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St. Jude Medical Settles

We could not let more than a week go by without discussing another legal settlement by a major health care organization.  <a href="http://www.twincities.com/business/ci_15230972?nclick_check=1">From the Pioneer Press</a>, <blockquote>Little Canada-based St. Jude Medical will pay $3.7 million to resolve allegations the medical device company provided kickbacks to hospitals in Kentucky and Ohio to secure sales of heart devices, the U.S. Department of Justice announced Friday. The government alleged that St. Jude Medical provided rebates that were retroactive and paid based on a hospital's previous purchases of heart device equipment from the company. Prosecutors also charged that St. Jude Medical paid rebates for purchases of heart-device equipment sold by its competitors to induce purchases of similar equipment from St. Jude Medical in the future. </blockquote> As I understand it, the issue was that the rebates did not amount to a simple volume discount, but were given only if the hospital allowed St. Jude to become its dominant supplier of certain devices, for example, <blockquote>One such rebate was offered to Parma Community General Hospital in Parma, Ohio, a suburb of Cleveland, according to settlement papers made available by the government on Friday. The medical center could earn discounts on products if it gave St. Jude Medical 90 percent of its annual usage of mechanical heart valves, 80 percent of its annual usage of conventional pacemakers and 50 percent of its annual usage of conventional implantable defibrillators, according to the settlement agreement. The two-year contract began in April 2003 and St. Jude Medical at the time did not have government approval to sell newer 'biventricular' pacemakers and ICDs. A rival company, however, did have approval for such products, and the settlement agreement asserts that St. Jude agreed to give the Ohio hospital a rebate for each biventricular pacemaker and ICD purchased from the competitor so long as Parma hospital maintained market share targets on St. Jude Medical products. 'The contract also mandated that once (St. Jude Medical) gained Food and Drug Administration approval for its own biventricular devices, the rebates would end, and (Parma) could earn discounts by giving (St. Jude Medical) 80 percent of its annual usage of biventricular pacemakers, and 50 percent of its annual usage of biventricular ICDs,' the settlement agreement states. </blockquote> What was the problem with this? <blockquote>'Hospitals should base their purchasing decisions on what is in the best interests of their patients,' Tony West, assistant attorney general for the Justice Department's civil division, said in a statement. </blockquote> St. Jude's response was that it was all so trivial and so long ago, <blockquote>In a statement issued Friday, St. Jude Medical said: 'The allegations centered on small, isolated product rebates that the company paid more than five years ago. The company entered into a settlement agreement in order to avoid the potential costs and risks associated with litigation.' </blockquote> So add another marcher in the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">parade of legal settlements</a>. While most of the marchers in this parade seem to be pharmaceutical companies, it appears that device manufacturers are trying to catch up. We have been noting new entrants to this parade for a while mainly as a way to document how often health care organizations, including some of the largest and seemingly most respectable organizations, have been accused of unethical conduct.  Often this conduct seems likely to increase health care costs, by driving up the prices of goods or services, or by encouraging the use of expensive tests or treatments when perhaps something simpler and cheaper would be just as good for the patient.  Sometimes, this conduct seems likely to decrease health care quality, and worsen patient outcomes because the tests or treatments being pushed by the unethical behavior may be less effective, and/or more likely to cause harm than other credible alternatives. We also have repeatedly said that the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior.  Even large fines (and the one described above would be peanuts to a large health care corporation) can be regarded just as a cost of doing business.   Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

St. Jude Medical Settles

We could not let more than a week go by without discussing another legal settlement by a major health care organization. From the Pioneer P...

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Before we revolutionize medicine via spending hundreds of billions on IT, perhaps we should first fix this problem

Before we revolutionize medicine via spending hundreds of billions on IT, maybe we should first fix a far more tractable problem. From Health Beat and Maggie Mahar: <blockquote><a href="http://www.healthbeatblog.com/2010/06/a-new-survey-reveals-what-most-hospitals-patients-dont-know-about-the-residents-who-care-for-them-pa.html">A New Survey Reveals What Most Hospitals Patients Don’t Know About the Residents Who Care For Them</a>-- Part 1 <div class="entry-content"> <div class="entry-body">Summary: Most hospital patients have no idea that the resident treating them could be coming to the end of a 30-hour shift. If he is exhausted, the resident’s judgment may be impaired. Yesterday, the union that represents some 13,000 residents and interns nationwide (CIRSEIU), the American Medical Student Association (AMSA) Public Citizen, the consumer advocacy organization based in Washington DC, , as well as sleep scientists at the Harvard Medical School’s Division of Sleep, announced the results of survey published in BMC Medicine, revealing how little the public knows about residents’ hours. Sleep deprivation is likely to lead to errors; residents themselves acknowledge that lack of sleep has caused them to make mistakes that harm, and sometimes even kill patients. Exhaustion also affects how they feel about their patients.In 2008, the Institute of Medicine (IOM) recommended capping shifts at 16 hours, saying that longer shifts are unsafe for patients and residents themselves. The Accreditation Council on Graduate Medical Education (ACGME), the group that oversees the training of physicians in the U.S currently allows resident physicians to work for 30 consecutive hours up to twice per week. The ACGME has been reviewing the IOM recommendations and is expected to announce its decision later this month. The problem: residents represent cheap labor. Some say that the ACGME faces an inherent conflict of interest because its board is dominated by the trade associations for hospitals, doctors and medical schools that benefit from the residents’ long hours.</div></div></blockquote> Read the entire post at the link above. There are fundamental social flaws in healthcare for which IT is most definitely not the solution. However, some of those hundreds of billions of dollars earmarked for IT might be better spent on additional clinical staff, so Residents can get a decent night's sleep. -- SS

Before we revolutionize medicine via spending hundreds of billions on IT, perhaps we should first fix this problem

Before we revolutionize medicine via spending hundreds of billions on IT, maybe we should first fix a far more tractable problem. From Healt...

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RUC Off - the New England Journal Once Again Fails to Mention the Unmentionable

Last week, the influential New England Journal of Medicine published an article by Bruce Vladek entitled "Fixing Medicare's Physician Payment System."(1)  Although only identified as working for Nexara, a health consulting business, Mr Vladek was a <a href="http://www.leighbureau.com/speaker.asp?id=128">former administrator</a> of what was then called the Health Care Financing Administration (HCFA) of the US Department of Health and Human Services (DHHS), the part of the department that then ran the US Medicare program.  Vladek thus can reasonably be viewed as an expert on Medicare.  Vladek identified two main problems with the current way physicians are paid by Medicare.  First, <blockquote>Medicare is captive to an arbitrary, if elegantly conceived, formula for total payments to physicians — the sustainable growth rate (SGR). In the alternate reality of the Congressional budget process, the SGR will reduce Medicare's physician payments, which already trail those from private insurers, as far into the future as the eye can see.</blockquote> Second, <blockquote>there is widespread consensus that the relative fees in the current system are a significant cause of the growing imbalance in supply and utilization between primary care and specialty services in the U.S. health care system. That imbalance, in turn, is widely perceived as a major cause of both excessive costs and inadequate quality of care. This is not just a Medicare problem: the Medicare Resource-Based Relative Value Scale is used by most private insurers to set relative prices for physicians.</blockquote> Vladek expanded on the second point as follows <blockquote>the basic mechanics of the Medicare Physician Fee Schedule, which was supposed to change physician payment to increase rewards for primary care services at the expense of procedural and interventional services, appears to have gone totally off track. For various reasons, the fee schedule, which originally did increase the prices of evaluation and management services relative to those of surgery or invasive procedures, turned in the other direction through the process of annual updating of relative value units. Surgeons, radiologists, and some medical specialists are now paid two to three times as much per hour as providers of cognitive services, which is about where we began 20 years ago; this was the situation that the fee schedule was supposed to fix. The question of the relative virtues of primary versus specialty care can be debated ad nauseam, but in other wealthy countries that serve their populations at least as well as we do, the ratio of primary care physicians to specialists is much higher than in the United States, and the gap in compensation is much smaller or the poles even reversed. Young physicians, burdened by increasing educational debts, may well choose a career path on the basis of a major difference in compensation, especially when the better-compensated positions require less ongoing responsibility for patients and offer better working hours.</blockquote> This is about all that Vladek wrote about how the imbalance between how Medicare pays for primary care and other "cognitive services," and for procedures came about. Vladek, and many others have argued that this imbalance has lead to strong financial incentives that have been slowly destroying primary care, and strong incentives that have lead to the use of too many procedures, both strong drivers of rising costs in the most expensive health care system in the world. Vladek noted vaguely that "through various reasons," the incentives were imbalanced by "the process of annual updating of relative value units." However, as we have discussed in several blog posts, a lot more is known about how this process got "totally off track." In fact, in 2007, an article by Bodenheimer et al in the Annals of Internal Medicine explained the problems in considerably more detail.(2)  As we <a href="http://hcrenewal.blogspot.com/2007/03/on-disparities-between-reimbursement-of.html">wrote then</a>, Its main points included <ul><li>Proceduralists are often able to learn how to do their procedures more quickly, and thus increase the volume of procedures done, while office and hospital visits can only be sped up so much.</li><li>The process used to update the RBRVS system is biased towards procedures for three main reasons: 1. "specialty society influence in proposing RVU [relative value unit] increases," 2. the specialist-heavy RUC [Relative Value Scale Update Committee] membership," and 3. "the desire of RUC specialists to avoid increases in evaluation and management [that is, cognitive, or non-procedural] RVUs."</li><li>Medicare now uses a formula to limit increases in overall spending. The use of this formula leads to across the board cuts in all reimbursements. Since cognitive services reimbursements were never high to begin with, and have rarely been individually increased, these cuts tend to have disproportionate decreases.</li><li>Private insurers and managed care organizations tend to follow Medicare's lead in their reimbursement procedures, but tend to tilt the playing field even more in favor of procedures versus cognitive services. Several studies showed that such payers paid more for procedures than did Medicare, but about the same for office and hospital visits.</li></ul>The role of the RBRVS Update Committee (RUC) is complex and in many ways mysterious.  As we <a href="http://hcrenewal.blogspot.com/2009/02/what-ruc-again-one-of-worlds-most.html">wrote before</a>, to update the system, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the <a href="http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/medicare/the-resource-based-relative-value-scale/the-rvs-update-committee.shtml">RBRVS Update Committee</a>. The RUC is a private committee of the AMA, <a href="http://www.ama-assn.org/ama1/pub/upload/mm/380/toptenthings.pdf">touted</a> as an "expert panel" that takes advantage of the organization's First Amendment rights to petition the government. Membership on the RUC is allotted to represent specialty societies, so that the vast majority of the members represent specialties that do procedures and focus on expensive, high-technology tests and treatments. However, the identities of RUC members are opaque, and the proceedings of the group are secret. To expand on the penultimate point, the <a href="http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/medicare/the-resource-based-relative-value-scale/the-rvs-update-committee.shtml">current page</a> on the AMA web-site that describes the RUC only lists its members in terms of their specialties and organizational affiliation.  Their names do not appear.  A <a href="http://www.ama-assn.org/ama1/pub/upload/mm/380/posesresponse.pdf">response </a>to a <a href="http://hcrenewal.blogspot.com/2009/02/what-ruc-again-one-of-worlds-most.html">previous post</a> by me on the subject by the then Chair and Chair-Elect of the RUC suggested that the RUC membership is not quite secret. They stated that "a list of the individual members of the RUC is published in the AMA publication, Medicare RBRVS 2009: The Physicians Guide." This publication is available from the AMA <a href="https://catalog.ama-assn.org/Catalog/product/product_detail.jsp?productId=prod1170041">here</a> for a mere $71.95. However, the book is not on the web, or in my local or university library, and I have no other way to easily access it.  Thus, the RUC membership as at best relatively opaque. To expand on the ultimate point, as Goodson(3) noted, RUC "meetings are closed to outside observers except by invitation of the chair." Furthermore, he stated, "proceedings are proprietary and therefore not publicly available for review." The fog surrounding the operations of the RUC seems to have affected many who write about.  We have posted (<a href="http://hcrenewal.blogspot.com/2007/12/is-sustainable-growth-rate-main-problem.html">here</a>, <a href="http://hcrenewal.blogspot.com/2008/07/can-we-fix-medicare-while-pretending.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2008/12/no-such-ruc-new-england-journal-takes.html">here</a>) about how previous publications about problems with incentives provided to physicians seemed to have avoided even mentioning the RUC.  In 2010, post the US recent attempt at health care reform, the RUC seems to remain the great unmentionable.  Even the leading US medical journal seems reluctant to even print its name.  Thus, as we <a href="http://hcrenewal.blogspot.com/2008/12/no-such-ruc-new-england-journal-takes.html">noted before</a>, however, the mysteries about it remain: <ul><li>How did the government come to fix the payments physicians receive? Government price-fixing has not been popular in the US, yet this has caused no outcry.</li><li>Why is the process by which they are fixed allowed to be so opaque and unaccountable? Why are there no public hearings on the updates, and why is there no input from practicing physicians or organizations other than those related to the RUC?</li><li>How did the RUC become de facto in charge of this process?</li><li>Why does the AMA keep the membership on the RUC so opaque, and give no input into the RUC process to its general membership?</li><li>Why is the RUC membership so dominated by procedural specialists? Why were primary care physicians, who made up at least a sizable minority of physicians when the update process was started, not represented according to their numbers?</li><li>Why has there been so little discussion of the RUC and its responsibility for an extremely expensive health care system dominated by high-technology, expensive, risky and invasive procedures?</li></ul>Without discussing how the incentives for physicians became so unbalanced, do we really expect we can fix them?  In this case, the persistence of the <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic effect</a> seems to be doing real damage to the discussion of the critical issues we in the US face today. References 1. Vladek B. Fixing Medicare's physician payment system. N Engl J Med 2010; 362:1955-1957. (Link <a href="http://content.nejm.org/cgi/content/full/NEJMp1004709">here</a>.) 2. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. (Link <a href="http://www.annals.org/content/146/4/301.full">here.</a>) 3. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310.  (Link <a href="http://jama.ama-assn.org/cgi/content/short/298/19/2308">here</a>.)

RUC Off - the New England Journal Once Again Fails to Mention the Unmentionable

Last week, the influential New England Journal of Medicine published an article by Bruce Vladek entitled "Fixing Medicare's Physici...

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Did EPIC CEO Judy Faulkner of Epic declare that ‘healthcare IT usability would be part of certification over her dead body?'

At the <a href="http://histalk2.com/2010/05/29/monday-morning-update-53110/">HisTALK blog 5/31/10 update</a>, a site with thousands of readers involved in all aspects of health IT, the following anonymous (at this point) report appeared: <blockquote> From Tabula Rosa: “Re: EMR usability. At one of the ONC Policy Committee meetings, [founder and CEO] Judy Faulkner of Epic supposedly declared that ‘usability would be part of certification over her dead body.’ I wonder if she has similar sentiments about making software accessible to people with disabilities?” Unverified. This inspired my new poll question – keep reading below. </blockquote> <a href="http://www.epic.com/">Epic Systems Corporation</a> is one of the largest health IT vendors in the U.S. If this report is true, it would have very, very serious implications towards the healthcare IT industry's attitudes about the usability - and ultimately the safety - of its products. The essential nature of usability and the relationship to safety is not an issue for debate - period. It was settled long ago in relation not only to IT, but also to devices and machinery that use IT. For instance, see the mid 1980's wisdom written for the U.S. Air Force on user interfaces at my eight part series on mission hostile health IT user experiences at <a href="http://tinyurl.com/hostileuserexper">http://tinyurl.com/hostileuserexper</a>. Microsoft and other responsible IT vendors spend billions on <a href="http://www.google.com/search?client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&channel=s&hl=en&source=hp&q=microsoft+usability&btnG=Google+Search">usability research</a>. I think it incumbent of the U.S. Office of the National Coordinator for Health IT, and its leader Dr. <a href="http://healthit.hhs.gov/portal/server.pt?open=514&objID=15930&&PageID=15653&mode=2&in_hi_userid=10731&cached=true">David Blumenthal</a>, to confirm or deny that such a statement was made, on or off-record, at an ONC policy committee meeting, and if it was made, its exact context. If it was made, it would raise the following questions: <ul><li>Would its utterer be saying this out of concern that their products have usability deficiencies that competitors do not, and that are not correctable in a short time frame?</li><li>How much concern would such a statement indicate for the complex jobs of physicians, nurses and other clinicians whose safe conduct of their medical obligations depends on health IT?</li><li>How much concern would such a statement imply towards the injured and dead bodies of patients affected by health IT of deficient usability?</li><li>Since the CEO sets the tone for their company and has the ultimate responsibility for its conduct (and its Board of Directors as well), would such a statement reflect willful negligence and perhaps criminal conduct?</li></ul> The last question is pertinent, for if, say, the CEO of Boeing were to relate that "usability of the control systems of its aircraft would be an FAA certification requirement over his or her dead body", or the CEO of oil drilling companies said same about their instrumentation that helps avoid underwater blowouts, I believe it would rise to the level of criminally negligent conduct. This is all the more pertinent to me, as my relative was just seriously injured by a medication error that appears to have started with the med list in an EMR. I am seriously wondering, in fact, if the average hospital has the gravitas and political and technologic maturity to truly implement health IT so that the technology is uniformly beneficial, instead of spontaneously harmful, to meet the needs of the grandiose plans for national health IT. The lack of seriousness, petty political fights, and technological dyscompetence and incompetence I have noted in my 20 years in this field do not seem surmountable in any time frame I consider "soon." Here seems to be the health IT industry and hospital MIS department view of healthcare IT, as some sort of game to be played for profit, power and political advantage: <a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyUCuCvfT3WTsv7KDqUEvbOGDWGFCN4B1WLVzhtocsecJhyphenhyphenhEjC-VHtDeFwJk0d0Rsm_X7O7F5dOZtIUUDoF3eojtJJ9v6ZtIFMrFqUdkCc1eH8hvR2ar4O5-ULSq1ia-_kyIWHnaPp5tk/s1600/operation_game.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5477041640529184818" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyUCuCvfT3WTsv7KDqUEvbOGDWGFCN4B1WLVzhtocsecJhyphenhyphenhEjC-VHtDeFwJk0d0Rsm_X7O7F5dOZtIUUDoF3eojtJJ9v6ZtIFMrFqUdkCc1eH8hvR2ar4O5-ULSq1ia-_kyIWHnaPp5tk/s320/operation_game.jpg" style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 320px; height: 320px;" /></a> -- SS

Did EPIC CEO Judy Faulkner of Epic declare that ‘healthcare IT usability would be part of certification over her dead body?'

At the HisTALK blog 5/31/10 update , a site with thousands of readers involved in all aspects of health IT, the following anonymous (at this...

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A "Pump and Dump" Stock Scheme and a University's "Incredible Gift"

Here is a new twist on how respected academic institutions have gained from less than respectable donors.  As <a href="http://www.palmbeachpost.com/news/crime/gardens-man-accused-of-stealing-60-million-from-708546.html">reported</a> by the Palm Beach (FL) Post, <blockquote>John David Mazzuto and a colleague stole more than $60 million from his former company and its investors, New York prosecutors said Tuesday afternoon. ... the Manhattan District Attorney said today that, while he was in bankruptcy from 2002 to 2009, he siphoned more than $15 million from Industrial Enterprises, and used the money to support 'a lavish lifestyle using millions of company dollars for homes, travel, and personal expenses.' They included Mazzuto's 7,715-square foot house at 11503 Green Bayberry Drive. Palm Beach County records show a corporation managed by him bought it for $2.6 million in 2007. No mortgage was recorded, suggesting the company bought it outright. New York prosecutors said Mazzuto also bought a $3 million home in the exclusive Long Island community of Southampton and spent more than $500,000 to fly on private jets. Palm Beach Gardens police arrested Mazzuto Thursday and investigators from New York were in a Palm Beach County court Monday to collect him. The New York indictment alleges Mazzuto and Cleveland, Ohio, attorney James W. Margulies, the corporation's general counsel, illegally issued millions of shares of stock and used fraud to inflate its value and deceive investors. Mazzuto and Margulies are charged with grand larceny, scheme to defraud, conspiracy, falsifying business records, and violations of New York State's securities fraud law. The district attorney said the two illegally issued millions of shares to family, friends, and associates. 'The defendants stole from the corporation and legitimate investors, and engaged in a variety of fraudulent accounting and securities practices to disguise the theft and pump up the value of the stock,' the release said. It said one outside investor lost more than $20 million. 'This was the wholesale looting of a public company,' Manhattan District Attorney Cyrus R. Vance, Jr., said in a statement. A 2007 class-action lawsuit filed by investors alleged Mazzuto had a long history of unscrupulous business practices. It also alleged Mazzuto used more than $100,000 from insider trading to buy a Porsche for his girlfriend. The suit said the federal Securities and Exchange Commission was investigating Industrial Enterprises for insider trading and accounting fraud during Mazzuto's tenure. The SEC has declined to comment. Mazzuto and Industrial Enterprises, saying the accounting mistakes were unintentional, agreed in April to settle the lawsuit for $3.8 million, records show. The settlement still is awaiting the court's approval. Industrial Enterprises has been negotiating since October for Yale to return a gift that paid for a head coach and a new all-weather baseball practice facility. Lawsuits alleged the bequest included improperly issued stock worth $1.7 million. </blockquote> The New York Times <a href="http://www.nytimes.com/2010/05/26/nyregion/26yale.html">added</a> some detail about Mezzuto's dontation to Yale: <blockquote>The news release called John D. Mazzuto one of the 'greatest supporters' of the Yale University baseball team. Mr. Mazzuto, a 1970 Yale graduate who played shortstop for the team, had donated to the baseball program about $1.5 million worth of shares in a company he owned. The university rewarded him by naming a new practice facility after him and his wife — the John and Theresa Mazzuto Field — and by adding his family name to the baseball coach’s official title: the Mazzuto Family Head Coach of Baseball. 'John has bestowed upon Yale baseball an incredible gift,' John Stuper, the baseball coach at Yale, said in the release, dated April 17, 2009. 'His support of our program has been absolutely phenomenal.' Manhattan prosecutors said Tuesday that Mr. Mazzuto’s support of his alma mater was illegal. Mr. Mazzuto, 61, was indicted on charges of fraudulently inflating the value of a company he owned to mislead investors into buying worthless shares. He gave shares of the company, Industrial Enterprises of America, to family and friends and to companies he controlled, and they sold them on the open market, giving some of the profits to Industrial Enterprises, prosecutors said. Those profits made Industrial Enterprises seem as though it was in better financial health than it actually was, raising its stock’s value, prosecutors said. 'It’s a new twist on a pump-and-dump,' said Garrett A. Lynch, the assistant district attorney handling the case. Mr. Mazzuto also gave shares of the stock to Yale, prosecutors said. The university sold its shares before their value plummeted and earned about $1.5 million, prosecutors said. Yale officials did not know that Mr. Mazzuto was issuing stocks illegally, prosecutors said, although some of the recipients of the shares did conspire with him. </blockquote> A <a href="http://online.wsj.com/article/SB10001424052748704026204575266662496877220.html">report</a> in the Wall Street Journal added: <blockquote>Industrial Enterprises, which was based in New York at one point, sought Chapter 11 bankruptcy protection in May 2009. [a month after Yale announced the donation - Editor] A shareholder lawsuit, filed in federal court in Manhattan in 2007, alleged the company engaged in accounting fraud by 'materially overstating' its revenue between December 2006 to November 2007. The company announced in November 2007 it had overstated revenue by millions of dollars for two quarters that year.</blockquote> For the sake of fairness, I must emphasize that the allegations against Mr Mezzuto and Mr Margulies are just that. However, there ought to be considerable suspicion that something unethical was going on, at least based on the company's admission of over-stated earnings, Mr Mezzuto's provision of the gift while he apparently was in personal bankruptcy, and (at least in retrospect), the company's filing for bankruptcy weeks after the gift of its stock was announced . Thus, Yale's acceptance of the gift, and its effusive accolades to its donor at best suggest an attitude of "what, me worry." At best, it seems that our once unimpeachable academic institutions have become so eager to raise money that the provenance of donations is no longer of interest to them.  Furthermore, it seems that anyone who provides a big donation becomes a local hero, regardless of the source of the donation.  Embracing donations arising out of questionably ethical situations implies a tacit endorsement of the means used to provide them.  Our universities ought to remember that their mission is teaching, research, and for academic medical institutions (as Yale is), patient care.  It may be true that if there is no margin, there is no mission, but if margin comes first, regardless of where it comes from, there soon will be no mission.

A "Pump and Dump" Stock Scheme and a University's "Incredible Gift"

Here is a new twist on how respected academic institutions have gained from less than respectable donors. As reported by the Palm Beach (F...

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How Did the CEO Who Presided Over the Company that Paid a $1.7 Billion Fraud Settlement Become a Credible Candidate for a State Governorship?

This one fits in the "you just can't make this stuff up" category.  Let me provide a <a href="http://articles.sun-sentinel.com/2010-05-20/news/fl-rick-scott-governor-hca-20100520_1_medicare-fraud-case-hospitals-in-el-paso-hospital-giant-columbia">summary</a> from the Fort Lauderdale, Florida Sun-Sentinel, <blockquote>It was and still is the biggest Medicare fraud case in U.S. history and ended with the hospital giant Columbia/HCA paying a record $1.7 billion in fines, penalties and damages. Now the man who ran the company at the time wants to be Florida's governor. Rick Scott was co-founder and CEO of Columbia/HCA in the 1990s, when the FBI launched a massive, multi-state investigation that led to the company pleading guilty to criminal charges of overbilling the government. Today, Scott is a Republican candidate for governor, running his campaign from an office in downtown Fort Lauderdale.</blockquote> Here is the Sun-Sentinel's review of the Columbia/ HCA case from the end of the 20th century: <blockquote>A Dallas lawyer whose clients included health care companies, Scott came from humble Midwestern roots — his father was a truck driver and his mother a JC Penney sales clerk. In 1987, at the age of 34, he started Columbia, investing $125,000 to buy two hospitals in El Paso, Texas. Within a decade, he was running the largest health care company in the country with more than 340 hospitals and $20 billion in annual revenue. Columbia aggressively bought other health care companies, including the Hospital Corporation of America, and became Columbia/HCA. The federal government began investigating in the mid 1990s with the help of whistleblowers including [Jim] Alderson and John Schilling, a Medicare reimbursement supervisor in Fort Myers. Among the fraudulent practices uncovered: billing Medicare and Medicaid for unnecessary lab tests, creating false diagnoses to claim a higher reimbursement and charging for marketing and advertising costs that were disguised as community education. The company even billed the government for tickets to the Kentucky Derby and country club dues, according to news accounts. The government's investigation became public in 1997 and that July, the FBI raided Columbia/HCA offices in seven states, including Florida. Days later, the board of directors announced Scott was out.</blockquote> The St Petersburg Times/ Miami Herald Politifacts Florida <a href="http://www.politifact.com/florida/statements/2010/may/20/alex-sink/rick-scott-healthcare-ceo-faces-questions-a/">web-site </a>included more details about the nature of the offenses alleged: <blockquote>* Columbia billed Medicare, Medicaid, the Defense Department's TRICARE health care program, and the Federal Employees' Health Benefits Program for lab tests that were not medically necessary or not ordered by physicians; * The company attached false diagnosis codes to patient records in order to increase reimbursement to the hospitals; * The company illegally claimed non-reimbursable marketing and advertising costs as community education; * Columbia billed the government for home health care visits for patients who did not qualify to receive them. </blockquote> It also documented the guilty pleas resulting from the charges: <blockquote>Southern District of Florida (Miami) -- Columbia Homecare Group Inc., a subsidiary of Columbia, will plead guilty to one count of conspiracy to defraud the U.S. and to violate the Medicare Anti-kickback Statute involving its fraudulent business in the purchase and operation of home health agencies and fraudulent billing of Medicare for management and personnel costs. The criminal fine is $3.36 million; Northern District of Georgia (Atlanta) -- Columbia Homecare Inc. will plead guilty to one count of violating the Medicare Anti-kickback Statute related to purchase of home health agencies. The criminal fine is $3.36 million; Department of Justice Criminal Fraud Section -- Another subsidiary, Columbia Management Companies Inc., will plead guilty to one count of conspiracy to defraud the U.S. and to make and use false writings and documents in connection with its fraudulent 'upcoding' of bills to Medicare for patients diagnosed with certain types of pneumonia. The criminal fine is $27.5 million. This investigation was based in Nashville, Tennessee; Middle District of Florida (Tampa) -- Columbia Homecare Group will plead guilty to one count of conspiring to defraud the U.S. and one count of conspiracy to violate the Medicare Anti-kickback Statute in connection with the purchase and operation of home health agencies. The criminal fine is $8.4 million. Also, Columbia Management Companies will plead guilty to eight counts of making false statements to the U.S. in connection with the submission of false cost reports to Medicare. The fine amount is $22.6 million; and, Western District of Texas (El Paso) -- Columbia Homecare Group will plead to a conspiracy to pay kickbacks and other monetary benefits to doctors in violation of the Medicare Anti-kickback Statute. The criminal fine is $30.1 million.</blockquote> The case was extensively dicussed in <a href="http://www.moneydrivenmedicine.org/">Money-Driven Medicine</a> by Maggie Mahar, who suggested that the business culture that Scott created lead to these crimes: <blockquote>Scott was obsessed not just with winning, but with money</blockquote> <blockquote>He bullied his subordinates. 'My father owned and operated a millinery factory in the garment district and [even in that tough garmento environment] I never witnessed such an extent of demeaning, debasing, and devaluing behavior as I personally experienced at Columbia,' Mark E. Singer, administrative director for medicine at Michael Reese Hospital in Chicago told The New York Times.</blockquote> <blockquote>Internal records showed that at Columbia/ HCA, just as at many other for-profits, executive salaries hinged not on such criteria as reducing infections or lowering death rates, but on meeting financial targets like 'growth in admissions and surgery cases.'</blockquote> <blockquote>Scott's detractors claimed that his cost cutting threatened patient care and safety: 'Gloves come in only one size and rip easily,' complained hospital workers in Florida. In California, nurses protested 'filty conditions,' and being 'stretched to the limit'....</blockquote> The Sun-Sentinel article included allegations that Scott actually knew about the crimes to which Columbia/ HCA subsidiaries pleaded guilty: <blockquote>Alderson thinks Scott had to know. The hospitals kept two sets of books: One showed the reimbursements actually submitted to Medicare and the other, marked confidential, detailed those charges that would likely be rejected if caught by federal auditors. The company kept funds in reserve to repay the government for those claims and once the timeframe for an audit had passed, the reserves would be reclassified as revenue, Alderson said. 'They had $1 billion in play in these reserves,' said Alderson, who now lives in La Quinta, Calif., and speaks to college students and Rotary clubs about business ethics. 'Anywhere from 25 to 33 percent of their bottom line was these reserves, so you bet he knew about it.''</blockquote> Scott was never charged with a crime. Instead, he "left Columbia/HCA with $10 million in severance and stock valued at $300 million." Now, he "lives in Naples in a $9 million house on the Gulf of Mexico." But, <blockquote>Joe Ford, the FBI agent who led the Columbia/HCA investigation and then took on corporate fraud at Enron, retired from the bureau and lives near San Francisco. He declined to comment for this story article but was quoted in a 2008 book by Schilling as saying that his biggest regret in the Columbia/HCA case was not charging corporate executives. 'After Columbia/HCA, I realized people, individual corporate officers, had to be held ccountable for the actions of their companies,' Ford said in Schilling's book, 'Undercover: How I Went from Company Man to FBI Spy – and Exposed the Worst Healthcare Fraud in U.S. History.' 'Instead of just giving us [the government] money, people need to go to jail,' Ford said in the book. 'I learn from my mistakes, and this was my first big one.'</blockquote> Of course, we have noted a parade of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> involving and <a href="http://hcrenewal.blogspot.com/search/label/crime">guilty pleas and criminal convictions</a> by  health care organizations, (or often just subsidiaries conveniently available to take the rap).  As we have noted, resulting fines may be just be treated as costs of doing business by health care leaders.  Almost never have the people who authorized, directed, or implemented wrong-doing almost never suffer negative consequences. Instead, they may just continue to haunt health care and society at large. Mr Scott's campaign web-site noted "mistakes were certainly made at Columbia/ HCA. As CEO I accept responsibility for what happened on my watch." If only.... To conclude, as I have repeated seemingly infinitum, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. ADDENDUM (27 May, 2010) - see comments by Maggie Mahar <a href="http://www.healthbeatblog.com/2010/05/hca-columbias-rick-scott-the-next-governor-of-florida.html">on the Health Beat Blog</a>.

How Did the CEO Who Presided Over the Company that Paid a $1.7 Billion Fraud Settlement Become a Credible Candidate for a State Governorship?

This one fits in the "you just can't make this stuff up" category. Let me provide a summary from the Fort Lauderdale, Florid...

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Genzyme Settles

In late 2009, we <a href="http://hcrenewal.blogspot.com/2009/11/genzymes-remarkable-businessstrategy.html">posted </a>about problems at a Genzyme plant that manufactured some fabulously expensive drugs, e.g. Cerezyme whose cost to patients approximated $160,000 a year.  We thought then that for a drug costing that much, the company ought to have figured out a conservative process to provide pure and unadulterated product.  In a later <a href="http://hcrenewal.blogspot.com/2009/11/was-is-worst-biotech-ceo-worth.html">post</a> we also why a company that could afford to make its CEO very rich could not afford to adequately maintain its manufacturing facilities. Now Genzyme has reached a settlement with the US Food and Drug Administration (FDA) on the matter.  As <a href="http://www.boston.com/business/healthcare/articles/2010/05/25/supervision_of_7_8_years_ordered_for_genzyme/">reported</a> by the Boston Globe, <blockquote>Genzyme Corp will remain under federal oversight for the next seven to eight years as it works to fix quality-control problems that have bedeviled its Allston Landing plant for 15 months. The timetable was spelled out in a consent decree struck between Genzyme and the Food and Drug Administration. Under its terms, Genzyme will pay a previously disclosed $175 million federal fine, the first in its 29-year history. The agreement, filed with the US District Court in Boston yesterday, is subject to court approval. Although the company said last month that it expected to pay the $175 million fine, other terms of the consent decree were not known until yesterday. Among them, Genzyme agreed to move fill-finishing work for its domestic drug shipments out of the Allston site by November. The transfer of fill-finishing for overseas shipments will take place by Aug. 31, 2011. Fill finishing is the process of pouring drugs into vials for shipments to hospitals and clinics, where they are administered to patients. Late last year, inspectors found bits of steel, rubber, and fiber in some drugs during the fill-finishing process in Allston. The work will be moved to a Genzyme operation in Waterford, Ireland, and to subcontractors such as Hospira Inc., subject to approval by federal regulators. The firm faces additional fines if it fails to meet FDA deadlines In all, the Cambridge biotechnology giant will spend two to three years in remediation under the consent decree, and another five years under oversight by a third-party contractor, the Quantic Group, a Livingston, N.J., consulting firm focused on boosting manufacturing quality and safety. Quantic will craft a remediation plan with Genzyme, and the company could be fined $15,000 a day for missing milestones.</blockquote> So now Genzyme is marching in our <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">parade of settlements</a>.  While this settlement is of charges related to very fundamental violations, failure to manufacture pure and unadulterated drugs, in one important way its provisions seem similar to many other such settlements we have now seen.  The settlement fines the company as a whole, but results in no penalties for any individuals.  As we have noted before, fines, even fines larger than this one, can be regarded just as a cost of doing business (especially when the business is very lucrative.  The company's <a href="http://www.sec.gov/Archives/edgar/data/732485/000104746910004189/a2198211zdefc14a.htm">2010 proxy statement</a> noted that even in 2009, when production was affected by the plant closure, "sales of Cerezyme were $793 million, compared with $1.2 billion in 2008. Sales of Fabrazyme were $431 million compared with $494 million in the previous year. So the company was fined $175 million for production problems with two drugs that brought in over $1.2 billion in revenue in 2009.)  Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike.  It provides no negative incentives for those who authorized, directed, or implemented the behavior in question.  So it is not clear that settlements like this deter future wrong-doing. Additionally, as we noted in the <a href="http://hcrenewal.blogspot.com/2009/11/was-is-worst-biotech-ceo-worth.html">earlier post</a>, the current CEO of Genzyme has gotten quite rich by virtue of his position.  While the <a href="http://www.sec.gov/Archives/edgar/data/732485/000104746910004189/a2198211zdefc14a.htm">2010 Genzyme proxy statement</a> indicates his compensation was affected by the financial impact of the production slowdown, even so he continued to get richer, albeit at a slightly slower pace than he did before.  That statement indicates that in 2009, CEO Henri Termeer's total compensation was a mere $9,507,403, down from $12,699,301 the previous year.  The main difference was that his non-equity incentive plan compensation dropped from $1,962,725 to 0.  While a $3 million plus salary decrement seems sizable, it is hard to conceive of an executive who makes nearly $10 million a year as suffering major financial consequences from the current debacle.  As I have said before, endlessly, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Genzyme Settles

In late 2009, we posted about problems at a Genzyme plant that manufactured some fabulously expensive drugs, e.g. Cerezyme whose cost to pat...

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