The Terribly Difficult Things Health Care CEOs Must Do to Make the Big Bucks: Back-to-Back Meetings, Complicated Schedules, Fatiguing Driving?!

On Health Care Renewal, we have been decrying American health care dysfunction since 2004 (look here).  For years, the US consistently has had the most expensive health care system of any developed country.  For that exhorbitant price, it provides at best medicocre access to and quality of care.

We have long contended that a major reason for health care dysfunction is perverse incentives, including those that allow top health care leaders to become rich by putting money ahead of patient care.  We have presented case after case supporting this point.  So what do health care CEOs have to do to make so much money?

The Hardest Part of CEOs' Days

A recent post in Beckers Hospital Review discussing what "the brightest executives in the healthcare industry" think are the hardest parts of their days.  Here is the summary, edited for brevity:

1. Andrew Agwunobi, MD, CEO UConn Health (Farmington, Conn.): 'when we lose, or are facing the possible loss of good talent.'

2. Wael Barsoum, MD, CEO of Cleveland Clinic Florida (Weston): 'if I hear about an issue that came up with a patient where they felt like we could've done better. It is hard to read letters that said we didn't do something up to their expectations.... these reports and issues are very rare' 

3. David Dill, CEO of LifePoint Health (Brentwood, Tenn.): 'shaking the nagging feeling that I didn't get everything done that I need to, mainly because I didn't mark 10 things off a list like I used to'

4. Suresh Gunasekaran, CEO of University of Iowa Hospitals & Clinics (Iowa City): 'We hold ourselves to a very high standard ...  sometimes, very rarely, we don't hit that standard.... I take a lot of personal responsibility for those failures

5. Tom Jackiewicz, CEO of Keck Medicine (Los Angeles): 'Since it takes awhile to get on my calendar, I need to ensure I am managing my own emotions to maintain my focus so everyone gets the attention they deserve'

6. Dr. Divya Joshi, CEO of OSF HealthCare's Children's Service Line (Peoria, Ill.): 'when an initiative gets stuck and is unable to move forward because there are so many people involved or options to pursue....  Beyond that, I would say when I don't have the answer to something.'

7. Ketul Patel, CEO of CHI Franciscan (Tacoma, Wash.): 'days full of meetings that are back-to-back'

8. Chris Van Gorder, CEO of Scripps Health (San Diego): 'there are bad things that happen occasionally. That burden falls on me.... when something happens to a patient that shouldn't have happened or if one of my employees is attacked by a patient, those days are difficult'

9. Prathibha Varkey, CEO of Yale New Haven (Conn.): Health's Northeast Medical Group. 'driving between the different practices,... driving can be physically exhausting'

10. Kevin Vermeer, CEO of UnityPoint Health (West Des Moines, Iowa) 'when I must make tough decisions that impact people's lives'

11.Andrea Walsh, CEO of HealthP artners (Bloomington, Minn.). 'juggling priorities on my calendar'

12. Jeff Welch, CEO of Florida Medical Center and Tenet's Miami-Dade Group (Fort Lauderdale, Fla.): 'making sure that everything our organization does is for the betterment of the patient and the community'

13. Albert Wright, PharmD, CEO of WVU Hospitals and WVU Health System (Morgantown, W.Va.): 'it's just keeping everybody rowing in the same direction. The other challenge is that we've been on this huge growth boom ... .Trying to keep up with the growth has been a challenge because you want to help others and save some of these challenged hospitals, but you have to grow at a pace that is safe and people can keep up with'

Things are tough all over.  As a physician, I am unimpressed.  I do realize that some of the lists above included vague references to "bad things that happen," "issues that come up," not hitting a "standard," making "tough decisions," etc.  However, without further detail, I wonder if these refer to anything  comparable to the urgent  issues and decisions that doctors and nurses can face on any given day?

Many of the issues cited with more specificity seem trivial, to be charitable.  So the hardest part of being a CEO could be not completing your daily to-do list; attending back-to-back meetings; trying to focus on people with whom you meet; driving around a lot; or juggling calendar priorities?

These are not exactly the sort of hardship postings that seem to demand lavish compensation.



The Money They Make

Yet we have noted that CEOs do get lavish compensation.  The CEOs above who complained of the most trivial hardships, who have to wrestle with busy schedules, multiple meetings, and heavy traffic etc are often paid ... millions.  Consider the following examples, which are  based on the most recent compensation data I could find:

David Dill, whose worst day would be one in which he did not check off his to-do list, is in line for a $25 million dollar plus golden parachute (look here).  According to Salary.com, his total compensation in 2017 was $5,372,271. It may be higher now.

Tom Jackiewicz, whose worst day would be one in which he had to manage his emotions to focus on people with whom he was meeting, had a total compensation of $2,322,895 reported on the USC 2019 form 990.

Prathibha Varkey, whose worst day involved a lot of driving, made $187,024 reportable compensation from Yale New Haven Health Services Corporation, $748,096 reportable compensation from related organizations, and $226,128 other compensation, totaling $1,161,248 according to the Yale Health Service Corporation form 990 from 2019 via ProPublica.

Andrea Walsh, whose worst day was one in which she had to juggle priorities on her calendar, made $1,085,956 as Executive Vice President for Marketing in 2017, the last year for which full 990 data is available from HealthPartners via ProPublica.  Her current compensation is likely more.

The things you have to do to bring in those big bucks.

For Comparison, The Hardest Parts of Physicians' Days
 
So let's see... in my clinical career as an academic general internist, I faced 100 hour work weeks as an intern.  From internship through my career as a hospital-based educator, I had to cope with numerous life-threatening medical emergencies, numerous acute situations in which bad decisions could lead to patients unnecessarily dying or ending up disabled or chronically ill.  I had to tell patients they had incurable illnesses, and console the family those who were dying.  Furthermore, many other doctors have had more difficult lives.  Think about what trauma surgeons do every day, just for one example.

I am sure my colleagues in nursing could come up with their own harrowing lists.


On a personal level, there were many times I would have given anything for a day when the worst problem I had to encounter was a full schedule, boring meetings, or being stuck in traffic.


So tell me again why hospital CEOs make the big bucks, often much bigger than those made by health care professionals in the same institution?

Summary

Inflated executive compensation in health care is rarely challenged, but when it is, the responses are formulaic.  Justifications are usually made by public relations flacks who are accountable to these executives, or the executives' cronies on their boards of trustees.  As I wrote in 2015,  and in May, 2016,  It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they were authored as public relations talking points. Additional examples appear here, here here, here, here, and here, here and here. 

The talking points are:
- We have to pay competitive rates
- We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).

Yet the examples above suggest that the work of a top health care manager hardly is as difficult as that of a health care professional.  And as we have discussed, these talking points are otherwise easily debunked.  But that certainly has not stopped executive compensation from rising year after year. 

The plutocratic compensation given leaders of non-profit hospitals is usually justified by the need to competitively pay exceptionally brilliant leaders who must do extremely difficult jobs.  Yet even leaders whose records seem to be the opposite of brilliance, or whose work does not seem very hard, often end up handsomely rewarded.

Other aspects of top health care managers' pay provide perverse incentives.  While ostensibly tied to hospitals' economic performance, their compensation  is rarely tied to clinical performance, health care outcomes, health care quality, or patients' safety.  Furthermore, how managers are paid seems wildly out of step with how other organizational employees, especially health care professionals, are paid.

Exalted pay of hospital managers occurred after managers largely supplanted health care professionals as leaders of health care organizations.  This is part of a societal wave of "managerialism."  Most organizations are now run by generic managers, rather than people familiar with the particulars of the organizations' work. 

That CEOs would view the minor travails of bureaucratic life as so significant suggests how deep they are within their managerialist bubbles, and how little they understand and relate to what their organizations actually are supposed to do, provide health care on the ground to real patients. 

Rather than putting patient care first, paying generic managers enough to make them rich now seems to be the leading goal of hospitals. I postulate that managerialism is a major reason the US health care system costs much more than that of any other developed country, while providing mediocre access and health care quality.

Improving the situation might first require changing regulation of executive compensation practices in hospitals, improving its oversight, and making hospital boards of trustees more accountable.  But that would be just a few small steps in the right direction

True health care reform might require something more revolutionary, the reversal of the managers' coup d'etat, returning leadership of health care to health care professionals who actually care about patients and put their and the public's health first, ahead of their personal gain.  Of course, that might not be possible without a societal revolution to separate managers from the levers of power in government, industry, and non-profit organizations. Remember the most salient example of managerialism now for most people in the US is a an executive with a Wharton business degree as the President of the United States.

Mission-Hostile Hospital Management: Quieter, but Still Pernicious After All These Years

Hospitals exist to take care of sick people, with the goal of making them better.  Hospitals employ and work with health care professionals, again who are sworn to put taking care of patients ahead of all other concerns.

However, since we founded Health Care Renewal, we have noted striking examples of hospital leaders threatening their hospitals' fundamental mission and/or health care professionals' core values, which we dubbed mission-hostile management.  We also saw mission-hostile management affecting the broader health care industry, particularly pharmaceutical and device companies.  Most recently, the most striking examples of mission-hostile health care related management appearing in the press have come from the Trump administration.

While journalists attention is focused on Trump et al, and coverage of other topics fades, bad management of hospitals has received less attention.  However, the problem has not vanished, nor become less important.  So here is my round-up of cases of mission-hostile hospital management from the recent past.


Hospitals Offering Better Care to Wealthier Patients

Hospitlas generally proclaim that they endeavor to care for all patients, regardless of their personal characteristics, or worthiness for care  Yet we have seen non-profit hospitals offering better care to those who can pay more.  


Preferential Treatment for Wealthy Foreign Nationals Seeking Organ Transplants 

A story from November, 2017 in ProPublica documented how some US hospitals seem to give preferential treatment to wealthy people coming from overseas specifically for organ transplants.  

Little known to the public, or to sick patients and their families, organs donated domestically are sometimes given to patients flying in from other countries, who often pay a premium. Some hospitals even seek out foreign patients in need of a transplant. A Saudi Arabian company, Ansaq Medical Co., whose stated aim is to 'facilitate the procedures and mechanisms of ‘medical tourism,’' said it signed an agreement with Ochsner Medical Center in New Orleans in 2015.

In particular,

Foreign patients generally are not entitled to the same discounts as those with private insurance or Medicare, the federal insurance program for seniors and the disabled. In 2015, for instance, the average sticker price for a liver transplant at NewYork-Presbyterian was $371,203, but the average payment for patients in Medicare was less than one-third of that, $112,469, according to data from the Centers for Medicare and Medicaid Services, which runs Medicare. In the case of Saudi Arabia, its embassy in Washington often guarantees payment for patients.

This is actually not a new pheonomenon. 

There have been scandals in the past about foreigners and organ transplants. In 2005, a liver transplant center in Los Angeles shut its doors after disclosing that its team had taken a liver that should have gone to a patient at another hospital and instead had implanted it in a Saudi national. The hospital said its staff members falsified documents to cover up the incident.

The University of California, Los Angeles, came under fire in 2008 for performing liver transplants on a powerful Japanese gang boss and other men linked to Japanese gangs, and then receiving donations afterward from at least two of the men. The hospital and its surgeon said they do not make moral judgments about patients.

We discussed the case of the Yakuza transplants most recently here.

Note that while foreign nationals seem to end up on the same waiting lists that US citizens may be on, the operation of these medical tourism programs implies that they are virtually guaranteed an organ, while US citizens are not. The preferential treatment of the medical tourists does not seem to stem from compassion, but rather from the larger fees they are willing to pay. 


Discouraging Organ Transplants for Patients Unable to Afford Expensive Anti-Rejection Drugs and Other After Care

A story from December, 2018 from Kaiser Health News published in the New York Times, suggested that most organ transplant centers will not take care of patients until they can show their ability to pay, usually to pay the "sticker prices." One case made public in November, 2018, brought this issue to light

Hedda Martin, 60, of Grand Rapids, was informed that she was not a candidate for a heart transplant because of her finances. It recommended 'a fund-raising effort of $10,000.'

The Times reporters found that this was not unusual.

Two years ago, Mr. Mannion, of Oxford, Conn., learned he needed a double-lung transplant after contracting idiopathic pulmonary fibrosis, a progressive, fatal disease. From the start, hospital officials told him to set aside $30,000 in a separate bank account to cover the costs.

Mr. Mannion, 59, who received his new lungs in May 2017, reflected: 'Here you are, you need a heart — that’s a tough road for any person,' he said. 'And then for that person to have to be a fund-raiser?'

Ms. Martin’s case incited outrage over a transplant system that links access to a lifesaving treatment to finances. But requiring proof of payment for organ transplants and postoperative care is common, transplant experts say.

'It happens every day,' said Arthur Caplan, a bioethicist at the New York University Langone Medical Center. 'You get what I call a ‘wallet biopsy.’'

Virtually all of the nation’s more than 250 transplant centers, which refer patients to a single national registry, require patients to verify how they will cover bills that can total $400,000 for a kidney transplant or $1.3 million for a heart, plus monthly costs that average $2,500 for anti-rejection drugs that must be taken for life, Dr. Caplan said.

Note again that the 'sticker prices' quoted above are much higher than those paid by US government health insurance programs, so this insistence on having enough money or coverage available to pay the sticker prices appears to discriminate against poorer patients who may not have the most deluxe insurance coverage.  Futhermore, it is likely that the actual costs to do the transplant and provide follow-up care are lower than the discounted prices, suggesting that the hospital are putting their revenue ahead of the mission to provide care to patients according to the patients' needs.


Expensive Concierge Care at Non-Profit Academic Medical Centers

We have previously discussed cases of non-profit academic hospitals offering deluxe services to patients able to pay hefty fees, despite their idealistic mission statements about serving the whole coummunity.  In March, 2018, the Michigan Daily discussed the latest version of such care offered by Michigan Medicine,

Michigan Medicine at the University of Michigan is currently launching Victors Care, a concierge medical care model aiming to deliver tailored health care access to a limited number of patients. These patients will receive specialized, convenient and optimized care with purchase of an annual membership fee to cover primary care services without copays or deductibles.

A number of faculty members took exception to this program in a letter addressed to top Michigan Medicine executives,

grievances listed in the faculty letter include: being unaware in the content of the Victors Care program invitation letter, video and website; discriminating against the underserved; promotional materials suggesting Victors Care patients will 'receive preferential treatment at Michigan Medicine based on ability to pay'; implication that if receiving Victors Care is quality care, receiving care from traditional primary care physicians is not quality; and a concern that Victors Care promotional materials and website recommend care that is not evidence based.

'We ask that the institution stop recruiting our patients to this program and advertising it as providing much better care than all the rest of our primary care clinics, the letter reads. 'Victors Care purports to offer ‘better’ health care to those with enough money to pay a large access fee. The University of Michigan is a public institution and our commitment is to serve the public, not a private few.'

The letter also includes direct quotations from Michigan Medicine faculty, one of which notes: 'This reinforces UM as an elitist institution catering to the wealthy.'

Note that Michigan Medicine is a creature of the University of Michigan, a non-profit, state-supported institution, although I cannot determine whether legally Michigan Medicine is a government entity, a non-profit corporation, or something else.  The mission statement on the organizational website is:

We advance health to serve Michigan and the world

It says nothing about providing better service to wealthier patients 


Hospital Spending Priorities Put Patients and Health Profesionals Last


Increasing Market Dominance Rather than Improving Affordability of Health Care

The problem was described in a February, 2018, NBC News article, entitled with the question:"Hospitals made $21B on Wall Street last year, but are patients seeing those profits?"

Some medical economists say that nonprofit hospitals are using lucrative Wall Street portfolios to fatten their bottom lines rather than lower what patients pay for health care.

'The tenor and the responsibility of hospital CEOs has now changed over time,' said Gerard Anderson, a professor of health policy, management and international health at the Johns Hopkins University Bloomberg School of Public Health. 'They focus on the bottom line and … they get performance ratings based on profitability,' he said.

In particular, the article suggested rather than using investment earnings to lower costs to patients,

Hospitals have an incentive to reinvest Wall Street income into growing their networks in order to compete. 'To acquire hospitals you need to have money. If you want to be the biggest hospital system in your community you have to have a lot of money,' Anderson said.

But bigger hospital networks don’t necessarily mean better, or cheaper, health care for patients.

Luxury Hotel Like Accoutrements Rather than Direct Patient Care Services

Furthermore, while the patients may literally see the results of lavish hospital spending, much of that spending has scant relationship to patient care. An  article in the Spectator, March, 2018, described the lavish ways many big non-profit academic medical centers spend their money.

The Emperor Nero would have felt at home in our hospitals.

At St. Vincent’s Hospital in Worcester, Massachusetts, visitors immediately encounter a waterfall, trees, massive rocks, and a pathway for hospital-goers interested in a stroll all located underneath a glass atrium. The massive indoor nature preserve of sorts appears about half the size of a football field. It provides peace and tranquility in a place in need of such comforts.

Also,

IU Health in Indianapolis boasts a monorail-like People Mover that shuttles patients, families, employees, and anybody else who cares to ride between hospitals for free. Cedars-Sinai in Los Angeles offers deluxe maternity suites featuring such perks as access to a 'personal doula,' 'soft colors and recessed lighting to offer a soothing environment for laboring women,' and an 'in-room refrigerator stocked with complimentary chilled juices and bottled water.' Even hospitals labeled 'struggling' struggle to avoid lavish spending. The New York Post reported in 2016 that Brooklyn’s SUNY Downstate Medical Center paid consultants $83,000 for such frills as 'pricey rooms at the Carlyle Hotel on the Upper East Side, a booze-infused ‘team dinner’ at the Docks Oyster Bar in Midtown, and sticker-shock limo bills.'

True to the publication's ideology, the article blamed the spending on the government.  Obviously, though, it was hospital managers who made the spending decisions.


Hospital Board Members Meet in Cayman Islands While Budget for Employee Benefits Threatened


Hospital managers, even in hospitals meant to serve the poor, like to use the hospital budget for lavish perks.  For example, according to a report from Newsday from March, 2018, Nassau University Medical Center, is a "safety net" hospital which

treats low-income people, receives state aid even though Nassau County ended its subsidy several years ago. However, the county is liable for more than $242 million in hospital long-term debt if NHCC defaults.

Its finances have been challenged:

hospital finances continue to be tight as NuHealth faces tens of millions of dollars in liabilities for accrued employee time, health care and pensions.

'This is a cash cow without the cash,' [Chairman of the Board George] Tsunis said. 'We have a very perilous position here.'

Yet until then, hospital management continued

the practice of sending three hospital officials to the Cayman Islands for a week during Thanksgiving and a week in February to discuss the health care corporation’s offshore self-insurance facility, Tsunis said.

Like other hospitals, NuHealth set up a limited liability company called NHCC LTD in the Cayman Islands for tax purposes to self-insure for malpractice and general liability claims. The hospital’s chief executive officer, chief financial officer and chief operating officer are the company board members. To maintain the Cayman location, company officials must meet at least once a year outside the United States.

The hospital usually sent all three board members to the Cayman Islands twice a year, Tsunis said.

Now the hospital will send two people once a year to a meeting at an airport hotel ... in Canada.

So even when the bottom line was threatened, Caribbean jaunts for board members continued, apparently until they were caught 


Eliminating Faculty Retention Bonuses to Pay for Legal Liability Due to Alleged Mismanagement

While hospital managers may get lavish perks, when expenses go up they do not shrink from cutting the pay of their employees, even their most well-trained medical professionals.  For example, in January, 2018, McClatchey reported (here via the Charlotte Observer) that the University of New Mexico suspended its retention bonuses for anesthesia faculty because of the settlement it had to pay for a suit brought by 'a former dismissed problem resident.' However,

The woman said in the wrongful termination lawsuit filed in 2011 that she was raped in June 2009 by a post-doctoral fellow and anesthesiologist at the university. Afraid she’d face repercussions, she waited until September to report it to department higher-ups, the lawsuit said.

The lawsuit said officials 'discouraged' her from reporting the alleged assault to law enforcement officials to avoid damaging the school’s reputation.

The suit accused the university of failing to conduct an investigation into the allegations and of eventually terminating the resident, violating state laws, in 2011. The case was thrown out in 2013 but reinstated on appeal in 2015. UNM’s attorneys agreed to settle for an undisclosed amount in November, according to the NM Political Report.

So the suit alleged considerable bad management, as well as bad behavior by one anesthesia trainee,  but the money to settle it had to come out of senior physicians' compensation, not management's pockets.


Hospitals Threatening Health Care Professionals who Call for Patient Care Improvements that Might Cost Money

Hospitals depend on health care professionals to actually take care of patients. Health professionals swear to put patients and patient care first, while hospital managers have no such professional values, unless they are also health professionals.  Yet hospital managers have been known to threaten health professionals who dare differ with them on matters pertaining to patient care, particularly professionals who call for changes that would cost more money.


In Medscape, from October, 2017, Dr John Mandrola described the plight of employed physicians who dare protest actions by their hospitals' managers:

The need to keep one's job decreases a worker's candor. Seniority offers little protection. Look at what happened to an esteemed surgeon who spoke out on double-booking in the OR. Hospital leaders fired him.

The irony of the employed-clinician model is that many embraced it for job security but have ended up feeling more vulnerable than before. And feeling vulnerable means making less noise. The danger is obvious: Clinicians become clock-punching workers rather than leaders; bad policies persist; outlier doctors continue working unabated, and low morale becomes the new normal.

In November, 2018, the New York Daily News reported a graphic example of a hospital CEO threatening to fire a nurse who complained about staffing levels:

Brooklyn Hospital CEO Gary Terrinoni, along with several other executives and department heads, were updating the nursing staff about the hospital's future a month ago when Terrinoni launched into what sources described as a nasty screed.

'Are you all tired?' Terrinoni mockingly asked the nurses, according to a letter distributed by the New York State Nurses Association.

When no one offered a response, Terrinoni singled out one veteran RN, who at first politely tried to deflect his question. After more prodding, she answered that the biggest problem they faced was understaffed shifts.

'That's what I'm talking about! Look at your attitude!' Terrinoni allegedly erupted. 'Then you don't need to be here. Go find another job!

When the 13-year Brooklyn Hospital vet noted she had more than a decade on the job, Terrinoni only grew more agitated, the union said.

'I don't care if you've been here ten years or 30 years,' he allegedly said. 'You can leave if you don't like it here.'

Summary

Recently we have seen many examples of mission-hostile management by political appointees to health care related leadership positions in the Trump administration.

However, while the political conflagration in Washington, DC has pulled journalists away from the health care beat, we continue to see examples of bad, and particularly mission-hostile management of non-profit hospitals that threatens care of vulnerable patients. Such management tends to prioritize hospital revenues, and the financial self-interest of management over patient care.

Some recent examples of related posts included one from 2017 in which we discussed a New York hospital CEO who seemed to put revenue generation in support of his own very generous paycheck ahead of quality of care and patient safety (look here).  Also, the revered Mayo Clinic seemed to let patients with more remunerative commercial insurance coverage get attention before poor patients who have only government insurance, despite its stated mission "providing the best care to every patient" (look here).

Mission-hostile management in hospitals, pharmaceutical companies, or government agencies seems to have been enabled by several factors. 

Managerialism is the belief that trained managers are better leaders of health care, and every other sort of organization, than are than people familiar with the particulars of the organizations' work.  Managerialism has become an ascendant value in health care over the last 30 years.  The majority of hospital CEOs are now management trained, but lacking in experience and training inmedicine, direct health care, biomedical science, or public health.  And managerialism is now ascendant in the US government.  Our president, and many of his top-level appointees, are former business managers without political experience or government experience.  

The rise of the manager-leader occurred at a time when management schools increasingly preach the dogma that maximizing shareholder value, usually equivalent to maximizing short-term revenue, should be the first, if not the only goal of all managers (look here).  A recent article on the miseducation of Sheryl Sandberg, Facebook's chief operating officer, asserted that

Harvard Business School, like much of the M.B.A. universe in which Sandberg was reared, has always cared less about moral leadership than career advancement and financial performance.

The article recounted a recollection of a case discussion which included Jeff Skilling, the now disgraced former CEO of Enron

in which the students were debating what the C.E.O. should do if he discovered that his company was producing a product that could be potentially fatal to consumers. 'I’d keep making and selling the product,' he recalled Skilling saying. 'My job as a businessman is to be a profit center and to maximize return to the shareholders. It’s the government’s job to step in if a product is dangerous.' Several students nodded in agreement, recalled LeBoutillier. 'Neither Jeff nor the others seemed to care about the potential effects of their cavalier attitude. . . . At H.B.S. . . . you were then, and still are, considered soft or a wuss if you dwell on morality or scruples.'

Boards of directors or trustees, which are now often dominated by managers, are inclined to financially reward organizational managers for increasing revenue.  Hospital boards rarely are so interested in improving patient care or public health.  So the result is mission-hostile management, which is very bad for patients' and the public's health


As I have said before,  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.

But this sort of reform would challenge the interests of managers who are getting very rich off the current system.  And these days, such reform would also challenge the interests of many people in top positions in the US government.  So I am afraid the US may end up going far down this final common pathway before enough people manifest enough strength to make real changes.

"Hope in a Bottle" - Components of Purdue Pharma Stealth Marketing Campaign for Oxycontin Revealed by Legal Documents from Tennessee

Introduction: Disinformation and Stealth Marketing Campaigns

Back in the distant past the US government made some attempt to hold big health care corporations to account for misleading marketing practices.  We learned a lot about these practices from documents revealed in the resulting litigation, and in particular, about stealthy, deceptive systematic marketing, lobbying, and policy advocacy campaigns on behalf of big health care organizations, often pharmaceutical, biotechnology and medical device companies.  For example, in 2012 we found out about the stealth marketing campaign used by GlaxoSmithKline to sell its antidepressant Paxil.  This included manipulating and suppressing clinical research, bribing physicians to prescribe the drug, use of key opinion leaders as disguised marketers, and manipulation of continuing medical education.  Other notable examples included Johnson and Johnson's campaign to sell Risperdal (look here),  and the infamous Pfizer campaign to sell Neurontin (look here and here).  We also found that stealth marketing seemed to be partially responsible for the growing popularity of narcotics (opioids) starting in the 1990s (look here).

The organization and complexity of stealth marketing, lobbying and policy advocacy campaigns have often been sufficient to characterize them as disinformation.  For example, we characterized the campaign by commercial health insurance companies to derail the Clinton administration's attempt at health reform in the 1990s, as described by Wendell Potter in his book, Deadly Spin, as just that (look here).  The tactics employed in that campaign included: use of front groups and third parties (useful idiots?); use of spies; distractions to make important issues anechoic; message discipline; and entrapment (double-think).

Nowadays, the current Trump administration does not seem interested in pursuing unethical or corrupt practices by big health care corporations.  A health care corporate fraud strike force was downsized by the Trump administration as we noted in July, 2017.  By May, 2018, legal actions by the US government against apparently corrupt acts by large US health care organizations seemed to be falling off.  Only one significant settlement had made that year.  Bloomberg published a report with the headline, "White-Collar Prosecutions Fall to 20-Year Low Under Trump," on May 25, 2018.  Meanwhile, the administration pulled one former stealth marketer through the revolving door to serve in the White House (look here), and has been  pushing its own disinformation campaigns (look here).
 
However, some state attorneys general and local prosecutors have picked up the baton.  In particular, as the opioid epidemic continues, they have filed many lawsuits against corporations that profited from narcotics sales.

Sleazy Marketing Tactics Used to Sell Oxycontin

And glory be, one such lawsuit has led to the disclosure of the shady marketing tactics used by the now notorious Purdue Pharma to sell Oxycontin.  Several news reports summarized the lawsuit filed by the Tennessee Attorney General against that company.  As described by the Knoxville News Sentinel,

The lawsuit, filed by Tennessee Attorney General Herbert H. Slatery III, uses Purdue’s own company records and its staffers’ own words to show the firm’s founders and executives pushed medical providers to prescribe increasingly high doses of OxyContin for longer periods — even after Purdue promised the state it would stop.

It lays bare a marketing campaign that was highly regimented and highly profitable, built upon a foundation of lies and trickery, and specifically targeted Tennessee’s most vulnerable medical providers and patients, including the elderly and veterans.

'Purdue summarized the marketing for its opioid products with the tagline, ‘We sell hope in a bottle’ in one of the company’s hiring guides for incoming marketing employees,' the lawsuit revealed.

Targeting the Beleaguered

Hope could best be sold through the prescriptions of the most beleaguered prescribers:

Purdue told its sales staffers to target medical providers who were overworked, serving poor communities in Tennessee and had less training, calling them 'high value prescribers' who could be easily persuaded to increase prescriptions and dosages of OxyContin.

To do this, most likely the pharma representatives used psychological manipulation, such as assuring the practitioners that the representatives were their true friends in a hostile health care environment.  Such tactics were well-documented in articles by Ahari and Fugh-Berman, e.g., look here and here. 

Perverse Incentives for Sales Reps

The company provided perverse incentives to its pharmaceutical representatives (perverse, at least, from the standpoint of the patients' welfare and health professionals' values):

Sales staffers’ bonuses were tied to how well they pushed 'super core' providers — the Tennessee prescribers handing out OxyContin prescriptions at a rate guaranteed to cause fatal overdoses — to keep pushing the drug on their patients.

The firm even had a 'toppers club' for sales staffers who pushed the most OxyContin, awarding them trips and cash, the lawsuit stated.

Deceptions and Third-Party Strategies

Although none of the Tennessee pharma reps were "medical professionals," they

were trained to position themselves as medical experts and then supply providers with carefully scripted lies about the addictive and deadly properties of OxyContin, the internal records show.

'Do (providers) believe (in) me on info?' one sales staffer wrote. 'Buy-in … (Provider) buys me first.'

Again, to do this they likely traded on the misguided trust of the physicians generated by the representatives' psychological manipulations.

Practitioners were supplied with biased, and in today's argot, fake literature to give to the physicians,

literature from fake advocacy groups touting the safety of opioids and labeling the growing opioid epidemic as 'pseudoaddiction' that would level off if providers simply prescribed more OxyContin.

Sales staffers were trained to teach providers that the best way to keep patients from addiction was 'to actually prescribe more and higher doses' until the 'symptoms' of addiction went away, the lawsuit stated.

The suit claimed that Purdue set up a "third party strategy," using "astroturf" organizations to pretend that influential health care professionals and sincere patient advocates supported ever increasing narcotics use:

The firm funded the creation of advocacy groups with names such as the American Pain Society and American Pain Foundation, and pamphlets, videos and social media campaigns to convince Tennesseans that OxyContin was a wonder drug — even as the number of fatal overdoses tied to it began to skyrocket.

The firm specifically targeted veterans with a web campaign titled 'Exit Wounds,' and called OxyContin the 'gold standard' for pain treatment.

'Long experience with opioids shows that people who are not predisposed to addiction are unlikely to become addicted to opioid medications,' veterans were told. 'When used correctly, opioid pain medications increase a person’s level of functioning.'

Third party strategies have been widely used in public relations/ propaganda/ disinformation campaigns. 

Profits Before Patients, and the Law

Purdue Pharma reps were instructed to keep pushing narcotic prescribing by physicians who were in danger of being sanctioned.

The lawsuit reveals Purdue’s sales staffers were instructed to ignore police warnings, indictments and overdose deaths involving Tennessee medical providers and to continue to call on them to hand out high-dose OxyContin — the firm’s most profitable brand — so long as they still had prescription pads.

The lawsuit and Purdue’s internal records link the firm’s sales staffers to some of Tennessee’s most notorious pill mill doctors, including one of the largest such operations in East Tennessee.

Purdue staffers called one medical provider, who is not identified in the lawsuit, 48 times — after law enforcement told the firm the provider had prescribed fatal doses of OxyContin and was running a cash-for-pills clinic.

A Nashville Public Radio report additionally noted that

According to the lawsuit, Purdue reps also continued to call on doctors after:

Law enforcement identified two particular doctors responsible for significant diversion
Credible reports of patient overdoses
A provider admitting to heroin addiction
Muggings over controlled substances outside a pharmacy linked to a provider
Admission by a provider he was running a pill mill
Observing a patient being coached in a waiting room
Choreographed pill counts and urine screenings
Standing-room-only waiting rooms

Clearly, generating more revenue by selling more drugs trumped respect for ethics or the law. 

Summary

Thus, Purdue Pharma appeared to use the same sort of multi-pronged deceptive marketing approach to ramp up prescriptions of its potent narcotics, even as more and more people became addicted.

While we have been (probably appropriately) distracted by larger scandals, managers of big health care corporations have continued their cynical tactics that put profits ahead of patients, and ahead of professional values. It is likely that deceptive marketing, and full blown stealth marketing is flourishing even more in the shadows created by a government that seems to put the profits of President and family's company ahead of taking "care that the laws be faithfully executed."

At least to some degree state law enforcement is beginning to step into the breach.  As a Tenessee attorney who is also involved in lawsuits against Purdue said (per NPR)  "I think it helps all of us engaged in this fight to better understand what has happened and ultimately to get more quickly and more efficiently to a resolution,..."

So to conclude,

 We have long advocated better awareness of insidious disinformation campaigns in health care, which we previously separated into stealth systematic marketing, lobbying, and policy advocacy campaigns.  Furthermore, we have long advocated more vigorous regulatory and law-enforcement action against them.  Remember that many of the stealth marketing campaigns we discussed came to light through regulatory and law enforcement action.

Yet what sense does that make when the federal regulators and law enforcers operate under a regime that was perfectly happy to use disinformation to secure its election?

It apparently makes no more sense than advocating for better federal law enforcement measures to reduce conflicts of interest and corruption in health care under an extraordinarily conflicted and corrupt regime (look here.)

The fish is rotting from the head. 

So in parallel with what we said then, the only way we can now address health care deception, crime, and corruption is to excise the deception, crime and corruption at the heart of our government.

Heads They Win, Tails We Lose - Non-Profit Hospital Executives Paid Generously After They Were Shown the Door

On Health Care Renewal, we have been decrying American health care dysfunction since 2004.  For years, the US consistently has had the most expensive health care system of any developed country.  For that exhorbitant price, it provides at best medicocre access to and quality of care.  The latest (2017) international comparison of health systems produced by the Commonwealth Fund shows that the US spends about 16% of its gross domestic product (GDP) on health care, compared to less than 12% spent by 10 other countries.  The US ranked no better than fifth on performance rankings measuring care process, access, administrative efficiency, equity, and health care outcomes.  It had the worst access, equity and health outcomes.

Even given that some of the measures used are debatable, these are dismal results.  No wonder US physicians are demoralized and burnt-out, as we first noted in our 2003 article. [Poses RM.   A cautionary tale: the dysfunction of American health care. Eur J Intern Med 14 (2003) 123–130. Link here.] 

Health care dysfunction is commonly discussed in the US, especially since health care reform became a legislative priority during the Obama administration.  The resulting Affordable Care Act (ACA, "Obamacare") resulted in some improvement in access to health insurance, but problems with access, quality and cost remain.

It is hard to understand how such a dysfunctional system continues without considering who benefits from it. One group who greatly benefit is health care organizational managers.  We have frequently discussed their luxurious and ever increasing pay.  Furthermore, often their pay seems wildly disproportionate to their accomplishments.  For example, in June, 2017 we profiled the CEO of safety-net hospital who made over $1 million a year from an institution charged with caring for the poor.  His institution demonstrated no great achievements in clinical care or improving patient outcomes.  Meanwhile it was alleged that he tried to increase revenue via unethical means, and was even cozy with organized crime.  

Such executive compensation is rarely challenged, but when it is, the responses are formulaic.  Justifications are made by public relations flacks who are accountable to these executives, or the executives' cronies on their boards of trustees.  As I wrote in 2015,  and in May, 2016,  It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they were authored as public relations talking points. Additional examples appear here, here here, here, here, and here, here and here. 

They talking points are:
- We have to pay competitive rates
- We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).

As we discussed recently, these talking points are easily debunked.  Additionally, rarely do those who mouth them in support of a particular leader show evidence that they apply to that leader. Could so many highly paid executives be so brilliant?

Instead we now we present cases from the second part of 2017 in which non-profit hospital executives were given lavish compensation just after they were forced out of their jobs.In alphabetical order by the states in which the hospitals are located...

Florida: Broward Health Vice President Got $214,008 After Allegations of Improper Payments Lead to Resignation

As reported by the Broward County (FL) Sun-Sentinel first on August 7, 2017,

Doris Peek resigned July 20 as senior vice president of Broward Health, which runs five hospitals and various clinics, after a law firm hired by Broward Health accused her of improperly directing nearly $1.7 million to a company owned by a prominent Republican consultant. At the time of the report, Broward Health released a statement saying that it took the report 'very seriously' and that 'every individual at Broward Health is held accountable in order to uphold established legal and ethical standards.'

Peek’s severance agreement, released by Broward Health in response to a public records request from the Sun-Sentinel, states that she will receive $214,008, most of which represents six months’ severance and the rest accrued leave.

Under the agreement, signed by Broward Health interim chief executive officer Beverly Capasso, Peek may cooperate with any government investigators or regulators looking into Broward Health, a taxpayer-supported system legally known as the North Broward Hospital District. But she promised to not take Broward Health to court and 'not engage in any activity either oral or written which disparage or adversely affect Broward Health.'

Such non-disparagement clauses are common in severance agreements, although they have been criticized for allowing employers to cover up problems.

The hospital administration gave no clear reason for the generosity of the agreement.  

Asked why Broward Health would agree to such a payment, considering the highly critical contents of the report, Broward Health’s public relations agency, EvClay Public Relations, released this statement: 'It is the policy of Broward Health to not discuss severance agreements.' Pressed on the reason for this, the agency provided this statement: 'We respect the privacy of our employees.'

Given the placement of the non-disparagement clause in the agreement it is worth considering that the interim CEO, Ms Beverly Capasso, who approved the contract, was also under a cloud at the time it was written. The Sun Sentinel had previously reported,

The new chief executive of Broward’s largest public hospital system holds a master’s degree in health administration from a defunct university that has been identified by federal investigators as a diploma mill.

Beverly Capasso, who was just awarded a $650,000 annual salary to run Broward Health, received the degree from Kennedy-Western University, a mail and online institution based in California and Wyoming that closed in 2009 after failing to gain accreditation. Her resume invokes the degree at the very top, giving her name as 'Bev Capasso RN, BSN MHA.'

Furthermore, soon after the severance agreement was announced, the Sun-Sentinel reported more resignations among Broward Health management,

Two more top Broward Health executives quit this week, deepening the leadership turmoil at the taxpayer-supported hospital system.

Dionne Wong, senior vice president for human resources, and Mark Sprada, interim chief executive of Broward Health Medical Center in Fort Lauderdale, both resigned. 

And in the months since, other major management problems became apparent.

The resignations come after Broward Health’s credit rating was lowered last month by S&P Global Ratings, which cited weak financial results and the leadership turmoil at the troubled system, legally known as the North Broward Hospital District.

After that, the hospital system was also alleged to have given a no-bid contract to 21st Century Oncology, allegedly with the involvement of Florida governor Rick Scott (News-Press, September 25); and  has been under grand jury investigation for violations of the open meeting law (Sun-Sentinel, September 26).

Ms Peek was allegedly involved in improper contracting.  While Ms Peek may not have been responsible for all the additional trouble and turmoil at the hospital system, she surely participated in it.  On the other hand, there is no obvious offsetting evidence of the brilliance of her management.    Why reward her with such a generous severance package?

Georgia: South Georgia Medical Center CEO Will Get More than $2M After Allegations of Violations of Open Meeting Law Lead to Termination

As reported by the Valdosta (GA) Daily Times, July 6, 2017,

The former South Georgia Medical Center CEO will be paid more than $2 million over the next three years, for doing nothing.

Raymond Snead was ousted as CEO in March, but he’ll stay on the payrolls for a while, according to his termination letter.

The April 19, 2017 letter, effectively firing Snead, called the ouster a 'termination without cause.'

The hospital will continue to pay Snead $650,000 per year — his base annual salary — for the next three years, the letter says. He’ll also get a $2,000 car allowance each month during that period.

The local Hospital Authority, which governs the hospital, also gave Snead and his wife the option to receive health benefits for the three years. He took the offer, said Sam Allen, Hospital Authority chairman.

However, it appears that this executive also had not previously covered himself in glory, certainly not sufficient to justify this level of post-employment compensation.

Snead became CEO in September 2015, and the hospital had been under fire for poor management practices under his watch.

There also was a major issue with an apparent subordinate of Snead's on his watch.

Snead’s ouster came on the heels of the resignation of hospital attorney Walter New.

New, along with the entire Hospital Authority, got into trouble in 2016 when the group held a closed meeting without the public’s knowledge, which is a violation of Georgia law.

Furthermore, City Councilman Robert Yost

has called repeatedly for the resignations of Hospital Authority members, saying their mismanagement has caused the hospital great harm. 'They have run the ER into the ground. They have run off doctors, nurses and regular employees, some who have worked there for 25 to 30 years,” he said at the June 22 City Council meeting.

'They have intimidated employees and treated them like dirt. When it is time to reappoint the City of Valdosta’s representatives on this authority, I say let’s make sure they are all reappointed.'

'… (They) have again made very bad business decisions on our behalf and they should all be fired.'

Again, it seems that Snead's management was the opposite of brilliant, yet he was allowed to walk away with a multi-million dollar severance package. 

North Carolina: Nash UNC Health Center CEO Will Get More than $1M After Concerns about Revenue Losses and Patient Safety Lead to Retirement

As reported by the Rocky Mount (NC) Telegram, July 16, 2017, Larry Chewning the CEO of Nash UNC Health Care retired

with around $1 million since he has an ironclad two-year rolling contract, according to multiple sources familiar with the situation but not authorized to speak publicly on the matter.

Chewning didn't deny the amount he is receiving....

However, it turns out that he did not actually retire, but,

was asked to step down late last month by the local hospital board but was allowed to announce he was retiring.

The hospital was hardly transparent about the facts of the case, which were futher confused by (perhaps deliberately) complicated corporate relationships:

Inquiries into Chewning's salary and severance package led the Telegram on a goose chase involving lawyers, public relations spokesmen and uninformed officials.

Beginning with Chewning, there has been a series of refusals to disclose the salary of the top executive at a publicly-owned hospital in a state-owned network of hospitals. Drilling down, it was discovered that all the CEOs in the UNC system except for the UNC Medical Center in Chapel Hill are employed by Rex Hospital, a privately-owned hospital in Raleigh.

'I am legally precluded from disclosing any information from my employment agreement with Rex Hospital,' Chewning said, including the contact information for Don Esposito, Rex Hospital's general counsel.

Esposito referred the Telegram to Alan Wolf, the media relations manager for UNC Health Care and UNC REX Healthcare.

'We comply with all legal requirements, but it's not our practice to disclose salary information, for competitive and privacy reasons,' Wolf said. 'Mr. Chewning is employed by Rex Hospital Inc., which is not a North Carolina governmental entity and therefore is not subject to Chapter 132, the Public Records Act.'

How public hospitals can have CEOs who are employees of a separate, private hospital system was not explained.

Even local government officials were kept in the dark.

Nash County officials said they understood that's they way it had to be, but none of them knew the CEO was being paid through Rex, which makes their salaries private.

Furthermore,

At least one member of the local hospital board said they don't understand how the process works and isn't sure how the hospital will get a new CEO. 'As part of the management agreement, UNC Health Care provides Nash with a CEO,' Wolf said. 'Having a centralized management team gives UNC Health Care more control over decisions and operations at its affiliated hospitals.'

But the hospital CEOs "provided" by state institution UNC all are employed by Rex?

Perhaps all this secrecy just added to the cognitive dissonance created when considering how Chewning's lucrative retirement package might have been related to events that lead up to Chewning's retirement:

Chewning's exit comes after the hospital has been losing money and in the wake of a negative patient safety report. Chewning will remain with the hospital while his replacement is sought, according to his retirement announcement.

So Chewning's management was hardly brilliant.  Yet those responsible for hospital governance were not only happy to let the CEO walk away with a munificent retirement package, they also did their best to obscure the facts of the matter

Ohio: Ohio State University Werner Medical Center CEO Receiving More than $1M Per Year as Senior Consultant After Complaints by Physicians Lead to Resignation

According to the Columbus (OH) Dispatch, August 16, 2017, after Dr Sheldon Retchin, the CEO of Ohio State University Wexner Medical Center resigned in May, but

from his resignation, which was announced on May 10, through June 30, Retchin was still paid the CEO and executive vice president salary and benefits for performing 'transitional duties,...

That base salary was $1.1 million.

[To make full disclosure, note that I was a colleague of Dr Retchin's when we were both young  faculty members in the Department of Internal Medicine at the Medical College of Virginia from 1987 - 1994.]

Thereafter,

a contract obtained by the The Dispatch on Tuesday shows that, since July 1, Retchin has been serving as senior advisor to the president for health policy at a base salary of $500,000 annually.  The university is also making a $600,000 annual contribution to a retirement plan for Retchin, who will hold the position for two years.

So his total compensation would be at least $1.1 million a year for two years post-retirement.  Also,

the new contract says he will be paid a 35 percent performance bonus.

The rationale for this new position per university spokesman Chris Davey was that

Retchin will make important contributions to Ohio State.

'Sheldon Retchin is a nationally known leader in health-care policy,' Davey said. 'During his two-year administrative appointment, he will advise the university concerning the critical issues of health-care reform, Medicaid policy and data-driven improvements to health outcomes.'

Left unsaid is that $1.1 million a year seems like greatly inflated compensation for a health policy adviser.

Also left unsaid were the circumstances surrounding Dr Retchin's departure.

Complaints against Rechin surfaced after a May 1 letter signed by 25 leading physicians criticized his leadership.  That was followed by a letter from five doctors representing the senior leadership of the medical center's Neurological Institute.  Another group of 14 physicians, who head clinical departments at the medical center, had engaged in discussions with top university l eaders.

Upon Retchin's resignation, the university issued a statement in which it said that allegations raised in the letters were untrue.  That prompted another critical letter from leaders in the College of Medicine's Department of Internal Medicine.

A report from a local television station's news department provided further details about why the physicians declared no confidence in Dr Retchin

Dozens of doctors and professors have written letters expressing 'no confidence' in the CEO of Ohio State's Wexner Medical Center.

10TV has obtained three letters from three different groups of doctors and staff members, including department chairs and senior leadership.

They all described problems with management and morale that they said are damaging care and endangering patients and issued a 'Vote of No Confidence' in CEO Sheldon Retchin and his leadership team.

They accused Retchin of a 'management style that is inconsistent with the University's values of excellence, integrity, transparency and trust' and of fostering a culture where physicians have been described as 'lazy' and the program called 'a complete mess.'

It has led to what they call a 'dramatic impact on morale' and 'an increasing number of faculty resignations.'

They said the consequences reach beyond the walls of the Wexner citing an ongoing shortage of doctors which in their words, 'endanger(s) patient safety and lowers the quality of care,' adding to the stress of remaining faculty.

Furthermore,

In the first letter, 25 staffers who signed it said they represent many more employees, but limited the number signing out of concern for retaliation.

They complained of threats against faculty leaders who don't 'get on board' with the plans of medical center leadership.

From the information publicly available, I cannot tell whether the complaints about patient safety and quality of care are valid.  Certainly, however, Dr Retchin's management was questionable.  Creating this degree of anger among the physician staff of an academic medical center hardly seems the mark of brilliant leadership.  Yet Dr Retchin, like the other executives above, seems to have been generously rewarded after he was forced out.

Summary

The plutocratic compensation given leaders of non-profit hospitals is usually justified by the need to competitively pay exceptionally brilliant leaders.  Yet even leaders whose records seem to be the opposite of brilliance often end up handsomely rewarded.  Thes are examples of perverse incentives.

Other aspects of top health care managers' pay provide perverse incentives.  While ostensibly tied to hospitals' economic performance, their pay is rarely tied to clinical performance, health care outcomes, health care quality, or patients' safety.  Furthermore, how managers are paid seems wildly out of step with how other organizational employees, espeically health care medical professionals, are paid.

Exalted pay of hospital managers occurred after managers largely supplanted health care professionals as leaders of health care organizations.  This is part of a societal wave of "managerialism."  Most organizations are now run by generic managers, rather than people familiar with the particulars of the organizations' work.  The best current example is the election of a business executive with an MBA to the Presidency of the United States.

Rather than putting patient care first, paying managers sufficiently to make them rich now seems to be the leading goal of hospitals. I postulate that managerialism is a major reason the US health care system costs much more than that of any other developed country, while providing mediocre access and health care quality.

Improving the situation might first require changing regulation of executive compensation practices in hospitals, improving its oversight, and making hospital boards of trustees more accountable.  But that would be just a few small steps in the right direction

True health care reform might require something more revolutionary, the reversal of the managers' coup d'etat, returning leadership of health care to health care professionals who actually care about patients and put their and the public's health first, ahead of their personal gain.  Of course, that might not be possible without a societal revolution to separate managers from the levers of power in government, industry, and non-profit organizations. 

A $1.7 Million/ Year CEO of a Safety Net Hospital - Alleged to Have Hired a Dangerous Surgeon, Paid Unethical Bonuses, and Associated with Organized Crime

We have long contended that a major reason for health care dysfunction is perverse incentives, including those that allow top health care leaders to become rich by putting money ahead of patient care.  We have presented case after case supporting this point, most recently including a collection of generously compensated top executives of non-profit hospital systems whose pay seemed disproportionate to their personal achievement, and unrelated to their hospitals' clinical outcomes or quality of care.

Such cases, with their recitations of monetary amounts and repeated public relations talking points, can be rather dry.  So this week we present another case which is a bit more colorful.


The Reliably High Pay of the CEO of Bronx-Lebanon Hospital

The CEO of the Bronx-Lebanon Hospital in New York City has long been criticized for receiving millions from a hospital which mainly serves the poor.

In 2009, the New York Post published an article entitled "Sickening Bonuses" about how

hospital presidents and CEOs ... collect fat bonuses and 'incentive payments,' even as health-care systems cry poverty,...

In particular it noted that presumably pre the 2008 global financial crisis:

A $1.2 million bonus went to Miguel Fuentes Jr., CEO of the 958-bed Bronx-Lebanon Hospital. His $4.8 million package included $878,024 in salary and an $858,000 pre-retirement payout. He’s also set to get $1.8 million in retirement cash next year.

In 2013, after the great recession, the New York World reported on a measure proposed by New York Governor Andrew Cuomo to cap salaries at hospitals that receive significant amounts of money from Medicaid.  It stated:

The hospitals that will be targeted by Cuomo’s salary cap sit in poorer neighborhoods and serve large volumes of patients who depend on Medicaid. They include Bronx-Lebanon Hospital Center,...

At that time it was known that Mr Fuentes still was making a lot of money, although less than before:

Bronx-Lebanon Hospital Center ... President and CEO Miguel Fuentes made more than $1.7 million in 2011, according to tax records....

In 2014, Modern Healthcare published an article that questioned whether hospital CEO pay was justified by their or their hospitals' performance.  In particular, it quoted a JAMA Internal Medicine article that:

found no association between CEO pay and very important benchmarks, including a hospital's 'margins, liquidity, capitalization, occupancy rates, mortality rates, readmission rates, or measures of community benefit.'

Researchers found wide variation in what trustees chose to pay the CEOs of their not-for-profit hospitals.

It also noted

One community hospital is a perennial on the list [of those with highly paid executives]. Bronx-Lebanon Hospital Center's Miguel Fuentes Jr. has spent decades at his institution, and arguably needs no retention pay. His $1.8 million package includes about $200,000 in a supplemental retirement plan payment.

So what does a CEO have to do to earn millions at a safety-net hospital? Hospital boards and public relations officials often justify high CEO with standard talking points: their CEOs are brilliant, and such brilliant people must be paid well to be recruited and retained (look here).  However, I found no published record of any attempt to probe justifications for this particular CEO's pay.  Mr Fuentes does seem to have won an award from the local YMCA for "outstanding leadership" (look here).   In a 2015 news release about an affiliation between the Mount Sinai Health System and Bronx-Lebanon, the hospital was described as

a remarkable institution that has shown leadership through its commitment to delivering high quality care to patients and the communities in the Bronx

But I could not find anything in public about the particulars of this outstanding leadership.

Allegations of Organized Crime Ties

On the other hand, in June, 2017, the New York Post published two articles suggesting that Mr Fuentes' leadership might be a bit more dubious than advertised above.

The first article, published June 4, 2017, included allegations of shady dealings between the hospital and organized crime:

The mob turned taxpayer-backed Bronx-Lebanon Hospital expansion into its own piggy bank.

Construction expenses at the hospital’s new nine-story outpatient center ballooned by some $5 million — with cash allegedly ending up in the pockets of the Lucchese crime family and hospital executives, The Post has learned.

Lucchese underboss Steven 'Wonder Boy' Crea Sr. and associate Joseph Venice were charged with wire and mail fraud in connection with the project at 'a major New York City hospital,' according to a federal indictment unsealed last week in a major mob takedown. But the document didn’t identify the hospital or reveal the scheme’s dirty details.

No Bronx-Lebanon executives were named in the indictment, but the federal probe, which began four years ago, is ongoing, and focused on hospital honchos whose palms may have been greased.

Crea, 69, had close ties to Sparrow Construction, the Bronx firm in charge of building the $42 million annex at Bronx-Lebanon. He was a regular visitor to the firm’s offices while the center was under construction, a source told The Post.

Crea worked for Sparrow before he was busted in a 2000 state racketeering case. At that time, he was considered the acting boss of the Luccheses.

Work began on the outpatient center in 2009 and was supposed to take 19 months. But the Health and Wellness Center wasn’t finished until 2014 and was plagued with cost overruns.

Sparrow was the general contractor and billed the hospital $26 million for only $21 million worth of work, sources told The Post.

The heating and ventilation system cost $2.3 million to install. Yet 'the hospital still paid somebody $5 million' for it, the source said.

The alleged scheme was carried out through falsified invoices and change orders, the source said.

'The hospital didn’t question one change order,' the source said.

The bulk of the project was paid for through the sale of $36 million in state Dormitory Authority bonds. The hospital is paying back the Dormitory Authority over 25 years.

At the end of the article we found that Mr Fuentes' compensation has remained large, and stable.

Longtime CEO Miguel Fuentes’ total compensation came to $1.7 million in 2015, according to its latest tax filings.

But it added that he has had a lifestyle to match:

Fuentes lives a luxury lifestyle with a condominium on the Upper East Side and a Southampton retreat with a pool.

Allegations of Unethical Conduct to Enhance Revenue

A second article published June 24, 2017, raised further questions about Mr Fuentes' management.  First, it questioned his direct appointment of a chief of orthopedic surgery.

Hospital CEO Miguel Fuentes hired [Dr Ira] Kirschenbaum as a division chief without consulting Dr. John Cosgrove, who was then chief of surgery and would have overseen him, Cosgrove told The Post.

Cosgrove said he did not have a chance to vet Kirschenbaum.

The article suggested  that Dr Kirschenbaum was hired to push "moneymaking surgeries such as hip and knee replacements."  

However,

The hospital lavished six-figure bonuses to its chief of orthopedics, Dr. Ira Kirschenbaum, despite brass being told of four deaths after he arrived in 2008 and about others patients who suffered serious complications, according to sources.

Kirschenbaum received a $314,210 bonus in 2014 and a $180,940 bonus in 2015, according to Bronx-Lebanon’s tax filings. The extra pay came on top of his $851,000 salary.

Seven hospital employees, who identified themselves as doctors, nurses and technicians, sent The Post a copy of a letter they said they presented to a state medical disciplinary panel to complain about patients more recently injured under Kirschenbaum’s care — including one who allegedly lost a leg.

The letter was sent anonymously, and the state Health Department would not comment on any complaints to the Office of Professional Medical Conduct.

Furthermore, Dr Cosgrove, who appears to have become a whistleblower, alleged dodgy payments to hospital employed physicians at the behest of Mr Fuentes, apparently to increase patient volume.

Cosgrove also said he saw another troubling practice at the hospital: bonus payments of up to $60 paid to doctors for each visit made to the institution’s clinics — in order to tout that it treated 1 million patients annually. The hospital realized that number in 2012, according to the MD.

'Seeing a patient in the clinic is your obligation as a hospital physician and that should not be incentivized,' Cosgrove said. 'Mr. Fuentes said at many meetings he wanted to hit a million-visit mark at their 55-or-so outpatient clinics.'

Doctors were already paid salaries by Bronx-Lebanon, and the clinic bounties came from the Medicaid reimbursements, according to Cosgrove.

Such an incentive system was ripe for abuse because it could entice doctors to schedule additional, and possibly unnecessary, visits, he said.

'It’s really counter to what we as doctors stand for,' said Cosgrove, who left the hospital in 2013 and is now chief of surgery at Eastern Long Island Hospital.

Finally,the article reiterated Mr Fuentes' total compensation of $1.7 million in 2017, but added that

He has a car and a driver — and a source described a $20,000 glass-and-tile shower for his office bathroom. The shower was removed because of concerns over how such an amenity might appear, the source said.

Yet,

Fred Miller, a hospital lawyer, said Bronx-Lebanon doctors were not paid clinic bonuses, only salaries, and that compensation was 'consistent with Medicare/Medicaid principles.'

Miller acknowledged that a shower had been installed, but called it 'modest' and disputed its cost.

Summary

So the CEO of Bronx-Lebanon Hospital has been paid more than a million a year since at least 2008 (and much more than that in 2008 before the great recession), without any apparent public explanation for this pay, and particularly without any apparent attempts to  justify it based on quality of care or clinical outcomes.  Yet recently there have been allegations that the CEO was directly involved with efforts to increase revenue regardless of ethical or patient safety concerns.  Worse, there have also been allegations that organized crime has been allowed to create a "piggy bank" out of the hospital, perhaps in ways also benefiting top executives, although none of this has been proven in a court of law.

Nonetheless, it seems that high executive pay in health care, particularly at non-profit institutions serving the poor, should be justified by more than lack of proof that the executives broke the law. In fact, how could anyone justify paying the CEO of a non-profit hospital that primarily serves the poor using government money unless that person had a sterling record of accomplishment promoting the quality of clinical care at his or her institution, accompanied by integrity and accountability?

Instead, we get questions of mob influence and $20,000 showers.

So here we go again....

We will not make any progress reducing current health care dysfunction if we cannot have an honest conversation about what causes it and who profits from it.  True health care reform requires publicizing who benefits most from the current dysfunction, and how and why.  But it is painfully obvious that the people who have gotten so rich from the current status quo will use every tool at their disposal, paying for them with the money they have extracted from patients and taxpayers, to defend their position.  It will take grit, persistence, and courage to persevere in the cause of better health for patients and the public. 

Whose Costs? Who Benefits? - A Close Reading of a Hospital System CEO's Prescription for Controlling Health Care Costs

The attempt to "repeal and replace" the Affordable Care Act has suddenly made health care dysfunction a hot topic in the US.  

For example, today, in my local paper, the Providence Journal, Dr Timothy J Bainbeau, the CEO of the Lifespan Health System,  the biggest regional health system weighed in on the problem of high and increasing health care costs.  A close reading of his commentary suggests how the leadership of big US health care organizations needs to think about whether their actions have become more of the problem than a source of solutions.

The CEO's Diagnosis and Prescription

 Dr Babineau began unremarkably with:

American health care is expensive. Too expensive. On this, there is little debate. In 2001 the median U.S. household spent 6.4 percent of its income on health care; by 2016, the same household spent 15.6 percent of its income on health care. That bigger share of the pie leaves less for other essential purchases, such as food, education and housing.

What was his diagnosis?  He stated that most costs are incurred in the care of severe acute or chronic illnesses.  So his prescription was:

A critical (but often overlooked) point is the fact that as much as 40 percent of spending during chronic and complex episodes is avoidable if providers and systems adhere to established standards of care. Reining in runaway health-care spending must involve better management of high cost episodes of chronic and complex care.

So,

Rather than debate the actual percentage that is 'wasteful spending' (now commonly referenced at around 30 percent) we would be better served by continuing the hard work of identifying and eliminating areas within our own systems where needless variations in care add cost without improving outcomes.

To translate, most of health care spending is for severe acute or chronic illnesses.  For patients with these problems, we do too much, that is, by failing to "adhere to established standards of care."  Therefore, we must learn to do less, by "eliminating areas within our own systems where needless variations in care add cost without improving outcomes."  His entire focus is on ending needless utilization, presumably of specific diagnostic tests, therapies and programs.

As an aside, his assertions ignore some real controversies.  Dr Babineau implied that "variation" means needless or bad care.  This echoes the old "practice variation" research school, which showed that the rate of certain services, that is tests or treatments, varies in different geographic areas.  The problem is that this school has never clearly shown how much variation is due to variation in patients' characteristics, including illness severity and preferences, and is therefore "appropriate" in some sense.  It also fails to take into account how much variation is due to the inevitable uncertainty in diagnosis, and in predicting response to treatment.  Few diagnostic tests are perfect, so test results can rarely prove a disease is present or absent, but just can suggest how probable it might be.  Similarly, no treatment always cures, and most treatments have adverse effects.  So at best physicians can only predict the probability that a patient will improve, remain the same, or be harmed by a treatment.

Whose Costs?  Who Benefits? 

It is odd, though, that while Dr Babineau wrote an essay on reducing costs, he did not even mention how much anyone pays for any particular test, treatment, program, service, etc.  Nor did he mention whose costs most need reduction: patients', health care systems', insurance companies', governments', or "society's" costs?   That was probably due to his point of view, from the bubble of the hospital system C-suite, from which the viewof the outside world may be distorted.

Dr Babineau introduced his prescription for cost reduction with a defense of  American hospitals.

American hospitals and health care systems are among the best in the world.  Rather than decrying 'American health care is broken' and in need of rebuilding from scratch, a better strategy may be to look at what works well within our system and ask how we can build on those strengths while facing the escalating costs head on.

Hospital systems are in the health-care business, and we should not be reluctant to say so. No matter what wellness and prevention programs we collectively offer, inevitably a small subset of the population will still get very sick, and it is a core mission of health systems — working in close partnership with our primary and specialty providers — to take the very best and most efficient care of them when that happens.

But should hospitals be "in the health-care business?"     Most physicians of a certain age swore oaths on medical school graduation that we would put care of individual patients ahead of all other concerns, including making money. We surely have not fulfilled those oathes perfectly. Yet at one time health care and medicine could be seen as callings, just ways to make money.

In 2007, Dr Arnold Relman wrote(1) (and see this post):

The law also has played a major role in the decline of medical professionalism. The 1975 Supreme Court ruling that the professions were not protected from anti-trust law7 undermined the traditional restraint that medical professional societies had always placed on the commercial behavior of physicians, such as advertising and investing in the products they prescribe or facilities they recommend. Having lost some initial legal battles and fearing the financial costs of losing more, organized medicine now hesitates to require physicians to behave differently from business people. It asks only that physicians' business activities should be legal, disclosed to patients, and not inconsistent with patients' interests. Until forced by anti-trust concerns to change its ethical code in 1980, the American Medical Association had held that 'in the practice of medicine a physician should limit the source of his professional income to medical services actually rendered by him, or under his supervision, to his patients' and that 'the practice of medicine should not be commercialized, nor treated as a commodity in trade.' These sentiments reflecting the spirit of professionalism are now gone.

The Supreme Court challenge to attorneys' and physicians' professionalism was orchestrated by extreme market fundamentalists. Since 1978 when I obtained my MD from Brown, market fundamentalism (sometimes confusingly called "neoliberalism") has become dominant in the US. 


On the (now sadly dormant) Hooked: Ethics, Medicine and Pharma blog, Dr Howard Brody discussed the application of this reigning orthodoxy in economic.  Basically, supporters of market fundamentalism et al seem to assume that all markets are idealized free markets, and that free markets are like a super computer combining all human thought to provide wisdom in the form of price information.  Furthermore, since the market is based on supposedly rational choices made by free individuals, one cannot go back to question such choices. 

Hence Dr Babineau is hardly alone in regarding all of health care now as a business. But he and many others like to ignore the theoretic problems with market fundamentalism applied to health care, specifically the possibilities that 1) people's choice may not be free, may not be rational, and may not be based on coldly rational cognition and the best possible knowledge; and 2) one person's economic choice may limit another person's choices, or directly harm another person.   And never mind that Dr Babineau leads a non-profit organization, which states (per the most recent, 2015 Rhode Island Hospital IRS Form 990) that its mission is "delivering health with care."

Market fundamentalism suggests that hospitals and other health care organizations should be run like businesses to improve efficiency.  Thus Dr Babineau allowed "it is a core mission of health systems — working in close partnership with our primary and specialty providers — to take the very best and most efficient care of them when that happens."  Efficiency requires the reduction of costs, but whose? 

The worry is that Dr Babineau is really out to improve his own institution's efficiency, very possibly because he has incentives to do so.  There is considerable anecdotal evidence that hospital CEOs are rewarded for efficiency, but the effiicency of their own hospitals, not the health care system.   CEOs may get incentives when they increase hospital efficiency by cutting the institution's costs and/or increasing its revenue (look here for some examples.)  Sometimes these incentives are hugely disproportionate to any improvements in net financial position (look here for examples).  Sometimes CEO compensation goes up even when CEOs have cut the pay of or laid off lesser employees to cut costs (look here for examples).  Sometimes their pay goes up even when their actions correlate with worsening quality of care (look here for examples).

I cannot find any published rationale for Dr Babineau's compensation, but it is certainly substantial.  According to the most recently available IRS Form 990 (2015) for Rhode Island Hospital, Dr Babineau's total compensation (in 2014) was $2,405,868. 


So the concern is that the sort of efficiency Dr Babineau advocates may benefit his organization's and his own bottom line, but maybe not patients, or society.  And the promise he made that his own hospital system will improve efficiency may actually conflict with his promise to improve patient care.  

Summary

I submit that if we are really worried about why our health care system is sick, why we as individuals pay more and more for health care that is not improving, we should look beyond limiting practice variation or eliminating obviously useless, and hence perhaps uncommon services to improve "efficiency."  Instead, we should question whether health care can ever really function as a free market, and certainly whether hospitals, other health care "providers," and health insurers should be businesses that put their revenues ahead of patients' and the public's health. 

I am not a Catholic, but found the clearest voices on this issue to be those of the current and former Popes.  Pope Benedict XVI decried the transformation of medicine and health care into a business.  As we noted here, he wrote

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,...

More recently, Pope Francis said,

Doctors, nurses and those who work in the field of health care must be defined by their ability to help their patients and be on guard against falling down the slippery slope of corruption that begins with special favors, tips and bribes, the pope told staff and patients of Rome's 'Bambino Gesu' children's hospital Dec. 15.

'The worst cancer in a hospital like this is corruption,' he said. 'In this world where there is so much business involved in health care, so many people are tricked by the sickness industry, 'Bambino Gesu' hospital must learn to say no. Yes, we all are sinners. Corrupt, never.'

Thus, I challenge health care executives to state their willingness to  put the care of patients ahead of their  organizations' revenue and own pay.  Will anyone step up?

Reference

1. Relman AS. Medical professionalism in a commercialized health care market. JAMA 2007; 298: 2668-2670. [link here]