WaMu Worry? - More Overlaps Between "Stewards" of Failed Financial Firms and the Leadership of Health Care Organizations

Investigations of the failures of major US financial corporations during the global financial meltdown continue to paint a picture of bad leadership.  The latest failed corporation to get public attention was Washington Mutual (WaMu).  As described by the Los Angeles Times,

Before Washington Mutual collapsed in the largest bank failure in U.S. history, its executives knowingly created a 'mortgage time bomb' by making subprime loans they knew were likely to go bad and then packaging them into risky securities, a congressional investigation has found.

In some cases, the bank took loans in which it had discovered fraudulent activity -- such as misstated income by borrowers -- and rolled them into mortgage securities sold to investors without disclosing the fraud, according to the report released Monday by the Senate's Permanent Subcommittee on Investigations.

The investigation strongly suggested that WaMu leaders ignored questions about their practices:

According to the Senate report, WaMu executives were aware in 2006 of problems at its Southern California subprime unit, Long Beach Mortgage Co. Excerpts of internal e-mails and reports offer a stark and unvarnished view of the warning signs that were dismissed as the bank tumbled toward failure.

The company's chief risk officers called Long Beach Mortgage, the subprime subsidiary the firm used to stage its rapid growth in home lending, 'a real problem for WaMu.' Stephen Rotella, WaMu's former chief operating officer, described the unit as 'terrible.'

The company and its Long Beach unit 'used shoddy lending practices . . . to make tens of thousands of high-risk home loans that too often contained excessive risk, fraudulent information or errors,' according to a subcommittee memo.

Making money in the short-term was more important than long-term consequences:

Internal company documents highlighted the profit pressures. 'In 2007, we must find new ways to grow our revenue. Home Loans Risk Management has an important role to play in that effort,' read a late 2006 message from the unit's chief risk officer to the risk management team.

A June 2008 review by the bank's main regulator, the Office of Thrift Supervision, found a 'culture focused more heavily on production volume rather than quality.'

Top employees could become members of the company's President's Club, which offered lavish, all-expense-paid trips to Hawaii or the Caribbean, the subcommittee found.

A vivid anecdote about this culture of greed was described by Politco,

In the years before it became the largest bank failure in American history, mortgage lenders at Washington Mutual liked to party hearty at the company’s annual retreats.

But a 2006 WaMu retreat produced one of the more cringe-worthy moments of the mortgage meltdown: Lenders, on the eve of their industry’s collapse, singing 'I Like Big Bucks' to the tune of Sir Mix-a-Lot’s 1992 hip-hop hit 'Baby Got Back.'

'I like big bucks and I cannot lie/You mortgage brothers can't deny,' sang the WaMu rappers.

The presentation, which included cheerleaders moving in time to the music, and choreographed moves by the singers, continued:

'That when the dough roles in like you're printin’ your own cash/
And you gotta make a splash/
You just spends/
Like it never ends/
Cuz you gotta have that big new Benz/
All of that bling you're wearin'/
Shining so bright peoples starin'/
It's crazy, I gotta ski Aspen/
That's all I'm askin''

The former CEO of WaMu, Kerry Killinger, was called to testify, but asserted that he was unaware of what was going on, according to a column in the Seattle Times:

Tuesday at the congressional grilling of the Washington Mutual brass on how they ran a respected, 119-year-old bank into the ground, another defense was tried: No one knows anything.

Former CEO Kerry Killinger said his bank's failure wasn't his fault (it was the economy and also the government.) But for a guy who ran the joint for 18 years, he seemed not all that clued in about what his company actually did.

Much of the questioning from a panel of U.S. senators was about WaMu's now well-known history of bundling up crappy, subprime loans, sprinkling them with fairy dust and selling them as investments on Wall Street.

The U.S. Senate Permanent Subcommittee on Investigations said it had evidence that WaMu rushed to unload some of these loans precisely because the bank knew they were rotten.

When asked about this, Killinger said he couldn't recall (they always say that). But he also said something that floored me: He never knew much about WaMu's business of securitizing subprime loans for sale on Wall Street.

Even though WaMu did it to the tune of $77 billion worth from 2000 to 2007.

'I was just simply not involved in any of those,' Killinger shrugged.

They were only the fuel for the fire that burned down the U.S. economy!

OK, well, moving on then. Killinger was asked about how even people inside WaMu considered the subprime securities coming out of WaMu's Long Beach Mortgage to be 'the worst paper in the market.'

Blank look. News to him.

How about how WaMu loan officers in various offices were involved in fraud, cutting and pasting false names on borrowers' bank statements or fabricating assets, just to move more subprime loan product?

Can't remember the specifics, said the guy who was in charge.

On it went, nearly two hours of I-have-no-knowledge or I-can't-recall.

Earlier a lower-ranking risk officer at the bank testified he'd come to Killinger in 2004 and made an 'impassioned argument' to take a stand against rampant fraud in the loan industry.

'Blow the whistle,' the guy said he urged Killinger. 'Say we at Washington Mutual will not participate any further.'

A senator asked Killinger about this. You're the CEO, the senator said. This is your bank. Didn't someone telling you there were serious fraud problems send chills up your spine?

Eh. He answered blandly that he of course tried to fix any problems. But chills? His demeanor was more Alfred E. Neuman: What, me worry?

It turns out that for his allagedly clueless leadership, Mr Killinger was paid enough to make him very rich, as per a quote from the investigation's report, via the Atlanta Journal-Constitution.

WaMu’s CEO (Kerry Killinger) received millions of dollars in pay, even when his high risk loan strategy began losing money, even when the bank began to falter, and even when he was asked to leave his post. From 2003 to 2007, Mr. Killinger was paid between $11 million and $20 million each year in cash, stock, and stock options. That’s on top of four retirement plans, a deferred bonus plan, and a separate deferred compensation plan. In 2008, when he was asked to leave to leave the bank, Mr. Killinger was paid $25 million, including $15 million in severance pay. $25 million for overseeing shoddy lending practices that pumped billions of dollars of bad mortgages into the financial system. Another painful example of how executive pay at U.S. financial firms rewards failure.

It was all gut wrenching, but perhaps the connection with health care iss not obvious. Let me explain.

A question not addressed by the congressional hearings so far was how the people ultimately responsible for the direction and financial health of Washington Mutual, the company's board of directors, allowed a CEO self-described as clueless become rich while a culture of greed produced an enormous number of questionable loans which ultimately drove the company into bankruptcy. Based on the report and testimony so far, on its face the case is strong that the WaMu board must have been one of the most irresponsible groups of supposed corporate stewards yet uncovered.

A list of the 13 board members who presided over the company's final collapse can be found in the company's 2008 proxy report.

Several of them turn out also to have been or be leaders of health care organizations:

- Thomas C Leppert, director since 2005, "the Mayor of Dallas, Texas," is also a member of the board of directors of the Baylor University Health System. (see this link)

- Charles M Lillis, director since 2005, was also on the board of Medco Health Solutions Inc

- Regina T Montoya, director since 2006, then the Chief Executive Officer of the New America Alliance, is now senior vice president and general counsel for the Children's Medical Center in Dallas, Texas. (see this link)

- Margaret Osmer-McQuade, director since 2002, then President of Qualitas International, is a member of the Board of Overseers of Weill Cornell Medical College. (see this link)

- Orrin C Smith, director since 2005, then President and Chief Operating Officer of Starbucks Corporation, is a member of the University of Washington UW Medicine Strategic Initiatives Committee. (see this link)

So, in summary, members of the board of directors of the failed Washington Mutual, which seemingly collapsed in a fog of greed and irresponsibility, currently sit on the boards of a medical school, a teaching hospital, and a pharmacy benefits management corporation, and on a strategic initiatives committee of another medical school, while another is an executive of another teaching hospital. People whose "stewardship" allowed an apparently clueless CEO to become rich while a corporate culture with the theme, "I Like Big Bucks" drove their company into bankcrupty now also lead some of the most prestigious US health care organizations.

Here is yet another example of how the leadership culture that so badly failed the financial sector was tied to the leadership of health care. (We posted here about how the board of the bankrupt Lehman Brothers also leads multiple health care organizations, and here how the leaders of how some of our major universities that house medical schools overlap with the leadership of other questionable financial corporations.)

We have another vivid illustration in the aftermath of the global economic collapse, and in an ongoing health care crisis, how some of the problems of health care, and academic medicine in particular, may have been at least enabled by leadership more used to working in an increasingly amoral marketplace than to upholding the academic mission. All health care organizations, for-profit and not-for-profit, those in the US and those in other countries, need leaders who value their health care and academic missions more than simply the money they may bring in.

Is H. Stephen Lieber, CEO of HIT Industry Trade Group HIMSS, Misinformed or Simply Lying?

In the Wall Street Journal article today entitled "Can Technology Cure Health Care?" by erstwhile WSJ reporter Jacob Goldstein, H. Stephen Lieber, CEO of the health IT trade group HIMSS disputes the idea that "electronic medical records systems focus on billing [and other administrative tasks] at the expense of patient care" and says:

[These systems] are "primarily designed for improving clinical outcomes, and a secondary benefit is that they improve administrative efficiencies."

Is Mr. Lieber misinformed, or worse, could he simply be lying?

In fact, these systems do neither of these things, as repeated studies are showing such as I aggregated in "2009 a Pivotal Year in Healthcare IT" at http://www.ischool.drexel.edu/faculty/ssilverstein/failurecases/?loc=cases&sloc=2009, and as in this new 2010 study report in Health Affairs:

Electronic Health Records' Limited Successes Suggest More Targeted Uses

The team, led by Harvard Medical School professor Catherine M. DesRoches, surveyed more than 3,000 U.S. community hospitals to assess factors such as inpatient costs and mortality and readmission rates. Here are their findings:

Understanding whether electronic health records, as currently adopted, improve quality and efficiency has important implications for how best to employ the estimated $20 billion in health information technology incentives authorized by the American Recovery and Reinvestment Act of 2009. We examined electronic health record adoption in U.S. hospitals and the relationship to quality and efficiency. Across a large number of metrics examined, the relationships were modest at best and generally lacked statistical or clinical significance. However, the presence of clinical decision support was associated with small quality gains. Our findings suggest that to drive substantial gains in quality and efficiency, simply adopting electronic health records is likely to be insufficient. Instead, policies are needed that encourage the use of electronic health records in ways that will lead to improvements in care.

... the researchers determined that the technological systems, as currently implemented, do not have a significant impact on improving care and reducing costs, DesRoches said.

A key phrase is "as currently implemented." To that, I'd add "as currently designed under the leadership of the HIT industry", which is to say, poorly.

I commented on this report in my prior post "Yet Another Study Shows Health IT Does Not Bat The Ball Out of the Park; And, is HIT an Issue of States' Rights?" at this link.

These results are also in line with the 2009 National Research Council report, the highest scientific authority in the U.S. that involved Octo Barnett and other health IT pioneers. The NRC report calls current approaches to health IT "insufficient" and calls for major redesign of health IT to support clinicians' cognitive needs.

From the NRC report:

Most importantly, current health care IT systems offer little cognitive support; clinicians spend a great deal of time sifting through large amounts of raw data (such as lab and other test results) and integrating it with their medical knowledge to form a whole picture of the patient. Many care providers told the committee that data entered into their IT systems was used mainly to comply with regulations or to defend against lawsuits, rather than to improve care. As a result, valuable time and energy is spent managing data as opposed to understanding the patient.

And this was from the country's most advanced centers in terms of healthcare IT.

As to cost savings, there's the Nov. 2009 “Hospital Computing and the Costs and Quality of Care: A National Study” (Amer J Med 123:1; 40-46) by Himmelstein and Woolhandler at Harvard Medical School, that also concluded “as currently implemented, hospital computing might [very] modestly improve process measures of quality but not administrative or overall costs."

There's also the June 2009 Wharton School of Business article "Information Technology: Not a Cure for the High Cost of Health Care" that I wrote about at this HC Renewal post.

Typical of the recalcitrant, recidivist IT industry, Lieber goes on to blame doctors:

"... there is a resistance on the part of some to recognize the professional clinical advantage that these systems give them, many default to 'This is designed for billing, not clinical outcomes.'"

Never does he consider that doctors might have good reasons to avoid the technology - as in, to protect the lives of the patients in their trust. (When they see user-hostile HIT products from major vendors such as these, who can blame them?)

He then waves off "glitches" - the kind that result in untold clinician inconvenience and disruption, and have resulted in an unknown but "tip of the iceberg" rate of patient injury and death per the FDA - by stating that:

"There is a range of systems out there, just as in any kind of product line, ranging from poor to mediocre to excellent."

His merchant computing, card tabulator/data processing mindset reveals itself in this statement. Unfortunately, health IT, as in other medical devices, IS NOT JUST ANY KIND OF PRODUCT LINE. Malfunctions and poor design do not simply cause a truckload of candy bars to be delivered to the wrong merchant.

As in pharma and other medical devices, when trade group leaders of the HIT medical device companies are unaware of current research, dismiss it, and blame end users, or simply are liars, that industry deserves serious academic and governmental scrutiny.

-- SS

Yet Another Study Shows Health IT Does Not Bat The Ball Out of the Park; And, is HIT an Issue of States' Rights?

At "2009 a Pivotal Year in Health IT" I aggregated a number of reports and articles from that year shedding needed critical light on the irrational exuberance surrounding computers in medicine, an exuberance that seems to consider clinical professionals with years of hard training and expertise as simpletons who should bow to the cybernetic miracles created by the health IT cartel.

The critical reviews continue in 2010. Here's another in Health Affairs from a team at Harvard: Electronic Health Records' Limited Successes Suggest More Targeted Uses. The team, led by Harvard Medical School professor Catherine M. DesRoches, surveyed more than 3,000 U.S. community hospitals to assess factors such as inpatient costs and mortality and readmission rates.

Here were their findings:

Understanding whether electronic health records, as currently adopted, improve quality and efficiency has important implications for how best to employ the estimated $20 billion in health information technology incentives authorized by the American Recovery and Reinvestment Act of 2009. We examined electronic health record adoption in U.S. hospitals and the relationship to quality and efficiency. Across a large number of metrics examined, the relationships were modest at best and generally lacked statistical or clinical significance. However, the presence of clinical decision support was associated with small quality gains. Our findings suggest that to drive substantial gains in quality and efficiency, simply adopting electronic health records is likely to be insufficient. Instead, policies are needed that encourage the use of electronic health records in ways that will lead to improvements in care.

On that last point, I disagree; it's not the use of HIT that needs to be encouraged, it's the remediation of HIT that needs to be encouraged/enforced to make HIT useful. More below.

The authors also report:

Hospitals with comprehensive electronic health record systems were compared with those with no or basic electronic systems, and the team only found slight differences in areas such as length of stay and surgical infection prevention.

Overall, the researchers determined that the technological systems, as currently implemented, do not have a significant impact on improving care and reducing costs, DesRoches said.

“Having a system is not enough,” DesRoches added. “We can’t expect that hospitals are just going to plug these systems in, and suddenly you’re going to see large improvements. [Not according to our President and the heads of HHS and ONC, who've explicitly stated that health IT will produce all sorts of technologically deterministic miracles - ed.] The systems are only going to be as good as how people are using them.”

I would differ from the authors on the last point, that "the systems are only going to be as good as how people are using them.” The authors seem to assume that health IT is a perfected technology.

I would say that "the results are only going to be as good as the systems clinicians are forced to use."

If the systems are crap, then the results of their use will be crap.

The authors concluded that "the study’s findings should not deter future technological advances in keeping medical records.

In fact, I think with results such as these, improving health IT through technological advancement is an absolute imperative. To do so, however, will require major advances in the health IT industry itself - its methodologies for health IT development and validation, its qualifications for leadership, and its regulation.

“With the amount of attention and money that the federal government is putting into this issue, I don’t think we can do anything but move forward at this point,” Desroches said.

Again, I disagree with the author's white-flagged surrender to the diktats of the Federal Government. The Federal takeover of health IT via the establishment on ONC by HHS made me uncomfortable when it occurred in 2004, and it is increasingly clear why.

When serious doubts are thrown on a technology being pushed on a critical profession and a nation's critical services, the imperative should be on slowing down and fixing the problems before spending hundreds of billions more dollars in a massive federal push, a push that even includes federal coercion in the form of Medicare penalties for non-adopters.

As studies like this show, HIT medical devices are experimental, yet increasingly serve as governors of medical care. They are "governors by cybernetic proxy", I might add. These devices put the federal government, and the health IT vendors as well, with their "best practices" criteria, directly in the exam room. This is done without true patient informed consent.

The rights to govern the practice of medicine reside with the states, not the Federal government. (Drug and device safety were made an exception via FDA regulation, but health IT is entirely unregulated, demonstrating incompetence at best on the part of the federal government in a matter critical to healthcare).

Perhaps the states need to take up the issue of federal pressure to implement experimental health IT. Health IT is technology that seeks to govern the practice of medicine but does not seem to have significant ROI the way it is designed and implemented today. It does, however, have a definite but unknown incidence of harm (the FDA's data on patient injury and death attributed to bad IT are suspected to be just the "tip of the iceberg" according to the FDA itself). Perhaps states' rights need to be invoked in order to slow the out-of-control, federally fueled locomotive.

It seems that federal imperatives to:

• coerce clinicians to purchase experimental products of commercial health IT companies under duress of federal penalty (much as consumers are going to be forced to purchase health insurance from commercial insurance companies under threat of penalty, although at least those products are not experimental);
  
• determine"meaningful use" criteria;
• determine who can "certify" the technology;
  
• set up federal "Regional Extension Centers" (REC's) and a national Health Information Technology Research Center (HITRC);
  

and the HITECH act itself represent a huge power grab that tramples states' rights to regulate the practice of medicine.

-- SS

You Can Judge a Culture By How They Treat Their Dead...

This article does not speak highly of the IT culture and the dead. Considering the IT culture that has invaded healthcare and whose tools are increasingly being mandated in treating the living, this article is another cause for concern:

Organs removed without consent after IT blunder

Bereaved families will be told that organs were removed from their loved ones without consent after a blunder affecting Britain’s donor register.

By Patrick Hennessy and Laura Donnelly
The Telegraph
10 Apr 2010

The records of 800,000 people were affected by an error that meant their wishes about the use of their organs after death were wrongly recorded.

An investigation has found that 45 of those for whom wrong records were stored have since died – and in approximately 20 cases organs were taken where consent had not been given.

Andy Burnham, the Health Secretary, said today he deeply regretted the distress caused to bereaved families of people whose organs were removed without consent following a huge blunder affecting the UK donor register.

He said: "I want to assure the millions of people on the organ donor register that they can have full confidence that only their accurate information will be discussed with their families, and that their wishes will be respected.

I'm not sure why people should "have full confidence" in a system where a huge blunder was made on the words of a politician ...

"I have asked NHS Blood and Transplant to take immediate steps to identify and contact all affected families. This process is under way and will be completed as quickly as possible.

Considering how poorly the NHS has managed its health computing on a national scale, I would not be reassured.

"I have asked Professor Sir Gordon Duff of Sheffield University to carry out a review to find out why this has happened, prevent mistakes like this being made again and ensure all necessary steps are taken to maintain confidence in the organ donor register."


Donors can give permission for any of their organs to be taken, or provide more specific agreements. A glitch in the system more than a decade ago removed the distinctions expressed by people.

... The error occurred in 1999, when data held by the Driver and Vehicle Licensing Agency, which includes a request for consent in applications for a driving licence, was transferred to the organ registry.

Allow me to reveal how this 'glitch' that removed critical data happened: careless, cavalier, undereducated, arrogant, overempowered IT personnel in HIT leadership roles.

Allow me to reveal how the 'glitch' was not discovered in over a decade: careless, cavalier, undereducated, arrogant, overempowered IT personnel in HIT leadership roles.

Joyce Robins, from the pressure group Patient Concern said: "This Government has got an absolutely dreadful record when it comes to data, but it is absolutely horrific that such sensitive details were handled in such a careless way."

If the dead are treated this poorly, what does this say about the wishes of the living?

The NHS is about to contact approximately 20 families who allowed organs to be taken from their relations after being misinformed about what consent had previously been given.

It is illegal to remove organs without prior consent from the person who died or their next of kin. A view is sought from relations before decisions are taken. In the cases where errors were made, it is understood that families were asked for permission, but their decisions were based on misinformation about the wishes of their relations.

Unbelievable.

After detecting the fault last year, NHS Blood and Transplant, which holds the organ donation register, was able to correct 400,000 of the flawed records. But 400,000 more people will shortly be contacted to be told that the wrong information may be held about them, and asked to provide consent again.

Just a little 'glitch', affecting nearly a million people. Nothing for the IT personnel to be concerned too much about.

Until fresh consent is obtained, organs will not be taken from any of those people in the event of death.

Let's hope the delays in organ availability don't create more dead people.

The mistake came to light when NHS Blood and Transplant (NHSBT) wrote letters to new donors thanking them for joining the register, and outlining what they had agreed to donate. Respondents wrote back to say the information was wrong.

Sick, living patients might not have the opportunity to tell their doctors the information in the eRecord has been corrupted or erased.

The point of this case is that the utmost care needs to be used in managing health data and healthcare information systems. The results of errors are not boxes of candy bars shipped to the wrong location.

As long as the culture of IT dominates in healthcare, IT being characterized by an arrogant, recalcitrant, recidivist culture whose failure rates are downright terrible even on non-healthcare projects, I'd frankly rather use paper.

Paper doesn't suffer 'glitches' that alter hundreds of thousands of fields of critical information en masse.

-- SS

A "Very Well Paid Boob" on the Harvard Corporation?

The ongoing investigation of the global financial collapse may also shed some indirect light on what has gone wrong with health care.  Consider the recent testimony by two leaders of the nearly failed, then bailed out global financial giant Citigroup, as reported by the New York Times. One of the leaders was Robert Rubin,

Robert E. Rubin, the former Treasury secretary, faced withering questions from the panel, the Financial Crisis Inquiry Commission, for his spare expressions of remorse. Repeatedly playing down his role as chairman of the executive committee of Citigroup’s board, he was met with anger and disbelief.

'You were either pulling the levers or asleep at the switch,' Philip N. Angelides, the committee’s chairman, told him.

Mr. Rubin stopped short of accepting personal responsibility. He grudgingly conceded that a few savvy investors saw the crisis coming, asserting that nearly everyone in the financial services industry had failed to see a dozen powerful forces — from excessive debt levels to trade imbalance — come together in a perfect storm.

'We all bear responsibility for not recognizing this, and I deeply regret that,' Mr. Rubin said.

Mr. Rubin’s stance left several members of the panel angry. Mr. Rubin earned more than $100 million during a decade at Citigroup.

Mr. Angelides, a former California state treasurer and a fellow Democrat, did not buy it. 'You were not a garden-variety board member,' he said. 'I think to most people chairman of the executive committee of the board of directors implies leadership. Certainly $15 million a year guaranteed implies leadership and responsibility.'

Attempts by Mr Rubin (and to some extent, former Citigroup CEO Charles O Prince III) to disavow responsibility met with more derision. For example, yesterday, see a New York Times editorial:

The latest public hearings of the Financial Crisis Inquiry Commission, held last week, made headlines for eliciting more apologies from financiers who presided over the market collapse.

You may recall a similar flurry last year, when Lloyd Blankfein, the chairman and chief executive of Goldman Sachs, was widely credited for having apologized for his firm’s role in the financial crisis.

We did not buy it then; Mr. Blankfein never said what he was sorry for or to whom he was apologizing. And we are not buying it now.

Mr. Prince says he 'could not' foresee the impending collapse, when he could have and should have seen it coming. Certainly, others did. Mr. Rubin has said that under his employment agreement, he was not responsible for the bank’s operations. But he was a towering figure at Citi, a source of its credibility and prestige. That implies responsibility, no matter what his contract said. Add all that to the 'I wasn’t the only one' context of both men’s comments, and their regret translates as, 'We feel bad about an accident we were powerless to prevent.'

Except that the financial crisis was not an accident and they were not powerless. The crisis was the result of irresponsibility and misjudgments by many people, including Mr. Prince and Mr. Rubin. Citi, under their leadership, epitomized the financial recklessness that ruined the economy.

A Seattle Times columnist was even more harsh, calling Rubin a "very well paid boob," and:

Rubin was barely contrite and went back to his meme of 'who knew?,' adding the unintended comedic line about how leaders shouldn't be responsibility for the 'granularity' of little things -- such as $40 billion in essentially fraudulent collateralized debt obligations. Rubin was being paid more than $100 million as a senior adviser to Citi while it headed toward collapse and a $45 billion taxpayer rescue. So 'granularity' is in the eye of the beholder.

Commission vice chairman Bill Thomas said, 'Apparently you get to the top without having had to experience anything the people underneath you do. You don't have a comprehension. You're not informed, but you get to make all this money on the upside, but there's no downside.'

Indeed. Rubin and Citigroup epitomize the public policies and the corporate practices that brought the economy to the brink of a new depression.

As Bill Clinton's Treasury Secretary, Rubin championed financial deregulation and the financialization of the economy as manufacturing was hollowed out. Among other things he helped keep derivatives from being regulated and encouraged the creation of 'too big to fail' institutions such as Citi. Rubin led the battle to dismantle Glass-Steagall, so Citi and its giant siblings could gamble in investment banking, while also doing commercial banking and insurance. An alum of Goldman Sachs, Rubin was fine with big compensation for executives, even if their leadership wrecked the bank (Prince walked away with $120 million). Funny how Rubin was offered the lucrative Citi position after he left such 'government service.'

So what does this tell us about health care? As we noted before, while Robert Rubin is no longer on the board of Citigroup, he has been a member of the Harvard Corporation since 2001. The Corporation is ultimately responsible for the US' oldest and most prestigious university, its equally prestigious medical school and teaching hospitals. Yet under Rubin's stewardship, Harvard's endowment has fallen a prodigious amount, and Harvard and its Partners Healthcare hospital system have faced charges of conflicts of interest and various sweetheart deals. Perhaps this is to be expected when the ultimate steward may be a "very well paid boob."

While Rubin's impressive resume and wealth in 2001 may have provided a rationale for his appointment to the Corporation, what would be the rationale for his continuing service?

As we have pointed out, as the world economy was driven to near ruin by "masters of the universe," some of the same also became leaders of academia and academic medicine in their spare time. Maybe this made sense 10 or 20 years ago, but why does it still make sense? On the other hand, now that we understand how bad the leadership of finance really was, it is a little easier to understand why the leadership of health care has become so bad.

Pfizer Settles One Lawsuit, Loses Another, Pays its CEO $13.7 Million

It's deja vu all over again for Pfizer Inc, the world's largest pharmaceutical company.

Settlement of Suit Alleging Neurontin Risks Concealed

Pfizer has kept busy in court defending against charges that a company it acquired promoted Neurontin (gabapentin) for uses not approved by the US Food and Drug Administration (FDA), and not well supported by the evidence.  Most recently, it was convicted by a jury in California of being a racketeering influenced and corrupt organization (RICO) because of a long-term "racketeering conspiracy" involving Neurontin marketing (see post here). Now additionally, according to the Wall Street Journal,

Pfizer Inc. said it reached a settlement agreement in a wrongful-death lawsuit brought by a woman who claimed her husband's use of the antiseizure drug Neurontin caused him to commit suicide in 2002.

The suit was brought by Linda Shearer of Berkshire County, Mass., whose husband, Hartley Shearer, was prescribed Neurontin to control the effects of his paralysis. The suit alleged Pfizer promoted this use of the drug even though it wasn't approved by U.S. regulators. The suit alleged Pfizer knew the drug was associated with a risk of suicide, but failed to properly warn of the risk.

The new wrinkle here is that Pfizer did not defend a suit that alleged the company knew of a potentially fatal side-effect of the drug, but failed to disclose that risk.

Jury Awarded Damages for Treatment of Whistle-Blower

Meanwhile, the Hartford Courant reported:

A former Pfizer scientist who claims she has been paralyzed by a virus designed at the pharmaceutical company's laboratory in Groton was awarded $1.3 million by a federal jury in Hartford Thursday following a trial that raised questions about safety practices in the dynamic field of genetic engineering.

The amount of the settlement awarded to molecular biologist Becky McClain of Deep River will likely increase in coming days. After about day of deliberation, the jury also awarded McClain punitive damages, to be determined by U.S. District Judge Vanessa L. Bryant, and awarded fees to McClain's two Connecticut lawyers, Bruce E. Newman and Stephen J. Fitzgerald.

McClain claimed in her suit that she was inadvertently exposed through work by a former Pfizer colleague in 2002 or 2003, to an engineered form of the lentivirus, a virus similar to the one that can lead to acquired immune deficiency syndrome, or AIDS.


She further claimed that Pfizer wrongly fired her in 2005 for complaining about laboratory safety to the U.S. Occupational Safety and Health administration and to co-workers.

Ultimately, the jury was not permitted during the 12-day trial to hear argument supporting McClain's claim of a causal link between her disability and virus research done at her laboratory in Groton.

The jury based its verdict on evidence concerning McClain's two remaining claims: that her dismissal violated Connecticut's whistle blower law and McClain's free speech right. Her lawyers contended her complaint to federal safety regulators amounted to a whistle blower complaint and that her discussion of safety issues with fellow workers was free speech.

So, after being convicted by a jury of being a "racketeering influenced and corrupt organization," (RICO), and settling civil and criminal fraud charges for an unprecedented $2.3 billion (see post here), and after many other allegations, settlements, and convictions (look here),  Pfizer failed to defend one action, and lost another that argued Pfizer tried to hide information which put the company and/or its products in an unfavorable light.

In fact, Even Pfizer CEO Jeffrey Kindler could not put much of a spin on the company's recent record. As reported by Duff Wilson in the New York Times,

The world’s largest drug company, Pfizer, has handled mergers badly, invented too few drugs and left its reputation in disrepair after two criminal cases.

And that is the assessment of its own chief executive.

CEO's Multi-Million Dollar Compensation
But while all this was going on, the company did disclose (as mandated by the US Securities and Exchange Commission [SEC]) that CEO Kindler is continuing his acquisition of riches.  As reported by the AP (via USAToday).

The chief executive of drug giant Pfizer Inc., Jeffrey Kindler, received a 2009 compensation package valued by The Associated Press at $13.7 million, down 7.6% from 2008, as the board reduced the stock awards he received, citing economic pressures.

The world's biggest drugmaker paid Kindler, 54, a salary of $1.6 million, up just $25,000 from the year before. But his performance bonus was bumped up to $3.5 million from $3 million in 2008, according to a filing this week with the Securities and Exchange Commission.

Most of Kindler's compensation comes from long-term awards of stock options and restricted shares. The total fell 17% to $8.1 million in 2009, from $9.8 million, even though they were granted in late February, a month after Kindler announced plans to buy Wyeth for $68 billion, a sound strategy to counter Pfizer's looming revenue plunge.

Kindler's other compensation — a variety of perks — totaled $449,731. That included $190,725 for Kindler's use of corporate aircraft as required by Pfizer's board, $43,099 for use of a car, $7,690 for financial counseling and $1,217 for home security.

Even admitting that Kindler's compensation last year was slightly decreased from last year's not so small fortune, there still seems to be a huge disconnect between the company's ethical woes, legal settlements, and guilty pleas and its CEO's rewards. Once again, it seems that leaders of large health care organizations never face real accountability for their company's bad behavior. It almost goes without saying that in the two cases summarized above, no one who authorized, directed, or implemented the actions leading to the settlements or damages seems to have had any negative consequences.

So once more with feeling.... In the US, we have put much of our health care system in the hands of very large organizations, for-profit and not-for-profit, without holding these organizations and their leaders accountable for their actions. The results have been increasingly rich leaders who often behave like a new aristocracy, and repeated bad behavior by the organizations they lead.

Our latest effort at health care "reform" has continued to rely on large private organizations, while so far not adding to their or their leaders' accountability. In my humble opinion, if we really want to reform health care so as to improve quality, increase access, control costs, and support professionalism, we will have to make our new health care oligarchs accountable.

Postscript - Pay for Health Care Reform Lobbying?

By the way, a commentary in The [New London, CT] Day suggested an explanation for why Kindler was so richly paid last year:

It takes pages and pages of a company securities filing to explain and justify all the bells and whistles of Kindler's 'annual incentive award,' a complicated stew of stock options and deferred payments and plain old salary.

From all of this, Timothy P. Carney of the Washington Examiner found one juicy tidbit, which especially titillated industry bloggers.

It turns out Kindler's salary increase, from $1.57 million to $1.6 million, was based in part, the compensation committee suggested, on his success in making a deal with President Obama that protected the drug industry from some of the more onerous proposals of health care reform.

Praising Kindler as an effective lobbyist in, among other things, heading off legislation that would allow the importing of cheaper prescription drugs, the committee said: 'These efforts included constructive participation in the U.S. legislative process to advance Pfizer's goals of achieving a more rational operating environment.'

Or, he kept a finger in the dike against health care reform.

Indeed, a recent report by the Sunlight Foundation, a private nonprofit dedicated to more transparency in government, indicates Kindler's extensive role in negotiating a deal for the drug companies with the Obama administration and Senate Finance Committee Chairman Max Baucus.

It turns out Kindler's name turns up four times on last year's White House visitor logs.

The final deal Kindler helped craft promised $80 billion in cost cutting by the drug companies but blocked much more onerous reform measures for the industry, like lowering prescription drug prices through Medicare negotiations, re-importation of drugs from other countries with lower prices and quicker release of generics onto the market.

The cost-saving of such measures, if allowed to occur, could have been in the hundreds of billions of dollars, according to government analysis.

Kindler, as the pay committee says, did good.

Several of our fellow bloggers have suggested that an installment of the Public Broadcasting Service (PBS) program "Frontline" will show just how much of the recent US health care reform effort was the product of health care corporate CEOs (e.g., see this post on GoozNews, and this post on Managed Care Matters). We shall see once the program airs, but maybe Mr Kindler's salary was a good value for Pfizer, but a very bad one for the rest of the country.

Everybody's Doing It - Health Care Leaders Appeal to Common Practice

There were two examples in the recent news about how health care leaders employ logical fallacies to advance their positions.

Caritas Christi / Cerberus

We posted recently about the proposed takeover of the not-for-profit Caritas Christi hospital system by the Cerberus Capital Management private equity firm. We proposed skepticism about the idea. For-profit hospitals have not been shown to provide better, cheaper, or more accessible care than not-for-profit hospitals. There is reason to worry that a private-equity firm would put margin ahead of mission. The Boston Herald interviewed Dr Ralph de la Toree, the current CEO of Caritas Christi, who would continue to run the health system after the takeover. Asked about the role of Cerberus,

De la Torre dismissed concerns that Cerberus’ executives - and their investments - may not jibe with Caritas’ social justice mission.

Cerberus investor J. Ezra Merkin, for example, is facing civil fraud charges because of his ties to disgraced money manager Bernard Madoff. Besides its failed Chrysler investment, Cerberus has also invested in companies, such as gunmaker Remington Arms, that some Catholics may not support.

De la Torre admitted Cerberus has a diverse portfolio and said most boards of local nonprofits have members who have made their money through questionable means.

The last sentence is a good example of the appeal to common practice. Basically, the logical fallacy is that because many do it, doing it must be good.

Although we are often critical of the cronyism of boards of for-profit corporations and not-for profit organizations, even I would not go so far as to suggest that most boards include people who have made money unethically. Regardless of the prevalence of this pheonomenon, however, boards of health care organizations should be composed of people of integrity and honesty who support the mission of the organizations.

Professor Uwe Reinhardt

We recently posted about how prominent health economist and public health care intellectual Professor Uwe Reinhardt of Princeton University has failed to disclose conflicts of interest when opining about health policy. A follow-up interview of Reinhardt on SFGate.com included:

I invite you to look at the Wall Street Journal [reporters] and see their list of boards.

I have no idea whether Wall Street Journal reporters fail to disclose their memberships on boards of companies relevant to the subject of their reporting. We have frequently discussed conflicts of interest and how they can influence medical care, teaching and research, and health care research and policy. I agree that  such conflicts are frequent, and often go undisclosed. Again, however, Prof Reinhardt seemed to be using an appeal to common practice. Just because others have failed to disclose conflicts of interest does not make such failure right.

Interested readers may want to review the interviews of De La Torre and Reinhardt to see if they can find other logical fallacies.

Note that we have frequently quoted Dr Joe Collier, "people who have conflicts of interest often find giving clear advice (or opinions) particularly difficult."  [Collier J. The price of independence. Br Med J 2006; 332: 1447-9. Link here.] We have discussed examples of how conflicted people seem to easily resort to logical fallacies to defend their conflicts (e.g., see post here.)

I do not think it is too much to ask prominent health care leaders to use evidence and logic, not logical fallacies to make their arguments.

Those who do use logical fallacies are inviting even more skepticism about their arguments and the agenda behind them.

What Me Worry? - Leaders Prosper Despite Questions About Their Organizations' Ethics and Performance

There were two examples in the recent news about how the leaders of health care organizations seem to prosper no matter what questions are raised about their organizations' ethics or performance.

WellPoint

It seemed that anger over a rate increase by a subsidiary of the huge insurance company/ managed care organization WellPoint was one reason for the revival of efforts in the US to enact some sort of health care reform legislation.  In our comment on this controversy, we noted that questions about the ethics of WellPoint's actions have appeared again and again.  Wellpoint...

• settled a RICO (racketeer influenced corrupt organization) law-suit in California over its alleged systematic attempts to withhold payments from physicians (see post here).
• subsidiary New York Empire Blue Cross and Blue Shield misplaced a computer disc containing confidential information on 75,000 policy-holders (see story here).
• California Anthem Blue Cross subsidiary cancelled individual insurance policies after their owners made large claims (a practices sometimes called rescission).  The company was ordered to pay a million dollar fine in early 2007 for this (see post here).  A state agency charged that some of these cancellations by another WellPoint subsidiary were improper (see post here).  WellPoint was alleged to have pushed physicians to look for patients' medical problems that would allow rescission (see post here).  It turned out that California never collected the 2007 fine noted above, allegedly because the state agency feared that WellPoint had become too powerful to take on (see post here). But in 2008, WellPoint agreed to pay more fines for its rescission practices (see post here).  In 2009, WellPoint executives were defiant about their continued intention to make rescission in hearings before the US congress (see post here).
• California Blue Cross subsidiary allegedly attempted to get physicians to sign contracts whose confidentiality provisions would have prevented them from consulting lawyers about the contract (see post here).
• formerly acclaimed CFO was fired for unclear reasons, and then allegations from numerous women of what now might be called Tiger Woods-like activities surfaced (see post here).
• announced that its investment portfolio was hardly immune from the losses prevalent in late 2008 (see post here).
• was sanctioned by the US government in early 2009 for erroneously denying coverage to senior patients who subscribed to its Medicare drug plans (see post here).
• settled charges that it had used a questionable data-base (builty by Ingenix, a subsidiary of ostensible WellPoint competitor UnitedHealth) to determine fees paid to physicians for out-of-network care (see post here). 
• violated state law more than 700 times over a three-year period by failing to pay medical claims on time and misrepresenting policy provisions to customers, according to the California health insurance commissioner (see post here).

But a few days ago, according to the Indianapolis Star:

Large stock awards helped boost total compensation to top executives at WellPoint by 51 percent to 75 percent last year over 2008.

The big jumps in take-home pay are detailed in the Indianapolis health insurer's annual proxy report to shareholders filed Friday.

Angela Braly, who is chair of the board, president and chief executive, saw her 2009 total compensation rise 51 percent, to $13.1 million. That compares with $8.67 million in 2008 and $14.8 million in 2007.

Braly's salary of $1.14 million barely budged from 2008, but she earned a $6.2 million stock award, almost triple the award she got in 2008.

Total compensation to other top executives:

Wayne DeVeydt, chief financial officer, $7.25 million, up 75 percent from 2008.

Ken Goulet, executive vice president, $4.43 million, up 62 percent.

Dijuana Lewis, executive vice president, $4.46 million, up 64.5 percent.

So whatever top WellPoint executives are paid for, it is not insuring that the company avoids ethical questions about its conduct, or controls health care costs or mdoerates premiums, for that matter. 

Boston Scientific, and Zimmer Holdings

We just commented on the generous compensation given the new and former CEOs of Boston Scientific, despite a series of ethical questions about that company's conduct, culminating in a guilty plea by the company to charges that it concealed information about important and potentially dangerous defects in its products.

A few days ago, I found a reminder, buried in an article in the Minneapolis Star-Tribune about a dispute between Boston Scientific and St Jude Medical, that current Boston Scientific CEO Ray Elliott has a track record of collecting generous compensation despite ethical questions about the companies he has lead.

Elliott is certainly familiar with the potential ethical minefield surrounding the relationships between sales reps and doctors. He was CEO at orthopedic devicemaker Zimmer Holdings Inc., which paid (along with four other companies) $311 million in 2007 to settle a Department of Justice investigation into the consulting fees paid to doctors.

As we discussed back in 2007, Zimmer Holdings Inc was one of four medical device companies which submitted to deferred prosecution agreements in response to charges that the companies implemented criminal conspiracies to violate federal anti-kickback laws. We posted several times about one aspect of this settlement, the mandate that the companies make public the payments (often huge) to orthopedic surgeons, academic institutions, and medical associations. (See posts here, here, here, here, here.) At the time, I did not think to look into what happened to the leadership of these companies thereafter.

According to the 2008 proxy statement by Zimmer Holdings, Ray Elliott conveniently retired in 2007, just before the deferred prosecution agreement was announced. Since he had been President of Zimmer since 1997 and CEO since 2001, according to the 2007 proxy statement, he appeared to have been in the top leadership of the corporation during the time the actions were performed that resulted in the deferred prosecution agreement. Nonetheless, again according to the 2008 statement, for the part of 2007 during which he served as CEO, his total compensation was $7,987,158. For 2006, his total compensation was $11,998,121. In 2007, the present value of his two pension plans were $269,764 and $5,302,050. In 2007, he owned 1,235,859 shares of stock (now worth $72,952,757 at the current price of $59.03 /share), and had the right to acquire 1,169,987 more within 60 days.

And of course, as we posted earlier, Boston Scientific paid him over $30 million for working part of 2009.

So Mr Elliott prospered mightily from his leadership of ethically challenged Zimmer Holdings, and was then further rewarded by ethically challenged Boston Scientific.

Summary

We have commented again and again that while numerous health care organizations have been charged with unethical, and sometimes illegal behavior, the people who oversaw, directed, or implemented the behavior almost never have had to suffer any negative consequences.  Now we see that while some large health care organizations have been subject to penalties for unethical and illegal behavior, the leaders of these organizations have been compensated so well as to make them rich, rich beyond the dreams of most people.  So the problem is not merely that captaining an organization onto the ethical rocks costs one nothing, but that it can make one very rich.

Clearly we see examples of both profoundly perverse incentives and a complete lack of accountability and responsibility affecting the leadership of major health care organizations.  Is it any wonder that these organizations continue to act unethically, and that the costs of the goods and services they provide rise continuously?

If we truly want health care that is accessible, of high quality, at a fair price, and more importantly, if we want health care that is honest and focused on patients, we need to provide health care leaders with clear, rational incentives in these directions, and make them fully accountable for their actions, and the courses of their organizations under their leadership.

Who Guards the Guardians? - the Case of Boston Scientific

The fallout from the case of the faulty implantable cardiac defibrillators continues.  To summarize the story thus far,

We started posting about Boston Scientific's travails in 2005, starting with allegations that Guidant, which is now a Boston Scientific subsidiary, hid information about defects in the implantable cardiac defibrillators (ICDs) the company manufactured. As we noted in early 2005 here, Guidant executives allegedly knew that ICDs made from 2000-2002 were at risk for short-circuiting and failing, thus making them unable to deliver potentially life saving electrical shocks meant to prevent cardiac arrests, but the company only revealed the problem in 2005. By failing to notify physicians and the public, Guidant executives let expensive and profitable, but potentially useless devices to continue to be implanted, potentially increasing the risk of sudden death for the patients who received them. Then here we noted reports that Guidant continued to ship failure-prone devices even after it had designed and started to manufacture new ICDs that were supposed to be less likely to fail. By June, 2005 we posted that Guidant had recalled thousands of ICDs, including models that were previously not identified as likely to fail. Later that year, the case rated an article by Robert Steinbrook in the New England Journal of Medicine. Towards the end of 2005, we noted that Eliot Spitzer had sued Guidant for fraud.  At the end of the year, more information appeared, suggesting that Guidant knew the ICDs were flawed, but continued to sell them. Still more appeared early in 2006. Then the business media became interested in the bidding war between Johnson and Johnson and Boston Scientific for Guidant, provoking a bit more interest in the tale of the suppression of data about the flawed ICDs.

Then all was quiet until 2009, when Guidant, now a Boston Scientific subsidiary, pleaded guilty to two criminal misdemeanor charges that it failed to properly notify the FDA about problems with its ICDs (see post here). Later, the Guidant subsidiary of Boston Scientific settled charges that it gave doctors kickbacks as part of a "seeding study" to use its devices. At that time, it came to light that Boston Scientific had made another settlement, in 2007, of civil lawsuits alleging that the company hid problems with its products (see post here).

More details about this guilty plea have just been reported.  As noted by the Minneapolis Star-Tribune,

A federal judge on Monday delayed a decision on whether to accept a $296 million plea agreement between the U.S. Justice Department and Boston Scientific Corp.'s Guidant subsidiary, which was charged with concealing critical safety information involving some of its top-selling heart devices.

If approved, the criminal penalty would rank as the largest ever in medical technology for a company that violated the federal Food, Drug and Cosmetic Act. But lawyers representing victims implanted with the potentially faulty devices threw a wrench into what was expected to be a routine hearing by demanding a piece of the settlement.

It appears that this settlement would not do any specific good for patients who claim to have been harmed by being implanted with a device that the manufacturer knew at the time to be faulty.

Also, the Star-Tribune noted:

Boston Scientific bought Guidant Corp., whose cardiac rhythm division is based in Arden Hills, for $27 billion in 2006. Though troubled, the division that makes pacemakers and defibrillators reported $2.6 billion in sales last year and still employs 2,000 people locally.

Thus, the financial penalty to be paid by Boston Scientific only would amount to little over ten percent of the yearly sales generated by the division which failed to disclose the faulty devices.

Adding to the sense that Boston Scientific and its leadership will feel little pain from the "largest criminal penalty ever assessed against a medical device company" (see this AP report) was this op-ed in the Boston Globe. It summarized just how richly the former CEO of Boston Scientific, Jim Tobin, who presided over the acquisition of Guidant and thus became responsible for its ethical lapses, and the current CEO, Ray Elliott have been compensated, in contrast to this supposedly large penalty. Re Tobin:

Tobin came to Boston Scientific in 1999 with similar instructions to clean up somebody else’s mess. He had to close facilities, ward off competitors, and, yes, settle patent lawsuits even back then. His carrot: A million stock options, a big deal in those days.

Tobin did fix some problems, and he brought the company’s new drug-eluting stent to market. Boston Scientific shares climbed, and he made about $39 million on options over the years. But Tobin also collected problems, the ones now in Elliott’s lap, and Boston Scientific shares fell again.

So here’s what the board did in February last year: It awarded Tobin 2 million more stock options, just a few months before announcing his retirement.

Adjusting for a stock split, the second option grant is the same size as what he got upon arrival.

And re Elliott:

Elliott, the man named as CEO of Boston Scientific Corp. last summer, became one of the best-paid chief executives in America in 2009. Separate national surveys published in the past week by The Wall Street Journal and The New York Times, although incomplete, come up with just one or two large-company CEOs with compensation packages that could outdo Elliott’s $33.5 million payday.

And see also this Health Care Renewal post. 

TheBoston Globe editorialist asked "so what exactly was the point of the second award [to Tobin]?"  Perhaps this question should be directed to the Boston Scientific board who approved it, and also approved Elliott's outsize pay package. 

The current board includes two co-founders of the company and the current CEO, two retired politicians, a few others with whom I am not familiar, but also two academics who may be quite familiar to Health Care Renewal readers. 

Recalling that Boston Scientific tried to plead guilty to charges of "making false statements ... to the FDA," and "failing to promptly notify regulators," it is striking that both these academics have had issues with transparency and free speech.  We just posted about the repeated failure of Prof Uwe Reinhardt to acknowledge the conflict of interests generated by his numerous memberships in the boards of health care companies, including Boston Scientific, when writing about health policy issues.  We have previously posted about the the conflicts of Marye Anne Fox, the Chancellor of the University of California - San Diego and hence leader of its medical school and academic medical center.  Chancellor Fox has just been criticized by FIRE (the Foundation for Individual Rights in Education) for allowing the silencing of a student publication and television station which had published or broadcast opinions that apparently offended university leaders.

So who in this sorry tale will stand up for quality care of patients?  The US Department of Justice is to be commended for pursuing deception by a large medical device company, but apparently could not bring itself to request a punishment for unethical practices likely to even inconvenience those responsible for the bad behavior.  The previous and current company CEOs have become quite rich without having to stand up for honesty, or patient safety.  The board of directors who are supposed to take responsibility for the overall direction of the company seem to have been happy just to go along.

As I have said before, endlessly, 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.  Relatively small fines imposed on large corporations pain workers on the line and stockholders while sparing the richly paid top hired management and the boards that will not reign them in. 

Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. 

Mainstream Media "Discovers" Conflicts of Interest of Prominent Health Policy Pundit

The main-stream media, in this case the San Francisco Chronicle, just "discovered" an important case of a conflicted health policy pundit,

Uwe Reinhardt, a Princeton economic professor who often writes about health care for the New York Times' Economix blog, earns more than $500,000 a year working for a number of health care companies. He also holds more than $5 million worth of related stock.

Reinhardt's NYT bio does not mention these financial relationships.

As the NYTPicker points out, Reinhardt's various incomes break the New York Times rules, which ban anyone who writes for the paper from having any financial interest 'in a company, enterprise or industry that figures or is likely to figure in coverage that he or she provides, edits, packages or supervises regularly.'

We asked the New York Times for comment. They sent us this email:

'Professor Reinhardt is a leading expert on the economics of health care, and has provided valuable and independent insights in his blog posts. He has mentioned his service on corporate boards in the blog, but we are reviewing how to more fully describe his activities for readers of Economix.'

We also asked Reinhardt for comment. He is working on one for us and we will post it here as soon as possible.

Here's the breakdown of what he owns, according to NYTPicker:

* Reinhardt either earns an income or stock options from the five different private health care companies for which he sits on the board of directors/serves as a trustee.
* He has sat on the board of health care company, Amerigroup, since 2003. This tenure has resulted in Reinhardt's accumulation of 144,558 shares in the company and $226,531 in cash-and-stock compensation. These shares are currently valued around $4.8 million.
* Reinhardt also holds 75,625 shares of Boston Scientific (worth more than $500,000 in value) and earned $213,132 from the company in 2009. He has sat on the board of this medical device manufacturing company since 2005.
* Reinhardt serves as a trustee for H&Q Healthcare Investors and H&Q Life Science Investors. His 2008 income from the companies included $43,000 in income and between $1 and $10,000 worth of securities.
* He also made $2.3 million from the 2007, $5.1 billion sale of Triad Hospitals to Community Health Systems.

It only took four years for this to get into the main-stream media. The reason "discovered" is in quotes is that we have been writing about Reinhardt's conflicts of interests vis a vis his prominent opinions on health policy since 2006 on Health Care Renewal.

As I wrote in a comment on the original NYTPicker post, in 2006, we first wrote about a letter to the editor of the NY Times by Reinhardt dismissing a physician op-ed writer's concerns about what has gone wrong with health care.  Reinhardt's letter failed to disclose the board memberships he held at that time. In 2009, we wrote about how Reinhardt left out some crucial facts in his discussion in the Economix blog of how physicians are paid. That year we also wrote about how Reinhardt defended Ms Karen Ignagni, CEO of America's Health Insurance Plans (AHIP) in an interview quoted in a Washington Post article.

In neither case above did Reinhardt or the newspaper reveal his conflicts.

Note that Reinhardt is not the only case of a prominent health policy expert with undisclosed conflicts of interest. See this post for some examples we had found in 2006.

In fact, in my humble opinion, the public discourse about health care policy in general, and health care reform in particular has been seriously distorted by various commentators, pundits, and experts who have major conflicts of interest, usually in the form of important financial relationships with large health care organizations.  In many cases, these conflicts are not disclosed.  A related problem is the influence of various non-profit organizations that are heavily funded by those with vested interests, usually in selling particular health care products or services.  Such funding is also rarely disclosed. 

I further submit that this distortion has overwhelmingly been in favor of various aspects of the status quo that have been so profitable for the discussants, and their commercial sponsors.  This distortion has meant that certain important problems, especially those that we discuss on Health Care Renewal, are rarely even mentioned in the mainstream media, in journals on health care and services research and health policy, and in political discussion.  Try, for example, to find any discussion of the impact of ill-informed, self-interested, conflicted or corrupt leadership of prominent health care organizations on costs, access and quality, or on patient outcomes.  It is simply not done to discuss the shortcomings of leadership, maybe because it is this leadership who subsidizes many of the pundits, commentators and experts. 

At a minimum, participants in the health policy discussion, starting with the most prominent, should fully disclose all financial relationships that could constitute conflicts of interest. 

Meanwhile, those listening to the discussion should be extremely skeptical about the opinions expressed. 

Quis Custodiet Ipsos Custodes?

HAPPY TIMES AT NIMH

Two weeks ago I discussed a Commentary in JAMA by Dr. Thomas Insel, Director of the National Institute of Mental Health. Over on Danny Carlat’s blog, Dr. Insel took exception to my linking him with Charles Nemeroff, and appeared to be putting distance between himself and Dr. Nemeroff. So, I did some checking, and a correction to one of my statements is in order.

I had said, “ … that Insel appointed Nemeroff as an advisor soon after he (Insel) moved to NIMH.” That was my recollection. It turns out what I recalled was instead Insel showcasing Nemeroff in the NIMH Director’s 7th Annual Research Roundtable June 10, 2003, a few months after Insel moved from Emory University to NIMH. Let the record stand corrected.

At that gala meeting, held at the National Press Club in Washington, DC, Dr. Insel characterized Nemeroff as one of the “real stars of NIMH’s research community…” Nemeroff used the occasion to pimp GlaxoSmithKline’s drug paroxetine (Paxil), showing data on change in platelet stickiness after Paxil in patients with heart disease and depression. This highlighting of Paxil by Nemeroff focused on the surrogate outcome of platelet function, and contained no evidence that Paxil modified any important clinical endpoints. Nevertheless, Nemeroff speculated liberally about the place of antidepressant drugs in managing heart disease. This is the sort of stuff Insel described at the Roundtable as “ … an excellent sampling of the Institute’s exciting research endeavors.”

My general point two weeks ago was that Dr. Insel, the Director of an NIH Institute, downplayed the seriousness of the ethics issues surrounding the seven academic psychiatrists he mentioned in his Commentary in JAMA. Though he spoke in platitudes about the need for transparency, the spirit of transparency did not move him to disclose his own close ties with Dr. Nemeroff, who is one of the seven. Lest there be any remaining doubt about those ties, here is Dr. Nemeroff lauding Dr. Insel at the 201st meeting of the National Advisory Mental Health Council September 13, 2002 in the presence of the NIH Director, Elias Zerhouni, MD. From the Minutes: Dr. Charles Nemeroff, Reunette W. Harris Professor and Chair, Department of Psychiatry and Behavioral Sciences, Emory University School of Medicine, commended Dr. Zerhouni’s selection of Dr. Insel as the next NIMH Director and added that Dr. Insel is the epitome of courage defined as grace under pressure. Dr. Nemeroff added that Dr. Insel will leave his current position as a most beloved professor, a respected scientist, and a great person.

In the comments on Danny Carlat’s blog I called Dr. Insel’s objections to my linking him with Nemeroff disingenuous. I still think that. Dr. Insel and Dr. Nemeroff are closer than Insel now seems comfortable acknowledging. Their record of talking up each other is hard to ignore. The irregularities identified by Senator Grassley involving Nemeroff’s reporting to NIH, his conflict of interest, and his conflict of commitment occurred on Insel’s watch. Considering the appearance of cronyism in their relationship, is it even possible for Dr. Insel to investigate Dr. Nemeroff’s performance in areas like the Emory-GlaxoSmithKline-NIMH Collaborative Mood Disorders Initiative?

Bernard Carroll

My WSJ Letter to the Editor: "Concern About Medical Records Is Not Misplaced"

A Wall Street Journal letter to the editor I authored entitled "Concern About Medical Records Is Not Misplaced" was published today, April 3, 2010.

On Mar. 23, 2010 the WSJ had carried an Op-Ed entitled "Your Medical Records Aren't Secure" by patient privacy rights advocate Deborah Peel, MD, a psychiatrist and founder-leader of the organization Patient Privacy Rights. Dr. Peel's Op Ed can be read here.

My letter to the editor is in response to criticism of Dr. Peel's concerns. The criticism occured in a WSJ letter "Industry Rep Calls Patient Privacy 'Overblown' Worry" on Mar. 30, 2010 by Mary R. Grealy, president of the Healthcare Leadership Council, a "coalition" of chief executives from major healthcare companies and organizations. Ms. Grealy's letter can be read here.

In her letter, Ms. Grealy criticized Dr. Peel's concerns about medical record privacy. She opined that "Dr. Peel seeks to frighten people into believing electronic health records are more vulnerable than paper ones, which is not the case" and that "stymieing the necessary transfer of data contained in one diagnosis, one prescription or one lab test could mean the difference between life and death. That is a very high price to pay in order to address overblown privacy concerns."

My letter in response published today speaks for itself:

Concern About Medical Records Is Not Misplaced
Wall Street Journal
Letter to the Editor
April 3, 2010

In her letter of March 30, Mary Grealy, president of the Healthcare Leadership Council, implies that Dr. Deborah Peel is being alarmist and hysterical about fears of electronic medical records (EMR) privacy ("Your Medical Records Aren't Secure," op-ed. March 24). Ms. Grealy makes the fantastic assertion that EMRs are less vulnerable than paper ones. Nonsense.

I do not recall many news stories of trucks hauling away 10,000 or 100,000 paper charts for diffusion to identity thieves, but massive IT security breaches and computer thefts involving tens of thousands of records or more are increasingly common. As one example, your Feb. 18 article "Global Attack Snags Corporate, Personal Data," tells about how hackers in Europe and China broke into computers at more than 2,400 companies and government agencies over the last 18 months, as well as at 10 U.S. government agencies. [I'd written about this story at HC Renewal here - ed.] It is quite realistic to be concerned about how hospitals, generally an IT backwater, will fare.

Further, who's being hysterical? Ms. Grealy asserts that without the unrestricted flow of medical data for research, "one prescription or one lab test could mean the difference between life and death." This is classic fear-mongering.

EMRs remain an experimental technology of uncertain risks and benefits. EMR data, itself uncontrolled as entered into multiple vendors' disparate EMR systems by multiple personnel of varied medical backgrounds and research experience, under widely varied circumstances, make statistically meaningful EMR-based research quite difficult if not impossible.

The gold standard of medical research is the randomized controlled clinical trial (RCT), and the irrational exuberance over EMRs as somehow able to bypass or surpass the RCT is dollar sign-studded nonsense. Perhaps one day EMRs will be used to rigorously gather RCT-quality data, but not today. EMRs are not magic bullets.

I note from a bio that Ms. Grealy is neither a medical professional nor an IT/informatics professional:

Ms. Grealy has a bachelor degree from Michigan State University and a law degree from Duquesne University.

Somewhat concerning is the following:

Ms. Grealy has an extensive background in health care policy. She has led important initiatives on the uninsured, improving patient safety and quality, protecting the privacy of patient medical information and reforming the medical liability laws. She testifies frequently before Congress and federal regulatory agencies.

Along with other non-medical medical experts such as at the EPIC company who proffer authoritative statements at HHS meetings that physicians will be uncomfortable reporting EMR defects and EMR-related injuries to the FDA, someone needs to remind me why we need non-medical, non-IT, non-informatics "experts" as healthcare leaders and promoters of healthcare IT universal beneficence at all.

It is in my opinion injurious to have healthcare leaders who cannot count on their own personal expertise to partition fact from fiction in medical affairs, and who through lack of that expertise suffer impairment in judging the concerns, expertise and competence of others who are domain experts.

(I should also note that conflicts of interest can also cause people to make statements they know are false or misleading.)

-- SS

Does the Award for the Most Risible Statement Made by a Health IT Vendor Belong to EPIC?

It may, because I am hard pressed to find any statement that approaches this one in vacuousness.

Regarding reporting of healthcare IT problems and defects that might cause, or have caused, patient harm, the executive VP at EPIC stated at a HHS Health IT Policy Committee certification workgroup:

... The FDA might not be the best organization to help the ONC create an environment where people feel comfortable coming forward with incident reports, said Carl Dvorak, executive VP at EHR system provider Epic Systems and a workgroup member

Dvorak said he's also concerned that the FDA's QSR process wouldn't address problems people spoke about in recent workgroup testimony. "If the mission is to build a safer system, I don't know that the FDA can contribute toward that mission," he said.

To this I ask these questions:

1. Where, exactly, does Mr. Dvorak think clinicians and healthcare organizations report defects and problems with devices and drugs now? Consumer Reports? Good Housekeeping?

2. What is Mr. Dvorak's first hand experience with the FDA in terms of reporting on medical devices and medical device IT, and pharmaceuticals? Could that be the reason he "doesn't know" how the FDA can contribute to "the mission" of HIT medical device safety?

Perhaps Mr. Dvorak himself is uncomfortable reporting defects and problems with health IT medical devices to FDA as opposed to some new, amateur medical device safety organization [see note 1] friendly to the HIT industry or in their pockets, but clinicians won't be.

Either that, or this is one of the lamest attempt at FUD in computing history [see note 2].

A possibly real billboard from parts unknown about where to report shoddy HIT: FDA's MedWatch Hotline. (Hat tip to HisTALK blog.)

-- SS

Notes:

[1] See my post "Third-Party Reviews of Medical Devices Come Under Scrutiny at the FDA - Except Healthcare IT Medical Devices, Which Get Special Accommodation" for more on the issue of third-parties and amateurs performing device review.

[2] HIT personnel in my experience often seem to resort to a psyops strategy of trying to instill Fear, Uncertainty and Doubt in others to kill ideas they don't like (usually, ideas that would cause them to have to work harder), although it's usually done in a far more credible manner than in this example.

More Doubts About Private Equity Taking Over Not-for-Profit Hospital Systems

Last week, we posted about how buy-outs of not-for-profit hospital systems by private equity firms seemed to be a new fashion in health care.  Since then, new doubts have been raised about whether this is a good idea.

Detroit Medical Center, Vanguard Health, and the Blackstone Group

Letters to the Detroit Free Press raised concerns,

As a nonprofit corporation, DMC's mission is to provide quality health care to the community. Management is accountable to Detroit area citizens and health care consumers, not to profit-motivated investors.

As a private, for-profit corporation, its mission will be to provide profit for its shareholders. Management will be accountable to shareholders and will be rewarded in relation to the rate of return on their investments.

Also, the Free Press reported that a coalition of local not-for-profit organizations challenged the legality of the proposed sale,

The sale of the Detroit Medical Center to a for-profit Nashville company violates state law and raises issues about whether poor patients who depend on the DMC will be assured of care for years to come, three nonprofit Michigan organizations said today.

Marjorie Mitchell, executive director of Michigan Universal Health Care Network, said the organizations e-mailed today a three-page list of concerns about the sale to Michigan Attorney General Mike Cox.

Mitchell testified briefly today at the Detroit City Council about the issue and distributed the letter. The two other nonprofit organizations signing the letter were Metropolitan Organizing Strategy Enabling Strength, or Moses, an organization of community and religious leaders active on health issues, and Michigan Legal Services, a Detroit legal aid organization. The three groups called themselves the Coalition to Protect Detroit Health Care.

Citing a provision in state law, the letter said Michigan law is clear that nonprofit companies should not 'permit assets … to be used, conveyed or distributed for non-charitable purposes.'

'The mission of a for-profit is to serve the stockholders,' the letter to Cox said. The letter said it is the opinion of the three groups that the purchase by Vanguard of the DMC 'violates Michigan’s nonprofit corporation statute.'

The three organizations asked Cox to hold public meetings to answer questions about the impact of the proposed sale on the health of Detroiters, particularly uninsured people.

The groups also have questions about how the DMC’s $140-million charitable assets will be used as well as concerns that use of state Renaissance Zone money would benefit a for-profit company.

Caritas Christi Health Care and Cerberus Capital Management

Boston Globe news articles noted that Cerberus failed recently not only in its management of Chrysler, but of GMAC (now also bailed out by the US government), its management is secretive even for the opaque world of private equity, and it has no experience running "large medical systems." 
 
A letter by Dr Arnold Relman, distinguished former editor of the New England Journal of Medicine, warned,

Cerberus promises to keep the present hospital management, add much money beyond the purchase price toward the operation and improvement of the hospitals, maintain charity support, and not sell the system — for three years. After that, who knows? Cerberus follows its own interests, and it will take money out of the community, not contribute to it.

As a close observer of the for-profit hospital industry ever since its beginnings, I predict that Cerberus will sell to another business sooner or later, and the initial promises will be forgotten. That’s what happened at Framingham’s MetroWest Hospital.

Control over the kinds of medical services provided by the hospital would be lost. Unprofitable services such as pediatrics, obstetrics, and outpatient psychiatry would disappear. Business-owned hospitals will resist major reforms to control medical costs or reorganize a community’s medical services in the public interest.

Caritas Christi ran an advertisement in local papers that referred to Cerberus as its new "financial sponsor," suggesting that the company was going to give a still not-for-profit health care system a grant, quite different from what was really proposed, which was that Cerberus would become the owner of a formerly not for-profit health care system, thus rendering it into a privately held, for-profit system.  One wonders why the public relations people thought they needed to spin the deal thus.

Finally, the Boston Globe profiled current Caritas Christi CEO Dr Ralph de la Torre, who apparently negotiated a deal that would leave him "as chief executive of Caritas, while also putting him in charge of acquiring other hospitals for Cerberus." But the article raised questions about what sort of leader he would be. It characterized him as transformed "from doctor to dealmaker," who now "stands to win a much bigger payout." Worse, it suggested that winning, as evidenced by making more money than anyone else, rather than access to quality patient care, is his prime motivation.

He used to say, ‘It’s not about the money, but that’s one way people keep score.’

In addition, Dr De la Torre has now so transformed into a CEO that "he let his medical license lapse."

Summary

Let me note some people think that the notion that how much money one makes should be considered a "score," and that he who dies with the most money wins, was one of the central reasons for the global financial collapse. For example, Nancy Rapoport suggested some New Year's resolutions for corporate boards (in 2008!), including:

I will remind myself and my colleagues that the level of CEO compensation is not an indicator of the company’s performance and that the arms race towards excessively high executive compensation is not a winnable race. At the point when money becomes just a way of keeping score, compensation is probably too high.

Earlier in 2007, Michael Kinsley wrote presciently in Time about,

a development in the larger economy. For most people, the point of money is that you can buy things with it. But at the top, where people already can buy whatever they want, the purpose of money is keeping score: making sure that you don't slip down in the Forbes 400 list.

So, putting someone who believes that he must always make more money in order to keep "winning" in charge of a large health care system does not seem to be a recipe for better patient care or more access, but rather for ever-increasing executive compensation while making money becomes the overwhelming priority for the organization, completely eclipsing such quaint concepts as quality of care, reasonable costs, or adequate access.

Recent history has not shown that for-profit hospitals deliver cheaper, better, or more accessible care than not-for-profit institutions. While their presence has influenced not-for-profit hospitals to behave more like for-profit institutions, costs have risen inexorably while quality and access decline.  

Moreover, for-profit hospitals run by private equity (as opposed to publicly traded corporations) would likely to be even more opaque than they were when they were not-for-profit. Increasing opacity of health care would likely worsen, not improve our current problems.

Deals that turn not-for-profit hospital systems into privately held for-profit systems ought to be scrutinized ith extreme skepticism. The questions raised above about the currently proposed deals ought to be addressed, In addition, I would suggest that all such deals should be conditioned on a requirement that the taken-over hospitals, and their parent private equity companies have to disclose at least as much as both public for-profit health care corporations and not-for-profit health care organizations are required to disclose, e.g., their ownership, the make-up of their boards of directors, the compensation, in detail, of their most highly paid officers, employees, and board members, all conflicts of interest affecting their leaders, etc. By the way, maybe such disclosure should be required of all health care organizations above some reasonable minimum size. If private equity companies are unwilling to make such disclosures, maybe they should not be allowed to run health care organizations.