease" and even be "life-saving."  What was not to like?  Of course, none of these messages suggested the existence of any evidence that the intervention could change behaviors, and that the behaviors could reduce the prevalence or severity of heart disease, much less improve life expectancy.

Further was the goal here really to improve health outcomes, or to advertise?

I was unable to find anything resenbling systematic evidence about health outcomes, but did find a January, 2014 blog post offering a somewhat jaundiced review from a marketing expert who traveled through Logan Airport.

If you travel through Boston Logan Airport, you know that Dunkin Donuts ads and banners are quite prevalent. If you’ve been through there lately, you may also be aware that Steward Healthcare has launched a Health & Wellness Sponsorship Program. The last couple of times that I flew in through the JetBlue Terminal I came into contact with the campaign. The first thing I noticed were Steward Healthcare announcements over the public address system. It struck me that the oxymoron presented by Steward’s health & wellness campaign and the Dunkin Donuts marketing speaks to the challenges we have as a society when it comes to healthy living. Of course, the other thing that struck me is that Steward’s campaign feels a lot more like a branding initiative rather than a true health and wellness program. As a frequent business traveler, the last thing I need is for a health system to tell me that I need to do more walking in airports – and from my observations, that is the primary thrust of the marketing campaign.

So apparently fast food powerhouse Dunkin Donuts was also in on this action, causing the blogger some cognitive dissonance, given the caloric content of their offerings.




(Dunkin Donuts shop in Peru)


As a somewhat frequent flier, I also agree that urging someone running through the airport to walk more seems a bit over the top.


So to summarize the story this far, a bunch of corporate entities, World Health Networks, nLIVEnHealth, and Airport Marketing Income teamed up to create a supposed health intervention that appeared more like an advertising campaign for its sponsors, for-profit hospital chain Steward Healthcare, and apparently fast food giant Dunkin Donuts.  World Health Networks boasted of the potential to reduce heart disease and even save lives, without providing any evidence to support these claims.  

After that in 2014, all was silent.  What happened to World Health Networks? I saw no further media coverage of this new innovation, much less publication of clinical evidence of its effects, until....

World Health Networks, Trump Organization Associates Felix Sater and Daniel Ridloff, Kazakh Fugitives, and Visas - Oh My

On July 21, 2017, McClatchy published a long investigative piece that provided a disconcerting followup.   It opened thus:
Two former associates of Donald Trump helped a family of wealthy Kazakh fugitives make extensive investments in the United States, some aimed at helping family members obtain legal residency here, a McClatchy investigation shows.

Felix Sater, an ex-con and one-time senior adviser in the Trump Organization, helped the Trump family scout deals in Russia. He led an effort that began in 2012 to assist the stepchildren of Viktor Khrapunov, who that year had been placed on an international detention request list by the global police agency Interpol.

Khrapunov is the former Kazakh energy minister and ex-mayor of Almaty, that nation’s most populous city. He fled to Switzerland a decade ago, after Kazakhstan’s leaders accused him and his wife of stealing government funds. They are now accused in civil lawsuits of laundering money through luxury properties, including Trump-branded condos in the Soho neighborhood New York.

McClatchy’s probe reveals that with the help of Sater and his then-business associate Daniel Ridloff, also formerly affiliated with the Trump Organization, the Khrapunov family invested millions in a short-lived company that sought to place biometrics machines in airports across the country.

The real aim of Khrapunov’s investment was obtaining US residency for at least one member of the family; the company submitted, with the help of the onetime Trump associates, at least three requests to obtain visas for foreign workers.

The McClatchy investigation reveals a deeper relationship than previously known between the former Trump Organization figures and the fugitive Khrapunovs — underscoring how little is known about many of those involved with the Trump Organization.

There is no evidence that Trump himself participated in the courting of the Khrapunovs, but the affair sheds light on the often murky activities of the associates with whom he did deals at home and abroad.

Oops.  The "short-lived company" that allegedly served as a vehicle for the sketchy Kazakhs to obtain visas was none other than World Health Networks, viz:

On the surface, a multimillion dollar investment by the Khrapunovs in a New York-based health technology company would appear to make little sense.

World Health Networks was formed from the ashes of a failed firm that had created health monitoring kiosks placed in pharmacies. The new company aimed to put similar devices in airports across the world, but first it needed capital.

Enter Sater. He was representing the Khrapunovs, who were looking for US investments, and was introduced to executives of World Health Networks through an intermediary who attended the same synagogue on Long Island, according to a person with intimate knowledge of the deal.

Company executives made a pitch to the Khrapunovs in April 2012, according to documents reviewed by McClatchy, and court documents show that the money started flowing into the New York firm soon after.

World Health Network’s business model evolved over the course of its short existence, from an early plan to attract sponsorships from health insurance companies to a later plan to sell advertising space on the machines.

'It was definitely a real company,' said Ken Williams, who helped develop the firm and sat on its board.

Sater installed Ridloff as the company’s chief operating officer, according to former employees who demanded anonymity because of several ongoing lawsuits.

McClatchy explained how World Health Networks could have been used to obtain visas for the Khrapunovs....

This much is known: Ridloff submitted three visa applications for highly skilled workers on the company’s behalf between March 2013 and March 2014, all seeking to hire foreign budget analysts.

Stopped on the street as he left his Manhattan office, Ridloff confirmed to McClatchy that the investment by the Khrapunovs – ultimately $6 million, according to court records -- was aimed at securing Kudryashova, Viktor’s stepdaughter, legal residence in the United States.

The company partnered with the Swiss-based World Heart Federation and managed to place its machines in several airports, including Detroit, San Jose and Sacramento, Calif. But former employees confirmed its revenue couldn’t keep pace with expenses.

The company spent liberally on international travel and a bloated payroll, they said, and it folded soon after funding from the Khrapunovs dried up in late 2014.

It’s unclear the visas were ever issued, or whether the Khrapunovs obtained legal U.S. residence through any other means. The State Department and Homeland Security did not immediately provide documents requested under the Freedom of Information Act about World Health Networks’ visa applications.

Elvira Kudryashova listed a Newport Beach, Calif., address on a 2016 incorporation document for an upscale toy store she owned called Anthill shopNplay. The property in Newport Beach was sold later the same year.
Note further that

On paper, Donald Trump’s business relationship with Sater ended almost a decade ago. But earlier this year, Sater re-entered Trump’s orbit when he and Michael D. Cohen, one of Trump’s personal lawyers, were involved with a Ukraine-Russia peace proposal that was presented to Michael Flynn, then Trump’s national security advisor.

Also,

This as Bloomberg reported Thursday that Trump Soho in New York, where the Khrapunovs invested, were among several Trump businesses being looked at by former FBI Director Robert Mueller in his probe of possible collusion between Russia and the Trump campaign in 2016.

Also,

Several key people in Trump’s orbit did business with the Kazakh clan, including the law firm of Trump campaign surrogate Rudy Giuliani and the Bayrock Group, which developed Trump-branded projects in New York, Florida and Arizona and was founded by Tevik Arif, a politically-connected former Soviet official from Kazakhstan.

Lincoln Mitchell, a political consultant who specializes in Russia and its neighboring countries, said virtually any investment from Kazakhstan warrants scrutiny.

'It would be hard to imagine getting Kazakh investment that wasn't close to the ruling family,' Mitchell said in a telephone interview from the former Soviet republic of Georgia.

Nursultan Nazarbayev has ruled resources-rich Kazakhstan since 1989, placing his children and their spouses in top government posts. Some of his family assets have been frozen in Switzerland, and a U.S. Justice Department settlement in 2015 spotlighted how bribes paid to senior Kazakh officials ended up in offshore accounts belonging to the Kazakh government.

Finally,

Both Sater and Ridloff had worked for Bayrock before joining the Trump Organization, Sater being one of its managing partners. Later, the two men facilitated the purchase in 2013 of three condos in the Trump SoHo for $3.1 million by companies tied to the Khrapunov children, Ilyas Khrapunov and Elvira Kudryashova. In 2012 and 2013 alone, Sater and Ridloff worked with the Khrapunovs on more than $40 million in real estate and investment deals. All came after Kazakhstan added Viktor to the Interpol wanted list in February 2012. Later, the former Trump associates and their Kazakh investors appeared to have a falling out, becoming mired in acrimonious lawsuits that ended in secret sealed settlements. Yet their business relationship appears to have continued after the settlements, and they continue to maintain a friendship via social media. Viktor Khrapunov’s wife, Leila, would be added to the Interpol wanted list later in 2012, and stepson Ilyas was added in May 2014.

The Khrapunovs – who declined to answer detailed questions from McClatchy — maintain that they are the victims of political persecution by the despotic Nazarbayev, who once offered Viktor the post of prime minister before their falling out.



Please note that based on the McClatchy article, whether the Khrapunovs were criminals or innocents fleeing from a despotic regime is not known. Or could the dispute between the regime and the Khrapunovs represent a falling out amongst cronies? Nor is it known whether top leaders of the Trump Organization, or Mr Trump himself, knew all the ramifications of what was going on.

Nonetheless, there at least appears to be a good argument that the World Health Networks' funding from the Khrapunovs depended on its potential ability to obtain visas for them and their family. Probably other aspects of its operations, including any ability to innovate in the health care sphere, were at best side effects of the main goal, and at worse window dressing.  When the company's main reason for being evaporated, so did it, and so did any chances for health care innovation, much less tangible health benefits to anyone.

But sic semper to most media hyped commercial health care innovations?  World Health Networks absorbed a lot of money, perhaps produced some visas useful to people with good or bad or indeterminate motives, produced no meaningful improvments in public health, and quietly died.  What was the use of it all?

Summary and Discussion

As we have previously discussed, based on the doctrines of neoliberalism or market fundamentalism, the US health care system is increasingly dominated by for-profit corporations.  The practice of medicine is increasingly corporate.  Hospitals and hospital systems are increasingly owned by for-profit corporations.  Health insurance is increasingly provided by for-profit companies.  Drug, device and biotechnology companies have been almost entirely commercial for a long time.  And touted as  sources of innovations, there are entrepreneurial start-ups everywhere offering new products and services.  All of this has been happening in a climate of deregulation, laissez faire, and laissez les bon temps roulez.

It may be that all this has produced a lot of innovation, but very little of it has proved to be capable of meaningful improvement in patient or public health outcomes.

Admittedly, the story above may be an extreme example.  However it does suggest that in a laissez faire envirnoment, an awful lot of churn is generated by fast buck schemes, some of which may not be entirely honest, or legal.  Furthermore, the tides of money rolling through the system may be attracting people much more interested in short-term returns than health care outcomes.  So we spend more and more, perhaps producing innovations, but without much obvious improvement in patients' or the people's health.

True health care reform might involve decreasing commercial involvement in selected aspects of health care, increasing transparency about the business operations of all health care organizations, and insisting that health innovations not be widely adapted without good clinical evidence that their benefits outweigh their harms.

For our musical interlude, The Cars, "Let the Good Times Roll," live




 

Thursday, September 29, 2016

Whose Hospitals Are They, Anyway? - Steward to Sell Off, but Continue Operating All Its Hospitals

This looks like the latest trend in the financialization of and diffusion of accountability for health care organizations.  The case involves good ol' Steward Health Care, which was the subject of quite a few Health Care Renewal posts back in the day.

Background - Caritas Christi Bought by Cerberus Capital Management, Became Steward Health Care



[Cerberus, the three headed dog, per William Blake]

Steward is what used to be Caritas Christi Health Care System, formerly a Catholic, non-profit health care system in Massachusetts.  In 2010, Caritas Christi was purchased by Cerberus Capital Management, a private equity, aka leveraged buyout firm, which was known for its not very successful run managing Chrysler (look here) and GMAC (look here).  Cerberus also had enlarging holdings in the gun industry, later expanded into the Freedom Group, and in military contracting, specifically including DynCorp which hired armed "security forces" and was involved in multiple scandals in Iraq, all of which might strike some health care professionals as inappropriate (look here and here).

Steward Health Care, as run by Cerberus, was one of the earlier leaders in hiring corporate physicians, whom it pressured to avoid "leakage" of patients to other hospitals and doctors, even if some might question whether the care provided elsewhere might be better for those patients (look here).  The multimillion dollar a year CEO of Steward suggested the health care had become a commodity, objectionable to those who thought that health care should be a mission-based calling (look here).

After Steward consolidated, operational misadventures began.  In 2013, it closed the pediatric unit at Morton Hospital (look here).  In 2014, it closed Quincy Hospital, despite promises that it would expand health care services, and specifically not close that hospital so quickly (look here).  Starting in 2014, Steward stonewalled state requests to disclose financial data as required by state regulations after the private equity takeover (look here).  In 2016, Steward continued to withhold financial data (look here), and closed the short-lived family medicine residency program at Carney Hospital,  amidst complaints by the residents about poor organization, and inadequate numbers of faculty (look here).

Steward to Sell All its Hospitals, but Keep Running Them

This week, the Boston Globe reported a stunning example of financial engineering:

Steward Health Care System said Monday that it lined up $1.25 billion from a real estate investment firm that will help the Boston-based company finance a national expansion, pay off debt, and return money to the private equity firm that bought it almost six years ago.

Steward said Medical Properties Trust Inc. would buy all of its hospital properties for $1.2 billion and pay $50 million for a 5 percent equity stake in the company. Steward will lease the properties from MPT, based in Birmingham, Ala.

Note that nearly all the "financing" was obtained by selling all the hospital properties, which somehow sound like the core assets of a hospital system.

Of course, current Steward management thought it was a great idea:

Steward’s chief executive, Dr. Ralph de la Torre, said the MPT investment will give Steward a second source of capital funding and allow it to grow its model of community-based care in other states. 'This validates the model,' he said in an interview.

Presumably he was talking about a financial model, maybe the model used by private equity firms (see below).  It did not appear that this model had anything to do with providing health care to patients.

On the other hand, perhaps Dr de la Torre was enthused because he stood a chance of personally profiting from this deal, which

is also designed to allow top Steward leaders to have a 'substantially larger stake' in the company.

The implication is that Dr de la Torre would end up with some piece of Steward, Cerberus, and/or MPT.

Furthermore, the deal apparently would let Cerberus Capital Management recover all the money it initially put into its buyout of Caritas Christi:

The entire initial investment to Cerberus will be paid back, but the amount is proprietary, de la Torre said. The deal will also pay down all of the company’s $400 million in debt, he said.


This would apparently now render the initial take-over of Caritas Christi financially risk-free for Cerberus Capital Managment, but perhaps not risk-free for patients and health care professionals (who essentially were not mentioned in the article.)  

Summary - What Happens When Private Equity Owns Hospitals

We have previously described the private equity playbook here, and here.  The main points were:

-  Private equity is just the new name for leveraged buyout firms (the type of firm described the book, and later movie Barbarians at the Gate.)

-  Therefore, when they buy out firms (e.g., the primary care practices discussed above), they use borrowed money.

-  But they leverage in two senses.  Once firms are bought, the private equity owners makes the firms take out further loans, and the money from them may go back to the owners, usually in the form of a special dividend, to pay down the debt originally incurred by the private equity owners.  This leaves the bought out firms heavily in debt, but frees the private equity firm from its original debt.  If the firm is eventually sold, the new buyers take over the debt.  In a worst case scenario, however, the bought out firm goes bankrupt, the private equity's firm stock in it becomes worthless, but the private equity firm need not be responsible for its financial obligations.

-  If the private equity firm desires more money while it still owns the acquired firm, it may sell parts of it off.

-  To make the finances of the acquired firm look more attractive to the next buyer, the private equity firms often undertakes short term cost cutting measures that may involve layoffs, increased workload on remaining workers, etc.

Other dark aspects of private equity are discussed on the Naked Capitalism blog here.


So Steward Health Systems, which bought out by Cerberus Capital Management, has now largely followed this playbook.  Cerberus initially infused hundreds of millions into Steward, ne Caritas.  Steward then closed facilities and programs, and otherwise cut costs.  Now Steward is going to sell off its biggest assets, the actual hospital facilities that one might think are at the core of hospital systems.  Doing so apparently would allow Cerberus to at least break even on the deal, while still remaining in control.


But now Steward Health is split.  It is still owned by Cerberus.  Its major facilities would be owned by Medical Properties Trust Inc.  Apparently, Steward would have no assets other than its employees.  Of course some employees, that is, top  management, would be more equal than others, since they are likely being paid millions in compensation, and would have the opportunity to enlarge their stakes in "the company," although whether that company is Steward, Cerberus, or even MPT is not clear.


Thus, a hospital system which ostensibly exists to take care of acutely and chronically ill patients, often in their hours of need and vulnerability, would now be split among multiple corporate entities.  Who woud actually be in charge of upholding the mission?  Who would be accountable when things go wrong?  Those questions are not clear.

But it does seem likely that top executives of Steward, Cerberus Capital Management, and perhaps Medical Properties Inc stand to personally gain from this bold bit of financialization.  Whether patients may benefit, or health care professionals work and ability to care for patients might be facilitated by all this is not clear, and was not addressed in the current article.

As we have said again and again,...

Physicians need to realize that to fulfill their oaths to put patients first, they have to reduce the influence of rich and powerful organizations with other agendas, like health care corporations, and especially corporations owned by private equity.  The metastasis of private equity into the corporate practice of medicine and into hospitals and hospital systems should make us all rethink the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

ADDENDUM (1 October, 2016) - This post was republished, with a very insightful introduction by Yves Smith, on the Naked Capitalism blog

Sunday, August 16, 2015

With 10 Health Care Executives on it Board, US Chamber of Commerce Defends Big Tobacco Abroad

Tobacco, especially smoked in cigarettes, is generally recognized by health care professionals as having health hazards that greatly outweigh its benefits to society.  Therefore, most health care organizations discourage tobacco use, and many have developed tobacco free policies.

However, the tobacco industry has its powerful supporters.  A recent NY Times investigative report, and a report entitled "Blowing Smoke for Big Tobacco," documented how the US Chamber of Commerce has defended the interests of tobacco companies overseas.  The apparent paradox here is that the leadership of the US Chamber of Commerce includes leaders of large health care organizations.  So far this paradox has not been explained by the parties involved.

How the US Chamber of Commerce Promotes Tobacco Interests Abroad

The NY Times Articles

On June 30, 2015, the NY Times published a wide ranging report on the pro-tobacco activities of the US Chamber of Commerce,

From Ukraine to Uruguay, Moldova to the Philippines, the U.S. Chamber of Commerce and its foreign affiliates have become the hammer for the tobacco industry, engaging in a worldwide effort to fight antismoking laws of all kinds, according to interviews with government ministers, lobbyists, lawmakers and public health groups in Asia, Europe, Latin America and the United States.

The U.S. Chamber’s work in support of the tobacco industry in recent years has emerged as a priority at the same time the industry has faced one of the most serious threats in its history. A global treaty, negotiated through the World Health Organization, mandates anti-smoking measures and also seeks to curb the influence of the tobacco industry in policy making. The treaty, which took effect in 2005, has been ratified by 179 countries; holdouts include Cuba, Haiti and the United States.

Facing a wave of new legislation around the world, the tobacco lobby has turned for help to the U.S. Chamber of Commerce, with the weight of American business behind it. While the chamber’s global tobacco lobbying has been largely hidden from public view, its influence has been widely felt.

Letters, emails and other documents from foreign governments, the chamber’s affiliates and antismoking groups, which were reviewed by The New York Times, show how the chamber has embraced the challenge, undertaking a three-pronged strategy in its global campaign to advance the interests of the tobacco industry.

In the capitals of far-flung nations, the chamber lobbies alongside its foreign affiliates to beat back antismoking laws.

In trade forums, the chamber pits countries against one another. The Ukrainian prime minister, Arseniy Yatsenyuk, recently revealed that his country’s case against Australia was prompted by a complaint from the U.S. Chamber.

And in Washington, Thomas J. Donohue, the chief executive of the chamber, has personally taken part in lobbying to defend the ability of the tobacco industry to sue under future international treaties, notably the Trans-Pacific Partnership, a trade agreement being negotiated between the United States and several Pacific Rim nations.

'They represent the interests of the tobacco industry,' said Dr. Vera Luiza da Costa e Silva, the head of the Secretariat that oversees the W.H.O treaty,...

The NYT asked the Chamber of Commerce for a response, and got only

The U.S. Chamber issued brief statements in response to inquiries. 'The Chamber regularly reaches out to governments around the world to urge them to avoid measures that discriminate against particular companies or industries, undermine their trademarks or brands, or destroy their intellectual property,' the statement said, adding, 'we’ve worked with a broad array of business organizations at home and abroad to defend these principles.'

The chamber declined to say if it supported any measures to curb smoking.

"Blowing Smoke for Big Tobacco"

Two weeks after the first NY Times article, a group of nine organizations including Campaign for Tobacco Free Kids, Corporate Accountability International, and Public Citizen released a report on the US Chamber of Commerce pro-tobacco actions. A summary article in the Huffington Post written by representatives of the latter two organizations included,

Our report and a two-part New York Times investigation shows that, while the Chamber throws its weight around in many Global South countries to protect its corporate members' interests, Big Tobacco has also pushed it to adopt particularly aggressive and radical positions in order to undermine the cascade of public health laws being passed as a result of the success of the global tobacco treaty.

In particular,

For tobacco control advocates familiar with this deadly industry's tactics, the Chamber's work in this space comes as no surprise. Internal documents tell us that as the tobacco industry lost its public credibility, it began to use third parties to advocate on its behalf.

Case studies in our report, from Africa to Latin America, make it clear that Big Tobacco is doggedly pursuing this strategy with the U.S. Chamber and its affiliates in Global South countries. In countries the tobacco industry has targeted around the world, the Chamber is delivering threatening letters that cast doubt on the science behind tobacco control, exaggerating exaggerate the economic impacts repercussions of proven measures like tobacco taxation and crying wolf about explosions in illicit trade. In pursuing these actions, the Chamber and its AmCham affiliates are exporting well-documented tobacco industry tactics to block health laws around the globe.

And as the New York Times points out in its investigation, (and then advocates that countries resist in their recent editorial: Tarred by Tobacco), these tactics are in some cases drafted by Big Tobacco executives themselves.

Who Runs the US Chamber of Commerce?

A 2010 MotherJones article noted that the US Chamber of Commerce as having a "name that evokes Main Street and Little League teams," and its history of "taking a moderate, nonpartisan approach."  So who is responsible for the US Chamber of Commerce becoming a tobacco advocate, at least outside of the US?

First, the Chamber has become more the creature of the biggest corporations than small businesses.  The MotherJones article noted that recently

The Chamber's politics became synonymous with its biggest corporate donors.  [Chamber President Tom] Donohue established special accounts for companies that feared taking controversial public stands, allowing them to anonymously funnel money to the Chamber, which advocated on their behalf.

Furthermore,

The Chamber claims that 96 percent of its members are small businesses, yet its self-seleted board includes just 6 representatives from small businesses, 1 from a local chamber, and 111 from large corporations.

Among these large corporations, tobacco corporations seem to be particularly influential.  The NY Times article noted,

The increasing global advocacy highlights the chamber’s enduring ties to the tobacco industry, which in years past centered on American regulation of cigarettes. A top executive at the tobacco giant Altria Group serves on the chamber’s board. Philip Morris International plays a leading role in the global campaign; one executive drafted a position paper used by a chamber affiliate in Brussels, while another accompanied a chamber executive to a meeting with the Philippine ambassador in Washington to lobby against a cigarette-tax increase. The cigarette makers’ payments to the chamber are not disclosed.

Yet the Chamber's governance also ostensibly includes health care viewpoints.  Its current board includes 10 member who are executives of large health care organizations:

- Richard Bagger Senior Vice President, Corporate Affairs & Strategic Market Access, Celgene Corporation, [biopharmaceutical company] Summit, NJ
- John Cannon Executive Vice President & Chief Administrative Officer, Health Care Service Corporation, [health insurance company] Chicago, IL
- Ken W. Cole Senior Vice President, Government Relations, Pfizer, Inc., [pharmaceutical company] Washington, DC
- Wayne S. DeVeydt Executive Vice President and Chief Financial Officer, Anthem, Inc., [health insurance company, formerly Wellpoint] Indianapolis, IN
- Ralph de la Torre, MD Chairman and CEO, Steward Health Care System LLC, [for-profit hospital system, owned by Cerberus Capital Management] Boston, MA
- Fuad El-Hibri Executive Chairman, Emergent BioSolutions Inc. [biopharmaceutical company] Gaithersburg, MD
- Daniel F. Evans, Jr. President & Chief Executive Officer, Indiana University Health, [non-profit hospital system] Indianapolis, IN
- Gregory Irace President and Chief Executive Officer, Sanofi US Services Inc., [US subsidiary of French pharmaceutical company] Bridgewater, NJ
- Paul J. Klaassen Founder, Sunrise Senior Living, Inc., [for-profit provider of nursing care, hospice care, etc] Arlington, VA
- Elaine R. Leavenworth Senior Vice President, Chief Marketing and External Affairs Officer, Abbott Laboratories, [pharmaceutical and device company] Abbott Park, IL

These organizations ostensibly are all about promoting or sustaining individual or population health.  Executives of these organizations serving on the board of the US Chamber of Commerce are responsible for the governance and stewardship of the Chamber.  How could they square the missions of the organizations which the lead, and their responsibility for the Chamber's pro-tobacco stance?

The Health Care Organizations Dodge the Question

The answer to that question is elusive.

The NY Times article stated,

It is not clear how the chamber’s campaign reflects the interests of its broader membership, which includes technology companies like Google, pharmaceutical giants like Pfizer and health insurers like Anthem.

An accompanying NY Times editorial added,

Health insurance and hospital companies that are members of the U.S. Chamber of Commerce find themselves in an uncomfortable situation. Publicly, these companies support policies designed to reduce smoking, but the chamber, as Danny Hakim recently reported, has opposed anti-smoking measures around the world.

The controversy appears to have surprised health-related businesses like Anthem, one of the nation’s biggest health insurers, and Steward Health Care Systems of Boston, which have executives on the board of the chamber. 'If the chamber is in fact advocating for increased smoking, we do not agree with them on this public health issue,' a spokeswoman for Steward said in a statement to The Times.

In an article in the Indianapolis Business Journal, J K Wall recounted how he tried to get a substantive response to the NY Times article from Indiana University Health, whose President is on the Chamber board,

Indiana University Health CEO Dan Evans is one of the most anti-smoking health care executives I know.

Just a few months after I started covering health care for IBJ in 2007, Evans told me in an interview that Indiana employees 'should snatch the cigarettes out of their co-workers mouths and say, ‘Hey, you’re costing me money!’'

However, Evans was not available, and the only response was this statement from a spokesperson

We are proud of the many programs we have in place for smoking prevention and cessation, as well as health promotion and screenings for our team members, patients and members of the community. IU Health has been and will continue to be a leader in Indiana to prevent and curtail the use of tobacco products.

IU Health is a member of many diverse state and national organizations to support our public policy goals including the U.S. Chamber of Commerce and the Indiana State Chamber of Commerce. We are talking with U.S. Chamber leadership about the facts surrounding recent stories in the NY Times and will strongly encourage the U.S. Chamber to review its international programs to ensure they are consistent with its own stated policy to oppose smoking and promote wellness.

Similarly, a follow up story in the New York Times documented this response from Anthem, (formerly Wellpoint), whose Executive Vice President and CFO is on the Chamber board,

Anthem said it was 'dedicated to helping people quit smoking and has led the charge to end tobacco use.'

'Anthem has shared its strong, longstanding position with the chamber and will continue to address our concerns with the chamber directly,' the statement said.

Likewise, the Times noted this response from

Greg Thompson, a spokesman for the Health Care Service Corporation, said in a statement last week: 'We are convinced that ending smoking may help people live longer, enjoy a better quality of life and reduce costs in our health care system.'

'This is a point of view we have advocated for decades and made clear to organizations that we support.'

Those seem to be the only public responses from companies whose leadership is represented on the Chamber of Commerce board. They all ignored the main issue.  None of them seemed informed by the role their companies' executives on the Chamber of Commerce board play.  None of the executives or the companies for whom they worked acknowledged any accountability for the Board's vigorous foreign campaign of pro-tobacco activities.

The Times did note that Chamber of Commerce member CVS, which is not specifically represented on the Chamber board, and which recently stopped selling tobacco products, withdrew from Chamber membership. But as a simply a member of the Chamber, it had little direct responsibility for the Chamber's actions.

Discussion

US health care is increasingly dominated by large organizations.  Most of these organizations like to portray themselves as warm and fuzzy supporters of individual and population health.  For example, Pfizer has a statement of responsibility which begins

As a member of today’s rapidly changing global community, we are striving to adapt to the evolving needs of society and contribute to the overall health and wellness of our world.

Anthem's statement includes

Anthem is dedicated to delivering better care to our members, providing greater value to our customers and helping improve the health of our communities.

Yet on Health Care Renewal, we have documented actions by leaders of health care organizations that directly contradict their lofty mission statements, and may have threatened patients' or the public's health.

In its aggressive international promotion of tobacco interests, the US Chamber of Commerce appears to be promoting the use of products that directly threaten individual's and the public's health.  Even though the Chamber protested that it was merely reaching out

to governments around the world to urge them to avoid measures that discriminate against particular companies or industries, undermine their trademarks or brands...

their protestation ignored how tobacco is a different product than that of nearly all industries.  It seems inherently dangerous to patient's the and public's health even when used as intended, and has no known health or societal benefits that even partially compensate for its risks.  Therefore, what is the argument not to discriminate those who make and promote such an inherently dangerous product from those who make products that do not threaten health, or provide obvious benefits that may compensate for their risks?

It is obvious why tobacco companies might want the Chamber's support.  What, however, could be the rationale for executives of corporations pledge to promote health to preside over the international promotion of tobacco?

The executives on the Chamber board, and their companies have not as yet even tried to provide an answer.

Thus, in the absence of better responses, in my humble opinion the presence of health care executives on the US Chamber of Commerce board is another example - an important one - of mission-hostile actions by top leaders of US health care organizations.

As we have said far too many times - without much impact so far, unfortunately - true health care reform would put in place leadership that understands the health care context, upholds health care professionals' values, and puts patients' and the public's health ahead of extraneous, particularly short-term financial concerns. We need health care governance that holds health care leaders accountable, and ensures their transparency, integrity and honesty.

Tuesday, November 11, 2014

Promises, Promises - Dendreon Bankrupt, Steward Healthcare Closes Quincy Hospital

Physicians and other health professionals are trained to attempt to make realistic, unbiased predictions, most frequently of the prognoses of individual patients.  Thus physicians may not question apparently authoritative predictions, claims, and promises made in the health care context.  They may not question, for example, predictions about the efficacy and safety of drugs and devices, even by people working for drug and device companies; predictions of the benefits of health care services, even by people working for the hospitals that provide them; and predictions of the benefits of health policies, even by politicians or organizations that stand to benefit if they are adapted.  Yet such predictions may influence health care policies and decisions.

However, in the business culture, confidence is often conflated with competence.  Generic managers, trained in business schools, and steeped in business culture, now run most health care organizations.  Managers are responsible for most of the sorts of predictions listed above, perhaps mediated through their marketing and public relations staffs.


Thus it should come as no surprise that a lot of the predictions, claims, and promises we now hear in health care eventually come to naught, but long after they have already influenced decisions and policy. 

Dendreon Bankruptcy

In 2007, we first wrote about biotechnology company Dendreon, and its single product, a vaccine meant to treat prostate cancer with the trade name Provenge ( generic name, sipuleucel-T).  Provenge has aroused unusual passions.  When the US Food and Drug Administration delayed its approval after a single small trial showed equivocal results, much hoopla produced by Dendreon partisans occurred.  Investors and patient advocates protested, at times picketing the FDA.  Someone threatened physicians who were publicly skeptical of the vaccine.  It did appear that Dendreon funded a patient advocacy group which was one of the vaccine's vocal supporters.

In 2009, Matthew Herper, writing in Forbes, reported that the company had released preliminary data from a new trial before the results were presented at any conference or published, apparently after breaking the treatment blinding, causing one biostatistics expert to say, "I'm shocked."  At that point, company CEO Mitch Gold

has been using the [controversial, unpublished] data to talk up Provenge. 'We’re clearly within shooting range,' Gold told analysts at a JP Morgan investor conference in January. 'Sometimes I use a football analogy where we are on the 10-yard line and we are in the red zone, and we need to punch it in the end zone right now.'

A TheStreet.com article noted that

Dendreon threw a celebratory cocktail party Tuesday night at a Chicago hotel just off the Miracle Mile. CEO Mitch Gold was beaming as he slapped backs, shook hands and hugged employees, investors and supporters.

In 2010, the FDA approved the vaccine based on the eventually published study that showed that Provenge prolonged survival for an average of about four months.  The company then priced a course of therapy at $93,000, starting one of the early big controversies about extremely expensive new drugs with apparently small benefits  (see this Washington Post article) .  

According to a 2011 article by Jim Edwards for CBS, through 2010 and into 2011, CEO Gold and Chief Operating Officer Hans Bishop continued to make optimistic forecasts about sales of Provenge.  But during the same time period, Gold and other insiders sold $87 million in stock.  Then in 2011, the company announced that its revenue projections had been far too optimistic.

Things continued downhill from there.  Dendreon settled for $40 million an investor class action lawsuit that asserted corporate executives made "false or misleading statements about the company," according to one very brief story in the Seattle Times.  

Then, on November 10, 2014, per the Seattle Times, the company announced it would file for bankruptcy,

Dendreon said it has filed for bankruptcy protection as part of a plan to restructure $620 million in debt, a move likely to effectively wipe out the value of its common stock.

The biotechnology company, once Seattle’s largest, filed a voluntary Chapter 11 bankruptcy petition Monday in Delaware.

"Within shooting range" - no more.  Yet from 2007 to 2011, the company CEO (and COO), aided by corporate marketers and public relations, created a huge brouhaha over the company's one product, making management insiders rich meanwhile.  The high price the company charged for the vaccine may have driven up the stock price early, facilitating the amassing of wealth by top management insiders.  While this pricing decision may have helped other health care corporations pursue gigantic revenues from new products, it may have ultimately damped demand and lead to bankruptcy.  How much money the managers who created the hoopla will keep remains to be seen.  Why skepticism about the executives fabulous predictions was not initially higher is unclear. 

ADDENDUM (20 November, 2014) - Added paragraph re 2013 investor class action settlement.

Steward Healthcare Closes Quincy Hospital

Starting in 2010, we wrote about the takeover of the Massachusetts non-profit Catholic hospital system Caritas Christi by private equity firm Cerberus Capital Management (named for the mythological three-headed dog that guards the gates of the underworld, look here.)  Despite some controversy, and the apparent contrast between Catholicism and the three-headed dog guarding the gates of hell, the takeover was approved, yielding the now privately held, for-profit Steward Healthcare.

Over the time period, proponents of the sale gave some big assurances.  In 2010, the Boston Globe reported,

Brett Ingersoll, co-head of private equity at Cerberus, called the Caritas acquisition 'a big win for the hard-working communities of Greater Boston.'’ Ingersoll said the new owners 'plan to create jobs, expand local tax bases, and provide world-class health care facilities.'

Similarly, from a Boston Herald article,

'Cerberus is pleased to be making a long-term investment that will help ensure the viability and future success of the Caritas Christi health care system,' said W. Brett Ingersoll, co-director of private equity at Cerberus in a statement.  'Caritas is the region's largest community hospital network, and our investment will give physicians, nurses, and other health professionals the additional tools they need to deliver world-class care to patients in the communities they serve.'

Later in October, Dr Ralph De La Torre, Caritas Christi CEO, a former cardiovascular surgeon who apparently no longer held an active medical license (look here), intoned per the Globe,

'The business plan, the strategy, or whatever you want to call it, is all about keeping care locally,' he said. 'If we improve the facilities, improve the infrastructure, make it so that our very own patients want to stay in our hospitals, that’s the business plan.'

Furthermore, at the same meeting,

The new holding company 'will continue to promote the public interest after this transaction,' Lisa Gray, Cerberus general counsel executive and a Steward board member, told the council.

A few days later, again per the Globe, Caritas Christi spokesman Chris Murphy said,

Once finalized, the sale will ensure the future of our system, the jobs of our employees, and the pensions of our retirees.


The takeover was eventually completed, and the new Steward Healthcare commenced acquisitions of other hospitals.  CEO De La Torre had become the most highly paid hospital system CEO in the Boston area, and was widely anticipated to be on the way to even higher compensation under Steward (look here). 

In 2011, Steward set its sights on Quincy Medical Center.  Once again, promises were made, per the Boston Herald,

In a statement today, interim CEO John Kastanis said the hospital's announcement is 'the culmination of an exhaustive process to find a capital partner who is committed to our mission, our employees and physicians, and the communities we serve.'

'We have found the partner in Steward,' Katsanis said.  'Steward is a community-based hospital system with tremendous resources that will enable us to grow and continue to provide world-class health care for generations to come.'

The Massachusetts Attorney General approved the sale of Quincy Medical Center to Steward, but with some conditions, as a September 8, 2011, Boston Globe article noted,

[Attorney General Martha]  Coakley imposed multiple conditions on the deal that are meant to safeguard patients and employees of the financially struggling hospitals. They included a guarantee that Boston-based Steward will not sell either one for at least five years, that it will keep making capital improvements after five years,...

Also, Steward

agreed to a 10-year “no close’’ period for both hospitals, though the deals included clauses that would allow Steward to close the hospitals under certain conditions in the last three years if financial targets aren’t met.


It all sounded so good.  However, on November 6, 2014, slightly more than three years after the sale of Quincy Medical Center was approved with the conditions above, per the Globe,

Steward Health Care System said Thursday that it would close Quincy Medical Center and displace nearly 700 workers after the long-struggling hospital finally succumbed to the intense competition for patients south of Boston.

 The shutdown, scheduled to be completed by the end the year, marks the biggest hospital closing in the state in at least a decade and the first failure for Steward, the for-profit company that promised to reinvent community health care when it entered the Massachusetts market four years ago.


So what happened to "world class health care for generations to come," or being "committed to our employees?"  The commitment lasted a little over three years, the employees will need to find new jobs, and the patients will need to go elsewhere for health care, whether world class or not.  At least Attorney General Coakley is looking into options given that Steward Health Care seemed to have violated that 2011 agreement, per the Herald,

The Attorney General’s Office is investigating whether Steward Health Care System violated the terms of a 2011 agreement when it announced yesterday that Quincy Medical Center will shut down operations by the end of the year, a spokesman said.

'We have just been notified about this decision and are currently reviewing it in the context of Steward’s legal obligations,' said Brad Puffer, a spokesman for Attorney General Martha Coakley.
When Steward bought the 196-bed Quincy hospital in a bankruptcy auction in 2011, it signed an agreement with Coakley that included a 10-year 'No Close Period' requiring that it 'maintain an acute care hospital in Quincy providing at least the same scope of services as Quincy Medical Center currently provides.'

Steward could close Quincy Medical in the last three-and-a-half years of that 10-year period if it could show the hospital 'experienced two consecutive fiscal years of negative operating margins' and provide the state’s Department of Public Health with 'at least 18 months prior written notice of its intent to close,' according to the agreement.

A Steward spokeswoman declined to comment when asked about the no-close clause last night.

 In any case, while there was plenty of skepticism about the acquisition of Caritas Christi by Cerberus Capital Management, and the ambitious expansion plans of the resulting Steward Healthcare, it was insufficient to slow down these aggressive plans.  I could speculate that had more skepticism come from physicians and health care policy experts, maybe things would have been different.  It is likely that Steward Healthcare/ Cerberus Capital Management insiders made plenty of money from the deals, although now that the hospital system is privately held, little about individual compensation has been disclosed.  The takeover of a once religious based, non-profit health care system by private equity, and the aggressive initial expansion of the new for-profit system, were in part enabled by extravagant promises and claims.  While this expansion is now clearly seen as not an unalloyed good, those making the claims likely have already personally profited from it. 

Summary

There have been lots of other expansive predictions in our era of commercialized health care that have come to naught.  In general, lots of physicians seemed convinced by predictions that:
- commercial managed care would improve access and quality, and cut costs
- large, vertically integrated hospital systems would improve access and quality, and cut costs
- commercial electronic health records would - guest what - improve access and quality, and cut costs.

How did those turn out?

There were lots of more specific and local predictions that proved equally inoperative.  Remember the former CEO of the Allegheny Health Education and Research Foundation (AHERF), one of the first really large vertically integrated health care systems, promising to create a more flexible, adoptable, and agile organization.  That organization was soon bankrupt, and he was soon in jail.  (Look here).

So now we have two new reminders that even apparently authoritative health care claims, predictions, and promises, particularly when made by executives or managers, when enabled through public relations or marketing, or appear likely to be self-serving, ought to be regarded with extreme skepticism, if not outright ridicule.  Many doctors now realize that they should not trust advertising of health care products and services.  Nor should they trust flowery pronouncements of business people about health care products, services, and policies when the predictors are in a position to benefit from short term actions adherent to these predictions.

True health care reform would restore leadership of health care that is knowledgeable about health care, committed to its values, and held accountable for patients' and the public's health.  Meanwhile, we ought to be extremely skeptical of claims, predictions, and promises made by health care organizations' management. 

Friday, January 04, 2013

BLOGSCAN - When Private Equity Owns Hospitals

On his Not Running a Hospital blog, Paul Levy discussed reasons for concern when private equity firms purchase and operate hospitals.  He used the example of Steward Health Care, now a for-profit hospital system (which also employs physicians to provide direct patient care), which in turn is owned by Cerberus Capital Management.   The issue is pertinent due to recent discussion in the media about Cerberus' newly stated intention to sell the large firearms and ammunition business it assembled, Freedom Group.  This intention was only stated after the tragic multiple murders of children and teachers by gunfire from a weapon manufactured by Freedom Group at a Connecticut elementary school.  We have previously posted about questions raised when private equity buys hospitals and employs physicians, specifically about Cerberus and Steward Health Care, and have questioned whether a private equity group is a suitable owner and operator of hospitals and physicians' practices when said private equity group also owns a large firearms and ammunition business, and, for that matter, a military contracting company which has been accused or providing "mercenaries" (look here and here).    

Friday, November 23, 2012

Should Health Care be a "'Commodity, Subordinate to the Laws of the Market?" - a Powerful Rebuttal

In the US, it has become the accepted wisdom that health care is now an industry, not a calling or a profession, and the health care it produces is a commodity, not a human service. 

The Conventional Wisdom

For example, earlier in 2012 we quoted Dr Ralph de la Torre, the CEO of Steward Healthcare (formerly the Caritas Christi health system, a Catholic health care system whose take-over by Cerberus Capital Management, a private equity firm, was arranged in part by Dr de la Torre [see posts here]):

In deference to those who love the individual hospital, you have to look back at America and the trends in industries that have gone from being art to science, to being commodities. Health care is becoming a commodity. The car industry started off as an art, people hand-shaping the bodies, hand-building the engines. As it became a commodity and was all about making cars accessible to everybody, it became more about standardization. It's not different from the banking industry and other industries as they've matured. Health care is finally maturing as an industry, and part of that maturation process is consolidation. It's getting economies of scale and in many ways making it a commodity

More recently, Human Events, which describes itself as "the nation’s first conservative weekly," featured a description of a new book by one Edmund L Valentine, "CEO of the Stamford, Conn.-based MMC International, a health care consulting firm, which emphasizes its expertise in the pharmaceutical and device manufacturing fields.  In it, Mr Valentine stated that one should:

treat health insurance as a commodity, where companies only compete based on their reputation and price.
but presumably companies should not compete based on the effects of their products on the health of those who buy them.

Furthermore, he supported

the further industrialization of healthcare, ...


'Industrialization created our great economy,' he said. 'Allow the market and competition can fix the inefficiencies in the system.'
This ignored the arguments going back to the work of Kenneth Arrow that health care cannot be an ideal market (see this post), and all the data suggesting that in the last 20-30 years, when the market fundamentalists became so influential in US health care, costs have risen continuously and quickly without commensurate gains in access or quality.    These are just the latest of many examples of the business people who now run health care justifying approaching it as just another business.

A Strong Rebuttal of the Argument that Health Care is an Industry that Produces a Commodity  

For quite a while, Dr Arnold Relman has lead a relatively lonely quest to restore medicine as a profession and health care as a calling  (see posts here, here and here).  He noted that at one time, the notion that "the practice of medicine should not be commercialized, nor treated as a commodity in trade.'" was considered very mainstream.  (The quote came from the mid- twentieth century AMA code of ethics.)  We have done what little we can to support him.  However, the opposition to the new normal of health care as an industry that produces a commodity has paled compared to the conventional wisdom favored by rich executives and supported by billions of dollars of marketing, public relations, and lobbying budgets.    

However, this week strong support for health care as professions, as a calling, and hospitals as serving a mission just appeared in a big way in a major address to a health care meeting in Europe.  First, in the context  

during the current economic crisis "that is cutting resources for safeguarding health,"...   Hospitals and other facilities 'must rethink their particular role in order to avoid having health become a simple 'commodity,' subordinate to the laws of the market, and, therefore, a good reserved to a few, rather than a universal good to be guaranteed and defended,'  
  
Furthermore,

'Only when the wellbeing of the person, in its most fragile and defenseless condition and in search of meaning in the unfathomable mystery of pain, is very clearly at the center of medical and assisted care' can the hospital be seen as a place where healing isn't a job, but a mission,

  The speaker thus directly challenged the current notion that health care is a commodity, and those who work in health care have jobs, not callings or missions. 

While the speaker was in fact a retired distinguished professor from a European university, but before any market fundamentalists start thinking he could be pilloried as some radical European academic, note the following.

The conference was the XXVI International Conference of the Pontifical Council for Health Care Workers, and the speaker quoted above was Pope Benedict XVI

Thus there is some very distinguished, albeit not numerous support for the ideas that held sway before market fundamentalism took over much of health care, the ideas that medicine is a profession and a calling, and hospitals should be mission oriented organizations, and that health care professionals and institutions should put patients' health and welfare first, very far ahead of short-term revenue and the accumulation of wealth by health care organizational leaders.