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A Lawsuit Over Healthcare IT Whistleblowing and Wrongful Discharge: Malin v. Siemens Healthcare

<div style="text-align: center;">"Any sufficiently advanced incompetence is indistinguishable from malice." - <a href="http://wikidumper.blogspot.com/2007/07/greys-law.html">Grey's law</a> </div> At an Aug. 2009 post "<a href="http://hcrenewal.blogspot.com/2009/08/why-siemens-healthcare-fails.html">Why Siemens Healthcare Fails</a>" I described medical informatics talent management issues that were apparent in a job posting at <a href="http://www.medical.siemens.com/">Siemens Medical Solutions</a>, a company that a decade ago seemed to value medical informatics expertise. (They in fact wanted to hire me then, an offer former employees tell me I was fortunate to have rejected due to a better offer from pharma). I now note a July 2007 healthcare IT-related lawsuit against the same company (and its summary dismissal) of which I was unaware when I wrote the above post. A physician, Murray Malin, MD [note: I do not know this person and have never had contact with him - ed.], working for Siemen's medical IT subsidiary filed a July 2007 lawsuit for wrongful termination after raising safety issues with Siemens HIT designed for critical care. The action initially began in late 2005 as a complaint against Siemens Health Services USA and Siemens Medical USA (which I shall refer to in this post as "Siemens Medical" for the sake of simplicity) to the Occupational Safety and Health Administration (OSHA) of the Department of Labor. This was done under the whistleblower protection provisions of Title VIII of the Sarbanes-Oxley Act of 2002 (SOX). The OSHA complaint was followed by a pro se lawsuit in federal court. The lawsuit's specifics are covered in the following four court documents (PDF). The events described could quite possibly serve as a true poster example of all that's wrong in the too-often perverse world of health IT. Sen. Grassley, <a href="http://hcrenewal.blogspot.com/2010/01/grassley-asks-hospitals-about.html">take note</a>. Here are the court documents: <blockquote>1. The Complaint: <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/siemens/Complaint_Malin_vs_siemens_medical.pdf">Complaint_Malin_vs_siemens_medical.pdf</a> (3.3 Mb PDF) 2. Siemens Answer to Complaint: <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/siemens/Complaint_answer_Malin_vs_siemens_medicl.pdf">Complaint_answer_Malin_vs_siemens_medical.pdf</a> (148 Kb PDF) 3. Memorandum Opinion: <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/siemens/Memorandum_opinion_Malin_vs_siemens_medical.pdf">Memorandum_opinion_Malin_vs_siemens_medical.pdf</a> (22 Kb PDF) 4. Judge Messitte opinion, US District Court Maryland: <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/siemens/MalinvSiemensMedicalOpinion&Order07cv1896.pdf">MalinvSiemensMedicalOpinion&Order07cv1896.pdf</a> (97 Kb PDF) </blockquote> (I have written about health IT problems extensively on this blog and at my <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/medinfo.htm">academic website on HIT failure</a>. These include but are not limited to: medical informatics specialists <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=clinical%20computing%20problems%20in%20ICU">ignored by nonclinician IT personnel</a> [the link is to another case involving critical care]; inverted and paradoxical organizational structures where IT facilitators become HIT project leaders and clinical leaders become HIT project facilitators; ill-conceived and poorly implemented <a href="http://www.tinyurl.com/hostileuserexper">mission hostile health IT</a>; perverse and in fact <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=Cardiology%20story">clinically cavalier IT "politics"</a>; failure to obtain <a href="http://hcrenewal.blogspot.com/2009/03/draft-patient-rights-statement-and.html">patient informed consent</a> as if health IT is an elite world not subject to the same ethical obligations as medicine; probable <a href="http://hcrenewal.blogspot.com/2009/03/health-it-hold-harmless-and-defects-gag.html">violations of Joint Commission safety standards and hospital executive fiduciary obligations</a>, and numerous others.) Here is a synopsis of why I think this 2007 lawsuit against Siemens Medical may be a sentinel case with regard to dysfunction in the healthcare IT industry, based upon the information in the court documents (read them yourself at the links above): <ul style="text-align: left;"><li>Siemens Medical's physician internal consultants (skilled anesthesiologists/informatics specialists), apparently in writing and including a remediation plan, opined that an IT system developed for critical care had numerous severe flaws, of sufficient seriousness that in their opinion the systems could harm or even kill patients if deployed;</li></ul><ul style="text-align: left;"><li>These were warnings of defects and flaws in IT in the worst possible medical environment, critical care with the sickest and most vulnerable of patients, not some ambulatory clinic or primary care office; </li></ul><ul style="text-align: left;"><li>Allegations were raised that the warnings were ignored, with at least one of the physicians, Dr. Malin, who was strongly concerned and vocal about the risks then being told his position was being eliminated. [It is not a surprise to note this rings alarm bells about the possibility of wrongful discharge based on retaliation and/or "greasing the skids" to eliminate potential whistleblowers or "<a href="http://www.ischool.drexel.edu/faculty/ssilverstein/informaticsmd/tactics.htm#team">non-team players</a>" who could delay release of the software and affect revenue - ed.]; </li></ul><ul style="text-align: left;"><li>The company possibly ignored the remediation plans of their own clinician/informatics experts;</li></ul><ul style="text-align: left;"><li>There were allegations of company misrepresentations about the new system to the FDA;</li></ul><ul style="text-align: left;"><li>There were allegations of decision making on these issues by non-clinician IT managers lacking healthcare or healthcare informatics expertise.</li></ul><ul style="text-align: left;"><li>A wrongful discharge complaint and then lawsuit were filed by Dr. Malin on the basis of violation of the whistleblower protection provisions of the Sarbanes-Oxley Act of 2002 (SOX), <a href="http://www.law.cornell.edu/uscode/18/usc_sec_18_00001514---A000-.html">18 U.S.C. § 1514A</a> ("Civil action to protect against retaliation in fraud cases - Whistleblower Protection for Employees of Publicly Traded Companies"); </li></ul><ul style="text-align: left;"><li>The suit was dismissed on the apparent technicality that Siemens Medical in the U.S. is not subject to the provision in the SOX Act as is the publicly-traded corporate parent, <a href="http://w1.siemens.com/">Siemens AG</a>; from document #4, pg 15: </li></ul><blockquote style="font-style: italic;">... Health Services is a wholly-owned subsidiary of Siemens Med ... Siemens Med is a wholly-owned subsidiary of Siemens Corporation, which is indirectly owned, through two intervening layers, by Siemens AG, a German company that is publicly traded as defined by § 1514A of SOX ... Of these entities, only Siemens AG is a publicly-traded company. While both Health Services and Siemens Med are incorporated in Delaware and located in Malvern, Pennsylvania, they are separately incorporated entities. </blockquote><ul style="text-align: left;"><li>Siemens Medical in their response to the suit denied the most severe allegations regarding the IT defects, but this issue was not followed up upon due to the lawsuit's dismissal on SOX issues despite the obvious potential public hazards the allegations of IT defects could represent;</li></ul><ul><li>In fact a US District Judge in the case, Peter J. Messitte, in the period after allowing Malin to prove the validity of SOX towards his case, opined that "No other discovery will be permitted, including but not limited to the alleged safety problems of Defendants’ product", document 4 above, Judge Messitte opinion, US District Court Maryland, pg. 25. [While perhaps understandable from a legal perspective, injured or dead patients don't really care about what legal precedents got them into the injured or dead state - ed.] </li></ul><ul style="text-align: left;"><li>Siemens Medical admitted in their responses to the suit that some of the software in question, actually put in use in hospitals, was in fact "beta" software, i.e., experimental (per Item 38 in 'Siemens Answer to Complaint' document).</li></ul> This latter admission also raises numerous questions. The answering of these questions seems imperative on the grounds of public interest in a rigorous and safe healthcare IT industry, an industry that, in effect <a href="http://histalk2.com/2010/02/01/readers-write-2110/">practicing medicine by machine proxy</a>, should respect patient rights and the Hippocratic Oath: <ul style="text-align: left;"><li>Were patients asked to give informed consent for the beta software's usage in their critical care?</li></ul><ul style="text-align: left;"><li>Were clinicians informed of the fact that the software was experimental?</li></ul><ul style="text-align: left;"><li>Were "hold harmless" clauses demanded from the customers?</li></ul><ul style="text-align: left;"><li>Did hospital executives violate their fiduciary and Joint Commission safety standards obligations by purchasing this beta software, either willfully, or inadvertently due to Siemens' possible concealment of the defects their own specialists wrote up?</li></ul><ul style="text-align: left;"><li>Would the use of beta-version software in critical care areas with possible known defects represent a human rights violation? </li></ul> What is not clear in these court documents is whether any patient harm was attributed to these HIT systems. This is not the important issue, however. The issue is risk and risk mitigation through rigor. One should not depend on good fortune to avoid predictable patient harm, especially when those predictions are from internal experts and are explicit. I therefore believe that the potential HIT safety issues raised in this case and the vendor's responses to internal warnings merit further investigation, especially regarding the specialist's concerns about the harmful defects in the software. These medical concerns and whether they were improperly dismissed were apparently never investigated impartially, due to the lawsuit's rejection by the court on technical grounds of SOX inapplicability. See the attached court documents. It is my personal opinion upon reading these court documents, and knowing this industry, that Dr. Malin was shafted. What is legal is not always just. One can only wonder how many other cases like this exist v. Siemens or other healthcare IT vendors. Perhaps the investigation being conducted by Sen. Grassley will shed more light on this. Finally, I note with sad irony, if these allegations are true, the doppelganger of a German-named company dismissing the concerns of an apparently Jewish physician about medical experiments possibly killing people. -- SS

A Lawsuit Over Healthcare IT Whistleblowing and Wrongful Discharge: Malin v. Siemens Healthcare

" Any sufficiently advanced incompetence is indistinguishable from malice. " - Grey's law At an Aug. 2009 post " Why Si...

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More Settlements: Christ Hospital, Teva Pharmaceutical Industries

For the end of the week, a round-up of the latest legal settlements involving large health care organizations, in alphabetical order.... Christ Hospital (Cincinnati, Ohio) As <a href="http://cincinnati.bizjournals.com/cincinnati/stories/2010/02/01/daily26.html">reported by the Business Courier of Cincinnati</a>: <blockquote>Christ Hospital and the federal government have reached a settlement agreement on a whistleblower lawsuit that accused the hospital of defrauding federal health-care programs. The suit alleged that Christ Hospital and the Ohio Heart Health Center cardiology practice, which Christ Hospital has since bought, 'devised a scheme that provided cardiologists improper financial incentives in exchange for generating revenue for the hospital,' according to the U.S. Department of Justice. Potential liability was reported to be as high as $424 million across the Health Alliance and its former members in an October 2007 document from VMG Health, a consultant hired as part of the separation of Christ Hospital from the Health Alliance. Christ faced potential liability of as much as $123 million in the case, according to the report, and the St. Luke Hospitals, which also left the Health Alliance, faced exposure of $51 million. The focus of the suit is an outpatient cardiology testing unit within Christ Hospital known as the Heart Station, where patients receive non-invasive heart procedures such as electrocardiograms, echocardiograms and stress tests. The action was originally filed in the U.S. District Court in Cincinnati under the whistleblower provisions of the False Claims Act by Dr. Harry Fry, a cardiologist who had provided services to Christ Hospital and Ohio Heart. The lawsuit alleges that, between at least 1999 and 2004, cardiologists were allocated time at the Heart Station based on the number of coronary arterial bypass graph procedures and catheter lab revenues they or their group generated for Christ the previous year. Many of the procedures were billed to federal benefit programs, including Medicare and Medicaid, according to the government. It’s against federal law to exchange financial incentives for patient referrals.</blockquote> Teva Pharmaceutical Industries As <a href="http://www.reuters.com/article/idUSN0519320420100205">reported by Reuters</a>, <blockquote>Generic drugmaker Teva Pharmaceutical Industries Ltd ... said on Friday it plans to settle lawsuits alleging it caused governments to pay inflated prices for its drugs under Medicaid and other programs. Teva, which denies the charges, said it will record a charge of about $315 million in its fourth quarter, 2009. The charge includes the settlement in principle and a reserve for the remaining drug pricing lawsuits to which Teva is a party. Israel-based Teva is one of a number of drug companies named in civil lawsuits that relate to drug price reporting by manufacturers in about 15 states. The cases are pending....</blockquote> The march of settlements continues. To repeat, seemingly ad infinitum, these are just the latest in a now long <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">parade</a> of settlements that serve as reminders of poor behavior by myriad health care organizations. As we have previously noted, these settlements seem to have little deterrent effect on future bad behavior. Usually, the companies involved only need to pay fines, and no individual who performed, directed or approved unethical or illegal acts will suffer any negative consequences. I submit once again that such fines are viewed merely as costs of doing business by the affected companies, and do not deter future bad behavior. Until the people who approve, direct, and perform unethical or illegal acts pay some penalties, expect such acts to continue.  I again suggest that to truly reform health care, we need rigorous regulation of health care organizations that has the power to deter unethical behavior that may risk patients' health.

More Settlements: Christ Hospital, Teva Pharmaceutical Industries

For the end of the week, a round-up of the latest legal settlements involving large health care organizations, in alphabetical order.... Chr...

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Networked, Interoperable, Secure National Medical Records a Castle in the Sky?

The holy grail of electronic medical record efforts of late is the creation of networked, interoperable, secure national medical records that would allow a physician in Palo Alto to retrieve the records of a patient from Hoboken if that patient moved or was found (in the hackneyed and somewhat histrionic scenario) unconscious on the streets of San Francisco. Recent events have made me skeptical we are anywhere near ready for such a technological accomplishment: <a href="http://www.pcmag.com/article2/0,2817,2358610,00.asp" style="font-weight: bold;"></a><blockquote><a href="http://www.pcmag.com/article2/0,2817,2358610,00.asp" style="font-weight: bold;">McAfee: Big Business Under Constant Cyber Attack</a> 01.29.10 At the World Economic Forum Annual Meeting in Switzerland, McAfee announced the results of a survey of 600 IT security execs in "critical infrastructure enterprises worldwide": that is, in places such as utility companies, banks, and even oil refineries. And apparently, they're constantly under cyber attack and also extortion related to those attacks. </blockquote> It's a real battlefield out there. <blockquote> The report, written by the Center for Strategic and International Studies (CSIS), says that 54 percent of those surveyed have already been attacked. The culprits behind the cyber-attacks are listed as "organized crime-gangs, terrorists, or nation-states."</blockquote> In other words, not simply teenage hackers or <a href="http://en.wikipedia.org/wiki/Papparazi">cyber-papparazi</a> interested in the medical condition of a movie star. <blockquote>Only one-fifth of the IT execs surveyed believe their systems are currently secure. One-third say things are worse now, vulnerability-wise, than a year ago, due to budget cuts. What constitutes a cyber attack? A distributed denial of service (DDoS) is the most typical ... mitigation can be hampered by the local laws, working in multiple countries, or the economics of where they operate. For example, half of those surveyed claim the laws in their countries don't do enough to prevent or deter cyber attacks. That's especially true for Russia, Mexico, and Brazil. Other attack vectors include DNS poisoning where Web traffic is redirected, SQL injection attacks on back-end data via a public Web site, and plain old theft of services. If you need a plot for your new thriller novel, keep in mind that 20 percent of these companies are not just cyber-attacked, but have also been threatened with attacks in the last two years in "low-level extortion" attempts. ... Those surveyed said the money loss is the worst part, second is the loss of reputation, and (if you thought you weren't important) loss of customers' personal information is third. This is a worldwide survey, and almost two-thirds of those surveyed believe foreign governments were responsible in some way for previous attacks. The two countries considering the biggest threats: China (by 33 percent of those surveyed) and the good ol' U.S. of A. (by 36 percent). China believes it's the biggest target. The full report, called <a href="http://newsroom.mcafee.com/images/10039/In%20the%20Crossfire_CIP%20report.pdf">In the Crossfire: Critical Infrastructure in the Age of the Cyber War</a> is free on McAfee's Web site in PDF format.</blockquote> I note that Google recently <a href="http://www.washingtonpost.com/wp-dyn/content/article/2010/02/03/AR2010020304057_pf.html">called in the National Security Agency</a> to help analyze a major corporate espionage attack: <blockquote>The attacks targeted Google source code -- the programming language underlying Google applications -- and extended to more than 30 other large tech, defense, energy, financial and media companies. The Gmail accounts of human rights activists in Europe, China and the United States were also compromised. </blockquote> Then there's this: <blockquote><a href="http://www.foxnews.com/politics/2010/02/03/intel-chief-risk-crippling-cyber-attack/"> Intelligence Chief: U.S. at Risk of Crippling Cyber Attack</a> Feb. 4, 2010 The United States is at risk of a crippling cyber attack that could "wreak havoc" on the country, Director of National Intelligence Dennis Blair said. "What we don't quite understand as seriously as we should is the extent of malicious cyberactivity that grows, that is growing now at unprecedented rates, extraordinary sophistication," Blair said. ... He said one critical "factor" is that more and more foreign companies are supplying software and hardware for government and private sector networks. "This increases the potential for subversion of the information in ... those systems," Blair said. [Outsourcing our HIT development overseas sounds like a great idea - ed.] </blockquote> Read the linked articles in their entirety. Perhaps we should focus on the local at present. National networked EMR's are a great concept, but there are a few social-technical details that remain to be worked out beforehand. <div style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgyamcc5CjVG9zPUhRgsRXCOiGds9uIKFJs9g940PSsnlrmmFf_slFeJn_nzzdFJIKjTAI9YxmIuo3ahUMtvrGs4W9lQBSnoKND8UltYUNPLoGQ5IyU3-wKPLA6qypoY2QiqApmsn9NM7P1/s1600-h/Castle_in_the_sky.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5434372822414454802" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgyamcc5CjVG9zPUhRgsRXCOiGds9uIKFJs9g940PSsnlrmmFf_slFeJn_nzzdFJIKjTAI9YxmIuo3ahUMtvrGs4W9lQBSnoKND8UltYUNPLoGQ5IyU3-wKPLA6qypoY2QiqApmsn9NM7P1/s320/Castle_in_the_sky.jpg" style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 123px; height: 166px;" /></a>A Castle in the Sky... </div> -- SS

Networked, Interoperable, Secure National Medical Records a Castle in the Sky?

The holy grail of electronic medical record efforts of late is the creation of networked, interoperable, secure national medical records tha...

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Atricure Settles

The march of legal settlements continues.  This time, the US Department of Justice <a href="http://www.justice.gov/opa/pr/2010/February/10-civ-115.html">announced</a>, <blockquote>Atricure Inc., a medical device manufacturer, has agreed to pay the United States $3.76 million to resolve civil claims in connection with the alleged promotion of its surgical ablation devices, the Justice Department announced today. Surgical ablation devices use focused energy to create controlled lesions or scar tissue on a patient’s heart or other organs. The settlement resolves allegations that the West Chester, Ohio-based company marketed its medical devices to treat atrial fibrillation (the most common cardiac arrhythmia or abnormal heart rhythm), a use that is not approved by the U.S. Food and Drug Administration (FDA). Atricure also allegedly promoted expensive heart surgery using the company’s devices when less invasive alternatives were appropriate, advised hospitals to up-code surgical procedures using the company’s devices to inflate Medicare reimbursement, and paid kickbacks to health care providers to use its devices. The United States asserted that by engaging in this conduct, Atricure knowingly violated the Food, Drug, and Cosmetic Act and caused the submission of false and fraudulent claims in violation of the False Claims Act.</blockquote> This settlement relates to topics we discussed back in the early days of Health Care Renewal, the convoluted financial ties beween the renowned Cleveland Clinic, its current CEO, and Atricure. In 2005,  investigative reporting published in the Wall Street Journal revealed the complicated relationships among the Clinic, its current CEO Dr Toby Cosgrove, the Clinic's venture capital fund, Foundation Medical Partners, and a small medical device company called Atricure. This coincided with the Clinic's firing of Dr Eric Topol from his leadership positions there. (See posts <a href="http://hcrenewal.blogspot.com/2005/12/one-horrible-debacle-indeed-topol.html">here</a> and <a href="http://hcrenewal.blogspot.com/2005/12/was-topol-fired-for-investigating.html">here</a>.) The Cleveland Plain Dealer uncovered more conflicts, involving Dr Cosgrove, the Clinic's board of trustees, Dr Bernadine Healy, and Invacare (see post <a href="http://hcrenewal.blogspot.com/2005/12/topol-merck-cleveland-clinic-case-gets.html">here</a>.)  In response, in 2006, the Clinic promised to revise its conflicts of interest policy, and held a big conference on the topic of conflicts of interest, although some were skeptical of these efforts (see post <a href="http://hcrenewal.blogspot.com/2006/05/cleveland-clinic-to-host-symposium.html">here</a>.) As the Cleveland Plain Dealer just <a href="http://www.cleveland.com/medical/index.ssf/2010/02/ohio-based_atricure_pays_38_mi.html">noted</a>, <blockquote>Cleveland Clinic Chief Executive Dr. Toby Cosgrove helped create the 'AtriClip Gillinov- Cosgrove LAA Exclusion System,' which is being sold by the company and won approval in October for use in the European market. While Cosgrove is eligible to receive royalties from the company, he has not recieved any, Clinic spokeswoman Eileen Sheil said. </blockquote> This settlement is just the latest in a now long <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">parade</a> of settlements that serve as reminders of poor behavior by myriad health care organizations.  As we have repeatedly noted, these settlements seem to have little deterrent effect on future bad behavior.  Usually, the companies involved only need to pay fines, and no individual who performed, directed or approved unethical or illegal acts will suffer any negative consequences. I submit once again that such fines are viewed merely as costs of doing business by the affected companies, and do not deter future bad behavior.  Until the people who approve, direct, and perform unethical or illegal acts pay some penalties, expect such acts to continue.  The wrinkle in this case comes from the numerous past ties between the company involved and a prestigious US health care system and its top leadership.  But I doubt that Cleveland Clinic CEO Dr Toby Cosgrove will have any public comment about it.  But why should I expect that a former company director will admit any accountability for that company's poor behaivor?  Hat tip to the <a href="http://lawprofessors.typepad.com/whitecollarcrime_blog/2010/02/in-the-news-around-the-blogosphere.html">White Collar Crime Prof Blog</a>.

Atricure Settles

The march of legal settlements continues. This time, the US Department of Justice announced , Atricure Inc., a medical device manufacturer,...

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Hospital Executive Pay in the Land Where All Our CEOs Are Above Average

In the US, it seems to be the season for news reports on the pay of hospital executives.  Here are reports from three states in the southeast, in alphabetical order. Florida The <a href="http://www.tampabay.com/news/business/economic-downturn-not-for-these-tampa-bay-nonprofit-hospital-chiefs/1069575">St Petersburg (FL) Times reported</a> on the total compensation of local hospital executives: <blockquote>While many workers in the Tampa Bay area have had their wages frozen or reduced in the past few years, life has been kinder to chief executives at nonprofit hospitals in the Tampa Bay area. A bright light in a dim economy, most local tax-exempt hospitals have continued to post surpluses, despite losses on investments and the growing number of uninsured. And the executives at the helms of these organizations have been duly rewarded by their community-based boards, according to the federal tax filings required of such organizations. In fact, average compensation at tax-exempt hospitals here is well above the national average. Members of the millionaire men's club include: • Isaac Mallah, chief executive of St. Joseph's Hospital in Tampa, who received total compensation of $2.2 million in 2008, the most recent year available. • Mallah's boss, Steve Mason, who heads BayCare Health System, toted up total compensation of more than $1.7 million. • Tampa General Hospital's chief executive, Ron Hytoff, also earned more than $1.7 million. • At All Children's Hospital in St. Petersburg, Gary Carnes' pay package was about $1.2 million. Across the street at Bayfront Medical Center, Sue Brody, the only female chief executive of a freestanding nonprofit hospital in the area, was paid $744,149. • Dr. William Dalton, president and chief executive of Tampa's H. Lee Moffitt Cancer Center and Research Institute, received just over $1 million in total compensation in 2008. But it could have been higher. In both 2008 and 2009, Moffitt's board eliminated bonuses for all managers because of tough economic conditions. Average compensation for chief executives at 14 nonprofit hospitals in the Tampa Bay area was about $876,000. Meanwhile, according to an IRS survey of more than 500 nonprofit hospitals last year, the national average was $490,000.</blockquote> How were these generous amounts of compensation justified? <blockquote>BayCare's Mason said he won't apologize for what he's paid to lead the seven-hospital system, which had more than $2 billion in revenue in 2008. 'I have significant responsibility over a lot of resources, providing a service that improves the health of the community,' said Mason, who joined BayCare in 2004. 'This is what it would cost our board to replace me.'</blockquote> In addition, <blockquote>Officials at area hospitals say their boards adhere 'meticulously' to IRS rules, hiring independent consultants every year to ensure their chief executives' salaries are comparable to pay at similarly sized nonprofit institutions. Mason said BayCare's board tries to ensure that its total compensation stays at about 75 percent of the maximum paid.</blockquote> North Carolina The <a href="http://charlotte.bizjournals.com/charlotte/stories/2010/01/11/daily30.html">Charlotte Business Journal noted</a>: <blockquote>Carolinas HealthCare paid Chief Executive Michael Tarwater $3.4 million in 2009, down from $3.5 million a year earlier. His 2009 compensation includes a base salary $950,697 and bonuses of $1.87 million. Paul Wiles, chief executive at Winston-Salem-based Novant, earned total compensation of a little more than $2 million in 2009, roughly the same as in 2008. His base salary last year was $900,000, and he was paid a bonus of $827,462. Novant estimates Wiles received $339,000 in other compensation, including benefits and deferred compensation. Carolinas HealthCare released compensation information for these other top executives: •Joseph Piemont, president and chief operating officer, $1,731,581. •Greg Gombar, chief financial officer and executive vice president, $1,526,254. •Paul Franz, executive vice president of the physician services group, $1,399,528. •Dennis Phillips, executive vice president of the Metro Group, $1,084,859. •David Dunlap, president and chief executive of Roper St. Francis Healthcare, $1,043,078. •Laurence Hinsdale, executive vice president, regional group, $1,041,586. •John Knox, executive vice president and chief administrative officer, $992,993. •Russell Guerin, executive vice president of business development and planning, $922,769. •Keith Smith, senior vice president and general counsel, $783,643. Presbyterian also released compensation information for its other top executives. Its figures include 2009 base salaries and 2008 bonuses, which were paid in 2009: •Greg Beier, president of acute-care services Novant Health, $1,615,322. •Carl Armato, president Novant core markets, $1,295,030. •Dean Swindle, president of ambulatory services and chief financial officer for Novant Health, $1,084,155. •Dr. Hayes Woollen, former president of Novant Medical Group, $1,009,168. •Jacque Gattis, chief administrative officer for Novant Health, $902,374. •Sallye Liner, president of Forsyth Medical Center and Winston-Salem market, $887,109. •Dr. Stephen Wallenhaupt, chief medical officer for Novant Health, $867,740. •Lawrence McGee, general counsel for Novant Health, $728,584. •Dr. A.J. Patefield, chief medical information officer Novant Health, $706,889.</blockquote> Again, how was the pay justified? <blockquote>'We need to stay on top of what’s going on in the market and stay competitive,' says James Hynes, chairman of Carolinas HealthCare’s board of commissioners and a member of its compensation committee. 'Our process delivers the number we think we ought to have,' Hynes says. 'We feel like we’ve done it correctly.'</blockquote> Texas Moving on to Texas, the <a href="http://www.dallasnews.com/sharedcontent/dws/news/localnews/stories/DN-bonuses_21met.ART.State.Edition2.4ba1b02.html">Dallas Morning News reported</a>: <blockquote>Top executives at Parkland Memorial Hospital collected about $1.7 million in bonuses at the end of last year, according to records released recently to The Dallas Morning News. The 2009 bonuses, approved in December by the hospital's board of managers, went to vice presidents, senior vice presidents and executive vice presidents at the charity hospital. The bonuses ranged from $36,054 for the vice president who heads the hospital's community clinics to $143,325 for Parkland's chief financial officer.</blockquote> And what was the justification for these bonuses? <blockquote>In previous years, Parkland's top three administrators were rewarded with bonuses for meeting certain goals. Last year, the pay plan was expanded to include the hospital's 'senior executive staff.' Dr. Lauren McDonald, chairwoman of Parkland's board of managers, objected Wednesday to referring to the payments as bonuses, a term that could imply nothing was done to earn the money. 'We kind of stay away from the word 'bonus,'' she said. 'It's really earned incentives. We have certain goals that we set forth as a board.' 'Working with a consultant, we made sure these were earned, instead of just given.' Dallas County Commissioner John Wiley Price said that he was aware of the new executive pay plan at Parkland and that he wholeheartedly approved. 'It's a step in the right direction,' he said. 'You pay to keep good talent, and what we're paying them is not unreasonable.' In particular, Price lauded the work of Anderson, who will earn $853,044 when his bonus is approved next week. His bonus will bring the hospital's total to about $2 million. 'The man has 29 years experience at Parkland,' Price said. 'He's put together the kind of executive team that has won Parkland an excellent bond rating. And it's debt-free, too.'</blockquote> On the other hand, a second <a href="http://www.dallasnews.com/sharedcontent/dws/news/localnews/stories/012710dnmetbonuses.4254b92.html">Dallas Morning News article </a>noted, <blockquote>The Parkland Memorial Hospital board of managers began its monthly meeting Tuesday by strongly endorsing the $1.7 million in 'incentive pay it handed out to 27 top executives at the end of December. 'There are a lot of negatives out there about this,' acknowledged Dr. Lauren McDonald, who chairs the board. Some employees who received only 2 percent to 3 percent in merit increases last year were unhappy to hear last week that their bosses had gotten 19 percent to 31 percent in extra pay. Dozens flooded online message boards with angry comments. A few called reporters to register their complaints. </blockquote> Summary So once again note that the top executives of health care organizations are not like you and me. Their total compensation generally ranges from generous to sufficiently lavish to make them instantly rich. Their pay almost never substantially decreases. If incentives are offered, they almost never fail to earn them. Furthermore, notice the way the executives, and the boards to whom they supposedly report justify these practices. It seems that the executives of every hospital are always above average. If pay is determined by comparisons to other institutions, it is never set at or below the average rate.  At every hospital, "our" executives are superior, but without any clear definition of how they might be superior to whom.  The processes by which compensation is made competitive are asserted to be accurate, without any objective confirmation of that accuracy provided (and note above that one leader seemed to justify the process because it produced the numbers he thought were right.)  Bonuses are awarded for reaching "goals," but the goals always seem easily within reach, and the bonuses offered executives are always a much larger proportion of base pay than the bonuses offered anyone else.  So, to repeat, the sorts of compensation reported in Florida, North Carolina, and Texas are a product of the current management culture that has been infused into nearly every health care organization in the US. That culture holds that managers are different from you and me. They are entitled to a special share of other people's money. Because of their innate and self-evident brilliance, they are entitled to become rich. This entitlement exists even when the economy, or the financial performance of the specific organization prevents other people from making any economic progress. This entitlement exists even if those other poeple actually do the work, and ultimately provide the money that sustains the organization. Although the executives of not-for-profit health care organizations generally make far less than executives of for-profit health care corporations, collectively, hired managers of even not-for-profit health care organizations have become richer and richer at a time when most Americans, including many health professionals, and most primary care physicians, have seen their incomes stagnate or fall. They are less and less restrainted by passive, if not crony boards, and more and more unaccountable. In a kind of multi-centric coup d'etat of the hired managers, they have become our new de facto aristocracy. Or as we wrote in our previous post, executive compensation in health care seems best <a href="http://hcrenewal.blogspot.com/2009/12/compensation-madness-insiders-hijacking.html">described as Prof Mintzberg</a> described compensation for finance CEOs, "All this compensation madness is not about markets or talents or incentives, but rather about insiders hijacking established institutions for their personal benefit." As it did in finance, compensation madness is likely to keep the health care bubble inflating until it bursts, with the expected adverse consequences. Meanwhile, I say again, if health care reformers really care about improving access and controlling costs, they will have to have the courage to confront the powerful and self-interested leaders who benefit so well from their previously mission-driven organizations. It is time to reverse the coup d'etat of the hired managers.

Hospital Executive Pay in the Land Where All Our CEOs Are Above Average

In the US, it seems to be the season for news reports on the pay of hospital executives. Here are reports from three states in the southeas...

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Virtual Medical Devices and Vendor Liabilities

My essay "<a href="http://histalk2.com/2010/02/01/readers-write-2110/">Virtual Medical Devices and Vendor Liabilities</a>" was published at the <a href="http://www.histalk.com/">HisTalk</a> website, a website that serves as a healthcare IT industry news/gossip/watchdog site. It addresses the hold-me-harmless, business IT-type claims made to Sen. Grassley by some healthcare IT vendors that they are "not liable when harm or loss results from the client’s use of the product in diagnosing and/or treating patients" (as indicated in Sen. Grassley's question #9 to hospitals <a href="http://grassley.senate.gov/news/Article.cfm?customel_dataPageID_1502=24867">here</a>). This is a somewhat absurdist claim, since these systems are not exactly sold to allow clinicians to play <a href="http://mario.nintendo.com/">Super Mario</a>: <div style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEz1GX0GyFudeawWvcGv1zhzkcB5bicXdUXdUjgspozMdFXt1iwiQ6-FxLpaodiZ2WX8XNM7gjFQ7f9YgZO_pXKhR0Eo4vbE51z48XEWRxyd3RRQ7cqlonBkp6LNPBCmKESx6mLZeNuX6n/s1600-h/supermario_emr.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5433685755107485218" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEz1GX0GyFudeawWvcGv1zhzkcB5bicXdUXdUjgspozMdFXt1iwiQ6-FxLpaodiZ2WX8XNM7gjFQ7f9YgZO_pXKhR0Eo4vbE51z48XEWRxyd3RRQ7cqlonBkp6LNPBCmKESx6mLZeNuX6n/s320/supermario_emr.jpg" style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 293px; height: 220px;" /></a>Play games with our EMR, but use it to diagnose and treat patients at your own risk! </div> I make the point in my essay that an EMR and other clinical IT systems are virtual medical devices, that is, medical devices that happen to reside on a computer, and that healthcare IT vendors are indeed practicing medicine by cybernetic proxy (e.g., in provision of alerts and reminders and clinical decision support). I also pointed out that a vendor claiming they are not liable when harm or loss results from the client’s use of the product in diagnosing and/or treating patients should put that disclaimer on every screen of their products. Ultimately, I opine that if a healthcare IT vendor claims to be a partner to clinicians and clinical medicine, they should be willing to accept the responsibilities that accompany such a position and their claims of omnipotent ecstasy about healthcare IT "transforming" or "revolutionizing" healthcare. See the essay at <a href="http://histalk2.com/2010/02/01/readers-write-2110/">this link</a>. -- SS

Virtual Medical Devices and Vendor Liabilities

My essay " Virtual Medical Devices and Vendor Liabilities " was published at the HisTalk website, a website that serves as a heal...

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Noticing the Elephant in the Room: Bigger Hospital Networks Charge More for the Same Service

We recently <a href="http://hcrenewal.blogspot.com/2010/01/price-is-what.html">discussed</a> a report on hospital prices here in Rhode Island, which showed that hospitals that are part of hospital systems were paid more for the same services than independent hospitals.  The price differences could not be explained by quality of care or severity of illness.  The results suggested that market power determines the price of hospital services, and that increasing concentration of power in hospital networks is likely to further increase costs, without improving quality of care.  The end of last week, a similar report out of the neighboring state of Massachusetts was announced.  As <a href="http://www.boston.com/news/local/massachusetts/articles/2010/01/29/attorney_general_says_clout_drives_up_health_costs/">reported by Liz Kowalczyk in the Boston Globe</a>, <blockquote>Massachusetts insurance companies pay some hospitals and doctors twice as much money as others for essentially the same patient care, according to a preliminary report by Attorney General Martha Coakley. It points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs. The yearlong investigation, set to be released today, found no evidence that the higher pay was a reward for better quality work or for treating sicker patients. In fact, eight of the 10 best-paid hospitals in one insurer’s network were community hospitals, which tend to have less complicated cases than teaching hospitals and do not bear the extra cost of training future physicians. Coakley’s staff found that payments were most closely tied to market leverage, with the largest hospitals and physician groups, those with brand-name recognition, and those that are geographically isolated able to demand the most money.</blockquote>While market power predicted pricing, quality of care and severity of illness did not. <blockquote>The report shows that a small group of about 10 hospitals statewide command significantly higher payments than the other 55, ranging from 10 to 100 percent more than their competitors for similar work. While academic medical centers are widely thought to be the most costly, the report noted that one major teaching hospital that treats some of the state’s sickest patients was paid less than dozens of others with healthier patients. The investigation also discovered that hospitals that treat large numbers of poor patients, who can be more expensive to care for, are as a group paid 10 percent to 25 percent less than average by commercial insurers.</blockquote> Finally, the report showed that increasing prices per unit of service, not increasing amounts of service, accounted for most of the rising costs of hospital care. <blockquote>Coakley’s investigators found that Massachusetts health care costs, which are growing by 7.5 percent annually, are mostly the result of rising prices, not patients getting more imaging tests, surgery, and other procedures. For one major insurer, provider price increases accounted for 80 percent of the total growth in medical expenses between 2006 and 2009.</blockquote> We have tried to encapsulate the concerns that motivated starting the <a href="http://hcrenewal.blogspot.com/">Health Care Renewal blog</a> as "concentration and abuse of power" in health care. Here is a stark of example of that. Lots of hospital insiders have tried to sell increasing concentration of power among hospitals as a way to decrease costs, improve quality, and improve access. The American experience going back to the 19th century, however, has been that market concentration increases costs regardless of quality or access. The two reports from Rhode Island and Massachusetts suggest that as hospitals combine in hospital systems, and these systems become more oligopolistic, costs, but not quality or access increase.  Of course, the insiders within the system are likely to keep selling the idea, because their pay doubtless goes up as the system gets bigger. As I have said many times, real health care reform will require reversing the trend towards concentrated power, maybe most directly by breaking up oligopolies such as large hospital systems, and changing health care organizations' leadership and governance to reduce the incentives to expand regardless of how expansion affects patient care.

Noticing the Elephant in the Room: Bigger Hospital Networks Charge More for the Same Service

We recently discussed a report on hospital prices here in Rhode Island, which showed that hospitals that are part of hospital systems were ...

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