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Investigations, Indictments and Guilty Pleas at Famous US Teaching Hospitals

Some of the US most prestigious academic medical centers have been receiving unusual scrutiny lately. Mount Sinai Medical Center and New York - Presbyterian Hospital. As <a href="http://online.wsj.com/article/SB10001424052748704464704575208374268651564.html">reported</a> first by the Wall Street Journal, <blockquote>Federal prosecutors are investigating allegations that bid rigging and fraud at Mount Sinai Medical Center and New York-Presbyterian Hospital resulted in the hospitals awarding contracts worth tens of millions of dollars to outside contractors. Purchasing officials at the hospitals, two of the city's largest and most prestigious, are alleged to have gotten more than a million dollars in payments from companies that were then given lucrative contracts to perform work such as re-insulating pipes and removing asbestos, according to documents filed in the Southern District of New York. Nine contractors are involved in the case. So far, eight people and three companies supplying the hospitals have pleaded guilty to charges including bid-rigging, mail fraud and tax fraud. Three more people have been indicted on similar charges. The Federal Bureau of Investigation and Internal Revenue Service have been investigating and the Justice Department's Antitrust Division is prosecuting the allegations in the case.</blockquote> Some relevant specifics: <blockquote>The most recent indictment, handed up by a federal grand jury April 6, involved the alleged awarding of more than $195,000 in maintenance and insulation contracts. Mario Perciavalle, associate director of plant services at Mount Sinai, is accused of taking at least $20,500 in cash from a Long Island City company in 2004 and 2005 in exchange for the company, unnamed in documents, winning the deals. Prosecutors also are pursuing a case involving a former official at New York-Presbyterian, Salvatore Scotto-DiVetta, a supervisor at the hospital's Facilities Operations department. He pleaded guilty in March to rigging bids for re-insulation contracts, the Department of Justice said.</blockquote> The next day, the Journal <a href="http://online.wsj.com/article/SB10001424052748704471204575210560835140390.html">reported</a>: <blockquote>Two New York-Presbyterian Hospital officials and two contractors who did business with the prestigious hospital were indicted on fraud charges Tuesday in the latest cases stemming from a federal investigation into bid-rigging and fraud. The indictment alleges that the hospital officials—Santo Saglimbeni of Armonk, N.Y., and Emilio Figueroa, whose hometown wasn't given—received payments and gifts in exchange for awarding contracts to certain companies. </blockquote> And already the box score for this investigation increased: <blockquote>As a result of the investigation, a total of five hospital employees, 10 people outside the hospitals and six companies have either pleaded guilty or face charges.</blockquote> The comments by hospital officials had a familiar ring to anyone who has been following the hearings in Washington on the global financial collapse. From the first article: <blockquote>A Mount Sinai spokesman said the hospital notified the Justice Department 'about the possibility of impropriety immediately after it was identified in an internal audit' and is cooperating with the investigation. The spokesman said the hospital dismissed the employee under investigation and instituted tougher contracting systems.</blockquote> From the second: <blockquote>New York-Presbyterian was an 'unknowing victim of these alleged crimes,' a hospital spokeswoman said. She also said that the staffers named in the indictment no longer work at the hospital, and it is cooperating with the investigation.</blockquote> Partners Healthcare System <a href="http://www.boston.com/business/healthcare/articles/2010/04/29/justice_department_launches_antitrust_review_of_partners_healthcare/">Just out</a> today in the Boston Globe: <blockquote>The US Department of Justice has opened a civil investigation into possible anticompetitive behavior by Partners HealthCare System Inc., the region’s most powerful hospital and physician network. In a letter sent to Partners and the state’s three largest health insurers on April 19, investigators from the Justice Department’s antitrust division demanded documents relating to Partners’ 'contracting and other practices in health care markets in Eastern Massachusetts.' The letter, obtained by the Globe, said the probe sought to determine whether the practices violated the Sherman Antitrust Act, which bars companies from using their market power to limit trade or artificially raise prices. </blockquote> The background is: <blockquote>Boston-based Partners has been under growing scrutiny because of its market power and ability to draw high prices from insurers. The company employs about 5,500 physicians and operates a half dozen smaller hospitals, in addition to their prestigious Harvard-affiliated Boston teaching hospitals, Mass. General and the Brigham. Earlier this year, Attorney General Martha Coakley issued a report documenting that Massachusetts insurance companies pay some hospitals and doctors, including those in the Partners network, twice as much money as others for essentially the same patient care. The report pointed to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs. A 2008 Globe Spotlight Team series focused on the Boston market found that hospitals such as Mass. General and the Brigham typically are paid 15 to 60 percent more for essentially the same work as other hospitals. Soon after that series, Coakley launched her investigation into whether Partners and Blue Cross-Blue Shield, the state’s largest health insurer, may have illegally colluded to increase the price of health insurance statewide over the last decade, according to several legal and government sources.</blockquote> And again, the official response had a familiarly evasive ring: <blockquote>Partners spokesman Rich Copp yesterday noted that the hospital network already has supplied similar information to investigators from the state attorney general’s office, which launched its own review of Partners’ contracting practices last year. He noted in Partners’ defense that it vies with other providers in the area’s 'highly competitive' health care market. 'The Department of Justice has requested the same information that we have provided to the attorney general’s office,' said Copp. 'We will continue to cooperate with both government agencies during this ongoing analysis of health care in Massachusetts.'</blockquote> Summary So there it is.  Multiple indictments for and guilty pleas to charges of bid-rigging and fraud at two New York academic medical centers, and state collusion and federal anti-trust investigations of a Massachusetts hospital system.  The issues involve four of the most prestigious teaching hospitals in the US. Of course, not all the indictments may result in convictions, and the investigations may not result in charges.  But this involves some institutions that at one time would have appeared beyond reproach.  The lack of clear denials from the inevitable official spokespeople, and attempts to deny responsibility for the actions of employees elsewhere identified as "officials" do not provide much reassurance. Of course, readers of Health Care Renewal would have known that questions could be raised about leadership and governance of these once-revered institutions.  Questions could be raised about the incentives implied by the <a href="http://hcrenewal.blogspot.com/2009/12/98-million-dollar-man.html">huge compensation</a> given to the top hired executives at New York - Presbyterian, awarded by a <a href="http://hcrenewal.blogspot.com/2009/12/with-leaders-like-these.html">board of trustees</a> that includes some of the leaders of the more prominent failed finance corporations involved in the global financial collapse.  <a href="http://hcrenewal.blogspot.com/2009/01/to-whom-did-scorpions-in-bottle-owe.html">Questions</a> could be raised about the dominant presence of finance leaders and possibly <a href="http://hcrenewal.blogspot.com/2009/06/mans-best-hospital-run-by-boss-of-mecc.html">conflicted</a> individuals on the Partners board, and apparent interlocks among Partners leadership and the leadership of the largest health insurer in Massachusetts, which was willing to <a href="http://hcrenewal.blogspot.com/2009/01/scorpions-in-bottle-shook-hands-secret.html">pay that system so much.</a> Maybe, instead of <a href="http://hcrenewal.blogspot.com/2010/04/pondering-leadership.html">lecturing</a> the more lowly among us about our responsibilities to improve health care, the leaders of our previously most august health care institutions need to introspect more about their own responsibility to address the metastasis of "greed and incompetence" in health care from the financial sector.

Investigations, Indictments and Guilty Pleas at Famous US Teaching Hospitals

Some of the US most prestigious academic medical centers have been receiving unusual scrutiny lately. Mount Sinai Medical Center and New Yor...

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Judge Rejects Prosecutors' Lenient Settlement of the Case of the Hidden Defibrillator Defects

We <a href="http://hcrenewal.blogspot.com/2010/04/explaining-health-care-executives.html">just discussed</a> the proposed settlement of a case in which the Guidant subsidiary of Boston Scientific was alleged to have withheld information about defects in its implantable cardiac defibrillators that were associated with six patient deaths (see next most recent post <a href="http://hcrenewal.blogspot.com/2010/04/who-guards-guardians-case-of-boston.html">here</a> with more complete summary).  The devices were manufactured in 2000-02, and the issue first became public in 2005.  The proposed settlement included a seemingly large fine for the company.  Now the New York Times has <a href="http://www.nytimes.com/2010/04/28/health/28device.html">reported</a> that the presiding judge has rejected the settlement as too lenient. <blockquote>A federal judge in Minnesota on Tuesday rejected a plea agreement between the federal government and the Guidant Corporation, saying that the deal did not hold the company sufficiently accountable for an episode in which it sold potentially flawed heart defibrillators. The ruling was a setback for the Justice Department, which had characterized the agreement as a demonstration of its get-tough approach to corporate crime. The deal called on Guidant to plead guilty to two misdemeanors and pay a $296 million fine, described as the largest by a medical device company. But in his opinion, the judge, Donovan W. Frank of United States District Court said the provisions of the agreement were 'not in the best interest of justice and do not serve the public’s interest because they do not adequately address Guidant’s history and the criminal conduct at issue.'</blockquote> The story brought several peculiar aspects of the settlement to light. - The settlement seemed to ignore the most egregious misconduct alleged: <blockquote>Recently, prosecutors charged in court papers that Guidant had knowingly sold potentially flawed defibrillators. But that issue was not addressed in the plea agreement. Instead, the company agreed to plead guilty to two misdemeanor charges that related to the completeness and accuracy of its filings with the Food and Drug Administration.</blockquote> - It was not really the Guidant subsidiary that was going to plead guilty, but a new entity apparently constructed solely to "take the rap." <blockquote>The company created to enter Guidant’s plea, Guidant LLC, existed only on paper. In his ruling, Judge Frank took direct aim at that argument, suggesting it contradicted the Justice Department’s own public statements about the case. He noted that a department news release said Guidant’s plea deal was 'about accountability.' Judge Frank wrote, 'The interests of justice are not served by allowing a company to avoid probation simply by changing their corporate form.' </blockquote> So, the judge demanded that at least the company be put on probation, and possibly be required to do some good works: <blockquote>Judge Frank said that prosecutors should have sought probation for Guidant and its parent, Boston Scientific. Probation would have required the companies to take certain steps, like helping to rebuild public confidence in the safety of heart devices, in addition to paying a fine. The judge also outlined other provisions that might be suitable in a new plea deal, including charitable activities by Guidant to improve heart device safety and improve medical care among minority patients. Daniel R. Margolis, a lawyer in New York who works on medical product cases, said that probation is effectively a way for a court to maintain some control over a company’s activities after it pays a financial penalty. </blockquote> However, the judge felt he could not require prosecution of the actual people who authorized, directed, or implemented the misbehavior at issue. <blockquote>After a hearing this month, several doctors and patients wrote to Judge Frank urging him to reject the deal and arguing that former Guidant executives should be criminally charged in the case. But Judge Frank noted in his ruling that it was up to prosecutors, not a court, to decide who should be prosecuted. </blockquote> We have discussed a series of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">settlements</a> and <a href="http://hcrenewal.blogspot.com/search/label/crime">convictions</a> resolving cases of alleged wrong-doing by health care organizations.  Almost none included any penalties for people who authorized, directed or implemented the bad behavior.  None of the financial penalties were so big as to be more than another cost of doing business for the organizations involved.  Some of the cases included gimmicks, like a subsidiary constructed only to plead guilty, that otherwise seemed to lessen accountability.  Despite the US Justice Department's assertion of a new "get-tough" approach, this new settlement did not seem like any more of a deterrent to bad behavior than the parade of settlements that cam before, that is, until Judge Frank acted.  We applaud the judge for trying to hold at least one large health care organization accountable for its misdeeds.  However, 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.

Judge Rejects Prosecutors' Lenient Settlement of the Case of the Hidden Defibrillator Defects

We just discussed the proposed settlement of a case in which the Guidant subsidiary of Boston Scientific was alleged to have withheld infor...

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Pondering Leadership

This blog often talks about the failure of leaders in health care. The <a href="http://hbr.org/archive-toc/BR1004">April, 2010, issue</a> of Harvard Business Review boasts an entire "Spotlight" Section on this subject. Perhaps the two most interesting articles in this section, both by big names--<a href="http://www.hsph.harvard.edu/faculty/atul-gawande/">Atul Gawande</a> and <a href="http://www.hsph.harvard.edu/faculty/thomas-lee/">Tom Lee</a>--among today's medical chattering classes, are entitled, respectively, "Health care needs a new kind of hero," and "Turning doctors into leaders." The first, an interview, first touts the good doctor's vaunted emphasis on <a href="http://www.usatoday.com/news/health/2010-01-27-checklist27_st_N.htm">checklists</a>, then goes on to plead for improved training in team-play: "we don't train physicians how to lead teams or be team members." The second, by Dr. Lee, is more substantive. The network president of Boston's Partners Healthcare System and CEO of Partners Community HealthCare, formed quite a while back by Brigham and Women's and MGH joining forces, Lee makes a longer version of the same argument which boils down, essentially to, "docs need to learn to play nice." He <a href="http://hbr.org/2010/04/turning-doctors-into-leaders/ar/1">starts</a> with the plea we've heard so often before, it sounds like elevator music: <blockquote>The problem with health care is people like me—doctors (mostly men) in our fifties and beyond, who learned medicine when it was more art and less finance. We were taught to go to the hospital before dawn, stay until our patients were stable, focus on the needs of each patient before us, and not worry about costs. We were taught to review every test result with our own eyes—to depend on no one. The only way to ensure quality was to adopt high personal standards for ourselves and then meet them. Now, at many health care institutions and practices, we are in charge. And that’s a problem, because health care today needs a fundamentally different approach—and a new breed of leaders.</blockquote>Seems unexceptionable, as far as it goes. Maybe I'm just a crank who preceded Dr. Lee at his alma mater by, oh, say, a decade or so, but I'm feeling just a wee bit brassed off at hearing, yet again, <a href="http://macleans.files.wordpress.com/2009/04/pogo-enemy-21.jpg?w=512&h=294">Pogo</a>'s same tired old "we have met the enemy and he is us" plaint. Here it is, from Dr. Lee himself: <blockquote>The usual suspects have surprisingly small roles. Greed and incompetence surely exist, but economists agree that they don’t account for double-digit annual cost increases on their own. </blockquote>Oh really? So let me see here, what we really need is more folks like Tom Lee, folks who are willing to apply "Tough Medicine" and understand that "Performance Matters." A whiff of the self-serving here. Being "tough" here means being a good measurement wonk, holding doctors to "results" standards. While one could never wholly disagree with this sentiment, or conviction, or whatever it is, what's missing is the big picture. For starters, the problem of executives with purely technocratic solutions. Which is partly why, in this observer's humble view, we continue to have this "anechoic effect." That's the one critics of the larger defects in the health care system don't just get drowned out by technocratic Pogo-talk. They really aren't much heard at all. The defects include rotten information technology, corrupt hospital and insurance leaders, and insurance companies cocky enough to crow, eleven days after <a href="http://docs.house.gov/rules/hr4872/111_hr4872_amndsub.pdf">HR 4872</a>, and now <a href="http://http//www.healthreform.gov/newsroom/children_preexisting.html">quoting </a>Secretary Sebelius, they're "allowed to insure a child, but exclude treatments for that child’s pre-existing condition." Why don't the self-professed next-gen leaders ever talk about this stuff? A recent New York Times op-ed <a href="http://www.nytimes.com/2010/04/19/opinion/19mon4.html?pagewanted=print">piece</a> suggested one answer. I read it and slapped my forehead, "of caws!" Adam Cohen, the author, is describing why the Cassandras--hey, there are a few of those in this blog, eh wot?--don't get heard. Why they disappear into the anechoic chamber. In this case, on the topic of the 2008-2009 meltdown in the broader economy. <blockquote>Incompetence often plays a role. So does ideology: one reason [Federal Reserve governor Edward] Gramlich, a Democratic nominee, was ignored was that his warnings clashed with the antiregulatory convictions of the Bush administration. In other cases, to borrow Al Gore’s phrase, an “inconvenient truth” imposes burdens that people don’t want or threatens powerful interests. </blockquote>Cassandras warning about the Catholic Church's abuses, about Bernie Madoff, about 9-11: you can find 'em all. But Cohen's is not a rant. It's a reasoned explanation of why warnings don't get listened to. So here are a couple warnings. Neither Tom Lee-style technocratic "let's pull up our socks" answers, nor HR 4872, get anywhere near solving the problems that continue to plague this country's bloated health care system. Primary care continues to <a href="http://www.annals.org/content/150/4/272.full">circle the drain</a>. Health care leaders continue to line their own pockets, basically betting against the system's ability to sustain this percentage of the GDP [this blog, passim]. I guess it's just the old dance. Leaders in lofty positions in Harvard organizations learn to measure their words and advance their own "be like me" agendas, while the Cassandras sit out there in the blogosphere and thump their chests. But wouldn't it be grand if just occasionally, the Tom Lees of the world grew some cojones and really stood up to those who're milking our system for everything it's worth? Or are they too busy <a href="http://hcrenewal.blogspot.com/search/label/Partners%20Healthcare">managing </a>their own conflicts of interest and sweetheart <a href="http://www.boston.com/business/healthcare/articles/2010/04/29/justice_department_launches_antitrust_review_of_partners_healthcare?mode=PF">deals</a>?

Pondering Leadership

This blog often talks about the failure of leaders in health care. The April, 2010, issue of Harvard Business Review boasts an entire ...

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Oh, the Prices We Pay, Reloaded - Celgene Balks at Explaining High Price of Thalidomide

A brief <a href="http://preview.bloomberg.com/news/2010-04-22/celgene-to-get-hearing-before-canada-s-supreme-court-over-thalomid-pricing.html">article</a> on Bloomberg.com implied that Celgene has been fighting efforts by the Canadian Patented Medicine Prices Review Board to get pricing data about the drug Thalidomid (thalidomide): <blockquote>Celgene Corp., the biotechnology company specializing in blood-cancer medicines, will get a hearing before Canada’s highest court over the country’s demands to provide pricing information for the drug Thalomid. The Supreme Court of Canada today agreed to hear Celgene’s appeal of a Federal Court of Appeal ruling that said Canada’s Patented Medicine Prices Review Board was entitled to information about the pricing of the drug. The high court gave no reason for its decision. Celgene’s two top-selling drugs are Revlimid and Thalomid, for a form of blood-cancer called multiple myeloma. They brought in more than 80 percent of the company’s total $2.25 billion in 2008 revenue.</blockquote> It should be no surprise that Celgene may be sensitive about the price of Thalidomid. We <a href="http://hcrenewal.blogspot.com/2005/07/oh-prices-we-pay-thalidomide-for.html">posted</a> back in 2005 about the stratospheric prices of new drugs that seemed disproportionate to manufacturing and development costs on one hand, and the value of the drugs for patients on the other. We noted that thalidomide, a very old drug that notoriously was found to cause birth defects when it was given to pregnant women, but that then showed promise as an anti-cancer drug, was being marketed in the US for $29 per capsule (approximately $25,000 a year), while a generic form sold in Brazil for $0.07 per capsule.   The amount Celgene manages to make from this very old (and demonstrably cheap to produce) molecule is vivid, albeit anecdotal evidence about what has gone wrong with health care prices in the US.  Despite health care insurance companies' protestations that their goal is to provide reasonably priced health care, they seem utterly incapable of negotiating down the prices of even the most obviously over-priced drugs.  And the US government Medicare program so far is prohibited by law from negotiating prices.  How our supposed free market health care system has tilted so far in favor of pharmaceuticals is a reason to wonder, but ought to be reason to investigate.    Meanwhile, <a href="http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzcyNzkwfENoaWxkSUQ9MzcwMzAxfFR5cGU9MQ==&t=1">Celgene's 2010 annual report</a> shows that the company has sold more than $400 million worth of Thalidomid yearly since 2007. The company's total sales in 2009 were $2.567 billion, while it spent $795 million on research and development, and $754 million on general, sales, and administrative expenses. According to the company's <a href="http://ccbn.10kwizard.com/xml/download.php?repo=tenk&ipage=6278317&format=PDF">2009 proxy statement</a>, in 2008 its CEO received over $8.5 million, its COO over $5.1 million, its CFO over $2.1 million in compensation, and a senior vice president over $3.0 million. The total compensation of its five highest-paid hired managers (compare to a total of 2813 full-time employees in 2009), approximately $20.5 million 2008, was was approximately 2.6% of the company's net income in 2009, and just under 1% of its total sales.   As we have <a href="http://hcrenewal.blogspot.com/2009/12/more-air-into-health-care-bubble-30000.html">said previously</a>, so the <a href="http://hcrenewal.blogspot.com/2009/12/health-care-bubble-parallels-with.html">health care bubble</a> continues to inflate.  One cause is"<a href="http://hcrenewal.blogspot.com/2009/12/compensation-madness-insiders-hijacking.html">compensation madness</a>," including "insiders hijacking established institutions for their personal benefit."  Another is the amazing acquiescence of those who pay bills at all levels, from the individuals who ultimately fund health care through salary dollars not earned, health insurance premiums, co-pays and the like, and tax payments, through the health care insurers and government agencies who did not balk at paying $25,000 a year for thalidomide in 2005.  If we really want to provide accessible health care of good quality and a reasonable cost, we will need to develop mechanisms to pay more reasonable amounts for health care goods and services. This will require some courage facing down the corporate and organizational insiders who have made themselves very rich from the current craziness.

Oh, the Prices We Pay, Reloaded - Celgene Balks at Explaining High Price of Thalidomide

A brief article on Bloomberg.com implied that Celgene has been fighting efforts by the Canadian Patented Medicine Prices Review Board to ge...

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BLOGSCAN: CMSS New Ethics Code Analyzed

BLOGSCAN: CMSS New Ethics Code Analyzed

The Council of Medical Specialty Societies got some good press for its new code of ethics regarding medical associations' interaction wi...

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Explaining Health Care Executives' Impunity - the (Unexplained) Leniency of Prosecutors

On Health Care Renewal, we noted many <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> and <a href="http://hcrenewal.blogspot.com/search/label/crime">criminal</a> convictions in cases alleging unethical behavior by health care organizations.  Some organizations have settled, and/or pleaded guilty, and/or been convicted numerous times.  And we have said repeatedly, (e.g., <a href="http://hcrenewal.blogspot.com/2010/04/who-guards-guardians-case-of-boston.html">here</a>) such legal actions will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Relatively small fines imposed on large corporations pain workers on the line and stockholders while sparing the richly paid top hired management and the boards that will not reign them in. A recent <a href="http://www.nytimes.com/2010/04/21/business/21device.html">article</a> in the New York Times about a plea agreement in a case in which the Guidant subsidiary of Boston Scientific was alleged to have withheld information about defects in its implantable cardiac defibrillators that were associated with six patient deaths (see most recent post <a href="http://hcrenewal.blogspot.com/2010/04/who-guards-guardians-case-of-boston.html">here</a>) throws some light onto the apparent impunity of top health care leaders.  The article reiterated: <blockquote>In recent years, the Justice Department has won hundreds of millions of dollars in fines from drug and device makers, including a string of cases in which the companies have pleaded guilty to violating federal laws. But corporate executives rarely face criminal charges in such actions....</blockquote> The article noted: <blockquote>“Prosecutors want the money,” said Mr. Fleder, of Hyman, Phelps & McNamara. “And at least in the big money settlements they have had in pharma cases, it appears that prosecutors are willing to settle even if it means forgoing prosecutions against individuals.” </blockquote> Yet, as we have said, <blockquote>Short of executives facing prosecution, companies see the hefty financial settlements demanded by the Justice Department as another price of doing business, industry critics say.</blockquote> There does not seem to be a legal barrier to holding these executives accountable: <blockquote>... they can be held liable under federal law for regulatory violations that occur on their watch — whether or not prosecutors can prove the executives participated in the wrongdoing or even knew about it. </blockquote> But if this is so, why have corporate leaders not faced such penalties before? An experienced prosecutor explained it at one level: <blockquote>A former prosecutor in many drug and medical device-related cases, Michael K. Loucks, said he never charged corporate executives with misdemeanors — which apply in cases when the violations are deemed unintentional — because he believed that being barred from the industry was too harsh a consequence. “I think that if you are going to take actions that take away someone’s liberty or livelihood, you should have to prove felony conduct,” said Mr. Loucks, who spent over 20 years as an assistant United States attorney in Boston. </blockquote> This ends up as a very disturbing response. Professionals who hold positions of trust in society, most particularly health care professionals, can lose their livelihood for unprofessional conduct or unethical actions that are not felonies, or even criminal. In health care (and in some other fields, like law), professionals are held to a higher standard that merely avoiding conviction for felonies. (For examples, peruse the lists of doctors and other health care professionals whose licenses were suspended or revoked by state medical boards.) In our current world of commercialized health care, leaders of large health care organizations can take actions that have as important consequences for peoples' health and safety as the individual actions of doctors and nurses. Why should they not be at risk of the loss of their current livelihood for actions that risk peoples' health and safety? I do not know why an experienced prosecutor felt that health care executives deserved so much more leniency than health care professionals may receive from medical boards. Maybe in the future we will begin to hold those who authorized or directed unethical actions that risk health and safety accountable.

Explaining Health Care Executives' Impunity - the (Unexplained) Leniency of Prosecutors

On Health Care Renewal, we noted many legal settlements and criminal convictions in cases alleging unethical behavior by health care organ...

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Pay for Hypocrisy for Health Insurance Executives

A few weeks ago, we <a href="http://hcrenewal.blogspot.com/2010/04/what-me-worry-leaders-prosper-despite.html">discussed</a> the cognitive dissonance produced by huge salary boosts for top executives of health care companies with miserable ethical track records.  One of our examples contrasted a long list of ethical violations by US giant health insurance company/ managed care organization WellPoint and the huge raises given its CEO and top executives.  Now more ethical questions are being raised about WellPoint. Rate Hikes Retrospectively for Golden Parachutes An op-ed published in several California newspapers (here <a href="http://www.sonomanews.com/articles/2010/04/15/opinion/doc4bc7c85a64e96634362792.txt">via the Sonoma Index-Tribune</a>) claimed that the huge rate hike that WellPoint's California subsidiary proposed earlier this year, an action that helped to revitalize the US legislative health care reform process, was meant to recoup costs of a previous merger that the company had agreed not impose on its policy-holders: <blockquote>Nobody at Anthem Blue Cross, the firm that's now a poster boy for out-of-control health insurance premiums, likes remembering the company's days of high anxiety back in 2004, when California's then-Insurance Commissioner John Garamendi was holding up its $18 billion deal to take over Thousand Oaks-based WellPoint and its California Blue Cross subsidiary. A frequent resister of insurance rate increases, he at least wanted to make sure Anthem didn't pass along the inflated price it paid for WellPoint to Blue Cross customers. So he refused for months to sign off on the merger, a form of passive resistance that threatened to hold up the entire deal, which also involved WellPoint insurance subsidiaries in other states. ...in the process, he achieved some things for California consumers: Anthem formally agreed to forego any rate increases for Blue Cross customers to cover the costs of the merger, which increased more than $2 billion during the delay as WellPoint shares rose from $91 to $113 between the day the deal was announced and the day it went through. The company also promised to invest $200 million over 10 years in under-served communities through California's Healthy Families program, plus another $15 million on children's insurance programs and $50 million for training nurses and operating clinics in California. It wasn't as good as keeping California Blue Cross a California company, but at least it was something. 'Was' now appears likely to be the operative word, because there is no way the cost of medical tests, doctor and hospital fees and medical supplies has risen 39 percent in one year, a claim made by Anthem executives while testifying before Congress and state legislative committees. Nope, it's now clear that, even if Anthem doesn't admit it, a good part of its rate increase would go to replenish corporate cash spent on the WellPoint takeover. It's been just over five years since that deal was completed, with Anthem adopting the WellPoint name for its parent company, much as North Carolina-based NationsBank renamed itself Bank of America after taking over the B of A. The Anthem tag was then hung on California Blue Cross. That's enough time so the corporation can conveniently maintain it has lived up to its written commitment not to make customers pay for its high-priced acquisition - while in reality making them do just that. For certain, the huge price increases Anthem may now assess violate the spirit of its agreement with Garamendi, even if they might not violate the letter of that deal.</blockquote> Note that this article did not make explicit what  "costs of the merger" Mr Garamendi did not want policy-holders to pay for.  As <a href="http://www.usatoday.com/money/industries/insurance/2004-11-09-anthem-wellpoint_x.htm">contemporaneous coverage</a> of the negotiations by USAToday made clear, these included golden parachutes for some of the executives involved. <blockquote>Commissioner John Garamendi was the last major stumbling block to the $16.4 billion deal, delaying the merger of a piece of the company, Blue Cross Life & Health, over which he had jurisdiction. His main concerns were costs to policyholders and the size of executives' golden parachutes, estimated at $200 million to $600 million. WellPoint CEO Leonard Schaeffer alone is expected to get a package worth $53.5 million in cash, stock options and pension payments when the deal is completed.</blockquote> Now, of course, it appears that the policy-holders are being called upon to retrospectively reimburse the company for the outrageous amounts it gave to executives back then, who may turn out to have been the biggest beneficiaries of the merger. Turning Administrative into Patient Care Costs Then, an <a href="http://www.washingtonpost.com/wp-dyn/content/article/2010/04/17/AR2010041702658.html">article</a> in the Washington Post reported how WellPoint was reclassifying administrative costs as patient care costs to fulfill an upcoming requiement of health care reform to spend at least 80 percent of premiums on health care. <blockquote>The idea was simple enough: Make sure that health insurers spend the vast majority of their revenue on patient care, instead of using it for things such as advertising, profits and executive pay. To that end, the new health-care law says an insurer must give money back to consumers if it devotes less than 80 percent of premiums to paying medical claims and improving care. For insurers serving large groups, the target is 85 percent. But even before the health-care overhaul was signed into law last month, one of the nation's largest insurance companies reclassified certain expenses in a way that increased its so-called medical-loss ratio. In January, WellPoint began including under medical benefits such costs as nurse hotlines, 'medical management,' and 'clinical health policy,' a WellPoint executive said in a March briefing for investors. </blockquote>To be clear, while it may be that "nurse hotlines" actually involve care for patients, it is hard to fathom what "medical management" by an insurance company means.  Certainly, "clinical health policy" is not direct patient care. Targeting Breast Cancer Patients for Insurance Policy Cancellation At least the above two cases were only about money. The third case affects patient care. A <a href="http://news.yahoo.com/s/nm/20100422/bs_nm/us_wellpoint_cancer">Reuters report </a>showed how WellPoint deliberately targeted every patient who developed breast cancer for a fraud investigation, often resulting in findings of minor irregularities in insurance applications that the company used as pretexts to retroactively cancel the patients' policies. Many of these patients then could not get needed cancer care. <blockquote>...WellPoint was using a computer algorithm that automatically targeted them and every other policyholder recently diagnosed with breast cancer. The software triggered an immediate fraud investigation, as the company searched for some pretext to drop their policies, according to government regulators and investigators. Once the women were singled out, they say, the insurer then canceled their policies based on either erroneous or flimsy information. WellPoint declined to comment on the women's specific cases without a signed waiver from them, citing privacy laws. That tens of thousands of Americans lost their health insurance shortly after being diagnosed with life-threatening, expensive medical conditions has been well documented by law enforcement agencies, state regulators and a congressional committee. Insurance companies have used the practice, known as 'rescission,' for years. And a congressional committee last year said WellPoint was one of the worst offenders. But WellPoint also has specifically targeted women with breast cancer for aggressive investigation with the intent to cancel their policies, federal investigators told Reuters.</blockquote> Not only did this seem heartless and unethical, it demonstrated the hypocrisy of WellPoint's leadership. <blockquote>The revelation is especially striking for a company whose CEO and president, Angela Braly, has earned plaudits for how her company improved the medical care and treatment of other policyholders with breast cancer.</blockquote> Specifically, <blockquote>Singling out women with breast cancer for aggressive investigation with the intent of canceling their insurance stands in stark contrast not only to the public image WellPoint cultivates for itself but also to the good work it does for many other policyholders with breast cancer. WellPoint CEO Braly has taken a strong personal interest in women's health issues. Foremost among them is how to increase services to people with breast cancer. The company prides itself on being one of the United States' largest corporations with women at the helm. Besides Braly, two high-powered, politically connected women sit on WellPoint's board: Susan Bayh, the wife of retiring Democratic Sen. Evan Bayh of Indiana, and Sheila Burke, who was chief of staff to former Senate Republican leader Bob Dole. On Braly's initiative, WellPoint has funded groundbreaking studies about the disparities in quality of health care to minority women -- including women with breast cancer. WellPoint has worked to encourage mammography for at-risk women. Personalized letters -- followed up by phone calls -- are sent to more than 80,000 women between the ages of 52 and 69 if they have not had a mammogram in the past year. The company conducts automated calls for women ages 40 to 69 to make sure they are getting mammograms. Once diagnosed, WellPoint has set up an 'Breast Cancer Resource Center' for its policyholders to help them 'navigate the complex health care system.' And in May 2009, WellPoint's charitable foundation, the WellPoint Foundation LLC, provided a grant for the American Cancer Society for its 'Hope Lodges,' which allow cancer patients and family members free lodging and support while receiving care far from home.</blockquote> The only explanation provided in the article for this behavior was that politically correct concerns about womens' health issues only go so far, money is more important. <blockquote>Why would WellPoint on the one hand work to improve health care for women with breast cancer while automatically investigating every single woman diagnosed with breast cancer for possible cancellation of their policies? Karen L. Pollitz, a research professor at the Health Policy Institute at Georgetown University, offers one possible explanation: 'It is important for these companies' profit margins that they get rid of policyholders with expensive diseases,' she said.</blockquote> I would add also that these profit margins provide the excuses for baronial compensation for the company's top executives.  Parenthetically, the article also noted that WellPoint had lobbied against provisions in the health care reform bill that might have threatened its ability to retrospectively cancel insurance policies after their holders got sick: <blockquote>Many critics worry the new law will not lead to an end of these practices. Some state and federal regulators -- as well as investigators, congressional staffers and academic experts -- say the health care legislation lacks teeth, at least in terms of enforcement or regulatory powers to either stop or even substantially reduce rescission. 'People have this idea that someone is going to flip a switch and rescission and other bad insurance practices are going to end,' says Peter Harbage, a former health care adviser to the Clinton administration. 'Insurers will find ways to undermine the protections in the new law, just as they did with the old law. Enforcement is the key.' During the recent legislative process for the reform law, however, lobbyists for WellPoint and other top insurance companies successfully fought proposed provisions of the legislation. In particular, they complained about rules that would have made it more difficult for the companies to fairly -- or unfairly -- cancel policyholders. For example, an early version of the health care bill passed by the House of Representatives would have created a Federal Office of Health Insurance Oversight to monitor and regulate insurance practices like rescission. WellPoint lobbyists pressed for the proposed agency to not be included in the final bill signed into law by the president. They also helped quash proposed provisions that would have required a third party review of its or any other insurance company's decision to cancel a customer's policy.</blockquote> Furthermore, an <a href="http://www.huffingtonpost.com/jane-hamsher/wellpoint-lobbyists-axed_b_548220.html">article</a> on the Huffington Post noted that a former WellPoint executive seems to have written a good part of the health care reform legislation: <blockquote>As Marcy Wheeler reported last year, the Senate Finance Committee bill was written by former WellPoint VP Liz Fowler, who left her position at the insurance company in February 2009 expressly for the purpose of helping the committee to draft the health care bill. And when Max Baucus did a 'victory lap' after the health care bil passed, he expressly thanked Fowler for her work: 'I wish to single out one person, and that one person is sitting next to me. Her name is Liz Fowler. Liz Fowler is my chief health counsel. Liz Fowler has put my health care team together. Liz Fowler worked for me many years ago, left for the private sector, and then came back when she realized she could be there at the creation of health care reform because she wanted that to be, in a certain sense, her profession lifetime goal. She put together the White Paper last November-2008-the 87-page document which became the basis, the foundation, the blueprint from which almost all health care measures in all bills on both sides of the aisle came.'</blockquote> Summary To make this more personal than these posts usually are, I wonder how WellPoint CEO Angela Braly sleeps in whatever luxurious accomodations her eight-figure compensation affords her?  I wonder how all the other current and former WellPoint leaders who styled themselves great proponents of "womens' health issues" can live with putting profits ahead of the care of breast cancer patients? Adding this latest list of ethical offenses to those we discussed earlier, WellPoint is beating out the heavy corporate competition as an example of the hypocrisy produced by putting imperial CEOs and their trusty hench-people ahead of every other consideration.  It has also become a premier example of how self-interested leadership can raise costs, decrease access, and degrade clinical care.  It further shows how compensating health care leaders to the point where they become imperial also grants them the power to fend off most threats to their power.  (Consider what health care reform might have become if it were orchestrated by people really interested in improving care, controlling costs, and increasing access, rather than by imperial CEOs who just wanted to become more imperial.)  If we truly want health care that is accessible, of high quality, at a fair price, and more importantly, if we want health care that is honest and focused on patients, we need to provide health care leaders with clear, rational incentives in these directions, and make them fully accountable for their actions, and the courses of their organizations under their leadership.

Pay for Hypocrisy for Health Insurance Executives

A few weeks ago, we discussed the cognitive dissonance produced by huge salary boosts for top executives of health care companies with mise...

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