The Financialized Medical Center - Executives of Non-Profit Wake Forest Baptist Medical Center Make an "Investor Call," but Have no Investors

We recently discussed the uncomfortable situation of Wake Forest Baptist Medical Center, the non-profit health system/ academic medical center of Wake Forest School of Medicine.  The organization suffered acute monetary losses after a problem plagued roll out of its new electronic health record.  Presiding over this mess were some extremely well paid executives who had been hailed as "visionaries" by their own public relations people. (Look here and here.)

An Even Bigger Financial Loss

The resourceful Richard Craver, writing in the Winston-Salem Journal, just documented that the financial losses due to this cybernetic chaos now seem even bigger,

The center said Monday in a report submitted to bond agencies that it had a $62.8 million operational loss and an overall loss of $3.2 million in the third quarter of fiscal year 2012-13, which ended March 31.

Stock investment gains of $54.6 million helped offset much of the operational revenue loss.

Still, the operational loss was $13.2 million higher than the $49.6 million it reported Dec. 31. At that time, the center reported $7.4 million in overall excess revenue because of investment gains.  

A Call to Non-Existent Investors
 
That, however, was not the big news.  Mr Craver further noted,

Wake Forest Baptist chief executive Dr. John McConnell and chief financial officer Edward Chadwick held an investors call on Monday to discuss the financial performance. It is the third such presentation of the fiscal year, according to the Municipal Securities Rulemaking Board’s www.emma.msrb.org website.

Mr Craver noted that there was something distinctly odd about this. 

The investor call represents a potential blurring of the lines between how not-for-profit hospitals and corporations operate, which also includes executive compensation as a hot-button topic.

Analysts said the call is comparable to an earnings warning that corporations provide when they try to soften the negative reaction from a poorer-than-projected financial performance.

Wake Forest Baptist did not comment when asked how long has it made investor calls and who receives notifications of the presentations. According to emma.org, the center did not have investor calls listed prior to the first quarter of the current fiscal year.

A search of Wake Forest Baptist’s public website did not find any references to investor calls or quarterly and annual financial reports. Spokesman Chad Campbell said the quarterly financial calls are in the public domain.

While US publicly traded for-profit companies usually do schedule quarterly conference calls with investors to inform them about recent developments, Wake Forest Baptist Medical Center is clearly not a publicly held for-profit company.  It is a non-profit organization.  Non-profit organizations do not have investors or shareholders,

For-profit corporations also may do periodic calls with bondholders.  Wake Forest Baptist Medical Center does have bondholders.  But the posted notice for the call discussed above clearly refers to an "investor call," not a bondholders call.  One can now listen to the call (+1 855 859 2056, conference ID 90279604), and when I did, I heard the call was introduced by the operator, and by the Wake Forest Baptist Medical Center CFO as an "investor call."  

A Financialized Mindset?

So what in the world is going on here?  So why would its CEO and CFO make a quarterly call to "investors?"  The idea is absurd on its face. 

Mr Craver was able to find one person to comment, who seemed to assume that the calls were truly "investor calls," not mislabeled calls to bondholders:

Ken Berger, president and chief executive of Charity Navigator, said a not-for-profit hospital holding an investors call 'is the antithesis of why a nonprofit exists.'

'Nonprofits are not supposed to be trying to maximize shareholder value, but maximize their benefit to the communities they serve,' Berger said. 'Transparency is great, whether corporation or nonprofit, for shedding light on financial performance.'

'In this instance, the investor call doesn’t represent full transparency, but only represents more morphing of a not-for-profit into a for-profit organization where only a select few investors are chosen to have access to pertinent current information.'

My guess is that Mr Berger got it right.  It may be that the top executives of Wake Forest Baptist Medical Center have the mindsets of executives of a big for-profit corporation in an era of financialization. 

In the New York Times Economix blog, Bruce Bartlett, an economist who has served in the administration of two Republican Presidents, Ronald Reagan and George HW Bush, and has worked for two Republican legislators, Jack Kemp and Ron Paul, cited financialization as the big largely anechoic reason for the global economic malaise.  He wrote,

 According to research by the economists Jon Bakija, Adam Cole and Bradley T. Heim, financialization is a principal driver of the rising share of income going to the ultrawealthy – the top 0.1 percent of the income distribution.

Research by the University of Michigan sociologist Greta R. Krippner supports this position. She notes that financialization exacerbates the well-known problem of corporate ownership and control: while corporate assets are owned by shareholders, they are controlled by managers who often extract an excessive share of corporate profits for themselves.

 As we have discussed, for a generation business schools have taught managers that there primary goal is to maximize shareholder value, which has been interpreted to mean short-term financial performance.  Large corporations now give top managers tremendous incentives to maximize such performance, such that top managers have become rich, often the richest members of society.  Many top managers of health care organizations now come from a business background, and health care managers, even of non-profit organizations, also get large incentives. 

Note also that the two executives on the "investor call" both had outsize compensation in 2011, the latest year for which the non-profit Wake Forest Baptist Medical Center has released the disclosure form (990 form) required by the US government.  The CEO, Dr McConnell, received over $2 million, while the CFO, Mr Chadwick, received just short of $1 million. (Look here.)  So it looks like they have a good reason to continue to operate a financialized organization so they can keep extracting sufficient revenue to make themselves rich.

Clearly, though, if we want our health care organizations to preserve and protect patients' and the public health, we need them to be lead by leaders who care much more about health care than about short-term revenue and making themselves rich.


As we have said endlessly,  true health care reform would put in place leadership that understands the health care context, upholds health care professionals' values, and puts patients' and the public's health ahead of extraneous, particularly short-term financial concerns. We need health care governance that holds health care leaders accountable, and ensures their transparency, integrity and honesty.

A Legal Settlement of One Aspect of the Fall of AHERF, Only 15 Years Later

It only took 15 years, but litigation related to one of the most important, but obscure cases of bad health care leadership and governance from the 1990s was finally settled.   

Background

The Allegheny Health Education and Research Foundation (AHERF) was a large integrated health care system formed out of multiple mergers.  AHERF went bankrupt in 1998, leading to massive layoffs, hospital closures, and the near dissolution of a medical school (which ended up taken over by Drexel University).  We last discussed the case in 2012 here.. A summary of other important points about it is appended below. 

As we noted in 2008, although the AHERF bankruptcy appears to be the largest failure of a not-for-profit health care corporation in US history, its story has produced remarkably few echoes for doctors, other health care professionals, health care researchers, and health policy makers. I often use the fall of AHERF as an example in talks, at least the few talks I am allowed to give on such unpleasant subjects. Rarely have more than a few people in the audience heard of AHERF prior to my discussion of it.

I only could locate one article in a medical or health care journal that discussed the case in detail, but was written too early to address it very completely [Burns LR, Cacciamani J, Clement J, Aquino W. The fall of the house of AHERF: the Allegheny bankruptcy. Health Aff (Millwood) 2000; 19: 7-41.]  I doubt the case is used for teaching in most medical or public health schools, although it.was a formative influence on my 2003 article on health care dysfunction [Poses RM. A cautionary tale: the dysfunction of American health care. Eur J Int Med 2003; 14: 123-130] and on this Health Care Renewal blog.  (A book about the case, Merger Games, by Judith Swazey, was published in 2012, and is available here as  a set of PDF files from Project Muse for those with the proper password, but it has not yet had much of an impact, and I confess I have not yet read it.)  The lack of discussion of such a significant case is a prime example of the anechoic effect. 

One Legal Settlement, 15 Years Later, for a Secret Amount

But a brief echo of the case did appear in a brief article in the Pittsburgh Tribune Review published in April, 2013:

Lawyers would not say Tuesday how much money an accounting firm will pay to settle a 13-year-old lawsuit claiming it helped destroy one of the state's largest health care systems. 

'It will result in a very significant recovery,' James Jones, one of the lawyers representing the unsecured creditor of the Allegheny Health Education and Research Foundation, said during a settlement hearing in Pittsburgh federal court.

The creditors in 2000 sued Coopers & Lybrand LLP, the predecessor of PricewaterhouseCoopers LLP, claiming that if auditors in 1996 and 1997 had informed AHERF's board about the foundation's true financial condition, it would have acted to avoid a bankruptcy that resulted in huge losses. The foundation's assets included the Allegheny General Hospital system.

It seems only fitting, given how anechoic this case has been, that much about this settlement remains obscure,

U.S. District Judge David Cercone, in a joint session with U.S. Bankruptcy Judge Judith Fitzgerald, approved the settlement with PricewaterhouseCoopers. 

The company disputes the method the committee used to calculate losses and denies liability in the settlement.

Joseph McDonough, a lawyer for PricewaterhouseCoopers, agreed the settlement amount is significant. He and Jones declined comment.

Jones said during the hearing that a trial could have lasted 40 days. Preparation for the case generated more than 200 depositions, 19 expert opinions and more than a million documents, he said.

The committee sent more than 3,500 notices to creditors about the proposed settlement, and none objected, he said.

Both sides agreed to keep the amount secret, and they discussed with Fitzgerald how to avoid releasing the amount in filings for related bankruptcy action.

Maybe if the case had somehow generated more echoes, health care professionals and policy makers, and patients and the public at large might have learned some of its lessons.  The story of AHERF is not merely that of an unlucky bankruptcy. It shows what can go wrong when health care is taken over by generic managers who adapt the latest management fads, and health care decision making is ruled by marketing, public relations and propaganda instead of evidence and logic, and allows power to be concentrated in organizations run by imperial CEOs.  .

 

We did not get a chance to learn this history, so we seem bound to repeat it.  

Appendix

Some important points about AHERF not found above (see also this narrative, starting on page 5):

• AHERF, one of the largest health care systems of its day, was built by the poster-boy for health care imperial CEOs, Sherif Abdelhak.
• Abdelhak, who started as food services purchasing manager at Allegeheny General Hospital, was repeatedly hailed as a "visionary" (in the March, 1997, ACP Observer) a "genius," and the like. His plans to create a huge integrated health care system were part of the wave of the future. Abdelhak was even invited to give the prestigious John D Cooper lecture at the annual meeting of the American Association of Medical Colleges (AAMC), which was published in Academic Medicine [Abdelhak SS. How one academic health center is successfully facing the future. Acad Med 1996; 71: 329-336.] He proclaimed that "we will need to create new forms of organization that are more flexible, more adaptive, and more agile than ever before." And he announced that "my aim as chief executive has been to unleash the creativity and productive potential of every individual and to provide an environment that encourages teamwork"
• While Abdelhak was making these grandiose promises, he paid himself and his associates very well. For example, he received $1.2 million in the mid-1990s, more than three times the average then for a hospital system CEO. He lived in a hospital supplied mansion worth almost $900,000 in 1989. Five of AHERF's top executives were in the top 10 best paid hospital executives in Philadelphia.
• Although Abdelhak talked of teamwork, he warned the combined faculty of the new Allegheny University of the Health Sciences (AUHS): "Don’t cross me or you will live to regret it."
• As AHERF was hemorrhaging money, Abdelhak continued to pay himself and his cronies lavishly.
• After the AHERF bankruptcy, which was at the time the second largest bankruptcy recorded in the US, Abdelhak was charged with numerous felonies involving receiving charitable assets. In a plea bargain, he pleaded no contest to misusing charitable funds, a misdemeanor, and was sentenced to more than 11 months in county prison.

Posted by Roy M. Poses MD to the Health Care Renewal blog

Is the Cystic Fibrosis Foundation a Charity or a Venture Capital Firm?

We have often discussed how health care organizations now seem prone to diversion from their stated missions, often when money is the object.  While the organizations in question are frequently academic, teaching hospitals, academic medical centers, or medical schools in particular, in May, the Milwaukee Journal Sentinel presented an example of a disease specific charity.  This article deserves considerably more attention than it apparently initially received.

Background

The background was,

What happens when a disease-fighting charity dives into venture capitalism?

In the first case of its kind, the results include one of the planet's most expensive pills, huge sales projections for a drug company and windfalls for executives who sold stock in the glow of enthusiastic news releases about the drug.

Kalydeco is a breakthrough drug designed from knowledge of the genetic roots of cystic fibrosis, a lung disease that kills most victims before they reach middle age. Developed by Vertex Pharmaceuticals with a $75 million investment from the Cystic Fibrosis Foundation, it is an early example of 'venture philanthropy,' where a nonprofit helps finance development of a treatment in return for a cut of sales.

Remember that while disease specific charities often sponsor basic and clinical research, in this case, the CFF sponsored drug development.  In fact, much of the research on which this development was based was sponsored by charities and the US National Institutes of Health:

In the 1980s, Francis Collins, now director of the National Institutes of Health, was a researcher at the University of Michigan and on his way to becoming a renowned gene hunter.

Collins and a team headed up by Lap-Chee Tsui at the Hospital for Sick Children in Toronto collaborated to identify the gene responsible for cystic fibrosis. That breakthrough involved funding from the NIH, the Cystic Fibrosis Foundation and the Howard Hughes Medical Institute, said Collins.

Another decade of intense basic science followed, much of it funded by NIH.

The Price to Patients 

Despite, or perhaps because of the funding provided by CFF, Vertex chose a stratospheric price for its new drug.

 Yet it costs each patient $307,000 a year to take two Kalydeco pills a day - a price borne by taxpayers through Medicaid and other government programs and by the workers and companies who finance employee health insurance plans.

In 2012, with less than a full-year on the market, Vertex sold $172 million worth of Kalydeco....

To put that in perspective, the yearly cost of Kalydeco is approximately six times the median family income in the US.


Minimizing the Harms

To put it further into perspective, keep in mind that for the moment, the data from the single best published clinical trial on Kalydeco suggests that while the drug seems to help the average patient, it is not without risks, and it is certainly not a cure.

The largest published trial that followed patients for a reasonable amount of time appeared in 2011 in the New England Journal of Medicine.  [Ramsey BW, Davies J, McElvaney G et al.  A CFTR potentiator in patients with cystic fibrosis and the G551D mutation. N Engl J Med 2011; 365: 1663-1672.  Link here.]  The study followed 161 patients for 48 weeks.  The patients treated with Kalydeco on average showed improved lung function (increase of FEV1 [forced expiratory volume in one second] of 10% compared to essentially no change (-0.2 percent) in the placebo group.  Treated patients were less likely to have an exacerbation of their pulmonary disease requiring hospitalization (31% vs 49%).  So the drug certainly seems to have benefits at least in the short term.  The number needed to treat to prevent one exacerbation requiring hospitalization in one year is five, which seems quite respectable.

On the other hand, the drug may have significant harms, even thought the report of the study seems to have attempted to minimize them.  The article stated

there was a lower rate of serious adverse events in the ivacaftor [Kalydeco] group than in the placebo group (24% vs 42%).  

However, this statement depended on a rather peculiar definition of severe adverse events.  In particular, pulmonary exacerbations of cystic fibrosis were included among severe adverse events.  Yet these are, as the term suggests, manifestations of the disease that is being treated.  Reduction of pulmonary adverse events should be and was considered a measure of efficacy.  So placing exacerbations within the definition of adverse events essentially double counts these incidents. 

Furthermore, the presence of these within the category of adverse events swamps out other events which may in fact be adverse results of the study drug.  If one subtracts pulmonary exacerbations and hemoptysis from the counts of serious adverse events, what remains is that patients on Kalydeco were more likely to have a serious adverse event (10%) than those on placebo (4%).  Thus the apparent number needed to harm was 17.  Thus, using this peculiar definition of adverse events appears to be a way to manipulate the analysis to minimize the apparent harmfulness of the drug.

While the study did appear to show that more patient received the benefit of avoiding a hospitalization due to a pulmonary exacerbation of cystic fibrosis than had a serious adverse event, the study did not show that the drug had overwhelming efficacy, or tremendous safety.   The study did not last long enough to show long term advantages, or to rule out rare but severe side effects.

This is the only drug available of this type, and it may well provide benefits that outweigh harms, at least over the short-term, but it is not a wonder drug, and the rationale to charge so much money for it, other than that is what the market will bear, is not obvious.  

A Windfall for Corporate Executives, and a Question of Insider Trading

The drug's approval has lead to a lot of financial success for stock holders, particularly Vertex executives:

 Last month, news about success of the drug sent Vertex stock soaring more than $6 billion in a single day. That surge and a similar one last May allowed top executives and directors of the company to sell stock and options worth more than $100 million.

The executives' lavish windfall occurred in somewhat questionable circumstances:

Vertex and its executives have benefited greatly from Kalydeco and foundation funding.

Last May, when Vertex and the foundation reported positive results from a clinical trial involving Kalydeco and whether it could be combined with another drug to treat more patients, the company's stock jumped more than 70%, from $37.41 to $64.85 a share.

Five executives and two directors sold off more than $35 million in shares, mainly at prices from about $55 to $64 a share. Many of the options were priced between $16 and $40 a share.

Three weeks later, the company said it overstated the effectiveness of the drug in that trial and the stock dropped about $7 a share, ultimately falling back under $40 by December.

Vertex spokeswoman Nikki Levy said in an email the company does not comment on individual stock sales.  She said the executive stock sales either were part of pre-existing 10b5-1 plans or followed the company's internal stock trading policy. A 10b5-1 plan is an automatic trading tool in which executives specify timing or pricing of sales to avoid questions about inside information the seller had at the time.

U.S. Sen. Chuck Grassley (R-Iowa) wrote a letter to the U.S. Securities and Exchange Commission, saying it could appear that Vertex executives took advantage of the situation, knowing the overstated clinical trial results would eventually be made public and cause the stock price to drop.

The letter said the stock sales were troubling for industry investors and the federal government, which pays billions of dollars a year for drugs through Medicaid and Medicare.

Judith Burns, a spokeswoman for the SEC, declined to comment on the Grassley letter.

Last month, the company's stock shot up more than 60% again, from $52.87 to $85.60, after positive early data from a clinical trial of Kalydeco and another drug it is developing with funding from the foundation. On April 19, the day after the news was released, the company's market value jumped by more than $6 billion.

That same day, two company executives sold huge chunks of stock options. Executive Vice President and Chief Financial Officer Ian Smith alone sold 745,685 shares worth more than $60 million. Most shares were sold at $81.50, with options purchased from $29 to $39.

So at least Senator Grassley raised the question of whether Vertex executives may have taken advantage of their insider knowledge to personally profit even more from this useful but not miraculous drug meant to be used on vulnerable patients.

Keep in mind that those huge trading gains were layered on top of already lavish compensation.  The 2013 Vertex proxy statement, the total compensation and stock holdings of its top executives in 2012 was:

Jeffrey M Leiden, CEO                                $5,656,684      441,160 shares
Ian F Smith, CFO                                           $3,109,193      795,434
Stuart A Arbuckle, Chief Commercial Officer   $4,808,697         66,477
Kenneth L Horton, Chief Legal Officer             $2,802,735         41,161
Peter Mueller, Chief Scientific Officer              $3,614,890        997,651
Matthew W Emmens, Former CEO                  $6,896,029    1,486,748
David T Howton Jr, Fomer Chief Legal Officer $3,447,898           3,105



So the top executives of Vertex, while their company got $75 million from an ostensible charity to develop what became an extremely expensive drug, got very rich in the process, although how they got rich may yet attract attention from the SEC.

A Windfall for the Cystic Fibrosis Foundation and its Executives

Furthermore, it appears that the supposedly charitable Cystic Fibrosis Foundation also made quite a bit of money, and its executives, while not getting quite as rich as their associates in Vertex, did not do at all badly.

As the Journal Sentinel noted,

the foundation cashed in by selling future royalties from the drug to an undisclosed firm for $150 million.

Keep in mind that since the CFF was to receive royalties, the money it gave for drug development was not a grant, but an investment.

Furthermore, according to the Foundation's 2011 form 990 (the latest available), its executives received the following total compensation from the foundation and its affiliated organizations:

Robert J Beall, CEO                                                      $1,073,725
C Richard Mattingly, COO                                              $759,799
Preston W Campbell MD, Exec VP of Medical Affairs     $736,031
Vera H Twigg, CFO                                                         $445,183
Ann Palmer, Senior VP                                                     $276,029 
Daniel Klein, Senior VP                                                    $277,300
Gregory August, CIO                                                       $262,698
David McLoughlin, Senior VP                                          $316,122
Glen Goldmark, VP                                                          $253,215
Amy DeMaria, Senior VP                                                 $241,672
Mary Dwight, Senior VP                                                   $246,232

These compensation amounts may be much lower than the gargantuan pay dealt out to for-profit health care corporate executives, but they are very high for those who are managing a supposed charity meant to help vulnerable patients.

A More Complex Web

While profiting from its underwriting of the development of Kalydeco, the CFF also sponsored guidelines about the treatment of cystic fibrosis, with not unexpected results.

Last month, new treatment guidelines for doctors who handle cystic fibrosis patients strongly recommended use of Kalydeco. The guidelines were funded by the Cystic Fibrosis Foundation.

Three of the 10 authors of the guidelines were employees of the foundation and four others worked for institutions that received grants from the foundation. The chairman, Peter Mogayzel, is a professor of pediatrics at Johns Hopkins University, which foundation tax records show received more than $2 million in grants from 2009 through 2011.

These guidelines hardly look like they would be deemed trustworthy according to the Institute of Medicine's standards (look here).  However, they certainly look like they might help sell ivacaftor, and hence help justify higher pay for the executives listed above.

Criticism of Venture Philanthropy

Merriam-Webster online suggests one definition of a charity is an institution funded by a gift for public benevolent purposes.

The Cystic Fibrosis Foundation appears to be such a charity, but now one that functions more as a venture capitalist.  In this case, it did provide venture capital to develop a new drug for its disease of interest.  However, the foundation appeared to have done so not to provide public benevolence, but to generate a  return on its investment.  It is using that return not for public benevolence, but to provide more venture capital to other drug companies, presumably with the goal of getting further returns.  Meanwhile, its executives make generous compensation for people who are supposed to be running a charity.  Finally, the drug has an astronomical price, and its pricing has helped make investors in and executives of the company supported by the CFF very rich.

This has not been lost on some dissidents, per the Journal Sentinel,

'The concept of a charitable, not-for-profit taking on the role of a venture capitalist is new and difficult to digest at the moment,' said Paul Quinton, a cystic fibrosis researcher at the University of California, Riverside and the University California, San Diego.

Quinton, who has cystic fibrosis, is one of 28 doctors and scientists who sent a letter to Vertex calling the price of Kalydeco 'unconscionable.' A copy of the letter was provided to the Journal Sentinel and MedPage Today. Kalydeco, the doctors wrote, costs 10 times more than what a typical cystic fibrosis patient pays in total drug costs.

'This action could appear to be leveraging pain and suffering into huge financial gain for speculators, some of whom were your top executives who reportedly made millions of dollars in a single day,' the doctors wrote.

Vertex responded with seeming contempt,

 Since receiving the letter last July, Vertex has raised the annual price of Kalydeco another $13,000.

The funding by the supposedly charitable CFF of guidelines that promote the drug it financed has also drawn criticism,

 'It is definitely a conflict of interest,' said Eric Campbell, an associate professor at Harvard Medical School who has researched conflicts of interest in patient treatment guidelines.

In the past, drug companies have been criticized for funding treatment guidelines that recommend their drugs. It is no different if the guidelines are funded by a foundation that gets royalties from drug sales, Campbell said.

Also,

'It is concerning that the organization now stands to profit when patients choose to use the drug,' ... [Prof Lisa Schwartz of Dartmouth Medical School] said. 'Financial entanglement with industry, even with the best of intentions, creates a conflict of interest.'

However, the very well paid CEO of the CFF pooh poohed concerns about conflicts of interest,

Robert Beall, president of the Cystic Fibrosis Foundation, said that without its financial support, drugs such as Kalydeco would never get to patients. Neither insurance companies nor patients have voiced any concern to him about conflicts of interest, he said.

'They applaud the decision and our business model to the utmost,' Beall said. 'The patients are excited.'

He rejected the idea of using the royalty money to help patients pay for the medical care, noting that the foundation needed the money to entice drug companies to get involved in risky cystic fibrosis drug research.

One wonders when patients would ever have the opportunity to voice any "concerns" to Mr Beall, who also disdained any restraints on the price of the drug,

.Beall said the foundation did not ask Vertex to price the drug more affordably.

'That would have been a deal-breaker,' he said.

That seems to put making money ahead of patients' needs.  Was this venture philanthropy, or vulture philanthropy? 

 Summary

We have discussed numerous cases in which non-profit health care organizations seem to put short term revenue ahead of their missions to further patients' and the public's health.  In this case, a disease specific charity seems to have foregone its mission to directly support patient care, teaching, or research to provide venture capital, an action which lead to a profit for the organization, huge profits for a drug company, large rewards for the charity's executives, and even greater wealth for the drug company's executives.  It did also lead to the marketing of a beneficial drug, but at a breathtaking price that no middle-class patient without exceedingly good insurance could afford.  

Where is the public benevolence here?  Where is the charity?  How much is about patients and how much is about  making insider executives wealthy? 

As we have said until blue in the face, true health care reform would ensure health care organizational leadership that upholds the health care mission, not their personal finances.  

Long After the Start of the "War on Terror," a Conflict of Interest about an Anthrax Scare Comes to Light

In May, David Willman writing for the Los Angeles Times broke a story of a somewhat new variant on the conflict of interest theme, one that has not gotten a lot of attention, but should.

The issue was medical, with a twist, - how to best treat a bioterror attack with anthrax engineered to be resistant to multiple drugs, an event that luckily is not known to ever have occurred.  The story came from the bad old days of the "war on terror," but only has now come to light years later.

The Alarm Raiser

The story opened thus,

Over the last decade, former Navy Secretary Richard J. Danzig, a prominent lawyer, presidential advisor and biowarfare consultant to the Pentagon and the Department of Homeland Security, has urged the government to counter what he called a major threat to national security.

Terrorists, he warned, could easily engineer a devastating killer germ: a form of anthrax resistant to common antibiotics.

In particular,

Danzig began warning about antibiotic-resistant anthrax after the terrorist attacks of Sept. 11, 2001, and the mailings of anthrax-laced letters that fall.

The powdered anthrax in the letters killed five people but was not resistant to common antibiotics. Asked what gave rise to his concern about resistant strains, Danzig cited conversations with 'people whose technical skills exceed mine.' One of them, Dr. Robert P. Kadlec, a bioterrorism advisor in the Bush White House, said he and others were concerned that terrorists could develop such a weapon.

Danzig has sounded the alarm in published papers and in private briefings and seminars for biodefense and intelligence officials.

In a 2003 report funded by the Pentagon, "Catastrophic Bioterrorism — What Is To Be Done?" he wrote that it would be 'quite easy' for terrorists to produce antibiotic-resistant anthrax. He has expanded on that theme over the years, including in a 2009 paper for the Pentagon.

In the 2003 report, published while raxi [raxibacumab, an anthrax anti-toxin] was in development at Human Genome, Danzig said a drug to combat resistant strains of anthrax should be produced 'as soon as possible' and that stockpiling such a treatment, 'even if expensive and in limited supply' would deter an attack.

John Vitko Jr., a top Homeland Security official during the Bush and Obama administrations, said he turned frequently to Danzig for advice on biodefense matters — and read and 'paid attention to' his 'Catastrophic Bioterrorism' report.

Note that while Danzig is a lawyer, and certainly not a physician or biomedical researcher, he had major credibility in the defense field, particularly in anti-terrorism, so his recommendations had great influence.

He served as a Pentagon appointee during the Carter administration and as undersecretary and then secretary of the Navy under President Clinton. He has a long-standing interest in biowarfare.

During the 2008 presidential campaign, Danzig advised then-Sen. Barack Obama on national security and bioterrorism. After Obama's election, Danzig was named to the Pentagon's Defense Policy Board and the President's Intelligence Advisory Board, in addition to his consulting positions with the Defense Department and Homeland Security.

So apparently at least partly due to Mr Danzig's persistent warnings, the government took action,

 In 2004, President Bush signed into law Project BioShield, which provided billions of dollars for biodefense drugs.

The contracts are administered by the Department of Health and Human Services, based on advice from federal agencies and consultants. Homeland Security must certify the need for a drug before the government can buy it.

 Danzig, through his seminars, writings and consulting duties, has helped frame the discussion over whether a given biological threat is 'material' and whether the government should stockpile medicines to defend against it.

Also,

Speaking of Danzig's broader role as a government advisor, Vitko said: 'Richard's got incredible insights into this and I think has made major contributions'

He called Danzig one of 'the major bio player' and said his views had informed a range of policy considerations, including 'how many countermeasures do you need, of what kind.'

It was in response to advice from Vitko and his staff that Homeland Security Secretary Tom Ridge in 2004 declared anthrax a 'material threat,' the certification required for the government to buy drugs to fight it.

The drug the government bought was raxibacumab, or raxi, an anthrax anti-toxin made by Human Genome Sciences Inc.  

In 2006, the Department of Health and Human Services finalized its first order of raxi — 20,000 doses at a cost of $174 million.

That year, Ridge's successor, Michael Chertoff, signed a second, more specific declaration, adding 'multi-drug-resistant' anthrax to the government's list of material threats.

Asked the basis for the second declaration, Vitko said: 'I think the concern was more forward-looking, and saying, 'How could the threat evolve, and are we prepared for that?''

Since 2009, the Obama administration has ordered an additional 45,000 doses of raxi for $160 million.

There was just one catch.

The Undisclosed Conflict

Mr Danzig had a largely undisclosed conflict of interest.  He was on the board of directors of Human Genome Sciences Inc, the company whose drug his constant warnings and exhortations lead the government to buy.

When Human Genome named Danzig to its board on May 24, 2001, the company's chief executive said his high-level federal experience would 'serve us well.'

He thus was on the board on September 11, 2001, and later when the events on that day and soon after apparently induced him to start sounding the alarm about resistant anthrax, and he stayed on the board as he continued sounding alarms, and after the government started buying his company's drug.

During his 11-year tenure on the board, which ended in August, Danzig collected at least $1,054,255 in director's fees and by cashing in grants of Human Genome stock and stock options, according to Fred Whittlesey of Compensation Venture Group, who reviewed the company's Securities and Exchange Commission filings for The Times.

Nearly half of Danzig's compensation came from the stock options, of which he had been granted 184,000 by the end of 2011, Whittlesey said.

Danzig did not seem to think that serving on the board of the company which made the primary drug directed at the perhaps hypothetical disease about which Danzig was sounding the warning constituted any sort of conflict of interest.

Danzig said in an interview that he believed his position at Human Genome posed no conflict.

He said he had tried to improve policymakers' understanding of biodefense issues, including the threat of antibiotic-resistant anthrax, but never lobbied the government to purchase raxi.

'My view was I'm not going to get involved in selling that,' Danzig said. 'But at the same time now, should I not say what I think is right in the government circles with regard to this? And my answer was, 'If I have occasion to comment on this, it ought to be in general, as a policy matter, not as a particular procurement.'

'I feel that I've acted very properly with regard to this'' he said.

He also apparently did not feel he needed to disclose his board membership to most of the people he was trying to persuade to be alarmed about resistant anthrax, and to pursue a treatment, such as that made by the company on whose board he sat.

 A number of senior federal officials whom Danzig advised on the threat of bioterrorism and what to do about it said they were unaware of his role at Human Genome.

Dr. Philip K. Russell, a biodefense official in the George W. Bush administration who attended invitation-only seminars on bioterrorism led by Danzig, said he did not know about Danzig's tie to the biotech company until The Times asked him about it.

Also,

 Vitko said he knew nothing of Danzig's involvement with Human Genome until a Times reporter asked him about it.

'I'm surprised I didn't,' Vitko said. 'I'm not aware of it.'

Five other present or former biodefense officials who conferred with Danzig said they, too, had been unaware of his position with the company. Danzig, they said, made no mention of it in their presence during group discussions he led or in smaller meetings.

Furthermore,

A Times search found seven papers Danzig had written on bioterrorism since 2001. In only one of those did he disclose his tie to Human Genome.

As an advisor to the federal government, Danzig is required to file confidential forms annually, revealing any outside affiliations but not his related compensation. Danzig said he had noted his position with the biotech firm on the forms.

Asked whether he mentioned his corporate role during contacts with government officials, Danzig replied: 'If I thought any of it posed a potential conflict that might cause somebody who knew about it to discount my views, I would tell them.'

Some people disagreed with Danzig's failure to perceive a conflict of interest

 'Holy smoke—that was a horrible conflict of interest,' said Russell, a physician and retired Army major general who helped lead the government's efforts to prepare for biological attacks.

The Take-Over by a Familiar Corporation

By the way, Human Genome Science was eventually bought out by a bigger company which has had its own sets of issues regarding conflicts of interest, GlaxoSmithKline,

 Human Genome was acquired by GlaxoSmithKline in August [presumably 2012] for $3.6 billion.

It may yet stand to make even more money from raxi,

 Because raxi loses its potency after three years in storage, the government's supply will expire as of 2015, according to federal documents and people familiar with the matter. 

Summary

This appears to be a variant on the "key opinion leader" (KOL) theme writ large.  Mr Danzig clearly functioned as a very major key opinion leader about bioterrorism.  Like many KOLs we have previously discussed, he had financial interests that favored the company whose drugs his key opinion leadership seemed to be favoring.  His influence seems to have lead to huge purchases of these drugs. Like many KOLs who are physicians or health care academics, Mr Danzig seems utterly blind to the possibility that his multiple efforts to emphasize the importance of the supposed disease for which his company made a drug could somehow be viewed as a conflict of interest, or to why failure to tell his audiences about his major relationship to this company might have appeared just a small bit dishonest.  We have seen many medical/ health care KOLs who deny that somehow their opinions could have been influenced by their financial relationships, or that their audiences deserved at least to be aware of these relationships.  Yet, of course, Mr Danzig is not a doctor, and he was trying to influence government purchasers of drugs, not physician prescribers of it.

It does seem that the leadership of health care organizations, particularly but certainly not limited to pharmaceutical and biotechnology companies, have no lack of imagination about how to construct financial relationships with influential people who could help sell their products, whether or not they acknowledge what amounts to their marketing roles.

Given that this story involved influencing the government, it will be interesting to see at this late date whether it results in any legal action.  After all, as David Willman pointed out,

 Federal law bars U.S. officials, including consultants, from giving advice on matters in which they or a company on whose board they serve have 'a financial interest.'

It will also be interesting to see if it gets any more attention.  Only a few blogs have noted it, but at least they included The Scientist.


Yet our country has an unfortunately very long history of corporate leaders getting close to political leaders who then may overlook the legal niceties when their friends' interests are at stake.  Nonetheless, true health care reform would require all those who have decision making power over patients, health policy, or the public health to be completely transparent about their conflicts of interest, and would ban the more serious variants of conflicts of interest, even if that might cost some already rich people a bit of money.  I am not holding my breath, however, about when this might happen.

Want to help a hospital go bankrupt? Get a bad EHR - Westchester hospitals' sale price over $54 million, Hospitals' debt about $200M

- Posted at the Healthcare Renewal Blog on June 3, 2013 - 

Sound Shore Medical Center (New Rochelle, NY) is filing for bankruptcy protection:

Montefiore Medical Center is offering to buy Sound Shore Health System for $54 million plus furniture and equipment, according to the latter’s bankruptcy filing — which also reveals just how far the troubled Westchester health network had fallen into the red.

Sound Shore Medical Center in New Rochelle, Mount Vernon Hospital and five related entities have about $200 million in debts owed to more than 3,000 creditors, while possessing only $159.6 million in assets, the U.S. Bankruptcy Court documents show. Sound Shore filed for Chapter 11 bankruptcy protection Wednesday as the first step in discharging its debts and selling itself to the Montefiore system.

Why were they in the red?

You can read the full article "Westchester hospitals' sale price over $54 million; Hospitals' debt about $200M" in The Journal News for yourself at this link: http://www.lohud.com/article/20130530/NEWS/305300081/Westchester-hospitals-sale-price-over-54-million?odyssey=tab|topnews|text|News&gcheck=1, but there's this interesting passage:

... Beginning in 2006, the hospitals saw falling patient volume and a change in their case mix. That led to “significant” losses in recent years, negative cash book balances and bills paid more than 225 days late. A 2011 electronic medical record and billing system conversion caused major delays in billing and cash collection that still haven’t been fully solved.

(This passage has a familiar ring to it; e.g., see SEC Count 9 at "Florida Hospital gets an 'F' on Informatics" at  http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=miami.)

A 2011 EHR and billing conversion?  It's now 2013.

How many hospital IT personnel does it take to screw in implement a light bulb new EHR?

-- SS

Is the Patient Centered Outcomes Research Institute Really More Industry-Centered?

One of the biggest reasons our health care system seems so dysfunctional is that clinicians and patients have great difficulty determining what might be the appropriate management of particular clinical problems.  Due to endless and sometimes deceptive marketing, conflicts of interest affecting health care professionals and academics, and manipulation and suppression of clinical research, making truly evidence based decisions that put individual patients interests first has become very difficult.  Instead, we may end up using excessively expensive, relatively ineffective, and more dangerous than anticipated drugs, devices, and diagnostic and therapeutic strategies, thus leading to poor patient outcomes and high costs.

Background - the Patient-Centered Outcomes Research Institute (PCORI)

One lingering hope has been that better clinical research, particularly focusing on the outcomes that are most important to patients (patient-centered outcomes), and comparing clinical strategies that may be widely used but poorly evaluated (comparative effectiveness research) would help dissipate the fog.  An attempt to promote such research in the US appeared in our recent health reform legislation, the Affordable Care Act.  It authorized the creation of the Patient Centered Outcomes Research Institute (PCORI).

However, as we observed, how good a solution this would be would depend on the details.  Our concerns were that PCORI, which is an independent although government sponsored institute, not a government agency, might be too beholden to "stake-holders" including the large organizations, device and pharmaceutical companies, insurance companies, hospital systems, etc, that already dominate health care and may promote their and particularly their executives' interests ahead of patients.

Recently, Merrill Goozner, the editor of Modern Healthcare, raised similar concerns,

there is the law's requirement for stakeholder boards to set PCORI research priorities. They must include representatives of researchers, clinicians, patients, providers, insurers, employers and industry. The interests of those groups are not the same. Priority-setting by stakeholder boards could turn into a prescription for steering clear of the most controversial, and therefore most significant, questions.

So,

There is no shortage of drug and device firms, specialty hospitals and medical specialty societies with a vested interest in leaving certain questions unasked or muddying the waters with methodological quibbles. They shouldn't be allowed to hijack or soften the agenda.

PCORI is now in operation, but has seemingly not gotten a lot of scrutiny. What scrutiny it has received as not allayed these concerns.

The PCORI Advisory Panels

Recently, the publication of the membership of four key advisory panels for PCORI got the attention of  Michael Millenson, blogging on the Health Care Blog.  He noted that initially the members of the panels were identified only by name and city of residence, without any information on their other affiliations or characteristics.  He suggested,

PCORI isn’t a church, where all are created equal in the eyes of God, but a politically created, politically governed, controversial dispenser of a very large amount of money that a host of interest groups would like to control. PCORI staff chose the panel members in part by looking at their affiliations, and those connections (or lack of them) should be an immediate part of the public record when the appointments are announced. By being vague, PCORI obfuscates political and power relationships and makes it more difficult for the public and industry stakeholders to either approve of or criticize those choices.

Eventually, PCORI did release somewhat more information on membership of these panels, on Addressing Disparities, Assessment of Prevention, Diagnosis, and Treatment Options, Improving Healthcare Systems, and Patient Engagement.  Mr Millenson was able to review the membership of one panel, and noted some strange anomalies in a comment to his original blog post. 

One panel member who supposedly represents "patients, caregivers, and patient advocates" had a full time position with a pharmaceutical company.  Another worked for a big consumer organization which is heavily funded by the pharmaceutical industry.

This raised concerns that PCORI may get guidance from people whose interests are actually different from those they are supposed to represent.

Therefore, I attempted to review the stated affiliations of all PCORI advisory panels.

Review of the what was made public about the membership of the advisory panels revealed several additional important anomalies.  Members said to be representing "patients, caregivers, and patient advocates" appeared to have positions working for organizations who might have their own, and different interests from the group they were supposed to be representing. 

Let me summarize the apparent anomalies by advisory panel.  In each case, in alphabetical order by panel,  I will list the panelists name, supposed representation, and affiliation, with my comments. 

Addressing Disparities

Monique Carter MS - Dallas, TX
representing: patients, caregivers, and patient advocates
affiliation: Senior Research Scientist, AROG Pharmaceuticals Inc

So this person would appear to be more of an industry (pharmaceuticals) representative.

Venus Gines, MA, P/CHWI - Manvel, TX
representing: patients, caregiver, and patient advocates
affiliation: Instructor, Chronic Disease Prevention and Control Research Center, Department of Medicine, Baylor College of Medicine

So this person appears to be more of a clinician, or health system representative

Doriane C Miller MD - Chicago, IL
representing: patients, caregivers, and patient advocates
affiliation: Director, Center for Community Health and Vitality, University of Chicago Medical Center

So this person also appears to be more of a clinician, or health system representative.

Carmen E Reyes, MA - Whittier, CA
representing: patients, caregivers, and patient advocates
affiliation: Center and Community Relations Manager, Los Angeles Community Academic Partnership in Research in Again, UCLA

So this person appears to be more of a health system representative.

Mary Ann Sander, MHA, MBA, NHA - Pittsuburgh, PA
representing: patients, caregivers, and patient advocates
affiliation: Vice President, Aging  and Disability Services, UPMC Community Provider Services

So this person appears to be more of a health system representative

Deborah Steward, MD, MBA - Jacksonville, FL
representing: clinicians
affiliation: Florida Blue

So in summary, this panel included five people who ostensibly represent patients, caregivers, and patient advocates but who actually work for large academic medical centers or health systems, and one who was there to ostensibly represent patients, caregivers, and patient advocates who works for a pharmaceutical firm.  (In addition, one person supposedly representing clinicians apparently works full time for a health insurance company.)

Assessment of Prevention, Diagnosis, and Treatment Options

Karen Chesbrough, MPH - Annandale, VA
representing: patients, caregivers, and patient advocates
affiliation: Scientific Program Administrator, Foundation for Physical Therapy.

Note that the stated mission of the Foundation for Physical Therapy is that it "supports the physical therapy profession’s research needs," and the foundation is funded in part by companies that make physical therapy devices and supplies  (look here).  Therefore, this person appears to be more of a representative of clinicians, or perhaps industry (devices).

Bettye Green RN - South Bend, IN
representing: patients, caregivers, and patient advocates
affiliation: Community Outreach Nurse and Associate Director of Advocacy, Alliance for Clinical Trials in Oncology, Saint Joseph Regional Medical Center

So this person appears to be more of a health system representative.

Debra Madden - Newtown, CT
representing: patients, caregivers, and patient advocates
affiliation: Clinical Applications Systems Analyst, Associated Neurologists

So this person appears to be more of a clinician representative.

Daniel Wall - Spencer, WI
representing: patients, caregivers, and patient advocates
affiliation: Analyst, Biomedical Informatics Research Center, Marshfield Clinic Foundation

So this person appears to be more of a clinician or health system representative

So in summary, this panel included four people who ostensibly represent patients, caregivers, and patient advocates but who actually work for health systems or clinician organizations, and one of the latter organizations appears to be heavily funded by the medical device and supplies industry.

Improving Healthcare Systems

Susan Diaz MPAS, PA-C - Jacksonville, FL
representing patients, caregivers, and patient advocates
affiliation: Physician Assistant in Liver Transplant, Mayo Clinic in Florida

So this person appears to be more of a clinician, or health system representative.

Anne Sales PhD-  Ann Arbor, MI
representing: patients, caregivers, and patient advocates
affiliation: Professor, School of Nursing, University of Michigan

So this person appears to be more of a clinician, or health system representative.

Jamie Sullivan MPH - Silver Spring, MD
representing: patients, caregivers, and patient advocates
affiliation: Director of Public Policy, COPD Foundation.

Note that the COPD Foundation receives support at least from "Boehringer-Ingelheim/Pfizer Inc. and Grifols" (look here).  .

So this person appears to be at least somewhat an industry (pharmaceutical) representative.

So in summary, this panel includes three people who ostensibly represent patients, caregivers, and patient advocates, two of whom actually work for large health system, and one who works for a foundation with significant pharmaceutical industry support.  

Patient Engagement

Stephen Arcona MA PhD - East Hanover, NJ
representing patients, caregivers, and patient advocates
affiliation: Executive Director, Outcomes Research Methods & Analytics, Department of Health Economics and Outcomes Research, Novartis Pharmaceuticals Corporation

So this person appears to be more of a researcher, and industry (pharmaceutical) representative.

Marc Boutin JD - Washington, DC
representing patients, caregivers, and patient advocates
affiliation: Executive Vice President and Chief Operating Officer, National Health Council 

Note that while the National Health Council claims to be an advocate for people with chronic disease and disability, its core membership includes "major pharmaceutical, medical device, health insurance, and biotechnology companies." and it receives considerable industry support.  For example, it disclosed contributions in the $100,000 - $300,000 range from Amgen, Astra-Zeneca, Eli Lilly, Novartis, Pfizer, and the Pharmaceutical Research and Manufacturers of America (PhRMA), and smaller but still significant contributions from other pharmaceutical companies and other industry associations.  So this person appears to be at least somewhat of an industry (pharmaceutical) representative.

Charlotte W Collins JD - Elkridge, MD
representing patients, caregivers, and patient adovcates
affiliation: Vice President of Policy and Programs, Asthma and Allergy Foundation of America

Note that while the Asthma and Allergy Foundation of America claims to be a patient advocacy organization, it disclosed financial support from many pharmaceutical, device, and health insurance companies, and from major health care systems

So this person appears to be at least somewhat an industry, health insurance, and/or health system representative.

Amy Gibson, RN MS - Washington, DC
representing patients, caregivers, and patient advocates
affiliation: Chief Operating Officer, Patient-Centered Primary Care Collaborative (PCPCC)

Note that the PCPCC has an executive committee that includes multiple pharmaceutical, device, and health insurance companies, and health systems.  So this person appears to be at least somewhat an industry, health insurance, and/or health system representative.

Julie Ginn Moretz - Augusta, GA
representing patients, caregivers, and patient advocates
affiliation: Associate Vice Chancellor, Patient- and Family-Centered Care, University of Arkansas for Medical Sciences

So this person appears to be more of health system representative.

Sara Triagle van Geertruyden - Washington, DC
representing patients, caregivers, and patient advocates
affiliation: Executive Director, Partnership to Improve Patient Care (PIPC)
(Note: this affiliation appears incomplete.  Sara van Geertruyden is listed as a current partner of Thorn Run Partners, a lobbying firm, with a major practice area in health care, boasting, "Thorn Run Partners offers one of Washington, DC’s most comprehensive, competent and effective health policy practices."


Note also that PIPC has membership that includes many specialty physician societies, and a steering committee that includes the Biotechnology Industry Organization, and PhRMA. 

So this person appears to be more of an industry (pharmaceutical and biotechnology) representative.

So in summary this panel includes six members who ostensibly represent patients, caregivers, and patient advocates, but who work for either patient advocacy organizations that get considerable industry support, or a health system, or a pharmaceutical company.  One person whose affiliation was listed as a patient advocacy organization also somehow appears to be a full-time lobbyist.  

Summary

While PCORI has set up advisory panels that seem to strongly emphasize representation of patients, caregivers, and patient advocates, a substantial fraction of the people who are supposed to provide this representation seem to work for patient advocacy groups with considerable industry support, or directly for industry or health care systems.  Some of them may work as clinicians or researchers, but many appear to have high level executive positions with these organizations.  One appears to be a full-time lobbyist at a firm that has a strong health care practice. 

Thus it appears that PCORI advisory panels actually may be as much about the interests of big health care organizations, including pharmaceutical and device companies, health insurance companies, and large hospital systems, as they are about patients, caregivers, or patient advocates.  

I am afraid my and Merrill Goozner's original fears that PCORI may end up being more about industry-centered interests than patient-centered outcomes may not be paranoid.  I do hope that PCORI leadership manages to put improving patients' and the public's health ahead of making industry executives happy. 

by Roy M. Poses MD, for Health Care Renewal

Marin General Hospital's Nurses are Afraid a Defective EMR Implementation Will Harm or Kill Patients .. CEO Cites Defective HHS Paper and Red Herrings As Excuse Why He Knowingly Allows This To Continue

- Posted at the Healthcare Renewal Blog on May 30, 2013 -

The following appeared in the Marin County Independent Journal about an EHR system so bad the nurses at Marin General Hospital were publicly complaining, putting their careers at risk (see my May 17, 2013 post "Marin General Hospital nurses warn that new computer system is causing errors, call for time out"):

National critic of health care information technology says Marin General should heed nurses' advice

By Richard Halstead
Marin Independent Journal

Posted:   05/27/2013 04:03:00 PM PDT

The critic is me.   I spoke to the reporter but did not know he would publish:

A nationally known critic of electronic health records has harshly criticized managers at Marin General Hospital for their response to a plea by nurses to hold off on a new computer system to prevent potentially dangerous errors.

"The executives at the hospital should be taking out extra insurance policies because they're setting themselves up for a massive corporate negligence lawsuit," said Dr. Scot Silverstein, an adjunct professor of health care informatics at Drexel University in Philadelphia.

Silverstein, who contacted the Independent Journal after reading about the Marin General situation, doesn't dispute the potential of digital records; but he believes implementation has been rushed. He thinks electronic health records should be regulated by the federal Food and Drug Administration, much like medical hardware or pharmaceuticals.

Or regulated by someone with experience in similar mission critical software, and with regulatory teeth.  Paper tigers and bad health IT are a very poor mix where patients' rights are concerned IMO.

At issue is a new computerized physician order entry system, known as CPOE; doctors place medication orders for patients directly into the system.

At a meeting of the Marin Healthcare District board on May 14, a group of Marin General nurses told the board problems with the new computer system were diverting them from their patients and causing errors, such as sending orders to the wrong patients. One nurse reported that a patient had received a medication to which he was allergic.

That is a very direct calling out of the potential for harm and death by front line clinical personnel.  To ignore it is grossly if not criminally negligent.

Lee Domanico, who serves as the CEO of both Marin General and the Marin Healthcare District, assured the board that the hospital was safe, despite "glitches" in the new system. Domanico said he was working to fix the problem.

Glitches = safe?  The Board must be highly gullible if they believe this  See http://hcrenewal.blogspot.com/search/label/glitch for more on "safe" glitches.

Silverstein said, "Glitches are a euphemism for life-threatening electronic health record malfunctions and defects."


"What they need to do is exactly what the nurses are asking for," Silverstein said. "They need to turn the system off and put it through rigorous testing and confirm the thing is going to work properly with no glitches before they use it on patients."

That's not rocket science - its common sense - unless they think their own nurses are lying.

Of course, as computers have more rights than patients, and bonuses might be affected, the system will likely continue in full operation, with patients as guinea pigs, and the nurses punished for informing the public that perhaps they should consider other hospitals while the "glitches" in this enterprise clinician command-and-control system are worked out.

Two days after the Marin Healthcare District meeting, Domanico issued a press release stating, "We have not received any medication error incident reports resulting from the implementation of computerized physician order entry."

On Friday, however, Barbara Ryan, a Marin General registered nurse who serves as the California Nurses Association/National Nurses United representative, said, "I can't understand why that statement was made."

Ryan said nurses have told her of errors, and information about errors appears in "Assignment Despite Objection" forms that nurses have filed since implementation of the computerized order system began on May 7. Nurses file the forms to document formal objections to an unsafe, or potentially unsafe, patient care assignment.

The statement's reason and purpose seems fairly obvious. 

Ryan said Marin General nurses have filed close to 50 such forms so far this month; she said typically 10 to 20 such forms are filed per month at the hospital.

"There are still problems with the system," she said. "There are still mistakes being made." Ryan said the hospital needs to boost nurse staffing ratios during the implementation.

That would increase costs (and probably decrease the pool of money for bonuses).

Jon Friedenberg, Marin General's chief fund and business development officer, said the hospital is in the process of upgrading computer servers and adding memory to work stations to increase the speed of the new computerized order system.

"We completed an upgrade of memory to 200 of the work stations, and 120 of the work stations have been replaced," Friedenberg said.

This reminds me of a similar IT fiasco I faced some years ago, when the brilliance of IT personnel really shone through regarding an ICU monitoring system that crashed regularly.  Their solution?  Add more RAM.  (See "Serious clinical computing problems in the worst of places: an ICU" at http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=clinical%20computing%20problems%20in%20ICU).

... Silverstein earned a medical degree from Boston University and subsequently completed a two-year fellowship in medical informatics at Yale University School of Medicine. He served as Merck Research Laboratories' director of scientific information in the early 2000s before serving for a time as a full-time professor at Drexel University. Today, in addition to teaching part-time, Silverstein works on [EHR-related - ed.] medical liability cases for plaintiff attorneys. [And the defense too, when asked; I'd rather advise on how to prevent mistakes, in fact, than get involved after the fact when someone's been injured or killed - ed.]

What was not mentioned was that I was a CMIO in a major hospital in the mid to late 1990s.

But of course, I - and similarly trained Medical Informatics experts - "don't have enough experience" to lead (as opposed to being an 'internal consultant') health IT projects, a refrain I've often heard from hospital executives.

Silverstein said he started assisting on the liability cases after his mother died as the result of an electronic health care record error that resulted in her not being given the proper heart medicine. Silverstein said his mother's case was not an anomaly.

For example, he pointed to the results of a recent Emergency Care Research Institute study of 36 hospitals conducted over a nine-week period. Asked to report electronic record problems on a volunteer basis, Silverstein said the hospitals reported 170 malfunctions, including eight incidents that resulted in patient harm, three of which may have contributed to patients' deaths.  Although the federal Food and Drug Administration does not regulate health care information technology, some manufacturers have voluntarily supplied data to the FDA. In February 2010, the FDA reported it had been notified of 260 problem events involving health care information technology in the previous two years that were linked with 44 injuries and six deaths.

See my Feb. 28, 2013 post "Peering Underneath the Iceberg's Water Level: AMNews on the New ECRI Deep Dive Study of Health IT Events" at http://hcrenewal.blogspot.com/2013/02/peering-underneath-icebergs-water-level.html.  Also see my Aug. 5, 2010 post "Internal FDA memorandum of Feb. 23, 2010 to Jeffrey Shuren on HIT risks. Smoking gun? I report, you decide" at http://hcrenewal.blogspot.com/2010/08/smoking-gun-internal-fda-memorandum-of.html. I merely report what ECRI, AMA and FDA have reported.

Finally:

In his press release, however, [CEO] Domanico stated that "more than 150 studies conducted since 2007 have confirmed that organizations using health information technology, like CPOE, have seen positive outcomes."

I believe he's referring to a highly biased and scientifically defective ONC paper of 154 selected studies: "The Benefits Of Health Information Technology: A Review Of The Recent Literature Shows Predominantly Positive Results."

What an unbelievably cavalier attitude.

My colleagues and I refuted (dare I say trashed) that paper pretty thoroughly here:
http://hcrenewal.blogspot.com/2011/03/benefits-of-health-information.html.

Even worse, the mention of that paper, or EHR benefits in general, is a diversion, an in-your-face red herring (at best; an inability to reason logically at worst), steering away from the real issue:  an EHR implementation about which nurses are complaining ... in the now.

http://www.nizkor.org/features/fallacies/red-herring.html:  A Red Herring is a fallacy in which an irrelevant topic is presented in order to divert attention from the original issue.

That a CEO of a major hospital relies on one defective paper - one that he most likely lacks the experience and expertise to understand, let alone critically evaluate - and red herrings is a poster example of why medical and medical informatics amateurs should not be running hospitals or clinical IT projects.

-- SS

Ghosts in the Criminal Machine - How a Drug Company Can Plead Guilty to Federal Fraud, Yet No One is Held Responsible

We have often discussed how leaders of health care organizations have become increasingly unaccountable for their actions.  A recent, slightly obscure story shows how a corporate admission of guilt to a felony can be used to prevent anyone, including anyone in corporate management, from being held responsible for that fraud.

Basics of the Settlement

The case was that of ISTA Pharmaceuticals.  The basics appeared in brief wire service articles, like this one from Rueters (via Fox News):

Ista Pharmaceuticals pleaded guilty on Friday to charges it used kickbacks and improper marketing to boost sales of a drug meant to treat eye pain and agreed to pay $33.5 million to settle criminal and civil liability, the U.S. Department of Justice said.

The unit of eye care company Bausch & Lomb pleaded guilty to conspiracy to offer kickbacks to induce physicians to prescribe Xibrom, a drug meant to treat pain after cataract surgery, and conspiracy to promote that drug for unapproved uses, including after Lasik and glaucoma surgeries.

Ista agreed as part of a criminal settlement to a $16.63 million fine and an $1.85 million asset forfeiture. It also agreed to a $15 million civil settlement to resolve allegations that its marketing of Xibrom caused false claims to be submitted to government health care programs.

Kickbacks Disguised as Honoraria and Consulting Fees

Note that unlike many such legal settlements involving large health care organizations, this one involved admissions of guilt to felonious criminal offenses.  The severity of the charges apparently arose out of the egregious conduct of company executives.  Colorful details were supplied by the Buffalo (NY) News:

ISTA, which is based in California, admitted using kickbacks to doctors and an illegal marketing campaign as part of an elaborate scheme to increase its sales of Xibrom.

The scheme, outlined in detail in newly released court papers, ranged from company-provided instruction sheets for doctors to continuing medical education programs to promote the drug.

In many cases, ISTA employees were told not to leave printed materials behind in doctors’ offices or to keep records of their meetings with doctors in order to avoid detection by others.

The company went so far as to offer speaking engagements and consulting appearances to doctors in hopes that they might use Xibrom for non-authorized treatments.

Doctors can legally prescribe drugs for non-FDA approved treatments, but drugmakers are prohibited from promoting their products for those uses.

'Essentially they entered into consulting arrangements to induce physicians to prescribe their drug,' said Jeffrey I. Steger, a lawyer in the Consumer Protection Branch of the U.S. Department of Justice.

When [US District Judge Richard J] Arcara asked if money was the doctors’ motivation, Steger said yes.

'Thousands of dollars,' he told the judge.

So here we have a company admitting that it bribed doctors to prescribe its drug, and its techniques of administering bribes included paying the doctors honoraria to give talks, and paying the doctors as consultants.  As an aside, note that many defenders of "collaboration" among doctors and industry sign the praises of doctors "consulting" for industry, and often see nothing wrong with industry paying doctors for "educational" speeches.  Yet here is more evidence that such paid talks and consulting assignments may be nothing more than marketing, and at times are merely disguised bribery.

An Apparently Tough Penalty

An unusual feature of this settlement was that (per Reuters):

As part of the settlement, Ista will be barred from participating in Medicare and Medicaid,...

That would appear to be the death knell for the company, as reported by Reuters,

Bausch & Lomb, which is based in Rochester, New York, said it was pleased to settle the matter, which involved conduct between January 2006 and March 2011, and that it knew of the government probe well before it purchased Ista.

That purchase closed in June 2012 and Bausch and Lomb plans to wind down the Ista corporate entity by year end.

So Bausch and Lomb bought a company that turned out to be valueless?  But wait,...  there's a trick. 

As detailed in FiercePharma,

 ISTA will be barred from doing business with Medicare, Medicaid, et al, for 15 years. Luckily for Bausch + Lomb, however, it bought ISTA in June 2012,  late enough in the game to actually escape the ramifications of exclusion. The exclusion won't begin until 6 months after the settlement date, giving Bausch + Lomb time to transfer ISTA's products out of that subsidiary and shift the drugs over to the Bausch + Lomb label.

A Crime Committed by... No One?

So Bausch and Lomb gets ISTA's drugs, and essentially can resolve the company's felony convictions by relatively small fines, and through management sleight of hand, can finesse ISTA's disbarment from federal programs..  This will occur despite admissions that someone within ISTA, presumably within ISTA management, perhaps high up in ISTA management, per FiercePharma,

instructed reps to avoid leaving a paper trail of their off-label discussions with doctors. Prosecutors had enough evidence of this to persuade ISTA to plead guilty to a felony fraud charge. 'These instructions were given in order to avoid having their conduct relating to unapproved new uses being detected by others, the Justice Department said. 'ISTA agreed that this conduct represented an intent to defraud under the law.'

So felony fraud was committed, but no person apparently committed it.  It was as if a ghost committed the crime.

 

Not only was a crime committed, but apparently by nobody, the corporation within which the crime was committed also becomes obscure.  ISTA became responsible, but by being bought out by Bausch and Lomb, the more severe penalty directed against ISTA will be meaningless.  

 

Should Bausch and Lomb be responsible?  Of course, they claim they should not.  As reported by Bloomberg, 

 

 Rochester, New York-based Bausch & Lomb said the actions occurred 'well before' it acquired Ista in 2012. 

'Bausch & Lomb is committed to earning trust in everything that we do and is pleased to have resolved this pre-acquisition issue,' Bob Bailey, a Bausch & Lomb spokesman, said in a statement. 

In fact, The Hill reported that the bad behavior took place from 2005 to 2010: 

But consider that while ISTA recently became part of Bausch and Lomb, since 2007, Bausch and Lomb has been wholly owned by private equity firm Warburg Pincus.  In fact, as we discussed in in 2009, some people suspected that this maneuver would have allowed Baush and Lomb to settle multiple suits alleging that its products were faulty and dangerous out of the public eye.  So while ISTA is now really Bausch and Lomb is now really Warburg Pincus, no one in the management of ISTA, Bausch and Lomb, or Warburg Pincus apparently will be held responsible for criminal fraud and kickbacks to doctors, even though guilty pleas for these felonies have been made.  So somehow we have admissions that crimes were committed, crimes that compromised the integrity of doctors, and exposed patients to needless side effects, yet these crimes were apparently committed by ... nobody, by a ghost, and even the machine that ghost was in - was it ISTA, Bausch and Lomb, or Warburg Pincus? - becomes a mystery.  Where is Sherlock Holmes when we need him most?.

Summary

This case thus becomes a really striking example of the impunity of health care corporate managers.  They can commit crimes, even felonies, yet the company, but no human beings, is held responsible.  But the company being a company, it cannot go to jail.  And through the magic of obfuscatory corporate take-overs, which company is guilty is not even apparent. 

As we have said ad infinitum,

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