Teaching Would-be Health Care Leaders About Health Care: Why Is This News?

The Wall Street Journal just published a story on a big innovation in the business school curriculum:

David Song was in the middle of a two-year executive M.B.A. program at University of Chicago's Booth School of Business in February when he got the idea to create a course to help business people better understand the inner workings of medicine.

Dr. Song, chief of plastic surgery at the University of Chicago Medical Center, believes the course may help close the gap between such industries as pharmaceutical and biotech, and the medical community they serve.

'Why not help reveal how things run and how we make decisions, particularly in this time of immense overhaul to the system?' says Dr. Song, who began collaborating with one of his marketing professors, Sanjay Dhar, to put together the course, titled 'Understanding the New Breed of Healthcare Decision Makers'—a five-day $7,650 program slated for May.

The program is designed to give participants a look at the administrative workings of an academic medical center, including how doctors make decisions about the way to treat patients, and which devices and products they choose to purchase.

Booth, like other business schools, is struggling to keep up enrollment in executive education at a time when companies are pulling back on training budgets. Dr. Song's health-care program is the only new addition to the curriculum for the academic year, says Stephen LaCivita, associate dean of executive education.

The program is geared toward professionals who work in areas like pharmaceuticals, medical devices and financial services, who may have a limited understanding of the physicians, nurses and other clinicians who are their customers.

Some of the issues addressed in the seminars, which will be taught by medical and business faculty, include: how doctors and hospitals define value; how reimbursement strategies work; and how supply chain, purchasing decisions, patient flow and operations are managed.

And here is the course's big feature:

As an added bonus, on the second to last day students will change into scrubs and observe a surgery, make rounds with doctors and see how patients are prioritized in the emergency room. 'This is getting a glimpse of what it's like and how we make decisions,' says Dr. Song.

Earlier this year we noted a NY Times article which breathlessly promoted management jobs in health care, partially by implying that they were available to those who knew little to nothing about what health care actually entails, with, at most "a little studying up." This new article suggests how little "studying up" may actually be needed.  The fact that a five-day course to teach budding MBAs a little bit about health care is considered a newsworthy business education innovation by the Wall Street Journal certainly suggests that the prevailing business culture allows management of heatlh care organizations by people with almost no knowledge of or experience in actual health care.

We noted in August that the NY Times article had the whiff of a bubble about to burst.  Indeed, we just noted an article that listed some of the salient characteristics of the recently burst financial/ housing bubble, including "major organizations lead by the clueless."  For that post, we used examples of three leaders of huge financial firms that have now failed (that is, are bankrupt or bailed out) who did not understand the complex derivatives their firms were buying and selling.  In the earlier post, we noted examples of leaders of two big American automobile companies that have now similarly failed who seemed to know little about automobiles.  So here we have would-be leaders in pharmaceutical, medical device and other health care corporations "who may have a limited understanding of the physicians, nurses and other clinicians."

This reinforces my thesis that health care is now in a bubble that will soon burst.  It also suggests why health care in the US costs so much, out of proportion to the quality or access provided.  Even setting aside how the business culture in the last 20 years has put short-term revenue and personal enrichment ahead of everything else, why would we expect that health care leadership by people who know little about health care, and care less for its values, would be anything but disastrous?

The Door Revolves: Tufts Medical School Dean Goes Back to Merck

A little news item in the Newark Star-Ledger:

Merck announced the appointment of Michael Rosenblatt as executive vice president and chief medical officer.

The appointment, which was announced this morning by the company, is effective immediately.

Rosenblatt will be responsible for bringing greater focus to Merck’s global medical activities as well as shaping innovative medical strategies. He will report directly to CEO Richard Clark.

Rosenblatt has served as dean of Tufts University Medical School since 2003.

Earlier, he was senior vice president for research at Merck Sharp & Dohme Research Laboratories, where he co-led the worldwide development team for Fosamax, Merck’s treatment for osteoporosis.

A quick Google tour revealed that while he was Dean, Dr Rosenblatt also served as a Scientific Advisor to Boston Millenia Partners, a venture capital firm; a Founder and then Scientific Advisor to Nuvios, which now is known as Radius Pharmaceuticals;  an Advisor to Puretech Ventures, which specializes"in company creation and early-stage investment in novel therapeutics, medical devices, diagnostics, and research technologies"; and a Director of Shire, "one of the world’s leading specialty biopharmaceutical companies."

This is a reminder how fuzzy the line has become between medical academics and health care corporations.  Here is an example of someone who alternated his main employment between leadership posts in academic medicine and in the pharmaceutical industry, but while in academia maintained a string of part time commitments to a further variety of biotechnology and pharmaceutical companies, and related venture capital firms.  Given all these positions and financial relationships, who knows where his main allegiance was? 

I would hope that the Dean of  a medical school would be the primary steward of the academic and clinical missions.  But what kind of stewardship can one expect from someone who came from one lucrative position in the pharmaceutical industry, and was to go back to an even higher level position, and who worked for several biotechnology/ pharmaceutical firms, and venture capital firms on the side?

Hat-tip to Shearlings Got Plowed blog.

British Medical Journal Interviews Dr Aubrey Blumsohn

About a year after we started Health Care Renewal, in late 2005, we wrote multiple posts about the complex and unfortunate case of Dr Aubrey Blumsohn's attempts to keep a research project honest.  Our most recent summary of the case was here.  The case involved suppression and manipulation of research, ghost-writing, institutional conflicts of interest, and attempts to silence a whistle blower. It provides lessons about the downsides of letting commercial firms sponsor and hence control human research designed to evaluate the products or services they sell; and of academic medicine becoming dependent on research money from such firms for such research.

The case was just re-capped in some detail on the occaision of an interview of Dr Blumsohn published in the British Medical Journal, just available on-line yesterday.  [Cyer C. Aubrey Blumsohn: academic who took on industry.  Brit Med J 2009; 339:b5293.  Link here.]  Dr Blumsohn's final words in the interview were:

It’s hard to encourage anyone to speak out about poor practice in the current environment. This case sums up what has gone wrong with systems set in place to ensure safety and integrity in scientific medicine. It would help if regulators put as much effort into responding to serious critics and whistleblowers as they do producing glossy brochures and yet more guidance.

My hat is off to Dr Blumsohn for his determination to pursue this case, and to the British Medical Journal for getting it into the "main-stream" health care literature.

Hat-tip to PharmaGossip.

Web Petition: Transparency and Openness in Electronic Patient Records and Other Healthcare Information Technology Systems

I have created a new Web petition "Transparency and Openness in Electronic Patient Records and Other Healthcare Information Technology Systems."

It is at WEBPETITIONS.COM at this link: http://www.webpetitions.com/cgi-bin/print_petition.cgi?99504454

Aimed at clinicians, hospital governance personnel and other healthcare stakeholders including patients, the petition states:

We, the undersigned, believe in transparency, accuracy, and accountability in scientific research, especially in matters related to healthcare.

We believe contractual nondisclosure clauses [1] that prohibit or restrain unfettered disclosure and dissemination of information about healthcare information technology problems related to bugs, design defects, suboptimal user interfaces, other factors that can adversely affect care, and the adverse events and near accidents these problems cause, are unethical.

We believe that patients and clinicians have a right to knowledge of healthcare information technology problems and defects that can distract clinicians and/or reduce clinician effectiveness and productivity. We also believe that hospital governance personnel have the fiduciary responsibility as well as obligation under Joint Commission safety standards to protect patients, clinicians and others working within and for their organizations from the potential consequences of healthcare information technology problems [2].

We believe that only through transparency about healthcare information technology can medical ethics be maintained, the rights of patients to the best possible care be protected and medical science advanced.

Therefore, we call for such clauses to be refused by governance bodies, vendors of healthcare information technology to refrain from including such clauses in their contracts, and the U.S. Congress to prohibit nondisclosure clauses related to medical devices and healthcare information technology.

Furthermore, retaliatory actions against those who in good faith report such matters or incidents should be prohibited.

[1] Koppel R, Kreda D. Health Care Information Technology Vendors' "Hold Harmless" Clause: Implications for Patients and Clinicians, JAMA. 2009;301(12):1276-1278.

[2] Silverstein S. "Health Care Information Technology, Hospital Responsibilities, and Joint Commission Standards." Letter to the Editor, JAMA. 2009; 302: 382.

The signed petition will be sent to the U.S. Senate Finance Committee (currently investigating healthcare IT), the Secretary of HHS, the Director of AHRQ, the Director of the Office of the National Coordinator for Health IT, and the President of the Joint Commission.

Please sign at the WEBPETITIONS.COM link http://www.webpetitions.com/cgi-bin/print_petition.cgi?99504454, and spread the word.

-- SS

Addendum: as an example of the problems these nondisclosure clauses can create, see my post "We are unable to share documents relating to problematic EHR's as our contract with Cerner includes a confidentiality clause."

Tensions and Paradoxes in Electronic Patient Record Research: Critical Thinking on Health IT

In "2009 a Pivotal Year In Healthcare IT" I wrote that:

2009 is proving to be a pivotal year in healthcare IT. Recent authoritative articles and reports on health IT problems largely validate the issues presented at this blog and others focusing on health IT issues, and at my academic website on HIT difficulties started over a decade ago, in 1998, freely available to the industry.

I then listed some of those articles and reports.

2009 is not over, however, and it has yielded another article, a systematic literature review and somewhat novel analytical approach, that supports the observations of numerous independent-minded investigators that health IT is very, very much harder than it looks, and that irrational exuberance unsupported by robust evidence (but perhaps -- in my own opinion -- supported by the color of money) is the prevalent health IT driver today.

The new article is entitled "Tensions and Paradoxes in Electronic Patient Record Research: A Systematic Literature Review Using the Meta-narrative Method" by Greenhalgh, Potts, Wong, Bark and Swinglehurst at University College London. The article appeared in the Dec. 2009 Milbank Quarterly, a multidisciplinary journal of population health and health policy published for over eighty years. The study was based on findings from hundreds of previous studies from all over the world.

The article is summarized at the Oct. 14, 2009 Healthcare IT News item "Electronic health records not a panacea, researchers say." The summary includes these key points:

• Large-scale electronic health record projects promise much, but sometimes deliver little, according to a new study.
• Researchers said their findings have implications for President Barack Obama’s election promise to establish electronic health records for every American by 2014, and for other large-scale EHR initiatives around the world.
• EHRs are often depicted as the cornerstone of a modern healthcare, capable of making care better, safer and cheaper. Yet, clinicians and managers the world over struggle to implement EHRs.
• outside the world of the carefully-controlled trial, between 50 and 80 per cent of electronic health record projects fail – and the larger the project, the more likely it is to fail."

I have reviewed the full article, available free as of this writing at this link (PDF). I note the following. The authors observed that the HIT literature is heterogeneous and at times conflicting (e.g., about benefits, risks and implementation challenges of HIT), not least because it covers multiple research traditions with different underlying philosophical assumptions and methodological approaches.

The authors used a somewhat novel meta-narrative method of systematic review, and identified over 500 full-text sources. They used ‘conflicting’ findings to address higher-order questions about how the electronic patient record (EPR) and its implementation were differently conceptualized and studied by different communities of researchers.

They noted a number of "tensions" in relation to and among:

• the EPR itself - is it a mere data container or a work-altering and defining ‘itinerary’?; the EPR user; the organizational context of the EPR (‘the setting within which the EPR is implemented’ or ‘the EPR-in-use’); the process of change including the 'politics' that accompany IT-mediated change; and other factors.
  

In other words (mine), health IT tools are virtual clinical tools for use in complex medical/social environments that happen to reside on a computer, not computer applications that happen to be used by clinicians.

The authors found that (emphases mine):

... while secondary work (audit, research, billing) may be made more efficient by the EPR, primary clinical work may be made less efficient; that paper, far from being technologically obsolete, currently offers greater ecological flexibility than most forms of electronic record; and that smaller systems may sometimes be more efficient and effective than larger ones.

They concluded that

The tensions and paradoxes revealed in this study extend and challenge previous reviews and suggest that the evidence base for some EPR programs is more limited than is often assumed.

The relevance of that statement towards national HIT initiatives cannot be understated.

I am going to highlight some other key points in the paper:

... We previously developed the meta-narrative method as a way of systematically making sense of complex, heterogeneous and conflicting bodies of literature (Greenhalgh, Robert, Macfarlane, Bate, and Kyriakidou 2004). We recommend that those unfamiliar with this approach access our methodological paper (Greenhalgh, Robert, Macfarlane, Bate, Kyriakidou, and Peacock 2005) ...

... The meta-narrative should be thought of not as the unified voice of a community of scholars but as the unfolding of what they are currently disagreeing on ... In a synthesis phase, we compared and contrasted the different meta-narratives and exposed tensions and paradoxes; and we sought explanations for these in terms of how researchers had conceptualized the world and chosen to explore it. [See full paper for further details -ed.]

While some might consider such analytical methods "soft", unorthodox, and therefore not robust, I counter that traditional methods of analytics and validation in biomedicine right up to and including today's peer review, especially related to issues of power and profit, have come under suspicion of corporate manipulation and other forms of taint. While the methodology will surely be subject to criticism and debate, which I will follow, I welcome possibly disruptively innovative methods that are probably clear of such pecuniary influences.

We found a complex and heterogeneous literature characterized by diverse philosophical assumptions about the nature of reality (ontology), how that reality might be known (epistemology), and the preferred research approaches and study designs (methodology) ... Our exploratory reading identified a number of historical roots which informed later research on the EPR, including human-computer interaction (HCI), evidence-based medicine (EBM), symbolic interactionism and ethnomethodology, workplace redesign, safety-critical systems research, the social practice view of knowledge, complexity theory, and science and technology studies (previously known as philosophy of science).

This only underscores the true complexity at the intersection of IT and medicine, a complexity I've repeatedly written has been glossed over by (and indeed, due to often narrow and limited backgrounds, may not be comprehensible to) HIT industry pundits and operatives.

... The data suggested a significant difference in the likelihood of success between local ‘home grown’ EPR systems (developed in an ad hoc way by clinicians close to the operational detail of key work practices [such as in this personal example I often cite- ed.]), and ‘off the shelf’ systems (developed either as commercial products or as public-sector systems of choice).

In other words, local projects led by experts were far more likely to provide major benefits than the extant commercial and industrial models of "shrink wrapped" (and massively expensive) HIT.

Studies consistently showed that introducing the EPR in an organization or across organizations is a complex task. It requires a well-articulated vision and strategy, strong leadership, adequate resources, good project management, an enabling organizational culture, effective communication, and attention to human resource issues [e.g., appropriate talent management and organizational structures - ed.]. Even when these preconditions were present, success was not guaranteed...

In other words, hospitals, being generally in strained economic conditions and generally being an IT backwaters are highly risky environments for implementing health IT, which are still largely experimental technologies to start with.

Information systems (IS) research is a heterogeneous tradition that emerged in business schools to consider the role of technology in business and management ... But very few such studies have been published on the EPR, perhaps because of the complexity and unpredictability of healthcare work and the highly institutionalized nature of the healthcare sector ... We found only three empirical studies ... all of which demonstrated that model-based analyses of the determinants of EPR success left much of the observed variance unexplained.

In other words, as much is unknown about "doing HIT right" as is known and further cross disciplinary research is urgently needed.

...there are multiple and conflicting framings of the EPR by users (assumptions about it, expectations of it, versions of the problem to which it is seen as a solution), some of which are explained by deeply-held institutional values (e.g. what counts as ‘professionalism’ amongst doctors or what is seen as ‘good nursing care’); these contrasts partly explain the low adoption and slow spread of the EPR in many healthcare settings.

In other words, HIT is primarily about people, not technology and grandiose promises of cybernetic miracles.

... individuals, working collectively around common tasks in organizations, actively and explicitly shape both technologies and work routines in a way that is mutually adaptive ... It would appear that in relation to the EPR, this adaptation is not happening – or at least, not happening smoothly or unproblematically ... healthcare work is uniquely complex and dependent on the coordinated practice of multiple actors. Research to date has barely scratched the surface of what the introduction of the EPR means, at the level of fine-grained detail, for a healthcare organization and the staff and patients who practice and interact in that setting – and still less so when the EPR is part of a large-scale regional or national program.

In other words, HIT is still largely a social experiment, and we as a society really don't know what we're doing or what the outcomes are likely to be. It raises the issue of slowing down the current locomotive of national HIT diffusion in five years.

In ‘failed’ EPR projects, technical designers typically missed these subtleties and produced artefacts that fitted poorly with the situated nature of knowledge and the micro-detail of clinical work practices. Paper records, being flexible, portable and tolerant of ambiguity, support the complex work of clinical practice remarkably well. CSCW [computer supported cooperative work - ed.] studies have highlighted a telling paradox – that high-tech healthcare environments such as intensive care units often make extensive use of paper charts, white boards, sticky notes, and oral communication.

In other words, paper has its place in healthcare, always will, and promises of "the paperless hospital" or office are utopian and not pratical.

... technologies reflect the interests and values of those who produce them, hence power struggles between bosses and workers, clinicians and managers, men and women, and the state and the citizen are played out partly through the design and use (or, indeed, non-use) of technology (Zuboff 1988). The EPR may be a focal point around which disputes of professional jurisdiction are fought.

In other words, HIT projects are intensely political, especially with regard to medical affairs. (IMO management information systems IT personnel are far out of their league in attempting to lead such projects.)

The synthesis in part concludes:

Much of the literature covered in this review suggests, conversely, that (a) the EPR may be alternatively conceptualized as an ‘itinerary’, ‘organizer’ or ‘actor’ [in the latter concepts HIT is a medical device -- that should probably be regulated -- not a simple passive tool - ed.]; (b) seamless integration between different EPR systems is unlikely ever to happen because human work will always be needed to bridge the model-reality gap and re-contextualize knowledge for different uses [so much for dreams of 100% interoperability - ed.]; (c) whilst secondary work (audit, research, billing) may be made more efficient by the EPR, primary clinical work is often made less efficient; (d) the EPR may support, but it will not drive, changes in the social order of the workplace; (e) paper will not necessarily disappear as it offers a unique level of ecological flexibility (though workable paperless systems have been developed in one or two centres); and (f) smaller, more local EPR systems may often (though perhaps not always) be more efficient and effective than larger ones.

Each item on this list contradicts nearly every precept of the national HIT initiative now underway in this country, at the expense of tens of billions of dollars.

Two of the recommendations made by the authors are of special note:

... as a cross-cutting theme in all the above areas, the realpolitik of EPR projects within and between organizations and interest groups should be more explicitly explored ... Orlikowski and Yates have called for more research on the “messy, dynamic, contested, contingent, negotiated, improvised, heterogeneous, and multi-level character of ICTs in organizations” (page 132) (Orlikowski and Yates 2006).

We suggest that sponsors and publishers eschew sanitized accounts of successful projects and instead invite studies of the EPR in organizations that “tell it like it is” – perhaps using the critical fiction technique to ensure anonymity (Winter 1986).

This recommendation is particularly intriguing to me.

I am perhaps one of the few people in the HIT world to have undertaken that approach in the de-identified "tell it like it is" cases at my Drexel U. website "Common Examples of Health IT Failure" begun over ten years ago. (I've made the lead author aware of the site and of the new multi author book "HIT or Miss: Lessons Learned from Failed HIT Implementations" that takes the same approach, to her approval.)

... Finally, given the mismatch between what is known about the EPR in organizations and what many policymakers assume is known, there is also scope for research that addresses this mismatch ... The role of the systematic reviewer in this process is itself worth studying, since very little research on knowledge translation to date has addressed such turbulent waters.

Yet, our government (and that of the UK as well) feel confident that HIT is such a perfected technology, investment of tens of billions of dollars on a frenetic timeframe will create massive quality improvements and cost savings. This is perhaps the height of magical thinking and political hubris.

Finally, the authors identify what does NOT need be done:

This review has also identified some areas where more research does not appear to be needed ... [including] simplified experimental studies based on functionalist and determinist assumptions of the general format “what is the impact of technology X on outcome Y?” or variations thereof ... the circumstances in which they add value are more limited than is often assumed.

We [also] believe that surveys of attitudes of patients or staff towards ‘the EPR’ or ‘computerization’ which are not adequately contextualized have almost no enduring value.

I note that these are the types of studies that seem to commonly appear in the soft "throwaway" literature aimed at the hospital governance board, CIO and IT worker.

In conclusion, I believe this literature review supports the notion expressed in other studies and opinion pieces here and elsewhere that we really need to SLOW DOWN the current HIT stampede, largely promoted by the HIT industry lobby. We need to take the appropriate time to better understand how to "do HIT well" before plunging in as if we actually know what we're doing.

In the authors' own words:

"It is time for researchers and policymakers to move beyond simplistic, technology-push models [for HIT] and consider how to capture the messiness and unpredictability of the real world."

Indeed.

They report, you decide.

-- SS


Addendum: this paper led me to the massive, near-600 page report "The Impact of eHealth on the Quality & Safety of Healthcare", A Report for the NHS Connecting for Health Evaluation Programme, Car et al., Imperial College, London, March 2008. This report was unknown to me but also validates much of the work of those studying the problems, risks and downsides of HIT.

I will post on the report in the near future. It is available (warning - 7 Mb PDF) here. The executive summary is quite informative.

The $9.8 Million Dollar Man

We seem to have a new candidate for the award for best-paid CEO of a not-for-profit academic medical center, as reported in the New York Post,

Wall Streeters aren't the only ones raking in big bonuses during tough economic times.

Hospital presidents and CEOs also collect fat bonuses and 'incentive payments,' even as health-care systems cry poverty, claiming they struggle to break even against government cutbacks, tightwad insurers and skyrocketing costs.

While warning of layoffs and slashed patient services, many hospitals shower their top execs and department heads with bonuses and perks. They include housing allowances, chauffeurs, first-class air travel, tuition for their kids and country-club memberships.

Under new IRS rules, the extras are disclosed for the first time in recently filed 2008 tax records obtained by The Post.

The filings for the city's biggest and most prestigious private, tax-exempt hospitals show at least a dozen CEOs get compensation of $1 million and up. Some also cash in early on million-dollar pre-retirement payouts while on the job.

Dr. Herbert Pardes, who runs the New York-Presbyterian Hospital and its health-care system -- the city's largest private hospital network -- received a $1 million bonus in 2008 on top of his $1.67 million salary.

The hospital has a 'pay for performance' philosophy but says even though Pardes met his goals, his bonus was smaller than 2007's to 'reflect the current external environment.'

But Pardes' compensation totaled $9.8 million in 2008 because he vested in a retirement plan that will pay $6.8 million when he leaves in 2011. He also received a $93,500 housing allowance and the use of a car and driver.

The Post article also listed two other hospital CEOs who got over $4.5 million in compensation, and several other top executives at other hospitals who got substantial compensation despite the hospitals' financial distress or accusations of unethical behavior.  On the other hand, the CEO of the city's Health and Hospital Corporation, with a budget of $6.3 million, got only $291,000.

Note that Dr Pardes' total compensation was more than double the compensation for a Boston medical center CEO that I thought was so outlandish back in September, 2009.

So here is much more evidence about the continually inflating health care bubble.  Not only do executives of big, for-profit drug, device, biotechnology and health insurance companies make seven and eight figure salaries, now it appears executives of ostensibly not-for-profit, charitable organizations can also make this much. 

Is it possible that at least Dr Pardes' compensation was a fluke, related to a one-time retirement payment?

The answer appears to be negative.  The New York - Presbyterian Hospital's 2007 US Internal Revenue Service (IRS) form 990, which was organized somewhat differently and may have used somewhat different definitions than the 2008 form from which the Post reporters apprently got their information, showed Dr Pardes total compensation to be $4,736,824 plus a $1,433,761 contribution to employee benefit plans and deferred retirement plans in that year. In addition, in 2007, (apparently former) executive Vice President Michael A Berman, MD received $5,949,092 in compensation plus $31,830, current Executive Vice President and Chief Operating Officer Steven J Corwin MD received $2,671,747 plus $455,304, Senior Vice President and Chief Financial Officer and Treasurer Phillis RF Lantos received $2,481,044 plus $336,284, Senior Vice President and Chief Operating Officer Robert Kelly received $1,538,412 plus $271,641, Senior Vice President and Chief Operating Officer Cynthia N Sparer received $1,370,541 plus $307,259, Senior Vice President and Senior Legal Officer Maxine Fass Esq received $1,337,354 plus $257.06, Senior Vice President, Finance Dov Schwartzben received $1,314,960 plus $173,848, Senior Vice President and Chief Nursing Officer Wilhelmina Manzano received $1,218,966 plus $159,555.  In summary, in 2007, the medical center paid at least 10 current and former executives each substantially more than $1 million a year.

By my calculations, the medical center paid these ten executives over $26 million a year, approximately equal to 25% of the center's fund excess (e.g., profit equivalent), of slightly over$106 million.  These ten executives received nearly 1% of the entire 16,850 employee institution's budget.  Furthermore, note that in the medical center's 2007 expense statement, general and administrative expenses, over $675 million, made up about 24% of the center's total expenses. 

So it appears that gigantic compensation for New York - Presbyterian Hospital executives, which is outsize both in comparison to the Hospital's fund excess and total budget, is part of a long-term trend
The Post quoted Brian Conway of the Greater New York Hospital Association with this excuse:

There are thousands of 20-somethings on Wall Street making millions who don't have anywhere near the responsibilities or skills of New York hospital CEOs.

This fits in our catalog of logical fallacies.  It is an appeal to common practice.  Of course, the particular practice to which Mr Conway appealed is the exaggerated executive compensation in finance that many believe was a cause of the global financial melt-down, aka great recession.  One could also argue that not one Wall Street executive has the life and death responsibilities of the typical practicing primary care physician.  I doubt Mr Conway would try to argue that Dr Pardes' job requires 40 times the skill of full-time practicing primary care or cognitive physician.

Instead, executive compensation for hospital CEOs seems best described as Prof Mintzberg described compensation for finance CEOs, "All this compensation madness is not about markets or talents or incentives, but rather about insiders hijacking established institutions for their personal benefit."  As it did in finance, compensation madness is likely to keep the health care bubble inflating until it bursts, with the expected adverse consequences.  Meanwhile, I say again, if health care reformers really care about improving access and controlling costs, they will have to have the courage to confront the powerful and self-interested leaders who benefit so well from their previously mission-driven organizations. 

"Person No. 7," Also Known as the 83rd Richest Man in the World

This one nearly snuck by. 

A Settlement and Some Indictments

In May, 2009, we posted that international Swiss-based medical device manufacturer Synthes settled charges that it was paying surgeons who conducted clinical trials for the company with company stock, and in June, 2009, we posted that Synthes was indicted based on allegations that it had subjected patients to an experimental use of its Norian XR bone cement product on the spinal cord, a use not approved by the US Food and Drug Administration, and that its executives had lied to the FDA about these actions.  It was noteworthy that the indictment named but did not charge the then CEO of the company as "Person No. 7" who allegedly decided not to conduct clinical trials of Norian XR, but rather to have surgeons use it in a case series that was not identified as clinical research.  The company CEO at that time was a Mr Hansjorg Wyss, who is still chairman of the Synthes board, owner of 40% of Synthes stock, and the richest man in the Philadelphia area, worth $5.7 billion according to Forbes magazine, making him the 83rd richest man in the world in 2009, according to Forbes magazine.

Four Guilty Pleas

Here is what first escaped my attention.  In July, 2009, the Philadelphia Inquirer reported:

Two senior executives of a West Chester-based manufacturer of medical devices pleaded guilty yesterday in connection with illegal clinical trials of a bone cement on about 200 patients, three of whom died.

The company, Synthes USA Inc., did not tell the patients that they were participating in what amounted to human experimentation, according to a 97-count indictment filed June 16 by the U.S. Attorney's Office in Philadelphia.

Michael D. Huggins, 51, of West Chester, was president and chief operating officer of Synthes' spine division from late 1994 to January 2008.

John J. Walsh, 46, of Coatesville, has served as director of regulatory and clinical affairs in the same division since August 2003.

Before U.S. District Judge Laurence F. Stengel, each pleaded guilty to a single misdemeanor count of introducing adulterated medical devices into interstate commerce. They face $100,000 fines and a year in prison when they are sentenced Oct. 22.

Then, in August, 2009, Bloomberg reported:

Synthes Inc. official Richard Bohner pleaded guilty in Philadelphia to charges tied to illegal clinical trials of a bone cement that led to three deaths.

Bohner, Synthes’ vice president of operations, is the last of four executives to plead guilty to shipping misbranded Norian XR across state lines. He faces as long as one year in prison plus a $100,000 fine, according to documents made public today in federal court in Philadelphia.

Bohner and the other executives, Michael Huggins, John Walsh and Thomas Higgins, promoted the drug through the use of test markets aimed at persuading surgeons to publish the results of their surgeries, according to court documents.

Huggins and Walsh, who pleaded guilty July 20, will be sentenced on Oct. 22.

So that is four individual guilty pleas so far in this case. The pleas received only scant attention in the local media, and hence slipped by the technology I was using to scan the media at the time.

The Richest Man in Philadelphia

I got caught up when on 6 December, 2009, the Philadelphia Inquirer published a summary article focused on the "Person No. 7":

Wyss also is chairman of Synthes in West Chester, which faces 52 felony counts stemming from allegations that it illegally experimented on patients, three of whom died.

Synthes is fighting the charges, and a trial could be held next year. Four of its executives already have pleaded guilty to misdemeanor counts in the case and face sentencing hearings in January.

Federal prosecutors in Philadelphia did not name or charge Wyss, but their June indictment describes a "Person No. 7," who was a major shareholder and chief executive officer of the company when the alleged illegal conduct occurred, from 2001 through 2004. A Synthes representative confirmed that Wyss was CEO then.

In 2001, the U.S. attorney's indictment says, Person No. 7 decided the company should not pursue the costly and time-consuming clinical trials that the U.S. Food and Drug Administration demanded for the company's bone-cement product, Norian.

Instead, according to the indictment, Person No. 7 directed the company to 'get a few sites to perform 60 to 80 procedures and help them publish their clinical results' to help popularize Norian for a use not approved by the FDA.

The procedures involved injecting Norian into the spines of patients who had vertebral compression fractures, which are typically caused by osteoporosis. FDA officials had previously approved Norian for other uses, but they demanded trials for that type of surgery, fearing that the cement could perform differently in the spine.

Even after tests in pigs showed that Norian could leak from the spine and cause life-threatening blood clots, Synthes continued with surgeries on human patients, who were never told that the procedure was experimental.

Three of those patients died, but prosecutors do not know whether Norian played any role in their deaths, because the company and doctors did not immediately report all the fatalities to the FDA. The patients have not been identified.

Through a Synthes representative, Wyss initially agreed to be interviewed for this article, but later declined.

The Inquirer article seemed to try to balance the allegations about Wyss with his wealth and philanthropy:

Wyss grew up in Bern, Switzerland. His father sold mechanical calculators and liked to discuss world events, according to Harvard's Web site. Wyss trained as an engineer in Switzerland and soon began setting up Chrysler manufacturing plants worldwide. In 1965, he earned a master's degree at Harvard's business school.

'I didn't speak in class for the first five weeks,' he told a Harvard Web publication at the time of his gift. 'My classmates were all the crème de la crème, with button-down shirts I had never seen before.'

He worked for several large companies, but sold airplanes on the side. One of his buyers was a Swiss surgeon who founded Synthes. That connection eventually led Wyss to become president of the company's U.S. business in 1977.

Over time, he became a large shareholder and chief executive. He retired from that post in 2007, but he remains chairman.

Forbes Magazine in March estimated Wyss was worth $5.7 billion. His fortune has helped him pursue whatever he wants, including the rehabilitation of the Crooked Tree Golf Course in Tucson, Ariz., and the purchase of the 900-acre Halter Ranch & Vineyard in Paso Robles, Calif. The winery emphasizes organic growing methods and sells many wines, including one named Synthesis.

Wyss has given away large chunks of his fortune, mostly to organizations dedicated to his primary passions: science and the environment.

His $125 million donation to Harvard funded the Wyss Institute for Biologically Inspired Engineering....

Wyss also established two private foundations. The Wyss Foundation is dedicated to preserving land in the American West. Wyss went hiking there as a student and fell in love, according to Forbes.

The Wyss Foundation gave away about $13 million and had about $250 million in assets in 2007, according to tax filings.

Wyss also donates heavily from his personal funds. BusinessWeek estimated his total giving from all sources at $277 million from 2004 through 2008.

However, some of Wyss' philanthropy seems more designed to benefit his company:

Wyss' other foundation, the Hansjörg Wyss Foundation, had about $172 million in assets and gave away $4.9 million in 2007. It focuses mostly on education and training of surgeons, according to the AO Foundation, a Swiss research group with ties to Synthes and Wyss.

By funding research and training, Synthes has forged tight relationships with surgeons. The U.S. Attorney's Office alleges that the company paid for trips to educational seminars in San Diego and Charlotte, N.C., where surgeons learned to use Norian in the spine.

Marketing Over Research

This emphasis on education that actually seems to partake of company marketing is also displayed by Synthes itself.  Per the company's 2008 Annual Report, the company runs a "residency program,"

The Synthes Resident Program was originally released in the United States in 2007 by Synthes Trauma. It was first developed to train orthopaedic trauma surgical residents and consists of both online training modules and locally offered workshops.

In 2008, the Synthes Resident Program was expanded to a selection of European countries with modifications for the needs of specific areas and markets. Furthermore it is now also being offered by Synthes Spine and Synthes CM.

This program has achieved remarkable popularity, or should we say "market penetrance?"

The Synthes Resident Program has been well accepted in the U.S., with more than 90% of all U.S. orthopedic residents having utilized the program.

The company also offers an "Enhanced Surgeon Education Program," and support's the AO Foundation's educational activities.

On the other hand, the financial summary provided in the report suggests that research is not what the company emphasizes.  Its 2008 operating expenses included $943.3 million in sales and promotion, $349.4 million in general and administrative, and only $169.9 million in research and development, only 11.6% of total operating expenses.

And if you like the report's verbiage about education, you will also appreciate its full page section on "Integrity," which includes the header:

Corporate Citizenship. Acting with Integrity. Acting ethically and respectfully is a cornerstone of our business. At Synthes we are committed to responding to the challenges in our business by operating in accordance with the highest levels of professional and ethical standards in our industry. Simply put, we must always act with integrity.

It also boasts:

Our commitment to abide by the rules and regulations applies throughout Synthes, to all countries and to all employees, and to all our business partners.

Acting ethically is highly important for Synthes. Our actions create our
reputation. Our good reputation is an integral part of our Synthes brand,
and an essential element of our continued success.

And finally asserts:

Our effort to operate with the utmost integrity begins with the commitment of our Board of Directors and senior managers. [italics added for emphasis]  Our managers are role models for our employees, and lead our efforts to build and to promote a culture that encourages positive ethical conduct and that demonstrates commitment to compliance with the law.

Those four now admitted guilty top executives certainly were excellent role models. Even better was "Person No. 7," the current board chairman and former CEO.

Summary

So here we have all the elements: guilty pleas by top executives in connection with a human experiment whose nature was concealed from patients; allegations about but no charges against a fabulously wealthy company leader; a company that promotes what appears to be marketing in the guise of education; a tremendously profitable company which spends most of its money on marketing, not research; a company that boasts of its integrity and how its leaders are "role models," even as some have pleaded guilty to crimes; and despite the worldwide reach of the company and its products, no national coverage of any of this, the anechoic effect redux.

We have, not only in the US, but in other developed countries (for example, Switzerland, in which Synthes is based), and globally, health care based on marketing and hype, on deception and conflicts of interest, and on making a few privileged insiders fabulously wealthy.  Here is the essence of our health care dysfunction, and the inflating health care bubble.  When would be health care reformer stop arguing about insurance coverage, perhapds they can then pay some attention to these major reasons why health care is so expensive, inaccessible, and often does so little good for patients. 

PS - Earlier this year, we commented on the make-up of the Board of Trustees of the prestigious Hospital for Special Surgery in New York, which seemed split mainly among leaders of finance, including such troubled corporations that contributed to the global financial meltdown as Bank of America, AIG, Citigroup, and Wachovia, and orthopedic surgeons with ties to device makers.  One of the latter was Dr David Helfet, who listed his memberships on advisory boards for OHK Medical Devices Inc, Healthpoint Capital, and Orthobond Corp.  Just to add to the whiffs of lack of full disclosure surrounding this case, Dr Helfet still does not disclose on the hospital web-site that he is on the Board of Directors of Synthes.

Note (added 14 December, 2009) - Per comment below, the Vice President of Corporate Compliance and Internal Audit at the Hospital for Special Surgery claimed that an administrative error, not failure of disclosure by Dr Helfet, lead to the omission of the information about his membership on the Synthes board from the Hospital's web-site.

More Air Into the Health Care Bubble: the $30,000 a Month Cancer Drug

Over four years ago, we posted about the stratospheric prices of new drugs that seemed disproportionate to manufacturing and development costs on one hand, and the value of the drugs for patients on the other.  For example, back then we noted that thalidomide, a very old drug that notoriously was found to cause birth defects when it was given to preganant women, but that then showed promise as an anti-cancer drug, was being marketed in the US for $29 per capsule (approximately $25,000 a year), while a generic form sold in Brazil for $0.07 per capsule.

That was then, and this is now.  This week, the New York Times reported on a $30,000+  per month cancer drug. 

A newly approved chemotherapy drug will cost about $30,000 a month, a sign that the prices of cancer medicines are continuing to rise despite growing concern about health care costs.

The price of the new drug, called Folotyn, is at least triple that of other drugs that critics have said are too expensive for the benefits they offer to patients. The colon cancer drug Erbitux, for instance, costs $10,000 a month and the drug Avastin about $8,800 when used to treat lung cancer.

So what could be the rationale for this breathtaking price?

Drug Effectiveness

Could it be that the drug is extremely effective? Not according to the NY Times:

Folotyn has not yet shown an effect on longevity. In the clinical trial that led to approval of the drug, 27 percent of the 109 patients experienced a reduction in tumor size. The reductions lasted a median of 9.4 months.

But considering all the patients in the trial, only 12 percent had a reduction in tumor size that lasted for more than 14 weeks. The trial did not compare Folotyn to another drug or a placebo

A PubMed search revealed no sign that this trial had been publsiehd, and no publications reporting any controlled trials of this drug.

So at best, this drug at best may temporarily shrink tumors, although that assertion is based on evidence that has not yet been published or subject to peer-review. It does not seem that the tremendous price of the drug could be justified by tremendous benefits to patients.

Research, Development and Manufacturing

So, perhaps the drug was very difficult and expensive to create, manufacture and develop?  That does not seem to be the case, either.

Folotyn's generic name is pralatrexate. As the name suggests, it is a chemical compound very similar to the much older anti-cancer drug methotrexate. [See O'Connor OA. Pralatrexate: an emerging new agent with activity in T-cell lymphoma. Curr Opin Oncol 2006; 18: 591-597.]  It was first developed not by Allos Therapeutics, but by Memorial Sloan-Kettering Cancer Center, Southern Research Institute, and Stanford Research Institute.  The Allos Therapeutics 2008 annual report noted that the company's total research and development expenses for the drug from 1992 through 2008 were $26.8 million (so much for the urban myth that the average drug costs $1 billion to develop.)  Based on the estimate that the drug would cost roughly $30,000/ month from the NY Times, the company could recover all the development costs of this drug after 893 patient-months of use.

Allos Therapeutics does not actually make pralotrexate, but outsources its production, according to the company's .  The firm's total yearly manufacturing costs (for several experimental drugs as well as pralotrexate) in 2008 were $6.7 million.

So it does not seem that the tremendous price of the drug could be attributed to the costs of discovering, developing, or manufacturing it.

So where would the money go?

General and Administrative Costs, Executive and Board Compensation

Allos Therapeutics seems to spend a disproportionate amount of money on marketing, general and administrative costs.  According to the 2008 report, "marketing, general and administrative expenses include costs for pre-marketing activities, corporate development, executive administration, corporate offices and related infrastructure."  In 2008, these expenses were $23 million, in one year, almost as much as the company spent over 16 years to research and develop Folotyn.

Allos Therapeutics has enriched its corporate insiders.  According to the company's 2009 proxy statement, in 2008, CEO Paul L Berns received $2,091,600 in total compensation; Chief Commercial Officer James V Caruso received $1,259,700; and Chief Medical Officer Pablo J Cagnoni received $1,408,700.  The total compensation of the five highest paid executives of the company in 2008, $5,945,500, was over 10% of the entire company's budget, $53,639,000. 

Mr Berns, who has only been with the company since 2006, owned 994,606 shares or equivalent (at a price of $6.62 per share on 4 December, 2009, worth $6,584,292).  Mr Caruso owned 272,072 shares or equivalent,and Dr Cagnoni owned 386,245.   Although two board members, Stewart Hen and Jonathan S Leff seemed to be serving by virtue of their positions with Warburg Pincus & Co, whose Private Equity VIII LP owns over 29% of Allos Therapeutics stock, Mr Hen and Mr Leff received $120,700 and $119,400 to sit on the board.

These amounts should be considered in light of the fact that the company is comparatively tiny.  Its 2008 report disclosed that it only has 81 full-time employees, of whom fully 31 "are involved in marketing, corporate development, finance, administration, and operations."  The company has never made money.  Its 2008 report noted losses of over $20 million a year in the past five years, and a total loss of over $289 million.

So one wonders if the real reason pralatrexate was priced so high was to justify the millions that top company leaders have reaped from a company that lost money over the 16 years?

Summary

The NY Times reported that people outside of Allos were not pleased with the price of Folotyn:

Dr. Lee N. Newcomer, senior vice president for oncology at the big insurer UnitedHealthcare, called the price of Folotyn 'unconscionable.' He said that Folotyn alone would cost as much as UnitedHealthcare now typically spends in total to treat a lymphoma patient from diagnosis until death. That median expenditure now, he said, is $87,000 for a little over a year of treatments.

But Dr. Newcomer said insurers would be obligated to pay for Folotyn because there were no alternatives.

Furthermore,

'This drug is not a home run,' Dr. Brad S. Kahl, a lymphoma specialist at the University of Wisconsin, said during a meeting of an advisory committee to the F.D.A. on Sept. 2. 'It’s not even a double. It’s a single.'

Saying that even a single was helpful, Dr. Kahl was part of a majority on the panel that recommended approval of the drug, 10 to 4.

But after recently learning what Allos planned to charge for Folotyn, Dr. Kahl said he was 'disappointed' by the 'excessive' price.

'It dampens my enthusiasm for using that drug,' he said. 'It creates these huge ethical quandaries about trying a drug that has a modest benefit for the average patient at enormous expense.'

So the health care bubble continues to inflate.  I suggest that the case of the ridiculous pricing of Folotyn shows how this bubble is in part generated by "compensation madness," not only "insiders hijacking established institutions for their personal benefit," but also insiders able to become rich at the expense of even tiny, money-losing corporations.   But the bubble is also generated by the amazing acquiescence of those who pay bills at all levels, form the individuals who ultimately fund health care through salary dollars not earned, health insurance premiums, co-pays and the like, and tax payments, through the health care insurers and government agencies who did not balk at paying $25,000 a year for thalidomide in 2005, and seemingly will not balk at paying $30,000+ a year for pralatrexate in 2009.

If we really want to provide accessible health care of good quality and a reasonable cost, we will need to develop mechanisms to pay more reasonable amounts for health care goods and services.  This will require some courage facing down the corporate and organizational insiders who have made themselves very rich from the current craziness. 

NOTE (21 December, 2009) - See also comments on the Postscript blog.

Troubled £12bn NHS IT System to be Scaled Back: UK MP's Come to Their Senses on Health IT. Will the U.S. Follow?

The UK National Programme for Health IT in the NHS, by the findings of the House of Commons Public Account audit committee, has been a £12bn debacle. Started as a starry-eyed utopian fantasy about experimental computerized clinical tools by former Prime Minister Tony Blair, nearly every possible mistake outlined at my ten year old website on HIT failure has been made, and made in abundance, the coup de grâce being dependence on an American health IT company.

It seems people's ability to detect rigor and seriousness in industrialists has become seriously impaired, the recent spectacular Ponzi schemes fallen for by quite prominent people and foundations being one example. Now the UK is at the point where hospitals are "unable to share documents" relating to problematic EHR's as their contract with that vendor includes a confidentiality clause. (Not that such clauses are limited to one company.

The health IT industry has generally profited from a sweetheart relationship of stunning proportions with healthcare regulatory agencies (it is entirely unregulated); with government (in the U.S., hundreds of billions of dollars are being thrown their way on similar starry-eyed dreams about reduced costs and improved quality per the economic "stimulus" bill); and with healthcare organizations (who accept HIT marketing puffery hook, line and sinker, do not perform due diligence properly for such critical clinical tools, who manage IT and informatics talent poorly, and who willingly sign defects nondisclosure and hold harmless clauses that violate the fiduciary responsibilities of their governance bodies as in my JAMA letter here and longer essay here).

At least for the £12bn down the drain, the U.K. is coming to their senses:

Troubled £12bn NHS IT system to be scaled back
BBC News
6 December 2009

The government is to scale back its £12bn NHS IT system in what the Tories are calling a "massive U-turn".

Chancellor Alistair Darling said he would be delaying parts of the scheme in Wednesday's pre-Budget Report as it was "not essential to the front line".

The move may save hundreds of millions but Mr Darling admitted it was only a fraction of total spending cuts needed.

The Tories and Lib Dems have been calling for the IT system, which has been hit by costly delays, to be axed.

... “It has held back the development of IT at a local level, cost billions and is running years behind schedule” - Norman Lamb, MP Liberal Democrats.

... [Chancellor Darling] said the full picture of cuts would not emerge until "the first half of next year at some point" - a reference to the comprehensive spending review, which the government has delayed until after an election.

The comprehensive spending review should be interesting, to say the least. I humbly suggest the NHS look at the contracting practices of the vendors, especially the gag clauses, the multiply-layered subcontracting deals with dyscompetent consulting companies common in IT, and conflicts of interest of local and national program leaders with IT and consulting suppliers.

I also suggest the reviewers borrow from the U.S. Senate Committee on Finance letter here from Senator Grassley to HIT vendors and consultants.

'Procurement disaster'

Treasury officials have stressed that only part of the NHS IT programme is facing the axe, and the whole project will not be scrapped.

But the Conservatives said Mr Darling's words represented a "massive U-turn".

Shadow Health Secretary Andrew Lansley said it was "another government IT procurement disaster".

"After seven years Labour have finally acknowledged what we've said for years, that the procurement for NHS IT was costing billions and not delivering," he said.

Why did it take years to acknowledge the obvious? The driving force behind blindness to IT failure goes way beyond wishful thinking. Lack of knowledge by the leadership of the complexities of "doing health IT right" and the ease of getting it wrong are a factor, especially when employing management talent in top positions inappropriate to the job such as these:

Two senior management appointments for NHS National Programme for IT announced
12 August 2008

The Department of Health has announced the two long-awaited senior management appointments for the National Programme for IT ... The Department announced in February that it was recruiting the two positions as part of a revised governance structure for handling informatics in the Department of Health.

Christine Connelly will be the first Chief Information Officer for Health and will focus on developing and delivering the Department's overall information strategy and integrating leadership across the NHS and associated bodies including NHS Connecting for Health and the NHS Information Centre for Health and Social Care.Christine Connelly was previously Chief Information Officer at Cadbury Schweppes with direct control of all IT operations and projects. She also spent over 20 years at BP where her roles included Chief of Staff for Gas, Power and Renewables, and Head of IT for both the upstream and downstream business.

Martin Bellamy will be the Director of Programme and System Delivery. He will lead NHS Connecting for Health and focus on enhancing partnerships with and within the NHS. Martin Bellamy has worked for the Department for Work and Pensions since 2003. His main role has been as CIO of the Pension Service.

"Informatics leadership" in healthcare with these backgrounds? Where's Winston Churchill when you need him?

Large sums of money in one's pocket also creates the most rabid enthusiasm in face of the obvious.

The electronic patient record system, which is thought to have cost about £12bn so far, was commissioned in 2002 by then prime minister Tony Blair, and was meant to be completed by 2010.

This sounds eerily familiar to the U.S., which set an equally unrealistic ten year timeline for a major social re-engineering project -- entirely dependent on experimental IT -- of immense proportions.

Mr Lansley told BBC One's Politics Show the Tories would scrap the "enormous centralised IT system" and instead give hospitals "the opportunity to buy IT systems" that could transfer images, patient records and prescriptions electronically.

A focus on easy wins - providing local hospitals leeway to buy or build systems to transfer images, basic records useful to clinicians in the real world (as opposed to every data point in the known universe possible about a patient) and prescriptions, with incremental refinement and slow spread as IT and human capabilities warrant, should have been the focus at the start, not an idealistic project to create a centralized national Medi-net.

It comes as the Conservatives called for a moratorium on all government computer projects, ahead of the publication of the government's five-year IT strategy later this week. They say Labour has spent £100bn on IT since 1997 and contracts worth another £70bn are due to be renewed or commissioned in the next two years.

That's a lot of money. What's the ROI, exactly?

The Liberal Democrats said the NHS programme had been "flawed from the start".

The party's health spokesman, Norman Lamb, said: "It has held back the development of IT at a local level, cost billions and is running years behind schedule."

That is subtantiated by the above linked House of Commons report.

But Dr Grant Ingrams, from the British Medical Association, said the system currently scheduled to come into effect would result in the NHS saving money.

"It's an essential tool for clinicians, for doctors and other staff to be able to treat patients," he said.

"The NHS pays out a third of a billion pounds a year on mistakes; a lot of that could be put right if the IT was in place."

That type of statement about medical mistakes is at the crux of the idealists' and zealots' dream. Unfortunately, they do not ask these simple minded questions:

• Are those mistakes due to informational issues, e.g., lack of immediate availability of patient information, or due to other personal, local and/or systemic factors?

• What percentage of the mistakes meet the criterion of being amenable to "prevention by IT"?

• Could computerized systems create new mistakes of their own?

• Where is the robust evidence that supports such a statement about error prevention?

• Has such evidence been rigorously reconciled with an accumulating evidence base to the contrary?
  

The answers to these simple questions are not hard to obtain to anyone who cares to look, and who will take off their global warming "Hide the Decline" blinders (warning: YouTube link to a most apropos satire and mockery).

Lacking the miracle of our own government officials sprouting new brain cells in cortical centers responsible for critical thinking and ethics, I regrettably predict the U.S. will be at this same point in approximately three to five years.

-- SS

"Compensation Madness" - "Insiders Hijacking Established Institutions for their Personal Benefit"

As we learn more about the causes of the global financial melt-down, aka great recession, the lessons appear more applicable to health care.  My latest example comes from last week's Wall Street Journal.  There appeared an article by a Professor from the Faculty of Management of McGill University (Montreal, Canada) on executive compensation that has important lessons for health care (Mintzberg H. No more executive bonuses. Wall Street Journal, Nov 30, 2009.  Link here.)

Prof Mintzberg's first major premise was that current executive compensation at major corporations resembles a rigged casino:

Although these executives like to think of themselves as leaders, when it comes to their pay practices, many of them haven't been demonstrating leadership at all. Instead they've been acting like gamblers—except that the games they play are hopelessly rigged in their favor.

First, they play with other people's money—the stockholders', not to mention the livelihoods of their employees and the sustainability of their institutions.

Second, they collect not when they win so much as when it appears that they are winning—because their company's stock price has gone up and their bonuses have kicked in.

Third, they also collect when they lose—it's called a 'golden parachute.'

Fourth, some even collect just for drawing cards—for example, receiving a special bonus when they have signed a merger, before anyone can know if it will work out. Most mergers don't.

And fifth, on top of all this, there are chief executives who collect merely for not leaving the table. This little trick is called a 'retention bonus' —being paid for staying in the game!

Prof Mintzberg points out that while there is no some recognition that the compensation system needs to be fixed, most proposals would simply tinker with the notion of pay for performance. However, Prof Mintzberg believes that such tinkering is hopeless, because the whole system is based on false assumptions. These are

"• A company's health is represented by its financial measures alone—even better, by just the price of its stock."

However,

Companies are a lot more complicated than that. Their health is significantly represented by what accountants call goodwill, which in its basic sense means a company's intrinsic value beyond its tangible assets: the quality of its brands, its overall reputation in the marketplace, the depth of its culture, the commitment of its people, and so on.

So the elements of true performance are multiple, and extremely hard to measure.

The consequences of making simple financial measures the only metric of performance are severe:

This flawed assumption, though, does far more damage than simply distorting CEO compensation. All too often, financial measures are a convenient substitute used by disconnected executives who don't know what else to do—including how to manage more deeply.

Or worse, such measures encourage abuse from impatient CEOs, who can have a field day cashing in that goodwill by cutting back on maintenance and customer service, 'downsizing' experienced employees while others are left to 'burn out,' trashing valued brands, and so on. Quickly the measured costs are reduced while slowly the institution deteriorates.

"• Performance measures, whether short or long term, represent the true strength of the company."

Prof Mintzer suggested that this has lead to an attempt to subsitute long-term rather than short-term financial measures. However, no one knows how long "long-term" should be.

" • The CEO, with a few other senior executives, is primarily responsible for the company's performance."

This one is especially pernicious

What if the CEO was lucky enough to have been in the right place at the right time? When it comes to a company's current performance, history matters, culture matters, markets matter, even weather can matter. How many chief executives have succeeded simply by maneuvering themselves into favorable situations and then hanging on while taking credit for all the success? In something as complex as the contemporary large corporation, how can success over three or even 10 years possibly be attributed to a single individual? Where is teamwork and all that talk about people being 'our most important asset?'

More important, should any company even try to attribute success to one person? A robust enterprise is not a collection of 'human resources'; it's a community of human beings. All kinds of people are responsible for its performance. Focusing on a few—indeed, only one, who may have parachuted into the most senior post from the outside—just discourages everyone else in the company. Sometimes, there is the impression that a forceful chief executive has turned around a troubled company. But how sure can we be that such a turnaround will be long-lasting? After all, so many of these supposed corporate resurrections eventually go sour.

So Prof Mintzberg observed, "if you do pay bonuses, you get the wrong person in ... [the CEO] chair."

Thus,

Executive bonuses provide the perfect tool to screen candidates for the CEO job. Anyone who insists on them should be dismissed out of hand, because he or she has demonstrated an absence of the leadership attitude required for a sustainable enterprise.

In summation, "All this compensation madness is not about markets or talents or incentives, but rather about insiders hijacking established institutions for their personal benefit."

I submit that Prof Mintzberg's essay is as applicable to health care organizations, not only public for-profit health care corporations, but also many of the not-for-profit organizations that have sought to become more businesslike, as it is to any large corporations.

We have discussed numerous examples of ill-informed, self-interested, conflicted and corrupt leaders of health care organizations, most of whom became rich despite, or perhaps because of these attributes.

We have seen examples of many of what Prof Mintzberg lists as examples of outcomes of the bonus culture:
- Short-term results twisted and hyped to enhance the reputation of a "visionary" CEO.  (For example, see the cautionary tale of the Allegheny Health Education and Research Foundation.  See posts here and here.)
- Leaders who focus only on short-term financial results, rather than the multi-faceted health care mission (For example, see how one academic health care leader revealed that institutions are only in it for the money.)
- Cutting back on quality to cut costs and maximize short-term financial results.  (For example, see the consequences of the out-sourced heparin, or failure to do adequate maintenance on over-worked production facilities.)

I would underline one particular point. The perverse incentives generated by the current bonus culture in business have lead to practices antithetical to the long-term prosperity of corporations, including cutting the quality and quantity of the product to cut costs, and firing or over-working employees, including the most experienced and sophisticated ones (outside of the leaders' inner circles). This would be bad for any kind of organization, but in health care can lead to distress, disease, disability, and death.

I again submit that to truly reform health care, we need to reform the current business culture of health care.  One primary element of that reformation is refocusing leadership on the health care mission.  For not-for-profit health care organizations, the mission must take precedence over making more money.  On the other hand, for-profit health care corporations that put short-term revenues (and bonuses paid to top leaders) before the quality of their products and hence their long-term reputations may find themselves, like some US automobile companies, without markets, without profits, and bankrupt. 

Pfizer CEO Now Acknowledges "We Need to be Straight with People"

Even the CEO of the world's largest pharmaceutical company is now conceding that unethical behavior by large health care corporations has lead to trouble.  As reported by The Day (New London, CT, US): 

Three months after his company paid the largest criminal fine in U.S. history, Pfizer Inc. chief executive Jeffrey B. Kindler called on government and business leaders Tuesday to face up to the 'real and legitimate anger' of citizens fed up with ethics breaches.

'If we fail to change, the future will not be pretty - for business or for society as a whole,' Kindler said in a keynote address to the Boston College Chief Executives' Club at the Boston Harbor Hotel. 'People have had enough, and the backlash is real.'

Kindler told the luncheon meeting of about 250 chief executives in the Boston area that a recent survey found two-thirds of the American people now have less trust in corporations than they did a year ago - and the decline in their faith in government and public officials has been even more drastic.

'When the majority don't trust you, they will find a way to force you to change,' he said. These changes, he added, could include limits on businesses' licenses to operate and might affect private-sector innovation.

Pfizer, he acknowledged, has had ethical lapses as well, capped by the $2.3 billion in fines imposed in September for the company's illegal marketing of various drugs. The company's $1.2 billion criminal fine was the largest corporate penalty in U.S. history.
'It was a real blow to our employees,' Kindler said. 'It did not reflect the company we all knew.'

The government of Switzerland also fined Pfizer and two other firms a total of $5.7 million Tuesday for alleged price-fixing of erectile dysfunction drugs.

Mr Kindler also pledged there would be some changes:

Kindler said he understood those in the audience who might wonder, in the wake of Pfizer's own ethical problems, 'Who are you to talk about trust?'

But he said Pfizer has changed. Golf trips, fancy dinners and tchotchkes left for doctors are now out, and there are fewer company sales representatives in the waiting rooms. Results of clinical trials are now posted for all to see.

Also, according to a Boston Herald article:

'We need to be straight with people,' said Kindler at a Boston College Chief Executives’ Club lunch.

'It’s up to us to earn back the trust we’ve lost,' Kindler said.

Already, the company is much more transparent with its operations, he said. It has begun disclosing a number of its business relationships on its Web site and has ceased the high-priced wooing of the doctors who might prescribe its products.

Let me applaud Mr Kindler's declaration that we "need to be straight with people," and in the spirit of constructive criticism, give him some unsolicited advice about ways the company could be more "straight."

First, he might start by admitting the scope of past problems.  As we posted previously,  the $2.3 billion settlement alluded to above was  the company's fourth major settlement of charges of unethical marketing behavior since 2002, and also as alluded to above, it is not the company's most recent ethical problem.  For a catalog of Pfizer's ethical pfailures, see this link. 

Second, he might acknowledge some responsibility for past problems, or indicate that someone will be held accountable for them.  Note that according to the biographical statement in the 2009 Pfizer proxy, Mr Kindler has held leadership positions at the company since 2002. 

Third, he might consider a more vigorous transparency effort, starting with the company's relationships with physicians, and other health care professionals and academics.  The company has pledged to put some sort of information about payments to such people online, but not until 2010.  Maybe that schedule could be sped up.  Furthermore, it is not clear how much information will be disclosed, but the company ought to consider making it clear what payments are for, what division of the company (e.g., research and development, or marketing or public relations) made the payments, and how the payments were linked to particular Pfizer products.

Fourth, he might make a more vigorous effort to disclose the results of all clinical research sponsored by Pfizer.  In the past, Pfizer has allegedly been a party to suppression of results of clinical research that turned out not to favor its products (e.g., see this post).  It is true that Pfizer pledged to post the results of at least some unpublished studies on ClinicalStudyResults.org, but the completeness of its reporting is questionable.  But a report by the German Institute for Quality and Efficiency in Health Care suggested that through this year Pfizer has been dragging its feet about disclosing results that may not make its products look good.  Consequently, the Institute is now calling for compulsory disclosure of the results of all clinical trials. 

I do hope that Mr Kindler and Pfizer management are serious about their commitment to "earn back the trust we've lost."  If so, more power to them.

The Health Care Bubble: Parallels with the Global Financial Meltdown

The global financial melt-down, or great recession, or whatever it will be called was a big surprise in September, 2008, to those of us not immersed in finance. A year later there is an opportunity to at least better understand the events leading up to it.  I have managed to read two focused books on aspects of the melt-down, (House of Cards, by William D Cohan, and Fool's Gold by Gillian Tett) and am in the midst of what may be the best general narrative of it published to date, The Sellout, by Charles Gasparino.

Reading the recent history of the meltdown makes me uncomfortably aware of parallels between these events and the current dysfunction of the health care system.  In his discussion of the run-up to the crash, Mr Gasparino emphasized a number of issues which I will catalog along with their health care parallels.

Prices Always Go Up

The prices in question were those of real-estate, and the notion that they would always go up helped to fuel would an explosion of mortgage loans made to people who had little chance of fully repaying them.  When housing prices reached an unsustainable level and started to fall, the melt-down began.

-  It is a cliche that overall health care costs in the US have been going up much faster than inflation for as long as most of us can remember (at least since the 1970s), creating the expectation that they always will go up.   

Products were Over-Rated by the Apparent Experts

Mortgages made to people who were unlikely to be able to pay them back were sold by irresponsible originators, and then packaged into financial derivatives by finance firms.  Many of these derivatives were rated "AAA" by trusted rating firms, even though they contained multiple individually risky mortages.  The rating firms boasted of expertise, and used complex mathematical models supposedly based on evidence to make their ratings. 

-  In health care, we have come to trust expert professionals' assessments of products (like drugs and devices) and services based on their expertise and clinical research evidence. 

Evidence Used to Rate Products was Suspect

The mathematical models used to predict risk were based on limited data and assumptions.  In particular, they did not account for the possibility that real-estate prices might go down, or that particular circumstances might cause multiple home-owners to default on their mortgages at the same time.  The increasing level of defaults, signaling that the derivatives based on the mortgages might be riskier and less valuable than previously thought, caused the melt-down to accelerate.

-  We have discussed how the clinical evidence may be manipulated by those with vested interests in selling products or services.  When manipulation  does not yield the result desired by the marketers, the results of the research may be entirely suppressed.  One particularly telling example was the suppression of research  unfavorable to new anti-depressant medications as documented in part by Erick Turner et al.  When all suppressed research was taken into account, the drugs appeared much less effective than was previously believed.

The Experts were Conflicted

The rating agencies were paid by the finance firms which sold the derivatives.  Ratings agencies that did not deliver sufficiently good ratings were likely to lose business.  "By 2005 triple-A ratings were being handed out like candy: underwriters could nearly demand they wanted on a deal and did."

-  We have discussed how physicians and medical academics frequently have conflicts of interest due to their financial ties to pharmaceutical/ biotechnology/ device and other health care companies.  August academic medical institutions have come to depend on money from industry to support research and education.  Distinguished academics are often paid key opinion leaders for drug and device marketers.

Deceptive Marketing

Per The Sellout, "On Wall Street, complexity isn't something to be avoided - it allows smooth-talking salesmen to obscure simple concepts like risk and losses."

- We have written again and again about deceptive marketing practices, how marketing is disguised as medical education, the use of stealth marketing, etc to promote often overpriced tests and treatments that are often less effective and/or more hazardous than they are advertised to be. 

Politicians Pushed Access without Regard to Consequences

US politicians from both parties pushed ever more accessible mortgages for the laudable goal of making better housing available to the less advantaged, but seemed unconcerned about how they would eventually pay back the loans.

-  The driving motivation for most current health care reforms efforts in the US seems to be to provide "access," now redefined as some sort of health insurance, without much attention to the reasons health care has become so inaccessible in the first place.

Major Organizations Lead by the Clueless

The Sellout provided some notable vignettes, including those about Jimmy Cayne, the CEO of Bear Stearns, who did not understand the complex derivatives his firm bought and sold, or the level of risk the firm was assuming; Stan O'Neal, the CEO of Merrill Lynch, whose tenure was "one of the strangest, most volatile, and ultimately most disastrous that Wall Street had ever seen;" and Charles Prince, the CEO of Citigroup, who apparently was a good lawyer, but had "little experience running a business," much less one as complex as Citigroup.

-  We have repeatedly discussed how large health care organizations are now often mismanaged, at times by people with little knowledge of or experience in the health care context.

Overpaid, Isolated, Arrogant, Imperial CEOs

The Sellout provided more notable vignettes.  Jimmy Cayne (see above), was at one point worth more than US $1 billion.  He spent more and more time playing bridge, and less managing his company.  Stan O'Neal (see above), would often vanish to play golf.  The leadership of Richard Fuld, the CEO of Lehman Brothers, "was more like that of a cult leader than even that of an imperial CEO."

-  We have repeatedly discussed how large health care organizations' leaders may be overpaid (some making nearly as much as the leaders of some financial firms before the collapse), arrogant imperial CEOs, some aspiring to be members of the superclass.  One striking example was the former CEO of UnitedHealth, Dr William McGuire, who was once worth more than US $1 billion before it became apparent that some of his fortune was based on back-dated stock options. 

Sycophantic Cronies as "Stewards"

The Sellout discussed how members of the boards of directors of financial firms were mostly chosen by the CEOs they were supposed to supervise.  For example, Jimmy Cayne, who had "a firm grip over his board of directors," noting "my board is my board."

-  We have often discussed poor governance of health care organizations, and specifically how boards of directors or trustees of health care organizations are similarly unlikely to challenge the CEOs they are supposed to supervise.  We also have noted how health care organizations' are often lead by the same Masters of the Universe who brought us the global financial collapse.  For example, Cornell's Weill Medical School was named after former trustee Sanford Weill, who constructed the giant conglomerate Citegroup, but did not figure out how to make its pieces fit together, and was forced "to step down as CEO as the research scandal [investigation] initiated by [former New York state Attorney General] Spitzer snared its highest-profile target, Weill himself." (from The Sellout, p. 187.)

Suppression of Dissent

The Sellout noted how increasingly arrogant leaders of financial firms ignored advice of more conservative or risk-adverse employees.  Dissenters were often afraid to speak out, and some were fired.  For example, at Bear Stearns, Jimmy Cayne increasingly marginalized "Ace" Greenberg, who was wary of excess risk.  At Lehman Brothers, the cult of personality that surrounded Fuld suppressed dissent and debate.

-  We have discussed the anechoic effect, the lack of discussion surrounding important health care issues, seemingly enabled by the sense that one simply does not talk about such issues.  Whistle-blowers are often ostracized, or worse, and academic freedom and free speech may be frankly threatened.

Ineffective, or Captured Regulators

From the 1980s onward, deregulation of the financial industry advanced.  The Sellout discussed how the Federal Reserve, lead by Allan Greenspan, enabled if not cheer-lead for the bubble.  The  Securities and Exchange Commission (SEC) was often ineffectual at best.

-  We have discussed how the FDA got conflicted advice and often seemed to feel that drug and device manufacturers, rather than the public were its clients.  We just noted that one version of health care reform would put control of a comparative effectiveness research institute in the hands of industry, and would empower its leaders to suppress research which offends them.

Summary

We have discussed the impetus to make physicians give up their professionalism ostensibly to increase competition (see post here), and to then hand over control of health care to managers ostensibly to reduce costs.  Since the 1980s, health care has increasingly been dominated by large organizations run as businesses by business managers.  It should therefore be no surprise that the ethos of health care management has come to resemble the ethos of business management in general.  Thus, maybe the parallels between some of the issues related to the global financial meltdown and the issues related to current health care dysfunction should not be surprising.

A few other bloggers and business writers have referred to a health care bubble in the last few years.  Notably, Dr Wes advanced the concept in 2008.  Dr Rich spoke out in early 2009, and Dr George Lundberg added to it later in 2009. 

So I make a fearless assertion and prediction.  Health care dysfunction has lead to a health care bubble, which is likely to burst soon with considerable adverse consequences.  Perhaps a controlled deflation of the bubble would be possible, but would require more courage and clear thinking than most of our political and health care leaders have exhibited so far.  We have repeatedly noted how current efforts to reform health care have ignored most of the issues discussed above and documented repeatedly on Health Care Renewal.  If one of the currently proposed versions of health care reform becomes law, it may postpone for a while the popping of the bubble.  However, the longer the bubble grows, the nastier the bursting of it.

Do not say we did not warn you.