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New Investigations of Boston Scientific, but New CEO Made $33.5 Million for Half a Year's Work

It appears that device-maker Boston Scientific has a new set of troubles.  The Boston Globe just <a href="http://www.boston.com/business/healthcare/articles/2010/03/31/recalls_put_boston_scientific_in_regulators_sights/">reported</a>: <blockquote>Stepped-up government scrutiny of Boston Scientific Corp. stems from heightened concern over medical safety and disappointment that the company made new missteps after resolving previous problems with the Food and Drug Administration, analysts said yesterday. The Natick medical-device maker, which has been working to settle patent suits and federal investigations dating back years, recently was notified of fresh investigations begun by the Department of Justice and the Securities Exchange Commission into problems that forced it to recall implantable heart defibrillators this month. Boston Scientific said March 15 that it had halted shipments and recalled unsold units of seven brands of cardioverter and cardiac resynchronization therapy defibrillators. The products represented roughly 15 percent of the company’s $8.2 billion in 2009 sales. On March 15, the company belatedly filed a notice informing the FDA of the production changes. Larry Biegelsen, a senior analyst for Wells Fargo Securities, estimated Boston Scientific could lose $5 million in revenue every business day until defibrillator sales resume. </blockquote> The Boston Globe article noted that: <blockquote>Boston Scientific’s latest woes are reminiscent of an earlier round of friction with the FDA when defibrillator problems came to light after the company bought Guidant. The agency issued a 'warning letter' in 2006, citing multiple manufacturing violations and limiting Boston Scientific’s ability to get new devices approved until it fixed the problems. The restrictions were gradually loosened over the next two years, as the company strengthened its compliance, and the letter was lifted in 2008.</blockquote> That summary actually soft-pedaled Boston Scientific's previous woes. We started posting about the company's travails in 2005, starting with allegations that Guidant, which is now a Boston Scientific subsidiary, hid information about defects in the implantable cardiac defibrillators (ICDs) the company manufactured. As we noted in early 2005 <a href="http://hcrenewal.blogspot.com/2005/05/guideants-short-circuit.html">here</a>, Guidant executives allegedly knew that ICDs made from 2000-2002 were at risk for short-circuiting and failing, thus making them unable to deliver potentially life saving electrical shocks meant to prevent cardiac arrests, but the company only revealed the problem in 2005. By failing to notify physicians and the public, Guidant executives let expensive and profitable, but potentially useless devices to continue to be implanted, potentially increasing the risk of sudden death for the patients who received them. Then here we <a href="http://hcrenewal.blogspot.com/2005/06/guidants-short-circuit-reloaded.html">noted</a> reports that Guidant continued to ship failure-prone devices even after it had designed and started to manufacture new ICDs that were supposed to be less likely to fail. By June, 2005 we <a href="http://hcrenewal.blogspot.com/2005/06/more-short-circuits-for-guidant.html">posted</a> that Guidant had recalled thousands of ICDs, including models that were previously not identified as likely to fail. Later that year, the case <a href="http://hcrenewal.blogspot.com/2005/07/new-england-journal-of-medicine-on.html">rated</a> an article by Robert Steinbrook in the New England Journal of Medicine. Towards the end of 2005, we <a href="http://hcrenewal.blogspot.com/2005/11/eliot-spitzer-sues-guidant-for-fraud.html">noted</a> that Eliot Spitzer had sued Guidant for fraud.  At the end of the year, more information <a href="http://hcrenewal.blogspot.com/2005/12/for-guidant-these-people-are-just.html">appeared</a>, suggesting that Guidant knew the ICDs were flawed, but continued to sell them. <a href="http://hcrenewal.blogspot.com/2006/03/more-about-guidant-it-is-possible-that.html">Still more</a> appeared early in 2006. Then the business media became interested in the bidding war between Johnson and Johnson and Boston Scientific for Guidant, provoking a bit <a href="http://hcrenewal.blogspot.com/2006/01/new-problems-for-guidant-and-boston.html">more interest</a> in the tale of the suppression of data about the flawed ICDs. Then all was quiet until 2009, when Guidant, now a Boston Scientific subsidiary, plead guilty to two criminal misdemeanor charges that it failed to properly notify the FDA about problems with its ICDs (see post <a href="http://hcrenewal.blogspot.com/2009/11/boston-scientific-to-plead-guilty-of.html">here</a>). Later, the Guidant subsidiary of Boston Scientific settled charges that it gave doctors kickbacks as part of a "seeding study" to use its devices. At that time, it came to light that Boston Scientific had made another settlement, in 2007, of civil lawsuits alleging that the company hid problems with its products (see post <a href="http://hcrenewal.blogspot.com/2009/12/boston-scientific-again-settles-this.html">here</a>). However, just as the latest questions about Boston Scientific were revealed, the Boston Globe also <a href="http://www.boston.com/business/healthcare/articles/2010/03/30/new_boss_reaps_huge_reward/">reported</a> about how the company compensated its new CEO, who started in the middle of 2009: <blockquote>Boston Scientific Inc. gave its new top executive an unforgettable welcome gift. The Natick medical device maker said it paid chief executive J. Raymond Elliott, who replaced former CEO James Tobin last summer, $33.5 million in total compensation last year, making him one of region’s highest-paid corporate leaders. Elliott’s pay package includes a salary of more than $598,000 for six months, a $1.5 million signing bonus, nearly $608,000 in other incentive awards, and $29.4 million in stock awards and options that will vest over the next few years. He also received other benefits, including a $12,500 executive allowance, nearly $198,000 for personal use of the corporate jet, and more than $1 million in relocation expenses. Tobin, who retired last year after running the medical device company for about a decade, earned $13.7 million last year, roughly six times his pay level in 2007 and 2008.</blockquote> And by the way, the compensation paid both these men did not exactly correlate with the company's financial, as opposed to ethical performance: <blockquote>In February, the company agreed to pay $1.7 billion to settle patent infringement charges from rival Johnson & Johnson. And for years, the company has struggled with anemic sales growth. Last year, the company reported it lost $1 billion, its fourth straight year in the red. Sales rose 2 percent to $8.2 billion. The company’s stock rose 16 percent in 2009, reflecting the broader stock market recovery. But shares have slipped 20 percent this year.</blockquote> You just cannot make this stuff up. How could the company possible justify paying over $30 million for half a year's work by its CEO at a time when the company is facing multiple investigations, has had to settle civil cases and criminal charges, has had to stop production of one of its most important products due to its failure to meet regulatory requirments, and has lost money for four years?  This illustrates how leaders of big health care organizations are able to make themselves extremely rich at the expense of share-holders, employees, patients, and ultimately society, completely out of proportion to any claims they can make about their or their companies' performance.  This indicates the collective lack of accountability of many health care leaders, and the perverse incentives that now drive health care.  But is it any wonder that health care costs continue to rise uncontrollably? Once again, I submit that true health care reform needs to make health care leaders accountable, and subject to clear ethical standards, and to eliminate the sorts of perverse incentives that are transforming them (and other corporate CEOs) into a new aristocracy.  Without such measures, we in the US may have near universal health care insurance, but soon no one will be able to afford access to any sort of quality health care.

New Investigations of Boston Scientific, but New CEO Made $33.5 Million for Half a Year's Work

It appears that device-maker Boston Scientific has a new set of troubles. The Boston Globe just reported : Stepped-up government scrutiny o...

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Meetings and Conferences of Interest

There are a number of upcoming conferences, and sessions within conferences which may be of interest to Health Care Renewal readers. In chronological order, and with apologies for somewhat tooting our own horn,... Annual Meeting, Society of General Internal Medicine Minneapolis, MN, USA, 28 April - 1 May, 2010. Those attending this meeting who read this blog may want to come to the meeting of the SGIM Professionalism Sub-Committee of the Clinical Practice Committee, which I chair, which will be on Friday, 30 April, 7:30-8:30am, Convention Center Room 102C, during the Annual Meeting. We would like to liven up the sub-committee, so please think about attending even if you are not now a member. See the whole meeting program <a href="http://www.sgim.org/userfiles/file/PreliminaryProgFINAL.pdf">here</a>. Annual Scientific Meeting, Rhode Island Chapter, American College of Physicians Warwick, RI, 13 May, 2010. I will be giving a session on external threats to ethical practice. The whole meeting program is <a href="http://www.acponline.org/meetings/chapter/ri-2010.pdf">here</a>. European meeting of the Society for Medical Decision Making Hall in Tyrol, Austria, 30 May - 2 June, 2010. Wally Smith and I will be giving a short course on recognizing external threats to rational decision making. The meeting brochure is <a href="http://www.umit.at/dataarchive/data69/announcement_smdm_2010_final.pdf">here</a>.  PharmedOut.org Conference, "Prescription for Conflict: Should Industry Fund Continuing Medical Education?" Washington, DC, 25 June, 2010. The entire content should be of interest to our readers. The conference site is <a href="http://www.pharmedout.org/conference.htm">here</a>.  Healthy Skepticism conference,"Selling Sickness; Influence on influence" Amsterdam, Netherlands, 7-8 October. Again, the entire content should be of interest. The conference site is <a href="http://www.gezondescepsis.nl/">here</a>.

Meetings and Conferences of Interest

There are a number of upcoming conferences, and sessions within conferences which may be of interest to Health Care Renewal readers. In chro...

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The Settlement and Conviction Round-Up: Friday Frequent Flier Edition

It's time for one of our periodic round-ups of legal settlements and convictions of health care organizations.  This time, we report on three frequent fliers, in chronologic order of the appearance of the relevant news stories. Robert Wood Johnson University Hospital Hamilton (UMDNJ) We have written multiple times about the woes of the University of Medicine and Dentistry of New Jersey, which lead to a deferred prosecution agreement and operation under the watchful eye of a federal monitor for several years, and resulted in criminal convictions of a former Dean and the state legislative leader he hired.  Scroll through <a href="http://hcrenewal.blogspot.com/search/label/UMDNJ">this</a> for far too many details.  Now, the redoubtable Newark Star-Ledger <a href="http://www.nj.com/news/index.ssf/2010/03/hamilton_hospital_agrees_to_pa.html">reports</a>: <blockquote>Robert Wood Johnson University Hospital in Hamilton has agreed to pay $6.35 million to settle allegations that the facility defrauded Medicare, Justice Department officials said today. The Mercer County hospital was accused of inflating charges to Medicare patients to obtain bigger reimbursements from the federal government. 'Taxpayer dollars should go towards quality health care, not wasted on fraud and abuse,' said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. The hospital denied wrongdoing in the settlement, said Skip Cimino, the facility's president and CEO. 'Robert Wood Johnson University Hospital Hamilton has resolved the outstanding Medicare Reimbursement issue with the government and looks forward to continuing its service to the community,' he said.</blockquote> Note that Robert Wood Johnson Medical School is one of the two medical schools contained within UMDNJ. Fresenius I admit that we last <a href="http://hcrenewal.blogspot.com/2007/09/dialysis-providers-and-restraint-of.html">discussed</a> Fresenius Medical Care Holdings Inc, a for-profit provider of kidney dialysis services, a while ago, back in 2007. At that time, the company settled charges made by the US Federal Trade Commission that it had tried to restrain competition. Last week, the Tennessean reported: <blockquote>A long-running whistleblower complaint against the once-Nashville based Renal Care Group has led to a $19.3 million federal court judgment against the acquired dialysis supplier and the German company that bought it four years ago. The lawsuit, which focused on improper claims submitted to Medicare for home dialysis supplies, named Renal Care Group Supply Co. and Fresenius Medical Care Holdings Inc., as co-defendants. The federal government joined the whistleblower complaint more than two years ago. Renal Care operated a shell billing company solely to submit claims on behalf of itself in violation of federal law that requires suppliers to be independent of the dialysis facilities where patients are treated, the government said. Even after employees raised concerns, Renal Care continued to operate the billing company because of the 'illicit revenues it created,' the suit said. One employee wrote: 'I do not wish to go to jail' and felt the company's plan 'was not in the best interests of patients,' said federal Judge William J. Haynes Jr. of Nashville in his ruling. The billings reportedly occurred over a six-year period beginning in 1999. The Fresenius-Renal Care acquisition closed in 2006 at a sales price of $3.5 billion.</blockquote> Pfizer Pfizer Inc, which proclaims itself to be the world's largest pharmaceutical company, has provided an amazing amount of material for Health Care Renewal. In September, 2009, we <a href="http://hcrenewal.blogspot.com/2009/09/pfour-legal-settlements-for-pfizer-why.html">discussed</a> the huge, that is, $2.3 billion dollar settlement Pfizer made of criminal and civil fraud charges. At that time, this was the fourth settlement of charges of unethical marketing made by Pfizer since 2002. Since then, we have discussed <a href="http://hcrenewal.blogspot.com/2009/10/pfizer-in-guise-of-pharmacia-pfound-to.html">another fraud settlement</a> in October, 2009, <strike>and </strike><a href="http://hcrenewal.blogspot.com/2010/01/physician-pleads-guilty-to-fraud-for.html"><strike>yet another</strike></a><strike> in January, 2010</strike>. Today, Bloomberg <a href="http://www.businessweek.com/news/2010-03-26/pfizer-told-to-pay-142-1-million-for-neurontin-marketing-fraud.html">reported</a>: <blockquote>Pfizer Inc. violated U.S. racketeering law in the marketing of its epilepsy drug Neurontin and should pay $142.1 million in damages, a jury decided. Kaiser Foundation Health Plan Inc. and Kaiser Foundation Hospitals claimed in a monthlong trial in federal court in Boston that Pfizer illegally promoted Neurontin for unapproved uses. The insurer said it was misled into believing migraines and bipolar disorder were among the conditions that could be treated effectively with Neurontin, approved in 1993 by the U.S. Food and Drug Administration for epilepsy. 'The jury found Pfizer engaged in a racketeering conspiracy over a 10-year period,' Tom Sobol, a lawyer for Kaiser, said after yesterday’s verdict. 'That bodes well for future cases.'</blockquote> Furthermore, this was a very special kind of verdict: <blockquote>The jury, which deliberated for two days, found that New York-based Pfizer violated the federal Racketeer Influenced and Corrupt Organizations Act, or RICO, and California’s Unfair Competition Law. Under RICO, the amount of actual damages found by the jury, $47.36 million, will be tripled.</blockquote> The RICO statute was meant to be used against organized crime.  A jury seems to have found that Pfizer is a "Racketeer Influenced and Corrupt Organization," that is, the moral equivalent of a crime syndicate. Summary So this week's settlement and conviction round-up shows the impunity that many health care organizations have exhibited thus far.  Some organizations have been charged again and again with unethical behavior.  Now one of the most frequent of the fliers has been convicted under the RICO law, certainly a new low. Yet none of the affected organizations in this post, and precious few we have discussed at other times, seem to have suffered any major consequences.  All have paid fines, some which seemed large at the time, but which have never been large enough to seriously threaten the organizations' financial well being.  None of the organizations seems to have lost business, or even much reputation.  Very few of the people within the organizations who approved, lead or implemented unethical behaviors have suffered any sort of negative consequences. There seems to be something very wrong here.  In the US, we have put much of our health care system in the hands of very large organizations, for-profit and not-for-profit, without holding these organizations and their leaders accountable for their actions.  The results have been increasingly rich leaders who often behave like a new aristocracy, and repeated bad behavior by the organizations they lead.  Our latest effort at health care "reform" has continued to rely on large private organizations, while so far not adding to their or their leaders' accountability.  In my humble opinion, if we really want to reform health care so as to improve quality, increase access, control costs, and support professionalism, we will have to make our new health care oligarchs accountable.

The Settlement and Conviction Round-Up: Friday Frequent Flier Edition

It's time for one of our periodic round-ups of legal settlements and convictions of health care organizations. This time, we report on ...

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Hospitals Under the Knife: Sacrificing Hospital Jobs for the Extravagance of Healthcare IT?

A WSJ article on the financial condition of NY hospitals, and specifically a line by NY Mayor Bloomberg, caught my eye: <blockquote>Wall Street Journal Mar. 26, 2010 <a href="http://online.wsj.com/article/SB10001424052748703409804575144184025495398.html">Hospitals Under the Knife</a> New York City System Aims to Cut 2,600 More Jobs as State Funding Drops By MICHAEL HOWARD SAUL and SUZANNE SATALINE NEW YORK—The nation's largest public hospital system plans to slash its work force—including doctors and nurses—by about 10% over two years as government aid drops and the number of uninsured patients jumps. With its budget deficit set to top $1 billion, New York City's Health and Hospitals Corp. plans to eliminate 2,600 jobs in the fiscal year that begins July 1. That comes on top of 1,300 positions to be eliminated this year."No hospital system in the country is exempt from the crushing economics facing the health-care industry," said New York Mayor Michael Bloomberg. He noted that New York had been early to adopt electronic medical records but said that state budget cuts were hitting the system hard. ... Previous job cuts focused on trimming support staff, but the new measures will include physicians and nurses, Alan Aviles, the corporation's president, said in an interview.</blockquote> "Early to adopt EMR's BUT the budget cuts were hitting the system hard?" To the knowledgeable, this seems a non sequitur. Its message is clearly that yes, we spent hundreds of millions of dollars on EMR's, but the adoption of EMR's should have saved us jillions of dollars, helping insulate us from economic downturns. Yet some very serious researchers say this is not the case. For starters, there's, Ashish Jha’s research at the Harvard School of Public Health that compared 3,000 hospitals at various stages in the adoption of computerized health records and found little difference in the cost and quality of care. A New York Times story "Little Benefit Seen, So Far, in Electronic Patient Records" on those findings is <a href="http://www.nytimes.com/2009/11/16/business/16records.html?_r=1">here</a>. Was anyone in the Governor's office or hospital governance reading their own newspaper? Then, there's the Nov. 2009 “<a href="http://www.ischool.drexel.edu/faculty/ssilverstein/AJM-Himmelstein-Hospital-Computing.pdf" style="font-weight: bold;">Hospital Computing and the Costs and Quality of Care: A National Study</a>” (Amer J Med 123:1; 40-46) by Himmelstein and Wololhandler at Harvard Medical School, that also concluded “as currently implemented, hospital computing might [very] modestly improve process measures of quality but not administrative or overall costs." There's the June 2009 <a href="http://www.wharton.upenn.edu/">Wharton School of Business</a> article "Information Technology: Not a Cure for the High Cost of Health Care" that I wrote about <a href="http://hcrenewal.blogspot.com/2009/06/wharton-on-healthcare-it-can-i-go-home.html">at this HC Renewal post</a>. Senior Wharton professors wrote: <blockquote>Technology could increase health care costs without markedly improving quality, according to experts at Wharton. ... "No one has done the careful research to indicate that if one health care system has information technology and the other doesn't, then the care is different. There are no controlled trials," says <a href="http://www.wharton.upenn.edu/faculty/pauly.html" style="font-family: arial;">Mark Pauly</a>, a health care management professor at Wharton. All that technology is no panacea, he warns. In fact, he believes IT could actually raise costs because of culture clashes, training, the implementation of the systems [I would say "the mayhem that often goes on during the implementation" - ed.] and the labor required to maintain the new technology. "The best-case scenario is that information technology will improve quality but not lower costs. The worst case is that there's no difference at all." ... That opinion is echoed by other experts at Wharton and the University of Pennsylvania. "The focus on IT in health care is a good thing, but there's way too much hype about it and misunderstanding about what the benefits will be and how quickly they will come," says <a href="http://www.med.upenn.edu/apps/faculty/index.php/g346/p6433357" style="font-family: arial;">Peter Gabriel</a>, medical director of clinical information systems at the University of Pennsylvania Health System. [<a href="http://www.wharton.upenn.edu/faculty/volpp.html" style="font-family: arial;">Kevin Volpp</a>, professor of medicine and health care management] agrees that tracking real cost savings from health care IT is a difficult task, but he expects there to be some benefits from spotting and eliminating redundant care. But those benefits aren't likely to add up to big savings, says <a href="http://www.wharton.upenn.edu/faculty/burnsl.html" style="font-family: arial;">Lawton R. Burns</a>, director of the <a href="http://hcmg.wharton.upenn.edu/chme/" style="font-family: arial;">Wharton Center for Health Management and Economics</a>. "I agree that information technology is important, but it's not the slam dunk it's portrayed to be," he says. The chase to reduce costs, improve quality and expand coverage is deemed the "iron triangle of health care. A lot of us wince [at that goal]," Burns notes. "It's arguable that we can't do any of those things well." <a href="http://www.wharton.upenn.edu/faculty/asch.html" style="font-family: arial;">David A. Asch</a>, a Wharton health care management and economics professor, agrees that technology is a big part of reform. "No one is arguing against it, but that doesn't mean that it's not oversold," he says. Gabriel likens the fascination over IT in health care to a shiny new object that's easier to focus on relative to more daunting issues. ... In addition, it's unclear what cultural issues [a big theme in my writings - ed.] will emerge as information technology is adopted. These cultural issues are in the forefront of primary care physician relationships. Experts at Wharton and Penn say physicians are generally skeptical of the technology movement. How much will a technology overhaul add to operating costs? How much will it cost to retrain workers? What's the electronic record learning curve? And what happens when a doctor has a laptop between him and the patient? "Individual physicians just don't know where the money is going to come from," says Pauly. "If IT is tied to reimbursements it could work, but [many] are skeptical." Burns adds that the physician-patient relationship can also be altered. "Technology adoption changes the way you practice. What happens when your primary care physician is looking at his screen instead of you?" </blockquote> There are the concerns of Abraham Verghese, Professor and Senior Associate Chair for the Theory and Practice of Medicine at Stanford, who wrote in the Wall Street Journal in a June 2009 article "<a href="http://online.wsj.com/article/SB10001424052970204005504574235751720822322.html" style="font-weight: bold;">The Myth of Prevention</a>" that: <blockquote>... I have similar problems with the way President Obama hopes to pay for the huge and costly health reform package he has in mind that will cover all Americans; he is counting on the “savings” that will come as a result of investing in preventive care and investing in the electronic medical record among other things. It’s a dangerous and probably an incorrect projection. </blockquote> Finally, this is an experimental technology whose benefits and risks are not well known. In the article "<a href="http://archinte.ama-assn.org/cgi/content/short/167/13/1400" style="font-weight: bold;">Electronic Health Record Use and the Quality of Ambulatory Care in the United States</a>" (Arch Intern Med. 2007;167:1400-1405), the authors examined electronic medical records use throughout the U.S. and the association of EMR use with 17 basic quality indicators. They concluded that “as implemented, EMRs were not associated with better quality ambulatory care.” Further, the FDA recently testified that this technology can actually harm and kill patients, but the extent is unknown. Existing FDA data is likely the "tip of the iceberg", testified FDA official Jeffrey Shuren MD, JD at the HIT Policy Committee, Adoption/Certification Workgroup, special meeting on health IT safety on February 25, 2010. I described Shuren's testimony in my HC Renewal post "<a href="http://hcrenewal.blogspot.com/2010/02/fda-on-health-it-adverse-consequences.html" style="font-weight: bold;">FDA on Health IT Adverse Consequences: 44 Reported Injuries And 6 Deaths, Probably Just 'Tip of Iceberg'</a>." Considering FDA is nearly unknown as the go-to for such reports, and the low reporting of medical errors related to computing noted by Koppel at the same meeting, the actual rates of injury and death could be much, much larger. In effect, NY hospital physicians, nurses and support staff will lose their job due to budget shortfalls, at the same time the NY hospitals have been spending hundreds of millions of dollars on the extravagance of experimental clinical IT systems whose benefit is still an unknown. Perhaps some of those millions could have been better spent on human beings, such as employees or better yet, patient care. As I've written before, the health IT industry seems to be staging an invasion of healthcare to its own benefit. Now, clinical personnel are losing their jobs as a result, and patient care is likely to suffer. While I'm supportive of EMR experimentation when finances are stable (when performed with patient safety considerations as paramount, of course), this is not the time for such extravagance in NY, especially when jobs - both support and clinical - are threatened. Irrational exuberance in technology is bad enough - it's far worse when you can't afford the objects of your affection. One suggestion is that the healthcare IT experiments be put on hold as unaffordable under current conditions, and resumed when finances are more stable. The money could be diverted to keeping physicians, nurses and support staff employed. The risks could also be studied further. However, this might cause some executives somewhere to have to forgo their pet contracts with their friendly HIT vendors and management consultant companies. Computers are more important than people, after all. At a time of massive international economic difficulty, "Blood for Computers!" can be the new rallying cry. Since many of the layoffs will involve union members of <a href="http://www.dc37.net/">District Council 37</a>, the city's largest municipal employee union, perhaps the rallying cry "Computers for Union Busting!" could also apply. (Some people would have no problems with that, but these are real, live hospital staff being put out of work, and the patients they care for being affected.) -- SS 3/26/10 Addendum: The advice above may apply to an entire country, the UK, that seems to have spent about £13 billion (about $19 billion U.S.) on health IT that <a href="http://www.computerweekly.com/blogs/tony_collins/2009/06/16-key-points-in-gateway-revie.html">doesn't work</a>. Per the Telegraph article today "<a href="http://www.telegraph.co.uk/health/healthnews/7529454/Hospital-wards-to-shut-in-secret-NHS-cuts.html" style="font-weight: bold;">Hospital wards to shut in secret NHS cuts</a>": <blockquote> Tens of thousands of NHS workers would be sacked, hospital units closed and patients denied treatments under secret plans for £20 billion of health cuts. ... The proposals could lead to: <ul class="storylist"><li>10 per cent of NHS staff being sacked in some areas.</li><li>The loss of thousands of hospital beds.</li><li>A reduction in the number of ambulance call-outs.</li><li>Medical professionals being replaced by less qualified assistants.</li></ul></blockquote> At least the IT industry is alive and well. -- SS

Hospitals Under the Knife: Sacrificing Hospital Jobs for the Extravagance of Healthcare IT?

A WSJ article on the financial condition of NY hospitals, and specifically a line by NY Mayor Bloomberg, caught my eye: Wall Street Journal ...

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Unsolicited Email From a Canadian Nurse Working in Healthcare IT

As a result of my writings I receive feedback from those involved in health IT. I reproduce this email from a Canadian nurse with her permission and without additional comment, because it speaks for itself about the <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/failurecases/?loc=cases&sloc=ecosystem">ecosystem of healthcare IT</a>: <blockquote>Dear Dr. S, I've reached your site while doing research about privacy and electronic medical records. I am an RN in Canada and have for the past 5 years been working towards integrating computer systems into health care practices. It has been quite the experience and ended with my being laid off. I've only had opportunity to quickly scan a few of your articles as yet but see a familiar theme. When I started in this area, I was convinced practitioners and patients would reap enormous benefits from computer assisted care. A major shortcoming I experienced in the IT community was a general lack of respect for the knowledge and experience that health care professionals bring to the table. I was not successful in explaining the health care industry's milieu and particular differences from the regular 'business world' to most of the IT professionals I worked with. My first accountability is to the welfare of my patients, not the ease of design and cost savings for the IT department. As an RN working to improve efficiencies and reduce stress for my colleagues, my accountability is first to my workplace, not the IT departments ease of control and maintenance. There were small, quiet pockets of understanding and agreement with what it means to design systems that support work flow efficiencies and meet patient/provider needs. Sadly, these small pockets were not the 'deciders' in my workplace. I am now in the process of re-evaluating my belief in the benefits of computer technology to patients and providers. Not because the technology is lacking, but because the IT community seems at odds with my professional responsibilities. (ie: there are no secrets: I must fully report any mistakes/incidents I make or uncover.) I'll be reviewing your site more closely in the months to come. I feel better knowing I'm not the only one questioning what the heck is going on here and trying to pull back the curtain.</blockquote> I asked her why she was laid off. Here is the reply: <blockquote> Why did the team get laid off? That is something we've all asked ourselves. So here is a bit of a long story....and remember it's from a jaded source. The official reason is we were redundant. We found that hard to fathom because 2 of us are clinicians and there was a very small number of clinicians working on the EHR. We went around the leadership to get a job at hand done. We had very limited funding, no support etc. We suspect we were the victims of our own success. (The acute care systems here get all the dollars and attention. Community and chronic disease very little. Why? Who knows when 80% of our time/resources is for CDM patients.) [chronic disease management - ed.] We went to the clinical community and designed with them leading the way. We enlisted the stats dept to help us as well as all allied professionals working in chronic disease. We had key indicators, outcome measurements etc in a configurable dashboard so each clinician could choose the reports they needed, in the view they wanted. There were drill downs to different levels of info. It was very helpful to managing a patient population as well as individual patients. It also allowed the clinician to review their practice, make 'to do' lists etc. Our 3 IT experts were fantastic. They're only goal was to make the clinicians happy so patient care would be improved. It was a joy to work with them. We demonstrated it could be done as bpg ["baseline process guide", I think - ed.] - as much as there are in IT - would suggest. <a href="http://en.wikipedia.org/wiki/Information_Technology_Infrastructure_Library">ITIL</a> principles in practice led to overwhelming clinical engagement and approval. Of note, the staff would not fully engage with the system in actual patient care until the leadership gave it complete approval. They said too many times they started using something, found it useful and then IT decided to decommission due to time required to support it. Indeed. That is what happened again. Surprise...the clinicians protested the cancellation of the tool to the leadership and the government (which 'owns' health care here). The team started being laid off when the pilot project was finished and the political began. But, to be fair, I and my colleague, a pulmonary therapist, were thorns in the IT leaderships side: we argued for what we believed in, we asked for performance indicators from the IT dept, we asked for ITIL lite for clinicians and Healthcare 101 for IT, we said quite clearly that IT is to support clinicians in their work by designing good tools, that IT in itself is not the goal or is their job to police clinicians. (Our clinicians refer to the IT help desk as the 'helpless desk' and IT security as the 'gestapo'.) I was told several times to speak the official line: IT is good, clinicians need to listen to & trust IT professionals to make the right decisions. I was told we were to allow clinicians to voice their desires/needs but to steer them to the decision IT wants them to make. That was my job. I disagreed: my first priority is patient care and it is my duty as an RN to stand up and speak out when something compromises patient care or negatively affects the provider's ability to provide quality care. Either they didn't understand or it was of no benefit to the dept. Maybe I'm a difficult, demanding person to work with or just can't express thoughts clearly enough. Funny now, but when I first started in the IT dept the RN's I contacted to say 'hey...what's the issues?' scoffed at me. They had absolutely NO trust in the IT dept or systems. I gave them pep talks and tried to convince them they were just afraid of change but change could be good for all. I'd be their voice to make sure clinical needs were first priority. One of the older RN's I knew then tiredly said I'd see what she was talking about soon enuf. Geesh. Could I have been any more delusional? The RN's told me do not bring anymore pilots to their depts. They were sick and tired of being asked for their opinions when it was obvious to them no one listened or took them seriously. They'd say 'here's what we need' and IT would say 'uh-no'. Here's what you get. The staff bluntly told me they do not have time for token engagement and get a rubber stamp of approval somewhere else. I was stunned. IT has squandered much good will they once had. I expected so much more. The number of RN's I know personally who believed in and worked for the EHR and now not only don't/won't but are skeptical of realizing any good out of it in our lifetime keeps growing. Yet, we all know health care will continue to be delivered with or without IT. Even if every computer in the world crashes and dies, health care will continue. IT worries about paper cuts and we're dealing with a failing health care system that is harming people and exhausted, discouraged staff doing their best to save patients from pain, suffering and untimely deaths. I know full well, that there are excellent IT professionals out there who could be a helpful part of the care team. They just have to be very, very quiet if they want to keep their IT jobs. At least here and now. It seems, so do health professionals. sigh...it is what it is. Thanks for listening. I know this is nothing new to you or your students. But the pain of it all is still quite fresh for me. Venting felt good and I hope you find something helpful in there somewhere. </blockquote>I replied that indeed my students, colleagues and other health IT workers facing similar circumstances shall benefit from this cautionary tale. -- SS

Unsolicited Email From a Canadian Nurse Working in Healthcare IT

As a result of my writings I receive feedback from those involved in health IT. I reproduce this email from a Canadian nurse with her permi...

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Now Private Equity Jumps into the Health Care Fray: Will Cerberus Do Better with Caritas Christi than It Did with Chrysler?

And now for an early report on what may be the latest fashion in the ongoing commercialization of US health care in the US.  In the last few weeks we spotted three stories that appear to be closely related.  (And thanks to one of our ever vigilant scouts for finding the first of these.) Psychiatric Solutions and Bain Capital The first story was <a href="http://www.businessweek.com/news/2010-03-10/psychiatric-solutions-says-approach-made-by-purchaser-update1-.html">in BusinessWeek</a> in early March: <blockquote>Psychiatric Solutions Inc., the operator of psychiatric facilities in 32 states, said it has been approached by a potential buyer. A special board committee will consider possible responses and Goldman, Sachs & Co. has been hired as a financial adviser, the Franklin, Tennessee-based company said today in a statement. Earlier today, the Wall Street Journal reported the company was in buyout talks with Bain Capital LLC. Boston-based Bain manages about $65 billion in assets under management, according to the firm’s Web site. </blockquote> The significance of this story was not initially clear. The proposed deal had not been consummated. Although there may be something jarring about a private equity firm running psychiatric clinics, the clinics were already run by a for-profit corporation. Detroit Medical Center, Vanguard Health, and the Blackstone Group About a week later, the Detroit News published <a href="http://www.detnews.com/article/20100319/BIZ/3190378/Vanguard-Health-to-buy-Detroit-Medical-Center">a story </a>about another deal, <blockquote>The Detroit Medical Center is expected to announce today it will be acquired by a private Nashville-based health system that is to invest $850 million in improvements, The Detroit News has learned. The nonprofit DMC, with nine general and specialty hospitals in Metro Detroit, will be acquired by Vanguard Health Systems, which has 15 hospitals in four states, several sources said. No money is changing hands in the transaction, but Vanguard will assume $300 million in DMC pension obligations and $200 million in bond debt obligations, a source said.</blockquote> The article further noted, <blockquote>Vanguard is majority-owned by The Blackstone Group, one of the nation's largest private equity firms, which gives it access to capital for improvements.</blockquote> This did seem to be a done deal, and one that inspired all sorts of optimism. For example, Tom Walsh, a columnist <a href="http://www.freep.com/article/20100321/COL06/3210523/1014/BUSINESS01/DMC-deal-allows-it-to-thrive-grow">wrote</a> in the Detroit Free Press, <blockquote>Just as the bankruptcies of General Motors and Chrysler marked the end of an unsustainable business model for Detroit's auto industry, Friday's deal to sell the Detroit Medical Center to a big for-profit hospital system is a game-changer for the funding and delivery of health care in metro Detroit.</blockquote> Walsh felt, <blockquote>three DMC leaders made a bold move -- before it was too late -- to secure access to the money needed to invest in critical technology and top talent.</blockquote> because, <blockquote>'We were being choked to death by the nonprofit business model,' Duggan, the DMC CEO, said Friday. </blockquote> Walsh enthused, <blockquote>Vanguard's proposed purchase of DMC for $417 million and a promised investment of $850 million more gives DMC a legitimate shot at survival and growth without anywhere near the pain and suffering that the GM and Chrysler retrenchment brought to the region. It's hard to overstate what a godsend this deal could be for a wobbly city and state where the public sector is in no shape to help a major employer like DMC, if the banks and Wall Street are unwilling to provide capital.</blockquote> Similarly, Detroit News' editors <a href="http://www.detnews.com/article/20100325/OPINION01/3250342/1008/opinion01/Editorial--DMC-purchaser-bets-on-making-profit-through-quality-care">opined</a> that Vanguard Health <blockquote>owned by the investment group Blackstone ... promises to plow $850 million into the DMC facilities over 10 years. The cash will modernize all of the hospitals and provide for a major expansion of Children's Hospital. The upgrades should enable DMC to compete with the best-appointed hospitals in Metro Detroit, and set a new competitive bar for health care in the region. The most significant news for Detroit is that Vanguard will maintain the DMC's commitment to treat all patients, whether or not they have private insurance.</blockquote> Caritas Christi Health Care and Cerberus Capital Management But third time is the charm. Today, the Boston Globe <a href="http://www.boston.com/business/healthcare/articles/2010/03/25/equity_firm_set_to_buy_caritas/">reported</a>, <blockquote>Caritas Christi Health Care, the state’s second-largest hospital group, is set to disclose today that it has agreed to be acquired by New York private equity firm Cerberus Capital Management in an $830 million deal that hospital officials say will allow the chain to shed debt and make major improvements. Under the agreement, Cerberus’s first investment in hospitals, Caritas Christi’s management in Boston will continue running the Catholic community hospitals. In addition, Cerberus has pledged to keep the system’s 12,000 employees and won’t sell the hospitals or take them public for at least three years. The firm said it hopes to expand its hospital holdings nationally and in Massachusetts, potentially making Caritas a more formidable competitor with large Boston hospitals for many routine procedures. All six Caritas hospitals, including the flagship St. Elizabeth’s Medical Center in Brighton, will remain open and follow the Catholic Church’s ethical and religious directives, among them a ban on abortions. But they would convert from nonprofit to for-profit businesses and begin paying taxes to state and local governments.</blockquote> This deal is so new that it has not yet generated the sort of breathless enthuisiasm fostered by the Detroit Medical Center/ Vanguard Health/ Blackstone Group deal. But the Fall River (MA) Herald-News did <a href="http://www.heraldnews.com/lifestyle/health/x1336918685/St-Annes-parent-company-to-be-acquired-by-private-equity-firm">note</a>, <blockquote>Officials with the Caritas Christi Health Care system and St. Anne's Hospital say an agreement to sell the system to Cerberus Capital Management will have a significant impact on improving services locally. The agreement with Cerberus, announced Thursday, will not only ensure the system maintains religious and ethical directives, but also infuse the system with millions of dollars in capital to make infrastructure improvements in the system's facilities. At St. Anne's that will mean vastly expanding the facility's emergency room, and allow for construction of planned operating and recovery rooms. The change will also allow St. Anne's to convert the recently acquired former St. Anne's School into a medical office complex. 'There will be more construction and expansion of the facility than any time in the history of the hospital,' Caritas Christi Chief Operating Officer Robert Guyon said.</blockquote> It certainly does look like a trend now. In fact, today a Wall Street Journal blogger <a href="http://blogs.wsj.com/deals/2010/03/25/obamacare-are-charity-hospitals-now-a-hot-commodity/">suggested</a> that this trend may be an immediate, although perhaps unintended result of the health care (insurance) reform legislation that just passed in the US Congress: <blockquote>Cerberus is planning to turn the Caritas Christi Health Care chain into a for-profit corporation in what it is likely the first sizable M&A bet on the newly minted Obama health-care overhaul law. [seemingly ignoring the Detroit Medical Center/ Vanguard Health/ Blackstone deal - ed] Hospitals that serve the poor and previously uninsured are expected to benefit from Obama’s plan, which is expected to extend insurance to 32 million previously uninsured Americans. That means such hospitals are likely to have more patients who can actually pay their bills. It is hard not to see how that new cash-flow stream wouldn’t have private equity licking its chops. </blockquote> That's funny, I did not think that a major reason to pass the bill was to benefit private equity.  Also, somehow the image of private equity honchos licking their chops over cash flow does not seem to fit with the breathless pronouncements above about improving quality, serving poor patients, etc. Will Private Equity and Health Care be Good for Each Other? In fact, it is not clear that these sorts of deals in the long run will be good for private equity, hospitals and health care providers, or patients. Barely mentioned in the coverage of the Caritas Christi / Cerberus deal was that at least one major past Cerberus deal, ironically located mainly in Detroit, home of the Detroit Medical Center/ Vanguard Health/ Blackstone deal, started with similar enthusiasm, but ended in disaster. As the New York Times <a href="http://www.nytimes.com/2009/08/09/business/09cerb.html">reported</a> in 2009, Cerberus' buy-out of Chrysler was once also heralded with breathless enthusiasm. <blockquote>'I thought, wow, this really signals a real change in the landscape here,' recalls a person who attended a Cerberus session who asked to remain anonymous because of agreements he signed. 'I guess it gave me hope. The auto companies needed an enormous amount of capital, and where else was it going to come from? John W. Snow, a former Treasury secretary in the Bush administration and Cerberus’s chairman, also heralded Cerberus as Chrysler’s savior, likening the firm’s investment to the government rescue of Chrysler in 1979. 'Over 25 years ago, when Chrysler faced bankruptcy, it turned to the United States government for assistance,' Mr. Snow said at a National Press Club meeting in 2007. 'Today, Chrysler again faces new financial challenges. But it is private investment stepping in to inject much-needed support.'</blockquote> However, the end results never did live up to the hype: <blockquote>For [Cerberus Capital Management CEO] Steve Feinberg, the onetime owner of Chrysler, the past year has been a crawl toward defeat. He lost billions of dollars. He lost prestige. He lost his privacy. And he ended up a ward and supplicant of the federal government. Mr. Feinberg took over Chrysler almost exactly two years ago, promising to revive the company. Chrysler filed for bankruptcy protection at the end of April. </blockquote> One problem in retrospect seems to be the hubris of the private equity leaders: <blockquote>Mr. Feinberg’s education at the hands of Chrysler, the government and economic reality is emblematic of the limits private equity players have encountered as they’ve sought to reap outsize returns while also contending that they had the smarts and managerial prowess to repair companies of any size.</blockquote> Even after the beautiful plan turned to ashes, it is still not clear that these leaders realized their limits: <blockquote>But, even now, Mr. Feinberg, a man who can play a decent game of chess while blindfolded, is hard-pressed to pinpoint many mistakes. Sitting in his office on Park Avenue, far away from the detritus that surrounds Detroit, he grows pensive when asked what he has learned from his audacious — and failed — effort to privatize and resurrect the legendary and deeply troubled auto giant. 'I don’t know what we could have done differently,' he says, crossing his arms on his chest. 'From the day we bought it, we worked hard to improve it.' </blockquote> One wonders if Mr Feinberg has learned more about his previous failure as he now grasps Massachusetts' second biggest hospital system. Summary The Chrysler debacle, however, suggests there should be concerns about private equity firms buying out hospitals and other health care providers, for example: - Will making a not-for-profit health care organization into a for-profit corporation really lead to more efficiency and lower costs? For-profit leaders tend to expect even larger compensation that not for-profit CEOs. Their decisions tend to driven by their short-term compensation, rather than the good of the organization.  For-profit corporations are supposed to generate profits for investors which may reduce re-investment in the corporation.  The thirst for more executive compensation may be a driving factor in the deal, as hinted in the Boston Globe coverage of the Caritas Christi/ Cerberus deal: <blockquote>While [current Caritas Christi CEO Ralph] de la Torre and other senior executives will retain their current salaries and benefits, they would be eligible for additional compensation from Cerberus based on the financial performance of the hospitals, Caritas officials said. They said the details of those financial incentives have yet to be worked out.</blockquote> - Can private equity cost-cutting techniques and other turn-around techniques really work in the health care environment? The Chrysler/ Cerberus case reveals how private equity leaders may get out of their depth in complex business contexts. Health care is even more complex than the automobile industry. - Finally, and more important, are for-profit hospitals and health care providers run by private equity really likely to be better at fulfilling their health care missions than they were when they were not-for-profit? I doubt there is any evidence that previous conversions of not-for-profit health care organizations to for-profit status improved health care, much less while simultaneously lowering costs and improving access. (Remember that many big health care insurance companies were once not-for-profit Blue Cross plans. Does Angela Braly's <a href="http://hcrenewal.blogspot.com/search/label/WellPoint">WellPoint</a> provide better care to more people at lower cost? But then again, when a Catholic charity teams up with an organization named for the <a href="http://en.wikipedia.org/wiki/Cerberus">three-headed dog</a> that guards the entrance to Hades, maybe they will need to put ski lifts in there too.

Now Private Equity Jumps into the Health Care Fray: Will Cerberus Do Better with Caritas Christi than It Did with Chrysler?

And now for an early report on what may be the latest fashion in the ongoing commercialization of US health care in the US. In the last few...

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The Health Care Reform Bill and Health Care Renewal

I have not written much about the seemingly endless health care reform debate in the US, because much of it has not been relevant to the issues we discuss on <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a>.  Now that the current phase of the debate is done, and legislation has been passed, let me offer my opinions on the few aspects that do seem relevant to this blog. The Sunshine Act For Health Care Renewal readers, the most important part of the legislation is that containing the provisions of the Sunshine Act, championed by Senators Grassley and Kohl.  (See <a href="http://postscript.communitycatalyst.org/?p=1209">this summary</a> on Postscript, the Prescription Project blog.)  The act requires that all drug, device, biologic, and medical supply manufacturers report essentially all payments to physicians or teaching hospitals to the goverment, and on the internet.  It does not appear that the rules apply to other health care related non-profit organizations, e.g., medical schools, disease advocacy groups, health care related charities, medical societies, etc, or to payments made by for-profit health insurers, clinical research organizations, and some other corporations.  Unfortunately, the provisions only take effect in 2013.  However, despite these quibbles, this still may be one of the most important advances promoting disclosure of health care related conflicts of interest made in the 21st century. Comparative Effectiveness Research As best as I can tell at this point, the current legislation used the wording from the bill previously passed in the US Senate, which we discussed <a href="http://hcrenewal.blogspot.com/2009/10/who-should-sponsor-comparative.html">here</a> and <a href="http://hcrenewal.blogspot.com/2009/11/no-free-speech-for-comparative.html">here</a>, regarding comparative effectiveness research.  Although its goal of setting up a not-for-profit comparative effectiveness organization seems laudable, the devil will be in the details.  The Senate version gave considerable oversight of this organization to those with vested interests in selling particular products or services, threatening the impartiality of the organization and the research it would sponsor, and perhaps thus wholly defeating its ostensible purpose.  Furthermore, the Senate bill included curious wording that seems to threaten the ability of those getting funding from the organization to express views that might disturb the organization's leadership, again threatening the integrity of their dissemination of its work, and perhaps violating the First Amendment of the US Constitution.  Whether these provisions provide benefits that outweigh their harms is highly questionable. Payments to Physicians We have criticized how the process of setting payments to physicians by the US Medicare system has been captured by a secretive committee of the American Medical Association that is dominated by physicians who do procedures, the RBRVS Update Committee, or RUC.  The results have been payments for primary care and other cognitive services that have failed to keep up with inflation, a major cause of the continuing decline of generalist/ primary care medicine in the US.  (See most recent post <a href="http://hcrenewal.blogspot.com/2009/06/letter-from-ruc-and-my-reply.html">here</a> about this.)  According to the summary provided by the American College of Physicians (<a href="http://www.acponline.org/advocacy/where_we_stand/access/health_reform_comparisons.pdf">here</a>), the new legislation would enable review of  payments made for specific services, and would reconsideration of the process used to set physician payments by an independent advisory group.  However, the bill would not mandate any changes in payments, or in the processes used to set them, including the pivotal role of the RUC.   So there is some chance that the legislation would lead to a more transparent, accountable, honest, and rational process for setting physician payments and hence eliminating perverse incentives, but no guarantee of such favorable changes. Summary The legislation seemingly will result in one major advance fostering disclosure of some conflicts of interest, and perhaps some progress in terms of reducing perverse incentives generated by Medicare's payments to physicians, and possibly reducing regulatory capture of this process.  It likely will result in more comparative effectiveness research, but how badly it will be biased in favor of vested interests is unclear.  As far as I can tell, the legislation will leave most of the other problems we discuss on Health Care Renewal untouched.  We thus have one or two small steps for mankind, but no reason for complacency. the news is not bad, but we are still a long way from meaningfully addressing concentration and abuse of power in health care.  There will be no rest for the weary bloggers of Health Care Renewal. Also, see comments <a href="http://brodyhooked.blogspot.com/2010/03/now-its-time-to-start-clearing-land.html">here</a> and <a href="http://brodyhooked.blogspot.com/2010/03/along-for-reform-ride-sunshine.html">here</a> by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog. ADDENDUM (25 March, 2010) - Also see <a href="http://alison-bass.blogspot.com/2010/03/shining-light-on-drug-company-shell.html">comments</a> on the Sunshine Act by Alison Bass on the Alison Bass Blog.

The Health Care Reform Bill and Health Care Renewal

I have not written much about the seemingly endless health care reform debate in the US, because much of it has not been relevant to the iss...

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