"Conspiracy Theory" Proven - Taking UCSF Private

Students and faculty at the University of California have come up with a vivid, and prescient example of how the hired executives and bureaucrats have taken over higher and health care education.  <br /><br /><strong>"Run in the Interests of the Administration"</strong><br /><br />Two weeks ago, the Orange County Register <a href="http://www.ocregister.com/news/faculty-334335-tuition-system.html">reported</a>:<br /><blockquote>Over the past few months, the University of California has <em>raised undergraduate tuition by 18 percent, awarded raises of as much as 23 percent to a dozen high-ranking administrators and announced a possible 81 percent tuition increase </em>over the next three years.<br /><br />Students haven't taken the news well.<br /><br />At campus rallies across the state, thousands of students and their faculty supporters have decried the actions, staging raucous rallies and 'Occupy'-style sit-ins that in some cases have ended in clashes with law enforcement. They've also descended en masse on UC regents' meetings, disrupting proceedings and even forcing officials to retreat to a private room.<br /><br />Behind the angry chanting and acts of civil disobedience is <em>a growing sense that the 10-campus UC system is no longer a public institution accessible to the middle class, but rather a sprawling bureaucracy of hospitals and auxiliary research institutions buffeted by an ever-expanding roster of administrators.</em><br /><br />The problem, as the student activists see it, is that <em>none of these functions translates directly into expanded course offerings or improved student-to-faculty ratios, even as their tuition dollars help sustain the system.</em><br /><br /><em><strong>'The university is now being run in the interest of the administration,'</strong></em> said UC Irvine student activist Anne Kelly, a Ph.D. candidate in earth system science. 'They're promoting their own internal growth, asking us to sacrifice with higher tuition – but administrators have had raises.'</blockquote><br />In higher education, as well as in health care education and in health care in general, the pattern is the same: rising costs without any obvious increase in quality or quantity of services. As in health care, however, the pain never seems to extend to administrators/ managers/ bureaucrats/ executives. Worse, as their numbers grow, these insiders seem to run organizations more for their own benefit, and less for the mission.<br /><br /><strong>One Manager Per Faculty Member </strong><br /><br />Furthermore, UC faculty have data:<br /><blockquote>The students' growing frustration is fueled by UC employment data that show that <em>almost three-fourths of UC's 152,500 employees last year were designated 'non-academic personnel,'</em> according to an annual UC employment report.<br /><br />In the report, UC characterizes the growth in its non-academic staff as the inevitable byproduct of 'an increasingly complex university system that 'requires greater professionalization of its staff, who must meet higher technical and competency standards.' Non-academic personnel includes everyone from custodians and food-service workers to accountants and plant operators. [The question begged is whether it was the managers and executives that caused this complexity - Ed.]<br /><br />UC Davis horticulture researcher Richard Evans, who has independently analyzed UC personnel data, offered a different take on the data, publishing a tongue-in-cheek piece for UC faculty in 2010 entitled <em>'Soon every faculty member will have a personal senior manager: Is this a good way to spend money?'</em><br /><br />'Data available from the UC Office of the President shows that there were <em>2.5 faculty members for each senior manager in the UC system in 1993,' Evans wrote in his piece. <strong>'Now there are as many senior managers as faculty.</strong> </em>Just think: Each professor could have his or her personal senior manager.'<br /><br />In his analysis, Evans compared the number of UC employees classified as either 'senior management' or 'managers and senior professionals' with the number of tenure-track UC faculty members.<br /><br />As of spring 2011, UC employed 8,144 senior managers, managers and senior professionals, and 8,521 tenure-track faculty members, according to the latest available UC data.</blockquote><br />This pattern is similar to that seen in some data we discussed a long time ago about the ever rising numbers of administrators/ managers/ bureaucrats/ executives in health care.  In 1988, Alain Enthoven advocated in <a href="http://www.amazon.com/gp/product/0444703594/102-6581115-0444916?n=283155">Theory and Practice of Managed Competition in Health Care Finance</a>, a book published in the Netherlands, that to decrease health care costs it would be necessary to break up the "physicians' guild" and replace leadership by clinicians with leadership by managers (see 2006 post <a href="http://hcrenewal.blogspot.com/2006/03/consequences-of-breaking-physicians.html">here</a>). Thus from 1983 to 2000, the number of managers working in the US health care system grew 726%, while the number of physicians grew 39%, so the manager/physician ratio went from roughly one to six to one to one (see 2005 post <a href="http://hcrenewal.blogspot.com/2005/04/growing-proliferation-of-managers.html">here</a>). Health care went from being controlled by clinicians to controlled by a growing volume of managers.  Most of these managers were generic, in that they had little if any knowledge of, experience in, or sympathy to the values of health care. These generic managers have used the same techniques advocated for the management of supermarkets or automobile manufacturers to manage health care organizations, despite all the obvious differences in context, goals, values, and people involved. <br /><br /><strong>A "Conspiracy Theory" About the Privatization of the University</strong><br /><br />At the University of California, the Register reported that there is a "conspiracy theory" about the next step to increase the domination of the managers:<br /><blockquote><em>The salaries and size of UC's administrative staff, in particular, have fueled <strong>conspiracy theories among students and faculty that the system has deliberately sought to 'privatize'</strong> <strong>itself</strong></em> – in other words, to compete with private universities on all fronts, from the scope of its non-instructional programs to executive compensation to the amount of tuition that students pay.<br /><br />Three years ago, the head of a UC faculty group advanced the privatization theory in a multi-part series called 'They Pledged Your Tuition.'</blockquote><br />Of course, the administrators denied, sort of, anything so far-fetched:<br /><blockquote>For its part, <em>UC denies all such allegations</em>, saying that while the university has arguably become privatized, outside influences beyond its control are entirely to blame.<br /><br />"It is not something we advocate, not something we want,' Klein said. But, 'he added, 'times have changed; the economic model has changed.'</blockquote><br /><strong>Not Just a "Conspiracy Theory" - UCSF Chancellor Advocates Privatization </strong><br /><br />It only took two weeks, however, for the notion of administrators taking the university private to go from "conspiracy theory" to official plan. Yesterday, the San Francisco Chronicle <a href="http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/01/19/MNF11MR2KE.DTL">reported</a>,<br /><blockquote>UCSF Chancellor Susan Desmond-Hellmann told the regents, delicately, that <em><strong>she wants out</strong></em>.<br /><br />Under her proposal, UCSF's medical school, hospital, clinics and research facilities would remain a public university connected to UC, the chancellor assured the regents. But <em>the tendrils connecting the two entities should be thinner than they are today.</em><br /><br />Desmond-Hellmann said she envisions a relationship like those of UC Hastings College of the Law, Lawrence Livermore National Laboratory and Lawrence Berkeley National Laboratory, which contract with UC for health and pension services. While ultimately accountable to the regents, <em>they are autonomous with their own boards of directors</em>.<br /><br /><em>Referring to 'alternative governance models'</em> and 'examining UCSF's financial relationship with UC,' <em>the chancellor and campus executives talked of their ambition to become the world's leading innovator in the health field - a goal better achieved, they hinted, <strong>without the rest of the university weighing it down</strong></em><strong>.</strong></blockquote><br />To <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a> readers, that UCSF would be proposed as the first part of the University of California to privatize should not come as a shock. After all, Chancellor Desmond Hellmann came not from academia, but from the world of for-profit biotechnology. She was a former president for drug development for Genentech. <br /><br />Two and one half years ago I <a href="http://hcrenewal.blogspot.com/2009/05/bio-tech-u.html">suggested</a> that "hiring a lavishly compensated top executive from a biotech firm known for its high drug prices to run a public health sciences university <em>does considerably blur the line between academic medicine and the health care industry</em>." Furthermore, three months ago I <a href="http://hcrenewal.blogspot.com/2011/10/logical-fallacies-to-support-putting.html">noted</a> that Dr Desmond Hellmann seemed be advocating that the university's focus turn to product development, so that it would start to emulate a contract research organization. Now it appears that Dr Desmond Hellmann wants to traverse the line between government and the private sector, so that the organization could "make a ton of money," and "focus on spinning innovations into business deals," according to the San Francisco Chronicle.<br /><br />What any of this has to do with the university's fundamental mission to discover and disseminate knowledge, and with this health care university's mission to take the best possible care of its patients is not clear. <br /><br /><strong>Summary</strong><br /><br />Turning UCSF into a private, quasi contract research organization might conceivably yield some good research and drug development. Why a formerly academic organization would be better at this than a purpose-built CRO is hardly proven. Whether UCSF recast as a CRO would yield better research, leading to better patient outcomes than would have resulted if it continued as a state government sponsored health care university is also hardly proven.<br /><br />Turning UCSF into a quasi CRO, however, would likely be very much in the self-interest of its administrators/ managers/ bureaucrats/ executives who would be freed from any constraints on their incomes, and the disclosure of same that were previously obligated by the messy representative democracy to which they formerly had to answer. <br /><br />On the other hand, it is hard to conceive of how such a privatization would be good for students or patients. In fact, it is not the least bit clear why a medical, nursing, or other health professional student would want to study within what would basically be a contract research organization. It is also unclear whether patients seeking care from such an organization could trust it to put their interests, rather than the organization's revenue and the self-interest of its administrators/ managers/ bureaucrats/ executives first.<br /><br />We are now a good 30+ years into our ill-fated American experiment about the effects of turning medicine commercial and making health care a commodity. So far, it has yielded the highest costs in the world, but declining access, mediocre quality, and demoralized professionals. Turning one of our once proud and  prestigious state government sponsored academic medical institutions into a private contract research organization would be a powerful symbol of our final national health care decline. <br /><br />Let us hope that the students and faculty whose "conspiracy theory" about privatization proved true will now mount a more effective protest before UCSF falls into the muck.

"Conspiracy Theory" Proven - Taking UCSF Private

Students and faculty at the University of California have come up with a vivid, and prescient example of how the hired executives and bureau...

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More Repeats of Talking Points Supporting Making Non-Profit Hospital CEOs Into Millionaires

I have found even more cases of non-profit hospital leaders for whose generous compensation the only support was the usual talking points, without clear evidence on their behalf, and despite obvious concerns based on publicly available data.  In chronological order,<br /><br /><strong>Wellstar</strong><br /><br />After the firing of its last CEO was later justified by contentions of misconduct and a "special relationship," but countered by accusations of insiders' financial "improprieties," (see <a href="http://www.ajc.com/news/health-care/execs-firings-rankle-wellstar-923660.html">this story</a> in the Atlanta Journal Constitution), Wellstar, a non-profit hospital system in Georgia, hired a new CEO, Reynold C Jennings, for hefty price, <a href="http://cherokeetribune.com/view/full_story/15144876/article-New-WellStar-CEO%E2%80%88to-earn--975K-in-base-pay?instance=home_news_bullets">per the Cherokee Tribune</a>,<br /><blockquote>He received a five-year contract composed of an initial term of three years and two one-year renewal options.<br /><br />The contract pays an <em>annual base salary of<strong> $975,000</strong>, in addition to a bonus that could range from 35 to 65 percent of his annual salary</em>, depending on his performance, [board of trustees chair Randall] Bentley said.<br /><br />By comparison, Bentley said WellStar’s last CEO, Dr. Greg Simone, earned a base salary last year of $900,000.<br /><br />Other benefits included in Jennings’ contract are:<br />Thirty annual paid vacation days, in addition to six holidays.<br />Payment for time lost from a serious health condition with proper medical certification.<br />Annual automobile allowance: <em>$12,000</em>.<br />Annual cell phone allowance: <em>$2,400</em>.<br />Annual physical exam allowance: <em>$800</em>.<br />Annual financial planning/tax preparation services: <em>$3,000</em>.<br />Because Jennings has existing medical and dental coverage and did not want to participate in the benefits plan offered by WellStar, WellStar will also pay him an <em>annual $12,000 allowance</em> for this reason.<br /><br />The contract also provides for life insurance, a retirement savings plan and long-term disability benefits.</blockquote><br />His total compensation thus would have to be more than $1 million, any additional bonus notwithstanding.<br /><br />The board gave the usual justification for making Mr Jennings a million-dollar plus baby:<br /><blockquote>'We’re very excited to have <em>someone of his talent and his capability</em>, someone that’s within our community, someone that <em>understands what it takes to take our system to a new level,</em>' said Randall Bentley, chairman of WellStar’s board of trustees. 'We’re very, very excited.'</blockquote><br />The WellStar board did not elaborate on Mr Jennings' "talent and capability," or to what "new level" he was expected to take Wellstar. The Cherokee Tribune did note he had a 10 year career in management of <a href="http://hcrenewal.blogspot.com/search/label/Tenet">Tenet Healthcare</a>, ending in 2007 as Vice Chairman.<br /><br />Neither the news article nor the board noted Tenet's troubles during Jennings' tenure there, culminating with financial woes and a $395 million settlement of the Redding Medical Center unnecessary heart surgery scandal in 2004 (look <a href="http://articles.sfgate.com/2004-12-22/news/17458067_1_redding-medical-center-steven-campanini-unnecessary-heart">here</a>), and a $21 million settlement of US government charges of kickbacks (look <a href="http://www.nytimes.com/2006/05/18/business/18tenet.html">here</a>), a $7 million settlement with the government of Florida of charges of fraudulent billing (look <a href="http://www.bizjournals.com/stlouis/stories/2006/02/20/daily31.html">here</a>), and a $900 million settlement of federal over-billing complaints (look <a href="http://articles.latimes.com/2006/jun/30/business/fi-tenet30">here</a>, and see our post <a href="http://hcrenewal.blogspot.com/2006/07/echos-of-previous-scandals-in-for.html">here</a>), all in 2006.  At least Mr Jennings had experience dealing with allegations of financial improprieties, but if anyone raised questions about hiring someone who lead a for-profit hospital corporation at a time when it seemed steeped in a culture of dubious ethics, they were not reported.<br /><br /><strong>University of California - Davis</strong><br /><br />The Sacramento Bee <a href="http://blogs.sacbee.com/the_swarm/2011/09/katehi-replacing-hospital-ceo.html">noted</a> that:<br /><blockquote>Last week, UC regents approved a <em>$259,000 raise to <strong>$960,000</strong> a year</em>, money paid by hospital fees, not state money or student tuition</blockquote>for UC Davis Medical Center CEO Ann Madden Rice, justified because,<br /><blockquote>that another academic hospital was recruiting Rice and offering $1.5 million.<br /><br />Katehi told The Bee's editorial board today that it was 'not an easy decision' to support the salary hike.<br /><br />While no one is irreplaceable, she said, <em>the cost and time of replacing Rice would be far greater than the raise.</em><br /><br />Just hiring an executive search firm would cost $500,000, Katehi said. Then the search would take a year, and <em>UC Davis would almost certainly end up paying more for Rice's successor. That's just the way the market is</em>, she said.<br /><br />Rice, the chancellor added, is <em>a great leader</em>.</blockquote><br />One wonders whether the decision was informed by Rice's leadership earlier in this year of a lawsuit against the University of California by a group of top university executives who sought a large increase in their pensions at a time that the university was under great fiscal stress (see our post <a href="http://hcrenewal.blogspot.com/2011/01/some-call-it-tyranny-top-leaders-of.html">here</a>). That lawsuit drew responses using words like "outrageous," "despicable," and "greed," (not taken out of context) from a variety of people at the university.  <br /><br /><strong>Lifespan</strong><br /><br />This last story is regrettably local, about Lifespan, the Rhode Island based hospital system, <a href="http://www.pbn.com/Union-slams-Lifespans-executives-pay,61281">published</a> by the Providence Business News,<br /><blockquote>A release of Lifespan’s executives’ salary, bonuses and supplemental retirement contributions has been met with great consternation by the Rhode Island Hospital union.<br /><br />The forms - the U.S. Internal Revenue Service 990 forms for non-profit organizations - show that Lifespan’s nine highest-paid executives received $9.4 million in total compensation in the last reported year, including $1.8 million in bonuses and $2.6 million in supplemental retirement contributions.<br /><br /><em>Lifespan President and CEO George A. Vecchione received a total of <strong>$2.9 million</strong> in salary and benefits – including <strong>$853,024</strong> in base salary, <strong>$522,051</strong> in bonuses, and <strong>$1,485,197</strong> in retirement or deferred compensation.</em><br /><br /><em>Dr. Timothy J. Babineau, president and CEO of Rhode Island Hospital and The Miriam Hospital, received <strong>$1.1 million</strong> in salary and benefits – including <strong>$573,675</strong>, in base salary, <strong>$379,376</strong> in bonuses and <strong>$92,035</strong> in retirement or deferred compensation</em>.</blockquote><br />The defense of these million dollar plus compensation packages was predictable:<br /><blockquote>Alfred Verrecchia, chairman of Lifespan’s board of directors, said that because of the hospital system’s significant size and complexity, the board places a priority on <em>recruiting and retaining a highly skilled leadership team who can manage in both good and bad times</em>, with the goal of providing the highest quality care to patients. 'The process for setting leadership compensation is undertaken by a board committee and is<em> informed by national surveys provide by the The Hay Group, an independent compensation consultant</em>,' Verrecchia said.<br /><br />Over the past several years, Verrecchia continued, 'base pay for executives has been relatively flat. A significant portion of the executive pay is at risk and is only paid out if quality, service and financial performance goals established by the compensation committee are achieved.'<br /><br />Verrecchia praised the current leadership team at Lifespan, saying: 'Lifespan hospitals are <em>fortunate to have a stable, sound leadership team with a proven track record of addressing significant financial challenges</em> in order to continue to fulfill our mission of providing the best and safest care to our patients.'</blockquote><br />The system's employees did not all agree:<br /><blockquote>'We are angry, <em>we feel disrespected</em>,' said Helene Macedo, president of the United Nurses & Allied Professionals which represents 2,200 employees at Rhode Island Hospital.<br /><br /><em>'It’s not justified, when we see the sacrifice that those of us who are working at the bedside are being asked to make</em>,' she told Providence Business News.<br /><br />Macedo, an operating room nurse who has been at Rhode Island Hospital for 20 years, was further irked by the fact that Lifespan had just announced a decision to cutting the matching contributions to employee’s 403(b) Fidelity plan for 2011 and eliminating the matching contribution for 2012.<br /><br />'It looks like <em>another example of corporate greed,</em>' she said, 'when you look at their executives’ salaries, bonuses and supplemental retirement, compared to that of what employees are making – and the sacrifices we’ve been asked to make during the last several years.'<br /><br />The atmosphere in the hospital, Macedo said, 'is one where <em>we’re counting every penny and cutting every corner. But there doesn’t appear to be any corner-cutting or counting in the corner office</em>.'</blockquote><br /><strong>Summary</strong><br /><br />Here were three more examples of million dollar (more or less) non-profit hospital system CEOs. As we have noted frequently, even non-profit hospital systems that are supposed to put their patient care and academic missions, when applicable, first somehow seem increasingly unable to function without yearly making their leaders instant millionaires.<br /><br />It was striking that the justifications, by boards of trustees or hospital spokespeople, for these indulgent pay packages followed the talking points we have <a href="http://hcrenewal.blogspot.com/2011/09/talking-points-sans-original-thought-to.html">identified before</a>:<br />-  We pay what everyone else pays<br />-  CEOs work hard and are brilliant, so they deserve high pay<br />-  High pay is needed to attract and retain competent, if not brilliant people<br /><br />Yet in these cases, as in nearly all cases we have discussed before, there were no logical, fact-based arguments why <br />- the particular CEOs deserved at least what supposedly comparable CEOs got, if not more, and how the comparator group were judged to be comparable; <br />- why the CEOs were so brilliant, (or in this case, had such "talent and capabilities," was a "great leader," or was "highly skilled," and "stable and sound") when there were at least reasonable but unanswered questions about their leadership based on publicly available information<br /><br />So despite their hospitals' financial challenges, and despite questions about their previous leadership, more non-profit hospital leaders are becoming million dollar babies, encouraged by boards of trustees who seem to be basing their "stewardship" on the same talking points, rather than reasoned arguments.  One can only wish that the boards who supposedly exercise stewardship over our formerly revered health care institutions actually had to answer some tough questions about the leaders they continue to uncritically endorse.<br /><br />So ad infinitum, I repeat.... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.<br /><br /><br />If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

More Repeats of Talking Points Supporting Making Non-Profit Hospital CEOs Into Millionaires

I have found even more cases of non-profit hospital leaders for whose generous compensation the only support was the usual talking points, w...

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"Making Their Numbers" - Examples of the Perverse Effect of Incentives Based on Short-Term Financial Targets in Health Care

Last week, we <a href="http://hcrenewal.blogspot.com/2011/01/why-is-johnson-and-johnson-spinning-out.html">discussed</a> how the large incentives for pharmaceutical executives to meet short term financial targets (that is, "making their numbers") may be an important cause of their firms' decreasing capacity to fulfill their most basic mission, manufacturing pure, unadulterated medicines.  <br /><br />In the news recently were two examples of how other health care leaders are incentivized to meet short-term financial targets.<br /><br /><strong>University of California</strong><br /><br />The first, and bigger example <a href="http://articles.sfgate.com/2011-01-21/news/27041122_1_uc-system-uc-officials-uc-president-mark-yudof">appeared </a>in the San Francisco Chronicle. First, note that the University of California system is currently in dire shape:<br /><blockquote><em>Finances are so dire at the University of California that it might have to turn away qualified students</em>,....</blockquote><br />Also,<br /><blockquote>UC President Mark Yudof told the regents that UC will <em>need to close a $1 billion budget gap</em> next year. He said <em>layoffs and course reductions are inevitable</em>, and that he expects to <em>have to turn away 20,000 to 30,000 qualified students over the next decade</em> because the university won't have the money to educate them.</blockquote><br />However, that did not stop the university from giving bonuses to a variety of employees, including larger bonuses for higher-ranking managers<br /><blockquote>UC has still <em>found a way to reward hundreds of employees with more than $4 million in incentive pay and raises</em>.<br /><br />At the regents meeting Thursday in San Diego, UC officials reported <em>giving rewards of $150 to $41,205 to nearly 1,500 UCSF employees who met performance targets</em>, raising the pay of some campus executives to above market rate, and <em>providing 10 percent raises of about $20,000 a year to three executives at their Oakland headquarters. </em><br /><em><br /></em><br /><em>The executives, who have various financial responsibilities for the UC system, will earn between $216,370 and $247,500 in base pay.</em><br /><br />'Whether a budget crisis or not, the university <em>still has to be able to pay competitive salaries and incentives consistent with industry standards</em>,' said Steve Montiel, a spokesman for the university. 'The university has no problem paying incentives to be competitive.'</blockquote><br />Note that the bonuses were apparently mainly based on short-term financial goals,<br /><blockquote>[UCSF spokeswoman Amy] Pyle said <em>the rewards were issued because those employees met targets for saving money</em> and streamlining procedures - but that the incentive program for that group has now been suspended because of the budget crisis.</blockquote><br />Note that despite the fact that the University has long-term financial woes, the biggest bonuses went to finance executives whose short-term performance obviously did not have much effect on these long-term problems:<br /><blockquote>One of them, Grace Crickette, UC's chief risk officer, <em>'has saved the university over $100 million by driving down the cost of workers' compensation</em>, negotiating much more advantageous terms with our insurance company,' Taylor said. The raises <em>'are a small price to pay for people working at the highest level.</em>'<br /><br />That rationale failed to convince representatives of UC's lowest-paid workers.<br /><br /><em>'The lowest-paid workers do a lot to save money too, and we've actually told them how</em>. But our workers are being hit' with higher costs for their own benefits, said Lakesha Harrison, president of the American Federation of State, County and Municipal Employees, which represents custodians, groundskeepers, patient-care workers and other employees earning less than $40,000. </blockquote><br />Also,<br /><blockquote>At UC Berkeley, for example, <em>the new vice chancellor for administration and finance will earn a base salary of $375,000 - 9 percent higher than the salary midpoint of $344,000 earned by colleagues at other universities,</em> UC officials reported.<br /><br />At UCLA, <em>the chief financial officer of the hospital system will receive a 10.5 percent raise</em>, bringing his salary to $420,000 from $380,000 as <em>a hedge against the possibility that he would go somewhere else.</em> The campus called it a 'pre-emptive retention salary adjustment.'</blockquote>So while the University of California has long-term financial woes, so severe that they will likely require major curtailment of fulfillment of its major academic mission, its leadership had no problem handing out bonuses for meeting short-term financial goals whose achievement obviously did not forestall the current problems. The biggest bonuses went to financial managers, rationalized by their supposed performance "at the highest level," or their need to prevent them from going "somewhere else." However, obviously <em>the long-term FINANCIAL performance of the University is its current biggest problem</em>, suggesting that overall these financial managers are not doing so well. Thus, the way the University handed out bonuses for people "making their numbers" seemed completely at odds with the University's inability to make its numbers in the long-run. Of course, the bonuses also seemed entirely unrelated to the University's ability, or lack thereof to fulfill its mission.<br /><br /><strong>Erlanger Health System</strong><br /><br />The <a href="http://www.erlanger.org/">Erlanger Health System </a>is "an academic medical center associated with the UT College of Medicine Chattanooga." The Chattanooga (TN) Times Free Press <a href="http://timesfreepress.com/news/2011/jan/25/erlanger-awards-bonus-payouts/">reported</a>:<br /><blockquote>Erlanger Health System executives <em>took home bigger bonuses in December compared with the awards paid out the year before, despite recording lower profits</em>.<br /><br />In December, 123 management-level Erlanger employees split $1.9 million in bonus payments, $200,000 more than the total awarded in bonuses in fiscal year 2009.<br /><br />President and CEO Jim Brexler received a $192,395 bonus in December on top of his base salary of $550,000.<br /><br /><em>The payments were based on the hospital's performance in fiscal year 2010</em>, which ended in June of last year. The hospital's operating profit of $8.58 million, and other performance measurements that year, met pre-established criteria approved by the hospital's board of trustees.</blockquote><br />The irony is that by the time the bonuses for fiscal year 2010 were awarded, it was already known that this year's finances are not so good:<br /><blockquote><em>Fiscal year to date, Erlanger has earned a $1.3 million profit, compared with a budgeted $6 million profit</em>, according to financial statements released at the hospital's Budget and Finance Committee Monday.</blockquote><br />Of course, one rationale for the bonuses is that Erlanger's executives are above average, just like, it seems, finance executives at the University of California (as noted above), and maybe all other health care organizational leaders:<br /><blockquote><em>'It takes a real expertise to deal in health care</em>. ... Just to make any positive operating margin is great,' said Kim White, an Erlanger trustee and chairwoman of Erlanger's Management and Board Evaluation Committee, which sets the criteria that determines whether bonus pay will be awarded and how much.<br /><br />'It's tough for people who don't have jobs to look at bonuses, but we look at this as a piece of their total compensation package.'</blockquote><br />Of course managers and executives may have "real expertise," as noted above, or be in charge of some initiatives that saves money (as noted above in the case of a UC executive.)  However, there may be many other people who work for the organization with "real expertise," some of whose expertise may be more directly related to the organization's primary mission.  Also, as the union leader noted above, even low-paid workers may have ideas for saving money.  However, the big bonuses or raises given to reward only the managers' expertise, or prevent only the managers from finding other jobs, show the exceptional treatment given to health care managers and executives, perhaps because they tend to answer to governing bodies (boards of trustees or directors) run by other managers and executives.<br /><br /><strong>Summary</strong><br /><br />There is increasing evidence that bonuses given to employees of health care organizations, particularly high-level managers and executives, are predominantly tied to short-term financial goals, e.g., "making their numbers." In my humble opinion, these are important <a href="http://hcrenewal.blogspot.com/search/label/perverse%20incentives">perverse incentives</a>, driving people to actions that disregard, or may even subvert the organizations' fundamental missions. <br /><br />While it is desirable for all health care organizations to be run in a business-like manner, and for not-for-profit health care organizations to have competent financial management, these are means to an end. The mission of health care organizations is health care. <br /><br />The main priority of non-profit organizations (or NGOs) should be to uphold their missions, not to make surpluses. Avoiding deficits, or making surpluses are means to uphold the mission, but ought to be subservient to the mission. <br /><br />While for-profit health care corporations are meant to make a profit, in the long run their profitability should depend on whether the health care products they make or services they provide are fit for purpose, that is, further health care of individual patients or populations. Putting short-term financial goals ahead of making quality products (e.g., making pure and unadulterated medicines as noted in our previous post) will ultimately be bad for patients, for public health, and for the long-term financial health of the corporation. <br /><br />Therefore, I submit that incentives for employees should be based on how their work upholds the primary mission. It may not be unreasonable to have some incentives based on long-term financial goals for financial executives of health care organizations. However, even those should be explicitly tied to mission fulfillment.<br /><br />However, as health care leaders seemed to have learned from leaders of financial services firms, the emphasis on incentives based on short-term financial goals seems to only be increasing. Failure to address these increasingly perverse incentives will only lead to increasing health care dysfunction.

"Making Their Numbers" - Examples of the Perverse Effect of Incentives Based on Short-Term Financial Targets in Health Care

Last week, we discussed how the large incentives for pharmaceutical executives to meet short term financial targets (that is, "making ...

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Why Would Directors of Health Care Corporations Push for Bigger Pensions for Academic Administrators?

We recently <a href="http://hcrenewal.blogspot.com/2011/01/some-call-it-tyranny-top-leaders-of.html">posted</a> about 36 well-paid top executives in the University of California system, including leaders of medical schools, academic medical centers, and public health, who threatened a lawsuit if their pensions were not increased according to what they claim was a promise made to them in 1999.<br /><br />Riddle me this: why would a group of directors of for-profit corporations that provide health care goods and services. plus a director of a leading biotechnology trade group, and the director of a leading mutual fund family band together to support this demand, thus to push for bigger pensions for these top managers of the University of California system?<br /><br />Here is a list of the directors, and their corporations:<br /><br />-  Mark R Laret, director of <a href="http://investors.varian.com/file.php/2678/Proxy+Statement+2010.pdf">Varian Medical Systems</a> and <a href="http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1odHRwOi8vaXIuaW50Lndlc3RsYXdidXNpbmVzcy5jb20vZG9jdW1lbnQvdjEvMDAwMDk1MDEyMy0xMC0xMTE4NjkvZG9jL051YW5jZUNvbW11bmljYXRpb25zSW5jLnBkZiZ0eXBlPTImZm49TnVhbmNlQ29tbXVuaWNhdGlvbnNJbmMucGRm">Nuance Communications Inc</a>, which provides numerous <a href="http://www.nuance.com/for-healthcare/index.htm">health care products </a><br />- Dr David Feinberg, director of <a href="http://investors.osi-systems.com/directors.cfm">OSI Systems</a>, whose <a href="http://osi-systems.com/bus_spacelabs.asp">Spacelabs Healthcare</a> subsidiary manufactures medical devices<br />- Steven C Currall, <a href="http://www.gsm.ucdavis.edu/currall/">director of Leadership in Medicine Inc</a>, which <a href="http://www.leadershipinmedicine.com/">claims</a> to be a leading provider of intelligence about <a href="http://hcrenewal.blogspot.com/search/label/key%20opinion%20leaders">key opinion leaders</a> (KOLs) in medicine and health care.  Its web-site asserts, "IF YOU NEED TO KNOW who are the most prominent, admired, and influential actors in healthcare, how they are interconnected, and why, you need our expertise.  Given how vastly complex are the relationships among providers, researchers, and other significant actors in healthcare, it is vital to focus on key opinion leaders (KOLs) at local, regional, and global levels, and to understand the ties among them."  (Note that we have often <a href="http://hcrenewal.blogspot.com/search/label/key%20opinion%20leaders">discussed</a> how KOLs function as stealth marketers for pharmaceuticals and devices.)<br /><br />They joined:<br />-  Robert S Sullivan, PhD - <a href="http://www.biocom.org/about_biocom/biocom_board_of_directors/">director of BIOCOM</a>, whose web-site <a href="http://www.biocom.org/about_biocom/">asserts</a> it is the" largest regional life science association in the world, representing more than 550 member companies in Southern California."<br />-  Richard K Lyons, <a href="http://www2.haas.berkeley.edu/Faculty/lyons_rich.aspx">director of iShares</a>, a leading <a href="http://us.ishares.com/home.htm">provider of mutual funds</a>.<br /><br />The answer is simple.  All the corporate directors listed above are also members of the group of 36 litigious executives.  See their name on the list of 36 <a href="http://articles.sfgate.com/2010-12-29/news/26349177_1_uc-employees-uc-system-higher-pensions">here</a> in the San Francisco Chronicle.<br /><br />- Mark R Laret, <span style="color: #cccccc;">director of Varian Medical Systems and Nuance Communications Inc, which provides numerous health care products</span>, is also CEO of UCSF Medical Center.<br />- Dr David Feinberg, <span style="color: #cccccc;">director of OSI Systems, whose Spacelabs Healthcare subsidiary manufactures medical devices</span>, is also CEO of the UCLA Hospital System<br />- Steven C Currall, <span style="color: #cccccc;">director of Leadership in Medicine Inc, which claims to be a leading provider of intelligence about key opinion leaders (KOLs) in medicine and health care</span>, is also Dean, and Professor of Management of the University of California - Davis Graduate School of Management. <br />Robert S Sullivan, PhD - <span style="color: #cccccc;">director of BIOCOM, whose web-site asserts it is the" largest regional life science association in the world, representing more than 550 member companies in Southern California</span>, is also Dean of the University of California - San Diego Rady School of Management.<br /><br />- Richard K Lyons, <span style="color: #cccccc;">director of iShares, a leading provider of mutual funds</span>, is also Bank of America Dean and Professor of Business, University of California - Berkeley Haas School of Business.<br /><br />Their inclusion within the larger group seems ironic, at best.  As corporate directors, they have outside income and have accumulated assets that will likely keep them out of poverty in their old age.  For example, Mr Laret had accumulated the equivalent of 37,168 shares of Varian, and was paid $267,300 a year for his services according to the company's <a href="http://investors.varian.com/file.php/2678/Proxy+Statement+2010.pdf">2010 proxy statement</a>.<br /><br />Furthermore, for those who directly lead health care institutions, Mr Laret and Dr Feinberg, their memberships on the boards of health care corporations, which imply fiduciary responsibilities to the companies and their stock-holders, conflict with their duties as leaders of academic health care to uphold teaching, research and patient care.  Dean Currall's responsibilities to an organization which seems entirely dedicated to helping drug, device, and biotechnology companies turn health care professionals and academics into stealth marketers at least seems unseemly given that his school is part of a university which also includes a medical school and academic medical center.  <br /><br />Since our earlier post, it appears that the University of California president will not accede to the demands of the 36, as <a href="http://www.sfgate.com/cgi-bin/article.cgi?f=%2Fc%2Fa%2F2011%2F01%2F04%2FBAF71H3L67.DTL">noted</a> in the San Francisco Chronicle.  Their demands have continued to provoke outrage.  A recent <a href="http://www.insidehighered.com/news/2011/01/05/california_pension_fight_politically_tough_for_yudof">discussion</a> in Inside Higher Ed interviewed Emeritus Professor Helen Henry, a member of the University's Academic Senate, who posited:<br /><blockquote>the debate as part of <em>a fundamental philosophical disagreement within the university</em>. <em>The signatories to the letter, many of whom are based in medicine or management, have a different view of the university</em> than faculty from other disciplines, she said.<br /><br />'I don’t think there’s any question but that there are these <em>two different mindsets</em> that are fighting for what the university should be. It’s transparent in this letter,' said Henry, a professor emeritus of biochemistry at the Riverside campus. <em>'They are running businesses. But there are those of us that don’t feel this is what the university should be.'</em><br /><br />'This is absolutely a manifestation of that <em>clash between the people who see UC as their business … and the people who see UC’s mission as teaching, and research and service to the state. That’s a dual personality that the university always has to live with</em>.'</blockquote><br />Five of the university leaders demanding higher pensions for themselves have responsibilities as directors of corporations that may conflict with their academic institutions' missions, while these corporate positions ought to insulate them from financial concerns about their retirement. This corroborates Prof Henry's notion that they see themselves as businesspeople whose role is separate from, and not necessarily supportive of the university mission. <br /><br />I disagree, however, with Prof Henry's implication that the University has to live with such a split among its leadership. People who lead academic institutions have a primary responsibility to support the academic mission. Their goals should not be to maximize profits, much less to enrich themselves. Letting academia, and academic medicine be lead by leaders out to make money and line their own pockets will lead to just that, but hardly better teaching, research, and patient care.

Why Would Directors of Health Care Corporations Push for Bigger Pensions for Academic Administrators?

We recently posted about 36 well-paid top executives in the University of California system, including leaders of medical schools, academic...

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Blast from the Anechoic Past: Former UCI Fertility Doctor Arrested in Mexico

Soon after we started Health Care Renewal, we ran a <a href="http://hcrenewal.blogspot.com/search/label/UCI">series of posts</a> about the University of California-Irvine (UCI) medical school and medical center, featuring stories of mismanagement of major programs, especially those involving organ transplantation (liver, kidney, and bone marrow) while the top executives who presided over the mess received generous compensation, sometimes in strikingly irregular ways, and while at least one whistle-blower alleged he lost his job for complaining about safety issues.  Some of the stories went back another 10 years, to 1995.  One particularly striking story involved the UCI infertility program.  Three physicians were accused of stealing ova from some women to implant in others.  One physician was convicted, and two fled the country (see post <a href="http://hcrenewal.blogspot.com/2006/02/more-trouble-but-also-little-hope-in.html">here</a>).<br /><br />One of those physicians just turned up.  As <a href="http://abcnews.go.com/Health/ReproductiveHealth/fugitive-fertility-doctor-ricardo-asch-arrested-mexico/story?id=12492575">reported</a> by ABC News at the end of 2010:<br /><blockquote>U.S. authorities are working to <em>extradite one of the doctors accused of being behind of the biggest fertility scandals in history</em>. Mexican authorities arrested Dr. Ricardo Asch last month. <br /><br />Back in the 1990s, <em>Asch and another fertility doctor, Jose Balmaceda, were charged with stealing embryos and eggs belonging to dozens of women who sought treatment at the University of California-Irvine Center for Reproductive Health and implanting them into other women.</em><br /><br />They are also <em>accused of not reporting more than $1 million in earnings, and fleeing the country to avoid prosecution</em>. <br /><br />Marla McCutcheon is one of the women who says she was victimized by Asch. She was one of his patients until she decided to switch physicians because she said she found him 'uncaring.'<br /><br />McCutcheon, from Irvine, Calif., says she found out years later that after she'd left Asch's care that there were leftover eggs she didn't know about. To this day, she doesn't know what happened to those eggs.<br /><br />'I would have done anything for those eggs at that time. It's still hard for me to grasp that there might be something to my eggs. Someone may have been able to get pregnant from them,' McCutcheon said.<br /><br />At the time of the scandal, ABC News saw documents showing that more than 60 other women who were patients at the fertility center had eggs taken from them without their consent. Asch, however, said he knew nothing about it. During the time the incidents occurred, it was not illegal to transfer human tissue without consent. </blockquote><br />The case had major repercussions for how fertility clinics operate:<br /><blockquote>The scandal allegedly involving Asch, Balmaceda and another doctor, Sergio Stone, <em>rocked the field of reproductive medicine, and doctors say they still feel its effects.</em><br /><br />'Reproductive medicine is very new. It's come a long way and we've made tremendous progress, but because of scientific advances, it's very high-profile,' said Dr. Jani Jensen, a Mayo Clinic reproductive endocrinologist in Rochester, Minn. 'Whenever there are publicized incidents like this that involve ethical issues, it's sometimes difficult to engender the public's trust.'<br /><br />Dr. Howard Zacur, director of the Division of Reproductive Endocrinology and Infertility at the Johns Hopkins Fertility Center in Baltimore, Md., said patients still want reassurance their eggs and embryos will be protected from these types of incidents.<br /><br />It is now against the law in California to take eggs from a woman without her consent. </blockquote><br />Note that the disconnect between problematic quality of care at UCI and the generous compensation afforded its top leaders continued through 2010, as <a href="http://hcrenewal.blogspot.com/2010/01/uci-medical-center-fails-inspection-uci.html">this post </a>discussed. <br /><br />Aside from its colorfulness, there are other reasons to recall the story of the stolen ova and the subsequent troubles at UCI.  First, the list of problems over 15 years discussed in our series of posts suggests an institution whose leadership culture is seriously disturbed.  I cannot view the institution from a distance and figure out what the fundamental problems are with its leadership and governance, but there must be some.  (Note that per a <a href="http://hcrenewal.blogspot.com/2006/02/mismanagement-in-oc-report-on-uci.html">2006 post</a>, an internal report did fault lack of accountability, leadership by people with no medical background, absence of clear reporting lines, and the overlooking of whistleblowers, but these are just descriptions of bad management and governance, not explanations of them.  Furthermore, it is not clear whether there have been any fundamental changes in leadership or governance since then.  If there readers know there is more to this, please let me know in the comments section below.)<br /><br />Second, this case illustrates how the <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic effect</a> has decreased recognition that the problems at UCI may be part of more systemic problems.  Despite the number of problems that occurred, their vividness, and their coverage in local media, the troubles at UCI have not gotten national media attention, nor as far as I can tell, have they ever been discussed in the medical, health care, health services research, or health policy literature.  (I have tried multiple Google scholar searches using the institution's name, and keywords including "scandal," and the names of some of the physicians most prominently named in our series of posts, and have found nothing relevant.)  The 15 year history has produced almost no echoes, and hence now has become as striking a black hole in the annals of bad health care leadership and governance as was the case of the fall of the <a href="http://hcrenewal.blogspot.com/search/label/AHERF">Allegheny Health Education and Research Foundation</a> (AHERF).  <br /><br />Certain issues that we discuss on Health Care Renewal have become less anechoic, in particular, conflicts of interest caused by academic physicians financial ties to the drug, biotechnology and device industries.  However, the larger issues of mismanagement by lavishly compensated, and hence perversely incentivized executives remains relatively anechoic.  I am not sure how big a scandal it will take to remove the taboo from discussing it. 

Blast from the Anechoic Past: Former UCI Fertility Doctor Arrested in Mexico

Soon after we started Health Care Renewal, we ran a series of posts about the University of California-Irvine (UCI) medical school and medi...

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Some Call it "Tyranny" - Top Leaders of University of California (Including Leaders of Academic Medicine) Demand Bigger Pensions for Themselves

The state of California, and its flagship university system, the University of California, have been under extreme financial pressure lately.  <br /><br /><strong>The 36 Executives' Demands</strong><br /><br />However, that apparently has not decreased the University's hired managers' and executives' sense of entitlement.  They are threatening to sue if their pensions are not increased.  As reported <a href="http://articles.sfgate.com/2010-12-29/news/26349177_1_uc-employees-uc-system-higher-pensions">by the San Francisco Chronicle</a>,<br /><blockquote><em>Three dozen of the University of California's highest-paid executives are threatening to sue unless UC agrees to spend tens of millions of dollars to dramatically increase retirement benefits for employees earning more than $245,000.</em><br /><br />'We believe it is the University's legal, moral and ethical obligation' to increase the benefits, the executives wrote the Board of Regents in a Dec. 9 letter and position paper obtained by The Chronicle.<br /><br />'Failure to do so will likely result in <em>a costly and unsuccessful legal confrontation</em>,' they wrote, using capital letters to emphasize that they were writing 'URGENTLY.'<br /><br /><em>Their demand comes as UC is trying to eliminate a vast, $21.6 billion unfunded pension obligation by reducing benefits for future employees, raising the retirement age, requiring employees to pay more into UC's pension fund and boosting tuition.</em> <br /><br />The fatter executive retirement benefits the employees are seeking would add $5.5 million a year to the pension liability, UC has estimated, plus $51 million more to make the changes retroactive to 2007, as the executives are demanding.<br /><br />The executives fashioned their demand as a direct challenge to UC President Mark Yudof, who opposes the increase.<br /><br />'Forcing resolution in the courts will put 200 of the University's most senior, most visible current and former executives and faculty leaders in public contention with the President and the Board,' they wrote. </blockquote><br /><strong>Background to the Case</strong><br />Here is the relevant background:<br /><blockquote>The roots of the pension dispute go back to 1999, five years after the IRS limited how much compensation could be included in retirement package calculations. But even after the IRS granted UC's waiver in 2007, nothing changed.<br /><br />University executives were having troubles of their own that year.<br /><br />President Robert Dynes resigned in 2007 after it was discovered that UC was awarding secret bonuses, perks and extra pay to executives. State auditors also found that UC's compensation practices were riddled with errors and policy violations.<br /><br />UC officials also had become aware of another big problem: UC's pension obligations were about to outstrip its ability to pay retirees. Neither UC nor its employees had paid into the fund since 1990.<br /><br />It took until this year for UC to act. In September, a retirement task force offered Yudof several options for closing the $21.6 billion gap - and one to widen it: increasing executive pensions.</blockquote><strong>Health Care Executives Included</strong><br /><br />Note that in addition to a bunch of finance officers and portfolio and asset managers, the demanding executives included quite a few leaders of the medical schools, and academic medical centers, including:<br /><blockquote>UC System's Central Office<br />Dr. Jack Stobo, senior vice president, health services and affairs<br /><br />UCSF<br />Dr. Sam Hawgood, vice chancellor and dean, School of Medicine<br />Ken Jones, chief operating officer, medical center<br />Mark Laret, CEO, medical center<br />Larry Lotenero chief information officer, medical center<br />John Plotts, senior vice chancellor<br /><br />UC Davis<br />William McGowan, CFO, health system<br />Dr. Claire Pomeroy, CEO health system, vice chancellor/dean, School of Medicine<br />Ann Madden Rice, CEO Medical Center<br /><br />UCLA<br />Dr. David Feinberg, CEO of the hospital system; associate vice chancellor<br />Dr. Gerald Levey, dean emeritus<br />Virginia McFerran, chief information officer of the health system<br />Amir Dan Rubin, chief operating officer of the hospital system<br />Dr. J. Thomas Rosenthal, chief medical officer of the hospital system; associate vice chancellor<br />Paul Staton, chief financial officer of the hospital system<br /><br />UC San Diego<br />Dr. David Brenner, vice chancellor for health sciences; dean of the School of Medicine<br />Tom Jackiewicz, CEO, associate vice chancellor of the health system<br />Dr. Thomas McAfee, dean for clinical affairs<br /><br />UC Irvine<br />Terry Belmont, CEO, Medical Center</blockquote><strong>The Outraged Reaction</strong><br />The executives' demands sparked anger on campus.<br /><br /><blockquote>Dissenting members of the task force said it would be<em> <strong>unseemly</strong>' to expand executive pensions</em>. Tuition had just been increased by 32 percent this fall, and the regents were poised to raise it another 8 percent for fall 2011. They also voted to shift more money into the retirement fund from employees' pockets, as low-wage workers worried about retiring into poverty.<br /><br />'I think it's <em><strong>pretty outrageous</strong></em> that this group of highly compensated administrators of a public university are challenging the president and the chair of the Board of Regents, said Daniel Simmons, chairman of UC's Academic Senate and a law professor at UC Davis.<br /><br />'What <strong><em>outrages me</em></strong> the most is that these 36 people are blind to the fact that this is a public entity in dire straits,' said Simmons, who also served on the retirement task force and opposed the higher pensions.</blockquote><br />The demands prompted outrage from politicians and editorialists. A few choice samples:<br /><br />- The executives are "<em><strong>tarnishing the university's name with greed</strong></em>," <a href="http://www.dailybruin.com/index.php/article/2011/01/with_the_uc_in_crisis_senior_executives_should_be_helping_to_fix_the_budget_instead_of_demanding_a_f">editorial (UCLA) Daily Bruin</a>.<br /><br />- "<em><strong>Very out of touch</strong></em>," by Governor Elect Jerry Brown; "<em><strong>truly living in an ivory tower</strong></em>...." while "people are suffering in the rest of the state and losing their homes," by Assemblyman Jerry Hill, D- San Mateo (<a href="http://articles.sfgate.com/2010-12-30/bay-area/26350890_1_uc-system-higher-pensions-uc-execs">per the San Francisco Chronicle</a>)<br /><br />- "<em><strong>Uncaring and divisive</strong></em>," "<em><strong>undercuts public support</strong></em> for one of California's most treasured institutions," "sending out its own special-interest message: <em><strong>what's in it for me</strong></em>," - <a href="http://articles.sfgate.com/2010-12-30/bay-area/26350890_1_uc-system-higher-pensions-uc-execs">editorial, San Francisco Chronicle</a>.<br /><br />- "<em><strong>despicable threat</strong></em>," the California Regents (UC board of trustees) should not "claim that lavish pension may be needed to recruit good people to UC. <em><strong>Good people don't threaten lawsuits against a cash-strapped sate to enrich themselves.</strong></em>" <a href="http://www.sacbee.com/2011/01/02/3290033/editorial-uc-executives-offer.html">editorial, Sacramento Bee</a>.<br /><br />- Governor-Elect B4rown should issue an executive order "to <em><strong>eliminate any position in the University of California system paying $245,000 a year or more</strong></em>," (thus effectively firing all the 36 complaining executives); "free taxpayers and students alike from the <em><strong>tyranny of those whose main objective during any time - tough or otherwise - is to keep milking the state for every penny the can squeeze out</strong></em>," <a href="http://www.mantecabulletin.com/news/article/19725/">editorial, Manteca Bulletin</a>.<br /><br /><strong>Summary</strong><br /><br />We have posted frequently about hired managers and executives of health care organizations receiving <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">compensation</a> and <a href="http://hcrenewal.blogspot.com/search/label/executive%20life%20style">benefits</a> out of all proportion to their apparent performance. The case of the demanding University of California executives is just one of many. However, what is really remarkable about this case is the reaction to it. We are hearing top leaders, including many of the top leaders of the state's medical schools and academic medical centers, called uncaring, greedy, and despicable by well-known politicians and in newspaper editorials, and we are hearing calls that they be fired, en masse.<br /><br />Maybe we are at a tipping point. <br /><br />Of course, hired health care managers and executives are not entitled to line their own pockets while patients and their other constituencies suffer during the great recession. They are not entitled to continually drive health care costs up while they enrich themselves. <br /><br />However, apathy,<a href="http://hcrenewal.blogspot.com/search/label/learned%20helplessness"> learned helplessness</a>, and the <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic effect</a> have let them promote themselves into a de facto new aristocracy (just like the hired managers and executives of some other non-profit organizations, for-profit corporations, and especially financial service corporations have turned themselves into the rest of that aristocracy.)<br /><br />If we do not reclaim health care from these new oligarchs, we will all end up not just with expensive, difficult to access, mediocre health care, but under their tyranny.<br /><br /><strong>Post-Script</strong><br /><br />This is just the latest example of the sense of entitlement displayed by the hired managers and executives of the University of California. Outrageous pay and benefits unjustified by any measure of performance for University of California's hired managers and executives has been grist for the Health Care Renewal mill since 2005.  A few samples:<br />-  The ranks of those paid more than $200 K rose much faster than those paid less, while lower paid employees endured a pay freeze, and the university cut its budget.  Managers got bonuses for extra work, while faculty did not.  Managers got housing allowances, and other perks.  (<a href="http://hcrenewal.blogspot.com/2005/11/leadership-living-large-at-university.html">November, 2005</a>)  <br />- UC-Irvine managers were paid lavishly while presiding over debacles involving transplant services  (liver transplants, <a href="http://hcrenewal.blogspot.com/2005/11/university-of-california-irvine-shuts.html">November, 2005</a>; bone marrow transplants, <a href="http://hcrenewal.blogspot.com/2006/01/even-more-trouble-in-oc-uci-bone.html">January, 2006</a>; kidney transplants, <a href="http://hcrenewal.blogspot.com/2006/01/california-bad-dreamin-more-troubles.html">January, 2006</a>)<br />- UC - San Diego Chancellor was paid $359 K plus a bonus of $248 K for supposed full time work while serving on ten for-profit corporate and non-profit boards, including directorships of for-profit health care corporations that were conflicts of interest with her role overseeing the medical school and medical center.  This was the first case of what we later called the "new species of conflicts of interest" posted on the blog.  (<a href="http://hcrenewal.blogspot.com/2006/01/california-nightmares-more-troubles-at.html">January, 2006</a>)<br />- UC - Irvine managers got bonuses while its medical center failed an inspection (<a href="http://hcrenewal.blogspot.com/2010/01/uci-medical-center-fails-inspection-uci.html">January, 2010</a>), as did managers at other UC campuses (<a href="http://hcrenewal.blogspot.com/2010/01/more-california-medical-centers-plagued.html">January, 2010</a>).<br /><br />Maybe if these older stories produced more outraged, the current situation would not have occurred. <br /><br />You heard it first on Health Care Renewal <br /><br />Hat tip to Prof Margaret Soltan <a href="http://www.margaretsoltan.com/?p=28524">on the University Diaries blog</a>.

Some Call it "Tyranny" - Top Leaders of University of California (Including Leaders of Academic Medicine) Demand Bigger Pensions for Themselves

The state of California, and its flagship university system, the University of California, have been under extreme financial pressure lately...

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University of California CEO - You Can Reduce My Pay if "You Throw In Air Force One"

The San Francisco Chronicle recently <a href="http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/02/15/BA6A1BUGLU.DTL">reported</a> how students at the University of California have been providing a satirical approach to the problems of the university's leadership:<br /><blockquote>It's been a seriously dramatic year at the University of California, where hundreds of students seized buildings, demonstrated and shut down regents meetings last fall to protest rising tuition and the perceived privatization of the public school.<br /><br />It's also been a satirically dramatic year, thanks to the UC Movement for Efficient Privatization, a fledgling group of mostly grad students in business attire that uses humor tinged with sarcasm to lampoon UC officials.<br /><br />Their own name is an example. Many UC students believe leaps in tuition and reduced state funding are turning the public university into a private institution.</blockquote><br />In particular, they drew attention to the university president's sense of entitlement:<br /><blockquote>UCMeP has made itself known on the Berkeley campus since September. That's when UC President Mark Yudof, who earns about $600,000, <em><strong>drew students' ire for telling the New York Times he'd take a $200,000 pay cut for salary parity with President Obama - if Air Force One were part of the package.</strong></em><br /><br />Seeing this as a philanthropic opportunity, UCMeP issued fundraising flyers: 'Help Buy Mark Yudof a Plane!'</blockquote>The relevant parts of the <a href="http://www.nytimes.com/2009/09/27/magazine/27fob-q4-t.html">New York Times interview</a>, which I regret to say I missed at the time it was published, are:<br /><blockquote>Some people feel you could close the U.C. budget gap by cutting administrative salaries, including your own. <br />The stories of my compensation are greatly exaggerated. <br /><br />When you began your job last year, your annual compensation was reportedly $828,000. <br />It actually was $600,000 until I cut my pay by $60,000. <em>So my salary is $540,000, but it gets amplified because people say, 'You have a pension plan.'</em><br /><br />What about your housing allowance? How much is the rent on your home in Oakland? <br /><em>It’s about $10,000 a month.</em> <br /><br /><em>Does U.C. pay for that on top of your salary? </em><br /><em>Yes, and the reason they do that is because they have a president’s house</em>, it needed $8 million of repairs and I decided that was not the way to go. Why the heck would I ever authorize $8 million for a house I didn’t want to live in anyhow? <br /><br />Why can’t you have architecture students repair the house for course credit? <br />Let me ponder that. <br /><br />What do you think of the idea that no administrator at a state university needs to earn more than the president of the United States, $400,000? <br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhT2dQCrvLxxi5nojjEMyPLIkI317MeI3P-ns4ZiESpXjSefmnUowhjM3i4TtGWzxx7rTAwKf6BdcTJAXSUi4E77ZRVZhdp9LDnmqS8GGqYo_VBwBB6-aoPtYT0bo0xDc7lqyjlTnKX4Euq/s1600-h/Air_Force_One_over_Mt__Rushmore.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" ct="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhT2dQCrvLxxi5nojjEMyPLIkI317MeI3P-ns4ZiESpXjSefmnUowhjM3i4TtGWzxx7rTAwKf6BdcTJAXSUi4E77ZRVZhdp9LDnmqS8GGqYo_VBwBB6-aoPtYT0bo0xDc7lqyjlTnKX4Euq/s320/Air_Force_One_over_Mt__Rushmore.jpg" /></a></div><em><strong>Will you throw in Air Force One and the White House?</strong></em></blockquote><br />While Yudof's response is clearly sarcastic, he obviously never substantively addressed why he is entitled to be paid comparably to the President of the richest country in the world.<br /><br />We have written a few times about the travails of the <a href="http://hcrenewal.blogspot.com/search/label/University%20of%20California">University of California</a>, some of its multiple campuses, and in particular its medical schools and teaching hospitals.  Most recently we have written about how leaders of its teaching hospitals also seemed to feel entitled to substantial compensation, including bonuses for "performance" even when their institutions were receiving bad publicity for quality problems (posts <a href="http://hcrenewal.blogspot.com/2010/01/more-california-medical-centers-plagued.html">here</a> and <a href="http://hcrenewal.blogspot.com/2010/01/uci-medical-center-fails-inspection-uci.html">here</a>).<br /><br />Again and again we see examples of leaders of academic medical institutions, and health care organizations in general who seem to feel entitled to be judged differently, and rewarded differently than the common folk.  These entitlements exist even when the economy, or the financial performance of the specific organization prevents other people from making any economic progress. This entitlement exists even if those other poeple actually do the work, and ultimately provide the money that sustains the organization. <br /><br /><br />Although the executives of not-for-profit health care organizations generally make far less than executives of for-profit health care corporations, collectively, hired managers of even not-for-profit health care organizations have become richer and richer at a time when most Americans, including many health professionals, and most primary care physicians, have seen their incomes stagnate or fall. They are less and less restrainted by passive, if not crony boards, and more and more unaccountable. In a kind of multi-centric coup d'etat of the hired managers, they have become our new de facto aristocracy. <br /><br />Or as we wrote in our previous post, executive compensation in health care seems best <a href="http://hcrenewal.blogspot.com/2009/12/compensation-madness-insiders-hijacking.html">described as Prof Mintzberg</a> described compensation for finance CEOs, "All this <em><strong>compensation madness is not about markets or talents or incentives, but rather about insiders hijacking established institutions for their personal benefit</strong></em>." As it did in finance, compensation madness is likely to keep the health care bubble inflating until it bursts, with the expected adverse consequences. Meanwhile, I say again, if health care reformers really care about improving access and controlling costs, they will have to have the courage to confront the powerful and self-interested leaders who benefit so well from their previously mission-driven organizations. It is time to reverse the coup d'etat of the hired managers.

University of California CEO - You Can Reduce My Pay if "You Throw In Air Force One"

The San Francisco Chronicle recently reported how students at the University of California have been providing a satirical approach to the ...

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More California Medical Centers Plagued by Quality Problems While Their Executives Get Bonuses for "Improved Patient Care"

Earlier this week, we <a href="http://hcrenewal.blogspot.com/2010/01/uci-medical-center-fails-inspection-uci.html">noted</a> that while executives at one University of California medical center were getting large bonuses supposedly for "improved patient health," the hospital was being cited for serious health care quality deficiencies.  Now, more stories have appeared that raise questions about the rationale for the generous bonuses handed out to multiple top hospital executives at University of California hospitals.  <br /><br /><strong>University of California - San Diego</strong><br /><br />First, in alphabetical order by city, the San Diego Union-Tribune <a href="http://www.signonsandiego.com/news/2010/jan/27/three-hospitals-fined-for-mistakes/">reported</a> on penalties for poor quality care announced by the California Department of Public Health: <br /><blockquote>UCSD Medical Center in San Diego was fined $50,000.... The state said the hospital staff failed to follow its surgical policies and procedures, which resulted in a patient having to have a second surgery to remove a foreign object — a guide wire that was left in the patient when a central venous catheter was inserted into the patient’s right femoral vein in the groin area in January 2009. The wire migrated into a chamber of the patient’s heart.<br /><br />The procedure was done by a first-year intern and supervised by a third-year resident.<br /><br />This marks the third time the state has penalized UCSD, with the first penalty issued in May 2008 and the second in May 2009.<br /></blockquote><br />However, a few days earlier, the Union-Tribune had <a href="http://www.signonsandiego.com/news/2010/jan/22/bonuses-uc-medical-center-execs-okd/">reported</a>:<br /><blockquote>Despite criticism from union leaders and rank-and-file employees, University of California regents yesterday overwhelmingly approved $3.1 million in incentive payouts to 38 medical center executives.<br /><br />The payouts mean, for instance, that <em>former UC San Diego Medical Center CEO Richard Liekweg will receive $136,174 in performance pay for the last fiscal year, added to his base of $660,500.</em><br /><br />Regents justified the payments by noting that incentive programs are common in the health care industry, and necessary to compete for top talent.<br /><br />'It’s the way this industry works,' said Regent William De La Pena, an ophthalmologist and medical director of eye clinics throughout Southern California.<br /><br /><em>At UCSD Medical Center, 10 senior managers will receive a combined $754,650 for surpassing goals set in areas ranging from <strong>improved patient safety</strong> to increased revenue. The bonuses amount to 14 to 23 percent added to executives’ salaries.</em><br /></blockquote><br /><strong>University of California - San Francisco</strong><br />Meanwhile, the San Francisco Chronicle <a href="http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/01/27/BA1U1BOD7C.DTL">reported</a> that a major University of California - San Francisco teaching hospital was also cited by the state Department of Public Health for quality problems:<br /><blockquote>San Francisco General was fined $25,000 for leaving a piece of surgical gauze in a patient who underwent an eight-hour operation for two types of cancer in September 2008. The foreign object was discovered about three months later and was removed without surgery during an office visit.<br /></blockquote><br />The Chronicle also <a href="http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/01/27/BA1U1BOI6U.DTL&type=health">reported</a> a possibly major breach in the confidentiality of patient records at the UCSF Medical Center:<br /><blockquote>Medical records for about 4,400 UCSF patients are at risk after thieves stole a laptop from a medical school employee in November, UCSF officials said Wednesday.<br /><br />The laptop, which was stolen on or about Nov. 30 from a plane as the employee was traveling, was found in Southern California on Jan. 8.<br /><br />There is no indication that unauthorized access to the files or the laptop actually took place, UCSF officials said, but patients' names, medical record numbers, ages and clinical information were potentially exposed.<br /><br />The security breach is UCSF's second in recent months. Last month, UCSF officials revealed that a faculty physician responding to an Internet 'phishing' scam potentially exposed the personal information of about 600 patients.<br /></blockquote><br />However, despite these obvious quality problems, the San Francisco Business Times <a href="http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2010/01/18/daily68.html">reported</a><br /><blockquote><em>University of California regents approved $500,000 in bonuses to six top officials at the UC San Francisco Medical Center</em>, part of a package of $3.1 million in payments to 38 hospital executives across the UC system.<br /><br />In an interview last week with UCSF Chancellor Susan Desmond-Hellman, she said that the <em>executive bonuses were tied to meeting specific performance goals, such as reducing clinical infections and increasing satisfaction ratings by patients</em>. She also pointed out that additional payments of $14.3 million to the UCSF Medical Center’s 6,600-strong workforce were approved earlier.<br /><br />The UCSF officials awarded bonuses were:<br /><br />* Mark Laret, chief executive officer, $181,227;<br />* Ken Jones, chief financial officer, interim chief operating officer, $89,162;<br />* Larry Lotenero, chief information officer, $66,045;<br />* John Harris, chief strategy and business development officer, $63,196;<br />* Susan Moore, finance director and interim chief financial officer, $53,261; and<br />* Sheila Antrum, chief nursing/patient care services officer, $49,280.<br /></blockquote><br /><strong>Summary<br /></strong><br />So, in summary, multiple executives at three major University of California medical centers received generous bonuses.  The rationale for these bonuses, given out at a time when the university system was under major financial constraints, was that they were incentives for exemplary performance and patient care.  <br /><br />Yet almost simultaneous with announcement of the bonuses were news reports indicating serious patient care problems at the same medical centers.  The point I am NOT trying to make is that the care at any of these medical centers is bad.  The examples of quality problems were limited.  I am sure that many other major medical centers hae had such quality problems as well.  However, the cases cited above were sufficient to argue that the care at these medical centers was not outstanding, not exemplary.  Yet, the bonuses were awarded not for acceptable performance or average quality.  Their rationale was exceptional performance and quality.  Thus, the rationale for the performance bonuses seems at best naive, if not foolish.  <br /><br />I would suggest, instead, that the sorts of bonuses given out at the University of California are a product of the current management culture that has been infused into nearly every health care organization in the US.  That culture holds that managers are different from you and me.  They are entitled to a special share of other people's money.  Because of their innate and self-evident brilliance, they are entitled to become rich.  This entitlement exists even when the economy, or the financial performance of the specific organization prevents other people from making any economic progress.  This entitlement exists even if those other poeple actually do the work, and ultimately provide the money that sustains the organization.  <br /><br />Although the executives of not-for-profit health care organizations generally make far less than executives of for-profit health care corporations, collectively, hired managers of even not-for-profit health care organizations have become richer and richer at a time when most Americans, including many health professionals, and most primary care physicians, have seen their incomes stagnate or fall.  They are less and less restrainted by passive, if not crony boards, and more and more unaccountable.  In a kind of multi-centric coup d'etat of the hired managers, they have become our new de facto aristocracy.  <br /><br />Or as we wrote in our previous post, executive compensation in health care seems best <a href="http://hcrenewal.blogspot.com/2009/12/compensation-madness-insiders-hijacking.html">described as Prof Mintzberg</a> described compensation for finance CEOs, "All this <em>compensation madness</em> is not about markets or talents or incentives, but rather about <em><strong>insiders hijacking established institutions for their personal benefit</strong></em>." As it did in finance, compensation madness is likely to keep the health care bubble inflating until it bursts, with the expected adverse consequences. Meanwhile, I say again, if health care reformers really care about improving access and controlling costs, they will have to have the courage to confront the powerful and self-interested leaders who benefit so well from their previously mission-driven organizations.  It is time to reverse the coup d'etat of the hired managers.

More California Medical Centers Plagued by Quality Problems While Their Executives Get Bonuses for "Improved Patient Care"

Earlier this week, we noted that while executives at one University of California medical center were getting large bonuses supposedly for ...

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UCI Medical Center Fails Inspection, UCI Executives Get Bonuses

Back in the early days of Health Care Renewal, we had many occasions to write about problems with the leadership of the University of California - Irvine (UCI) medical school.  Starting in late 2005, we posted  about various management problems at the institution, involving its liver transplant service, cardiology division, and bone marrow transplant service, (see posts <a href="http://hcrenewal.blogspot.com/2005/12/more-trouble-in-oc-golden-parachutes.html">here</a> and <a href="http://hcrenewal.blogspot.com/2006/01/even-more-trouble-in-oc-uci-bone.html">here</a>) which lead the new chancellor of the campus to "acknowledge a failure of leadership and accountability" (see post <a href="http://hcrenewal.blogspot.com/2006/04/some-themes-emerge-from-problems-at.html">here</a>.) Slightly more recently, we noted the almost 20 year history of questionable financial relationships that involved one of UCI's "biggest stars" in clinical researach and several pharmaceutical companies (see post <a href="http://hcrenewal.blogspot.com/2006/08/yet-more-trouble-in-oc-psychiatrist.html">here</a>).  Then, in 2007, we wrote about some strange contracting practices involving UCI and a local orthopedic practice (see post <a href="http://hcrenewal.blogspot.com/2007/03/strange-contracting-at-uci.html">here</a>).<br /><br />So it was deja vu all over again when last week the Los Angeles Times <a href="http://www.latimes.com/news/local/la-me-uci22-2010jan22,0,4604550.story">reported</a> about the latest batch of problems at UC Irvine Medical Center:<br /><blockquote>Federal investigators<em> found scores of problems at UC Irvine Medical Center during a fall inspection that again put the troubled hospital's Medicare funding at risk</em>, according to report released Thursday.<br /><br />In an 85-page report on their surprise October inspection, regulators said they observed poor oversight and mistakes by UCI doctors, nurses and pharmacists, leading to inadequate care that in some cases harmed patients.<br /><br />Among the findings:<br /><br />* An 82-year-old man was mistakenly given a narcotic patch by a medical resident, without approval of doctors or pharmacists. The patch led to an overdose that required emergency intervention and may have contributed to his death a week later.<br /><br />* A patient in the neuropsychiatric unit fell twice in three days and despite yelling 'Help me, doctor, help me,' suffered a head injury and had to be taken to intensive care.<br /><br />* An on-call resident did not respond to repeated emergency pages from nurses in the neurological intensive care unit, where a patient with an irregular heartbeat languished for more than an hour.<br /><br />* Pharmacists failed to monitor and store drugs correctly, allowing nurses to carry narcotics in their pockets and inject patients without proper oversight.<br /><br />The report comes a year after investigators from the Centers for Medicare and Medicaid Services documented repeated examples of poor oversight at the hospital and threatened to cut Medicare funding.<br /><br />In July, Medicare officials issued a finding of immediate jeopardy after investigators discovered that five UCI patients had received overdoses because nurses using pain medication pumps were not properly trained. UCI officials immediately began training nurses to use the pumps, the finding was lifted within 24 hours and the hospital submitted a plan of correction.<br /></blockquote>However, the 2010 continuation of the sad tale of UCI adds an interesting contrast.<br /><blockquote>UCI nurses said Thursday that <em>many of the latest problems stem from understaffing and other cost-cutting, even <strong>as the facility turned a $54.2-million profit</strong> last year and the <strong>chief executive earned an $83,250 bonus</strong>.</em><br /><br />'This is a problem of money. To provide extra training, extra staffing, is money,' said Beth Kean, California Nursing Assn. director for UC nurses, including 1,000 at UCI.<br /><br />Terry A. Belmont, who took over as the hospital's chief executive last year, disputed that the facility was understaffed.<br /></blockquote>The new wrinkle in the UCI saga seems to be that now the leadership of UCI has been raking in bonuses while the mismanagement of the organization apparently continues.<br /><br />Indeed, also last week several California newspapers reported on a series of bonuses granted to the top executives of the University of California system.  For example, <a href="http://www.latimes.com/news/local/la-me-uc22-2010jan22,0,487236.story">per the Los Angeles Times</a>, <br /><blockquote>The University of California regents Thursday approved <em>the controversial payment of $3.1 million in performance bonuses to 38 senior executives at UC's five medical centers</em>.<br /><br />The regents emphasized that the payments were <em>linked to improved patient health and stronger hospital finances</em> and said they were important tools to attract and retain talent. They said the bonuses were part of a 16-year-old plan funded by hospital revenue, not state funds or student fees. An additional $33.7 million is distributed among 22,000 lower-ranking medical employees.<br /><br />However, union activists denounced the executive bonuses as unconscionable as other parts of the university were coping with pay cuts and layoffs.<br /><br />'This is appalling to do this when they are telling the lowest-paid workers to stay in poverty,' said Lakesha Harrison, president of the American Federation of State, County and Municipal Employees Local 3299, which represents about 20,000 UC workers, including hospital technicians and campus custodians.<br /><br />Some of the union's members get bonuses of about $300 a year, Harrison said. In contrast, the payments to the 38 senior managers range from about $30,100 to nearly $219,000.<br /><br />The incentives were awarded after the UC medical center system met such targets as reducing catheter-related infections and saving money through group purchases of supplies, officials said.<br /><br />Among the payments approved Thursday by the regents in San Francisco were $218,728 to UCLA Medical Center Chief Executive David Feinberg, on top of his $739,695 base salary; $181,227 to UC San Francisco medical center Chief Executive Mark Laret, on top of $739,700 in pay; and $87,000, in addition to his $580,000 salary, for John Stobo, the UC system's senior vice president for health sciences.<br /></blockquote>Corroborating the assertion that the bonus plan is not new is a <a href="http://www.universityofcalifornia.edu/news/compensation/payroll2008/table3.pdf">document</a> that lists executive compensation at the University of California in 2008. (2009 data does not yet seem to be available on the web.) This document noted the following bonuses paid to University of California - Irvine medical leaders in 2008:<br />- Susan J Rayburn, Executive Director of Clinical Enterprise - Base Salary= $212,700, Bonus=$28,401<br />- Lisa M Reiser, Chief Patient Care Services Officer - $243,000, $26,507<br />- Eugene Spiritus, Chief Medical Officer - $310,000, $38,373<br />- Patricia D Thatcher, Executive Director - HR and Customer Service, Medical Center - $197,547, $17,542<br />- Cynthia A Winner, Chief Ambulatory Care Officer - $238,200, $24,371<br />- Maureen L Zehntner, Associate Vice Chancellor/ Chief Executive Officer, Medical Center - $555,000, $74,432<br /><br />Note that Dr Spiritus, the Chief Medical Officer, did not mention that he was a 2008 bonus recipient when he defended bonuses given to UCI leaders in the LA Times article,<br /><blockquote>'Everybody's fallible. We just have to make sure we have the right processes in place' to catch errors, <em>said Dr. Eugene Spiritus, UCI Medical Center's chief medical officer</em>.<br /><br /><em><strong>Spiritus also defended the compensation for hospital managers, saying they need to stay competitive in order to attract and keep talented managers</strong></em>, especially given the cost of living in California.<br /></blockquote><br />F Scott Fitzgerald wrote, "the very rich are different from you and me."  These days, it is executives and managers who are very different from you and me.  <br /><br />Physicians are beginning to dread the notion of "pay for performance," which may mean tiny increases in fees paid to physicians who uncritically follow wooden-headed guidelines based on over-simplified notions of disease, poor measurement schemes, and manipulated and suppressed clinical data.  <br /><br />However, for health care organization executives, "pay for performance" seems to mean lavish bonuses only tenuously related to any rational notion of performance.  In the example above, it seems that multiple UCI executives earned bonuses for their management of clinical affairs at the medical center in 2008, and at least the medical center CEO earned a bonus in 2009 for "improved patient health" while outside review of the medical center's performance in 2009 revealed "scores of problems" sufficient to threaten withdrawal of Medicare funding.  One wonders about the basis for all the millions in bonuses that have been paid to University of California executives over the years?<br /><br />In fact, the executive "pay for performance" programs that started in the for-profit corporate world, and now are prevalent in not-for-profit health care organizations, seem to reflect the culture of executive entitlement now so prevalent in the US (and maybe most developed countries.)  First, executives claim credit for any improvements in their organizations, while the workers in the trenches who actually accomplished the improvements get chump change.  Second, when things go wrong, the workers face salary cuts and lay-offs, while the executives' total compensation never seems to go down.  <br /><br />As we <a href="http://hcrenewal.blogspot.com/2009/12/98-million-dollar-man.html">mentioned before</a>, executive compensation in health care seems best described <a href="http://hcrenewal.blogspot.com/2009/12/compensation-madness-insiders-hijacking.html">as Prof Mintzberg described compensation</a> for finance CEOs, <em><strong>"All this compensation madness is not about markets or talents or incentives, but rather about insiders hijacking established institutions for their personal benefit."</strong></em> As it did in finance, compensation madness is likely to keep the health care bubble inflating until it bursts, with the expected adverse consequences. Meanwhile, I say again, if health care reformers really care about improving access and controlling costs, they will have to have the courage to confront the powerful and self-interested leaders who benefit so well from their previously mission-driven organizations.

UCI Medical Center Fails Inspection, UCI Executives Get Bonuses

Back in the early days of Health Care Renewal, we had many occasions to write about problems with the leadership of the University of Califo...

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Boston Scientific (Again) Settles - This Time, Charges of Kickbacks Disguised as Clinical Studies

One would think that the stories about bad behavior by health care organizations would quiet down just before Christmas, but no...<br /><br />As reported <a href="http://www.google.com/hostednews/ap/article/ALeqM5i6EeKMw1uQyqOJxROb_E5H2vMIeQD9CP8M1O0">by the AP</a>:<br /><blockquote>U.S. attorneys in Boston said Wednesday heart device maker <em>Boston Scientific will pay $22 million to resolve allegations its Guidant division paid kickbacks to doctors to get them to use its heart devices.</em><br /><br />The U.S. Department of Justice said Guidant paid physicians $1,000 to $1,500 each in 2003 and 2004 to participate in four studies, called RaCE, RaCE II, RaCE III, and MERITS. It said the studies were designed to increase sales of pacemakers and defibrillators.<br /><br />Federal officials said the <em>company targeted doctors who favored products made by other companies, hoping the payments would induce them to use Guidant devices more often</em>. They said Guidant submitted claims for payment on the devices to Medicare.<br /><br />Boston Scientific did not admit wrongdoing as part of the civil settlement. Under the agreement, its cardiac rhythm management division will have to publicly disclose payments to physicians on a Web site. Boston Scientific also entered into a <em>corporate integrity agreement</em>.<br /></blockquote><br />So here we have an example of a "<a href="http://hcrenewal.blogspot.com/2008/08/article-in-annals-of-internal-medicine.html">seeding study</a>," that is, a marketing effort to persuade physicians to prescribe a product disguised as a clinical research study, but for medical devices, not drugs.  Seeding studies seem to combine multiple kinds of unethical behavior, deceptive marketing and manipulated research.  There had been some question in the past whether seeding studies exist, but this is the second recent example to come to light, suggesting that not only do they exist, but that they are used by device as well as pharmaceutical companies.<br /><br />Note that, as <a href="http://www.bloomberg.com/apps/news?pid=20601103&sid=a0ZPcYxXqf88">Bloomberg reports</a>, this is the third major settlement of allegations of bad behavior made by Boston Scientific, <br /><blockquote>The company agreed last month to pay $296 million to settle a Justice Department probe into Guidant’s handling of heart devices and restated third-quarter results. [See post <a href="http://hcrenewal.blogspot.com/2009/11/boston-scientific-to-plead-guilty-of.html">here</a>.] In 2007, Boston Scientific agreed to pay $240 million to settle more than 8,000 lawsuits claiming Guidant hid defects in defibrillators, which are devices that shock the heart back into regular rhythm. <br /></blockquote>Cataloging legal settlements seems to be a useful way to assess the sorts of bad behavior manifested by large health care organizations (see some posts <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">here</a>). However, as we have said frequently, such settlements, including the "corporate integrity agreements" now frequently attached to them, seem to have done little to deter bad behavior.  Usually, the companies involved only need to pay fines, and no individual who performed, directed or approved unethical or illegal acts will suffer any negative consequences. I submit once again that such fines are viewed merely as costs of doing business by the affected companies, and do not deter future bad behavior.<br /><br />I submit that would-be health care reformers who want to improve care, reduce costs and improve access should advocate for real negative consequences for people who implement, direct or approve the various versions of fraud, kickbacks, and miscellaneous corruption and malfeasance we have discussed on Health Care Renewal.<br /><br />By the way, the <a href="http://www.bostonscientific.com/AboutUs/Leadership.bsci/,,/navRelId/1004.1012/seo.serve">board of directors</a> of Boston Scientific includes two noted academics with leadership roles in academic health care.  Marye Anne Fox is the <a href="http://www-chancellor.ucsd.edu/leadership.html">Chancellor of the University of California - San Diego</a>, and hence the leader of a major medical school and academic medical center.  The <a href="http://www.ucsd.edu/explore/about/index.html">university's mission statement</a>, alongside which sits her picture, proclaims it "strives to maintain a climate of fairness, cooperation, and professionalism." Uwe Reinhardt, Professor at Princeton, is a noted health care economist, and <a href="http://economix.blogs.nytimes.com/author/uwe-e-reinhardt/">blogger on the Economix blog</a> for the New York Times.  Perhaps such august academic personages could tell  us how they are assuring that the company they are paid well to oversee upholds, rather than undermines professionalism and fairness.

Boston Scientific (Again) Settles - This Time, Charges of Kickbacks Disguised as Clinical Studies

One would think that the stories about bad behavior by health care organizations would quiet down just before Christmas, but no... As report...

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Did a Yakuza Boss Pay "A Million Dollars for One Liver?"

One of the more bizarre stories to appear on Health Care Renewal just resurfaced.  To summarize, in June, 2008, we <a href="http://hcrenewal.blogspot.com/2008/06/for-few-yen-more-ucla-liver-transplants.html">posted</a> about the strange case of four Japanese men, allegedly affiliated with Yakuza criminal organizations, who received liver transplants from the UCLA Medical Center, apparently with some alacrity. All likely paid full list prices for their procedures, and two later donated $100,000 each to the medical center. The case raised concerns by several notables (including Senator Charles Grassley, and Professor Arthur Caplan) about the integrity of the transplant system. Presumably these concerns were based on suspicions that the four may have received a higher priority than others on the list. More concerns should have been raised after it was revealed that shadowy characters threatened a reporter who started to investigate the case in Japan, and the reporter's family (see post <a href="http://hcrenewal.blogspot.com/2008/06/worst-example-of-anechoic-effect-erase.html">here</a>).  Later, the Chancellor for Medical Sciences and Dean of the David Geffen School of Medicine's public response to the case side-stepped all the important concerns while deploying a series of logical fallacies (see post <a href="http://hcrenewal.blogspot.com/2008/06/strawmen-red-herrings-and-liver.html">here</a>).<br /><br />Then, despite all the colorful details and ethical concerns presented by this story, it faded from view for a year and a half.  <br /><br />Last night, the US investigative reporting television show "60 Minutes" aired a follow-up on the Yakuza transplants, following closely on the publication of a book, Tokyo Vice, by Jake Adelstein, the reporter who first broke the story.<br /><br />The <a href="http://www.cbsnews.com/stories/2009/11/01/60minutes/main5484118.shtml?tag=contentMain;contentBody">web-based version</a> of the 60 Minutes story reprised the main points, but added emphasis to a few of interest to Health Care Renewal.  <br /><br />First, the 60 Minutes piece raised suspicions that the Yakuza members paid a premium to jump the UCLA liver transplant priority list:<br /><blockquote>Getting into the U.S. was one thing, but getting a liver transplant at a leading American medical center like UCLA was something else altogether.<br /><br />'What's the average waiting time for someone in California waiting for a liver transplant?' [CBS correspondent Lara] Logan asked California attorney Larry Eisenberg.<br /><br />'It's probably realistically three years. And it could be much longer,' he replied.<br /><br />Not for Tadamasa Goto, who got a liver in just six weeks. Eisenberg finds that surprising, especially since Goto was number 80 on the waiting list.<br /><br /><em>'It should not be possible that an unsavory character from out of the country, with ties to organized crime, comes into the United States and gets a priority and obtains a transplant</em>,' Eisenberg said.<br /><br />Two families, Eisenberg's clients, both lost loved ones waiting for livers at another transplant center in the same area: Salvador Ceja was number two on the waiting list; John Rader was number five.<br /><br />'Do you think, for one second, that this was legitimate? That they stood in line and waited just like your husband did?' Logan asked Rader's widow Cheryl.<br /><br />'Absolutely not,' she replied. 'No. Because nobody gets a liver that quickly.'<br /><br />'I think they were playing God,' Yolanda Carballo, Ceja's stepdaughter, added. 'Now, I think they were picking and choosing who they wanted to give a liver to.'<br /><br />'So, in your minds, what was this about?' Logan asked.<br /><br />'Money,' Rader said. 'Spoke loud and clear. And they listened.'<br /><br />'That's what it was all about. Money,' Carballo agreed.<br /><br />Three of Goto's Yakuza cronies also got liver transplants at UCLA. For them, money was no object. <em>UCLA says each of their transplants cost about $400,000 dollars; the Yakuza all paid cash.</em><br /><em><br /></em><br /><em>The hospital also acknowledged Goto and another Yakuza each made $100,000 donations to the transplant center.</em><br /><em><br /></em><br /><em>Adelstein says Goto paid even more. <strong>'According to police documents and sources, a million dollars for Goto. A million dollars</strong>,' </em>he told Logan.<br /><br />'A million dollars for one liver?' she asked.<br /><br />'A million dollars for one liver,' Adelstein said.<br /></blockquote><br />Second, 60 Minutes emphasized the risk Mr Adelstein faced after he drew attention to the story of the Yakuza liver transplants at UCLA:<br /><blockquote>Tadamasa Goto returned to his life of crime as a Yakuza godfather and it all stayed hidden until Adelstein was tipped off. It took him years to piece together the details for a newspaper story. Then, when word got out that Adelstein knew, <em>the Yakuza tried to buy his silence, offering him half a million dollars.</em><br /><br />Asked if he was tempted by the cash offer, Adelstein said, 'Of course I'm tempted. You know? When someone offers you half a million dollars not to write something, but then again, you know I don't want to be owned by organized crime the rest of my life.'<br /><br />Adelstein wrote the story for 'The Washington Post' and it eventually made its way back to Japan. The news infuriated the Yakuza bosses. For Goto, it was a humiliating blow from which he would never recover.<br /><br />'I heard from someone very close to him that as he was leaving and getting in his car he said, <em><strong>'That goddamn American Jew reporter, I wanna kill him,</strong></em>'' Adelstein said.<br /><br />Japanese and U.S. law enforcement agents took Goto's threat seriously.<br /><br />Adelstein now lives alone, under Tokyo police protection; his wife and children are in hiding.<br /><br />'Are you concerned that there is an American citizen here whose life is at risk?' Logan asked the U.S. Embassy's Mike Cox.<br /><br />'Very much so. I mean, we think the Japanese police are doing what they can to make sure that no harm comes to Mr. Adelstein. I mean, we certainly don't want to see anything happen to him,' Cox said.<br /><br />'What do you have to do in your daily life to stay alive?' Logan asked Adelstein.<br /><br />'You have to keep your rooms shuttered, because you don't want a sniper to pick you off across from somebody’s house,' he said.<br /><br />Asked if he lives in darkness, Adelstein said, 'When I'm up in my room typing, yes. All the rooms are shuttered. You gotta be very careful on rainy days. Because when Yakuza take people out, they like to do it on rainy days, because fewer people are on the streets and the rain washes away trace evidence.'<br /><br />Even in disgrace, Tadamasa Goto still has a small army of loyal soldiers and a hit out on Jake Adelstein. The Yakuza say he will never be safe.<br /><br /><em>'When someone does something that causes them (Yakuza) to lose face, they will use any means possible, legal or illegal, to crush the person who has gotten in their way, who has humiliated them</em>,' the disguised Yakuza boss told Logan.<br /></blockquote><br />Finally, 60 Minutes found that the UCLA Medical Center continued to be uncooperative, cloaking its refusal to categorically refute allegations that it sold a liver for a million dollars in concerns with patient confidentiality:<br /><blockquote>Asked if UCLA knew who these people were, Adelstein said, 'When you see guys with lots of tattoos, missing fingers, wouldn't it occur to you, like, 'Oh, this guy is a gangster.' I can't believe they didn't know.'<br /><br />Attorney Eisenberg says transplant rules require extensive background checks on every patient. Yet,<em> UCLA insisted to federal investigators they had 'no knowledge' that Goto or his cronies had ties to Japanese organized crime</em>.<br /><br /><em>UCLA declined all of 60 Minutes' requests for interviews. The only thing the medical center will say on the record is that their program has been reviewed and found to be in 'total compliance' with liver transplant rules</em>.<br /><br />The hospital told us, 'state and federal patient confidentiality laws prohibit UCLA from responding to the…issues raised by 60 Minutes.'<br /><br />'In my opinion, the medical center has a moral and ethical obligation to determine the source of those funds,' Eisenberg said.<br /><br />'A moral and ethical obligation, but apparently no legal obligation?' Logan asked.<br /><br />'Well, it's not addressed in the rules specifically,' Eisenberg said<br /></blockquote><br />As I wrote in my first post on this case, you just can't make this stuff up...<br /><br />However, the colorfulness of the case should not distract from its very serious implications.  We have written a lot in this blog about the <a href="http://hcrenewal.blogspot.com/2007/08/bling-bling-poltical-correctness-and.html">anechoic effect</a>, how cases with important implications about ethics, governance and leadership in health care often fail to attract the attention they deserve.  We have opined that academics and professionals have realized that it is simply "not done" to discuss cases which might offend the powerful leaders of health care organizations.  We have written about whistle-blowers who have lost jobs or been theatened with lawsuits.  But in this case, the journalist who wrote about the case allegedly has received death threats and lives in hiding under police protection.  This may be the most serious case of the anechoic effect known.<br /><br />Furthermore, we have written a lot in this blog about how leaders of health care organizations ought to uphold their organizations' mission and the core values to which physicians and other health care professionals have sworn devotion.  The continued disinclination of UCLA leadership to respond to charges that its medical center accepted $1 million to put Japanese gangsters at the head of the liver transplant list may reflect fear of gangsters who also allegedly threatened the life of the journalist who reported the case.  But by failing to rebut such charges, the leadership leaves the impression that they cannot claim to be better than the moral equivalents of gangsters.  Institutions that aspire to join "<a href="http://dgsom.healthsciences.ucla.edu/about/">the ranks of the nations [sic] elite medical schools</a>" ought also to aspire to have leaders that have better ethics than Yakuza bosses.  <br /><br /><a href="http://www.transparency.org./global_priorities/health/">Transparency International</a> has <a href="http://www.transparency.org/publications/gcr/gcr_2006">suggested</a> that health care corruption is a global scourge that costs lives.  Serious health care reform cannot ignore health care corruption as a cause of excess costs, denied access, and poor quality.  Health care organizations ought to be held to a higher standard of ethics, and be less prone to corruption than, for example, garbage hauling firms.  Health care organizations ought to subscribe to rigorous codes of ethics, impartially enforced, which apply to all within the organizations, including top leaders.  While the accused need to be afforded due process, whistle-blowers must also be protected.  In my humble opinion, true health care reform requires so confronting health care corruption.  Maybe the leadership of the Gefen School of Medicine might want to consider setting an example in this regard.  <br /><br />Note: Jake Adelstein's book is available <a href="http://www.randomhouse.com/acmart/catalog/display.pperl?isbn=9780307378798">here</a>, and it was reviewed by Reuters <a href="http://in.reuters.com/article/lifestyleMolt/idINTRE59C0NX20091013">here</a> and by the AP (via the Canadian Press) <a href="http://www.google.com/hostednews/canadianpress/article/ALeqM5im14v74_JcALAnj5xqPbv_2PGGYA">here</a>.

Did a Yakuza Boss Pay "A Million Dollars for One Liver?"

One of the more bizarre stories to appear on Health Care Renewal just resurfaced.  To summarize, in June, 2008, we posted  about the strange...

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