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A University President, But No Longer a Goldman Sachs Director

A frequent topic on Health Care Renewal is how leaders of not-for-profit health care organizations now frequently value their "margin," that is, revenue generation more than mission.  (One good example <a href="http://hcrenewal.blogspot.com/2007/04/medical-schools-to-faculty-show-me.html">here</a> shows how medical school leaders value faculty most for how much money they bring in, rather than the quality of their teaching, research, or patient care.)  "Masters of the Universe" as Leaders of Academic Medicine As we have cast about for reasons behind this important and unfortunate transformation, we noticed that many of the members of the boards of trustees of some of the most prestigious universities that house medical schools, medical schools, and teaching hospitals seemed to be leaders in the finance industry. The importance of that finding became more relevant after the global financial collapse, aka "great recession," became evident.  Since then, we noted the influence of finance leaders on the leadership of <a href="http://hcrenewal.blogspot.com/2009/04/investment-bankers-strike-back.html">Dartmouth College</a>, <a href="http://hcrenewal.blogspot.com/2008/12/what-linked-parallel-declines-of.html">Harvard University</a>, <a href="http://hcrenewal.blogspot.com/2009/04/hedge-fund-u.html">Yeshiva University</a>, and the <a href="http://hcrenewal.blogspot.com/2009/10/board-of-trustees-or-social-club-for.html">Hospital for Special Surgery</a>. Although it seems that the complex relationships between various "masters of the universe" and academia, particularly academic medicine ought to have generated considerable discussion, they remained almost as <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a> as many of the other issues discussed on Health Care Renewal. Therefore, with some regret, I will take up the latest example of such relationships from my own alma mater, Brown University.  ((Full disclosure: I am an alumnus of the College at Brown, and of the Medical School. I am a former full-time Brown faculty member, and currently a voluntary Clinical Associate Professor in the  Alpert Medical School.)  (Also note that <a href="http://hcrenewal.blogspot.com/2009/04/pension-fund-scandals-payment-agents.html">here </a>we discussed some of the questions about the financial dealings of a prominent member of Brown's Board of Fellows, the inner circle of the Brown Corporation, the equivalent of its board of trustees, who was also the very wealthy leader of a prominent hedge fund.  We noted then that his connection to Brown was not noted in current media stories about the controversy.) A Goldman Sachs Director as University President Last week (9 February, 2010), the Brown Daily Herald published <a href="http://www.browndailyherald.com/simmons-won-t-be-buffeted-about-on-boards-1.2144610">an interview</a> with the President of Brown, Ruth Simmons, about her service on the board of directors of Goldman Sachs, one of the most prominent, profitable and controversial investment banks.  Some of the main points were: - President Simmons seemingly denied responsibility for any of the company's past actions that have inspired criticism: "There are lots of things in a complex institution that go on." So, "you're not in charge of everything that your friends do and every policy that organizations that you're affiliated with issue." - She also implied that she joined the board expressly and only to advocate for women and minorities in finance: "We had a big push to think about how we could improve the knowledge and ability of women to manage their financial affairs." Also, "at the same time, there was a good deal of interest in the fact that women have not done so well in the financial sector and on Wall Street." The goal was "to make certain fields more accessible to women and minorities through her service on the boards of Goldman, Texas Instruments and Pfizer." "She called her work with women and minorities on boards meaningful to her in 'a way that a lot of people won't understand.'" She stated "the seniority she now enjoys on Goldman's board allows her to advocate for programs to help women and minorities." - She implied that she served on the board to learn something about economics, "her service on Goldman's board gave her the economic savvy to take certain risks...." So in summary, in her role as a member of the board of Goldman Sachs, one of the most important financial companies in the world, which had major involvement in the events that lead to the global economic collapse, or "great recession," President Simmons claimed that her major role was to advocate particular political positions on the board, implied that she did not know much about the company's core business when she joined the board, and took no responsibilities for any actions of the company which might have inspired criticism. Presdient Simmons' responses might have made sense were she just a member of an advisory board on diversity.   However, she <strike>is</strike> was a member of the board of directors. In this interview, she seemed to ignore her fiduciary duties as a board member to show "unyielding loyalty"  to the stockholders of the company and their interests  [Per Monks RAG, Minow N. <a href="http://www.amazon.com/Corporate-Governance-Robert-G-Monks/dp/1405116986">Corporate Governance</a>, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.]. She in particular seemed to disavow any responsibility for overseeing the actions of hired Goldman Sachs management.  It is a testament to the power of the anechoic effect that an interview showing a member of the board of directors of one of the most important and controversial finance firms involved in the global financial collapse seemed to dodge responsibility for the firm's overall direction and financial practices seemed to inspire only one piece of commentary beyond Brown.  Felix Salmon <a href="http://blogs.reuters.com/felix-salmon/2010/02/10/revamping-goldmans-board/">opined</a> <blockquote>In all the bellyaching about the governance of the biggest banks, and the fact that their boards were spectacularly unqualified to provide any kind of oversight of what they were doing, Goldman Sachs has gone largely unmentioned. But what’s true of Merrill Lynch and Bank of America is true of Goldman too: its executives need some kind of adult supervision, seeing as how they work for their shareholders, rather than just for themselves.</blockquote> He then noted, <blockquote>this interview with one Goldman board member, Ruth Simmons, hardly instills in me the confidence that she can or will understand what Goldman is doing, stop them from acting in a reckless manner, or keep a close eye on compensation as she wears her hat as a member of the compensation committee....</blockquote>A Rapid Resignation However, what happened next does suggest maybe the times they are "a-changing." On 13 February, 2010, <a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aNg3joWQ08zs&pos=5">per Business Week</a> <blockquote>Goldman Sachs Group Inc., the most profitable securities firm in Wall Street history, said Ruth Simmons will leave its board after 10 years because of 'increasing time requirements' in her role as Brown University president. </blockquote>This despite the small fortune that President Simmons had made learning to develop "economic savvy," <blockquote>According to a Feb. 5 filing with the U.S. Securities and Exchange Commission, Simmons owned 27,386 restricted stock units in Goldman Sachs, worth $4.2 million at yesterday’s closing share price of $153.93. According to the filing, the units convert to shares on the first trading day in the third quarter of the year following her retirement from the board. Simmons also has 10,000 options that she can exercise on the date she ceases to be a director, according to the filing. </blockquote> Felix Salmon then <a href="http://blogs.reuters.com/felix-salmon/2010/02/13/simmons-leaves-goldmans-board/">commented</a>, <blockquote>I said after Tuesday’s interview with Simmons was published that she seemed to think about her membership on Goldman’s board much more in terms of what it could do for her and her pet causes than in terms of being a shareholder representative tasked with overseeing senior management, and I called for a revamp of the board. Friday’s news is exactly the step in that direction that I was looking for: maybe Simmons took my comments to heart!</blockquote>Summary So in the end, the complex relationships among academic, and academic medical leaders and the finance industry are at least less anechoic. The issue is likely not over at Brown. While the initial Brown Daily Herald interview focused on whether President Simmons' position on the Goldman Sachs board might have lead to a direct conflict of interest, he did not ask whether her position in the leadership of Goldman Sachs had any relevance to the prominence of financial leaders on the Brown Corporation.  In fact, the same day that the Brown Daily Herald published the interview, it published <a href="http://www.browndailyherald.com/trustee-may-face-lawsuit-from-ex-wife-1.2144625">an article</a> on the legal travails of a Brown Corporation who has become one of the richest hedge fund leaders in the world.  The 2008-09 Brown Corporation (webpage no longer works <a href="http://brown.edu/Administration/News_Bureau/Info/Corporation.html">here</a>, but cached <a href="http://74.125.47.132/custom?q=cache:ZAu0jiCokecJ:brown.edu/Administration/News_Bureau/Info/Corporation.html+Brown+Corporation&cd=5&hl=en&ct=clnk&gl=us&client=google-coop-np">here</a>) included three other current or retired Goldman Sachs leaders, a <a href="http://www.brown.edu/Administration/News_Bureau/2004-05/04-022.html">former partner</a>, <a href="http://www.brown.edu/Administration/News_Bureau/2004-05/04-146.html">head of merchant banking</a>, and former leader <a href="http://www.brown.edu/Administration/News_Bureau/2006-07/06-166.html">with less specified responsibilties</a>.  It also included numerous other leaders of various other finance companies.  In the aftermath of the global economic collapse, and in an ongoing health care crisis, it seems reasonable to hypothesize that some of the problems of academia, and particularly the problems of medical academia, may have been at least enabled by leadership more used to working in an increasingly amoral marketplace than to upholding the academic mission.  I hope that Brown's latest travails will inspire more interest in who now leads academia, especially medical academia, how they got there, and what they have wrought.  Academic medical institutions and other not-for-profit health care organizations need leaders who value their missions more than the money they may bring in.

A University President, But No Longer a Goldman Sachs Director

A frequent topic on Health Care Renewal is how leaders of not-for-profit health care organizations now frequently value their "margin,...

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The Yin and Yang of Electronic Health Records

Lest we be led into believing that healthcare IT is a tried and true, safe, proven technology:<a href="https://exchangeweb.drexel.edu/owa/redir.aspx?C=b748bf66abed4f66accf9bada595b371&URL=http%3a%2f%2fwww.ihealthbeat.org%2fdata-points%2f2010%2fhas-your-organization-had-a-patient-safety-issue-directly-resulting-from-an-electronic-system.aspx" target="_blank"> </a> <blockquote><p style="margin: 1.45em 0.833em 0.7em; padding: 0px; border-width: 0px; outline-width: 0px; font-weight: bold; font-style: inherit; vertical-align: baseline; color: rgb(0, 0, 0); line-height: 1.235em;font-size:1em;">Friday, February 05, 2010 <p style="margin: 1.45em 0.833em 0.7em; padding: 0px; border-width: 0px; outline-width: 0px; font-weight: bold; font-style: inherit; vertical-align: baseline; color: rgb(0, 0, 0); line-height: 1.235em;font-size:1em;">iHealthBeat.org <p style="margin: 1.45em 0.833em 0.7em; padding: 0px; border-width: 0px; outline-width: 0px; font-weight: bold; font-style: inherit; font-size: 1em; vertical-align: baseline; color: rgb(0, 0, 0); line-height: 1.235em;"><a href="http://www.ihealthbeat.org/data-points/2010/has-your-organization-had-a-patient-safety-issue-directly-resulting-from-an-electronic-system.aspx">Has Your Organization Had a Patient Safety Issue Directly Resulting From an Electronic System?</a> <div style="margin: 0.5em 1em; padding: 0px 0px 2em; border-width: 0px; outline-width: 0px; font-weight: inherit; font-style: inherit; vertical-align: baseline; line-height: 1.235em;font-size:1.084em;"> Thirty-two percent of health IT professionals surveyed said their health care organization has had a patient safety or health care quality issue that could be classified as being a direct result of having an electronic system, according to a recent <a href="https://exchangeweb.drexel.edu/owa/redir.aspx?C=b748bf66abed4f66accf9bada595b371&URL=http%3a%2f%2fwww.himss.org%2fcontent%2ffiles%2fvantagepoint%2fvantagepoint_201002.asp" style="margin: 0px; padding: 0px; border-width: 0px; outline-width: 0px; font-weight: inherit; font-style: inherit; font-size: 13px; vertical-align: baseline; color: rgb(62, 82, 146); text-decoration: none;" target="_blank">Healthcare Information and Management Systems Society survey</a>. Meanwhile, 10% of respondents said they have had clients report patient safety or health care quality issues that were a direct result of having an electronic system, according to the survey. The survey also found that 29% of respondents said their electronic health record implementation has exceeded or vastly exceeded their expectations, while 22% of respondents said their EHR implementation has not met expectations. Results are based on an online survey conducted in January of 217 health IT professionals. Source: HIMSS, "Value of Electronic Health Records."</div></blockquote>It might perhaps be prudent to heed this three-decade-old Texan wisdom on the true nature of computers (<a href="http://www.radioshackcatalogs.com/catalogs_extra/1981_rsc-05/">link</a>, see page 2): What is a Computer?" <blockquote>... A computer is an extension of the human brain. It is to the mind what the lever is to the arm - a machine capable of multiplying effectiveness. It can free you from tedious, repetitive work which does not require judgment. IT can provide facts and figures with lightning speed, giving you more time to exercise your judgment thoughtfully. </blockquote> The key words are that IT can free a person from tedium which "does not require judgment." That has not changed, and in medicine it is likely to not change before we retire. There is an existential problem related to what IT can do, and what it cannot do in a cognitive, judgment-based field such as medicine, as opposed to straight information retrieval or other "tabulating machine"-based uses of IT. (As I wrote previously, medicine's problems are not due to a reductionist "<a href="http://hcrenewal.blogspot.com/2010/01/does-ceo-of-google-use-google.html">platform database</a><a href="http://hcrenewal.blogspot.com/2010/01/does-ceo-of-google-use-google.html"> deficiency</a>.") Health IT designed and oversold as if it can do more than freeing clinicians from tedium so they may exercise better clinical judgment (based on hard-earned experience), and that in fact often makes their work <a href="http://www.tinyurl.com/hostileuserexper">more tedious than it already is</a>, will always be a double edged sword. -- SS

The Yin and Yang of Electronic Health Records

Lest we be led into believing that healthcare IT is a tried and true, safe, proven technology: Friday, February 05, 2010 iHealthBeat.org H...

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Merck Settles Another Vioxx Case

All the shenanigans that went on in the course of Merck's marketing of the now withdrawn Cox-2 inhibitor non-steroidal anti-inflammatory drug Vioxx have provided grist for the <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a> mill since 2005.  For example, see these posts: - <a href="http://hcrenewal.blogspot.com/2005/04/more-evidence-of-ghostwriting.html">here</a> about ghost-writing of a Vioxx research publication; - <a href="http://hcrenewal.blogspot.com/2005/06/allegations-that-merck-threatened.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2005/12/more-allegations-that-merck-executives.html">here</a> about allegations that Merck executives tried to intimidate Vioxx critics; - <a href="http://hcrenewal.blogspot.com/2007/03/drug-crazy.html">here </a>about how advocates of an extreme laissez faire approach to regulation of health care corporations used illogical arguments about the Vioxx case; - <a href="http://hcrenewal.blogspot.com/2008/08/article-in-annals-of-internal-medicine.html">here</a> about how an apparently major clinical trial of Vioxx turned out to be a "seeding trial," that is, a study really meant to recruit supposed physician-researchers as prescribers; and - <a href="http://hcrenewal.blogspot.com/2010/01/physician-pleads-guilty-to-fraud-for.html">here</a> about how one once prominent Vioxx researcher pleaded guilty to fraud in connection with his research on other drugs.  Thus, the Vioxx case provides a good lesson about some of the tactics used to deceptively and unethically promote health care products (pharmaceuticals in this case). Merck just announced just the latest settlement of Vioxx related legal actions, as <a href="http://www.businessweek.com/news/2010-02-10/merck-changes-safety-procedures-pays-in-vioxx-suits-update1-.html">reported by Business Week</a>: <blockquote>Merck & Co. agreed to settle shareholder lawsuits over the withdrawn Vioxx painkiller by strengthening its drug-safety procedures, appointing a new chief medical officer and paying $12.2 million in legal fees. Merck would appoint one committee to address risks that require immediate action and another to monitor the safety of drugs, the company said in a regulatory filing. Merck would also amend its code of conduct to promote scientific and academic integrity as well 'honest communication' with doctors. 'In all research endeavors that are sponsored by Merck, we will refrain from attempting to influence inappropriately the results and conclusions of such research,' according to the amended code. 'We strive for all communications with the medical community to be accurate, truthful and consistent with labeling.'</blockquote> Also, <blockquote>The company will be required to make corporate governance changes and “supplement existing policies and procedures,” ... [a Merck spokesperson] said.</blockquote><blockquote>Merck would submit results of clinical trials to a public registry, with its compliance overseen by an independent third party. The chief medical officer will have an 'executive voice' on product safety issues independent of Merck Research Laboratories. </blockquote>Note that this settlement is only of one type of lawsuit, as described in <a href="http://online.wsj.com/article/SB10001424052748704140104575057231552987908.html">a Wall Street Journal article</a>, <blockquote>The pact, which is pending final court approval, would resolve state and federal shareholder 'derivative' complaints (which are brought by shareholders on behalf of a company) alleging that current and former Merck officers and directors breached their fiduciary duties in handling Vioxx. </blockquote>Merck had already settled thousands of lawsuits, <blockquote>Since the Vioxx controversy erupted, about 27,000 personal-injury lawsuits have been filed, the company says. Merck has been challenging all of the cases and settled many of them. Most notably, it agreed to a pay $4.85 billion to settle personal-injury claims of more than 40,000 people. In another settlement, the company will pay $80 million to resolve 190 claims filed by drug-benefit plans seeking to recover costs of paying for Vioxx use.</blockquote>Merck has lots of other legal actions to go through, <blockquote>The Vioxx litigation remains far from over. The U.S. Supreme Court is weighing a separate shareholder case, seeking billions of dollars in damages from the company. Merck disclosed last year the U.S. Attorney's office in Boston was conducting a grand-jury investigation of Merck's handling of Vioxx. The claims of some 310 plaintiff groups are outstanding in courts in the U.S., according to the securities filing. There are also cases overseas, including Australia and Turkey.</blockquote>So the parade of legal actions and settlements thereof continues.  We believe that the scope of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">this parade</a> provides some sort of index of bad behavior by the health care organizations needing to make such settlements.  Most of these legal results are reported on in the business media, and rarely appear in any medical, health care research, or health policy journals.  I submit that were health care professionals, health care researchers, and health policy makers more systematically aware of these cases, they might realize that unethical and sometimes illegal behavior, often generated by bad leadership unrestrained by poor organizational governance, is a major cause of the current, seemingly intractable health care crisis. One notable attribute of the current Vioxx settlement is that it does mandate some changes in Merck's governance and leadership meant to prevent future cases similar to this one.  These include developing leadership structures and changing the company's code of conduct to emphasize the need for "truthful" communication, and the need to refrain from "inappropriately" influencing research.  On <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a> we have discussed numerous examples of deceptive practices by health care organizations, often affecting marketing, and of <a href="http://hcrenewal.blogspot.com/search/label/manipulating%20clinical%20research">manipulation</a> and <a href="http://hcrenewal.blogspot.com/search/label/suppression%20of%20medical%20research">suppression</a> of research.  It is a small step forward for one company to commit to honest communications and to not manipulate research.  A better code of conduct may at least be a start towards an <a href="http://hcrenewal.blogspot.com/2009/10/organisational-ethics-policies-primer.html">organizational ethics policy</a>, which in turn may have the potential to actually improve behavior.  On the other hand, typical settlements that involve only monetary damages paid by the organization 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 suffers 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, at best deterred only slightly by written policies that condemn them. 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

Merck Settles Another Vioxx Case

All the shenanigans that went on in the course of Merck's marketing of the now withdrawn Cox-2 inhibitor non-steroidal anti-inflammatory...

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Green Ketchup for Novartis?

We recently <a href="http://hcrenewal.blogspot.com/2010/01/drowning-our-sorrows-in-ketchup.html">commented</a> on the challenges facing the large, Swiss based multinational pharmaceutical company Novartis.  <a href="http://www.businessweek.com/magazine/content/10_07/b4166058305717.htm">From Business Week</a> came an interview with the new CEO of Novartis, in which he revealed why he thinks he is especially qualified for the job: <blockquote>Joe Jimenez says that more than 20 years selling Clorox (CLX) bleach and Heinz ketchup taught him to make decisions quickly. Now, as CEO of Novartis (NVS), Europe's second-largest drugmaker, he'll try to prove that speed can also make a difference in the pharmaceutical business. Jimenez, an American with degrees from Stanford and the University of California at Berkeley, believes his consumer-products background will help. He started his career at Clorox, the world's largest maker of bleach, ran two divisions of ConAgra Foods (CAG), and oversaw H.J. Heinz' (HNZ) European operations. With consumer packaged goods, 'Decisions have to be made quickly because the market moves quickly,' he says. But pharmaceutical businesses have long development lead times, which 'tends to slow decision-making in areas where it doesn't need to.' Jimenez oversaw the introduction of kid-friendly green ketchup when he was Heinz' North America chief executive,....</blockquote>Further explanation of why supervising the selling of cleaning or food products would be good experience for the chief executive of a pharmaceutical company, which faces technical, regulatory, and clinical issues very different from the challenges of selling bleach or ketchup, was not forthcoming. The reason for citing Jiminez's responsibility for green ketchup was more obscure.  According to the authoritative medical journal, <a href="http://www.womansday.com/Articles/Food/The-Biggest-Food-Product-Duds-of-All-Time.html">Woman's Day magazine</a>, Heinz's green ketchup was one of the "7 Biggest Food Product Duds," in the US, and was discontinued in 2006. As we have <a href="http://hcrenewal.blogspot.com/2009/12/on-automobile-and-health-care-companies.html">discussed before</a>, the current culture of US and global business includes the belief that someone trained in finance or marketing is the most suitable leader of every type of organization.  Such leadership has lead the US biggest automobile manufacturer into bankruptcy.  We have discussed numerous examples of leaders of health care organizations with no health background or experience who seem to be most expert at making sure their compensation is hugely larger than that of most of their employees. We hope Novartis does not end up trying to sell the pharmaceutical equivalent of green ketchup.  I say again, to really reform health care, we need to have leaders of health care organizations who actually understand health care and share its values.

Green Ketchup for Novartis?

We recently commented on the challenges facing the large, Swiss based multinational pharmaceutical company Novartis. From Business Week c...

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Everything is Up to Date in Kansas City, Except the Health Care University CEO's Knowledge of Her Own Budget

They say everything is up to date in Kansas City, so maybe it should not be a surprise that it is the source of a new and colorful tale of how leaders of health care organizations are different from you and me.  The Kansas City Star <a href="http://www.kansascity.com/105/story/1731811.html">reported</a> about the professional life of the recently fired CEO of Kansas City University of Medicine and Biosciences: Hiring the CEO <blockquote>There’s an often-told story about how Karen Pletz, the fired president of the Kansas City University of Medicine and Biosciences, got her job in the first place. On a flight from Phoenix to Kansas City in 1995, a stranger sat next to her: Jack Weaver, then chairman of the university’s board of trustees. Pletz, with a law degree and a career in banking, so impressed Weaver that he proposed she join the board. When the trustees met her, they asked her to apply for the president’s job.</blockquote> The CEO's Compensation <blockquote>Big paydays: Pletz’s compensation skyrocketed from $261,000 in fiscal 1999 to nearly $1.2 million — about $250,000 more than the president of Johns Hopkins University made.</blockquote>Also, <blockquote>Pletz’s million-dollar compensation package put her among an elite group of university presidents. A review of the latest available tax records — for the fiscal year ending June 30, 2008 — shows that the leaders of other osteopathic medical schools in the region were being compensated far more modestly. While Pletz was making $1.2 million, the CEO of the larger Des Moines University received $347,000. A.T. Still University of Health Sciences in Kirksville, Mo., where osteopathy got its start, changed CEOs nine months into the year. Both were paid about $50,000 a month; their combined compensation was $609,000. The last time the Chronicle of Higher Education included free-standing medical schools in its survey of compensation of private college and university presidents, in 2006, Pletz was one of only seven making seven figures.</blockquote>The CEO's Spending Decisions She spent disproportionately on administration versus education: <blockquote>Spending on the university’s primary mission — educating medical students — didn’t keep pace with the school’s rapidly growing administrative costs. From fiscal 1999 to 2008, the amount spent on educating students and other program services rose 59 percent. At the same time, administration expenses jumped 384 percent.</blockquote>Other executives were paid well: <blockquote>For Douglas Dalzell, executive vice president for institutional development, the compensation was $437,000 in fiscal 2008, more than double his pay in 1999. For Richard Hoffine, chief financial officer, it was $616,000, more than triple. Dalzell’s compensation frequently rose in five-figure increments. Hoffine’s pay increased by as much as $127,000 in a single year. The board fired Dalzell on Dec. 31, and Hoffine resigned over the New Year’s weekend.</blockquote> She spent copiously on entertainment and items less well defined: <blockquote>Along with the generous compensation paid to Pletz and her top lieutenants, the university was spending large sums on special events and other activities. Shortly before a retreat for university managers in 1998, the university spent $15,000 to have 26 members of the Kansas City Symphony play for faculty and department heads at the Folly Theater. The object was to demonstrate with music how teamwork and good leadership produce the best work. Records show that expenses for graduation activities jumped 47 percent in just three years, from $199,000 in 2005 to $294,000 in 2008. Entertainment costs averaged $84,000 a year. In fiscal 2002, the university spent more than $197,000 for various services at the Fairmont hotel — now the InterContinental — on the Plaza. Even 'miscellaneous expenses' exploded, according to the university’s tax forms: They were about $81,000 in fiscal 2001 and $1.4 million in fiscal 2005, the last year they appear on tax reports. The university also was spending as much as $739,000 a year on expenses for 'healthcare leadership,' tax records show. Pletz defended the spending on graduation and other ceremonies because of their importance to medical students and their families. Graduation is 'a whole weekend of events,' Pletz said. Many homecoming activities were held at the Fairmont, she said. As to what the healthcare leadership spending entailed, Pletz said she didn’t know.</blockquote> Executives hired their relatives: <blockquote>Family members and friends, including Pletz’s daughter and a top associate’s daughter-in-law, were added to the payroll in administrative positions. The university’s nepotism policy allowed a lot of leeway.</blockquote>And then there was the mysterious Health Policy Institute (as <a href="http://www.kansascity.com/105/story/1731812.html">reported</a> separately by the Kansas City Star): <blockquote>After HCA, Inc., acquired the large, nonprofit hospital group Health Midwest in 2003, opportunity came knocking for Health Midwest executive Barry Seward: An appointment as president of the Kansas City University of Medicine and Biosciences’ new Health Policy Institute. It was an unpaid position, but Seward didn’t have to work for free. He received consulting fees of as much as $177,300 a year from the university, tax records show. Seward’s son, Michael, became the institute’s unpaid vice president. The younger Seward also has a paying job as the university’s director of grant development. Along with his consulting income, Barry Seward has had the fringe benefit of extensive travel for the institute. The Health Policy Institute’s budget was $62,909 in 2008, tax records show. A few thousand dollars of that went to office overhead. The rest was spent on travel and meals.</blockquote> Ms Pletz justified the Health Policy Institute thus: <blockquote>Pletz said the institute’s position papers are widely distributed.  Eight are posted on the institute’s Web site</blockquote>However, <blockquote>they average about 240 words. Stem-cell research took five paragraphs; pandemic flu got three.</blockquote>Neither the Health Policy Institute web-site nor a Google search revealed any experience or expertise in health policy on the part of its President.  I would note also that Institute's <a href="http://www.kcumb.edu/hpi/policypositions.asp">position paper</a> on "healthcare workforce" failed to note the shortage of primary care physicians, and the <a href="http://www.kcumb.edu/hpi/policypositions.asp">paper</a> on integrative medicine advocated for more access to, more insurance coverage for, and more medical school training in complementary and alternative medicine without acknowledging the lack of evidence supporting many "CAM" treatments. The Role, Such As It Was, of the University Board <blockquote>Current board chairman Danny Weaver, who also is the university’s acting president, won’t discuss why she was fired. Pletz, who says she’s proud of her work for the school, won’t get into specifics. Danny Weaver, son of Jack Weaver, will say only that more than one person in September brought 'extremely serious' issues to the board’s attention that led to Pletz’s termination. University administrators kept the governing board in the dark for months at a time about important issues, Weaver said. But it was the board Weaver has led since 2004 that approved Pletz’s salary and incentive package. The board, which met just twice a year, approved the university’s budget, but it did not monitor the way money was actually spent. And it did not routinely review key filings the university made to the Internal Revenue Service.</blockquote> How the board justified Peltz's compensation: <blockquote>Questions about her salary and incentives, Pletz said, should go to the university’s trustees. 'Compensation was a board decision,' she said. 'It was the board’s responsibility.' She said she thought the board was interested in retaining top managers. 'It was a very team-oriented approach,' Pletz said. 'If the performance was there, the compensation was there.'</blockquote>In addition, <blockquote>Weaver defended the compensation the board granted Pletz. 'Based on her production and what she brought to the university, her compensation was within reason,' he said.</blockquote> However, apparently none of her production had to do with familiarity with her own university's budget: <blockquote>The spending figures are all line items in tax documents called 990 forms that nonprofit corporations, such as the university, must file each year with the IRS. The forms are available to the public. Pletz could not say what the line items on the 990 forms represented. 'Any questions about the 990, I would not be able to answer for you,' she said. 'You’re going back a number of years, and I really don’t have direct knowledge about those line items and what they would have been comprised of in any given year.'</blockquote> Of course, the board might not have caught that problem, since they seemed equally unfamiliar with the budget: <blockquote>Weaver, who has been on the board since 2001, said he has never reviewed the documents. 'I never see the 990s as the chairman. … The board never saw the 990s,' he said. 'That’s the business of the president and the CFO.' Weaver said he had no idea how the university could run up $1.4 million in miscellaneous expenses. He 'couldn’t even gather a guess' on the entertainment costs. And Weaver said he could only speculate on what 'healthcare leadership' expenses were: Perhaps they were expenses Pletz and her vice presidents incurred in their work with community organizations.</blockquote>Summary So here we have a particularly colorful example of how the leaders of health care organizations are different from you and me.  The CEO of one osteopathic health care university got more than one million a year despite her <a href="http://people.forbes.com/profile/karen-l-pletz/46868">lack of any experience or expertise in health care</a>, and her unawareness of her institution's budget, which apparently included lavish spending on administration and other expenses unrelated to the educational mission.  She nominally reported to a board of trustees which seemed completely clueless about her activities, but happy to pay her for "production" of what they did not know.  So, as I <a href="http://hcrenewal.blogspot.com/2010/02/hospital-executive-pay-in-land-where.html">wrote</a> last week about out-size compensation given for no clear reasons to CEOs and other top executives of not-for-profit hospitals in three US states... 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 described compensation for finance CEOs</a>, "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. A final note - we have heard a lot from health policy "experts" in this time of interest in health care reform, and millions of words about health policy have been dispensed by such "experts" during the continuous health care "crisis" of the last 30 years.  This case demonstrates how little one needs to know about health policy to run a university "Health Policy Institute" to churn out health policy position papers, especially when the university CEO and board of trustees are equally unkowledgeable. Hat tip to Prof Margaret Soltan <a href="http://www.margaretsoltan.com/?p=21133">on the University Diaries blog</a>.

Everything is Up to Date in Kansas City, Except the Health Care University CEO's Knowledge of Her Own Budget

They say everything is up to date in Kansas City, so maybe it should not be a surprise that it is the source of a new and colorful tale of h...

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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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