"Dreaming On" - The Illusions of the Leaders of Large Health Organizations, as Illustrated by Medtronic's Founder

CEO disease deception legal settlements Medtronic mission-hostile management

"Dreaming On" - The Illusions of the Leaders of Large Health Organizations, as Illustrated by Medtronic's Founder

Unknown 11/13/2015 Komentar

On Health Care Renewal, we have posted story after story about amazingly well paid leaders of big organizations presiding over amazingly bad organizational behavior (including subversion of mission, conflicts of interest, deception, fraud, kickbacks, various other crimes and outright corruption).  Yet the leaders often seem curiously disconnected from what occurs on their watches, while they are sometimes hailed as "visionaries," and at times exude messianic confidence.

Medtronic's Founder on its Sacred Mission

A recent article appearing in an unexpected place provides an example of leaders' excess confidence in their own righteousness.  In the IEEE (Institute of Electrical and Electronics Engineers) Institute was a commentary by Earl Bakken, the founder of medical device/ biotechnology giant Medtronic, modestly proclaiming the "secrets of corporate success."

Keep in mind that while Mr Bakken founded the company, at age 91, while no longer its leader, he proclaimed, " I stay involved with my company."  As such, he remains proud of its mission statement,

In 1960, when corporate mission statements were rare, I wrote one that has never changed. It remains the company’s guiding principle. There are six tenets, but the first one is the most important: To contribute to human welfare by application of biomedical engineering in the research, design, manufacture, and sale of instruments or appliances that alleviate pain, restore health, and extend life.

Starting in the 1970s, I met with all new employees, explained our history and mission, and in each of their hands I placed a medallion imprinted with the mission statement. I encouraged them to live by it—at work and at home.

Note that the official mission also includes,

To strive without reserve for the greatest possible reliability and quality in our products; to be the unsurpassed standard of comparison and to be recognized as a company of dedication, honesty, integrity, and service. [ital added]

Apparently, he believes that under the "visionary leadership" and "astute direction" of the current, this mission remains central to the organization.

At Medtronic, we live our mission. It’s the basis for how we behave in relationship to our stakeholders, each other, our communities, and the world. But it also guides our relationships with ourselves. We live the Medtronic Mission every day in truly genuine ways by serving others. I am proud to have a mission that is so deeply woven into the fabric of this company that improves millions of lives throughout the world.

Here’s to dreaming on.

Honesty? Integrity? - the Company's 10 Year Track Record 

I hate to disillusion a 91-year old, but in light of the company's last 10 year track record, as discussed on Health Care Renewal, he does appear to be in a dream world.


Medtronic has provided our blog with lots of material, including some amazing stories about conflicts of interest (starting in 2006, here, here, here, here, here, here, here, here, nad here,) and revolving doors  (here, here, here, and here). 

The company has also made a series of legal settlements of various allegations of infamous behavior, in chronological order...
 
2006

- We discussed detailed and vivid allegations that Medtronic had been paying off doctors starting in 2003.
 - Medtronic subsidiary Sofamor Danek settled for $40 million allegations that it gave kickbacks to doctors in the form of sham consulting fees and lavish trips (look here).

2007

As Bloomberg summarized in 2014,

Medtronic agreed in 2007 to pay about $130 million to settle consumer suits accusing the device maker of hiding defects in its defibrillators.

 2008

- Medtronic subsidiary Kyphon settled a suit for $75 million and signed a corporate integrity agreement for allegations that it defrauded Medicare through a scheme that lead to excessive hospitalization for patients who received the company's spine surgery device (link here)

2010

Per the Bloomberg 2014 summary again,

The company agreed to a $268 million settlement of suits in 2010 over allegations that fractured wires in another line of defibrillators caused at least 13 patient deaths.

2011

-  Medtroinic settled for $23.5 million two other federal lawsuits alleging it paid kickbacks to encourage physicians to implant its devices (look here).

2014  

In June, we discussed a settlement Medtronic made of allegations that  Medtronic gave kickbacks (that is, bribes) to doctors to get them to use its cardiac devices.

2015

In April, 2015 we discussed three settlements made by Medtronic:
- Its subsidiary EV3 settled old allegations that it coached hospitals how to overbill the US government for procedures using its products
- The company settled allegations it gave kickbacks to physicians to induce them to use its neuromodulation devices.
- The company settled allegations it lied to the US military about US origins of its devices.

(And by the way, we will not belabor the contrast between the statement's committment to "recognize the personal worth of employees," and the gargantuan payments made to certain employees, that is, the top managers, all who got over $3.5 million in 2014, and the "visionary" CEO, who got over $12 million, look here. )

Summary

Someone needs to wake up Mr Bakken.  He may still believe in the mission statement, and wish that it is central to his company.  However, the track record seems to suggest that the mission statement has been honored often in the breach.

Perhaps the problem is that Mr Bakken is really much more detached from the company he founded than he now admits.  However, I worry that this immensely positive spin suggests that he, like many other health care oragnizational leaders, live in some sort of bubble into which no negative karma is allowed to penetrate.  Thus convinced of their own innate goodness, they can provide no check on continuing manifestations of corporate greed, most likely with the solace of the own fortunes they build up. 

IMHO, we need to break up these huge health care organizations which have become so big that those who run them cannot be in touch with what really goes on.  We need to reestablish the accountablity of leaders, and no longer allow them to get credit for all the good that happens, and dodge responsibility for all the bad.  True health care reform would entirely transform health care leadership, so that it can become well-informed, supportive of the mission, unconflicted, less self-interested, honest, and certainly law abiding. 

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Northwestern Upholds its "Brand," Never Mind Free Speech and Academic Freedom

academic freedom anechoic effect bioethics censorship free speech mission-hostile management Northwestern University

Northwestern Upholds its "Brand," Never Mind Free Speech and Academic Freedom

Unknown 9/03/2015 Komentar

Threats to free speech and academic freedom in health care were a major concern when we started Health Care Renewal.  Such threats may now be less anechoic, but do not seem to have diminished.

Censorship and the Resignation of Alice Dreger

The latest example was at Northwestern University. The basics of the case appeared in the Chronicle of Higher Education. Alice Dreger just resigned her position of 10 years as "a clinical professor of medical humanities and bioethics."

What prompted her departure was the fallout over an article by William Peace, who at the time was a visiting professor in the humanities at Syracuse University. Mr. Peace wrote an essay for an issue of the journal, Atrium, that Ms. Dreger guest-edited. The essay is a frank account of a nurse who helped Mr. Peace regain his sexual function after he was paralyzed.

According to Ms. Dreger, Eric G. Neilson, vice president for medical affairs and dean of the university’s school of medicine, tried to censor the essay. The essay is straightforward in its description of sex, and includes multiple mentions of 'the dick police,' but the purpose is to illuminate what went on in the era prior to disability rights and studies.

As Mr. Peace writes, the unconventional approach of the unnamed nurse 'injected a compassionate eroticism that made me a better man.'

In her letter, Ms. Dreger writes that the university allowed the essay to be published online only after she and Mr. Peace threatened to talk publicly about what they saw as censorship. She writes that she was 'disgusted that the fear of bad publicity was apparently the only thing that could move this institution to stop censorship.'

Now the essay is out there, for all to see, 'dick police' and all. So what does Ms. Dreger want?

She asked the university to acknowledge that attempting to remove portions of the essay was a mistake and to promise not to do so in the future. 'They never acknowledged that the censorship was real,' Ms. Dreger said in an interview. 'I wanted a concrete acknowledgment and assurance that my work would not be subject to monitoring.' That, she said, would have been enough for her to remain.

The idea that institutions must acknowledge wrongdoing is central to Ms. Dreger's academic work.

More details about university managers' alleged attempts to control the content of an academic journal emerged in an article in the local newspaper, that is, the Chicago Tribune.  The managers wanted to appoint their own oversight committee to control journal content.

The journal Atrium stopped publication after faculty objected to the new oversight committee, which [University spokesman Alan] Cubbage has described as 'an editorial board of faculty members and others, as is customary for academic journals.'

Note, however,  that editorial boards are usually appointed by journal editors, not managers or executives.

Also, as noted in an article in Inside Higher Ed,

Dreger, who guest-edited the 'Bad Girls' issue [in which the controversial article first appeared], said that soon after publication, medical school administrators asked Atrium’s editors to remove the essay from the web, because the content was considered inflammatory and too damaging to the new Northwestern Medicine 'brand.' (Northwestern Memorial Health Care recently acquired Northwestern’s Feinberg School of Medicine faculty practice and merged with Cadence Health to operate under the Northwestern Medicine banner.) The editor, another faculty member, refused to single out one article for censorship and took down the journal’s web archive instead.

Furthermore, the university administration's reaction to the publication of the article prompted another resignation,

The controversy prompted the resignation of Kristi Kirschner, a former clinical professor humanities and bioethics at Feinberg, in 2014. Kirschner, now an adjunct professor of disability and human development at the University of Illinois at Chicago, told Inside Higher Ed earlier this summer that the alleged censorship had a 'chilling effect, antithetical to the idea of the university.'

As for that "chilling effect,"

A university spokesman declined to comment on Dreger’s case on Tuesday, saying it was a personnel issue. He also declined to answer general questions about censorship or the status of Atrium, which recently had its funding reduced, causing the journal to be canceled.

Atrium’s editor, Katie Watson, an assistant professor of bioethics and medical humanities, declined an interview but said the funding cut was not related to the 'Bad Girls' issue or censorship.

She referred additional questions to a post she wrote for Peace’s blog, Bad Cripple, in June, in which she said that she was disappointed with Peace for taking certain details of the case public, and in which she confirmed that a university content oversight committee meeting had been 'disheartening.'

"[T]he medical school required me to allow a vetting committee to review my editorial choices and veto them if they were perceived to conflict with other institutional interests," Watson wrote.

So note that the allegations of censorship have come from at least three separate faculty members at Northwestern, and from the author of the censored article, a faculty member at another institution.  Furthermore, on university spokesperson has contradicted these charges.  

Previous Mysterious Events at Northwestern

Of further concern is that this case may be part of a pattern.

Two years ago we wrote (here and here) about another case, albeit mysterious and convoluted, at Northwestern in which a faculty member, Dr Charles Bennett, resigned after being accused of mismanaging the finances of a government grant.  However, although he was responsible for the scientific management of the project, university managers, nor Dr Bennet, were responsible for its finances.  While the university settled allegations of financial mismanagement, and a university staffer pleaded guilty to related charges, a university statement implied that it was mainly Dr Bennett's fault, per the Cancer Letter

'As the settlement makes clear, the covered conduct in the settlement involved allegations focused on Dr. Charles Bennett, and grants for which Dr. Bennett was the principal investigator,' Northwestern officials said in a statement.

In addition,

The statement was signed by Northwestern President Morton Schapiro, Provost Daniel Linzer, and Vice President for Medical Affairs and Dean of the Feinberg School of Medicine Eric Neilson.

Note that the Vice President and Dean Neilsen above was the same Dean who Prof Dreger accused of trying to censor her journal.

Suspicions were raised at that time that the treatment of Dr Bennett might have been somehow related to how he made himself unpopular by authoring research that suggested Aranesp, a blockbuster Amgen epoetin drug, was much more dangerous than it seemed.  The Cancer Letter had interviewed one of Dr Bennett's collaborators,

[Michael]  Henke confesses to wondering whether the many powerful enemies Bennett made in the pharmaceutical and biotechnology industries have struck back.

'We shouldn’t feed paranoia,' Henke said. 'However, given the exclusively positive experience when collaborating with his group, makes me wonder whether this litigation might follow some very particular other issues.'

And recently the editor of the Cancer Letter, and the author of the above article, has been fighting subpeonas from Amgen intended to make him reveal his sources of negative information about Aranesp, (look here and here).

As far as I can tell, the questions I raised about the case of Dr Bennett (look here and here) have never been answered.

Nonetheless, the case of Prof Dreger has also been rather anechoic.  It was also covered by the Times of London Higher Education Supplement, and inspired comment from FIRE, but has otherwise not gotten national media attention, or any apparent coverage in medical or health care journals.  

Sometimes you may be paranoid, and sometimes someone may be out to get you.
Summary and Comments

So, to summarize, multiple sources suggested that top Northwestern Medicine leadership attempted to censor an academic publication edited and led by university faculty.  After publication of an article apparently controversial for its sexual content, but which likely also brought up valid issues about compassionate treatment of disabled patients versus traditional ethical concerns about boundary issues for health professionals, university leaders imposed an oversight committee which apparently was more concerned about the instiution's "brand" and other "institutional interests" than about free discussion of important health care issues.  The chilling effects of this attempt at censorship seemed to include resignations by two faculty members, and the demise of the journal.

Thus it appears that the managers were putting public relations and revenue concerns ahead of the fundamental academic values of free speech and academic freedom, thereby threatening these values.  In a post on Bioethics.net, Craig Klugman reminded us,

 According to the American Association of University Professors (1940):
'Academic freedom is essential to these purposes [the search for truth and its free exposition] and applies to both teaching and research. Freedom in research is fundamental to the advancement of truth.'

Cary Nelson, president of the AAUP and an English professor says that academic freedom:
'Gives both students and faculty the right to express their views — in speech, writing, and through electronic communication, both on and off campus — without fear of sanction, unless the manner of expression substantially impairs the rights of others or, in the case of faculty members, those views demonstrate that they are professionally ignorant, incompetent, or dishonest with regard to their discipline or fields of expertise.'

Even the American Society for Bioethics & Humanities, which is known for not taking positions on 'substantive moral and policy issues,' does take positions to support academic freedom and has done so in the past.

Since 1940, the notion of academic freedom has been a core tenet of university and faculty life. The idea was born in response to centralized governments telling researchers what they could and could not study and what they should and should not teach.

So free expression and academic freedom remain under threat in academic health care institutions. These threats seem in part to stem from managers' continuing inclinations to put commercial concerns ahead of the academic mission, perhaps fueled by prodigious amounts of money waved around by health care corporations looking to make their marketing appear more scientifically based.  These threats may be partially enabled by the anechoic effect, a sort of second order self censorship, so that cases of censorship are another kind of recent unpleasantness that get little public attention.

Students, health care professsionals, and faculty members who care about medical education and research ought to be asking some hard questions about the leadership of their organizations.  It looks like Northwestern students, trainees, and faculty members could have lots of questions to ask.

As we have said until blue in the face, true health care reform would enable leadership of health care organizations that upholds and is willing to be accountable for putting patients' and the public's health first, and leadership of health care academic organizations that also puts honest, transparent research and education ahead of commercial interests.   

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With 10 Health Care Executives on it Board, US Chamber of Commerce Defends Big Tobacco Abroad

Abbott Celgene mission-hostile management Pfizer Sanofi-Aventis Steward Health Care tobacco US Chamber of Commerce WellPoint

With 10 Health Care Executives on it Board, US Chamber of Commerce Defends Big Tobacco Abroad

Unknown 8/17/2015 Komentar

Tobacco, especially smoked in cigarettes, is generally recognized by health care professionals as having health hazards that greatly outweigh its benefits to society.  Therefore, most health care organizations discourage tobacco use, and many have developed tobacco free policies.

However, the tobacco industry has its powerful supporters.  A recent NY Times investigative report, and a report entitled "Blowing Smoke for Big Tobacco," documented how the US Chamber of Commerce has defended the interests of tobacco companies overseas.  The apparent paradox here is that the leadership of the US Chamber of Commerce includes leaders of large health care organizations.  So far this paradox has not been explained by the parties involved.

How the US Chamber of Commerce Promotes Tobacco Interests Abroad

The NY Times Articles

On June 30, 2015, the NY Times published a wide ranging report on the pro-tobacco activities of the US Chamber of Commerce,

From Ukraine to Uruguay, Moldova to the Philippines, the U.S. Chamber of Commerce and its foreign affiliates have become the hammer for the tobacco industry, engaging in a worldwide effort to fight antismoking laws of all kinds, according to interviews with government ministers, lobbyists, lawmakers and public health groups in Asia, Europe, Latin America and the United States.

The U.S. Chamber’s work in support of the tobacco industry in recent years has emerged as a priority at the same time the industry has faced one of the most serious threats in its history. A global treaty, negotiated through the World Health Organization, mandates anti-smoking measures and also seeks to curb the influence of the tobacco industry in policy making. The treaty, which took effect in 2005, has been ratified by 179 countries; holdouts include Cuba, Haiti and the United States.

Facing a wave of new legislation around the world, the tobacco lobby has turned for help to the U.S. Chamber of Commerce, with the weight of American business behind it. While the chamber’s global tobacco lobbying has been largely hidden from public view, its influence has been widely felt.

Letters, emails and other documents from foreign governments, the chamber’s affiliates and antismoking groups, which were reviewed by The New York Times, show how the chamber has embraced the challenge, undertaking a three-pronged strategy in its global campaign to advance the interests of the tobacco industry.

In the capitals of far-flung nations, the chamber lobbies alongside its foreign affiliates to beat back antismoking laws.

In trade forums, the chamber pits countries against one another. The Ukrainian prime minister, Arseniy Yatsenyuk, recently revealed that his country’s case against Australia was prompted by a complaint from the U.S. Chamber.

And in Washington, Thomas J. Donohue, the chief executive of the chamber, has personally taken part in lobbying to defend the ability of the tobacco industry to sue under future international treaties, notably the Trans-Pacific Partnership, a trade agreement being negotiated between the United States and several Pacific Rim nations.

'They represent the interests of the tobacco industry,' said Dr. Vera Luiza da Costa e Silva, the head of the Secretariat that oversees the W.H.O treaty,...

The NYT asked the Chamber of Commerce for a response, and got only

The U.S. Chamber issued brief statements in response to inquiries. 'The Chamber regularly reaches out to governments around the world to urge them to avoid measures that discriminate against particular companies or industries, undermine their trademarks or brands, or destroy their intellectual property,' the statement said, adding, 'we’ve worked with a broad array of business organizations at home and abroad to defend these principles.'

The chamber declined to say if it supported any measures to curb smoking.

"Blowing Smoke for Big Tobacco"

Two weeks after the first NY Times article, a group of nine organizations including Campaign for Tobacco Free Kids, Corporate Accountability International, and Public Citizen released a report on the US Chamber of Commerce pro-tobacco actions. A summary article in the Huffington Post written by representatives of the latter two organizations included,

Our report and a two-part New York Times investigation shows that, while the Chamber throws its weight around in many Global South countries to protect its corporate members' interests, Big Tobacco has also pushed it to adopt particularly aggressive and radical positions in order to undermine the cascade of public health laws being passed as a result of the success of the global tobacco treaty.

In particular,

For tobacco control advocates familiar with this deadly industry's tactics, the Chamber's work in this space comes as no surprise. Internal documents tell us that as the tobacco industry lost its public credibility, it began to use third parties to advocate on its behalf.

Case studies in our report, from Africa to Latin America, make it clear that Big Tobacco is doggedly pursuing this strategy with the U.S. Chamber and its affiliates in Global South countries. In countries the tobacco industry has targeted around the world, the Chamber is delivering threatening letters that cast doubt on the science behind tobacco control, exaggerating exaggerate the economic impacts repercussions of proven measures like tobacco taxation and crying wolf about explosions in illicit trade. In pursuing these actions, the Chamber and its AmCham affiliates are exporting well-documented tobacco industry tactics to block health laws around the globe.

And as the New York Times points out in its investigation, (and then advocates that countries resist in their recent editorial: Tarred by Tobacco), these tactics are in some cases drafted by Big Tobacco executives themselves.

Who Runs the US Chamber of Commerce?

A 2010 MotherJones article noted that the US Chamber of Commerce as having a "name that evokes Main Street and Little League teams," and its history of "taking a moderate, nonpartisan approach."  So who is responsible for the US Chamber of Commerce becoming a tobacco advocate, at least outside of the US?

First, the Chamber has become more the creature of the biggest corporations than small businesses.  The MotherJones article noted that recently

The Chamber's politics became synonymous with its biggest corporate donors.  [Chamber President Tom] Donohue established special accounts for companies that feared taking controversial public stands, allowing them to anonymously funnel money to the Chamber, which advocated on their behalf.

Furthermore,

The Chamber claims that 96 percent of its members are small businesses, yet its self-seleted board includes just 6 representatives from small businesses, 1 from a local chamber, and 111 from large corporations.

Among these large corporations, tobacco corporations seem to be particularly influential.  The NY Times article noted,

The increasing global advocacy highlights the chamber’s enduring ties to the tobacco industry, which in years past centered on American regulation of cigarettes. A top executive at the tobacco giant Altria Group serves on the chamber’s board. Philip Morris International plays a leading role in the global campaign; one executive drafted a position paper used by a chamber affiliate in Brussels, while another accompanied a chamber executive to a meeting with the Philippine ambassador in Washington to lobby against a cigarette-tax increase. The cigarette makers’ payments to the chamber are not disclosed.

Yet the Chamber's governance also ostensibly includes health care viewpoints.  Its current board includes 10 member who are executives of large health care organizations:

- Richard Bagger Senior Vice President, Corporate Affairs & Strategic Market Access, Celgene Corporation, [biopharmaceutical company] Summit, NJ
- John Cannon Executive Vice President & Chief Administrative Officer, Health Care Service Corporation, [health insurance company] Chicago, IL
- Ken W. Cole Senior Vice President, Government Relations, Pfizer, Inc., [pharmaceutical company] Washington, DC
- Wayne S. DeVeydt Executive Vice President and Chief Financial Officer, Anthem, Inc., [health insurance company, formerly Wellpoint] Indianapolis, IN
- Ralph de la Torre, MD Chairman and CEO, Steward Health Care System LLC, [for-profit hospital system, owned by Cerberus Capital Management] Boston, MA
- Fuad El-Hibri Executive Chairman, Emergent BioSolutions Inc. [biopharmaceutical company] Gaithersburg, MD
- Daniel F. Evans, Jr. President & Chief Executive Officer, Indiana University Health, [non-profit hospital system] Indianapolis, IN
- Gregory Irace President and Chief Executive Officer, Sanofi US Services Inc., [US subsidiary of French pharmaceutical company] Bridgewater, NJ
- Paul J. Klaassen Founder, Sunrise Senior Living, Inc., [for-profit provider of nursing care, hospice care, etc] Arlington, VA
- Elaine R. Leavenworth Senior Vice President, Chief Marketing and External Affairs Officer, Abbott Laboratories, [pharmaceutical and device company] Abbott Park, IL

These organizations ostensibly are all about promoting or sustaining individual or population health.  Executives of these organizations serving on the board of the US Chamber of Commerce are responsible for the governance and stewardship of the Chamber.  How could they square the missions of the organizations which the lead, and their responsibility for the Chamber's pro-tobacco stance?

The Health Care Organizations Dodge the Question

The answer to that question is elusive.

The NY Times article stated,

It is not clear how the chamber’s campaign reflects the interests of its broader membership, which includes technology companies like Google, pharmaceutical giants like Pfizer and health insurers like Anthem.

An accompanying NY Times editorial added,

Health insurance and hospital companies that are members of the U.S. Chamber of Commerce find themselves in an uncomfortable situation. Publicly, these companies support policies designed to reduce smoking, but the chamber, as Danny Hakim recently reported, has opposed anti-smoking measures around the world.

The controversy appears to have surprised health-related businesses like Anthem, one of the nation’s biggest health insurers, and Steward Health Care Systems of Boston, which have executives on the board of the chamber. 'If the chamber is in fact advocating for increased smoking, we do not agree with them on this public health issue,' a spokeswoman for Steward said in a statement to The Times.

In an article in the Indianapolis Business Journal, J K Wall recounted how he tried to get a substantive response to the NY Times article from Indiana University Health, whose President is on the Chamber board,

Indiana University Health CEO Dan Evans is one of the most anti-smoking health care executives I know.

Just a few months after I started covering health care for IBJ in 2007, Evans told me in an interview that Indiana employees 'should snatch the cigarettes out of their co-workers mouths and say, ‘Hey, you’re costing me money!’'

However, Evans was not available, and the only response was this statement from a spokesperson

We are proud of the many programs we have in place for smoking prevention and cessation, as well as health promotion and screenings for our team members, patients and members of the community. IU Health has been and will continue to be a leader in Indiana to prevent and curtail the use of tobacco products.

IU Health is a member of many diverse state and national organizations to support our public policy goals including the U.S. Chamber of Commerce and the Indiana State Chamber of Commerce. We are talking with U.S. Chamber leadership about the facts surrounding recent stories in the NY Times and will strongly encourage the U.S. Chamber to review its international programs to ensure they are consistent with its own stated policy to oppose smoking and promote wellness.

Similarly, a follow up story in the New York Times documented this response from Anthem, (formerly Wellpoint), whose Executive Vice President and CFO is on the Chamber board,

Anthem said it was 'dedicated to helping people quit smoking and has led the charge to end tobacco use.'

'Anthem has shared its strong, longstanding position with the chamber and will continue to address our concerns with the chamber directly,' the statement said.

Likewise, the Times noted this response from

Greg Thompson, a spokesman for the Health Care Service Corporation, said in a statement last week: 'We are convinced that ending smoking may help people live longer, enjoy a better quality of life and reduce costs in our health care system.'

'This is a point of view we have advocated for decades and made clear to organizations that we support.'

Those seem to be the only public responses from companies whose leadership is represented on the Chamber of Commerce board. They all ignored the main issue.  None of them seemed informed by the role their companies' executives on the Chamber of Commerce board play.  None of the executives or the companies for whom they worked acknowledged any accountability for the Board's vigorous foreign campaign of pro-tobacco activities.

The Times did note that Chamber of Commerce member CVS, which is not specifically represented on the Chamber board, and which recently stopped selling tobacco products, withdrew from Chamber membership. But as a simply a member of the Chamber, it had little direct responsibility for the Chamber's actions.

Discussion

US health care is increasingly dominated by large organizations.  Most of these organizations like to portray themselves as warm and fuzzy supporters of individual and population health.  For example, Pfizer has a statement of responsibility which begins

As a member of today’s rapidly changing global community, we are striving to adapt to the evolving needs of society and contribute to the overall health and wellness of our world.

Anthem's statement includes

Anthem is dedicated to delivering better care to our members, providing greater value to our customers and helping improve the health of our communities.

Yet on Health Care Renewal, we have documented actions by leaders of health care organizations that directly contradict their lofty mission statements, and may have threatened patients' or the public's health.

In its aggressive international promotion of tobacco interests, the US Chamber of Commerce appears to be promoting the use of products that directly threaten individual's and the public's health.  Even though the Chamber protested that it was merely reaching out

to governments around the world to urge them to avoid measures that discriminate against particular companies or industries, undermine their trademarks or brands...

their protestation ignored how tobacco is a different product than that of nearly all industries.  It seems inherently dangerous to patient's the and public's health even when used as intended, and has no known health or societal benefits that even partially compensate for its risks.  Therefore, what is the argument not to discriminate those who make and promote such an inherently dangerous product from those who make products that do not threaten health, or provide obvious benefits that may compensate for their risks?

It is obvious why tobacco companies might want the Chamber's support.  What, however, could be the rationale for executives of corporations pledge to promote health to preside over the international promotion of tobacco?

The executives on the Chamber board, and their companies have not as yet even tried to provide an answer.

Thus, in the absence of better responses, in my humble opinion the presence of health care executives on the US Chamber of Commerce board is another example - an important one - of mission-hostile actions by top leaders of US health care organizations.

As we have said far too many times - without much impact so far, unfortunately - 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.

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Who Benefits? - Rising Generic Drug Prices and the Case of Mylan's Conflicted Property Purchases

boards of directors conflicts of interest executive compensation mission-hostile management Mylan perverse incentives

Who Benefits? - Rising Generic Drug Prices and the Case of Mylan's Conflicted Property Purchases

Unknown 7/09/2015 Komentar

Rising Generic Drug Prices

Health care costs in the US continue their seemingly inexorable rise.  Even the parts of health care that used to seem reasonably priced now are affected.  As Ed Silverman discussed on PharmaLot

prices for many generic drugs have been climbing, prompting concerns that a low-cost staple of the U.S. health care system might soon strain budgets.

Generic drugs, like practically every other part of US health care, have become big business.  As a Forbes article pointed out, the industry is becoming more consolidated, and more likely to suffer from manufacturing and regulatory issues.  However, there may be other reasons for increasing generic drug costs.

Case: Mylan Purchased Properties Developed by its Own Board Vice Chair

A recent Wall Street Journal scoop on the big generic pharmaceutical company Mylan suggested that maybe such companies are now suffering from the same leadership and governance ills we have been finding throughout US - and indeed global - health care.  Furthermore, to understand the impacts of such health care dysfunction, one must consider the incentives that underlie them, that is, who benefits?

The story concentrated on some dodgy deals involving the company and firms linked to the Vice Chairman of its board of directors.  The first part of the story was:

Generic-drug maker Mylan NV moved into new headquarters in December 2013 after buying vacant land in an office park near Pittsburgh and erecting a five-story building for about 700 employees.

The company hasn’t publicly disclosed that the office park’s main developer is Rodney Piatt, Mylan’s vice chairman, lead independent director and compensation-committee chief. The new headquarters was a big boost for the mixed-use real-estate development, called Southpointe II, where all the land has been sold and some of the last buildings are now rising.

Securities regulators require public companies to tell shareholders about any significant transactions with directors, executives or other 'related persons.' Members of boardroom compensation committees have special duties under securities and tax laws to avoid dealings that compromise their independence.

Mylan, now fighting a three-way takeover battle in the pharmaceutical industry, says there was no need to disclose Mr. Piatt’s connection to the $60 million real-estate project because he and the company avoided any direct dealings with each other.

The day before Mylan announced plans to build the new headquarters, a company managed and partly owned by Mr. Piatt sold a 7-acre site for $1 to an entity owned by a business partner in Southpointe II, according to property records reviewed by The Wall Street Journal. The partner’s firm sold the same land to Mylan for $2.9 million later the same day.

Also,

Real-estate records show a similar transaction in May. Mylan paid $9.2 million to buy an adjacent 11 acres from Mr. Miller, whose firm previously bought the land for $10 from a company partly owned by Mr. Piatt.

'Mr. Piatt was not a party to either transaction' involving Mylan and 'had no direct or indirect material interest in the transactions,' says a Mylan spokeswoman.

She adds that Mr. Piatt didn’t make a profit on either sale to Mylan because Mr. Miller separately arranged to buy out Mr. Piatt at cost and then sold the land directly to Mylan. Mr. Piatt didn’t return calls seeking comment.

Note however that

Securities rules require disclosure of any transaction of more than $120,000 where a related person will have a direct or indirect material interest, regardless of whether the person makes a profit.

In the case of compensation-committee members, related-party transactions can jeopardize the independence required of them under tax and securities rules. That can threaten the tax-favored status of some executive-pay programs and require executives to disgorge some of their gains on stock sales.

Some securities-law and corporate-governance experts say Mylan should have been more transparent about the real-estate transactions or handled them differently.

'The optics are terrible,' says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware and a director at HealthSouth Corp. and Bob Evans Farms Inc. 'Pittsburgh is a big town with no shortage of real estate. Either they could have gone somewhere else, or [Mr. Piatt] could have relinquished the directorship and eliminated the conflict.'

Just to emphasize the questions about Mr Piatt's independence,

The new headquarters is named the Robert J. Coury Global Center, after Mylan’s executive chairman. Mr. Coury, 54, was chief executive from 2002 to 2012.

A few months after the project’s approval by local officials, Mr. Piatt signed a pension amendment that increased the value of Mr. Coury’s promised benefits by 40%. His overall pension of $48.8 million is 11th-largest among executives at U.S. publicly traded companies, according to Standard & Poor’s ExecuComp.

Further muddying the waters,

During construction, Mylan hired project-management firm RIZ Consulting & Management Inc. to oversee the general contractor and architect. RIZ has the same business address and phone number as Mr. Piatt’s real-estate company, and he is listed as the contact person for RIZ in the local chamber of commerce’s membership directory.

RIZ’s president also is a top executive at Mr. Piatt’s company, and some employees of Mr. Piatt’s company worked for RIZ on the project, according to state records, construction documents and the minutes of permit meetings. RIZ’s president didn’t return calls seeking comment.

'They set it up that way because [Mr. Piatt] sits on the board of Mylan,' says Jeff Yates, a project manager with PJ Dick Inc., the general contractor for the Mylan headquarters project. 'It was kind of a conflict of interest, [so] RIZ was a separate company set up to be the owner’s rep.'

We often discuss how health care is tangled in a vast web of conflicts of interest.  The kinds of apparent conflicts of interest in play in this case are somewhat different from those we frequently discuss, but still seem part of this web.

In the last few days, other Pittsburgh newspapers have jumped into the fray, and found their own experts to question these deals.  Per the Post-Gazette,

'It doesn’t pass the smell test'” said Mel Fugate, a management professor at Southern Methodist University.  Mr. Fugate said that while the SEC places legal requirements on which transactions must be disclosed, the legal obligations are 'the lowest hurdle of them all.'

'This smells bad … even if they can prove legally there are no conflicts' he said.

Again, as noted above the law in certain instances may define conflicts of interest more narrowly than ethical definitions.  For example, the Institute of Medicine defined conflicts of interest in medicine: occurring "when an individual or institution has a secondary interest that creates a risk of undue influence on decisions or actions affecting a primary interest."

The Tribune weighed in,

'The whole thing stinks,' said Douglas Branson, a University of Pittsburgh law professor and an expert in corporate governance. 

Board members'have to serve the best interest of the corporation,' he said. 'You can't be both a seller and buyer — that's the classic definition of conflict of interest.

So here we see serious allegations of conflicts of interest affecting the Vice Chair of the Mylan board, and perhaps affecting another board member and former CEO.  These conflicts suggest that company operations could have been manipulated for these individuals' benefits.

Other Questions about Mylan's Leadership and Governance

Yet these are not the only examples of questions about Mylans' leadership and governance, questions which suggest that managers and board members may have been putting personal gain ahead of the larger interests of the corporation, its shareholders, and the patients who take its drugs


A Pittsburgh Business Journal article noted the "allegations of impropriety" raised by the current case, but also hinted at larger problems with the leadership and governance of Mylan.


Current CEO's Invalid MBA

Per the Pittsburgh Business Journal

Mylan (Nasdaq: MYL) has had ethics questions in the past. An MBA awarded to CEO Heather Bresch was withdrawn in 2008 following an investigation that found she didn’t complete the necessary course credits.

However, that finding did not apparently affect her ongoing career trajectory at Mylan

Former CEO's Use of Company Jet to Help Son's Rock Music Career

The Pittsburgh Business Journal also stated,

And in 2012, the Wall Street Journal found that [former CEO] Coury transported his son to rock concerts on the corporate jet, which was allowed as part of his employee benefits package.

That WSJ article emphasized,

 Nina Devlin, a spokeswoman for Pittsburgh-based Mylan, said Mr. Coury's employment contracts have allowed outside personal activities, 'including those related to his son Tino's career.' She said Mr. Coury isn't required to use the corporate jets but his employment contracts for the past decade have allowed personal use by him and his family.

Thus these contracts apparently allowed valuable Mylan resources to be expended in support of the former CEO's son's career, even though Tino did not apparently have any direct role in the company. Note that these revelations also apparently did not affect Mr Coury's career trajectory with the company, nor did those below.

Transactions Between Former CEO's Brothers and Mylan

That same WSJ article also found,

 This wasn't the only business relationship between the elder Mr. Coury and his brothers. Coury Investment Advisors, a company in which two of his brothers, Gregg and Paul, are principals, has served as a broker for Mylan's employee-benefit plans. Various insurers paid them $597,000 in the past three years for Mylan-related business, according to U.S. Labor Department filings.

That appeared to be another conflict of interest, benefiting different members of the former CEO's family.

However, that is still not the whole story.  A quick look through our magic files, and Google, revealed some other pieces.

Mylan Settled Allegations of Inflated Pricing

In 2010, we briefly posted about a settlement by Mylan of charges it falsely inflated prices for several drugs.
As is usual in such settlements, none of the people who authorized, directed or implemented the actions leading to this settlement apparently suffered any negative consequences, including the top managers on whose watch they occurred. 

Mylan Fired Executive Allegedly for Filing Whistleblower Lawsuit Against Another Company

In June, 2014, the Pittsburgh Tribune reported,

 When Mylan Inc. learned that its vice president of marketing had filed a whistleblower lawsuit against his previous employer, it fired him, the man alleged in a federal lawsuit filed Tuesday.

Note that the lawsuit was against Cephalon, not Mylan.  Rocking the boat, or blowing the whistle apparently are not rewarded at Mylan.

Current CEO Named US Patriot of the Year, then Moved Mylan to Netherlands

In 2014, some wondered how Heather Bresch, still the Mylan CEO, could have claimed to be ultra-patriotic while she was planning to move her company out of the US.  In 2011, Esquire listed Ms Bresch in an article on "Americans of the Year: Patriots." They were apparently particularly impressed that she had called for more inspections on foreign drug companies whose products are imported into the US. However, in 2014, per Ron Fournier in the National Journal.

This story is about a gilded class of people and corporations enriched by the new American economy while the rest of its citizens pay the tab. The protagonists could be any number of institutional elites, but this column happens to be about a Democratic senator from West Virginia, Joe Manchin, and his daughter, Heather Bresch, the chief executive of Mylan, a giant maker of generic drugs based outside Pittsburgh.

Her company's profits come largely from Medicaid and Medicare, which means her nest is feathered by U.S. taxpayers. On Monday, Bresch announced that Mylan will renounce its United States citizenship and instead become incorporated in the Netherlands – leaving this country, in part, to pay less in taxes.

This is the sort of story that makes blood boil in populists – voters from the Elizabeth Warren wing of the Democratic Party to libertarians who follow Rand Paul and including tea party conservatives. These disillusioned souls, growing in numbers, hate hypocrites who condemn the U.S. political system while gaming it.

Later, Ms Bresch's father, Senator Manchin, said what his daughter did should be illegal, again per another Ron Fournier article in the National Journal, whose title says it all:

Senator Manchin: What My Daugher Did Should be Illegal

Nonetheless, late in 2014, Bloomberg reported that not only would Mylan go ahead with the inversion, but it would pay the excess taxes personally incurred by its own executives due the transaction.  Such taxes were meant as a negative incentive to discourage such maneuvers.  Even so, top managers seemed to be able to pay themselves to avoid the effect of these incentives, and of course any resulting personal financial losses.


Summary

 The latest story about Mylan seemed to show a leading board member financially benefiting from transactions between the company over which he was supposed to exercise stewardship and his own company.  Other stories showed Mylan executives seeming to gain outsized benefits for themselves or their family members from Mylan beyond conventional salaries and corporate benefits packages. Of course, since Mylan is not just any company, but a very large generic drug company, putting top hired managers and boards of directors first may mean putting patients second.  The cost of these managers' and boards' interests may be at the expense of patients, and the public at large.

Thus perverse incentives enable mission-hostile management and ultimately health care dysfunction.

So once again, when considering how US, and global health care has become so dysfunctional, it makes sense to think about who is benefiting from the current dysfunction.  It very often is organizational insiders, particularly top hired managers, and sometimes those who are supposed to keep an eye on them. 

 Thus, like hired managers in the larger economy, health care managers have become "value extractors."  The opportunity to extract value has become a major driver of managerial decision making.  And this decision making is probably the major reason our health care system is so expensive and inaccessible, and why it provides such mediocre care for so much money. 

One wonders how long the people who actually do the work in health care will suffer the value extraction to continue?
As we have said far too many times - without much impact so far, unfortunately - 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.

But this sort of reform would challenge the interests of managers who are getting very rich off the current system.

As Robert Monks said in a 2014 interview,

People with power are very reluctant to give it up. While all of us recognize the problem, those with the power to change it like things the way they are.

So I am afraid the US may end up going far down this final common pathway before enough people manifest enough strength to make real changes.

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Who Benefits? - Despite Data Breaches, Staff Cuts, Vulnerable Patients' Coverage Cuts, Transplant Program Probation, Multi-Million Dollar Executive Compensation Persists at UPMC

executive compensation hospital systems legal misconduct medical record confidentiality mission-hostile management UPMC

Who Benefits? - Despite Data Breaches, Staff Cuts, Vulnerable Patients' Coverage Cuts, Transplant Program Probation, Multi-Million Dollar Executive Compensation Persists at UPMC

Unknown 6/10/2015 Komentar

There are so many things wrong with US and global health care that it is easy to get lost in the details, and despair of finding solutions.  Keep in mind, however, that the intractability of many of the problems may be quite man made.  Many problems may persist because the status quo is so beneficial to some people.

The Current Troubles at UPMC

Consider, for example, the troubles that have recently plagued UPMC, the giant health care system in western Pennsylvania.  In the last month, the following reports have appeared.

Electronic Data Breach Affected 2200 Patients

On May 15, the Pittsburgh Tribune-Review reported,

Personal data may have been stolen from more than 2,000 UPMC patients by an employee of an outside company the hospital giant used to handle emergency room billing, the latest in a string of data thefts to hit Pittsburgh health companies.

Note that this was only the most recent data breach at UPMC,

 UPMC was the victim of a data breach last year in which Social Security numbers and other sensitive data from all 62,000 UPMC employees were stolen when thieves hacked into an employee database at the health system.

The confidentiality of patient records is a  major responsibility of health care professionals and hospitals.  Yet UPMC does not seem to be doing a good job in protecting such confidentiality.

UPMC Move to Cut 182,000 "Vulnerable" Elderly Patients from it Medicare Advantage Plan Challenged in Court

The Pittsburgh Business Times reported on May 21,

Health system UPMC will defend its decision to cut 182,000 seniors from its provider network at a Commonwealth Court hearing May 27 in Harrisburg.

The hearing will determine whether UPMC complied with a consent decree that was reached last year and intended to protect 'vulnerable' populations from fallout of the messy Highmark-UPMC divorce. The seniors have Medicare Advantage coverage through UPMC rival Highmark Inc., and most commercial contract relations between the two health care titans ended Dec. 31.

This doesn't sound like the "patient-centered" care UPMC boasts about on its website.

UPMC to Cut 3,500 Staff Via Buyouts

Modern Healthcare reported on May 26,

In Pittsburgh's fiercely competitive healthcare market, UPMC announced voluntary buyouts to reduce its labor costs.

The system—which has also cut its hospital capacity in recent months—offered 3,500 workers voluntary buyouts to 'achieve cost-savings for UPMC by adjusting our workforce to meet the demands of the healthcare marketplace,' said spokeswoman Gloria Kreps.

Not mentioned by UPMC spokespeople were the possible effects on patient care of cutting about 5% of the most experienced members of the UPMC workforce.

UPMC Attorneys Disqualified from Defense of Wrongful Death Case

The Pittsburgh Post-Gazette reported on May 30,

The law firm that represents UPMC in many civil matter was disqualified from a medical malpractice cast this week after a judge found that an attorney from Dickie, McCarney & Chilcote improperly spoke with and advised a witness.

This does not say a lot for how UPMC managers pick legal counsel and manage their seemingly many legal defenses.

UPMC Lung Transplant Program on Probation, Again

On June 2, the Tribune-Review reported,

A national organ-sharing group has put UPMC's lung transplant program on probation for a year, listing concerns about how the program handled donated organs. 

The United Network for Organ Sharing cited 14 cases in 2013 and 2014 when the hospital system accepted lungs that UPMC doctors later found could not be transplanted in intended recipients, said Dr. Jonathan D'Cunha, UPMC's lung transplantation surgical director.

UPMC kept the organs for other patients in UPMC Presbyterian in Oakland, an approach approved by regional organ procurement groups that supplied the lungs, D'Cunha said. But UNOS, a nonprofit that manages the American organ transplant system, objected to what it called 'an unusually high number of instances' of the practice.

Probation ordered by the board of UNOS and the Organ Procurement and Transplantation Network took effect Monday, according to UNOS.

D'Cunha said the transplant program remains fully operational but will be operating under a corrective-action plan.

This was not the first trouble that a UPMC transplant program has encountered.  As the Pittsburgh Post-Gazette reported,

This is  the second time UPMC has been placed on probation for a transplant problem.

In 2011, it was placed on probation ... after disease was transferred from a living kidney donor to a recipient.

Note that while the first instance of probation seemed to suggest competency issues, the latest one seems to be about ethical issues.  By transplanting kidneys into immediately available UPMC patients who may have lower priorities than other patients on the list, UPMC may be disfavoring patients from "outside," whose transplants, incidentally, would not generate much revenue for UPMC.

An editorial in the Post-Gazette suggested while UPMC "pleads ignorance" about these rules, "Western Pennsylvania's largest hospital network should have known better."

Just Another Bad Month?

Thus it was just another bad month at the office for UPMC management.  But UPMC management has had lots of bad months.  For example, since 2011, we have previously discussed
-  Fantastical musing by the UPMC CEO about health care run by computers, not doctors (look here)
-  Fantastical claims by UPMC in response to a lawsuit that is has no employees (look here)
-  Numerous malpractice cases filed against UPMC related to problems with its electronic medical records (look here, here, here, here)
-  Layoffs at UPMC due to problems with its electronic medical records (look here)
-  A lawsuit by the Mayor of Pittsburgh claiming UPMC should be stripped of its non-profit status (look here).  

The $6.4 Million CEO, and the Other Million Dollar Managers

One would think that these series of events, all in a short time, coupled with all these previous stories, might raise questions about who is running the institution, and what they are being paid.


Instead, however, the Pittsburgh Tribune-Review published a story on May 15, 2015, about just how well paid top UPMC managers continue to be.

UPMC's Jeffrey Romoff banked total compensation of $6.4 million two years ago, ranking the chief executive's pay among the nation's highest for nonprofit health leaders.

The 69-year-old Romoff was one of 31 employees of Western Pennsylvania's largest integrated health system to be paid more than $1 million in 2013,...

Romoff's 2013 pay, which included a base salary of nearly $1 million plus $5 million in incentives and deferred income, was down 3 percent from the previous year but well above the median compensation for a nonprofit hospital CEO.

The defense of Mr Romoff's compensation followed the same pattern we have discussed repeatedly. Justifications for exceedingly generous compensation for health care managers, particularly of non-profit hospital, often are superficial, limited to talking points we have repeatedly discussed, (first  here, with additional examples of their use here, here here, here, here, here, here, and here.)  These are:
- We have to pay competitive rates
  We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).

So,

UPMC spokeswoman Susan Manko wrote in an email that compensation for the company's executives is tied to performance that is based on 'clearly defined goals, including quality of care, community benefit, financial measures and other key factors.'  Pay takes into consideration what other industry executives are making, she noted.

Thus,, by inference, she implied Mr Romoff's brilliance in meeting the "clearly defined goals," and overtly stressed the competitive rates talking point.

However, the clearly defined goals including putting the transplant on probation twice, having several electronic data breaches, trying to discharge the most experienced employees, being sued for being a non-profit in name only, being subject to numerous malpractice suits, and having one law firm used to defend one of these suits disqualified,  and dumping hundreds of thousands of elderly, "vulnerable" patients?  Really?

A fair comparison was to other overpaid managers, not to the dedicated health care professionals who make the system work?  Really?

Also, as the Pittsburgh-Tribune Review reported on February, 2015, the Chairman of the Board of UPMC, Nicholas Beckwith, thinks Mr Romoff is a

brilliant leader and stood by the board's decision to pay Romoff $6.6 million a year, among the highest CEO salaries for nonprofits in the region.

Furthermore,

'When people ask me about his pay, I say, ‘What would you pay him?'' Beckwith said. 'If they're going to understand the brilliance of Jeffrey Romoff, they have to acknowledge there's no more effective leader in the nation than Jeff Romoff.'

So here was the "brilliance" talking point really writ large.  The most effective leader in the entire US?  Really?

At best, Mr Beckwith seemed to be only thinking about the financial performance of UPMC, rather than its clinical performance, its ethical performance or its effects on patients and their outcomes. But then again, Mr Beckwith might not know much about that,

Beckwith worked as a salesman for Murrysville-based Beckwith Machinery and eventually became its CEO.

But one letter to the Pittsburgh Tribune-Review did suggest

Perhaps UPMC should consider offering buyouts to that group of egotists who inhabit the upper reaches of the U.S. Steel Tower. Then they could move to the next phase of life — old and wealthy.

Summary

So we have presented the recent unpleasantness at UPMC as emblematic of some of the types of unpleasantness that afflict US (and global) health care, including threats to patients' confidentiality and access, problems with quality of health care, possible ethical misconduct, ill treatment of experienced health care staff, etc.  Yet consider that despite these multiple failings, and a history of similar failings going back years, the top hired managers of the non-profit hospital health care system are being made millionaires many times over.  They clearly are benefiting greatly from the current system, regardless of whether the system benefits others.  In fact, one begins to wonder if they are paid well despite the current problems, or because of them?

So one lesson is: every time some new version of health care dysfunction appears in public, think not only about its bad effects on patients, professional values, the public, etc.  Think about who is gaining from the current bad status quo.

 For a slightly more specific lesson....  In a 2014 interview, corporate governance experts Robert Monks and Nell Minow, Monks said,

Chief executive officers' pay is both the symptom and the disease.

Also,

CEO pay is the thermometer. If you have a situation in which, essentially, people pay themselves without reference to history or the value added or to any objective criteria, you have corroboration of... We haven't fundamentally made progress about management being accountable.

The symptom and the disease have metastasized to health care, from huge for-profit corporations now also to even small non-profit hospitals.   Thus, like hired managers in the larger economy, health care managers have become "value extractors."  The opportunity to extract value has become a major driver of managerial decision making.  And this decision making is probably the major reason our health care system is so expensive and inaccessible, and why it provides such mediocre care for so much money. 

One wonders how long the people who actually do the work in health care will suffer the value extraction to continue?
As we have said far too many times - without much impact so far, unfortunately - 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.

But this sort of reform would challenge the interests of managers who are getting very rich off the current system.

As Robert Monks also said in the 2014 interview,

People with power are very reluctant to give it up. While all of us recognize the problem, those with the power to change it like things the way they are.

So I am afraid the US may end up going far down this final common pathway before enough people manifest enough strength to make real changes. 

ADDENDUM (16 June, 2015) - This post was re-posted on OpEdNews.com. 

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Health Care Professional Societies Whose Leadership Betrays Their Own Members - the APA Alleged to Have Supported Torture, and Deceived its Members to Collect Money

APA boards of trustees crimes against humanity deception executive compensation legal settlements mission-hostile management

Health Care Professional Societies Whose Leadership Betrays Their Own Members - the APA Alleged to Have Supported Torture, and Deceived its Members to Collect Money

Unknown 6/05/2015 Komentar

Health care professionals usually view their professional societies as allies, supporting their values and acting in their professional and their patients' interests.  Increasingly, however, these societies appear to be run more to support the interests of their top leaders. 

Allegations that the American Psychological Association (APA) Supported Torture

The latest example is the American Psychological Association.  As noted by a Washington Post article from May, 2015, "the APA ... represents more than 122,000 doctoral-level psychologists around the world...."  Of these, about 60,000 are licensed clinical psychologists, and the remainder are mainly research psychologists.

The most serious allegations that the APA had betrayed its members values were described in a New York Times article from late April, 2015. 

The American Psychological Association secretly collaborated with the administration of President George W. Bush to bolster a legal and ethical justification for the torture of prisoners swept up in the post-Sept. 11 war on terror, according to a new report by a group of dissident health professionals and human rights activists.

Furthermore,

The involvement of health professionals in the Bush-era interrogation program was significant because it enabled the Justice Department to argue in secret opinions that the program was legal and did not constitute torture, since the interrogations were being monitored by health professionals to make sure they were safe.

The interrogation program has since been shut down, and last year the Senate Intelligence Committee issued a detailed report that described the program as both ineffective and abusive.

In particular,

In early June 2004, a senior official with the association, the nation’s largest professional organization for psychologists, issued an invitation to a carefully selected group of psychologists and behavioral scientists inside the government to a private meeting to discuss the crisis and the role of psychologists in the interrogation program.

Psychologists from the C.I.A. and other agencies met with association officials in July, and by the next year the association issued guidelines that reaffirmed that it was acceptable for its members to be involved in the interrogation program.

To emphasize their argument that the association grew too close to the interrogation program, the critics’ new report cites a 2003 email from a senior psychologist at the C.I.A. to a senior official at the psychological association. In the email, the C.I.A. psychologist appears to be confiding in the association official about the work of James Mitchell and Bruce Jessen, the private contractors who developed and helped run the enhanced interrogation program at the C.I.A.’s secret prisons around the world.

In the email, written years before the involvement of the two contractors in the interrogation program was made public, the C.I.A. psychologist explains to the association official that the contractors 'are doing special things to special people in special places.'

These are very serious allegations.  In a Forbes blog post, Todd Essig wrote,

Starting after 9/11, and continuing to the present day, APA leadership has made a series of bad decisions, ones with appalling and destructive consequence. Significant numbers of people have been harmed. Opportunities to apply psychological knowledge to benefit society and improve people’s lives have been lost. The public trust in the profession of psychology has been undermined. Things are so bad that the only way forward now is for the involved leadership to resign.

Essig emphasized that the actions of APA leadership appeared to directly conflict with the organization's mission,

Every day without decisive action to redress the breach of the public trust further undermines the APA’s ability to fulfill its mission to 'advance the creation, communication and application of psychological knowledge to benefit society and improve people’s lives.'

Nonetheless, the APA leadership has made no move to resign, and appear to be waiting for the supposedly independent review they have commissioned of the society's actions regarding torture.

Legal Settlement that the APA Deceived its Members to Collect More Money

While less dramatic, another story appeared last month that further suggested that the APA has seemed to have gone rogue from the interests of its members and their patients.  The Washington Post reported,

The American Psychological Association (APA) has settled a class-action lawsuit that accused the organization of deceptively requiring many of its members to pay a large annual fee to fund the group's lobbying arm. The fee was actually optional.

Under the settlement, the APA, which represents more than 122,000 doctoral-level psychologists around the world, has agreed to refund a total of $9.02 million to members who paid the fee between 2000 and early 2015. The assessment, which changed from year to year, was about $140 annually and was charged only to licensed clinicians, not research scientists and others. It generated about $6 million a year, according to the lawsuit.

Note that...

The lawsuit claimed that in a variety of ways over the years, the APA 'deceptively created the impression that the fee was actually required as part of annual APA dues.' For example, an annual dues assessment said that members who provide health-related services “must pay" the fee that supports the lobbying arm, a separate group known as the APA Practice Organization (APAPO). It was established separately because tax laws restrict nonprofits like the APA from political work and other forms of advocacy.

In 2002, the APA’s Web site stated that members 'must pay the Special Assessment,' and in 2004, the APA announced that starting in 2005 'all APA members who are licensed psychologists will be billed the assessment,' the lawsuit claimed.

This was a legal settlement, so APA leadership did not have to

concede that its communications were misleading and acknowledged no wrongdoing in the settlement. In a news release sent out in January, when the settlement was announced, the organization said that 'APA/APAPO and the plaintiffs disagreed about whether the APA dues statement could mislead practice members concerning the annual practice assessment.'

How Did a Society's Leadership Become So Disconnected from its Members and their Values?

These allegations do raise the question of how the leadership of a health care professional society could become so profoundly disconnected from its members.  I briefly would suggest the hypothesis that many health care professional societies have functionally become more like publishing houses or marketing and public relations firms. 

Consider the most recent financial statement (US IRS form 990) available from the APA (for 2013, link here).    The APA had total revenue of over $127 million.  Of that, less than 10% came from membership dues ($10,802,967) and convention and conference fees ($2,742,353).  So the major sources of revenue of this supposed membership organization were not the members, but "licensing, royalties, and rights," "journal subscriptions," "publication sales," and "other program service."  Thus, the organization's finances were more that of a publishing house/ marketing and public relations firm than that of a membership organization. Presumably, leadership may have been more concerned about continuing to generate revenue from such activities than about their membership's wishes, or interests.


The revenue from these activities allowed the organization to accrue real estate valued at over $78 million, and investments valued at over $90 million.  Also, it allowed generous payments to the members who served as officers.  Twelve members who served as officers, on the board of directors, or otherwise in leadership got more than $10,000 a year.  The president got more than $38,000.  Traditionally, officers and board members of true membership organizations are unpaid.  In addition, the APA paid its hired managers very handsomely.  Sixteen received more than $225,000.  Of those, twelve received more than $300,000.  The executive vice president/ CEO received over $750,000. 

So the transformation of the APA from a membership organization to a publishing house/ marketing and public relations firm that allegedly ended up supporting torture, and deceiving its supposed members created a very cozy and remunerative environment for its leaders and those who ostensibly exercised stewardship over them.

Again, this is particularly egregious since this was supposed to be a membership organization that would support research and education in psychology, and psychological care of patients. 

Summary

In the bigger story from last month, very serious allegations surfaced about the American Psychological Association.  These included accusations that top society leaders collaborated with torture, which would seem to be a huge contradiction of the organization's supposed mission to help patients with psychological problems.  At the same time, the organization settled a lawsuit that had alleged organizational leaders had deceived their own members in order to collect money to support their lobbying efforts. 

We have frequently discussed how leaders of large nominally non-profit health care organizations, mainly hospitals and hospital systems, often seem to put revenue, and their own financial advancement, ahead of the organizations' missions.  Sometimes, their actions have been actively mission-hostile.  The takeover of hospitals and hospital systems by people with little concern for, or even hostility to those organizations' once noble missions appears to be a singularly bad problem that may be responsible for much health care dysfunction, rising costs, declining access, and ultimately bad patient outcomes. 

Now we see another example of a large health care organization, this time a health care professional society,  whose leadership seems to have trampled their members' values, supported mistreatment of human beings, and just incidentally deceived their members' to make more money.  An important difference in this case is that the organization's leadership is nominally supposed to represent its members.  So maybe its members can rise up to ensure leadership that would actually uphold their professional values and their and most importantly their patients' interests.


Maybe the members will still rise up and force the resignations of the officers and managers who profited so much from this mess.  At least, if they were to leave the organization, it could no longer pretend to be a membership organization.

As we have said until blue in the face, true health care reform requires leadership of health care organizations that understand health care, cares about its mission, and is willing to be held accountable.  A good place to start such reform would be the organizations that are supposed to represent health care professionals. 

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Timing Discharges to Maximize Revenue - "Corruption" of Corporate Long-Term Hospitals?

corporate physician health care corruption Kindred Health mission-hostile management Select Medical

Timing Discharges to Maximize Revenue - "Corruption" of Corporate Long-Term Hospitals?

Unknown 2/23/2015 Komentar

A recent Wall Street Journal article that focused on a quirk in US Medicare payment rules that may be gamed by long-term hospitals also revealed the plight of physicians employed by such hospitals, and worse, the danger posed by such gaming to patients.

Discharging Patients at Particular Times Maximizes Hospital Revenue

Here is how the rule works:

Under Medicare rules, long-term acute-care hospitals like Kindred’s typically receive smaller payments for what is considered a short stay, until a patient hits a threshold. After that threshold, payment jumps to a lump sum meant to cover the full course of long-term treatment.

That leaves a narrow window of maximum profitability in caring for patients at the nation’s about 435 long-term hospitals, which specialize in treating people with serious conditions who require prolonged care.

Systemic Evidence that Discharges are More Likely to Occur at Times that Maximize Revenue

Thus the Medicare rules provides financial incentives for discharging patients at particular times during their admissions. The reporters found some systemic evidence that patients were more likely to be discharged at those times:

The Journal analysis of claims Medicare paid from 2008 through 2013 found long-term hospitals discharged 25% of patients during the three days after crossing thresholds for higher, lump-sum payments. That is five times as many patients as were released the three days before the thresholds.

The issue here is that the decision to discharge a patient from any kind of hospital should be made by health care professionals and their patients, sometimes with the input of the patients' families. The decision should depend on the patients' medical status, the availability of follow-up care, and the patients' wishes and values. Hospital managers should have no direct influence on these decisions. So why would patient discharges occur more often at the times when they are most financially advantageous for the hospitals?

An Illustrative Case

The Wall Street Journal article opened with an illustrative anecdote.

A Kindred Healthcare Inc. hospital in Houston discharged 79-year-old Ronald Beard to a nursing home after 23 days of treatment for complications of knee surgery.

The timing of his release didn’t appear to correspond with any improvement in his condition, according to family members. But it did boost how much money the hospital got.

Kindred collected $35,887.79 from the federal Medicare agency for his stay, according to a billing document, the maximum amount it could earn for treating most patients with Mr. Beard’s condition.

If he had left just one day earlier, Kindred would have received only about $20,000 under Medicare rules. If he had stayed longer than the 23 days, the hospital likely wouldn’t have received any additional Medicare money.

Furthermore,

Between mid-2011 and the end of 2013, the Kindred hospital that treated Mr. Beard discharged eight times as many Medicare patients on the day they reached their threshold as on the day before. In the days immediately after the lucrative three-day window, discharges plummeted. Kindred acquired the hospital, which has two campuses, in the summer of 2011.

Mr. Beard, a retired drilling-equipment salesman, was discharged from Kindred’s facility on Nov. 12, 2011. His family says his condition had deteriorated at the hospital and they wish he had been released sooner.

Mr. Beard was admitted to Kindred Hospital Town and Country in Houston in late October 2011 after surgeons found the site of an earlier knee surgery had become infected with drug-resistant bacteria called MRSA. He was sent to the Kindred facility that Oct. 20 for a course of antibiotics, according to the records and Ms. Beard.

On his fourth day at the Kindred hospital, nurses administered the drug Remeron to treat sleeplessness. Mr. Beard’s wife says he had an allergy to that drug—documented at the time on a wristband provided by another hospital—and he went into a coma for a time.

'I wished then that I could take him somewhere else,' says Ms. Beard, now 77 years old.

Over the next two weeks, Mr. Beard’s condition deteriorated as he received treatments from a dozen doctors. A Medicare document provided by his wife shows he received an hour and a half of 'critical care' services on Nov. 9, three days before Kindred discharged him.

When he left the facility in a transport van on Nov. 12, bound for a nursing home, he complained of nausea, his wife says. The van driver called for an ambulance from a gas station. The ambulance took him to the emergency room at a general hospital in Katy, Texas.

Ms. Beard says doctors determined that, aside from low blood pressure, he was stable. She drove him to the nursing facility herself, but because Kindred’s discharge papers had been left behind in the van, the nursing facility declined to accept him. He wound up back at the Katy hospital to begin an additional three-day hospitalization, where doctors performed tests to monitor an existing heart condition, the billing documents show.

Ms. Beard says she doesn’t regret that her husband left Kindred’s hospital when he did, despite the chaos of those days. 'I think if he had stayed at Kindred, he would have laid there and died,' she says.

Note that Mr Beard was apparently discharged during the window of maximum revenue for the hospital, but there was no obvious medical reason for his discharge on that particular day.

Evidence that Hospital Managers Pressure Health Care Professionals to Discharge Patients at Times that Maximize Revenue

The WSJ statistical analysis suggested that Kindred and other for-profit long-term hospital corporations are particularly prone to discharge patients at times that maximize revenue.

For-profit companies such as Kindred and Select were more likely to discharge patients during the most-lucrative window than nonprofit competitors, the Journal’s analysis shows. Nonprofits discharged 16% of people during the window, compared with 27% at for-profits.

The WSJ also found evidence that managers at two for-profit long-term hospital systems pushed health care professionals to discharge patients at the most profitable times.

Former long-term-hospital executives say they sometimes called the threshold the 'normal low' or 'five-sixth date,' referring to the Medicare formula. The Journal interviewed 16 people who have worked at facilities operated by Kindred or rival for-profit system Select Medical Corp. in 10 states, including former hospital administrators, doctors and case managers who oversaw discharges. Those two publicly traded companies billed Medicare for 42% of all long-term-hospital claims it processed during the period the Journal studied.

The former administrators say their corporate bosses exerted pressure to discharge as often as possible during the most lucrative days, rewarding managers who succeeded and questioning those who didn't.

'You’d hear from the powers that be if your hospital was not…hitting a pretty high percentage of your patients for Medicare' soon after the payment threshold, says Karen Shammas, who was chief executive of a Kindred hospital in Peoria, Ariz., until late 2013, when she retired.

Ms. Shammas, like some other long-term-hospital administrators who were interviewed, described meetings in which hospital staffers would discuss plans for each patient at the facility—armed with printouts from a computer tracking system that included, for each patient, the date at which reimbursement would shift to a higher, lump-sum payout.

Ms. Shammas says she never kept patients hospitalized for financial reasons if they were medically ready to leave.

Kindred declined to comment in detail on discharge patterns or corporate policies.

Former executives at both Kindred and Select say doctors, pressured by hospital administrators, sometimes ordered extra care or services intended in part to retain patients until they reached their thresholds, or discharged those who were costing the hospitals money regardless of whether their medical conditions had improved.

Former executives at hospitals run by each chain say their bonuses depended in part on maintaining a high share of patients discharged at or near the threshold dates to meet earnings goals.

In some cases, their bosses gave them specific targets for discharge rates during the most lucrative days, the former hospital executives say. When they missed their targets, some of the executives say, their bosses asked for explanations as to why individual patients weren’t released during the target window.
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Select said in a written statement that its long-term hospitals discharge patients 'based on their medical condition and not on the Medicare reimbursement system' and 'do not manipulate discharge timing based on financial considerations.' The company said bonuses are based on 'overall financial performance,' among other factors, and not the share of patients discharged near the threshold.

Select’s corporate managers were 'very intense about managing that length of stay really effectively to maximize the profit potential for any particular patient, says Robert Marquardt, former CEO of a Select hospital in Fort Wayne, Ind.

If a patient was two days from the threshold, 'you were incentivized to see if you couldn’t find a reason to keep them for two more days,' says Mr. Marquardt, who left the company in December to work as a consultant.

Mr. Marquardt says he didn’t believe the efforts caused harm. 'You might play the game a bit, but you would never put a patient at risk,' he says.

Select said while it monitors discharge dates and other metrics and seeks to understand deviations from norms, it doesn’t set discharge targets. It said efforts to prolong a patient’s stay or discharge a patient early would be a violation of Select’s policies.'

So the WSJ article presented statistical analysis that patients are more likely to be discharged on the days that are most advantageous from the standpoint of hospital revenue than on other days.  The WSJ  article also presented narratives by several people that suggest that top managers gave incentives to lower level managers to maximize the number of discharge on the most financially advantageous days, and that managers tried to directly influence physicians, presumably those employed by the hospital systems, to discharge patients on the most financially advantageous days.

The Private Gain of Mangers of Long-Term Corporate Hospital Systems

I do not know a way to determine how much money Kindred and Select may have made from the practice of timing long-term hospital discharges for maximum revenue, but there is certainly evidence that the top managers of these corporations do very well.

Based on the most recent available (2014) proxy statement from Kindred, its CEO, Paul J Diaz, received $4,303,072 in 2013, and all listed managers received more than $1 million that year. Based on the most recent available (2014) proxy statement from Select Medical Holdings Inc, its CEO, Robert A. Ortenzio, received $3,557,860 in 2013, and its executive chairman, Rocco A Ortenzio, received $2,701,916 in 2013, and all listed managers more than $1.5 million that year

Revenue Maximization as "Corruption"

The WSJ reporters interpreted their findings as "a sign that financial incentives in the Medicare system may shape patient care."  It thus implied that a reasonable policy response to this problem would be to change the  Medicare rules for paying for long-term care.  However, left unwritten was that only in a health care system in which managers feel that short-term revenue may trump the best interests of patients, and in which managers are empowered to influence, if not override physicians' decision-making would such financial incentives have any major effect.


The WSJ article did include an expert's opinion that it was unethical, or worse, for hospital managers to pressure physicians to discharge patients at times that maximized revenue, rather than times that were optimal for the patients' medical care and well being.

The pattern of discharging patients at the most lucrative juncture is 'troubling and disturbing,' says Tom Finucane, a doctor and professor at Johns Hopkins University School of Medicine, after learning of the Journal’s findings. 'The health-care system should serve the patients and try to improve their health, and any step away from that is a corruption.'

Dr. Finucane and other medical experts say longer-than-necessary hospital stays increase risks for medical errors, infection and unnecessary care. Discharges that come too early can mean patients don’t get care they need.

Recall that the Transparency International (ethical, not necessarily legal) definition of corruption is abuse of entrusted power for private gain. Physicians are entrusted to make decisions on behalf of their individual patients, so as best to improve their patients' health and health care outcomes. Hospitals are entrusted to provide the settings in which physicians can act in the best interests of their patients. So it seems clear that pressuring physicians to discharge patients so as to maximize hospital revenue regardless of the effect of such discharges on patients is corruption in this sense, health care corruption.

Note that health care corruption has generally been a taboo topic, especially when the corruption occurs in developed countries.  It is notable that the WSJ article made that topic slightly less anechoic.

Furthermore, framing this problem as health care corruption that endangers patients suggests that the issue goes far beyond a Medicare policy that is easy to game, and that another policy response, such as an investigation to see if such actions were legal, might be more to the point than adjusting the Medicare payment formula.

Beyond that, there are lessons for doctors and more globally for policy makers.  We have previously discussed the plight of the corporate physician, caught between his or her oath to put care of individual patients above all other concerns, and effective subservience to managers who may well put short-term corporate revenue, and growing their own incomes, ahead of all other concerns, including patients' and the public's health.  Health care professionals should not hold any illusions that they can take jobs with corporate health care providers and uphold their own values.

Furthermore, the plight of the physicians, and more importantly, the patients at corporate long-term hospitals raises a bigger policy question.  In my humble opinion, is it now time to end our badly conceived experiment with gilded age health care.  In the US, we have decided that the "free market" can solve all of our health care problems, disregarding the near impossibility of maintaining a real free market in health care.  Instead, we now have health care dominated by poorly regulated large corporations in an era when top managers believe they have a mandate to do anything to improve short-term revenue,  and often conveniently increase their own wealth.  It appears to be time to bring back the old laws against the corporate practice of health care, and consider whether we should allow hospitals and other health care organizations that provide direct patient care to be for-profit enterprises.

Meanwhile, patients and health care professionals, you should realize that you approach corporate hospitals and other corporate health care providers at your own risk. 

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