Through a Glass Darkly - How Can So Many Health Care Executives Be Visionaries?

<span style="background-color: #eeeeee;"><i><span style="font-size: x-small;">Visionary (noun)</span></i></span><br /><span style="background-color: #eeeeee;"><i><span style="font-size: x-small;"></span></i></span> <br /><div class="sblk"><div class="scnt"><span style="background-color: #eeeeee;"><i><span style="font-size: x-small;">1<span class="ssens"><b>:</b>  one whose ideas or projects are impractical <b>:</b>  <a href="http://www.merriam-webster.com/dictionary/dreamer">dreamer</a> </span></span></i></span></div></div><div class="sblk"><div class="scnt"><span style="background-color: #eeeeee;"><i><span style="font-size: x-small;">2<span class="ssens"><b>:</b>  one who sees <a class="formulaic" href="http://www.merriam-webster.com/dictionary/visions">visions</a> <b>:</b>  <a href="http://www.merriam-webster.com/dictionary/seer">seer</a> </span></span></i></span></div></div><div class="sblk"><div class="scnt"><span style="background-color: #eeeeee;"><i><span style="font-size: x-small;">3<span class="ssens"><b>:</b>  one having unusual foresight and imagination</span></span></i></span></div></div><div class="scnt"><span style="background-color: #eeeeee;"><i><span style="font-size: x-small;"><span class="ssens"><span class="vi"> </span><a href="http://www.merriam-webster.com/dictionary/visionary"><span class="vi">Merriam-Webster Dictionary online </span></a></span></span></i></span></div><div class="scnt"></div><div class="scnt"><br /><span class="ssens"><span class="vi"><b>The Visionary, or Messianic Health Care Executive </b></span></span></div><div class="scnt"></div><div class="scnt"><br /><span class="ssens"><span class="vi">In 1997, Sherif Abdelhak, the CEO of the then unusually large vertically integrated health care system based in Pennsylvania, the Allegheny Health Education and Research Foundation (AHERF) </span></span>was described in an American College of Physicians publication as a "visionary." (See the summary beginning on p 5 <a href="http://www.acponline.org/about_acp/chapters/ri/nl-fall04.pdf">here</a>.) Abdelhak had previously been called a "visionary" or a "genius" in the media. [Gaul GM. Creator of a cross-state health system despite personal and financial questions, Sherif Abdelhak has boldly expanded from Pittsburgh to Philadelphia. Philadelphia Inquirer, March 4, 1991. P. D1. Gaul GM. The new prescription for health care: Hahnemann’s merger dwarfs - and frightens - many local rivals. Philadelphia Inquirer, November 21, 1993. P. E1.]   In 1998, AHERF was bankrupt, and Abdelhak eventually pleaded guilty to misusing charitable funds and went to jail.  </div><div class="scnt"><span class="ssens"><span class="vi"><br /></span></span></div><div class="scnt"><span class="ssens"><span class="vi">Mr Abdelak was one of the earlier examples I found of the hospital leader regarded as fearless leader, visionary, even messianic, and the possible bad effects of putting so much money, power, and faith in one person.  </span></span>For more recent examples of how health care leaders may be described in messianic terms, look <a href="http://hcrenewal.blogspot.com/2011/09/more-repeats-of-talking-points.html">here</a>, <a href="http://hcrenewal.blogspot.com/2011/09/talking-points-sans-original-thought-to.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2011/12/more-tales-of-hospital-ceo-compensation.html">here</a>.  For  related, and also religiously allusional theories of the "divine rights of CEOs," look <a href="http://hcrenewal.blogspot.com/2012/03/golden-calf-explains-how-economism-lead.html">here</a> and <a href="http://hcrenewal.blogspot.com/2012/03/why-health-care-leaders-remain.html">here.</a></div><div class="scnt"></div><div class="scnt"><br /><span class="ssens"><span class="vi">Modern health care, the US economy, and many developed countries have seen<a href="http://hcrenewal.blogspot.com/search/label/managers%27%20coup%20d%27etat"> increasing domination by administrators, managers and executives</a>.  In particular, US hospitals were once small non-profit institutions based in communities or universities, often threadbare, and run by dedicated if harried health care professionals.  They now have morphed into huge organizations run by professional managers who may <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">become multimillionaires</a> in the process.  Meanwhile, US health care has become increasingly expensive, but without any obvious advantages to patients' or the public's health.  </span></span></div><div class="scnt"></div><div class="scnt"><br /><span class="ssens"><span class="vi">As we have noted, justification for the domination by professional managers and their lavish remuneration often includes paeans to their brilliance.  Most recently we<a href="http://hcrenewal.blogspot.com/2014/06/a-real-example-of-public-relations.html"> discussed</a> how the rise of the professional manager has been explained by a not very clear analogy between such managers and the "great men" of history.  </span></span></div><div class="scnt"></div><div class="scnt"><br /><span class="ssens"><span class="vi"><b>Can They All be Visionaries? </b></span></span></div><div class="scnt"></div><div class="scnt"><span class="ssens"><span class="vi"><br />The notion of every hospital CEO as a Napoleonic figure seems ridiculous, but there seems to be little public skepticism of the notion of executives, including hospital leaders as fearless leaders.  </span></span></div><div class="scnt"></div><div class="scnt"><br /><span class="ssens"><span class="vi">One reason may be that the exposure most people have to these notions is limited.  One may see the local hospital CEO extravagantly praised, but it is always possible the local CEO is brilliant.  Most people probably do not see the praises sung for the CEO of the hospital 100 miles away.</span></span></div><div class="scnt"></div><div class="scnt"><br /><span class="ssens"><span class="vi">So inspired by our most recent discussion of the public relations talking points used to justify health care CEOs often million dollar plus compensation, I set out to see if brilliant hospital leaders are really a dime a dozen.  My methods were simple.  I used Google News to search back about one month, and looked simply for hospital CEOs or other top leaders described as "visionaries." </span></span></div><div class="scnt"></div><div class="scnt"><br /><span class="ssens"><span class="vi">Here are the results, in chronological order.</span></span></div><div class="scnt"></div><div class="scnt"><span class="ssens"><span class="vi"></span></span></div><div class="scnt"><br /><span class="ssens"><span class="vi"><u>CEOs of Frederick Regional Health System, Meritus Health, and Western Maryland Health System </u></span></span></div><div class="scnt"></div><div class="scnt"><br /><span class="ssens"><span class="vi">[Maryland, June 9, 2014]</span></span></div><div class="scnt"></div><div class="scnt"><br /><span class="ssens"><span class="vi">The context was,</span></span></div><div class="scnt"></div><blockquote class="tr_bq"><div class="scnt"><span class="ssens"><span class="vi"> </span></span><span class="ssens"><span class="vi">Frederick Regional Health System, Meritus Health and Western Maryland Health System announced Trivergent Health Alliance as the name of their regional health care alliance.<br /><br /> After a national executive search, Raymond Grahe, senior vice president and chief financial officer of Meritus Health based in Hagerstown, has been named chief executive officer of Trivergent Health Alliance MSO, the management services organization that is a subsidiary of the alliance.</span></span></div></blockquote><div class="scnt"></div><div class="scnt"><br /><span class="ssens"><span class="vi">This is what Grahe said about the CEOs of the three hospitals,</span></span></div><div class="scnt"></div><blockquote class="tr_bq"><div class="scnt">It is thanks to the dedication of these <i>three <b>visionary</b> CEOs</i> that Trivergent Health Alliance exists today. </div></blockquote><div class="scnt"></div><div class="scnt"><a href="http://www.times-news.com/local/x1396882112/Meritus-official-named-CEO-for-Trivergent-Health-Alliance">From the Cumberland Times-News</a>.</div><div class="scnt"></div><div class="scnt"><br /><u>Baystate Health CEO</u></div><div class="scnt"><br /></div><div class="scnt">[Massachusetts, June 18, 2014]</div><div class="scnt"><br /></div><div class="scnt">In the course of a tribute to retiring CEO Mark R Tolosky, an attorney by training, Mary Jo Stafford, a nurse, said,</div><div class="scnt"><br /></div><blockquote class="tr_bq"><div class="scnt">He has been incredibly accessible and is a <b><i>visionary</i></b></div></blockquote><div class="scnt"></div><div class="scnt"><br /><a href="http://www.masslive.com/news/index.ssf/2014/06/baystate_health_names_building.html">From Masslive.com</a>. </div><div class="scnt"><br /></div><div class="scnt"><u>Anna Jacques Hospital CEO</u></div><div class="scnt"></div><div class="scnt"><br />[Massachusetts, June 18, 2014] </div><div class="scnt"></div><div class="scnt"><br /></div><div class="scnt">On the announcement of the retirement of Delia O'Connor, David LaFlamme, chairman of the hospital board, said,</div><div class="scnt"><br /></div><blockquote class="tr_bq"><div class="scnt">Her legacy is that of <i>a <b>visionary</b>, decisive leader</i> whose extraordinary contributions to the hospital and local area have earned her the trust and respect of the entire community.</div></blockquote><div class="scnt"></div><div class="scnt"><br /><a href="http://www.newburyportnews.com/local/x1927809729/AJH-CEO-to-retire">From the Newburyport News</a></div><div class="scnt"></div><div class="scnt"><br /><u>CoxHealth Vice President for Marketing and Public Affairs</u></div><div class="scnt"></div><div class="scnt"><br />[Missouri, June 23, 2014]</div><div class="scnt"></div><div class="scnt"><br />On the announcement of the appointment of Jim Anderson as the new Vice President for Marketing and Public Affairs, CoxHealth CEO Steve Edwards said,</div><div class="scnt"></div><blockquote class="tr_bq"><div class="scnt"> We welcome Jim Anderson, <i>a great <b>visionary</b></i> with a passion for our community</div></blockquote><div class="scnt"></div><div class="scnt"><br /><a href="http://www.ky3.com/news/local/coxhealth-hires-retired-chamber-president-for-pr-veep/21048998_26619350">From KY3</a>. </div><div class="scnt"><br /></div><div class="scnt"><u>Good Shepherd Medical Center Chief Medical Officer</u></div><div class="scnt"><br /></div><div class="scnt">[Texas, June 25, 2014]</div><div class="scnt"><br /></div><div class="scnt">Per a news report on the announcement of the appointment of Dr Lawrence T Verfurth as new Chief Medical Officer</div><div class="scnt"><br /></div><blockquote class="tr_bq"><div class="scnt">Dr. Verfurth, who joined the Good Shepherd staff earlier this month, is <i>a <b>visionary</b> physician executive</i> with a broad base of operation and clinical leadership spanning the spectrum of healthcare</div></blockquote><div class="scnt"><br /></div><div class="scnt"><a href="http://www.cbs19.tv/story/25868616/good-shepherd-medical-center-names-new-chief-medical-officer">From KYTX</a>. </div><div class="scnt"></div><div class="scnt"><br /><u>Bassett Healthcare Newtork President and CEO</u></div><div class="scnt"></div><div class="scnt"><br />[New York, June 25, 2014]</div><div class="scnt"></div><div class="scnt"><br />On the occasion of awarding the Distinguished Service Award by the Healthcare Association of New York State (HANYS) to Dr William F Struck as Bassett Healthcare Network President and CEO, HANYS President Dennis Whalen said,</div><div class="scnt"></div><blockquote class="tr_bq"><div class="scnt"> Under Dr. Streck’s <i><b>visionary</b> leadership</i>, a single hospital in Cooperstown, with 70 physicians, has grown into a network of six affiliated hospitals, with 45 community- and school-based health centers, and more than 400 providers serving eight counties</div></blockquote><div class="scnt"></div><div class="scnt"><br /><a href="http://www.hanys.org/news/index.cfm?storyid=3546">From a AHNYS press release</a>. </div><div class="scnt"><br /></div><div class="scnt"><u>Milford Hospital CEO</u></div><div class="scnt"><br /></div><div class="scnt">[Connecticut, June 26, 2014]</div><div class="scnt"><br /></div><div class="scnt">On the occasion of an article published by Milford Hospital researchers, Dr Sin Hang Lee, one of the authors and director of Milford Medical Laboratory, a Milford Hospital affiliated laboratory said,</div><div class="scnt"><br /></div><blockquote class="tr_bq"><div class="scnt">the four employees of Milford Hospital's Department of Pathology are carrying out the commitment of <i>the hospital's <b>visionary</b> president and CEO</i> Joseph Palaccia</div></blockquote><div class="scnt"><br /></div><div class="scnt"><a href="http://www.businesswire.com/news/home/20140626005650/en/Milford-Hospital-Pathology-Staff-Independent-Physicians-Discover#.U6xutEDNCic">From a Milford Medical Laboratory news release via BusinessWire</a>.</div><div class="scnt"><br /></div><div class="scnt"><u>St Jude Children's Research Hospital</u></div><div class="scnt"><br /></div><div class="scnt">[Tennessee, June 26, 2014]</div><div class="scnt"><br /></div><div class="scnt">On the announcement of the appointment of Dr James R Downing as the new CEO of St Judge Children's Research Hospital, Terry Burman, chairman of the St Jude Board of Governors, said,</div><div class="scnt"></div><blockquote class="tr_bq"><div class="scnt">Dr Downing is an exceptional scientist whose <i><b>visionary</b> approach</i> to the next era of growth and discovery at St. Jude will mirror the legacy established by Danny Thomas more than 50 years ago. </div></blockquote><div class="scnt"></div><div class="scnt"><br /><a href="http://www.memphisdailynews.com/news/2014/jun/26/st-jude-names-downing-new-ceo/">From the Menphis Daily News</a>. </div><div class="scnt"><br /></div><div class="scnt"><b>Summary</b></div><div class="scnt"><br /></div><div class="scnt">So with a very cursory search covering less than one month I was able to find eight CEOs, one vice president for marketing, and one CMO, from 10 hospitals in seven states who were called visionary or visionaries.  It is hard to believe that all these people were truly visionaries using the definition above.  </div><div class="scnt"></div><div class="scnt"><br />None of the news articles or press releases that used the v word provided any detailed justification.  In most cases, the visionary designation was made either by someone who worked directly for the leader in question, or was a member of the organization's board of trustees and hence responsible for that individual holding a leadership position. This is more evidence that there are cults of leadership surrounding most health care leaders these days.  </div><div class="scnt"><br /></div><div class="scnt">Actually, labeling a health care manager a visionary should evoke more suspicion than admiration.  As in the unfortunate case of Mr Abdelhak and AHERF, we have seen many health care leaders praised for their brilliance and paid royally despite leadership resulting in financial distress, <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management">threats to the organizations' health care missions</a>, poor patient care, unethical behavior, or even <a href="http://hcrenewal.blogspot.com/search/label/crime">crime</a>.</div><div class="scnt"></div><div class="scnt"><br />Yet health care CEOs are just people, sometimes smart, but almost never brilliant.  Promoting them as messianic or "great men" (or more rarely women) to bewitch key constituencies, justify the remuneration of other top managers, and the hiring of more public relations flacks is likely to lead to the sort of organizational disasters and system-wide dysfunction we discuss on Health Care Renewal.  The rise of the falsely messianic leader may allow the entry of the most dangerous false messiahs, the psychopathic ones.  (We discussed the likelihood that some health care leaders are actually psychopaths <a href="http://hcrenewal.blogspot.com/search/label/psychopaths">here</a>.)</div><div class="scnt"></div><div class="scnt"><br /><br />In the secular occupation of health care, we ought not to yearn for messiahs, or even "great men" or women, but instead hope for reasonable leadership that draws on the collective knowledge and values of health care professionals rather than dubious "visions."  True health care reform would promote leaders who show accountability, integrity, transparency, honesty, and ethics. </div><div class="scnt"></div><div class="scnt"></div>

Through a Glass Darkly - How Can So Many Health Care Executives Be Visionaries?

Visionary (noun) 1 :   one whose ideas or projects are impractical :   dreamer 2 :   one who sees visions :   seer 3 :   one having unus...

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

It only took 15 years, but litigation related to one of the most important, but obscure cases of bad health care leadership and governance from the 1990s was finally settled.   <br /><br /><b>Background </b><br /><br />The Allegheny Health Education and Research Foundation (AHERF) was a large integrated health care system formed out of multiple mergers.  AHERF went bankrupt in 1998, leading to massive layoffs, hospital closures, and the near dissolution of a medical school (which ended up taken over by Drexel University).  We last discussed the case in 2012 <a href="http://hcrenewal.blogspot.com/2012/04/pittsburgh-experiment-ii-another-echo.html">here</a>.. A summary of other important points about it is appended below.  <br /><br />As we <a href="http://hcrenewal.blogspot.com/2008/07/10-years-later-eerie-echo-of-fall-of.html">noted</a> in 2008, although the AHERF bankruptcy appears to be the largest failure of a not-for-profit health care corporation in US history, its story has produced remarkably few echoes for doctors, other health care professionals, health care researchers, and health policy makers. I often use the fall of AHERF as an example in talks, at least the few talks I am allowed to give on such unpleasant subjects. Rarely have more than a few people in the audience heard of AHERF prior to my discussion of it.<br /><br />I only could locate <a href="http://content.healthaffairs.org/cgi/reprint/19/1/7.pdf">one article </a>in a medical or health care journal that discussed the case in detail, but was written too early to address it very completely [Burns LR, Cacciamani J, Clement J, Aquino W. The fall of the house of AHERF: the Allegheny bankruptcy. Health Aff (Millwood) 2000; 19: 7-41.]  I doubt the case is used for teaching in most medical or public health schools, although it.was a formative influence on my <a href="http://www.ncbi.nlm.nih.gov/pubmed/12719032">2003 article</a> on health care dysfunction [Poses RM. A cautionary tale: the dysfunction of American health care. Eur J Int Med 2003; 14: 123-130] and on this <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a> blog.  (A book about the case, Merger Games, by Judith Swazey, was published in 2012, and is available <a href="http://muse.jhu.edu/books/9781439907191">here</a> as  a set of PDF files from Project Muse for those with the proper password, but it has not yet had much of an impact, and I confess I have not yet read it.)  The lack of discussion of such a significant case is a prime example of the <a href="http://hcrenewal.blogspot.com/2007/08/bling-bling-poltical-correctness-and.html">anechoic effect</a>.  <br /><br /><b>One Legal Settlement, 15 Years Later, for a Secret Amount</b><br /><br />But a brief echo of the case did appear in a brief <a href="http://triblive.com/news/allegheny/3875012-74/aherf-settlement-creditors">article</a> in the Pittsburgh Tribune Review published in April, 2013: <br /><br /><blockquote class="tr_bq"><div class="News-body-text"> Lawyers would not say Tuesday how much money an accounting firm will pay to <i>settle a 13-year-old lawsuit claiming it helped destroy one of the state's largest health care systems</i>. </div><div class="News-body-text"><br /></div><div class="News-body-text"> 'It will result in a very significant recovery,' James Jones, one of the lawyers representing the unsecured creditor of the Allegheny Health Education and Research Foundation, said during a settlement hearing in Pittsburgh federal court. </div><div class="News-body-text"><br /></div><div class="News-body-text"><i>The creditors in 2000 sued Coopers & Lybrand LLP, the predecessor of PricewaterhouseCoopers LLP, claiming that if auditors in 1996 and 1997 had informed AHERF's board about the foundation's true financial condition, it would have acted to avoid a bankruptcy that resulted in huge losses.</i> The foundation's assets included the Allegheny General Hospital system. </div></blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br />It seems only fitting, given how anechoic this case has been, that much about this settlement remains obscure,</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote class="tr_bq"><div class="News-body-text"> U.S. District Judge David Cercone, in a joint session with U.S. Bankruptcy Judge Judith Fitzgerald, approved the settlement with PricewaterhouseCoopers. </div><div class="News-body-text"><br /></div><div class="News-body-text"> The company disputes the method the committee used to calculate losses and denies liability in the settlement. </div><div class="News-body-text"><br /></div><div class="News-body-text">Joseph McDonough, a lawyer for PricewaterhouseCoopers, agreed the settlement amount is significant. He and Jones declined comment. </div><div class="News-body-text"><br /></div><div class="News-body-text">Jones said during the hearing that a trial could have lasted 40 days. Preparation for the case generated more than 200 depositions, 19 expert opinions and more than a million documents, he said. </div><div class="News-body-text"><br /></div><div class="News-body-text">The committee sent more than 3,500 notices to creditors about the proposed settlement, and none objected, he said. </div><div class="News-body-text"><br /></div><div class="News-body-text"><i>Both sides agreed to keep the amount secret</i>, and they discussed with Fitzgerald how to avoid releasing the amount in filings for related bankruptcy action. </div></blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Maybe if the case had somehow generated more echoes, health care professionals and policy makers, and patients and the public at large might have learned some of its lessons.  The story of AHERF is not merely that of an unlucky bankruptcy. It shows what can go wrong when health care is taken over by <a href="http://hcrenewal.blogspot.com/search/label/generic%20managers">generic managers</a> who adapt the latest management fads, and health care decision making is ruled by <a href="http://hcrenewal.blogspot.com/search/label/marketing">marketing</a>, <a href="http://hcrenewal.blogspot.com/search/label/public%20relations">public relations</a> and <a href="http://hcrenewal.blogspot.com/search/label/propaganda">propaganda</a> instead of evidence and logic, and allows power to be <a href="http://hcrenewal.blogspot.com/search/label/concentration%20of%20power">concentrated</a> in organizations run by<a href="http://hcrenewal.blogspot.com/search/label/imperial%20CEO"> imperial CEOs</a>.  .</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">We did not get a chance to learn this history, so we seem bound to repeat it.   </div></div><br /><span style="font-size: x-small;"><b>Appendix</b></span><br /><span style="font-size: x-small;"><br /></span><span style="font-size: x-small;">Some important points about AHERF not found above (see also <a href="http://www.acponline.org/chapters/ri/nl-fall04.pdf">this narrative</a>, starting on page 5):</span><span style="font-size: x-small;"><br /></span><br /><ul><li><span style="font-size: x-small;">AHERF, one of the largest health care systems of its day, was built by the poster-boy for health care imperial CEOs, Sherif Abdelhak.</span></li><li><span style="font-size: x-small;">Abdelhak, who <a href="http://www.post-gazette.com/aherf/part2.asp">started as food services purchasing manager </a>at Allegeheny General Hospital, was repeatedly hailed as a "<em>visionary</em>" (<a href="http://www.acponline.org/journals/news/mar97/phillymc.htm">in the March, 1997, ACP Observer</a>) a "genius," and the like. His plans to create a huge integrated health care system were part of the wave of the future. Abdelhak was even invited to give the prestigious John D Cooper lecture at the annual meeting of the American Association of Medical Colleges (AAMC), which was published in Academic Medicine [Abdelhak SS. How one academic health center is successfully facing the future. Acad Med 1996; 71: 329-336.] He proclaimed that "we will need to create new forms of organization that are more flexible, more adaptive, and more agile than ever before." And he announced that "my aim as chief executive has been to unleash the creativity and productive potential of every individual and to provide an environment that encourages teamwork" </span></li><li><span style="font-size: x-small;">While Abdelhak was making these grandiose promises, he paid himself and his associates very well. For example, he received $1.2 million in the mid-1990s, more than three times the average then for a hospital system CEO. He lived in a hospital supplied mansion worth almost $900,000 in 1989. Five of AHERF's top executives were in the top 10 best paid hospital executives in Philadelphia.</span></li><li><span style="font-size: x-small;">Although Abdelhak talked of teamwork, he warned the combined faculty of the new Allegheny University of the Health Sciences (AUHS): <a href="http://www.post-gazette.com/aherf/part6.asp">"Don’t cross me or you will live to regret it."</a></span></li><li><span style="font-size: x-small;">As AHERF was hemorrhaging money, Abdelhak continued to pay himself and his cronies lavishly.</span></li><li><span style="font-size: x-small;">After the AHERF bankruptcy, which was at the time the second largest bankruptcy recorded in the US, Abdelhak was charged with numerous felonies involving receiving charitable assets. In a plea bargain, <a href="http://www.post-gazette.com/localnews/20020830abdelhak0830p4.asp">he pleaded no contest </a>to misusing charitable funds, a misdemeanor, and was sentenced to more than 11 months in county prison.</span></li></ul>Posted by Roy M. Poses MD to the Health Care Renewal blog

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

It only took 15 years, but litigation related to one of the most important, but obscure cases of bad health care leadership and governance f...

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The Pittsburgh Experiment - II - Another Echo of the Fall of AHERF

We recently <a href="http://hcrenewal.blogspot.com/2012/04/pittsburgh-experiment-i-caught-in.html">started</a> a series of posts about the battle for domination of health care in western Pennsylvania.  The contenders are the UPMC hospital system, the dominant hospital system in the region, and Highmark, the dominant health insurer in the region.  While these two health care behemoths fight, patients, health care professionals, and the public seem to be caught in the <a href="http://hcrenewal.blogspot.com/search/label/cross%20fire">crossfire</a>.<br /><br />There is something of history repeating itself in this battle.<br /><br />The biggest bone of contention in it is Highmark's attempt to purchase the struggling West Penn Allegheny hospital system.  UPMC leadership seemed to feel that this would put the insurer in direct competition with it, even though UPMC already provides a health insurance product, the <a href="http://www.upmchealthplan.com/">UPMC Health Plan</a>.<br /><br />West Penn Allegheny, in turn, is struggling because it is a remnant of a previous attempt by a single organization to dominate the health care system in this area.  As we <a href="http://hcrenewal.blogspot.com/2011/07/restless-shade-of-aherf-and-return-of.html">wrote</a> in 2011,  West Penn Allegheny was formed from some components of what used to the be the Allegheny Health Education and Research Foundation, AHERF.   AHERF was a large integrated health care system formed out of multiple mergers.  AHERF went bankrupt in 1998, leading to massive layoffs, hospital closures, and the near dissolution of a medical school (which ended up taken over by Drexel University). <br /><br />As we <a href="http://hcrenewal.blogspot.com/2008/07/10-years-later-eerie-echo-of-fall-of.html">noted</a> in 2008, although the AHERF bankruptcy appears to be the largest failure of a not-for-profit health care corporation in US history, its story has produced remarkably few echoes for doctors, other health care professionals, health care researchers, and health policy makers. I often use the fall of AHERF as major example in talks, at least the few talks I am allowed to give on such unpleasant subjects. Rarely have more than a few people in the audience heard of AHERF prior to my discussion of it. I only could locate <a href="http://content.healthaffairs.org/cgi/reprint/19/1/7.pdf">one article </a>in a medical or health care journal that discussed the case in detail, albeit incompletely since it was written before Abdelhak's guilty plea [Burns LR, Cacciamani J, Clement J, Aquino W. The fall of the house of AHERF: the Allegheny bankruptcy. Health Aff (Millwood) 2000; 19: 7-41.] I doubt the case is used for teaching in most medical or public health schools. (There is a new book out about the case, Merger Games, by Judith Swazey, available <a href="http://muse.jhu.edu/books/9781439907191">here</a> as  a set of PDF files from Project Muse for those with the proper password, but it has not yet had much of an impact, and I confess I have not yet read it.)  The lack of discussion of such a significant case is a prime example of the <a href="http://hcrenewal.blogspot.com/2007/08/bling-bling-poltical-correctness-and.html">anechoic effect</a>.<br /><br />Therefore, let me summarize some of important points about AHERF not found above (see also <a href="http://www.acponline.org/chapters/ri/nl-fall04.pdf">this narrative</a>, starting on page 5):<br /><br /><br /><ul><li>AHERF, one of the largest health care systems of its day, was built by the poster-boy for health care imperial CEOs, Sherif Abdelhak.</li><li>Abdelhak, who <a href="http://www.post-gazette.com/aherf/part2.asp">started as food services purchasing manager </a>at Allegeheny General Hospital, was repeatedly hailed as a "<em>visionary</em>" (<a href="http://www.acponline.org/journals/news/mar97/phillymc.htm">in the March, 1997, ACP Observer</a>) a "genius," and the like. His plans to create a huge integrated health care system were part of the wave of the future. Abdelhak was even invited to give the prestigious John D Cooper lecture at the annual meeting of the American Association of Medical Colleges (AAMC), which was published in Academic Medicine [Abdelhak SS. How one academic health center is successfully facing the future. Acad Med 1996; 71: 329-336.] He proclaimed that "we will need to create new forms of organization that are more flexible, more adaptive, and more agile than ever before." And he announced that "my aim as chief executive has been to unleash the creativity and productive potential of every individual and to provide an environment that encourages teamwork" </li><li>While Abdelhak was making these grandiose promises, he paid himself and his associates very well. For example, he received $1.2 million in the mid-1990s, more than three times the average then for a hospital system CEO. He lived in a hospital supplied mansion worth almost $900,000 in 1989. Five of AHERF's top executives were in the top 10 best paid hospital executives in Philadelphia.</li><li>Although Abdelhak talked of teamwork, he warned the combined faculty of the new Allegheny University of the Health Sciences (AUHS): <a href="http://www.post-gazette.com/aherf/part6.asp">"Don’t cross me or you will live to regret it."</a></li><li>As AHERF was hemorrhaging money, Abdelhak continued to pay himself and his cronies lavishly.</li><li>After the AHERF bankruptcy, which was at the time the second largest bankruptcy recorded in the US, Abdelhak was charged with numerous felonies involving receiving charitable assets. In a plea bargain, <a href="http://www.post-gazette.com/localnews/20020830abdelhak0830p4.asp">he pleaded no contest </a>to misusing charitable funds, a misdemeanor, and was sentenced to more than 11 months in county prison.</li></ul>The story of AHERF is not merely that of an unlucky bankruptcy. It shows what can go wrong when health care adopts business practices such as jumping the latest management band-wagons and genuflecting before imperial CEOs.  It also shows what happens when a single health care organization, and the person who leads it, becomes too powerful.<br /><br />If either UPMC or Highmark definitively wins their current battle, the winner will become at least as locally dominant as AHERF.  As we shall see in the posts to come in this series, the leadership of both organizations has already demonstrated a certain arrogance.  Yet since 2008 we have not progressed to the point of controlling the tendency of a laissez faire health care system to approach monopoly, nor the monopolist's tendency to put his self-interest ahead of all else.  <br /><br />If nothing else, maybe the messiness of the fight between UPMC and Highmark will remind more people of AHERF, hence the need not to let our health care leadership and governance problems remain anechoic, hence the need for true health care reform that would constrain health care leaders to put patients' and the public's health before their narrow self-interest. 

The Pittsburgh Experiment - II - Another Echo of the Fall of AHERF

We recently started a series of posts about the battle for domination of health care in western Pennsylvania.  The contenders are the UPMC ...

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"It's All Been Done Before," If We Only Could Remember What it Was - the AHERF Example

A big Wall Street Journal <a href="http://online.wsj.com/article/SB10001424052970204319004577084553869990554.html">article</a> by Anna Wilde Mathews featured the latest wave of mergers affecting large health care organizations.<br /><br /><strong>Large, Vertically Integrated Health Care Systems (Redux)</strong><br /><blockquote>Call it the united state of health care.<br /><br />Amid enormous pressure to cut costs, improve care and prepare for changes tied to the federal health-care overhaul, major players in the industry are staking out new ground, <em>often blurring the lines between businesses that have traditionally been separate.</em><br /><br /><em>Hospitals are bulking up into huge systems, merging with one another and building extensive new doctor work forces. They are exploring insurance-like setups</em>, including direct approaches to employers that cut out the health-plan middleman.<br /><br />On the other side, <em>insurers are buying health-care providers</em>, or seeking to work with them on new cooperative deals and payment models that share the risks of health coverage. And employers are starting to take a far more active role in their workers' care.</blockquote><br />This ongoing consolidation is being discussed as inevitable. <br /><blockquote>'We're seeing a marketplace reacting to an economic imperative,' says Michael O. Leavitt, a former U.S. Secretary of Health and Human Services who is now chairman of a health-information company. 'The new delivery models are <em>far more integrated</em>.'</blockquote><br />The ongoing consolidation is also being proclaimed as leading to a brave new world of health care. For example,<br /><blockquote>Jim Taylor, the chief executive of the University of Louisville Hospital, says <em>his institution's future depends on an ambitious statewide merger </em>with two other hospital systems. Now, he has to persuade others that he's right.</blockquote><br />These mergers often are meant to lead to the creation of large, vertically integrated health systems which may include hospitals, physicians and other health professionals (sometimes as hired help), and an insurance function.<br /><br /><strong>It's All Been Done Before</strong><br /><br />"Large, vertically-integrated health care systems," of course, were all the rage in the 1990s.  In fact, the WSJ also published a companion article by Anna Wilde Mathews that suggested "it has all been done before," it did not necessarily work then, and therefore, it may not work now.<br /><br />One example used in the <a href="http://online.wsj.com/article/SB10001424052970204319004577086330087780146.html">latter article </a>:<br /><blockquote>Perhaps the most dramatic flameout was the Allegheny Health, Education, and Research Foundation. Starting in the mid-1980s, it was built from a Pittsburgh hospital into a statewide system through hospital and doctor-practice acquisitions. In 1998, AHERF, as it was called, became the U.S.'s <em>largest health-care nonprofit bankruptcy. Its debts became unsustainable after it piled on too many money-losing assets, failed to manage the new primary-care physicians successfully, and lost money on capitated business</em>, according to an account published in Health Affairs in 2000.<br /><br />The hospitals' moves in the 1990s 'did not improve quality, they did not reduce costs. In fact they <em>increased everyone's spending,' partly because some hospitals eventually used their bulked-up leverage to push for higher rates</em>, says Lawton Robert Burns, a Wharton School professor and the AHERF history's lead author. 'Nobody's showed me we're going to do it a whole lot better this time....To expect that with one piece of legislation, everyone's going to sit around the campfire and sing kumbaya, forget about it.'</blockquote><br />However, the Mathews article showed that even people who ought to have been familiar with this case seemed to think that this time things would be different. For example, it included this quote from the CEO of Humana which had problems with the integrated model in the 1990s:<br /><blockquote>'It's not like we don't understand what we are getting back into here,' said Michael B. McCallister, Humana's CEO, at an investor conference. <em>'But things have changed.'</em></blockquote><br />Maybe so, but maybe if the enthusiasts of the resurrected vertically integrated health system model realized how badly things went in the past they would not be so optimistic.<br /><br /><strong>A More Complete Version of the AHERF Story</strong><br /><br />In fact, Professor Burns' take on the AHERF bankruptcy above did not seem to reflect all that went on then. A somewhat more pointed summary of that massive failure had appeared in 2008. Then, Moody's Investor Service issued a report on the 10 year anniversary of the fall of the house of AHERF. Per <a href="http://www.post-gazette.com/pg/08204/898514-28.stm">an article again by Steve Twedt in the Pittsburgh Post-Gazette</a>, who also wrote a significant <a href="http://www.post-gazette.com/aherf/">series</a> in the same newspaper summarizing the collapse of AHERF,<br /><blockquote><br />From the distance of 10 years, the historic bankruptcy of Allegheny General Hospital's then-parent organization still offers valuable lessons for today's health-care industry, says a new report by Moody's Investor Service.<br /><br /><em>'AHERF left such a stain, such an indelible mark on hospital management teams, they realized that if one of the big systems can fail, no one is immune</em>,' said Lisa Goldstein, leader of the Moody's health-care team that produced the report.<br /><br /><em>On July 21, 1998, Allegheny Health and Education Research Foundation (AHERF) defaulted, resulting in what is still the largest bankruptcy ever among the 560 Moody's-rated not-for-profit health-care entities</em>. At the time, AHERF had $2 billion in revenue and $555 million in outstanding debt, according to the Moody's report.<br /><br />Analyst Lisa Martin, who wrote the report, says industrywide forces converged with <em>'the organization's own management and governance failures'</em> to cause the foundation's failure.<br /><br />The external forces included Medicare reimbursement cuts -- still an issue a decade later -- and highly competitive markets in both Pittsburgh and Philadelphia.<br /><br />But, she added, 'we believe its ultimate downfall was driven more by decisions of the organization itself -- <em>weak governance, poorly executed strategies, lack of refined leadership, and absence of methodical execution</em>.'</blockquote><br />Even that version seems too polite. <br /><br />Although the AHERF bankruptcy appears to be the largest failure of a not-for-profit health care corporation in US history, its story has produced remarkably few echoes for doctors, other health care professionals, health care researchers, and health policy makers. I often use the fall of AHERF as major example in talks, at least the few talks I am allowed to give on such unpleasant subjects. Rarely have more than a few people in the audience heard of AHERF prior to my discussion of it. The only scholarly <a href="http://content.healthaffairs.org/cgi/reprint/19/1/7.pdf">article </a>I could locate on the topic that discussed the case in any detail, albeit incompletely since it was written before Abdelhak's guilty plea, was written by Professor Burns, who was quoted above, and colleagues [Burns LR, Cacciamani J, Clement J, Aquino W. The fall of the house of AHERF: the Allegheny bankruptcy. Health Aff (Millwood) 2000; 19: 7-41.] I doubt the case is used for teaching in most medical or public health schools. The lack of discussion of such a significant case is a prime example of the <a href="http://hcrenewal.blogspot.com/2007/08/bling-bling-poltical-correctness-and.html">anechoic effect</a>.<br /><br />Therefore, let me repeat my <a href="http://hcrenewal.blogspot.com/2008/07/10-years-later-eerie-echo-of-fall-of.html">2008 summary</a> of some of important points about AHERF not found above (see also <a href="http://www.acponline.org/chapters/ri/nl-fall04.pdf">this more detailed narrative</a>, starting on page 5):<br /><br /><br /><ul><li>AHERF, one of the largest health care systems of its day, was built by the poster-boy for health care  CEOs at the time, Sherif Abdelhak.</li><li>Abdelhak, who <a href="http://www.post-gazette.com/aherf/part2.asp">started as food services purchasing manager </a>at Allegeheny General Hospital, was repeatedly hailed as a "<em>visionary</em>" (<a href="http://www.acponline.org/journals/news/mar97/phillymc.htm">in the March, 1997, ACP Observer</a>) a "genius," and the like. His plans to create a huge integrated health care system were part of the wave of the future. Abdelhak was even invited to give the prestigious John D Cooper lecture at the annual meeting of the American Association of Medical Colleges (AAMC), which was published in Academic Medicine [Abdelhak SS. How one academic health center is successfully facing the future. Acad Med 1996; 71: 329-336.] He proclaimed then that "we will need to create new forms of organization that are more flexible, more adaptive, and more agile than ever before." And he announced that "my aim as chief executive has been to unleash the creativity and productive potential of every individual and to provide an environment that encourages teamwork" </li><li>While Abdelhak was making these grandiose promises, he paid himself and his associates very well. For example, he received $1.2 million in the mid-1990s, more than three times the average then for a hospital system CEO. He lived in a hospital supplied mansion worth almost $900,000 in 1989. Five of AHERF's top executives were in the top 10 best paid hospital executives in Philadelphia.</li><li>Although Abdelhak talked of teamwork, he warned the combined faculty of the new Allegheny University of the Health Sciences (AUHS): <a href="http://www.post-gazette.com/aherf/part6.asp">"Don’t cross me or you will live to regret it."</a></li><li>As AHERF was hemorrhaging money, Abdelhak continued to pay himself and his cronies lavishly.</li><li>After the AHERF bankruptcy, which was at the time the second largest bankruptcy recorded in the US, Abdelhak was charged with numerous felonies involving receiving charitable assets. In a plea bargain, <a href="http://www.post-gazette.com/localnews/20020830abdelhak0830p4.asp">he pleaded no contest </a>to misusing charitable funds, a misdemeanor, and was sentenced to more than 11 months in county prison.</li></ul><strong>The Moral of the Story</strong><br /><br />The story of AHERF was not merely that of an unlucky bankruptcy. It shows what can go wrong when health care adopts business practices such as jumping on the latest management band-wagons and genuflecting before imperial CEOs.<br /><br />Yet since the fall of AHERF, we are still hearing breathless stories about the latest wonderful plans to save health care (think about, for example, electronic medical records, pay for performance schemes, etc), and the the need to genuflect to brilliant CEOs who may turn out to be not so brilliant (think about, for example, Dr William McGuire, the former CEO of UnitedHealth, and his<a href="http://hcrenewal.blogspot.com/2010/08/despite-scandal-former-unitedhealth-ceo.html"> back-dated stock options</a>). <br /><br />We health care professionals need to stop falling for this hype and spin. Saving health care will take clear thinking and hard work by a lot of people. The "visionaries," if we let them, are likely to depart with a huge cache of money, leaving us and health care worse off. If it is just "not done" to talk about cases such as that of AHERF, and other examples of "recent unpleasantness," how will be learn not to fall for the propaganda?<br /><br />Of course, it is those who benefit from the propaganda who do not want us catching on to their game.<br /><br />If physicians, health professionals, health care researchers, and health policy makers do not learn the lessons of the fall of AHERF, they will be doomed to see its repetitions. <br /><br />With apologies to the Bare Naked Ladies - do not forget <a href="http://www.youtube.com/watch?v=Zs3xXlXSOKk">"it's all been done (before)"</a><br /><iframe allowfullscreen="" frameborder="0" height="315" src="http://www.youtube.com/embed/BlEW-QoJqTE" width="420"></iframe><br />(only live version I could find, actual song starts at about 3:00)

"It's All Been Done Before," If We Only Could Remember What it Was - the AHERF Example

A big Wall Street Journal article by Anna Wilde Mathews featured the latest wave of mergers affecting large health care organizations. Larg...

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The Restless Shade of AHERF and the Return of Merger Mania: Highmark Tries to Buy Another Insurance Company, a Hospital System, a Medical School, and Physicians' Practices

Starting in the 1990s, as US health care became more commercialized, a wave of mergers lead to super-sized hospital systems, insurance companies, and pharmaceutical companies.  Not all those mergers, especially involving hospitals, prospered.  Although the mergers were justified as drivers of increased efficiency, health care has become decreasingly accessible, increasingly expensive, and of no better quality.  However, now a whole new wave of mergers seems to be upon us.  <br /><br /><strong>The Proposed Highmark Blue Cross/ West Penn Allegheny Health System Merger</strong><br /><br />The latest example to get national attention is the proposed combination of already large non-profit health insurer Highmark Inc, a Blue Cross Blue Shield plan, and non-profit hospital system Allegheny Health System.  The national attention was in a Wall Street Journal <a href="http://online.wsj.com/article/SB10001424052702303627104576413580875856442.html">article</a> by Anna Wilde Matthews, which described the proposed transaction:<br /><blockquote><em>Pittsburgh insurer Highmark Inc. struck a deal to acquire the second-largest hospital chain in its region</em>, an ambitious, controversial step that would further blur the lines between those who pay for medical care and those who provide it. <br /><br />Under the tentative plan, nonprofit Highmark will pump as much as $475 million into the five-hospital West Penn Allegheny Health System, which has been operating in the red for the past five years. <br /><br />If state and federal regulators sign off on the plan, Highmark officials say the deal will allow them to move away from traditional fee models that reward providers for providing unnecessary procedures and services. <br /><br />Instead they would pay salaries to doctors, offering them incentives to achieve quality and efficiency goals. The integrated model would also rely on primary-care doctors to coordinate patients' care and focus on preventive efforts. <br /><br />Highmark officials said the deal is the best way to keep West Penn in business. 'It brings our expertise as an insurance company into the provider system,' said Kenneth R. Melani, Highmark's chief executive. </blockquote><br />This deal is unusual because it would unite a health care insurance company/ managed care organization with a hospital system. <br /><br /><strong>The Context: An Already Concentrated Health Care Environment</strong><br /><br />The deal appears in the context of and may be in response to an already concentrated health care environment.  Per the WSJ:<br /><blockquote><em>The newly combined Highmark-West Penn will face off against the University of Pittsburgh Medical Center, which is officially known by its acronym, UPMC. The prestigious $8 billion,19-hospital network employs 2,881 doctors and has <strong>about 56% of the inpatient market share</strong> in Allegheny County. It also owns a health plan with about 1.6 million members</em>. <br /><br />UPMC's current contract with Highmark runs out next June. Paul Wood, the hospital system's vice president for public relations, said the network won't sign a new one after the acquisition. 'In effect, Highmark expects UPMC to subsidize our competitor,' he said.</blockquote>UPMC has had its issues, too, as discussed in posts <a href="http://hcrenewal.blogspot.com/search/label/UPMC">here</a>.  <br /><br />The deal is also more extraordinary because it was accompanied by several other proposed deals that would create quite a sprawling health care entity.<br /><br /><strong>The Extended Scope of the Merger</strong><br /><br />First, and as noted in the WSJ article, the proposed deal would involve physicians' practices:<br /><blockquote>Highmark may also <em>buy or invest in other providers, including doctor practices</em>, Dr. Melani said.</blockquote>However not noted in the WSJ article, or in a contemporaneous Pittsburgh Post-Gazette <a href="http://www.post-gazette.com/pg/11179/1156765-100.stm">article</a>, was that since 2010 there has also been a proposal on the table for Highmark to merge with a non-profit Blue Cross Blue plan in neighboring Delaware. The latest discussion of this deal can be <a href="http://www.delawareonline.com/article/20110626/BUSINESS/106260317/Layoffs-would-pay-top-execs-well">found on </a>DelawareOnline, and was just noted in a Philadephia Inquirer <a href="http://www.philly.com/philly/insights/in_money/124837394.html">commentary</a>. <br /><blockquote>In Delaware, a bill that would remove a major obstacle to <em>Highmark's proposed affiliation with Blue Cross Blue Shield of Delaware </em>sailed through the legislature, passing the Senate unanimously Tuesday and the House, 34-5, Wednesday.</blockquote><br />That is not all. It seems that while pursuing the merger with Highmark, West Penn Allegheny Health was also pursuing an arrangement with Temple University to set up a branch of its medical school in Western Pennsylvania. As<a href="http://www.pittsburghlive.com/x/pittsburghtrib/news/health/s_741530.html"> noted </a>by the Pittsburgh Tribune Review:<br /><blockquote>West Penn Allegheny Health System leaders expressed optimism on Friday about their partnership prospects with Highmark Inc. as they announced <em>plans with Temple University to establish a four-year medical school campus in the North Side.</em></blockquote>So it appears that lined up against the UPMC behemoth could be another behemoth combining a large Pennsylvania insurance company, a Delaware insurance company, a good-sized hospital system, physicians' practices, and a branch of a medical school.  So we see a new effort to divide the health care supposed "market" among a few large, vertically-integrated health care systems.<br /><br /><strong>The Eerie Shadow of AHERF</strong><br /><br />Maybe all these simultaneous deals, which would apparently create a conglomerate of Highmark Blue Cross, Delaware Blue Cross Blue Shield, West Penn Allegheny Health System, Temple University Medical School, and possibly a large group of doctors' practices, were all being discussed separately because of how they could be seen as a strange shadow of the spectacularly failed Allegheny Health Education and Research Foundation (AHERF) of the late 1990s.<br /><br />As discussed <a href="http://hcrenewal.blogspot.com/2008/07/10-years-later-eerie-echo-of-fall-of.html">here</a>, AHERF was a large integrated health care system formed out of multiple mergers.  AHERF which went bankrupt in 1998, leading to massive layoffs, hospital closures, and the near dissolution of a medical school (which ended up taken over by Drexel University). The former AHREF CEO, whose high compensation (for the time) was accompanied by an autocratic management style, ended up in the local jail on a plea bargain. Note that West Penn Allegheny Health System was formed from some of the pieces of the failed AHERF, and seems to have never fully recovered from its previous troubles.<br /><br />Despite the fact that the AHERF bankruptcy was the second largest US bankruptcy up to its time, this vivid case was notably <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a>. The lack of echoes it originally produced made it prototypical of the anechoic effect. <br /><br />The link to AHERF was briefly noted in the Post-Gazette <a href="http://www.post-gazette.com/pg/11179/1156765-100.stm">article</a>:<br /><blockquote>'They are well-capitalized, and we're not,' said David L. McClenahan, WPAHS board chairman, speaking of Highmark. 'That's putting it mildly.' In the decade <em>since the collapse of the Allegheny Health Education and Research Foundation, whose bankruptcy eventually bore the West Penn Allegheny Health System, WPAHS has been persistently starved for capital</em>, he said.</blockquote>So far, however, the ominous implications of that previous debacle have not been publicly discussed. <br /><br /><strong>How Some Executives Would Gain</strong><br /><br />Perhaps the executives rushing to make a deal are being distracted by the potential for personal gain. The DelawareOnline article noted that current executives of Delaware Blue Cross Blue Shield may be able to pull the ripcords of their golden parachutes if its proposed merger with Highmark goes through:<br /><blockquote><em>Seven executives at Blue Cross Blue Shield of Delaware, for example, are due a combined <strong>$6 million</strong> in severance pay -- equal to about three years of salary -- if they lose their jobs</em>.<br /><br />Details of Blue Cross severance payout packages have attracted attention recently because top executives at Delaware's largest health insurer are busy pressing for a merger with Pittsburgh-based insurer Highmark Inc., which could mean the elimination of some top positions.<br /><br />Highmark has pledged that Blue Cross President and CEO Tim Constantine will keep his job after the merger's closing, if the deal is approved by state regulators. But Constantine, who has an annual salary of $420,000, would be due a $1.6 million payment if he were to lose his job.<br /><br />Six other top executives, who earn between $245,000 and $330,000 annually, have potential payouts equal to about $4.3 million. Highmark has not discussed the fate of those officers, who range in position from the company's general counsel to its chief medical and financial officers.</blockquote><br />That article further noted:<br /><blockquote>Some observers worry that the <em>prospect of large severance payments could cloud the judgments of executives working to close the deal</em>.<br /><br />Considering the size of the Blue Cross payouts in relation to annual salaries, the payout promises deserve attention, said Ethan Rome, executive director of Health Care for America Now, a Washington consumer advocacy group. Severance agreements are typically in place to provide a cushion between jobs, he said. 'Three years is a long time,' Rome said. 'Three years is not a severance. It's a substantial payout.'</blockquote><br />One wonders which other executives involved in these potential deals may also have prospects for either larger compensation or golden parachutes. This could include executives in particular current executives of West Penn Allegheny.  One also wonders whether the creation of this new conglomerate will produce rationales for big raises for the current executives of all the organizations involved who get to work for the new merged entity.  Perhaps someone should ask them. <br /><br /><strong>Further Implications</strong><br /><br />Of course the various mergers were touted as productive of new efficiencies, as attempts to obtain increased market power usually are. As reported by the Post-Gazette:<br /><blockquote>While the short-term goal of this partnership is to preserve a 'fragile' Pittsburgh hospital system, the long term goal, said Highmark CEO and President Kenneth Melani, is the <em>creation of a new model of health care, one that is outcomes based, with an integrated delivery and financing system.</em><br /><br />;Health care services are becoming less affordable,' he said. <em>'It's important to have choice</em>. It's important to have a second system.'</blockquote><br />And, as we discussed <a href="http://hcrenewal.blogspot.com/2008/07/10-years-later-eerie-echo-of-fall-of.html">here</a>, the former CEO of AHERF pledged "new forms of organization that are more flexible, more adaptive, and more agile than ever before." But common sense and history suggests that increasing market domination will be good mainly for the market dominators, not their customers, or in this case, their patients, clients and students. <br /><br />As Dr Westby Fisher <a href="http://www.medcitynews.com/2011/06/highmarks-hospital-acquisition-a-lose-lose-for-doctors-and-patients/">asserted</a> about how the new conglomerate will likely own physicians' practices:<br /><blockquote>So <em>doctors lose more professional independence and autonomy and have even more chance that clinical decisions will be compromised by bureaucratic dictates</em>. Yet ask patients who they want steering the boat when they get sick: their doctor.<br /><br />It continues to be clear who the winners and losers are as health care reform unfolds. But <em>when doctors lose autonomy, patients lose autonomy.</em><br /><br />It’s that simple.<br /><br />To argue that the only way to control the health care dollar is to bloat the bureaucratic levels of our system is a fool’s game. However, <em>bureaucrats promote bureaucrats – it’s always been this way. Until doctors and the public speak up, there’s simply nothing to stop this train.</em></blockquote><br />So I wonder if this complex merger will get more scrutiny than the many mergers that have preceded it in the last 30 years. Someone who is more likely to get answers than I am should be asking:<br />- What evidence is there that this merger will lead to any benefits to individual patients or to the public health?<br />- How will any efficiencies achieved benefit anyone other than the organizations' current and future managers?<br />- What sorts of management layers will the complexity of the multiple mergers proposed necessitate between current Highmark executives and current management of its new acquisitions?<br />- If the current problem is existing market concentration, why will these mergers be a better solution than a direct approach to that concentration?<br />- How will the current leaders of all the organizations involve personally benefit from this merger?<br /><br />Meanwhile, increasing concentration of power in health care continues to benefit the leaders of the enlarging health care organizations, while reducing the choice of individual patients and the autonomy of health care professionals.

The Restless Shade of AHERF and the Return of Merger Mania: Highmark Tries to Buy Another Insurance Company, a Hospital System, a Medical School, and Physicians' Practices

Starting in the 1990s, as US health care became more commercialized, a wave of mergers lead to super-sized hospital systems, insurance compa...

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