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. 

Being a Health Care CEO Means Never Having to Say You Are Sorry - (Michael) Covert Edition

Physicians and other health care professionals are increasingly subject to various measures of their quality, productivity, and "value," and beholden to administrators, managers and bureaucrats.  The notion of health professionals being primarily accountable to patients and to professional standards has become old school.  Instead, the business school dogma of  "pay for performance" reigns. There is little evidence that putting health care under the control of administrators, managers and bureaucrats has been good for anyone but administrators, managers, and bureaucrats, but the burdens they have imposed seem to be a major reasons for increasing professional burn-out.

While health care professionals are thus subject to increasingly burdensome oversight by managers and administrators, it is not clear that those managers and administrators are taking their own medicine.  At best, they seem only accountable to each other.  And thus, their pay and power seem disconnected from any rational notion of their performance.

I recently stumbled upon a story illustrating how top health care managers can repeatedly get hired again and again despite major questions about previous performance.

A New CEO Position for Michael Covert

In June, 2014, the Houston Chronicle announced Mr Michael Covert as the new CEO of the Catholic Health Initiatives (CHI) St Luke's Hospital System,  and a new Senior Vice President of CHI.  It included the typical praise from top CHI leaders and stewards.

'Michael has the qualities, skill and professional background to help lead CHI through the many dramatic changes occurring today in health care,' Michael Rowan, Catholic Health Initiatives' president of health systems delivery and CEO, said in a written statement.

Leonard Tallerine, [apparently the former CEO of GoldKing Energy, which is currently in bankruptcy] chairman of the CHI St. Luke's Health board of directors, agreed.

'Michael's depth of experience has honed two key skills: communication and collaboration,' Tallerine said in a written statement.

I confess I missed that article, but I did see an article from mid-September, 2014, in the Chronicle documenting a rather uncritical interview with Mr Covert.  He did manage to boast of his previous success:

Q. What makes you the right guy ...?

A. It's because of my past experience. I've worked in an academic setting. I've worked in a Catholic hospital setting. I have run systems. I've worked for physicians. I've been doing it for a while. And I've had the fortune of some good success.

He also decried excess regulation in California ("we were so regulated");  promised to "develop relationships with our physicians that are strong"; promised "It's not going to be all about buildings"; boasted about "teams I've created"; and proclaimed "it's important for us to be strong on our quality, our finance, our patient engagement, our employee engagement."


So far, here we have yet another new top hospital system manager who seems to be a fount of excellence, at least according to those to whom he is supposed to be accountable.

However, the name Michael Covert rang a bell, and quick search of Health Care Renewal, plus Google revealed that his record is not quite as pristine as portrayed above. 


The Covert Record

Million Dollar Plus Compensation  Questionable Celebrity Endorsements, Quality Problems

Mr Covert first lit up the Health Care Renewal radar screen in 2010 because of his relatively large compensation, greater than $1 million per year, for the CEO of a not very large, nominally public hospital system, Palomar Pomerado.  At the time, the usual explanations were provided by the hospital district chairman, who happened to be a former hospital executive.  It later turned out that Mr Covert was the second most highly paid public official in the state of California.


As Mr Covert's pay became the subject of wider discussion, the hospital nurses' union weighed in with charges that Mr Covert had irresponsibly spent money on celebrity endorsements, particularly from a well known athlete who soon left California for New York. (Look here.)


Also, in 2011 the San Diego Union-Tribune reported that the two hospitals Mr Covert lead had been fined for significant errors/ quality problems in 2010, and had been fined before for such problems.

These facts did not seem aligned with the claims by the district hospital board that Mr Covert was a "phenomenal," "excellent" or "top" leader.  They also seemed to belie Mr Covert's recent discussion of being responsible about finance, employee engagement, or quality.  On the other hand, one can see why he dislikes regulation.

Alleged Obstructed Investigation of Murderous Fake Doctor in the 1980s

Later in 2011, a little big of digging on the internet suggested that Mr Covert had a long history of issues.  In 2008, the local Community Paper did an extensive investigation into his past.  We summarized it here.  First, the article charged that in the 1980s, as a top manager at the Ohio State University Hospital System, Mr Covert impeded the investigation into Michael Swango, a fake doctor working at that institution, who was ultimately convicted of murdering three patients.

At that time, Mr Covert seemed not so interest not merely in regulation, but in the laws of the land.

Illegally Revoked a Physician's Hospital Privileges in the 1990s

The Community Paper also found that the Sarasota Memorial Hospital illegally revoked a physician's privileges.  At the time, Mr Covert was CEO of that hospital.  The Community Hospital also alleged that Mr Covert's testimony at that trial was "thoroughly impeached."

What was that about strong relationships with physicians?  

Alleged Misrepresentation of Facts About Hospital Bond Issue

The Community Paper reported in 2007 that Mr Covert misrepresented facts in his advocacy for a large bond issue to support building a new hospital for the Palomar Pomerado Health District.

Responsible about finance? 

Dictatorial Management Style

The Community Paper interviewed multiple health professionals at Palomar Pomerado uncovering multiple charges that Mr Covert was a manipulative, egotistical and dictatorial leader.

Was this a way to develop wonderful teams? 

Another Lawsuit Claiming Improper Termination of a Physician's Privileges

Later in 2008, the Community Paper noted a lawsuit filed against Palomar Pomerado by a staff physician who also alleged that the hospital had improperly terminated his privileges.  I cannot find any record of how this was resolved.

Again, what was that about relationships with physicians? 

Palomar Pomerado Left in Debt

Mr Covert resigned from Palomar Pomerado in mid-2014 to head to his new position as CEO of Catholic Health Initiatives St Luke's Health System in Houston.  At that time, the San Diego Union-Tribune reported that after building an expensive new facility, Mr Covert would be leaving a hospital system deep in debt and with substantially worsening financial results.

Moody’s Investors Service, the bond rating agency that warned twice in two years of Palomar’s declining financial health, most recently in March. 'PH’s debt measures are among the weakest in Moody’s portfolio of rated public and not-for-profit health care organizations (debt measures exclude GO debt),' the agency said.

Palomar Health’s hospitals and clinics run at a loss; operating margin was negative 4.2 percent in the first half of fiscal year 2014, an improvement from minus 12.2 percent in the same period in 2013.

Worse, the district has cash problems. While improving, it’s still violating a bond covenant to keep enough cash for 80 days.

Didn't Mr Covert say something like it's not about the buildings?  Again, what happened to that emphasis on strong finance? 

And in general, looking at the whole section above, what did Mr Covert think was his "good success?"

Summary

The bureaucrats and managers to whom Mr Covert reported as CEO of Palomar Pomderado, and those to whom he will report as CEO of CHI St. Luke's thought he was brilliant.  Mr Covert proclaimed that he would engage employees, collaborate with physicians, and focus on quality and responsible finance, among other issues.  Yet Mr Covert seemed to leave in his wake as former leader of multiple hospital systems allegations of dictatorial leadership, irresponsible management of finances, deceptions, and opacity (even in the face of investigations of criminal behavior).  Mr Covert's previous hospitals paid fines for quality violations, went into severe debt, terminated physicians' privileges once allegedly improperly, and once illegally as found by a jury, and in one early case harbored a homicidal fake doctor.

Were the people who recruited and vetted Mr Covert bamboozled by his charm, to the point that they did not even bother to check the public record of his past performance?  Or were they, as managers and administrators, not apt to question a fellow member of their guild?

By the way, why did no one in the Houston media think to actually ask some hard questions about the latest star on the local health care management scene?

So why should we as health care professionals, or members of the public ever believe the managers and administrators who have taken over health care? Especially when they promise to improve quality and control costs by making everyone else responsible to them?

True health care reform would make health care leaders accountable for putting patients' and the public's health ahead of personal gain.  Generic managers following business dogma may not be the people to do this. 

ADDENDUM (29 September, 2014) - Thanks to the comment by Dr Howard Brody below, I corrected the statements about that Michael Swango was a fake doctor.  He did in fact have a real MD degree. 

To Die in Texas - Dr Mahmood's Apparently Fatal Stealth Hospital System Collapses Nearly Anechoically

I would bet that most people in the US still think our health care system is highly regulated.  Some may thus conclude that the system is basically safe, because, for example, drugs have to be proven safe and effective to be approved by the government, and hospitals must be licensed and run by competent people who are thoroughly vetted.  Of course, some people still think that the US has, or had until recently, the best health care system in the world (look here).

Furthermore, the view that less regulation is always better is no quite popular in the US and elsewhere.  For example, after the chemical spill threatened water supplies in the capitol of West Virginia, the Dallas News reviewed Texas Governor Rick Perry's consistent attacks on government regulation.   

'American business in general, and American agriculture specifically, have had enough of bureaucracy at both the federal and state levels, but especially bureaucracy out of Washington,' Perry said at a congressional hearing. 'The men and women who feed and clothe this nation are suffocating under the weight of mounting federal regulations.'

That was back in 1993, when Perry was Texas’ agriculture commissioner. Now Texas’ longest-serving governor, Perry has remained steadfast in his opposition to government regulations.

Some who take such a neoliberal stance may say the health care system is over-regulated, and thus is inefficient and not innovative, leading to our high costs and poor access.

However, an amazing case out of Governor Perry's Texas that was made public last year, and I regret I just heard about recently, suggests how little health care may be regulated, and how unregulated health care, whether or not it is efficient, may be deadly.

As reported in the Dallas News, July, 2013, in the last few years there seems to have been an epidemic of quality problems in a number of seemingly unrelated small rural Texas hospitals.  The report focused first on one hospital,

Renaissance Hospital Terrell

After for-profit hospital corporation Renaissance Healthcare declared bankruptcy in 2008 (look here), it sold its hospital in Terrell, Texas to RH Terrell Management LLC owned by one Dr Tariq Mahmood.  Almost immediately, however, there was trouble.  First Edwina Henry, the quality director, spied a doctor making questionable entries in patients' charts:

from her office, she had a clear view of doctors’ foot traffic through the medical records department.

When she saw [Dr Tariq] Mahmood jotting in patient charts, she knew he wasn’t seeing patients. Mahmood himself had not been credentialed to treat patients — a process in which management vets backgrounds and competencies of doctors. Part of Henry’s job was tracking such evaluations. She also knew it was a breach of privacy laws to review patients’ medical records.

'I immediately questioned some of the clerks and [insurance billing] coders,' she said. They were deeply concerned, saying he was altering the patients’ records to help boost reimbursements for insurance claims, Henry said.

When Ms Henry complained, things did not go well,

Henry made her confidential call to the bankruptcy court in early November 2008, alleging potential fraud and threats to patient care that were eluding government notice [Ed - note that the hospital was going through bankruptcy proceedings and had just been acquired by a new owner]. The court forwarded her complaint to the U.S. Justice Department, the Texas attorney general’s office and the state health department, officials confirmed.

Later that month, the state health department sent an inspector to the hospital. However, the visit was brief, Henry said, and the inspector didn’t interview her or seek her help in obtaining records.

Williams, the health department spokeswoman, told The News her agency’s records show the inspector was unable to substantiate violations at the time.

Henry was terminated from Renaissance as part of a 'restructuring'....

Then the hospital was cited for turning patients away from the emergency department,

At Renaissance, two women in labor, one bleeding, were refused treatment. The inspection reports don’t reveal whether the women suffered complications because of the delays.

A Renaissance employee told one of the women that if she 'could stand there and have a conversation with them then (she) wasn’t about to have a baby,' reports say.

Then there were problems with infection control,

At Renaissance, no supervision over infection control could be found. For three months in the summer of 2010, no one was in charge of tracking infectious diseases or preventing their spread.

The next year, the problem was blood transfusions

Inspectors returned to Renaissance in September 2011 to investigate a botched blood transfusion procedure. They found that a registered nurse had not supervised the patient’s care. In another case, an inspector witnessed an unsupervised vocational nurse administering blood to a patient, despite no evidence that she was competent to do so — another violation.

In 2012,

During the summer, the Texas secretary of state had revoked Renaissance’s business charter for failure to pay franchise taxes.

That office didn’t share the information with the health department; it isn’t required to do so.

In September, state health regulators notified Renaissance that they were proposing a $35,050 fine for 13 violations, including the nursing supervision failures, dating as far back as 2010.

Williams, the health department spokeswoman, could not explain why the fine process took nearly two years since the first violation. 

Finally, in 2013, patients started to die,

In January of this year, when state inspectors returned to Renaissance, they found nursing supervision failures yet again.

This time, the failures had led to three deaths: All ER patients. All with severe breathing difficulties. All receiving little to no intervention as their conditions worsened.

In particular,

[Eve] McCallum sought her own care after complaining of shortness of breath during a family dinner.

McCallum had chronic obstructive pulmonary disease. When she was admitted, nurses were ordered to monitor her vital signs and oxygen levels. Her breathing soon improved, said her niece, Lou Ann Sims.

'We were fully expecting to pick her up the next morning,' Sims said.

Instead, they watched helplessly as her condition deteriorated. On Christmas Day, a physician explained to McCallum’s family that she had to be transferred to the intensive care unit.

Later, Sims witnessed a scene she can’t let go of: Her aunt lay connected to a ventilator while a nurse stood smoking a cigarette just outside the door. The nurse had propped open the door with an IV pole.

The family immediately sought to have McCallum transferred to another hospital. But hospital officials told them 'this would be a lateral move and was not allowed,' according to a transcript of an interview the family later conducted with state officials.

McCallum died two days later.

Inspectors wrote that a licensed vocational nurse had been left in charge of her treatment, without a registered nurse’s oversight. There was no evidence an RN had assessed her condition on admission or was watching over her in the ICU.

They could find no doctor orders to place her on oxygen, no order for medications administered to her, 'nor evidence of communication with the M.D.'

Suspecting more than just care breakdowns at Renaissance, McCallum’s family reported her death to the Texas attorney general’s fraud-control unit.

So partially in response to this egregious case,

By February, the state health department had moved to revoke Renaissance’s operating license, and CMS had ordered its federal funding terminated — only the ninth time nationally in the last three years CMS had taken such a step.

Even those steps could not shut down the hospital, but city officials took that last step due to the failure to pay taxes.

Other Hospitals

Dallas News reporter Miles Moffeit found several other cases of severe problems at small hospitals owned by Dr Mahmood, with at least one patient death apparently resulting, .


Shelby Regional Medical Center

This hospital was owned by Tenet Healthcare, but was sold to another of Dr Mahmood's companies, Shelby Medical Holdings, in 2007 (look here). 

In 2009, this hospital was also cited for providing insufficient treatment in the emergency department.

In 2012, things were really falling apart,

In October 2012, inspectors were at Shelby chronicling dirty, clogged air-conditioners and failures to prevent ceiling plaster 'from falling into the patient food service line and contaminating food.' Those problems put patients’ safety in 'immediate jeopardy,' they wrote.

As inspectors roamed Shelby’s halls in December, the power suddenly went out in four buildings, though not in the main hospital facility itself. The electric bill hadn’t been paid. They found other debts stacking up, too — as much as $190,442 owed to as many as 79 service providers.

Signs of neglect were everywhere. Only three of 20 patient rooms inspected were 'fully functional for patient care,' they wrote. They found holes in walls, dirty and tattered curtains, and patients complaining of heat pouring from the faulty A/C system.

Finally, in 2013, another patient died,

On Wednesday, CMS cut off federal funding to ... Shelby Regional Medical Center in Center in East Texas after regulators said a patient rushed there by ambulance never received treatment from a doctor.

The ER physician wouldn’t leave his 'sleep room,' the inspection report said, resulting in the patient’s death. Regulators also cited the hospital for failing to vet backgrounds of doctors and nurses.

Apparently soon thereafter Dr Mahmood shut the hospital down due to "legal issues that ... [he] is facing," per the Shelby Light and Champion.


Lake Whitney Medical Center

Dr Mahmood apparently purchased this hospital from a struggling local hospital authority in 2007.  

In 2009, it was cited for inadequate care in the emergency department,

At Lake Whitney, a nurse acknowledged to inspectors that she had shredded records of a patient who was denied care following a fall, according to a report. The 'patient wasn’t going to pay anyway,' the nurse was quoted as saying in the document.

In 2010, there was evidence of major infrastructure problems,

At Lake Whitney, patients were served food on rusty 'over-the-bed tables that were a source of possible infections for open wounds.' Bulging ceiling tiles exposed pipes. Pavement outside a main hospital door was 'cracked and unlevel,' putting patients at risk of injury.

As Dr Mahmood's legal troubles mounted, the hospital was sold to Frontier Hospitals Inc (look here).


Cozby-Germany Hospital 

I have been unable to discover when Dr Mahmood purchased this hospital. 

In 2010, it became apparent that the hospital was not properly licensed,

'The administrator reported the new owner had not notified (CMS) … and has not applied for hospital licensure with the state licensing agency,' a report said. [The owner] ... also was found to have appointed his own employees to the hospital’s governing board of directors, instead of independent outsiders.

And there were more severe problems with credentialing,

At Cozby-Germany hospital, hospital inspectors discovered that the chief of staff and another doctor had expired medical licenses. There were no 'functional' nurse and doctor credentialing processes, and clinical policies had not been updated since 2008, they said. The hospital pledged reforms.

But in May 2011, records show, Cozby hired one of Texas’ most notorious doctors, Rolando Arafiles.

At the time, Arafiles had been placed on probation by the medical board for allegations of harming nine patients, overbilling and improper coding at a Winkler, Texas, facility, according the board. He also was disciplined for intimidating the Winkler nurses who blew the whistle on his practices.

In November, Arafiles would be convicted of two felonies linked to the retaliation and would surrender his license.

In 2013, two local doctors purchased the hospital.

The Vanishing Owner

What made this series of cases all the more amazing is that it was really one interlinked case.  All these hospitals, plus a few more, had the same owner.  Yet no one, especially  no one in state or federal government knew that until 2013 when the facts were uncovered by Mr Moffeit.

[Dr Tariq] Mahmood, a Pakistan-trained doctor, obtained his Texas medical license in 1978. Since 2008, he has practiced medicine only at his Central Texas Hospital in Cameron, south of Waco, records with the Texas Medical Board show. Older documentation is not available.

Over the last two decades, he has purchased at least six hospital companies and two home-health care agencies, according to filings with the Texas secretary of state. He also has invested his money outside health care, acquiring the historic Hotel Lawrence in downtown Dallas, property records show.

In addition to Renaissance, Shelby and Central Texas Hospital, Mahmood owns the Lake Whitney Medical Center in Whitney and Cozby-Germany Hospital in Grand Saline. He sold Community General Hospital in Dilley around the time of his arrest in April.

The hospitals have no common corporate identity and little or no website presence, making it difficult for anyone to know they are owned by Mahmood or are part of a chain.

However, much bout Dr Mahmood was mysterious, and the deliberate cultivation of mystery might have slowed the response to this case.

Mahmood is rarely seen in the communities where his hospitals are located, say business associates and city officials. Sometimes they catch a glimpse of him passing by in a chauffeur-driven car.

'He’s almost impossible to track down' to discuss business matters, said Tom Elliott, a director for a nonprofit company that owns the hospital building in Grand Saline. 'He lets his people do the talking.'

Mahmood is a mystery to many of his own employees. He works almost entirely behind the scenes, they say, focusing largely on the business side of his operations. He often is traveling or spending time at his 10,000-square-foot gated estate in Cedar Hill, they say.

'We see him maybe once a year,' said one of his hospital physicians. 'The employees say he doesn’t like confrontation. I say he just doesn’t like to communicate. He seems to live in a different world.'

Aftermath

 At some point, the shadowy Dr Mahmood may have to answer for all this, at least to some extent,

In April, federal authorities charged the 62-year-old Cedar Hill resident with defrauding Medicare and Medicaid programs through $1.1 million in false billings.

Mahmood is accused of directing employees at his Central Texas Hospital in Cameron to alter underlying information in insurance claims from his other hospitals. 'In many cases,' the indictment alleges, these were 'for patients he had never seen.' Mahmood pleaded not guilty, and his attorney said he denies all charges. He has declined repeated interview requests from The Dallas Morning News. 

Note, however, that these are charges of financial fraud.  They do not obviously have to do with poor quality care, risks to patients' safety, or the deaths of at least three patients as discussed above.

This case was so bad that even the current Governor of Texas, Rick Perry, a politician known for taking a small government, minimal regulation stance, at least said he was going to take some action, as reported again in the Dallas News,

The governor’s office has ordered a 'deep and comprehensive look' at health care facilities owned by Dr. Tariq Mahmood, whose chain of rural Texas hospitals avoided serious regulatory action despite years of endangering patients.

The inspector general for the state Health and Human Services Commission and one of the agencies it oversees, the state health department, will conduct separate investigations, officials said Friday.

And in February, 2014, the Dallas News reported that the chief financial officer of the Dr Mahmood's stealth hospital chain was also in hot water,

The top administrator of a chain of hospitals that collapsed under the ownership of a North Texas physician faces charges that he defrauded the federal government of nearly $800,000 in stimulus funds.

Joe White of Cameron rose from maintenance man to head administrator and chief financial officer over hospitals once owned by Dr. Tariq Mahmood. Now he joins Mahmood in facing the possibility of prison time.

Like Mahmood, who pleaded not guilty, White is accused of identify theft and bilking the federal government of health care dollars. White has yet to enter a plea.

Note that the CFO and apparently COO was not even a professional generic manager.  He was a former maintenance man  and operator of a Radio Shack store.. 

Dr Mahmood has not yet come to trial.  Many questions about the case remain unanswered:
 -  Did Mahmood the only person besides his CFO cum maintenance man in charge of all this, or did he have other backers,  cronies, associates?
-  What happened to the rigorous state investigation promised by Rick Perry?
-  Given that what went on harmed patients, and hence was not just financial manipulation, are there any civil lawsuits pending?  Are there any other criminal investigations?\

Furthermore, despite its egregious nature, this case was amazingly anechoic  The only national recognition I could find was in Paul Levy's Not Running a Hospital blog.  Seven months later, I could find nothing in the national media, nothing in medical and health care literature.  Despite the amazingly poor quality of care in evidence, despite the fact that patients died, I could find no cries of outrage from those who proclaim to support quality health care or patient safety. 


Summary

Dr Mahmood and his chief operating and financial officer collectively displayed leadership that was ill-informed (the COO/ CFO was a former maintenance man), incompetent (see the egregious health quality problems listed above), self-interested (note the size of Dr Mahmood's mansion versus how little was obviously spent on his hospitals), opaque and dishonest (note how Dr Mahmood's ownership of the hospitals was obscured), and allegedly criminal.  This leadership persisted over at least eight years until it culminated in cases of apparently needless patient deaths.  

The amazing case of the stealth for-profit hospital system run by Dr Mahmood, and how its combined problems failed for so long to get systemic regulatory notice hardly suggest that our health care system is heavily regulated, or that current regulation can be relied upon to reassure patients that all is well and that the system is safe.

In fact, in the case of Dr Mahmood, government regulators did not seem to even want to know too much about hospital ownership,

Top health regulators weren’t even aware Mahmood owned several hospitals until The News sought information about them earlier this year. Regulatory agencies aren’t set up to track problem hospital owners or hold them accountable. Nor do they look for patterns of care breakdowns inside hospital chains.

'We just don’t have that authority,' said David Wright, deputy regional administrator for CMS. The federal agency oversees the state health department’s inspections of federally funded hospitals. 'We can only address problems in stand-alone facilities.'

Furthermore, it appears that modern regulators have decided to become hospital managers' and owners' best friends,

The process allows hospitals to avoid sanctions if they cooperate. Hospitals submit “corrective action plans” to remedy failures. It can take months for state regulators to bring penalties such as fines against a facility. In the case of Renaissance, it took years.

'We want to do what’s in the best interest of the patients, and our regulatory philosophy is to get hospitals into compliance,' said Carrie Williams, spokeswoman for the Texas Department of State Health Services. 'We’re not in the business of shutting down hospitals. We will give them some leeway and work with them.'

Of course, this minimalist, light touch regulatory methodology may have made some sense in an earlier era when nearly all hospitals were small community not-for-profit organizations, non-profit academic institutions, or were run by local governments.  It seems quaint, and hopelessly out of date in an era when most hospitals are part of ever larger systems, now often owned for-profit corporations, and when hospital system CEOs who are professional, and thus generic managers, not health care professionals, in an era of financialization and "maximizing shareholder value," that is, making short-term revenue the most important outcome.

Instead, the current minimalist regulatory system seems insufficient to prevent patients from dying of poor care allowed by poor leadership of health care organizations.  Much of the content of this blog has been about bad health care leadership, i.e., leadership that is ill-informed, incompetent, unsympathetic or hostile to health care professionals' values, self-interested, conflicted, dishonest, or even corrupt.  In my humble opinion, health care regulation ought to be sufficient to promote competent, caring, unconflicted, honest leadership that is accountable for putting patients' interests ahead of self-interest.  Regulation needs to be more intense, and much smarter, geared to the reality of a health care system that is now largely for-profit in an era when management dogma puts revenue ahead of all other concerns.

Maybe the deaths of some patients in Dr Mahmood's Texas hospital will finally let the air out of the mindlessly anti-regulatory bubble, and start some discussion of intelligent regulation to improve patient safety.

However, that cannot happen if this case remains anechoic.  I regret it took me so long to find it, but now I have done my part to start some echoes.  But where are the media, where are the journal editors, and where are those who so loudly proclaim their interest in patient safety and health care quality?

In particular, there are several prominent organizations that claim to promote health care quality and patient safety.  These organizations make these claims-

Joint Commission

 For more than 60 years, The Joint Commission has been a champion of patient safety by helping health care organizations to improve the quality and safety of the care they provide.

Leapfrog Group

 The Leapfrog Group is a voluntary program aimed at mobilizing employer purchasing power to alert America’s health industry that big leaps in health care safety, quality and customer value will be recognized and rewarded.

National Quality Forum

 Transforming our healthcare system to be safe, equitable, and of the highest value will take time and the work of many, but the potential rewards are great. The National Quality Forum (NQF) is a nonprofit, nonpartisan, public service organization committed to this transformation.

Robert Wood Johnson Foundation

Our efforts focus on improving both the health of everyone in America and their health care—how it's delivered, how it's paid for, and how well it does for patients and their families.

These  organizations should the ones to start the conversation about improving rather than forever shrinking regulation.   I have not heard anything from them about the deadly hospitals of Dr Mahmood.  Are they listening now?  Will we ever hear from them?  Time will tell.... 

 Note: the entire Dallas News series on the Mahmood hospitals can be found here. 

UnitedHealth CEO Continues to Prosper While His Company's Behavior Appears to Contradict its Mission Statement

Tis spring, the season in the US for legal settlements, government findings, and proxy statements revealing executive compensation.  Therefore, maybe there should be no surprise that we are seeing a series of cases in which health care corporate leaders continue to enrich themselves while their organizations' behavior raises ethical questions.

Following on the Amgen example, we now present the latest UnitedHealth example (in a post organized similarly.)

The CEO Gets Richer

Last week, the Associated Press (via the Washington Post) summarized UnitedHealth CEO Stephen J Hemsley's growing pile of money:

UnitedHealth Group Inc. kept CEO Stephen J. Hemsley’s salary stable in 2012 but bumped up his total compensation for a year in which the nation’s largest health insurer grew earnings and enrollment and launched a major acquisition.

The Minnetonka, Minn., insurer gave its top executive a compensation package valued at about $13.9 million last year, according to the company’s proxy statement filed with the Securities and Exchange Commission. That’s up 4 percent from the $13.4 million total he received last year.

Hemsley, 60, received a $1.3 million annual salary in 2012, like he has the past several years. He also received $7 million in stock awards, which is the same total as 2011. But his performance-based bonus climbed 7 percent to $5.3 million, and he received $287,443 in other compensation, up from $154,804 in 2011.

Other compensation included savings plan contributions and a $125,000 Hart-Scott-Rodino Antitrust Improvement Act filing fee payment UnitedHealth made on behalf of the CEO so he could maintain and increase his stock ownership in the company.

At the same time, Hemsley continued to cash in stock options which also added to his riches:
 

Outside AP’s calculation of his 2012 total compensation, Hemsley also acquired 284,836 shares that had vested with a value of $15.3 million. He also exercised options to acquire 600,000 shares and realized a value of $12.5 million. Those options and stock awards had been previously given to the executive.

The proxy said Hemsley directly owned UnitedHealth shares valued at about $140 million, as of March 1.

The Mission Promises Much but the Company Delivers Less

On one hand, the rate of rise of Hemsley's compensation at least seemed comparable to the company's financial performance:

Overall, UnitedHealth shares climbed 7 percent to close 2012 at $54.24, a smaller gain than the 13.4 percent advance from the Standard & Poor’s 500 index.

On the other hand, the largess given to the CEO ought to be contrasted with the how UnitedHealth failed to deliver what its mission promised.  

Most recently, a jury found the company failed to live up to its legal obligation (in the state of Nevada) to review the quality of the clinicians on its panel.  As reported by Bloomberg,

Two UnitedHealth Group Inc (UNH)  units must pay $24 million in damages for failing to properly monitor a doctor who gave two colonoscopy patients hepatitis C by employing substandard medical practices, a Nevada jury ruled.

Jurors in state court in Las Vegas deliberated about five hours over two days before finding officials of Health Plan of Nevada and Sierra Health Services were negligent in their oversight of Dipek Desai.  The former gastroenterologist has been blamed for infecting patients with hepatitis C by reusing vials of the anesthetic Propofol and failing to sterilize equipment.

The panel ordered the two UnitedHealth units to pay $15 million in compensatory damages to Bonnie Brunson and her husband and $9 million to Helen Meyer. The two women contend they got hepatitis during colonoscopy procedures at Desai’s clinic. Their lawyers said earlier in the case they may ask the jury to award more than $1 billion in punitive damages.

The verdict reflects 'what’s wrong with health insurance companies in the U.S.' Robert Eglet, Brunson’s lawyer, said in an interview after the verdict was announced. 'They put profit before patient safety.'

Note that the state of Nevada does explicitly hold managed care organizations accountable for the clinical quality of its health care professionals' practice,

 

Meyer and Brunson sued under a Nevada law requiring HMOs to file annual reports showing officials reviewed the quality of health services provided to their members.

The women’s lawyers argued officials of the UnitedHealth units knew Desai had a reputation for sloppy practice before giving him a contract to handle colonoscopies and then didn’t check the quality of his work. At one point, Desai was a member of Nevada's Board of Medical Examiners,  which oversees the licensing of doctors in the state.

The plaintiffs contend the insurer didn’t properly monitor Desai’s practices and procedures even though they received complaints about his practices.

During the trial, witnesses said Desai adopted a cavalier attitude toward patient safety, speeding through procedures so he could see as many as 20 patients in a three-hour period.

The women’s lawyers argued the insurers’ executives had an obligation to insure Desai was providing quality care to their HMO members and were required to vet his practices before hiring him.

Also note that managed care organizations and other health insurers often boast about the quality of their provider panels.
For example, see the UnitedHealth mission statement:

- Our mission is to help people live healthier lives. Our role is to help make health care work for everyone.
 - We seek to enhance the performance of the health system and improve the overall health and well-being of the people we serve and their communities.
- We work with health care professionals and other key partners to expand access to quality health care so people get the care they need at an affordable price.
- We support the physician/patient relationship and empower people with the information, guidance and tools they need to make personal health choices and decisions.

It seems reasonable to interpret the italicized parts above as a statement of accountability for the quality of care provided by the health care professionals within the United network.

To reinforce that accountability, a subsequent Bloomberg story added,

Two UnitedHealth Group Inc (UNH) units must pay $500 million in punitive damages for failing to oversee a doctor blamed for giving colonoscopy patients hepatitis C through shoddy medical practices, a Nevada jury found.

Jurors in state court in Las Vegas deliberated more than six hours yesterday before handing down the punitive-damages award against Health Plan of Nevada and Sierra Health Services for turning a blind eye to Dipak Desai's actions. 

Furthermore, the lofty UnitedHealth mission statement should be compared to two recent government findings.

In the state of California, as reported by the Los Angeles Times,

California Insurance Commissioner Dave Jones said the nation's largest health insurer, UnitedHealth Group Inc., is imposing unreasonable rate hikes on about 5,000 small businesses. 

Jones said Wednesday that UnitedHealth couldn't justify the average annual increase of nearly 8%, which reflects both higher premiums and a reduction in benefits. He said the rate hike, which went into effect Wednesday, affects up to 45,000 small-business employees and dependents and represents $12.5 million in higher costs.

'At a time when small businesses are struggling to survive, UnitedHealthcare's rate increase is just one more unwarranted economic burden on California's small business owners and their employees,' Jones said. 

Such behavior seems to contradict the mission statement's assurance that the company will seek to provide health care at "an affordable price."

Meanwhile, Bloomberg just published a story about how UnitedHealth has been running an insurance program for US military families.

The Pentagon rebuked UnitedHealth (UNH) Group Inc, the nation’s largest insurer, after military families began experiencing long delays getting medical-care referrals from the company. 

The backlogs occurred almost as soon as Minnetonka, Minnesota-based UnitedHealth took over a contract, valued as much as $20.5 billion, from TriWest Healthcare Alliance Corp. It assumed responsibility on April 1 for the western region of the military’s health-care system, known as Tricare.

UnitedHealth’s 'failure to meet contractor requirements' has prevented a large number of beneficiaries in one Tricare health plan from obtaining timely access to specialty care, Jonathan Woodson, assistant secretary of defense for health affairs, said in a memo yesterday to other military leaders.

Woodson, calling the situation 'extraordinary,' said the Pentagon stepped in to grant a temporary waiver so the plan’s members in the western region could get specialty care without UnitedHealth’s authorization and not incur penalties.. 

This behavior seemed to contradict the mission statement's assurance that the company seeks to "expand access to quality health care."

The Song Remains the Same 

Of course, UnitedHealth actually has a very long record of preaching about its aspirational mission, while paying its top hired managers extraordinary amounts and contradicting that mission, and at times ethical norms. Our posts on UnitedHealth are here. Recently we wrote,

 UnitedHealth would be the company whose CEO once was worth over a billion dollars due to back dated stock options, some of which he had to give back, but despite all the resulting legal actions, was still the ninth best paid CEO in the US for the first decade of the 21st century (look here). UnitedHealth would be the company whose then CEO made a cool $106 million in 2009 (look here).

Moreover, UnitedHealth would also be the company known for a string of ethical lapses:
- as reported by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."
- UnitedHalth promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post here);
- UnitedHealth's acquisition of Pacificare in California allegedly lead to a "meltdown" of its claims paying mechanisms (see post here);
- UnitedHealth's acquisition of Sierra Health Services allegedly gave it a monopoly in Utah, while the company allegedly was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post here)
- UnitedHealth frequently violated Nebraska insurance laws (see post here);
- UnitedHealth settled charges that its Ingenix subsidiaries manipulation of data lead to underpaying patients who received out-of-network care (see post here).
- UnitedHealth was accused of hiding the fact that the physicians it is now employing through its Optum subsidiary in fact work for a for-profit company, not directly for their patients (see post here).

Summary

The US dysfunctional health care system has produced a long string of big corporations that promise warm and fuzzy health care yet deliver something less, all the while mightily enriching their top hired managers. Given the deadly serious nature of the health care system, these companies' promises, marketing, public relations and mission statements cannot be dismissed as fluff and puffery. Market fundamentalists and executive apologists have touted our system as market based. If patients must act as consumers, they cannot make good consuming decisions if they are awash with deceptive marketing and advertising. It is one thing for Hollywood to advertise blockbuster movies that are duds. It is another for health care corporations to advertise quality care and deliver bad care.

As we have said far too many times, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Corporate Medicine Marches On - Putting Revenue Ahead of Patients

The ongoing transformation of physicians from independent professionals to corporate employees has attracted considerable recent media attention.

The Ranks of Corporate Physicians Grow

Several articles noted examples of the rush to corporate medicine.  In early November, Anna Wilde Matthews wrote in the Wall Street Journal about the push by for-profit health insurer/ managed care organization/ hospital chain Humana to hire more physicians to provide direct patient care. 

The insurer said Monday it is spending around $500 million in cash—or $850 million including debt—to acquire Metropolitan Health Networks Inc, a Boca Raton, Fla., company that operates health-care-provider networks serving people on Medicare, Medicaid and other plans. 

Also,

Humana also said its Concentra unit had acquired 55 primary-care practices in 2012.
Between direct employment, owning stakes in practices, or close contracting that also involves providing services to the doctors, Humana said it had close ties with around 2,300 physicians, and it planned to add 300 to 400 next year.

An article in Bloomberg in mid-November noted how several large for-profit hospital chains were seeking to hire physicians to provide direct patient care.

This year, HCA increased the number of doctors it employs through acquisitions and direct hiring by about 150 to 200 for a total of 3,200, said Samuel Hazen, president of operations for HCA, on a conference call Nov. 1 with analysts. The Nashville, Tennessee-based company plans to continue expanding the number of doctors it employs, though at a slower pace than over the past several years, he said.

Tenet spokesman Rick Black said acquiring physician practices is part of the company’s effort to 'ensure our hospitals provide the medical services needed by the communities they serve, and to foster the development of ongoing clinical initiatives that improve the quality of care that is delivered to patients and control costs.' He declined to comment on how many physicians Dallas-based Tenet has added through acquisitions.

Focusing on cardiology, the article highlighted a larger trend,

In Wisconsin, the number of heart doctors in private practice has declined to 11 percent from 62 percent of cardiologists in 2007, according to the American College of Cardiology, whose main offices are in Washington.  The trend is similar nationwide. The number of heart doctors working for U.S. hospitals has more than tripled, while the number in private practice has fallen 23 percent over five years, the ACC said. 

An article in the American Medical News provided the big picture,

Only 36% of practicing physicians will hold a practice ownership stake by the end of the 2013, down from 57% in 2000, according to Accenture’s analysis of data from the American Medical Association and MGMA-ACMPE.

These and several other articles began to describe the adverse effects of having physicians employed by corporations to take care of patients.  

Excess Costs

The Bloomberg article noted that the rush to employ physicians is

creating a new dynamic that threatens to raise the price of health care, even as the federal government and states strain to keep a lid on costs.

Under Medicare’s tangled payment system, hospitals get higher reimbursements than individual doctors for cardiology treatment, as they do for other specialty services, in some cases as much as three times more. At the same time, the added bargaining power gained by controlling more of the heart care in a geographic market has given large hospital systems added leverage in negotiating reimbursements from insurers, such as UnitedHealth Group Inc and WellPoint Inc.

'Clearly, in the short run, it raises costs,' said Paul Ginsburg, president of the Center for Studying Health System Change, a Washington-based nonprofit research group. 'We have a case where a physician becomes employed by a hospital and now a payer, like Medicare, has to start paying more.'

Specifically,

Medicare, the U.S. government’s health program for the elderly and disabled, pays a hospital $400 for an echocardiogram, $180 for a cardiac stress test and more than $25 for an electrocardiogram, according to data from the American College of Cardiology. At a private physicians office, Medicare pays $150 for an echocardiogram, about $60 for a cardiac stress test and $10 for an electrocardiogram.

Doctors Pressured to Put Revenue Ahead of Patients' Welfare

A far more serious concern is that physicians who are now reporting to corporate executives will be pushed to actions that increase corporate revenue even if they put patients at risk.  The Bloomberg article noted,

While they may gain more stable incomes, doctors often have less freedom over how they care for their patients under strict hospital protocols. Some doctors are also under pressure to see more patients each day when they are employed by a hospital, ...

Two major examples of investigative journalism provided concrete examples of employed physicians enticed with incentives for making decisions that put revenue ahead of patients' interests, or threatened for doing the opposite.  An article in the New York Times provided these examples

Bonuses for Early, Possibly Premature Discharge

One Florida primary care physician said he could earn a $5,000 bonus for keeping patients in the hospital for less than three days, according to a lawsuit he filed this year. Hospitals, which are typically reimbursed a fixed amount of money for treating a specific illness, can make more money if patients stay for shorter periods of time.

Bonuses for Ordering Possibly Unnecessary Tests

Last month, the Justice Department reached a $9.3 million settlement with Freeman Health System, a hospital group in Joplin, Mo., which was rewarding doctors it employed partly based on how many tests they ordered. 

Pressure to Refer Patients Only to Other Physicians Employed by the Same Corporation
 

Other physicians say they are pushed to ignore what is best for patients by referring them to doctors working for the same hospital. Dr. Victoria Rentel, a family practice doctor near Columbus, Ohio, recalled feeling pressured when she was employed by a local hospital to send her patients to doctors there for tests and procedures.

'I routinely got reports about the money I kept in the system,' Dr. Rentel said, detailing how much revenue she was generating for the hospital through in-house referrals.

Also,

In Boise, doctors are pressured to refer only within their own system, according to St. Alphonsus in its complaint. It reported a 90 percent drop in admissions to its hospitals by physicians employed by St. Luke’s.

Incentives for Possibly Unnecessary Admissions

The Times article provided evidence that physicians were pressured to admit patients regardless of need,

Health Management Associates, a for-profit hospital chain; EmCare, a Dallas-based emergency room staffing company for hospitals; and other hospitals have disclosed that they are the subjects of federal investigations. Regulators are looking into whether the hospitals improperly pressured physicians to admit patients.
 

According to two emergency room doctors who worked at Carlisle Regional Medical Center in Pennsylvania, the message could not have been clearer: more patients needed to be admitted. 

The doctors were employed by EmCare, whose parent company was later acquired by the private equity firm Clayton, Dubilier & Rice in 2011 as part of a $3.2 billion deal. EmCare, in turn, was under contract to provide emergency room doctors for the hospital, which is owned by Health Management Associates. In interviews, doctors said that hospital administrators created targets for how many patients they should admit. More admissions translated into more dollars for the hospital. 

Dr. Jean-Paul Romes, one of the physicians, recalled getting phone calls in the middle of the night questioning why he had not admitted an older patient whose hospitalization he could easily have justified. 'The pressure to admit was so high,' he said. Dr. Romes left the hospital last year.

How Incentives for Unnecessary Admissions are Disguised

A major report on the famous muck-raking CBS television program 60 Minutes provided more detail about how Health Management Associates prettied up apparent demands to increase hospital admissions, no matter what.  The reporting was based on interviews with "more than 100 current and former employees," and featured an on air discussion with three former HMA physicians and one former HMA administrator, a video clip of a deposition by a former HMA executive vice president, and an interview with a former director of compliance with HMA.

All asserted that HMA pressured physicians to increase admissions to an arbitrary proportion of emergency department patients, at times between 16 ad 20 percent.   Several alleged that physicians who failed to meet that "benchmark" were threatened with termination of their jobs.  For example,

[Dr] Cliff Cloonan: My department chief said, we will admit 20 percent of our patients or somebody's going to get fired.

A former executive vice president of HMA contended that the admission quotas came from the very top of corporate leadership.

In August, a former executive vice president of the hospital chain - John Vollmer - testified under oath in a deposition, that HMA's aggressive admission policies came directly from the top: CEO Gary Newsome.

[John Vollmer: Mr. Newsome's thought was that an average of 16 percent was accomplishable at all hospitals or more and we should seek to do that and make that happen.]

Vollmer, who was also fired by HMA, became angry when the company lawyers challenged him.

[John Vollmer: I did my duty by informing HMA that what they are doing is wrong. You can't require them all to have 16 percent admission rates and beat up doctors and administrators and all these folks over it when you are doing it to increase your revenue for the facility.
HMA attorney: I'm going to move to strike what you just said.]

By using such a benchmark, the hospital executives seemed to be trying to maintain "plausible deniability" that they meddled in individual treatment decisions.  No one accused executives of directing the admission of a specific patient.  However, there seems to have been no way for a doctor to achieve the "benchmark" without unnecessary admissions.

[CBS Correspondent] Steve Kroft: They're saying, 'You will admit these people whether they're sick or not, whether they need to be hospitalized?'
[Dr] Scott Rankin: Correct--
[Dr] Cliff Cloonan: They never phrase it that way. They did say admit 20 percent. The reality of that is that there's only one way that that can happen. And that is if it is arbitrary. That is, if you do admit patients that don't need to be admitted.

Furthermore, the hospital corporation seemed to disguise the admission imperative as part of quality assurance.  This supposed quality assurance was administered through commercial health care information technology, "corporate wide computer software called Pro-MED which was installed in every emergency room. HMA says it was designed and approved by medical experts to improve the quality of patient care."  However,

The computer program also generated printed reports like this one evaluating each doctor's performance and productivity. On this document the doctors who hit corporate admissions goals received praise from company managers. Those who didn't knew it.

[Dr] Cliff Cloonan: The primary purpose of the scorecard was to track how you were doing in terms of revenue generation based on number of tests ordered and number of patients admitted to the hospital.
[Dr] Scott Rankin: It has nothing to do with patient safety and patient care. It has everything to do with generating revenues.

They say that when a doctor decided send to an emergency room patient home, the computer would often intervene, prompting the doctor to reconsider.

[Dr] Jeff Hamby: The minute I hit 'Home', it says, 'Qual Check.' And then it comes up with a warning, 'This patient meets criteria for admission. Do you want to override?'
[CBS Correspondent] Steve Kroft: What was the reaction from the administrators if you overrode the computer?

[Dr] Jeff Hamby: It was like being called to the principal's office.

Summary

Recent articles in the media have shown that physicians are increasingly practicing medicine as corporate employees (look here).  It is not clear how physicians in this situation can make sure they are always putting the interests of their individual patients ahead of other interests, including their corporate leaders' interests in increasing revenue and enriching themselves.  The most recent media reports discussed above add to the evidence that corporate physicians are constantly pressured to put short-term revenue generation ahead of patient welfare, and that they may specifically be pushed to admit patients unnecessarily, order unneeded laboratory tests, and discharge patients prematurely to satisfy corporate dictates.  One new wrinkle in this latest set of reports is how corporate executives may try to pretty up what they are doing by cloaking their actions within the quality assurance rubric, thus corrupting another important and well-intentioned component of health care.

The American Medical Association once declared "the practice of medicine should not be commercialized, nor treated as a commodity in trade." (Look here)  Despite such historic but now seemingly forgotten exhortations, and a complete lack of evidence of any benefits of the corporate practice of medicine to patients' or the public's health that might outweigh its obvious risks, the new movement to make every doctor a corporate employee marches on. 

A false hope of some resistance to it was just raised by that same American Medical Association in its new "AMA Principles for Physician Employment," but this only provided the ambiguous advice,

A physician’s paramount responsibility is to his or her patients. Additionally, given that an employed physician occupies a position of significant trust, he or she owes a duty of loyalty to his or her employer. This divided loyalty can create conflicts of interest, such as financial incentives to over- or under-treat patients, which employed physicians should strive to recognize and address.

How physicians could strive to recognize and address the inherent strong conflict of interest remains a mystery. 

Worse, while the principles recognized that physicians may be asked to sign "agreements or understandings (explicit or implicit) restricting, discouraging, or encouraging particular treatment or referral options," but rather than condemning such restraints on physicians' autonomy to give patients the best possible care, the principles only suggested that they "are disclosed to patients."

Furthermore, while the AMA response has been weak-kneed at best, I am not aware of any stronger responses from any other professional societies, or from state licensing boards, physician accrediting organizations, or any other organizations that are supposed to be concerned about patient's and the public's health, or about physicians' professionalism.

As I have said before, we need to challenge the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.