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

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

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

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

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

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

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

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

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

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

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

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

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Logical Fallacies in Support of Payments for Board Members of Non-Profit Health Insurers

The kerfuffle over the huge golden parachute given the departing CEO of an ostensibly non-profit Massachusetts health insurer/ managed care organization continues to evolve (see posts <a href="http://hcrenewal.blogspot.com/2011/03/massachusetts-blue-cross-blue-shield.html">here</a> and <a href="http://hcrenewal.blogspot.com/2011/03/some-dare-call-it-corruption.html">here</a>), providing some new insight into governance problems afflicting health care organizations.  <br /><br />One of the issues that aroused initially aroused concern was that Massachusetts Blue Cross Blue Shield paid the members of its board of trustees substantial amount, an unusual practice for a non-profit organization.  Board members who feel they owe their pay to the CEO they are supposed to be overseeing might be particularly inclined to over pay that same CEO.<br /><br />Nonetheless, the Boston Globe just <a href="http://www.boston.com/business/healthcare/articles/2011/03/31/two_health_insurers_boards_opt_to_keep_accepting_pay/">reported</a> that other non-profit Massachusetts health insurers were defending their payments to board members:<br /><blockquote>The state’s second- and third-largest health insurers said yesterday their board members have decided to keep <em>paying themselves five-figure annual fees despite objections from the state attorney general and an inquiry into directors’ compensation at nonprofit health plans</em>.</blockquote>The rationales for these decisions were fascinating, amounting to four variations of special pleading, plus an appeal to tradition.<br /><br /><strong>Special pleading: Our board members are experienced and independent</strong><br /><blockquote><em>'Good governance is advanced by the recruitment and retention of experienced, independent, reasonably compensated directors</em>,' Harvard Pilgrim said in its statement. 'In 2010, our board worked more than 2,000 hours.'</blockquote><br />I doubt any non-profit organization would admit to not wanting experienced, independent board members,  but very few other non-profits pay their board members. Asserting that board members of the Massachusetts insurance companies especially deserve pay because of characteristics they share with other members of other boards who are not paid amounts to <a href="http://www.nizkor.org/features/fallacies/special-pleading.html">a special pleading</a>. <br /><br />The second statement seems just to be a simple exaggeration, since 2000 hours a year implies that the board members work there full-time (40 hours/week * 50 weeks = 2000 hours).   <br /><br /><strong>Special Pleading: Our board members are skilled and experienced</strong><br /><blockquote>Wellesley-based Harvard Pilgrim, however, said in its statement that board members <em>'apply their specialized experience and skills in the areas of medicine, accounting, finance and law</em>, to support our company and its mission. Our board serves as responsible, independent fiscal stewards for our members’ premium dollars.'</blockquote><br />Again, board members of all sorts of non-profit organizations could be described in similar terms. So using this as an argument for paying board members when members with the same attributes of other boards are not paid is another special pleading. <br /><br /><strong>Special Pleading: Our boards have great responsibility</strong><br /><br /><blockquote>Tufts, based in Watertown, said its board believes there is 'an additional overlay of responsibility' for directors of a health insurance company.<br /><br />'Unlike the directors of other nonprofits, they are subject to distinct regulatory considerations,' the Tufts statement said. 'Therefore, compensation for time, commitment and skill of top talent is a responsible approach for the oversight of an organization that provides health care coverage to hundreds of thousands' of members.</blockquote><br />Of course, boards of hospitals have their own "distinct regulatory considerations," as do boards of academic institutions  Boards of hospitals are also responsible for the health of their patients and boards of academic institutions are responsible for the education of their students. So this is a third example of a special pleading.<br /><br /><strong>Special Pleading: Our responsibility, our time, our effort</strong><br /><strong>Appeal to Tradition: Our tradition is to pay directors</strong><br /><blockquote>The <em>history and tradition of nonprofit health plans is to pay [directors] in this state</em>. These are people from various walks of life <em>who bring a skill set</em>. These are not political hacks. . . . It’s because of <em>the responsibility, the time, the effort, and the work</em> you have to put into it. It’s a lot of homework.</blockquote><br />It is true that the four non-profit Massachusetts health insurers all apparently did pay their board members, although in many other states, members of the boards of non-profit health insurers were not paid. But in the absence of any further argument that Massachusetts organizations were right when the others were wrong, this amounts to <a href="http://www.nizkor.org/features/fallacies/appeal-to-tradition.html">an appeal to tradition</a>.   The rest of this personal statement was again a special pleading.  <br /><br /><strong>Summary</strong><br /><br />Board members of non-profit organizations generally are said to have three duties, as <a href="http://www.boardsource.org/Knowledge.asp?ID=3.364">per BoardSource</a>: <br />- The Duty of Care: "a board member owes the duty to exercise reasonable care when he or she makes a decision as a steward of the organization."<br />- The Duty of Loyalty: "a board member must give undivided allegiance when making decisions affecting the organization. This means that a board member can never use information obtained as a member for personal gain, but must act in the best interests of the organization."<br />- The Duty of Obedience: "The duty of obedience requires board members to be faithful to the organization's mission. They are not permitted to act in a way that is inconsistent with the central goals of the organization."<br /><br />The notion that boards stewarding non-profit organizations, including health care organizations, have these core responsibilities seems to have become increasingly ignored and forgotten in an increasingly commercialized health care environment.  Simply fulfilling these duties should not be regarded as exceptional board service, and certainly not so exceptional as to require pay.  The fallacious arguments made on behalf of lucrative payments given to members of the boards of two of the more highly regarded non-profit health insurance corporations in the country indicate how low governance and stewardship of health care organizations has sunk.<br /><br />Again, we need governance of health care organization by people who understand their fundamental duties, who are willing to be accountable, and who put their organizations' mission ahead of personal gain.  <br /><br />Those who profess concern about the stewardship of health care need not go far to find examples of fundamental misconceptions about what such stewardship involves.  We need to restore core values of governance to our health care organizations. 

Logical Fallacies in Support of Payments for Board Members of Non-Profit Health Insurers

The kerfuffle over the huge golden parachute given the departing CEO of an ostensibly non-profit Massachusetts health insurer/ managed care organization continues to evolve (see posts here and here), …

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Wendell Potter on "Insurers’ Cynical Calculations on the Cost of Doing Business"

<a href="http://wendellpotter.com/2011/03/insurers%E2%80%99-cynical-calculations-on-the-cost-of-doing-business">On his blog</a>, Wendell Potter, former head of public relations for CIGNA, discussed big health insurance/ managed care organizations' attitudes toward paying financial penalties for wrong-doing:<br /><blockquote>Having served as head of PR for two of the country’s largest health insurers — CIGNA and Humana — I know from personal experience that such fines are not widely considered newsworthy.<br /><br />Insurers know this, and so, annoying as being charged with breaking the law might be, <em>they largely shrug off the fines and the threat of a day’s worth of bad publicity that occasionally accompany them. They are perfectly willing to risk being caught because they long ago realized that the fines are never severe enough to make them radically change the way they do business</em>. Such a change would involve dealing more honestly with both their customers and the doctors who provide care to the people they insure.</blockquote><br />We have frequently discussed the parade of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> involving major health care organizations, including drug, device, biotechnology companies, and hospitals and health care systems as well as insurers and managed care organizations. We have repeatedly noted that fines or payments imposed on these organizations seem to have little deterrent effect. Now we have some documentation that this is true from someone who used to be in the belly of the beast.<br /><br />So I get to repeat:  we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Wendell Potter on "Insurers’ Cynical Calculations on the Cost of Doing Business"

On his blog, Wendell Potter, former head of public relations for CIGNA, discussed big health insurance/ managed care organizations' attitudes toward paying financial penalties for wrong-doing:Having s…

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How Large Health Care Organizations Set the "Rules of the Game" to Dominate Health Care

The notion that health care is increasingly "dominated by large, bureaucratic organizations which do not honor ... [its] core values"(1) just made it into a main-stream, large circulation US medical journal.  A brand new commentary in the American Journal of Medicine(2) by Supri and Malone declared:<br /><blockquote>To explain why we have the most expensive health care system in the world and yet one of the lowest performing, we need to take a perspective that focuses on the US institution of medicine as a whole. <em>We expose the hidden rules by which this institution operates and discuss how <strong>its powerful organizations shape, control and perpetuate this ailing system</strong>.</em></blockquote><br />The article then described the main types of large, powerful health care organizations:<br /><blockquote>The US institution of medicine is not a single, comprehensive and cohesive system of health care. Instead, it is comprised of a myriad of large and powerful organizations, including <a href="http://hcrenewal.blogspot.com/search/label/health%20insurance">insurance companies</a>, <a href="http://hcrenewal.blogspot.com/search/label/managed%20care%20organizations">Health Maintenance Organizations</a> (HMOs), corporate for-profit hospital chains, and <a href="http://hcrenewal.blogspot.com/search/label/pharmaceuticals">pharmaceutical companies</a>. This institutional structure is large and vast, and has over the years become ever more labyrinthine. </blockquote><br />Note that there are even more kinds of large and powerful health care organizations, including non-profit <a href="http://hcrenewal.blogspot.com/search/label/hospitals">hospitals</a> and <a href="http://hcrenewal.blogspot.com/search/label/hospital%20systems">hospital systems</a>, <a href="http://hcrenewal.blogspot.com/search/label/employers">employers</a> acting as payers for health care, <a href="http://hcrenewal.blogspot.com/search/label/government">government agencies</a>, <a href="http://hcrenewal.blogspot.com/search/label/medical%20devices">device</a> and <a href="http://hcrenewal.blogspot.com/search/label/biotechnology">biotechnology</a> companies, <a href="http://hcrenewal.blogspot.com/search/label/Healthcare%20IT%20failure">health care information technology companies</a>, <a href="http://hcrenewal.blogspot.com/search/label/public%20relations">public relations firms</a>, <a href="http://hcrenewal.blogspot.com/search/label/medical%20education%20and%20communication%20companies">medical education and communication companies</a>, <a href="http://hcrenewal.blogspot.com/search/label/contract%20research%20organizations">contract research organizations</a>, <a href="http://hcrenewal.blogspot.com/search/label/medical%20societies">professional societies</a>, <a href="http://hcrenewal.blogspot.com/search/label/patient%20advocacy%20groups">patient advocacy groups</a>, accrediting bodies, health care charities, etc, etc, etc.  But the point is that the large organizations, not the patients, the physicians, nor the public dominate.<br /><br />Supri and Malone suggested that each kind of organization sets the "rules of the game," that is, the priorities important to the organization, which are very different from the core values that many of us believe ought to guide health care:<br /><blockquote>Not only is the institutional structure large, it is dynamic, and actively creates, shapes, and maintains the institution of medicine. It does this through what we call setting the “rules of the game”; that is, by imposing the terms by which the system operates.</blockquote><br />For example, <br /><blockquote>Insurance companies have set the rule 'restrict choice and coverage.' They enact this through their elaborate system of copayments and deductibles, exclusion clauses and loopholes, each designed to deter patients from claiming the health care they need, and to override physicians' medical judgment.</blockquote><br />Similarly, it cited the rules for managed care, "manage care," that is, "restrict utilization of health care" regardless of patients' needs; the pharmaceutical industry, "charges as much as we want, because insurance will pay;" and "corporate hospital chains ... test as much as we want, because insurance will pay." Thus it made the point that US health care now is driven by the priorities of large organizations whose interests at best may disregard and at worst may conflict with providing the best possible care for individual patients.<br /><br />Further, the resulting complexity is to the benefit of the large organizations:<br /><blockquote>As each organization has created its own 'rules of the game,' the institution of medicine has grown into a complex entity that few really understand. This very complexity actually works to the advantage of the organizations that comprise the system, creating an operating environment that allows them to siphon off billions of dollars. It is one of the main reasons why the cost of health care has spiraled out of control. </blockquote><br />This is very important, and suggests that the system will just become more bureaucratic, complex and opaque until it finally collapses.<br /><br />Finally, it raised the point that the organizations collude to promote their priorities at the expense of patients' and the public's health:<br /><blockquote>Although each organization sets their 'own rules of the game,' <em>they are also <strong>strongly and deeply interlinked, and cooperate and collaborate </strong>to protect the system of health care that they have devised, so that it remains intact and continues to serve their own interests</em>.</blockquote><br />Although  Supri and Malone did not differentiate the leadership of large organizations from the organizations themselves, we have pointed out that the top leaders of various kinds of organizations seem to think alike, becoming a sort of de facto executives' guild, with a "<a href="http://hcrenewal.blogspot.com/search/label/superclass">superclass</a>" of oligarchs at its pinnacle.  The guild may be enabled by these leaders' often <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">huge compensation</a> and other benefits and corporate arrangements that keep them shielded from the vicissitudes of daily life that patients, health care professionals, and lower level organizational employees must face.  Furthermore, the leadership of these organizations is often interlinked, for example, by leaders of one organization serving on boards of <a href="http://hcrenewal.blogspot.com/search/label/boards%20of%20directors">directors</a> or <a href="http://hcrenewal.blogspot.com/search/label/boards%20of%20trustees">trustees</a> of others.<br /><br />It is so nice for us at Health Care Renewal to have some company. It is a very important blow to the <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic effect</a> for these sorts of views to appear in a mainstream medical journal.<br /><br />When I interviewed a motley group of physicians and health care professionals in the early part of the 21st century, many expressed concerns about how medicine had been taken over by large organizations which did not honor its values. The article published in 2003(1) in Europe which tried to summarize their concerns probably could not have been published at that time in the US, but its publication remote from its main topic only made it more anechoic. It may be that an article published in a respected American journal will generate some more echoes. Here is hoping that Health Care Renewal can help create some such echoes.  <br /><br />Obviously, those who lead large organizations in health care will not be happy about that, so it is possible this article's appearance in a main-stream journal may incite some pushback, perhaps generated by the public relations machines of the large health care organizations (see <a href="http://hcrenewal.blogspot.com/2011/02/health-care-corporate-disinformation.html">this post</a> about how Wendell Potter's excellent <a href="http://wendellpotter.com/deadlyspin/"><em>Deadly Spin</em></a> documented how large organizations use propaganda and disinformation to undermine viewpoints that threaten their domination.)<br /><br />In conclusion, I strongly support Supri and Malone's final sentiments:<br /><blockquote>The sum of the 'rules of the game' devised by these organizations has resulted in a fragmented, haphazard and broken system of health care. Reform is long overdue, and <em><strong>demands root and branch transformation of the 'rules of the game' governing the US institution of medicine. This requires us to understand these rules, who is setting them, and how these rules are being used to exploit the system of medicine.</strong></em> Only then can we begin to heal our ailing health care system.</blockquote>Well said!<br /><br />But now almost 8 years since the publication of "A Cautionary Tale," we still have a long way to go.<br /><br /><span style="font-size: x-small;"><strong>References</strong></span><br /><span style="font-size: x-small;"><br /></span><br /><span style="font-size: x-small;">1.  Poses RM. A cautionary tale: the dysfunction of American health care.  Eur J Inte Med 2003; 14: 123-130.  Link </span><a href="http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VSB-48D4VTD-D&_user=489286&_coverDate=03%2F31%2F2003&_rdoc=1&_fmt=high&_orig=gateway&_origin=gateway&_sort=d&_docanchor=&view=c&_searchStrId=1699586911&_rerunOrigin=google&_acct=C000022678&_version=1&_urlVersion=0&_userid=489286&md5=52787b7440a81ac69b0bffe22ddbe5ff&searchtype=a"><span style="font-size: x-small;">here</span></a><span style="font-size: x-small;">.</span><br /><span style="font-size: x-small;">2.  Supri S, Malone K. On the critical list: the US institution of medicine. Am J Med 2011; 124: 192-193.  Link <a href="http://www.ncbi.nlm.nih.gov/pubmed/21396498">here</a>.</span><span style="font-size: x-small;"> </span>

How Large Health Care Organizations Set the "Rules of the Game" to Dominate Health Care

The notion that health care is increasingly "dominated by large, bureaucratic organizations which do not honor ... [its] core values"(1) just made it into a main-stream, large circulation US medical j…

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"Government-Run Health Insurance" Run by Corporations? - Two Medicaid Examples

In the US, there seems to have been a constant argument between right- and left-wingers over "government-run" health insurance.  The right tends to disparage all aspects of "government-run" health care, and in the case of insurance, uses the alleged faults of the two big US government health insurance programs as examples.  (Medicare is a federal government health insurance program for the elderly and disabled. Medicaid is federal-state program for the poor.)  <br /><br />For example, per the Associated Press <a href="http://www.businessweek.com/ap/financialnews/D9LTA0UO2.htm">via BusinessWeek</a>, from a currently prominent Republican hopeful for President, former Minnesota Governor Tim Pawlenty,<br /><blockquote>The former Minnesota governor was the latest politician to participate in the Health Policy Grand Rounds program that Dartmouth-Hitchcock Medical Center has organized for its staff during the past two presidential campaign cycles. <em>Using Medicare and Medicaid as examples, he criticized the notion that government-run health care will produce efficiency and said the answer lies in empowering consumers.</em></blockquote><br />Republican Congressman Darrell Issa (California) <a href="http://issa.house.gov/index.php?option=com_content&view=article&id=271:rep-darrell-issa-the-lackluster-record-of-government-run-health-care&catid=23:opinion-editorials">wrote</a> in 2010:<br /><blockquote><em>an expansion of the federal bureaucracy at that rate will greatly increase the incidence of waste, fraud and abuse in health care</em>. Already Medicare, which accounts for 14% of all federal spending, is rife with waste, fraud and abuse. Even Attorney General Eric Holder has said, 'By all accounts, <em>every year we lose tens of billions of dollars in Medicare and Medicaid funds to fraud</em>.'<br /><br />A recent analysis by the Government Accountability Office (GAO) estimated that federal subsidy programs cost taxpayers about $100 billion every year in improper payments, with <em>Medicare and Medicaid accounting for more than half of that</em>.</blockquote><br />The left may advocate for government-run, "single-payer" insurance programs, perhaps using the alleged benefits of Medicare and Medicaid as examples.<br /><br />Scholarly articles about health care policy may refer to Medicaid as a government "single-payer" system.  (For example, see: Robinson JC. The commercial health insurance industry in an era of eroding employer coverage. Health Aff 2006; 25:1475-1486. Link <a href="http://content.healthaffairs.org/content/25/6/1475.short">here</a>.)<br /><br />In any case, I suspect most of us think of Medicaid as an example of "government-run" health care insurance, regardless of whether we believe that is a good or a bad thing.<br /><br />Yet the reality may be more complex. Two recent stories, one a follow-up on an old Health Care Renewal post, provide some dots to connect.<br /><br /><strong>Connecticut HUSKY Medicaid Program</strong><br /><br />In 2007, we <a href="http://hcrenewal.blogspot.com/2007/11/health-plans-programs-cancelled-for.html">posted</a> about how the state of Connecticut was going to end participation in the HUSKY state Medicaid program for poor children by four insurance companies/ managed care organizations.  They apparently refused to provide information about payments to physicians and denial of payments for prescription drugs to the state.  The two largest organizations involved were Anthem Health Plans (a subsidiary of WellPoint), and Health Net.  At the time, we noted that this case provided an example of the lack of transparency exhibited by major health organizations.<br /><br />Late last year, the Connecticut Mirror <a href="http://www.ctmirror.org/story/8085/husky-managed-care-company-profits">documented </a>more criticism of the HUSKY program based on a report that showed that participating companies were making big profits from it (but perhaps not from other state Medicaid programs):  <br /><blockquote>The three managed care companies in the state's HUSKY insurance program for low-income children and families<em> recorded profits of $18.8 million</em> last year, according to figures released by the state Department of Social Services.<br /><br />In one part of HUSKY, the insurers <em>made margins of at least 20 percent and spent less than 72 percent of their revenues on medical care.</em><br /><br />The figures released this month drew criticism from members of the Medicaid Care Management Oversight Council, who are in the midst of considering moving HUSKY out of managed care.</blockquote><br />In more detail, the relevant numbers were:<br /><blockquote><em>AmeriChoice, part of UnitedHealthcare, spent 62 percent of its revenue on medical care and posted a 22.9 percent profit margin in the HUSKY B program</em>.<br /><br />By contrast, the federal health reform law sets minimum medical care ratios for insurers of 80 percent or 85 percent, depending on the type of plan. The provision does not apply to Medicaid plans, but was cited as a benchmark in the council's discussion.<br /><br />None of the insurers met those benchmarks in HUSKY B, which covers children whose family income does not qualify for Medicaid. Last year, it covered between 13,000 and 16,000 children, many whose families earned below 300 percent of the federal poverty level.<br /><br /><em>Aetna spent 70.5 percent on medical care and made a 20 percent margin, while Community Health Network of Connecticut, a non-profit with far more enrollees than the other insurers, spent 71.8 percent of its revenues on medical care and made a 20.6 percent margin</em>.<br /><br />Margins were lower, and medical care ratios higher, in HUSKY A, a Medicaid program that enrolled as many as 358,088 children and adults in 2009.<br /><br />Community Health Network reported a 95.1 percent medical care ratio and a -0.3 percent margin. AmeriChoice spent 86.3 percent of its revenue on medical care and achieved a 3.5 percent margin, while Aetna had an 83.9 percent medical care ratio and 6.5 percent margin.<br /><br /><em>Overall, the medical care ratio was 90.7 percent for both HUSKY programs and all three insurers. The overall margin was 2.3 percent</em>.</blockquote><br />The insurers involved defended themselves by noting to participate in HUSKY they also had to participate in another program, Charter Oak Health Plan, "on which they lose money."<br /><br />Last month, it looked to be the end of managed care in these Medicaid programs, again as <a href="http://www.ctmirror.org/story/11427/malloy-administration-moving-husky-out-managed-care">reported</a> by the Connecticut Mirror:<br /><blockquote>The Malloy administration announced plans Tuesday to <em>move the HUSKY and Charter Oak health programs out of managed care </em>and increase care coordination in the state's other Medicaid programs, an effort officials said would save money while giving the state more control over health programs that serve more than 500,000 people. </blockquote><br />This article also noted:<br /><blockquote>In the current system, the state pays three managed care companies set fees for each HUSKY and Charter Oak member every month, and the companies use the money to pay medical claims. Critics say it gives the <em>managed care companies an incentive to deny care since they get to keep the money not spent on medical costs</em>.</blockquote><br />So let us deal directly with the cognitive dissonance generated by these articles. In the ongoing US health reform debate, Medicaid is usually discussed as a "government-run" health care (insurance) program. Yet these news articles from Connecticut suggest at least in that state, part of Medicaid was out-sourced to mostly large, national, for-profit health insurance companies/ managed care organizations. Furthermore, as noted just above, these corporations seemed to be mainly calling the shots in how their part of Medicaid was run. So is this "government-run" health care (insurance)?<br /><br />But wait, there is more....<br /><br /><strong>Minnesota Medicaid Controversy</strong><br /><br />Last month, the Politics in Minnesota web-site ran a <a href="http://politicsinminnesota.com/blog/2011/02/picking-the-lock-on-hmos-%E2%80%98black-box/">report</a> on an unlikely reformer:<br /><blockquote>Dave Feinwachs is no stranger to the Capitol.<br /><br />For three decades he was the general counsel to the Minnesota Hospital Association. In that capacity, he negotiated with state agencies and testified regularly before legislative committees on health care issues.<br /><br />But early last year, Feinwachs said, he was ordered by his superiors at the hospital association not to provide any further testimony at the Capitol. The reason for the muzzle: his vocal insistence that health maintenance organizations (HMOs) should contribute money to help salvage the state’s General Assistance Medical Care program for indigent adults.<br /><br />Feinwachs says he abided by the prohibition on testimony before legislative committees, but apparently it was not enough to keep him in the good graces of his employer. In November he was fired as the group’s principal attorney. Feinwachs will not discuss the reason for his termination, citing potential litigation. But it almost certainly had something to do with <em>his ongoing zealous campaign to force greater transparency and accountability on the state’s HMOs - primarily Blue Cross & Blue Shield, HealthPartners, Medica and UCare - which receive roughly $3 billion annually to run health plans for many of the state’s poorest residents.</em></blockquote><br />So here we go again. This article suggested that Minnesota had out-sourced a very large part of its Medicaid program.<br /><br />Furthermore, it also appears that the state government knows little about what happens to the money it hands over:<br /><blockquote><em>In the next two years, Minnesota is slated to funnel about $6 billion to the state’s HMOs to provide health care for 550,000 of the state’s poorest residents. To put that figure in perspective, it is nearly 20 percent of the state’s expected 2012-13 general fund revenues</em> - and nearly identical to the state’s projected $6.2 billion deficit. In coming up with a solution to Minnesota’s financial crisis, Feinwachs and others believe, legislators must at least have a clear accounting of this massive pot of health care dollars.<br /><br /><em>HMOs, meanwhile, are not exactly yearning for scrutiny,</em> especially as they launch a pitch to administer even more of the state’s health care spending.</blockquote><br />In addition, there is reason to believe that Minnesota may be paying a significant amount for administration:<br /><blockquote><em>Feinwachs believes that the administrative overhead collected by HMOs could be in the neighborhood of 16 percent.</em> He concedes, however, that this is no more than a 'guesstimate' pieced together from the limited information that is publicly available.</blockquote><br />Then, there is reason to suspect that the private (and nominally not-for-profit) HMOs that Minnesota pays to run Medicaid have resisted accounting for how the money they got was spent:<br /><blockquote><em>Past attempts to bolster accountability and transparency for HMOs have largely run into a brick wall.</em> For instance, when legislators considered requiring the health plans to chip in on a plan to restore the General Assistance Medical Care program last year, they were told by officials from the Department of Human Services that such a move would be illegal. <em>Efforts to provide more financial disclosure have been rebuffed by the argument that such information is proprietary and not subject to the state’s data practices rules.</em> The complexity of Minnesota’s patchwork of publicly funded health care plans, which very few individuals clearly understand, has also helped forestall changes.<br /><br />'We can’t let the complexity of data and information beat us down, and I think that’s what happened in the years past,' Hosch said. <em>'The systems almost seem like they’re deliberately complex in order to confuse us</em>.'</blockquote><br />Apparently in these parlous financial times, Mr Feinwachs got some attention. Last week, the state Governor announced his willingness to dig into the results of the state's out-sourcing of Medicaid, per the Minneapolis Star-Tribune:<br /><blockquote>It's high time that Minnesota started<em> treating its nonprofit health plans for what they are -- some of state government's largest vendors.</em><br /><br />Reforms announced this week by Gov. Mark Dayton's office are a promising first step toward scrutinizing health plan contracts for savings and finding new ways to rein in Minnesota's soaring medical costs.<br /><br />Managing care for more than 500,000 low-income, disabled and elderly Minnesotans enrolled in state public health programs is a $3.1 billion-a-year business for health plans in Minnesota, with the state and federal government jointly footing the bill.<br /><br />Over the past decade, <em>the state's portion of this outsourced care has increased from 5 percent to 11 percent of the state budget</em>, according to Dayton's office.<br /><br />The state also has more than 249,000 people -- typically the sickest of the sick -- in a fee-for-service public program. That spending is also ripe for a cost-savings review.<br /><br />On Wednesday, Dayton announced plans to do what good business leaders do in difficult financial circumstances. His administration is going to start driving harder bargains with health plans.<br /><br />Key parts of the plan include <em>making the contracting system more competitive, making financial information more transparent, and doing deeper auditing of plans' books to analyze administrative and medical expenses</em>.</blockquote><br />So again in Minnesota, it appeared that the state had out-sourced a large proportion of its Medicaid program, covering apparently two-thirds of the state's Medicaid patients. It appears that knowledge of the out-sourcing of most of Medicaid was relatively anechoic, and that even the state's former Governor Pawlenty was unaware of it (see his comments in introduction to this post). Despite the amounts of money and the numbers of people involved, up to now the state government had apparently very little information about how billions of dollars were being spent by private, albeit nominally non-profit health insurance companies/ managed care organizations.<br /><br /><strong>Summary</strong><br /><br />Two cases from two states suggest that some proportion of Medicaid, perhaps a very large proportion, has been out-sourced to private corporations, both nominally non-profit and for-profit. <br /><br />In fact, a Washington Post <a href="http://www.washingtonpost.com/wp-dyn/content/article/2010/07/07/AR2010070703560.html">article</a> last year suggested that 70% of Medicaid patients are in managed care plans, most of which are likely out-sourced, not run by state Medicaid agencies.<br /><br />Our two cases above further suggest that government officials may know little about how the money given to these corporations was spent, and how the corporations managed the supposedly "government-run" health insurance.<br /><br />So much for the notion that the US Medicaid program is "government-run" health insurance.  Whether one believes that government bureaucrats are good or bad at running health care, it seems that most Medicaid patients' care is managed by corporate, not government bureaucrats.<br /><br />The likelihood that a substantial proportion of Medicaid patients actually get their health care coverage from corporations, be that non-profit or for-profit, raises some important questions.<br />- What proportion of the government funds provided these corporations goes to health care versus administration, overhead, etc?<br />-  What then is the proportion of all Medicaid money spent on health care versus administration, overhead, etc at the federal, state, and corporate levels?<br />-  What proportion of the revenue of major health insurers/ managed care organizations actually comes from tax-payers via Medicaid?<br />-  To what extent do health insurers/ managed care organizations influence clinical care through their role implementing Medicaid?<br />-  How transparent are their finances and their implementation of Medicaid?<br />-  How well are they supervised and regulated by national and state government?<br /><br />Meanwhile, it appears that there is far more overlap between government and corporate health insurance and managed care than most of us realized.  That suggests the usual debate between the foes and proponents of "government-run" health care (insurance) was vastly too simplistic.  Maybe some of those involved in the debate should have known that.   <br /><br />Meanwhile, the concerns I <a href="http://www.ejinme.com/article/S0953-6205%2803%2900029-3/abstract">discussed</a> in 2002 that "health care has become dominated by large, bureaucratic organizations" appear increasingly well-founded.  This domination seems to be increasingly facilitated by collaboration - or should that be collusion? - among government and private bureaucracies.  The danger, as we have repeatedly discussed, is that the leaders of these bureaucracies may feel increasing loyalty to the managers' and executives' guild, and decreasing pressure not to fulfill their own and their cronies' self-interest.  We need at least to have some frank discussions about the increasing corporatism of health care and all of society, and what to do about it. 

"Government-Run Health Insurance" Run by Corporations? - Two Medicaid Examples

In the US, there seems to have been a constant argument between right- and left-wingers over "government-run" health insurance.  The right tends to disparage all aspects of "government-run" health car…

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Passport to ... Fraud? - AmeriHealth Mercy Settles

Back in November, 2010, we <a href="http://hcrenewal.blogspot.com/2010/11/living-high-life-on-money-to-treat-poor.html">discussed</a> the relatively opulent pay and perks given to and conflicts of interest affecting leaders of Passport Health Plan, a non-profit, state (Kentucky) supported Medicaid managed care organization/ health insurer.  This seemed to be another case of health care organizational insiders putting their personal gain ahead of their mission, which was particularly unseemly because their mission was serving the poor.  <br /><br />Now Passport Health is <a href="http://www.courier-journal.com/article/20110126/NEWS01/301260140/1010/features/Passport+Health+Plan+contractor+pays+$2+million+to+settle+fraud+investigation">in the news</a> again, and not in a favorable way, as per the Louisville (Kentucky) Courier-Journal:<br /><blockquote>Passport Health Plan’s main contractor has agreed to <em>pay more than $2 million in damages to the Kentucky Medicaid program to settle a fraud investigation</em>, Attorney General Jack Conway announced Wednesday.<br /><br />The settlement with AmeriHealth Mercy Plan is the result of a nine-month investigation by the Attorney General's Medicaid Fraud Unit into <em>alleged falsification of records by the company that entitled it to more than $677,000 in bonus money for good performance</em>.<br /><br />Conway said the investigation centered on an allegation from a whistleblower that AmeriHealth <em>falsely reported data to the state Medicaid Services Department on the number of Medicaid recipients who received cervical cancer screenings in 2009</em>. The false numbers allowed AmeriHealth to receive the bonus money under the terms of its contract.</blockquote><br />We have discussed a variety of cases of leaders of health care organizations getting compensation or benefits that seemed disproportionate in their organizations' context. The usual justification seems to be that it takes such rewards to attract the excellent leaders needed by health care organization.<br /><br />Here is another example of leaders who not only seemed to get excessive compensation and benefits, but whose performance seemed far from excellent. <br /><br />Moreover, it suggests that compensation and benefits may actually have an inverse correlation to performance. Organizations whose stewards seem unrealistic about the talents of their hired managers, and dependent on material rewards to retain such managers may lack good stewardship. Leaders who find themselves rewarded beyond any reasonable evaluation of their work may learn the lesson that they cannot ask for too much. Meanwhile, the excess of their rewards may inspire increasing greed rather than increasing devotion to the mission, while the pay and perks increasingly place them in a bubble that insulates from the concerns of the common people who their organizations are supposed to serve.<br /><br />As we have <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">said before</a>, far too often the leaders of not-for-profit health care institutions seem more interested in padding their own bottom lines than upholding the institutions' missions. They often seem entirely unaware of their duty to put those missions ahead of their own self-interest. Like the financial services sector in the era of "greed is good," health care too often seems run by <a href="http://hcrenewal.blogspot.com/2009/12/compensation-madness-insiders-hijacking.html">"<strong><em>insiders hijacking established institutions for their personal benefit.</em></strong>"</a> True health care reform would encourage leadership of health care who understand health care and care about its mission, rather than those who see a quick way to make a small fortune. <br /><br />PS - Also note that this is also another example of the sort of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> of misbehavior by health care organizations that seems to have little deterrent effect, mainly because no individual who authorized, directed or implemented the bad behavior suffers any negative consequences.  See our discussion in <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">these previous posts</a>.  True health care reform would also hold leaders accountable for their organizations' misdeeds.

Passport to ... Fraud? - AmeriHealth Mercy Settles

Back in November, 2010, we discussed the relatively opulent pay and perks given to and conflicts of interest affecting leaders of Passport Health Plan, a non-profit, state (Kentucky) supported Medicai…

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Health Insurers Sanctioned, Fined

It has not been a good few weeks for big US health insurance companies.  First was a report (e.g., <a href="http://online.wsj.com/article/BT-CO-20101122-708949.html">per</a> the Wall Street Journal) that three companies had been suspended from selling Medicare Advantage plans:<br /><blockquote>The U.S. government's Medicare program has ordered three health insurers--<em>Universal American Corp. (UAM), Health Net Inc. (HNT) and Arcadian Health</em>--<em>to stop marketing to and enrolling new members in their Medicare Advantage health and prescription-drug plans, saying the companies violated regulations. </em></blockquote><br />In particular,<br /><blockquote>Universal American was told to stop marketing to and enrolling people in its Medicare Advantage plans effective Dec. 5. The action doesn't affect current members or the enrolling of beneficiaries in the company's stand-alone Medicare prescription-drug plans.<br /><br />Health Net had to suspend the marketing of and enrollment in its Medicare Advantage plans and stand-alone Medicare prescription-drug plans as of Friday, as the government said the <em>company's conduct poses a 'serious threat' to enrollees</em>. The sanction doesn't affect the status of current enrollees, however.<br /><br />In a letter Friday to Theodore Carpenter, head of Universal American's Medicare Advantage business, the Centers for Medicare and Medicaid Services <em>alleged the company has a 'longstanding pattern of prohibited marketing practices targeted to highly vulnerable populations in violation' of federal law and guidelines as well as contractual terms with CMS</em>.<br /><br />Universal American is a<em> 'chronic poor performer' with respect to the regulations</em>, according to CMS, which said the company's agents engaged in <em>aggressive sales tactics and abusive behavior, and misled or confused beneficiaries or misrepresented the plan</em>.<br /><br />The agency's letter to Health Net government-programs executive Scott Kelly said the company's <em>conduct 'poses a serious threat to the health and safety of its enrollees,' as a result of the company's 'intractable failure to provide its enrollees with prescription drug benefits in conformance" with laws, guidelines and contract terms.' CMS cited a 'history of non-compliance.' </em></blockquote><br />Then, the state of California fined and ordered restitution from multiple companies, as <a href="http://articles.sfgate.com/2010-11-30/business/24951943_1_health-insurers-san-francisco-insurer-dmhc">reported</a> by the San Francisco Chronicle:<br /><blockquote>State regulators Monday fined seven of California's largest health insurers nearly $5 million for <em>systematically failing to pay doctors and hospitals fairly and on time</em>.<br /><br />The California Department of Managed Health Care issued the fines following an 18-month audit in which investigators looked at a small but statistically significant sample of claims. The investigation found the <em>plans were paying on average about 80 percent of the claims correctly</em>, far below the legal threshold of 95 percent.<br /><br />'Our clear and consistent message is that California's hospitals and physicians must be paid fairly and on time,' said Cindy Ehnes, director of the Department of Managed Health Care, which is charged with regulating the states' health maintenance organizations, or HMOs.<br /><br />In addition to the fines, the companies <em>must pay the doctors and hospitals restitution that is expected to run into the "tens of millions of dollars,"</em> Ehnes said. The plans will also be required to come up with a plan to correct the problem and submit to future audits.<br /><br />Failing to pay providers properly makes it tougher for them to survive in the struggling economy, Ehnes said. 'If providers are not paid, patient care and access suffer,' she said.<br /><br /><em>Regulators fined Anthem Blue Cross and Blue Shield of California $900,000 each. United/PacifiCare was fined $800,000 and Kaiser Foundation Health Plan and Health Net were both hit with fines of $750,000.</em><br /><em><br /></em><br /><em>The fines for Cigna and Aetna were $450,000 and $300,000, respectively, for a total of $4.85 million.</em></blockquote><br />Please note that some of these companies have become "frequent flyers" on the Health Care Renewal blog.  Anthem Blue Cross in California is a subsidiary of WellPoint. WellPoint, in particular, just appears again and again on Health Care renewal.  A list of all posts about that company is <a href="http://hcrenewal.blogspot.com/search/label/WellPoint">here</a>, and see <a href="http://hcrenewal.blogspot.com/2010/04/what-me-worry-leaders-prosper-despite.html">this post</a> for a list of past ethical and management missteps.  Health Net appeared in both stories above, and appeared on Health Care Renewal <a href="http://hcrenewal.blogspot.com/search/label/Health%20Net">here</a>.  Posts on Aetna are <a href="http://hcrenewal.blogspot.com/search/label/Aetna">here</a>.<br /><br />Having been writing for this blog now for several years, I am struck by how often the conduct of particular health care organizations has been discredited, without any discernible effect on the organization's leadership or course.  It is particularly striking how the attention paid and pay given to the leaders of some health care organizations contrasts with the public record of their organization's bad behavior.<br /><br />In particular, contrast the long catalog of misbehavior by WellPoint, noted above, with the enormous earnings of the company's CEO (more than $13 million in 2009), and her status as a prominent speaker on health care policy (see post <a href="http://hcrenewal.blogspot.com/2010/11/prominent-health-care-policy-advice.html">here</a>).  <br /><br />In the laissez faire, anything goes, wild, wild west economy of today, spearheaded by the financial service companies that lead us to the global economic collapse, it seems that ethical leadership counts for nothing.  This is bad when it applies to the leadership of financial services, whose bad leadership can cost us all a lot of money.  It is worse when it applies to health care, whose bad leadership can cost us our health and our lives.<br /><br />As I have said ad infinitum, to really reform health care, we will need to get accountable, ethical, transparent leadership of health care organizations.

Health Insurers Sanctioned, Fined

It has not been a good few weeks for big US health insurance companies.  First was a report (e.g., per the Wall Street Journal) that three companies had been suspended from selling Medicare Advantage …

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"Living High Life on Money to Treat the Poor"

Here is another story that has developed over the last week about questionable goings on at a not-for-profit health care organization.  The organization in question this time was the not-for-profit, but state government supported Medicaid managed care organization/ health insurer for the Louisville, Kentucky region.  The details came from a Louisville (Kentucky) Courier-Journal <a href="http://www.courier-journal.com/article/20101109/NEWS01/311090031/1008/">article</a> about a state auditor's report on the Passport Health Plan:<br /><blockquote>The organization providing Medicaid services in Jefferson and surrounding counties has <em>spent lavishly on such things as travel, meals, salaries, bonuses and lobbying</em> in recent years, the state auditor’s office said in a report released Tuesday.<br /><br />The scathing report, which Gov. Steve Beshear described as 'disheartening,' said two Passport Health Plan officials — Executive Vice President Shannon Turner and Associate Vice President Nici Gaines — were <em>paid well, ate well and traveled extensively</em>.<br /><br />'Lodgings were often <em>luxury spas and resorts</em>,' the report said. 'The executives used <em>limousine services</em> and dined at <em>expensive restaurants</em>. While these types of expenditures may be routine for many private, for-profit companies, they should not be typical in nonprofit, health care organizations.'<br /><br />The report also said Passport made extraordinary efforts to burnish its public image and gain political support by <em>spending $1 million since 2007 on lobbying and public relations</em>, as well as $423,000 in donations and sponsorships.<br /><br />Many of the <em>donations had no connection with health care</em>, the report said — including $600 to sponsor a reception for the Senate Republican majority in 2009, $10,000 to sponsor an 'inflatable character' for the Kentucky Derby Festival's Pegasus Parade, and contributions to the Boy Scouts, Kentucky Opera, Volunteers of America and others.</blockquote><br />Here are some more specifics about amounts spent:<br /><blockquote>Travel: Passport spent $106,722 on more than 36 trips including trips to conferences at resorts in New Orleans, Key West, Las Vegas, Seattle, Philadelphia, Tucson, Washington and Coeur d'Alene, Idaho.<br />Meals: Spent $72,994 on 753 meals for groups large and small. These were mostly at Louisville restaurants but included tabs at some famous restaurants outside Kentucky, such as <em>Emeril's and Commander's Palace in New Orleans</em>.<br />Limo services: Five uses of limos totaling $3,996.<br />Lobbying and public relations: Spent $1 million.<br />Donations and sponsorships: Spent $423,000, some with no connection to health care, including $10,000 to be an “Inflatable Character Sponsor” for the Kentucky Derby Festival.<br />Gifts: Spent $9,311 for 95 gifts, which included flowers and Christmas gifts.<br />Salaries: Paid salary and bonuses of $303,750 to Executive Vice President Shannon Turner and $156, 000 to Associate Vice President Nici Gaines in most recent year. </blockquote><br />Here are more specifics about conflicts of interest:<br /><blockquote>Conflicts of interest: Both Turner and Gaines received <em>additional compensation in contracts with subcontractor they were overseeing, AmeriHealth Mercy</em>. Also, Larry Cook, Passport's chairman and CEO, had divided loyalties because he serves as an executive vice president of U of L. He also was reimbursed $1,717 by AmeriHealth for expenses for a trip to Ireland in 2007.<br />Grants: Many <em>grants were made by Passport to groups with ties to staff and/or board members </em></blockquote><br />The organization also was charged with distributing additional funds to area health providers based on their initial investment in the not-for-profit managed care organization, but not on the amount of care they were providing to Medicaid patients:<br /><blockquote>[State Senator Tim] Shaughnessy was particularly concerned about distributions of $10 million in excess funds in late 2008 and again in and 2009 to the large Jefferson County health-care providers that formed Passport.<br /><br />These distributions were reported to the Kentucky Department of Insurance as grants to cover indigent care costs incurred by Passport's provider partners — University Medical Center, University Physician Associates, Norton Healthcare, Jewish Hospital and St. Mary's Healthcare, and the Louisville/Jefferson County Primary Care Association.<br /><br />But the auditor’s report said the money was <em>distributed based on the percentage of the providers' initial investments to create Passport — not the amount of indigent care they provided.</em> And the report said this money was placed in the general funds of these providers 'rather than specifically set aside for uncompensated indigent care.'</blockquote><br />Finally, it appears that Passport tried to block disclosure of important information, including the compensation of its executives, even though it is a not-for-profit organization entirely funded by the government:<br /><blockquote>Early this year The Courier-Journal filed a request under the state open records law seeking Passport records on compensation of its executives and minutes of its board meetings. But <em>Passport refused to release them</em>, claiming that the law did not apply.<br /><br />The attorney general's office disagreed, saying that Passport is 100 percent publicly funded and must release the records. But Passport <em>again refused</em> and took the matter to Jefferson Circuit Court, where it is pending.</blockquote><br />So again we have the same tiresome features of leaders who apparently regard their organization as their own personal sandbox: lavish compensation, given the context, luxuries supplied the leadership out of organizational funds, conflicts of interest that apparently increased further the leaders' personal gains, and attempts to keep the whole thing secret. As a Lexington (Kentucky) Herald-Leader <a href="http://www.kentucky.com/2010/11/14/1524618/living-high-life-on-money-to-treat.html">editorial </a>("Living High Life on Money to Treat the Poor") noted, given the mission of the organization, this sort of sleaze is particularly unfortunate:<br /><blockquote>In one way, though, Passport's profligacy deserves special condemnation. Every dollar Passport executives spent on their own pleasurable pursuits, on lobbying to insure tax money kept flowing their way, on buying goodwill in the Louisville area or on any other unnecessary expense was a dollar taken away from providing Medicaid services to the most vulnerable, needy members of society.</blockquote>This case resembles one we <a href="http://hcrenewal.blogspot.com/2010/08/making-community-health-agency-into.html">discussed </a>previously, that of the non-profit community health agency in Florida whose leaders again seemed to regard their job as an opportunity for personal enrichment.  It seems that even leaders of non-profit organizations whose mission is to help the needy may seem to put their own needs before those of their disadvantaged constituents.  Of course, given they may have seen leaders of not-for-profit universities and hospital systems making millions, and leaders of for-profit pharmaceutical, device, and especially managed care organizations/ health insurers making tens of millions, and conclude that their six-figure salaries and occasional luxuries were barely adequate compensation.<br /><br />As we have noted before, the "executives take all" mentality of an era economically dominated by financiers as aristocrats seems to have infected health care.  Somehow we have to restore the idea that executives and managers  like doctors and nurses, should regard their work as calling meant to put the needs of patients and public health first, rather than a quick way to get rich. 

"Living High Life on Money to Treat the Poor"

Here is another story that has developed over the last week about questionable goings on at a not-for-profit health care organization.  The organization in question this time was the not-for-profit, b…

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Wellcare Settles Again, but Wait, There is More...

We posted several times, most recently in 2009 (<a href="http://hcrenewal.blogspot.com/2009/05/wellcare-settles-accepts-deferred.html">here</a> and <a href="http://hcrenewal.blogspot.com/2009/08/wellcare-did-not-contest-that-its.html">here</a>), about misbehavior by the health insurance company/ managed care organization Wellcare.  That year, the company settled criminal charges that it defrauded the Florida state Medicaid program by paying a fine and accepting a deferred prosecution agreement.  Previously, the state of Connecticut had canceled its arrangement with Wellcare to run a Medicaid program in that state after the company refused to provide the state with requested data.  Then the company signed a consent order with the Florida Elections Commission in which it admitted making "questionable" political contributions.<br /><br />Then this year, it was announced that the company would settle additional civil charges, as <a href="http://www.tampabay.com/news/health/wellcare-health-plans-strikes-1375-million-settlement-challenged-by-new/1104947">per the St. Petersburg (FL) Times</a>, <br /><blockquote>Tampa-based WellCare Health Plans Inc. has agreed to pay $137.5 million to the U.S. Department of Justice and other federal agencies to settle civil lawsuits accusing the company of overcharging for its Medicaid and Medicare programs.</blockquote><br />Also,<br /><blockquote>Under the tentative deal, which must be approved in court, WellCare would have three years to make payments to the Justice Department's civil division, the U.S. Attorney's Office for the Middle District of Florida and the U.S. Attorney's Office for Connecticut.<br /><br />WellCare said the payments will include the approximately $23 million owed to the Florida Agency for Health Care Administration for overpayments received by the company in 2005.<br /><br />The civil settlement is separate from a deal struck last year on the criminal front. In that case, WellCare agreed to pay $80 million to settle a charge of conspiracy to defraud the Florida Medicaid program and the Florida Healthy Kids Corp.<br /><br />It also previously agreed to a $10 million civil penalty settling an informal inquiry by the Securities and Exchange Commission that regulatory filings reflected more than $40 million in profits that WellCare failed to return to the Florida agencies from 2003 to 2007.<br /><br />WellCare, which is Florida's largest Medicaid plan operator, has acknowledged that it overcharged Florida and Illinois health programs by about $46.5 million.</blockquote><br />But wait, there is more. No sooner than this settlement been announced than it was challenged. While considering the settlement, the judge involved unsealed a set of complaints by whistle-blowers about Wellcare. First, <a href="http://www.miamiherald.com/2010/06/28/1704842/wellcare-whistleblower-complaint.html">as reported by the Miami Herald</a>,<br /><blockquote>The complaint, filed by former WellCare financial analyst Sean J. Hellein, portrays a company so ethically challenged that it rewarded employees who dumped hundreds of sick newborns and terminally ill patients from the membership rolls, thereby pumping up profits by millions of dollars.<br /><br />It describes a company that embraced fraudulent accounting as a business model, eventually stealing between $400 million and $600 million from Medicare and Medicaid programs in several states, perhaps most of it from Florida.</blockquote><br />See these specifics:<br /><blockquote>Hellein, who wore a wire for more than a year to gather evidence for federal agents, says in the complaint that:<br /><br />- WellCare moved money between accounts to make it appear that patients' treatment cost much more than it actually did. In some cases, the company made payments years in advance to jack up the apparent cost of care to fool states into increasing Medicaid premiums. It worked, he said.<br /><br />- When states made overpayment errors, WellCare didn't pay the money back, as its contract requires. Florida Medicaid made a series of overpayment blunders that fattened WellCare's bottom line by many millions; those who made the errors included both state officials and contractors.<br /><br />- Sometimes hospitals and physician groups helped WellCare hide its true spending from Medicaid programs by accepting payments through one account for expenses incurred by another. Sometimes they allowed WellCare to pay for future years' expenses to make it appear spending for the current year was higher than it actually was.<br /><br />Hellein named two hospital systems - one in Illinois and one in Florida - that he said participated in the sham arrangement, but he said it was common.<br /><br />WellCare pushed expenses into certain programs - behavioral health programs in Florida and Illinois and the Healthy Kids program in Florida, a program for uninsured children of families with modest incomes - because they required repayment if the cost of treatment fell below a certain threshold.<br /><br />Florida public officials were repeatedly duped by WellCare. The director of the Florida Medicaid program from 2004 to 2007, while much of the alleged fraud was going on, was Tom Arnold. He currently is Secretary of the Agency for Health Care Administration.<br /><br />Another agency that fell for WellCare's line was the Office of Insurance Regulation, where an actuary found nothing wrong with a WellCare subsidiary in the Cayman Islands acting as the company's reinsurer.<br /><br />The reinsurance arrangement enabled WellCare to bank $5 for each insured while making it appear that the cost was just 11 cents, the complaint says.<br /><br />After Wall Street analysts raised questions about the legality of the reinsurance arrangement in 2007, some thought it might be reviewed by Chief Financial Officer Alex Sink. But nothing ever came of it.<br /><br />WellCare conducted a study to figure out which Medicaid recipients were profitable and which were not so that it could engage in "cherry-picking," a term for enrolling only the profitable members. The study found that disenrolling a baby born with health problems saved the company an average of $20,000; each terminally ill patient saved $11,500.<br /><br />Those who were persuaded to resign from WellCare went into the general Medicaid or Medicare fee-for-service programs.<br /><br />WellCare also restructured its benefit package to discourage the least-profitable Medicaid recipients from enrolling and encouraging those who were more profitable to sign up.<br /><br />Low-income mothers and children yielded a net of only about 10 percent, while the physically and mentally disabled paid for by Medicare yielded a net of 30 percent, the complaint says.<br /><br />The complaint names about 20 employees of WellCare who knew about the fraudulent activities. Only one, Gregory West, has been charged. He pleaded guilty in December 2007 but sentencing has been postponed several times.<br /><br />No charges have been brought against three former executives of the company named in the complaint as orchestrating the fraud: President, CEO and Chairman Todd Farha, CFO Paul Behrens and General Counsel Thaddeus Bereday.<br /><br />They all resigned in January of 2008, three months after the FBI and other law-enforcement agents raided the Tampa campus of WellCare and carted off computers and files.</blockquote><br />The the St. Petersburg Times <a href="http://www.tampabay.com/news/business/more-lawsuits-against-tampa-company-wellcare-made-public/1105716">reported</a> about two more complaints that were unsealed:<br /><blockquote>Clark J. Bolton, a former supervisor of special investigations at WellCare, said the insurer encouraged overbilling and refused to audit claims for fraud in order to curry favor with doctors and hospitals and build market share. The result was millions in excessive and illegal expenses passed through to federal Medicare and state Medicaid programs, Bolton said.<br /><br />Eugene Gonzalez, a referral coordinator for seven years, claimed WellCare met government customer service standards only because it had employees create backdated documents and make bogus calls to the company's phone lines. Failure to meet these standards would have resulted in the loss of billions of dollars worth of Medicare and Medicaid contracts.</blockquote><br />As we have before, we see a striking contrast between the scope of the allegations and the response by the government agencies that are supposed to regulate insurers, insure that public money is spent wisely, and investigate and seek punishment for illegal activities. As the latter St. Petersburg Times article noted,<br /><blockquote>U.S. Rep. Kathy Castor criticized the proposed settlement as wholly inadequate in a letter this week to Attorney General Eric Holder. 'Where is the penalty and punishment for such egregious actions?' she wrote. 'It appears that companies such as these simply build such payments into the 'cost of doing business.' We cannot allow this to continue.'</blockquote><br />This notion should be familiar to readers of Health Care Renewal. The Wellcare case fits right into the parade of<a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements"> legal settlements</a> we have discussed. As we have said again and again, the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior by health care organizations. Even large fines can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. <br /><br />Also note that the case of Wellcare remains relatively <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a>. Despite the severity of allegations, and the national scope of the company, the case has only been mentioned in news stories, mainly in Florida where the company has its headquarters, and in a few health care trade publications. It, like many of the cases we discuss on Health Care Renewal, has not been mentioned in the medical/ health care research/ health care policy literature. <br /><br />If we cannot even speak about the sort of very bad management that afflicted Wellcare as a cause of many of the ills of our health care system, how do we really expect to constructively reform that system?

Wellcare Settles Again, but Wait, There is More...

We posted several times, most recently in 2009 (here and here), about misbehavior by the health insurance company/ managed care organization Wellcare.  That year, the company settled criminal charges …

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