"Prepare Them to Die" - For-Profit Hospices as the Real Death Panels

A Bloomberg news investigative report illustrated the adverse effects of having for-profit corporations taking care of patients.

Hospice as a Social Movement

The corporations in question this time are for-profit hospices. Hospices in general gained a good reputation for improving the quality of life for patients near life's end:

Hospice got its start in the 1960s as a social movement. Volunteers, often meeting in schools and church basements, organized care so patients could die at home with loved ones, instead of at the hospital laced with tubes. Dame Cicely Saunders, the pioneering English physician who opened St. Christopher’s Hospice in London in 1967, fought traditional methods of unconditional resistance to death, and brought the concept to U.S. shores.

Hospices Become Commercial

Subsequently, in the US, every part of health care has become commercialized, including hospices:

hospice care has evolved from its charitable roots into a $14 billion business run mostly for profit,

In addition,

Of the hospices with two- thirds or more of their patients in nursing homes, 72 percent are for-profits.

Commercial Hospices Expand Their Markets: "Stop All the Live Discharges"

Hospices were originally meant to care for patients near death, however commercial hospices sought to expand their markets:

Providers have been accused of boosting their revenues with patients who aren’t near death and not eligible for hospice -- people healthy enough to live a long time with traditional medical care.

In particular,

Two-thirds of patients in hospices run for profit have general diagnoses like 'failure to thrive' and 'debility' compared to half in non-profits, which cater more to faster- killing conditions like cancer, a Harvard University study found earlier this year. Patients stay an average of 98 days in for- profit hospices versus 68 days at non-profits, which have a 0.2 percent profit margin, according to Medicare. The margin at for- profits is 50 times higher at 10 percent.

My comment is that "failure to thrive," and "debility" are not real diagnoses. At best, they are merely general descriptions of patients' conditions. Physicians have a hard enough time predicting the life span of patients with chronic, ultimately terminal, well-defined diseases, like specific types of metastatic cancer. How anyone can accurately predict the survival of patients who fail to thrive or exhibit debility is beyond me (and I have spent many years assessing the accuracy of physicians' predictions of a variety of outcomes, including the survival of critically ill patients, references provided on request).

So,

To be eligible for Medicare hospice coverage, a person must have a prognosis of six months or less to live, certified by two doctors. Yet 20 percent of hospice patients live beyond that term, with their providers receiving government checks via recertifications that can go on indefinitely.

One case cited by the Bloomberg article includes allegations that a for-profit hospice held on to patients even though it had become clear they were not at the end of life.

An executive of a hospice owned by Harden Healthcare LLC emailed managers in 2008 urging them to 'stop all these live discharges' of patients to keep enrollments high, according to a civil fraud complaint by the Justice Department in federal court in Kansas City, Kansas. Company spokeswoman Meg Meo said the alleged events occurred before Austin, Texas-based Harden owned the hospice.

A whistleblower lawsuit brought by a former social worker for hospices run by Atlanta-based Gentiva Health Services Inc. (GTIV) said her job was to talk people who weren’t dying into believing that they were. The allegations predated Gentiva’s ownership of the chain, spokesman Scott Cianciulli said.

Gentiva’s Odyssey hospice unit faces investigations by HHS’s Office of Inspector General and the state of Georgia, according to regulatory filings. The company, which is the second-largest hospice provider, is cooperating with investigators, Cianciulli said.

Furthermore,

Enrolling patients, retaining them as long as possible, and controlling costs are the top priorities at for-profit hospices, according to former and current employees interviewed by Bloomberg News. To increase revenues, hospices tie employee bonuses to enrollment, pay kickbacks to patients and referral sources, and use false diagnoses to admit ineligible patients, according to whistleblower, or qui tam, suits against three chains filed under the False Claims Act, which allows plaintiffs to share in any financial recovery for the government.

The Bloomberg report contained an even more chilling case:

One of the suits was filed by Misty Wall, a former social worker at Gentiva’s VistaCare hospice unit who said she was fired in 2005. Wall was assigned to convince people who weren’t dying that they were, she said in an interview.

Wall, now an assistant professor of social work at Boise State University in Idaho, said one woman broke down in tears when Wall suggested her father was dying from renal failure. The man’s own doctor had declined to recommend hospice, prescribing dialysis instead. Wall said VistaCare sent her to the daughter to change the family’s mind.

'I gave her this huge emotional blow, then sat there and soothed her,' Wall said. 'Of course she signed.'

Wall’s lawyer, Loren Jacobson, said, 'It wasn’t her idea. She did it because that was what was expected of her as part of her job, and when she refused to do it anymore and complained, she was fired.' Jacobsen called her client 'an extremely good soul stuck in a bad situation.'

Wall’s lawsuit, filed in federal court in Dallas, accuses VistaCare of paying illegal kickbacks to patients and nursing- home employees who referred residents to hospice. It also accuses VistaCare of doctor shopping to get patients certified.

As part of its sales pitch, the hospice told prospects, 'The VistaCare Foundation is here to make all your dreams come true,' Wall said. 'We used it as a selling feature.'

This case is particularly disturbing because patients with kidney failure actually may have quite a long life expectancy if they do not have serious co-morbid disease. Patients can be sustained on dialysis, and may be eligible for kidney transplants.

Note also that in 2009 we discussed a case of SouthernCare, a for-profit hospice company which settled (for $24.7 million) a case alleging that it had enrolled patients who were not likely to die in six months to increase its revenue, further suggesting that this is a widespread problem among for-profit hospices.

Limiting Care: "Prepare Them to Die" 

So I am actually surprised that only 20% of hospice patients survived more than six months.

However, putting patients who were not already near the end of life in hospice may mean denying potentially life saving care to patients who had the potential to live for at least a while:

Providers have been accused of boosting their revenues with patients who aren’t near death and not eligible for hospice -- people healthy enough to live a long time with traditional medical care. In hospices, patients give up their rights to 'curative' measures because they are presumed to be futile.

'By admitting these folks to hospice, they are denied access to routine medical and rehabilitative care that they need to extend and improve their lives,' said Cristen Krebs, executive director of Catholic Hospice of Pittsburgh, a non- profit. 'A vulnerable and voiceless population is preyed upon for money.'

So if "curative" measures are not used for patients who started with relatively favorable prognoses, but have developed new problems, guess what may happen?

The Bloomberg article opened with another distressing case:

With his mother wheezing and losing consciousness in a California nursing home, Robert Rogers wanted her moved to a hospital. Vitas Healthcare, her hospice provider, said that wasn’t in the plan.

'Our job is not to prepare them to live,' a Vitas nurse told Rogers on the phone, according to a deposition he gave in April. 'Our job is to prepare them to die.'

Rogers called 911. At the hospital, an emergency-room doctor removed 11 maggots from an open wound on his mother’s big toe. Five days later, in September 2008, 91-year-old Thelma Covington died of a sepsis infection brought on by gangrene in her toe and poor circulation, her death certificate said.

Rogers is suing Vitas, a unit of Cincinnati-based Chemed Corp. (CHE), in a California court for alleged elder abuse and wrongful death. Vitas, the biggest company in hospice care, has denied negligence and said that Covington and Rogers knew the risk involved in entering hospice.

The article elaborated on Ms Covington's initial condition, and how she was enrolled in hospice despite of it:

Vitas admitted Thelma Covington to hospice in November 2007, taking over her medical care at Willow Pass Healthcare Center in Concord, California. Her son, Robert Rogers, who had Covington’s power of attorney, said a Vitas salesperson called him and offered help so he wouldn’t have to be there so much.

Rogers said he didn’t know he was giving up rights to curative care when he signed his mother up for hospice, and wouldn’t have done so if he did. He said he 'didn’t read the fine print' and gave his consent because he was told there would be more people looking after her, taking a load off him.

He described her as alert on his visits, doing crossword puzzles, discussing movies and enjoying the Kentucky Fried Chicken he brought her.

The Vitas admission assessment for Covington said she was terminally ill with 'debility, unspecified' and had various other conditions, including dementia, congestive heart failure and diabetes. Two doctors certified that she had less than six months to live.

'She didn’t have no dementia,' Rogers said.

No one said anything about his mother’s life expectancy, according to Rogers, 75, a retired longshoreman and Covington’s only child. For 10 months, Medicare paid Vitas $199 a day to provide palliative care for her at Willow Pass, bills show.

Obviously, Ms Covington had more than 10 months to live. There is a major question whether she had anything resembling dementia. As noted earlier, "debility" is not a real diagnosis and does not imply a specific life-span.

The details of how the hospice allegedly failed to treat a new condition which was eventually fatal for Ms Covington are gut-wrenching:

On July 9, 2008, two months before her death, a Vitas doctor ordered a two-week cleansing and ointment treatment for an open wound on Covington’s toe, medical records show. The treatment was never carried out because the plan wasn’t placed in the 'treatment administrative record' that the nursing home used to implement orders, according to a deposition by Jennifer Bernal, one of Covington’s Willow Pass nurses. She called it 'a serious nursing error.'

Nevertheless, Vitas 'discontinued' the toe treatment on July 28, according to notes written by one of its nurses, who added 'course complete.'

Two days later, Covington was in agony from the wound; a Vitas nurse assessed her pain at level 10 on a 10-point severity index, records show. She was given morphine and a sedative.

On Aug. 25, a nursing home employee noted in a 'skin condition report' that the toe was scabrous, swollen, contained pus and had developed black 'eschar' -- dead tissue that’s a sign of gangrene. 'Hospice notified,' the report said.

Vitas’s notes on the toe for Aug. 25 and Aug. 27 again said 'interventions effective, continue plan.' On Sept. 5, a Vitas nurse described 'soft black eschar' on the toe. By then, Covington was in such pain from the wound that she lay moaning, 'Lo[r]d have mercy,' a Vitas nurse noted.

On the morning of Sept. 7, a Vitas nurse discovered the gangrene and maggots, conferred with a Vitas doctor, washed the toe and wrapped it in plastic, according to nursing notes.

Rogers said in his deposition that he learned of the maggots later that day from the emergency-room doctor.

Summary

There has been a lot of blather from politicians in the US about "death panels" in debates about health care reform. Many such politicians seem worried that the US government has or will have death panels under the new health care reform legislation. We have criticized that legislation for not addressing many important health care problems. No one, however, has convingly demonstrated how its provisions would convene "death panels."

Wendell Potter argued in his book, Deadly Spin, (see this post) that for-profit insurance companies had their own "death panels." The Bloomberg article strongly suggests that for-profit hospices may also act like death panels. In search of more revenue, for-profit hospices may enroll patients who are not at the end of life, but then provide them only "comfort care," so that if they develop new conditions that are treatable, they are likely to die in the absence of treatment.

I am waiting for the politicians who so enthusiatically condemned the supposed "death panels" to be found in health care reform legislation to condemn for-profit hospices for behaving like death panels. 

In my humble opinion, the cases discussed above are the strongest argument yet that we need to reconsider our headlong rush to turn health care, particularly the direct care of patients, over to relatively unregulated, for-profit corporations. The cases above suggest that the pursuit of revenue ahead of patients' welfare by such organizations may lead to sick and dead patients.

I cannot see how for-profit direct patient care can be made safe for patients without intense government regulation. If any of those vocal advocates of "free market" health care (in the absence of any good explanation of how health care can ever be an ideal free market, see this post) can explain to me how for-profit hospices can be made safe for patients without such regulation, I would welcome their attempts.

Meanwhile, this just calls out for legislative and legal investigation, and urgent policy changes.

How the Fallacy of the "Perfect" Health Care Market Undermined Professionalism and Caused Health Care Dysfunction - in the New York Times

We began this blog way back in 2005 to discuss threats to physicians' values, especially from concentration and abuse of power.  Personal experience, and cases and anecdotes described by colleagues suggested that a dysfunctional health care system was making patients and physicians miserable.  Interviews with more physicians suggested pervasive threats to their values, many stemming from how leaders of health care organizations wielded their power.  

Threats to Professional Values

In a 2007 post, based on an article in JAMA by Dr Arnold Relman, I asserted that the notion that threats to physicians' professional values are a major cause of health care dysfunction was becoming mainstream.  Furthermore, Dr Relman's review of the history of the problem suggested that the rising power of for-profit health care corporations, for whom making money came before the health and safety of patients, was a primary culprit. 

Dr Relman has discussed the issue frequently (e.g., see this post).  However, despite occasional publication in some prestigious medical journals, his views seem to have gotten little traction. 

Arrow's Analysis: Is Health Care a Perfectly Competitive Market?

Amazingly, however, the issue has made it into the New York Times, in the form of two posts in the Economix blog by health economist Prof Uwe Reinhardt.  Prof Reinhardt started by resurrecting the classic article by "Nobel laureate economist Kenneth Arrow," which argued that health care's special context means that the health care market cannot be truly competitive.

First Prof Arrow reviewed the characteristics of a perfectly competitive market:

To lay down a standard to which to compare the health care sector, Professor Arrow explained first on what basis economists consider a perfectly competitive market for some good or service as 'maximizing human welfare,' an outcome economists describe as 'efficient.'

The crucial characteristics of a perfectly competitive market are (1) that all of the quality dimensions of the good or service traded in that market are accurately understood by buyer and seller; (2) that potential buyers have full transparency on the price they will have to pay per unit of that good or service; (3) that it is easy and relatively costless for potential sellers to enter and exit this market; (4) and that there are so many potential buyers and sellers that none individually can affect the market price of the thing being traded.

If those and some other conditions are met, Professor Arrow explained, then for any given initial distribution of income and wealth that market will settle down at a unique equilibrium, that is, a state from which no potential buyer or seller would want to move. This equilibrium has important attributes.

First, in what Professor Arrow calls the First Optimality Theorem of welfare economics, it can be shown that in this equilibrium the traded good or service is allocated among buyers in such a way that it would be impossible through any reallocation to make someone happier without making someone else less happy.

It is an allocation that economists call Pareto efficient, in honor of the Italian industrialist, economist and philosopher Vilfredo Pareto (1848-1923), who first proposed this criterion.

For any given initial distribution of income and wealth, economists declare the associated Pareto-efficient allocation of the thing being produced and traded to be 'welfare-maximizing' — hence the term 'welfare economics' for this type of analysis.

Second, and very importantly, in what Arrow calls the Second Optimality Theorem, he explains that if on ethical grounds society wished to distribute a good or service (for example, education or health care or food or beach houses) among people in a particular way — like egalitarian principles — it need not have government directly involved in producing or distributing that good or service.

In his second blog post, Prof Reinhardt summarized why health care cannot be such a competitive market. The problems are uncertainty and asymmetry of information:

This uncertainty has several aspects.

First, physicians may not agree on the medical condition causing the symptoms the patient presents.

Second, even if physicians agree in their diagnoses, they often do not agree on the efficacy of alternative responses — for example, surgery or medical management for lower-back pain.

Third, information on both the diagnosis of and the likely consequences of treatment are asymmetrically allocated between the sell-side (providers) and the buy-side (patients) of the health care market. The very reason that patients seek advice and treatment from physicians in the first place is that they expect physicians to have vastly superior knowledge about the proper diagnosis and efficacy of treatment. That makes the market for medical care deviate significantly from the benchmark of perfect competition, in which buyers and sellers would be equally well informed.

Uncertainty and asymmetry of information about the quality of goods or services being traded is not, of course, unique to the medical care market. It is ubiquitous in modern economies that trade in highly complex goods and services. We find these characteristics, for example, in financial transactions, including all types of insurance; in automobile repairs, in plumbing and even in the purchase of some consumer electronics.

Wherever asymmetry of information is present, there exists the potential for the better-informed market participants to exploit the ignorance of the less well informed. How society responds to this flaw in markets depends on the severity of its consequences.

In the market for electronic products, for example, the consequences appear to be regarded as trivial. A customer may be seduced into purchasing an excessively complex and expensive product, but society takes no action on this front. In finance, on the other hand, the consequences of asymmetric information can be severe, as we have been reminded once again in the recent financial crisis.

Professional Standards and Mission-Oriented Non-Profit Organizations to Remedy Market Imperfections
Prof Arrow suggested that how health care worked when he wrote his article, in 1963, could be partially explained as attempting to remedy the problems created by uncertainty and asymmetry of information.

Professor Arrow explained many of the nonmarket social institutions and regulations characteristic of medical care [at that time] that he had identified as 'attempts to overcome the lack of optimality resulting from asymmetry of information and the inability of competitive markets to allocate efficiently all of the risks inherent in health care.'

Pointedly, he said, 'It is the general social consensus, clearly, that the laissez-faire solution for medicine is intolerable.'

That was then and this is now.

The Rise of "Greed is Good"

The problem is, of course, that health care has changed a lot since 1963. In an interview with the Atlantic from 2009, Prof Arrow defended his basic analysis:

I think the fundamental questions are the same. I also think there are more problems in the market today than when I wrote the paper. But I think the basic analysis hasn't changed.

He also discussed how failure to heed it have lead to our current dysfunctional health care system:

The market won't work -- it doesn't work well in the health context. But something else supplements the market, and the thing I put stress on in the paper are the elements that put a non-economic influence on the market: professional commitments to provide a service, to engage in services that aren't self-serving. Standards of caring decided by non-economic actors. And one problem we have now is an erosion of professional standards. In a way there is more emphasis on markets and self-aggrandizement in the context of healthcare, and that has led to some of the problems we have today.

Furthermore, he commented on those who sold the idea, which today ought to be totally discredited, in my humble opinion, that health care could be a perfect market, and this market would make everything right:

Sometimes I think it's because of the Chicago School. I think there has been a general drift around the country towards the idea that greed is good. Look at Wall Street. All of these industries involve a professional element in which information is flowing. You're supposed to be constrained to be honest about it. I don't really know why. But there is now more of an emphasis on popularization, which does improve efficiency but can also lead to an erosion of professional standards. There was this idea that professional standards were a mask for monopoly power--a Chicago theory, which I believe came from George Stigler. I don't know if they were that influential, but they seemed to be saying a lot of things that people were taking up in practice. I'm not totally sure why these professional standards changed, but it's more than medical reasons.

So you do not need to take it from me, take it from a Nobel laureate economist.  It now seems clear in retrospect that a major characteristic of modern health care is how the "better-informed market participants ... exploit the ignorance of the less well informed."

Summary: What is to be Done?
We have been sold a real bill of goods that health care could function as an ideal market. That bill of goods has lead to the deprofessionalization and commercialization of physicians, the destruction of the basic values of health care professionals, and the rise of health care organizations that put making money ahead of patients' health, safety, and welfare. And in health care, the dominant slogan has become "greed is good." This is true of course, but only for the greedy.

True health care reform would help physicians and other health care professionals uphold their traditional values, including, as the AMA once stated, "the practice of medicine should not be commercialized, nor treated as a commodity in trade." True health care reform would put health care "delivery" back in the hands of mission-focused, not-for-profit organizations, which put patients' health, safety and welfare first.

These reforms, however, would certainly threaten the continuing wealth of a lot of people who have profited mightily from the current dysfunctional system. So do not expect them to be happy about even the discussion of them.

A Web of Deception Ensnares US Nursing Homes

The New York Times just published a report of some important investigative reporting about changes in how US nursing homes are currently managed, or mismanaged, leading to bad effects on patients' outcomes and safety. As an example, the report recounted the case of an elderly women who died in the Habana Health Center in Tampa, FL. The article made a series of key points,

• The homes were acquired by private equity companies not usually associated with health care.
• The companies drastically cut the costs of their acquisitions.
• These cost cuts decreased care, apparently leading to poor outcomes.
• The private equity companies set up complex corporate structures for their acquisitions, hiding their ownership, and thwarting lawsuits and regulation.

I have summarized supporting quotes for each point below.

Acquisition by Private Equity Companies

The changes seem to stem from the acquisition of many nursing homes and nursing home chains by "large Wall Street investment companies .... Those investors include prominent private equity firms like Warburg Pincus and the Carlyle Group, better known for buying companies like Dunkin’ Donuts. As such investors have acquired nursing homes, they have often reduced costs, increased profits and quickly resold facilities for significant gains."

The acquisitions involved were substantial. "But in recent years, large private investment groups have agreed to buy 6 of the nation’s 10 largest nursing home chains, containing over 141,000 beds, or 9 percent of the nation’s total. Private investment groups own at least another 60,000 beds at smaller chains and are expected to acquire many more companies as firms come under shareholder pressure to sell."

Drastic Cost Cutting

The major manifestations of mismanagement seem to be drastic cost cutting.

'The first thing owners do is lay off nurses and other staff that are essential to keeping patients safe,' said Charlene Harrington, a professor at the University of California in San Francisco who studies nursing homes. In her opinion, she added, 'chains have made a lot of money by cutting nurses, but it’s at the cost of human lives.'

The Times’s analysis of records collected by the Centers for Medicare and Medicaid Services reveals that at 60 percent of homes bought by large private equity groups from 2000 to 2006, managers have cut the number of clinical registered nurses, sometimes far below levels required by law. (At 19 percent of those homes, staffing has remained relatively constant, though often below national averages. At 21 percent, staffing rose significantly, though even those homes were typically below national averages.) During that period, staffing at many of the nation’s other homes has fallen much less or grown.

Nurses are often residents’ primary medical providers. In 2002, the Department of Health and Human Services said most nursing home residents needed at least 1.3 hours of care a day from a registered or licensed practical nurse. The average home was close to meeting that standard last year, according to data.

But homes owned by large investment companies typically provided only one hour of care a day, according to The Times’s analysis of records collected by the Centers for Medicare and Medicaid Services.

For the most highly trained nurses, staffing was particularly low: Homes owned by large private investment firms provided one clinical registered nurse for every 20 residents, 35 percent below the national average, the analysis showed.

Poor Patient Outcomes

In turn, such cost cutting was associated with poor outcomes.

The typical nursing home acquired by a large investment company before 2006 scored worse than national rates in 12 of 14 indicators that regulators use to track ailments of long-term residents. Those ailments include bedsores and easily preventable infections, as well as the need to be restrained. Before they were acquired by private investors, many of those homes scored at or above national averages in similar measurements.

In addition,

Regulators with state and federal health care agencies have cited those staffing deficiencies alongside some cases where residents died from accidental suffocations, injuries or other medical emergencies.

Federal and state regulators also said in interviews that such cuts help explain why serious quality-of-care deficiencies — like moldy food and the restraining of residents for long periods or the administration of wrong medications — rose at every large nursing home chain after it was acquired by a private investment group from 2000 to 2006, even as citations declined at many other homes and chains.

The typical number of serious health deficiencies cited by regulators last year was almost 19 percent higher at homes owned by large investment companies than the national average, according to analysis of Centers for Medicare and Medicaid Services records.

In the case of Habana Health Center,

Habana’s managers increased occupancy, and cut expenses by laying off about 10 of 30 clinical administrators and nurses, Medicare filings reveal. (After regulators complained, some positions were refilled and other spending increased.) Soon, Medicare regulators cited Habana for malfunctioning fire doors and moldy air vents.

'Those owners wouldn’t let us hire people,' said Annie Thornton, who became interim director of nursing around the time Habana was acquired, and who left about a year later. 'We told the higher-ups we needed more staffing, but they said we should make do.'

Regulators typically visit nursing homes about once a year. But in the 12 months after Formation’s acquisition of Habana, they visited an average of once a month, often in response to residents’ complaints. The home was cited for failing to follow doctors’ orders, cutting staff below legal minimums, blocking emergency exits, storing food in unhygienic areas and other health violations.

Soon after, nursing home inspectors wrote in Centers for Medicare and Medicaid Services documents that Habana was at fault when a resident suffocated because his tracheotomy tube became clogged. Although he had complained of shortness of breath, there were no records showing that staff had checked on him for almost two days.

Five months later, Mrs. Hewitt discovered that her mother had a large bedsore on her back that was oozing pus. Mrs. Garcia was rushed to the hospital. A physician later said the wound should have been detected much earlier, according to medical records submitted as part of a lawsuit Mrs. Hewitt filed in a Florida Circuit Court.

Three weeks later, Mrs. Garcia died.

Complex, Opaque Corporate Structures

Particularly fascinating and disturbing was the evidence that the nursing homes' managers evaded regulation, and legal responsibility for what they were doing by creating immensely complicated and opaque corporate structures.

Private investment companies have made it very difficult for plaintiffs to succeed in court and for regulators to levy chainwide fines by creating complex corporate structures that obscure who controls their nursing homes.

By contrast, publicly owned nursing home chains are essentially required to disclose who controls their facilities in securities filings and other regulatory documents.

The Byzantine structures established at homes owned by private investment firms also make it harder for regulators to know if one company is responsible for multiple centers. And the structures help managers bypass rules that require them to report when they, in effect, pay themselves from programs like Medicare and Medicaid.

For example,

Formation bought Habana, 48 other nursing homes and four assisted living centers from Beverly Enterprises, one of the nation’s largest chains, for $165 million.

Formation immediately leased many of the homes, including Habana, to an affiliate of Warburg Pincus. That firm spread management of the homes among dozens of other corporations, according to documents filed with Florida agencies and depositions from lawsuits.

Each home was operated by a separate company. Other companies helped choose staff, keep the books and negotiate for equipment and supplies. Some companies had no employees or offices, which let executives file regulatory documents without revealing their other corporate affiliations.

Current staff members at Habana declined to comment. Formation Properties I said it owned only Habana’s real estate and leased it to an independent company, and thus bore no responsibility for resident care.

That independent company — Florida Health Care Properties, which eventually became Epsilon Health Care Properties and subleased the home’s operation to Tampa Health Care Associates — is affiliated with Warburg Pincus, one of the world’s largest private equity firms. Warburg Pincus, Florida Health Care, Epsilon and Tampa Health Care all declined to comment.

The example of Habana Health Center showed how the complex and opaque corporate structures thwarted regulators.

Those [government] citations never mentioned Formation, Warburg Pincus or its affiliates. Warburg Pincus and its affiliates declined to discuss the citations. Formation said it was merely a landlord.

'Formation Properties owns real estate and leases it to an unaffiliated third party that obtains a license to operate it as a health care facility,' Formation said. 'No citation would mention Formation Properties since it has no involvement or control over the operations at the facility or any entity that is involved in such operations.'

Florida’s Agency for Health Care Administration has named Habana and 34 other homes owned by Formation and operated by affiliates of Warburg Pincus as among the state’s worst in categories like 'nutrition and hydration,' 'restraints and abuse' and 'quality of care.' Those homes have been individually cited for violations of safety codes, but there have been no chainwide investigations or fines, because regulators were unaware that all the facilities were owned and operated by a common group, said Molly McKinstry, bureau chief for long-term-care services at Florida’s Agency for Health Care Administration.

And even when regulators do issue fines to investor-owned homes, they have found penalties difficult to collect.

'These companies leave the nursing home licensee with no assets, and so there is nothing to take,' said Scott Johnson, special assistant attorney general of Mississippi.

Complex corporate structures also enable nursing home management to evade scrutiny of what they charge.

Government programs require nursing homes to reveal when they pay affiliates so that such disbursements can be scrutinized to make sure they are not artificially inflated.

'The government tries to make sure homes are paying a fair market value for things like rent and consulting and supplies,' said John Villegas-Grubbs, a Medicaid expert who has developed payment systems for several states. 'But when home owners pay themselves without revealing it, they can pad their bills. It’s not feasible to expect regulators to catch that unless they have transparency on ownership structures.'

In the case of Habana Health Center,

For example, Habana, operated by a Warburg Pincus affiliate, paid other Warburg Pincus affiliates an estimated $558,000 for management advice and other services last year, according to reports the home filed.

However, complex corporate structures make such scrutiny difficult. Regulators did not know that so many of Habana’s payments went to companies affiliated with Warburg Pincus.

Summary

We see some very familiar themes in this sorry tale.

Health care is increasingly dominated by large organizations. In this case, some of these organizations are not usually identified with health care, and the identity of other organizations is secret.

The leadership of many health care organizations will put their financial self-interest ahead of patients' interests.

The leadership of many health care organizations will hide what they are doing, evade responsibility, and thwart accountability by deliberate complexity and outright deception.

Until the leadership of health care organizations becomes more transparent and accountable, things are likely to continue to go downhill.

Once again, "sunlight is the best disinfectant."

Dialysis Providers and the Restraint of Competition

This story almost made it under the radar. Our local Providence Journal provided this exclusive,

Two area dialysis clinic operators — American Renal Associates and Fresenius Medical Care Holdings — have signed consent orders with the Federal Trade Commission settling charges that they unlawfully tried to restrain competition.

According to the FTC, the parties entered into an asset purchase agreement on Aug. 3, 2005, under which ARA proposed to purchase five Rhode Island dialysis clinics from Fresenius. The agreement also required Fresenius to close an additional three clinics — two in Rhode Island and one in Fall River. The parties terminated the asset purchase agreement on March 13, 2006, after FTC staff raised antitrust concerns.

The FTC’s complaint alleges two separate violations of antitrust laws. The commission charges that the agreement between ARA and Fresenius to close three Fresenius clinics was an agreement to eliminate competition in the affected areas of East Providence, North Providence and Fall River. The effect of this elimination of competition would have been an increase in ARA’s ability to raise prices in these areas and to reduce ARA’s incentives to improve service and quality.

Also, commission charged that ARA’s proposed acquisition of two Fresenius clinics in Warwick would substantially reduce competition for outpatient dialysis services in the Warwick/Cranston area.

According to the FTC, agreements to pay a competitor to exit a market, such as the one allegedly negotiated between ARA and Fresenius, are illegal.

Although the report was local, it involved actions by two large commercial provider of dialysis services, Fresenius Medical Care Holdings, part of Fresenius Medical Care, a German firm claiming to be the world's largest provider of services to patients with chronic renal disease, and American Renal Associates, which claims to be one of the largest US dialysis providers. As such, it indicates the goals of the leaders of these organizations, and the means they will utilize to achieve these goals. Fresenius has received much more coverage lately for its efforts to stave off proposed reductions in payments for large doses of epoetin to treat anemia in dialysis patients, even given that such aggressive treatment has not shown to provide any clear benefit to patients.

This story is particularly interesting because it is, to my knowledge, one of the few reports of an anti-trust action against commercial health care service providers in the US, even though the provision of health care services is more and accomplished by corporations that grow ever larger and more powerful. This suggests that one way such organizations may grow large and powerful is by collaborating with others with whom they are ostensibly competing.

On the other hand, this is just one of many stories, found on Health Care Renewal, the other blogs that now act as health care watchdogs, and of course in the news media, of health care organizations bumping up against legal limits in their pursuit of money.

The problem is that these stories are scattered around blogs and the news media, and very rarely in medical and health care journals. I believe that were they better aggregated, physicians and the public alike would realize how much of health care is now driven by the self-interest of the leaders of large health care organizations, and how little is unfortunately driven by the needs of patients and the advancement of science.