healthy4u: concentration of power

Planned Obsolescence Disguised as Innovation, Oligopoly Disguised as a Free Market, and the Enrichment of Oligarchs

The New York Times published another<a href="http://www.nytimes.com/2014/04/06/health/even-small-medical-advances-can-mean-big-jumps-in-bills.html"> article</a> in its series on the high cost of US health care.  This one, focused on the care of type 1 diabetes mellitus and other chronic diseases, shines some light on the business management practices that now determine how our health care system functions, or not, and implies who benefits the most from them. Planned Obsolescence Disguised as Innovation The article first discussed the brave new world of type 1 diabetes treatment.  The introductory theme was: <blockquote class="tr_bq">Today, the routine care costs of many chronic illnesses eclipse that of acute care because new treatments that keep patients well have become a multibillion-dollar business opportunity for device and drug makers and medical providers.</blockquote> Much of modern diabetes treatment seems to depend on medical devices and disposable medical supplies: <blockquote class="tr_bq">That captive audience of Type 1 diabetics has spawned lines of high-priced gadgets and disposable accouterments, borrowing business models from technology companies like Apple: Each pump and monitor requires the separate purchase of an array of items that are often brand and model specific. A steady stream of new models and updates often offer dubious improvement: colored pumps; talking, bilingual meters; sensors reporting minute-by-minute sugar readouts. [Diabetes patient] Ms. Hayley’s new pump will cost $7,350 (she will pay $2,500 under the terms of her insurance). But she will also need to pay her part for supplies, including $100 monitor probes that must be replaced every week, disposable tubing that she must change every three days and 10 or so test strips every day.</blockquote> Of course, the device and supply manufacturers claim that the high prices reflect the value of the wondrous new innovations: <blockquote class="tr_bq">Companies that produce the treatments say the higher costs reflect medical advances and the need to recoup money spent on research.</blockquote> Yet now the Times reporter was able to find physicians who claim the "innovations" are really just the latest version of planned obsolescence: <blockquote class="tr_bq">Diabetes experts say a good part of what companies label as innovation amounts to planned obsolescence. Just as Apple customers can no longer buy an iPhone 3 even if they were content with it, diabetics are nudged to keep up with the latest model.</blockquote>For example, <blockquote class="tr_bq"><div class="story-body-text story-content" data-para-count="410" data-total-count="4006" id="story-continues-3" itemprop="articleBody">Those companies spend millions of dollars recruiting patients at health fairs, through physicians’ offices and with aggressive advertising — often urging them to get devices and treatments that are not necessary, doctors say. 'They may be better in some abstract sense, but the clinical relevance is minor,' said Dr. Joel Zonszein, director of the Clinical Diabetes Center at Montefiore Medical Center.</div><div class="story-body-text story-content" data-para-count="410" data-total-count="4006" id="story-continues-3" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="109" data-total-count="4115" itemprop="articleBody">'People don’t need a meter that talks to them,' he added. 'There’s an incredible waste of money.'</div></blockquote> Pharmaceutical companies have also discovered this model. <blockquote class="tr_bq">insulin ... has been produced with genetic engineering and protected by patents, so that a medicine that cost a few dollars when Ms. Hayley was a child now often sells for more than $200 a vial, meaning some patients must pay more than $4,000 a year.</blockquote> In particular, <blockquote class="tr_bq">Synthetic human insulin is safer for patients, who sometimes developed reactions to animal insulin. But it is made by only three companies: Eli Lilly, Sanofi and Novo Nordisk. Manufactured in microbes, each one’s product has minor dissimilarities that reflect the type of cell in which it was made. Since the companies owned the cell lines, it is nearly impossible for other companies to make exact copies or even similar versions that would be cheaper, even once the patents expire. And the pharmaceutical companies defend the patents ferociously. <div class="story-body-text story-content" data-para-count="270" data-total-count="12681" itemprop="articleBody">What’s more, the three companies continued to refine their product, adding chemical groups that made the insulin absorb somewhat more quickly or evenly, for example. They are called insulin analogues, and their benefits are promoted tirelessly to doctors and patients.</div></blockquote> Of course, the pharmaceutical companies also claim that it's all about innnovation, <blockquote class="tr_bq">Dr. Todd Hobbs, chief medical officer of Novo Nordisk, defended the rising prices of insulin, linking them to medical benefits. 'The cost to develop these new insulin products has been enormous, and the cost of the insulin to the consumer in developed countries has risen to enable these and future advancements to occur,' he wrote in an email.</blockquote> Not everyone is convinced, <blockquote class="tr_bq">'The insulins are tweaked for minor benefits that may help a small number of patients with difficult-to-control diabetes, and result in major price increases for all,' [Kings College, London, UK Professor] Dr. Pickup said. Because of analogues, he added, Britain’s National Health Service has had to spend 130 percent more on insulin in the past five years. In the United States, said Dr. Zonszein at Montefiore, the price of Humalog, Lilly’s analogue insulin, was typically two to four times that of its older human insulin line, called Humulin. 'There is not a lot of difference between Humulin and analogues,' he said, but he noted that Humulin was getting 'hard to find.' Sanofi Aventis has stopped selling its older product in the United States, and Mr. Kliff, the financial analyst, said other companies were likely to follow suit, effectively forcing patients to use the costlier versions.</blockquote> The arguments about valuable innovation also do not explain why the prognosis of diabetes in the US does not seem to reflect all the money we spend on the disease, <blockquote class="tr_bq"><div class="story-body-text story-content" data-para-count="306" data-total-count="4993" itemprop="articleBody">Complication rates from diabetes in the United States are generally higher than in other developed countries. That is true even though the United States <a href="http://www.cdc.gov/diabetes/statistics/complications_national.htm">spends more</a> per patient and per capita treating diabetes than elsewhere, said Ping Zhang, an economist at the Centers for Disease Control and Prevention.</div><div class="story-body-text story-content" data-para-count="306" data-total-count="4993" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="280" data-total-count="5273" itemprop="articleBody">The high costs are taking their toll on public coffers, since 62 percent of that treatment money comes from government insurers. The cumulative outlays for treating Type 1 and Type 2 diabetes <a href="http://www.diabetes.org/advocacy/news-events/cost-of-diabetes.html">reached nearly $200 billion</a> in 2012, or about 7 percent of America’s health care bill.</div></blockquote> So to summarize, there is considerable evidence that companies that make drugs and devices to manage type 1 diabetes constantly provide "innovations," yet most are minor changes that encourage obsolescence of previous products, but do not provide important increases in benefits or reductions in harm for patients.  Oligopoly Disguised as a Free Market Many in the US sing the praises of our supposed free-market health care system.  As noted above however, the insulin market is an oligopoly, dominated by three companies.  The diabetes device market is also dominated by a few companies, and in particular, the insulin pump market is dominated by a single company, <blockquote class="tr_bq"><a href="http://www.medtronic.com/">Medtronic</a> is the dominant insulin pump manufacturer, serving 65 percent of American patients and the majority of those worldwide. Though smaller companies sell cheaper pumps, it is hard to make inroads: Once familiar with the Medtronic system and its extensive support network for troubleshooting problems, patients are reluctant to switch. Doctors are leery of prescribing equipment from a new company that may be out of business in a year; their office computer may not sync with the new software anyway.</blockquote> Of course, Medtronic public relations will justify it all again based on innovation, <blockquote class="tr_bq">Medtronic declined to talk about specific prices, but said a core tenet was to make only 'a fair profit.' Amanda Sheldon, a spokeswoman, added: 'We are committed to reinvesting in research and development of new technologies to improve the lives of people with diabetes, and our current pricing structure ensures that we can bring new products to market.' </blockquote> The article also discussed the prices of treating chronic diseases other than diabetes.  For example, see how a nominally non-profit hospital priced treatments for chronic diseases, <blockquote class="tr_bq">Dr. Kivi was on high doses of steroids for debilitating joint pain that left him unable to walk at times. But when his last three-hour infusion at NYU Langone Medical Center’s outpatient clinic generated a bill of $133,000 — and his insurer paid $99,593 — Dr. Kivi was so outraged that he decided to risk switching to another drug that he could inject by himself at home. </blockquote> However,  this pricing appears to have been facilitated by the hospital's increasing market domination generated by its purchase of physician practices, <blockquote class="tr_bq">He had moved his care to NYU Langone to follow his longtime doctor, who had moved her practice from a nearby hospital where the same infusion had been billed at $19,000. The average price that hospitals paid for Dr. Kivi’s dose of Remicade late last year was about $1,200, according to Medicare data.</blockquote> So in summary, a few companies now dominate the production of drugs and devices for the management of diabetes, and a few large hospitals may increasingly dominate the treatment of particular chronic diseases.  Such oligopolists are able to increase prices without improving treatment to or outcomes of patients. Enrichment of the Oligarchs This example shows how the current US health care system is dominated by huge organizations, mostly for-profit corporations but including some nominally non-profit corporations that act similarly.  They loudly proclaim innovation, but much of that innovation seems to provide few benefits to patients, and actually appears to be planned obsolescence.  The result is high and ever-rising prices. So if patients do not benefit from this, who does? It does not appear to be the health care professionals, <blockquote class="tr_bq">Meanwhile, as the price of supplies rises, endocrinologists remain among the lowest-paid specialists in American medicine, meaning severe physician shortages in many areas and long waits to see a doctor.</blockquote> We  have seen other examples of how leaders of the big health care organizations have become as<a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation"> rich as royalty</a>.  Therefore, let us consider the pay of the leaders of the organizations mentioned above.  I will focus on the two US based corporations, Eli Lilly and Medtronic, and the New York hospital, NYU Langone Medical Center. Eli Lilly According to the company's <a href="http://investor.lilly.com/secfiling.cfm?filingID=59478-14-90&CIK=59478">2014 proxy statement</a>, the 2013 total compensation of its five highest paid hired executives was - John C Lechleiter PhD, CEO                                      $11,217,000 - Derica W Rice, CFO                                                   $5,176,822 - Jan M Lundberg, PhD, EVP, Science and Technology   $4,774,535 - Michael J Harrington, General Counsel                          $3,174,222 - Erico A Conterno, President Lilly Diabetes                    $3,009,041 Note that all of these executives save Mr Harrington have also amassed more than 100,000 shares of company stock, and Dr Lechleiter has amassed more than 1,000,000. It should be no surprise, given our recent discussion (e.g., <a href="http://hcrenewal.blogspot.com/2014/04/finally-article-in-large-circulation.html">here</a>) of the currently symbiotic relationship among top health care corporations and academic medicine, that several of the members of the Lilly board of directors that has exercised stewardship over the company, and is thus responsible for these gargantuan compensation packages and the business practices discussed above are top academic leaders.  These include, - Alfred G Gilman, MD, PhD, Regental Professor Emeritus, recent (until 2009) executive vice presdient, provost, and dean of medicine, University of Texas Southwestern  - William G Kaelin Jr, MD, Professor of Medicine, Associate Director of Basic Science, Dana-Farber Cancer Center, Harvard University - Marschall S Runge MD, Executive Dean and Chair of the Department of Medicine, University of North Carolina Medical School - Katherine Baicker PhD, Professor of Health Economics, Harvard University School of Public Health  (I must note that Prof Baicker is also - amazingly - on the Medicare Payment Advisory Committee, MEDPAC). - Ellen R Marram, Trustee, New York-Presbyterian Hospital - Ralph Alvarez, President's Council, University of Miami - R David Hooper, Trustee, Children's Hospital of Colorado - Franklyn G Pendergast MD PhD, Professor, Mayo Medical School All but the newest directors were paid at least $250,000 a year by the company (and thus by the executives the directors are supposed to supervise), and all but the newest directors had accumulated tens of thousands of shares of stock or the equivalent as pay for their services. Medtronic Similarly, according to the company's<a href="http://phx.corporate-ir.net/phoenix.zhtml?c=76126&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTkwMjY0MzAmRFNFUT0wJlNFUT0wJlNRREVTQz1TRUNUSU9OX0VOVElSRSZzdWJzaWQ9NTc%3d"> 2013 proxy</a> (the latest now available), CEO Omar Ishrak made $8,975,866 in 2013, and the next four highest paid executives all made over $2,500,000 each.   Mr Ishrak owned or could acquire the equivalent of more than 500,000 shares of stock, and the other top paid executives owned of could acquire from over 100,000 to over 1,000,000 shares of stock. Again, the executives were nominally supervised by a board of directors that included an academic and non-profit leader, Dr Victor J Dzau, MD former chancellor for health affairs at Duke University, and president-elect of the Institute of Medicine (note that we discussed Dr Dzau's conflicts of interest most recently <a href="http://hcrenewal.blogspot.com/2014/02/incoming-president-of-iom-outed-as.html">here</a>).  It also included a former government leader, Michael O Leavitt, former US Secretary of Health and Human Services; and a hospital leader, Preetha Reddy, Managing Director of Apollo Hospitals Enterprise Limited (India).  NYU Langone Medical Center The Medical Center's<a href="http://www.guidestar.org/FinDocuments/2012/133/971/2012-133971298-09798bbc-9.pdf"> 2011 US form 990</a> is old, but the latest available, and is remarkably obscure, omitting, for example, mentioning the titles of any of the people listed as highest paid officers and employees.  The current CEO, was listed as receiving total compensation of just over $2.000,000.  Four individuals then received over $1,000,000.  The 990 form also mentioned that the Medical Center provided some individuals with first class travel, tax gross-up payments, housing allowances, and reimbursement for personal services.  Neither the 990, nor the center's <a href="http://www.med.nyu.edu/about-us/who-we-are/medical-center-leadership/trustees">web-site</a> makes all the possible conflicts of interest of its trustees obvious.    So in summary, the large organizations, for-profit and non-profit, that are able to greatly increase their prices through planned obsolescence disguised as innovation, and oligopoly disguised as free markets, are able to make their top executives very rich, and also enrich those who are supposed to exercise stewardship over them.  Summary An extensive journalistic investigation revealed how certain aspects of chronic care in the US health care system are dominated by a few large organizations.  These organizations are able to charge very high prices, mainly through market domination, and with the aid of marketing and public relations that tout planned obsolescence as valuable innovation.  The leaders of these organizations have become wealthy, often fabulously so.  This state of affairs has not been challenged by those who are supposed to provide stewardship, including many prominent academics. The US health care system is the most expensive, on a per capita basis, in the world, and far more expensive than that in any other developed country.  Yet there is no evidence that its results are superior to those of other countries.  What evidence there is suggests in fact that our results are mediocre at best. The current example suggests how the US system differs from those of other countries.  It has an ostensible free market focus.  Yet the system appears more to be an oligopoly, with most of its market components dominated by a few large organizations, run as an oligarchy, by a small, overlapping in-group of managers, executives and their cronies, with elements of corporatism, that is with the cooperation of, rather than regulation by government entities and leaders A real free market health care system would include a level playing field.  This could only be achieved by the government acting as a fair umpire, not a crony.  Anti-competitive practices would have to end.  Oligopolies would have to be broken.  Deceptive marketing and public relations would have to be exposed.  Leaders would have to be made accountable, especially for putting patients' and the public's health ahead of their own enrichment.  All this would be horribly difficult, as the oligarchs have amassed much money and control, and would oppose, possibly violently, any effort to challenge them.  If we do not challenge them in the US, however, not only will our health care continue to become ever more expensive, less accessible, and less beneficial to patients, but we will all cease to be citizens of one of the first real democracies, and end up serfs instead.

Planned Obsolescence Disguised as Innovation, Oligopoly Disguised as a Free Market, and the Enrichment of Oligarchs

The New York Times published another article in its series on the high cost of US health care. This one, focused on the care of type 1 diabetes mellitus and other chronic diseases, shines some light …

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14 Apr 2014

No Fooling - When a Retired Conservative Politician Warns About Oligarchy...

then things must be getting really bad. Of course, we have been warning about <a href="http://hcrenewal.blogspot.com/search/label/oligarchy">oligarchy</a>, and related issues such as <a href="http://hcrenewal.blogspot.com/search/label/concentration%20of%20power">concentration of power</a>, <a href="http://hcrenewal.blogspot.com/search/label/oligopoly">oligopoly</a>  in health care for a long time.  Basically, we have been warning that health care is increasingly run by a small group of insiders, mostly professional managers/ executives, and their cronies, who often have multiple overlapping leadership positions (e.g., as we <a href="http://hcrenewal.blogspot.com/2014/03/better-late-than-never-jama-article.html">discussed</a> recently, leadership of one health care organization while being member of the board of another), or may interchange positions through the <a href="http://hcrenewal.blogspot.com/search/label/revolving%20doors">revolving door</a>.  It appears that this pattern is merely part of a larger one involving US and even global society. While warnings about the growing threat of oligarchy or plutocracy have mainly come from people (including your loyal Health Care Renewal bloggers) who might be regarded as out of the mainstream, that is changing. We have a striking local example. David Carlin is a former Majority Leader of the Rhode Island Senate.  While he is a Democrat, he could hardly be called a flaming leftist.  He just published an <a href="http://www.providencejournal.com/opinion/commentary/20140401-david-carlin-is-it-oligarchy-in-democracy-out.ece">op-ed</a> in the Providence Journal which opened, <blockquote class="tr_bq">I am not a leftist. Far from it. Not only have I become a conservative in my old age, but I find myself growing more conservative every month.</blockquote> He then went on, <blockquote class="tr_bq"> Nonetheless, I think those on the left are correct about one thing, at least. They are right when they warn us that the United States, where the top 1 percent of people own about 40 percent of the nation’s wealth, has a dangerous imbalance of wealth. Please don’t misunderstand. I am far from agreeing with the leftist notion that the ideal society would be one in which wealth is equally distributed. This is absurd. Nonetheless, this great inequality of wealth is dangerous for America. For it is making the United States less and less a democracy (a form of government in which the people rule) and more and more an oligarchy (a form of government in which a small number of very rich people rule).</blockquote> He did propose a specific remedy for the problem.  However, he did warn of the consequences in dire terms. <blockquote class="tr_bq">in the United States we have a special problem. For we are and always have been philosophically democratic. We believe that government is legitimate to the degree — and only to the degree — that it is chosen by the people. When we conclude that in reality our government is controlled by the rich and super-rich, not the people, we will experience a great legitimacy crisis; our government will no longer feel legitimate to us, and thus it will not receive the deference that legitimate authority is entitled to. Lawlessness and disorder will follow.</blockquote> That is pretty strong, and when people like Mr Carlin start making such strong warnings, things must be really bad. In my humble opinion, there are already plenty of reasons to have doubts about whether the ostensible authorities in health care are legitimate.  Just to mention some recent examples: we have discussed how the leaders of two major prestigious non-profit health care organizations (look <a href="http://hcrenewal.blogspot.com/2014/02/incoming-president-of-iom-outed-as.html">here</a> and <a href="http://hcrenewal.blogspot.com/2014/03/american-board-of-internal-medicine.html">here</a>) and one major medical school (look <a href="http://hcrenewal.blogspot.com/2014/03/turnabout-is-fair-play-why-university.html">here</a>) were revealed to simultaneously be responsible for the governance of for-profit health care organizations, some of which had clear track records of ethical misadventures which cast doubt on the abilities of these leaders to uphold their organizations' missions.  Two of the three leaders subsequently dropped their outside board memberships, but not their leadership positions, and their previous actions in those positions have not been revisited. In health care, if we do not re-establish leadership which is accountable for putting the health of patients and the public ahead of self-interest, the deluge will not be far behind.

No Fooling - When a Retired Conservative Politician Warns About Oligarchy...

then things must be getting really bad.Of course, we have been warning about oligarchy, and related issues such as concentration of power, oligopoly in health care for a long time. Basically, we hav…

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01 Apr 2014

Who Knew? ... Judge Finds that Hospital Takeover of Medical Practices Raised Prices

A story that caused only a few ripples in the media in late January, 2014, corroborates concerns about the increasing concentration of power in health care, and suggests new skepticism about the continuing transition of physicians from independent professionals to corporate employees. The Judge Quashes a Hospital System's Acquisition of Physicians' Practices The original story was carried, albeit briefly, in some national business news sources, e.g., the <a href="http://online.wsj.com/news/articles/SB10001424052702304856504579340733626090534">Wall Street Journal</a> and Bloomberg news.   In summary, according to the WSJ, <blockquote class="tr_bq">A federal judge ruled Friday that an Idaho hospital system must unwind its acquisition of the state's largest independent doctor group, a decision that could have significant implications as health-care providers nationwide increasingly seek to join forces.</blockquote> In particular, <blockquote class="tr_bq"> At issue was St. Luke's Health System's 2012 deal for the 40-doctor Saltzer Medical Group. The FTC argued the merger would reduce competition among primary-care physicians and give St. Luke's extra muscle to extract higher payments from health plans, which, in turn, could raise insurance prices for consumers.</blockquote> The Judge seemed to agree, <blockquote class="tr_bq">U.S. District Judge B. Lynn Winmill ruled the deal anticompetitive, but offered comments that reflected current tensions in the debate over industry consolidation. Judge Winmill said he was 'convinced' the deal would have improved the delivery of health care in the region. But he ruled that 'there are other ways to achieve the same effect that do not run afoul of the antitrust laws and do not run such a risk of increased costs.' The judge said he would order St. Luke's to fully divest Saltzer's physicians and assets. The court made only a summary of the ruling public, sealing the full decision temporarily so confidential business information can be redacted. </blockquote> Furthermore, the Bloomberg <a href="http://www.businessweek.com/news/2014-01-24/hospital-antitrust-case-won-by-u-dot-s-dot-over-doctor-group-merger-1">coverage</a> raised a related issue, <blockquote class="tr_bq">David Balto, an antitrust lawyer in Washington who has represented consumer groups, said the ruling could be read as conflicting with the Obama administration’s health care overhaul, which advocates reducing fragmentation of medical care to improve quality. ' This is going to raise really difficult questions about the kind of integration that’s envisioned by the Affordable Care Act,' he said. Winmill didn’t specify alternate means of improving patient outcomes and released only a summary of his ruling pending redaction of proprietary information in the full opinion. </blockquote> Note several aspects to this coverage.  It implied that the deal was done solely for high-minded purposes, improving "health care delivery," and in response to the need for "integration" arising from the health care reform produced by the Affordable Care Act; that health care reform might be in jeopardy from this ruling in the absence of the judge's new prescription for "improving patient outcomes"; and that details of the ruling and the justification for it were kept secret as "confidential business information."  So this initial coverage was difficult to interpret, raising more questions than it answered.  If the practice acquisition was made with such lofty goals, why couldn't it be legally saved?  How could health care reform possibly continue without Judge Winmill saying what should be done?  That last question was sarcastic, maybe the real question is why did anyone think it was the judge's job to explain how to improve health outcomes?  Finally, why was so much of the ruling and the details underlying it kept secret. In a few days, local journalists came up with a better idea of what was really going on. It Was All About the Money The same day that the Wall Street Journal and Bloomberg covered the case, the Idaho Statesman <a href="http://www.idahostatesman.com/2014/01/24/2989492/federal-judge-says-st-lukes-buyout.html">reported</a> more details about the judge's ruling that seem to suggest different interpretations, <blockquote class="tr_bq">Winmill said in his ruling that while it may not have been the goal of the acquisition, it 'appears highly likely that health care costs will rise as the combined entity obtains a dominant market position that will enable it to (1) negotiate higher reimbursement rates from health insurance plans that will be passed on to the consumer, and (2) raise rates for ancillary services (like x-rays) to the higher hospital-billing rates.'</blockquote> Then only a week later, the Statesman <a href="http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html">covered </a>the unveiling of some previously hidden portions of the ruling, first giving the background, <blockquote class="tr_bq"> As St. Luke’s Health System aggressively added hospitals and doctors over the past several years, it commanded more money from Idaho’s largest insurer, and it planned to raise prices in order to give a newly acquired group of doctors a 30 percent raise, according to <a href="http://media.idahostatesman.com/smedia/2014/01/29/09/31/1fjNtG.So.36.pdf" target="_blank">newly released court documents</a>. Unsealed Tuesday, the documents explain why U.S. District Judge B. Lynn Winmill <a href="http://www.idahostatesman.com/2014/01/25/2990546/judge-st-lukes-deal-not-legal.html" target="_blank">last week ordered St. Luke’s to nullify</a> its year-old merger with Nampa’s Saltzer Medical Group. Lawyers for St. Luke’s and Blue Cross of Idaho asked the judge not to reveal some facts in the documents, arguing that they contained trade secrets. But Winmill <a href="http://media.idahostatesman.com/smedia/2014/01/29/09/35/1dSNod.So.36.pdf" target="_blank">denied the requests</a>. 'The facts and figures sought to be redacted are crucial to the court’s analysis, and their removal would render the decision indecipherable,' Winmill said.</blockquote> Then it got to the nitty gritty,  Winmill said in his decision Tuesday to make his ruling public that when the trial started, he thought there were compelling reasons to keep parts of it veiled. But as it went on, those reasons seemed less compelling, he said. <div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy</div>Winmill immediately opened his entire decision.   St. Luke’s told Winmill that he should keep statements such as the following out of his public ruling: <ul><li> 'By 2012, St. Luke’s had three of the top five highest-paid hospitals, and its top hospital was receiving reimbursements 21 percent higher than the average Idaho hospital'</li><li> 'After the acquisition, if St. Luke’s were to bill for (routine services such as lab tests or X-rays) at the higher ‘hospital-based’ rates, (Blue Cross of Idaho) estimates that costs ... would increase by 30 to 35 percent.'</li><li> 'St. Luke’s own analysis projected that it could gain an extra $750,000 through hospital-based billing from Saltzer from commercial payers for lab work and $900,000 extra for diagnostic imaging.'</li><li> 'Consultant Peter LaFleur prepared an analysis at the direction of St. Luke’s showing how office/outpatient visits could be billed for higher amounts if the visit was hospital-based rather than Saltzer-based. The hospital-based billings were more than 60 percent higher.' </li></ul><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy</div> <div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.idahostatesman.com/2014/01/24/2989492/federal-judge-says-st-lukes-buyout.html#storylink=cpy</div> Although it certainly makes sense that the hospital system would want to know what the financial implications of buying the physicians' practices might be, the implication certainly seems to be that making a lot more money faster, in addition to any hopes for better patient outcomes, might be a goal of the merger. Trying to Keep Facts that Might Embarrass the Leaders out of Public View It is hard to understand why the hospital leadership was so fixated on keeping such information private if it were not to forestall any impression that this was all about the money.  As the Statesman reported, <blockquote class="tr_bq">Much of the four-week trial happened behind closed doors, and <a href="http://www.idahostatesman.com/2013/10/18/2821968/hundreds-of-documents-in-st-lukes.html" target="_blank">many documents were sealed or heavily redacted</a>. Lawyers for the hospitals — and for insurance companies and local employers — marked those parts of the trial private because they said they needed to protect trade secrets. St. Luke’s spokesman Ken Dey said some underlying data from Blue Cross of Idaho on which Winmill based his decision was sealed, and St. Luke’s lawyers could not access it. St. Luke’s is concerned that data might have led to some 'misleading conclusions,' he said. The <a href="http://www.idahostatesman.com/2013/11/13/2866737/statesman-other-news-groups-appeal.html" target="_blank">Statesman and several other Idaho news outlets filed a lawsuit</a> to pry open the court proceedings, and that lawsuit is now before the U.S. Ninth Circuit Court of Appeals.</blockquote> It is obviously a matter of opinion whether revealing more information might have lead to misleading, or to accurate conclusions.  Note that local journalists were driven to file their own lawsuits just to gain access to records from a trial held in a government run court, and that many of those records are still secret.   It will be interesting to see the results of these further proceedings, but it seems much more likely that the hospital system leaders tried so hard to keep everything secret to protect their own images as only caring about "patient outcomes," not money.  If these were trade secrets, given that the hospital system seems to have become dominant in the market, from what competitors were they hiding?  <div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy</div> Summary - Even More Reasons to be Concerned about Corporations Hiring Physicians to Take Care of Patients This case suggests some interesting conclusions which we hope are not misleading. Nationally or globally important health care issues are often still not well covered by national news media, much less the medical and health care literature.  Local journalists may doe a much better job, but local journalism is increasingly threatened. One reason important cases may be <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a> is that people involved with them fear public discussion of what may prove to be embarrassing, uncomfortable or worse to them.  When those people are rich and locally influential, the likelihood of the <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic effect</a> swallowing discussion increases. More specifically, we should be extremely skeptical of attempts at health care reform that add more bureaucracy to try to counter the effects of existing bureaucracy.  The main way current health care reform legislation seemed to address  the high costs and poor quality that we on Health Care Renewal contend may be due to concentration and abuse of power in health care is to further concentrate power without providing safeguards to prevent abuse. Finally, while this case was about whether hospitals (and other large organizations) hiring physicians to provide medical care may command higher prices, the real concern is whether physicians who now have to answer to corporate executives and organizational bureaucrats, that is who have become <a href="http://hcrenewal.blogspot.com/search/label/corporate%20physician">corporate physicians</a>,  may have to put their organizations' and their leaders' needs and wants ahead of their patients' and the public's health. True health care reform would be informed by the core value that physicians are supposed to endorse: the individual patient comes first.  Health care should not be mainly about increasing corporate revenues, or pleasing corporate executives or government bureaucrats.  However, big organizations and the in-group who personally profit from their operations want to keep such concerns anechoic. Instead, we all should start by appreciating the words of Judge Winmill and the information he has provided us. Roy M. Poses MD on Health Care Renewal

Who Knew? ... Judge Finds that Hospital Takeover of Medical Practices Raised Prices

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07 Feb 2014

The Adventures of the Purloined Bequest, the Resident Heiress, and the Hidden Hospital System

The game is afoot again.  A series of recent articles in the media described a series of cases whose mysterious interrelationships Sherlock Holmes might have appreciated. The Purloined Bequest A singular <a href="http://online.wsj.com/article/SB10001424127887324324404579045331810905304.html">article </a>in the Wall Street Journal, entitled "Judge Rules in Case of Fortune Tied to Buffett," first made this case explicit, but some background is required to understand it. The story focused on Long Island College Hospital, in Cobble Hill, Brooklyn, New York.  [Full disclosure: this story got my attention particularly because I grew up nearby in Brooklyn, and was born at that hospital, which was also the local hospital my parents often used.]   LICH has long been the major community hospital for downtown Brooklyn. The story appeared to begin in 2011, per the WSJ, <blockquote class="tr_bq"> In 2011, Judge [Carolyn] Demarest approved the merger of LICH and SUNY Downstate on the condition it would keep the charitable hospital going. As part of the deal, the hospital transferred properties to Downstate estimated to be worth as much as $1 billion collectively, according to a previous court order.</blockquote> The merger was supposed to keep LICH in operation as a community hospital and provider of acute care to the poor.  However, things did not work out.  This year, however, Downstate announced plans to shut the hospital, leading to protests from Brooklyn residents and local politicians. <blockquote class="tr_bq">'It is clear that the premise upon which this Court authorized the transfer of assets has been defeated,' Justice Demarest wrote in her Aug. 20 decision, adding that Downstate had breached its contractual obligations. She cited a 'legal and moral responsibility' to correct her earlier error in approving the merger. She directed Downstate to return all assets to the hospital's previous owner, Continuum Health Partners Inc., which subsequently said it couldn't take the reins. The court is expected to review other proposals. </blockquote> The judge also discovered that hospital management had been raiding an large endowment fund intended for other purposes, <blockquote class="tr_bq">A New York state judge ruled this week that a struggling Brooklyn hospital must repay tens of millions of dollars it borrowed from an endowment set up by early investors with billionaire Warren Buffett. The ruling aims to rectify the previous use of the money by Long Island College Hospital, which is hurting financially and was scheduled to close. Mr. Buffett in July told The Wall Street Journal that his late friends, Donald and Mildred Othmer, would have felt 'betrayed' at the way the funds were spent.</blockquote> Apparently, <blockquote class="tr_bq"> The Othmers, natives of Omaha, Neb., who later lived in Brooklyn, were longtime friends of Mr. Buffett's, and each invested $25,000 with the billionaire in 1961. When they died—he in 1995 and she in 1998—they gave away a fortune estimated at $780 million, including the $135 million permanent endowment for the hospital. The Othmer wills stipulated the interest on the endowment could be used for operating expenses but the principal should be held 'in perpetuity.' In a series of court-approved transactions that began in 2000, the hospital borrowed from the funds repeatedly to meet short-term obligations and cover debts. The hospital argued that the money was necessary to keep the hospital afloat, which it said the Othmers would have wanted. The transfers depleted most of the endowment, a result that came to light after the Journal wrote about the situation in July.</blockquote> <a href="http://www.nytimes.com/2013/08/21/nyregion/judge-rejects-long-island-college-hospitals-ownership-deal.html">New York Times</a> and <a href="http://www.brooklyneagle.com/articles/dead-lich-could-net-suny-100-million">Brooklyn Daily Eagle</a> articles focused on the question of whether SUNY/ Downstate intended to close the hospital so it could sell its apparently valuable real estate assets in a now fashionable neighborhood, but not on how the hospital fell into these dire straits. There seem to be some lingering questions - -  If the losses and borrowing began in 2000, or earlier, who was responsible for them, given the current owners have only been in place since 2011? Note that the phrasing in the article above ("the hospital argued that the money was necessary to keep the hospital afloat") suggested that before SUNY took over, the hospital was independent.  However, the article mentioned, albeit only briefly in passing, that the hospital had a previous owner, Continuum Health Partners Inc. -  How were the losses explained when they occurred, and what was the rationale for  borrowing from restricted endowment as a response, instead of, for example, direct efforts to minimize losses or increase capital and revenue? Note that the article implied that when SUNY acquired LICH, it acquired some very valuable real estate.  Why did the previous management of LICH not consider selling off some of this real estate to resolve its debts? -  Did mismanagement of the hospital lead to excess losses, and did borrowing funds from the principle of the hospital's endowment to offset these losses amounted to more mismanagement?   Meanwhile, a second even more bizarre story about another New York City hospital almost simultaneously got media attention. The Resident Heiress The case first made it into the media in 2012, when the tabloid New York Post <a href="http://nypost.com/2012/09/02/beth-israel-medical-center-shook-down-heiress-huguette-clark-for-13-million-relatives-say/">reported</a>, <blockquote class="tr_bq">Beth Israel Medical Center milked reclusive copper heiress Huguette Clark for more than $13 million in fees, donations and even a priceless painting during her 20-year stay as a patient — and greedy executives angled for $125 million more, her relatives allege in shocking new court filings over Clark’s estate. The alleged shakedown was illuminated in an e-mail in which hospital board member and former CEO Dr. Robert Newman referred to Clark as 'the biggest bucks contributing potential we’ve ever had,' according to court papers. He told a colleague her 'potential has been overwhelming[ly] unrealized.' At one point, he suggested to Clark that she pay nearly one-third of her estimated $400 million fortune to keep the now-shuttered Beth Israel North on the Upper East Side open so she could keep living in the room she had refused to leave for 15 years despite being in good physical health, the papers allege. But instead of addressing Clark’s crippling anxiety, hospital honchos played on her fears, engaging in 'a concentrated effort, orchestrated at the highest board and executive levels,' to get her money, court documents obtained by The Post allege. Clark’s death last year at age 104 set off a battle over her estate. Her distant relatives claim lawyer Wallace Bock, accountant Irving Kamsler, private-duty nurse Hadassah Peri and the Beth Israel administrators manipulated the feeble Clark for her money. The nurse, who received cash and gifts from Clark, stands to inherit nearly $34 million and Clark’s priceless doll collection in the now-disputed will. Beth Israel is to get $1 million. The Paris-born Clark inherited her money from her father, William, a rail and mining baron and former US senator whose wealth rivaled the Rockefellers’. She went to Beth Israel North in 1991, when she was 85, after a doctor found her emaciated and ill in one of her three sprawling Fifth Avenue apartments. She spent the last two decades of her life in dismal hospital rooms with the shades drawn and door shut even though there was 'no medical basis for keeping her' past the first few months, documents show. Clark was 'the perfect patient' for the hospital, her relatives charge, noting, 'She required no medical care, possessed enormous wealth, paid over $800 a day for her room, and became progressively more dependent on the hospital.' 'Beth Israel had a plan to subtly, but ever so persistently, court Huguette for the purpose of garnering gifts and ultimately do a will in favor of the hospital,' court papers claim.</blockquote> This case also seems to be about wealthy donors and hospital executives.  Yet what makes it most bizarre are the circumstance of Ms Clark's hospital stay.  As a former intern, resident, fellow, and teaching hospital attending, I can attest that most hospital administrators are concerned, if not obsessed, with discharging patients quickly.  Hospital stays are currently paid by most insurers according to the patients' diagnoses, but not their length of stay.  Long stays cost hospitals money.  Furthermore, unnecessarily long stays use up resources that could better serve acutely ill and injured patients.  Yet Ms Clark stayed an astounding 20 plus years, without any obvious medical rationale.  No hospital official contested the fact that Ms Clark stayed that long in the NY Post article. Furthermore, in a 2013 New York Times <a href="http://www.nytimes.com/2013/05/30/nyregion/hospital-caring-for-an-heiress-pressed-her-to-give-lavishly.html">article,</a> the hospital's lawyer, defending a parallel attempt to recover the money donated to the hospital, wrote <blockquote class="tr_bq"> Beth Israel had provided Mrs. Clark with 'a well-attended home where she was able to live out her days in security, relative good health and comfort, and with the pleasures of human company.' Besides, he said, the amount of money she gave to Beth Israel was “not very large considering her vast wealth.”</blockquote> Furthermore, a member of the Beth Israel fund-raising staff wrote in a memo disclosed during litigation, <blockquote class="tr_bq"> She was well enough by then to go home to her spacious apartment at Fifth Avenue and 72nd Street, overlooking Central Park, Ms. [Cynthia L] Cromer said, but 'she asked if she might stay in the hospital longer: she feels comfortable and safe, and her apartment is being renovated.'</blockquote> Never mind that the fundamental mission of the hospital is to provide acute care for the sick and injured, not to provide comfortable retirement housing. But hospital managers are apparently on record acknowledging that the hospital was basically providing Ms Clark with services that are normally available in a retirement community, not services that acute care hospitals normally provide anyone   There is no evidence that the hospital ever provided similar services to any other patients.  The obvious mystery, then, is - why no one at the hospital, no doctor, nurse, or manager, or no visitor, regulator, accrediting agency, insurer ever questioned why the hospital was providing a long-term residence to a former patient? No answer to the question has appeared in any coverage I have seen of this case, including a September, 2013,.NY Times followup <a href="http://www.nytimes.com/2013/09/15/nyregion/the-two-wills-of-the-heiress-huguette-clark.html">article</a> on the occasion of the case nearing trial.  In the absence of a creditable explanation for this strange distortion of the hospital mission, - is there any other conclusion than that its purpose was to extract a large amount of money from a vulnerable, rich, but no longer acutely ill former patient? This would suggest an unusual but monumentally unethical kind of hospital mismanagement. So we have two recent stories about major, unusual, apparently severe mismanagement by hospital executives.  These stories were reported as if they were independent. However, buried in the original NY Post article, but unmentioned in either of the major NY Times articles, however, was a hint of how this case and that above of the purloined inheritance appeared to be linked. The Hidden Hospital System The NY Post article referred thus to the Beth Israel CEO who allegedly pushed Ms Clark for contributions, <blockquote class="tr_bq"> Newman, former CEO of Continuum Health Partners, Beth Israel’s parent organization, took the unusual step of offering to help Clark complete a will so 'some faceless bureaucrat of the government' wouldn’t get his hands on her estate, court papers say.</blockquote> Quick Watson, did you see that? Continuum Health Partners was the "parent organization" of Beth Israel Hospital during at least some of the time Ms Clark was in residence there.  Continuum Health Partners also was the "previous owner" of Long Island College Hospital during at least some of the time it apparently was suffering large losses and its endowment was being depleted.  So were both these stories really about the same organization, the same hospital system? Digging a little further, per its <a href="http://www.linkedin.com/company/continuum-health-partners/products">own LinkedIn page</a>, <blockquote class="tr_bq"> Continuum Health Partners, Inc. was formed in 1997 as a partnership of three venerable institutions — Beth Israel Medical Center, St. Luke's Hospital, and Roosevelt Hospital.</blockquote> So while the hospital system did not exist when Ms Clark first entered Beth Israel Hospital, the heiress' "care" was under the control of the organization apparently from 1997 to the day she died. Furthermore, as noted in a 2011 Chronicle of Higher Education article, <a href="http://www.innovativeresourcesgroup.com/archive/89-latest-and-greatest/314-from-mergers-that-didnt-stick-lessons-emerge-for-other-charities">available from </a>Innovative Resources Group Inc, <blockquote class="tr_bq"> If there was a honeymoon after the merger of Long Island College Hospital, in Brooklyn, with Continuum Health Partners, in New York in 1998, few remember it. The bickering began early and dragged on for years, but divorce didn’t seem inevitable until the doctors went public.</blockquote> So the hospital system called Continuum Health Partners took over Long Island College Hospital in 1998 and held it for 13 years.  Furthermore, apparently LICH was part of Continuum Health Partners during the time when its losses rose and the Othmer bequest was depleted.  For example, from the CHE article, <blockquote class="tr_bq">  Several physicians told a crowd gathered outside the hospital’s entrance in 2008 that Continuum had withheld money from the 150-year-old institution, needlessly cutting patient services and endangering the hospital’s future.</blockquote> Also in 2008, the Brooklyn Heights Blog <a href="http://brooklynheightsblog.com/archives/3845">reported</a> this response to a question about finances from the Continuum Health Partners CEO, Stanley Bazenoff, <blockquote class="tr_bq"> LICH faces an immediate fiscal crisis. Unless action is taken quickly, he said, LICH will not have cash on hand to meet payrolls and other current expenses. He ascribed LICH’s problem to three factors. First, the hospital carries a heavy debt burden–approximately $150 million in long-term bonds financed through the New York State Dormitory Authority and $25 million in short-term commercial paper–which results in annual debt service (including interest and amortization) cost of approximately $22 million. Second, LICH has an operating deficit, presently about $40 million on an annual basis,...</blockquote> Denis Hamill, a columnist for the New York Daily News, made this accusation in a February, 2013, <a href="http://www.nydailynews.com/new-york/hamill-lich-merged-death-article-1.1266344">editorial</a>: <blockquote class="tr_bq">Under Continuum, the once-profitable LICH ran up $300 million in debt from pure administrative malpractice. And then Brezenoff brokered the smelly SUNY Downstate merger, with state taxpayers absorbing the $300 million debt.</blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> So it certainly looks like there is an argument that Continuum Health Partners, under its CEO, Stanley Bazenoff, was responsible for the manipulation of pseudo-patient and rich heiress Hughette Clark to secure a large donation, and the nearly simultaneous depletion of Long Island College Hospital's finances, including a large bequest that was supposed to be untouchable.</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Not surprisingly, Mr Bazenoff, described by Mr Hamill as <blockquote class="tr_bq">a ruthless powerbroker ... whose nickname at LICH is Darth Vader </blockquote> and <blockquote class="tr_bq">a quintessential member of what muckraker Jack Newfield called The Permanent Government of New York  </blockquote> also seems to have gotten rich in his position as leader of Continuum Health Partners, along with his other top managers.   The blog LICH Watch <a href="http://lichwatch.blogspot.com/2011/03/salary-scandal-at-hospitals.html">found</a> these results from the system's 2009 IRS 990 report,</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote class="tr_bq">here are some highlights, figures for Continuum employees who, hm, earned more than a million dollars for the year: Chandra Sen, MD, $2,109,204 Stanley Brezenoff, $2,014,413 Kathryn C. Meyer, Esq. $1,049,807 John Collura, $1,307,556 Gail Donovan, $1,365,354</blockquote>  A 2011 New York Post <a href="http://nypost.com/2011/03/16/nonprofit-hosp-bigs-megabucks/">article</a> stated,</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote class="tr_bq"> Stan Brezenoff, CEO of Continuum Health Partners, overseeing such hospitals as Beth Israel, St. Luke’s and Roosevelt, pulled in about $3.5 million. </blockquote>  So this leads to yet more mysteries, first about the individual cases when viewed as occurring within one large hospital system:</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">-  Why were Long Island College Hospital's finances addressed as if it were an independent entity, when it was in fact just a subsidiary of Continuum Health Partners? </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> -  Why was Continuum Health Partners role in the hospital's enlarging debt and depleting endowment not discussed?</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> Similarly,</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> -  Why was the bizarre treatment of Hughette Clark attributed to "Beth Israel executives," but not Continuum Health Executives, when Beth Israel was also just a subsidiary of Continuum Health? </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Then there is the larger mystery,</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> -  Why have these two cases been discussed as completely independent, when they appear to be part of a pattern of conduct by Continuum Health Partners management? </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Summary</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">While we continue to see cases, some amazingly bizarre, suggesting mismanagement and unethical management of hospitals and hospital systems, there seems to be an amazing lack of curiosity about how they occurred and what their implications may be.  This lack of curiosity is so profound that no one seems to have noticed that two vivid and strange cases getting prominent media notice in the same city and the same time involved the same large hospital system. </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Health care organizations seem to become ever larger.  Such enlarging organizations can concentrate their power, dominate their "markets," and hence increase their revenues and the compensation of their top hired managers.  Without any countervailing force, they push seemingly inexorably towards oligopoly and then monopoly.</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Furthermore, the cases of the purloined bequest and the resident heiress show that ever larger organizations with ever more complex structures are ever better at hiding the accountability of their top hired managers.  We have previously noted, e.g. <a href="http://hcrenewal.blogspot.com/2010/10/glaxosmithkline-subsidiary-pleads.html">a case</a> in which a subsidiary of GlaxoSmithKline pleaded guilty to crimes involving production of adulterated drugs, thus shielding GSK and its management from responsibility, how subsidiaries of large corporations may plead guilty to crimes, thus absolving their parent organizations and its managers of any blame. In the current cases, it seems that somehow a large health care system was able to avoid accountability by letting its component hospitals appear to be independent.  Yet it is the larger system that was booking the revenue and making millionaires out of its hired managers.  This seems to show how concentration of power into ever more complex organizations can be used to enhance the <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic effect</a>, making mismanagement and those accountable for it ever more obscure. </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">As we have said until blue in our collective faces, if we do not hold the real leaders of health care accountable for their actions and the actions of their organizations on their watches, we can expect continued misbehavior, and hence continued health care dysfunction.   </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div> It's appropriate to conclude with this, a video of Jeremy Brett in A Scandal in Bohemia, from the first season of the show as first shown on PBS. <iframe allowfullscreen="" frameborder="0" height="315" src="//www.youtube.com/embed/shLYcUVOMb4?list=PL2VjH97HFEqmNfN8aQ5qiv90kPM7ncZ7U" width="560"></iframe>

The Adventures of the Purloined Bequest, the Resident Heiress, and the Hidden Hospital System

The game is afoot again. A series of recent articles in the media described a series of cases whose mysterious interrelationships Sherlock Holmes might have appreciated.The Purloined BequestA singula…

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19 Sep 2013

The Push Back Continues: the Mayor of Pittsburgh Sues UPMC Claiming it is No "Public Charity"

There is another indication that push back against the power of large health care organizations is getting more significant. In February, 2013, we <a href="http://hcrenewal.blogspot.com/2013/02/another-reason-for-hope-concern-about.html">noted</a> that the Governor of the state of Connecticut publicly criticized lavish executive compensation at a small regional hospital system, compensation partially fueled by government funded health insurance payments, and in contrast to hospitals' claims that insufficient reimbursement was driving them to poverty.    The Suit Challenging the Charitable Status of UPMC Now the outgoing Mayor of Pittsburgh has launched a lawsuit challenging the status of huge, nominally non-profit health system UPMC as a public charity.  A summary of the arguments comes from an <a href="http://www.post-gazette.com/stories/local/neighborhoods-city/upmc-pittsburgh-stake-positions-for-court-fight-on-nonprofit-status-680393/">article</a> in the Pittsburgh Post-Gazette.  First, in the state of Pennsylvania, a Supreme Court description set out a test to determine if a particular organization is a public charity, the status the UPMC currently claims: <blockquote class="tr_bq">The Supreme Court's 1985 ruling involving the Hospital Utilization Project (or HUP) set out a test that requires that a purely public charity must fulfill all five of the test's points that it: advances a charitable purpose; donates or renders gratuitously a substantial portion of its services; benefits a substantial and indefinite class of persons who are legitimate subjects of charity; relieves the government of some of its burden; and operates entirely free from private profit motive. That ruling was reaffirmed by the Supreme Court in April in a case involving an Orthodox Jewish summer camp in Pike County that was found to not deserve its property tax exemption.</blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> The city's lawyer, E.J. Strassburger of Strassburge Mckenna Gutnick & Gefsky, argued that UPMC does not pass that test:</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><a href="http://www.post-gazette.com/stories/local/neighborhoods-city/upmc-pittsburgh-stake-positions-for-court-fight-on-nonprofit-status-680393/#ixzz2OezY8Lbc" style="color: #003399;"></a> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> <blockquote class="tr_bq">Mr. Strassburger wrote, first and most strongly, that 'it seems virtually certain that UPMC would fail to carry its burden of proving that it satisfies the fifth prong of the HUP test by 'operating entirely free from profit motive.'' He cited UPMC's nearly $1 billion surplus over the last two years and $3 billion in reserves as evidence of this, and that UPMC 'is carefully structuring its operations to prioritize profits-generation over charity.'</blockquote> Also,  <blockquote class="tr_bq">In addition, Mr. Strassburger wrote that UPMC does not 'advance a charitable purpose' in part because UPMC 'maintains an 'open admissions policy' in name only' and it does not make all of its health care available to everyone, regardless of ability to pay.</blockquote> Furthermore, <blockquote class="tr_bq">the review says UPMC fails to provide sufficient charity care, operates far-flung international operations that are losing money, and has closed operations in poor communities only to open or expand into richer ones. But it also cites what it terms 'excessive' benefits of UPMC executives, including CEO Jeffrey Romoff's $5.9 million salary; the fact that more than 20 employees are paid more than $1 million; UPMC's corporate jet; Mr. Romoff's 'lavish'  Downtown headquarters (which it claims includes a private chef, chauffeur and private dining room).</blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div></div> The Post-Gazette also sought the advice of experts, <blockquote class="tr_bq">Nicholas Cafardi, dean emeritus and professor at Duquesne University's Law School, said he believes the argument that UPMC is not free from a private profit motive is the strongest one in Mr. Strassburger's review, in part because of how far-flung UPMC has become. 'The more they do that gets them away from their core purpose, the more they open themselves up to the argument that they aren't doing charity,' he said. In addition, Mr. Cafardi said, UPMC's extensive advertising campaign --sometimes directly against rival Highmark -- makes it look like the organization is operating for profit. 'A lot of things like that make them look like they're operating for a private profit,' he said. 'You advertise because you're in competition. That's the private profit motive.' Gary M. Grobman, former head of the nonprofit Pennsylvania Jewish Coalition and author of 'The Pennsylvania Nonprofit Handbook,' said UPMC would have a fight on its hands. 'Based on what [Mr. Strassburger] has written, which may or may not be true, it seems some staff at the hospital are paid quite well and some decisions are made based on achieving as much revenue as possible instead of providing as much charity as possible,' he said. 'And if all of that is true, they don't deserve their not-for-profit status.'</blockquote> So the main issues brought up by the city are similar to issues we have raised about numerous nominally non-profit health care organizations.  We have shown that many particular organizations appear not to act like charities when they appear to put short-term revenue ahead of the organization's mission, a process sometimes called <a href="http://hcrenewal.blogspot.com/search/label/financialization">financialization</a>, and put <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">lavish compensation of top hired managers </a>ahead of the organization's general financial well-being; and when their leadership appears to <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management">subvert the organization's mission</a>. The UPMC Response versus Anger in the Community Of course, UPMC public relations disagreed with the premises of the lawsuit: <blockquote class="tr_bq">'We think the 13-page memo that a local law firm wrote for the City is very weak and reaches its conclusions entirely based on opinion, not fact,' UPMC spokesman Paul Wood wrote. 'Rather than responding to partisan politics and blatant union pandering by the Mayor, UPMC looks forward to demonstrating in a court of law that we meet all five prongs of the HUP test and that our hospitals easily qualify for the tax-exempt status they unquestionably deserve. Interestingly, by hiring an outside law firm the City is prepared to waste millions of dollars of taxpayer funds on an unsuccessful attempt to pursue this case.'</blockquote> Note that the unsubstantiated allusions to "partisan politics" and "pandering" appear to be an <a href="http://www.nizkor.org/features/fallacies/appeal-to-ridicule.html">appeal to ridicule</a>, "a fallacy in which ridicule or mockery is substituted for evidence in an 'argument.'"  We have noted before how public relations flacks working for top executives of health care organizations seem to be very good at using such <a href="http://hcrenewal.blogspot.com/search/label/logical%20fallacies">logical fallacies</a>. Mr Wood also scoffed at the naive notion that having a $1 billion surplus and $3 billion in reserves means the organization operates like a business:   <blockquote class="tr_bq">Mr. Wood wrote that 'numerous people have tried to distort the meaning of that component to attain a political result.' 'It does not mean a nonprofit shouldn't strive to have a positive operating margin -- organizations that don't do that go out of business,' he added.</blockquote> Note that Mr Wood seems to be arguing that the only alternative to a very large surplus and a very large reserve is a deficit.  By ignoring another obvious alternative, having a small surplus and a small reserve, his argument thus is derived from the logical fallacy known as the <a href="http://www.nizkor.org/features/fallacies/false-dilemma.html">false dilemma</a>.  He also seemed to be arguing that a deficit inevitably leads to bankruptcy.  Of course prolonged deficits might lead to bankruptcy, but a single deficit would not necessarily do so.  Thus he also employed the logical fallacy known as the <a href="http://www.nizkor.org/features/fallacies/slippery-slope.html">slippery slope</a>.  On the other hand, a Post-Gazette columnist <a href="http://www.post-gazette.com/stories/opinion/sally-kalson/mayor-v-moneybags-upmc-could-be-beloved-if-it-put-patients-over-profits-and-perks-680646/">showed</a> the depth of community concern over the role of UPMC: <blockquote class="tr_bq">Someone in power is taking official action against the biggest corporate bully in town. Can I get an Amen? In fact, I can get many Amens, and that says a lot about the behavior of the region's dominant hospital system. Has there ever been a 'charity' so disliked and mistrusted by the people it's supposed to serve and the people it employs? You rarely hear anyone say 'I cannot stand CARE,' or 'I despise Doctors Without Borders.' But you hear it all the time about UPMC, notwithstanding the jobs it creates, the medical innovations it advances, the life-saving care its doctors deliver and its commitment of $100 million for the Pittsburgh Promise scholarship fund. With all that to its credit it should be beloved, but the opposite is true. Not helping matters is its corporate public relations, which is increasingly tone deaf. In an emailed response to the mayor's announcement, UPMC spokesman Paul Wood said the lawsuit 'appears to be based on the mistaken impression that a non-profit organization must conduct its affairs in a way that pleases certain labor unions, certain favored businesses, or particular political constituencies.' No, Mr. Wood. It's based on the correct impression that a nonprofit hospital's top priority should be the patients, not building a monopoly. And that a $10 billion system with a billion-dollar surplus and $2 billion to $3 billion in reserves should be taking care of many more indigent sick people than UPMC has been treating -- especially when it owns land that a Post-Gazette investigation valued at $1.6 billion, even as it enjoys a $20-million tax break every year, underwritten by the good citizens of Pittsburgh and Allegheny County. You can try blaming the SEIU organizing campaign or your arch-enemy, Highmark the insurer, or politics, but this is so much bigger than any of those things. And the public knows it.</blockquote> Keep in mind that the current discussion of UPMC in the media focuses on very recent events.  On Health Care Renewal, we have <a href="http://hcrenewal.blogspot.com/search/label/UPMC">posted frequently</a> over the last eight years about problems with the leadership of UPMC.  We <a href="http://hcrenewal.blogspot.com/2005/05/guilty-pleas-in-another-hospital.html">started </a>in 2005 with their inability to prevent a fraud  perpetrated by some UPMC middle managers. In 2008, we <a href="http://hcrenewal.blogspot.com/2008/11/questions-of-benefits-vs-risks-for-upmc.html">discussed </a>the apparent mismanagement of the highly touted UPMC liver transplant program.    <a href="http://hcrenewal.blogspot.com/2009/02/healthcare-it-blamed-in-patient-death.html">Starting in 2009</a>, and continuing <a href="http://hcrenewal.blogspot.com/2013/03/when-human-error-causes-ehr-downtime.html">through 2013</a>, InformaticsMD chronicled how the leadership has presided over health care information technology so problematic that it has been <a href="http://hcrenewal.blogspot.com/2009/02/healthcare-it-blamed-in-patient-death.html">blamed for patient deaths</a>.  In 2009, we<a href="http://hcrenewal.blogspot.com/2009/09/upmc-fouls-another-one-off.html"> noted</a> sanctions against UPMC's public relations.   In 2010, we <a href="http://hcrenewal.blogspot.com/2010/05/at-upmc-dealings-with-board-members.html">noted</a> conflicts of interest and apparent self-dealing and nepotism affecting the UPMC board of trustees and UPMC executives.  Summary For at least a generation, health care leaders and health policy makers have been pushing for consolidation of health care organizations in the name of efficiency.  We now have a health care system dominated by fewer, larger organizations, and whatever efficiencies have been produced mainly seem to have benefited organizational insiders.  Maybe now, though, some are beginning to remember that monopolists - starting at least with John D Rockefeller, I believe - have historically touted their ability to improve efficiency and rationality.  The results, however, have been higher prices and poorer results for everyone else.  Hospitals and hospital systems have been particularly good at getting away with the efficiency argument despite the fact that health care prices in the US have been soaring ever since the "vertical integration" craze in the early 1990s.  I believe such organizations have been getting away with this nonsense because of their revered status within their communities.  Now, however, as huge hospital systems drive up prices and make their top executives rich, maybe we will remember Theodore Roosevelt's warnings about trusts and malefactors of great wealth. There is no good evidence that large hospitals and even larger hospital systems take better care of patients, or provide better teaching and research.  Not only should we question whether huge hospital systems like UPMC are public charities, we should wonder how we ever let them get so big, and proceed to break up these new sorts of "trusts."

The Push Back Continues: the Mayor of Pittsburgh Sues UPMC Claiming it is No "Public Charity"

There is another indication that push back against the power of large health care organizations is getting more significant.In February, 2013, we noted that the Governor of the state of Connecticut pu…

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26 Mar 2013

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

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

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

We recently started a series of posts about the battle for domination of health care in western Pennsylvania. The contenders are the UPMC hospital system, the dominant hospital system in the region, …

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08 Apr 2012

The Pittsburgh Experiment - I - Caught in the Crossfire

In our increasingly dysfunctional health care system, patients, health care professionals and the public are often caught in the crossfire between big health care organizations.  Such organizations are often led by people who do not seem to put the interests of patients and the public, and the values of professionals first.  (Note that we have been writing about this since at least 2003, when the concept appeared in my article: Poses RM. A cautionary tale: the dysfunction of the American health care system. Eur J Int Med 2003; 14: 123-130. Link <a href="http://www.ejinme.com/article/S0953-6205%2803%2900029-3/abstract">here</a>.) Last week, Anna Wilde Matthews and John W Miller <a href="http://online.wsj.com/article/SB10001424052702303812904577295901619123904.html">wrote in the Wall Street Journal</a> about an amazing example of such a crossfire that pitted the two dominant health care organizations in Western Pennsylvania against each other.  The case turns out to touch on many of the most dysfunctional aspects of US health care.  So rather than try to cram it into an overly long blog post, I plan to periodically discuss it over the next few weeks, starting now with an overview of the grappling titans. The Basic Conflict Per the Wall Street Journal article, <blockquote>In Pittsburgh, the acrimonious battle between <a href="http://hcrenewal.blogspot.com/search/label/Highmark">Highmark</a>, the region's most powerful health insurer, and <a href="http://hcrenewal.blogspot.com/search/label/UPMC">UPMC</a>, the dominant health-care provider, is drawing national attention as a test case on the impact of consolidation in the health-care industry. At the heart of the dispute is Highmark's effort to acquire a financially troubled local hospital group, West Penn Allegheny Health System, as the centerpiece of what it says will be a lower-cost and more efficient health-care operation. UPMC, which has its own insurance arm as well as 19 area hospitals and 3,240 doctors, says it doesn't want to bolster a company it now considers a direct rival. It has vowed not to sign a new contract to treat patients covered by Highmark, which would mean those patients generally would pay high out-of-network rates to use UPMC hospitals and doctors.</blockquote> As we will see, the dispute is between a dominant hospital system that is trying to muscle into the insurance business, and a dominant insurer that is trying to muscle into the hospital business. If either were to succeed, it would become the dominant health care organization in the Pittsburgh area. A Personal Fight Amongst Two CEOs However, the fight soon seemed to be more among the CEOs of the two organizations. Per the WSJ, <blockquote>In Pittsburgh, the battle has become unusually bitter, spearheaded by the two companies' chief executives, UPMC's Jeffrey A. Romoff, 66, and Highmark's Kenneth Melani, 58. Mr. Romoff, who has built UPMC into a $9 billion juggernaut and put its initials on the tallest skyscraper in the city, calls Highmark a 'monopoly.' Dr. Melani uses the same term in warnings about UPMC's power and referred to Mr. Romoff in a local newspaper as 'trying to rape the commercial marketplace to build his empire.'  (A spokesman for Mr. Romoff said the comment 'lacked both substance and dignity.')</blockquote> An <a href="http://www.pittsburghlive.com/x/pittsburghtrib/news/pittsburgh/s_771458.html">article</a> from December, 2011 in the Pittsburgh Tribune-Review had illustrated other aspects of the bitterness about and between the CEOs. <blockquote>UPMC CEO Jeffrey Romoff's satiric, fake Twitter profile lists his favorite games as Monopoly and Risk. In recent tweets, the anonymous author wrote under his name, 'New York State, here we come!' and said he wants to take Highmark CEO Dr. Kenneth Melani 'outside to settle things -- but it would be unfair competition if (we) could BOTH use our fists.' The month-old Fake Jeffrey Romoff persona, whose author declined to be interviewed but said it's 'no laughing matter,' depicts the head of Western Pennsylvania's dominant health care system as a greedy tyrant with an angry avatar. It counts fewer than 40 followers, but its existence points to a public relations failure for UPMC in its fight with Highmark Inc., media experts say. 'Nobody feels sorry for Romoff,' said Andrea Fitting, president of Downtown marketing firm Fitting Group. 'If you ask anyone on the street, they'll say Romoff is a monster. There's no person who's trustworthy and sympathetic who they've enlisted as a spokesman.' Romoff could not be reached for comment. UPMC spokesman Paul Wood said he is not concerned about the profile's effect on the hospital network's image. 'Not something that has virtually no followers,' he said. There's no fake Twitter handle lampooning Melani, but experts say the state's largest insurer is not doing a great job of managing its public image either.</blockquote> As found in the WSJ article, <blockquote>'There's no white hat here,' says Don White, a Republican who chairs the state Senate committee overseeing insurance. 'They're both concerned about their self-preservation and domination.' </blockquote> Neither CEO seems satisfied that his organization has become dominant in its field, and both seem to resent the success of the other organization in another field. Let us briefly review the backgrounds of both systems. UPMC as Dominant Hospital System The WSJ article started to probe the complexity of the situation: <blockquote>The struggle in Pittsburgh has roots that go back decades. UPMC, led since 1992 by Bronx native Mr. Romoff, has grown on his watch to $9 billion in annual revenue from $797 million when he took over. Today, UPMC has around 58% inpatient market share in Allegheny County and a brand buoyed by its identification with nationally known research and treatment centers like Hillman Cancer Center, where Ms. Wyckoff is being treated. The nonprofit system, with around $406 million in operating income in its most recent fiscal year ended June 30, is also Pennsylvania's biggest private employer. UPMC's initials dominate the Pittsburgh skyline from the top of the U.S. Steel Tower, the city's tallest building. The nonprofit leases a private jet that is used to fly executives and doctors to its facilities in Ireland and Italy. Mr. Romoff has become one of the city's most prominent business leaders. Poking fun at a local nickname for his boss, a staffer once presented Mr. Romoff with a Darth Vader action figure. In 2009, UPMC published a glossy history of its own expansion titled 'Beyond the Bounds.'</blockquote> Highmark as Dominant Insurer On the other hand, <blockquote>As UPMC grew, its main hospital rival, West Penn Allegheny, withered. The five-hospital group emerged from the ashes of a Pennsylvania hospital system that filed for bankruptcy in 1998 after piling on too much debt and acquiring money-losing assets. It struggled for years. By 2011, West Penn Allegheny was in the red, with heavy debt and pension obligations. To cut costs, it shut down much of its Western Pennsylvania Hospital. At one point, filmmakers took over its empty intensive-care unit to film a scene for a coming Tom Cruise movie. In June, Highmark's Dr. Melani unveiled his plan to acquire West Penn Allegheny for a combination of loans and grants valued at as much as $475 million. Like UPMC, nonprofit Highmark was a dominant presence in its market, formed from the merger of a Blue Cross and a Blue Shield plan in 1996. By 2011, it had market share of around 60% in Allegheny County, with annual revenue of $14.8 billion, and it was sitting on reserves of about $4.1 billion. Still, it was a bold and risky stroke for Dr. Melani, a blunt-spoken internal-medicine physician who himself trained at West Penn.</blockquote> Marketing Rather than Substance The two sides launched a marketing and public relations battle which did not seem to have much to do with quality of, access to, and cost of health care. As the WSJ article noted, <blockquote>The spat quickly got nasty. Highmark highlighted UPMC's rate request in ads, and hired a Washington lobbying firm to pull together a coalition of churches, patient groups and others that would press for a deal. UPMC's own ad campaign urged patients to 'Keep your doctor. Check your plan.' Highmark sued, arguing the ads were misleading. UPMC bought Google ads that called up its site when a user searched for 'Highmark.'</blockquote> The Pittsburgh Tribune-Review article included, <blockquote>Public relations experts agree that Highmark faces a daunting challenge: People might see UPMC -- and by extension, Romoff -- as a bully, but they don't want to lose access to the system's 19 hospitals and 3,000 doctors in Western Pennsylvania. UPMC's 'Keep Your Doc' ad campaign, produced by South Side agency GatesmanMarmion+Dave, is successful because it furthers the organization's business objectives, said Dale Leibach, an associate with Prism Public Affairs in Washington. This year, for the first time, UPMC gave four national insurers full access to its facilities and doctors, an arrangement previously granted only to Highmark. 'I would give points to UPMC for consistency and transparency, in promising more competition and then delivering on that promise by giving people in Pittsburgh and in the region many more options in terms of insurance providers,' said Leibach, who reviewed news accounts about the dispute. David Kosick Sr., senior associate at KMA Public Relations in Canonsburg, takes the opposite stance, saying Highmark receives greater sympathy from a public that views UPMC as an insensitive corporate titan. Mullen Advertising in the Strip District produces Highmark's 'Accepted. Everywhere' ad campaign for TV, radio, publications, billboards and the Internet. 'Highmark's winning the PR battle,' Kosick said, citing threats by state lawmakers to intervene and public criticism directed at UPMC, including Allegheny County Council's refusal last month to issue $335 million in bonds for UPMC because of public opposition. Wood said the health system recognizes its reputation 'may have taken a bit of a short-term hit locally,' but 'UPMC is focused on the longer term.' 'We've used our PR and marketing to fundamentally change the health care market in Western Pennsylvania,' Wood said. Gene Grabowski, senior vice president of Washington-based public relations firm Levick Strategic Communications, said that strategy could backfire.</blockquote> Also, <blockquote>In addition to online social media, the public relations campaigns have ramped up on television and in other advertising. UPMC placed its TV ads on major networks and cable and estimates they will reach the average Pittsburgh viewer four times a week, Wood said. He declined to say how much UPMC is spending on the ad campaign or what it budgets for advertising, but he said the budget has not changed since last year. The ads, Fitting said, target 'what people are really worried about.' Highmark stepped up its campaign in response to UPMC's, Weinstein said. He would not say how much Highmark pays Mullen Advertising or what it budgets for advertising. 'UPMC launched an aggressive, multifaceted misinformation campaign targeted at employers and consumers who subscribe to Highmark's health plans,' Weinstein said.</blockquote> Caught in the Crossfire Meanwhile, of course, patients and doctors are trying to avoid being stomped by the wrestling titans. The Wall Street Journal article opened with this theme, <blockquote>Trish Wyckoff is struggling with stage-four breast cancer, but now the 53-year-old Pittsburgh resident has another worry: a possible divorce between the hospital system that is treating her, the University of Pittsburgh Medical Center, and Highmark Inc., the health insurer that pays for her care. If the two companies can't agree, she fears she won't be able to keep seeing the doctors who she believes are keeping her alive. 'We are absolutely stuck in the middle,' she says. This is a really scary time.' </blockquote> Here is another anecdote, <blockquote>With local newspapers chronicling each tit-for-tat, Pittsburgh residents like Dan Glasser say they have been acutely aware of the battle. Mr. Glasser, a 46-year-old lawyer, says he is alarmed and annoyed at the potential split between his insurer and UPMC. If forced to choose a side, he says, he would switch health plans to ensure access to UPMC. He has been seeing the same doctor there since he graduated from law school. 'That's almost my whole adult life,' he says.</blockquote> Doctors are equally unhappy. <blockquote>For his part, Kenneth Gold, Mr. Glasser's primary care physician, says he has been telling worried patients that 'all of us are pawns in this fight,' which he hopes gets resolved. If Highmark and UPMC do break up, 'it is going to be mass chaos,' he says. </blockquote> Even employers are unhappy, <blockquote>Employers, for their part, say they feel trapped in the middle, worried about health-care costs and also under pressure from employees to lock in access to UPMC. Cheryl Melinchak, director of benefits at Pittsburgh-based Westinghouse Electric Co., says the firm is likely to offer a new health plan this fall, in addition to Highmark and a high-deductible Aetna version, to ensure workers can use UPMC. The standoff is 'frustrating,' she says. 'We need competition on both sides,' insurers and health providers. </blockquote> Summary So here we have the brave new world of the US health care system, a system that some people in other countries seem to think is worthy of emulation. Increasing <a href="http://hcrenewal.blogspot.com/search/label/concentration%20of%20power">concentration of power</a> has lead to health care dominated by ever larger organizations lead by ever more egocentric executives. Organizations that are dominant in one area seek to dominate other areas. Caught in the crossfire are patients, doctors, employers, and the public. While more money goes to advertising, public relations, and lawyers, nothing about the fight seems to be about improving care or making it more accessible. Further considering how this particular fight came to be will reveal various interlocking facets of health care dysfunction. If we can start to address them, we may be able to accomplish real health care reform.  Clearly we need health care organizations to concentrate on health care, not on increasing their power and domination.  We need them using most of their resources for health care, not on marketing, public relations, legal services, administrative support, and executive compensation.  Stay tuned to <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a> as we continue this series.

The Pittsburgh Experiment - I - Caught in the Crossfire

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05 Apr 2012

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