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

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

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

Visionary (noun) 1:  one whose ideas or projects are impractical :  dreamer 2:  one who sees visions :  seer 3:  one having unusual foresight and imagination Merriam-Webster Dictionary online The Visi…

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A Real Example of Public Relations Talking Points to Justify Outsize Executive Compensation - and Why We Should No Longer be Fooled

We frequently discuss outsize <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">executive compensation</a> in health care organizations as both a symptom and a cause of these organizations' poor leadership and governance, and hence of widespread health care dysfunction.<br /><br /><b>The Latest Stories of Huge CEO Pay </b><br /><br />Stories of gargantuan compensation appear almost daily.  For example, some headlines about pay at hospitals and hospital systems in the last few months included,<br /><br /><blockquote class="tr_bq"><a href="http://www.gjsentinel.com/news/articles/millionaire-health-care">Millionaire health care?</a><br />With high costs and insurance premiums in Garfield County, focus falls on pay of a hospital’s chief executive<br /><a href="http://www.masslive.com/politics/index.ssf/2014/05/audit_faults_umass_medical_sch.html">Audit faults UMass Medical School for improper documentation of $2 million in bonus compensation</a><br /><a href="http://www.tennessean.com/story/news/health/2014/05/25/saint-thomas-ceos-salary-benefits-soar/9556721/">St Thomas CEO's salary, benefits soar</a><br /><a href="http://bangordailynews.com/2014/06/07/news/state/mainehealth-defends-executive-pay-despite-major-cuts/">MaineHealth defends top executives' pay despite major cuts</a></blockquote><br />Then there were stories about the amazing pay given to CEOs of top for-profit health insurance companies, e.g., <a href="http://ifawebnews.com/2014/05/30/single-payer-advocate-reports-pay-increases-for-many-health-carrier-ceos-in-2013/">via IFAwebnews,</a><br /><br /><br /><blockquote class="tr_bq">According to research published by a single-payer advocacy group, <i>average compensation for nine CEOs at large health insurance companies rose by more than 19% in 201</i>3, with some chief executives seeing steep increases in pay, while others received less remuneration.<br /><br /> Healthcare-NOW!, a non-profit that says its goal of single-payer health coverage is also known as 'improved Medicare for all,' analyzed recent financial reports of the Fortune 500 health insurance carriers.<br /><br /> According to Healthcare-NOW!,<i> the highest compensation increase went to Aetna CEO Mark Bertolini, who received a <b>$30.7 million</b> compensation package in 2013. The Bertolini pay package, which included a large “special one-time performance-based retention award,” represented a 131% increase</i> over his $13.3 million compensation in 2012.<br /><br />Molina Healthcare and Centene, insurers that specialize in privately managed Medicaid plans, <i>roughly doubled CEO compensation in 2013. J. Mario Molina received <b>$11.9 million</b>, up from $5 million in 2012, while Centene’s CEO Michael Neidorff made <b>$14.5 million</b>, up from $8.5 million.</i><br /> <br />Overall, <i>average CEO pay across Fortune 500 health insurers rose from $11.6 million in 2012 to $13.9 million in 2013.</i></blockquote><br />Here we go again.  In May, 2014, I <a href="http://hcrenewal.blogspot.com/2014/05/more-stories-of-million-dollar-plus.html">summarized</a> how discussion of executive compensation, particularly in non-profit hospitals and hospital systems, seemed to follow a clear pattern. <br /><br /><blockquote class="tr_bq"><b>The Pattern </b><br /><br />Nearly all non-profit hospitals must release minimal data on the total compensation of a few of the highest paid executives.  When these reports come out, sometimes the local media take a look, either at an individual hospital or hospital system, or at a number of local hospitals.  They almost inevitably find that some, usually most executives make what appears to be lots of money.  This could be hundreds of thousands of dollars at small community hospitals, or millions of dollars at larger hospitals and hospital systems.  Sometimes the reports end there.  Sometimes the reporters ask hospital representatives or local experts to explain the apparently exalted compensation figures.  <br /><br /><b>The Talking Points </b><br /><br /> The explanations are usually very similar, and so we have called this part of The Pattern The Talking Points. <br /><br />It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they are talking points, possibly crafted as a public relations ploy.   We first listed the talking points <a href="http://hcrenewal.blogspot.com/2011/09/talking-points-sans-original-thought-to.html">here</a>, and then provided additional examples of their use <a href="http://hcrenewal.blogspot.com/2011/09/more-repeats-of-talking-points.html">here</a>, <a href="http://hcrenewal.blogspot.com/2012/03/example-of-how-complex-takes-control.html">here</a> <a href="http://hcrenewal.blogspot.com/2012/12/health-care-hired-managers-not-playing.html">here,</a> <a href="http://hcrenewal.blogspot.com/2013/05/executive-compensation-as-legal.html">here</a>, <a href="http://hcrenewal.blogspot.com/2013/06/no-blues-but-lots-of-green-for-st-louis.html">here,</a> and <a href="http://hcrenewal.blogspot.com/2013/08/should-we-cry-for-non-profit-hospital.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2013/08/the-long-con-charitable-hospitals-make.html">here</a>.  <br /><br />They are:<br />- We have to pay competitive rates<br />- We have to pay enough to retain at least competent executives, given how hard it is to be an executive<br />- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).<br /><br />The talking points are usually supplied by hospital public relations personnel, sometimes by hospital trustees or executives, sometime by various health care consultants.  The talking points are rarely questioned.</blockquote><br /><b>There Really Were Talking Points, at Least at Cigna</b><br /><br /><br />I hypothesized that perhaps public relations managers at various hospitals might actually have organized these talking points, since so many news stories of executive compensation in health care seemed to faithfully follow the pattern.  That was, however, speculation.  However, now there is anecdotal evidence that public relations executives really did use these talking points to defend their bosses' compensation.<br /><br /><br />Wendell Potter is the former head of public relations for for-profit health insurance company Cigna who defected, and now advocates for honest, fair health care.  On June 9, 2014, he <a href="http://wendellpotter.com/2014/06/skyrocketing-salaries-for-health-insurance-ceos/">wrote</a> in <a href="http://wendellpotter.com/blog/">his blog</a> about the latest revelations about outrageous executive compensation given to health insurance CEOs (as summarized above).  <br /><br /><br /><blockquote class="tr_bq">When I handled financial communications for Cigna, the day I dreaded most every year was the day we filed the company’s proxy. That’s because I knew I would get calls from reporters wanting to know <i>how we could justify paying the CEO so much when most other employees were lucky to get 3 percent raises.</i><br /><br /><i><b>I always had talking points</b> drafted with plenty of help from the company’s lawyers and HR executives.</i> They didn’t vary much from year to year. Basically, all I said was, hey, <b><i>this is a very big company, the CEO has a very big job and his pay is in line with what other firms of similar size pay their top guys.</i></b></blockquote><br />So there you are.  First, at least at this company, it appears that an important responsibility of the company public relations department was to defend the CEOs pay.  In my humble opinion, this confirms my suspicion that corporate public relations and marketing often put the personal interests of the top company executives ahead of everything else, including the interests of shareholders of for-profit companies in fair executive compensation, and the interests of patients in reasonable health care costs.<br /><br />Second, there really were talking points used at least in this company's public relations that were pretty similar to those I hypothesized:<br /><br /> - We have to pay competitive rates = <i>"his pay is in line with what other firms of similar size pay their top guys."</i><br /><br />- We have to pay enough to retain at least competent executives, given how hard it is to be an executive = <i>" this is a very big company, the CEO has a very big job"</i><br /><br />- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job) = by implication.<br /><br />You heard it here first.<br /><br /><br />So maybe we should all be a lot more skeptical about executive compensation.  Unfortunately, Mr Potter suggests we may be getting less so.<br /><br /><blockquote class="tr_bq">I made frequent use of those talking points the first couple years. But toward the end of my 15 years at the company, I would rarely get more than one or two calls. By 2008, the year I left, the phone didn’t ring at all, at least not from the media. Fewer and fewer reporters even bothered to look at the proxy statements.</blockquote><br />Of course, that may have something to do with the general decline of journalism, perhaps partially due to the transformation of journalism into a pursuit of a few big corporations, lead by overly compensated executives. <br /><br />Furthermore, instead of the talking points, consider some recent ideas about causes and effects of excess executive compensation.  We have discussed some of these frequently, but here are some recent versions.<br /><br /><b>Causes of Excess Executive Compensation</b><br /><br /><u>Cronies on the Board</u><br /><br />- from an Associated Press story <a href="http://www.usnews.com/news/business/articles/2014/05/27/the-ceo-got-a-huge-raise-you-didnt-heres-why">via US News and World Report</a>,<br /><br /><blockquote class="tr_bq">Some board members defer to a CEO's judgment on what his or her own compensation should be. There's a good reason: <i>Many boards are composed of current and former CEOs at other companies.</i> And in some cases, <i>board members are essentially hand-picked or at least vetted by the CEO</i>. Not surprisingly, the boards' compensation committees offer generous bonuses.</blockquote><br />In more detail, from <a href="http://www.startribune.com/opinion/commentaries/258379541.html">an op-ed in the Minneapolis-St Paul Star Tribune</a>,<br /><br /><blockquote class="tr_bq"> <span class="Text_BoldOff_Body">Under current practice, a nominating committee made up of current board members selects nominees to be presented to the shareholders for approval. Since there are rarely any more nominees than open positions, <i>being nominated virtually assures election</i>. These elections are the same as what you would expect in a communist country where voters vote yes or no on a single candidate. </span><br /><br /><span class="Text_BoldOff_Body">The nominating committee is <i>usually selected by the board chairman and the CEO (in too many cases, the same person)</i>. <i>The CEO and the chairman are almost always on the nominating committee</i>. It is <i>in the CEO’s interest to select board members whose loyalty can be trusted</i>. In many cases, a nominee’s <i>primary qualification is loyalty to the CEO</i> and the board chairman, with </span><span class="Text_BoldOff_Body">little knowledge of or experience in the business. Often <i>there is a prior business or personal relationship to the nominee</i> and very often the CEO and/or the chairman serves on the board of a nominee, a cozy mutual back-scratching arrangement. </span><br /><br /><span class="Text_BoldOff_Body">Serving on the board is <i>prestigious and lucrative and abounds in perks</i>. Besides cash and/or stock options or grants, perks such as company-paid travel to foreign trade shows, board meetings in posh resorts (with spouses, of course) and other company benefits make continuing on the board the first priority of most board members, with shareholder interests a distant second priority. This is akin to a politician whose first priority is to get re-elected and whose constituents’ interests come next.  <i>To maintain continuation of this bonanza of benefits, the board member must be assured of being renominated by the nominating committee. Since the CEO and the chairman are on the nominating committee, which they selected, they have great influence over the ultimate choices for nominees.</i> Now, if you are a board member and want to be assured of being renominated, it pays (literally) to be looked upon favorably by the CEO and the chairman. </span></blockquote><br /><br /><span class="Text_BoldOff_Body">Note that both of these accounts referred to for-profit corporations, but could easily apply to boards of non-profit organizations as well.   Note further that crony boards violate the expectations of their charges, which are to defend the organizations' mission and the interests of all their stakeholders, not just a few top executive cronies.</span><br /><br />T<u>he Ratchet, or "Lake Wobegon" Effect</u><br /><br />-  from an Associated Press story <a href="http://www.usnews.com/news/business/articles/2014/05/27/the-ceo-got-a-huge-raise-you-didnt-heres-why">via US News and World Report</a>,<br /><br /><blockquote class="tr_bq">Robert Solow, a Nobel Prize-winning economist, recently observed that <i>CEOs live in 'Lake Wobegon,'</i> that fabled town created by radio show host Garrison Keillor where, it is said,<i> 'all the children are above average.' </i>Solow didn't mean it as a compliment.<br /><br /><i>Corporate boards often set CEO pay based on what the leaders of other companies make. No board wants an 'average' CEO</i>. <i>So boards tend to want to pay their own CEO more than rival CEOs</i> who are chosen for benchmarking compensation packages.<br /><br /><i>This will 'naturally create an upward bias' in pay,</i> Charles Elson and Craig Ferrere of the University of Delaware concluded in a 2012 paper. '(T)he compounded effect has been to create a significant disparity between the pay of executives and what is appropriate to the companies they run.'</blockquote><br />Note that the Lake Wobegon effect is based on a logical fallacy.  All CEOs cannot be above average.  <br /><br /><u>CEOs as "Great Men"</u><br /><br />- from an <a href="http://www.washingtonpost.com/opinions/great-men-great-pay-why-ceo-compensation-is-sky-high/2014/06/12/6e49d796-d227-11e3-9e25-188ebe1fa93b_story.html">op-ed in the Washington Post</a>,<br /><br /><blockquote class="tr_bq">It is a system that rests on<i> the Great Man theory of history: a school of thought that attributes virtually all important developments through time to heroic individuals.</i><br /><br />Think back to Jack Welch’s 20-year reign as chief executive of General Electric. He was lauded as a corporate leader and management guru who, seemingly single-handedly, grew the company’s revenue and market capitalization many times over. Before long, GE had become a synonym for Jack Welch (or was it the other way around?).</blockquote><br />The theory is from the 19th century,<br /><br /><blockquote class="tr_bq"> As a historian trying to parse America’s enthrallment with superstars, I keep coming back to the Great Man theory of history. Popularized in the mid-19th century by the Scottish essayist Thomas Carlyle, this concept holds that <i>history is largely attributable to the actions of great individuals, who because of their personal (and often mysterious) qualities — such as intelligence, wisdom, deftness, goodness and energy — use their agency to make a big impact</i>. 'In all epochs of the world’s history,' <a href="http://grammar.about.com/od/classicessays/a/On-Heroes-And-Hero-Worship-By-Thomas-Carlyle.htm" title="grammar.about.com">Caryle wrote</a> in his 1841 book, <a href="http://www.amazon.com/gp/product/1461064619?ie=UTF8&camp=1789&creativeASIN=1461064619&linkCode=xm2&tag=thewaspos09-20" title="www.amazon.com">'On Heroes, Hero-Worship and the Heroic in History,''</a> 'we shall find the Great Man to have been the indispensable saviour of his epoch.'</blockquote><br />But it makes no real sense,<br /><br /><blockquote class="tr_bq"> <i>Such lionization is misplaced</i>. Operating a sustainable enterprise, as any executive, manager or employee knows well, is <i>inherently a team spor</i>t. Across companies and industries, <i>this activity depends on many people working in concert in all kinds of groups, at all levels of the organization</i>. Such interdependence means that it is hard to precisely delineate, much less quantify, any one individual’s contribution, even that of the most senior manager, to a firm’s performance.</blockquote><br />This is particularly true in health care, and particularly in organizations that provide direct patient care.  In my humble opinion, it is ridiculous to lionize managers when health care professionals actually take care of patients, using tests and treatments developed by other professionals and scientists.  <br /><br /><br /><b>Effects of Excess Executive Compensation </b><br /><br /><u>Declining Morale of all Other Employees</u><br /><br />-  from an Associated Press story <a href="http://www.theguardian.com/business/2014/may/27/us-ceo-median-package-rise-10m">via the UK Guardian</a>,<br /><br /><blockquote class="tr_bq"> 'There's this unbalanced approach, where there's all this energy put into how to reward executives, but <i>little energy being put into ensuring the rest of the workforce is engaged, productive and paid appropriately,</i>' says Richard Clayton, research director at Change to Win Investment Group, which works with labor union-affiliated pension funds.</blockquote><br /><u>The CEO Disease</u><br /><br />- per Dan Quiggle, who invented the term, <a href="http://www.exchangemagazine.com/morningpost/2014/week24/Thursday/14061910.htm">in Exchange Magazine</a>, which leads to:<br /><br /><blockquote class="tr_bq">You either hear really good things from your people…or nothing at all.<br />You don’t trust the feedback you receive.<br />You take criticism too personally. <br />In general, your employees don’t seem engaged.<br />Your best employees are unhappy or leaving. <br />You don’t connect with people in a way that leads to loyalty.</blockquote><br />That is, bad management, and hence...<br /><br /><u>Poor Organizational Performance</u><br /><br />- from a <a href="http://www.forbes.com/sites/susanadams/2014/06/16/the-highest-paid-ceos-are-the-worst-performers-new-study-says/">Forbes column by Susan Adams</a>,<br /><br /> Across the board, <i>the more CEOs get paid, <b>the worse their companies do</b> over the next three years</i>, according to extensive <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1572085">new research</a>. This is true whether they’re CEOs at the highest end of the pay spectrum or the lowest. 'The more CEOs are paid, the worse the firm does over the next three years, as far as stock performance and even accounting performance,' says one of the authors of the study, Michael Cooper of the University of Utah’s David Eccles School of Business.<br /><br />Since most health care CEOs seem to know more about finance and health care, I wonder if this effect is even more pronounced on health care quality and patient outcomes?<br /><br /><u>Income Inequality and a Declining Economy</u><br /><br />- from <a href="http://www.fiercehealthcare.com/story/ceo-compensation-time-reign-skyrocketing-salaries-incentives/2014-06-19">an editorial in FierceHealthcare</a>,<br /><br /><blockquote class="tr_bq">Indeed, <i>the continual <a href="http://www.fiercehealthfinance.com/story/healthcare-ceo-pay-skewing-economy/2014-06-12" target="_blank">rise of executive paychecks may contribute to inequities in the U.S. economy</a>,</i> according to a new Roosevelt Institute paper, 'Taking Stock: Why Executive Pay Results in an Unstable and Inequitable Economy.'<br /><br />'The toxic combination of stock-based executive pay and open-market stock repurchases has contributed to not only the g<i>rowing concentration of income at the top but also the failure of the U.S. economy to sustain existing middle-class jobs and create new ones</i>,' wrote author William Lazonick, professor and director of the Lowell Center for Industrial Competitiveness at the University of Massachusetts.</blockquote><br /><u>Civil Unrest</u><br /><br />- from a <a href="http://www.washingtonpost.com/opinions/robert-j-samuelson-the-ceo-aristocracy-may-not-be-worth-all-that-money-they-get/2014/06/22/d0bbd596-f888-11e3-8aa9-dad2ec039789_story.html">Washington Post op-ed by Robert J Samuelson</a>,<br /><br /><blockquote class="tr_bq">Americans dislike aristocracies. Unless companies can find a more restrained pay system, t<i>hey risk an anti-capitalist public backlash. This is the ultimate danger.</i></blockquote><br /><b>Summary</b><br /><br />So far, the rise of executive compensation in health care has been inexorable.  Much of the public and many health care professionals have been lulled into complacency, or paralyzed by learned helplessness.  Yet the talking points used to justify outrageous executive pay are nonsense.  Rising compensation seems to be really due to crony capitalism, logical fallacies, and false historical analogies.  Rising pay may lead to poor management, poor organizational performance, worsening social inequality, a failing economy, and ultimately civil unrest.  Although the transition of executives into a new aristocracy is a society wide, if not a global problem, we in health care cannot be complacent that someone else will solve it.  True health care reform would enable accountable leadership that puts the health care mission and patients' and the public's health ahead of personal gain.    <br /><br />

A Real Example of Public Relations Talking Points to Justify Outsize Executive Compensation - and Why We Should No Longer be Fooled

We frequently discuss outsize executive compensation in health care organizations as both a symptom and a cause of these organizations' poor leadership and governance, and hence of widespread health c…

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Is this Any Way to Discuss Health Care Policy? - Television Advertising about US Health Care Reform Cost $445 Million from 2010 -2014

Every now and then, we get an anonymous comment criticizing our "lack of balance" or words to that effect, maybe because we criticized some action by a big, often but not always for-profit, health care organization.  We usually respond that we have no obligation to be balanced, since<br />- We publish opinion, not hard news<br />-  It is questionable that even hard news reporters must report all opinions on an issue, if some of those opinions are demonstrably less credible<br />-  There are far more voices extolling the wonderful "innovations" provided by our current "best health care system in the world," than providing our sorts of criticism.<br /><br />To expand on that last point - a recent news item suggests how much of the health care policy debate is paid marketing and public relations, rather than individual voices of citizens, health care professionals, or even health care policy experts.<br /><br />From the AP, <a href="http://www.seattlepi.com/news/article/Study-Political-TV-ads-on-health-law-total-445M-5483653.php">via the Seattle Post -Intelligencer</a>,<br /><br /><blockquote class="tr_bq">A new analysis finds the nation's health care overhaul deserves a place in advertising history as the focus of extraordinarily high spending on negative political TV ads that have gone largely unanswered by the law's supporters.<br /><br />The report, released Friday by nonpartisan analysts Kantar Media CMAG<a href="http://www.seattlepi.com/?controllerName=search&action=search&channel=news%2Fpolitics&search=1&inlineLink=1&query=%22Kantar+Media+CMAG%22"></a>, estimates <i><b>$445 million</b> was spent on political TV ads mentioning the law since the enactment of the Affordable Care Act in 2010</i>. Spending on negative ads outpaced positive ones by more than 15 to 1.</blockquote><br />In particular,<br /><br /><blockquote class="tr_bq">In the 2014 congressional races, 85 percent of the anti-Obama ads were also anti-'Obamacare' ads, the analysis found. In some competitive races, 100 percent of the pro-Republican TV ads aimed at Democrats contained anti-health law messages.<br /><br />Over the four years,<i> an estimated $418 million was spent on 880,000 negative TV spots focusing on the law, compared to $27 million on 58,000 positive spots</i>, according to the analysis. Nearly all of the spending was on local TV stations, in races ranging from state offices such as treasurer and governor to Congress and the presidential election.</blockquote><br />That is just amazing. <br /><br />My concern is not so much that much of this advertising is against "Obamacare."  We have not often written about the Affordable Care Act (ACA), aka "Obamacare," and what we wrote at best was mild praise.  As I <a href="http://hcrenewal.blogspot.com/2010/03/health-care-reform-bill-and-health-care.html">posted</a> back in 2009, very little of the law had anything to do with the issues we discuss on Health Care Renewal.  In my humble opinion, since the law went into effect, it has increased access to health insurance, especially for certain groups of people that commercial health care insurers previously spurned, e.g., older people and people with pre-existing diseases.  It also contained provisions that might increase disclosure of conflicts of interest, and foster comparative effectiveness research.  On the other hand, the law has done nothing to reduce <a href="http://hcrenewal.blogspot.com/search/label/concentration%20of%20power">concentration of power</a> in health care.  It has done nothing to make health care leaders more <a href="http://hcrenewal.blogspot.com/search/label/accountability">accountable</a>, especially for their organization's unethical or even <a href="http://hcrenewal.blogspot.com/search/label/crime">criminal</a> behavior, decrease their ability to <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">line their pockets</a> regardless of such behavior, and thus reduce their <a href="http://hcrenewal.blogspot.com/search/label/impunity">impunity.</a>  It will not obviously decrease <a href="http://hcrenewal.blogspot.com/search/label/conflicts%20of%20interest">conflicts of interest </a>affecting those who make decisions about patient care or health policy, lock the <a href="http://hcrenewal.blogspot.com/search/label/revolving%20doors">revolving door</a> between government and the health care industry, end <a href="http://hcrenewal.blogspot.com/search/label/manipulating%20clinical%20research">manipulation of clinical research</a> to serve vested interests, or <a href="http://hcrenewal.blogspot.com/search/label/suppression%20of%20medical%20research">suppression of research</a> whose results offend such interests, etc, etc.  So there is plenty to discuss about health care reform and related matters of health care policy.<br /><br />Yet a major venue of US public discussion about health care policy, at least having to do with health care reform legislation, appears to be 15 -60 second paid television advertisements.  Often who pays for these ads are obscure, as certainly are the identities of the advertising or public relations firms that actually craft them.  Certainly, the ads do not explain who might profit were what they urge be implemented. The ads may appeal to emotion, or engage in logical fallacies.  And they appear in millions of peoples homes day in and day out.<br /><br />Such advertising, added to all the other billions of dollars worth of <a href="http://hcrenewal.blogspot.com/search/label/marketing">marketing</a> and <a href="http://hcrenewal.blogspot.com/search/label/public%20relations">public relations</a> that swirl around health care, make any sort of intelligent discussion very difficult.  The advertising frenzy renders the voices of individual citizens, health care professionals, and even health policy experts  whispers in comparison.<br /><br />While there are ostensible free speech advocates who defend these advertisements, and maybe who promote the free speech rights of corporations as the same as those of human citizens (without, of course, many of the responsibilities of citizens), none of these vocal self-proclaimed civil libertarians seem to be doing anything to defend the audibility of the voices of individuals in the health care policy debate.<br /><br />So we will continue to do what we can to bring some healthy skepticism about loud proclamations in health care made by people who stand to gain financially from their effects.  But is it any wonder that our voices create <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">so few echoes</a>? <br /><br />

Is this Any Way to Discuss Health Care Policy? - Television Advertising about US Health Care Reform Cost $445 Million from 2010 -2014

Every now and then, we get an anonymous comment criticizing our "lack of balance" or words to that effect, maybe because we criticized some action by a big, often but not always for-profit, health car…

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The Smarming of Health Care - How to Spin a Minimally Efficacious Variant on an Old Drug as New and Wonderful

A recent announcement of the approval of a new drug showed the latest ways pharmaceutical companies can spin products as new and effective when in reality they are barely either.  <br /><br /><b>Announcing a Drug Approval with a Twist</b><br /><br />United Therapeutics just got US Food and Drug Administration (FDA) approval for their new oral prostacyclin agent for the treatment of pulmonary arterial hypertension. The basics, <a href="http://www.bloomberg.com/news/2013-12-21/united-therapeutics-wins-u-s-approval-for-lung-therapy.html">per Bloomberg</a>, were:<br /><br /><br /><blockquote class="tr_bq">United Therapeutics Corp. (UTHR)’s gained U.S. marketing approval for the oral version of its treatment for high blood pressure in the arteries that supply the lungs. <br /><br />The Food and Drug Administration cleared orenitram, an extended-release tablet, for the treatment of pulmonary arterial hypertension to improve exercise capacity in some types of patients, the Silver Spring, Maryland-based company said today in a statement. <br /><br />The pill’s active ingredient, treprostinil, is the same as in the company’s approved injection and inhalation solution for PAH, a life-threatening disorder, United Therapeutics said. The FDA had rejected the oral version of the therapy in March and in October> <br /><br />'This approval marks the first time that the FDA has approved an orally administered prostacyclin analogue for any disease -– and our fifth approval from the FDA for treatment of PAH -- supporting our mission of providing a wider choice of PAH therapies for physicians and patients,' Roger Jeffs, the company’s president and chief operating officer, said in the statement. 'We are grateful for the FDA’s thorough review and will continue to build clinical support for the use of Orenitram.' </blockquote><br /><br /><br />But the triumphant announcement by the company CEO had some unusual twists.  As<a href="http://www.npr.org/blogs/health/2013/12/24/256839330/orenitram-united-therapeutics-names-pill-after-ceo-who-sought-daughters-cure"> reported</a> on National Public Radio's (NPRs) Shots blog,<br /><br /><blockquote class="tr_bq">'When I started the company 17 years ago, the only option for treating pulmonary hypertension was intravenous ,' Martine Rothblatt, CEO of United Therapeutics told investors in a celebratory conference call Monday. '<i>My young daughter looked at me and said, 'Can't there be a pill?</i>''<br /><br />Now there is </blockquote><br />So,  <br /><br /><blockquote class="tr_bq">'What it has resulted in is<i> something that as the parent of a lovely young lady with pulmonary hypertension, I cannot even put into words, the emotional meaning that it has to have a pill form of prostacyclin,' Rothblatt said.</i></blockquote><br />It appears to be such a warm and happy story.  A mother is so concerned about her daughter's serious illness that she founds a company to develop treatments for it.  Now many years later they have come up with something groundbreaking.<br /><br />How could anyone not shed a tear?  How could anyone not be happy about this triumph of commercial drug development.<br /><br />However, while it may seem snarky to point this out, drug development is usually about issues other than "emotional meaning," and this discussion of emotional meaning took place during the public relations/ marketing blitz put on after the approval of the marketing of a new drug, so maybe closer examination, and some skepticism are warranted. <br /><br /><br /><b>How Well Does Orenitram Work?</b><br /><br />The quote above from the CEO was about "emotional meaning," not efficacy or effectiveness.  In fact, the blog post by Mr Hensley hinted at and a review of the one relevant published article strongly suggested that the drug really had minimal efficacy, and possibly benefits that failed to outweigh its harms.<br /><br />Mr Hensley wrote, <br /><br /><blockquote class="tr_bq"> The FDA approved Orenitram on the basis of a study that gauged its safety and effectiveness as a standalone treatment. The drug helped people <i>walk a little farther in a timed walking test. </i>The <i>most common side effects seen in the study were headache, nausea and diarrhea.</i></blockquote><br />On my review of the evidence....<br /><br />A single randomized controlled trial(1) showed that patients given treprostinil could walk on average 26 meters (less than 100 feet) more in 6 minutes after 12 weeks of treatment than they could at the beginning of the treatment, while those given placebo were only able to walk about as far as they did before.  The treated patients also had some improvement in their shortness of breath.  On the other hand, they were substantially more likely to experience adverse effects, particularly nausea, vomiting, diarrhea, flushing, jaw pain, or pain in the extremities.  <br /><br />Furthermore, the study lasted only 12 weeks, and provided no information about outcomes after that.  Treated patients were not spared overall worsening of their clinical situation compared to untreated patients.  Treated patients were no less likely to be hospitalized or to die.<br /><br />Various aspects of its design may increase doubts about its validity, including emphasis on a "modified intention-to-treat population" which was not clearly defined, a relatively high rate of premature study drug discontinuation, and a complex statistical analysis scheme which seemed unnecessary to assess the main results of a randomized controlled trial.<br /><br />Finally, the generalizability of the study was limited to patients already optimally treated with conventional therapy, and perhaps by ist predominantly Asian female population. <br /><br />So the only apparently positive trial of trepronsinil did not provide good evidence that its benefits outweighed its harms.  At best, some patients might find that the modest increases in exercise capacity and decreases in dyspnea it may produce may be worth nausea, vomiting, diarrhea, flushing, or jaw or extremity pain.   <br /><br />Note that treprostinil is an oral version of a type of compound called a prostacyclin.  As noted above, United Therapeutics markets other forms of prostacyclin.  However, the latest (2005) Cochrane Collaboration systematic review of this class of drugs for pulmonary arterial hypertension only found evidence that the drugs helped when added to first-line drugs to improve symptoms for the short-term, no more than 12 weeks.  It found no evidence that prostacyclin prolongs survival, or lessens complications of the illness(2)  <br /><br />So having an oral prostacyclin treatment for PAH may have emotional meaning, but the pill, while likely more convenient than an injectable prostacyclin, does not seem to have sufficient efficacy to outweigh its harms for many patients.  <br /><br /><b>What Does Orenitram Cost, and Why?</b><br /><br />But United Therapeutics may have been able to make one aspect of this drug superlative, - its price.  Per Scott Hensley in the Shots blog,<br /><br /><blockquote class="tr_bq">Orenitram won't be available for sale for about six months, the company said, and its exact price hasn't been determined either. But<i> it will be very expensive, about<b> $150,000 a year</b>, </i>according to an estimate by Dr. Mark Schoenebaum, an industry analyst with ISI.</blockquote><br />That would be about three times the median US family income.  But the CEO shrugged concerns about the price off,<br /><br /><blockquote class="tr_bq">Rothblatt acknowledged that the cost of the drugs is high but manageable, because pulmonary hypertension remains pretty rare, though the exact prevalence is hard to pin down.</blockquote><br />One explanation for that amazingly high price comes from a <a href="http://www.forbes.com/sites/matthewherper/2013/12/23/this-drug-company-ceo-just-named-her-new-drug-after-herself/">post</a> on Forbes by Matthew Herper,<br /><br /><blockquote class="tr_bq">She commercialized [prostacyclin] ..., and was able to get investors interested because she realized there was<i> no maximum price </i>insurers would pay for an effective drug. United Therapeutics became one of biotech’s great success stories.</blockquote><br />A lack of an upper limit on pricing has other effects of course.  <a href="http://financials.morningstar.com/ratios/r.html?t=UTHR&region=usa&culture=en-US&ownerCountry=USA">According to Morningstar</a>, the company's sky high pricing enabled a net profit margin over 33% in 2012-13.   According to the <a href="http://ir.unither.com/common/download/download.cfm?companyid=UTHR&fileid=660323&filekey=f90b5dc7-52ac-4a2a-9350-8446eaeee34d&filename=UTHR_2013_Proxy_Statement_v2.pdf">United Therapeutics 2013 proxy statement</a>, CEO Martine Rothblatt's total compensation is<b><i> $7,958,328</i></b>.  Three other executives got more than $4.5 million.<br /><br />So I imagine that marketing a drug that may produce so much revenue may have emotional meaning for company executives.  On the other hand, in this era of high insurance deductibles and co-payments it may have considerable negative emotional meaning for patients. <br /><br /><b>Some Off-Key Notes</b><br /><br /><br />The recent publicity about the new oral prostacyclin did not dwell on an issue that appeared earlier in a December, 2013, <a href="http://ir.unither.com/releasedetail.cfm?ReleaseID=812424">press release</a> from United Therapeutics about its other prostacyclin products,<br /><br /><blockquote class="tr_bq"> United Therapeutics Corporation (NASDAQ: UTHR) announced today that it has received a subpoena from the Office of the Inspector General of the Department of Health and Human Services reflecting <i>an investigation by the United States Department of Justice</i>, principally represented by the United States Attorney's Office in Baltimore. The subpoena requests <i>documents regarding Remodulin® (treprostinil) Injection, Tyvaso® (treprostinil) Inhalation Solution and Adcirca® (tadalafil) Tablets, including the company's marketing practices relating to these products.</i></blockquote>Instead, as we discussed above, the CEO of the company that will market this very expensive but not very efficacious drug went out of her way to bring up emotional issues about her own daughter's illness.  Certainly, anyone can believe the CEO was motivated to develop prostacyclins for PAH by concerns about her daughter's own illness.  However, focusing on such emotional issues may also distract from concerns about other aspects of the company's marketing. <br /><br />So maybe it is not a surprise that she decided to name the new drug in a personal way,...  But she did not name it for her daughter.  Again per Scott Hensley,<br /><br /><blockquote class="tr_bq"> Now there is: Orenitram. The<i> name comes from 'Martine Ro,' as in Martine Rothblatt, backward.</i></blockquote><br />Instead, Martine Rothblatt names her company's new drug for.... herself. <br /><br />So what is this very emotional and personal drug marketing/ public relations campaign really about? <br /><br /><br /><b>On Smarm in Health Care </b><br /><br />So it appears that United Therapeutics and its CEO used what may now be called smarm to promote their vested interests and divert attention from uncomfortable facts. <br /><br />In a now widely read and commented upon article in Gawker, Tom Scocca asserted that smarm has become "an omnipresent, unnamed cultural force."  Some aspects of smarm, as discussed in the article,<br /><br /><blockquote class="tr_bq">Smarm is a kind of performance—an assumption of the forms of seriousness, of virtue, of constructiveness, without the substance.</blockquote><br /><blockquote class="tr_bq"> it expresses one agenda, while actually pursuing a different one. It is a kind of moral and ethical misdirection. Its genuine purposes lie beneath the greased-over surface.</blockquote><br /><blockquote class="tr_bq"> Smarm, whether political or literary, insists that the audience accept the priors it has been given. Debate begins where the important parts of the debate have ended.</blockquote><br />So the smarmy element in the public relations about Orenitram was the misdirection created by invoking the CEO's daughter's illness and its emotional ramifications.  By focusing on an emotional issue which apparently only the callous could dismiss, the issues of the drug's minimal efficacy, frequent side effects and very high price were eclipsed.   Yet they, not the emotional connection between a particular parent and chile should be salient to patients, doctors, regulators, and the general public.<br /><br /> (The issues of the investigation of the company's marketing of other prostacyclin products, and the egotism implied by the drug's name were certainly eclipsed as well.) <br /><br />Presumably by raising these truths which might be unpleasant to United Therapeutics executives, I am now guilty of "snark."  As Scocca pointed out, one aspect of smarm is to exile reasonable criticism and skepticism as "snark,"<br /><br /><blockquote class="tr_bq">What is snark reacting to? <br /><div data-textannotation-id="723f1b5670939f8ac0e1ede8374c51aa"><br /></div><div data-textannotation-id="723f1b5670939f8ac0e1ede8374c51aa">It is reacting to smarm. </div></blockquote><div data-textannotation-id="723f1b5670939f8ac0e1ede8374c51aa"><br /></div><div data-textannotation-id="723f1b5670939f8ac0e1ede8374c51aa">So snarky as it may be, I believe that the major considerations for patients and physicians when considering a therapy - like Orenitram - should be the benefits versus harms of the the therapy for the individual patient, and the strength of the evidence supporting both.  The more marketers, public relations functionaries, and executive try to distract from that, and the more smarm they employ to do so, the more skepticism is required.  </div><br /><br /><b>References</b><br /><br />1.  Jing ZC, Parikh K, Pulido T et al.Efficacy and safety of oral treprostinil monotherapy for the treatment of pulmonary arterial hypertension: a randomized, controlled trial.  Circulation 2013; 127: 624-633. Link <a href="http://circ.ahajournals.org/content/127/5/624.full">here</a>.<br /><br />2. Paramothayan NS, Lasserson TJ, Wells A et al.   Prostacyclin for pulmonary hypertension in adults. Cochrane Review 2005; Link <a href="http://onlinelibrary.wiley.com/doi/10.1002/14651858.CD002994.pub2/abstract;jsessionid=631C530B905482CD4A1108101CF1D775.f04t04">here</a>.

The Smarming of Health Care - How to Spin a Minimally Efficacious Variant on an Old Drug as New and Wonderful

A recent announcement of the approval of a new drug showed the latest ways pharmaceutical companies can spin products as new and effective when in reality they are barely either.  Announcing a Drug Ap…

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"Engaging Excellence" while Engaging Secret Paychecks - The Rise and Fall of the Upstate Medical University President

Yet another leader of a big health care organization seems to have acquired the excessively entitled CEO syndrome.<br /><br /><b>Another Brilliant, Fearless Leader </b><br /><br />When Dr David R Smith was appointed President of Upstate Medical University, a part of the State University of New York (SUNY) system located in Syracuse, he got the usual rave reviews from the school's board of trustees, <a href="http://www.suny.edu/sunyNews/News.cfm?filname=2006-06-27BOTApprovesSmith.htm">according to a university press release</a>: <br /><br /><blockquote class="tr_bq">'David Smith rose to national prominence through his <i>leadership ability,</i> experience in children’s medicine, public health policy, and as the chancellor of the Texas Tech University system. We are very pleased to have a <i>one of the country’s foremost educators and health-care professionals</i> lead Upstate Medical University,' said Board Chairman Thomas F. Egan. 'The State University of New York continues to enjoy an <i>excellent record of success in attracting top academic and administrative talent</i> from all over the country.' <br /><br />'My colleagues and I are very impressed by Dr. Smith’s <i>tremendous record of success</i> and pleased that the Upstate Medical University search committee and University Council have brought Dr. Smith to New York. I am confident that Dr. Smith will <i>excel as the next president </i>of Upstate Medical Center,' said Ryan.</blockquote><br />By 2012, Dr Smith's <a href="http://www.upstate.edu/president/biography.php">official presidential biography on the university web-site</a> trumpeted,<br /><br /><blockquote class="tr_bq">Since coming to Central New York, Dr. Smith has <i>reenergized the Upstate campus</i> in a time of dwindling State resources with an <i>aggressive program of patient revenue and research growth.</i><br /><br />The Upstate campus has emerged as one of the <i>true economic engines </i>of the region. There are now over 9,200 State, research and contract jobs on campus and an all-funds budget that exceeds $1.3 billion. Dr. Smith has built upon a <i>vigorous expansion and renewal</i> of campus facilities with 'The Upstate Initiative' which is achieving $600 million worth of bricks-and-mortar projects. Included in that is a long-awaited repurposing of several neglected properties within the City of Syracuse.<br /><br />At the start of his presidency, Dr. Smith <i>launched the Engaging Excellence campaign </i>as his invitation to the entire SUNY Upstate community to achieve and recognize work of the <i>highest standard.</i> The centerpiece of <i>Engaging Excellence</i> was the development of a 10-year strategic plan for purposeful campus growth. </blockquote>They must have used a thesaurus to generate all those superlatives.<br /><br />As we have mentioned in discussions of the <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">outsize compensation</a> now routinely given to the leaders of big health care organizations, the boards of trustees or directors that govern such institutions almost always seem to think their presidents and CEOs are brilliant, or at least, like the children of Lake Woebegone, above average (look <a href="http://hcrenewal.blogspot.com/2013/08/the-long-con-charitable-hospitals-make.html">here</a> for recent example).  Such leaders usually command <a href="http://hcrenewal.blogspot.com/search/label/public%20relations">public relations</a> teams whose job is to continually reinforce impressions of their brilliance.  Of course, anyone who starts an "excellence" campaign has to be excellent, doesn't he?<br /><br />Yet not every leader can be above average, much less excellent or brilliant.  In fact, the need for such leaders to have public relations apparati constantly touting their excellence suggests the opposite.   <br /><br /><b>Secret Paychecks </b><br /><br />In any case, Dr Smith thus seemed to be collecting all the usual accolades acquired by top health care leaders, and appeared poised to take on an even bigger position when it all came to a crashing halt. As <a href="http://www.timesunion.com/local/article/SUNY-president-got-349-295-on-side-4958828.php">reported</a> first by the Albany (NY) Times-Union, <br /><br /><blockquote class="tr_bq">The president of the State University of New York's upstate medical campus <i>ruined his chance to become the 18th president of Pennsylvania State University and has been placed on leave after SUNY leaders learned he has been padding his state pay without authorization, </i>two state officials familiar with the matter said. <br /><br />SUNY headquarters is reviewing all sources of compensation for SUNY Upstate Medical University President David R. Smith and is threatening more severe measures, according to a letter obtained by the Times Union on Tuesday. <br /><br />Smith, who is based in Syracuse, was put on paid leave Tuesday. <br /><br />Penn State trustees were close to announcing that Smith would be the next president at the home of the Nittany Lions, according to the people familiar with the search. <br /><br />Instead, the public announcement planned for last Friday was canceled after questions about Smith's compensation in New York arose. <br /><br />A search firm working for Penn State, which also works for SUNY, <i>found out about extra pay Smith arranged through outside companies linked to his school</i>, the people familiar with the situation said. The search firm contacted SUNY officials about Smith's additional income. <br /><br />Several members of his executive team at Upstate Medical — the biggest employer in the Syracuse region — may also have been receiving unapproved extra pay from the outside companies, according to the sources. <br /><br />Smith, a pediatrician, became president of Upstate Medical in 2006 after five years as chancellor of Texas Tech University. <i>SUNY pays Smith $625,000, including $315,000 in salary plus a $60,000 housing stipend approved by the SUNY trustees, plus $250,000 from the SUNY Research Foundation.</i> Smith is a member of the Research Foundation's board of directors. </blockquote><br />However, in addition to that <br /><br /><blockquote class="tr_bq"><i>Smith's outside money has been coming from two companies during recent years that are linked to SUNY Upstate: Medbest Medical Management Inc. and Pediatrics Service Group LLP. </i><br /><br />Officials with the companies did not respond to emails and calls on Tuesday. <br /><br />Smith's unapproved arrangements added substantially to his pay, according to a Nov. 1 letter to Smith from SUNY Chancellor Nancy Zimpher. In the letter, she alerts Smith to a recent review of his income and says <i>he accepted $349,295 from the outside sources without Zimpher's approval.</i></blockquote><br />I could not find a web-page for the Pediatric Services Group LLC. Medbest did not list Dr Smith as a member of its <a href="http://medbest.org/pages/page.cfm?pageid=3">administrative team</a>.<br /><br /><b>A Conflict of Interest? </b><br /><br />As <a href="http://www.syracuse.com/news/index.ssf/2013/11/union_upstate_medical_pay_investigation_shows_institution_needs_to_be_more_trans.html">reported</a> by the Syracuse Post-Standard, it does not appear that the interests of Upstate are precisely aligned with those of at least one of the companies that was paying Dr Smith on the side, Medbest. <br /><br /><blockquote class="tr_bq">Susan Kent, president of the New York State Public Employees Federation, which represents 1,430 workers at Upstate, said <i>Upstate has been hiring non-union nurses employed by MedBest to fill jobs traditionally filled by union nurses</i>. 'It's being done in a very sneaky backdoor fashion,' Kent said. 'We see it as their <i>(Upstate's) way of trying to drive down wages and not use public sector workers.' </i><br /><br />MedBest, headquartered at 251 Salina Meadows Parkway in Liverpool, provides billing and other practice management services for doctors affiliated with Upstate. It also provides staffing. On its website, the company says it employs more than 500 people. </blockquote><br />Also, <br /><br /><blockquote class="tr_bq">Bobbi Stafford, a registered nurse and PEF representative at Upstate, said Upstate has been <i>filling positions formerly held by union nurses with MedBest nurses in outpatient clinics to save money on retirement costs and other benefits</i>. 'It's just a matter of time before they (MedBest employees) weasel their way into the hospital,' she said. <br /><br />Kent said <i>using MedBest may not be a savings to Upstate if the intent of the arrangement is to increase the pay of Upstate administrators. </i></blockquote><br />The implication is that while outsourcing nursing services may cut how much the university pays nurses, the financial gain may be used as a rationale to increase payments to administrators, and not, for example, to decrease costs to patients.. <br /><br />Thus the revelations about the Upstate Medical University President's sources of income raise not only questions about his honesty, since he did not see fit to reveal these payments until the search firm found them, and about whether they are conflicts of interest.<br /><br /><b>Ending the "Distraction" </b><br /><br />Supposedly to end the "distraction" causes by pondering such questions, Dr Smith just announced he will resign his executive position, <a href="http://blog.timesunion.com/capitol/archives/199003/suny-upstate-president-resigns-amid-compensation-review/">according to</a> the Albany Times-Union, <br /><br /><blockquote class="tr_bq">To avoid further distraction for the University from its important mission, I intend to submit my resignation as president of SUNY Upstate Medical Center, so that this great institution can move on to even greater success. </blockquote><br /><b>Summary </b><br /><br />This case provides another reason to be very skeptical of the hype now that constantly emerges from health care organizations' public relations and communications departments about their managements', particularly their top managements' brilliance. Consider waiting for real results before believing in the next Excellent program to Excellently Promote Excellence.   <br /><br />Furthermore, I wonder if Dr Smith had come to believe all the hype about him.  Top leaders of big organizations often seem to exist in a bubble created by people who keep telling them what they want to hear, and protect them from anything that might discomfit them.  Many of the bubble keepers are dependent on the leaders for their own exalted administrative pay.  Other bubble keepers who are members of governing boards supposedly entrusted with stewardship of the organization may want to bask in the reflected glory of a brilliant leader renowned for encouraging "excellence," and also certainly to do not want to be seen as supporting an average or mediocre leader.<br /><br />In this bubble, it must be very hard not to take on a sense of entitlement.  I can only speculate that such a sense of entitlement may lead to feeling entitled to receive enough money from whatever the source to get close to the magic $1 million a year figure that CEOs now seem to regard as the minimum acceptable.<br /><br />How many more examples do we need of the currently "toxic" culture that surround the leadership of health care organizations  (to borrow a term from Prof Alan Sager, look <a href="http://www.golocalprov.com/news/rhode-island-non-profit-hospital-ceos-criticized-for-big-paychecks/">here</a>) to motivate action to change this culture, and how such organizations are lead.  Breaking up market dominant organizations, and thus dispersing the power of their leadership, and finding ways to make leaders accountable for putting patients' and the public's health first would be true health care reform. <br /><br />Hat tip to <a href="http://www.margaretsoltan.com/?p=41906">University Diaries</a>.

"Engaging Excellence" while Engaging Secret Paychecks - The Rise and Fall of the Upstate Medical University President

Yet another leader of a big health care organization seems to have acquired the excessively entitled CEO syndrome.Another Brilliant, Fearless Leader When Dr David R Smith was appointed President of Up…

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Pharmaceutical Industry "'Mobilised' an Army of Patient Groups to Lobby Against" Improving Clinical Research Integrity

I had guessed that this sort of thing was going on all the time, but being kept very well hidden.  Now we have some more evidence.<br /><br />An<a href="http://www.guardian.co.uk/business/2013/jul/21/big-pharma-secret-drugs-trials"> article</a> in yesterdays Guardian showed how the pharmaceutical industry is using pet patient advocacy groups in a public relations campaign to defeat calls for for measures against <a href="http://hcrenewal.blogspot.com/search/label/suppression%20of%20medical%20research">suppression</a> and <a href="http://hcrenewal.blogspot.com/search/label/manipulating%20clinical%20research">manipulation</a> of clinical research. In summary,<br /><br /><blockquote class="tr_bq"><i>The pharmaceutical industry has 'mobilised' an army of patient groups to lobby against plans to force companies to publish secret documents on drugs<a href="http://www.guardian.co.uk/science/drugs" title="More from guardian.co.uk on Drugs"></a> trials.</i></blockquote><br />More specifically,<br /><br /><br /><blockquote class="tr_bq"><i>The strategy was drawn up by two large trade groups, the <a href="http://hcrenewal.blogspot.com/search/label/PhRMA">Pharmaceutical Research and Manufacturers of America (PhRMA)</a> and the European Federation of Pharmaceutical Industries and Associations (EFPIA)</i>, and outlined in a memo to senior industry figures this month, according to an email seen by the Guardian.  The memo, from Richard Bergström, director general of EFPIA, went to directors and legal counsel at <a href="http://hcrenewal.blogspot.com/search/label/Roche">Roche</a>, <a href="http://hcrenewal.blogspot.com/search/label/Merck">Merck</a>, <a href="http://hcrenewal.blogspot.com/search/label/Pfizer">Pfizer</a>, <a href="http://hcrenewal.blogspot.com/search/label/GlaxoSmithKline">GSK</a>, <a href="http://hcrenewal.blogspot.com/search/label/AstraZeneca">AstraZeneca</a>, <a href="http://hcrenewal.blogspot.com/search/label/Eli%20Lilly">Eli Lilly</a>, <a href="http://hcrenewal.blogspot.com/search/label/Novartis">Novartis</a> and many smaller companies. It was leaked by a drugs company employee.<br /><br />The email describes a four-pronged campaign that starts with<i> 'mobilising patient groups to express concern about the risk to public health by non-scientific re-use of data'.</i> Translated, that means<i> patient groups go into bat for the industry by raising fears that if full results from drug trials are published, the information might be misinterpreted and cause a health scare.</i><br /><br />The lobbying is targeted at Europe where the European Medicines Agency (EMA) wants to publish all of the clinical study reports that companies have filed, and where negotiations around the clinical trials directive could force drug companies to publish all clinical trial results in a public database.</blockquote><br />The argument for continuing to allow clinical trials to be suppressed was to be,<br /><br /><blockquote class="tr_bq">The patient groups focus on the concern that if companies release all of their clinical trials data, the information might be misconstrued, or intentionally cherry-picked, and spark damaging health scares around certain drugs or vaccines.</blockquote><br />The Guardian story did not disclose which patient groups were cooperating with this effort. <br /><br />By the way, the other parts of this strategy involved using scientific associations and academics to push the pharmaceutical companies' agenda,<br /><br /><blockquote class="tr_bq"> Two other strands of the campaign include discussions with scientific associations about the risks of data sharing, and work with other businesses that are concerned about the release of trade secrets and confidential data. The final strand calls, in the long term, for a network of academics across Europe that can be called on to correct false interpretations of the data. </blockquote>Several of the large multinational drug companies contacted by the Guardian issued the usual non-denial denials<br /><br /><blockquote class="tr_bq">In response to queries from the Guardian, GSK said: 'This is not something we are doing. One of the reasons we're involved in this is we want more companies to move towards greater transparency. I don't think it's for us to be mobilising patient groups to campaign on a negative level.'<br /><br />A Roche spokesperson said the company consulted patient groups to understand their concerns about clinical trials, but 'to our knowledge Roche has not been involved in any EFPIA's potential activity in mobilising patient groups to express concern about the risk to public health by non-scientific re-use of data'.<br /><br />A Lilly spokesman said: 'Lilly is committed to working with Europe-based patient advocacy organisations for the benefit of patients in a way that is true to the EFPIA code of practice and Lilly's integrity in business policy.'</blockquote><br /><br /><b>Summary</b><br /><br />We have long discussed and decried how vested interests, chiefly health care corporations with services and products to sell, have<a href="http://hcrenewal.blogspot.com/search/label/manipulating%20clinical%20research"> manipulated clinical research</a> to make their wares look better, and <a href="http://hcrenewal.blogspot.com/search/label/suppression%20of%20medical%20research">suppressed research </a>whose results, even if manipulated, could not be made sufficiently favorable. This has resulted in making drugs and devices look more efficacious and/or less hazardous than they really are.  See <a href="http://hcrenewal.blogspot.com/2013/06/a-call-to-restore-integrity-of-clinical.html">this post</a> for our latest discussion, and information on the latest effort to counter suppression and manipulation of clinical research.<br /><br />It is not surprising that pharmaceutical companies do not want to have to publish every clinical trial they sponsor, or expose their manipulations of these trials.  Instead, the Guardian article suggests that companies and their trade associations, including the US based pharmaceutical trade association, and several large US companies, and well as large companies based elsewhere, are using a third-party public relations strategy.  Wendell Potter's muckraking book on the US commercial health care insurance industry, <i>Deadly Spin</i>, revealed how similar strategies were used by US based health insurance companies to defeat the Clinton administration's attempt at health care reform, and other measures targeted to make the US commercial health care insurance system more equitable and ethical  (see post <a href="http://hcrenewal.blogspot.com/2011/02/health-care-corporate-disinformation.html">here</a>).  Third party strategies are fundamentally deceptive.    <br /><br />The current alleged use of the third party strategies by pharmaceutical companies to support ongoing suppression and manipulation of clinical research is more than just deceptive.  It is corrupt.<br /><br />Patient advocacy groups are usually believed to represent patients' interests.  For such groups to support a public relations campaign that could allow ongoing harm of patients (by suppressing and manipulating evidence to prevent it from being used to forestall excess use of ineffective, dangerous drugs) is abuse of their entrusted power.  To do it for money, money used to support these groups, or help underwrite generous compensation for their executives, fits the definition of corruption used by Transparency International - abuse of entrusted power for private gain.<br /><br />Note that the Guardian provided this viewpoint,<br /><br /><blockquote class="tr_bq">Tim Reed, of Health Action International, a group that has previously exposed the pharmaceutical industry's financial links with patient groups, said: 'It's incredibly ironic that this is a transparency initiative and we've now got clear indications that the pharmaceutical industry is ready to use patient organisations to fight their corner.<br /><br />'It underlines the fact that<i> patient groups who are in the pay of the pharmaceutical industry will go into battle for them.</i> There's a hidden agenda here. The patient groups will say they think it's a great idea to keep clinical trials data secret. Why would they do that? They would do that because<i> they are fronts for the pharmaceutical industry.</i><br /><br />'Patient groups get traction because they are assumed to represent the voice of the suffering. But industry uses them to say we're not going to get innovative medicines if the industry is deterred from investing by having to be transparent about their clinical trials,' he added.</blockquote><br />We have previously noted isolated examples of evidence that particular US based <a href="http://hcrenewal.blogspot.com/search/label/patient%20advocacy%20groups">patient advocacy groups</a> were being supported by commercial firms presumably to aid their marketing.  We have also found examples of conflicts of interest affecting<a href="http://hcrenewal.blogspot.com/search/label/medical%20societies"> medical societies</a>, and <a href="http://hcrenewal.blogspot.com/search/label/institutional%20conflicts%20of%20interest">many affecting</a> non-profit hospitals and academic medical institutions, and<a href="http://hcrenewal.blogspot.com/search/label/conflicts%20of%20interest"> their staff and faculty</a>.  I begin to wonder if most health care non-profit organizations in the US, and now it appears maybe in UK and in Europe, have been paid off to support marketing and/or public relations interests of health care corporations.<br /><br />This latest example suggests that health care worldwide has become deeply corrupt, even more corrupt than <a href="http://hcrenewal.blogspot.com/search/label/Transparency%20International">Transparency International</a>'s <a href="http://www.transparency.org/whatwedo/pub/global_corruption_report_2006_corruption_and_health">Global Report on health care corruption in 2006</a>, or the those responding to Transparency International's <a href="http://hcrenewal.blogspot.com/2013/07/43-believe-that-us-health-care-corrupt.html">global corruption survey in 2013</a>, could envision.<br /><br />I only hope that the pile up of new examples - each seemingly worse than the one before - of health care corruption, will be sufficient to overcome the anechoic effect, and create enough global outrage to give us a chance to clean up our corrupt health care before it destroys our health.<br /><br />ADDENDUM (25 July, 2013) - See also <a href="http://brodyhooked.blogspot.com/2013/07/the-astroturf-speaks-out-more-industry.html">comments</a> by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog. <br /><br />ADDENDUM (29 July, 2013 - See the <a href="http://1boringoldman.com/index.php/2013/07/28/a-closing-argument/">comment</a> on the 1BoringOldMan blog. 

Pharmaceutical Industry "'Mobilised' an Army of Patient Groups to Lobby Against" Improving Clinical Research Integrity

I had guessed that this sort of thing was going on all the time, but being kept very well hidden.  Now we have some more evidence.An article in yesterdays Guardian showed how the pharmaceutical indust…

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Clouded "Visionary" Leadership - Wake Forest Baptist Medical Center's EPIC "Business Cycle Disruptions"

A typical excuse for the multi-million dollar compensation now enjoyed by many leaders of health care organizations is these leaders' supposed brilliance.<br /><br />For example, in 2011 we <a href="http://hcrenewal.blogspot.com/2011/05/million-dollar-plus-hospital-ceo.html">noted  </a>that the total compensation of Dr John McConnell, the CEO of Wake Forest Baptist Medical Center, a non-profit teaching hospital, rose from over <b><i>$700,000</i></b> in 2008-2009 to over <b><i>$1.6 million</i></b> in 2009-2010.  Other top executives in the system made nearly one million a piece.  An official statement from the hospital system claimed that this level of compensation was needed to "retain skilled executives and <b><i>visionary leaders</i></b> for the medical center."  Furthermore, in 2012 we <a href="http://hcrenewal.blogspot.com/2012/05/more-rising-compensation-for-executives.html">noted </a>that in 2010-2011 Dr McConnell's compensation had grown to nearly <b><i>$2.5 million</i></b>, while other top executives received from over $900,000 to over $1.1 million.  <br /><br />Recent events, however, suggest that the "visionaries" may need new glasses.<br /><br /><b>An EPIC Challenge </b><br /><br />Last month, the Winston-Salem Journal <a href="http://www.journalnow.com/business/business_news/local/article_c2801866-9e0c-11e2-bf84-0019bb30f31a.html">reported</a> that Wake Forest Baptist Medical Center is facing some unexpected fiscal challenges, especially from its new electronic health record (EHR):<br /><br /><span class="paragraph-0"></span><br /><blockquote class="tr_bq">Wake Forest Baptist Medical Center’s <i>struggles to implement its <a href="http://hcrenewal.blogspot.com/search/label/EPIC">Epic electronic records system</a></i> <i>contributed to additional costs and lost revenue</i> during the first half of its fiscal year 2012-13.<br /><span class="paragraph-1"> <br />The center provided the information in a second-quarter financial report submitted to bond agencies in which it also reported <i>a $49.6 million operational loss</i> and a gain of $7.4 million in overall excess revenue.<br /> </span></blockquote><br />That is interesting.  There have been many criticisms of EHRs, particularly for how they may <a href="http://hcrenewal.blogspot.com/search/label/healthcare%20IT%20difficulties">impede</a>, rather than help health professionals, and more importantly for their risks of causing <a href="http://hcrenewal.blogspot.com/search/label/healthcare%20IT%20dangers">adverse effects</a> affecting patients, in the absence of clear data from controlled clinical trials that they provide benefits that outweigh their potential harms to patients.  Some of these problems may stem from design and implementation that prioritizes benefits to managers and institutional finances over effects on patients and doctors.  As InformaticsMD <a href="http://hcrenewal.blogspot.com/2013/05/ama-says-ehrs-create-appalling-catch-22.html">noted</a>, even the AMA now admits that<br /><br /><blockquote class="tr_bq"> As the healthcare industry moves to EHRs, t<b>he medical record has essentially been reduced to a tool for billing, compliance, and litigation that also has a sustained negative impact on doctors' productivity,</b> according to Steven J. Stack, MD, chair of the American Medical Association’s board of trustees. </blockquote><br />Yet in this case, a well known commercial EHR did not even help out the hospital system's finances.<br /><br />Furthermore,<br /><br /><blockquote class="tr_bq">Wake Forest Baptist said it spent as of Dec. 31 about $13.3 million directly on the Epic electronic-record system, which went live in September.</blockquote><br />And,<br /><br /><blockquote class="tr_bq"> The center also cited $8 million in 'other Epic-related implementation expense' that it listed among '<i>business-cycle disruptions (that) have had a greater-than-anticipated impact on volumes and productivity</i>.' Also listed was $26.6 million in lost margin <i>'due to interim volume disruptions during initial go-live and post go-live optimization</i>.'</blockquote><br />Note that InformaticsMD frequently criticizes proponents of commercial health care information technology for glossing over potentially bad effects on patients and practice with management-speak (e.g., as "glitches," or "hiccups.").  Here is a great example of an attempt to gloss over bad effects on finance with management-speak. <br /><br /><b>Bond Downgrades and Furloughs, Wage Reductions, Hiring Freezes, Retirement Contribution Reductions, and Bonus Eliminations</b><br /><br />As a consequence,<br /><br /><blockquote class="tr_bq"> On March 20, <i>Moody’s Investors Service downgraded the center’s long-term debt rating below the lowest level of high-grade investment quality.</i> The downgrade to A1 from Aa3 affects $597.2 million of rated debt outstanding.</blockquote><br />The rationale was clear,<br /><br /><blockquote class="tr_bq"> Moody’s said the A1 rating 'reflects the unexpected decline in financial performance through the first half of fiscal 2013, largely due to the installation of a new information technology platform (Epic), encompassing 95 percent of all revenue components of the enterprise.'</blockquote>You know when you see bond downgrade by rating agencies that  financial matters are really going badly.   <br /><br />By May, 2013, month, the problems were evidently still not solved, and the hospital was forced to take more drastic measures.  As again <a href="http://www.journalnow.com/business/business_news/local/article_0cb3b3a8-b33d-11e2-a80f-0019bb30f31a.html">reported</a> by Richard Carver writing for the Winston-Salem Journal, <br /><br /><span class="paragraph-0"> </span><br /><blockquote class="tr_bq">The workforce at Wake Forest Baptist Medical Center is <i>paying a paycheck price to make up for the financial shortcomings to date of its Epic electronic records system</i>.<br /><br /><span class="paragraph-1"> The center said in a statement Thursday it has begun <i>another round of cost-cutting measures</i> that will last through at least June 30, the end of its 2012-13 fiscal year.<br /> </span> <br /><br />The measures include attempts at <i>volunteer employee furloughs and hour-and-wage reductions, a hiring freeze, a reduction in employer retirement contributions, and elimination of executive incentive bonuses for 2013.</i></blockquote><br /><br />Management made clear that the cuts were in response to the Epic debacle,<br /><br /><br /><blockquote class="tr_bq">Even though management said Thursday the center is making progress with fixing the Epic revenue issues, it acknowledged it 'will not meet projected financial targets for the current fiscal year.'<br /><br />'Wake Forest Baptist has identified immediate multimillion-dollar savings with a series of short-term measures that impact personnel,' according to the statement.</blockquote><br />To give credit where it is due, at least the cuts will apparently not affect line clinical employees:<br /><br /><blockquote class="tr_bq"> Those primarily affected by the volunteer furloughs and hour-and-wage reduction requests are nonclinical full-time employees, including administrative staff. They can volunteer to work as few as 30 hours a week with no loss of health or dental benefits for May and June. In the memo, management said employees can volunteer to continue the reduced-hour work week into fiscal year 2013-14.</blockquote><br />However, it seems likely that they will affect many employees, including some proportion who likely had not responsibility for the problems with Epic.<br /><br /><b>When in Doubt, Lobby the Government </b><br /><br />What the hospital system did not seem to be cutting was lobbying and public relations.  Perhaps this was a response to its unexpected inability to manage its own commercial health care information technology?  What bad management can lose, maybe government can supplant.  Once again Richard Carver had <a href="http://www.journalnow.com/news/state_region/article_1aee766e-b5e1-11e2-bba7-001a4bcf6878.html">the story</a> for the Journal:<br /><br /><span class="paragraph-0"> </span><br /><blockquote class="tr_bq">Stung by a series of unusual setbacks at the General Assembly, the North Carolina hospital industry is <i>launching a public relations campaign</i> aimed, in part, at protecting revenues and staving off competition from lower cost surgery centers.<br /><br /><span class="paragraph-1"> In a social media initiative targeted at lawmakers and their constituents, the N.C. Hospital Association says hospitals are 'fighting for their economic survival.' [It was not said whether they were fighting in part because they had already managed to shoot themselves in their economic feet - Ed]<br /><br /> </span> <br />The association and some of the state’s bigger hospitals also are hiring more GOP lobbyists to make inroads with the Republicans who control the state House, Senate and governor’s mansion.<br /><br />The hospital association recently began promoting a new website — <a href="http://www.healthyhospitalsnc.org/">www.healthyhospitalsnc.org</a> — that describes an array of financial threats.</blockquote><br />Wake Forest Baptist is a big part of this initiative:<br /><br /><blockquote class="tr_bq">When asked about its lobbying efforts, Wake Forest Baptist spokeswoman Paula Faria said last week that the center’s Office of Government Relations monitors proposed legislation and regulations at both the federal and state levels.<br /><br />'It informs North Carolina’s congressional delegation, members of the General Assembly and their staff about how proposed language could impact the day-to-day operations of the medical center.'</blockquote><br />Maybe they should be first worrying about the impact of badly chosen, designed, or implemented commercial health care information technology on "day-to-day operations of the medical center" first. <br /><br /><b> Summary</b><br /><br />So the top executives of Wake Forest Baptist Medical Center have seen compensation rising at a rate greater than inflation and than the general public's income over the last few years.  In particular, the CEO has seen his compensation go up three and one-half times in three years!  The hospital system administration has justified this extraordinary increase by referring to supposedly "visionary" leadership.  Yet over this time frame these "visionaries" decided to implement an EHR whose first effects were to lose the hospital system a lot of money.  Based on previous anecdotes about the Epic system, it is quite possible it had other adverse effects.  For example, InformaticsMD <a href="http://hcrenewal.blogspot.com/2012/09/in-addition-to-nurses-doctors-now-air.html">discussed</a> a case in which an EPIC system apparently lead to a large disruption in patient workflow and hence large increases in waits for acute care, and <a href="http://hcrenewal.blogspot.com/2012/08/contra-costas-45-million-computer.html">lead to errors</a> that could have adversely affected patients.  So this underscores some important lessons:<br /><br />So beware that "visionary" behind the curtain. As we have noted repeatedly, top health care managers can now easily make themselves rich.  They, their boards of directors (who may be their cronies), and their public relations flacks often justify their exorbitant compensation by their supposed brilliance, if not visionary status.  Such claims are rarely further explained, and mostly seem be be humbug, for want of a better term.  It seems that most top leaders of health care organizations have participated in the managers' coup d'etat, and become at least manager nobility, if not manager-kings  At least, the public should know that their compensation is what they can grab, and its justification is often nonsense. <br /><br />Note that contrary to a red herring argument often made, outrageous compensation is important not so much because of how much money it drains out of health care, although that can be large in the aggregate.  It is important because it reflects a system that is no longer accountable, and leaders who follow perverse incentives.<br /><br />Such management compensation is almost never revisited to determine whether it turned out to be justified.  Instead, the public, watchdog organizations, health care professionals, and even politicians ought to demand accountability of health care management, good  justification for their compensation, and rationality for the incentives they are provided.  True health care reform would encourage well-informed, competent, mission-focused, honest, responsible, accountable and transparent management, leading organizations of manageable size.  But as long as things stay the same, expect the craziness to continue.    <br /><br /><br />

Clouded "Visionary" Leadership - Wake Forest Baptist Medical Center's EPIC "Business Cycle Disruptions"

A typical excuse for the multi-million dollar compensation now enjoyed by many leaders of health care organizations is these leaders' supposed brilliance.For example, in 2011 we noted  that the total …

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The Myth of the Tough Prosecutor as a Distraction from Health Care Corporate Executives' Impunity

The tragic case of the Boston Marathon bombing illustrates how myth making about tough law enforcement obscures the impunity enjoyed by top health care executives.<br /><br /><b>A "Tough to a Fault" Prosecutor</b><br /><br />A recent Reuters<a href="http://www.reuters.com/article/2013/04/22/us-usa-explosions-prosecutor-idUSBRE93L00X20130422"> article</a> touted the toughness of the prosecutor who will take on the case of the surviving accused Boston terrorist:<br /><br /><blockquote class="tr_bq"><span id="articleText"><span class="focusParagraph">As the top federal law enforcer in Massachusetts, U.S. Attorney Carmen Ortiz has<i> taken heat for being tough to a fault and coming down too hard on some defendants.</i><br /><br /> </span><span id="midArticle_1"></span>But as she builds a possible death penalty case against suspected Boston Marathon bomber Dzhokhar Tsarnaev, 19, the <i>unflinching approach </i>that earned her opponents in the past could become a legal asset for the biggest case of her career, said attorneys who have faced off against her.<br /><span id="midArticle_2"></span><br />'The criticism lately has been that they've<i> over-charged some people and been overly harsh</i>,' said Peter Elikann, a Boston defense attorney.'I don't think that's relevant for Tsarnaev because no one is going to accuse any prosecutor of making too big a deal out of this case.'</span></blockquote><span id="articleText"></span><br /><br />Similarly, an<a href="http://www.businessweek.com/news/2013-04-23/marathon-bomb-prosecutor-seen-as-ready-for-marquee-case"> article</a> in Bloomberg included this:<br /><br /><br /><blockquote class="tr_bq">Ortiz’s former bosses insist that she’s ready for her moment on the big stage. <br /><br />'She’s<i> tough-minded</i> and exceptionally professional,' [former Massachusetts Attorney General Scott] Harshbarger said. </blockquote><br />One of the cases cited as an example of Ms Ortiz's toughness was her prosecution of electronic information freedom activist Aaron Swart.  As Rueters noted,<br /><br /><blockquote class="tr_bq"><span id="articleText">One of Ortiz's best-known cases to date was her prosecution of Aaron Swartz on wire fraud and hacking allegations for downloading millions of articles from an academic database.<br /><br /><span id="midArticle_10"></span>Swartz, a 26-year-old computer prodigy, hanged himself in his Brooklyn, New York, apartment in January, prompting friends and family to partly blame Ortiz's prosecution for his death.</span></blockquote><br /><span id="articleText"></span><br />At the time, Ms Ortiz was criticized for being unreasonably harsh, but then as now toughness was touted as her style.<br /><br /><b>Not So Tough on Corporate Crime </b><br /><br />However, as we <a href="http://hcrenewal.blogspot.com/2013/01/the-tragic-case-of-aaron-swartz-unequal.html">pointed out then</a>, while Ms Ortiz was noted for being tough on individuals accused of various offenses, she was notably not so tough on individuals involved in alleged corporate health care wrong doing.<br /><br />In particular, as we wrote before, Ms Ortiz was involved in three settlements of notably bad behavior by large health care corporations, none of which involved prosecution of, or any penalties for the individuals at the corporations who authorized, directed or implemented the bad behavior.<br /><br /><span style="background-color: #f3f3f3;"><u>Forest Pharmaceuticals </u></span><span style="background-color: #f3f3f3;"><br />In September, 2010, how Ms Ortiz led the pursuit of a settlement with Forest Pharmaceuticals became apparent (look <a href="http://hcrenewal.blogspot.com/2010/09/forest-pharmaceuticals-pleads-guilty-to.html">here</a>).   The company was accused of promoting its anti-depressant Celexa for use in adolescents and children.  Such drugs have since been shown to increase the risk of suicide by such young patients, and this drug was only approved for adults.  At the time, Ms Ortiz said, "Forest Pharmaceuticals deliberately chose to pursue corporate profits over its obligations to the F.D.A. and the American public."  Although the offense may have lead to use of the drug by many adolescents and children, and hence may have lead to some of them attempting or committing suicide, the case was settled only with fines.  As is usual in such legal settlements, no individual corporate executive who authorized or lead the off-label and potentially dangerous marketing of the drug was arrested, or accused, and none suffered any negative consequences.</span><span style="background-color: #f3f3f3;"><br /></span><span style="background-color: #f3f3f3;"><u>GlaxoSmithKline </u></span><span style="background-color: #f3f3f3;"><br />In October, 2010, how Ms Ortiz led the pursuit of a settlement with GlaxoSmithKline became apparent (look <a href="http://hcrenewal.blogspot.com/2010/10/glaxosmithkline-subsidiary-pleads.html">here</a>.)  The company was accused of selling drugs that were not what they appeared to be, apparently because the wrong drugs were put in labelled containers.  Obviously, taking one drug, like Paxil, GSK's anti-depressant which has a number of known adverse effects, including suicide risk for adolescents and children as noted above, when a patient is supposed to be taking a wholly different drug could lead to patient harm.  At that time, Ms Ortiz said, "We will not tolerate corporate attempts to profit at the expense of the ill and needy in our society -- or those who cut corners that result in potentially dangerous consequences to consumers."   Again, while the settlement involved a guilty plea by a GSK subsidiary, again no individual corporate executive who had authority over the drug manufacturing was arrested or accused, much less suffered any negative consequences.</span><span style="background-color: #f3f3f3;"><br /></span><span style="background-color: #f3f3f3;"><u>St Jude Medical </u></span><span style="background-color: #f3f3f3;"><br />In January, 2011, Ms Ortiz led the pursuit of a settlement with St Jude Medical (look <a href="http://hcrenewal.blogspot.com/2011/01/st-jude-medical-settles-again.html">here</a>).  The company was accused of paying kickbacks to doctors to implant its cardiac defibrillators (ICDs) and pacemakers.  Obviously, providing kickbacks to doctors may have lead them to plant devices in patients who did not really need them, yet the devices and the implantation procedures can have adverse effects.  At that time, Ms Ortiz said, "The United States alleges that St Jude solicited physicians for the studies in order to retain their business and/or convert their business from a competitor's product."  Again, as is usual, the settlement did not require any executive who authorized or directed the activities leading to the kickbacks suffered any negative consequences.</span><br /><br /><br />Despite this, note that Bloomberg in its recent coverage of the Tsarnaev prosecution even tried to make Ms Ortiz failure to hold any individuals accountable for this health care corporate misbehavior seem like tough prosecution.<br /><br /><br /><blockquote class="tr_bq"><span id="articleText">The office has been a <i>leader in health-care fraud prosecutions</i>, securing $4 billion in civil and health-care recoveries in 2012. Those included a $3 billion payment from GlaxoSmithKline Plc (GSK), which pleaded guilty to charges that it illegally promoted prescription drugs. </span></blockquote><span id="articleText"></span><br />Again, note that apparently being a "leader" in health care fraud prosecution involved pushing for big fines to be paid by the corporations involved in actions that may have harmed many patients, but no punishment for  the individuals who may have authorized, directed or implemented the bad behavior, but being "tough" on Aaron Swartz involved pushing for a long imprisonment of someone whose alleged crime was not violent, and did not result in anyone being hurt.<br /><br /><br /><b>Summary </b><br /><br />As we have noted again and again and again, leaders of large health care organizations, particularly the largest health care corporations, seem to enjoy virtual impunity.  No matter how bad the behavior of the corporations which they are supposed to be leading, and no matter whether such behavior might have harmed patients, they almost never have to face any negative consequences, especially not fines they must pay themselves, much less prison time.  We have <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">documented many legal settlements</a> of often egregiously bad alleged behavior that did not involve any penalties for top corporate leaders. <br /><br />One way corporate leaders thus escape accountability seems to be the cultivation of myths that distract the public from what is going on.  One such urban legend seems to be the toughness of government prosecutors.  If prosecutors are believed to be uniformly tough and uncompromising, then the public may be lead to believe either that they are tough and uncompromising on corporate crime    <br /><br />As we have said repeatedly, true health care reform would require making the leaders of health care organizations accountable, especially for the effects of their actions on patients' and the public's health.<br /><br />

The Myth of the Tough Prosecutor as a Distraction from Health Care Corporate Executives' Impunity

The tragic case of the Boston Marathon bombing illustrates how myth making about tough law enforcement obscures the impunity enjoyed by top health care executives.A "Tough to a Fault" ProsecutorA rece…

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