Johnson and Johnson Settles Suit Alleging Management Incompetence and Deception, Managers Continue to Prosper

Very quietly, pharmaceutical/ biotechnology/ medical device corporate giant Johnson & Johnson just settled another lawsuit. The most pithy version is by Ed Silverman on Pharmalot, although Reuters and Bloomberg published short accounts.

The New Settlement

Per Mr Silverman, the gist is:

The health care giant agreed to resolve the dispute brought over allegations that J&J management shirked their responsibilities and allowed a chain of events that resulted in congressional probes; lost market share, consumer confidence and revenue, and a consent decree with the FDA. In the lawsuit, a shareholder charged that J&J bungled the integration of the Pfizer consumer health acquisition, placed inexperienced execs in charges of its OTC unit and cut costs so drastically that quality control suffered.

The lawsuit, which was brought by Ronald Monk, alleged that the health care giant made misleading statements about its products before disclosing problems with the Fort Washington plant and another in Puerto Rico. He also maintained that J&J withheld material information before its decision three years ago to shut down the Fort Washington plant, where contamination led to the unpublicized recall of defective Motrin tablets in 2009.

In agreeing to the settlement, J&J refused to admit any wrongdoing

So let me review. The allegations in this case were all about problems with the management of Johnson and Johnson.  They included allegations that management was incompetent and deceptive.  The incompetence was in handling the core functions of the company, assuring that its drug products were pure and unadulterated.  The deception was of patients, the public, and the nominal owners of the company to whom management is supposed to report, and allegedly included an attempt to cover up concerns about the purity of its drug products.

The proposed settlement follows the current practice of allowing the defendant not to admit the allegations, leaving their truth unproven.  However, one wonders, given that the allegations are about the core responsibilities of management and were leveled by the company owners, why the management would not defend their honor more forthrightly.

The Company's Sorry Legal Record

Furthermore, this settlement also follows the current practice of being made without reference to any other seemingly relevant legal proceedings.  In fact, it is just the latest of a long string of settlements and other resolutions of legal actions, including guilty pleas, by Johnson and Johnson management.  As we summarized most recently here, these included:

- Convictions in two different states in 2010 for misleading marketing of Risperdal
- A guilty plea for misbranding Topamax in 2010
- Guilty pleas to bribery in Europe in 2011 by Johnson and Johnson's DePuy subsidiary
- A guilty plea for marketing Risperdal for unapproved uses in 2011 (see this link for all of the above)

- A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post here)
- In 2012, testimony in a trial of allegations of unethical marketing of the drug Risperdal (risperidone) by the Janssen subsidiary revealed a systemic, deceptive stealth marketing campaign that fostered suppression of research whose results were unfavorable to the company, ghostwriting, the use of key opinion leaders as marketers in the guise of academics and professionals, and intimidation of whistleblowers. After these revelations, the company abruptly settled the case (see post here).
-  Also in 2012,  Johnson & Johnson was fined $1.1 billion by a judge in Arkansas for deceiving patients and physicians again about Risperdal (look here).
-  Also in 2012, Johnson & Johnson announced it would pay $181 million to resolve claims of deceptive advertising again about Risperdal (see this post).

Even though the record includes a number of settlement in which management did not have to admit guilt, the company has made a surprising number of guilty pleas in just the last few years.  Despite all this evidence of poor, that is incompetent or unethical management, Johnson and Johnson managers have been getting very rich.

As we mentioned here, Mr William Weldon, the outgoing CEO on whose watch most of the misbehavior resulting in the legal actions above occurred, retired with a huge retirement package, after receiving extremely generous compensation prior to that.  The new CEO as of April, 2012,  Mr  Alex Gorsky, per the company's 2013 proxy statement, already owns more than 190,000 Johnson and Johnson shares,  and received $10,977,109  total compensation in 2012.  Mr Weldon received over $29 million in total compensation just for 2012, the year in which he retired.  Other top executives received from over $3.5 million to over $8 million. 

Summary

So why do the stockholders, the owners of Johnson and Johnson continue to pay so much to an executive team on whose watch so many bad things have happened?  Why did law enforcement authorities allow the company to continue to plead guilty or settle cases without imposing any negative consequences on these executives?  Maybe only the Shadow knows. Of course, the lack of any discussion beyond that on Health Care Renewal, that puts each new settlement or guilty plea in the context of the ones before, and juxtaposes them to the rewards of given to management, may not help. 

As we said the last time we addressed the contrast between Johnson and Johnson's sorry legal record and its voluminous payments to executives, we have noted again and again and again that many of largest and once proud health care organizations now have recent records of repeated, egregious ethical lapses. Not only have their leaders have nearly all avoided penalties, but they have become extremely rich while their companies have so misbehaved.

These leaders seem to have become like nobility, able to extract money from lesser folk, while remaining entirely unaccountable for bad results of their reigns. We can see from this case that health care organizations' leadership's nobility overlaps with the supposed "royalty" of the leaders of big financial firms, none of whom have gone to jail after the global financial collapse, great recession, and ongoing international financial disaster (look here). The current fashion of punishing behavior within health care organization with fines and agreements to behave better in the future appears to be more law enforcement theatre than serious deterrent.  As Massachusetts Governor Deval Patrick exhorted his fellow Democrats, I exhort state, federal (and international, for that  matter) law enforcement to "grow a backbone" and go after the people who were responsible for and most profited from the ongoing ethical debacle in health care.

As we have said before, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior.

More than Just a Conflict of Interest? - Should Rutgers University's Own Contract Research Organizations Report to the Board of Covance?

Transparency International's 2013 global survey showed that over 40% of Americans think the country's health care is corrupt (see this post).  Transparency International defines corruption as abuse of entrusted power for private gain.  It is likely that one reason many US citizens feel this way is that they have become aware of the web of conflicts of interest that now permeates health care.

The Institute of Medicine defined conflicts of interest in medicine as occurring "when an individual or institution has a secondary interest that creates a risk of undue influence on decisions or actions affecting a primary interest."  Since the primary interest of physicians is to provide good care that puts patients' interests first, and the primary interests of academic medicine are to provide education and research of quality and integrity, conflicts of interest affecting physicians or academic medical institutions increase the risk of abuse of the entrusted power defined by these primary interests.

The most striking conflicts may occur when one person simultaneously runs two different health care organizations whose missions and interests are at odds.  For example, we have been documenting since 2006 how some top leaders of academic medicine simultaneously sit on boards of directors of health care corporations.  Thus, for example, the dean of a prestigious medical school may sit on the board of a large pharmaceutical company.  That person is supposedly responsible both for the honest education of students, including unbiased education about the use of drugs, and for a company whose revenue depends on selling more drugs at higher prices.

Rutgers University President, Director of VWR International and Covance

Such conflicts attracted little public notice when we first blogged about them, but now occasionally attract more attention.  For example, the NorthJersey.com just reported on the conflicts affecting the President of Rutgers University, which includes two medical schools and many other academic health care components,

As he leads the transformation of the state’s flagship university into a medical research hub with national aspirations, Rutgers University President Robert Barchi is also collecting hundreds of thousands of dollars for privately advising two firms that do millions of dollars of business with Rutgers related to scientific research.

In particular,

both firms have a business relationship with Rutgers. Those relationships predate Barchi’s appointment. They could expand, however, with Rutgers’ recent merger with most of the University of Medicine and Dentistry of New Jersey.

Rutgers has paid VWR International, a publicly traded lab supply company, and its subsidiaries a total of $15 million since 2008, records show. It is on pace to pay the company $2 million this calendar year, even though a contract with the firm expired in 2012. A university spokesman said the deal was extended, but an official who handles public records requests said a copy of the extension was not on file. Covance Inc., a pharmaceutical research firm, has been paid about $100,000 by Rutgers since 2008. It supplies products and services used in biological research.

Those two companies paid Barchi a combined $317,000 in fees and stock awards last year to sit on each company’s board, part-time advisory positions he has held more than seven years. Barchi has also accumulated stock in both companies — in the case of Covance, worth the equivalent of $2.5 million as of Friday, according to corporate filings. The annual fees supplement Barchi’s annual pay at Rutgers, which is worth up to $747,000 after bonuses.

Dr Barchi argued that since he had disclosed these relationships to the university board of governors, it is all good,

'I disclosed my membership on the board fully during the search process, both on my résumé and in discussions with Rutgers board of governors members,' Barchi wrote in a statement issued in response to questions and an interview request submitted through a spokesman. 'Rutgers University recognizes the value of having its chief executives serve on corporate boards. ... Recognizing the potential for a conflict, however, since becoming president at Rutgers I have not been involved in any decisions at Rutgers involving' the companies.

Members of the university governing board did not seem too troubled either.

'It was fully disclosed,' said Gordon MacInnes, a member of the governing board. 'I don’t see any inherent conflict.'

However, NorthJersey.com found some people who thought there could be a real issue since the university has direct financial relationships with both companies on whose board Dr Barchi sits.

Cary Nelson, a past president of the American Association of University Professors who has written a dozen books on higher education policy and conflicts of interest, said Barchi’s arrangement 'is not an ambiguous case, unfortunately,' calling it a clear conflict.

There’s a danger of impropriety, Nelson said, even if Barchi never actively exerts influence on behalf of the companies he advises. For example, officials who make large buying decisions for the university may choose contracts with the companies to curry favor with the president or because they 'don’t want to make waves,' he said.

Nelson is the co-author of an extensive report for the professors’ association due out at the end of this year that will suggest university policies to avoid such problems.

'What we say is that no administrator should serve on a corporate board or have any kind of financial relationship with a company that does business with the university,' he said. 'That’s a fundamental principle that has to be honored.'

Public Notice

Unlike some cases we have previously discussed (for example, here and here), this one produced an immediate kerfuffle, if not an uproar.  The New York Times reported on it.  Already editorialists (e.g., here) and a few politicians (look here) have called for Dr Barchi to step down from his corporate board positions. For example, per again NorthJersey.com,

'This is a two-way financial arrangement that creates a textbook example of a conflict of interest,' said Senate Majority Leader Loretta Weinberg, a Teaneck Democrat, who called on him to resign from his advisory posts for the companies, VWR International and Covance Inc. 'The president of the university is on the payroll of companies that are paid millions of dollars by the school. Even if Mr. Barchi avoids direct involvement in business decisions between Rutgers and these firms, the appearance of a conflict could undermine his credibility at a key time in the evolution of the university.'

Some Additional Perspective

Dr Barchi's conflicts of interest have drawn considerable more coverage than similar conflicts of other academic health care leaders whom we have discussed in the past. Unlike these previous cases, they have also provoked upset, if not some outrage.

Yet there could be more outrage, because this case is actually worse than it has been so far publicly described.

First, the public discussion seems not to have taken into account the nature of Dr Barchi's responsibilities to VWR International and Covance.  He is not on advisory boards to these two companies, as implied by the initial NorthJersey.com report.  He is a member of both these companies' boards of directors.

As we noted in 2008,  the issue goes beyond just the often generous payments board service entails. The important consideration is that directors of public for-profit corporations have a duty to "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.]   (Many people would now argue that many current corporate directors function more like cronies of top management than representatives of the shareholders).

But the important message is the boards of directors are responsible for the governance and overall direction of the company.  For example, the 2013 Covance proxy statement includes, "The Board of Directors provides oversight of senior management in its operation of the Company."   The members of the board have a fiduciary duty to align with the companies' interests which goes beyond whatever loyalty their compensation from the company ought to inspire.  Thus, the extreme conflict between, for example, one person's roles as a university president responsible for education, including unbiased education of physicians about drugs,  and a director of a drug company ought to be obvious.

Dr Barchi, is not a director of a drug company, but the director of a contract research organization.  The description of Covance in the NorthJersey.com article above was incomplete.  In fact, the Covance web-site describes the company as "one of the world’s largest and most comprehensive drug development services companies."  In particular, Covance functions as a contract research organization (CRO).  Its work includes running clinical research for pharmaceutical and biotechnology companies, including "Early Patient Studies,Clinical Development (Phase II-III)."

As university president, Dr Barchi is simultaneously responsible for educating students about clinical research, and for the integrity of clinical research performed within the university.  More acutely, however, he actually is responsible for several contract research organizations that appear to be competing with Covance.

As more clinical research has been taken over by CROs, some academic institutions have decided to compete directly with CROs.  In particular, Rutgers University, in particular, seems to have its own CROs.  First, as proclaimed by its Biopharma Educational Initiative, "Rutgers Biomedical and Health Sciences is one of the largest health care research institutions in the US with our own (emerging) contract research organization."  The Rutgers Clinical Research Organization asserts "Rutgers CRO connects industry, patients and academic collaborators with the University's state-wide academic resources."  Meanwhile the Rutgers New Jersey Medical School Institute of Genomic Medicine states "the IGM functions as an academic contract research organization (CRO) dedicated to biomarker discovery and the clinical evaluation of biomarkers.".

Thus, not only does Dr Barchi's role in the governance of Covance seem to present a conflict with his role in upholding the integrity of research at Rutgers, but it could conceivably be anti-competitive.  While one may question whether university's should directly compete with CROs, as long as they do, it seems they ought not to be run by those responsible for the governance of the CROs with which they are ostensibly competing.

Summary

As the web of conflicts of interest that entangles health care becomes more visible, the risks of corruption that it generates become more obvious.  I hope as disclosure improves, public outrage about health care corruption will increase.   Ultimately, true health care reform requires more than disclosing conflicts of interest.

The IOM  report  on conflicts of interest suggested full disclosure of all payments that could be considered conflicts of interest, banning clinical research by conflicted individuals, prohibiting academic physicians from giving "drug talks" whose content was provided by industry, and developing methods to fund continuing medical education independent from industry.  This report, and its recommendations have gotten scant attention, maybe because they would threaten a status quo that enriches conflicted health professionals and the companies that create these conflicts.  However, in my humble opinion, implementing all the report's recommendations would only be a beginning down the road of restoring the integrity of clinical care, teaching, and research.

Hat tip to Prof Margaret Soltan on the University Diaries blog.

See also the comments by Dr Carl Elliott on the Fear and Loathing in Bioethics blog.  

ADDENDUM (24 July, 2013) - see additional comments here and here by Prof Margaret Soltan on the University Diaries blog. 

Kim Kardashian, Meet Electronic Medical Records

In yet another example of breach of medical record privacy (http://hcrenewal.blogspot.com/search/label/medical%20record%20privacy), Kim Kardashian's privacy on the birth of her daughter, as well as the privacy of more than a dozen other patients, was violated between June 18 and June 24:
 

Workers fired in privacy breach at L.A. hospital popular with stars

LOS ANGELES | Sat Jul 13, 2013

(Reuters) - Five medical workers have been fired over a patient data breach at Cedars-Sinai Medical Center, the Los Angeles facility said in a statement, while celebrity website TMZ reported on Saturday that the hacking effort targeted reality star Kim Kardashian.
Cedars-Sinai, a favorite destination for celebrities seeking medical care, said in the statement it has a "high standard for security" and "in this case that standard was violated."  [How do ordinary hospital workers, medical assistants, and even a volunteer as below violate a "high standard for security", I wonder? - ed.]

Kardashian, the star of the reality television show "Keeping Up With the Kardashians," gave birth on June 15 at Cedars-Sinai to daughter North West, whose father is Grammy-winning rap star Kanye West.

Cedars-Sinai officials declined to say whose privacy had been breached, but the hospital said it "informed the affected patients" and apologized to them.

The breach of 14 patient records occurred between June 18 and June 24, the hospital statement said.

TMZ reported that Kardashian checked out of Cedars-Sinai about a week after she gave birth and was contacted by the hospital and told she was one of the patients whose records were accessed.

TMZ, which cited unnamed sources, said Kardashian's family suspected a leak of information at Cedars-Sinai after media reports disclosed details Kardashian had not revealed to anyone.

Representatives for Kardashian did not return calls or emails seeking comment on Saturday.

The Cedars-Sinai statement said four of the workers who inappropriately logged onto the hospital's information system to access patient records were employees of local physicians with staff privileges at the hospital.

The other workers were a medical assistant employed by the Cedars-Sinai Medical Care Foundation and a student research assistant who was a volunteer, the hospital said. As a result of the privacy breach, the five medical workers with ties to Cedars-Sinai were fired and the volunteer barred from working there, it said.

Cedars-Sinai said that while it had no indication "any criminal acts were committed by the individuals" it was reaching out to law enforcement agencies in "an abundance of caution."

It looks like the "high standard for security" needs some work.

(A paper chart could have been sequestered, of course, not permitting its access by riff raff, but then there would not be all the tremendous advantages of today's commercial EHRs such as detailed at http://hcrenewal.blogspot.com/2013/07/rns-say-sutters-new-electronic-system.html.)

-- SS

RNs Say Sutter’s New Electronic System Causing Serious Disruptions to Safe Patient Care at East Bay Hospitals

Add the following from Sutter East Bay Hospitals to nurses' and physicians' complaints at Marin General Hospital (http://hcrenewal.blogspot.com/2013/05/marin-general-hospitals-nurses-are.html), Affinity Medical Center (http://hcrenewal.blogspot.com/2013/06/affinity-rns-call-for-halt-to-flawed.html), Contra Costa County (http://hcrenewal.blogspot.com/2012/08/contra-costas-45-million-computer.html), San Francisco Department of Public Health (http://hcrenewal.blogspot.com/2010/11/avatar-fails-no-not-cameron-movie-but.html), and others:

For Immediate Release 
July 11, 2013
Contact-  Charles Idelson, 510-273-2246

RNs Say Sutter’s New Electronic System Causing Serious Disruptions to Safe Patient Care at East Bay Hospitals

Introduction of a new electronic medical records system at Sutter corporation East Bay hospitals has produced multiple problems with safe care delivery that has put patients at risk, charged the California Nurses Association today.

Problems with technology are not unique to health care – pilots of the ill fated Asiana airline that tragically crashed at San Francisco International Airport July 6 told federal investigators that an automatic throttle failed to keep the jetliner at the proper speed for landing, the Los Angeles Times reported July 9.  [What is unique to healthcare IT is the complete lack of regulation - ed.]

In over 100 reports submitted by RNs at Alta Bates Summit Medical Center facilities in Berkeley and Oakland, nurses cited a variety of serious problems with the new system, known as Epic. The reports are in union forms RNs submit to management documenting assignments they believe to be unsafe.

Patient care concerns included computerized delays in timely administration of medications and contact with physicians, ability to properly monitor patients, and other delays in treatment.  Many noted that the excessive amount of time required to interact with the computer system, inputting and accessing data, sharply cuts down on time they can spend with patients with frequent complaints from patients about not seeing their RN.  [Note: patients are not given the opportunity for informed consent about the risks, nor opt-out of EHR use in their care - ed.]

"EPIC is a system that is so cumbersome to use for nurses and physicians, that we often feel as though we are caring for a computer, not a patient,” said Thorild Urdal, an RN at Alta Bates Summit’s hospital in Berkeley. “It delays care and treatment, the program is naturally counter-intuitive and it was clearly not designed in concert with nurses and physicians." [Clinicians end up caring for an "iPatient", as others have noted - ed.]

"The Epic program developed and implemented by Sutter is neither nurse or patient friendly,” said Alta Bates Summit Oakland RN Mike Hill. “Epic does not enhance my ability to chart instead it takes time away from the bedside and my patients and preventing me from providing the absolute best care that they and I expect from me as a nurse."

Sutter CEO Pat Fry last year told the San Francisco Business Times that Sutter will spend $1 billion on Epic, a system that has sparked controversy at several other hospitals, including a Contra Costa facility where several RNs cited serious medical errors in testimony to county supervisors last August.

At Alta Bates Summit specific incidents directly related to Epic problems included:

• A patient who had to be transferred to the intensive care unit due to delays in care caused by the computer.  [It's happenstance they did not have to be transferred to the morgue - ed.]
• A nurse who was not able to obtain needed blood for an emergent medical emergency.
• Insulin orders set erroneously by the software.
• Missed orders for lab tests for newborn babies and an inability for RNs to spend time teaching new mothers how to properly breast feed babies before patient discharge.
• Lab tests not done in a timely manner.
• Frequent short staffing caused by time RNs have to spend with the computers.
• Orders incorrectly entered by physicians requiring the RNs to track down the physician before tests can be done or medication ordered.
• Discrepancies between the Epic computers and the computers that dispense medications causing errors with medication labels and delays in administering medications.
• Patient information, including vital signs, missing in the computer software.
• An inability to accurately chart specific patient needs or conditions because of pre-determined responses by the computer software.
• Multiple problems with RN fatigue because of time required by the computers and an inability to take rest breaks as a result.
• Inadequate RN training and orientation.

These "incidents" are certainly capable of causing harms or fatalities.  One wonders if hospital executives are providing the usual refrain that these are just "glitches" (http://hcrenewal.blogspot.com/search/label/glitch) and that patient care has not been compromised (http://hcrenewal.blogspot.com/search/label/Patient%20care%20has%20not%20been%20compromised).

A bit more background follows:

... Hospitals nationally are spending tens of billions of dollars on technology systems, especially on electronic health records (EHR) programs for which they also receive federal financial incentives.

EHR programs are paraded as a panacea for reducing medical errors and cutting costs, but in life the promise is falling short in both areas.

A RAND corporation analysis earlier this year said visions of savings and improved efficiency in patient care have had what the New York Times called “mixed results, at best.”

The U.S. Food and Drug Administration has acknowledged getting hundreds of reports of problems involving health information technology including numerous patient injuries and deaths.

Some examples seen at hospitals across the country:

• At Marin General Hospital in Northern California, RNs called on the Marin Healthcare District board to delay implementation of their EHR system. "Orders are being inadvertently passed to the wrong patients. People have gotten meds when they've been allergic to them. This is dangerous," Marin RN Barbara Ryan said in comments reported by the Marin Independent Journal.
• In Chicago, the Chicago Tribune in 2011 reported on a patient death at Advocate Lutheran General hospital after an automated machine prepared an intravenous solution containing a massive overdose of sodium chloride — more than 60 times the amount ordered by a physician.
• At Affinity Medical Center RNs in Massillon, Oh. RNs in June raised multiple objections to the hurried introduction of an EHR system. Subsequently, they have cited medication errors, delays in care, problems with documentation, computers crashing, and other concerns.

I am simply the reporter here.

-- SS

A "Simply Outstanding," "Superb" Hospital CEO Cops a Plea to Two Felonies

In all the discussions of what is wrong with US health care, very rarely is the quality of the leadership of health care organizations questioned.  In fact, no major US health care organization seems to have leadership that is anything short of brilliant.  The amazing brilliance of these leaders serves as a rationale for the ever increasing compensation that they receive.  Yet while subordinates, friendly members of boards of trustees, and hard working public relations flacks may stress their leaders' wondrous qualities, there rarely is an opportunity to compare their proclamations with results.

A few small items in the New York media provide us one case study of how these proclamations may not square with reality.

Background

In 2005, the CEO of New York's renowned Hospital for Special Surgery announced his retirement.  In a hospital news release, we find these pronouncements about outgoing President and CEO John Reynolds,

HSS board Co-Chairman Aldo Papone said, 'John's guidance and devotion to the Hospital for Special Surgery these last two decades have been simply outstanding. Under his watch, the quality of care, fiscal health and scope of treatment for musculoskeletal disease at the hospital have reached the highest level in its history.  While we regret his decision, we can only offer a most grateful expression of thanks...'

Also, HSS board Co-Chairman Dean R. O'Hare said,

He is a superb leader and we appreciate his thoughtful approach to succession which is emblematic of his service to HSS.

I cannot find anything on the internet about Mr Reynolds' compensation prior to his retirement, but in 2006, after he took on the position of Co-CEO during the transition, a copy of the hospital's 2006 990 form filed with the US Internal Revenue service, (and still available here, note though that rather confusingly, the Hospital still files under its archaic original name, "The New York Society for the Relief of the Ruptured and Crippled,") showed that Mr Renynolds' total compensation was $1,310,603

The CEO as Crook

Nothing publicly appeared to challenge the notion that Mr Reynolds' leadership was less that "outstanding" and "superb" until a Bloomberg article in September, 2012,

.

John R. Reynolds, former chief executive officer of New York's Hospital for Special Surgery, was charged by federal prosecutors with taking $1.4 million in a decade-long illegal-kickback scheme.

Reynolds, 63, was arrested at his home in Massachusetts this morning, according to a statement from the office of U.S. Attorney Preet Bharara. An indictment unsealed today in Manhattan federal court charges Reynolds with racketeering and making false statements to the government. He faces as long as 25 years in prison if convicted.

Prosecutors claim that, from 1996 to 2007, Reynolds took money from at least two hospital vendors, a hospital employee and an unidentified health-care organization in the U.K.

Furthermore,

 The government claims Reynolds took a total of $420,000 in kickbacks from at least two hospital vendors, from 1996 to 2002, in exchange for steering hospital business to them. From 2000 to 2005, he extorted an additional $298,500 from a subordinate at the hospital after negotiating an annual bonus for the employee, according to the charges. Reynolds also received $670,000 for approving a clinical partnership between his hospital and the U.K. health-care organization, prosecutors claim.


Reynolds is also charged with lying in 2008 to an agent of the U.S. Department of Health and Human Services inspector general’s office.

'By allegedly exploiting his position at the helm of a world renowned hospital for his own personal gain, John Reynolds tarnished the hospital’s reputation and did a disservice to its employees,' Bharara said in the statement.

Not surprisingly,

 'Obviously, it was a shock to us,' said Deborah Sale, a hospital spokeswoman, referring to the charges.

Of course, in the US, people accused of crimes are assumed to be innocent until proven guilty.  So I am now writing about this case because yesterday Bloomberg published the follow up story,

The former chief executive officer of New York’s Hospital for Special Surgery, charged by federal prosecutors with taking $1.4 million in kickbacks, pleaded guilty to two felonies. 

John R. Reynolds, 64, today pleaded guilty to wire fraud and making false statements, admitting that he took payments from a hospital employee and lied to investigators about it.

He will be subject to a stiff fine, although less than what he was charged with extracting through his scheme, and may be imprisoned,

 Under a plea agreement with the government, Reynolds will forfeit $718,500. Both sides agreed that federal sentencing guidelines, which are advisory, call for him to serve 27 to 33 months in prison.

The story so far has also been covered briefly by two tabloids, the New York Post, and the Daily News.  To date, the Hospital for Special Surgery has not issued a news bulletin on this.

Summary

So yet another "outstanding," "superb" multimillion dollar CEO turned out to be something rather less, in  fact, to be a criminal.


We have frequently discussed how the leaders of large US health care organizations are often hailed as brilliant, and compensated hugely for their brilliance, but rarely publicly subject to any objective assessment of their performance.  In many cases, they seem unaccountable for leadership that may be ill-informed, hostile to the health care mission, or even criminal or corrupt.

 The good news is that this criminal was eventually caught.  The bad news is that it only happened 18 years after he began acting criminally, hardly an example of swift justice.  One wonders how many other brilliant health care leaders will years later turn out not to be so, and how many others' performance will never be publicly assessed.  

While we breathlessly await the rigorous prospective study that assesses public assessments of the leaders of large health care organizations against objective results, we are stuck with case studies as a means to do so.  This case study shows a particularly stark contrast between the public relations puffery and the sordid reality. 


Instead of "brilliant" leaders paid like royalty, we would do better with competently collegial leaders rewarded reasonably as part of a team all focused on the health care mission, which puts service to patients first.  As long as health care organizations appear to be a path to riches for their leaders, expect the people who want to lead them to be more interested in their own fortunes than patients' and the public's health.  As long as health care professionals, policy makers and the public assume that those who lead health care organizations are fully qualified, fairly paid, and always do what is right, expect the insiders to continue to run things for their own profit. 

The qualifications of those who would lead health care, how much they are paid, what they are doing and what the results of their work are ought to be publicly known and publicly discussed.  Health care professionals, policy makers, and the public should demand nothing less.  . 

43% Believe that US Health Care is Corrupt, 64% that Government is Run by a Few Big Interests, Media Shrug

We have noted  (most recently here),  that health care corruption, particularly its global nature and its presence in developed countries like the US, is a taboo topic and thus remains anechoic.  

Transparency International just released its yearly massive survey on corruption worldwide.  The results are not pretty for health care and related sectors world wide and in the US.  As expected, these results appear to be causing few echoes. 

Global Results

Some useful summary statements found in the written version of the report:

Governments are not thought to be doing enough to hold the corrupt to account.  The majority of people around the world believe that their government is ineffective at fighting corruption and corruption in their country is getting worse.

The democratic pillars of societies are viewed as the most corrupt.  Around the world, political parties, the driving force of democracies, are perceived to be the most corrupt institution.

Personal connections are seen as corrupting the public administration.  People surveyed regard corruption in their country as more than just paying bribes: almost two out of three people believe that personal contacts and relationships help to get things done in the public sector in their country.

Powerful groups rather than the public good are judged to be driving government action.  More than one in two people (54 per cent) think their government is largely, or entirely run by groups acting in their own interests rather than for the benefit of the citizens. 

The survey included questions about corruption in the health care sector.  Globally, respondents perceived it was a major problem.  On average, 17% said they or their family members had to pay bribes in connection with medical and health care.  The average perception of corruption in medicine and health care across all countries was 3.2, where 1 = not at all corrupt, and 5 = extremely corrupt.  (Scores for the media were 3.1, business sector, 3.3, education system, 3.1, public officials, 3.6, political parties, 3.8, and NGOs, 2.7)

US Results

While the US did not have the worst results, our numbers were not very good (see US specific results here). More than one-third (43%) of respondents thought that US health care is corrupt.  Large numbers of people also thought that related sectors were corrupt (53% thought business in general was corrupt, 34% education, 58% the media, 55% public officials, 61% the legislature, 78% political parties.)

For comparison, the proportions of people who thought the health care sector is corrupt were 24% in Canada, 28% in France, 48% in Germany, 47% in Japan, and 19% in the United Kingdom

Also, more than half (60%) of respondents said corruption in the US has increased over the last 2 years, almost two-thirds (64%) thought that the US government is run by a few big interests. 

Thus, this survey confirmed that health care corruption is a global problem, and that a large proportion of people in the US believe it is a major problem here. 

The Media Shrug


This would seem to be major news.  However, so far the Transparency International survey results have received little  media attention in the US.  Moreover, what attention they have received in the US makes corruption appear to be some other countries' problem.  .

Most of the US media reports avoided mentioning any results that relate directly to the country.  In particular, the New York Times, the Wall Street Journal, Fox News, CNN, NBC, and Reuters coverage said nothing about the US.  Businessweek provided reports from Malaysia and Russia that focused on those countries' results.  A brief report in the Los Angeles Times only noted a single US statistic, about the bribery rate, one area in which the US had relatively favorable results.  Only a lonely Forbes blogger alluded to the US results in slightly more detail,  (and then went on to summarize those from Brazil, Russia, India, and Mexico in detail).

In contrast, media reports from some other countries, like India, Ghana, and Israel, noted their own countries' poor results.

Summary

So once again we see how anechoic are the notions that health care corruption is a severe global problem, and that it affects all countries, including the most supposedly developed.  Of course, the unwillingness to discuss global health care corruption, health care corruption in the US, and the relationship of health care corruption in the US to corruption in other sectors may arise from the fear, as stated by one person interviewed in Charles Ferguson's documentary Inside Job, that discussion could lead to investigation, and investigation could "find the culprits".

On Health Care Renewal, we try to discuss global health care corruption,.  We were first inspired by the 2006 publication of Transparency International's Global Corruption Report which focused on health care, and documented how health care corruption is global, severe, and not restricted to the poorest countries  (see post here).

This blog focuses on the US, and we  now have in our archives some amazing stories that document various forms of health care corruption in the US, including numerous allegations of misbehavior by large health care organizations ending in legal settlements, and examples of outright fraud, bribery, kickbacks and other crimes. On the other hand, we have demonstrated again and again that bad  and corrupt behavior by large health care organizations is a taboo topic.  For example, we could find  very few significant efforts to discuss, teach about, or research ways to fight corruption, or to promote accountability, integrity, transparency, honesty and ethics by academic health care institutions. (See this post for how difficult it was to find academic institutions' initiatives to resist conflicts of interest.) One can count the conferences, meetings, symposia, and courses on such topics on one's fingers. When I last looked, I could count only a single course on fighting corruption at any US medical or public health school (at Boston University, by Prof Taryn Vian).

Of course, if we really want to reform health care, in the little time we may have before our health care bubble bursts, we will need to take strong action against health care corruption.  Such action will really disturb the insiders within large health care organizations who have gotten rich from their organizations' misbehavior, and thus taking such action will require some courage.

ADDENDUM (16 July, 2013) - See comments by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.

Another Attempt to Show the RUC Behind the Curtain

In 2007, readers of the Annals of Internal Medicine could read part of the solution to a great medical mystery.(1)  For years, health care costs in the US had been levitating faster than inflation, without producing any noticeable positive effect on patients.  Many possible reasons were proposed, but as the problem continued to worsen, none were proven.

Prices are High Because They are Fixed That Way

The article in the Annals, however, proposed one conceptually simple answer.

The prices of most physicians' services, at least most of those that involved procedures or operations for Medicare patients, were high because the US government set them that way. Although the notion that prices were high because they were fixed to be so high was simple, how the fixing was done, and how the fixing affected the rest of the health system was complex, mind numbingly complex.

Perhaps because of the complexity of its implementation, the simplicity of the concept has not seemingly reached the consciousness of most American health care professionals or policy makers, despite the publication of several scholarly articles on the subject,.efforts by humble bloggers such as yours truly, a major journalistic expose, and recent congressional hearings.  The lack of discussion of this issue seemed to be a prime example of what we have called the anechoic effect, that important causes of health care dysfunction whose discussion would discomfit those who are currently personally profiting from the current system rarely produce many public echoes.  (For a review of what is known to date about how the offputtingly named Resource Based Relative Value Scale Update Committee (RUC) works, and previous attempts to makes it central role in fixing what US physicians are paid public, see the Appendix.)

The Washington Monthly Pulls Back the Curtain

Now another attempt to pull back the curtain that hides the RUC was just made by the Washington Monthly.  A long, detailed, well-written article by Haley Sweetland Edwards went through the major points, and included some new discoveries.  She asserted:

The RUC is Well Hidden

[The RUC is] probably one of the most powerful committees in America that you’ve never heard of.

The RUC Fixes Prices

when a roomful of professionals from the same trade meet behind closed doors to agree on how much their services should be worth. It’s called price-fixing. 

The Government Enables the RUC to Fix Prices

 this kind of 'price-fixing' is not only perfectly legal, it’s sanctioned by the U.S. government. At the end of each of these meetings, RUC members vote anonymously on a list of 'recommended values,' which are then sent to the Centers for Medicare and Medicaid Services (CMS), the federal agency that runs those programs. For the last twenty-two years, the CMS has accepted about 90 percent of the RUC’s recommended values—essentially transferring the committee’s decisions directly into law.

The Government Fixed Prices are Endorsed by the Private Sector

 private insurance companies also use Medicare’s fee schedule as a baseline for negotiating prices with hospitals and other providers. 

The Price Fixing Drives Up Costs and the Use of Services

 So if the RUC inflates the base price Medicare pays for a specific procedure, that inflationary effect ripples up through the health care industry as a whole.

These Incentives Cripple Primary Care

 These manipulated prices are also a major reason why specialists are in oversupply in many parts of the country, while a worsening shortage of primary care providers threatens the whole health care delivery system. 

These Incentives Benefit Big Corporations, not just Medical Specialists

 the incentives are perfectly aligned: ordering that extra test means more money for a doctor’s practice or hospital, more money for the labs, and often more money for the device makers and drug companies, too. (Oh, and, by the way, the device makers and drug companies are, not incidentally, major funders of the medical specialty societies whose members vote on the RUC.)

[Art by Monte Wolverton for the Washington Monthly article]

What to Do and What Will Happen?

We previously wrote,

 Economists have beaten us over the head with idea that incentives matter.  The RUC seems to embody a corporatist approach to fixing prices for medical services to create perverse incentives for physicians to do more procedures, and do less conversing with and examining patients, examining the best clinical research evidence about their problems, and rigorously thinking about how best to help them.  More procedures at higher prices helps physicians who do procedures.  It may help even more the corporations that provide the devices and drugs whose use is necessitated by such procedures, and the hospitals who can charge a lot of money as sites for performance of procedures.  It may even help insurance companies by driving ever more money through the health care system, and thus allow rationalization for higher administrative expenses as a function of overall money flow.

Yet incentives favoring procedures over all else may lead to worse outcomes for patients, and more costs to patients and society.  If we do not figure out how to make incentives given to physicians more rational and fair, expect health care costs to continue to rise, while access and quality continue to suffer.

Ms Edwards ended her article with two specific suggestions:

take the process away from the control of the AMA and put it in the hands of a well-resourced group of experts under the auspices of the federal government. This might take the form of a panel of doctors employed by the government, or of an advisory committee of representatives of different medical societies but with greater representation of primary care doctors.

Or

 get Medicare out of the business of funding fee-for-service medicine. 

I can only hope that the latest Washington Monthly article, which was accompanied by an editorial and a short first-hand account of how difficult is the lot of the modern primary care physician, will succeed in increasing awareness of the RUC and its essential role in making the US health care system increasingly unworkable.  Of course, such awareness may disturb the many people who are making so much money within the current system.  But if we do nothing about the RUC, and about the ever expanding bubble of health care costs, that bubble will surely burst, and the results for patients' and the public's health will be devastating.

APPENDIX - Background on the RUC

 We have frequently posted, first here in 2007, and more recently here,  here, here, and here, about the little-known group that controls how the US Medicare system pays physicians, the RBRVS Update Committee, or RUC.

Since 1991, Medicare has set physicians' payments using the Resource Based Relative Value System (RBRVS), ostensibly based on a rational formula to tie physicians' pay to the time and effort they expend, and the resources they consume on particular patient care activities. Although the RBRVS was meant to level the payment playing field for cognitive services, including primary care vs procedures, over time it has had the opposite effect, as explained by Bodenheimer et al in a 1997 article in the Annals of Internal Medicine.(1) A system that pays a lot for procedures, but much less for diagnosing illnesses, forecasting prognoses, deciding on treatment, and understanding patients' values and preferences when procedures and devices are not involved, is likely to be very expensive, but not necessarily very good for patients.
 
As we wrote before, to update the system, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the RBRVS Update Committee. The RUC is a private committee of the AMA, touted as an "expert panel" that takes advantage of the organization's First Amendment rights to petition the government. Membership on the RUC is allotted to represent specialty societies, so that the vast majority of the members represent specialties that do procedures and focus on expensive, high-technology tests and treatments.
 
However, the identities of RUC members were opaque for a long time, and the proceedings of the group are secret.  As Goodson(2) noted, RUC "meetings are closed to outside observers except by invitation of the chair." Furthermore, he stated, "proceedings are proprietary and therefore not publicly available for review."
 
In fact, the fog surrounding the operations of the RUC seems to have affected many who write about it. We have posted (here, here, here, and here) about how previous publications about problems with incentives provided to physicians seemed to have avoided even mentioning the RUC. Up until 2010, after the US recent attempt at health care reform, the RUC seemed to remain the great unmentionable. Even the leading US medical journal seemed reluctant to even print its name.
 
That changed in October, 2010.  A combined effort by the Wall Street Journal, the Center for Public Integrity, and Kaiser Health News yielded two major articles about the RUC, here in the WSJ (also with two more spin-off articles), and here from the Center for Public Integrity (also reprinted by Kaiser Health News.) The articles covered the main points about the RUC: its de facto control over how physicians are paid, its "secretive" nature (quoting the WSJ article), how it appears to favor procedures over cognitive physician services, etc.
 
In 2011, after the "Replace the RUC" movement generated some more interest about this secretive group, and its complicated but obscure role in the health care system, the current RUC membership was finally revealed.  It was relatively easy for me to determine that many of the members had conflicts of interest (beyond their specialty or sub-specialty identity and their role in medical societies that might have institutional conflicts of interest, and leaders with conflicts of interest).  
 
Then that year a lawsuit was filed by a number of primary care physicians that contended that the RUC was functioning illegally as a de facto US government advisory panel.  It appeared that things might change.  However, it was not to be.  A judge dismissed the lawsuit in 2012, based on his contention that the law that set up the RBRVS system prevented any challenges through the legal system to the mechanism used to set payment rates.  The ruling did not address the legality of the relationship between the RUC and the federal government.  The eery quiet then resumed, only punctuated briefly in early 2013, when a Senate committee held hearings with no obvious effect.      

ADDENDUM (15 July, 2013) - see also comments by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.  

ADDENDUM (18 July, 2013) - see also comments by Yves Smith on the Naked Capitalism blog.

References
1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. (Link here.)
2. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. (Link here.)

More Perversity on Health IT Risks, and ... EHR Sense from Nurses on "Nurse Talk", a Syndicated Radio Show

As I mentioned on July 2 at this post, in a June 25, 2013 Bloomberg News article "Digital Health Records’ Risks Emerge as Deaths Blamed on Systems" by technology reporter Jordan Robertson an EHR-harms case in which I am (unfortunately) intimately involved as substitute plaintiff is mentioned: that of the death of my mother.

I'd previously written about EHR-related electronic encounters with truly perverse individuals at my Jan. 2010 post "More on Perversity in the Healthcare IT World: Is Meditech Employing Sockpuppets?" at http://hcrenewal.blogspot.com/2010/01/more-on-perversity-in-hit-world.html.

There were quite a few thoughtful comments in the reader comments of the June 25, 2013 Bloomberg article, but also the typical callous, incompetent and/or bizarre comments that an anonymous forum invites (really, semi-anonymous, as the website tracks IP's of commenters).  The anonymous comment below stood out from the rest as a worst-case example of perverse defense of health IT (it may have been removed by now):

Pharm Aid 1 week ago

I'm surprised at the poor quality of reporting in this article. 

First, Scot Silverstein has been on jihad against electronic medical records LONG before his dear mother passed away in 2011.  According to Silverstein's own website, he opposed EMRs back as far as 2009.

Second, the article fails to mention Silverstein's conflict of interest here - he works in this space.  Essentially, Silverstein contacts a vendor of EMRs, offers his "consulting" services.  This totally smacks of a shakedown to me.  If they don't hire him, he criticizes them and claims they are killing people.  Don't take my word for it, check out his website and blog.

Third, the number of medical errors from paper-based records is staggering.  According to a study from 7 years ago, a staggering number - 23% - of patients at one health system had medication errors attributed to illegible paper-based charts.  This is roughly consistent with other studies, including the epic IOM report on errors in medicine.

Let me point out the perversities.  I am assuming the comment was not simply deliberately false character assassination and that the writer believed what he/she was writing - which if not, would show the industry's cheerleaders in an even worse light than if the assumption is the poster believes what he/she wrote:

• No expression of sympathy or remorse at my mother's death, whatever the cause.

• Gross and almost humorously silly caricature of my "consulting" (which is as expert witness) and defamatory comments.

• Gross mischaracterization of this blog and my Drexel Univ. healthcare informatics teaching site at http://www.ischool.drexel.edu/faculty/ssilverstein/cases.

• A mysterious invocation of some unnamed article on paper records at one health system.   I note that N=1 for both the mysterious unnamed study and its subject institution, representing the absolute worst regarding drawing conclusions, especially conclusions that we need to spend hundreds of billions of healthcare dollars on what today is largely bad health IT (see definitions of good and bad health IT at the aforementioned Drexel site).

• An apparent mischaracterization of the "epic" 1999 IOM report "To Err is Human"on errors in medicine (http://www.iom.edu/~/media/Files/Report%20Files/1999/To-Err-is-Human/To%20Err%20is%20Human%201999%20%20report%20brief.pdf).  It's clear that many if not most medical errors have nothing whatsoever to do with documentation, either paper or electronic (I made that point at my Dec. 2010 post "Is health IT the solution to the wrong problem?" at http://hcrenewal.blogspot.com/2010/12/is-healthcare-it-solution-to-wrong.html).  From that 1999 IOM report's summary:

... Among the problems that commonly occur during the course of providing health care are adverse drug events and improper transfusions, surgical injuries and wrong-site surgery, suicides, restraint-related injuries or death, falls, burns, pressure ulcers, and mistaken patient identities.

•  As to "[my] claims that EHRs are [injuring and] killing people", I merely report what others find - that still others deliberately dismiss (e.g., as "anecdotal") - or ignore. Just the latest example is the ECRI Deep Dive study (http://hcrenewal.blogspot.com/2013/02/peering-underneath-icebergs-water-level.html).  171 health information technology-related problems voluntarily reported during a nine-week period to the ECRI Institute PSO from just 36 hospitals.  Eight of the incidents reported involved patient harm, and three may have contributed to patient deaths, said the institute.  Other examples appear at HC Renewal.

In summary, there is someone out there who reads Bloomberg and who either 1) supports health IT, but lacks empathy, lacks judgment, and lacks scientific and critical thinking skills or 2) is simply a confabulator and liar.

Perversity regarding health IT needs sunlight - lots of it.

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

Here's some of that sunlight in a talk program on "Nurse Talk", a nationally syndicated radio show by and for nurses.

Nurse Talk is heard on the air in major metropolitan areas on both the West and East Coasts, and worldwide on the Internet, and has partnerships with the largest groups of nurses in the country.

Listen to the July 3, 2013 program "RNs DeAnn McEwen and Michelle Mahon on Electronic Medical Records" at http://nursetalksite.com/2013/07/03/rns-deann-mcewen-and-michelle-mahon/.

-- SS

How's this for patient rights? Affinity Medical Center manager: file a safety complaint, and I'll plaster it to your head!

At my June 19, 2013 post "Affinity RNs Call for Halt to Flawed Electronic Medical Records System Scheduled to Go Live Friday" (http://hcrenewal.blogspot.com/2013/06/affinity-rns-call-for-halt-to-flawed.html) I noted what appeared to be an imperial hospital leadership recklessly and negligently ignoring their own nurses' concerns about safety of a new EHR system implementation.

Now there's this at IndeOnline.com:

"Judge orders Affinity to bargain with union" (http://www.indeonline.com/news/x1808710525/Judge-orders-Affinity-to-bargain-with-union?zc_p=1)

CANTON (OH) — July 2, 2013

A judge ruled Affinity Medical Center violated federal labor laws and ordered the hospital to bargain with the registered nurses’ union and reinstate a nurse fired for union activity.

Affinity says it will appeal the decision.

National Labor Relations Board Administrative Law Judge Arthur Amchan issued a 36-page ruling Monday based on a hearings held April 29 through May 5 in Cleveland.

The National Nurses Organizing Committee-Ohio, an affiliate of National Nurses United, filed several labor complaints against Affinity and its parent company, Community Health Systems. The complaints cited the hospital’s refusal to bargain with the union, which was certified last year.

... The judge ordered the hospital to reinstate Ann Wayt, an orthopedic nurse for 23 years, with back pay and restitution of benefit or pension losses, and withdraw efforts to have Wayt’s nursing license pulled by the Ohio State Board of Nursing. Wayt was fired in September and never had been disciplined before that month.

“I was confident that the truth would come out,” Wayt said in a statement. “The judge has spoken for me. I want to thank the community, the nurses at Affinity, and the nurses across the country for their support.”

The judge also ordered the hospital to stop firing, disciplining or otherwise discriminating against other registered nurses.

Mentioned in the article is this:

The judge also ruled that the hospital must end threats and other acts of retaliation against nurses who submit objection forms to the employer documenting assignments they believe are unsafe. The hospital also must stop denying access to the hospital of union representatives ... Two weeks ago, nurses filed an unfair labor practice charge with the NLRB after requesting that the hospital delay a launch of the new electronic health record system, citing inadequate training and short staffing.

The nurses began to file objection forms related to the EHR.

What really caught my eye was this:

... In his ruling, the judge found one Affinity manager violated labor laws by threatening to plaster the objection forms on the forehead of any employee who submitted one. That same manager also began scrutinizing patient charts more closely, stated how much she would enjoy disciplining a prominent union supporter and retaliated against employees by reducing the number of nurses in the intensive-care unit [to make others work harder, patient safety be damned, apparently - ed.], according to the ruling.

I dislike stating the obvious, but this manager, a clear bully, is a danger to patient safety and clinician esprit de corps, and needs - at best - sensitivity training, ethics education and perhaps a psychiatric exam.

-- SS

55 of Medtronic's Best Hospital Friends, Including HCA, Settle for $34 Million

The case of the over-marketing of Kyphon's kyphoplasty device (look here) just got more complicated, and now appears to have involved an amazing number of players.

The State of Play

 As reported by the AP (via the Washington Post),

 Fifty-five hospitals in 21 states have agreed to pay $34 million to the U.S. government to settle allegations that they used more expensive inpatient procedures rather than outpatient spinal surgeries to get bigger payments from Medicare, the U.S. Justice Department said Tuesday.

The settlement involves kyphoplasty procedures used to treat spinal fractures usually caused by osteoporosis. It can be done as an outpatient procedure, but he Justice Department said the hospitals performed the surgeries as inpatient procedures to increase Medicare billings.

The current media reports provided little detail about the allegations, but did note that this case has been litigated for a while,

 A similar settlement was reached last year, when 14 hospitals agreed to pay a settlement of more than $12 million. And in 2008, the Justice Department agreed to a $75 million settlement with Medtronic Inc.’s spine business. The government was investigating allegations that Kyphon, a company that had been acquired by Medtronic Spine in 2007, advised hospitals to do inpatient kyphoplasties to bulk up their Medicare payments.

The Players

Per the AP, there were quite a few

In the latest settlement, the largest payments are being made by Atrium Medical Center of Middletown, Ohio, which will pay $4.2 million; Mount Sinai Medical Center in Miami, $1.8 million; Altru Health System of Grand Forks, N.D., $1.5 million; Cedars Sinai Medical Center in Los Angeles, $1.5 million; Wayne Memorial Hospital in Goldsboro, N.C., $1.3 million; Trover Health System of Madisonville, Ky., $1.2 million; The Queen’s Medical Center in Honolulu, $1.1 million; and Des Peres Hospital in suburban St. Louis, $900,000.

Several multi-hospital organizations agreed to settlements, including:
—Twenty-three hospitals with HCA Inc. of Nashville, Tenn., paying a total of $7.1 million.
—Six hospitals with Lifepoint Hospitals Inc. of Brentwood, Tenn., $2.5 million.
—Five hospitals with Trinity Health of Livonia, Mich., $3.9 million.
—Four hospitals with Morton Plant Mease BayCare Health System of Clearwater, Fla., $2.4 million.
—Three hospitals with Baptist Memorial Hospital-Golden Triangle of North Columbus, Miss., $1.8 million.
—Two hospitals with Bayhealth Medical Center of Newark, Del., $1.1 million.

A Modern Healthcare report noted that the leadership of HCA, the hospital system with the largest liability, made it out to all be a misunderstanding,

Hospital executives say the allegations are prompted by  unclear Medicare rules on when spinal-surgery patients should be held overnight. And they note that even though the whistle-blowers and the government are targeting hospitals, the decision to admit patients is usually dictated by the treating physician.

'We are pleased to see new clarification of industry care standards, which help physicians make decisions regarding kyphoplasty patients,' HCA spokesman Ed Fishbough said in an e-mailed statement Tuesday. 'We are confident as a result that this issue has been resolved.'

However, the case appears to be more complicated than that.

What Really Happened, and Who Benefited?

In fact, we discussed the Medtronic settlement in 2008.  At that time, a New York Times article described the government's allegations about what went on this way,

A unit of Medtronic defrauded Medicare of hundreds of millions of dollars, according to a civil lawsuit that was unsealed Thursday and simultaneously settled with the Justice Department.

Two insiders had said Kyphon, which Medtronic acquired in 2007, improperly persuaded hospitals to keep people overnight for a simple outpatient procedure to repair small fissures of the spine. Medicare then reimbursed the hospitals much more generously than it otherwise would have for the procedure, which was developed as a noninvasive approach that could usually be done in about an hour.

By marketing its products this way, Kyphon was able to artificially drive up demand among hospitals, bolstering its revenue and driving up its stock price. Medtronic subsequently bought the company, its competitor, for $3.9 billion, greatly enriching Kyphon’s senior executives.

Furthermore,

 The scheme at Kyphon was based on Medicare’s practice of reimbursing hospitals more for complex inpatient back surgery than for outpatient care. The two whistle-blowers, Charles M. Bates and Craig Patrick, said Kyphon had deliberately urged doctors to admit patients overnight, knowing the admissions were unnecessary.

Hospitals saw the overnight admissions as a way to raise revenue, the two said, and bought Kyphon’s products, even though they were expensive, starting at $3,500 to repair one spinal fissure. The hospitals could recover the cost through the improper reimbursements for overnight stays.

Kyphon sold so much equipment this way that at one point it enjoyed a 90 percent profit margin, according to the two insiders, both of whom worked in sales positions.

The former employees said the scheme began in 1999, when Kyphon’s products first came to the market. Kyphon’s rapid sales growth and profitability eventually gave rise to a patent dispute with Medtronic, which was dropped when Medtronic acquired it. The acquisition richly rewarded Kyphon’s shareholders, particularly its top executives. The company said its top 15 executives stood to receive about $145 million by cashing in their options and restricted stock.

Note that at that time, Medtronic leadership, whose decision to purchase of Kyphon would end up so enriching Kyphon executives, seemingly had no worries,

A  spokeswoman for Medtronic, Marybeth Thorsgaard, said the company had known Kyphon was under investigation when it made the acquisition. She said it knew that Kyphon’s marketing strategy was being challenged, and took the risk of litigation into account. 'There were no surprises,' she said.

I can find no public record that any individual who authorized, directed, or implemented the arrangements above that lead to huge overcharges to Medicare, and huge revenues to Kyphon and the hospitals was subject to any negative consequences.  As noted above, it appears that the executives who lead Kyphon at the time it was acquired by Medtronic made substantial amounts of money apparently attributable to this scheme to allegedly "defraud Medicare of hundreds of millions of dollars" (as it was described above in the New York Times). 

Using the public record available on the internet, I tried to see how the top three Kyphon executives are doing now.  It appears they are not doing badly, and remain influential in health care.  According to its 2007 proxy statement, just before Kyphon was bought out, its CEO was Richard W Mott.  As best as I can tell, per Equilar, he currently runs a consulting firm (Walkabout Consulting LLC), and was previously chairman of PhotoThera, which just went out of business.  Kyphon's chief science officer was  Karen D Talmadge, PhD, who is now on the board of directors of the American Diabetes Association, and is also "Chair of the Board of Directors of Gynesonics, and serves on the Boards of Directors of Amplyx Pharmaceuticals, Velocity Pharmaceutical Development and Venous Health Systems."  Kyphon's chief operating officer was Arthur T Taylor, who is now on the board of directors of Providence Medical Technology.

The CEO of Medtronic at the time it bought out Kyphon, and the CEO of HCA at the time the arrangements began appear not to be doing badly either.  The CEO of Medtronic at the time it acquired Kyphon was Arthur D Collins Jr, who is now on the boards of directors of Boeing, Alcoa, and US Bancorp, also, according to his Boeing biography, he is a senior adviser to Oak Hill Capital Partners, and is on the Board of Overseers of the Wharton School.  The CEO of HCA at the time of its arrangement with Kyphon began was Dr Thomas Frist Jr, who is currently on the Forbes list of billionaires at number 262 in the world, with a total worth estimated at $4.3 billion.

Summary

In retrospect, this case allegedly involved arrangements between Kyphon, a device company, and multiple hospitals to increase the revenue of all parties by billing the US government for unnecessary hospitalizations occurring after the use of a device made by Kyphon.  The arrangements appeared to have been particularly lucrative for Kyphon's executives after a larger device company, Medtronic, chose to buy Kyphon. Medtronic ultimately paid a large fine and entered into a corporate integrity agreement nine years after the arrangements began.  Now fourteen years after the arrangements began, at least some of the hospitals involved have also paid fines.  The former Kyphon executives who benefited the most seemingly paid no penalties, nor seemingly did any managers of Medtronic or the hospitals who might have gotten larger compensation because of all the revenue that these arrangements generated.    

So initially, the big losers from this complex dance were the US government, and ultimately US tax payers.  Some patients may have also paid out of pocket for unnecessary services and thus lost money too.  Whether some patients suffered due to adverse effects of unneeded procedures was not clear.  Much later, Medtronic and some of the hospitals involved did pay big fines and thus lost some money.  However, it does not appear that they paid anything like what they made from the original scheme, and their payments were delayed for years.  However, the insiders who personally made a lot of money never apparently paid anything later.  So, this case appears to be a vivid example of how such insiders can walk away with piles of money from the misbehavior of their own corporations, while others pay the price.


Many of those of us of a certain age were brought up on myths that ultimately the good guys win and the bad guys lose.  We would all like to believe that the "arc of the moral universe ... bends toward justice."  History and this recent example suggest that it may not do so without our active intervention. 

In health care, as we have said many times (look here for examples), when bad behavior occurs within a large health care organization, rarely are the insiders who authorized or directed it, and who had the most to gain from the behavior ever made to suffer any negative consequences.  As long as health care leaders have such impunity, expect them to continue to personally profit from unethical behavior.  As a result, expect health care costs to continue to rise as quality and access get worse and worse.

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

Is ONC's definition of "Significant EHR Risk" when body bags start to accumulate on the steps of the Capitol?

In a June 25, 2013 Bloomberg News article "Digital Health Records’ Risks Emerge as Deaths Blamed on Systems" by technology reporter Jordan Robertson (http://go.bloomberg.com/tech-blog/author/jrobertson40/),  Mr. Robertson wrote:

... “So far, the evidence we have doesn’t suggest that health information technology is a significant factor in safety events,” said Jodi Daniel (http://www.healthit.gov/newsroom/jodi-daniel-jd-mph), director of ONC’s office of policy and planning. “That said, we’re very interested in understanding where there may be a correlation and how to mitigate risks that do occur.”

In my opinion this statement represents gross negligence by a government official.  Ms. Daniel is unarguably working for a government agency pushing this technology.   She makes the claim that "so far the evidence we have doesn't suggest significant risk" while surely being aware (or having the fiduciary responsibility to be aware) of the impediments to having such evidence.

From my March 2012 post "Doctors and EHRs: Reframing the 'Modernists v. Luddites' Canard to The Accurate 'Ardent Technophiles vs. Pragmatists' Reality" at http://hcrenewal.blogspot.com/2012/03/doctors-and-ehrs-reframing-modernists-v.html  (yes, this was more than a year ago):

... The Institute of Medicine of the National Academies noted this in their late 2011 study on EHR safety:

... While some studies suggest improvements in patient safety can be made, others have found no effect. Instances of health IT–associated harm have been reported. However, little published evidence could be found quantifying the magnitude of the risk.

Several reasons health IT–related safety data are lacking include the absence of measures and a central repository (or linkages among decentralized repositories) to collect, analyze, and act on information related to safety of this technology. Another impediment to gathering safety data is contractual barriers (e.g., nondisclosure, confidentiality clauses) that can prevent users from sharing information about health IT–related adverse events. These barriers limit users’ abilities to share knowledge of risk-prone user interfaces, for instance through screenshots and descriptions of potentially unsafe processes. In addition, some vendors include language in their sales contracts and escape responsibility for errors or defects in their software (i.e., “hold harmless clauses”). The committee believes these types of contractual restrictions limit transparency, which significantly contributes to the gaps in knowledge of health IT–related patient safety risks. These barriers to generating evidence pose unacceptable risks to safety.[IOM (Institute of Medicine). 2012. Health IT and Patient Safety: Building Safer Systems for Better Care (PDF). Washington, DC: The National Academies Press, pg. S-2.]

Also in the IOM report:

… “For example, the number of patients who receive the correct medication in hospitals increases when these hospitals implement well-planned, robust computerized prescribing mechanisms and use barcoding systems. But even in these instances, the ability to generalize the results across the health care system may be limited. For other products— including electronic health records, which are being employed with more and more frequency— some studies find improvements in patient safety, while other studies find no effect.

More worrisome, some case reports suggest that poorly designed health IT can create new hazards in the already complex delivery of care. Although the magnitude of the risk associated with health IT is not known, some examples illustrate the concerns. Dosing errors, failure to detect life-threatening illnesses, and delaying treatment due to poor human–computer interactions or loss of data have led to serious injury and death.”

I also noted that the 'impediments to generating evidence' effectively rise to the level of legalized censorship, as observed by Koppel and Kreda regarding gag and hold-harmless clauses in their JAMA article "Health Care Information Technology Vendors' Hold Harmless Clause: Implications for Patients and Clinicians", JAMA 2009;301(12):1276-1278. doi: 10.1001/jama.2009.398.

FDA had similar findings about impediments to knowledge of health IT risks, see my Aug. 2010 post "Internal FDA memorandum of Feb. 23, 2010 to Jeffrey Shuren on HIT risks. Smoking gun?" at http://hcrenewal.blogspot.com/2010/08/smoking-gun-internal-fda-memorandum-of.html.

I also note this from amednews.com's coverage of the ECRI Deep Dive Study (http://hcrenewal.blogspot.com/2013/02/peering-underneath-icebergs-water-level.html):

... In spring 2012, a surgeon tried to electronically access a patient’s radiology study in the operating room but the computer would show only a blue screen. The patient’s time under anesthesia was extended while OR staff struggled to get the display to function properly. That is just one example of 171 health information technology-related problems reported [voluntarily] during a nine-week period [from 36 hospitals] to the ECRI Institute PSO, a patient safety organization in Plymouth Meeting, Pa., that works with health systems and hospital associations in Kentucky, Michigan, Ohio, Tennessee and elsewhere to analyze and prevent adverse events. Eight of the incidents reported involved patient harm, and three may have contributed to patient deaths, said the institute’s 48-page report, first made privately available to the PSO’s members and partners in December 2012. The report, shared with American Medical News in February, highlights how the health IT systems meant to make care safer and more efficient can sometimes expose patients to harm.

One wonders if Ms. Daniels' definition of "significant" is when body bags start to accumulate on the steps of the Capitol.

I also note she is not a clinician but a JD/MPH.

I am increasingly of the opinion that non-clinicians need to be removed from positions of health IT leadership at regional and national levels.

In large part many just don't seem to have the experience, insights and perhaps ethics necessary to understand the implications of their decisions.

At the very least, such people who never made it to medical school or nursing school need to be kept on a very short leash by those who did.

-- SS