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History Repeats, and Repeats: McKesson Settles

Here a settlement, there a settlement, everywhere a settlement....  And the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">march</a> continues, as <a href="http://www.theday.com/article/20101020/BIZ02/310209877/1044">reported</a> by the New London (CT) Day, <blockquote>Pharmaceutical distributor McKesson Corp. will pay Connecticut $15 million for 'illegal and deceptive practices' that inflated drug costs for both individual consumers and state-funded programs, Attorney General Richard Blumenthal announced Tuesday. The settlement calls for $9 million to be used for reimbursing Connecticut's Medicaid program and $3 million for ConnPace, a state program that provides drug coverage for seniors. In addition, $2.3 million will be paid as a civil penalty and $700,000 will go into the state's drug-assistance program for AIDS patients. Blumenthal had charged in a lawsuit that San Francisco-based McKesson conspired with First DataBank - which publishes average wholesale prices of drugs - to increase the amounts Connecticut paid for brand-name remedies by about 25 percent over usual wholesale costs. Previously, the prices had been 20 percent above wholesale. McKesson used the increase to sweeten the 'spread' - the amount of profit - that could be taken by pharmacies, thereby increasing its share of the market, he said. 'McKesson manipulated the drug market - conspiring to inflate costs for hundreds of drugs and exploiting public programs that serve our most vulnerable citizens,' Blumenthal said in a statement. </blockquote> Having been posting on this blog for nearly five years, it is interesting that viewed over time, patterns emerge suggesting that certain organizations have chronic problems with bad behavior. Last year, we <a href="http://hcrenewal.blogspot.com/2009/11/former-mckesson-ceo-and-board-chairman.html">noted</a> that a former McKesson Chairman of the Board was convicted of five counts of securities fraud arising from actions occurring in the early part of the 21st century. Five former McKesson executives had already pleaded guilty to related crimes. Last year, Bloomberg called this scandal "one of the largest white-collar crimes." This pattern may go back a lot longer that the turn of the last century.  Amazingly, the same company, McKesson, was involved in one of the biggest frauds of the great depression era. From the <a href="http://en.wikipedia.org/wiki/McKesson_%26_Robbins_scandal_%281938%29">Wikipedia entry</a>, <blockquote>The McKesson & Robbins, Inc. scandal of 1938 was one of the major financial scandals of the 20th century. The company McKesson & Robbins, Inc. (now McKesson Corporation) had been taken over in 1925 by Phillip Musica, who had previously used Adelphia Pharmaceutical Manufacturing Company as a front for bootlegging operations. Musica, a twice-convicted felon, used assumed names to conceal his true identity in taking control of the two companies: Frank D. Costa at Adelphia Pharmaceutical and F. Donald Coster at McKesson & Robbins. Although he was successful in expanding the company’s legitimate business operations, Musica recruited three of his brothers, also working under assumed names, one outside the company and two inside it, to generate bogus sales documentation and to pay commissions to a shell distribution company under their control. Eventually, McKesson & Robbins treasurer Julian Thompson discovered the distribution company was bogus. It was eventually determined that about $20 million of the $87 million in assets on the company’s balance sheet were phony. In December 1938, the Securities and Exchange Commission (SEC) opened an investigation and Musica was arrested. Only after he was booked, fingerprinted and released on bond did the authorities realize that 'Coster' was in reality Musica. His bond was revoked and he committed suicide before he could be rearrested. The McKesson & Robbins scandal led to major corporate governance and auditing reforms. The SEC required that public companies have audit committees of 'outside' directors and that the appointment of auditors be approved by the shareholders. The American Institute of Accountants (now the American Institute of Certified Public Accountants) adopted audit standards requiring that auditors verify accounts receivable and inventory.</blockquote> So I guess in some ways it should not be a surprise that a company involved in one of the biggest financial scandals of the depression era, and then one of the biggest white-collar crime of the early 21st century, should now be involved in a comparatively small settlement involving allegations of over-charges for drugs. Given that in this latest case, the settlement was small, and there were no negative consequences for any individual who authorized, directed, or implemented the alleged market manipulation, it seems doubtful that it will have any lasting effect on corporate leadership of the corporate culture. McKesson's long and chequered history suggests some sort of chronic affliction of its corporate culture.  It also suggests a rationale for requiring heath care organizations to have ongoing, active <a href="http://hcrenewal.blogspot.com/2009/10/organisational-ethics-policies-primer.html">organizational ethics policies</a>.

History Repeats, and Repeats: McKesson Settles

Here a settlement, there a settlement, everywhere a settlement.... And the march continues, as reported by the New London (CT) Day, Pharm...

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Medical data breach of the week - but your EMR data is secure, trust us, we're IT experts

I have written frequently about the pipe dream of secure national electronic medical records, such as in February 2010 at my post "<a href="http://hcrenewal.blogspot.com/2010/02/networked-emrs-and-healthcare.html">Networked EMR's and Healthcare Information Security: Practical When Massive IT Security Breaches Continue</a>?", my post "<a href="http://hcrenewal.blogspot.com/2010/02/networked-interoperable-secure-national.html">Networked, Interoperable, Secure National Medical Records a Castle in the Sky?</a>", as well as "<a href="http://hcrenewal.blogspot.com/2010/01/it-flaws-and-coverups-of-same-why-i.html">Operation Aurora And a Widespread Reluctance to Discuss IT Flaws: Is Universal Healthcare IT Really a Good Idea in 2010?</a>" and <a href="http://hcrenewal.blogspot.com/search/label/medical%20record%20privacy">others</a>. I was also <a href="http://www.philly.com/philly/business/homepage/99591364.html">quoted</a> on July 30, 2010, in a Philadelphia Inquirer story about the theft of a laptop computer with data on 21,000 patients from Thomas Jefferson University Hospital here, and also interviewed August 2 by local NPR station WHYY-91FM, where I stated: <div><div style="overflow: hidden; text-decoration: none; border: medium none;"><blockquote>"There is almost no excuse for unencrypted data to be sitting on any computer at a hospital or any organization," said Scot Silverstein, a Drexel University expert on health-information technology.</blockquote> In the latest health-data-on-computer-theft-of-the-week, the Inquirer ran this story today about a local theft ten times as large as July's: <blockquote><a style="font-weight: bold;" href="http://www.philly.com/philly/business/homepage/105415178.html">Medical-data breach said to be major</a> <div><div style="overflow: hidden; text-decoration: none; border: medium none;"> By Jane M. Von Bergen, Inquirer Staff Writer, Thu, Oct. 21, 2010 <div id="body-content" class="body-content"> A computer flash drive containing the names, addresses, and personal health information of 280,000 people is missing - one of the largest recent security breaches of personal health data in the nation. "We deeply regret this unfortunate incident," said Jay Feldstein, the president of the two affiliated Philadelphia companies, Keystone Mercy Health Plan and AmeriHealth Mercy Health Plan. The breach, which involves the records of Medicaid recipients, is the first such Medicaid data breach in Pennsylvania since at least 1997, according to the state's Department of Welfare, which has oversight.</div></div></div></blockquote><div><div style="overflow: hidden; text-decoration: none; border: medium none;"> There is little more I can add to my prior postings on this issue except the words of privacy advocate, psychiatrist Dr. Deborah Peel: <div><div style="overflow: hidden; text-decoration: none; border: medium none;"><blockquote>The security failure, one of the several largest in nearly two years, involves nearly two-thirds of the insurers' subscribers. It became known only after The Inquirer requested information Tuesday evening. The insurers said the drive was missing from the corporate offices on Stevens Drive in Southwest Philadelphia. It noted that the same flash drive was used at community health fairs. "That seems grossly irresponsible," said Dr. Deborah Peel, a Texas psychiatrist who heads Patient Privacy Rights, an advocacy group. "Why would you be hauling around private patient information to a health fair," she said. "I can't imagine what they were thinking, taking this data out of a locked room at company headquarters. "What's tragic is that this is a particularly vulnerable group of people," Peel said. "They tend to be vulnerable to identity theft, vulnerable to discrimination." Medicaid recipients are low-income people.</blockquote> As to encryption (a built-in feature of the upper tier versions of Windows and of Mac OS X): <div><div style="overflow: hidden; color: rgb(0, 0, 0); text-decoration: none; border: medium none;"><blockquote>They [the companies] would not comment on the riskiness of taking the drive to health fairs, nor would they say whether the data on the drive was encrypted.</blockquote> Highly likely translation: no. The companies issued an apology: <div><div style="overflow: hidden; color: rgb(0, 0, 0); text-decoration: none; border: medium none;"><blockquote>"At Keystone Mercy Health Plan and AmeriHealth Mercy Health Plan, our number one priority is our members. Since reporting this unfortunate incident to the Department of Public Welfare, we have actively and responsibly executed a multifaceted plan to inform those affected, while also evaluating and enhancing our security measures to ensure this does not happen again." [Did any employee have their "privileges revoked" -- the medical term of art for a physician who is 'fired' -- I wonder? - ed.]</blockquote> Perhaps the executives in charge of this data, as well as the IT department, should read stories like the aforementioned July 30, 2010 story. However, I fear there are those who are ineducable or hopelessly irresponsible when it comes to acting cautiously and responsibly regarding computer-based medical information, in the poorly bounded, complex, unpredictable world of healthcare. That is not to even mention deliberate theft for personal gain. This is why the dream of secure national electronic medical records seems a pipe dream for the foreseeable future. -- SS 10/23 Addendum in an <a href="http://www.philly.com/philly/business/homepage/20101023_Insurers_respond_to_loss_of_health-plan_data.html">updated story</a>, the Inquirer reports the data was indeed unencrypted, although the companies claimed an encryption project was in progress. </div></div><a style="color: rgb(0, 51, 153);" href="http://www.philly.com/philly/sports/82985662.html" target="_blank"></a></div></div></div></div></div></div></div></div>

Medical data breach of the week - but your EMR data is secure, trust us, we're IT experts

I have written frequently about the pipe dream of secure national electronic medical records, such as in February 2010 at my post " Net...

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"Toxic and Dangerous?" - The Watchdog vs Medtronic's Man at the VA

An odd story that appeared earlier this month linked several people we have discussed on Health Care Renewal. On one hand, we <a href="http://hcrenewal.blogspot.com/2009/07/polly-want-million-plus.html">posted </a>about how Dr David Polly, a spine surgeon at the University of Minnesota, testified before the US Congress in support of research on treatments of bone injuries afflicting US soldiers.  He did not then reveal that he had been paid more than one million dollars for consulting by Medtronic, the manufacturer of a bone growth product used to treat such injuries, also the source of payments of his expenses for the trip to Washington.  At the time, we suggested this case was a reminder to be skeptical about academics who are really stealth health policy advocates for industry. On the other hand, in a <a href="http://hcrenewal.blogspot.com/2010/06/deferred-prosecution-agreements-end-so.html">post</a> about renewed payments by makers of artificial joints to orthopedic surgeons after the US government advocated a series of deferred prosecution agreements as a cure for such apparent conflicts of interest, we quoted Dr Charles Rosen, "Nothing will change until someone goes to jail. It’s a big game." The link between them appeared in two related articles.  First, the Minneapolis Star-Tribune <a href="http://www.startribune.com/business/104458368.html?elr=KArksUUUoDEy3LGDiO7aiU">reported</a> on the appointment of another Medtronic consultant to a top leadership post in the US Department of Veterans Affairs: <blockquote>In a Sept. 28 letter to Veterans Affairs Secretary Eric Shinseki, Sen. Charles Grassley asks whether Dr. Stephen Ondra's 'policy advice and decisions at the VA are vulnerable to potential conflicts of financial interest' given his prior relationship with the Fridley-based medical technology giant. Ondra and Medtronic mutually severed their financial relationship in July 2008. But just prior to that, Medtronic paid him $3.6 million in royalties related to spine-surgery instruments, according to financial disclosure forms he submitted to the VA.</blockquote>It appears that Medtronic lobbied hard for the appointment of its former consultant: <blockquote>While noting that Ondra is not a Medtronic employee, Grassley characterized the surgeon's relationship with the company as 'unambiguous and substantial.' Further, Grassley notes that Ondra 'was able to penetrate the political establishment at its highest level to obtain a senior position at the VA' because of his previous ties to the company.</blockquote>The details are: <blockquote>Ondra's candidacy for his current post was supported by Medtronic Chief Executive William Hawkins III, who wrote a letter of recommendation to Secretary of Defense Robert Gates on his behalf. This was at the suggestion of Dr. S. Ward Casscells III, who was then assistant secretary of defense for health affairs, according to a series of internal e-mails obtained by the Star Tribune. 'I have known Dr. Casscells for many years and was comfortable in approaching him on this topic,' Hawkins wrote in a Jan. 16, 2009 e-mail to the then-head of Medtronic's $3.5 billion spine device business, Steve La Neve. (La Neve left that position earlier this year in a corporate reorganization.) La Neve replied a day later that Ondra wanted to meet with him or with Hawkins before a reference letter was sent, 'so that it can capture his work on appropriate industry-physician relationships and transparency.'</blockquote>(It is not clear whether the last sentence above is meant to be an ironic pun about regulatory capture.) A <a href="http://www.pharmalot.com/2010/10/the-medtronic-consultant-and-the-toxic-critic/">post</a> on Pharmalot explains what Dr Ondra's first priority was once he got his government job: <blockquote>Within a few days, however, Ondra objected to the proposed nomination of another spine surgeon, Charles Rosen, as US Surgeon General. Why? As founder of the Association of Medical Ethics, Rosen publicly questioned consulting ties between doctors and device makers and, for his trouble, allegedly suffered retaliation by members of the American Academy of Orthopaedic Surgeons (see <a href="http://freepdfhosting.com/505a7ce28c.pdf">this</a>). In a January 21, 2009 email exchange with Davd Polly, a University of Minnesota professor who was another Medtronic consultant, Ondra acknowledged never having heard of Rosen, but reacts viscerally to a recent story in The Orange County Register that details Rosen’s self-appointed role as a watchdog. 'Since this individual is toxic and dangerous I would leave nothing to chance,' he responds to Polly, who had forwarded the newspaper story to Ondra. Polly, by the way, is a nationally known spine surgeon who came under congressional scrutiny for his work several years ago for the device maker, something that Rosen had criticized (look here). 'This moment in history is too important to our country to let such a disreputable and dangerous person continue his self-promotion crusade,' Ondra continues. 'I would encourage you and any other physicians and citizens to weigh in on this to HHS and public health.'</blockquote>Got that?  Medtronic pays Dr Ondra millions.  Medtronic pushes for Dr Ondra's appointment to a top VA leadership position.  Once in that position, Dr Ondra confers with another million dollar Medtronic consultant, and then works to block the appointment as Surgeon General of a known foe of the cozy web of conflicts of interest that afflicts medicine.  Thus do conflicts of interest work to promote the capture of government by special interests.  The Pharmalot post concluded with this opinion: <blockquote>'It’s obvious that Dr. Ondra benefited from his relationship with Medtronic. And since he worked to kill off the nomination of Chuck Rosen, Medtronic’s main critic, I can see how Medtronic benefited from Dr. Ondra,' says Paul Thacker, a former Grassley staff investigator and US Army specialist. 'What I don’t understand is how I and other veterans have benefited from all this back-door dealing. What’s in it for us?'</blockquote>That is a good question. It appears that nothing was in it for veterans, or the US public. But everything was in it for Medtronic and the doctors it pays so well.  I would submit that it is the readiness of big health care corporations to create conflicts of interest that seduce physicians to put their loyalties to their corporate sponsors ahead of the public interest that is toxic and dangerous. This convoluted story suggests the urgent need for full disclosure of all relationships between physicians and others who make decisions and wield influence in health care on one hand, and health care organizations on the other hand.  If physicians want their health policy efforts to be met with anything other than guffaws and cynical eye rolls, they need to seriously consider swearing off the sorts of cushy corporate relationships that Dr Ondra and Dr Polly embraced.

"Toxic and Dangerous?" - The Watchdog vs Medtronic's Man at the VA

An odd story that appeared earlier this month linked several people we have discussed on Health Care Renewal. On one hand, we posted about h...

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Medical center has more than 6000 "issues" with Cerner CPOE system in four months - has patient harm resulted?

<div style="text-align: left;">As I have written at Healthcare Renewal before, computerized physician order entry systems (CPOE's) are known to present risks to patients through induction of medical errors. </div> This technology is held out to be ready for national diffusion, right up to the POTUS. Per ONC director Blumenthal in the July 13, 2010 <a href="http://hcrenewal.blogspot.com/2010/07/new-england-journal-on-meaningful-use.html">NEJM</a>: <blockquote> The widespread use of electronic health records (EHRs) in the United States is inevitable. EHRs will improve caregivers’ decisions and patients’ outcomes. Once patients experience the benefits of this technology, they will demand nothing less from their providers. Hundreds of thousands of physicians have already seen these benefits in their clinical practice.</blockquote> Vendors deny major problems with their CPOE and other health IT products. The true story is a bit more complex. Fortunately, there are some medical centers who are open and honest about HIT problems. These medical centers seem a rarity. However, those that do share are actually conducting themselves in an honorable and mission-true manner, per <a href="http://hcrenewal.blogspot.com/2009/03/health-it-hold-harmless-and-defects-gag.html">Joint Commission Safety Standards</a>, the ethics of the medical profession, and the expectations of the public. They should be commended. One such example is <a style="font-weight: bold;" href="http://www.munsonhealthcare.org/locations/mmc/mmc.php">Munson Medical Center</a> in Michigan. From the October 2010 "News for Physicians affiliated with Munson Medical Center" newsletter, a large medical center in Northern Michigan, about more than six thousand "issues" with their Cerner CPOE: <blockquote>POE Program Continues to be Improved, Enhanced The Provider Order Entry (POE) program continues to be improved. Since implementation in June [four months ago - ed.], more than 6,000 issues have been reported. Issues are defined as an aspect of the program not working as intended [does that include medication and treatment errors and 'near-misses'? - ed.], process issues [can these 'issues' kill? - ed.], education needs, or <a href="http://www.google.com/search?client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&channel=s&hl=en&source=hp&q=cerner+powerplan">PowerPlan</a> [Cerner - ed.] change requests. About 600 of these remain open. Issues are prioritized by the POE Team and addressed according to existing standards.</blockquote> One wonders how many of those 6,000, and how many of the 600 remaining "issues" <a href="http://hcrenewal.blogspot.com/2009/03/draft-patient-rights-statement-and.html">fall into categories of</a> "likely to cause patient harm in short term if uncorrected" or "may cause in patient harm in medium or long term." I note that Cerner CPOE is not a new product, nor are similar products from other vendors also afflicted with long lists of "issues." That there could be more than 6,000 "issues" at a new site suggests deep rooted, severe problems with CPOE specifically and health IT design and implementation processes in general. Did patient harm result here or at other CPOE sites (using products of any vendor, not just this one) that had hundreds or thousands of "issues"? We may never know. That national rollout is mandated as if this technology were proven, safe, and plug and play is a scandal of <a href="http://hcrenewal.blogspot.com/2010/09/national-programme-for-health-it-fails.html">UK NPfIT-like</a> proportions. -- SS

Medical center has more than 6000 "issues" with Cerner CPOE system in four months - has patient harm resulted?

As I have written at Healthcare Renewal before, computerized physician order entry systems (CPOE's) are known to present risks to patien...

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21st century EMR experiments: messing around with people's lives in a broke city, while not having a clue what you're doing

<div style="text-align: left;">I was astounded to read the <a href="http://histalk2.com/2010/10/18/histalk-interviews-leland-babitch-cmio-detroit-medical-center">following passage</a> in an interview of the current chief medical information officer at <a href="http://www.dmc.org/" target="_blank">Detroit Medical Center</a> ("DMC") Detroit, MI: </div> <blockquote>DMC tried CPOE in 2003 and said it would regroup and try it again. What lessons were learned from that first attempt? In 2003 we did try at one hospital — a more community-based hospital — on two units. We did it on our rehab unit, the psych unit. I think the first lesson we learned there was that it was really just designed as, or worked out as, an IT project. I mean, it was really IT-led and there wasn’t clinical involvement from the get-go. There wasn’t really a leadership pattern that had physician and nursing components to it. There wasn’t a design phase that included a lot of clinicians. There wasn’t leadership buy-in from the hospital. We took the product from the vendor and implemented what they gave us. It was really doomed to fail from the start. [Doomed, that is, due to inexcusable health IT illiteracy for the year 2003 - ed.]</blockquote> This is striking for a number of reasons, least of which is the tone in which the failure is presented, a tone that suggests this failure and its "lessons" were banal in character and something that "just happens." It's as if by 2003 there was no other way to have done due diligence and learned these lessons, other than by actual experimentation on hospital floors with live patients and busy clinicians. If this story had appeared about a health IT project in, say, 1983 or 1993, it would have been less remarkable. By 2003, however, the literature on how do do health IT "right" (and on how not to do it, including all the faults mentioned about DMC's efforts), was quite voluminous. The medical informatics literature from AMIA and IMIA, textbooks such as <a href="http://www.amazon.com/Managing-Technological-Change-Organizational-Informatics/dp/0387985484">Lorenzi and Riley's</a> "Organizational Aspects of Health Informatics: Managing Technological Change" (<a href="http://www.ncbi.nlm.nih.gov/pmc/articles/PMC226105/?page=1">ed. 1 - 1995</a>), sites such as my own on <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/">HIT failures</a> (freely available and one of the first hits one received via google on searches on "Healthcare IT failure" and similar concepts even then), and other resources could have prevented the CPOE failure - if someone at DMC or their consultants had had the meta-knowledge to know of their existence or the managerial savvy to ask, and the initiative to actually read the materials and heed the advice of experts. Instead, this sounds like a classic example of hospital mismanagement, via not knowing what you don't know, and not caring. What is described is a failure due to HIT naivete and managerial dyscompetence (or incompetence) around technology management that should not have existed in hospitals in an American city in 2003. One should wonder what other mishaps occured in other domains of medical technology under this type of "leadership." Clinical personnel and patients are the potential victims - not laboratory rats. The story is certainly remarkable in terms of risk presented by this experiment on live patients, and again for its banal tone regarding that crucial issue. It is well known that poorly done CPOE is associated with medication errors, not a happy event on a psychiatry unit or PM&R/rehab unit (where elderly frail patients often abound). The story is also remarkable due to the waste of money it represents in a city <a href="http://www.npr.org/templates/story/story.php?storyId=4955488">not exactly rolling in money</a>, looking somewhat like Dresden after the WW2 firebombing and with wide sections of former residential land designated for demolition and "return to nature." Instead of spending money on "let's try to figure out CPOE today, all by ourselves!" health IT experiments, perhaps the money could have been used for better care of Detroit's poor. The "lessons learned" in 2003 could and should have been learned for free and without risk to patients - in a public library. I ask: <ul><li>Did patients get injured in this debacle? If they did, are the records sealed? We may never know.</li></ul><ul><li>Has DMC truly learned the lessons of 2003 fully, or do similar problems continue?</li></ul><ul><li>Were the executives responsible for this failure held accountable in any meaningful fashion? </li></ul> Finally - and this is my major point - how many organizations in 2010 and beyond are similarly stuck in the stone age regarding how to "do health IT well"? I believe the answer is "far too many." -- SS

21st century EMR experiments: messing around with people's lives in a broke city, while not having a clue what you're doing

I was astounded to read the following passage in an interview of the current chief medical information officer at Detroit Medical Center (...

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More on Hospital Market Dominance, Enabled by Secret Pricing

This week two more articles appeared describing how large hospital systems use market dominance to charge more.  Naturally, both were in news publications, not scholarly health services research journals. San Francisco Kaiser Health News (<a href="http://www.contracostatimes.com/top-stories/ci_16357914?nclick_check=1">via the Contra Costa [CA] Times</a>) discussed hospital market dominance in the San Francisco area.  The article documented how particular systems can command higher prices. Consider the example of John Muir Health vs San Ramon Medical Center: <blockquote>Often, a hospital's dominance in an area helps determine how much it can charge, experts say. Consider John Muir Health, a two-hospital nonprofit system in the East Bay. With campuses in Concord and Walnut Creek, John Muir has the biggest footprint in the local hospital market, accounting for 54 percent of all the acute care inpatient stays in 2009, more than any other hospital group, according to state data. The hospital with the weakest market penetration is San Ramon Medical Center, a Tenet-owned, for-profit hospital, with 10 percent of the acute care inpatients. The least the insurer Aetna paid John Muir for an outpatient colonoscopy was $3,185, according to Aetna's website, which tracks two years of payments. Aetna paid $1,483 to San Ramon Regional Medical Center for the same service. The least Aetna paid John Muir for an uncomplicated birth was $7,722, while its lowest price for a birth at San Ramon was $5,278. Yet on broad quality measures, John Muir's hospitals generally score no better than San Ramon's, according to the California Hospitals and Reporting Taskforce, a nonprofit that produces hospital report cards published at Calhospitalcompare.org. San Ramon ranks equal to John Muir's Walnut Creek campus in most major measures, including mortality rates in the intensive care units, overall patient satisfaction and maternity care. John Muir's Concord campus ranks below San Ramon on several measures, including mortality rate and patient experience, though John Muir was rated better in avoiding complications for patients on ventilators. </blockquote> Then there is Sutter Health: <blockquote>[Stanford University associate vice president for Benefits Les] Schlaegel says so many employees like to see doctors at the Palo Alto Medical Foundation, a doctors' organization affiliated with Sutter with a clinic near the Stanford campus, that the university feels obliged to keep offering insurance networks that include Sutter. 'Sutter basically has a stranglehold on Northern California,' says Schlaegel. 'They are strategically situated, both for hospitals and medical groups. They know purchasers need them. When you are strategically located, you can say 'this is our price and you can pay it.'' </blockquote> Secret Pricing The ability of dominant hospitals to charge higher prices is facilitated by secrecy in which hospital pricing is cloaked <blockquote>The hospitals haven't made it easy for consumers to comparison shop. State law requires hospitals to reveal their charges for specific services. But those charges don't reflect the lower negotiated rates insurers actually pay - rates hospitals usually insist be kept secret. The California Hospital Association has opposed legislation to ban such 'gag clauses'; the most recent of these bills died in the state Assembly in August. Hospitals have also resisted a four-year campaign by the Pacific Business Group on Health, an employer coalition, and CalPERS to create a 'hospital value initiative' that would allow hospital comparison based on cost and quality of care. </blockquote> Summary <blockquote>In many cases, hospitals are able to keep raising prices beyond inflation because their sizes or reputations give them clout in negotiating rates with insurers, researchers say. Yet high prices don't always equate with superior care. Quality measures for some of the Bay Area's most prestigious hospitals, including Stanford and John Muir, show that in some instances, less expensive competitors perform as well or better in their basic responsibilities, such as avoiding infections and high death rates for patients in intensive care. 'Some hospitals are able to charge higher prices than the market normally would bear, even without providing higher quality,' says Dr. R. Adams Dudley, a professor of medicine and health policy at the University of California, San Francisco. 'That means they're getting those higher prices without really offering more to patients or the rest of society.'</blockquote>New York City Meanwhile, a long feature story <a href="http://nymag.com/news/features/68991/">in New York magazine </a>about the demise of St Vincent's hospital (see our post <a href="http://hcrenewal.blogspot.com/2010/08/st-vincents-goes-bankrupt-executives.html">here</a>) also discussed the market power of its competitors as one factor in its decline: <blockquote>The city’s largest and most powerful hospitals, which are crucial to an insurer’s customers, exert their leverage to secure deals that are believed to pay well above the average margin; smaller hospitals, which are often located in low-income neighborhoods, have little choice but to accept the dismal rates dictated by insurers if they want to remain in the insurers’ plans. 'When the big players take their cut, there are only scraps left for everyone else,' says the CEO of an outer-borough hospital. “'United HealthCare couldn’t care less about having my hospital in their network. They tell me to take it or leave it. </blockquote>Secret Prices Like in California, market dominance is enabled by secret pricing: <blockquote>the rates negotiated between hospitals and insurance providers are withheld from public scrutiny—even state health and insurance regulators are denied the information</blockquote>Free Markets? Secret prices determined by market power hardly sound like characteristics of a free market. Yet in New York, at least, they seem partially to be the result of the free market ideology of previous political leaders: <blockquote>Then George Pataki took office in 1995, determined to allow hospitals to test their mettle in the free market by negotiating their own terms with insurers. It turned out to be an exercise in shock-therapy capitalism. Inexperienced at the bargaining table, hospitals engaged in intramural rivalry with each other, cutting unfavorable deals with insurers in order to hold on to patients in the short term. With their already thin margins pared down further by deregulation, many hospitals soon built up paralyzing debt loads. Even the largest and seemingly least vulnerable facilities decided that their best hope for survival was to get bigger. A flurry of mergers and buyouts ensued, and by the end of the nineties, the hospital system began to assume its current bewildering patchwork of partnerships and affiliations. Columbia Presbyterian and New York Hospital, both attached to elite medical schools, joined forces. NYU and Mount Sinai forged a deal (it later came undone). On the eastern edge of the city, North Shore hospitals merged with nearby Long Island Jewish, staking out an enormous swath of the hospital market on Long Island, Queens, and Staten Island. Beth Israel and St. Luke’s–Roosevelt, debt-ridden and left on the sidelines by the major academic hospitals, decided to try making a go of it together. It was unclear if bigger was actually better—for patients or the bottom line—but size seemed to offer hospitals a buffer against collapse. By 2005, less than a decade into its dalliance with free enterprise, the city’s hospital system had taken on something of a post-Soviet tinge, with winners ruling the roost like oligarchs and losers reduced to a state of grim dependency. A pecking order emerged, with elite academic centers at the top, well-regarded independent hospitals like Lenox Hill in the middle, and community hospitals on the bottom. </blockquote>Summary We have previously written (for example, <a href="http://hcrenewal.blogspot.com/2010/08/more-examples-of-us-hospital-market.html">here</a> and <a href="http://hcrenewal.blogspot.com/2010/01/price-is-what.html">here</a>) about how increasing market dominance by large, sometimes strategically located, and sometimes politically well-connected (e.g., see <a href="http://hcrenewal.blogspot.com/2009/01/scorpions-in-bottle-shook-hands-secret.html">here</a>) hospital systems run by conflicted leaders. This seems like another unintended consequence of the "free markets solve all problems" ideology, possibly fueled by conflicts of interest that has done so badly in our financial arena (see <a href="http://hcrenewal.blogspot.com/2010/10/what-conflicted-web-we-weave-academic.html">here</a>). What some of these free market enthusiasts seem to forget, their forgetfulness perhaps fueled by payments received from the large corporations that have profited from this movement, are that true free markets are hard to maintain. This is particularly so in health care, in which knowledge is asymetric, outcomes are uncertain, and sick and anxious patients have trouble making cool, rational choices (as per Arrow, see <a href="http://hcrenewal.blogspot.com/2010/08/how-fallacy-of-perfect-health-care.html">this post</a>.) But if the free market enthusiasts really believe in free markets, why have they not been out campaigning to prevent the "unfree" characteristics, like secret pricing, of current health care markets?  Of course, ending secret pricing might compromise the ability of their financial sponsors to keep earning their millions

More on Hospital Market Dominance, Enabled by Secret Pricing

This week two more articles appeared describing how large hospital systems use market dominance to charge more. Naturally, both were in new...

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Last Week's Scandals

The march of settlements and other unfavorable legal results for health care organizations continued last week, in alphabetical order CVS Settles for $77.6 Million for Violating the Controlled Substances Act As <a href="http://www.bloomberg.com/news/2010-10-14/cvs-to-pay-77-6-million-in-methamphetamine-accord-over-sales-to-criminals.html">reported</a> by Bloomberg, <blockquote>CVS Caremark Corp. agreed to pay $77.6 million to settle claims that some of its stores in California and Nevada allowed criminals to buy cold medications that were used to make methamphetamine. The pharmacy chain will pay a $75 million fine, the largest civil penalty ever paid under the Controlled Substances Act, and forfeit $2.6 million in profits from the illegal sales, the U.S. Attorney’s Office in Los Angeles said today in a statement. Between September 2007 and November 2008, CVS failed to ensure that stores in Southern California complied with laws limiting sales of over-the-counter drugs made with pseudoephedrine, which allowed methamphetamine traffickers to buy large amounts of the drugs, according to the statement. CVS changed its sales practices only after it became aware of the investigation, prosecutors said. </blockquote> What was unusual about this case is that the company's CEO actually seemed to acknowledge that it did something wrong, and vowed change: <blockquote>'While this lapse occurred in 2007 and 2008 and has been addressed, it was an unacceptable breach of the company’s policies and was totally inconsistent with our values,' CVS Chief Executive Officer Thomas Ryan said in a statement. 'We have strengthened our internal controls and compliance measures and made substantial investments to improve our handling and monitoring of PSE.' </blockquote>Amazing, a CEO acknowledging that his corporation's values include complying with the law... [sarcasm off] Note that we most recently posted about a settlement by CVS, one by CVS Caremark for improperly charging a public entity, in September, 2010, <a href="http://hcrenewal.blogspot.com/2010/09/at-end-of-summer-everybody-well-nearly.html">here</a>. Johnson & Johnson Found Liable for $257.7 Million for Fraud As <a href="http://www.businessweek.com/news/2010-10-15/j-j-told-to-pay-257-7-million-over-risperdal-marketing-tactics.html">reported </a>by Bloomberg, <blockquote>Johnson & Johnson lost a $257.7 million jury verdict in Louisiana for making misleading claims about the safety of the company’s Risperdal antipsychotic drug. J&J officials defrauded the state’s Medicaid system by wrongfully touting Risperdal as superior to competing antipsychotic drugs and minimizing its links to diabetes, said jurors in state court in Opelousas, Louisiana.</blockquote> Specifically, <blockquote>The jury found 35,542 violations of the state’s Medical Assistance Programs Integrity Law and imposed a penalty of $7,250 for each. The total $257.7 million verdict is the fifth- largest in the U.S. so far in 2010, according to data compiled by Bloomberg. 'You can’t come into Louisiana and disseminate false and misleading information,' Patrick Morrow, who represented the state, said after the verdict in a phone interview. 'I’m sure this matter will be in the appellate courts for years to come. This is the first step.' The state’s case centered on drug safety claims that J&J and Ortho-McNeil Janssen made in November 2003 correspondence to 700,000 doctors. In those letters, J&J touted Risperdal as safer than competing antipsychotics such as Indianapolis-based Eli Lilly & Co.’s Zyprexa and London-based AstraZeneca Plc’s Seroquel. Risperdal global sales peaked at $4.5 billion in 2007, declining after the company lost patent protection. The U.S. Food and Drug Administration responded with a warning letter saying J&J made false and misleading claims that minimized the potentially fatal risks of diabetes and overstated the drug’s superiority to rival medicines. Lawyers for the state asked jurors to hold J&J liable for the 7,604 letters it sent to Louisiana doctors and regulators making those claims along with more than 27,542 sales calls in the state made by the drugmaker’s representatives in 2003 and 2004.</blockquote> Note that we last discussed problems at Johnson and Johnson, those being manufacturing issues leading to contaminated drugs, in September, 2010, <a href="http://hcrenewal.blogspot.com/2010/09/should-president-of-university-of.html">here</a>. Medtronic Settles for $268 Million for Personal Injuries As <a href="http://www.startribune.com/business/104968279.html">reported</a> by the Minneapolis Star Tribune, <blockquote>Medtronic Inc. has agreed to pay $268 million to settle thousands of lawsuits that patients filed after a 2007 recall of a faulty heart defibrillator wire that caused at least 13 deaths. The settlement announced Thursday covers some 8,100 personal injury lawsuits in both federal and state courts over Medtronic's popular Sprint Fidelis lead, which was implanted in some 235,000 people when the company recalled the device after a small number fractured. The malfunction could cause the defibrillator to stop working or to inappropriately shock patients -- a frightening and uncomfortable experience, but usually not life-threatening. The cases had been lingering in a kind of legal limbo that began with a 2008 U.S. Supreme Court decision involving another Medtronic case that prevented many patients with faulty medical devices from filing suit against the makers of those products. Rather than wait for a definitive resolution to various legal appeals, the Fridley-based medical technology giant agreed to end the three-year legal battle with a settlement. </blockquote> Note that we last discussed Medtronic's payments to physicians, in June, 2010, <a href="http://hcrenewal.blogspot.com/2010/06/deferred-prosecution-agreements-end-so.html">here</a>. Summary Ho-hum, another week, another set of settlements, convictions, and/or verdicts unfavorable to large, important health care organizations. Although all the actions above would result in seemingly large payments by the companies involved, all of the payments were trivial in size compared to the companies' revenues. Note that in none of the cases above did any individual pay any penalty. In only one of the cases did a corporate leader acknowledge that bad things were done, but should be done no more. As we have noted infinitum, penalties that only appear to be (relatively small) costs of doing business are unlikely to deter future bad behavior. Until the people who actually authorized, directed and implemented the bad behavior have to suffer some negative consequences, expect the bad behavior to continue.  Note that each of the companies discussed above have had their previous ethical lapses discussed in previous Health Care Renewal posts. The continuing march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">settlements</a>, and sometimes <a href="http://hcrenewal.blogspot.com/search/label/crime">criminal</a> convictions involving major health care organizations should be regarded merely as providing a floor to estimates of the extent of bad behavior by large health care organizations. Bad behavior may not be reported, or lead to legal action, and legal action may not lead to settlements or convictions. However, it is amazing how many organizations that were once regarded as exemplary have had to settle, or plead guilty, or been convicted. When it comes to health care's leadership, society seems to have acceded to defining deviancy down. Until we start holding health care leaders to high standards, expect their organizations not to uphold high standards.

Last Week's Scandals

The march of settlements and other unfavorable legal results for health care organizations continued last week, in alphabetical order CVS Se...

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