UnitedHealth's Latest Blunders Include Lax Fraud Detection, Recalled EHRs - So Why is its CEO Worth $13.9 Million, or is it $34.7 Million?

We managed to go four months since our last post about UnitedHealth, but sure enough, the company that keeps on giving... examples of poor management to contrast with ridiculous management pay... has done so again.<br /><br />There were two obvious examples of poor management that recently appeared in the media.<br /><br /><b>Lax Fraud Dection</b><br /><br />The background, as noted in a Kaiser Health News <a href="http://www.kaiserhealthnews.org/Stories/2013/September/15/medicaid-managed-care.aspx">article</a> published in September, is that it is now fashionable for American states to outsource some or most of their Medicaid health insurance programs to managed care organizations, often for-profit, as is UnitedHealth.  These programs are meant to provide insurance to the poor and disabled.  Yet once they have outsourced Medicaid, the states may be reluctant to cancel contracts, even if the outsourcing is not working:<br /><br /><blockquote class="tr_bq"> In Florida, a national managed care company’s former top executives were convicted in a scheme to rip off Medicaid. In Illinois, a state official concluded two Medicaid plans were providing 'abysmal' care. In Ohio, a nonprofit paid millions to settle civil fraud allegations that it failed to screen special needs children and faked data.<br /><br />Despite these problems, state health agencies in these - and other states - continued to contract with the plans to provide services to patients on Medicaid, the federal-state program for the poor and disabled.<br /><br />Health care experts say that’s because states are reluctant to drop Medicaid plans out of fear of leaving patients in a bind.<br /><br />'You probably won’t find many examples of states flat out pulling the plug. That’s sort of the nuclear option,' said James Verdier, a senior fellow at Mathematica Policy Research, a nonpartisan think tank. </blockquote>Never mind that leaving such programs as is means taking money meant to finance care for the poor and using it to finance fraud, and reward managed care organizations for failing to find fraud. <br /><br />One of the examples, but not a new one, used in the Kaiser Health News article, involved UnitedHealth:<br /><br /><br /><blockquote class="tr_bq">Linda Edwards Gockel, spokeswoman for the Texas Health and Human Services Commission, said that in 2009, officials were concerned about a pilot program in the Dallas-Fort Worth area run by Evercare, a subsidiary of <a href="http://www.unitedhealthgroup.com/" target="_blank">UnitedHealth Group</a>. The program, which coordinated care and long-term services for elderly and disabled people, had been fined more than $600,000 for not providing proper access to care and failing to coordinate services.<br /><br />Gockel said Texas decided to cancel the contract 15 months early, but continued to do business with Evercare because the problems in Dallas-Fort Worth weren’t affecting services it was providing elsewhere.</blockquote><br />Then in July, NJ.com <a href="http://www.nj.com/politics/index.ssf/2013/07/nj_comptrollers_report_finds_hmos_fraud_detection_efforts_lax_in_medicaid.html">reported</a> an investigation by the state of New Jersey into UnitedHealth's ability, or lack thereof, to detect fraud in the Medicaid managed care program it runs for the state.<br /><br /><blockquote class="tr_bq"> <i>An HMO that earned $1.7 billion from 2009 to 2010 by providing Medicaid coverage to 350,000 low-income and disabled New Jerseyans didn't try very hard to detect fraudulent billing</i> — identifying only $1.6 million, or one-tenth of one percent in improper payouts, according to a report the Office of the State Comptroller released today.</blockquote><br />UnitedHealth did not even come close to fulfilling its obligations to provide sufficient resources to fight fraud:<br /><br /><br /><blockquote class="tr_bq">The HMOs in the Medicaid program are required to dedicate one investigator for every 60,000 Medicaid clients. At that ratio, <i>United's special investigations unit should have been comprised of about six employees whose sole focus is to detect fraud and abuse by medical providers and patients.</i><br /><br />Instead, United reported it had dedicated the equivalent of two investigators during the two-year study period based on the amount of hours devoted to the unit. Upon scrutiny, the comptroller found United 'overstated' its staffing levels; <i>the unit had one investigator,</i> the report said. </blockquote><br />Note that this abject failure appeared to violate the contract UnitedHealth had with the state,<br /><br /><blockquote class="tr_bq">UnitedHealthcare Community Plan of New Jersey failed to hire enough investigators and train them properly, <i>in violation of the managed care company's contract</i> with the state, according to the report. </blockquote><br />Presumably, if fraud led to excess program expenses, it would be New Jersey, not UnitedHealth who ultimately had to pay them.  Again, it appears that money meant of pay for health care for the poor and disabled was diverted to fraudsters, and to revenue for UnitedHealth (partly because the latter did not see fit to spend enough money up front to detect the fraud.)  Of course, such management by UnitedHealth helped to increase its already fat revenue stream.<br /><br /><b>Faulty Electronic Health Records</b><br /><br />In September, Bloomberg <a href="http://www.bloomberg.com/news/2013-09-10/unitedhealth-recalls-digital-health-record-software.html">reported</a> that UnitedHealth had to recall electronic health record software because of faults that likely increased the risk of bad patient outcomes,<br /><br /><blockquote class="tr_bq">UnitedHealth Group Inc has recalled software used in hospital emergency departments in more than 20 states because of an <i>error that caused doctor’s notes about patient prescriptions to drop out </i>of their files.<br /><br />Certain versions of the software made by the largest U.S. health insurer had a bug that d<i>idn’t print information related to the medication and failed to add data to patients’ charts,</i>according to a document filed with the U.S.Food and Drug Administration and <a href="http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfRes/res.cfm?ID=119832" rel="external" title="Open Web Site">posted</a> July 29. <br /><br />The technology is used in 35 facilities in states including California<a href="http://topics.bloomberg.com/california/"></a>, New Jersey, and Florida<a href="http://topics.bloomberg.com/florida/"></a>, the document shows. The recall began June 21. There were no reports of patient harm and each facility was notified and received a digital fix, said Kyle Christensen, a spokesman for the UnitedHealth division that makes the <a href="http://www.picis.com/solutions/emergency-department/ed-pulsecheck.aspx" rel="external" title="Open Web Site">Picis ED PulseCheck</a> software that was recalled. <br /><br />The incident shows how software errors can <i>create dangers for patients</i> at a time when digital health records are being implemented as a cornerstone of President  Barack Obams's modernization of the nation’s health-care system. </blockquote><br />The "bug" could potentially harm patients,<br /><br /><blockquote class="tr_bq"> Doctor’s notes are critical for some medications, as they contain directions about diet and use. Failure to include the instructions <i>could lead to serious injury or death</i>, [University of Pennsylvania adjunct professor of sociology and medicine Ross] Koppel said.</blockquote><br />It turns out that the Picis software has had other problems that could have increased the risk of harm to patients,<br /><br /><br /><blockquote class="tr_bq">An online database maintained by the FDA shows that Picis Inc., a Wakefield, Massachusetts-based company that UnitedHealth acquired in 2010 for an undisclosed price, has reported <i>six recalls involving electronic health record software since 2009.</i><br /><br />One <a href="http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfRes/res.cfm?id=104224" rel="external" title="Open Web Site">incident</a> in 2011 involved anesthesia-management software sold nationwide that in one instance <i>displayed a patient’s medical information in another patient’s file</i>. <a href="http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfRes/res.cfm?id=86830" rel="external" title="Open Web Site">Another</a>involved software sold worldwide where on an unspecified number of occasions, the <i>program failed to display the discontinued status on medication orders</i>. Others included glitches that caused <i>a <a href="http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfRes/res.cfm?id=103528" rel="external" title="Open Web Site">failure</a> to display appropriate allergy interaction warnings</i>, the <a href="http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfRes/res.cfm?id=89514" rel="external" title="Open Web Site">freezing</a> of administrative controls, and other issues.</blockquote><br />Note that it is the same Picis software that our blogger, InformaticsMD, has alleged lead to the death of his mother,<br /><br /><blockquote class="tr_bq"><br />Alleged flaws in electronic health records have led to lawsuits. Scot Silverstein, a doctor and health-care informatics professor at  Drexel University, sued Abington Memorial Hospital in Pennsylvania in 2011 over the death that year of his 84-year-old mother. He blamed her death on a flaw in her electronic health record that he claims caused a critical heart medication to vanish from her file. One of the systems involved was made by Picis, according to his lawsuit. Picis is not being sued.</blockquote><br />Linda Millevoi, a spokeswoman for Abington Memorial, declined to comment. <br /><br />The latest InformaticsMD posts on this case are <a href="http://hcrenewal.blogspot.com/2013/09/a-new-and-quite-perverse-hospital-ploy.html">here</a> and <a href="http://hcrenewal.blogspot.com/2013/08/a-good-way-to-cynernetically-harm-or.html">here</a>. <br /><br /><b>Summary</b><br /><br />These cases are just the latest in a long list of blunders and ethical missteps made by UnitedHealth and its top management.  The most significant examples of the latter about which we have posted appear in the appendix at the end.  The latest examples likely diverted money that should have supported health care for the poor, and and may have put patients' health and lives at risk. <br /><br />Yet UnitedHealth is now the largest US health insurance company, and it has succeeded in making its current and former CEO fabulously wealthy.  According to filings with the US Security and Exchange Commission (SEC), its current CEO, Stephen J Hemsley, got <b><i>$13.9 million</i></b> in 2012, up from $13.4 million in 2011, as we posted <a href="http://hcrenewal.blogspot.com/2013/05/unitedhealth-ceo-continues-to-prosper_3.html">here</a>.  However, an <a href="http://apps.startribune.com/top_100_exec_comp/topCeoView.php">analysis</a> by the Minneapolis Star-Tribune that took into account stock gains and shares vesting suggested he got <b><i>$34,721,122</i></b> in 2012, admittedly down from a breathtaking $48,075,614 in 2011.  <br /><br />The previous UnitedHealth once was worth over a billion dollars due to back dated stock options, some of which he had to give back, but despite all the resulting legal actions, was still the ninth best paid CEO in the US for the first decade of the 21st century (look <a href="http://hcrenewal.blogspot.com/2010/08/despite-scandal-former-unitedhealth-ceo.html">here</a>).<br /><br />So UnitedHealth continues to provide us with examples of how top leaders of health care organizations can become tremendously rich, despite, or perhaps because of repeated mismanagement and apparently unethical management on their watches.  Only when we make health care leaders truly accountable for their organizations, and especially for their organizations' ethics and effects on patients' and the public's health will be begin to challenge health care dysfunction. <br /><br />(Note to readers recently joining us from countries other than the US - UnitedHealth is a multi-national that claims to operate in 33 countries (look <a href="http://careers.unitedhealthgroup.com/why-work-here/our-locations.aspx">here</a>).  For example, its UK web-site is <a href="http://www.unitedhealthuk.co.uk/">here</a>.  So beware the export of bad management for enhanced prices.)  <br /><br />  <br /><span style="font-size: x-small;"><b>Appendix - UnitedHealth's Ethical Lapses</b></span><br /><span style="font-size: x-small;"><br /></span><span style="font-size: x-small;"> - as <a href="http://www.courant.com/business/hc-natbizdigbrf0530.art2may30,0,109447.story">reported</a> by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."</span><br /><span style="font-size: x-small;">- UnitedHalth promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post <a href="http://hcrenewal.blogspot.com/2008/05/commercial-managed-care-organizations.html">here</a>);</span><br /><span style="font-size: x-small;">- UnitedHealth's acquisition of Pacificare in California allegedly lead to a "meltdown" of its claims paying mechanisms (see post <a href="http://hcrenewal.blogspot.com/2008/01/bungled-not-brilliant-results-of.html">here</a>);</span><br /><span style="font-size: x-small;">- UnitedHealth's acquisition of Sierra Health Services allegedly gave it a monopoly in Utah, while the company allegedly was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post <a href="http://hcrenewal.blogspot.com/2007/03/unitedhealth-declares-health-care.html">here</a>)</span><br /><span style="font-size: x-small;">- UnitedHealth frequently violated Nebraska insurance laws (see post <a href="http://hcrenewal.blogspot.com/2007/01/on-performance-on-one-supposedly.html">here</a>);</span><br /><span style="font-size: x-small;">- UnitedHealth settled charges that its Ingenix subsidiaries manipulation of data lead to underpaying patients who received out-of-network care (see post <a href="http://hcrenewal.blogspot.com/2009/01/unitedhealth-and-ingenix-settles.html">here</a>).</span><br /><span style="font-size: x-small;">- UnitedHealth was accused of hiding the fact that the physicians it is now employing through its Optum subsidiary in fact work for a for-profit company, not directly for their patients (see post <a href="http://hcrenewal.blogspot.com/2011/07/here-comes-your-new-doctor-brought-to.html">here</a>).</span>

UnitedHealth's Latest Blunders Include Lax Fraud Detection, Recalled EHRs - So Why is its CEO Worth $13.9 Million, or is it $34.7 Million?

We managed to go four months since our last post about UnitedHealth, but sure enough, the company that keeps on giving... examples of poor management to contrast with ridiculous management pay... has …

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UnitedHealth CEO Continues to Prosper While His Company's Behavior Appears to Contradict its Mission Statement

Tis spring, the season in the US for legal settlements, government findings, and proxy statements revealing executive compensation.  Therefore, maybe there should be no surprise that we are seeing a series of cases in which health care corporate leaders continue to enrich themselves while their organizations' behavior raises ethical questions.<br /><br />Following on the <a href="http://hcrenewal.blogspot.com/2013/05/amgen-ceos-prosper-despite-or-because.html">Amgen example</a>, we now present the latest UnitedHealth example (in a post organized similarly.)<br /><br /><b>The CEO Gets Richer</b><br /><br />Last week, the Associated Press (<a href="http://articles.washingtonpost.com/2013-04-25/business/38810785_1_medicare-advantage-insurer-compensation">via the Washington Post</a>) summarized UnitedHealth CEO Stephen J Hemsley's growing pile of money:<br /><br /><blockquote class="tr_bq"><div class="mod-washingtonpostarticletext mod-tribunearticletextimpl mod-articletext" id="mod-a-body-first-para">UnitedHealth Group Inc. kept CEO Stephen J. Hemsley’s salary stable in 2012 but <i>bumped up his total compensation</i> for a year in which the nation’s largest health insurer grew earnings and enrollment and launched a major acquisition.<br /><br />The Minnetonka, Minn., insurer gave its top executive <i>a compensation package valued at about <b>$13.9 million</b> last year</i>, according to the company’s proxy statement filed with the Securities and Exchange Commission. That’s <i>up 4 percent from the $13.4 million total he received last year.</i><br /><br />Hemsley, 60, received <i>a $1.3 million annual salary </i>in 2012, like he has the past several years. He also <i>received $7 million in stock awards</i>, which is the same total as 2011. But his <i>performance-based bonus climbed 7 percent to $5.3 million, and he received $287,443 in other compensation, up from $154,804 in 2011.</i><br /><br />Other compensation included savings plan contributions and a $125,000 Hart-Scott-Rodino Antitrust Improvement Act filing fee payment UnitedHealth made on behalf of the CEO so he could maintain and increase his stock ownership in the company.</div></blockquote><br />At the same time, Hemsley continued to cash in stock options which also added to his riches:<br />  <br /><blockquote class="tr_bq">Outside AP’s calculation of his 2012 total compensation, Hemsley also <i>acquired 284,836 shares that had vested with a value of $15.3 million.</i> He also <i>exercised options to acquire 600,000 shares and realized a value of $12.5 million</i>. Those options and stock awards had been previously given to the executive.<br /><br />The proxy said Hemsley <i>directly owned UnitedHealth shares valued at about $140 million</i>, as of March 1.</blockquote><br /><b>The Mission Promises Much but the Company Delivers Less</b><br /><br />On one hand, the rate of rise of Hemsley's compensation at least seemed comparable to the company's financial performance:<br /><br /><blockquote class="tr_bq">Overall, UnitedHealth shares climbed 7 percent to close 2012 at $54.24, a smaller gain than the 13.4 percent advance from the Standard & Poor’s 500 index.</blockquote><br />On the other hand, the largess given to the CEO ought to be contrasted with the how UnitedHealth failed to deliver what its mission promised.   <br /><br />Most recently, a jury found the company failed to live up to its legal obligation (in the state of Nevada) to review the quality of the clinicians on its panel.  As <a href="http://www.bloomberg.com/news/2013-04-04/unitedhealth-units-told-to-pay-24-million-over-hepatitis-doctor.html">reported</a> by Bloomberg,<br /><br /><br /><blockquote class="tr_bq"><i>Two UnitedHealth Group Inc (UNH)  units must pay $24 million in damages for failing to properly monitor a doctor who gave two colonoscopy patients hepatitis C by employing substandard medical practices</i>, a Nevada jury ruled. <br /><br />Jurors in state court in Las Vegas deliberated about five hours over two days before finding officials of Health Plan of Nevada and Sierra Health Services were negligent in their oversight of Dipek Desai.  The former gastroenterologist has been <i>blamed for infecting patients with hepatitis C by reusing vials of the anesthetic Propofol and failing to sterilize equipment.</i><br /><br />The panel ordered the two UnitedHealth units to pay $15 million in compensatory damages to Bonnie Brunson and her husband and $9 million to Helen Meyer. The two women contend they got hepatitis during colonoscopy procedures at Desai’s clinic. Their lawyers said earlier in the case they may ask the jury to award more than $1 billion in punitive damages.<br /><br />The verdict reflects 'what’s wrong with health insurance companies in the U.S.' Robert Eglet, Brunson’s lawyer, said in an interview after the verdict was announced. 'They put profit before patient safety.'</blockquote><br />Note that the state of Nevada does explicitly hold managed care organizations accountable for the clinical quality of its health care professionals' practice,<br /><br />  <br /><blockquote class="tr_bq">Meyer and Brunson sued under a Nevada law <i>requiring HMOs to file annual reports showing officials reviewed the quality of health services provided to their members.</i><br /><br />The women’s lawyers <i>argued officials of the UnitedHealth units knew Desai had a reputation for sloppy practice before giving him a contract to handle colonoscopies and then didn’t check the quality of his work</i>. At one point, Desai was a member of Nevada's Board of Medical Examiners,  which oversees the licensing of doctors in the state.<br /><br />The plaintiffs<i> contend the insurer didn’t properly monitor Desai’s practices and procedures even though they received complaints about his practices. </i><br /><br />During the trial, witnesses said Desai adopted a cavalier attitude toward patient safety, speeding through procedures so he could see as many as 20 patients in a three-hour period.<br /><br />The women’s lawyers argued the insurers’ executives had an obligation to insure Desai was providing quality care to their HMO members and were required to vet his practices before hiring him.</blockquote><br />Also note that managed care organizations and other health insurers often boast about the quality of their provider panels. <br />For example, see the UnitedHealth <a href="http://www.unitedhealthgroup.com/About/MissionValues.aspx">mission statement</a>:<br /><br /><blockquote class="tr_bq">- Our mission is to help people live healthier lives. <i>Our role is to help make health care work for everyone.</i><br /> - <i>We seek to enhance the performance of the health system and improve the overall health and well-being of the people we serve and their communities.</i><br />- <i>We work with health care professionals and other key partners to expand access to quality health care</i> so people get the care they need at an affordable price. <br />- We support the physician/patient relationship and empower people with the information, guidance and tools they need to make personal health choices and decisions. </blockquote><br />It seems reasonable to interpret the italicized parts above as a statement of accountability for the quality of care provided by the health care professionals within the United network.<br /><br />To reinforce that accountability, a subsequent Bloomberg <a href="http://www.bloomberg.com/news/2013-04-09/unitedhealth-to-pay-500-million-over-hepatitis-doctor.html">story </a>added,<br /><br /><blockquote class="tr_bq">Two UnitedHealth Group Inc (UNH) units must <i>pay $500 million in punitive damages for failing to oversee a doctor blamed for giving colonoscopy patients hepatitis C through shoddy medical practices</i>, a Nevada jury found.<br /><br />Jurors in state court in Las Vegas deliberated more than six hours yesterday before handing down the punitive-damages award against Health Plan of Nevada and Sierra Health Services for turning a blind eye to Dipak Desai's actions. </blockquote><br />Furthermore, the lofty UnitedHealth mission statement should be compared to two recent government findings.<br /><br />In the state of California, as<a href="http://articles.latimes.com/2013/may/01/business/la-fi-unitedhealth-rates-20130502"> reported</a> by the Los Angeles Times,<br /><br /><blockquote class="tr_bq"><i>California Insurance Commissioner Dave Jones said the nation's largest health insurer, UnitedHealth Group Inc., is imposing unreasonable rate hikes on about 5,000 small businesses. </i><br /><br />Jones said Wednesday that <i>UnitedHealth couldn't justify the average annual increase of nearly 8%</i>, which reflects both higher premiums and a reduction in benefits. He said the rate hike, which went into effect Wednesday, affects up to 45,000 small-business employees and dependents and represents $12.5 million in higher costs.<br /><br />'At a time when small businesses are struggling to survive, UnitedHealthcare's rate increase is just one more unwarranted economic burden on California's small business owners and their employees,' Jones said. </blockquote><br />Such behavior seems to contradict the mission statement's assurance that the company will seek to provide health care at "an affordable price."<br /><br />Meanwhile, Bloomberg just published a <a href="http://www.bloomberg.com/news/2013-05-03/pentagon-blames-unitedhealth-for-failures-under-contract.html">story</a> about how UnitedHealth has been running an insurance program for US military families.<br /><br /><blockquote class="tr_bq"><i>The Pentagon rebuked UnitedHealth (UNH) Group Inc, the nation’s largest insurer, after military families began experiencing long delays getting medical-care referrals from the company. </i><br /><br /><i>The backlogs occurred almost as soon as Minnetonka, Minnesota-based UnitedHealth took over a contract</i>, valued as much as $20.5 billion, from TriWest Healthcare Alliance Corp. It assumed responsibility on April 1 for the western region of the military’s health-care system, known as Tricare.<br /><br /><i>UnitedHealth’s 'failure to meet contractor requirements' has prevented a large number of beneficiaries in one Tricare health plan from obtaining timely access to specialty care, Jonathan Woodson, assistant secretary of defense for health affairs, said</i> in a memo yesterday to other military leaders.<br /><br />Woodson, <i>calling the situation 'extraordinary,</i>' said the Pentagon stepped in to grant a temporary waiver so the plan’s members in the western region could get specialty care without UnitedHealth’s authorization and not incur penalties.. </blockquote><br />This behavior seemed to contradict the mission statement's assurance that the company seeks to "expand access to quality health care."<br /><br /><b>The Song Remains the Same </b><br /><br />Of course, UnitedHealth actually has a very long record of preaching about its aspirational mission, while paying its top hired managers extraordinary amounts and contradicting that mission, and at times ethical norms. Our posts on UnitedHealth are here. Recently we wrote,<br /><br /> UnitedHealth would be the company whose CEO once was worth over a billion dollars due to back dated stock options, some of which he had to give back, but despite all the resulting legal actions, was still the ninth best paid CEO in the US for the first decade of the 21st century (look <a href="http://hcrenewal.blogspot.com/2010/08/despite-scandal-former-unitedhealth-ceo.html">here</a>). UnitedHealth would be the company whose then CEO made a cool $106 million in 2009 (look <a href="http://hcrenewal.blogspot.com/2010/08/can-1-billion-group-of-babies-provide.html">here</a>).<br /><br />Moreover, UnitedHealth would also be the company known for a string of ethical lapses:<br />- as <a href="http://www.courant.com/business/hc-natbizdigbrf0530.art2may30,0,109447.story">reported</a> by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."<br />- UnitedHalth promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post <a href="http://hcrenewal.blogspot.com/2008/05/commercial-managed-care-organizations.html">here</a>);<br />- UnitedHealth's acquisition of Pacificare in California allegedly lead to a "meltdown" of its claims paying mechanisms (see post <a href="http://hcrenewal.blogspot.com/2008/01/bungled-not-brilliant-results-of.html">here</a>);<br />- UnitedHealth's acquisition of Sierra Health Services allegedly gave it a monopoly in Utah, while the company allegedly was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post <a href="http://hcrenewal.blogspot.com/2007/03/unitedhealth-declares-health-care.html">here</a>)<br />- UnitedHealth frequently violated Nebraska insurance laws (see post <a href="http://hcrenewal.blogspot.com/2007/01/on-performance-on-one-supposedly.html">here</a>);<br />- UnitedHealth settled charges that its Ingenix subsidiaries manipulation of data lead to underpaying patients who received out-of-network care (see post <a href="http://hcrenewal.blogspot.com/2009/01/unitedhealth-and-ingenix-settles.html">here</a>).<br />- UnitedHealth was accused of hiding the fact that the physicians it is now employing through its Optum subsidiary in fact work for a for-profit company, not directly for their patients (see post <a href="http://hcrenewal.blogspot.com/2011/07/here-comes-your-new-doctor-brought-to.html">here</a>).<br /><br /><b>Summary</b><br /><br />The US dysfunctional health care system has produced a long string of big corporations that promise warm and fuzzy health care yet deliver something less, all the while mightily enriching their top hired managers. Given the deadly serious nature of the health care system, these companies' promises, marketing, public relations and mission statements cannot be dismissed as fluff and puffery. Market fundamentalists and executive apologists have touted our system as market based. If patients must act as consumers, they cannot make good consuming decisions if they are awash with deceptive marketing and advertising. It is one thing for Hollywood to advertise blockbuster movies that are duds. It is another for health care corporations to advertise quality care and deliver bad care.<br /><br />As we have said far too many times, 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.

UnitedHealth CEO Continues to Prosper While His Company's Behavior Appears to Contradict its Mission Statement

Tis spring, the season in the US for legal settlements, government findings, and proxy statements revealing executive compensation.  Therefore, maybe there should be no surprise that we are seeing a…

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Don't Cry for Me, Brazil - UnitedHealth May Buy Brazilian Managed Care Company

While <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a>'s bloggers are at the moment all Americans, and hence tend to focus on the wild and crazy US health care system, we have suggested that many of the issues we discuss have global implications.  In fact, the first article I managed to publish on health care dysfunction was in a European journal, and framed the US experience as a cautionary tale for other countries. [Poses MD. A cautionary tale: the dysfunction of American health care.  Eur J Int Med 2003; 14: 123-130.  Link <a href="http://www.ejinme.com/article/S0953-6205%2803%2900029-3/abstract">here</a>.]<br /><br /><b>The Possible Acquisition by UnitedHealth of Brazil's Leading Managed Care Company </b><br /><br />However, sometimes it appears that the US experience might be directly exported.  Today Bloomberg <a href="http://www.bloomberg.com/news/2012-10-05/unitedhealth-said-to-seek-brazil-s-amil-participacoes.html">reported</a>,<br /><br /><blockquote class="tr_bq">UnitedHealth Group Inc., the biggest U.S. health insurance company, is in talks to buy a stake or all of the Brazilian insurer and hospital operator Amil Participacoes SA, according to people familiar with the matter. </blockquote><blockquote class="tr_bq">Acquiring all or part of Brazil’s biggest managed-care company, which carries a market value of 9.01 billion reais ($4.47 billion), would give Minnetonka, Minnesota-based UnitedHealth access to a growing private-insurance market in the world’s second-biggest emerging economy. It also may generate more opportunities for UnitedHealth’s Optum unit, which provides technology and consulting to health systems in India, China, the U.K. and elsewhere. </blockquote><b>UnitedHealth's Ethical Record </b><br /><br />UnitedHealth would be the company whose CEO once was worth over a billion dollars due to back dated stock options, some of which he had to give back, but despite all the resulting legal actions, was still the ninth best paid CEO in the US for the first decade of the 21st century (look <a href="http://hcrenewal.blogspot.com/2010/08/despite-scandal-former-unitedhealth-ceo.html">here</a>). UnitedHealth would be the company whose current CEO made a cool $106 million in 2009 (look <a href="http://hcrenewal.blogspot.com/2010/08/can-1-billion-group-of-babies-provide.html">here</a>).<br /><br />Moreover, UnitedHealth would also be the company known for a string of ethical lapses:<br />- as <a href="http://www.courant.com/business/hc-natbizdigbrf0530.art2may30,0,109447.story">reported</a> by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."<br />- UnitedHalth promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post <a href="http://hcrenewal.blogspot.com/2008/05/commercial-managed-care-organizations.html">here</a>);<br />- UnitedHealth's acquisition of Pacificare in California allegedly lead to a "meltdown" of its claims paying mechanisms (see post <a href="http://hcrenewal.blogspot.com/2008/01/bungled-not-brilliant-results-of.html">here</a>);<br />- UnitedHealth's acquisition of Sierra Health Services allegedly gave it a monopoly in Utah, while the company allegedly was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post <a href="http://hcrenewal.blogspot.com/2007/03/unitedhealth-declares-health-care.html">here</a>)<br />- UnitedHealth frequently violated Nebraska insurance laws (see post <a href="http://hcrenewal.blogspot.com/2007/01/on-performance-on-one-supposedly.html">here</a>);<br />- UnitedHealth settled charges that its Ingenix subsidiaries manipulation of data lead to underpaying patients who received out-of-network care (see post <a href="http://hcrenewal.blogspot.com/2009/01/unitedhealth-and-ingenix-settles.html">here</a>).<br />- UnitedHealth was accused of hiding the fact that the physicians it is now employing through its Optum subsidiary in fact work for a for-profit company, not directly for their patients (see post <a href="http://hcrenewal.blogspot.com/2011/07/here-comes-your-new-doctor-brought-to.html">here</a>).<br /><br /><b>Exporting Health Care Dysfunction</b><br /><br />So while the deal discussed above might be good for UnitedHealth, it is not so clear that it would be good for Brazil, as it would give a big toe-hold in Brazil to a US company whose actions have not always been exemplary, and hence may give Brazil a whiff of US health care dysfunction.<br /><br /><br />Health care dysfunction in the US has been manifested by continuously rising costs while access and quality have been threatened.  While it is possible that our recent Affordable Care Act reforms will improve access, and perhaps quality, it is likely the country will continue to lag other developed countries in providing health care value (for examples, look at <a href="http://www.commonwealthfund.org/Topics/International-Health-Policy.aspx">this Commonwealth Fund site</a> including international comparisons.)  <br /><br />Moreover, health care dysfunction may have resulted in a uniquely distressed physician population in the US compared to those in other countries.  <a href="http://hcrenewal.blogspot.com/2012/08/will-another-study-on-physician-burnout.html">Here</a> we discussed a recent large-scale survey showing nearly half of all US physicians, and more than half of generalist physicians are burned-out.  <a href="http://hcrenewal.blogspot.com/2012/10/health-care-academics-unrest-and-bad.html">Here</a> we discussed another recent large-scale survey showing that more than a third of US academic physicians want to quit their institution and/or academia. That survey may have suggested that their dissatisfaction was due to concerns that their leaders did not share their values about patient care and academics, their leaders may put revenue ahead of these values, their leaders may have suppressed dissent, free speech, academic freedom, and whistle-blowing, and their leaders may have acquiesced to a culture of dishonesty and deceit.<br /><br /> On Health Care Renewal, we have postulated that our unique mix of health care misery may be due to a witch's brew of  <a href="http://hcrenewal.blogspot.com/search/label/concentration%20of%20power" target="_blank">concentration</a> and abuse of power in health care, bad (that is, <a href="http://hcrenewal.blogspot.com/search/label/ill-informed%20management" target="_blank">ill-informed</a>, incompetent, <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management" target="_blank">mission-hostile</a>, self-interested, <a href="http://hcrenewal.blogspot.com/search/label/conflicts%20of%20interest" target="_blank">conflicted</a> or <a href="http://hcrenewal.blogspot.com/search/label/health%20care%20corruption" target="_blank">corrupt</a>) leadership of health care, tactics used by bad health care leadership such as use of <a href="http://hcrenewal.blogspot.com/search/label/perverse%20incentives" target="_blank">perverse incentives</a>, creation of <a href="http://hcrenewal.blogspot.com/search/label/conflicts%20of%20interest" target="_blank">conflicts of interest</a>, <a href="http://hcrenewal.blogspot.com/search/label/deception" target="_blank">deception</a>, <a href="http://hcrenewal.blogspot.com/search/label/disinformation" target="_blank">disinformation</a>, <a href="http://hcrenewal.blogspot.com/search/label/propaganda" target="_blank">propaganda</a>, <a href="http://hcrenewal.blogspot.com/search/label/intimidation" target="_blank">intimidation</a>, etc<br /><br />Thus we would not recommend that other countries look to our health care system as a role model, and that their citizens should be very skeptical of US health care organizations, particularly large, for-profit health care corporations with spotty ethical records, when they come calling. Meanwhile, we in the US must do a better job solving our own health care problems, and should avoid trying to export them.

Don't Cry for Me, Brazil - UnitedHealth May Buy Brazilian Managed Care Company

While Health Care Renewal's bloggers are at the moment all Americans, and hence tend to focus on the wild and crazy US health care system, we have suggested that many of the issues we discuss have glo…

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The Revolving Door's Bearings Overheat - Two Examples of the Health Care Insiders Who Keep it Spinning

Two recent stories illustrate a kind of conflict of interest affecting government health care policy. Note that neither story appeared in any one media outlet, but had to be pieced together from several sources, not all contemporaneous.<br /><br /><strong>The Peripetatic Architect of Health Care Reform Implementation</strong><br /><br />Here is the story of Steve Larsen's latest career move, <a href="http://online.wsj.com/article/SB10001424052702303822204577468680618029466.html">per the Wall Street Journal</a>,<br /><blockquote><em>A top official in charge of implementing the federal health-care overhaul said Friday he would step down in mid-July</em>, shortly after the Supreme Court is expected to rule on the fate of the law.<br /><br /><em>The official, Steve Larsen, heads the office at the Centers for Medicare and Medicaid Services that oversees most of the insurance provisions in the 2010 law</em>. Those include setting up exchanges for consumers to shop for plans and obtain subsidies for premiums, establishing rules on how much money insurers must spend on medical benefits, and administering a federal program to provide insurance for consumers with pre-existing conditions.<br /><br />Mr. Larsen said in an interview that <em>his departure was '100% for personal and family reasons,'</em> and that he hadn't considered the timing of the court decision. He cited <em>his need to pay tuition for his college-bound children</em>,... </blockquote><br />The Wall Street Journal coverage made it sound like Mr Larsen was fleeing his post to avoid dealing with how the Supreme Court's decision on the Obama administration's health care reform law might complicate future functions of his office,<br /><blockquote>Mr. Larsen's departure highlights the challenges the administration will face once the Supreme Court rules. If the court upholds the law, the administration has a 2014 deadline to put it in place, including persuading states to set up the exchanges or establishing them on states' behalf.<br /><br />If the court strikes down the law's key requirement, that most individuals purchase insurance or pay a fine, federal officials will have to establish whether they can make the remaining insurance elements of the law work, which would face stiff opposition from insurance companies and from Republican lawmakers who have pledged to overturn the law.<br /><br />If the court voids the law entirely, officials will have to start undoing hundreds of its requirements that are set up to take effect or are, in many cases, already in place. </blockquote><br />It only briefly mentioned where Mr Larsen was going, ostensibly in hopes that a better salary would aid in his tuition payments,<br /><blockquote>[he] said he would be <em>working at a health-services business unit of UnitedHealth Group, an insurer</em></blockquote><br />On the other hand, a <a href="http://www.bna.com/cciio-director-steve-n12884910135/">report from Bloomberg </a>suggested that UnitedHealth thought he would be well worth his salary,<br /><blockquote>Larsen will be executive vice president at Optum, a health services and information technology company that is part of UnitedHealth Group Inc., of Minnetonka, Minn., the company confirmed. UnitedHealth Group is the parent company of UnitedHealthcare, the largest health insurer in the United States in terms of policyholders and revenues.<br /><br /><em>'We are excited to welcome Steve Larsen to Optum,'</em> company spokesman Matthew Stearns told BNA in an email. <em>'Steve's extensive, broad-based experience in health care</em> will further enhance the support Optum provides to the health system and consumers in a rapidly evolving environment.'</blockquote>It is funny how that experience seemed to be about crafting the regulations under which Optum, or at least its parent corporation would have to operate.<br /><br />But wait, there is more. Bloomberg also mentioned that Mr Larsen had previously gone from a state government health policy position to the insurance industry before he wound up at the CCIIO.<br /><blockquote>Prior to joining the Obama administration to implement PPACA, <em>Larsen served in a number of capacities at Amerigroup Corp., a public managed care company</em> serving Medicaid and Medicare beneficiaries, according to his biography on the CCIIO website. Larsen also was Maryland insurance commissioner for six years, chairman of the Maryland Public Service Commission for Gov. Martin O'Malley (D),... </blockquote>To clarify, Amerigroup is a publicly-held, Fortune 500 for-profit corporation (look <a href="http://phx.corporate-ir.net/phoenix.zhtml?c=122199&p=irol-IRHome">here</a>).<br />So in summary, and in chronological order, as best as I can establish it, Mr Larsen went from a Maryland state government policy position that affected health (and other insurance) companies, to a health insurance company (Amerigroup), to a US government policy position that affected health insurance, and now to another health insurance company (UnitedHealth).<br /><br /><strong>The Peripatetic Legislative Policy Director</strong><br /><br />Brett Roper moved in the opposite direction, to government from industry, and to the Republican legislative majority, not the executive branch now controlled by the Democrats. Early in June, <a href="http://www.republicreport.org/2012/brett-loper-boehner/">on the Republic Report</a>,<br /><blockquote>In late 2010, as Congressman John Boehner (R-OH) prepared to take the gavel as Speaker, he <em>hired a lobbyist named Brett Loper as his new policy chief. Loper left his job at the Advanced Medical Technology Association, a lobby group for medical device-makers</em>, to join Boehner.</blockquote><br />The Association did not seem to sad to see him go,<br /><blockquote>Republic Report reviewed ethics forms disclosed filed with the House clerk’s office, and noticed that <em>Loper actually received a $100,147 bonus in 2011 for leaving his medical device lobbying group and becoming a public servant</em>.</blockquote><br />But wait, there is more. Loper also previously made more than one transition between government and industry. As <a href="http://www.politico.com/news/stories/1210/46211.html">Politico reported </a>in 2010, before Loper worked for the Advanced Medical Technology Association,<br /><blockquote><em>Loper worked in senior positions for then House Majority Leader Tom DeLay and as the House Ways and Means Committee Republican staff director under then-ranking member Rep. Jim McCrery of Louisiana</em></blockquote><br />But wait, there is still more. In 2011, the <a href="http://www.theatlantic.com/politics/archive/2011/04/corruption-watch-john-boehners-abramoff-connection/73396">Atlantic reported</a>,<br /><blockquote>In December, Boehner hired Brett Loper to be his policy director. At the time, articles focused on Loper's previous job as a lobbyist for the Advanced Medical Technology, where Loper vigorously resisted attempts to reduce the deficit by fighting cuts in fees to his clients proposed by the Obama administration. <br /><br />That is part of the story. <br /><br />But missing from the pieces about Loper have been <em>his connection to the Abramoff scandal and knowledge of how to use government money to 'nfluence'legislators</em>. <br /><br />Sometimes a picture is worth a thousand words. Here is a photo of Loper (far right), basking in the tropical sun of the Marianas Islands, with <em>Michael Scanlon (center), Jack Abramoff's partner in crime.</em><br /><br />What is Loper doing in the Marianas? <br /><br />As a staff member for Tom Delay, <em>Loper was part of a mission to deliver money from the "favor factory," otherwise known as the Appropriations Committee of Congress, to two legislators in the Marianas, Norm Palacios and Alejo Mendiola (between Scanlon and Loper, above). In exchange for money for their two pet projects, Palacios and Mendiola agreed to switch their votes and support Abramoff's key ally in the Marianas, Benigno Fitial,</em> in his bid to become Speaker of the House there.<br /><br />The gambit worked. Fitial won. Abramoff -- whose lobbying contract to the Marianas had been canceled -- was re-hired by the Marianas. In that capacity, Abramoff resumed lobbying for the continuation of abusive labor practices in the islands. (For more on this, see my film, 'Casino Jack and the United States of Money.') Abramoff also continued to make sure that the grateful garment factory owners flowed campaign cash to key mainland Republican legislators, including Tom Delay. </blockquote><br />Note that according to the <a href="http://www.washingtonpost.com/wp-dyn/content/linkset/2005/06/22/LI2005062200936.html">Washington Post web-page on the Abramoff scandal</a>,<br /><blockquote>Former Republican lobbyist Jack Abramoff was sentenced to five years and 10 months in prison on March 29, after pleading guilty to fraud, tax evasion and conspiracy to bribe public officials in a deal that requires him to cooperate in an investigation into his relationshps with members of Congress. Sources familiar with the federal probe have told The Post that half a dozen lawmakers are under scrutiny, along with Hill aides, former business associates and government officials.<br /><br />The scandal prompted Rep. Tom DeLay (R-Tex.) and Rep. Robert Ney (R-Ohio) to give up their leadership posts,...</blockquote><br />So Mr Larsen went from Republican senior legislative staff positions, during which time he associated with the now admittedly guilty Abramoff, to an industry trade association, and then back to a Republican senior legislative staff position.<br /><br /><strong>Summary</strong><br /><br />So here are two recent good examples of a particular type of conflict of interest involving government and health care corporations. Both cases are of people who have made multiple transitions through the "revolving door" between the health care corporate world, and government agencies and organizations that are involved in policies that affect that world. <br /><br />These transitions' multiplicity appears to represent a conflict of interest because these peoples' frequent revolutions through the door might diminish any sense that they ever have a primary interest on behalf of any immediate employer when another employer on the other side of the supposed arms' length government-industry relationship is always beckoning. Thus the people involved appear to have become members of a peculiar class always in transition, and hence more attuned to self-interest than to promoting the health of patients and the population (which ought to have been the primary concern for government leaders.) As Matt Kelley <a href="http://www.complianceweek.com/as-the-revolving-regulatory-door-turns/article/246085">on the Compliance Week blog </a>wrote in response to the Larsen story,<br /><blockquote>if you ever wonder why so many Americans feel like their country is slipping away from them, the revolving door—the sense that a private club of success exists in this country, and most Americans don't get to go through it, but merely live with the dictates of those who do—is a big reason why.</blockquote>As we wrote before health policy in the US, in particular, has become an insiders' game. Unless it is redirected to reflect patients' and the public's health, facilitated by the knowledge of unbiased clinical and policy experts rather than corporate public relations, expect our efforts at health care reform to just increase health care dysfunction.<br /><br />Physicians, public health advocates, whatever unbiased health policy experts remain must educate the public about how health policy has been turned into a corporate sandbox. We must try to somehow activate the public to call for health care policy of the people, by the people, and for the people.

The Revolving Door's Bearings Overheat - Two Examples of the Health Care Insiders Who Keep it Spinning

Two recent stories illustrate a kind of conflict of interest affecting government health care policy. Note that neither story appeared in any one media outlet, but had to be pieced together from sever…

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Insurers' diversification creating monopoly power and conflict of interest - quoted in the Washington Post

I am quoted in a Washington Post article today on potential conflicts of interest when medical payers/insurers acquire the firms that hospitals and doctors use to challenge medical payment denials:<br /><br /><blockquote class="tr_bq"> <b><a href="http://www.washingtonpost.com/health-insurance-companies-push-to-diversify-raises-concerns/2012/04/27/gIQAWoSkoT_story.html" target="_blank">"Health insurers’ push to diversify raises ethical concerns" </a><br /><br />Washington Post <br />Jay Hancock, Sunday, April 29 </b><br /><br />Like hospitals and doctors everywhere, Banner Health fights a daily battle to get paid by insurance companies and government agencies for the care it delivers.  So the hospital system hired a company called Executive Health Resources to fight back against the likes of Medicare and UnitedHealthcare when they deny claims or pay bills for less than what Banner thinks it is owed.</blockquote><br />Fair enough.<br /><br /><blockquote class="tr_bq">But Banner executives began to worry about EHR’s independence when the firm was acquired in 2010 by UnitedHealth Group, UnitedHealthcare’s parent. </blockquote><br />Issues can get a bit sticky under such an arrangement.<br /><br />I put it this way:<br /><blockquote class="tr_bq"><br />Critics call United’s ownership of EHR a troubling conflict of interest that could give it confidential information about rivals as well as patients and limit EHR’s power to demand payment from its much larger corporate sister. “How is that ownership going to affect the mission of a company whose business is to extract more money from payers?” said Scot Silverstein, a physician and specialist in medical software and patient records at Drexel University. <b>“Imagine going to a plaintiff’s lawyer to take your malpractice case and not knowing that plaintiff’s lawyer actually works for the hospital that you’re suing.”</b></blockquote><br />When payers acquire those who would challenge their payment denials, I worry about the consolidation of power being too great for the public good.<br /><br />As we learn, the relationship is somewhat stealthy:<br /><br /><blockquote class="tr_bq">... There is no mention of EHR’s ownership in the “Corporate Overview” section of its Web site or elsewhere on the site. Nor did the American Hospital Association identify EHR as a United subsidiary in September when it renewed its exclusive endorsement of EHR’s denial-fighting services. EHR pays the hospital association a fee for the endorsement. The group declined to disclose the amount.  </blockquote><br />The plot thickens:<br /><br /><blockquote class="tr_bq">Claims consultants such as EHR<b> typically gain access to millions of patient records and confidential contracts between hospitals and insurers</b>, industry officials say. If UnitedHealthcare, United’s insurance wing, gained access to that data,<b> it would obtain “a huge business advantage” over insurance rivals as well as the hospitals</b>, Kofman said.</blockquote><br />In today's healthcare business environment, "if" seems to me to be optimistic.<br /><br />Hancock goes further in the article:<br /><blockquote class="tr_bq"><br />As insurers eager to add revenue streams convert themselves into diversified health-services companies,<b> they often buy traditional business adversaries</b>, including physician groups and hospital consultants such as EHR. They’re also buying technology companies and research firms that serve medical-care providers,<b> raising questions not only about independence but about the privacy of patient information. </b></blockquote><br />A Georgetown professor, formerly a state insurance superintendent, gets to the heart of the matter, using United as but one example:<br /><blockquote class="tr_bq"><br />“I am not convinced that, even with proper disclosure, that an entity owned by United could aggressively advocate against United’s interests,” said Mila Kofman, a Georgetown professor who was Maine’s insurance superintendent.</blockquote><br />This factoid is eye-opening:<br /><blockquote class="tr_bq"><br />Appealing claims denials has become a huge, high-tech business, reflected in the more than $1 billion that United reportedly paid for EHR [Executive Health Resources].</blockquote><br />You might think there were better things to do with $1 billion besides administrative bloat - such as taking care of patients. <br /><br />We probably need new laws to catch up with the flurry of M&A's going on in healthcare between payers, the healthcare delivery sector, and the "referees" that mediate between them when disputes arise.<br /><br />Read the entire article at the WaPo link above.  The examples get even more convoluted.<br /><br />-- SS<br /><br />Addendum:<br /><br />Roy Poses notes:<br /><br /><blockquote class="tr_bq">This appears to be a newly recognized type of conflict of interest that contributes to the concentration of power in the US commercialized health care system.  While many people tout how our health care system is "competitive" and a "free market," it is ever more dominated by a decreasing number of enlarging organizations.  True health care reform would break up health care oligopolies. </blockquote><br />-- SS

Insurers' diversification creating monopoly power and conflict of interest - quoted in the Washington Post

I am quoted in a Washington Post article today on potential conflicts of interest when medical payers/insurers acquire the firms that hospitals and doctors use to challenge medical payment denials: "H…

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Exporting the US "Health Ecosystem" and its "Wonderful Technology, Wonderful Approaches," or Exporting "A Parasite Eating Its Host?"

Last week, an <a href="http://www.startribune.com/business/130604608.html">article </a>in the Minneapolis Star-Tribune suggested that our US corporate health care giants think they are doing such a good job they want to export the "world's best health care system" overseas:<br /><blockquote>A coalition of U.S. health care businesses, including Minnesota-based UnitedHealth Group and Medtronic, <em>proposes to rebuild America's battered economy by selling the country's 'health ecosystem' internationally</em>.<br /><br /><em>The Alliance for Healthcare Competitiveness (AHC) wants the U.S. government to build its foreign free-trade policy around the health care industry</em>, noting that the sector has been a significant jobs creator since the recession began in 2008. <em>Breaking down tariffs and other forms of international discrimination against America's 'health ecosystem' will allow developing countries such as China, India and Brazil to improve medical care while allowing U.S. companies to rescue the American economy by hiring more people</em>, AHC leaders said Monday.<br /><br />The worldwide need for health care in aging populations will lead to a demand for goods and services that can drive sales of American insurance, medical devices and record-keeping technology, said Simon Stevens, <em>UnitedHealth's president of global health and an AHC member.</em></blockquote><br />AHC members seem really convinced of the value of what they have to sell:<br /><blockquote>'We've got a lot of wonderful technologies, wonderful approaches,' said <em>Alex Gorsky, Johnson & Johnson's vice chairman. </em></blockquote><br />The Star-Tribune did note that our "health ecosystem" is<br /><blockquote>beset with skyrocketing costs and inefficiencies. Americans currently pay more for health care and rank lower in life expectancy and infant mortality than much of the developed world.</blockquote><br />The article also managed to find one slightly dissenting expert,<br /><blockquote><em>'It seems ironic</em>, at best,' said Jean Abraham, a professor of health policy and management at the University of Minnesota</blockquote><br />Let me add a little more irony. The AHC advocates are top leaders at UnitedHealth and Johnson and Johnson.<br /><br /><strong>UnitedHealth Group's Sorry Record</strong><br /><br />UnitedHealth would be the company whose CEO once was worth over a billion dollars due to back dated stock options, some of which he had to give back, but despite all the resulting legal actions, was still the ninth best paid CEO in the US for the first decade of the 21st century (look <a href="http://hcrenewal.blogspot.com/2010/08/despite-scandal-former-unitedhealth-ceo.html">here</a>). UnitedHealth would be the company whose current CEO made a cool $106 million in 2009 (look <a href="http://hcrenewal.blogspot.com/2010/08/can-1-billion-group-of-babies-provide.html">here</a>). Howver, UnitedHealth would also be the company known for a string of ethical lapses:<br />- as <a href="http://www.courant.com/business/hc-natbizdigbrf0530.art2may30,0,109447.story">reported</a> by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."<br />- UnitedHalth promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post <a href="http://hcrenewal.blogspot.com/2008/05/commercial-managed-care-organizations.html">here</a>);<br />- UnitedHealth's acquisition of Pacificare in California allegedly lead to a "meltdown" of its claims paying mechanisms (see post <a href="http://hcrenewal.blogspot.com/2008/01/bungled-not-brilliant-results-of.html">here</a>);<br />- UnitedHealth's acquisition of Sierra Health Services allegedly gave it a monopoly in Utah, while the company allegedly was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post <a href="http://hcrenewal.blogspot.com/2007/03/unitedhealth-declares-health-care.html">here</a>)<br />- UnitedHealth frequently violated Nebraska insurance laws (see post <a href="http://hcrenewal.blogspot.com/2007/01/on-performance-on-one-supposedly.html">here</a>);<br />- UnitedHealth settled charges that its Ingenix subsidiaries manipulation of data lead to underpaying patients who received out-of-network care (see post <a href="http://hcrenewal.blogspot.com/2009/01/unitedhealth-and-ingenix-settles.html">here</a>).<br />- UnitedHealth was accused of hiding the fact that the physicians it is now employing through its Optum subsidiary in fact work for a for-profit company, not directly for their patients (see post <a href="http://hcrenewal.blogspot.com/2011/07/here-comes-your-new-doctor-brought-to.html">here</a>).<br /><br /><strong>Johnson and Johnson's Sorry Record</strong><br /><br />Johnson and Johnson also would be the company known for recalling heroic numbers of products, 26 different recalls since 2009, the latest, of Eprex, two weeks ago (see the WSJ Health blog recall watch <a href="http://blogs.wsj.com/health/2011/09/23/jj-recall-watch-eprex-anemia-drug-pulled-on-potency-worries/">here</a>.). <br /><br />Johnson and Johnson also has an amazing recent record of ethical lapses and guilty pleas, including:<br />-  Convictions in two different states in 2010 for misleading marketing of Risperdal<br />-  A guilty plea for misbranding Topamax in 2010 <br />-  Guilty pleas to bribery in Europe in 2011 by J+J's DePuy subsidiary<br />-  A guilty plea for marketing Risperdal for unapproved uses in 2011 (see <a href="http://hcrenewal.blogspot.com/2011/08/why-cultivate-weldons-confidence-ceo.html">this link</a> for all of the above)<br />-  Accusations that the company, which makes smoking cessation products,  participated along with tobacco companies in efforts to lobby state legislators (see post <a href="http://hcrenewal.blogspot.com/2011/09/smart-alecs-strange-bedfellows.html">here</a>)<br />-  A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post <a href="http://hcrenewal.blogspot.com/2011/09/johnson-and-johnson-pleads-guilty.html">here</a>)<br /><br />With the justification that "he met expctations," so despite, or maybe because of all this, Johnson and Johnson paid its CEO $29 million in 2010 (see post <a href="http://hcrenewal.blogspot.com/2011/03/despite-recalls-legal-settlements.html">here</a>).<br /><br /><strong>Summary</strong> <br />  <br />So maybe UnitedHealth Group and Johnson and Johnson want to quickly export their brilliance before someone else realizes how bad their corporate records are, and takes action in response.  Note that the "international discrimination" against such companies noted above could simply be another description of better regulatory systems in other countries which are more able to defend against the sorts of sleazy behavior that has plagued US health care.  If US "free-trade" policy succeeds in challenging such regulation, other developed countries, which provide generally better health care at lower costs, could become more susceptible to catching the US health care dysfunction syndrome.<br />  <br />For more pithy comments, Minneapolis Public Radio published a <a href="http://minnesota.publicradio.org/display/web/2011/09/30/durenberger/">commentary</a> by David Durenberger in which he noted:<br /><blockquote>A physician I know read a story in Tuesday's newspaper at about the same time I did, 6 a.m. By 8 we'd found that we were having identical reactions to this absurdity. But he had a better way of expressing it: <em>'It's like a parasite eating its host.'</em><br /><br />'They have bankrupted our culture, so now they want to try and bankrupt China and India,' he said. </blockquote><br />Of course, if maybe we could export all of Johnson and Johnson, UnitedHealth Group, and other corporations with similarly bad records of crimes, legal settlements, ethical missteps, and bad leadership to India and China, maybe our health care system would start recovering from its dysfunction (but then pity the poor Chinese and Indians). <br /><br />Maybe the corporate leaders quoted above suffer from the same apparently complete lack of insight that another health care CEO (actually former CEO) exhibited recently (look <a href="http://hcrenewal.blogspot.com/2011/09/do-health-care-leaders-realize-they-do.html">here</a>). However, such glaring inability to perceive one's own problems surely will lead them to grief in the near future. Our corporate health care giants have already lead our dysfunctional health care system to enough grief.<br /><br />True health care reform would favor leaders of health care organizations who understand the health care context, and uphold health care professionals' values, and have enough insight to realize when they are falling short of these standards.<br /><br />Meanwhile, rest assured that US health care is the system where nothing can go wrong, go wrong, go wrong.

Exporting the US "Health Ecosystem" and its "Wonderful Technology, Wonderful Approaches," or Exporting "A Parasite Eating Its Host?"

Last week, an article in the Minneapolis Star-Tribune suggested that our US corporate health care giants think they are doing such a good job they want to export the "world's best health care system" …

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Here Comes Your New Doctor, Brought to You By UnitedHealth

A long time ago, practicing physicians were mainly self-employed solo practitioners. As health care became more bureaucratic, physicians formed group practices as partnerships, which sometimes employed additional junior or part-time physicians. Some physicians worked for non-profit practice foundations, often affiliated with academic medical institutions, sometimes with non-profit physician-run health insurers, like some Kaiser plans. However, traditionally, almost no practicing physicians were employed by for-profit corporations. In fact, until about 30 years ago, it was considered unethical for physicians' practices to be "commercialized, or treated like a commodity in trade." (See posts <a href="http://hcrenewal.blogspot.com/2007/12/relman-in-jama-on-threats-to-physicians.html">here</a> and <a href="http://hcrenewal.blogspot.com/2009/06/why-did-us-physicians-give-up-their.html">here</a>.)<br /><br />That is all changing, and apparently quickly.<br /><br />We recently <a href="http://hcrenewal.blogspot.com/2010/03/now-private-equity-jumps-into-health.html">discussed</a> how a private equity company, Cerberus Capital Management, bought out a formerly non-profit hospital system, Caritas Christi, and its associated physicians' practices. Thus, what were formerly Caritas Christi physicians ended up employed by for-profit Steward Health Care, owned entirely by Cerberus (see <a href="http://hcrenewal.blogspot.com/2011/02/new-steward-health-care-will-superbowl.html">this post</a>). <br /><br /><strong>For-Profit Health Insurance Companies Hiring Physicians to Take Care of Their Patients</strong><br /><br />Not it is commercial health insurance companies rushing to hire physicians, as <a href="http://www.washingtonpost.com/insurers-quietly-gaining-control-of-doctors-covered-by-companies-plans/2011/06/29/AG5DNftH_story.html">reported</a> by the Washington Post and Kaiser Health News:<br /><blockquote>United health services wing is <em>quietly gaining control of doctors who treat patients covered by United plans — buying medical groups and launching physician management companies</em>, for example.<br /><br />It’s the latest sign that the barrier between companies that provide health coverage and those that provide care is crumbling. <br /><br /><em>Other large insurers, including Humana and WellPoint, have announced deals involving doctors</em> in recent months, part of a strategy to curb rising health costs that could cut into profits and to weather changes to their business arising from the federal health law. But United is the biggest insurer by revenue, making the trend much more significant. </blockquote><br />As they are supposed to do, the reporter clearly included both sides of the story, including how UnitedHealth justified its new business strategy:<br /><blockquote>Employers and other customers 'are saying, I want more value for the dollars I spend in health care,' said Dawn Owens, chief executive officer of OptumHealth, United’s health services subsidiary. But, 'there’s also a realization that the delivery system isn’t ready for that kind of change. That’s where we come in.'<br /><br />The tools needed to control costs and improve care are things insurers have 'invested in over the years,' she said. 'The provider community doesn’t have those tools.'</blockquote><br />The article even got a UnitedHealth board member to provide a somewhat confusing defense of the new practice:<br /><blockquote>Gail Wilensky, a United board member and health official in President George H.W. Bush’s administration, said the insurer doesn’t seek to control every doctor who sees patients enrolled in its health plans. Typically, insurers contract with doctors to care for their policyholders. She also cautioned the strategy is in the early stages and has not yet proven its success.<br /><br />'It’s just trying many different ways to see what appeals to the American public and what adds value,' she said. 'Whether it will actually mark the trend of the future, I don’t know.'</blockquote><strong>"Incentivizing" Doctors to Do Less</strong><br /><br />At least the WaPo/ Kaiser Health News story cautiously tip-toed up to the obvious potential downside of commercial health insurers employing doctors to see patients, the issue of whose interests such employed physicians might put first:<br /><blockquote>Many patients insured by these companies are going to see <em>much tighter management of their care.</em><br /><br />'Health-care costs are still going to rise,' said Wayne DeVeydt, chief financial officer of WellPoint, which entered the business of running clinics in June with the announcement that it would acquire CareMore, a health plan operator based near Los Angeles that owns 26 clinics. 'But the only way to stem those costs in the long term is to <em>manage care on the front end</em>.'<br /><br />That means enlisting doctors. Their orders drive most health-care spending, including the wasteful share: treating heart patients with expensive stents when cheaper drugs might work, or overusing high-tech imaging devices, for example. <em><strong>By managing doctors directly, insurers believe they can reshape the practice of medicine — and protect their profits</strong></em>.<br /><br />For instance, Cigna, another large insurer, saves 9 percent on patients treated by doctors in a Phoenix medical group it controls, said Stephanie Gorman, president of Cigna Arizona. Cigna has expanded the group over the past 18 months in response to the health law, and it now serves patients at 32 locations.<br /><br />'The doctors, at the end of the day, control the patients, and currently they’re financially incentivized to do more tests, more procedures,' said Chris Rigg, a Wall Street analyst for Susquehanna Financial Group. 'But,<em> if they’re employed by a managed care company, <strong>they’re financially incentivized' to do less</strong>.</em><br /><br />That thought unnerves consumer advocate Anthony Wright of Health Access in Sacramento, who <em>worries that profit pressure could affect care</em>. But Wright also said there may be upsides to more tightly managed care: 'No patient wants to get more procedures than they actually need.'</blockquote><strong>How Doing Less Can Harm Patients</strong><br /><br />Let us look at that from a different angle. Commercial insurance companies increase revenue when they decrease their "medical losses," that is, the money they pay for policy-holders' care. Physicians employed by such companies, but who take care of patients who may be those companies' policy-holders, could be "'incentivized' to do less." That is more than "unnerving."<br /><br />It is widely accepted that many patients get tests and treatments whose benefits do not outweigh their harms, and the costs of such interventions increase the costs of health care while doing patients no good, and perhaps harm. If we could eliminate those unneeded tests and treatments, we could decrease costs and improve patients' outcomes.<br /><br />Yet another important driver of health care costs are tests and treatments whose benefits outweigh their costs, but which are priced much higher than could be justified by their benefit/harm ratio. It could also be that many tests and treatment are priced fairly.<br /><br />So "incentivizing" physicians to do less across the board could very well harm patients by depriving them of interventions whose benefits outweigh their harms. It appears that for-profit insurers who hire physicians are likely to place their physician employees in a situation in which incentives to do less may conflict with the physicians' duties to do what is best for each patient. <br /><br />That is more than unnerving. <br /><br /><strong>Hiding Physicians' Commercial Employment</strong><br /><br />That this new sort of employment requires much more scrutiny very quickly is also suggested by how the commercial health insurance companies are trying to hide their new relationships with physicians. As reported in the article, UnitedHealth Group's subsidiary:<br /><blockquote>Optum and its Collaborative Care unit have acquired Memorial Healthcare IPA and AppleCare Medical Management in Orange County, Calif., as well as WellMed Medical Management, which runs clinics in Texas and Florida. Collaborative Care also launched Lifeprint in Phoenix.<br /><br />In some cases, <em>the company obscured its role</em>. For instance, a Collaborative Care business, NextDoor Health, which is partnering with a local doctors group to open retail clinics at Wal-Mart stores in Texas and other states, describes itself on its Web site as 'a privately held LLC based in Minneapolis.' United is based just outside of Minneapolis.</blockquote><strong>The Mirror Image: "Leakage Reduction"</strong><br /><br />Note that the essential conflict caused by a doctor hired to take care of patients by a company that profits from decreasing care across the board is the mirror image of the conflict caused by a doctor hired by a for-profit hospital system. In the latter case, the doctor is hired by a company which profits from increasing those services which are particularly well reimbursed. So we <a href="http://hcrenewal.blogspot.com/2011/02/new-steward-health-care-will-superbowl.html">noted previously </a>that doctors hired by the for-profit Steward Health Care system were being pushed to reduce "leakage," that is, referral of patients outside of the system for well-reimbursed services. "Leakage reduction" could also harm patients, although in a more subtle way, perhaps. Doctors incentivized to refer more patients within the system for well-reimbursed services, which are now mostly invasive procedures and high-technology tests may get patients to undergo interventions which are unnecessary, and sometimes whose harms outweigh their benefits, thus leading to adverse effects without any benefits. <br /><br /><strong>Summary</strong><br /><br />So in my humble opinion, the sudden rush of for-profit health care companies to hire doctors to take care of patients ought concern patients, health care professionals, and health care policy makers a lot. Physicians employed by for-profit corporations whose revenues are affected by their own decisions have serious conflicts of interest. <br /><br />Just how bad these conflicts are may be difficult to determine, because there seems to be little public knowledge about how physicians are actually "incentivized" by these corporations. Note that the WaPo article never discussed the details of the incentives the insurance companies imposed on their employed physicians. Note also that our previous discussion of "leakage" reduction was not based on any public knowledge about how the employed physicians might have been influenced to reduce leakage. <br /><br />Also, just how frequent these conflicts may be may also be difficult to determine, because it appears that employed physicians do not always reveal who their employers are.<br /><br /><strong>What is To Be Done? </strong><br /><br />I strongly suggest that <br /><br />Patients:<br />- Find out if their physicians are employed, and if so, by whom.<br />- Find out what incentives their physicians have, if employed, to recommend more or less care of certain types.<br />-  Find out whether other aspects of the physicians' employment arrangements, e.g., contractual confidentiality clauses, could affect his or her relationships with patients<br />- Avoid doctors employed by for-profit companies who have incentives to provide more or less care than what may be best for the patient<br /><br />Physicians:<br />- Do not accept any employment offer or contract which has incentives to provide more or less care than is best for individual patients<br />- Who are already employed disclose to their patients such employment, and any incentives it may provide to provide more or less care<br /><br />Policy-makers:<br />- Rapidly investigate the extent that for-profit companies whose revenues depend on physicians' decisions are hiring physicians to take care of patients, and the incentives and influences that these companies use to affect physicians' decisions<br />- Develop regulations that force disclosure of all such employment and relevant incentives and influences<br />- Consider whether such "commercial practice of medicine" ought to be once again banned.

Here Comes Your New Doctor, Brought to You By UnitedHealth

A long time ago, practicing physicians were mainly self-employed solo practitioners. As health care became more bureaucratic, physicians formed group practices as partnerships, which sometimes employe…

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Big Door Keeps On Turning - Bi-Directional Interchanges Among Government and Corporate Health Care Leadership

Recently we noted some complex examples of the health care "revolving door," cases of health care corporate leaders who came from government heading back into government.  The first was <a href="http://www.politico.com/news/stories/0111/47922.html">reported</a> by Politico:<br /><blockquote><em>California Rep. Mary Bono Mack has hired PhRMA’s former chief spokesman as a senior adviser</em>, adding another Republican lawmaker to the list of those who have recruited staff members with K Street ties.<br /><br />Ken Johnson will serve as a senior policy and communications adviser to Bono Mack, chairwoman of a House Energy and Commerce subcommittee. <em>Johnson has deep ties to the committee, having worked for former Republican Rep. Billy Tauzin</em> when he headed the Energy and Commerce Committee.<br /><br /><em>When PhRMA hired Tauzin months after the Louisiana congressman helped pass the industry-supported Medicare drug benefit, Johnson followed</em>. So it was not surprising that Johnson did not stay on with PhRMA last year after Tauzin stepped down.<br /><br />In 2009, Tauzin made more than $4.5 million and Johnson pulled in more than $500,000, according to tax records.</blockquote>Note that Mr Johnson went from an influential government position to a position representing the pharmaceutical industry, and then back to government<br />In the same vein and in the same article was:<br /><blockquote><em>House Speaker John Boehner hired the medical device industry’s chief lobbyist as his policy director.</em></blockquote><br />Meanwhile, the Minneapolis Star-Tribune <a href="http://www.startribune.com/local/114648204.html">noted</a>:<br /><blockquote><em>Minnesota health executive Lois Quam has signed to lead the multibillion dollar Global Health Initiative at the U.S. State Department</em>.<br /><br />A State Department spokesman confirmed Wednesday that Quam will be executive director of the initiative.<br /><br />In 2009, President Barack Obama committed $63 billion over six years to the program aimed at helping developing nations fight disease, improve nutrition and provide more aid for prenatal and postnatal care.<br /><br /><em>Quam, of St. Paul, is a former UnitedHealth Group executive who co-founded a health consulting firm last year</em>. She is married to Matt Entenza, a former state lawmaker who ran unsuccessfully for governor in 2010.<br /><br />The appointment <em>reunites Quam with Secretary of State Hillary Clinton. Quam was a senior adviser to Clinton's health care task force in the 1990s</em>.</blockquote><br />Note that Ms Quam went from government leadership (in the Clinton administration's abortive attempt at health care reform via an elaborate version of managed care), to corporate leadership (in one of the largest commercial managed care organizations, some of whose exploits are discussed <a href="http://hcrenewal.blogspot.com/search/label/UnitedHealth">here</a>), then back to government (now leading global health.  As an aside, UnitedHealth has been developing its global presence for years, e.g., see <a href="http://hcrenewal.blogspot.com/2006/06/in-uk-large-corporations-awarded.html">this post</a> about its forays into the UK.)<br /><br />We last discussed the "revolving door," that is, the easy interchange among leadership in government and health care corporations <a href="http://hcrenewal.blogspot.com/2010/12/former-nih-director-spins-trhough.html">here</a>.  The brief news items above shows how the door spins continuously, resulting not only in former government leaders ending up in influential, and well-recompensed positions in the health care industry, but also in industry leaders ending up in influential government positions.  In two cases above, people who started out in influential government positions transitioned to health care corporate positions, and then back to government.  <br /><br />As we noted earlier, the continually revolving door is a sign of the increasingly <a href="http://hcrenewal.blogspot.com/search/label/corporatism">corporatist</a> nature of the US.  Government and the biggest corporations now seem to see themselves as natural allies, partially because their leadership increasingly forms a cozy combined group.  The big problem, of course, is such an alliance leaves out everybody else, from small business, to individual professionals, to the people at large.  <br /><br />As I noted earlier, if we want health care to put the needs of individual patients first, we ought to consider ways to make both government and corporate health care leaders more responsive to the people rather than to their combined self-interest. 

Big Door Keeps On Turning - Bi-Directional Interchanges Among Government and Corporate Health Care Leadership

Recently we noted some complex examples of the health care "revolving door," cases of health care corporate leaders who came from government heading back into government.  The first was reported by Po…

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Can a $1 Billion Group of Babies Provide Fair Value in Health Care?

The issue of executive compensation in health care seems to be attracting more media attention.<br /><br />A St Louis Post-Dispatch <a href="http://www.stltoday.com/news/opinion/columns/the-platform/article_7c8df848-aca4-11df-9b5b-0017a4a78c22.html">editorial</a> noted how executive compensation for for-profit health insurance CEOs has grown. It started with a quote from Steven Hemsley, the CEO of UnitedHealth:<br /><blockquote>Today the American people are <em>questioning whether or not we receive fair value for the $2.6 trillion we, as a society, are expecting to spend this year on our health care system</em>. The vast majority, including those of us at UnitedHealth Group, believe the answer is, 'No.'</blockquote><br />Here is a summary of the compensation information:<br /><blockquote>Modern Healthcare, a leading health industry trade journal, published its annual executive compensation survey this week. <em>Topping the list is Stephen Hemsley, quoted above</em>, who gave a speech to the Detroit Economic Club last year questioning the value Americans receive for all that health spending. [Note: We discussed Hemsley's compensation <a href="http://hcrenewal.blogspot.com/2010/06/how-can-101-million-year-ceo-help.html">here</a>.]<br /><br /><em>His take for 2009: <strong>$106 million</strong> — $7.5 million in salary and benefits and $98.5 million in stock options</em>.<br /><br />Mr. Hemsley is not alone. The CEOs at insurance giants Cigna, Humana, Aetna, Coventry Health Systems and WellPoint <em>all took home between $10 million and about $18 million</em>. Many of those companies already have announced double-digit premium increases for next year.<br /><br />In all, <em>the CEOs of America’s 10 largest health insurance companies made $228.1 million in salary and stock options during 2009</em>, according to the liberal advocacy group Health Care For America Now. (That's enough to buy health insurance for at least 47,284 people, based on figured cited in this Kaiser Family Foundation survey on average premiums.)<br /><br /><em>Since 2000, those CEOs have received <strong>slightly less than $1 billion</strong> in compensation</em>, the group said.</blockquote><br />As an aside, the article noted how the compensation received by CEOs of the larger US health care corporations of all types, not just health insurance companies, has grown:<br /><blockquote>Researchers analyzed pay and benefits for 342 CEOs of corporations in the Standard & Poor’s 500 index.<br /><br />They found that <em>health care CEOs received an average compensation of <strong>$10.5 million</strong> last year</em>. That’s 40 percent more than the average for all S&P 500 companies — 77 percent higher than chief executives at financial services companies.</blockquote><br />Even the CEOs of not-for-profit hospital systems have become million dollar babies:<br /><blockquote>Last year, <em>the average compensation for hospital system CEOs was <strong>$1 million</strong></em>. That’s enough to hire five new primary care doctors.</blockquote><br />However, the editorial was a bit vague about why paying CEOs of health care organizations so much was a bad idea, although it did imply that it was unseemly given that much of health care is funded by government programs, and not-for-profit health care organizations receive tax breaks that give "the public an even larger stake in their efficient operation"<br /><br />In my humble opinion, there are other big problems with the massive compensation that hired managers of health care organizations now command.<br /><br />Paying them so much instantly vaults them into the upper class, and the CEOs of larger health care corporations now live a life style more reminiscent of aristocracy than of that of the patients who depend on them. Such riches isolate those who receive them in their own bubbles. Can one really expect a million, or ten million, or hundred million dollar CEO to really care about the health of individual patients?<br /><br />Furthermore, paying them so much, usually regardless of their performance, their companies' performance, or the health effects of their products and services gives them perverse incentives to maintain their position at any cost, even at the cost of the patients they are supposed to serve.<br /><br />So, we do not receive "fair value for the $2.6 trillion we, as a society, are expecting to spend on our health care system." But we cannot really expect a billion dollar group of babies to fix that.<br /><br />True health care reform would decrease perverse incentives throughout the systems, spread the power in organizations more broadly, and make leaders accountable.

Can a $1 Billion Group of Babies Provide Fair Value in Health Care?

The issue of executive compensation in health care seems to be attracting more media attention.A St Louis Post-Dispatch editorial noted how executive compensation for for-profit health insurance CEOs …

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Despite Scandal, Former UnitedHealth CEO was Ninth Best Paid CEO of the Decade

A little while ago, the Wall Street Journal <a href="http://online.wsj.com/article/SB10001424052748703724104575379680484726298.html">reported</a> on the highest paid US corporate CEOs of the past decade.  One name stood out for those interested in  health care: Dr William W McGuire, the former CEO of giant health care insurance company/ managed care organization UnitedHealth Group.  Dr McGuire was number 9 on the <a href="http://online.wsj.com/public/resources/documents/st_execpay1007_20100725.html">list</a>, with a total realized compensation of $469,300,000.  <br /><br />We started <a href="http://hcrenewal.blogspot.com/2005/05/how-can-1248-million-year-ceo-make.html">discussing</a> the disconnect between Dr McGuire's corpulent pay and his company's failure to uphold its stated ideals back in 2005, when he was reported to have received more than $124 million to lead a company which championed "affordable" health care.  Later, it turned out that much of Dr McGuire's compensation came in the form of back-dated stock-options, and the resulting <a href="http://hcrenewal.blogspot.com/2006/08/more-entangled-web-unitedhealth-case.html">scandal</a> was followed by his <a href="http://hcrenewal.blogspot.com/2006/10/another-really-big-one-bites-dust-ceo.html">resignation</a>.  Later, Dr McGuire was forced to <a href="http://hcrenewal.blogspot.com/2007/12/some-payback-by-former-managed-care-ceo.html">give back</a> some the options.  The <a href="http://hcrenewal.blogspot.com/2009/08/final-settlement-of-unitedhealth.html">final settlement</a> of the fiasco cost UnitedHealth $895 million, and Dr McGuire $30 million and the cancellation of 3.6 million stock options. <br /><br />Meanwhile, UnitedHealth was compiling an unenviable record of ethical lapses:<br /><ul><li>as <a href="http://www.courant.com/business/hc-natbizdigbrf0530.art2may30,0,109447.story">reported</a> by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."</li><li>UnitedHalth promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post <a href="http://hcrenewal.blogspot.com/2008/05/commercial-managed-care-organizations.html">here</a>);</li><li>UnitedHealth's acquisition of Pacificare in California allegedly lead to a "meltdown" of its claims paying mechanisms (see post <a href="http://hcrenewal.blogspot.com/2008/01/bungled-not-brilliant-results-of.html">here</a>);</li><li>UnitedHealth's acquisition of Sierra Health Services allegedly gave it a monopoly in Utah, while the company allegedly was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post <a href="http://hcrenewal.blogspot.com/2007/03/unitedhealth-declares-health-care.html">here</a>)</li><li>UnitedHealth frequently violated Nebraska insurance laws (see post <a href="http://hcrenewal.blogspot.com/2007/01/on-performance-on-one-supposedly.html">here</a>);</li><li>UnitedHealth settled charges that its Ingenix subsidiaries manipulation of data lead to underpaying patients who received out-of-network care (see post <a href="http://hcrenewal.blogspot.com/2009/01/unitedhealth-and-ingenix-settles.html">here</a>).</li></ul>At the same time, UnitedHealth continues to <a href="http://www.unitedhealthgroup.com/AboutUs/MissionAndValues.aspx">boast</a> that:<br /><br /><blockquote>Our mission is to help people live healthier lives.<br /><br />* We seek to <em>enhance the performance</em> of the health system and improve the overall health and well-being of the people we serve and their communities.<br />* We work with health care professionals and other key partners to <em>expand access</em> to quality health care so people get the care they need at an affordable price.<br />* We support the physician/patient relationship and <em>empower people</em> with the information, guidance and tools they need to make personal health choices and decisions.</blockquote><br />Dr McGuire certainly expanded his access to money, which doubtless empowered him.    <br /><br />And as we noted <a href="http://hcrenewal.blogspot.com/2010/04/what-me-worry-redux-another-leader.html">here</a>, his successor, Mr Stephen J Helmsley, seems to be going down the same path.  In 2009 his total compensation was $8.9 million, and he sold stock options obtained from previous compensation packages for $98.6 million.  Mr Helmsley was a top leader (President and Chief Operating Officer [COO]) of UnitedHealth during Dr McGuire's reign as CEO, so should be viewed as having some responsibility for the excesses of the McGuire years.<br /><br />Despite recent attempts to reform health care, or at least health insurance, it seems that the health insurance industry still leads the way in providing its leaders perverse incentives while failing to hold them accountable for their organizations' unethical behavior and subversion of their stated missions.  Is it any wonder that these organizations continue to act unethically, and that the costs of the goods and services they provide rise continuously?<br /><br /><br />If we truly want health care that is accessible, of high quality, at a fair price, and more importantly, if we want health care that is honest and focused on patients, we need to provide health care leaders with clear, rational incentives in these directions, and make them fully accountable for their actions, and the courses of their organizations under their leadership.

Despite Scandal, Former UnitedHealth CEO was Ninth Best Paid CEO of the Decade

A little while ago, the Wall Street Journal reported on the highest paid US corporate CEOs of the past decade.  One name stood out for those interested in  health care: Dr William W McGuire, the forme…

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How Can a $101 Million a Year CEO Help "People Get the Care They Need at an Affordable Price?"

In 2005, we entitled a post, <a href="http://hcrenewal.blogspot.com/2005/05/how-can-1248-million-year-ceo-make.html">"How Can a $124.8 Million a Year CEO Make Health Care More Affordable?"</a>  At that time, we contrasted the enormous compensation given to the then CEO of UnitedHealth, Dr William McGuire, with the stated mission of his corporation.  Since then, we have traced the travails of UnitedHealth and its leadership.  Dr McGuire was eventually accused of receiving backdated stock options (which at one time raised his personal fortune to over $1 billion), and was pushed into retirement.  UnitedHealth was accused of a variety of management and ethical lapses.  The rather sorry story as of April, 2010 was summarized <a href="http://hcrenewal.blogspot.com/2010/04/what-me-worry-redux-another-leader.html">here</a>.<br /><br />The more things change, the more they stay the same.  The Minneapolis Star-Tribune just<a href="http://www.startribune.com/business/97179209.html"> reported</a>:<br /><blockquote>Stephen Hemsley, a serious and studious man, is known for his marathon-like work schedule, which regularly includes Saturdays and Sundays, in his role as chief executive of Minnetonka-based UnitedHealth Group.<br /><br />Now, he also is known as the highest-paid CEO in Minnesota with <em>a 2009 pay package totaling <strong>$101.96 million</strong>,</em> six times the amount paid to the next CEO in the Star Tribune's annual survey of the state's 100 highest-paid chief executives at publicly traded companies.<br /><br />But Hemsley's big pay package is also a vestige of the company's former practice of loading executive compensation heavily with stock options, a practice that changed in the wake of a crippling backdating scandal four years ago.<br /><br />Those options, granted under a different regime of board directors, accounted for $98.6 million of Hemsley's income in 2009.</blockquote><br />The attempts company officials made to minimize Hemsley's outsized compensation were almost funny:<br /><blockquote>UnitedHealth officials assert that Hemsley's 2009 pay package minus the 10-year-old options was $8.9 million, far less than the compensation paid to CEOs in other health insurance organizations.</blockquote><br />But Hemsley did exercise the options, so he did receive the additional $98.6 million. <br /><br />Hemsley also seems on target to get gargantuan compensation this year too:<br /><blockquote>Nonetheless, Hemsley has already put up good compensation numbers for 2010 with the <em>exercising of additional options granted after 1999 worth <strong>$21 million</strong></em>. He also controls 6 million exercisable and unexercisable options, half of which are underwater or below the stock's current value.</blockquote><br />The cringe-inducing contrast is with UnitedHealth's high-minded mission statement:<br /><blockquote>Our mission is to help people live healthier lives.<br /><br />* We seek to enhance the performance of the health system and improve the overall health and well-being of the people we serve and their communities.<br />* We work with health care professionals and other key partners to expand access to quality health care <em><strong>so people get the care they need at an affordable price</strong></em>.<br />* We support the physician/patient relationship and empower people with the information, guidance and tools they need to make personal health choices and decisions.</blockquote><br />Hemsley's compensation could have provided "care they need" to quite a few people at an affordable price. <br /><br />More to the point, it is hard to imagine that a company that feels the need to pay so much to its CEO, and a CEO that can accept such riches, have the slightest understanding or interest in providing people "the care they need at an affordable price." <br /><br />In this cynical age, I doubt many people credit the UnitedHealth mission statement with being more than advertising fluff. Nonetheless, I suspect most people believe that our society should try to provide as many people as possible with "the care they need at an affordable price," but realize that we are far from doing so. Health care insurance companies/ managed care organizations that see fit to make their hired leaders extremely rich seem to be part of the problem, not the solution.

How Can a $101 Million a Year CEO Help "People Get the Care They Need at an Affordable Price?"

In 2005, we entitled a post, "How Can a $124.8 Million a Year CEO Make Health Care More Affordable?"  At that time, we contrasted the enormous compensation given to the then CEO of UnitedHealth, Dr Wi…

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Corporate Proxies Suggest CEOs Rewarded for Influencing Health Care Reform

We have frequently <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">discussed</a> the often outsized, if not outrageous compensation awarded to top leaders of health care organizations.  Such compensation may seem disproportionate to the leaders' real-world achievements, and may contrast with organizational actions that seem inept, mission-hostile, or unethical.<br /><br />In perusing this year's crop of proxy statements from some of the biggest US health care corporations, I noted that some provide some narrative, qualitative justification for their top leaders pay.  I was struck by three similar statements:<br /><br /><strong>Johnson and Johnson</strong><br /><br />We recently <a href="http://hcrenewal.blogspot.com/2010/05/19-million-means-never-having-to-say.html">discussed</a> the contrast between Johnson and Johnson CEO William Weldon's gargantuan compensation and his detached response to the findings of an inspection of one of his company's factories that lead to its shutdown and the recall of its products.   According to the company's <a href="http://files.shareholder.com/downloads/JNJ/895865678x0xS950123-10-25426/200406/filing.pdf">2010 proxy statement</a>, Mr Weldon's total compensation approved  in 2010 was $19,847,026.   The proxy statement included this overview of his performance:<br /><blockquote>The Board believes that Mr. Weldon generally exceeded expectations despite substantial economic, political, regulatory and competitive challenges as well as significant patent expirations. As referenced in the table above, the Company delivered solid financial results and positioned itself for future growth.</blockquote><br />Under "strategic results" was this statement:<br /><blockquote>Mr. Weldon played an <em><strong>effective role in helping shape health care policy</strong></em> around the world and has been<em><strong> very involved with efforts on U.S. Health Care Reform</strong></em>. <em><strong>Mr. Weldon’s personal involvement with key leaders and organizations has ensured the interests of the Company are well represented.</strong></em></blockquote><br /><strong>Pfizer</strong><br /><br />We recently <a href="http://hcrenewal.blogspot.com/2010/04/pfizer-settles-one-lawsuit-loses.html">discussed</a> the contrast between Pfizer Inc CEO Jeffrey Kindler's sizable compensation and the number and size of lawsuits alleging unethical conduct that the organization has settled, and its criminal conviction as a "racketeering influenced and corrupt organization" (RICO). According to the company's 2010 proxy statement, Mr Kindler's total compensation in 2009 was $14,898,038. The proxy statement included an Executive Compensation Discussion and Analysis. Its summary of Mr Kindler's performance was:<br /><blockquote>The committee believes that Mr Kindler's leadership was a significant factor in the continued progress made by Pfizer in 2009 in strengthening the foundation for future growth and long-term success.</blockquote><br />It also specifically addressed Mr Kindler's "industry leadership":<br /><blockquote>During 2009, <em><strong>Mr Kindler was actively involved</strong></em>, through both Pfizer and external organizations, in <em><strong>developing and advancing US and global public policies that serve the overall interest of our Company and our shareholders</strong></em>, as well as doctors and patients. These efforts included <em><strong>constructive participation in the US legislative process to advance Pfizer's goals of achieving a more rational operating environment</strong></em>....</blockquote><br /><br /><strong>UnitedHealth Group</strong><br /><br />We recently <a href="http://hcrenewal.blogspot.com/2010/04/what-me-worry-redux-another-leader.html">discussed</a> the contrast between UnitedHealth Group CEO Stephen J Helmsley's large total compensation and the profit he recently made from the sale of stock options and various questions raised about his company's ethical performance.  According to the company's <a href="http://www.sec.gov/Archives/edgar/data/731766/000119312510083028/ddef14a.htm#toc14068_20">2010 proxy statement</a>, his 2009 total compensation was $8,901,916. The company's 2010 proxy statement stated his compensation was based upon a variety of factors, including:<br /><blockquote><em><strong>Positive participation and leadership of the Company in the health care reform and modernization debate</strong></em></blockquote><br /><strong>Summary</strong><br /><br />We have noted how health care organization may be gripped by <a href="http://hcrenewal.blogspot.com/2009/12/compensation-madness-insiders-hijacking.html">"compensation madness,"</a> caused by "insiders hijacking established organizations for their personal benefit."  One could view the statements above as just one form of post-hoc justification for compensation madness.  It is possible that timid, if not crony boards are simply getting more inventive in their rationalizing CEOs' imperial pay scales.  On the other hand, those justifying the compensation of three extremely well-compensated health care corporate CEOs may really believe what they wrote about their CEOs roles in health care reform.  <br /><br />We have posted little about the US health care reform effort because so much of it seemed irrelevant to the concerns mentioned on Health Care Renewal.  Health care reform legislation did little to address problems with health care leadership, governance and ethics, and how they challenge health care professionals' values and lead to higher costs, declining access, poor health care quality and disgruntled health care professionals (see <a href="http://hcrenewal.blogspot.com/2010/03/health-care-reform-bill-and-health-care.html">this summary</a>).  Maybe one reason this was so was that the top leaders of health care organizations did a good job pushing their personal and organizational priorities into the reform legislation, meanwhile discouraging any provisions that might threaten the way they were leading their organizations, and how much they were making while doing so.  <br /><br />There a many reasons for the popular dissatisfaction with the recently enacted US health care reform legislation.  The influence of the leadership of top health care corporations in promoting their, rather than the populace's goals, ought to be a topic of further inquiry.  Meanwhile, it may be that the <a href="http://hcrenewal.blogspot.com/search/label/superclass">"superclass"</a> has struck again. 

Corporate Proxies Suggest CEOs Rewarded for Influencing Health Care Reform

We have frequently discussed the often outsized, if not outrageous compensation awarded to top leaders of health care organizations.  Such compensation may seem disproportionate to the leaders' real-w…

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