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That Wheel Was Already Invented: the UN Special Rapporteur's Guidelines for Pharmaceutical Companies

For five years now, we have been writing about concentration and abuse of power in health care, and on specific tactics used predominantly by large health care organizations that threaten the values that physicians and other health care professionals once swore to uphold. <a href="http://hcrenewal.blogspot.com/search/label/pharmaceuticals">Pharmaceutical companies</a> may not have been the worst offenders when it came to threatening these values, but they have not been laggards.  Specific issues we have discussed included (in a peculiar order that I will explain in a minute): failure of the companies' <a href="http://hcrenewal.blogspot.com/search/label/boards%20of%20directors">boards of directors</a> to be accountable for misbehavior by its management, sometimes associated with conflicts of interest affecting these board members (e.g., <a href="http://hcrenewal.blogspot.com/2010/09/should-president-of-university-of.html">this recent case</a>); outright <a href="http://hcrenewal.blogspot.com/search/label/crime">crime</a> and corruption (e.g., <a href="http://hcrenewal.blogspot.com/2010/09/forest-pharmaceuticals-pleads-guilty-to.html">this case</a>); use of <a href="http://hcrenewal.blogspot.com/search/label/key%20opinion%20leaders">key opinion leaders</a> paid by the company to market products cloaked in the mantle of academia; payments made by the companies to patient advocacy groups (e.g., <a href="http://hcrenewal.blogspot.com/2009/10/alliance-on-mental-illness-or-for.html">this one</a>), <a href="http://hcrenewal.blogspot.com/search/label/medical%20societies">medical societies</a>, and academic institutions that induce institutional <a href="http://hcrenewal.blogspot.com/search/label/conflicts%20of%20interest">conflicts of interest</a>, and enlist these well-reputed organizations as <a href="http://hcrenewal.blogspot.com/search/label/stealth%20marketing">stealth marketers</a>; ridiculously <a href="http://hcrenewal.blogspot.com/search/label/health%20care%20prices">high prices</a> charged for particular medicines, often to particularly vulnerable patients (e.g., <a href="http://hcrenewal.blogspot.com/2010/04/oh-prices-we-pay-reloaded-celgene-balks.html">this case</a>); <a href="http://hcrenewal.blogspot.com/search/label/suppression%20of%20medical%20research">suppression</a> and <a href="http://hcrenewal.blogspot.com/search/label/manipulating%20clinical%20research">manipulation</a> of clinical research evaluating the companies' products; and <a href="http://hcrenewal.blogspot.com/search/label/deception">deceptive</a> drug marketing practices. Many other bloggers have written about these issues.  Some of them have been widely taken up in the mainstream media.  A few have even made it into the medical and health care literature.  But those of us who bring them up have been attacked as a tiny group of pharmascolds (e.g., <a href="http://hcrenewal.blogspot.com/2009/07/blogscan-reports-from-acre-meeting.html">here</a>), who get in the way of the needed innovation and scientific advances that the pharmaceutical industry generously brings to the public.  Despite such attacks, it may be that our concerns are somewhat more universal, although those with vested interests in maintaining the status quo might not want that publicized too much. A new issue of PLoS Medicine included several articles on drug companies' responsibilities for human rights.  <a href="http://www.plosmedicine.org/article/info%3Adoi%2F10.1371%2Fjournal.pmed.1000330">One</a> was by a former United Nations Special Rapporteur on the right to the highest attainable standard of health.  I, and I suspect most of even our Health Care Renewal readers were not familiar with that office.  I also confess to being unaware that he had published a report to the UN General Assembly entitled <a href="http://www.essex.ac.uk/human_rights_centre/research/rth/docs/GA2008.pdf">Human Rights Guidelines for Pharmaceutical Companies in Relation to Access to Medicines</a>, which included 47 specific guidelines.  Amazingly enough, it turns out that some of these guidelines seemed to directly address the issues raised above, to wit: Board of Directors' Accountability <blockquote>11. The company should have a governance system that includes direct board level responsibility and accountability for its access to medicines policy.</blockquote> Anti-Corruption <blockquote>15. A company should publicly adopt effective anti-corruption policies and measures, and comply with relevant national law implementing the United Nations Convention against Corruption.</blockquote> Disclosure of Financial Support <blockquote>18. The company should annually disclose its financial and other support to key opinion leaders, patient associations, political parties and candidates, trade associations, academic departments, research centres and others, through which it seeks to influence public policy and national, regional and international law and practice. The disclosure should extend to amounts, beneficiaries and channels by which the support is provided. 19. When providing any financial or other support, the company should require all recipients to publicly disclose such support on all appropriate occasions.</blockquote> Drug Pricing <blockquote>33. When formulating and implementing its access to medicines policy, the company should consider all the arrangements at its disposal with a view to ensuring that its medicines are affordable to as many people as possible. In keeping with Guideline 5, the company should give particular attention to ensuring its medicines are accessible to disadvantaged individuals, communities and populations, including those living in poverty and the very poorest in all markets. The arrangements should include, for example, differential pricing between countries, differential pricing within countries, commercial voluntary licences, not-for-profit voluntary licences, donation programmes, and public private partnerships. 34. The arrangements should take into account a country’s stage of economic development, as well as the differential purchasing power of populations within a country. The same medicine, for example, may be priced and packaged differently for the private and public sectors within the same country. 35. The arrangements should extend to all medicines manufactured by the company, including those for non-communicable conditions, such as heart disease and diabetes.</blockquote> Suppression and Manipulation of Clinical Research <blockquote>39. The company should take effective measures to ensure that all information bearing upon the safety, efficacy and possible side effects of a medicine are easily accessible to individuals so they can make informed decisions about its possible use.</blockquote> Deceptive Drug Marketing <blockquote>41. The company should publicly disclose its promotional and marketing policies and activities, including costs.</blockquote> Needless to say, I can see no evidence that any big pharmaceutical companies are trying to adhere to any of these guidelines.  Somehow I suspect that those who are supporting the vested interests of big pharmaceutical corporations may not all have that much respect for the United Nations.  However, I think that the Special Rapporteur's guidelines lend more credibility to the argument that we need better leadership of health care organizations, and specifically that such organizations should follow clear ethical precepts, and their leadership should be held accountable when they do not. So the next time someone calls you a "pharmascold," you can say, "yeah, yeah, so is the UN Special Rapporteur."

That Wheel Was Already Invented: the UN Special Rapporteur's Guidelines for Pharmaceutical Companies

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29 Sep 2010

More Tales of Hospital Executive Compensation: Pay for What?

I have collected another series of stories from the wild and wacky world of health care executive compensation.  These are from three different hospitals/ hospital systems, ordered from smallest to largest. Jefferson Healthcare This <a href="http://www.peninsuladailynews.com/article/20100915/news/309159984/hospitals-new-ceo-highest-paid-public-official-in-jefferson-county">story</a>, from Jefferson County, Washington state, came from the Peninsula Daily News: <blockquote>When Mike Glenn takes over the Jefferson Healthcare CEO office Oct. 4, he will be receiving $225,000 annually to run the 25-bed publicly funded hospital. And he will become the highest-paid public official in Jefferson County. Jefferson Healthcare's budget is $65 million, and it employs 360 full-time workers and about 550 part-timers.</blockquote> Note that the amount above is apparently salary, not total compensation, which could well be higher. Lakeland Regional Medical Center This <a href="http://www.theledger.com/article/20100925/NEWS/9255038/1134?Title=Officials-Pay-Is-Disclosed-At-LRMC">story</a>, from Lakeland, Florida, came from the Lakeland Ledger. <blockquote>The latest IRS report available on Lakeland Regional Medical Center shows, for the first time, how much LRMC officials receive in base pay and how much in 'bonus and incentive compensation' based on meeting goals assigned them. Not-for-profit hospitals are required to release their IRS reports. Previously, those reports combined salary and bonuses, which may or may not be awarded in a given year. Jack Stephens, president and chief executive, was paid $856,514. Of that, $644,034 was his base pay and $212,480 was bonuses. Second-highest paid was Paul Powers, vice president and chief financial officer. He earned a total $435,581, of which $352,661 was base pay and $82,920 in bonuses. Third was Dr. William Sadowski, psychiatrist, earning $430,117, of which $149,226 was base pay and $280,891 bonuses. Others listed as highest compensated: Dr. Edward Sammer, chief medical officer, $404,789 ($327,607 base pay, $77,182 bonus). Dr. Olumide O. Sobowale, who heads trauma services, $306,792 ($227,692 base pay, $79,100 bonus). Janet Fansler, vice president/cardiac and specialty care, $266,672 ($215,954 base, $50,718 bonus). Mary Ford, chief information officer, $264,283 ($213,978 base, $50,305 bonus). Carole Philipson, vice president support services and facilities, $246,530 ($199,474 base, $47,056 bonus). Hugh Autry, vice president acute/surgical care, $245,216 ($198,408 base, $46,808 bonus). Jeffery Payne, vice president human resources, $229,304 ($185,696 base, $43,608 bonus). John Schliesser, vice president planning and external relations, $226,571 ($183,363 base, $43,208 bonus). Dr. Michael A. Campanelli, neurosurgeon, $197,887, not divided into base/bonus. Ken Menefee, executive director LRMC Foundation, $181,045 ($151,142 base, $29,953 bonus). Dr. Joy L. Jackson, physician adviser, $164,923, not divided into base/bonus. Dr. Rajan K. Raj, trauma surgeon, $141,344, not divided into base/bonus.</blockquote> Note that LRMC is a bigger institution that Jefferson Healthcare, with operating revenue just under $650 million. However, it is now having financial woes, as reported in a <a href="http://www.theledger.com/article/20100925/NEWS/9255036?Title=LRMC-Rates-Going-Up">separate story </a>in the Ledger. <blockquote>Lakeland Regional Medical Center's rates will increase an average 10 percent, for the third year in a row, in the fiscal year starting Friday. These continual increases reflect the financial pressures affecting hospitals, patients and the health care system nationwide. Costs are increasing for almost everything LRMC pays for - drugs, bad debts, charity care, write-offs to managed-care and government insurance plans, insurance and utilities among them. The number of hospitalized patients is expected go up very little, an increase of slightly less than 2 percent, according to Vice President and Chief Financial Officer Paul Powers.</blockquote> UCLA Medical Center Our last <a href="http://articles.latimes.com/2010/sep/17/local/la-me-uc-20100917">story</a>, from the Los Angeles Times, is about a large, prestigious academic medical center. <blockquote>First, the board [of regents] approved $3.1 million in bonuses for medical center executives that are linked to efficiencies and improvements in patient health. That money, which comes from hospital revenues, will be distributed among 37 UC hospital leaders across the state. As part of that group, Feinberg, UCLA's hospital system chief executive officer, will receive a $210,000 bonus. But in a more divisive matter, UCLA officials also received the regents' approval to give Feinberg an extra raise of about $410,000, boosting his total compensation to more than $1.3 million.</blockquote> Why was this divisive? It turns out that the University of California system is in deep financial trouble. <blockquote>The University of California regents took steps Thursday to shore up the university's badly underfunded retirement plans by raising the amounts employees and the university will be expected to contribute to them. </blockquote> In particular, <blockquote>Meeting at UC San Francisco, the regents unanimously approved a plan that will raise contributions to the pension and retirement health plans over two years to 5% from the current 2% of employees' paychecks, and to 10% from 4% of payroll for the university. The change will take effect quickly for about half of UC's 115,000 employees, including its faculty, but must be negotiated with its unionized employees. More tough choices are ahead as UC tries to fill an estimated $21-billion liability gap in its retirement plans. Until this spring, neither the university nor its employees had made any contributions to the plans for 20 years. In December, the regents are expected to review proposals for even more extensive changes, including one that would create a less generous program for employees hired after 2013 and boost the minimum retirement age to 55 from 50.</blockquote> So in times of such financial stress, why increase the compensation of the UCLA medical center CEO so much? <blockquote>UCLA Chancellor Gene Block said Feinberg was doing an excellent job and was being wooed by other employers. 'Keeping this team together is essential,' he said. </blockquote> Summary So to summarize, the CEO of a tiny hospital gets $225,000 in salary, presumably more in total compensation. The CEO of a mid-size medical center with stagnant revenues and rising costs got over $850,000 in total compensation, while 11 other executives, mostly non-physicians, all got more than $180,000. The CEO of a large medical center, within a university system with a seriously underfunded pension plan which is increasing deductions from all employees' pay, and contemplating reduced retirement programs for new hires, got a $210,000 bonus and a $410,000 raise for total compensation of more than $1.3 million. So once again we see that even in tiny, public hospitals, the CEOs are paid well, and in bigger hospitals, even those in the midst of financial problems, the CEOs are paid very well.  There does seem to be a rough correlation with hospital size.  Executives, and their boosters like to imply that the bigger the institution, the harder the job.  Keep in mind, however, that most hospitals, like most modern corporations, are highly pyramidal.  The CEO hardly manages each and every worker.  Rather, the CEO manages a few top executives, who in turn manage a few middle-managers, etc, etc.  For example, a <a href="http://www.bloomberg.com/news/2010-09-21/bofa-chief-names-ex-fleet-comrades-laughlin-lyons-mogenson-to-top-roles.html">Bloomberg report</a> noted that only 11 top executive report to the CEO of the huge Bank Of America.  Another claim by CEOs and their defenders is that it is all about pay for performance.  As noted above, and in other posts about executive compensation, the criteria for performance are rarely stated, and hardly explicit.   Anecdotally, there are many examples, including one above, of financially stressed institutions cutting back in other areas, but paying top executives more.  As in the last case above, nearly every CEO seems to be doing a wonderful job, at least according to the boards of directors or trustees to whom he or she is supposed to be accountable.  In fact, the real lesson seems to be that top managers almost always do well financially, regardless of performance, regardless of financial pressures on their organizations, and do better and better the longer they hold their jobs.  Top executives are really different from you and me. I say again, if we do not hold health care leaders accountable, if we do not provide them with incentives that are proportional to their actual performance, why should we expect health care organizations to do any more than satisfy their leaders' self-interest?

More Tales of Hospital Executive Compensation: Pay for What?

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28 Sep 2010

Interface Problems, Ill-Informed Leadership, Suppression of Whistle Blowing: A New Look at a Historic Case

Three issues that come up frequently on Health Care Renewal are problems with man-machine interfaces in health care information technology (IT), as in <a href="http://hcrenewal.blogspot.com/2010/09/ultimate-workaround-to-mission-hostile.html">this post</a> by Dr Scot Silverstein;<a href="http://hcrenewal.blogspot.com/search/label/ill-informed%20management"> ill-informed</a> and mission-ignorant or <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management">hostile leaders</a>, sometimes in a position to overrule health care professionals, as in <a href="http://hcrenewal.blogspot.com/2010/09/health-care-leaders-in-maine-fail-to.html">this post</a>; and <a href="http://hcrenewal.blogspot.com/search/label/whistle-blowers">whistle-blowers</a>, and their silencing. A truly amazing story just surfaced that deals with all these issues, albeit not in health care.  If it is true, and if it had been revealed earlier, maybe society would have become more concerned earlier with these issues, and maybe they would have not ended up plaguing health care so. Let me first just go through the basic structure of the story to underline the parallels with health care issues.  Then I will quote the specifics. (If you do not instantly recognize the story, I suggest going through this post sequentially, not jumping to the end, to make its impact more clear.) The Structure of the Story Introduction A large corporation had just put on-line, with much publicity, a high-technology system that was advertised as bigger, faster, better than the competition.  Confusing Interface and Terminology, Wrong Control Input  A few days after becoming operational, those in charge suddenly noticed a looming and severe problem.  A technician was ordered to make an extreme control input to avoid the problem.  However, there was confusion about the terminology of the input.  While the system he was controlling was new, and had a new interface, it was operating in an area in which the old terminology, from a time in which the interface for the particular control worked in the opposite direction, was still in use.  So his extreme input was in exactly the wrong direction.  By the time the mistake was clear, and the control was reversed, it was too late, and the first stage of the catastrophe ensued.  Ill-Informed Management Overrules the Professionals It is possible that the catastrophe could have been ameliorated if a crucial part of the system were then to have been quickly shut down.  The highest ranking professional on duty ordered it shut down.  However, soon after the events above, a top executive in the corporation, who was nearby only because of all the hoopla surrounding the system's roll out, came on the scene.  He countermanded the order for the shutdown, possibly thinking continuing operation would cost less money and result in less bad publicity.  True disaster then ensued. Whistle Blowing Suppressed After the disaster, there were several government hearings.  The top executive denied any knowledge of the decision making that lead to the disaster.  A professional who had not been present when the decisions were made, but was told about them by those who were present, avoided mention of the events above, because the top executive had told him that if he were to have told the truth, the company would have been found negligent, its insurance would not have covered the disaster, and it would have gone bankrupt, and everyone would lose their jobs.  So he never told anyone except first-degree relatives.  The other people who were present for the events above did not testify, for reasons to be discussed below. So this story has all the familiar elements.  But so have many others.  Why was the suppression of this version of the story (assuming its true, which is not proven) so important? The Real Story Let us go through the elements again, this time with quotes from <a href="http://www.telegraph.co.uk/culture/books/booknews/8016751/The-truth-about-the-sinking-of-the-Titanic.html">the article</a> in the London, UK, Telegraph: Introduction and Context <blockquote>All families have their secrets, but usually about things that don’t matter to anybody else. Not in the case of Louise Patten, though – or The Lady Patten to give her her full title, the wife of former Tory Education minister, Lord (John) Patten, though her own career as one of the first women board directors of a FTSE 100 company, and as a successful author of financial thrillers, means that she has plenty of achievements in her own right. As a teenager in the 1960s, Patten was let in on a secret by her beloved grandmother, which, if revealed, she was warned, would result in two things. The first was awful – it would destroy the good name of her dead grandfather, Charles Lightoller, awarded the DSC with Bar in the First World War, and a hero again for his part in the evacuation of Dunkirk in 1940. But the second would change history, overturning the authorised version of one of the world’s greatest disasters, the sinking of the Titanic with the loss of 1517 lives in April 1912. The tension between these two outcomes goes some way to explaining why, for 40 years, Patten kept quiet.... 'After the collision,’ Patten goes on, 'my grandfather went down with the Captain and [First Officer] Murdoch to Murdoch’s cabin to get the firearms in case there were riots when loading the lifeboats. That is when they told him what had happened.'</blockquote>Confusing Terminology and Interface <blockquote>'Instead of steering Titanic safely round to the left of the iceberg, once it had been spotted dead ahead, the steersman, Robert Hitchins, had panicked and turned it the wrong way.’ At first glance it sounds extraordinary that anyone – much less the man put in charge of the wheel on the maiden voyage of what was then the world’s most expensive ocean liner – could have made such a schoolboy error. 'Titanic was launched at a time when the world was moving from sailing ships to steam ships. My grandfather, like the other senior officers on Titanic, had started out on sailing ships. And on sailing ships, they steered by what is known as “Tiller Orders” which means that if you want to go one way, you push the tiller the other way. [So if you want to go left, you push right.] It sounds counter-intuitive now, but that is what Tiller Orders were. Whereas with “Rudder Orders’ which is what steam ships used, it is like driving a car. You steer the way you want to go. It gets more confusing because, even though Titanic was a steam ship, at that time on the North Atlantic they were still using Tiller Orders. Therefore Murdoch gave the command in Tiller Orders but Hitchins, in a panic, reverted to the Rudder Orders he had been trained in. They only had four minutes to change course and by the time Murdoch spotted Hitchins’ mistake and then tried to rectify it, it was too late.</blockquote> A Manager Countermanding the Professional <blockquote>If the steersman Hitchins had made a human error, Bruce Ismay, chairman of the White Star Line, owners of the Titanic, and another survivor of the sinking, gave a lethal order. 'Titanic had hit the iceberg at her most vulnerable point,’ explains Patten, 'but she could probably, my grandfather estimated, have gone on floating for a long time. But Ismay went up on the bridge and didn’t want his massive investment to sit in the middle of the Atlantic either sinking slowly, or being tugged in to port. Not great publicity! So he told the Captain to go Slow Ahead. Titanic was meant to be unsinkable.’ </blockquote> However, <blockquote>'If Titanic had stood still,’ she demonstrates, 'she would have survived at least until the rescue ship came and no one need have died, but when they drove her 'Slow Ahead’, the pressure of the sea coming through her damaged hull forced the water over the bulkheads and flooded sequentially one watertight compartment after another – and that was why she sank so fast.’ </blockquote> Whistle Blower Suppressed, the Cover Up <blockquote>Why, though, I puzzle, would Patten’s grandfather, who sounds like a thoroughly honest and brave man, have lied and carried on lying? 'Because,’ she explains, 'when he was on the rescue ship, Bruce Ismay pointed out to my grandfather that if he told the truth, the White Star Line would be judged negligent and its limited liability insurance would be invalid. Ismay pretty much said that the whole company would go bust and everyone would lose their jobs. There was a code of honour among men like my grandfather in those days. So he lied to protect others’ jobs.’ But why didn’t her grandmother speak up after her husband’s death in 1952? 'She was worried about showing this heroic figure to be a liar. And my mother, who also knew the secret and was even uncomfortable with Granny having told me, felt even more strongly about it. She hero-worshipped my grandfather.’ So there this secret sat, locked in a family circle from which Patten is now the only survivor.</blockquote>Conclusion The story does seem amazing. I am hardly an expert on the sinking of the Titanic, so should not try to comment on its truth. It does have some plausibility, and provides an explanation for one of the most important and influential disasters of the 20th century that is still poorly understood and a cause for controversy. In my humble opinion, if it were true, and had it come out earlier, this amazing story would have focused society's concerns on issues that have instead become scourges of our current era, and particularly important, if not frequently enough discussed causes of our health care dysfunction. The Titanic disaster lead to major changes in numerous safety practices, leading to rules about the adequacy of lifeboats and radio communication, and even swimming proficiency requirements in higher education. (I had to pass a swimming test as a Brown University freshman that was a legacy of the sinking of the Titanic, I was told.) Most of these practices increased the survivability of accidents. What if the focus was also on the causes of accidents? What if there was a groundswell of advocacy, starting in 1912, against pressure from business and financial leaders on professionals sworn to protect the public's health and safety, and against intimidation of whistle-blowers whose revelations could protect public health and safety? Maybe health care, and many other parts of life, would have turned out better? <div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjC2x-Vb8jkTslhToSFewiisC4lrHpytdoZwEdpDAIazK1SH-ruHpcP3OiSclE_ju0hoPkvDRbcVUOJCn5cZE3fk4od8ovAarc7voeI9XSUaBZ6Fyc_cSInXMH6qJYjsJPBz9Xdvyeks5xf/s1600/Titanic_3.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="235" px="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjC2x-Vb8jkTslhToSFewiisC4lrHpytdoZwEdpDAIazK1SH-ruHpcP3OiSclE_ju0hoPkvDRbcVUOJCn5cZE3fk4od8ovAarc7voeI9XSUaBZ6Fyc_cSInXMH6qJYjsJPBz9Xdvyeks5xf/s320/Titanic_3.jpg" width="320" /></a></div>

Interface Problems, Ill-Informed Leadership, Suppression of Whistle Blowing: A New Look at a Historic Case

Three issues that come up frequently on Health Care Renewal are problems with man-machine interfaces in health care information technology (IT), as in this post by Dr Scot Silverstein; ill-informed an…

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24 Sep 2010

The Dangers of Critical Thinking in A Politicized, Irrational Culture

My early mentor in biomedicine Victor P. Satinsky MD lived by the credo "critical thinking always, or your patient's dead." Unfortunately, the motto of today's degraded culture in biomedicine (and other domains) might well be "critical thinking, and your career is dead." At "<a href="http://hcrenewal.blogspot.com/2010/09/health-it-on-anecdotalism-and.html">Health IT: On Anecdotalism and Totalitarianism</a>" I posted these thoughts: <div dir="ltr" style="font-family:arial;"></div><blockquote><div dir="ltr" style="font-family:arial;">At the article <a href="http://www.massdevice.com/news/blumenthal-emrs-debate-raging-over-competition-vs-standards">Blumenthal on EMRs: Debate "raging" over competition vs. standards</a>, ONC czar David Blumenthal is cited as saying several interesting things: </div> <div dir="ltr" style="font-family:arial;"> </div> <blockquote dir="ltr" style="margin-right: 0px;font-family:arial;"> <div dir="ltr">... EMRs make him a better physician, he said, recounting personal anecdotes of discovering patients' allergies through automated EMR alerts and using stored image date to more quickly get a diagnosis for a patient without subjecting them to more radiation and toxic radiation agents ... </div></blockquote> <div dir="ltr" style="font-family:arial;"> </div> <div dir="ltr" face="arial"> It's the EMR "anecdotalists" (as opposed to the "<a href="http://www.blogger.com/redir.aspx?C=dc7b9da405614c5dbab920a23075d904&URL=http%3a%2f%2fonline.wsj.com%2farticle%2fSB122910977401502369.html%3fmod%3dloomia%26loomia_si%3dt0%3aa16%3ag2%3ar3%3ac0.0175368%3ab0" target="_blank">Markopolists</a>") who say that "anecdotes" of HIT-related injury are meaningless. They deem reports of safety issues and HIT-related misadventures and risk as simply "anecdotal", and that "anecdotes don't make evidence" (or "anecdotes don't make data"). </div> <div dir="ltr" face="arial"> </div> <div dir="ltr" style="font-family:arial;"> Yet anecdotal reports of EMR "saves" are used by a czar to justify tens of billions of dollars of expenditures?</div> <div dir="ltr" style="font-family:arial;"> </div> To the anecdotalists, I say: you can't have it both ways.</blockquote> I also posted nearly the same complete Healthcare Renewal post to several mailing lists of the American Medical Informatics Association including the Clinical Information Systems working group (CIS-WG). CIS-WG is a mailing list read by something over 1000 healthcare informatics professionals at last time I had access to the statistics a few years ago. I received some supportive replies from colleagues, including collaborators on the AHIMA (not AMIA) book we co-authored in 2009 entitled "<a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=hitormiss">H.I.T. or Miss: Lessons Learned from Health Information Technology Implementations</a>" - itself not exactly a popular exercise among the strictly <a href="http://en.wikipedia.org/wiki/Positivism">positivist</a> informatics leadership class. Now, I thought my posting on the double standard regarding "anecdotes" highly straightforward. From a high ranking academic leader of a major national informatics program, Bill Hersh at OHSU, however, the following reply was posted: <blockquote>Scot, For someone who is a faculty in informatics, I am surprised at how unfamiliar you are with the literature. There is solid evidence, much more than anecdotes, on the efficacy of health IT. Even Dr. Blumenthal himself has posted on that. (I think you are taking this quote out of context. </blockquote>I am then served a platter of literature I must be "unfamiliar with" such as: <blockquote>Goldzweig, C., Towfigh, A., et al. (2009). Costs and benefits of health information technology: new trends from the literature. Health Affairs, 28: w282-w293. [Note - I had commented on and linked to this very article at <a href="http://hcrenewal.blogspot.com/2010/08/health-it-via-observation-and-research.html">this Aug. 29, 2010 post</a> - ed.] Garg, A., Adhikari, N., et al. (2005). Effects of computerized clinical decision support systems on practitioner performance and patient outcomes: a systematic review. Journal of the American Medical Association, 293: 1223-1238. Amarasingham, R., Plantinga, L., et al. (2009). Clinical information technologies and inpatient outcomes: a multiple hospital study. Archives of Internal Medicine, 169: 108-114. Longhurst, C., Parast, L., et al. (2010). Decrease in hospital-wide mortality rate after implementation of a commercially sold computerized physician order entry system. Pediatrics, 126: 14-21. </blockquote> Now, aside from the serious breach of academic etiquette of attacking the competence of your colleagues in a public forum, I seem to be hearing that it's OK to purvey positive anecdotes about health IT (usually based on weak retrospective observational studies alone, not randomized clinical trials), but not anecdotes of HIT malfunctions or of HIT-related adverse outcomes, since there's 'solid evidence' of the efficacy of health IT. In plain English, an ad hominem fallacy is followed by an appeal to authority of sorts ("the literature") to justify public Pollyanna attitudes towards HIT by high ranking officials. And since the literature is so glowing, negative anecdotes must be of low worth. [Jan. 2011 addendum - perhaps the literature's <a style="font-style: italic;" href="http://hcrenewal.blogspot.com/2011/02/updated-reading-list-on-health-it.html">not so glowing</a> - ed.] Actually, the response in its entirety was a non sequitur to my post. Others in cis-wg took affront. One of my book co-authors responded that: <blockquote>I didn't read Scot's comment as saying that there is no data in support of EHRs .... despite a body of evidence, Dr. Blumenthal made a statement only about personal experience in what Scot quoted. At the same time, ONC has asked for EHR users to share their positive experiences, but has not (as far as I have seen) asked for their failures. Quite frankly, the failures would be more instructive and would constitute a very valuable repository. ONC has also not shared the studies on the dangers and failures of EHR implementations with nearly the same passion as the successes. My point is that there is data and there is anecdote for both sides and ONC has not presented a balanced picture so that we can adequately address the real risks.</blockquote> Another CIS-WG reader shared valuable observations: Regarding Goldzweig: <blockquote>Regarding studies conducted by the HIT leaders (e.g. Partners Vandy, Regenstrief, IHC, etc...): "Many of the new studies report modest or even no benefits of the new applications or changed functionalities." Regarding studies of commercial HIT systems: "These study results were similar to those reported by the health IT leaders—most studies demonstrated modest benefits, some demonstrated no benefits, and a few demonstrated marked benefits." </blockquote> Regarding Adhikari: <blockquote>The CDSS improved practitioner performance in 62 (64%) of the 97 studies assessing this outcome, 52 trials assessed 1 or more patient outcomes, of which 7 trials (13%) reported improvements.</blockquote> And so on. In other words, the literature's mixed. Finally, the knock-the-ball-out-of-the-park response came from a Medical Informatics researcher Down Under: <blockquote>I think such defences are particularly unuseful especially with respect to the dismissal of personal stories and experiences as "anecdotes", hence committing them to the realm of folklore. I offer these notions as a counterpoint. Discounting Anecdotes: 1. Is a perfidious and specious act. 2. It denies early warning signs of problems. 3. It denies a voice and disempowers the working clinical community who have to operationalise decisions made by others. 4. It denies a route to process improvement within an institution - which is most important for EBM and incremental review of local processes. 5. It defends software manufacturers from fault rectification - cuts off even a need to deliberate on it. Critics of the value of anecdotes are squarely on the side of the faulty and deficient manufacturer. 6. A rule of project management is that projects consist of 3 components, cost, quality and time and if their needs to be a compromise it has to be on quality. Anecdotes are early warning signs of such a compromise. </blockquote> I, of course, added that ignoring "anecdotes" of HIT problems was even more cavalier if one recognized the context of the stories, that is, that they arise in an environment hostile to diffusion through contractual arrangements, poorly recognized reporting resources, fear, etc. Understood in context, they should be receiving more research attention than otherwise, and certainly not ignored. However, the comment about my purported lack of knowledge of the literature was sent out to 1000+ people by a nationally-recognized informatics leader, people who may or may not read the followup in detail. This is unfortunate and perhaps reflects the ethos of our day. -- SS Addendum: Also see the Aug. 2011 post "<a href="http://hcrenewal.blogspot.com/2011/08/from-senior-clinician-down-under.html">From a Senior Clinician Down Under: Anecdotes and Medicine, We are Actually Talking About Two Different Things</a>" for a truly stunning takedown of the "anecdotes" canard, which amounts to conflating risk management with scientific discovery.

The Dangers of Critical Thinking in A Politicized, Irrational Culture

My early mentor in biomedicine Victor P. Satinsky MD lived by the credo "critical thinking always, or your patient's dead."Unfortunately, the motto of today's degraded culture in biomedicine (and othe…

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24 Sep 2010

Health Care Leaders in Maine Fail to Learn from Past Experience

From down east Maine comes a telling story about the problems of contemporary health care leadership.  I assembled this case from three articles by Meg Haskell in the Bangor Daily News, links are below. (1-3) Complaints About the CEO's Clinical Policies The story begins with complaints about clinical policies instituted by the CEO of Acadia Hospital. <blockquote>[Acadia CEO David] Proffitt has come under fire in recent weeks from current and former Acadia Hospital employees who say the incidence and severity of staff injuries have risen since he initiated a policy that essentially eliminates the use of mechanical and physical restraints with mentally ill patients who become violent. (2)</blockquote> The concerns were raised with government agencies: <blockquote>Since the end of July, the federal Occupational Safety and Health Administration has been conducting an on-site investigation into employee complaints of unsafe working conditions at Acadia. The state Department of Health and Human Services also recently has investigated conditions at Acadia, with a report due later this month. (2)</blockquote> Furthermore, <blockquote>The OSHA investigation was triggered earlier this summer by a complaint filed with the agency alleging an increase in patient assaults on staff after Proffitt implemented stricter standards against the use of mechanical and physical restraints, even when patients turn violent.(3) </blockquote> Loss of Experienced Clinicians There were also concerns that Mr Proffitt presided over the loss of experienced clinicians who were replaced by those with less experience <blockquote>Employees also have alleged that Proffitt has fired or pushed out a number of clinical leaders at Acadia, including former Vice President for Medical Affairs Dr. Paul Tisher and former Chief Nursing Officer April Giard. They have criticized his replacements as lacking expertise in psychiatric care.(3)</blockquote> Lack of Clinical Experience or Training, Questionable Educational Credentials Given his direct involvement in clinical decision making, it surprising that Mr Proffitt has no clinical training or experience: <blockquote>Proffitt’s academic qualifications also have been questioned. Proffitt’s education includes a 1984 bachelor’s degree in therapeutic recreation from the University of Nebraska at Omaha, a 1989 master’s degree in recreational administration from Arizona State University, and a 2007 doctoral degree in health administration from Warren National University, now a defunct, unaccredited on-line program. His academic career has been criticized as being inadequate to prepare him for the top-level positions he has held at both Riverview and Acadia, although neither position requires a doctoral degree.(2)</blockquote> Repeating the Past It turns out that similar concerns were raised about Proffitt's performance in his previous position: <blockquote>Psychiatrists formerly employed at Riverview said this week that both patient care and employee morale eroded under Proffitt’s leadership there. 'Over the course of David Proffitt’s tenure at Riverview, a significant number of long-standing and experienced staff left and were replaced with less experienced or temporary people,' said Dr. Bryan Woods, who was employed at Riverview from 2003 to 2006 and now practices in Portland. “\'In my opinion, this resulted in a decrease in the quality of patient care.' Woods said Proffitt’s management style was often in conflict with the collaborative 'treatment team' approach commonly used in acute-care psychiatric settings. 'Ultimately, I left, because I simply could not work with him,' Woods said. Woods’ colleague Dr. Dan Filene, who also worked at Riverview under Proffitt, said direct-care staff at the state hospital were placed at increased risk by a stringent policy that all but eliminated the use of any kind of restraints. 'The staff at Riverview are heroic,' he said. 'It’s not just dangerous; it is emotionally challenging, fatiguing, low-paying work. When they are actively being injured, it can’t help but affect patient care.' Filene stressed that most people with mental illness are not dangerous or violent. Sen. Stanley Gerzofsky, D-Brunswick, is chairman of the Legislature’s Criminal Justice Committee. The committee oversees the locked forensic unit at Riverview, where criminals with severe mental illness are housed and treated. Proffitt’s policy of doing away with restraints for even the most dangerous patients prompted a number of complaints, he said. 'We heard concerns that staff members were being injured [by patients],' Gerzofsky said in an interview this week. 'Staff were complaining that [Proffitt] didn’t have the right credentials and that he didn’t take the violence very seriously. We had him in front of our committee several times.' Gerzofsky’s colleague on the committee, Sen. John Nutting, D-Leeds, said he heard from several Riverview patient families and staff members. 'Legislators were called to see if he could be replaced,' he said. 'There was really just one single reason — he was telling doctors how to treat their patients. He was trying to get between the patients and their doctors. Nutting said parents of patients were especially concerned. 'They wanted their loved ones to get the care their doctors wanted them to receive, not the CEO of the hospital,' he said.(2)</blockquote> Proffitt's credentials were also questioned before: <blockquote>Proffitt’s degrees in recreational therapy and his online doctorate, Nutting observed, did little to reassure worried families.(2)</blockquote> Proffitt's Defenders The allegations made against Proffitt, which appear to be from clinical professionals and patients' relatives, were countered by support from, perhaps not surprisingly, managers and executives: <blockquote>Michelle Hood, CEO of the hospital’s corporate parent Eastern Maine Healthcare Systems, says that under Proffitt, Acadia is 'moving in the right direction.' She lauded the progress he has made toward de-stigmatizing mental illness and ramping up Acadia’s outpatient and community services.</blockquote> Note that Michelle Hood, although she has considerable health care management experience, appears not to have any clinical experience of expertise, from <a href="http://www.emh.org/dynamic.aspx?id=6764">her official biography</a>: <blockquote>Before arriving at EMHS, Michelle was president and CEO of the Sisters of Charity of Leavenworth Health System, Montana Region, as well as president and CEO of its flagship hospital, St. Vincent Healthcare. She received her Bachelor of Science in 1978 at Purdue University and her Master of Health Care Administration at Georgia State University in 1981. Her early career included roles of associate hospital director at Emory University Hospital in Atlanta Georgia, executive vice president and chief operating officer of St. Vincent’s Hospital (of now Ascension Health) in Birmingham, Alabama and chief administrative officer of Norton Hospital in Louisville, Kentucky.</blockquote> Somehow, the process that hired Mr Proffitt, presided over by Ms Hood, did not seem to consider his previous work at Riverview: <blockquote>At EMHS, Michelle Hood said Proffitt’s troubles at Riverview 'did not come up' during his interviews for the position of CEO at Acadia. One of 16 applicants in a nationwide search to replace outgoing CEO Dorothy Hill, he had appropriate letters of reference from former employers, she said.(2) </blockquote> By the way, the process involved checking whether his educational credentials were accurate, but apparently was unconcerned with the meaning of an on-line degree from an unaccredited institution (subsequently closed down by state authorities, see here.) <blockquote>His educational credentials checked out.... (2)</blockquote> Hood dismissed concerns about losses of experienced staff: <blockquote>Asked about the loss of key clinical administrators at Acadia, including Vice President for Medical Affairs Dr. Paul Tisher and Chief Nursing Officer April Giard, Hood said 'turnover is normal' with a new administration and that Proffitt has successfully recruited new talent and promoted qualified staff from within the organization. </blockquote> The board of trustees of Acadia Hospital also supported their CEO <blockquote>At the end of last week, John Bragg, chairman of the hospital’s board of directors, said the board supports embattled CEO David Proffitt, despite a deluge of concerns raised by current and former employees and unflattering revelations about Proffitt’s educational credentials and his leadership at his previous post. At its regular meeting last Wednesday, the board went into executive session to discuss the situation, Bragg said Friday. 'We came out supporting Dr. Proffitt and the changes that are in place and the team he has put together,' he said. </blockquote> As best as I can tell, Mr Bragg is the <a href="http://corp.nhbragg.com/?cat_id=268">President</a> of a local industrial firm, N H Bragg. By the way, here is what George Eaton, chairman of the board of Eastern Maine Healthcare Systems, the parent not-for-profit corporation for Acadia Hospital, said about the executives that are accountable to him: <blockquote>By making critical decisions, engaging in aggressive fundraising and other activities, 'exceptional senior executives can and should add many multiples of what they cost to the value of the institution,' he said. Eaton said CEO compensation packages within EMHS are determined using information from comparable institutions nationwide.(1)</blockquote> Also, <blockquote>The job of the CEO is 'incredibly complex,' working in 'the most regulated environment in any industry,' Eaton said. 'The prudent thing to do is to get the best people you can,' he said, 'and pay them what you need to in order to retain them — so long as they are achieving the performance goals set by their board.'</blockquote>Note that Mr Eaton appears to be an attorney, according to the <a href="http://www.emh.org/dynamic.aspx?id=6790">EMHS site</a>, "George F. Eaton II, Esq.; Bangor; attorney, Rudman & Winchell." Summary This case illustrates much of what has gone wrong with leadership and governance of health care organizations. We see health care organizations lead by people who have <a href="http://hcrenewal.blogspot.com/search/label/ill-informed%20management">no experience or training</a> in actually giving health care. Yet people who are not doctors, nurses, or therapists make clinical policies and control clinical care, even against the advice of experienced clinicians. In fact, some such leaders seem to regard clinicians as interchangeable widget-makers making interchangeable widgets. The ill-informed leaders of health care organizations often seem sensitive about their lack of knowledge and experience, and hence may be quick to punish any health care professional who protests their ill-informed decisions.  Moreover, the ill-informed leaders of health care seem to band together to support each other, even in the face of criticism from people with real expertise in health care, or from patients and relatives directly affected by health care and how it is delivered.  Higher level executives who are supposed to supervise lower level executives, and boards of directors which are supposed to exercise stewardship and support institutional values may seem more concerned with protecting the prerogatives of all executives rather than than the patient care mission. As we have said again, again, again, health care desperately needs leadership that understand the context, and believes in the values.  It needs leaders that puts patients first, ahead of the pay and prerogatives of the executive and managerial class, our would-be new aristocracy. References 1.  Haskell M. Maine's hospitals: big jobs, big pay. Bangor Daily News, March 6, 2009.  <a href="http://www.bangordailynews.com/detail/101030.html">Link</a>. 2.  Haskell M. Acadia CEO criticized at previous post.  Bangor Daily News, September 10, 2010.  <a href="http://www.bangordailynews.com/story/Greater-Bangor/Acadia-CEO-criticized-at-earlier-post,153555">Link</a>. 3.  Haskell M. Acadia board supports CEO despite claims.  Bangor Daily News, September 20, 2010.  <a href="http://www.bangordailynews.com/story/Greater-Bangor/Acadia-board-supports-CEO-despite-claims,154302">Link</a>.

Health Care Leaders in Maine Fail to Learn from Past Experience

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23 Sep 2010

More Than $1 Million to Run a Public Health Agency

After a well-publicized story that managers of small town in California were paid in the high six-figures, reporters in California have gotten interested in the pay of public officials. Thus the San Diego Union-Tribune <a href="http://www.signonsandiego.com/news/2010/sep/18/public-health-exec-pay-tops-1-million/">reported</a> on the compensation received by CEOs of local public health agencies, called public health care districts, two of which run hospitals. One in particular received generous compensation: <blockquote>The top official at Palomar Pomerado Health, a public agency serving health-care needs in Poway and Escondido, receives in excess of $1 million in compensation per year. Michael Covert, who has run the North County hospital district since 2003, receives a base salary of $736,000 a year. Retirement, bonuses and other benefits push Covert’s total pay past $1.1 million.</blockquote> One other public health CEO, also responsible for a hospital, made somewhat less: <blockquote>Tri-City chief executive Larry Anderson collects a base salary of $480,000 and benefits that drive his total compensation past $625,000 a year. He also received a $50,000 relocation benefit when he arrived last year.</blockquote> Two CEOs of health districts that did not run hospitals, having leased them out, made less still: <blockquote>Grossmont chief executive Barry Jantz makes about $183,000 a year in base pay and benefits that increase his total compensation to just under $250,000 a year. Fallbrook administrator Vi Dupre, ... is paid a base salary of $61,000 a year and benefits that raise her compensation to just over $69,000,....</blockquote> Why is Mr Covert paid so much? <blockquote>Bruce Krider, the health-care district chairman, said Covert does an excellent job managing a complex enterprise that includes two major hospitals. Covert juggles the interests of staff, physicians, patients, volunteers, board members and other stakeholders, he said. 'A million dollars sounds pretty good to anybody, but my view is, pay a lot and expect a lot,' said Krider, a management consultant who also is a former hospital executive. 'You can’t have some mediocre public servant. You need somebody that has got vision, that can see the issues that are most important and put it all together.'</blockquote> So now even the managers of public health agencies have become million dollar babies. And of course, according to the boards of trustees who are supposed to supervise them, they all do excellent work and therefore are underpaid even then. As we have noted before, it seems that every board supervising every health care executive thinks their executives are above average, if not stellar. Note, though, that the chair of the board overseeing Mr Covert is himself a retired hospital administrator. So, as we have noted before, it seems that the boards of such organizations often have a preponderance of members who are not inclined to be critical of their hired executives, much less limit their pay. So the rules for top leaders of health care organizations seem to be different from those for you and me.  All these managers seem to be entitled to be above average.  (The only ones who are eventually deemed below average seem to be those up to no good in ways that do not financially benefit their organizations, e.g., see <a href="http://hcrenewal.blogspot.com/2010/07/where-no-hospital-ceos-are-below.html">this</a>.) In my humble opinion, it is unseemly for the leader of a government run public health organization to make so much.  True health care reform would decrease perverse incentives throughout the systems, spread the power in organizations more broadly, and make leaders accountable.

More Than $1 Million to Run a Public Health Agency

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20 Sep 2010

Health IT: On Anecdotalism and Totalitarianism

<div dir="ltr" style="font-family:arial;">At the article Blumenthal on EMRs: Debate "raging" over competition vs. standards (<a href="http://www.massdevice.com/news/blumenthal-emrs-debate-raging-over-competition-vs-standards" target="_blank">http://www.massdevice.com/news/blumenthal-emrs-debate-raging-over-competition-vs-standards</a>), ONC czar David Blumenthal is cited as saying several interesting things: </div> <div dir="ltr" style="font-family:arial;"> </div> <blockquote dir="ltr" style="margin-right: 0px;font-family:arial;"> <div dir="ltr">... EMRs make him a better physician, he said, recounting personal anecdotes of discovering patients' allergies through automated EMR alerts and using stored image date to more quickly get a diagnosis for a patient without subjecting them to more radiation and toxic radiation agents ... </div></blockquote> <div dir="ltr" style="font-family:arial;"> </div> <div dir="ltr" style="font-family:arial;"> It's the EMR "anecdotalists" (as opposed to the "<a href="http://en.wikipedia.org/wiki/Harry_Markopolos" target="_blank">Markopolists</a>") who say that "anecdotes" of HIT-related injury are meaningless. They deem reports of safety issues and HIT-related misadventures and risk as simply "anecdotal", and that "anecdotes don't make evidence" (or "anecdotes don't make data"). </div> <div dir="ltr" style="font-family:arial;"> </div> <div dir="ltr" style="font-family:arial;"> Yet anecdotal reports of EMR "saves" are used by a czar to justify tens of billions of dollars of expenditures?</div> <div dir="ltr" style="font-family:arial;"> </div> <div dir="ltr" face="arial"> To the anecdotalists, I say: you can't have it both ways. </div> <div dir="ltr" face="arial"> </div> <div dir="ltr" style="font-family: arial;">That same article concludes with this concerning statement: </div> <div dir="ltr" style="font-family: arial;"> </div> <blockquote dir="ltr" style="margin-right: 0px;font-family:arial;"> <div dir="ltr">... Blumenthal, adamantly pro-EMR, said there is a move afoot to add technical fluency into certification for healthcare providers. "Boards of certification, all the primary care boards of medicine have adopted principles that will lead them to create requirements for the use of electronic health systems as a research requirement, and even the medical licensing boards are beginning to think about whether the maintenance of licensure should be dependent, to some degree, on using electronic health systems," he said. "Information is the lifeblood of medicine, and unless physicians and other healthcare professionals are capable of using the most modern technology available for managing information, I think they will have trouble claiming, in the 21st century, the unique competence that entitles them to being licensed and board certified. I think they'll have trouble holding up their heads as professionals and claiming that they are at the top of their game and capable of providing the best care that technology allows."</div></blockquote> <div style="font-family: arial;" dir="ltr"> It appears that my observation ten years ago of a cross-occupational invasion on Medicine by the IT domain (and its purveyors) was prescient. They've continued the march, and now they're now literally at the castle gates. I commented on this issue in more detail a few weeks ago at my post "<a href="http://hcrenewal.blogspot.com/2010/09/american-board-of-medical-specialties.html">American Board of Medical Specialties to "incorporate tools to promote meaningful use of health IT into its maintenance-of-certification program"</a>. I have two questions: </div> <div style="font-family: arial;" dir="ltr"> </div> <div style="font-family: arial;" dir="ltr">1) Was it the intention of the Medical Informatics pioneers to prohibit physicians from being licensed and/or board certified on the basis of using health IT? If such a seemingly totalitarian intention existed, that's fine, I just want to hear it debated. </div> <div style="font-family: arial;" dir="ltr"> </div> <div dir="ltr">2) Is the mere consideration (let alone enactment) of such a restriction, for all specialties, truly evidence based? (Note some merely skimming-the-surface "evidence" at my post "<a href="http://hcrenewal.blogspot.com/2010/07/new-england-journal-on-meaningful-use.html">Science or Politics? The New England Journal and "The 'Meaningful Use' Regulation for Electronic Health Records"</a>.) -- SS </div>

Health IT: On Anecdotalism and Totalitarianism

At the article Blumenthal on EMRs: Debate "raging" over competition vs. standards (http://www.massdevice.com/news/blumenthal-emrs-debate-raging-over-competition-vs-standards), ONC czar David Blument…

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20 Sep 2010

Should the President of the University of Michigan be Held Accountable for Johnson and Johnson's Adulterated Drugs and Defective Devices?

We first started to discuss the intense conflicts of interest generated when leaders of academic medicine are also members of boards of directors of for-profit health care corporations <a href="http://hcrenewal.blogspot.com/2006/03/new-species-of-conflict-of-interest-in.html">in 2006</a>. The issue really made the big time in 2010 when the New York Times published a front page <a href="http://www.nytimes.com/2010/08/01/business/01prez.html">article</a> in its Sunday Business section about whether university presidents who also were corporate directors were part of an "academic-industrial complex." University of Michigan President Mary Sue Coleman as a Director of Johnson and Johnson One such director we<a href="http://hcrenewal.blogspot.com/2010/04/smoke-screen-how-conflict-of-interest.html"> discussed</a> this year is Mary Sue Coleman, President of the University of Michigan, and hence leader of a prestigious medical school and academic medical center, who is also Director of the large health care conglomerate, Johnson and Johnson. This relationship became locally controversial when President Coleman supported a smoking ban on campus, and critics pointed out that Johnson and Johnson is a prominent maker of smoking cessation products. Now President Coleman's role on the Johnson and Johnson board made it into the national media, as the topic of <a href="http://www.detnews.com/article/20100914/OPINION01/9140316/1008/opinion01/Ethics-problems-in-higher-ed">an editorial</a> in the Detroit News: <blockquote>Should public officials moonlight as corporate operatives? This is a question being raised at the University of Michigan in the wake of the administration's decision to ban smoking on campus. While some students have criticized the ban, many take issue with the priorities of the administrators who backed it: Specifically, U-M President Mary Sue Coleman, whose decision-making may have been influenced by her membership on the board of Johnson & Johnson, a private company. The right thing for Coleman to do would be to resign from her corporate position, or, at the very least, refuse to accept payment.</blockquote>(Not to toot my own horn, but I thank the editorial writer for quoting me as a "high-profile" ethicist.) The issue in this editorial, and in the earlier discussion of President Coleman's responsibilities for Johnson and Johnson, was whether the latter could influence specific decisions made in the former role. However, events since our original posts on this case should create a new set of concerns. Johnson and Johnson's Recall of Over-the-Counter Childrens' Medications Johnson and Johnson has been dealing with a series of crises generated by revelations of problems in how it manufactures many of its marquee drugs and devices. We posted <a href="http://hcrenewal.blogspot.com/2010/05/19-million-means-never-having-to-say.html">here</a> about problems in the manufacture of well known over-the-counter childrens' medications, such as childrens' Tylenol (acetaminophen) and Motrin (ibuprofen), by Johnson and Johnson's McNeil Consumer Healthcare subsidiary. Medications were found to be contaminated, and the plant making them was shut down. Stringent Cost Cutting, Merger Mania, and Executives Who Don't Understand their Company's Business Since then, investigative <a href="http://money.cnn.com/2010/08/18/news/companies/jnj_drug_recalls.fortune/index.htm">reporting</a> by Fortune suggested that quality control problems were the result of that tactic popular among corporate executives to boost profits and hence their own over-stuffed pay checks, stringent cost cutting: <blockquote>McNeil's quality-control department thrived for a few years. Then, not long after Larsen retired in 2002, it began to slowly weaken. The culprit was a familiar one -- cost cutting -- but in a subtler form. There were no wholesale layoffs in quality control. Instead experienced staffers were repeatedly laid off and replaced with newbies who mostly lacked technical pharmaceutical experience. By 2008 the analytical laboratory, formerly staffed almost entirely by full-time scientists, was half-full of contract workers, according to a former manager there. Once stricter than a schoolmarm, the department grew lax. The team that tested the production lines was dubbed the 'EZ Pass system,' according to a former quality-control employee.</blockquote> Quality problems also appeared to be products of another familiar tactic that "brilliant" CEOs use to quickly boost the bottom line, mergers and acquisitions: <blockquote>At the end of 2006, J&J, on the hunt for growth amid slowing sales and profits, completed the $16.6 billion acquisition of Pfizer's (PFE, Fortune 500) consumer health care division.... The merger dramatically altered McNeil's position. It had previously been part of the pharma unit, but after the deal it was folded, along with the Pfizer group, into J&J's consumer sector, headed by Colleen Goggins. According to former executives, the difference between divisions was both cultural and financial. 'The people who ran pharma understood the requirements associated with [regulatory] compliance and the investments required to keep that up,' says a former executive. Consumer relied more on marketing, or 'smoke and mirrors,' as an ex-McNeil director scoffs. Perhaps the most striking difference was in profit margins. Companies in the consumer group typically had margins around 10%; McNeil generated more than twice that.</blockquote> So, <blockquote>Their new consumer bosses were now in charge of reducing McNeil's spending so that the company could meet the merger targets. Goggins looked to squeeze every cost, former employees say, and her team leaned heavily on McNeil, with its juicy margins, to absorb the cutbacks. 'I was given savings goals that were mind-boggling, unheard-of,' says one former executive.</blockquote> And the merger brought out another common feature of contemporary management, executives with plenty of power, but almost no knowledge about or experience in the sort of work done by their subordinates: <blockquote>Because the consumer executives lacked pharmaceutical experience, former McNeil employees say, they demanded ill-advised operational reductions. One VP remembers arguing with one of Goggins's</blockquote> A Growing List of Recalls and Mistakes While we learned about how Johnson and Johnson executives pursued all the currently fashionable management techniques to make more money, but likely to the detriment of the quality and safety of their products, we also learned that the problems at the company were not limited to a single factory, the specific products listed above, or a single unit of the company. The company also recalled some contact lenses made by Johnson and Johnson Vision Care, as <a href="http://www.google.com/hostednews/ap/article/ALeqM5gKNufIGxLdxRyZ8TPAzFIe83oA1gD9HPEJA01">reported by the Associated Press</a>, <blockquote>Health giant Johnson & Johnson has issued its ninth recall of a consumer health product in a year, this time covering millions of 1 Day Acuvue contact lenses sold in Japan and two dozen other countries in Asia and Europe. The affected contact lenses were mostly sold in Japan and none were sold in the U.S. or Canada, the company said. Johnson & Johnson said Monday it had received a limited number of complaints from customers in Japan that they experienced an unusual stinging or pain when inserting the Acuvue TruEye Brand contact lenses.</blockquote> Then it recalled prosthetic hips made by its DePuy orthopedic unit, as <a href="http://www.medscape.com/viewarticle/727699">reported by Medscape</a>, <blockquote>An orthopaedic unit of Johnson & Johnson (J&J) is voluntarily withdrawing 2 implant systems for hip replacement after learning that roughly 1 of 8 patients in England and Wales who received the implants needed a second hip replacement operation. The 2 devices under recall are the ASR XL Acetabular System, a metal cup fitted into the pelvis and the corresponding metal ball that replaces the femoral head, and the ASR Hip Resurfacing System, which is similar except that a metal cap is fastened to the femoral head. Both devices are manufactured by DePuy Orthopaedics of J&J. </blockquote> Then the US Food and Drug Administration (FDA) warned Johson and Johnson's DePuy unit about its marketing of some different joint replacement products, as <a href="http://online.wsj.com/article/BT-CO-20100824-710295.html">reported by the Wall Street Journal</a>, <blockquote>A Johnson & Johnson (JNJ) unit is marketing joint-replacement products without the required approval from federal regulators, the U.S. Food and Drug Administration said in a warning letter recently made public. In the letter, the FDA said J&J unit DePuy Orthopaedics Inc. is illegally marketing its TruMatch Personalized Solutions system because it hasn't received appropriate clearance to sell the product. Additionally, the FDA found that DePuy is promoting another system--its Corail Hip System--for uses that haven't yet been approved. 'A review of our records reveals that you have not obtained marketing approval or clearance before you began offering the TruMatch Personalized Solutions System for sale, which is a violation of the law,' the FDA said in the letter. The FDA added that the Corail Hip System has been misbranded and asked DePuy to immediately stop marketing the Corail system for unapproved uses. </blockquote> And a few days ago, the now embattled head of the Johnson and Johnson consumer products unit, which was central to some of the earlier recalls, but not to some of the later problems, announced her resignation, as <a href="http://www.nytimes.com/2010/09/17/business/17tylenol.html">reported by Natasha Singer and Reed Abelson writing for the New York Times</a>, <blockquote>A longtime senior executive at Johnson & Johnson in charge of the consumer products division is leaving the company early next year, signaling a shake-up after a troubling series of recalls, including of children’s Tylenol, tarnished the company’s reputation in the last year. The company said Thursday that the executive, Colleen A. Goggins, who testified this spring before a Congressional committee investigating the recalls, would retire in March. Ms. Goggins, 56, has worked at Johnson & Johnson since 1981 and was a member of the company’s senior leadership. </blockquote> Who Will Be Accountable for a Company in Disarray? Johnson and Johnson was one of the most trusted names in health care for a long time, perhaps partially because of its forthright response to the apparently external contamination of its Tylenol products in the 1980s. Now it appears to be a company in disarray, battered by numerous recalls of apparently contaminated, adulterated, or defective products, both drugs and devices, allegations that its conventional management wisdom lead to these quality and safety problems, and now with at least one key senior manager leaving. All that went wrong is not exactly clear yet. Clearly, however, top managers, and the board of directors to whom they report ought to be accountable. Here is where we return to the case of University of Michigan President Mary Sue Coleman. She is, after all, well-paid to be a director of Johnson and Johnson. Therefore, she ought to be accountable for the type of people hired as top managers, and the general direction of their management. She ought to be accountable for letting Johnson and Johnson CEO William Weldon and consumer products head Colleen Goggins continue in office, and receive outsized compensation, ($19,847,026 and $5,345,737  total compensation respectively last year, see <a href="http://hcrenewal.blogspot.com/2010/05/19-million-means-never-having-to-say.html">here</a>). She also ought to be accountable for the general thrust of their management, including excess cost-cutting, seeking mergers without clear plans for assimilating them, and putting people who did not understand pharmaceuticals in charge of pharmaceutical production. The original controversy about President Coleman's role on the Johnson and Johnson board focused on whether her decision to promote a smoke free campus resulted from her conflict of interest.  Then, one defense mounted by President Coleman's spokesperson was: <blockquote>'It's essential that U-M have a voice and interact with the business world,' said Rick Fitzgerald, a U-M spokesman. 'She thinks it's her duty to understand what the commercial world is doing.'</blockquote> Now President Coleman has had a chance to have a voice and interact with Johnson and Johnson, and understand what it is doing by assuming a position that gives her ultimate responsibility for the company's top leadership and the direction they took. Now it appears the leadership may have been faulty, and their direction ill-advised. Will President Coleman take responsibility for that? Maybe some enterprising student journalists at the university should ask her. Meanwhile, this case now illustrates another important facet of the problems created when leaders of academic medicine serve on boards of directors of health care corporations. The mission of the University of Michigan's medical school and academic medical center includes taking the best possible care of individual patients. Taking the best possible care of individual patients cannot be done when the drugs physicians recommend or prescribe in good faith turn out to be adulterated, or when the devices they employ in good faith turn out to be faulty. President Coleman's primary interests and entrusted responsibilities include upholding the best possible care for individual patients. Presiding over a company whose sloppy and ill-informed leadership, and misplaced priorities lead to the production of adulterated medicines and defective devices seems to conflict with this primary interest and entrusted responsibility. Maybe all those academic leaders who accepted apparently cushy jobs on corporate boards will reconsider their decisions when they start being held responsible for their companies' poor leadership and poor decisions leading to poor health care outcomes of the use of their companies' products. They may really start to reconsider when journalists learn that academic leaders are more accessible than the current and ex-CEOs who also populate corporate boards. Meanwhile, academic medicine ought to really rethink whether continuing to defend the "new species of conflicts of interest" will soon become counter-productive.

Should the President of the University of Michigan be Held Accountable for Johnson and Johnson's Adulterated Drugs and Defective Devices?

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19 Sep 2010

Forest Pharmaceuticals Pleads Guilty to Obstruction of Justice, No Individual Pays Any Penalty

The parade of legal settlements marches on.  The latest story is about Forest Laboratories and its marketing of Celexa (citalopram ) and Levothyroid (l-thyroxin).  Here is the most <a href="http://www.nytimes.com/2010/09/16/health/16drug.html">complete version</a>, courtesy of Natasha Singer reporting for the New York Times. First, the lead sentence: <blockquote>A unit of Forest Laboratories, the maker of the antidepressant Celexa, agreed on Wednesday to pay more than $313 million to settle criminal and civil complaints, including a claim that it had illegally promoted the drug for use in children. </blockquote> Here are the charges: <blockquote>Among the criminal charges was one that the subsidiary, Forest Pharmaceuticals, marketed Celexa, which was approved only for adult depression, to treat children and adolescents. The government also claimed that, in conjunction with the company’s off-label promotion, Forest publicized the positive results of a study on Celexa in adolescents while failing to tell doctors about a similar study that had negative results. 'Forest Pharmaceuticals deliberately chose to pursue corporate profits over its obligations to the F.D.A. and the American public,' Carmen Ortiz, the United States attorney for the District of Massachusetts, said in a statement Wednesday. In addition, federal prosecutors accused Forest of paying doctors to induce them to prescribe Celexa and another antidepressant, Lexapro. The remuneration included 'cash payments disguised as grants or consulting fees, expensive meals and lavish entertainment, and other valuable goods and services,' the government said in its civil complaint. Among the items that Forest sales representatives gave to doctors from 1998 to 2005, the complaint said, were tickets to St. Louis Cardinal games, which were to be 'leveraged and sold as a reward for prescriptions'; a $1,000 gift certificate to Alain Ducasse, a gourmet French restaurant, for a high-prescribing child psychiatrist; a deep-sea fishing trip off Cape Cod for a doctor and his three sons; $400 in Broadway theater tickets for a doctor and his wife; and Red Sox tickets worth $2,276 to be used for doctors in the Boston area. </blockquote> So we not just off-label marketing, but suppression of clinical research (of course, a study whose results were not favorable to the product being marketed), and payments to doctors as an "inducement to prescribe." But wait, there is more: <blockquote>As part of the criminal settlement, Forest Pharmaceuticals, which is based in St. Louis, agreed to plead guilty to one felony count of obstructing justice, acknowledging that employees had lied to F.D.A. officials during a plant inspection in 2003. The company also agreed to plead guilty to two misdemeanors, one of which covers the company’s misbranding of Celexa by marketing the antidepressant for use in children from 1998 to 2002. The other misdemeanor covers the illegal distribution from 2001 to 2003 of an unapproved drug, Levothroid, to treat a thyroid hormone deficiency. Such thyroid pills, made by various drug makers, had been sold in the United States since the 1950s without F.D.A. approval. But in 2001, the agency told drug makers that they needed to reduce their distribution of such medications until the companies obtained agency approval to market the pills. The criminal charges accused Forest of making a deliberate decision to continue distributing the drug in quantities exceeding the F.D.A.’s directive. After the agency sent a warning letter to Forest, the company directed employees to work until 1 a.m. to continue shipping as much Levothroid as possible, according to the criminal complaint. </blockquote> So there was also obstruction of justice in the form of lying to the FDA, and selling drugs that the FDA had ordered not to be sold. So what are the penalties? <blockquote>The criminal settlement calls for the company to pay a $150 million fine and to forfeit an additional $14 million in assets. Forest will also pay more than $88 million to the federal government and more than $60 million to the states to resolve a civil complaint that its actions caused false claims to be submitted to federal health care programs. In addition, two whistle-blowers will split $14 million from the federal share of the settlement. Forest has also entered into a five-year corporate integrity agreement, requiring an independent expert to review the company’s compliance with drug marketing regulations.</blockquote> So here we go again. A large drug company was up to no good, suppressing research, paying doctors for their prescriptions, lying to the FDA, and disobeying its orders. The penalty seemed large, over $300 million. However, Celexa was a big revenue generator at the time the events above occurred, topping $1 billion in revenue first in 2002 (per Forbes <a href="http://www.forbes.com/2002/08/15/0815frx.html">here</a>). Furthermore, as <a href="http://www.pharmalot.com/2010/09/forest-labs-pays-313m-for-illegal-marketing">noted by Ed Silverman on Pharmalot</a>, it seems no individual will suffer any negative consequences for authorizing, directing, or implementing the conduct described above. Finally, as best I can tell, despite the fact that a Forest subsidiary will plead guilty to a felony, the company is not going to be barred from doing business with the government.  So, despite pleading guilty to a felony and three misdemeanors, neither Forest as a company nor any individual working for the company will really suffer very much.  On the other hand, the leaders of Forest have been doing very well.  The company's CEO, Howard Solomon, was number 18 on <a href="http://online.wsj.com/public/resources/documents/st_execpay1007_20100725.html">Wall Street Journal list</a> of the 25 highest paid CEOs over the last decade.  His total realized compensation was over $385 million over the last 10 years.  According to<a href="http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1odHRwOi8vaXIuaW50Lndlc3RsYXdidXNpbmVzcy5jb20vZG9jdW1lbnQvdjEvMDAwMDAzODA3NC0xMC0wMDAwMTYvZG9jL0ZvcmVzdExhYm9yYXRvcmllc0luYy5wZGYmdHlwZT0yJmZuPUZvcmVzdExhYm9yYXRvcmllc0luYy5wZGY="> the company's 2010 proxy statement</a>, his total compensation in 2009 was $8,267,236.  The four other highest paid executives made from just over $2.5 million to $5.3 million. So here we go again.  Another large health care organization has been found to have done wrong, but the only penalty is a fine that whose impact will be diffused across the whole company, and ultimately be paid by its employees, its customers, including patients, and its stockholders.  Meanwhile, the people who authorized, directed, or implemented the wrong doing apparently will pay nothing and receive no negative incentives.  Furthermore, the top leaders of the company, whose huge compensation in the past was increased by the results of the wrong doing, will continue to prosper. As we have said again and again,  we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. By the way, the current case offers an avenue for those who do not like what Forest did to ask those who are supposed to be ultimately responsible for its behavior how this was allowed to happen.  The board of directors of the company is supposed to be ultimately accountable for the company's actions.  As we have noted before, these directors are supposed to "demonstrate unyielding loyalty to the company's shareholders." [Per Monks RAG, Minow N. <a href="http://www.amazon.com/Corporate-Governance-Robert-G-Monks/dp/1405116986">Corporate Governance</a>, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.] The current directors of Forest Laboratories, according to <a href="http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1odHRwOi8vaXIuaW50Lndlc3RsYXdidXNpbmVzcy5jb20vZG9jdW1lbnQvdjEvMDAwMDAzODA3NC0xMC0wMDAwMTYvZG9jL0ZvcmVzdExhYm9yYXRvcmllc0luYy5wZGYmdHlwZT0yJmZuPUZvcmVzdExhYm9yYXRvcmllc0luYy5wZGY=">the company's 2010 proxy statement</a>, include <a href="http://connects.catalyst.harvard.edu/profiles/profile/person/24377">Dr Nesli Basgoz</a>, "Associate Chief for Clinical Affairs, Division of Infectious Diseases, Massachusetts General Hospital (MGH)," and "Associate Professor of Medicine at Harvard Medical School."  Also, it includes<a href="http://www.mountsinai.org/profiles/lester-b-salans?id=0000072500001497265082"> Dr Lester B Salans</a>, "Clinical Professor" at Mount Sinai Medical School, not to mention <a href="http://connects.catalyst.harvard.edu/profiles/profile/person/48486">Dr Peter J Zimetbaum</a>, "Director of Clinical Cardiology" at Beth Israel Deaconess Medical Center in Boston (BIDMC), and "Associate Professor of Medicine at Harvard Medical School."   Maybe some enterprising student journalist will get to ask the good doctors how they let things at Forest get so ethically out of hand.

Forest Pharmaceuticals Pleads Guilty to Obstruction of Justice, No Individual Pays Any Penalty

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17 Sep 2010

Health Care Leaders: the Best and the Brightest?

We have recently discussed how even executives of relatively small, not-for-profit health care organizations are <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">paid enough</a> to make them rich.  The compensation and privileges given to leaders of health care organizations are often justified by the notion that they are the "best and brightest," such arguments sometimes accompanied by a few choice logical fallacies (e.g., <a href="http://hcrenewal.blogspot.com/2010/09/logical-fallacies-in-defense-of-million.html">here</a>).  So here are a few news stories about the activities of some choice health care executives. Canopy Financial This company provided financing for health care services.  As<a href="http://www.google.com/hostednews/ap/article/ALeqM5gVyFvPO6tDLsg228D_xK6c123SvAD9I3U2881"> reported</a> by the Associated Press, <blockquote>A former executive of the bankrupt health care company Canopy Financial Inc. has agreed to plead guilty in an alleged multimillion-dollar fraud. Court documents released Wednesday say former chief technology officer Anthony Banas will plead guilty to wire fraud. Chicago-based Canopy was known as one of the nation's fastest growing businesses before its 2009 bankruptcy. Many clients relied on it to pay medical bills.</blockquote> Danbury Hospital This is a community hospital in Connecticut. As <a href="http://www.newstimes.com/news/article/Former-Danbury-Hospital-CFO-pleads-not-guilty-in-651364.php">reported</a> by the Danbury News Times, <blockquote>Danbury Hospital's former Chief Financial Officer William Roe pleaded not guilty Thursday morning to defrauding the hospital and a previous employer out of nearly $200,000. Roe was freed on bond after he agreed to a stringent set of conditions imposed by a federal judge.</blockquote> Here are more details of the charges: <blockquote>The 54-year-old Roe is accused of wire fraud and two counts of interstate transportation of stolen money, stemming from fraudulent invoices he allegedly submitted to Danbury Hospital and his previous employer, St. Rita's Medical Center of Lima, Ohio, a member of Catholic Healthcare Partners. The invoices were from a software company Roe set up in Pennsylvania in 2008, and, according to investigators, no services were ever provided to either institution. The wire fraud charge carries a maximum penalty of up to 20 years in prison, and the other two charges carry potential maximum penalties of up to 10 years each behind bars, Assistant U.S. Attorney Rahul Kale said. Kale initially expressed reservations about releasing Roe on bond because the court determined that hours after his arrest by FBI agents on Aug. 17, Roe violated a previous no-contact order by barraging Danbury Hospital president Dr. John Murphy with e-mails and cell phone calls and begging him to make the charges 'go away.' A day later, on Aug. 18, Roe also sent an e-mail to the hospital's vice president for human resources, asking her to arrange a meeting with Murphy, Kale said. Those actions resulted in the judge revoking the $100,000 bond Roe had posted and filing additional charges against him, including witness tampering and harassment. In the Aug. 18 e-mail, Roe acknowledged that he wasn't supposed to contact any hospital officials, but sought a 'brief conversation' with Murphy 'before any court proceedings begin,' Kale said. The prosecutor said the order had been entered because 'Danbury Hospital had expressed a concern about the employee's return' and referenced a shooting at the hospital earlier this year and another incident of workplace violence in Manchester. Not only did Roe violate the no-contact rule, but he also traveled to Pennsylvania on Aug. 18 without notifying court officials, Kale said, even though he was supposed to seek permission before leaving the state.</blockquote> H. C. Healthcare This company operated a community hospital in Florida. As <a href="http://www.gainesville.com/article/20100910/ARTICLES/9101003/1002">reported</a> by the Gainesville (Florida) Sun: <blockquote>The former chief financial officer of a Gainesville company that ran medical facilities in several small North Florida counties has been arrested in Illinois on racketeering charges for allegedly misusing grant money, reported the Florida Department of Law Enforcement. Arrested was Natalie Ann Krasnow, 35, of Huntley, Ill., on various felony charges including racketeering, aggravated white-collar crime and operating a scheme to defraud. Krasnow is now being held on a $250,000 bond pending an initial appearance before a judge in McHenry County, Ill. Krasnow was the former CFO of H.C. Healthcare Inc. of Gainesville. It operated and owned Trinity Community Hospital in Jasper. Krasnow's arrest is a continuation of the joint investigation by the Attorney General's Medicaid Fraud Control Unit, FDLE and the State Attorney's Office for the 3rd Judicial Circuit into activities at the now closed Trinity Community Hospital and its affiliated clinics in Hamilton, Suwannee and Columbia counties. Krasnow is the eighth person employed by or associated with H.C. Healthcare who has been arrested during the investigation. In July, investigators with the Attorney General's Medicaid Fraud Control Unit, FDLE and the McHenry County Sheriff's Office arrested owner Robert A. Krasnow, 36, of Gainesville; Dr. Yong Am Park, 66, of Lake City; Robert T. Krasnow, 58, of Gainesville, the father of Robert A. Krasnow; hospital administrator Christina L. Ortega, 42, of Lake City; and licensed practical nurse Ashley Lane Butler, 37, of Live Oak. The former medical director at Trinity Hospital, Dr. Wayne A. Rahming, and former Trinity staff physician, Jorge Prieto, were arrested by Medicaid fraud investigators in a separate scheme involving the unlicensed practice of medicine at a clinic in High Springs. Additional arrests may follow. The investigation of Trinity Community Hospital established that more than $660,000 in state grant funds dedicated to hospital improvements were received by the corporation, but little if any of the money was used to make such improvements, FDLE reported. Natalie A. Krasnow was the corporation's grants liaison officer with the Florida Department of Health and was instrumental in applying for and accounting for the proper disposition of these funds. Most of the money was used either to support the activities of the criminal enterprise or diverted to the personal use of Krasnow or her brother, hospital owner Robert A. Krasnow, FDLE said.</blockquote> North Memorial Health Care This is a health care system in Minnesota. <a href="http://www.startribune.com/lifestyle/health/102111219.html?">Per</a> the Minneaopolis - St Paul Star Tribune: <blockquote>David Cress, the hospital executive arrested and charged with engaging in prostitution this week, has been suspended indefinitely without pay as president and chief executive of North Memorial Health Care, officials said late Thursday. Cress, 60, was one of about a dozen men arrested at a Richfield hotel during a daylong vice operation. He was released from jail Wednesday and is scheduled to appear in court Sept. 15 on a misdemeanor charge. He has been at North Memorial since 1982, and took over as the top executive in 2005.</blockquote> Summary So the box score is one guilty plea to fraud charges, arrests for wire fraud. interstate transport of stolen money, witness tampering and harassment; for racketeering, white collar crime, and operating a scheme to defraud; and for engaging in prostitution; and violation of a no-contact order.  The people involved were all "C-level" executives, including a CTO, two CFOs, and a CEO. Of course, all people who are arrested are not guilty.  There are only four organizations, all relatively small, involved in this series of cases. Again, however, should not the standard of conduct for health care leaders be somewhat higher than that of, for example, garbage haulers?  (I am sorry if that appears to insult garbage haulers.  Such was not my intention.)  For people generally paid so well because they were thought to be the best and the brightest, should not our expectations be higher.

Health Care Leaders: the Best and the Brightest?

We have recently discussed how even executives of relatively small, not-for-profit health care organizations are paid enough to make them rich. The compensation and privileges given to leaders of hea…

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15 Sep 2010

Small Hospital System Loses $61 Million Betting on Financial Derivatives, But Pays CEO Nearly a Million Dollars

As we have quoted many times, sunlight is the best disinfectant.  New US Internal Revenue Service requirements for reporting by not-for-profit organizations has resulted in more transparency about the finances of many health care organizations, and this transparency has shown that the culture of perverse incentives and management privilege has spread far and wide. How far and wide?  Consider this <a href="http://www.exploreharford.com/news/5882/ceo-makes-900000/">story</a> in the (Harford County, Maryland) Aegis: <blockquote>Harford County’s Upper Chesapeake Health lost $70 million because of bad bets in the derivatives markets two years ago, but still paid its chief executive more than $900,000 in annual salary and bonuses. According to figures from their latest tax returns and from the state agency that regulates hospital rates, Upper Chesapeake Medical Center in Bel Air and Harford Memorial Hospital in Havre de Grace, hospitals owned and operated by nonprofit Upper Chesapeake Health Inc., posted huge losses in their fiscal year ending December 2008. The losses were the result of an increase in non-operating expenses, according to the Maryland Health Services Cost Review Commission. The hospitals had combined revenue of $254 million for the year, but posted a combined net loss of $61 million. The two hospitals also paid out some of the highest salaries in Harford County, led by their CEO, Lyle Sheldon, who made more than $900,000 in 2009, a figure which was first reported by The Baltimore Sun on Aug. 29. Including Sheldon, the hospitals’ top administrators and top medical staff, who are hospital employees, received a combined $5 million in salary, bonuses and other compensation in 2009.</blockquote> So how did the hospital's management explain the huge loss? <blockquote>'That was the year the stock market fell, in fiscal year 2008,' Dean Kaster, Upper Chesapeake’s senior vice president of corporate strategy and business development, said Tuesday in explaining the 2008 loss. 'We saw a significant change in terms of how some of the instruments we used in managing our debt service were valued and during that time period what these dollar changes reflected was an accounting loss directly related to the decline in the overall market in 2008,' he said. Kaster said Upper Chesapeake, like many hospitals, has investment instruments it uses, called derivatives and hedges, to manage its long-term debt. He said the value of those instruments changed in fiscal year 2008. In simpler terms, like many corporate, institutional and individual investors, Upper Chesapeake got burned by taking risks that backfired when the economy tanked. Since those markets have come back, Kaster said, Upper Chesapeake has recovered two-thirds, or about $46.7 million, of the $70 million it lost from investments.</blockquote> Of course, 2008 was the year of the great recession/ global financial collapse, or whatever we may end up calling it, happened. The value of many investments, and many peoples' homes, imploded. The best current  explanation of the collapse had to do with the bets financial institutions made on risky derivatives which their managers often did not understand. In hindsight, these bets seem somewhere between unnecessarily risky and stupid. Many smaller businesses and organizations were fortunate to be financially conservative enough not to have bet on derivatives. But little Upper Chesapeake Health apparently bet a large chunk of its money on them, and lost badly. Although VP Kaster belabored the obvious in noting that 2008 was the year of the collapse, he did not explain what the stewards of a not-for-profit health care institution were doing when they were betting on risky derivatives. One thing they were doing was making a lot of money themselves. <blockquote>At UCH, the highest compensated employee is President and CEO Lyle Sheldon. Sheldon’s annual compensation for the hospital’s fiscal year 2009, the most recent information available, was $918,957, according to the Form 990 submitted to the IRS. Sheldon’s base salary for the year was $535,000 and his bonus and incentive compensation was $224,007. Sheldon’s compensation is nearly $500,000 more than the next highest paid employee for UCH.</blockquote> Other executives did well too: <blockquote>Second to Sheldon, the next highest paid employee in UCH’s upper management is Joseph Hoffman III, the senior vice president and CFO, who was paid $420,355 in the hospital’s fiscal year 2009. His base salary was $272,210 and his bonus and incentive compensation was $91,439. Senior Vice President and COO Kenneth Kozel was paid $352,538, according to Upper Chesapeake’s Form 990. Kozel received additional nontaxable benefits and deferred compensation on Harford Memorial’s form, bringing his total compensation to $396,039. Kaster, the senior VP for strategy and business development, was paid $281,142, according to Upper Chesapeake’s form. He also has additional nontaxable benefits and deferred compensation on Harford Memorial’s form, bringing his total to $330,598. Vice President of Human Resources Toni Shivery’s Upper Chesapeake compensation was $204,531, with an additional $33,895 from Harford Memorial, bringing the total to $238,426.</blockquote> Note that the CFO of this small hospital system, the person who ought to be most directly responsible for the decision to "invest" in derivatives, made over $420,000, and the vice president for strategy and business development, responsible for the simplistic discussion of derivatives above, made over $330,000. Providing such perverse incentives seems to contradict the hospital system's high-minded <a href="http://www.uchs.org/?section=about&page=mission">statements of values</a>, which includes: <blockquote>Responsibility: We take responsibility for our actions and hold ourselves accountable for the results and outcomes. </blockquote> A CEO who truly accepted responsibility for a $61 million loss from risky bets on opaque derivatives would not accept total compensation of over $900,000. A CFO who truly accepted responsibility for these bets would not accept over $400,000. So in summary, we see that now CEOs of even the smallest community hospital systems seem entitled to make nearly a million dollars a year. We see that even CEOs whose institutions lose millions due to risky investments still receive such compensation. We see that the executives who seem directly responsible for making such money losing investments still earn hundreds of thousands of dollars. This is an extreme illustration of how perverse incentives permeate health care, how CEOs command pay beyond the dreams of ordinary people, even when their leadership is financially calamitous, and how little health care leaders support their organizations' idealistic values. Are leaders who are not held accountable for easily measured financial performance likely to be good stewards of clinical performance, which is much harder to measure? If we do not hold health care leaders accountable, if we do not provide them with incentives that are proportional to their actual performance, why should we expect health care organizations to do any more than satisfy their leaders' self-interest? ADDENDUM - If you got to this page from a blog with "royposes" in its URL, and with "roy poses" ostensibly listed as its author - neither has anything to do with me, Roy M Poses MD.  I have no knowledge of who wrote posts on that blog, and no responsibility for them.  The only blog to which I presently regularly post is this one, Health Care Renewal.

Small Hospital System Loses $61 Million Betting on Financial Derivatives, But Pays CEO Nearly a Million Dollars

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13 Sep 2010

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