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Pay for What? - Redux: Surrealistic Pay for Health Care Corporate CEOs

Pay-for-performance has been a persistently fashionable mantra for health care business leaders and policy advocates, particularly as applied to physicians to control costs and perhaps even improve quality.  We have been highly critical of current methods proposed to measure performance and tie pay to it (e.g., <a href="http://hcrenewal.blogspot.com/2006/09/p4p-band-wagon-rolls-but-in-whose.html">here</a>), and other bloggers, notably Dr Robert Centor at DB's Medical Rants, have vigorously pursued this issue (e.g., <a href="http://www.medrants.com/archives/5837">here</a>). It is beyond ironic that meanwhile, the pay of health care organizations' leaders seems less and less related to their performance.  For example, in a recent series on local executive pay in the Boston Globe <a href="http://www.boston.com/business/articles/2010/10/03/executive_share/">there were</a> these examples: Hologic <blockquote>Hologic Inc. gave its chief executive, John W. Cumming, a $1.5 million “retention payment’’ as part of his $10.5 million pay package last year. He was promised the payment in mid-2006 if he remained with the company through the end of 2008. At the same time, the Bedford women’s health care products company posted a $2.2 billion loss, largely resulting from a big write-down related to the 2007 purchase of Cytic Corp. Cumming has since stepped down as chief executive, but remains chairman. Hologic declined to comment.</blockquote> Charles River Laboratories <blockquote>Charles River Laboratories International Inc. chief executive James C. Foster received $1.3 million in deferred compensation in a year when the company disclosed plans to cut 300 workers, or 3 percent of its workforce. Charles River declined to comment.</blockquote> Note that a Charles River board member was one of the authors of an Institute of Medicine report advocating P4P for physicians, as we posted <a href="http://hcrenewal.blogspot.com/2006/09/p4p-band-wagon-rolls-but-in-whose.html">here</a>. Ah, the irony. Boston Scientific <blockquote>New Boston Scientific Corp. CEO J. Raymond Elliott started midyear and received a $1.5 million bonus. Boston Scientific posted a $1 billion loss last year. </blockquote>Elliott got a lot more than that, as reported in a <a href="http://www.boston.com/business/articles/2010/10/03/like_sports_stars_top_business_players_command_big_bucks/">companion Boston Globe article</a>: <blockquote>Elliott, whose experience includes running another medical device company, Zimmer Holdings Inc., was paid a performance bonus of nearly $608,000 last year, in addition to a $1.5 million signing bonus and $29.4 million in stock awards and options.</blockquote> Meanwhile, the company's losses continue to mount: <blockquote>And in February, Boston Scientific agreed to pay $1.7 billion to settle patent infringement charges from rival Johnson & Johnson, making it likely the company will post another loss this year.</blockquote>Note that Boston Scientific has had its ethical as well as financial failings, especially involving the case of the faulty implantable cardiac defibrillators, which resulted in settlements of civil lawsuits alleging that it hid data about the defects, and two guilty pleas by a company subsidiary to charges that it did not notify the FDA about these problems (see post <a href="http://hcrenewal.blogspot.com/2010/04/who-guards-guardians-case-of-boston.html">here</a>). Vertex Pharmaceuticals Inc <blockquote>At Vertex Pharmaceuticals Inc., chief Matthew W. Emmens, who took over five months into the year, received $2.8 million performance award last year, a year in which the company lost $642 million.</blockquote> He actually got a lot more than that, too, as per the second Globe article: <blockquote>His pay package included more than $15 million in restricted stock and options. </blockquote> Cephalon At the same time, an <a href="http://articles.latimes.com/2010/oct/03/business/la-fi-hiltzik-20101003">op-ed </a>by Michael Hiltzik in the Los Angeles Times noted that a health care company had the most unfairly paid CEO, according to "veteran compensation consultant Fraef Crystal," <blockquote>Cephalon Inc., ... CEO, Frank Baldino, Crystal identifies as the most overpaid chief executive in his database. (Baldino's $11.1 million pay last year is 832% of what would be fair, Crystal calculated.)</blockquote> Note that Cephalon settled charges of off-label promotion of narcotics for over $400 million in 2008 (see post <a href="http://hcrenewal.blogspot.com/2008/09/whats-drug-addicts-life-worth-to.html">here</a>). Summary So the general rule seem to be that top executives of health care organizations make large, sometimes enormous amounts of money, and that occurs regardless of company or personal performance. The riches keep flowing even if the company loses millions or billions, or lays off significant chunks of its workforce. Hiltzik identified corporate executive pay as: <blockquote>the No. 1 scandal of American business — executive pay that bears scant relationship to what these people are worth. The CEO pay curve has been galloping out of control for so long that it has achieved the status of a cliche. In 1965 the average U.S. CEO earned 24 times the pay of the average worker. Four decades later the ratio was 411 to 1..</blockquote> Furthermore, <blockquote>The dismal reality of CEO pay is that it comprises two problems, not one. Top executive pay generally is too lavish in the U.S. no matter what performance standard you apply. Good performance or bad, the pay disparity between the CEO and the rank and file is larger than in any other country, contributing to rising income inequality and to its consequent social pathologies. It's also based on several flawed assumptions, argue Jay Lorsch and Rakesh Khurana of Harvard Business School in a recent article for Harvard Magazine. One is that money is the only motivating factor behind executive performance. Another is that shareholders are the only stakeholders in corporate performance whose interests matter. This is a relatively recent paradigm, they observe; as late as 1990 business groups recognized the importance of a corporation's responsibility to stakeholders such as employees, customers, suppliers and the community. The flaw in the latter assumption is that it ties CEO pay to stock prices, which they can't influence on their own. But the picture of the CEO as virtually the sole auteur of a corporation's fate permeates American society. Listen to a Meg Whitman campaign ad talking about 'the EBay Meg created.' If you pay attention you may catch a reference to the 15,000 employees who were there when she left, at least a few of whom must have had something to do with the company's success.</blockquote> A further problem is that the pay of top corporate leaders is generally set not by the share-holders, that is, the owners of the company, but by boards of their cronies, many of whom are also members of the CEO club.  As Hiltzik noted, <blockquote>although most corporate boards make a show of placing pay decisions in the hands of a committee of 'independent' directors, the members are almost always current or former top executives themselves, members of a tight club.</blockquote> By the way, as we posted <a href="http://hcrenewal.blogspot.com/2009/09/safety-net-medical-center-ceo-gets.html">here</a>, a member of both the Hologic and Vertex boards was a former hospital CEO who got a generous retirement package despite its financial straits. So while their policy flacks continue to push pay-for-performance for physicians, maybe health care corporate leaders should set an example by embracing real pay for performance themselves. To repeat, again, again, again,.... Until they do, top executives remain really different from you and me.  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?

Pay for What? - Redux: Surrealistic Pay for Health Care Corporate CEOs

Pay-for-performance has been a persistently fashionable mantra for health care business leaders and policy advocates, particularly as applie...

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Wright Medical Settles, ... But Wait, There is Less

Everyone loves a parade, and so the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">parade of legal settlements</a> by prominent health care organizations continues.  The latest to march into view is Wright Medical Group, as <a href="http://www.bloomberg.com/news/2010-09-30/wright-medical-technology-to-pay-7-9-million-end-criminal-civil-probes.html">reported</a> by Bloomberg: <blockquote>Wright Medical Technology Inc. agreed to pay $7.9 million to resolve U.S. criminal and civil investigations into whether it paid kickbacks to induce doctors to use its hip and knee devices. Prosecutors in Newark, New Jersey, today charged Wright with conspiring to violate a federal anti-kickback statue through consulting contracts with orthopedic surgeons. The U.S. agreed to drop the case in 12 months if a monitor agrees that Wright has reformed the way it hires consultants. Wright, based in Arlington, Tennessee, also agreed to a $7.9 million civil settlement with the Justice Department and inspector general of the Health and Human Services Department to resolve fraudulent-marketing claims. The company entered into a five-year corporate integrity agreement. </blockquote> Here we go again. A company is accused of giving kickbacks, aka bribes, to individual doctors, in this case orthopedic surgeons, to get them to use the company's products. Such payments clearly violate medical ethics (especially doctors' obligations to put the interests of patients ahead of their personal financial interests), leading to decision making not in the best interests of the patients. However, the penalty to the company itself is minuscule, only a fraction of the company's revenue, <a href="http://www.google.com/finance?q=NASDAQ:WMGI&fstype=ii">according to Google Finance</a>, in 2009, just under $500 million. As we have noted endlessly before, financial penalties to corporations are diffused among all shareholders and employees, and possibly customers and patients. Do we really expect that this penalty will change anything, or deter future bad behavior by this or any other company? But our government continues to treat the corporate employees who authorize, direct, or implement bad behavior like this as essentially above the law. In this case, like in many others we have discussed previously, no one who authorized, directed or implemented the bad behavior will have to pay any sort of penalty or suffer any sort of negative consequences.  Does anyone in their right mind believe that Wright Medical really is <blockquote>pleased to announce these agreements and look[ing] forward to working with the independent monitor as we continue our commitment to the highest standards of ethical and legal conduct</blockquote> That was a quote from Wright Medical CEO Gary D Henley. He may be pleased to announce the agreements, since they really amount to such a tiny pinprick of a penalty. After all, Mr Henley will be able to to continue to use Wright Medical's revenues, virtually unaffected by this penalty, to justify his compensation (per <a href="http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1odHRwOi8vaXIuaW50Lndlc3RsYXdidXNpbmVzcy5jb20vZG9jdW1lbnQvdjEvMDAwMDk1MDEyMy0xMC0wMzUxMjEvZG9jL1dyaWdodE1lZGljYWxHcm91cEluYy5wZGYmdHlwZT0yJmZuPVdyaWdodE1lZGljYWxHcm91cEluYy5wZGY=">the 2009 proxy statement</a>, $2,036,517 in 2009, and his continuing accumulation of wealth, e.g., 436,601 shares of stock, currently valued at $13.86/ share <a href="http://www.google.com/finance?q=NASDAQ%3AWMGI">according to Google Financial</a>.) I leave an assessment of what the company's previous commitment to "the highest standard of ethical and legal conduct" was to our dear readers. We will not have true health care reform until we end the unholy alliance between big government and big health care organizations, that is, <a href="http://hcrenewal.blogspot.com/2010/10/novartis-settles-but-wait-theres-more.html">health care corporatism</a>. Then, maybe, we can make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Wright Medical Settles, ... But Wait, There is Less

Everyone loves a parade, and so the parade of legal settlements by prominent health care organizations continues. The latest to march into...

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Cart before the horse, again: IOM to study HIT patient safety for ONC; should HITECH be repealed?

<div style="text-align: justify;">In my July 2010 post <a href="http://hcrenewal.blogspot.com/2010/07/meaningful-use-final-rule-have.html">"Meaningful Use Final Rule" </a>I pointed out the cart-before-the-horse problem of creating "meaningful use" rules for health IT before usability issues were resolved: </div><blockquote> From the HIMSS EHR Usability Task Force, June 2009: Electronic medical record (EMR) adoption rates have been slower than expected in the United States, especially in comparison to other industry sectors and other developed countries. A key reason, aside from initial costs and lost productivity during EMR implementation, is lack of efficiency and usability of EMRs currently available. Achieving the healthcare reform goals of broad EMR adoption and “meaningful use” will require that efficiency and usability be effectively addressed at a fundamental level. These "usability" problems require long term solutions. There are no quick fix, plug and play solutions. Years of research are needed, and years of system migrations as well for existing installations. Yet we now have an HHS Final Rule on "meaningful use" regarding experimental, unregulated medical devices the industry itself admits have major usability problems, along with a growing body of literature on the <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=2009">risks entailed</a>.<div dir="ltr"> </div><div dir="ltr">For crying out loud, talk about putting the cart before the horse... </div> <div style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbxjl-AlGATfarPayjaUYkCOG4sUrulp4D88Nk7_z-eEbaWRl-xi1g0neGKWDhEL1w6-_-FCu4iBoJx9AUlU-bccaAmEcMfmGI1uoa4gTohjch5gzcx5tA9Ru-uMB0Mip6NE0PuUsfDXJ5/s1600/horse-cart.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5493460657310735298" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbxjl-AlGATfarPayjaUYkCOG4sUrulp4D88Nk7_z-eEbaWRl-xi1g0neGKWDhEL1w6-_-FCu4iBoJx9AUlU-bccaAmEcMfmGI1uoa4gTohjch5gzcx5tA9Ru-uMB0Mip6NE0PuUsfDXJ5/s320/horse-cart.jpg" style="display: block; margin: 0px auto 10px; width: 253px; cursor: pointer; height: 168px; text-align: center;" /></a>Something's very wrong here...</div></blockquote><div style="text-align: center;"> </div> Here we go again. "Ready ... fire ... aim" seems the postmodern approach to healthcare IT: <blockquote><a href="http://www.govhealthit.com/newsitem.aspx?nid=74754" style="font-weight: bold;">Institute to study HIT patient safety for ONC</a> Mary Mosquera Government Health IT, Thursday, September 30, 2010 The Institute of Medicine (IOM) announced it will conduct a year-long study for the Office of the National Coordinator for Health IT to identify best policies and practices for improving healthcare safety when using electronic health records. The IOM, an arm of the National Academy of Sciences, will examine prevention of health IT-related errors, rapid reporting of patient safety concerns [To whom? The vendor, as now, so they can sit on the problems until it suits them to fix it? In the face of contractual gag clauses, I'm not sure where else such reports can go - ed.] and methods to promote safety-enhancing features of electronic health records (EHRs), said Dr. David Blumenthal, the national health IT coordinator. The IOM will also make recommendations about the potential effects of government policies and private sector efforts to make the most of patient safety and avoid medical errors through health IT. [In reading the hype right up to the <a href="http://hcrenewal.blogspot.com/2010/07/new-england-journal-on-meaningful-use.html">ONC Director Blumenthal</a> and the POTUS, one would get the impression that medical error-prevention was an inherent, deterministic characteristic of this 100% beneficent technology, so much so that simply putting it in will revolutionize medicine. Now, we all of a sudden need to study its safety? - ed]. ... “This study will draw on IOM’s depth of knowledge in this area to help all of us ensure that HIT reaches the goals we are seeking for patient safety improvement,” Blumenthal said. Earlier this year, the Health IT Policy Committee, a federal advisory group, conducted hearings about patient safety and EHRs. It recommended creating a national database to which healthcare providers can report patient data errors and unsafe conditions they encounter using EHRs. [To reiterate, there is a major problem with this proposal: "providers" cannot do this with contractual gag clauses in effect. It also seems such databases belong at the state level, since the control of medicine traditionally resides in the states, but these days the Federal government seems to know no bounds - ed.] The committee also urged the establishment of a patient safety organization to analyze the reports and share information from the database to make healthcare a learning system.</blockquote> So, in the midst of a National Program for Health IT in the United States (NPfIT in the U.S.), with tens of billions of dollars earmarked for health IT already (money we don't really have, but it can be printed quickly, or borrowed from China) the IOM is going to study health IT safety, prevention of health IT-related errors, etc. ... only now? Perhaps these studies should have been initiated, say, ten years ago, or at least before the beneficence of health IT and its capacity to revolutionize medicine was openly promoted by the past and current Administrations (the current one going so far as to institutionalize penalties for non adopters)? A move like this suggests someone's blown the whistle on the purveyors of the NPfIT in the U.S. They are now attempting to cover their tracks regarding this glaring deficiency (unknown risk) in an already-initiated, extremely expensive national program based on equivocal studies and literature, an increasing amount of which is now refuting the grandiose claims made about health IT. The purveyors would seem to have a figurative gun at their heads causing them to ask the IOM for assistance at this rather late date in the scheme of things (could that gun be named <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/grassley_erecords102409.pdf">Grassley</a>?) A tidbit of common sense regarding IT, all too lacking in today's national leadership: <ul><li>You should not need year-long IOM studies to study the safety of supposedly safe devices already slated for national rollout.</li></ul> Finally, the sudden interest in health IT safety suggests the HITECH act on health IT with its timelines and penalties, 'smuggled' in under the auspices of the ARRA, is premature. HITECH's timelines should be delayed delayed until this technology and its safety is truly understood (or it should be repealed entirely and redone in a non-cavalier fashion). -- SS 10/2/10 addendum: I recall that we already have the 2009 National Research Council HIT study. It reported that HIT in its present form does not support physician cognitive needs and that our approaches to HIT are "insufficient" to achieve stated goals... <blockquote> The U.S. National Research Council’s "Current Approaches to U.S. Health Care Information Technology are Insufficient" is <a href="http://www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=12572">here</a>. A full report on an investigation of healthcare IT lack of progress is <a href="http://www.nlm.nih.gov/pubs/reports/comptech_prepub.pdf">here</a> (PDF). </blockquote><blockquote dir="ltr" style="margin-right: 0px;"> </blockquote> From the NRC/NAS/IOM sites:<blockquote> "The National Research Council (NRC) functions under the auspices of the National Academy of Sciences (NAS), the National Academy of Engineering (NAE), and the Institute of Medicine (IOM)." ... "The IOM is the health arm of the NAS."</blockquote> The National Research Council report on HIT was basically buried. HITECH happened anyway. ONC seems to now be going back to the same source(s), presumably for either a glowing report, or a report that it can safely ignore. Finally:That HIT effectiveness issues, safety issues, admittedly poor usability but "meaningful use" criteria crafted anyway, lack of clinician cognitive support requiring years of multidisciplinary research to correct, etc. - have had no inhibitory effect on grandiose, autocratic and highly expensive plans for national HIT also suggest political agendas far beyond "improving patient care."-- SS

Cart before the horse, again: IOM to study HIT patient safety for ONC; should HITECH be repealed?

In my July 2010 post " Meaningful Use Final Rule" I pointed out the cart-before-the-horse problem of creating "meaningful use...

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Novartis Settles..., But Wait, There's More

Back in January, 2010, we <a href="http://hcrenewal.blogspot.com/2010/01/drowning-our-sorrows-in-ketchup.html">posted</a> about Novartis' settlement of charges that it promoted its anti-seizure drug, Trileptal, (Oxcarbazepine) for off-label uses, agreeing to plead guilty to one charge of violating the US Food, Drug and Cosmetic Act.  This week, the full story of the settlement just came out, and yes, but wait, there's more.  Per the New York Times <a href="http://www.nytimes.com/2010/10/01/health/policy/01novartis.html">article</a> by Duff Wilson, the story is not only about Trileptal: <blockquote>The Swiss drug giant Novartis is paying $422.5 million to settle criminal and civil investigations into the marketing of the antiseizure medicine Trileptal and five other drugs, federal officials said on Thursday.</blockquote>The other drugs were: <blockquote>Diovan, a hypertension drug that is the company’s top-selling product, at $6 billion last year; Sandostatin, a drug to treat a growth hormone disorder that had worldwide sales of $1.2 billion last year; Exforge, a hypertension drug that sold $671 million; Tekturna, a blood pressure medicine that sold $290 million; and Zelnorm, a medicine for irritable bowel syndrome and constipation that was later withdrawn from the United States market. </blockquote> And the issue was not solely off-label marketing: <blockquote>Federal prosecutors accused Novartis of paying illegal kickbacks to health care professionals through speaker programs, advisory boards, entertainment, travel and meals. But aside from pleading guilty to one misdemeanor charge of mislabeling in an agreement that Novartis announced in February, the company denied wrongdoing. </blockquote> While the allegations were much more broad than those originally announced, the penalties were the usual suspects: <blockquote>The settlement includes a $170 million criminal fine and $15 million in criminal forfeiture by Novartis Pharmaceuticals, its United States subsidiary.</blockquote> Also, <blockquote>Novartis settled the investigation into the other drugs for $237.5 million. </blockquote> However, <blockquote>Prosecutors said top management at Novartis had approved illegal marketing from July 2000 to June 2004. No individual, however, was named or charged.</blockquote> Back in June, we <a href="http://hcrenewal.blogspot.com/2010/06/attempt-to-hold-health-care-leaders.html">posted</a> about how US law enforcement was supposedly going to start getting tougher with the people who authorized, directed or implemented wrong doing by health care organizations. Back then, federal officials said that executives would be held accountable, and forced to leave their jobs or even be disbarred from working in the industry. However, here we are, four months later, and even a case that mushroomed from involving allegations of off-label promotion of one drug to off-label promotion of six drugs, allegations of kickbacks to physicians, and allegations that top management knew about what was going on results in no negative consequences to any individuals. So it still seems that if misdeeds, such as promotion of drugs for off-label uses, and giving kickbacks to doctors disguised as honoraria for talks, consulting fees, and meals and travel payments, are done under the auspices of a large health care organization, no one is ultimately responsible for them.  The organization may have to pay what appears to be a big fine, but one that pales against the profits to be made from the misdeeds. So, if an ordinary person commits fraud, he or she is likely to have to pay a big fine and go to jail.  If a physician commits fraud, he or she is likely to have to pay a big fine and go to jail, and incidentally to lose his or her medical license.  But if a corporate executive authorizes a fraudulant practice, he or she is likely not to pay any penalty (but may well have already collected a big bonus). We have repeated endlessly that by limiting penalties to only modest increases in the costs of doing business for organizational malfeasance in health care, we just encourage more bad behavior.  But with each new example like this, I agree more that the fundamental problem has become corporatism, (or <a href="http://www.amazon.com/Corpocracy-Business-Roundtable-Hijacked-Greatest/dp/0470145099">Corpocracy</a>, as Robert A G Monks put it).  Government and corporate leaders find that they have more in common with each other than with the little people.  Or as Barry Ritholtz just <a href="http://www.ritholtz.com/blog/2010/09/you-vs-corporations/">blogged</a>: <blockquote>The new dynamic, however, has moved past the old Left Right paradigm. We now live in an era defined by increasing Corporate influence and authority over the individual. These two 'interest groups' – I can barely suppress snorting derisively over that phrase – have been on a headlong collision course for decades, which came to a head with the financial collapse and bailouts. Where there is massive concentrations of wealth and influence, there will be abuse of power. The Individual has been supplanted in the political process nearly entirely by corporate money, legislative influence, campaign contributions, even free speech rights. This may not be a brilliant insight, but it is surely an overlooked one. It is now an Individual vs. Corporate debate – and the Humans are losing.</blockquote> Furthermore, <blockquote>There is some pushback already taking place against the concentration of corporate power: Mainstream corporate media has been increasingly replaced with user created content – YouTube and Blogs are increasingly important to news consumers (especially younger users). Independent voters are an increasingly larger share of the US electorate. And I suspect that much of the pushback against the Elizabeth Warren’s concept of a Financial Consumer Protection Agency plays directly into this Corporate vs. Individual fight. But the battle lines between the two groups have barely been drawn. I expect this fight will define American politics over the next decade. Keynes vs Hayek? Friedman vs Krugman? Those are the wrong intellectual debates. Its you vs. Tony Hayward, BP CEO, You vs. Lloyd Blankfein, Goldman Sachs CEO. And you are losing . . .</blockquote>

Novartis Settles..., But Wait, There's More

Back in January, 2010, we posted about Novartis' settlement of charges that it promoted its anti-seizure drug, Trileptal, (Oxcarbazepin...

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That Wheel Was Already Invented: the UN Special Rapporteur's Guidelines for Pharmaceutical Companies

For five years now, we have been writing about concentration and abuse of power in health care, and on specific tactics used predominantly by large health care organizations that threaten the values that physicians and other health care professionals once swore to uphold. <a href="http://hcrenewal.blogspot.com/search/label/pharmaceuticals">Pharmaceutical companies</a> may not have been the worst offenders when it came to threatening these values, but they have not been laggards.  Specific issues we have discussed included (in a peculiar order that I will explain in a minute): failure of the companies' <a href="http://hcrenewal.blogspot.com/search/label/boards%20of%20directors">boards of directors</a> to be accountable for misbehavior by its management, sometimes associated with conflicts of interest affecting these board members (e.g., <a href="http://hcrenewal.blogspot.com/2010/09/should-president-of-university-of.html">this recent case</a>); outright <a href="http://hcrenewal.blogspot.com/search/label/crime">crime</a> and corruption (e.g., <a href="http://hcrenewal.blogspot.com/2010/09/forest-pharmaceuticals-pleads-guilty-to.html">this case</a>); use of <a href="http://hcrenewal.blogspot.com/search/label/key%20opinion%20leaders">key opinion leaders</a> paid by the company to market products cloaked in the mantle of academia; payments made by the companies to patient advocacy groups (e.g., <a href="http://hcrenewal.blogspot.com/2009/10/alliance-on-mental-illness-or-for.html">this one</a>), <a href="http://hcrenewal.blogspot.com/search/label/medical%20societies">medical societies</a>, and academic institutions that induce institutional <a href="http://hcrenewal.blogspot.com/search/label/conflicts%20of%20interest">conflicts of interest</a>, and enlist these well-reputed organizations as <a href="http://hcrenewal.blogspot.com/search/label/stealth%20marketing">stealth marketers</a>; ridiculously <a href="http://hcrenewal.blogspot.com/search/label/health%20care%20prices">high prices</a> charged for particular medicines, often to particularly vulnerable patients (e.g., <a href="http://hcrenewal.blogspot.com/2010/04/oh-prices-we-pay-reloaded-celgene-balks.html">this case</a>); <a href="http://hcrenewal.blogspot.com/search/label/suppression%20of%20medical%20research">suppression</a> and <a href="http://hcrenewal.blogspot.com/search/label/manipulating%20clinical%20research">manipulation</a> of clinical research evaluating the companies' products; and <a href="http://hcrenewal.blogspot.com/search/label/deception">deceptive</a> drug marketing practices. Many other bloggers have written about these issues.  Some of them have been widely taken up in the mainstream media.  A few have even made it into the medical and health care literature.  But those of us who bring them up have been attacked as a tiny group of pharmascolds (e.g., <a href="http://hcrenewal.blogspot.com/2009/07/blogscan-reports-from-acre-meeting.html">here</a>), who get in the way of the needed innovation and scientific advances that the pharmaceutical industry generously brings to the public.  Despite such attacks, it may be that our concerns are somewhat more universal, although those with vested interests in maintaining the status quo might not want that publicized too much. A new issue of PLoS Medicine included several articles on drug companies' responsibilities for human rights.  <a href="http://www.plosmedicine.org/article/info%3Adoi%2F10.1371%2Fjournal.pmed.1000330">One</a> was by a former United Nations Special Rapporteur on the right to the highest attainable standard of health.  I, and I suspect most of even our Health Care Renewal readers were not familiar with that office.  I also confess to being unaware that he had published a report to the UN General Assembly entitled <a href="http://www.essex.ac.uk/human_rights_centre/research/rth/docs/GA2008.pdf">Human Rights Guidelines for Pharmaceutical Companies in Relation to Access to Medicines</a>, which included 47 specific guidelines.  Amazingly enough, it turns out that some of these guidelines seemed to directly address the issues raised above, to wit: Board of Directors' Accountability <blockquote>11. The company should have a governance system that includes direct board level responsibility and accountability for its access to medicines policy.</blockquote> Anti-Corruption <blockquote>15. A company should publicly adopt effective anti-corruption policies and measures, and comply with relevant national law implementing the United Nations Convention against Corruption.</blockquote> Disclosure of Financial Support <blockquote>18. The company should annually disclose its financial and other support to key opinion leaders, patient associations, political parties and candidates, trade associations, academic departments, research centres and others, through which it seeks to influence public policy and national, regional and international law and practice. The disclosure should extend to amounts, beneficiaries and channels by which the support is provided. 19. When providing any financial or other support, the company should require all recipients to publicly disclose such support on all appropriate occasions.</blockquote> Drug Pricing <blockquote>33. When formulating and implementing its access to medicines policy, the company should consider all the arrangements at its disposal with a view to ensuring that its medicines are affordable to as many people as possible. In keeping with Guideline 5, the company should give particular attention to ensuring its medicines are accessible to disadvantaged individuals, communities and populations, including those living in poverty and the very poorest in all markets. The arrangements should include, for example, differential pricing between countries, differential pricing within countries, commercial voluntary licences, not-for-profit voluntary licences, donation programmes, and public private partnerships. 34. The arrangements should take into account a country’s stage of economic development, as well as the differential purchasing power of populations within a country. The same medicine, for example, may be priced and packaged differently for the private and public sectors within the same country. 35. The arrangements should extend to all medicines manufactured by the company, including those for non-communicable conditions, such as heart disease and diabetes.</blockquote> Suppression and Manipulation of Clinical Research <blockquote>39. The company should take effective measures to ensure that all information bearing upon the safety, efficacy and possible side effects of a medicine are easily accessible to individuals so they can make informed decisions about its possible use.</blockquote> Deceptive Drug Marketing <blockquote>41. The company should publicly disclose its promotional and marketing policies and activities, including costs.</blockquote> Needless to say, I can see no evidence that any big pharmaceutical companies are trying to adhere to any of these guidelines.  Somehow I suspect that those who are supporting the vested interests of big pharmaceutical corporations may not all have that much respect for the United Nations.  However, I think that the Special Rapporteur's guidelines lend more credibility to the argument that we need better leadership of health care organizations, and specifically that such organizations should follow clear ethical precepts, and their leadership should be held accountable when they do not. So the next time someone calls you a "pharmascold," you can say, "yeah, yeah, so is the UN Special Rapporteur."

That Wheel Was Already Invented: the UN Special Rapporteur's Guidelines for Pharmaceutical Companies

For five years now, we have been writing about concentration and abuse of power in health care, and on specific tactics used predominantly b...

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More Tales of Hospital Executive Compensation: Pay for What?

I have collected another series of stories from the wild and wacky world of health care executive compensation.  These are from three different hospitals/ hospital systems, ordered from smallest to largest. Jefferson Healthcare This <a href="http://www.peninsuladailynews.com/article/20100915/news/309159984/hospitals-new-ceo-highest-paid-public-official-in-jefferson-county">story</a>, from Jefferson County, Washington state, came from the Peninsula Daily News: <blockquote>When Mike Glenn takes over the Jefferson Healthcare CEO office Oct. 4, he will be receiving $225,000 annually to run the 25-bed publicly funded hospital. And he will become the highest-paid public official in Jefferson County. Jefferson Healthcare's budget is $65 million, and it employs 360 full-time workers and about 550 part-timers.</blockquote> Note that the amount above is apparently salary, not total compensation, which could well be higher. Lakeland Regional Medical Center This <a href="http://www.theledger.com/article/20100925/NEWS/9255038/1134?Title=Officials-Pay-Is-Disclosed-At-LRMC">story</a>, from Lakeland, Florida, came from the Lakeland Ledger. <blockquote>The latest IRS report available on Lakeland Regional Medical Center shows, for the first time, how much LRMC officials receive in base pay and how much in 'bonus and incentive compensation' based on meeting goals assigned them. Not-for-profit hospitals are required to release their IRS reports. Previously, those reports combined salary and bonuses, which may or may not be awarded in a given year. Jack Stephens, president and chief executive, was paid $856,514. Of that, $644,034 was his base pay and $212,480 was bonuses. Second-highest paid was Paul Powers, vice president and chief financial officer. He earned a total $435,581, of which $352,661 was base pay and $82,920 in bonuses. Third was Dr. William Sadowski, psychiatrist, earning $430,117, of which $149,226 was base pay and $280,891 bonuses. Others listed as highest compensated: Dr. Edward Sammer, chief medical officer, $404,789 ($327,607 base pay, $77,182 bonus). Dr. Olumide O. Sobowale, who heads trauma services, $306,792 ($227,692 base pay, $79,100 bonus). Janet Fansler, vice president/cardiac and specialty care, $266,672 ($215,954 base, $50,718 bonus). Mary Ford, chief information officer, $264,283 ($213,978 base, $50,305 bonus). Carole Philipson, vice president support services and facilities, $246,530 ($199,474 base, $47,056 bonus). Hugh Autry, vice president acute/surgical care, $245,216 ($198,408 base, $46,808 bonus). Jeffery Payne, vice president human resources, $229,304 ($185,696 base, $43,608 bonus). John Schliesser, vice president planning and external relations, $226,571 ($183,363 base, $43,208 bonus). Dr. Michael A. Campanelli, neurosurgeon, $197,887, not divided into base/bonus. Ken Menefee, executive director LRMC Foundation, $181,045 ($151,142 base, $29,953 bonus). Dr. Joy L. Jackson, physician adviser, $164,923, not divided into base/bonus. Dr. Rajan K. Raj, trauma surgeon, $141,344, not divided into base/bonus.</blockquote> Note that LRMC is a bigger institution that Jefferson Healthcare, with operating revenue just under $650 million. However, it is now having financial woes, as reported in a <a href="http://www.theledger.com/article/20100925/NEWS/9255036?Title=LRMC-Rates-Going-Up">separate story </a>in the Ledger. <blockquote>Lakeland Regional Medical Center's rates will increase an average 10 percent, for the third year in a row, in the fiscal year starting Friday. These continual increases reflect the financial pressures affecting hospitals, patients and the health care system nationwide. Costs are increasing for almost everything LRMC pays for - drugs, bad debts, charity care, write-offs to managed-care and government insurance plans, insurance and utilities among them. The number of hospitalized patients is expected go up very little, an increase of slightly less than 2 percent, according to Vice President and Chief Financial Officer Paul Powers.</blockquote> UCLA Medical Center Our last <a href="http://articles.latimes.com/2010/sep/17/local/la-me-uc-20100917">story</a>, from the Los Angeles Times, is about a large, prestigious academic medical center. <blockquote>First, the board [of regents] approved $3.1 million in bonuses for medical center executives that are linked to efficiencies and improvements in patient health. That money, which comes from hospital revenues, will be distributed among 37 UC hospital leaders across the state. As part of that group, Feinberg, UCLA's hospital system chief executive officer, will receive a $210,000 bonus. But in a more divisive matter, UCLA officials also received the regents' approval to give Feinberg an extra raise of about $410,000, boosting his total compensation to more than $1.3 million.</blockquote> Why was this divisive? It turns out that the University of California system is in deep financial trouble. <blockquote>The University of California regents took steps Thursday to shore up the university's badly underfunded retirement plans by raising the amounts employees and the university will be expected to contribute to them. </blockquote> In particular, <blockquote>Meeting at UC San Francisco, the regents unanimously approved a plan that will raise contributions to the pension and retirement health plans over two years to 5% from the current 2% of employees' paychecks, and to 10% from 4% of payroll for the university. The change will take effect quickly for about half of UC's 115,000 employees, including its faculty, but must be negotiated with its unionized employees. More tough choices are ahead as UC tries to fill an estimated $21-billion liability gap in its retirement plans. Until this spring, neither the university nor its employees had made any contributions to the plans for 20 years. In December, the regents are expected to review proposals for even more extensive changes, including one that would create a less generous program for employees hired after 2013 and boost the minimum retirement age to 55 from 50.</blockquote> So in times of such financial stress, why increase the compensation of the UCLA medical center CEO so much? <blockquote>UCLA Chancellor Gene Block said Feinberg was doing an excellent job and was being wooed by other employers. 'Keeping this team together is essential,' he said. </blockquote> Summary So to summarize, the CEO of a tiny hospital gets $225,000 in salary, presumably more in total compensation. The CEO of a mid-size medical center with stagnant revenues and rising costs got over $850,000 in total compensation, while 11 other executives, mostly non-physicians, all got more than $180,000. The CEO of a large medical center, within a university system with a seriously underfunded pension plan which is increasing deductions from all employees' pay, and contemplating reduced retirement programs for new hires, got a $210,000 bonus and a $410,000 raise for total compensation of more than $1.3 million. So once again we see that even in tiny, public hospitals, the CEOs are paid well, and in bigger hospitals, even those in the midst of financial problems, the CEOs are paid very well.  There does seem to be a rough correlation with hospital size.  Executives, and their boosters like to imply that the bigger the institution, the harder the job.  Keep in mind, however, that most hospitals, like most modern corporations, are highly pyramidal.  The CEO hardly manages each and every worker.  Rather, the CEO manages a few top executives, who in turn manage a few middle-managers, etc, etc.  For example, a <a href="http://www.bloomberg.com/news/2010-09-21/bofa-chief-names-ex-fleet-comrades-laughlin-lyons-mogenson-to-top-roles.html">Bloomberg report</a> noted that only 11 top executive report to the CEO of the huge Bank Of America.  Another claim by CEOs and their defenders is that it is all about pay for performance.  As noted above, and in other posts about executive compensation, the criteria for performance are rarely stated, and hardly explicit.   Anecdotally, there are many examples, including one above, of financially stressed institutions cutting back in other areas, but paying top executives more.  As in the last case above, nearly every CEO seems to be doing a wonderful job, at least according to the boards of directors or trustees to whom he or she is supposed to be accountable.  In fact, the real lesson seems to be that top managers almost always do well financially, regardless of performance, regardless of financial pressures on their organizations, and do better and better the longer they hold their jobs.  Top executives are really different from you and me. I say again, 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?

More Tales of Hospital Executive Compensation: Pay for What?

I have collected another series of stories from the wild and wacky world of health care executive compensation. These are from three differ...

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Interface Problems, Ill-Informed Leadership, Suppression of Whistle Blowing: A New Look at a Historic Case

Three issues that come up frequently on Health Care Renewal are problems with man-machine interfaces in health care information technology (IT), as in <a href="http://hcrenewal.blogspot.com/2010/09/ultimate-workaround-to-mission-hostile.html">this post</a> by Dr Scot Silverstein;<a href="http://hcrenewal.blogspot.com/search/label/ill-informed%20management"> ill-informed</a> and mission-ignorant or <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management">hostile leaders</a>, sometimes in a position to overrule health care professionals, as in <a href="http://hcrenewal.blogspot.com/2010/09/health-care-leaders-in-maine-fail-to.html">this post</a>; and <a href="http://hcrenewal.blogspot.com/search/label/whistle-blowers">whistle-blowers</a>, and their silencing. A truly amazing story just surfaced that deals with all these issues, albeit not in health care.  If it is true, and if it had been revealed earlier, maybe society would have become more concerned earlier with these issues, and maybe they would have not ended up plaguing health care so. Let me first just go through the basic structure of the story to underline the parallels with health care issues.  Then I will quote the specifics. (If you do not instantly recognize the story, I suggest going through this post sequentially, not jumping to the end, to make its impact more clear.) The Structure of the Story Introduction A large corporation had just put on-line, with much publicity, a high-technology system that was advertised as bigger, faster, better than the competition.  Confusing Interface and Terminology, Wrong Control Input  A few days after becoming operational, those in charge suddenly noticed a looming and severe problem.  A technician was ordered to make an extreme control input to avoid the problem.  However, there was confusion about the terminology of the input.  While the system he was controlling was new, and had a new interface, it was operating in an area in which the old terminology, from a time in which the interface for the particular control worked in the opposite direction, was still in use.  So his extreme input was in exactly the wrong direction.  By the time the mistake was clear, and the control was reversed, it was too late, and the first stage of the catastrophe ensued.  Ill-Informed Management Overrules the Professionals It is possible that the catastrophe could have been ameliorated if a crucial part of the system were then to have been quickly shut down.  The highest ranking professional on duty ordered it shut down.  However, soon after the events above, a top executive in the corporation, who was nearby only because of all the hoopla surrounding the system's roll out, came on the scene.  He countermanded the order for the shutdown, possibly thinking continuing operation would cost less money and result in less bad publicity.  True disaster then ensued. Whistle Blowing Suppressed After the disaster, there were several government hearings.  The top executive denied any knowledge of the decision making that lead to the disaster.  A professional who had not been present when the decisions were made, but was told about them by those who were present, avoided mention of the events above, because the top executive had told him that if he were to have told the truth, the company would have been found negligent, its insurance would not have covered the disaster, and it would have gone bankrupt, and everyone would lose their jobs.  So he never told anyone except first-degree relatives.  The other people who were present for the events above did not testify, for reasons to be discussed below. So this story has all the familiar elements.  But so have many others.  Why was the suppression of this version of the story (assuming its true, which is not proven) so important? The Real Story Let us go through the elements again, this time with quotes from <a href="http://www.telegraph.co.uk/culture/books/booknews/8016751/The-truth-about-the-sinking-of-the-Titanic.html">the article</a> in the London, UK, Telegraph: Introduction and Context <blockquote>All families have their secrets, but usually about things that don’t matter to anybody else. Not in the case of Louise Patten, though – or The Lady Patten to give her her full title, the wife of former Tory Education minister, Lord (John) Patten, though her own career as one of the first women board directors of a FTSE 100 company, and as a successful author of financial thrillers, means that she has plenty of achievements in her own right. As a teenager in the 1960s, Patten was let in on a secret by her beloved grandmother, which, if revealed, she was warned, would result in two things. The first was awful – it would destroy the good name of her dead grandfather, Charles Lightoller, awarded the DSC with Bar in the First World War, and a hero again for his part in the evacuation of Dunkirk in 1940. But the second would change history, overturning the authorised version of one of the world’s greatest disasters, the sinking of the Titanic with the loss of 1517 lives in April 1912. The tension between these two outcomes goes some way to explaining why, for 40 years, Patten kept quiet.... 'After the collision,’ Patten goes on, 'my grandfather went down with the Captain and [First Officer] Murdoch to Murdoch’s cabin to get the firearms in case there were riots when loading the lifeboats. That is when they told him what had happened.'</blockquote>Confusing Terminology and Interface <blockquote>'Instead of steering Titanic safely round to the left of the iceberg, once it had been spotted dead ahead, the steersman, Robert Hitchins, had panicked and turned it the wrong way.’ At first glance it sounds extraordinary that anyone – much less the man put in charge of the wheel on the maiden voyage of what was then the world’s most expensive ocean liner – could have made such a schoolboy error. 'Titanic was launched at a time when the world was moving from sailing ships to steam ships. My grandfather, like the other senior officers on Titanic, had started out on sailing ships. And on sailing ships, they steered by what is known as “Tiller Orders” which means that if you want to go one way, you push the tiller the other way. [So if you want to go left, you push right.] It sounds counter-intuitive now, but that is what Tiller Orders were. Whereas with “Rudder Orders’ which is what steam ships used, it is like driving a car. You steer the way you want to go. It gets more confusing because, even though Titanic was a steam ship, at that time on the North Atlantic they were still using Tiller Orders. Therefore Murdoch gave the command in Tiller Orders but Hitchins, in a panic, reverted to the Rudder Orders he had been trained in. They only had four minutes to change course and by the time Murdoch spotted Hitchins’ mistake and then tried to rectify it, it was too late.</blockquote> A Manager Countermanding the Professional <blockquote>If the steersman Hitchins had made a human error, Bruce Ismay, chairman of the White Star Line, owners of the Titanic, and another survivor of the sinking, gave a lethal order. 'Titanic had hit the iceberg at her most vulnerable point,’ explains Patten, 'but she could probably, my grandfather estimated, have gone on floating for a long time. But Ismay went up on the bridge and didn’t want his massive investment to sit in the middle of the Atlantic either sinking slowly, or being tugged in to port. Not great publicity! So he told the Captain to go Slow Ahead. Titanic was meant to be unsinkable.’ </blockquote> However, <blockquote>'If Titanic had stood still,’ she demonstrates, 'she would have survived at least until the rescue ship came and no one need have died, but when they drove her 'Slow Ahead’, the pressure of the sea coming through her damaged hull forced the water over the bulkheads and flooded sequentially one watertight compartment after another – and that was why she sank so fast.’ </blockquote> Whistle Blower Suppressed, the Cover Up <blockquote>Why, though, I puzzle, would Patten’s grandfather, who sounds like a thoroughly honest and brave man, have lied and carried on lying? 'Because,’ she explains, 'when he was on the rescue ship, Bruce Ismay pointed out to my grandfather that if he told the truth, the White Star Line would be judged negligent and its limited liability insurance would be invalid. Ismay pretty much said that the whole company would go bust and everyone would lose their jobs. There was a code of honour among men like my grandfather in those days. So he lied to protect others’ jobs.’ But why didn’t her grandmother speak up after her husband’s death in 1952? 'She was worried about showing this heroic figure to be a liar. And my mother, who also knew the secret and was even uncomfortable with Granny having told me, felt even more strongly about it. She hero-worshipped my grandfather.’ So there this secret sat, locked in a family circle from which Patten is now the only survivor.</blockquote>Conclusion The story does seem amazing. I am hardly an expert on the sinking of the Titanic, so should not try to comment on its truth. It does have some plausibility, and provides an explanation for one of the most important and influential disasters of the 20th century that is still poorly understood and a cause for controversy. In my humble opinion, if it were true, and had it come out earlier, this amazing story would have focused society's concerns on issues that have instead become scourges of our current era, and particularly important, if not frequently enough discussed causes of our health care dysfunction. The Titanic disaster lead to major changes in numerous safety practices, leading to rules about the adequacy of lifeboats and radio communication, and even swimming proficiency requirements in higher education. (I had to pass a swimming test as a Brown University freshman that was a legacy of the sinking of the Titanic, I was told.) Most of these practices increased the survivability of accidents. What if the focus was also on the causes of accidents? What if there was a groundswell of advocacy, starting in 1912, against pressure from business and financial leaders on professionals sworn to protect the public's health and safety, and against intimidation of whistle-blowers whose revelations could protect public health and safety? Maybe health care, and many other parts of life, would have turned out better? <div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjC2x-Vb8jkTslhToSFewiisC4lrHpytdoZwEdpDAIazK1SH-ruHpcP3OiSclE_ju0hoPkvDRbcVUOJCn5cZE3fk4od8ovAarc7voeI9XSUaBZ6Fyc_cSInXMH6qJYjsJPBz9Xdvyeks5xf/s1600/Titanic_3.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="235" px="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjC2x-Vb8jkTslhToSFewiisC4lrHpytdoZwEdpDAIazK1SH-ruHpcP3OiSclE_ju0hoPkvDRbcVUOJCn5cZE3fk4od8ovAarc7voeI9XSUaBZ6Fyc_cSInXMH6qJYjsJPBz9Xdvyeks5xf/s320/Titanic_3.jpg" width="320" /></a></div>

Interface Problems, Ill-Informed Leadership, Suppression of Whistle Blowing: A New Look at a Historic Case

Three issues that come up frequently on Health Care Renewal are problems with man-machine interfaces in health care information technology (...

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