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Forest Pharmaceuticals Pleads Guilty to Obstruction of Justice, No Individual Pays Any Penalty

The parade of legal settlements marches on.  The latest story is about Forest Laboratories and its marketing of Celexa (citalopram ) and Levothyroid (l-thyroxin).  Here is the most <a href="http://www.nytimes.com/2010/09/16/health/16drug.html">complete version</a>, courtesy of Natasha Singer reporting for the New York Times. First, the lead sentence: <blockquote>A unit of Forest Laboratories, the maker of the antidepressant Celexa, agreed on Wednesday to pay more than $313 million to settle criminal and civil complaints, including a claim that it had illegally promoted the drug for use in children. </blockquote> Here are the charges: <blockquote>Among the criminal charges was one that the subsidiary, Forest Pharmaceuticals, marketed Celexa, which was approved only for adult depression, to treat children and adolescents. The government also claimed that, in conjunction with the company’s off-label promotion, Forest publicized the positive results of a study on Celexa in adolescents while failing to tell doctors about a similar study that had negative results. 'Forest Pharmaceuticals deliberately chose to pursue corporate profits over its obligations to the F.D.A. and the American public,' Carmen Ortiz, the United States attorney for the District of Massachusetts, said in a statement Wednesday. In addition, federal prosecutors accused Forest of paying doctors to induce them to prescribe Celexa and another antidepressant, Lexapro. The remuneration included 'cash payments disguised as grants or consulting fees, expensive meals and lavish entertainment, and other valuable goods and services,' the government said in its civil complaint. Among the items that Forest sales representatives gave to doctors from 1998 to 2005, the complaint said, were tickets to St. Louis Cardinal games, which were to be 'leveraged and sold as a reward for prescriptions'; a $1,000 gift certificate to Alain Ducasse, a gourmet French restaurant, for a high-prescribing child psychiatrist; a deep-sea fishing trip off Cape Cod for a doctor and his three sons; $400 in Broadway theater tickets for a doctor and his wife; and Red Sox tickets worth $2,276 to be used for doctors in the Boston area. </blockquote> So we not just off-label marketing, but suppression of clinical research (of course, a study whose results were not favorable to the product being marketed), and payments to doctors as an "inducement to prescribe." But wait, there is more: <blockquote>As part of the criminal settlement, Forest Pharmaceuticals, which is based in St. Louis, agreed to plead guilty to one felony count of obstructing justice, acknowledging that employees had lied to F.D.A. officials during a plant inspection in 2003. The company also agreed to plead guilty to two misdemeanors, one of which covers the company’s misbranding of Celexa by marketing the antidepressant for use in children from 1998 to 2002. The other misdemeanor covers the illegal distribution from 2001 to 2003 of an unapproved drug, Levothroid, to treat a thyroid hormone deficiency. Such thyroid pills, made by various drug makers, had been sold in the United States since the 1950s without F.D.A. approval. But in 2001, the agency told drug makers that they needed to reduce their distribution of such medications until the companies obtained agency approval to market the pills. The criminal charges accused Forest of making a deliberate decision to continue distributing the drug in quantities exceeding the F.D.A.’s directive. After the agency sent a warning letter to Forest, the company directed employees to work until 1 a.m. to continue shipping as much Levothroid as possible, according to the criminal complaint. </blockquote> So there was also obstruction of justice in the form of lying to the FDA, and selling drugs that the FDA had ordered not to be sold. So what are the penalties? <blockquote>The criminal settlement calls for the company to pay a $150 million fine and to forfeit an additional $14 million in assets. Forest will also pay more than $88 million to the federal government and more than $60 million to the states to resolve a civil complaint that its actions caused false claims to be submitted to federal health care programs. In addition, two whistle-blowers will split $14 million from the federal share of the settlement. Forest has also entered into a five-year corporate integrity agreement, requiring an independent expert to review the company’s compliance with drug marketing regulations.</blockquote> So here we go again. A large drug company was up to no good, suppressing research, paying doctors for their prescriptions, lying to the FDA, and disobeying its orders. The penalty seemed large, over $300 million. However, Celexa was a big revenue generator at the time the events above occurred, topping $1 billion in revenue first in 2002 (per Forbes <a href="http://www.forbes.com/2002/08/15/0815frx.html">here</a>). Furthermore, as <a href="http://www.pharmalot.com/2010/09/forest-labs-pays-313m-for-illegal-marketing">noted by Ed Silverman on Pharmalot</a>, it seems no individual will suffer any negative consequences for authorizing, directing, or implementing the conduct described above. Finally, as best I can tell, despite the fact that a Forest subsidiary will plead guilty to a felony, the company is not going to be barred from doing business with the government.  So, despite pleading guilty to a felony and three misdemeanors, neither Forest as a company nor any individual working for the company will really suffer very much.  On the other hand, the leaders of Forest have been doing very well.  The company's CEO, Howard Solomon, was number 18 on <a href="http://online.wsj.com/public/resources/documents/st_execpay1007_20100725.html">Wall Street Journal list</a> of the 25 highest paid CEOs over the last decade.  His total realized compensation was over $385 million over the last 10 years.  According to<a href="http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1odHRwOi8vaXIuaW50Lndlc3RsYXdidXNpbmVzcy5jb20vZG9jdW1lbnQvdjEvMDAwMDAzODA3NC0xMC0wMDAwMTYvZG9jL0ZvcmVzdExhYm9yYXRvcmllc0luYy5wZGYmdHlwZT0yJmZuPUZvcmVzdExhYm9yYXRvcmllc0luYy5wZGY="> the company's 2010 proxy statement</a>, his total compensation in 2009 was $8,267,236.  The four other highest paid executives made from just over $2.5 million to $5.3 million. So here we go again.  Another large health care organization has been found to have done wrong, but the only penalty is a fine that whose impact will be diffused across the whole company, and ultimately be paid by its employees, its customers, including patients, and its stockholders.  Meanwhile, the people who authorized, directed, or implemented the wrong doing apparently will pay nothing and receive no negative incentives.  Furthermore, the top leaders of the company, whose huge compensation in the past was increased by the results of the wrong doing, will continue to prosper. As we have said again and again,  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. By the way, the current case offers an avenue for those who do not like what Forest did to ask those who are supposed to be ultimately responsible for its behavior how this was allowed to happen.  The board of directors of the company is supposed to be ultimately accountable for the company's actions.  As we have noted before, these directors are supposed to "demonstrate unyielding loyalty to the company's shareholders." [Per Monks RAG, Minow N. <a href="http://www.amazon.com/Corporate-Governance-Robert-G-Monks/dp/1405116986">Corporate Governance</a>, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.] The current directors of Forest Laboratories, according to <a href="http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1odHRwOi8vaXIuaW50Lndlc3RsYXdidXNpbmVzcy5jb20vZG9jdW1lbnQvdjEvMDAwMDAzODA3NC0xMC0wMDAwMTYvZG9jL0ZvcmVzdExhYm9yYXRvcmllc0luYy5wZGYmdHlwZT0yJmZuPUZvcmVzdExhYm9yYXRvcmllc0luYy5wZGY=">the company's 2010 proxy statement</a>, include <a href="http://connects.catalyst.harvard.edu/profiles/profile/person/24377">Dr Nesli Basgoz</a>, "Associate Chief for Clinical Affairs, Division of Infectious Diseases, Massachusetts General Hospital (MGH)," and "Associate Professor of Medicine at Harvard Medical School."  Also, it includes<a href="http://www.mountsinai.org/profiles/lester-b-salans?id=0000072500001497265082"> Dr Lester B Salans</a>, "Clinical Professor" at Mount Sinai Medical School, not to mention <a href="http://connects.catalyst.harvard.edu/profiles/profile/person/48486">Dr Peter J Zimetbaum</a>, "Director of Clinical Cardiology" at Beth Israel Deaconess Medical Center in Boston (BIDMC), and "Associate Professor of Medicine at Harvard Medical School."   Maybe some enterprising student journalist will get to ask the good doctors how they let things at Forest get so ethically out of hand.

Forest Pharmaceuticals Pleads Guilty to Obstruction of Justice, No Individual Pays Any Penalty

The parade of legal settlements marches on. The latest story is about Forest Laboratories and its marketing of Celexa (citalopram ) and Lev...

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Health Care Leaders: the Best and the Brightest?

We have recently discussed how even executives of relatively small, not-for-profit health care organizations are <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">paid enough</a> to make them rich.  The compensation and privileges given to leaders of health care organizations are often justified by the notion that they are the "best and brightest," such arguments sometimes accompanied by a few choice logical fallacies (e.g., <a href="http://hcrenewal.blogspot.com/2010/09/logical-fallacies-in-defense-of-million.html">here</a>).  So here are a few news stories about the activities of some choice health care executives. Canopy Financial This company provided financing for health care services.  As<a href="http://www.google.com/hostednews/ap/article/ALeqM5gVyFvPO6tDLsg228D_xK6c123SvAD9I3U2881"> reported</a> by the Associated Press, <blockquote>A former executive of the bankrupt health care company Canopy Financial Inc. has agreed to plead guilty in an alleged multimillion-dollar fraud. Court documents released Wednesday say former chief technology officer Anthony Banas will plead guilty to wire fraud. Chicago-based Canopy was known as one of the nation's fastest growing businesses before its 2009 bankruptcy. Many clients relied on it to pay medical bills.</blockquote> Danbury Hospital This is a community hospital in Connecticut. As <a href="http://www.newstimes.com/news/article/Former-Danbury-Hospital-CFO-pleads-not-guilty-in-651364.php">reported</a> by the Danbury News Times, <blockquote>Danbury Hospital's former Chief Financial Officer William Roe pleaded not guilty Thursday morning to defrauding the hospital and a previous employer out of nearly $200,000. Roe was freed on bond after he agreed to a stringent set of conditions imposed by a federal judge.</blockquote> Here are more details of the charges: <blockquote>The 54-year-old Roe is accused of wire fraud and two counts of interstate transportation of stolen money, stemming from fraudulent invoices he allegedly submitted to Danbury Hospital and his previous employer, St. Rita's Medical Center of Lima, Ohio, a member of Catholic Healthcare Partners. The invoices were from a software company Roe set up in Pennsylvania in 2008, and, according to investigators, no services were ever provided to either institution. The wire fraud charge carries a maximum penalty of up to 20 years in prison, and the other two charges carry potential maximum penalties of up to 10 years each behind bars, Assistant U.S. Attorney Rahul Kale said. Kale initially expressed reservations about releasing Roe on bond because the court determined that hours after his arrest by FBI agents on Aug. 17, Roe violated a previous no-contact order by barraging Danbury Hospital president Dr. John Murphy with e-mails and cell phone calls and begging him to make the charges 'go away.' A day later, on Aug. 18, Roe also sent an e-mail to the hospital's vice president for human resources, asking her to arrange a meeting with Murphy, Kale said. Those actions resulted in the judge revoking the $100,000 bond Roe had posted and filing additional charges against him, including witness tampering and harassment. In the Aug. 18 e-mail, Roe acknowledged that he wasn't supposed to contact any hospital officials, but sought a 'brief conversation' with Murphy 'before any court proceedings begin,' Kale said. The prosecutor said the order had been entered because 'Danbury Hospital had expressed a concern about the employee's return' and referenced a shooting at the hospital earlier this year and another incident of workplace violence in Manchester. Not only did Roe violate the no-contact rule, but he also traveled to Pennsylvania on Aug. 18 without notifying court officials, Kale said, even though he was supposed to seek permission before leaving the state.</blockquote> H. C. Healthcare This company operated a community hospital in Florida. As <a href="http://www.gainesville.com/article/20100910/ARTICLES/9101003/1002">reported</a> by the Gainesville (Florida) Sun: <blockquote>The former chief financial officer of a Gainesville company that ran medical facilities in several small North Florida counties has been arrested in Illinois on racketeering charges for allegedly misusing grant money, reported the Florida Department of Law Enforcement. Arrested was Natalie Ann Krasnow, 35, of Huntley, Ill., on various felony charges including racketeering, aggravated white-collar crime and operating a scheme to defraud. Krasnow is now being held on a $250,000 bond pending an initial appearance before a judge in McHenry County, Ill. Krasnow was the former CFO of H.C. Healthcare Inc. of Gainesville. It operated and owned Trinity Community Hospital in Jasper. Krasnow's arrest is a continuation of the joint investigation by the Attorney General's Medicaid Fraud Control Unit, FDLE and the State Attorney's Office for the 3rd Judicial Circuit into activities at the now closed Trinity Community Hospital and its affiliated clinics in Hamilton, Suwannee and Columbia counties. Krasnow is the eighth person employed by or associated with H.C. Healthcare who has been arrested during the investigation. In July, investigators with the Attorney General's Medicaid Fraud Control Unit, FDLE and the McHenry County Sheriff's Office arrested owner Robert A. Krasnow, 36, of Gainesville; Dr. Yong Am Park, 66, of Lake City; Robert T. Krasnow, 58, of Gainesville, the father of Robert A. Krasnow; hospital administrator Christina L. Ortega, 42, of Lake City; and licensed practical nurse Ashley Lane Butler, 37, of Live Oak. The former medical director at Trinity Hospital, Dr. Wayne A. Rahming, and former Trinity staff physician, Jorge Prieto, were arrested by Medicaid fraud investigators in a separate scheme involving the unlicensed practice of medicine at a clinic in High Springs. Additional arrests may follow. The investigation of Trinity Community Hospital established that more than $660,000 in state grant funds dedicated to hospital improvements were received by the corporation, but little if any of the money was used to make such improvements, FDLE reported. Natalie A. Krasnow was the corporation's grants liaison officer with the Florida Department of Health and was instrumental in applying for and accounting for the proper disposition of these funds. Most of the money was used either to support the activities of the criminal enterprise or diverted to the personal use of Krasnow or her brother, hospital owner Robert A. Krasnow, FDLE said.</blockquote> North Memorial Health Care This is a health care system in Minnesota. <a href="http://www.startribune.com/lifestyle/health/102111219.html?">Per</a> the Minneaopolis - St Paul Star Tribune: <blockquote>David Cress, the hospital executive arrested and charged with engaging in prostitution this week, has been suspended indefinitely without pay as president and chief executive of North Memorial Health Care, officials said late Thursday. Cress, 60, was one of about a dozen men arrested at a Richfield hotel during a daylong vice operation. He was released from jail Wednesday and is scheduled to appear in court Sept. 15 on a misdemeanor charge. He has been at North Memorial since 1982, and took over as the top executive in 2005.</blockquote> Summary So the box score is one guilty plea to fraud charges, arrests for wire fraud. interstate transport of stolen money, witness tampering and harassment; for racketeering, white collar crime, and operating a scheme to defraud; and for engaging in prostitution; and violation of a no-contact order.  The people involved were all "C-level" executives, including a CTO, two CFOs, and a CEO. Of course, all people who are arrested are not guilty.  There are only four organizations, all relatively small, involved in this series of cases. Again, however, should not the standard of conduct for health care leaders be somewhat higher than that of, for example, garbage haulers?  (I am sorry if that appears to insult garbage haulers.  Such was not my intention.)  For people generally paid so well because they were thought to be the best and the brightest, should not our expectations be higher.

Health Care Leaders: the Best and the Brightest?

We have recently discussed how even executives of relatively small, not-for-profit health care organizations are paid enough to make them r...

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Small Hospital System Loses $61 Million Betting on Financial Derivatives, But Pays CEO Nearly a Million Dollars

As we have quoted many times, sunlight is the best disinfectant.  New US Internal Revenue Service requirements for reporting by not-for-profit organizations has resulted in more transparency about the finances of many health care organizations, and this transparency has shown that the culture of perverse incentives and management privilege has spread far and wide. How far and wide?  Consider this <a href="http://www.exploreharford.com/news/5882/ceo-makes-900000/">story</a> in the (Harford County, Maryland) Aegis: <blockquote>Harford County’s Upper Chesapeake Health lost $70 million because of bad bets in the derivatives markets two years ago, but still paid its chief executive more than $900,000 in annual salary and bonuses. According to figures from their latest tax returns and from the state agency that regulates hospital rates, Upper Chesapeake Medical Center in Bel Air and Harford Memorial Hospital in Havre de Grace, hospitals owned and operated by nonprofit Upper Chesapeake Health Inc., posted huge losses in their fiscal year ending December 2008. The losses were the result of an increase in non-operating expenses, according to the Maryland Health Services Cost Review Commission. The hospitals had combined revenue of $254 million for the year, but posted a combined net loss of $61 million. The two hospitals also paid out some of the highest salaries in Harford County, led by their CEO, Lyle Sheldon, who made more than $900,000 in 2009, a figure which was first reported by The Baltimore Sun on Aug. 29. Including Sheldon, the hospitals’ top administrators and top medical staff, who are hospital employees, received a combined $5 million in salary, bonuses and other compensation in 2009.</blockquote> So how did the hospital's management explain the huge loss? <blockquote>'That was the year the stock market fell, in fiscal year 2008,' Dean Kaster, Upper Chesapeake’s senior vice president of corporate strategy and business development, said Tuesday in explaining the 2008 loss. 'We saw a significant change in terms of how some of the instruments we used in managing our debt service were valued and during that time period what these dollar changes reflected was an accounting loss directly related to the decline in the overall market in 2008,' he said. Kaster said Upper Chesapeake, like many hospitals, has investment instruments it uses, called derivatives and hedges, to manage its long-term debt. He said the value of those instruments changed in fiscal year 2008. In simpler terms, like many corporate, institutional and individual investors, Upper Chesapeake got burned by taking risks that backfired when the economy tanked. Since those markets have come back, Kaster said, Upper Chesapeake has recovered two-thirds, or about $46.7 million, of the $70 million it lost from investments.</blockquote> Of course, 2008 was the year of the great recession/ global financial collapse, or whatever we may end up calling it, happened. The value of many investments, and many peoples' homes, imploded. The best current  explanation of the collapse had to do with the bets financial institutions made on risky derivatives which their managers often did not understand. In hindsight, these bets seem somewhere between unnecessarily risky and stupid. Many smaller businesses and organizations were fortunate to be financially conservative enough not to have bet on derivatives. But little Upper Chesapeake Health apparently bet a large chunk of its money on them, and lost badly. Although VP Kaster belabored the obvious in noting that 2008 was the year of the collapse, he did not explain what the stewards of a not-for-profit health care institution were doing when they were betting on risky derivatives. One thing they were doing was making a lot of money themselves. <blockquote>At UCH, the highest compensated employee is President and CEO Lyle Sheldon. Sheldon’s annual compensation for the hospital’s fiscal year 2009, the most recent information available, was $918,957, according to the Form 990 submitted to the IRS. Sheldon’s base salary for the year was $535,000 and his bonus and incentive compensation was $224,007. Sheldon’s compensation is nearly $500,000 more than the next highest paid employee for UCH.</blockquote> Other executives did well too: <blockquote>Second to Sheldon, the next highest paid employee in UCH’s upper management is Joseph Hoffman III, the senior vice president and CFO, who was paid $420,355 in the hospital’s fiscal year 2009. His base salary was $272,210 and his bonus and incentive compensation was $91,439. Senior Vice President and COO Kenneth Kozel was paid $352,538, according to Upper Chesapeake’s Form 990. Kozel received additional nontaxable benefits and deferred compensation on Harford Memorial’s form, bringing his total compensation to $396,039. Kaster, the senior VP for strategy and business development, was paid $281,142, according to Upper Chesapeake’s form. He also has additional nontaxable benefits and deferred compensation on Harford Memorial’s form, bringing his total to $330,598. Vice President of Human Resources Toni Shivery’s Upper Chesapeake compensation was $204,531, with an additional $33,895 from Harford Memorial, bringing the total to $238,426.</blockquote> Note that the CFO of this small hospital system, the person who ought to be most directly responsible for the decision to "invest" in derivatives, made over $420,000, and the vice president for strategy and business development, responsible for the simplistic discussion of derivatives above, made over $330,000. Providing such perverse incentives seems to contradict the hospital system's high-minded <a href="http://www.uchs.org/?section=about&page=mission">statements of values</a>, which includes: <blockquote>Responsibility: We take responsibility for our actions and hold ourselves accountable for the results and outcomes. </blockquote> A CEO who truly accepted responsibility for a $61 million loss from risky bets on opaque derivatives would not accept total compensation of over $900,000. A CFO who truly accepted responsibility for these bets would not accept over $400,000. So in summary, we see that now CEOs of even the smallest community hospital systems seem entitled to make nearly a million dollars a year. We see that even CEOs whose institutions lose millions due to risky investments still receive such compensation. We see that the executives who seem directly responsible for making such money losing investments still earn hundreds of thousands of dollars. This is an extreme illustration of how perverse incentives permeate health care, how CEOs command pay beyond the dreams of ordinary people, even when their leadership is financially calamitous, and how little health care leaders support their organizations' idealistic values. Are leaders who are not held accountable for easily measured financial performance likely to be good stewards of clinical performance, which is much harder to measure? If we do not hold health care leaders accountable, if we do not provide them with incentives that are proportional to their actual performance, why should we expect health care organizations to do any more than satisfy their leaders' self-interest? ADDENDUM - If you got to this page from a blog with "royposes" in its URL, and with "roy poses" ostensibly listed as its author - neither has anything to do with me, Roy M Poses MD.  I have no knowledge of who wrote posts on that blog, and no responsibility for them.  The only blog to which I presently regularly post is this one, Health Care Renewal.

Small Hospital System Loses $61 Million Betting on Financial Derivatives, But Pays CEO Nearly a Million Dollars

As we have quoted many times, sunlight is the best disinfectant. New US Internal Revenue Service requirements for reporting by not-for-prof...

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A Golden Parachute for Captain Outrageous

A year ago, I <a href="http://hcrenewal.blogspot.com/2009/09/captains-outrageous-for-cape-annes.html">posted</a> about leadership and governance problems at Northeast Health Systems, a small hospital system located in neighboring Massachusetts.  The colorful story included leaders who solicited money from the community but concealed what they were doing from the same community, an adolescent pregnancy pact after the hospital system refused to provide confidential birth control information at the high school clinic it ran, a hospital vice-president accused of art theft, various cuts, some concealed, of medical services, accusations of conflicts of interest affecting the board of trustees, and no-confidence votes by nurses and physicians. Finally, Stephen Laverty, the CEO held responsible for much of the mess, resigned and things quieted down a bit.  However, he left a system in deficit, leading to further lay-offs, (e.g., see <a href="http://www.boston.com/yourtown/salem/articles/2010/08/18/beverly_hospital_group_to_cut_jobs/">this story</a> in the Boston Globe).  And the vice-president accused of art theft was also "arraigned on bribery and larceny charges" (also <a href="http://www.boston.com/business/healthcare/articles/2010/07/23/former_hospital_official_accused_of_kickback_scheme">per the Boston Globe</a>.) Yet, Mr Laverty collected a tidy sum just to leave, as the Salem News just <a href="http://www.salemnews.com/local/x605762202/Laverty-got-1M-after-he-resigned">reported</a>: <blockquote>Former Northeast Health System President and CEO Stephen Laverty collected more than $1 million from the nonprofit hospital chain after he resigned under fire in the fall of 2008, newly released financial records show. The earnings, $1.08 million in total, include a settlement package of more than a year's salary plus pay for the one month the controversial Laverty was at the helm of Northeast, which owns Beverly Hospital, as well as Gloucester's Addison Gilbert Hospital. The documents provide the first details of how much Northeast, now laying off workers and cutting costs, was willing to pay to part ways with its CEO who had just endured no-confidence votes from nurses and doctors, plus the arrest of one of his top managers.</blockquote> Neither the hospital system nor its former CEO was exactly forthcoming about the rationale for this payment: <blockquote>As part of Laverty's resignation, both sides agreed not to discuss the settlement or any of the details that led them to part ways. 'I have no understanding of what you are talking about,' Laverty said yesterday afternoon from his home in Concord, when asked about his settlement package. He then hung up the phone. A spokeswoman for Northeast Health System said she could not comment on Laverty or the terms of any agreements between the company and past employees.</blockquote> So even the hired manager of a small community hospital system is entitled to a million dollar plus golden parachute when resigning in disgrace. This is another great example of the current perversity of the incentives given to hired health care managers. Even small community hospitals, the backbone of real community health care throughout the country, seem to feel obligated to make millionaires out of their managers, no matter how bad their performance. As we said before, the problem is not just the money wasted paying for bad performance. These perverse incentives are likely to encourage worse performance.  They send the message to even the worst executives that they are wonderful people, they can do no wrong, and should stand for no criticism, all further diverting them from what they really are supposed to be doing: upholding the mission. As an <a href="http://www.gloucestertimes.com/opinion/x627001820/Northeast-board-bears-blame-for-shameful-1M-Laverty-buyout">editorial</a> in the Gloucester Times noted, although the nexus is perverse incentives given to paid managers, it is not only the paid managers who are to blame for this situation. <blockquote>The other party to his contract was the Northeast Board of Trustees. </blockquote>So, <blockquote>Those who want to serve as trustees of Northeast need to get the notion out of their heads that their board seats are not just resume builders — with high-profile community roles and a few corporate dinners thrown in. These are positions of community leadership and responsibility that comes with a measure of accountability. New Northeast CEO Ken Hanover has indeed seemingly ushered in a new era of relative openness in dealing with the community. But the same cannot be said for the Board of Trustees. If Laverty's shameful buyout deal and these types of contracts are examples of their 'leadership' and responsibility, each and every one of them should step down now.</blockquote> As we have said many times before, true health care reform would encourage leaders of health care who understand health care and care about its mission, rather than those who just see a quick road to riches or social respectability.

A Golden Parachute for Captain Outrageous

A year ago, I posted about leadership and governance problems at Northeast Health Systems, a small hospital system located in neighboring M...

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National Programme for Health IT Declared Dead Due to 'Luddite Doctors' and Lousy IT, But Mostly Lousy IT

And poor leadership. From the NHS Department of Health (also see "<a href="http://www.e-health-insider.com/news/6227/end_of_npfit_to_be_announced_today">End of NPfIT to be announced today</a>" at eHealth Insider.com): <blockquote>9 Sept. 2010 <a href="http://www.dh.gov.uk/en/MediaCentre/Pressreleases/DH_119293">The future of the National Programme for IT</a> A Department of Health review of the National Programme for IT has concluded that a centralised, national approach is no longer required, and that a more locally-led plural system of procurement should operate, whilst continuing with national applications already procured. A new approach to implementation will take a modular approach, allowing NHS organisations to introduce smaller, more manageable change, in line with their business requirements and capacity. NHS services will be the customers of a more plural system of IT embodying the core assumption of ‘connect all’, rather than ‘replace all’ systems. This reflects the coalition government’s commitment to ending top-down government and enabling localised decision-making. The review of the National Programme for IT has also concluded that retaining a national infrastructure will deliver best value for taxpayers. Applications such as Choose and Book, Electronic Prescription Service and PACS have been delivered and are now integrated with the running of current health services. Now there is a level of maturity in these applications they no longer need to be managed as projects but as IT services under the control of the NHS. Consequently, in line with the broader NHS reforms, the National Programme for IT will no longer be run as a centralised national programme and decision making and responsibility will be localised. Health Minister, Simon Burns, said: “Improving IT is essential to delivering a patient-centred NHS. But the nationally imposed system is neither necessary nor appropriate to deliver this. We will allow hospitals to use and develop the IT they already have and add to their environment either by integrating systems purchased through the existing national contracts or elsewhere. “This makes practical sense. It also makes financial sense. Moving IT systems closer to the frontline will release £700 million extra in savings. Every penny saved through productivity gains will be reinvested to improve patient care.” Director General for [Medical] Informatics Christine Connelly [former CIO of Cadbury Schweppes, the candy-and-soft drink company, and before that Chief of Staff for Gas, Power and Renewables, and Head of IT at British Petroleum - ed.] said: “It is clear that the National Programme for IT has delivered important changes for the NHS including an infrastructure which the NHS today depends on for providing safe and responsive health care. Now the NHS is changing [ostensibly away from central bureaucratic control and towards more physician autonomy - ed.], we need to change the way IT supports those changes, bringing decisions closer to the front line and ensuring that change is manageable and holds less risk for NHS organisations.” </blockquote> The U.S. will painfully learn these lessons in years to come, it being clear that to date we've learned nothing from the UK's experiences. Worse, our own government is ignoring the downside risks of the technology, bypassing science (and patient safety) for political expedience. At the same time, the EU is heading in the reverse direction, with the Swedish Medical Products Agency leading the way for consideration of HIT in the EU as a medical device to be regulated (see "<a href="http://hcrenewal.blogspot.com/2009/06/improving-patient-safety-in-eu-hit.html">Improving Patient Safety In The EU: HIT Should Be Classified As Medical Devices</a>"). On ignoring science, see my July 2010 post <a href="http://hcrenewal.blogspot.com/2010/07/new-england-journal-on-meaningful-use.html">"Science or Politics? The New England Journal and "The 'Meaningful Use' Regulation for Electronic Health Records"</a>. Also see my prior calls for US restraint such as at "<a href="http://hcrenewal.blogspot.com/2008/11/should-us-call-moratorium-on-ambitious.html">Should The U.S. Call A Moratorium On Ambitious National Electronic Health Records Plans</a>?" and "<a href="http://hcrenewal.blogspot.com/2008/12/open-letter-to-president-barack-obama.html">Open Letter to President Barack Obama on Healthcare Information Technology</a>". In fact, a major American health IT vendor (e.g., <a href="http://www.publications.parliament.uk/pa/cm200809/cmselect/cmpubacc/153/15304.htm">at this link</a>, items 5 and 6, Cerner Millenium) was explicitly blamed by the UK's government for many of the National Programme's travails. The key experience of the NHS is reflected in this passage: <blockquote>A new approach to implementation will take a modular approach, allowing NHS organisations to introduce smaller, more manageable change, in line with their business requirements and capacity. </blockquote> The "meaningful use" requirements in the U.S. alone ignore local "business requierments and capacity" over the centralized diktats of bureaucrats. -- SS Sept. 10 addendum, from <a href="http://histalk2.com/2010/09/09/news-91010/">here</a>: <blockquote>... Said the co-director of the Royal College of Physicians Health Informatics Unit, “One of the dirty secrets of the NHS is the regrettable state of medical record keeping. Earlier reports have shown that this compromises patient safety and clinical care. If IT in the health service is going to regain the confidence of the medical profession, then more emphasis has to be placed by the Department of Health on making sure that the new systems accurately capture the dialogue between doctor and patient. Everything else flows from getting that right.” </blockquote> Earlier reports ["earlier" with respect to...what? - ed.] "have shown that [poor electronic medical record keeping] compromises patient safety and clinical care? You don't say? -- SS

National Programme for Health IT Declared Dead Due to 'Luddite Doctors' and Lousy IT, But Mostly Lousy IT

And poor leadership. From the NHS Department of Health (also see " End of NPfIT to be announced today " at eHealth Insider.com): 9...

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Projecting Competence ...

Projecting competence ... used to be important. No longer. Today I received a mailing about a surgical educational conference at a local hospital, Jefferson. The envelope, pre-printed stationery used by the department, had the following logo: <div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhvllq0zIUlTXeu_2HP0HkqQ178gNReMcf3LQi5fGdIRkGm0pB1jLdLqcfbdY7cmqVrgeLjwKvaXv_Qo1nfxcCtx31Lhg4R-c_ibXzmf80viFfKcklQMf6MJrrzPuJ-MbXtsla39d7P8eiZ/s1600/sugery1.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5514679740966751026" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhvllq0zIUlTXeu_2HP0HkqQ178gNReMcf3LQi5fGdIRkGm0pB1jLdLqcfbdY7cmqVrgeLjwKvaXv_Qo1nfxcCtx31Lhg4R-c_ibXzmf80viFfKcklQMf6MJrrzPuJ-MbXtsla39d7P8eiZ/s320/sugery1.jpg" style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 395px; height: 167px;" /></a>(click to enlarge) </div> This envelope certainly does not inspire my confidence. We are in a bad time in medicine when hospitals cannot spell. I cannot imagine how this was missed, other than via the hiring of the cheapest help possible. -- SS

Projecting Competence ...

Projecting competence ... used to be important. No longer. Today I received a mailing about a surgical educational conference at a local hos...

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Logical Fallacies in Defense of Million Dollar Babies

We recently posted about the latest example of generously paid health care leaders, million dollar plus hospital CEOs in the Baltimore area (<a href="http://hcrenewal.blogspot.com/2010/08/more-hospital-ceos-join-millionaires.html">here</a>).  Such stories are appearing more often in the media, and increasingly generating skeptical, anguished, or angry responses.  Defending Millionaire Hospital CEOs So it should be no surprise that the defenders of rich hospital CEOs are starting to rally.  The Baltimore Sun published two letters defending the million dollar plus compensation received by many local hospital CEOs.  But what arguments they made. First, let us examine in detail  <a href="http://articles.baltimoresun.com/2010-09-02/news/bs-ed-hospital-assn-letter-20100902_1_hospital-ceo-hospital-leaders-maryland-hospital-association">the arguments made</a> by Carmela Coyle, "president and CEO of the Maryland Hospital Association."  She opened with this description of hospitals as organizations: <blockquote>Famed management expert Peter Drucker said that health care is the most difficult, chaotic, and complex industry to manage today, and that the hospital is "altogether the most complex human organization ever devised." Indeed, hospitals are not your typical business. Hospitals are places where lives are saved. They ease pain and suffering. Hospitals are open every minute of every day, driven by a mission of caring and rooted in their communities. Hospitals do not close up and move on when economic times get tough. This requires extraordinary dedication, commitment, talent, and leadership. And hospitals are governed by trustees--independent leaders from the communities hospitals serve. </blockquote> She then briefly described her version of how hospital CEO compensation is set: <blockquote>The compensation for hospital executives is determined by those boards and compensation committees who follow nationally recommended practices for setting contract terms, evaluating CEO performance, reviewing salary comparability data, setting and approving compensation, and ensuring the process is free from conflict of interest.</blockquote> Then she provided this extraordinary description of what hospital CEOs do: <blockquote>Perhaps the more important look is at what these hospital leaders do day in and day out for Marylanders: •Provide more than 88,000 Maryland jobs; most hospitals are the largest employers in their communities and they employ your friends and neighbors; •Make health care available 24 hours a day, every day of the year, regardless of a recession, blizzards, physician and nurse shortages, or other obstacles; •Bring you the latest technology and facilities so you, your family, and your neighbors can get the care they need, when they need it; •Manage the uncertainties and vast change that health care reform will bring; •Preserve your local hospital as the cornerstone of care in your community. Hospitals are unique places, and it takes unique people to run them. Maryland is fortunate to have such leaders.</blockquote>. "Famed management expert Peter Drucker said...." - Appeal to Authority Mr Drucker may be a management expert, but what expertise does he have in health care, medicine, or the health care environment?  I actually agree that the hospital environment is "difficult, chaotic, and complex" in many senses, but would assert that it is the health care professionals in hospitals (doctors, nurses, other clinicians, therapists, technicians, etc) who are most expert at and primarily tasked with responding to these complexities (see below).  I submit that the opening citation of Drucker is an example of an <a href="http://www.nizkor.org/features/fallacies/appeal-to-authority.html">appeal to authority</a> (chosen not because of his specific expertise in the relevant context.) "Hospitals are places where lives are saved...." - Appeal to Emotion Of course they are, and the general description of the hospital is true.  However, who is it who (rarely) save lives, (hopefully often) relieve pain and suffering, and provide continuous service "every minute of every day?"  It is, glaringly obviously, the health care professionals listed above, admittedly assisted by a variety of staff who keep the lights on, make the food, clean the operating rooms, etc, etc.  The most removed from the actual clinical care are the managers.  The higher the managers are in the food chain, the less likely they are to have any contact with actual clinical care.  I submit that most CEOs deal mainly with C-level officers and vice presidents, and interact mainly with them, spread sheets, PowerPoints, and emails.  Given that hospitals do al these wonderful things, should not the support, credit, and frankly, pay go to those who actually do wonderful things, not sit in meetings and play with spread sheets? I believe that this wonderful description of the hospital mission is mainly an <a href="http://www.nizkor.org/features/fallacies/appeal-to-emotion.html">appeal to emotion</a>, designed to generate warm and fuzzy opinions about hospitals that make paying their detached top managers much more than the people who actually provide patient care more emotionally, but not logically palatable. "And hospitals are governed by trustees...." "The compensation for hospital executives is determined by those boards...." - Begging the Questions and an Appeal to Common Practice The description of how CEO pay is set merely describes a process, but does not explain why this process is likely to come up with the right result.  It <a href="http://www.nizkor.org/features/fallacies/begging-the-question.html">begs questions</a> about hospital leadership and governance that we have discussed often, including whether <a href="http://hcrenewal.blogspot.com/search/label/boards%20of%20trustees">boards</a> populated by people with little understanding of health care, sometimes including leaders of <a href="http://hcrenewal.blogspot.com/search/label/finance">financial firms</a> who helped usher in the great recession, and sometimes including individuals with obvious <a href="http://hcrenewal.blogspot.com/search/label/conflicts%20of%20interest">conflicts of interest</a> are likely to make decisions about executive compensation that ultimately support the hospitals' missions.  It begs questions about the standards to which <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">executive pay</a> is compared, especially the phenomenon that all executives are above average (see this <a href="http://hcrenewal.blogspot.com/2010/07/where-no-hospital-ceos-are-below.html">post</a>).  The implication that because a process is in place that follows the usual practice, the outcome must be good amounts to an <a href="http://www.nizkor.org/features/fallacies/appeal-to-common-practice.html">appeal to common practice</a>.  "what these hospital leaders do day in and day out...." -Appeal to Emotion and the Questionable Cause Fallacy In one sense, this is just a more extreme version of the <a href="http://www.nizkor.org/features/fallacies/appeal-to-emotion.html">appeal to emotion</a> used above.  Furthermore, the bullet points are really about what hospitals and their health care professionals and support staff, not what their leaders do.  It is the hospitals as organizations that provide jobs.  It is the professionals and support staff who make the health care available every hour of every day.  (Have you ever seen the CEO of a hospital caring for an acute patient at 2 AM?  LOL.)  It is the hospital that provides the technology and facilities.  It is largely the health care professionals who manage uncertainties.  Suggesting that the few CEOs, sitting in their meetings and reading their spread-sheets, rarely directly interacting with health professionals, and virtually never actually involved in patient care, should get most of the credit for these good works insults the thousands of health care professionals who actually do the health care.  It also amounts to an example of the <a href="http://www.nizkor.org/features/fallacies/questionable-cause.html">questionable cause fallacy</a>: the fallacy is that because the managers are somehow associated with actual health care, they cause the health care to happen.  (Think how long a hospital could provide services if the health care professionals and support staff were to vanish.  Think how long a hospital could provide services if the managers vanished.) The <a href="http://articles.baltimoresun.com/2010-09-03/news/bs-ed-hancock-ceo-pay-letter-20100903_1_hospital-ceo-hospital-boards-board-compensation-committee">second letter</a> to the Baltimore Sun was by the chairman and CEO of Yaffe & Company, Inc, apparently a firm that consults on executive pay.  This letter was even less to the point than that above.  I invite our readers to discover its logical fallacies. Summary For a while we have been writing an informal series of posts about how logical fallacies may be deployed to advocate questionable health policy arguments, usually in a highly self-serving manner.  Our most recent example was <a href="http://hcrenewal.blogspot.com/2010/04/everybodys-doing-it-health-care-leaders.html">here</a>.  Most of the <a href="http://hcrenewal.blogspot.com/search/label/logical%20fallacies">examples</a> seemed to involve defenses of financial relationships among doctors and medical academics and drug and device companies, often written by people who themselves have financial relationships with such companies.  The question of huge compensation given to leaders of health care organizations, and related questions about the effects of their <a href="http://hcrenewal.blogspot.com/search/label/perverse%20incentives">perverse incentives</a>, <a href="http://hcrenewal.blogspot.com/search/label/impunity">impunity</a> from negative consequences of their actions, status as a new aristocracy, etc on health care dysfunction are getting more attention in the media.  So it should be no surprise that the defenders of the pay and power of these leaders are appearing.  It probably, but regrettably should also be no surprise that the defenses are mostly illogical, and made by people with financial interests in continuing excess compensation for health care leaders. Physicians, other health care professionals, those interested in health policy, and the public at large need to be continuously skeptical about health policy advocacy appearing in the media, especially by those who stand to personally gain from the results of the advocacy. My just slightly tongue-in-cheek suggestion for a policy position that could address this issue would be mandatory training in logical and evidence-based thinking, specifically to include recognition of logical fallacies, beginning at least at the middle-school level for all Americans (and around the globe), reinforced for those in health care.  (See the <a href="http://www.nizkor.org/features/fallacies/">Nizkor Project site</a> for a useful catalog of logical fallacies.)

Logical Fallacies in Defense of Million Dollar Babies

We recently posted about the latest example of generously paid health care leaders, million dollar plus hospital CEOs in the Baltimore area ...

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