Former US Secretary of Health and Human Services Saunters Through Revolving Door, Ends Up as Director of Medtronic

There they go again.  Another US government health care leader, this time the top health care leader at the end of the previous George W Bush administration, has wound up in a leadership position in a big, for-profit health care corporation.  As per the press release published in the Minneapolis-St Paul Business journal,

Mike Leavitt, the former Governor of Utah who also oversaw the Food and Drug Administration for four years, has been elected to the board of Medtronic Inc.

Leavitt is the founder and chairman of Leavitt Partners, which advices clients in the healthcare and food safety sectors, according to a news release from Fridley-based Medtronic (NYSE: MDT).

He served as governor of Utah from 1993 through 2003. Former President George W. Bush appointed Leavitt administrator of the Environmental Protection Agency in late 2003 and secretary of Health and Human Services in January 2005. Leavitt served in that position into January 2009.

At Health and Human Services, he oversaw the FDA and the Center for Medicare and Medicaid Services — two agencies that are important to Medtronic, which makes medical devices.

Mr Leavitt's full-time job is to chair Leavitt Partners, which advertises that it "advises clients that invest in health care and food safety." It does not publicize its client list, but that list apparently includes Alliance Health Networks, whose press release noted that Leavitt Partners "will help it expand its presence in the US health industry and beyond "(look here); and Connextions, Inc, whose press release noted that it would work with Leavitt Partners to " refine existing health insurance exchange models for federal and state governments, as well as private sector organizations that are navigating health care reform law," (look here.)

Note that Mr Leavitt's official Department of Health and Human Services biography listed no training or experience in direct health care (or in biomedical sciences or the engineering of health care devices, for that matter.) Before he was Secretary of HHS, he was Governor of Utah, and before then, he was the CEO of an insurance company.  Since I very much doubt Mr Leavitt is a large Medtronic shareholder, it would appear that the rationale for his position on its board is his conectedness with other powerful health care insiders.

Summary: the Revolving Door

Mr Leavitt did not transit the revolving door as quickly as did other health care leaders from that administration.  We noted in 2010 that the leaders of the US Food and Drug Administration (FDA), US National Institute of Health (NIH), and US Centers for Disease Control (CDC) at the end of the Bush administration had already gotten powerful positions in the health care corporate world.  Mr Leavitt is not the first recent former Secretary of HHS to become the director of a big health care corporation whose fortunes may be affected by what HHS does.  We noted in 2011 how rapidly the Secretary of HHS at the end of the William Clinton administration, Donna Shalala, signed up as a director for UnitedHealth.  We have also noted a variety of other examples of the revolving door phenomenon.

These examples suggest how the leaders of government health care agencies and health care corporations are becoming interchangeable, forming a giant embedded network of influence.  Furthermore, they suggest how top government health care leaders can now expect a cushy corporate position to open up as soon as they can legally accept it.  Whether government leaders who expect such future job opportunities will avoid offending possible corporate employers while in office, even if giving such offense would be good for patients' or the public's health, is an open question.  The answer, I fear, may be obvious.   

These examples suggest that the US is becoming increasingly corporatist, a country dominated by an unholy alliance between top leaders of government and of large corporations, who are becoming increasingly interchangeable.  Another way of putting it is the country is increasingly dominated by an insider elite that manipulates the system for its own benefit. 

A recent article in the Atlantic juxtaposed two cases, one that of a CEO given a golden retirement package after presiding over the decline of his media company, and two union lobbyists who gamed the system to get outsized pensions.  While the first example would commonly draw condemnation from the left wing, and the second from the right, they are similar, and similar to those of  revolving doors we have discussed.   Author Conor Friedersdorf summarized the cases thus

neither the CEO nor the lobbyists were paid what they earned, nor were they compensated in a way that made the relevant stakeholders better off. Instead they were taken care of in a way that reflected their elite insider status and their ability to take advantage of wrinkles in the system while breaking no laws. In both cases, less politically connected people -- other Gannett employees, Gannett shareholders, readers of Gannett newspapers, Illinois school teachers, and Illinois taxpayers -- were unjustly made worse off by what transpired. And isn't the overlapping ethic that guided the behavior of these people a big part of what's wrong with America?

Behavior like theirs is one reason Americans on the right and left have recently taken to the streets. Ours is a society that has always tolerated inequality of wealth; and so long as some imperfect degree of fairness is maintained in the getting of material goods, the system functions smoothly. But if people feel that wealth they struggled to earn is being taken from them to pad the nest eggs of dishonorable union lobbyists; or that they're at risk of being fired from their $14 an hour job if they're ten minutes late, whereas their ultimate boss retires with an eight-figure package after presiding over plummeting stock prices and massive layoffs; people put in situations like that eventually revolt, if they've concluded that injustice is the norm rather than an aberration.

I would propose that the fundamental injustice of having an insider elite run health care so as to put their self-interest first is the basis of what has gone wrong with health care (and the rest of the country, and maybe the world.) If we do not have the courage to first say this out loud, and then restore some rationality and justice to the structure and leadership of health care, the spiral will continue downward.

Additional Thought

I expect if any of the insider elite's defenders bother to read this, one argument they might propose is it was always thus.  How can one expect people who work as government leaders for a short time not to take advantage of the best possible job offers when they leave?  My answer is that an admittedly cursory look at history suggests it has not always been thus.  Using Wikipedia as an imperfect but quick source, I found that Joseph A Califano Jr, the last Secretary of Health, Education and Welfare under President Carter worked at a law firm, founded the National Center for Addiction and Substance Abuse, and wrote books after he left office.  He did serve on a corporate board (CBS), but not for a health care corporation.  Patricia Roberts Harris, the first Secretary of HHS under President Carter, became a law professor.  Dr Otis R Bowen, the last Secretary of HHS under President Reagan, retired after that, but served on some non-profit boards and government committees.

Now a Mainstream Notion: "Profit-seeking Players in Finance and Health Care Have Captured Congress"

We have been writing - some might say wailing Cassandra-like - about health care dysfunction since I published about it in the European Journal of Internal Medicine in 2003.(1) However, while our dismal warnings were inspired by fears of  health care professionals who saw bad things happening in their local health care environments, the notion that things were really bad in health care really did not get a lot of traction. After all, we were in the second decade of a prolonged economic "great moderation," the good times were rolling, so who was really worried by a few whiners and complainers in health care?

However, after the fall of Lehman Brothers ushered in the global financial collapse, or great recession, this complacency was disturbed, and it began to appear that our problems in health care were not unique, but were linked to much bigger problems in the general political economy. However, the stock market rebounded, the bankers went back to making money, and economists declared the great recession over, reassuring those on the right, although the middle class continued to whine and complain about unemployment, stagnant wages, and mortgage foreclosures. Furthermore, a Democratic administration legislated both financial and health care reform, reassuring those on the left.

We on Health Care Renewal went on and on that things were not better, and health care reform no more than barely scratched the surface.

Now with stock markets falling around the world, it appears that the great recession/ global financial collapse may not really be over.  In this increasingly dismal era, the notion that health care dysfunction has not really improved, and may in fact be an important component of the larger political economic problems may be getting more mainstream.

To wit, last week, David Wessel wrote in the Wall Street Journal:

Two big sectors of the U.S. economy have been on steroids: finance and health care. If anything is crowding out more productive activities, it's them, as ... [New York University economist Paul] Romer argued in a recent National Academy of Sciences lecture.

The bloated financial sector—all those brains lured by big bucks who might otherwise have been employed in science, software, engineering or other fields—has harmed the U.S. economy more than any of our post-World War II communist adversaries did.

The American health system costs more per person than any other, but isn't delivering the world's healthiest people. The U.S. isn't getting its money's worth from either sector.

Furthermore, his diagnosis of the problem sounds like something we might have written on Health Care Renewal, if we wrote as well as he does:

Profit-seeking players in finance and health care have captured Congress, resisted regulation that would curb their excesses and exploited antiquated rules and policy for private gain.

[Paul Romer said,] 'The legislative process may just be too vulnerable to manipulation by very well-financed entities with an enormous amount of wealth and income at stake,' he said. 'Congress is for sale at bargain-basement prices.'

My only quibble is that while those who have personally profited from health care and finance have exploited antiquated rules, they also cannily managed to dispose of many time-proven rules that stood in their way.

In any case, we have written repeatedly about the linkages between finance and health care,(2) and how the current corrupt culture of finance has affected health care; that true health care reform will be very difficult because it will be resisted by those who have been made wealthy by the current system;(3) that they were made wealthy by the increasing commercialization of health care accompanied by the abandonment of previous regulations and safeguards;(4) and about their use of regulatory capture and embedded networks of influence(5) to further their aims.

You heard it here first.

Wessel's solution is:

Congress should tie its own hands more often, retaining power to investigate and vote proposals up or down but avoiding the detailed crafting of legislative provisions that influence the flow of money.

In other words, he wants more bodies such as the Base Closure and Realignment Commission (to decide which military bases to close), the Independent Payment Advisory Board (to identify ways Medicare can save money) and, perhaps, the new Joint Select Committee on Deficit Reduction (to find $1.5 trillion in deficit-reduction cuts).
Maybe that's an answer. But it's clear that future prosperity depends on the U.S.—its government, business, people and universities—coalescing behind a strategy for growth and creating incentives so talent and capital flow to promising sectors where the U.S. still has an edge in an increasingly competitive global economy.

My general suggestions maybe are complementary.

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.

Health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

Notes:

1. Poses RM. A cautionary tale: the dysfunction of American health care.  Eur J Int Med 2003; 14: 123-130.  Link here.

2.  Medical school leaders become stewards (as members of boards of directors) of for-profit health care corporations - An example is here, and a summary of how we discovered this phenomenon in 2006 is here. The conflict of interest is severe because directors of for-profit corporations are supposed to have unyielding loyalty to the interests of the corporation and its stockholders, although they are frequently accused of acting mainly as cronies of the top hired executives (see here and here).

Leaders of failed finance firms become stewards of academic medicine - We have found numerous examples, e.g., here, here, and here, of top executives and/or board members of the finance firms who helped bring on the global financial collapse also being trustees of medical schools, academic medical centers, or their parent universities. Such "stewards" may bring to the academic environment the "greed is good" culture now pervasive in finance.

3.  For example, see this post and its links
 
4. In the US, a Supreme Court decision was interpreted to mean that medical societies could no longer regulate the ethics of their members.  Until 1980, the US American Medical Association had  ruled that the practice of medicine should not be "commercialized, nor treated as a commodity in trade."  After then, it ceased trying to maintain this prohibition.  The result was increasing, now rampant commercialization.  See posts here and here.   Furthermore, the notion that information asymmetry, uncertainty and ambiguity, and inability of patients to make coldly rational decisions about disease and its management made it impossible for health care to be an ideal free market, necessitating mechanisms to compensate for market failure became passe.  Such mechanisms were then abandoned, with disastrous results.  For further discussion, see this post
 
5.  For example, see this post

Embedded Networks of Influence in Health Care: An Illustrative Case

At the 12th International Anti-Corruption Conference (IACC), sponsored by Transparency International, one of the plenary sessions was devoted to the topic of "embedded networks of influence."  The session description included this description of the topic as:

the major stumbling block in the fight against corruption, namely, the power of 'embedded networks' in advancing personal or group interests through state institutions. The extent of their power can create what is known as “state capture” meaning democratic governance failure. It will take a close look at the influential role of private sector, especially of the multinational private sector.

A recent investigative report in the Chronicle of Higher Education illustrated a striking case of how one key individual has affected health care through multiple connections to what can be regarded as embedded networks of influence, thus tying in to many of the topics we have discussed on Health Care Renewal.

The article focused on the University of Miami and its current President, Donna Shalala. Let me summarize the set of relevant topics in roughly chronological order and note how the article links them to President Shalala.

Speech Codes and Restrictions on Free Speech within Academia

As I wrote in my 2003 article, (Poses RM. A cautionary tale: the dysfunction of the American health care system.  Eur J Int Med 2003; 14: 123-130.  Link here), speech codes and other restrictions on free speech within academia created the framework for the suppression of clinical research that may offend those with vested interests:

Failure of universities to champion the academic freedom of their clinical researchers may stem from their abandonment of their own academic core value of free enquiry. There is abundant evidence that universities may restrict expression and limit academic freedom. In The Shadow University, Kors and Silverglate charged that 'universities have become the enemy of a free society.' Universities have punished faculty and students who raised unpopular viewpoints.

In the Chronicle,

Ms. Shalala, ... was previously president of Hunter College of the City University of New York and chancellor of the University of Wisconsin at Madison....

The Shadow University, the pioneering work on challenges to individual rights by leaders at academic institutions, dealt with Ms Shalala's role as a leading early proponent of silencing speech that offended academic leaders.

Wisconsin chose to enact a speech code. On March 29, 1990, the Wisconsin ACLU joined a suit against the university, announcing that the important moral goals of toleration and equal opportunity 'can be accomplished through means other than the creation of rules which infringe upon the fundamental freedom to express ideas.'

The speech code was drafted with the help of UW-Madison Law School professors Richard Delgado, Gordon Baldwin, and Ted Finman.... On June 9, 1989, upon recommendation by Chancellor Shalala, it was adopted by the Board of Regents...."

The speech code was soon declared unconstitutional by a federal court, which held:

the policy was unconstitutional precisely because 'the UW rule regulates its speech upon its content.'

Ms Shalala then:

recommended a new code to the regents in the spring of 1992, which they adopted in March.

However,

Faced with another lawsuit, the regents reversed themselves

For these and similar efforts, as discussed by Evans and Novak in 1993, Ms Shalala was dubbed "the Queen of PC" [political correctness].

Speech codes and other restrictions on free speech in the academic setting seem mainly to be used to target speech that administrators find offensive, including speech critical of management practices. This is echoed in the Chronicle story, which suggested how fearful University of Miami faculty now are of criticizing Ms Shalala:

Others, including several current and former faculty members, outline their complaints in far more detail. But they do so anonymously, saying they don't want to tangle head-on with such a politically powerful president.

Ms Shalala's prominence in academics, probably more due to rather that in spite of her hostility to free speech and free enquiry, may have enabled her to join another and even more powerful network of influence, this one at the center of the US political world.
 
The Rise of Commercial Health Insurance 

In Deadly Spin, former CIGNA executive Wendell Potter documented how clever and unscrupulous use of public relations and marketing techniques enabled commercial health care insurance and managed care companies to increase dominance of US health care, while allowing health care costs to soar, and denying access to larger numbers of patients. 

The Chronicle article briefly alluded to Ms Shalala's role in the rise of for-profit health insurance.  Despite being labelled "farthest to the left and most controversial of all President-elect Clinton's Cabinet appointments," again per Evans and Novak, Ms Shalala departed the University of Wisconsin in 1993 to become US Secretary of Health and Human Services. In that role, she presided over the administration's failed attempt at health care reform, as Potter wrote,

When President Bill Clinton was forced to give up on comprehensive health care reform in 1994, the damage was far more extensive than anyone could have imagined - the administration's defeat emboldened health insurance companies to totally redefine the mission and methods of an industry that now strands nearly fifty million people without insurance.

As I outlined..., insurers knew after the Clinton disaster that the coast was clear for them to abandon nonprofit practices, long-standing commitments to public service, and traditional insurance models and turn instead to satisfying Wall Street investors' desire to make money, by limiting spending on health care.

Note that my only quibble with what Wendell Potter wrote is that it may be that the insurance companies' top executives, rather than their stockholders who benefited the most from these changes, as we will address below.

Ms Shalala remained Secretary of HHS until 2001, but after the failure of the health care reform proposal in 1994, her department apparently did nothing to try to ameliorate the changes to health care that Potter described above.

Bloated Executive Compensation Disproportionate to Any Measure of Organizational Performance

We have frequently discussed how health care leaders now seem entitled to get huge amounts of compensation disproportionate to their organizations' performance and their responsibility for it. 

Despite Ms Shalala's reputation in the 1990s as an extreme leftist, upon leaving her role in the Clinton administration, she almost immediately embraced the for-profit corporate model of health insurance. In a notable example of what now is called the "revolving door" that went unnoticed at the time,  Ms Shalala went from would be regulator of commercial managed care to leader of commercial managed care.  As noted by the Chronicle:

Debates over ethical boundaries are not new to those involved in the university's growth surge. Ms. Shalala was on the compensation committee of the board of the health insurer UnitedHealth Group when it was caught in one of the nation's largest-ever stock-options scandals. She also received low-cost loans in 2002 as part of a favors-for-politicians scandal at Countrywide Financial Corporation.

Both Ms. Shalala and [University of Miami medical school dean] Dr. Goldschmidt have served on the boards of companies directly or indirectly affected by the university's business decisions. The university had $30-million in annual business with UnitedHealth Group when Ms. Shalala was on its board.

Note that Ms Shalala served as Secretary of Health and Human Services from 1993 to 2001, (see this list), then joined the board of UnitedHealth Group within months (see this article.)

We discussed in considerable detail the ethical failings of UnitedHealth Group while Ms Shalala had fiduciary responsibility as a board member for its conduct. A particularly striking failing was how the board of directors granted sufficient back-dated stock options to the company's former CEO to make him a billionaire on paper.  The resulting scandal was followed by his resignation.  Later, Dr McGuire was forced to give back some the options.  The final settlement of the fiasco cost UnitedHealth $895 million, and Dr McGuire $30 million and the cancellation of 3.6 million stock options.  As we most recently summarized here, former CEO William McGuire was one of the top 10 best compensated CEOs of the first decade of the 21st century, despite the company's multiple ethical failings. 

Conflicts of Interest, Especially Involving Key Opinion Leaders who Promote Marketing Objectives Cloaked in Academic Respectability

We have extensively discussed the web of conflicts of interest that now pervades health care. For academic health care leaders, the most intense kind of conflict of interest may be created by service on the board of directors of a for-profit health care corporation.  Note that corporate directors, as we have discussed previously, have a fiduciary duty to exhibit "unyielding loyalty" to the stockholders of the company and their interests  [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.].  We first started to discuss the intense conflicts of interest generated when leaders of academic medicine are also members of boards of directors of for-profit health care corporations in 2006.  The issue really made the big time in 2010 when the New York Times published a front page article in its Sunday Business section about whether university presidents who also were corporate directors were part of an "academic-industrial complex."  As we noted above, Ms Shalala's service on the board of UnitedHealth Group created such a conflict, and she apparently presided a similar board level conflict of interest affecting her medical school dean. 

A particularly pernicious kind of conflict of interest may be created when a company selling health care goods or services pays an academic to become a "key opinion leader."  Industry spokespeople and key opinion leaders themselves tout KOLs as clinical, educational, and/or scientific experts chosen for their expertise to advance medicine, science and public health.  There are documented instances (e.g., see posts here and here) in which defectors from marketing departments of commercial health care corporations described KOLs as salespeople who could be more influential hidden within their professional or academic cloaks.  Even some physicians paid to be speakers on behalf of pharmaceutical corporations have acknowledged their role as salespeople in fancy dress (see post here).  There are cases of documents revealed by discovery in legal actions that show how companies planned organized stealth marketing efforts for drugs that included activities by KOLs (e.g., see post here about marketing of Lexapro, and here about Neurontin).

The Chronicle recounted how Ms Shalala also was linked to one of the better known examples of industry paid KOLs:

Dr. Goldschmidt did not fully report the income from such corporate associations on the medical school's financial-disclosure Web site, even while promoting the site as evidence of his faculty's commitment to openness. He also brought to Miami a repeat violator of financial-conflict-of-interest standards, Charles B. Nemeroff, to serve as a professor and chairman of the department of psychiatry and behavioral sciences.

In a companion article, the Chronicle summarized Dr Nemeroff's career thus:

Dr. Nemeroff had quit as chairman of Emory University's psychiatry department in December 2008 after the university received complaints about his secretly receiving money from GlaxoSmithKline and other pharmaceutical companies while helping promote their products.

We (Dr Bernard Carroll more than yours truly)  have posted previously about Dr Nemeroff's exploits, including those at the University of Miami, numerous times. 

The Fall of Municipal Hospitals, the Rise of For-Profit Hospitals

We have frequently discussed how the leaders have undermined health care organizations' core missions, and particularly how hospitals and hospital systems have strayed from their patient care mission to make more money. The Chronicle suggested how Ms Shalala's leadership of the University of Miami has enriched the institution's teaching hospital at the apparent expense of the local municipal hospital system:

Another set of problems, cited by current and former university faculty and Jackson staff members, stems from the 2007 takeover of a facility that became the University of Miami Hospital, across the street from Jackson. The purchase has greatly expanded the university's ability to direct many of the area's most profitable patients and procedures to the new facility and to other university-owned hospitals, further worsening Jackson's own considerable budget woes.

In addition,

The university's patient-enrollment practices were part of the problem. The inspector general of the U.S. Department of Health and Human Services and the U.S. Attorney's Office for the Southern District of Florida are looking into the question of whether university doctors routinely enrolled Jackson patients in research projects without telling the hospital.

In a 2008 letter from Jackson officials to university leaders, Nathan Anspach, who was vice president for physician services at the hospital, described a series of failed efforts 'to stop new clandestine research' at Jackson by university doctors.

Meetings with university officials aimed at stopping the practice 'went badly,' Mr. Anspach wrote, and Dr. Goldschmidt, the medical-school dean, was 'outwardly annoyed' by Jackson's requests for information that would help it identify research patients in the building.

Ms. Shalala was copied on at least some of the correspondence, including a 2006 letter in which Marvin O'Quinn, then-president and chief executive of the Jackson Health System, which runs Jackson Memorial, warned Dr. Goldschmidt about the legal risks of submitting claims for patient care that should be covered by a medical study.

The current director of compliance at Jackson Health System, Diana Salinas, said the allegations are a matter of investigation by the two federal agencies. Ms. Shalala and Dr. Goldschmidt told The Chronicle that they were unfamiliar with the matter. 'This must not be a very big issue,' Ms. Shalala said, 'because none of the Jackson senior leadership has ever brought it up with me.'

Finally,

And the departing chief executive of the Jackson Health System, Eneida O. Roldan, whose appointment two years ago was supported by the university, said medical-school officials made clear from the start 'that they were going to take cardiology across the street.'

Ms. Dixon-Shim, of the support-workers' union, is among those who say they've seen it happen. 'Most of the indigent patients, they're staying at Jackson,' she says. 'But most of the private patients, the physicians are taking them over to their area' at the university-owned hospitals.

Note that we previously discussed how Jackson's financial troubles lead to a bid by for-profit Steward Health Care to take it over.

Summary

So, through her mutiple roles that allowed her to serve at several key nodes of networks of influence in health care, one person has been linked to multiple dysfunctional aspects of US health care that arguably have been responsible for our increasing costs, declining access, and poor quality.  Note that these multiple roles seem to have been logically and even ideologically inconsistent, suggesting that multiplying her roles within the  networks may have been more compelling to her than logical or ideological rationales for particular actions.

We have discussed before, the leadership of health care organizations has become incredibly interrelated, interlocked, and incestuous. It appears that top leaders of various health care organizations may be more familiar with and identify more with each other, and with other hired executives and managers, than with their organizations, their organizations' missions, and their organizations' professionals, staff, students, clients, and patients.  It now appears reasonable to characterize the relationships among health care leaders as embedded networks of influence. 


So to repeat- I strongly believe that there needs to be much more investigation, academic, journalistic, and perhaps legal, of the identity, nature, and culture of the leaders of health care, and their relationships. A few bloggers cannot do it all. Obviously, the anechoic effect mitigates against medical and health care academics looking into their own leaders. However, failing to understand who is leading our march to the brink of health care failure ought not to be something such academics would want on their conscience.

Finally, and obviously, health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

The Cloud Spreads from UMDNJ

The cloud from ongoing problems at the University of Medicine and Dentistry of New Jersey (UMDNJ) is starting to spread over other institutions.

We have posted extensively at the troubles at UMDNJ, which now is operating under a federal deferred prosecution agreement with the supervision of a federal monitor (see most recent post here.) We had previously discussed allegations that UMDNJ had offered no-bid contracts, at times requiring no work, to the politically connected; had paid for lobbyists and made political contributions, even though UMDNJ is a state institution; and seemed to be run by political bosses rather than health care professionals. (See post here, with links to previous posts.)

The Philadelphia Inquirer just reported that New Jersey Governor Corzine is proposing substantial ($169 million) cuts in state higher education funding affecting all state colleges and universities, not just UMDNJ, because he believes that the problems at UMDNJ reflect systemic problems with the management of all New Jersey higher education. He said, "frankly, the UMDNJ issue tells me there may be management weaknesses. UMDNJ tells me the institutions are not as disciplined as we would like...." Furthermore, if the colleges and universities try to make up the cuts with tuition increases, not management cuts, Corzine is threatening to re-organize the entire state higher education effort.

Meanwhile, the Inquirer also reported that questions are being raised about former UMDNJ managers who wound up at Drexel University College of Medicine in Philadelphia. We had previously posted about two fomer managers who wound up at Drexel after receiving golden parachutes from UMDNJ. James Archibald, former senior vice president for administration and finance at UMDNJ, is now Senior Vice President for Health Sciences at Drexel. John Ekanius, former vice president for government and public affairs at UMDNJ, is now Associate Dean for External Relationships and Strategic Development. The Inquirer reported that Archibald had arranged one of the famous "no-bid contracts" at UMDNJ, with the late, politically connected Ronald A. White, former fund raiser for New Jersey's former Governor Jim McGeevey. Drexel also hired David L Printy as chief operating and business development officer at the medical school. He left a year later after a "problem" he had with the US Securities and Exchange Commission (SEC) in 1996 was revealed, which had lead to a 10 year ban from working in the securities field.

Drexel was the successor institution to the former Allegheny University of Health Sciences (AUHS), part of the Allegheny Health Education and Research Foundation (AHERF). As the Inquirer pointed out, "Allegheny leaders spent tens of millions of dollars in restricted medical endowments to keep the money-losing system afloat. That resulted in a 2002 plea and a 11 1/2 - month sentence for Allegheny's head, Sherif Abdelhak. (For a somewhat more detailed history of the AHERF debacle, see the article I wrote for the RI chapter newsletter for the Amercian College of Physicians.) The Inquirer quoted a former assistant US attorney re Drexel's relationship to AHERF, "when you are the successor to a company that has gone through the tumultuous times with law enforcement like Allegheny, there should be lessons learned and a desire to reestablish credibility, not only with regulators, but with the public at large."

Yet, in addition to Printy's "issue," there were other issues raised about Archibald after he became the leader to which Drexel's medical school reported. Archibald's only experience with health care had come during his management career at UMDNJ. Before then he was the Chief Financial Officer (CFO) for SEPTA, the Philadelphia municipal transit system. The Inquirer stated, "Archibald's style and lack of medical credentials angered many on the Drexel faculty." "In March, 2004, nearly all of the 23 [Drexel] department chairs signed a letter to [Drexel President] Papadakis, seeking Archibald's demotion.... 'The dean must be empowered to be the unquestioned leader' they wrote.... The letter stated that the atmosphere of the school had 'become one of both dysfunction and distrust.'" 18 months later, the new dean of the medical no longer had to report directly to Archibald. The Inquirer article was silent about whether the Drexel medical school faculty still feel the institution's atmosphere is characterized as dysfunction and distrust.

The new Governor of New Jersey has realized the existence of widespread mismanagement in our formerly trusted and revered health care and educational institutions, and the consequences such mismanagement may have. I hope the President of Drexel, which only acquired a medical school due as a consequence of mismanagement, and worse, at Allegheny, now realizes that not everyone who fell into health care management in the last 20 boom years necessarily should continue in these roles.

Addendum: Some quick Google searching revealed that Ms. Susan Mettlen, formerly vice president for information services and technology at UMDNJ, who became Chief Information and Technology Officer for Drexel medical school, was forced to resign her position of vice chancellor for information infrastructure at the University of Tennessee in 1998 after questions were raised about her relationship with a company that sold software to the school. Maybe the people who oversee the managers of health care organizations should learn how to use Google.

Addendum (4/7/2006): The Philadelphia Inquirer published a letter from Joseph Jacovini, chair of the Drexel University Board of Trustees, in response to the article cited above:

The reputation of a university is its most important asset. Your Page One headline ("N.J. probe may touch Drexel's reputation," March 24) unfairly imputes a Drexel association with this matter. Simply stated, the facts of the article do not support the headline and your newspaper has improperly impugned Drexel's reputation.

The situation at the University of Medicine and Dentistry of New Jersey is not a Drexel story. It is not related to any actions at Drexel by James Archibald, senior vice president for health sciences, or any of the former UMDNJ employees hired. I should not have to make this clear, except that your article was misleading. The financial management of Drexel University is beyond reproach.

Drexel began operating the College of Medicine in 1998 with the support of Gov. Ridge and Mayor Rendell after the catastrophic Allegheny bankruptcy, saving 13,000 jobs and an irreplaceable medical resource. The college today is strong both financially and academically, earning the highest possible evaluation from its accrediting body and attracting a high caliber of applicants.

As long as your readers know the facts, they will understand that Drexel's reputation as one of the most successful and respected universities in the nation is unassailable. We are owed an apology and a retraction.

Note that Jacovini did not dispute the facts about Archibald, or any other administrators from UMDNJ who were hired by Drexel, that appeared in the original Philadelphia Inquirer story. The concerns I raised above were not about the financial management of Drexel, but about Archibald's alleged involvement with a no-bid contract at UMDNJ, and the protests against him by Drexel Department chairs based on his lack of any direct health care experience or credentials, which they apparently felt were not appropriate for a Vice President for Health Sciences, to whom the Dean of the Medical School and all faculty reported.

Note further that Jacovini, the Chairman of the Dillworth Paxson law firm, is also on the board of directors of Corcell, a health care corporation that provides cord blood stem cell banking services.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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