healthy4u: regulatory capture

Another Attempt to Show the RUC Behind the Curtain

In 2007, readers of the Annals of Internal Medicine could read part of the solution to a great medical mystery.(1)  For years, health care costs in the US had been levitating faster than inflation, without producing any noticeable positive effect on patients.  Many possible reasons were proposed, but as the problem continued to worsen, none were proven. Prices are High Because They are Fixed That Way The article in the Annals, however, proposed one conceptually simple answer. The prices of most physicians' services, at least most of those that involved procedures or operations for Medicare patients, were high because the US government set them that way. Although the notion that prices were high because they were fixed to be so high was simple, how the fixing was done, and how the fixing affected the rest of the health system was complex, mind numbingly complex. Perhaps because of the complexity of its implementation, the simplicity of the concept has not seemingly reached the consciousness of most American health care professionals or policy makers, despite the publication of several scholarly articles on the subject,.<a href="http://hcrenewal.blogspot.com/search/label/RUC">efforts by humble bloggers such as yours truly,</a> a major journalistic expose, and recent congressional hearings.  The lack of discussion of this issue seemed to be a prime example of what we have called the <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic effect</a>, that important causes of health care dysfunction whose discussion would discomfit those who are currently personally profiting from the current system rarely produce many public echoes.  (For a review of what is known to date about how the offputtingly named Resource Based Relative Value Scale Update Committee (RUC) works, and previous attempts to makes it central role in fixing what US physicians are paid public, see the Appendix.) The Washington Monthly Pulls Back the Curtain Now another attempt to pull back the curtain that hides the RUC was just made by the Washington Monthly.  A long, detailed, well-written <a href="http://www.washingtonmonthly.com/magazine/july_august_2013/features/special_deal045641.php">article</a> by Haley Sweetland Edwards went through the major points, and included some new discoveries.  She asserted: The RUC is Well Hidden <blockquote class="tr_bq">[The RUC is] probably one of the most powerful committees in America that you’ve never heard of.</blockquote> The RUC Fixes Prices <blockquote class="tr_bq">when a roomful of professionals from the same trade meet behind closed doors to agree on how much their services should be worth. It’s called price-fixing. </blockquote> The Government Enables the RUC to Fix Prices <blockquote class="tr_bq"> this kind of 'price-fixing' is not only perfectly legal, it’s sanctioned by the U.S. government. At the end of each of these meetings, RUC members vote anonymously on a list of 'recommended values,' which are then sent to the Centers for Medicare and Medicaid Services (CMS), the federal agency that runs those programs. For the last twenty-two years, the CMS has accepted about 90 percent of the RUC’s recommended values—essentially transferring the committee’s decisions directly into law.</blockquote> The Government Fixed Prices are Endorsed by the Private Sector <blockquote class="tr_bq"> private insurance companies also use Medicare’s fee schedule as a baseline for negotiating prices with hospitals and other providers. </blockquote> The Price Fixing Drives Up Costs and the Use of Services <blockquote class="tr_bq"> So if the RUC inflates the base price Medicare pays for a specific procedure, that inflationary effect ripples up through the health care industry as a whole.</blockquote> These Incentives Cripple Primary Care <blockquote class="tr_bq"> These manipulated prices are also a major reason why specialists are in oversupply in many parts of the country, while a worsening shortage of primary care providers threatens the whole health care delivery system. </blockquote> These Incentives Benefit Big Corporations, not just Medical Specialists <blockquote class="tr_bq"> the incentives are perfectly aligned: ordering that extra test means more money for a doctor’s practice or hospital, more money for the labs, and often more money for the device makers and drug companies, too. (Oh, and, by the way, the device makers and drug companies are, not incidentally, major funders of the medical specialty societies whose members vote on the RUC.)</blockquote><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHWzSplnD2du3x_SfpKZJ5CaSFXrAoZkdhDxue_1J1f0wQIAV2rbRMgDA-oHz01r7lgv341htPKIV2_EfPKtU_eEAzu6xAn9ZPSUdVYtqfaappwD18k5EziA-KfAvazcaaooKFrlj7doQ9/s1600/SpecialDeal(WashingtonMonthly0713).jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="195" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHWzSplnD2du3x_SfpKZJ5CaSFXrAoZkdhDxue_1J1f0wQIAV2rbRMgDA-oHz01r7lgv341htPKIV2_EfPKtU_eEAzu6xAn9ZPSUdVYtqfaappwD18k5EziA-KfAvazcaaooKFrlj7doQ9/s320/SpecialDeal(WashingtonMonthly0713).jpg" width="320" /></a></div> [Art by Monte Wolverton for the Washington Monthly article] What to Do and What Will Happen? We previously wrote,  Economists have beaten us over the head with idea that incentives matter.  The RUC seems to embody a corporatist approach to fixing prices for medical services to create <a href="http://hcrenewal.blogspot.com/search/label/perverse%20incentives">perverse incentives</a> for physicians to do more procedures, and do less conversing with and examining patients, examining the best clinical research evidence about their problems, and rigorously thinking about how best to help them.  More procedures at higher prices helps physicians who do procedures.  It may help even more the corporations that provide the devices and drugs whose use is necessitated by such procedures, and the hospitals who can charge a lot of money as sites for performance of procedures.  It may even help insurance companies by driving ever more money through the health care system, and thus allow rationalization for higher administrative expenses as a function of overall money flow. Yet incentives favoring procedures over all else may lead to worse outcomes for patients, and more costs to patients and society.  If we do not figure out how to make incentives given to physicians more rational and fair, expect health care costs to continue to rise, while access and quality continue to suffer. Ms Edwards ended her article with two specific suggestions: <blockquote class="tr_bq">take the process away from the control of the AMA and put it in the hands of a well-resourced group of experts under the auspices of the federal government. This might take the form of a panel of doctors employed by the government, or of an advisory committee of representatives of different medical societies but with greater representation of primary care doctors.</blockquote> Or <blockquote class="tr_bq"> get Medicare out of the business of funding fee-for-service medicine. </blockquote> I can only hope that the latest Washington Monthly article, which was accompanied by an <a href="http://www.washingtonmonthly.com/magazine/july_august_2013/editors_note/the_doctor_cartel_will_see_you045632.php">editorial</a> and a short first-hand <a href="http://www.washingtonmonthly.com/magazine/july_august_2013/features/a_day_in_the_life_of_a_primary045640.php">account</a> of how difficult is the lot of the modern primary care physician, will succeed in increasing awareness of the RUC and its essential role in making the US health care system increasingly unworkable.  Of course, such awareness may disturb the many people who are making so much money within the current system.  But if we do nothing about the RUC, and about the ever expanding bubble of health care costs, that bubble will surely burst, and the results for patients' and the public's health will be devastating. APPENDIX - Background on the RUC  We have <a href="http://hcrenewal.blogspot.com/search/label/RUC">frequently posted</a>, first <a href="http://hcrenewal.blogspot.com/2007/03/on-disparities-between-reimbursement-of.html">here in 2007</a>, and more recently <a href="http://hcrenewal.blogspot.com/2010/07/primary-care-and-hc-renewal-ruc-kus.html">here,</a>  <a href="http://hcrenewal.blogspot.com/2010/06/ruc-off-new-england-journal-once-again.html">here</a>, <a href="http://hcrenewal.blogspot.com/2011/02/replace-ruc.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2011/03/getting-out-of-our-ruc-open-letter-to.html">here</a>, about the little-known group that controls how the US Medicare system pays physicians, the RBRVS Update Committee, or <a href="http://hcrenewal.blogspot.com/search/label/RUC">RUC</a>. Since 1991, Medicare has set physicians' payments using the Resource Based Relative Value System (RBRVS), ostensibly based on a rational formula to tie physicians' pay to the time and effort they expend, and the resources they consume on particular patient care activities. Although the RBRVS was meant to level the payment playing field for cognitive services, including primary care vs procedures, over time it has had the opposite effect, as explained by Bodenheimer et al in a 1997 article in the Annals of Internal Medicine.(1) A system that pays a lot for procedures, but much less for diagnosing illnesses, forecasting prognoses, deciding on treatment, and understanding patients' values and preferences when procedures and devices are not involved, is likely to be very expensive, but not necessarily very good for patients.   As we <a href="http://hcrenewal.blogspot.com/2009/02/what-ruc-again-one-of-worlds-most.html">wrote before</a>, to update the system, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the <a href="http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/medicare/the-resource-based-relative-value-scale/the-rvs-update-committee.shtml">RBRVS Update Committee</a>. The RUC is a private committee of the AMA, <a href="http://www.ama-assn.org/ama1/pub/upload/mm/380/toptenthings.pdf">touted</a> as an "expert panel" that takes advantage of the organization's First Amendment rights to petition the government. Membership on the RUC is allotted to represent specialty societies, so that the vast majority of the members represent specialties that do procedures and focus on expensive, high-technology tests and treatments.   However, the identities of RUC members were opaque for a long time, and the proceedings of the group are secret.  As Goodson(2) noted, RUC "meetings are closed to outside observers except by invitation of the chair." Furthermore, he stated, "proceedings are proprietary and therefore not publicly available for review."   In fact, the fog surrounding the operations of the RUC seems to have affected many who write about it. We have posted (<a href="http://hcrenewal.blogspot.com/2007/12/is-sustainable-growth-rate-main-problem.html">here</a>, <a href="http://hcrenewal.blogspot.com/2008/07/can-we-fix-medicare-while-pretending.html">here</a>, <a href="http://hcrenewal.blogspot.com/2008/12/no-such-ruc-new-england-journal-takes.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2010/06/ruc-off-new-england-journal-once-again.html">here</a>) about how previous publications about problems with incentives provided to physicians seemed to have avoided even mentioning the RUC. Up until 2010, after the US recent attempt at health care reform, the RUC seemed to remain the great unmentionable. Even the leading US medical journal seemed reluctant to even print its name.   That <a href="http://hcrenewal.blogspot.com/2010/10/ruc-it-up-how-us-government-fixes.html">changed</a> in October, 2010.  A combined effort by the Wall Street Journal, the Center for Public Integrity, and Kaiser Health News yielded two major articles about the RUC, <a href="http://online.wsj.com/article/SB10001424052748704657304575540440173772102.html">here</a> in the WSJ (also with two more spin-off articles), and <a href="http://www.publicintegrity.org/articles/entry/2571/">here </a>from the Center for Public Integrity (also <a href="http://www.kaiserhealthnews.org/Stories/2010/October/27/AMA-center-public-integrity.aspx">reprinted</a> by Kaiser Health News.) The articles covered the main points about the RUC: its de facto control over how physicians are paid, its "secretive" nature (quoting the WSJ article), how it appears to favor procedures over cognitive physician services, etc.   In 2011, after the "<a href="http://www.replacetheruc.org/">Replace the RUC</a>" movement generated some more interest about this secretive group, and its complicated but obscure role in the health care system, the current RUC membership was finally revealed.  It was relatively <a href="http://hcrenewal.blogspot.com/2011/04/rucing-about-conflicts-of-interest.html">easy for me to determine </a>that many of the members had conflicts of interest (beyond their specialty or sub-specialty identity and their role in medical societies that might have institutional conflicts of interest, and leaders with conflicts of interest).     Then that year a lawsuit was filed by a number of primary care physicians that contended that the RUC was functioning illegally as a de facto US government advisory panel.  It appeared that things might change.  However, it was not to be.  A judge <a href="http://careandcost.com/2012/05/19/medicare-physician-payment-the-rucs-hollow-victory/">dismissed the lawsuit</a> in 2012, based on his contention that the law that set up the RBRVS system prevented any challenges through the legal system to the mechanism used to set payment rates.  The ruling did not address the legality of the relationship between the RUC and the federal government.  The eery quiet then resumed, only punctuated briefly in early 2013, when a <a href="http://hcrenewal.blogspot.com/2013/01/us-senate-subcommittee-asks-what-ruc-is.html">Senate committee held hearings</a> with no obvious effect.       ADDENDUM (15 July, 2013) - see also <a href="http://brodyhooked.blogspot.com/2013/07/the-ruc-revisited-more-corruption-in.html">comments</a> by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.   ADDENDUM (18 July, 2013) - see also <a href="http://www.nakedcapitalism.com/2013/07/how-the-ama-engages-in-government-sanctioned-price-fixing.html">comments</a> by Yves Smith on the Naked Capitalism blog. References 1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. (Link <a href="http://www.annals.org/content/146/4/301.full">here</a>.) 2. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. (Link <a href="http://jama.ama-assn.org/cgi/content/short/298/19/2308">here</a>.)

Another Attempt to Show the RUC Behind the Curtain

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08 Jul 2013

The "King of Pain" Recants - Pharmaceutical Paid Key Opinion Leader Admits It Was All "Misinformation"

This may be a first.  A Wall Street Journal <a href="http://online.wsj.com/article/SB10001424127887324478304578173342657044604.html">story</a> announced that the "key opinion leader" who played a pivotal role in the promotion of  aggressive use of narcotics to treat non-malignant chronic pain has had a change of heart.   Background - Embracing Narcotics In the long ago time when I was in medical school, the wisdom was then that narcotics (that is, drugs like morphine or heroin, the latter not legal) should only be used in severe acute pain, like that due to bad trauma or occurring post-operatively, or for the pain of terminal illnesses, like cancer.  The reason their use was so restricted was that the drugs were believed to cause frequent adverse effects, from severe constipation, to addiction, to respiratory depression and death. However, starting in the 1990s, the conventional wisdom changed.  Suddenly, the focus was on the under-treatment of chronic, but not malignant pain, and it became permissible, or even preferable, to use potent narcotics for this purpose.  Physicians like me who were very conservative in their use of narcotics were chastised for under-treating pain. The Wall Street Journal <a href="http://online.wsj.com/article/SB10001424127887324478304578173342657044604.html">article</a> explained how this radical change in approach was apparently engineered by a few key opinion leaders, particularly Dr Russell Portenoy.  It opened, <blockquote class="tr_bq">Two decades ago, the prominent New York pain-care specialist drove a movement to help people with chronic pain. He campaigned to rehabilitate a group of painkillers derived from the opium poppy that were long shunned by physicians because of their addictiveness. Dr. Portenoy's message was wildly successful. Today, drugs containing opioids like Vicodin, OxyContin and Percocet are among the most widely prescribed pharmaceuticals in America. </blockquote> The article provided graphics showing that per capita prescription narcotic use has more than tripled since 1999,  A Change Driven by Wishful Thinking, not Evidence Unfortunately, as the article made clear, the radical change that seemed so odd to some of us physicians who were trained before the 1990s was not driven by any good evidence from clinical research. Per the WSJ, <blockquote class="tr_bq">Because doctors feared they were dangerous and addictive, opioids were long reserved mainly for cancer patients. But Dr. Portenoy argued that they could be also safely be taken for months or years by people suffering from chronic pain. Among the assertions he and his followers made in the 1990s: Less than 1% of opioid users became addicted, the drugs were easy to discontinue and overdoses were extremely rare in pain patients. </blockquote> However, Dr Portenoy's contention seemed to be based only on a small case-series of patients, lacking any sort of control group, and too small and likely too selective to generalize, particularly to patients with chronic, non-malignant pain.(Portenoy RK, Foley KM.   Chronic use of opioid analgesics in non-malignant pain: report of 38 cases. Pain 1986; 25:171-86.  This article does not seem to be available online.) <blockquote class="tr_bq">In 1986, at the age of 31, he co-wrote a seminal paper arguing that opioids could also be used in the much larger group of people without cancer who suffered chronic pain. The paper was based on just 38 cases and included several caveats. Nevertheless, it opened the door to much broader prescribing of the drugs for more common complaints such as nerve or back pain. </blockquote>  Dr Portenoy also cited <blockquote class="tr_bq">the statistic that less than 1% of opioid users became addicted. Today, even proponents of opioid use say that figure was wrong. 'It's obviously crazy to think that only 1% of the population is at risk for opioid addiction,' said Lynn Webster, president-elect of the American Academy of Pain Medicine, one of the publishers of the 1996 statement. 'It's just not true.' The figure came from a single-paragraph report in the New England Journal of Medicine in 1980 describing hospitalized patients briefly given opioids.</blockquote> The reference here appears to be a letter to the New England Journal of Medicine ( Porter J, Jick H. Addiction rate in patients treated with narcotics. New England Journal of Medicine 1980; 302:123.  Link <a href="http://www.nejm.org/doi/full/10.1056/NEJM198001103020221">here</a>.)  This was literally one paragraph long, so the methods of the research it reported cannot be rigorously evaluated.  In any event, the letter appears to have retrospectively documented an observation of hospitalized patients who were given at least a single dose of narcotics, and thus appears not relevant to the effects of long-term narcotics on patients with chronic pain.  Thus, Dr Portenoy's enthusiasm for aggressive use of narcotics in non-malignant chronic pain was never based on any good evidence from well designed and performed randomized controlled trials with long-term followup that showed that narcotics were safe and effective in this setting.  At best, Dr Portenoy's and colleagues' contentions that narcotics should be liberally utilized for such patient were based on wishful thinking, not good evidence. A Change Driven by Stealth Marketing The WSJ article documented how Dr Portenoy was a prime mover in what appeared to be deceptive stealth campaigns to market narcotics for chronic, non-malignant pain.  Dr Portenoy's 1986 case-series <blockquote class="tr_bq">opened the door to much broader prescribing of the drugs for more common complaints such as nerve or back pain. Charming and articulate, he became a sought-after public speaker. He argued that opioids are a 'gift from nature' that were being forsaken because of 'opiophobia' among doctors. 'We had to destigmatize these drugs,' said Dr. Portenoy. He rose to chairman of pain medicine and palliative care at Beth Israel Medical Center in New York. His small office is studded with awards and evidence of his offbeat sense of humor. He prominently displays a magazine mock-up that jokingly dubs him 'The King of Pain.' At medical conferences, his confident, knowing manner helped smooth the way for his message. Before an audience of government regulators, he once joked that he might tell a patient at low risk of abuse: 'Here, [have] six months of drugs. See you later,' he said, according to a Food and Drug Administration transcript. Amid laughter, he added, 'It's just hyperbole. I don't actually do that.' Steven Passik, a psychologist who once worked closely with Dr. Portenoy and describes him as his mentor, says their message wasn't based on scientific evidence so much as a zeal to improve patients' lives. 'It had all the makings of a religious movement at the time,' he says. 'It had that kind of a spirit to it.' </blockquote> So Dr Portenoy became a respected opinion leader.  His influence was demonstrated by how he generated disciples <blockquote class="tr_bq"> Dr. Portenoy's ideas about opioids reached into mainstream medicine and attracted outspoken advocates. In a 1998 talk in Houston, Alan Spanos, a South Carolina pain specialist, said patients with chronic noncancer pain could be trusted to decide themselves how many painkillers to take without risk of overdose. According to a recording, Dr. Spanos said he understood that a patient would simply 'go to sleep' before stopping breathing. While asleep, he said, the patient 'can't take a dangerous dose. It sounds scary, but as far as I know, nobody anywhere is getting burned by doing it this way.'</blockquote> Dr Portenoy was affiliated with organized efforts that facilitated the marketing of narcotics for chronic malignant pain.  The marketing used clinical practice guidelines to push narcotics <blockquote class="tr_bq">Dr. Portenoy helped write a landmark 1996 consensus statement by two professional pain societies that said there was little risk of addiction or overdose among pain patients. </blockquote> The campaign enlisted government regulators, and thus seemed to include an element of regulatory capture, <blockquote class="tr_bq">One of Dr. Portenoy's chief complaints was that doctors were reluctant to prescribe opioids because they feared scrutiny by regulators or law enforcement. In the second half of the 1990s, he and his followers campaigned successfully for policies to change that. <a href="http://www.blogger.com/blogger.g?blogID=9551150" name="U90171026145MLH"></a>In 1998, the Federation of State Medical Boards released a recommended policy reassuring doctors that they wouldn't face regulatory action for prescribing even large amounts of narcotics, as long as it was in the course of medical treatment. In 2004 the group called on state medical boards to make undertreatment of pain punishable for the first time.</blockquote> This case demonstrated the direct involvement of pharmaceutical companies who sold narcotics, <blockquote class="tr_bq">That policy was drawn up with the help of several people with links to opioid makers, including David Haddox, a senior Purdue Pharma executive then and now. The federation said it received nearly $2 million from opioid makers since 1997. The federation says it derives the majority of its funding from administering medical licensing exams, credential verification, and data services. A federation-published book outlining the opioid policy was funded by opioid makers including Purdue Pharma, Endo Health Soluttions Inc, and others, with proceeds totaling $280,000 going to the federation. . </blockquote>  The campaign also involved an important hospital accrediting organization <blockquote class="tr_bq">In 2001, the Joint Commission, [JCAHO] which accredits U.S. hospitals, issued new standards telling hospitals to regularly ask patients about pain and to make treating it a priority. The now-familiar pain scale was introduced in many hospitals, with patients being asked to rate their pain from one to 10 and circle a smiling or frowning face. The Joint Commission published a guide sponsored by Purdue Pharma. 'Some clinicians have inaccurate and exaggerated concerns" about addiction, tolerance and risk of death, the guide said. "This attitude prevails despite the fact there is no evidence that addiction is a significant issue when persons are given opioids for pain control.'</blockquote> A Change Leading to Personal Enrichment Meanwhile, Dr Portenoy was personally profiting from his relationships with pharmaceutical companies <blockquote class="tr_bq">Over his career, Dr. Portenoy has disclosed relationships with more than a dozen companies, most of which produce opioid painkillers. 'My viewpoint is that I can have those relationships, they would benefit my educational mission, they benefit in my research mission, and to some extent, they can benefit my own pocketbook, without producing in me any tendency to engage in undue influence or misinformation,' he said. Dr. Portenoy and Beth Israel declined to provide details of their funding by drug companies. A 2007 fundraising prospectus from Dr. Portenoy's program shows that his program received millions of dollars over the preceding decade in funding from opioid makers including Endo, Abbott Laboratories, Cephalon, Purdue Pharma and  Johnson & Johnson.  </blockquote> He currently also appears to be on the advisory boards of  <a href="http://www.insideview.com/directory/zars-pharma-inc">Zars Pharma Inc</a>,  <a href="http://www.relevarepharma.com/index.php?option=com_content&view=article&id=11&Itemid=13">Relevare Therapeutics</a>, and <a href="http://www.cytogelpharma.com/board-of-managers.html">Cytogel Pharma</a>. Thus, it seems that Dr Portenoy fit the usual definition of <a href="http://hcrenewal.blogspot.com/search/label/key%20opinion%20leaders">key opinion leader</a>.  He was regarded as an authority in his area and his opinions were obviously influential.  He was paid by health care corporations with interests in selling their goods or services, in this case, narcotic drugs, and was using his influence to promote individual patient care decisions and policy decisions that facilitated the widespread use of these drugs.  A Change Leading to Sick and Dead Patients Since the campaign to "destigmatize" narcotics began, the US has seen what many have called an epidemic of narcotic adverse effects.  The WSJ article provided graphs showing that narcotic related deaths and hospital admissions both increased more than five times since 1999.   As the WSJ put it, <blockquote class="tr_bq"> some specialists now question whether the drugs should be prescribed so freely for months or years to people with chronic pain that isn't related to cancer, as Dr. Portenoy proposed 25 years ago. "People lost sight of the fact that these are dangerous drugs that are highly addictive," said Jane Ballantyne, a pain specialist at the University of Washington. She once agreed with Dr. Portenoy and proponents of broad opioid use but now believes they need to be used more selectively.</blockquote> Dr Portenoy Recants What is most remarkable about this case is that it seems to be the first in which a highly influential industry paid key opinion leader has publicly had a change of heart. <blockquote class="tr_bq">Now, Dr. Portenoy and other pain doctors who promoted the drugs say they erred by overstating the drugs' benefits and glossing over risks. 'Did I teach about pain management, specifically about opioid therapy, in a way that reflects misinformation? Well, against the standards of 2012, I guess I did,' Dr. Portenoy said in an interview with The Wall Street Journal. 'We didn't know then what we know now.'</blockquote> I would note there is some sophistry there.  There was never good evidence for narcotics' effectiveness or safety for patient with chronic, non-malignant pain. In fact, Dr Portenoy also admitted that, sort of, <blockquote class="tr_bq">'Data about the effectiveness of opioids does not exist,' Dr. Portenoy said in his recent Journal interview. To get a painkiller approved, companies must prove that it is better at reducing pain than a sugar pill during short trials often lasting less than 12 weeks. 'Do they work for five years, 10 years, 20 years?' Dr. Portenoy said in the Journal interview. 'We're at the level of anecdote.'</blockquote> Again, it is not that the data that supported the use of the drugs has disappeared, or that new data has been developed that contradicts the old data.  There never has been any good data, that is, from well designed and performed randomized controlled trials that demonstrate that the benefits of narcotics outweigh their harms for patients with chronic, non malignant pain.  It does not exist now and it never existed. Dr Portenoy also admitted, <blockquote class="tr_bq">'I gave innumerable lectures in the late 1980s and '90s about addiction that weren't true,' Dr. Portenoy said in a 2010 videotaped interview with a fellow doctor. The Journal reviewed the conversation, much of which is previously unpublished. </blockquote><blockquote class="tr_bq">In it, Dr. Portenoy said it was 'quite scary' to think how the growth in opioid prescribing driven by people like him had contributed to soaring rates of addiction and overdose deaths. 'Clearly, if I had an inkling of what I know now then, I wouldn't have spoken in the way that I spoke. It was clearly the wrong thing to do,' Dr. Portenoy said in the recording. </blockquote> So not only did the Wall Street Journal article describe how the overuse of narcotics for chronic, non-malignant pain came from wishful thinking energized by the possibility of corporate and personal profit, it showed how the chief medical cheer leader for these drugs now admits he was wrong. Summary In summary, it appears that the huge increase in the use of narcotics to treat chronic, non-malignant pain was never based on clear convincing evidence from well-designed studies.  At best it was based on irrational enthusiasm and wishful thinking by some very vocal and persuasive advocates.  These advocates seemed to become "key opinion leaders," that is, influential people who promoted the use of pharmaceuticals while they were being paid by pharmaceutical companies, and were likely involved in what appears to be systematic stealth marketing campaign by the pharmaceutical companies that make narcotics.  These campaigns included production of clinical practice guidelines promoted as authoritative, and enlistment of accrediting organizations and government regulatory agencies. One particularly disturbing part of this story was the involvement of numerous people and organizations  entrusted by society to promote good medical care.  It shows how physicians, other health professionals, and the public at large must be very skeptical of vocal advocates of new, aggressive, "innovative" approaches, of clinical practice guidelines even those developed by apparently prestigious professional societies, of accrediting organizations, and of government regulators.  That is discouraging, and could lead to the cynical approach of simply not trusting anyone. I would note, however, that two ways the headlong rush to over-use of narcotics could have been derailed would have been: -  employment of extreme skepticism of people paid by narcotics manufacturers advocating increased use of these drugs, no matter how distinguished, scholarly, or influential these people appear to be.  This suggests the need for general skepticism of people with financial relationships with health care corporations pushing the goods or services these corporations provide, or pushing policies that would aid the selling of those goods or services -  a rigorous evidence-based medicine approach, meaning making clinical and policy decisions based on the best evidence found by systematic search from rigorously evaluated clinical research about the benefits and harms of these decisions, informed by patients' values.  Such an approach would have revealed there was never any good clinical evidence to support long-term use of narcotics for chronic, non-malignant pain, the particular "innovation" being pushed in this case. So I would argue that the case of the legal narcotics pushers underlines the need for utmost transparency about conflicts of interest affecting people and organizations that advocate for particular approaches to health care, and to the management of individual patients; continuing movement to bar at least the most egregious conflicts, as per the Institute of Medicine report on the topic (look <a href="http://hcrenewal.blogspot.com/2009/04/institute-of-medicine-report-on.html">here</a>); and the need for the very skeptical, rigorous application of true evidence-based medicine approaches.   Finally, I must note that this seems to be the first time that a prominent, highly influential key opinion leader  has recanted.  Maybe he will write an article entitled "Dr Drug Pusher?" - just joking, but at least one former  key opinion leader did write the confessional  "<a href="http://hcrenewal.blogspot.com/2007/11/most-popular-dr-drug-rep.html">Dr Drug Rep</a>."  Maybe this is the beginning of a movement toward health care based on logic and evidence rather than wishful thinking, irrational enthusiasm, or ideology, or even worse, on deception or personal enrichment.

The "King of Pain" Recants - Pharmaceutical Paid Key Opinion Leader Admits It Was All "Misinformation"

This may be a first. A Wall Street Journal story announced that the "key opinion leader" who played a pivotal role in the promotion of aggressive use of narcotics to treat non-malignant chronic pain…

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17 Dec 2012

Is the Meaningful Use Stage 2 Final Rule invalid?

Here are a few reasonable questions I decided to elevate as a post of its own. In the face of the discovery of industry influence over comments submitted to ONC regarding Meaningful Use Stage 2, as I documented at my post earlier today "<a href="http://hcrenewal.blogspot.com/2012/08/health-it-vendor-epic-uses-clients-as.html">Health IT Vendor EPIC Caught Red-Handed: Ghostwriting And Using Customers as Stealth Lobbyists - Did ONC Ignore This?</a>" (<a href="http://hcrenewal.blogspot.com/search/label/ghost%20writing" target="_blank">ghost writing</a>, in effect, by those with obvious conflicts of interest): <ul><li> Is the MU Stage 2 Final Rule invalid due to the influence the industry had on the submitted "public" comments and opinions, supposedly by and of the submitters, which are now demonstrably tainted?</li><li> Should an investigation be opened?</li></ul> After all, as I pointed out on Aug. 29 in "<a href="http://hcrenewal.blogspot.com/2012/08/the-scientific-justification-for.html" target="_blank">The Scientific Justification for Meaningul Use, Stage 2: The NWB Methodology</a>", not only is MU2 based on an admitted "nevertheless, we believe" justification (that is, lack of scientific rigor), but now it appears the legislation is based on stealth lobbying and resultant regulatory capture, ONC in essence doing the seller's bidding. Tens of billions of taxpayer dollars are at issue here. -- SS

Is the Meaningful Use Stage 2 Final Rule invalid?

Here are a few reasonable questions I decided to elevate as a post of its own.In the face of the discovery of industry influence over comments submitted to ONC regarding Meaningful Use Stage 2, as I d…

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31 Aug 2012

Old Mystery Solved? Former FDA Reviewer Speaks Out About Intimidation, Retaliation and Marginalizing of Safety

At my Dec. 2005 post "<a href="http://hcrenewal.blogspot.com/2005/12/report-life-science-manufacturers.html" target="_blank">Report: Life Science Manufacturers Adapt to Industry Transition</a>" I wrote: <blockquote class="tr_bq">... The recognition of a gap in formally-trained medical informatics-trained personnel in the pharmaceutical industry [by Gartner Group] is welcome. For example, from my own experience: I recall an interview I had last year with the head of the Drug Surveillance & Adverse Events department at Merck Research Labs in a rehire situation [after a 2003 layoff]. I came highly recommended by an Executive Director in the department, to whom I had shown my prior work. This included well-accepted, novel human-computer interaction designs I'd developed for use by busy biomedical researchers for a large clinical study in the Middle East, as well as my work modeling invasive cardiology and leading the development and implementation of a <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/scotsilv/invascard.htm" target="_blank">comprehensive information system</a> to detect new device and treatment modality risks in a regional center performing more than 6,000 procedures/year. In addition, I'd worked with the wife of the Executive Director in years prior, when she ran the E.R. of the hospital where I was director of occupational medicine. Despite all this in my favor, the Executive Director's boss, himself a former FDA adverse events official [a former deputy director of CDER’s office of drug safety, who'd recently moved to the pharma industry he once regulated - ed.], dismissed me in five minutes as I was showing him the cardiology project, saying flatly "we don't need a medical informatics person here." I had driven 80 miles to Rahway for this interview to save the executive a trip to Pennsylvania, where I was originally scheduled to come for the interview, since the executive's father was ill in the hospital. In an instance of profound social ineptness, my effort was not even acknowledged. Perhaps he was in a bad frame of mind, but the dismissal under the circumstances was all the more disappointing.</blockquote> I recall this was one of the most puzzling hiring debacles I'd ever experienced, as all the senior people in his dept. had recommended he hire me - I was really only there for his approval and signoff - and the work I'd shown him had improved care, saved lives, and saved money. I may not need to be puzzled any longer.  This story just appeared: <blockquote class="tr_bq"><a href="http://truth-out.org/news/item/10524-former-fda-reviewer-speaks-out-about-intimidation-retaliation-and-marginalizing-of-safety" target="_blank">Former FDA Reviewer Speaks Out About Intimidation, Retaliation and Marginalizing of Safety</a> By Martha Rosenberg, <a href="http://truth-out.org/" target="_blank">Truthout </a> July 29, 2012 The Food and Drug Administration (FDA) is often accused of serving industry at the expense of consumers. But even FDA defenders are shocked by reports this week of an institutionalized FDA spying program on its own scientists, lawmakers, reporters and academics that included an enemies list of "actors" and collaborators ... Ronald Kavanagh [FDA drug reviewer from 1998 to 2008]:  ... In the Center for Drugs [Center for Drug Evaluation and Research or CDER], as in the Center for Devices, the honest employee fears the dishonest employee. There is also irrefutable evidence that managers at CDER have placed the nation at risk by corrupting the evaluation of drugs and by interfering with our ability to ensure the safety and efficacy of drug ... While I was at FDA, drug reviewers were clearly told not to question drug companies and that our job was to approve drugs.</blockquote> Read the entire story at the link.  I won't cover it more here, except to say it's certainly possible to believe certain FDA officials don't want serious people around -- who in addition to being MD's can write serious software to detect drug and device problems -- whose work can get in the way of drug approvals. -- SS

Old Mystery Solved? Former FDA Reviewer Speaks Out About Intimidation, Retaliation and Marginalizing of Safety

At my Dec. 2005 post "Report: Life Science Manufacturers Adapt to Industry Transition" I wrote:... The recognition of a gap in formally-trained medical informatics-trained personnel in the pharmaceut…

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13 Aug 2012

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

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

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

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27 Jun 2012

Head of Lobbying Firm with Health Care Clients Walks Through Revolving Door into Executive Branch

A Washington Post <a href="http://www.washingtonpost.com/opinions/obama-embraces-k-street/2012/03/06/gIQAR4ChvR_story.html">op-ed</a> described the latest case of a revolving door frequent flier, or perhaps frequent revolver, with health care connections. I will try to piece it together chronologically. The story revolves around one Steven Ricchetti. His earlier career trajectory was: <blockquote>Blue Cross Blue Shield, then the Democratic Senatorial Campaign Committee, then the Clinton White House, then lobbying, then back to the Clinton White House, then more lobbying, this time starting Ricchetti Inc. with his brother, Jeff. (A call seeking comment from Ricchetti Inc. wasn’t returned.) </blockquote> Most recently, he "was tapped to be counselor to Vice President [Joseph] Biden." His recent clients were"Fannie Mae, General Motors, the American Hospital Association, and <a href="http://hcrenewal.blogspot.com/search/label/Eli%20Lilly">Eli Lilly</a>," obviously includeingtwo prominent health care organizations. Previously he had represented <blockquote>AT&T, Reed Elsevier, <a href="http://hcrenewal.blogspot.com/search/label/Pfizer">Pfizer</a>, <a href="http://hcrenewal.blogspot.com/search/label/Sanofi-Aventis">Sanofi-Aventis</a>, <a href="http://hcrenewal.blogspot.com/search/label/Siemens">Siemens</a>, Sirius XM, <a href="http://hcrenewal.blogspot.com/search/label/Amgen">Amgen</a>, <a href="http://hcrenewal.blogspot.com/search/label/Boston%20Scientific">Boston Scientific</a>, America’s Health Insurance Plans, eBay, Dow Chemical, the U.S. Conference of Catholic Bishops, among others, according to the Center for Responsive Politics. Cumulatively, they paid Ricchetti and his firms millions.</blockquote> Eli Lilly, Pfizer, Sanofi-Aventis, Amgen, and Boston Scientific are obviously "pure" health care corporations. Reed Elsevier has a publishing subsidiary with important medical titles. <a href="http://hcrenewal.blogspot.com/search/label/Siemens%20Healthcare">Siemens Healthcare</a> is an important part of that company. The links above are to our relevant posts about these firms, some of which describe various ethically questionable behavior. Note that Mr Ricchetti's appointment apparently circumvented the President's previous statement that "lobbyists 'will not run my White House.'" He <blockquote>achieved this feat — getting around the ban on lobbyists serving in the administration — by using one of Washington’s most-honored traditions: the loophole. Just as Obama won the presidency, Ricchetti de-registered as a lobbyist for his various clients. But he remained president of the lobbying firm that continued to work for many of those same clients, as well as a few more, such as the American Bankers Association. </blockquote> While Mr Ricchetti is no doubt an intelligent and hard-working man, could not someone who was not so strongly financially tied to the leadership of some of the US' most ppowerful health care corporations be found who was well-qualified for this position? Pending the answer to that question, which I do not expect to receive, this story becomes our latest example of the coziness between political and government leadership on one hand, and the leadership of large health care organizations, and those they choose as representatives. We have seen all sorts of permutations of revolving door stories involving people with strong ties to the largest health care organizations. The implication is that both health care's private sector and the government functions meant to provide or regulate health care do not operate at arms' length, and in fact seem to be run by a group of insiders who overlap both, and may be more attuned to their self-interest and patients' and the public's health. Health policy in the US has become an insiders' game. Unless it is redirected to reflect patients' and the public's health, facilitated by the knowledge of unbiased clinical and policy experts rather than corporate public relations, expect our efforts at health care reform to just increase health care dysfunction. Physicians, public health advocates, whatever unbiased health policy experts remain must educate the public about how health policy has been turned into a corporate sandbox. We must try to somehow activate the public to call for health care policy of the people, by the people, and for the people.

Head of Lobbying Firm with Health Care Clients Walks Through Revolving Door into Executive Branch

A Washington Post op-ed described the latest case of a revolving door frequent flier, or perhaps frequent revolver, with health care connections. I will try to piece it together chronologically.The st…

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12 Mar 2012

Unequal Justice Under Law - Comparing Cases of Alleged Misbehavior by Large Health Care Organizations and Individuals

How the wealthy and powerful have become able to play by a different set of rules than those affecting ordinary people may be the defining issue of our time.  Yesterday, President Obama's State of the Union message asked for an economy in which "everyone plays by the same set of rule."  We posted about how this issue, which got national attention due to the Occupy movement, affects health care <a href="http://hcrenewal.blogspot.com/2011/11/health-care-also-needs-to-challenge.html">here</a>. We have previously posted again and again about how the penalties for misbehavior by large US health care organizations seem to be so minimal as to be incapable of deterring future bad behavior (e.g., see <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">posts</a> about legal settlements).  At most, corporations often pay fines that are no more than a cost of doing business.  They rarely have to admit guilt, and when they do, it is usually to a relatively trivial charge.  The people who authorized, directed, or implemented the bad behavior almost never suffer any negative consequences.  Thus, the leaders of large US health care organizations seem to have <a href="http://hcrenewal.blogspot.com/search/label/impunity">impunity</a>. Similar complaints have been made about the lack of accountability of the leaders of the finance firms that lead us into the global financial crisis, or great recession.  However, while I have reviewed now hundreds of stories about such minimal organizational punishments, I have also seen hundreds of stories discovered by my automatic news searches of much more severe penalties paid by individuals who have been accused of similar misbehavior.  I have never previously made an explicit comparison of how health care corporate and individual misbehavior are handled. A recent set of examples of organizational misbehavior invites such a comparison.  Here they are, in chronological order. KV Pharmaceutical On December 6, 2011, the St Louis Post Dispatch <a href="http://www.stltoday.com/business/local/kv-pharmaceutical-agrees-to-million-settlement-with-doj/article_3c947aee-2054-11e1-8c50-001a4bcf6878.html">reported</a>: <blockquote>KV Pharmaceutical Co. has agreed to pay $17 million to federal and state authorities to settle Justice Department allegations that it defrauded federal health care programs. The settlement resolves allegations that KV, as the Bridgeton-based parent company of now-defunct Ethex Corp., misrepresented the regulatory status of two of its drugs that did not qualify for coverage under federal health care programs, the Justice Department said today. The Justice Department alleges that Ethex submitted false quarterly reports to the federal Centers for Medicare and Medicaid Services related to the two drugs: nitroglycerin extended release capsules and hyoscyamine sulfate extended release capsules.</blockquote> Company leadership made the usual sort of comment. CEO Greg Divis said: <blockquote>The closure of this matter is another step forward as KV moves ahead as a women's healthcare focused branded specialty pharmaceutical company.</blockquote>Corporate leaders seem to love putting such unpleasantness in the past and moving on, especially when they personally are not held accountable for the previous misbehvior. Note that this is just the latest settlement for KV Pharmaceutical: <blockquote>KV shut down Ethex after the subsidiary pleaded guilty in March 2010 to two felony counts of criminal fraud for failing to report to the Food and Drug Administration that it was making oversize drugs - and drew $27.6 million in fines and restitution.</blockquote> Catholic Healthcare West, Sutter Health On December 8, the Sacramento Bee <a href="http://www.sacbee.com/2011/12/08/4107855/chw-sutter-pay-23-million-to-settle.html">reported</a>: <blockquote>Two of Sacramento's biggest health care players paid a combined $2.3 million to the federal government to settle allegations that 61 of their hospitals double-billed Medicare for therapies and services, U.S. Department of Justice officials announced Wednesday. Catholic Healthcare West paid more than $875,000 and Sutter Health nearly twice that – more than $1.43 million – for alleged duplicate charges for infusion therapies and treatments to break up kidney and bladder stones, in what Lauren Horwood, a spokeswoman in the Sacramento U.S. attorney's office, called 'a significant settlement.'</blockquote> As usual, <blockquote>Officials at the two health networks admitted no wrongdoing in agreeing to the settlement, Horwood said. No charges will be filed.</blockquote> Again, however, this was not the first such issue to affect these large non-profit organizations: <blockquote>In 2006, Sutter Health agreed to grant discounts and refunds to uninsured patients the network was accused of overcharging, stemming from a 2004 class-action lawsuit.</blockquote> Blue Shield (California) On December 29, 2011, the Los Angeles Times <a href="http://articles.latimes.com/2011/dec/29/local/la-me-blue-shield-20111229">reported</a>: <blockquote>More than a year after the healthcare reform law sought to prevent sick patients from losing medical coverage, insurers are still paying for their alleged abuses. Blue Shield has agreed to pay $2 million to resolve accusations that the company improperly dropped policyholders after they got sick and needed expensive treatment. The settlement, announced Wednesday by Los Angeles City Atty. Carmen Trutanich, ends an investigation into more than 1,000 so-called rescissions by Blue Shield, a San Francisco-based not-for-profit company.</blockquote> As usual, there was no admission of guilt, and a company spokesperson claimed that while the company decided to pay out the money in response to the allegations, it, of course, was blameless: <blockquote>Blue Shield spokesman Steve Shivinsky said the firm settled to avoid litigation. 'Our process meets or exceeds all legal and regulatory requirements,' Shivinsky said in a statement. 'In every instance, we provide immediate notice, ensure multiple layers of review, involve a medical director in the decision, give members an opportunity to provide additional information before we take any action, and follow the guidance of an independent third party review.'</blockquote> Note that rescission is now against US federal law: <blockquote>President Obama made rescission a central theme in his push for a healthcare overhaul. In September 2010, a ban on rescissions for unintentional application errors became one of the first pieces of the healthcare law to take effect.</blockquote> GE Healthcare On December 29, 2011, the Detroit Free Press reported (<a href="http://www.usatoday.com/money/industries/health/story/2011-12-29/ge-healthcare-settlement-30-million-dollars/52268818/1">via</a> USA Today): <blockquote>Pharmaceutical giant GE Healthcare will pay $30 million to the U.S. Department of Justice to settle claims in a case filed by a Michigan salesman, alleging one of its companies marketed a diagnostic drug used in cardiology tests as one that could be diluted and stretched to more patients than intended.</blockquote> Not surprisingly, <blockquote>GE admitted no wrongdoing in the settlement. </blockquote> This was despite the fact that the actions alleged may have harmed patients as well as defrauding the government: <blockquote>For patients, the diluted product resulted in more false positives during cardiology tests and exposed them to additional and unnecessary testing....</blockquote>We have <a href="http://hcrenewal.blogspot.com/search/label/General%20Electric">posted previously</a> about some previous questionable behavior by GE in the health care sphere. Actavis On January 3, 2012, Bloomberg <a href="http://www.businessweek.com/news/2012-01-03/actavis-to-pay-84-million-to-end-medicaid-drug-pricing-suit.html">reported</a>: <blockquote>Two units of Actavis Group Hf will pay $84 million to settle a lawsuit over drug pricing, Texas officials said, less than half the amount an Austin jury said the company should pay. The state accused Actavis Mid-Atlantic LLC and Actavis Elizabeth LLC, subsidiaries of the Iceland-based company’s U.S. division, of inflating billings to the Texas Medicaid program by falsely reporting drug prices. The state court jury in February ordered the units to pay the state $170 million. The settlement resolves that litigation, Texas Attorney General Greg Abbott said today in a statement.</blockquote> Note that Medicaid is a joint federal-state insurance program for the poor. The company's statement had a familiar ring to it: <blockquote>'Actavis denies any and all wrongdoing, and denies that it has any liability relating to the Texas judgment,' the company and the state said in the settlement agreement. The parties reached a settlement 'to avoid the delay, uncertainty, inconvenience and expense of continuing the litigation.'</blockquote> Nothing to see here, just move along. Denver Health Medical Center On January 5, 2012, the Denver Post <a href="http://www.denverpost.com/breakingnews/ci_19680861">reported</a>: <blockquote>Denver Health Medical Center will pay $6.3 million to federal and state officials for overbilling Medicare and Medicaid, state and U.S. attorneys said. After investigating a whistleblower's lawsuit, government officials said Denver Health was classifying patients with an "inpatient" status when it should have been listing them as 'outpatient' or under 'observation' status, which paid less under government rules.</blockquote> Oops, missing from this story was the pro forma denial of blame, wrongdoing, misconduct by organizational leadership. However, the Denver Business Journal was <a href="http://www.bizjournals.com/denver/news/2012/01/05/denver-health-settles-medicare.html">able to add that</a>: <blockquote>Denver Health, in a statement, said it and the government agreed to the settlement to avoid 'protracted litigation' over the allegations. It did not admit guilt in agreeing to the settlement.</blockquote> Of course, again despite having to pay millions, the organization asserted that it is fine and upstanding: <blockquote>'Denver Health has, and will continue to, strive to ensure that its billing systems are accurate,' the hospital said in a statement, adding that the hospital has implemented a system to correct and improve billing accuracy.</blockquote> Whoever wrote the statement seemed to overlook the implication that flowed from the need to "correct" the system. CVS Caremark On January 12, 2012, the Baltimore Sun <a href="http://articles.baltimoresun.com/2012-01-12/business/bal-consuming-interests-cvs-caremark-settles-deceptive-pricing-charge-for-5-million-20120112_1_cvs-caremark-drug-pricing-information-drug-plan">reported</a>: <blockquote>The Federal Trade Commission announced that CVS Caremark Corp. agreed to pay $5 million to settle a complaint that it misinformed seniors about the price of certain Medicare Part D prescription drugs sold through CVS and Walgreens pharmacies. The action by the company, according to the FTC, caused seniors and consumers with disabilities to pay significantly more for drugs. It also pushed them more quickly into the so-called 'doughnut hole,' in which drug costs aren’t covered by the federal program.</blockquote> Despite its multimillion dollar payment, the company admitted no guilt, of course, and asserted its exemplary corporate citizenship: <blockquote>CVS Caremark released a statement: 'During the course of this two year investigation, our company cooperated fully with the FTC and provided to the government millions of documents as well as access to numerous members of our management team who participated in voluntary interviews and depositions,' said Douglas A. Sgarro, Executive Vice President and Chief Legal Officer of CVS Caremark.</blockquote> He also took comfort from the fact that there were not even more charges: <blockquote>It is important to note that, at the conclusion of this comprehensive investigation, the FTC made no allegations of antitrust law violations or anti-competitive behavior associated with any of our business practices, products or service offerings.</blockquote> Stryker Corp On January 18, 2012, Bloomberg <a href="http://www.bloomberg.com/news/2012-01-18/stryker-biotech-pleads-guilty-to-misbranding-charge-pays-15-million-fine.html">reported</a>: <blockquote>A Stryker Corp. (SYK) unit agreed to plead guilty and pay a $15 million fine while the medical-device maker was on trial on charges it marketed an unapproved mixture of products for strengthening human bone growth. The unit, Stryker Biotech, and three Stryker sales representatives were on trial in federal court in Boston on a 13-count criminal indictment claiming conspiracy and wire fraud. The trial began Jan. 9 with jury selection. Stryker Biotech agreed to plead to one misdemeanor count of misbranding a medical device, according to a letter dated yesterday from the U.S. Attorney’s Office in Boston and filed with the federal court. </blockquote> This did involve an admission of guilt, but to what amounts to a financial violation when there were allegations that patients may have been harmed: <blockquote>The U.S. had charged Stryker Biotech with misbranding and its sales force with conspiring to defraud surgeons into combining the company’s OP-1 and OP-1 Putty with the bone filler Calstrux. Some patients suffered adverse side effects and required more surgery, the U.S. said. 'That mixture was never studied clinically,' Assistant U.S. Attorney Susan Winkler told the jury in her opening statement on Jan. 12. 'They did not know if it worked. They did not know if it was safe, and they marketed it to doctors anyway.' </blockquote> Interval Summary We have presented eight cases in which  major US health care organizations settled cases involving allegations of financial gain under false pretenses. Nearly all involved US federal charges, and the others included alleged misbehavior that affected a federal program or that now would be illegal under federal law. All the cases were resolved with fines over $1 million. However, while these fines may seem big to most people, they were trivial compared to the revenues of the organizations. None of the settlements involved any penalties to actual people who authorized, directed, or implemented the misbehavior. No individuals at any of the involved organizations admitted any mistakes, much less wrong doing. While the volume of such settlements indicates the prevalence of misbehavior by large health care organizations, it is not clear that their results, which amount to slaps on corporate wrists, have any deterrent effect. In comparison, see what happens when little people obtain money from the government under false pretenses. I found a convenience sample of such cases reported in the last month through a Google search. Vasquez On January 9, the San Francisco Chronicle <a href="http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2012/01/09/state/n193158S68.DTL">reported</a>: <blockquote>A Los Angeles woman who pleaded guilty to committing $6.2 million in Medicare fraud has been sentenced to 5 years in prison. Federal Health and Human Services officials say 47-year-old Carolyn Ann Vasquez has also been ordered to pay $6.2 million in restitution. Vasquez admitted to conspiring with others to use a series of fraudulent Los Angeles-area medical clinics to defraud the federal health care insurance program for people over age 65 and the disabled. Between 2007 and 2008, Vasquez obtained a physician's personal information and Medicare provider number and used it to print prescription pads. She then had a physician's assistant, David Garrison, write fraudulent prescriptions for pricey medical equipment.</blockquote> Curtis On January 7, 2012, the [Jacksonville] Florida Times-Union <a href="http://jacksonville.com/news/georgia/2012-01-07/story/leader-medicare-fraud-scheme-gets-3-years-6-months-prison">reported</a>: <blockquote>A federal judge sentenced the would-be owner of a Brunswick prosthetic business to three years and six months in prison for his organization and leadership of a scheme that defrauded Medicare of more than $250,000.</blockquote> Also, <blockquote>In addition to prison, Wood sentenced Curtis to repay $254,750.94 to Health and Human Services and serve three years’ probation. She dismissed eight other counts as part of his plea agreement.</blockquote> In stark contrast to the stories above about cases of fraud involving large health care organizations: <blockquote>Samuel Curtis III, who had submitted false claims from Preferred Prosthetics and Orthotics in Brunswick and Team Orthotics and Prosthetics of Houston, had pleaded guilty in July to conspiring to commit health care fraud. Curtis, 38, apologized and asked U.S. District Judge Lisa Godbey Wood for leniency during his sentencing hearing Friday.</blockquote> Popov On January 12, 2012, the Sacramento Bee <a href="http://blogs.sacbee.com/crime/archives/2012/01/doctor-posing-as-sacramento-clinic-owner-sentenced-in-scam.html">reported</a>: <blockquote>A Los Angeles physician who assumed the role as co-owner of a Sacramento medical clinic has been sentenced to federal prison for his participation in a Medicare fraud scam. Alexander Popov, 47, was sentenced today by U.S. District Judge Morrison C.England Jr. to eight years and one month in prison for committing health care fraud and conspiring to commit health care fraud, according to a federal Department of Justice news release. He was found guilty by a jury in July. In sentencing, Judge England found that Popov was responsible for more than a million dollars in fraudulent billings submitted to Medicare and more than $600,000 in payments made on false claims. Evidence at trial showed that Popov gave false testimony and manufactured evidence at trial, amounting to an obstruction of justice, officials said.</blockquote> Also, <blockquote>Vardges Egiazarian previously pleaded guilty in the case and is serving 78 months in prison. </blockquote> Applebaum On January 20, 2012, Medscape <a href="http://www.medscape.com/viewarticle/757251">reported</a>: <blockquote>A former Idaho psychiatrist was ordered to pay nearly $95,000 in a legal judgment this week, adding to a prison sentence of up to 5 years, which he received in November for obstruction and falsifying records relating to Medicaid fraud. The judgment, obtained by the US Attorney's Office against Michael Applebaum, MD, of Nampa, Idaho, involved a civil lawsuit in which he was accused of submitting false Medicare and Medicaid claims for undocumented and ineligible services from 2004 through 2009. Prosecutors claimed Dr. Applebaum failed to properly document services for approximately 502 claims, including falsifying service dates on 49 claims to make them appear eligible for reimbursement under Medicaid's rule of submitting claims within 12 months of the date of service.</blockquote> Summary As we noted above, if a large organization, such as a hospital system, pharmaceutical company, or health insurance company is accused of fraud against the government, the outcome is likely to be a large fine that is nonetheless small compared with the organization's revenue, no admission of guilt or responsibility, and no penalties for any individuals who authorized, directed or implemented the misbehavior. However, if an individual or small business is accused of such fraud, the results are likely to include fines sufficient to bankrupt either, admissions of guilt, and years of jail time. Yet such actions by large organizations are likely to be more harmful to individuals and society than those of individuals or small businesses. This seems like a glaring, stark example of unequal justice in health care. If an individual does something bad in a health care context, the punishment is likely to be severe and life altering. If an individual who is a leader of a large health care organization does something equally bad, he or she is likely to receive no punishment at all. This is an example that ought to unite the left and the right, liberals and libertarians in outrage. Liberals are supposed to believe in the rights of the individual and economic justice. Libertarians are supposed to believe in economic freedom and the economic rights of the individual. In this example, the government and large corporations seem to have gotten together to let corporate leaders play by different rules than individuals. Corporate leaders seem to be above the law, the same law that can ruin individuals who violate it. If we really want to reform health care, we need to make sure that its rules apply equally to all individuals, whether humble or rich, whether they are individual professionals of corporate CEOs. As long as the rich and powerful can play by different rules, we only fuel cynicism and anger. Down that road lies disaster.

Unequal Justice Under Law - Comparing Cases of Alleged Misbehavior by Large Health Care Organizations and Individuals

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25 Jan 2012

The Center for Medicare and Medicaid Services' Quiet Coziness with Wall Street

An <a href="http://www.pogo.org/pogo-files/alerts/government-corruption/wall-street-in-washington-gc-ii-20111208.html">article</a> from the Project on Government Oversight (POGO) reveals a new aspect of the growing coziness between the US government and big corporations with obvious relevance to health care. CMS' Coziness with Leaders of the "Capital Markets" Here is the introduction and the example most relevant to health care: <blockquote>Nearly a dozen senior staff at the Centers for Medicare and Medicaid Services (CMS), the giant agency that administers hundreds of billions in federal health care dollars, had been called to a meeting. After a discussion with five Wall Street professionals that lasted nearly two hours, one senior CMS analyst filed an ethics complaint that later went to the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS). His beef: that a handful of deep-pocketed investors had won a private hearing to probe whether the agency would allow Medicare reimbursement for specific medical devices manufactured by companies in which they already held a stake or might put new money. The market for one device, already approved for Medicare, was rapidly heading toward $1 billion annually; the agency’s impending decision to reimburse competing devices could have major market impact, a shift potentially worth hundreds of millions of dollars. 'This meeting forced agency staff to redirect their attention toward a select group from Wall Street, when neither competing investors nor patient-oriented stakeholders were present,' the whistleblower told the Project On Government Oversight (POGO). 'They got to probe us for hours in private about what we planned to do and how we approached procedures for reimbursing medical devices, the mechanics and psychology of CMS decision-making, in general and with respect to these specific devices.' The meeting was set up by a former CMS employee working for the Marwood Group, an asset manager that counsels big health-care industry investors, the whistleblower says. The firm’s president is Edward 'Ted' Kennedy Jr., son of the late Massachusetts senator and a major supporter of President Obama’s health care reforms, and includes Kennedy cousins Robert F. Kennedy, Jr. and Stephen E. Smith, Jr., as senior advisors. The firm’s website highlights its staff recruitment among Congressional aides, the Executive Office of the President and CMS. One CMS veteran who joined Marwood after the 2009 meeting with Wall Streeters is Barry Straub, the agency's former Chief Medical Officer, who is also an expert on Medicare reimbursement, the website says. A company spokesman had no comment. A supervisor at CMS’s Coverage Advisory Group, which decides which services the agency will pay for, also helped organize the session with investors. The whistleblower says he was told by a supervisor that such get-togethers are 'a routine practice at CMS.' At the time, in 2009, CMS’s top administrator had an aide with the title, 'capital markets advisor,' tasked with tracking investment community activity in Washington and elsewhere. At the investor meeting, Wall Streeters asked a range of questions 'about confidential CMS information.' The whistle blower says he does not believe they received illegal disclosures, though they peppered CMS analysts with queries about the agency’s decision-making process and other sensitive matters which, if answered, could have violated the law or related regulations that bar the sharing of internal deliberations and decisions. The whistleblower first filed his complaint in April 2009. He was terminated in 2011 for being disloyal to the agency mission after he made a series of internal protests, including the objection to what he calls a pattern and practice of unfettered access to CMS staff by Wall Street investors. He says he is currently fighting his dismissal through all available legal and administrative channels. </blockquote>Implications and Summary As the POGO article put it, <blockquote>CMS does have a set of 'Open Door' policies and affords a variety of avenues for public access. The disclosure of payments to physicians and teaching hospitals by pharmaceutical companies and other interests are required under President Obama’s health reform. In practice, however, the public, not to mention competing investors and stakeholders, rarely get the kind of information and insight available in meetings like the whistleblower described.</blockquote> In general, <blockquote>A balance is necessary between the danger of too much insider access, and imposing excessive limitations. Indeed, the biggest problem with special access for Wall Street insiders is not just that they seem to get meetings and acquire information that may be privileged and non-public, but that others, including other investors, do not get a crack at the same material.</blockquote>The activities above have all the usual elements of excess corporate - government coziness.  These include enhanced access for corporate leaders beyond what any ordinary members of the public might achieve; the <a href="http://hcrenewal.blogspot.com/search/label/revolving%20doors">revolving door</a> between government service and corporate leadership; the participation of well-connected inside the beltway types, etc, etc.  It also includes the apparent formalization of representation of corporate interests, e.g., the "Capital Markets Advisor," with no parallel formalization of the public's or patients' interests.  Even more worrisome is that an effort to make this all less <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a> resulted in alleged intimidation of a <a href="http://hcrenewal.blogspot.com/search/label/whistle-blowers">whistle-blower</a>. So, let's see, CMS, the Center for Medicare and Medicaid Services, the US Department of Health and Human Services (DHHS) branch which controls the Medicare and Medicaid programs, the government run single-payer programs for the elderly, the disabled, and the poor, does not seem to be able to afford to figure out in-house how to pay physicians for specific services.  Instead, it has effectively farmed out this task to a private committee, the American Medical Association's <a href="http://hcrenewal.blogspot.com/search/label/RUC">RBRVS Update Committee (RUC</a>).  As we have <a href="http://hcrenewal.blogspot.com/search/label/RUC">discussed many times</a>, this obscure and secretive committee likely had a major role in structuring the financial incentives that favor procedures and disfavor primary care. leading to excess costs, declining access, and degrading quality.  However, CMS can afford to have a "Capital Markets Adviser" and to use up staff time briefing wealthy investors and hedge fund types.  What is wrong with this picture? In my humble opinion, government health care agencies ought to put the public's and patient's health first. They should not give special consideration to the rich, the powerful, the well-connected, whom some now call the one percent. Yet in the US we seem to have an increasingly <a href="http://hcrenewal.blogspot.com/search/label/corporatism">corporatist</a> state in which government and the plutocrats work together for their mutual interests, regulatory capture writ large. We need to restore government, and our health care agencies to being of the people, by the people, and for the people.  Obviously, true health care reform would start with the government and its officials putting patients' and the public's health first, way ahead of the financial comfort of corporate leaders.

The Center for Medicare and Medicaid Services' Quiet Coziness with Wall Street

An article from the Project on Government Oversight (POGO) reveals a new aspect of the growing coziness between the US government and big corporations with obvious relevance to health care.CMS' Cozine…

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09 Dec 2011

Will the Citigroup Ruling Challenge Health Care Leaders' Impunity?

A federal judge's refusal to approve yet another cozy settlement that was supposed to resolve allegations of wrong-doing by a giant corporation has left the financial world atwitter.  It may be that this ruling will also affect the coziness between giant health care corporations and government regulators.  Summary of the Citigroup Case We first discussed this case twp weeks ago <a href="http://hcrenewal.blogspot.com/2011/11/parallels-between-health-care-and.html">here</a>.  Here is a summary of the government's (in this case, the Securities and Exchange Commision's) original allegations <a href="http://www.nytimes.com/2011/11/29/business/judge-rejects-sec-accord-with-citi.html">from the New York Times</a>. <blockquote>According to the Securities and Exchange Commission, Citigroup stuffed a $1 billion mortgage fund that it sold to investors in 2007 with securities that it believed would fail so that it could bet against its customers and profit when values declined. The fraud, the agency said, was in Citigroup’s falsely telling investors that an independent party was choosing the portfolio’s investments. Citigroup made $160 million from the deal and investors lost $700 million.</blockquote>The Problems with the Proposed Settlement Judge Jed Rakoff refused to approve the settlement because of a series of problems, listed below as summarized by <a href="http://www.economist.com/node/21540667">the Schumpeter columnist in the Economist</a>. <blockquote>Mr Rakoff faulted the SEC for prosecuting Citigroup for negligence when a fraud prosecution was warranted; for failing to provide the court with 'any proven or admitted facts upon which to exercise even a modest degree of independent judgment'; for erroneously contending that 'public interest…is not part of [the] applicable standard of judicial review'; and for wrongly arguing that 'if the public interest must be taken into account, the SEC is the sole determiner'.</blockquote>Furthermore, <blockquote>Mr Rakoff also attacked a second condition of the settlement. Citigroup had agreed to operate under a court injunction if it ever violated the deal, which could lead to contempt charges. Whatever threat this carried, Mr Rackoff wrote, it was mitigated because Citigroup, as other financial firms, had been cited similarly over the past decade—and never faced any consequences. </blockquote>The Parallels with Legal Settlements Made by Health Care Organizations Several of the features of the settlement that the Judge found so objectionable are commonly also features of the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">settlements</a> we have seen involving health care organizations. Government regulators often seem to make much milder charges that were warranted by the apparent facts. They make the organizations party to <a href="http://hcrenewal.blogspot.com/search/label/corporate%20integrity%20agreement">corporate integrity</a> or <a href="http://hcrenewal.blogspot.com/search/label/deferred%20prosecution%20agreement">deferred prosecution</a> agreements, even though sometimes the same corporations were already subject to such agreements when they appeared to misbehave again. The agreements often allow the organizations to neither admit to or deny any charges, leaving the facts of the case forever in doubt. <a href="http://www.rollingstone.com/politics/blogs/taibblog/federal-judge-pimp-slaps-the-sec-over-citigroup-settlement-20111129">Matt Taibi in the Rolling Stone</a> provided some pithy comments on these commonly seen features of legal settlements. <blockquote>By accepting hundred-million-dollar fines without a full public venting of the facts, the SEC is leveling seemingly significant punishments without telling the public what the defendant is being punished for. This has essentially created a parallel or secret criminal justice system, in which both crime and punishment are adjudicated behind closed doors. This system allows for ugly consequences in both directions. Imagine if normal criminal defendants were treated this way. Say a prosecutor and street criminal come into a judge’s chamber and explain they’ve cooked up a deal, that the criminal doesn’t have to admit to anything or plead to any crime, but has to spend 18 months in house arrest nonetheless. What sane judge would sign off on a deal like that without knowing exactly what the facts are? Did the criminal shoot up a nightclub and paralyze someone, or did he just sell a dimebag on the street? Is 18 months a tough sentence or a slap on the wrist? And how is it legally possible for someone to deserve an 18-month sentence without being guilty of anything? Such deals are logical and legal absurdities, but judges have been signing off on settlements like this with Wall Street defendants for years.</blockquote>As we have said numerous times before, (starting <a href="http://hcrenewal.blogspot.com/2008/07/amerigroup-settles.html">here</a> in 2008) the current manner of regulation, in which organizations pay fines (and sometimes submit to corporate integrity or deferred prosecution agreements), rarely admit any guilt, but in which individuals who directed, authorized or implemented the alleged misbehavior almost never suffer any negative consequences, fails to deter future bad behavior. We have noted that the costs of the settlements are paid by the organization as a whole, and thus simply regarded as costs of doing business by executives. The leaders' impunity will allow the bad behavior to be repeated again and again. Here is how Taibbi and Rakoff put it: <blockquote>these crappy settlements have evolved into a kind of cheap payoff system, in which crimes may be committed over and over again, and the SEC’s only role is to take a bribe each time the offenders slip up and get caught. If you never have to worry about serious punishments, or court findings of criminal guilt (which would leave you exposed to crippling lawsuits), then there’s simply no incentive to stop committing fraud. These SEC settlements simply become part of the cost of doing business, as Rakoff notes: <blockquote>As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. This, indeed, is Citigroup's position in this very case.</blockquote> That line, 'a cost of doing business imposed by having to maintain a working relationship with a regulatory agency,' is one of the more brutally damning things you’ll ever see a judge write. Rakoff is essentially saying that these fines are payoffs to keep the SEC off the banks’ backs. They’re like the pad that numbers-runners or drug dealers pay to urban precinct-houses every month to keep cops from making real arrests. That's what he means when he refers to 'maintaning a working relationship.' It's heavy stuff.</blockquote> What the Judge appears to be saying is that the whole system stinks of <a href="http://hcrenewal.blogspot.com/search/label/regulatory%20capture">regulatory capture</a>, and that the settlements paid by the organizations are the moral equivalent of bribes paid to government officials. That is indeed "heavy stuff." Now that Occupy Wall Street has made it socially acceptable to discuss the economic dysfunction that lead to the great recession or global financial collapse, I can only hope that this discussion will lead to a parallel discussion about health care dysfunction. It certainly seems that the regulatory capture that seems to be part of the dismantling of regulation of finance is similar to regulatory capture affecting health care. But I await someone beyond us few lonely bloggers to take up this topic. I might as well end with this sentiment<a href="http://hcrenewal.blogspot.com/2009/09/biovail-settles-and-judge-explains-why.html"> from 2009</a> regarding another case over which Judge Rakoff presided: Again, in my humble opinion, until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations.

Will the Citigroup Ruling Challenge Health Care Leaders' Impunity?

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29 Nov 2011

Health Care Also Needs to Challenge "Crony Capitalism," the "New Gilded Age, and "the Idolatry of the Market"

The increasing size and scope of the "Occupy Wall Street" movement, and continuing instability in the finance system, most recently due to the threatened default of Greece, and resulting problems with the Euro, and now the bankruptcy of yet another prominent financial firm, MF Global, has lead to renewed discussion of what has gone wrong with the greater political economy. As I have perused some of it, I noted distinct parallels with the some of the discussion we have had about what has gone wrong with health care.  In fact, at the root of health care dysfunction appear to be the dysfunction of the greater political economy. Few in the One Percent Deserved the Money A dominant slogan of the "Occupy" movement is "we are the 99 percent," that is <blockquote>'We are the 99 percent,' is the continuing chant of the protesters, who are now in their seventh week of marching through the streets of Manhattan. And, surprisingly, they have hit upon the crux of America's problems with precisely this sentence. Indeed, they have given shape to a development in the country that has been growing more acute for decades, one that numerous academics and experts have tried to analyze elsewhere in lengthy books and essays. It's a development so profound and revolutionary that it has shaken the world's most powerful nation to its core. Inequality in America is greater than it has been in almost a century. Those fortunate enough to belong to the 1 percent, made up of the super-rich, stand on one side of the divide; the remaining 99 percent on the other. Even for a country that has always accepted opposite extremes as part of its identity, the chasm has simply grown too vast.</blockquote>[Schulz T] The One Percent are Mostly Salaried Corporate Executives Contrary to some propaganda, many in the one percent are not entrepreneurs, but corporate employees, albeit special ones. <blockquote>Also cited as factors contributing to the rapid growth of income at the top were the structure of executive compensation....</blockquote>[Pear R] In Health Care - We have frequently discussed the outsized compensation given to a few top executives. CEOs of for-profit health care corporations may make tens of millions of dollars a year (<a href="http://hcrenewal.blogspot.com/2011/10/peer-benchmarking-lake-wobegone-effect.html">here</a> is a recent example, and many similar stories can be found <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">here</a>.) Even CEOs of non-profit hospital systems can make millions of dollars a year. (See <a href="http://hcrenewal.blogspot.com/2011/09/highly-paid-skilled-executives-and.html">this recent example</a>, then go <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">here</a> for more.) Thus, a fair number of the one percent are likely to be from health care, and most of those at the top are likely to be current or former top hired executives. The One Percent's Wealth May be More Due to Luck than Skill, Intelligence, or Creativity According to a recent simulation study, <blockquote>by the 'inexorable effect of chance,' and chance alone, 'a small proportion of entrepreneurs come to possess essentially all of the wealth. ... The concentration of wealth occurs merely because some individuals are lucky by randomly receiving a series of high growth rates, and once they are ahead with exponentially growing capital, they tend to stay ahead.' According to Fargione, greater variation in rates of return hastened the concentration of wealth. Inequality grows with time. Wealth concentration continues despite periods of recession and depression.</blockquote>[Breining G] In Health Care-No similar study has been done in health care. However, we have documented many cases in which top health care executives' compensation seemed to have nothing to do with their skill, originality, or ability to uphold the health care mission. How "peer benchmarking," and the "Lake Woebegone Effect" account for immense compensation despite bad results was discussed <a href="http://hcrenewal.blogspot.com/2011/10/peer-benchmarking-lake-wobegone-effect.html">here</a>. A recent series of cases (with links to others) of hospital CEOs who prospered while their institutions' finances decayed was <a href="http://hcrenewal.blogspot.com/2011/08/more-executives-prospering-despite.html">here</a>. The One Percent Gamed the System, and Personally Profited from Perverse Incentives <blockquote>Most fundamentally, what protest groups on the left and the right share with less activist middle-class Americans -- the apolitical voters who often decide elections -- is an abiding sense that the bond between work and reward has been broken. Huge financial rewards are given to executives who fail miserably and get fired. Debt relief programs help not only those who have fallen behind through no fault of their own, but also the profligate who lived beyond their means. The list goes on: What’s inflaming voters isn’t so much inequality per se, though that’s certainly a symptom of the problem. It’s the fact that the rewards in our economic system seem increasingly divorced from American values of hard work, risk taking and innovation. Instead, these benefits are more and more likely to be awarded on the basis of connections and political power. </blockquote>[Klain R] In Health Care-We have seen not merely cases of top health care leaders paid a lot of money for mediocre financial results. We have seen cases in which leaders got outsize pay despite evidence of organizational misconduct, or even crime. For example, see posts <a href="http://hcrenewal.blogspot.com/2011/09/johnson-and-johnson-pleads-guilty.html">here</a>, <a href="http://hcrenewal.blogspot.com/2011/08/why-cultivate-weldons-confidence-ceo.html">here</a> and <a href="http://hcrenewal.blogspot.com/2011/03/despite-recalls-legal-settlements.html">here</a> that contrast one company's multiple legal settlements and guilty pleas and its CEO's eight-figure compensation. The One Percent Deny Accountablity While Blaming Others for the Problems They Produce Based on a as yet unpublished survey of top finance leaders in London, its leader, Rev Andrew Studdert-Kennedy, <blockquote>said he had been 'astonished' by the attitudes of some City workers displayed towards the financial crisis. He said, 'I did speak to many people about morality. I was amazed by how many banking crises there had been and how sanguine people were about them. A number of people said 'this is just what happens - it's the nature of banking, it's the nature of capitalism.' 'It's one thing having historical perspective, but I was astonished that people didn't try to learn a bit more. There is a recognition that there is something wrong, but a reluctance to admit they are part of the problem.'</blockquote>[Brady et al] In addition, <blockquote>Talk to most bank executives and they’ll still place the blame for the 2008 financial crisis on 'irresponsible consumers' who took out mortgages they couldn’t afford; dishonest mortgage brokers; and—at the top of the list—the government, which used Fannie Mae and Freddie Mac to finance mortgage lending to 'people who shouldn’t own homes,' as one senior New York bank executive put it to me recently. All of which is partly true but omits the enthusiasm with which Wall Street feasted on that market, and the fact, as Warren puts it, 'that Wall Street made tens of billions of dollars' from it. In short, there is no remorse, let alone a sense of obligation, because bank executives generally do not believe they were the cause of the financial collapse. As Neil Barofsky, Treasury’s former inspector general charged with oversight of TARP, the $700 billion government bailout of the banks, recalls from his interviews with bankers, the attitude instead was that 'shit happens.' The state of denial has been massive. On Wall Street today, says the vice-chairman of a private-equity firm, 'there is this enormous persecution complex in the banking industry about Dodd-Frank, that everyone is going after the banks.'</blockquote>[Andrews S] In Health Care-Health care leaders and their apologists sometimes cite their awesome responsibility as a rationale for their outrageous compensation. Yet while health care leaders often decry the state of the health care system, I have yet to hear one take any responsibility for what has gone wrong. Meanwhile, Wendell Potter has described how the leaders of one part of health care, health insurance and managed care, set up elaborate but stealthy public relations campaigns to blame the problems of health care mainly on patients and doctors, but certainly not the health insurance or managed care (see post <a href="http://hcrenewal.blogspot.com/2011/03/millions-to-health-insurance-ceos-but.html">here</a>). This echoes how top finance leaders blame their industry's problems on feckless consumers. The One Percent are Not Held Accountable, and Have De Facto Impunity <blockquote>So, yes, we face a threat to our capitalist system. But it’s not coming from half-naked anarchists manning the barricades at Occupy Wall Street protests. Rather, it comes from pinstriped apologists for a financial system that glides along without enough of the discipline of failure and that produces soaring inequality, socialist bank bailouts and unaccountable executives. </blockquote>[Kristof ND] <blockquote>In our article in the last issue,1 we showed that, contrary to the claims of some analysts, the federally regulated mortgage agencies, Fannie Mae and Freddie Mac, were not central causes of the crisis. Rather, private financial firms on Wall Street and around the country unambiguously and overwhelmingly created the conditions that led to catastrophe. The risk of losses from the loans and mortgages these firms routinely bought and sold, particularly the subprime mortgages sold to low-income borrowers with poor credit, was significantly greater than regulators realized and was often hidden from investors. Wall Street bankers made personal fortunes all the while, in substantial part based on profits from selling the same subprime mortgages in repackaged securities to investors throughout the world. Yet thus far, federal agencies have launched few serious lawsuits against the major financial firms that participated in the collapse, and not a single criminal charge has been filed against anyone at a major bank. The federal government has been far more active in rescuing bankers than prosecuting them.</blockquote>[Madrick J et al] In Health Care-We have gone on endlessly how despite numerous examples of unethical or even criminal behavior by health care organizations, almost never has any individual who authorized, directed or implemented the bad behavior suffered any negative consequences. (Look <a href="http://hcrenewal.blogspot.com/search/label/crime">here</a> and <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">here</a>.) The One Percent Have Captured Government The most important reason for the unaccountability of the one percent is regulatory capture, leading to corporatism: <blockquote>much as the economic giants of the Gilded Age developed such enormous influence that they could dictate basic political conditions, today's Wall Street bosses and CEOs have successfully arranged extensive deregulation for their industries. Indeed, he argues that this is the only thing that can explain how hedge fund managers suddenly started making billions of dollars a year. Former Citigroup CEO Sanford Weill, for example, kept a framed pen in his office as a symbol of his influence. It was the pen President Bill Clinton -- at Weill's instigation -- used in 1999 to sign into law legislation repealing the provisions in the Glass-Steagall Act of 1933 that separated the transactions of investment and commercial banks. At the same time, Bartels writes, the wealthy receive enormous tax breaks worth hundreds of billions of dollars. </blockquote>[Schulz T] In Health Care- We have discussed <a href="http://hcrenewal.blogspot.com/search/label/regulatory%20capture">regulatory capture</a>, <a href="http://hcrenewal.blogspot.com/search/label/embedded%20networks%20of%20influence">embedded networks of influence</a>, and <a href="http://hcrenewal.blogspot.com/search/label/corporatism">corporatism</a> in health care. Summary The articles I summarized above called for the need to "save capitalism from crony capitalists," [Kristof ND], and to seize "the high political ground" by "reform that lessens the influence of money in politics and government," and to strengthen "the bonds between work and reward," [Klain], and to end the impunity of the wealthy [Madrick et al]. A Vatican Council has <a href="http://www.zenit.org/article-33718?l=english">called</a> for the end of the "idolatry of the market," the "ethic of solidarity," and the "primacy of the spiritual and the ethical," and of "politics - which is responsible for the common good - over the economy and finance." This has also been supported by the Archbishop Of Canterbury. In parallel, as we have said again and again, true health care reform requires competent, ethical leadership that upholds health care's core values within a governance structure of accountability, integrity, transparency, and honesty. Tackling the deep problems in health care will require tackling the deeper problems in the global political economy which helped to generate them. References Andrews S. The woman who knew too much. Vanity Fair, November, 2011. Link <a href="http://www.vanityfair.com/politics/features/2011/11/elizabeth-warren-201111">here</a>. Brady B, Merrick J. Exclusive: cover-up at St Paul's. The Independent, Oct 30, 2011. Link <a href="http://www.independent.co.uk/news/uk/home-news/exclusive-coverup-at-st-pauls-2377923.html">here</a>. Breining G. The 1 percent: how lucy they are. Minneapolis Star-Tribune, Oct 29, 2011. Link <a href="http://www.startribune.com/opinion/132819963.html">here</a>. Klain R. Americans want a government that ties rewards to work. Bloomberg, Oct 31, 2011. Link <a href="http://www.bloomberg.com/news/2011-10-31/americans-want-a-government-that-ties-rewards-to-work-ron-klain.html">here</a>. Kristof ND. Crony capitalism comes home. NY Times, Oct 28, 2011. Link <a href="http://www.nytimes.com/2011/10/27/opinion/kristof-crony-capitalism-comes-homes.html">here</a>. Madrick J, Portnoy F. Should some bankers be prosecuted? NY Review of Books, November 10, 2011. Link <a href="http://www.nybooks.com/articles/archives/2011/nov/10/should-some-bankers-be-prosecuted/">here</a>. Pear R. Top earners doubled share of nation's income, study finds. NY Times, Oct 25, 2011. Link <a href="http://www.nytimes.com/2011/10/26/us/politics/top-earners-doubled-share-of-nations-income-cbo-says.html">here</a>. Schulz T. The second gilded age: has America become an oligarchy? Spiegel Online, Oct 28, 2011. Link <a href="http://www.spiegel.de/international/spiegel/0,1518,793896,00.html">here</a>.

Health Care Also Needs to Challenge "Crony Capitalism," the "New Gilded Age, and "the Idolatry of the Market"

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03 Nov 2011

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