Pfizer's Pforeign Pfiasco

Quelle surprise.  Giant international pharmaceutical company Pfizer managed to go for nearly 10 months without announcing a major legal settlement.  However, this month, as reported by Bloomberg, it was time for Pfizer to settle again.  The basics were:

Pfizer Inc., the world’s biggest drugmaker, agreed to pay $60.2 million to settle foreign bribery cases it brought to U.S. authorities involving alleged payments paid by employees and agents of subsidiaries.

Pfizer entered into two agreements with the Securities and Exchange Commission and the New York-based drugmaker reached a deferred prosecution accord with the Department of Justice, according to filings today in federal court in Washington.

Bribery

This case is worth perusing because of how it documents what the US government called not merely deceptive, but corrupt practices used by Pfizer to sell drugs. The practices were widespread around the world:

The settlements announced today include Pfizer operations in eight countries: Bulgaria, Croatia, Kazakhstan, Russia, Italy, China, the Czech Republic and Serbia. The Wyeth settlement, over its nutrition business, was for China, Indonesia, Saudi Arabia and Pakistan.

The practices involved, not to put too fine a point on it, bribing doctors. Furthermore, as part of the settlement Pfizer apparently admitted to some of the specific practices alleged by the government:

In Bulgaria, local representatives spent $28,000 to invite government doctors on 'incentive trips' to Greece, as a reward for the physicians who were the biggest prescribers of Pfizer’s products, Pfizer admitted according to the Justice Department filing. They also paid $17,000 to send doctors to medical conferences, again in exchange for commitments to prescribe Pfizer drugs.

In Croatia, the unit there had used a consulting agreement with a government doctor to help influence which drugs were allowed to be sold in the country, paying the physician in cash and travel expenses, Pfizer admitted.

Pfizer also admitted to what was called the 'hospital program,' in Russia, where doctors were given a 5 percent kick- back on certain drugs prescribed.

'Pfizer Russia used the Hospital Program to make cash payments to individual government healthcare professionals to corruptly reward past purchases and prescriptions of Pfizer products, and to corruptly induce future purchases and prescriptions,' the Justice Department said in the filing. Pfizer’s Russian unit also used intermediary companies to pay off doctors and government officials, the company admitted.

No Individual Penalties

Despite the shamefulness of these practices, as is now distressingly usual (look here), no individual seems to be obligated to suffer any penalty or negative consequences as a result of this settlement. While the US government alleged criminal behavior, beyond the fines imposed on the company, further prosecution will be deferred:

The Justice Department charged the Pfizer HCP Corp. unit with two criminal counts, conspiracy to violate the Foreign Corrupt Practices Act and a violation of the FCPA’s anti-bribery provisions. Prosecutors agreed to defer prosecution and drop the charges after two years if Pfizer continues to cooperate and take remedial steps.

The article contained a curious statement seemingly asserting that the payments were somehow made independent of any actions by individuals at Pfizer:

The SEC said the payoffs were made 'without the knowledge or approval of officers or employees of Pfizer, but the inaccurate books and records of Pfizer subsidiaries were consolidated in the financial reports of Pfizer.'

So were the payments made by machines acting autonomously? or by ghosts? Maybe this was just a typo. However, note that the de rigeur statement by Pfizer's internal counsel was phrased so as to imply the actions somehow occurred outside of the organization:

'The actions which led to this resolution were disappointing, but the openness and speed with which Pfizer voluntarily disclosed and addressed them reflects our true culture and the real value we place on integrity and meeting commitments,' Amy Schulman, Pfizer’s general counsel, said in an e-mailed statement.

Summary

This latest settlement reaffirms the poor ethical culture now prevalent in major health care organizations throughout the world.  It also affirms how deeply unethical the culture has become at some of our largest and most prominent and influential health care organizations.  This settlement is only the latest evidence of ethical missteps by Pfizer's leadership.

In the beginning of the 21st century, according to the Philadelphia Inquirer, Pfizer made three major settlements,

October 2002: Pfizer and subsidiaries Warner-Lambert and Parke-Davis agreed to pay $49 million to settle allegations that the company fraudulently avoided paying fully rebates owed to the state and federal governments under the national Medicaid Rebate program for the cholesterol-lowering drug Lipitor.

May 2004: Pfizer agreed to pay $430 million to settle DOJ claims involving the off-label promotion of the epilepsy drug Neurontin by subsidiary Warner-Lambert. The promotions included flying doctors to lavish resorts and paying them hefty speakers' fees to tout the drug. The company said the activity took place years before it bought Warner-Lambert in 2000.

April 2007: Pfizer agreed to pay $34.7 million in fines to settle Department of Justice allegations that it improperly promoted the human growth hormone product Genotropin. The drugmaker's Pharmacia & Upjohn Co. subsidiary pleaded guilty to offering a kickback to a pharmacy-benefits manager to sell more of the drug.

Thereafter, Pfizer paid a $2.3 billion settlement in 2009 of civil and criminal allegations and a Pfizer subsidiary entered a guilty plea to charges it violated federal law regarding its marketing of Bextra (see post here).  Pfizer was involved in two other major cases from then to early 2010, including one in which a jury found the company guilty of violating the RICO (racketeer-influenced corrupt organization) statute (see post here).  The company was listed as one of the pharmaceutical "big four" companies in terms of defrauding the government (see post here).  Pfizer's Pharmacia subsidiary settled allegations that it inflated drugs costs paid by New York in early 2011 (see post here).   In March, 2011, a settlement was announced in a long-running class action case which involved allegations that another Pfizer subsidiary had exposed many people to asbestos (see this story in Bloomberg).  In October, 2011, Pfizer settled allegations that it illegally marketed bladder control drug Detrol (see this post).

Thus, it appears on 10 separate occasions between 2002 and 2012, Pfizer settled allegations of, pleaded guilty to, or was convicted for actions that represented seriously unethical behavior.  Note that these included a conviction that found the company to be a racketeer-influenced corrupt organization.

Yet the company has not failed or been restructured, and none of its leaders has ever faced any negative consequences.  In fact, last year its CEO made over $18 million, up from over $6 million the year before (see this post).   

So obviously it is not just that one company's culture has become seriously corrupt.  We seem to live in such a corrupt nation, and maybe such a corrupt global society that such corrupt cultures thrive in our major corporations and organizations.  Despite stories like this in health care, just like in finance despite the global financial collapse, as Charles Ferguson said at the Oscar awards last year, " not a single ... executive has gone to jail, and that's wrong."




Unless we hold leaders of health care organizations accountable for bad behavior and corruption, expect bad behavior and corruption to get worse.  Until we have political leaders with the courage to stand up for honesty and the law, expect continued dishonesty and the law to continue to be trampled by the rich and powerful. 

Did Joint Commission Accredit a Hospital Whose Understanding of Medication Reconciliation is Recklessly Superficial?

I submitted this complaint to the Joint Commission today.

I've been challenging them in recent years (especially since my JAMA letter "Health Care Information Technology, Hospital Responsibilities, and Joint Commission Standards" on hospital executive's violation of JC Safety Standards of July 2009) over the issue of their accreditation of hospitals using bad health IT.

Eventually, I hope, they will take a leadership role on health IT risk, lest they become a target for litigation.  (I think they're already there for their inaction on EHR problems despite admitted knowledge of the problems, in print, e.g., in their 2009 Sentinel Events Alert on Health IT Risks.)

Here is my complaint submitted both via email and via the Joint Commission "Report a Complaint online" page.  I added a few comments for readers in [bold red italics] that, of course, were not part of the submission:

------------------------------

Thank you for submitting your complaint!     Monday, August 20, 2012

Your complaint incident number is:     ########-########

------------------------------

Dear Joint Commission,

I also sent this complaint to PSchyve, AGiuntoli and MChassin via email.

You are already aware of the injury and death from Med Recon failure of my mother at [name redacted] Hospital, in an incident that began May 19, 2010.  Reference Incident #######-######.

I am also filing the issue below as a formal JC complaint:

As demonstrated in the sworn defense response by [name redacted] Hospital today, 8/20/12, the hospital has a very superficial understanding of Med Recon and Med Recon Failure. 

I am assuming they passed Joint Commission Accreditation that includes the ability to ensure continuity of care, including giving correct meds via Med Recon.

The hospital through defense counsel today (8/20/12) writes in a document I've placed at [URL redacted]:  

... 4.  As plead [sic -ed.], the gravamen [the basic gist of every claim or charge in a complaint - ed.] of Plaintiffs complaint is the allegation that he told the treating professionals about Mrs. Silverstein's Sotalol medication.

5.  Therefore, the central issue of this case is one of human communication- i.e., whether Dr. Silverstein told the various staff or not.  [In other words, their obligations to check medications end there - ed.]

In fact, the complaint was quite clear:

...32.  The tortious conduct of defendant [name redacted] Hospital consisted of the following:

a. vicarious liability for the actions of its agents [redacted], [redacted] and [redacted] to ensure continuation of the Sotalol therapy [can we all agree that's a primary responsibility of a hospital and its agents? - ed.];

b. vicarious liability for the actions of its agents [redacted], [redacted] and [redacted] to ensure proper operation of the defendant’s EMR system so as to ensure continuation of a presently active medication;

c. vicarious liability for the failure of its agents identified in this complaint to adequately communicate Ms. Silverstein’s complete medication history with the subsequent treating health care providers during this admission;

d. vicarious liability for the failure of its agents, identified in this complaint, to question why no Sotalol was ordered given the noted history of arrhythmia [a medical student-level question - ed.];

e. failure to have in place adequate procedures or policies to insure that presently active medications are continuously active in the EMR system unless deactivated by an appropriately qualified health care provider;

f. failure to have in place adequate procedures or policies to insure that the computer generates appropriate alerts for others to see when critical medications become inactive;

g. failure to properly assess the operational effectiveness of its EMR system so as to insure that presently active medications are automatically continued unless specifically deactivated by a qualified and authorized health care provider.

33. As a result of the above identified failures in medication administration and medical record charting, Ms. Silverstein has suffered the following:

a. Intracranial hemorrhage; b. atrial fibrillation; c. damage to her nerves and nervous system, including memory difficulties, and seizure activity; d. brain compression due to the intracranial hemorrhage; e. requirement for additional procedures; f. prolonged hospitalizations; g. need for rehabilitation; h. need for continuous therapies; i. pain, suffering, embarrassment, humiliation, and the loss of life’s pleasures; j. death.

While I gave the history of Sotalol to the clinicians on 5/19/10 (my mother had been on it dating to 2002) as I had done multiple times in this ED, this hospital seems to believe its Med Recon responsibilities end at the family - even when they have records in abundance in their paper records and EHRs (ED and floor), including from just a few weeks prior, with current med lists.

I note (as I had previously sent you) that Pennsylvania's Medicare QIO, Quality Insights, found the hospital had failed in medication continuity, and that the failure to administer Sotalol caused the recurrent A. fib and subsequent complications, the care not meeting professionally accepted standards. [The formal terminology for "malpractice" - ed.]

If you accredited this hospital, as I believe you did, this superficial understanding of Med Recon that you apparently missed or recklessly glossed over poses a serious danger to the community, and contributed materially to my mother's injuries, suffering and death.

Sincerely,

S. Silverstein, MD

Cc:  [attorney handling the malpractice lawsuit]

- end complaint -

--------------------

They defense is also trying to deflect the Judge from the issue of Metadata:

... At this point in time, it is respectfully submitted that the proposed electronic discovery is not relevant to the central issue of this case. For example, if the Triage Nurse and subsequent providers were all to testify that Dr. Silverstein never informed them that Sotalol was a current medication of Mrs, Silverstein, then the fact that medical record does not record this as a current medication has nothing to do with metadata.

Wrong.

"The fact that medical record does not record Sotalol as a current medication" after the ED encounter on 5/19/10 indicates a forensic examination of the metadata is crucial.

It is in fact only through metadata that it can be determined if the medication, listed as "current" only a few weeks prior and normally visible when the user brings up a patient's record to initiate triage, was deleted by the user (e.g., via "use error" per NIST, related to bad IT design) and how and when; if it ended up in another patient's chart due to malfunction (misidentification); if the EHR malfunctioned and simply erased the med; if the chart was altered to try to hide the mistake, etc.  These are all well known failure modes.  See an example of what metadata can show at this link in a case that settled for over $1 million before a trial even began.

In fact, over and above potentially misrepresenting my and my mother's stated medication history at ED triage:

Note their attempting to deflect attention away from health IT and the med recon failure of their own staff.  

Also note a reckless understanding of Medication Reconciliation, that seems to imply the hospital believes it had no duty to reconcile meds with itself, that is, check its own EHR or paper records from just a few weeks prior along with multiple others dating back 8 years, or check with the hospital-affiliated primary care and other physicians treating the patient for years, who were reachable via a simple phone call.  Instead, the issue of whether a family member told "them about the med or not" seems to be their central defense.   

On the issue of who's actually responsible (and liable) for Med Recon, from the American Medical Association monograph entitled "The physician’s role in medication reconciliation", pg. 3.  

... The essence of medication reconciliation is making sense of a patient’s medications and resolving conflicts between different sources of information [paper, electronic, verbal, information from other physicians treating the patient, etc. - ed.] to minimize harm and to maximize therapeutic effects. It is an ongoing, dynamic, episodic and team-based process that should be led by and is the responsibility of the patient’s attending or personal physician in collaboration with other health care professionals. Medication reconciliation is essential to optimize the safe and effective use of medications. It is one element in the process of therapeutic use of medications and medication management for which physicians are ultimately held legally accountable.

The AMA monograph has a special section starting on p. 20 on IT and Med Recon.  It warns explicitly about practicing medicine like a mindless robot:

... IT systems and applications do have the potential to streamline the medication reconciliation process—especially assembling and storing patient information—and to provide the means to effectively transfer patient medication information across the continuum of care. However, health care technology is fragmented and requires close attention by potential users to ensure that implementation does not create additional pressures and problems with accuracy of medications.

The apparent hospital misunderstanding of Med Recon could - and in my view, should - result in charges of gross negligence, perhaps criminal, against its medical leadership if other patients have been, or are, harmed as a result of resultant medication reconciliation errors.

Of course, it's also possible that the defense is just making stuff up again to try to blow smoke up the judge's behind.  However, what's sworn certainly should not be lightly dismissed. 

I also note that this hospital is making a spectacle of itself in front of the Judge, the President Judge in the county where it conducts operations, who already dismissed a boatload of meritless claims.  That does not bode well for them in the future.

-- SS

Paging Doctor EBDITA - How Private Equity May Push Hospitals to Put Revenue Ahead of Patient Care

Issues raised by the increasing influence of private equity firms in the direct care of patients were illuminated by a series of articles about the for-profit hospital chain HCA.

Quality Problems

The articles highlighted a series of concerns about quality problems affecting the chain's patients. 

Cardiac Overtreatment

First, a New York Times article described problems in the care of cardiac patients. 

HCA, the largest for-profit hospital chain in the United States with 163 facilities, had uncovered evidence as far back as 2002 and as recently as late 2010 showing that some cardiologists at several of its hospitals in Florida were unable to justify many of the procedures they were performing. Those hospitals included the Cedars Medical Center in Miami, which the company no longer owns, and the Regional Medical Center Bayonet Point. In some cases, the doctors made misleading statements in medical records that made it appear the procedures were necessary, according to internal reports.

More specifically, at one hospital, cardiac catheterizations seemed to occur to often: "about half the procedures ... were determined to have been done to patients without significant heart disease." Two patients at another hospital had severe adverse effects after cardiac procedures that seemed unnecessary in retrospect. There were "incidents at Bayonet Point where patients were treated for multiple lesions, or blockages, even when 'the second lesion (or third) did not appear to have significant disease....' [In] 'several cases'  ... patients were treated even though their arteries did not have significant blockages." Then,

HCA brought in an external company, CardioQual Associates of Franklin, Mich., in 2004 to examine medical records from Bayonet Point. In a confidential memo prepared in December 2004 and reviewed by The Times, CardioQual concluded that as many as 43 percent of 355 angioplasty cases, where doctors performed invasive procedures to open up a patient’s arteries, were outside reasonable and expected medical practice. Worse, the investigation revealed that some physicians had indicated in medical records that the patients had blockages of 80 to 90 percent when a later, more scientific analysis of a sampling of cases revealed the blockages had ranged from 33 to 53 percent.

Possible Undertreatment of Acute Illness

Then, a second NY Times article found that

HCA decided not to treat patients who came in with nonurgent conditions, like a cold or the flu or even a sprained wrist, unless those patients paid in advance. In a recent statement, HCA said that of the six million patients treated in its emergency rooms last year, 80,000, or about 1.3 percent, 'chose to seek alternative care options.'

Of course, the problem with this approach is that it is not always possible to tell how severe an acute illness is without a more complete evaluation than can be done in emergency department triage. There is anecdotal evidence that HCA turned away some patients who actually had serious illness:

Regulators in several states have taken HCA hospitals to task over screening out patients too aggressively, including situations where the screening missed serious conditions.

In early 2010, an uninsured patient who entered HCA’s TriStar Skyline Medical Center in Nashville, complaining of 'pain when breathing,' was sent away. An hour and a half later, at another hospital, the same patient was found to have pneumonia, according to the results of a Medicare investigation. Regulators cited Skyline for having 'failed to ensure that an appropriate medical screening examination was conducted.'

This year, the Office of Inspector General fined HCA’s Northside Hospital in St. Petersburg, Fla., $38,000 for sending home a feverish patient with an artificial heart valve. Two days later, the patient reappeared with the flu and severe respiratory problems. The following day, he died.

Undertreatment of Bed Sores

The second Times article also suggested that decreased nurse staffing at HCA hospitals lead to worse treatment of bed sores (decubitus ulcers):

Experts say there is often a direct correlation between bedsores and the quality of hospital staff levels. 'Staffing is critical,' said Courtney H. Lyder, the dean at the UCLA School of Nursing and an expert on wound care. 'When you see high levels of wounds, you usually see a high level of dysfunctional staff,' he said.

HCA owned eight of the 15 worst hospitals for bedsores among 545 profit-making hospitals nationwide, each with more than 1,000 patient discharges, tracked by the Sunlight Foundation using Medicare data from October 2008 to June 2010. HCA’s West Houston Medical Center and CJW Medical Center in Richmond, Va., landed near the top of the list.

HCA says it has increased its nursing staff at its hospitals each year over the last five years. But an examination of lawsuits shows bedsore problems have been persistent at several HCA facilities. In Portsmouth Regional Hospital in New Hampshire, a 60-year-old woman died in 2009 after her bedsores went untreated for three days and became infected, according to a wrongful-death lawsuit filed in the spring of 2011 in federal court against the hospital.

One HCA hospital

was cited twice by Florida regulators, in 2008 and 2010, for having inadequate numbers of nurses on its staff to oversee wound care for patients. During the 2010 examination, regulators noted that Memorial had less than the equivalent of two full-time nurses who specialized in wound care to treat the 132 patients who required aid.

'The system of treatment for wound care places patients at risk for additional medical complications,' the examiners said.

So, in summary, there is reason for concern about overtreatment of cardiac disease, and undertreatment of acute illness and bedsores at HCA hospitals. However, no hospital and no doctor is perfect. Everyone makes mistakes, and many decisions can be questioned in retrospect. Instead

Putting Money Ahead of Quality

Instead, the articles suggested they were part of a pattern in which concerns about short-term revenue trumped concerns about patient care.

Cardiac Procedures to Generate More Revenue

The article about cardiac care noted that one of the physicians who allegedly was doing too many cardiac procedures

was highlighted by the hospital in a 2009 business plan as being the most profitable doctor at the facility. 'Our leading EBDITA MD,' the plan described him. (Ebitda, or earnings before interest, taxes, depreciation and amortization, is a measure of corporate earnings.)

On the other hand, according to the Tampa Bay Times, some of the doctors whom HCA suspended for doing too many percutaneous cardiac revascularization procedures charged that the issue was that

far from concern over the cost of stents — Bayonet Point was upset that stents were replacing more expensive bypass surgeries.

The first NY Times article also suggested that HCA executives did their best to keep the issue quiet so as not to affect revenue. First,

HCA declined to provide evidence that it had alerted Medicare, state Medicaid or private insurers of its findings, or reimbursed them for any of the procedures that the company later deemed unnecessary, as required by law.

Also,

HCA also declined to show that it had ever notified patients, who might have been entitled to compensation from the hospital for any harm.

The Times uncovered internal HCA communications suggesting that obfuscation was deliberate:

In January 2005, David Williams, who was then the chief executive of Bayonet Point, wrote in an e-mail: 'Clearly, we have protected ourselves under the peer review umbrella and have released very little information.' The recipients of his message included Dan Miller, who then oversaw HCA’s hospitals in western Florida, and Charles R. Evans, a Nashville executive who was president of all of HCA’s hospitals on the eastern side of the country.

In his response, Mr. Evans thanked Mr. Williams for the update and asked for a 'summary as to the business impact.'

Furthermore, as the last sentence above indicated, review of internal emails suggested that executives were more worried about revenue than quality of care or patient outcomes:

A review of those communications reveals that rather than asking whether patients had been harmed or whether regulators needed to be contacted, hospital officials asked for information on how the physicians’ activities affected the hospitals’ bottom line.

Avoiding Caring for Poor Patients in the Emergency Department

On the other hand, the impetus for triaging away apparently less acutely ill patients from the Emergency Department was to avoid such patients who could not pay. The second NY Times article noted there was a way for supposedly less ill patient to get Emergency Department treatment,

Patients whose ailments were not deemed urgent were told to go somewhere else, like a free clinic, or that they could be treated if they paid the co-payment for their insurance or around $150 in cash.

In addition, there is reason to think that HCA management pushed health care professionals to put off increasing numbers of patients, regardless of their clinical problems,

Several former emergency department doctors at Lawnwood Regional Medical Center in Fort Pierce, Fla., said they frequently had felt compelled to override the screening system in order to treat patients.

Also,

'Physicians had a really, really hard time with it,' said Dr. J. Patrick Pearsall, who worked for an emergency physician group based in Houston that worked in HCA hospitals. When the doctors failed to meet the hospital’s goals for how many patients should be considered emergencies, 'they really started putting pressure on.'

One emergency room doctor who worked at an HCA Florida hospital said doctors had been told they had targets to hit. The doctors’ concerns about the screening policy were acknowledged in an e-mail reviewed by The Times that was sent to the doctors at the hospital in early 2008 by an outside company that worked in the emergency room.

The doctors were told HCA’s regional executives were 'quite intent on pursuing this program at least for the time being and fully expects us to comply. Their expectations are that approximately 15 percent of all patients are to be screened and of those screened no more than 35 percent overridden.'

Keep in mind that variations in patient populations over time and across geographic areas means that the proportions of more and less severely ill patients showing up at individual Emergency Departments will vary substantially. Pressuring health care professionals to turn away a minimum percentage of people will make it very likely that at some times severely acutely ill patients will not be seen.

So it appears that at HCA, patients sometimes were overtreated, and sometimes were undertreated, and that executives trying to increase revenue may have been more responsible for both than simple human error.

Finally, there is reason to think that the take-over of HCA by private equity (that is, leveraged buy-out) firms further increased the for-profit corporation's emphasis on short-term revenue leading to worsening quality of care.

Private Equity Pushed for Even More Short-Term Revenue

The second NY Times article first noted,

During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.

In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.

The big winners have been three private equity firms — including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate — that bought HCA in late 2006.

HCA’s robust profit growth has raised the value of the firms’ holdings to nearly three and a half times their initial investment in the $33 billion deal.

The financial performance has been so impressive that HCA has become a model for the industry.

Note that the private equity firms extracted a considerable amount of cash from HCA at the time they turned it back into a publicly held for-profit corporation:

In 2010, buoyed by robust growth in profit, HCA was able to issue billions of dollars in debt that was used to pay funds overseen by the three buyout firms nearly $1 billion in dividends — each. In the spring of 2011, in one of the most closely watched public offerings since the financial crisis, HCA became a public company once again. Its three buyout owners each sold another $500 million worth of stock, allowing them to recoup all their initial investment.

By thus increasing the new public corporation's debt load, they further increased pressure on its executives to bolster short-term revenue.

However,

As HCA’s profits and influence grew, strains arose with doctors and nurses over whether the chain’s pursuit of profit may have, at times, come at the expense of patient care.

Summary:  Why No Hospital Should be For-Profit?

Among all developed countries, I believe only the US has such a high proportion of for-profit hospitals, and physicians employed by for-profit corporations to take care of patients.

However, in summary, this case shows there is evidence that
- The management of one for-profit hospital chain was pushed to focus even more on short-term revenue by a leveraged buy-out engineered by private equity firms
- This focus lead management to pressure health care professionals to increase revenue, even if that required over- or under-treating patients
- The resulting over- and under-treatment likely harmed patients.

As a Tampa Bay Times editorial put it,

the allegations suggest a disturbing pattern of endangering patients, and they again expose the weaknesses of a health care system driven by volume and profit rather than efficiencies and patient outcomes.

In a column in Forbes, Steve Denning warned,

The hospitals owned by private equity are making money in the short-term at the expense of Medicare and the economy. But when the private equity firms depart, as they plan to do, they leave the hospitals with a load of debt, dispirited doctors and nurses, and a bankrupt Medicare system, with serious questions as to whether overall care has been maintained, let alone improved.

The current bonanza for private equity from milking Medicare is a bubble that cannot be sustained.

We have noted how health care organizations have increasingly been "financialized," lead by executives who put short-term revenue generation ahead of all other goals, including good patient care. Furthermore, hospitals are increasingly likely to be formally for-profit, and hence likely to be lead by such executives. Worse, hospitals are increasingly likely to be owned by private equity firms, further increasing the emphasis on short-term money making. Even worse, physicians are now more frequently employed by such organizations, which may pressure them to do what it takes to increase revenue, no matter what the effect on patients' and the public's health.

The probably effects on the quality of care, access, and costs are obvious.

In my humble opinion, before the health care bubble bursts, 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. Before market fundamentalism became so prominent, many stated prohibited the corporate practice of medicine, and the American Medical Association forbade the commercialization of medicine. It is time to heed that wisdom. 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.

As Todd Hixon wrote, surprisingly in Forbes,

I believe a big part of the answer lies in changing the idea that health care should be a path to riches. There are professions, like university teaching and research, where a big part of the motivation is helping people and gaining respect in the community. If we could shift the balance for health care providers in that direction, solving problems like the one manifest at HCA would be a lot more possible.

True health care reform will require an end to market fundamentalism in health care.

Note - See also comments by Paul Levy in the Not Running a Hospital Blog.

Health IT difficulties and controversial excuses from health IT hyperenthusiasts and extremists

As I observed at my Aug. 15, 2012 post "Contra Costa's $45 million computer health care system endangering lives, nurses say" and other posts, common in case reports of health IT difficulties is the refrain (usually from a seller, healthcare executive or health IT pundit) that:

• It's a rare event, it's just a 'glitch',  it's teething problems, it's a learning experience, we have to work the 'kinks' out, it's growing pains, etc.

Or perhaps worse:

• Patient safety was not compromised (stated long before the speaker or writer could possibly know that).

What these statements translate to:  any patient harm that may have resulted is for the "greater good" in perfecting the technology.

Here is the problem with that:

These statements, while seemingly banal, are actually highly controversial and amoral. and reflect what can be called "faith-based informatics beliefs" (i.e., enthusiasm not driven by evidence).

They are amoral because they significantly deviate from accepted medical ethics and patient rights, especially regarding experimentation or research such as the plain language of the Nuremberg code, the Belmont Report, World Medical Association Declaration of Helsinki, Guidelines for Conduct of Research Involving Human Subjects at NIH, and other documents that originated out of medical abuses of the past.

Semantic or legal arguments on the term "research", "experimentation" etc. are, at best, misdirection away the substantive issues.  Indeed, for all practical purposes the use of unfinished software (or software with newly-minted modifications) that has not been extensively tested and validated and that is suspected to or known to cause harm, without explicit informed consent, is contrary to the spirit of the aforementioned patients' rights documents.

They are excuses from health IT hyper-enthusiasts ("Ddulites"), who in fact have become so hyper-enthusiastic as to ignore the ethical issues and downsides.  The attitude gives more rights to the cybernetic device and its creators than to the patients who are subject to the device's effects.

These excuses are, in effect, from people who it would not be unreasonable to refer to as technophile extremists.

-- SS

Addendum:

The Belmont Report of the mid to late 1970's, long before health IT became at all common, actually starts out with a section discussing "BOUNDARIES BETWEEN PRACTICE AND RESEARCH."  I have updated one of the observations in that section to modern times:

 ... It is important to distinguish between biomedical and behavioral research, on the one hand, and the practice of accepted therapy on the other, in order to know what activities ought to undergo review for the protection of human subjects of research.

... When a clinician [or entire healthcare delivery system - ed.] departs in a significant way from standard or accepted practice, the innovation does not, in and of itself, constitute research. The fact that a procedure is "experimental," in the sense of new, untested or different, does not automatically place it in the category of research.

Radically new procedures of this description [such as use of cybernetic intermediaries to regulate and govern care - ed.] should, however, be made the object of formal research at an early stage in order to determine whether they are safe and effective. Thus, it is the responsibility of medical practice committees, for example, to insist that a major innovation [such as health IT - ed.] be incorporated into a formal research project.

Health IT appears to have been "graduated" from experimental to tried-and-true without the formal safety research called for in the Belmont report.

The Belmont report continues:

Research and practice may be carried on together when research is designed to evaluate the safety and efficacy of a therapy. This need not cause any confusion regarding whether or not the activity requires review; the general rule is that if there is any element of research in an activity, that activity should undergo review for the protection of human subjects.

Instead, what we have for the most part are excuses and special accommodations for health IT, on which the literature is conflicting regarding safety and efficacy, all the way up to the Institute of Medicine.

-- SS

EHR sabotage for ransom: Try this with paper!

I have frequently written that health IT, touted as a technology that will deterministically "transform medicine", allows (aside from clinical chaos) new sorts of problems, such as information security abuses en masse, to occur.  See this query link for numerous postings on that topic:  http://hcrenewal.blogspot.com/search/label/medical%20record%20privacy

I am not, of course, advocating a return to paper; I am in fact "pro-good IT" but "anti-bad IT."

"Bad IT" is IT that interferes with quality patient care for any reason, permits evidence spoliation, permits overbilling, exposes confidential medical information to unauthorized parties, etc.

Here is another example of unintended consequences of bad health IT.  Try this trick with paper:

Attackers Demand Ransom After Encrypting Medical Center's Server
John E Dunn, Techworld
August 14, 2012 

Details have emerged of an extraordinary data breach incident in which a U.S. medical practice had thousands patient records and emails encrypted by attackers who then demanded a ransom to unscramble the data.

The incident appears to have come to light after a security blogger 'Dissent Doe' noticed a data breach report made by Illinois-based The Surgeons of Lake County medical centre to the US Department of Health and Human Services.

According to a small newswire that reported events, attackers were able to compromise one of the medical centre's servers, encrypting its contents including 7,067 patient records and a quantity of emails.

The first the centre knew about the attack was on 25 June when a ransom note for an undisclosed sum was posted on the server, at which point it was turned off.

It is not clear whether the data was recovered through backups but the organisations reported the incident to the police and Department of Health.

... What marks the compromise out from almost every data breach attack recorded is that the attackers opted to extort the victim organisation rather than attempting to sell or exploit the data itself.  [Cyber criminals should never be assumed to be uncreative - ed.]

It remains unlikely that the intention was to abuse this data directly; having occurred only days before the extortion note was received, the criminals would normally want a longer period to execute data and identity theft crimes. Most data theft criminals attempt to go undetected for this reason.

The criminals will, nevertheless, had access to sensitive data including names, addresses, social security and credit cards numbers plus medical records, prompting the centre to inform its affected patents of the breach.

"This is a warning bell. Maybe they're the canary in the coal mine that unpredictable things can happen to data once it's digitized," [you think? - ed.] said Santa Clara University law school professor, Dorothy Glancy, quoted by Bloomberg.

This incident is, quite simply, stunning.  In addition to identity theft concerns, a patient whose information was cybernetically 'held hostage' could have suffered clinically as a result.

A warning bell indeed about "bad IT."

-- SS

Contra Costa's $45 million computer health care system endangering lives, nurses say

I am providing a number of editorial comments about this familiar story of health IT difficulties (in red italics), and additionally highlighting familiar themes I have written about at this blog.  This story is rich in those themes:

Contra Costa's $45 million computer health care system endangering lives, nurses say

By Matthias Gafni

Contra Costa Times (CA)mercurynews.com

Posted:   08/14/2012 05:30:07 PM PDT

August 15, 2012 3:55 AM GMTUpdated:   08/14/2012 08:55:52 PM PDT

MARTINEZ -- A new medical computer system used at Contra Costa correctional facilities recommended what could have been a fatal dose of a West County Jail inmate's heart medication last week, an incident that a detention nurse characterized Tuesday as one of many recent close calls with the month-old program.

However, the inmate's nurse was familiar with his medical history, recognized the discrepancy and administered the correct amount of Digoxin.

It's just one of a number of computer errors that medical staffers say have been endangering inmates, medical staff and sheriff's deputies at the county's five jail facilities since Contra Costa switched on July 1 to EPIC, a computer system that links the correctional facilities to the Contra Costa Regional Medical Center and other county health care operations, two nurses and their union representative told the Contra Costa County Board of Supervisors on Tuesday.

"It's dangerous. It's very dangerous," said an emotional Lee Ann Fagan in a phone interview. The registered nurse works at West County Detention Facility in Richmond. "It's hard to work in an environment that's so frustrating.  [Staff frustration increases risk of error and decreases morale, which increases risk of error further - ed.]

"What nurses want is for the EPIC program to go away until it's fixed," she said.

The $45 million EPIC system integrates detention medical records with the other arms of the county health system. The system led to 142 nursing complaints in July, said California Nurses Association labor representative Jerry Fillingim, who told supervisors the system does not mesh well with detention health care.

"I have never in all the time working with the California Nurses Association seen that many (complaints) be filled out," he said. "Each day, these nurses are fearful that they will kill somebody [requiring hypervigilance, which is emotionally and intellectually tiring, increasing risk of error further - ed.] ... I think the county tried to rush it, making it comprehensive for everything."

EPIC has never included corrections in its software and is treating Contra Costa as a "guinea pig," Fillingim said.  [Subjects of this experiment don't get the opportunity for informed consent, I add - ed.]

Guinea pigs to experiments don't give consent

'Just a tool'

The county wanted to create a uniform electronic health record (EHR), and executives said the tool is important, but not the be-all, end-all.

"The EHR is just a tool," said David Runt, chief information officer for the county health services department and who helped phase the system in over 18 months. "It's just one piece of the health care system. The people are the most important part of this process. We can't rely just on a computerized system."  [That's certainly a welcome and much more temperate position than the usual seller and pundit conceit that health IT will "transform" or "revolutionize" medicine.  It is also an especially good observation when the tool is unreliable! - ed.]

... "It's the beginning of a long journey that occurs over time," [i.e., an experiment - ed.] she said. "I think we can do a better job ... at how we communicate everything we're doing to respond to concerns." [The health IT industry has had several decades to "get it right."  When will the experiment end? - ed.]

Management warned

Staff superusers have warned management of EPIC issues, and two training sessions in May and June were inadequate, Fagan said.

"They were next to useless because the program wasn't in place well enough to practice," she said. "Everyone in the classes could see the gross loopholes in information."

Although nurses across the county's health care system have complained [but impediments to diffusion per FDA, IOM etc. prevented the complaints from becoming more widely known - ed.], the problems have been acute in detention, Fagan and Fillingim said.

On Monday, one inmate told a nurse she was supposed to be seen by mental health specialists because she was hearing voices, but the follow-up appointment was not registered in the system. The same patient had a Pap smear scheduled for two weeks ago to test for sexually transmitted diseases, but the appointment disappeared from the system, Fagan said.

Nurses cannot access tuberculosis history for inmates, so when some are transferred to Immigration and Customs Enforcement, staff cannot provide a full medical summary.
"We don't exactly know how that happened; we can't tell," she said.

The kinks will be worked out, and patient safety issues rise to the top of the list, Runt said. ["kinks" is a synonym for that other common, milquetoast euphemism "glitches";  I also ask -  why does the statement that "patient safety issues rise to the top of the list" even have to be made - ever? - ed.]

"When we go live is just a point in time, and now it becomes a period of stabilization and optimization," he said.

I think the line "We don't exactly know how that happened; we can't tell" sums up the dangers of today's "EHR's", in reality enterprise clinical resource management and clinician workflow control systems, very well.

I note that nurses in California may be a bit better prepared to recognize and call out the dangers of ill-designed and ill-implemented health IT than those in other states.  See my post "Health Information Technology Basics From Calif. Nurses Association and National Nurses Organizing Committee."

Regulation, anyone, or shall the experiment continue as-is?

Finally, in my career to date, I have both experienced and heard many stories of this type of medical and organizational chaos that endangers patients.  The usual scenario is one of non-medical, domain-novice IT personnel and executives serving as the industry's defense (as in American football), doing their best to tackle anyone who speaks out.  Two such stories arrived in my inbox in just the past few weeks.

The scenarios are also usually accompanied by amoral misdirection from these personnel away from patient risks via hackneyed excuses and euphemisms such as: it's a rare event, it's just a 'glitch', patient safety was not compromised, it's teething problems, it's a learning experience, we have to work the 'kinks' out, it's growing pains, it's the users' fault, etc.   

Herein is the problem:  the attitude that a clinic full of non-consenting patients is an appropriate testbed for alpha and beta clinical software that puts them at risk is medically unethical, based on the guidelines developed from medical abuses of the past.  There is nothing to argue or debate about this.

It is time to consider that some of the ignorant-to-the-point-of-endangerment or corrupt IT and other healthcare executives who do not listen to the concerns of clinicians, or actively block them from being disseminated and acted upon, should be subjected to charges of gross or even criminal negligence when harm occurs.

Gross negligence: carelessness in reckless disregard for the safety or lives of others, which is so great it appears to be a conscious violation of other people's rights to safety.

Criminal negligence:  failure to use reasonable care to avoid consequences that threaten or harm the safety of the public and that are the foreseeable outcome of acting in a particular manner.

Perhaps they'll enjoy experiencing a prison environment with a troublesome EHR firsthand.

-- SS

When Does Lavish Executive Compensation Become "Embezzlement?"

A single article in the Miami Herald raises the question of when is excessive executive compensation in health care too excessive.  To set up the question, I will be quoting from the story in an order quite differently from how the story was presented.

Background

The story is about the executives of the Miami Beach Community Health Center, described thus:

Headquartered on Biscayne Boulevard in North Miami, the Miami Beach Community Health Center is one of the oldest and most well-respected public health clinics in Florida. It opened more than three decades ago, and now includes four locations, three on the Beach, including two sites that care for people with mental illness. The center employs more than 280 people, with a monthly payroll of around $1.2 million.

The health center’s annual budget is about $36 million — about one-third of which comes from private insurance, Medicaid, the state and federal health insurance for needy people, Medicare, the federal insurer for elders, and private payments.

The CEO's Compensation

Previous stories, and public records suggested that the Center's CEO, Kathryn Abbate, was very well compensated. First,

an October 2010 Miami Herald business story ..., relying on federal tax documents, reported Abbate’s compensation package as $824,000 in 2008. In the article, Abbate said the compensation package was inflated by cashed-out sick time, vacation time and a retirement account.

She did even better in subsequent years,

The Miami Beach Community Health Center’s federal tax report for 2010 indicates Abbate’s base salary was $261,165 — but includes an additional $956,584 in 'bonus and incentive' dollars that pushed her total compensation to more than $1.2 million. The center’s IRS disclosure for the prior year reported Abbate’s base salary as $970,532, and total compensation of $987,902. In 2008, Abbate’s total reported compensation was $824,686, records show.

The CEO got very generous compensation given the size of her organization.  This compensation was documented on forms the organization submitted to the IRS that were in the public domain.

However, as we have discussed many times before (look here), many leaders of health care organizations, including non-profit organizations, have been collecting very generous compensation.

The Role of the Board of Trustees

As we have discussed before, e.g., here, exceptional compensation for top hired managers is often justified by the governing boards, that is, boards of trustees or directors, to whom the hired managers nominally report.  These governing board members often seem to be working off a common set of "talking points." 

In this case, there was a difference. The Herald reported that the Centers board of trustees "never agreed to pay Abbate more than $300,000, [Center Chief Medical Officer Dr Mark] Rabinowitz said."

The board seemed totally unaware of what their organization was paying its CEO.

Rabinowitz and a health center spokeswoman, Alia Faraj-Johnson, said that board members they spoke to had not seen the [2010] newspaper story [about the CEO's 2008 compensation]until just recently, and acknowledged its content would have raised significant red flags.

'That would have tripped everybody’s light,' Rabinowitz said.

Why the board had never thought to look at the organization's own reports (990 forms) to the US Internal Revenue Service which detailed the executives' compensation, reports that were in the public domain, and are easily available online (look here), is unknown.

The article implied that the board was somehow not up to this task even though it has fiduciary responsibilities to oversee the top hired managers, oversee the overall budget, and try to maintain both the organization's mission and fiscal stability did not seem up to the task. The article noted,

board members remained unaware until last spring. Under federal law, at least half of the board members of federally subsidized health centers such as Miami Beach’s must be consumers of the clinic, and some of the clinic’s board members were simply ill-equipped to detect what the center calls a sophisticated financial crime.

The board members seemed to think that it was the job of the CEO's subordinates to keep tabs on her compensation,

'One of the sad things about this, regrettably, is that if the gatekeeper in this case, the chief financial officer, had done his job, a large portion of this would have been discovered a long time ago,' said Bill Dillon, a Tallahassee-based healthcare lawyer who is advising the center.

The Chief Financial Officer contended that he would not have been able to successfully blow the whistle:

[CFO Stanley] DeHart, who lives in Coral Springs, said he was aware of many of Abbate’s activities, but declined to alert the board of directors. 'The board of directors was very close to her, and I really thought they would not believe me,' DeHart said. 'They held her in very high esteem.'

DeHart and members of his staff 'discussed whistle-blowing,' he said, but they all agreed taking such an action was more likely to result in their firing than Abbate’s. 'I felt at the time, and I still feel, that I had no proof that the board of directors would accept.'

And, DeHart added, blame for the scandal should include outside auditors, who failed to raise any objections when Abbate wrote dozens of checks to herself for 'community development' — a department that regularly generated an enormous amount of 'abnormal activity.' DeHart said he told auditors he suspected something was amiss in the community development department.

'The external auditors had to have known about this,' DeHart said, 'because I laid it out to them in plain view. I did not hide anything.'

In fact, the CEO's total compensation, plus a variety of other payments she seemed to direct to herself, were not made clear until

May, after a routine audit required by federal funders turned up irregularities, said Mark Rabinowitz, an obstetrician and gynecologist who is the center’s chief medical officer. Abbate had written a check for $5,000 to herself, and cashed it, labeling the expenditure a 'community development' expense....

Only after that,

Calling the actions of their former administrator an 'outrageous betrayal of trust,' authorities with the Miami Beach Community Health Center are investigating what they call the theft of almost $7 million in taxpayer money by the center’s longtime chief executive.

Members of the health center’s board of directors fired Chief Executive Officer Kathryn Abbate, saying she diverted the nearly $7 million in money intended to provide healthcare for the needy to her personal use beginning in 2008.

Summary

So let me backtrack a bit. The board of a moderately big, non-profit community health center seemed to make no attempt to monitor the organization's finances, did not even review the organization's own filings with the US government, and therefore had no idea what they were paying their CEO. Nonetheless, they seemed to assume that the organization's finances would be kept in order by an executive who reported to that same CEO. When an audit ordered externally ordered revealed that the CEO was being paid much more than the board had assumed, they charged "embezzlement," again even though a good chunk of such payments were in the form of compensation reported to the US government.

The real distinction between this case and many other cases of huge executive compensation we have discussed is that in this one the board seemed to be trying to maintain "plausible deniability" of any knowledge of the CEO's compensation, even though supervising that compensation was its direct responsibility. In other cases, board seem fully aware of enormous compensation, but blithely dismissive of any concerns about it. 

So does this case could represent "embezzlement, " why were all the other cases of hired managers lavishly compensated not so regarded, even when their compensation was completely out of proportion to their known accomplishments, their organizations' financial performance, much less their organizations' fulfillment of their missions and positive impact on patients' and the public's health?  In many of those cases, the money paid out in executive compensation was also partially derived from taxpayers, and also was partially meant to "provide healthcare for the needy."

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


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

Old Mystery Solved? Former FDA Reviewer Speaks Out About Intimidation, Retaliation and Marginalizing of Safety

At my Dec. 2005 post "Report: Life Science Manufacturers Adapt to Industry Transition" I wrote:

... The recognition of a gap in formally-trained medical informatics-trained personnel in the pharmaceutical industry [by Gartner Group] is welcome. For example, from my own experience:

I recall an interview I had last year with the head of the Drug Surveillance & Adverse Events department at Merck Research Labs in a rehire situation [after a 2003 layoff]. I came highly recommended by an Executive Director in the department, to whom I had shown my prior work. This included well-accepted, novel human-computer interaction designs I'd developed for use by busy biomedical researchers for a large clinical study in the Middle East, as well as my work modeling invasive cardiology and leading the development and implementation of a comprehensive information system to detect new device and treatment modality risks in a regional center performing more than 6,000 procedures/year. In addition, I'd worked with the wife of the Executive Director in years prior, when she ran the E.R. of the hospital where I was director of occupational medicine.

Despite all this in my favor, the Executive Director's boss, himself a former FDA adverse events official [a former deputy director of CDER’s office of drug safety, who'd recently moved to the pharma industry he once regulated - ed.], dismissed me in five minutes as I was showing him the cardiology project, saying flatly "we don't need a medical informatics person here." I had driven 80 miles to Rahway for this interview to save the executive a trip to Pennsylvania, where I was originally scheduled to come for the interview, since the executive's father was ill in the hospital. In an instance of profound social ineptness, my effort was not even acknowledged. Perhaps he was in a bad frame of mind, but the dismissal under the circumstances was all the more disappointing.

I recall this was one of the most puzzling hiring debacles I'd ever experienced, as all the senior people in his dept. had recommended he hire me - I was really only there for his approval and signoff - and the work I'd shown him had improved care, saved lives, and saved money.

I may not need to be puzzled any longer.  This story just appeared:

Former FDA Reviewer Speaks Out About Intimidation, Retaliation and Marginalizing of Safety
By Martha Rosenberg, Truthout
July 29, 2012

The Food and Drug Administration (FDA) is often accused of serving industry at the expense of consumers. But even FDA defenders are shocked by reports this week of an institutionalized FDA spying program on its own scientists, lawmakers, reporters and academics that included an enemies list of "actors" and collaborators

... Ronald Kavanagh [FDA drug reviewer from 1998 to 2008]:  ... In the Center for Drugs [Center for Drug Evaluation and Research or CDER], as in the Center for Devices, the honest employee fears the dishonest employee. There is also irrefutable evidence that managers at CDER have placed the nation at risk by corrupting the evaluation of drugs and by interfering with our ability to ensure the safety and efficacy of drug ... While I was at FDA, drug reviewers were clearly told not to question drug companies and that our job was to approve drugs.

Read the entire story at the link.  I won't cover it more here, except to say it's certainly possible to believe certain FDA officials don't want serious people around -- who in addition to being MD's can write serious software to detect drug and device problems -- whose work can get in the way of drug approvals.

-- SS

A Bonus for Bankruptcy? - KV Pharmaceutical Reveals CEO's Bonus, then Declares Bankruptcy

The latest example of the disconnect between compensation for leaders of health care organizations and their and their organizations' performance comes from a report in the St Louis Business Journal. 

Executive Compensation and KV Pharmaceutical

Its essence was:

KV Pharmaceutical Co. President and CEO Gregory Divis Jr. earned $976,270 in the fiscal year ended March 31, more than double the $385,102 he was paid in fiscal 2011, according to a proxy statement the company filed Thursday with the Securities and Exchange Commission.

His 2012 earnings were comprised of a $638,750 salary, a $130,000 bonus, $204,189 in option awards and $3,331 in other compensation, which includes a $2,909 car allowance, a 401(k) match and group term life insurance.

The total pay for other top executives was as follows:

Treasurer and Chief Financial Officer Thomas McHugh earned $506,615 in fiscal 2012, including a $65,000 bonus. Hit total comp in fiscal 2011 was $320,950.
Vice President, General Counsel and Secretary Patrick Christmas earned $530,604 in fiscal 2012. He joined the company in June 2011.

Admittedly, compensation of just under $1 million a year does not seem that high for the CEO of a pharmaceutical company in this day and age. Furthermore, as noted in Forbes, Mr Divis' compensation is less than that of his predecessor:

who was interim ceo and president, received $1.25 million before Divis succeeded him, and so the ceo is now being compensated at a lower amount.

The Troubled History of the Company

However, first consider that the company was not exactly in the best financial health at the time Mr Divis was getting his pay, as per the St Louis Business Journal:

KV Pharmaceutical Co. officials said July 20 that the company has been notified by the New York Stock Exchange that it is below listing standard criteria due to the company’s average market capitalization being less than $50 million over a 30-day trading period and its stockholder’s equity being less than $50 million.

After years of missteps, mismanagement and mounting losses, KV Pharmaceutical’s ability to survive is in question. The company itself raised doubts as to its ability to continue as a going concern in its quarterly filing Feb. 9 with the Securities and Exchange Commission. [Note that this filing occurred during the same fiscal year in which the CEO received the compensation noted above - Ed.]

In fact, as we discussed here in 2010, a former KV Pharmaceutical CEO and Chairman is one of the very few for-profit health care corporate leaders who actually received personal punishment due to a US government prosecution. Former CEO and Chairman Marc Harmelin was banned from doing business with the US government for 20 years after a fraud prosecution that lead to "a KV subsidiary's conviction on criminal charges earlier this year for shipping oversize morphine tablets" per the St Louis Post-Dispatch.

The Failed Strategy to Get a License for a Previously Generic Drug, and Increase its Price by Ten Thousand Percent (10,000%)

Then consider the direction company leadership took after that setback.  As described in an August, 2012, St Louis Post-Dispatch article, the company's main strategy was based on a license to sell Makena, an injectable form of hydroxyprogesterone. Hydroxyprogesterone had first been approved in the 1950s. In 2003, a National Institute of Health funded study showed that injecting it reduced the risk of premature birth [Meis PJ, Klebanoff M, Thom E et al. Prevention of recurrent preterm delivery by 17 alpha-hydroxyprogesterone caproate. N Engl J Med 2003; 348: 2379. Link here.]. Somehow, with funding from KV Pharmaceutical, "the FDA granted the approval to Hologic, which presented the application and argued for the drug based on medical research sponsored by the National Institutes of Health." After that, while "KV neither invented nor patented Makena, but agreed to pay Hologic nearly $200 million for 'orphan drug' status – and seven years of market exclusivity – for the rights to sell the branded drug." I cannot figure out why either company should have been granted an exclusive right to sell this drug under these circumstances. Nonetheless, once KV Pharmaceutical obtained the rights,

Makena sparked a national controversy over its sky-high price – a 100-fold increase over the average cost – about $15 – for an already widely available non-branded version of the drug produced by compounding pharmacies.

Leading national medical organizations and advocacy groups, including the March of Dimes and two U.S. senators, publicly blasted the pricing.

On March 30, 2011, the FDA announced that it would not enforce KV’s market exclusivity because of concerns that the drug would be unaffordable to many women. Hours later, the federal Centers for Medicare and Medicaid Services indicated that states could purchase the compounded version, called 17P, from specialty pharmacies.

The resistance prompted KV executives to dramatically lower Makena’s cost, but the move failed to forestall the backlash. As a result, KV’s ambitious sales projections for its latest drug failed to materialize.

Bankruptcy

That sealed the company's fate, and the same article reported,

KV Pharmaceutical Co., once among the St. Louis region’s strongest public companies, now faces yet another survival struggle after filing for bankruptcy.

Summary: A Bonus for Bankruptcy

So a company that suffered a criminal conviction for selling morphine tables whose dose was twice what was on their label, whose former CEO was banned from the pharmaceutical industry, which based its survival on a scheme to game the regulations to allow it to sell a previous $15 drug for $1500, then paid its CEO nearly $1 million, including over $330,000 in cash bonus and stock options just before it filed for bankruptcy.  Note that the CEO "earned" that compensation over a time period during which the company revealed doubts that it could survive as a "going concern."

This is a simple, relatively small, but especially graphic example of how leaders of health care organizations are not simply overpaid, but seem to personally profit from their organizations' mismanagement, poor financial results, and last but not least, exploitation of patients. Describing these incentives as perverse seems euphemistic.

Economists seem to like to justify outsized executive compensation by citing shareholder value they create, realistically defined as short-term stock price (look here).  One could argue that companies that sell health care products or provide health care directly should measure performance in terms of effects on patients' and the public's health.  Putting this aside, however, in this case, the executives seemed to be receiving bonuses not based on shareholder value, or stock price, but for continuing a course that resulted in the complete destruction of shareholder value.  (Stock shares lose essentially all their value when a company goes bankrupt.) 

In this case, and in others we have discussed, executive compensation seems to be based on the ability of executives to control their own pay, which seems more like what economists like to call "rent-seeking," as defined by Wikipedia, gaining from "manipulating the social or political environment in which economic activities occur, rather than by creating new wealth." 

Clearly, as long as health care leaders can personally profit however bad their performance is, or even due to their poor performance, we can expect nothing other than worsening performance.  Health care will become continually more dysfunctional until true reform makes health care leaders accountable for their actions, and all their effects, on stockholders, but also on patients' and the public's health.

My Presentation to the Health Informatics Society Of Australia: "Critical Thinking on Building Trusted, Transformative Medical Information: Improving Health IT as the First Step"

In early 2011 I was invited to present at the annual convention of the Health Informatics Society of Australia (HISA) by its CEO, Louise Schaper, PhD.  HISA was aware of my writings and thought a presentation at their conference would be of interest to the Australian informatics and healthcare governance community.

Dr. Schaper wrote:

From: Louise Schaper
Sent: Thursday, March 24, 2011 10:50 AM
To: Scot Silverstein
Subject: HIC invitation to deliver a keynote presentation

Hi Scot,

I trust this email finds you well and I hope spring is bringing you some warmer weather and cheer.

I wanted to let you know that the Health Informatics Conference committee met recently and expressed a high level of interest in having you deliver a keynote address at HIC and also to form part of a panel presentation. 

I know you may not be able to make a commitment to come to Australia in August, but I wanted to let you know what we would love to have you, if circumstances permit you being here.  I’m confident we could have your trip sponsored (providing you don’t mind spending some face-time with the sponsoring organisation) and generate some media coverage around your visit.

The preliminary program will be advertised in the next few weeks and at the moment I’m leaving a ‘spot’ for you in the hope that you may be able to join us.  I know you are in difficult and upsetting circumstances so please know that I’m not intending to add to any pressure – I just wanted to let you know that we would be honoured if you are able to deliver an address at HIC this year and I will keep a speaking spot reserved for you if you think you may be able to accept our invitation.

Thanks for your time Scot.  I look forward to hearing from you.

Kindest regards,

Louise

Sadly, the "difficult and upsetting circumstances" she mentioned were my involvement in caring for my mother, seriously injured in May 2010 in a healthcare information technology-related medical misadventure and, by this time, dying.

I was thus unable to attend.

My mother passed away June 6, 2011 of her injuries.

In January 2012, Dr. Schaper was gracious enough to re-invite me to the annual 2012 conference in Sydney.  I accepted.

I attended HIC 2012, held in the Darling Harbour Convention Centre in Sydney 30 July - 2 August 2012.

I enjoyed taking pictures like this with my trusty (and portable) Canon SX110 IS.  Click to enlarge.  More photos here.

My powerpoint slides for the presentation entitled "Critical Thinking on Building Trusted, Transformative Medical Information:  Improving Health IT as the First Step" are at this link.

Darling Harbour Convention Centre, Sydney, Australia. Click to enlarge.

Australia has embarked on a national Personally Controlled Electronic Health Record (PCEHR) project under the auspices of Nehta, the National E-Health Transition Authority.  I find this an interesting approach to national health IT; unlike the U.S., whose project is top-down (centrally controlled records), Australia seems to have learned from our mistakes and is initiating health IT as a bottom-up (patient-controlled) initiative.

At the conference last week, I delivered a keynote address on the theme of improving health IT as an essential step in leveraging the capabilities of the technology.

Being that I am anti-"bad IT" and pro-"good IT", implicit in my address was the issue of the technology's untrustworthiness in 2012, largely due to the unregulated free-for-all its market represents and the poor engineering that is the result.

I also participated in a Panel Discussion led by Australian investigative journalist and popular political TV program host Tony Jones.  Mr. Jones hosts the Australian Broadcasting Corporation's "Q&A - Adventures in Democracy."

Panel discussion moderated by Australian political commentator Tony Jones, who hosts the show "Q&A" on the Australian Broadcasting Corporation.  Click to enlarge.

I will highlight several key points I made in my keynote and on the panel:

• Critical thinking is essential at all times in healthcare ... or your patient's dead.
• Critical thinking is not mindless criticism; on the contrary, it is reflective, inquisitive, logical thinking that is focused on deciding what to believe or do.
• Health IT must be trusted by users and patients [and be free of major downsides] - as a primary step before HIT can optimally benefit healthcare 
• I pointed out I am not suggesting anything new and that, in fact, I am suggesting something old:  "First, do no harm."
• I pointed out the "revolutions" usually have downsides, and IT always produces winners...and losers (per the empirical research of Social Informatics). 

Me presenting my keynote, driving home the point that IT on its own won't "revolutionize" healthcare; it is a tool to facilitate the true enablers of healthcare - clinicians - a point that should never be forgotten.  Click to enlarge. From the excellent multimedia piece on the conference at this link.

I then posed a series of questions of great relevance to understanding health IT realities.  Click to enlarge:

  

 

I left it to the audience to answer these questions.

I then posed the question "Is health IT being done well?"

I provided links to various evidence that it was not, such as the National Research Council 2009 report on health IT; AMIA's report on its workshop on healthcare IT failure, the 2012 U.S. IOM report on safety, the 2012 U.S. NIST report on usability, work by Australian Professor Jon Patrick of U. Sydney on health IT defects, and other sources as aggregated at this link.

Again, I did not impose views on the audience.  I didn't need to, as that corpus speaks for itself.

I also clarified terminology that reduces essential caution, such as the terms "electronic medical record" (EMR) and "electronic health record" (EHR) - a source of endless, wasted contention on definitions of which is which - being anachronisms from an earlier age of IT.  I pointed out that in 2012 what these innocuous terms somewhat deceptively and disarmingly represent are in reality complex enterprise clinical resource management and clinician workflow control systems – where many, many things can go wrong.

"EHR":  an innocuous "file cabinet" for records, or something else entirely?  Click to enlarge.

I asked if case reports of health IT unintended consequences (UC’s) were “anecdotal” and to be played down, while studies of health IT benefits to date solid science.  I then asked if the reality might be that studies of health IT benefits to date were mostly anecdotal (e.g., in specialized settings; weak observational studies vs. randomized clinical trials) while reports of UC’s are risk management-relevant incident report “red flags” pointing to possible systemic problems.

I pointed out the common seller marketing memes of beneficence and deterministic efficacy, and asked if these were realistic.  I also pointed out the need for transparency about HIT risks, and the impediments to this transparency.

Finally, I indicated what was the likely problem affecting all countries involved in EHR projects: that the rigor, ethics and skepticism of medical science itself not applied in the domain of health IT.

I suggested a simple solution:  a paradigm shift in thinking about health IT as another medical device, that needed to be subject to the same methodologies and ethical considerations applicable for decades (or more) in the healthcare delivery sector such as medical devices, pharmaceuticals, and research (and other risk-prone industries e.g., aviation and automotive).

My goal was to provoke thinking about these issues, to circumvent blank, uncritical acceptance of industry and industry-supporter memes.

I believe I succeeded.  Feedback I received was that the audience, including government officials, found many new things to consider as they embark on their national health IT projects.

I also heard that some HIT seller representatives were squirming a bit.  That was not unexpected.  I was taking "control of their message" away from them.

University of Sydney Professor Jon Patrick presenting on computational linguistics.   Jon is the author of a treatise on health IT defects (at this link), mentioned numerous times on this blog.  Dr. Patrick graciously hosted me at his Sydney home for several days after the conference and he and his wife gave me a wonderful tour of the city.  Click to enlarge.

Finally, I had a question from the audience, from fellow blogger Matthew Holt of the Health Care Blog.  (I've had some online debate with him before, such as in the comment thread at my April 2012 post here.)

Matthew asked me a somewhat hostile question (perhaps in retaliation for the thrashing he received at the end of my May 2009 post on the WaPo's HIT Lobby article here), that I was well prepared for, expecting a question along these lines from the seller community, actually.  The question was preceded by a bit of a soliloquy of the "You're trying to stop innovation through regulation" type, with a tad of Merck/VIOXX ad hominem thrown in (I ran Merck Research Labs' Biomedical libraries and IT group in 2000-2003).

His question was along the lines of - you were at Merck; VIOXX was bad; health IT allowed discovery of the VIOXX problem by Kaiser several years before anyone else; you're trying to halt IT innovation via demanding regulation of the technology thus harming such capabilities and other innovations.

The audience was visibly unsettled.  Someone even hollered out their disapproval of the question.

My response was along the lines that:

• VIOXX was certainly not Merck at its best, but regulation didn't stop Merck from "revolutionizing" asthma and osteoporosis via Singulair and Fosamax;
• That I'm certainly not against innovation; I'm highly pro-innovation;
• That our definitions of "innovation" in medicine might differ, in that innovation without adherence to medical ethics is not really innovation.  It is exploitation.

(I forgot to mention that I gave an invited presentation to Merck's Drug Surveillance department in 2006, PPT here, long after I was their employee, on the potential use of EHR data to detect drug adverse events sooner than traditional phase IV studies or ad-hoc reporting allowed.)

When I spoke of medical innovation requiring ethics, nearly the full audience at my keynote address - hundreds of people - broke out in applause.

•

I knew at that point that my talk was a success.

This author with HISA CEO Louise Schaper , PhD. Click to enlarge.

More photos of my trip are here.

-- SS

Addendum:  Another added pleasure in my visit Down Under. As Australia and the U.S. respect each other's amateur radio licenses, I was able to operate my handheld radio as "KU3E portable Victor-Kilo." VK is the international radio prefix for Oz.  Contacting Australia from the U.S. is considered a "holy grail" of ham radio.  It was interesting to hear amateur radio "from the other end."

Yaesu VX-3 Multiband Transceiver

-- SS

Aug. 11, 2012 Addendum:

An excellent multimedia video of HIC 2012 produced as the conference proceeded has been posted on YouTube at http://www.youtube.com/watch?v=DZg_46wY0E0.  It was finished and shown immediately after the conference's conclusion.

-- SS