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The Case of the Bleeding Heart Prosecutors - How the Justice Department Became Lenient with Corporate Wrong-Doing

We have frequently posted, some may say tiresomely, about the lack of consequences or negative incentives for health care organizational leaders involved in wrong-doing.  For example, see the numerous cases against health care organizations that resulted in <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a>, almost never requiring any penalties against individuals who authorized, directed, or implemented the behavior in question. Now a <a href="http://www.nytimes.com/2011/07/08/business/in-shift-federal-prosecutors-are-lenient-as-companies-break-the-law.html">major article</a> in the New York Times by Gretchen Morgenson and Louise Story explains some of the history behind this aspect of the decreasing accountability of corporate leadership.  Their article focused on financial corporate leadership, but clearly is generalizable to health care corporate leadership. Banks Asked to Report Their Own Misbehavior The Times article documents how the US Department of Justice deliberately became more lenient in the 1990s, supposedly to conserve scarce investigational resources: <blockquote>dating to the mid-1990s ... banks were asked to regularly report suspicious activities to the Treasury Department, an effort that aimed at relieving regulators of some of their enforcement loads.</blockquote> The Effect of the Arthur Andersen Case Around the beginning of the 21st century there had been some vigorous prosecution of corporate financial wrong-doing: <blockquote>The names have become synonymous with corporate wrongdoing — and forceful prosecution: Not just Enron, but also WorldCom, Tyco, Adelphia, Rite Aid and ImClone. In the early part of the last decade, senior executives at all these companies were convicted and imprisoned. </blockquote> However, for reasons that were not explained, a single unsuccessful case caused reconsideration of this approach: <blockquote>The department began pulling back from a more aggressive pursuit of white-collar crime around 2005, say defense lawyers and former prosecutors, after the Supreme Court overturned a conviction it won against the accounting firm Arthur Andersen. That ended an era of brass-knuckle prosecutions related to fraud at companies like Enron. </blockquote> Sympathy for the Targets of Investigation The pullback was rationalized for a sudden sympathy for the objects of investigation: <blockquote>But by 2005, a debate was growing over aggressive prosecutions, as some business leaders had been criticizing the approach as perhaps too zealous. That May, Justice Department officials met ahead of a session with a cross-agency group called the Corporate Fraud Task Force. It was weeks after Justice Department lawyers had presented to the Supreme Court their case against Arthur Andersen, which was seeking — successfully, it would turn out — to overturn its criminal fraud conviction in a prominent case. In the meeting, the deputy attorney general at the time, James B. Comey, posed questions that surprised some attendees, according to two people there who asked to remain anonymous because they were not supposed to discuss private meetings. Was American business being hurt by the Justice Department’s investigations?, Mr. Comey asked, according to these two people, who said they thought the message had come from others. He cautioned colleagues to be responsible. 'It was a total retrenchment,' one of the people said. 'It was like we were going backwards.' Mr. Comey said recently that he did not recall this conversation. Around the same time, the Justice Department was developing instructions on dealing with companies under investigation — particularly companies that work with the government. It issued a memo in 2003 that gave companies more credit for cooperating than in the past. That message was reinforced in another memo in 2006. As the first memo put it, 'it is entirely proper in many investigations for a prosecutor to consider the corporation’s pre-indictment conduct, e.g., voluntary disclosure, cooperation, remediation or restitution, in determining whether to seek an indictment.' During this period, the Justice Department increased the use of deferred prosecutions or even nonprosecution agreements. Many well-known companies have benefited. In 2004, the American International Group, the giant insurer, paid $126 million when it entered a deferred prosecution agreement to settle investigations into claims that it had helped clients improperly burnish financial statements. Deals over accounting improprieties also were struck that year by Computer Associates International, a technology company, and in 2005 by Bristol- Myers Squibb, a pharmaceutical concern. Prudential Financial entered into a deferred prosecution in 2006 over improper mutual fund trading. </blockquote> Note that while the emphasis of this article was on the financial services industry, big health care organizations were also benefiting from more lenient treatment.  Note also that one firm given lenient treatment, AIG, went on to threaten collapse, a collapse that was feared could take down the entire world financial system, and hence was given a very generous government bail-out, which has not be paid back to this day.  Formalized Leniency In 2008, the approach was formalized: <blockquote>As the financial storm brewed in the summer of 2008 and institutions feared for their survival, a bit of good news bubbled through large banks and the law firms that defend them. Federal prosecutors officially adopted new guidelines about charging corporations with crimes — a softer approach that, longtime white-collar lawyers and former federal prosecutors say, helps explain the dearth of criminal cases despite a raft of inquiries into the financial crisis. Though little noticed outside legal circles, the guidelines were welcomed by firms representing banks. The Justice Department’s directive, involving a process known as deferred prosecutions, signaled 'an important step away from the more aggressive prosecutorial practices seen in some cases under their predecessors,' Sullivan & Cromwell, a prominent Wall Street law firm, told clients in a memo that September. The guidelines left open a possibility other than guilty or not guilty, giving leniency often if companies investigated and reported their own wrongdoing. In return, the government could enter into agreements to delay or cancel the prosecution if the companies promised to change their behavior. </blockquote> Less Deterrence The NY Times article documented a number of opinions that increasing leniency was resulting in less deterrence of bad behavior: <blockquote>'If you do not punish crimes, there’s really no reason they won’t happen again,' said Mary Ramirez, a professor at Washburn University School of Law and a former assistant United States attorney. 'I worry and so do a lot of economists that we have created no disincentives for committing fraud or white-collar crime, in particular in the financial space.' </blockquote> Why So Much Sympathy from Prosecutors? What was not really clear from the article is why US federal prosecutors seemed to go from their stereotypically tough on crime personas to bleeding hearts for corporate criminals. The one rationale the article provided from the Department of Justice was: <blockquote>Defending the department’s approach, Alisa Finelli, a spokeswoman, said deferred prosecution agreements require that corporations pay penalties and restitution, correct criminal conduct and 'achieve these results without causing the loss of jobs, the loss of pensions and other significant negative consequences to innocent parties who played no role in the criminal conduct, were unaware of it or were unable to prevent it.' </blockquote> This, however, makes no sense. Well directed prosecutions of the people who apparently authorized, directed or implemented the wrong-doing ought to have very little effect on "innocent parties." The only jobs and pensions that should be lost should be those of the accused. Conclusions This seems to be the most recently documented example of important but overlooked, or concealed changes in government policies that have enabled the health care system to become more unethical, dishonest and corrupt, and hence more dysfunctional. <a href="http://hcrenewal.blogspot.com/2009/06/why-did-us-physicians-give-up-their.html">Here</a> we discussed a Supreme Court decision interpreting US anti-trust law that has been used to prevent medical societies from enforcing ethical rules, and hence helped medicine to become increasingly commercialized, and to increasingly put money ahead of patient care. <a href="http://hcrenewal.blogspot.com/2009/06/why-did-us-physicians-give-up-their.html">Here</a> we discussed little discussed legislation from 1945 that allowed US insurance companies/ managed care organizations to avoid federal anti-trust investigation and enforcement, and hence to increased market power. <a href="http://hcrenewal.blogspot.com/2010/06/attempt-to-hold-health-care-leaders.html">Here</a> we discussed failure of the executive branch, and especially the Department of Justice to use existing legal doctrine, the Responsible Corporate Officer Doctrine, available since 1943, to make corporate leaders responsible for their companies' bad behaviors, leading to their increasing lack of accountability and less deterrence of malfeasance. Now we have seen a deliberate turn away from even direct penalties on corporations which have misbehaved, in return basically for a promise that "we won't do it again." The first two examples may be of unintended consequences. The last two seem to signal an increased coziness between some in government and corporations. The origins of this coziness just beg for investigation. Meanwhile, there seems to be no evidence that the government's new leniency has protected innocent people who would have been harmed by the previous tougher approach. Instead, there seems to be a growing tide of bad behavior by health care organizations, exemplified by the nature of some of the bad behavior that lead to the march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a>, and to the <a href="http://hcrenewal.blogspot.com/search/label/deferred%20prosecution%20agreement">deferred prosecution agreements</a> and <a href="http://hcrenewal.blogspot.com/search/label/corporate%20integrity%20agreement">corporate integrity agreements</a> generated in response to the new policies. What Is to Be Done? - There clearly needs to be investigation, both by journalists and at a congressional level, of Department of Justice policies that have been increasingly lenient to and cozy with large corporations, including health care corporations. - Current Department of Justice officials need to be reminded that their clients are the US people, not corporate executives, no matter how hearty and well-met. ADDENDUM (12 July, 2011) -  See this related <a href="http://www.nakedcapitalism.com/2011/07/defining-deviancy-away-how-the-justice-department-adopted-see-no-evil-approach-to-corporate-crime.html">post</a> on the Naked Capitalism blog. ADDENDUM (19 July, 2011) - See related <a href="http://brodyhooked.blogspot.com/2011/07/kid-gloves-on-corporate-crime-different.html">post</a> by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.

The Case of the Bleeding Heart Prosecutors - How the Justice Department Became Lenient with Corporate Wrong-Doing

We have frequently posted, some may say tiresomely, about the lack of consequences or negative incentives for health care organizational lea...

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Guest Blog: Health Care in Dangerous Times

Health Care Renewal presents another guest blog by Steve Lucas, a retired businessman who formerly worked in real estate and construction who has a long standing interest in business ethics, and has long observed the health care scene. <a href="http://hcrenewal.blogspot.com/">Health Care Renewal </a>has often covered the disconnect between the stated goals of companies and the realities of their day to day operations. This raised the following question: Has medicine moved from being dysfunctional to being dangerous? There is certainly no lack of material to support this question as in the last two weeks we can find examples of pharma/biotech/device companies all engaged in questionable behavior. Medtronic and Manipulation of Study Data In the print media, The Wall Street Journal, a pro-business newspaper regularly highlights stories questioning the actions of companies. In the June 29 <a href="http://online.wsj.com/article/SB10001424052702303627104576413663395567784.html">story</a> titled "Medtronic Surgeons Held Back, Study Says" by John Carreyrou and Tom McGinty we find doctors being paid by Medtronic held back information regarding negative out comes of a bone growth product. <blockquote>'Medtronic paid millions to doctors and those same doctors, oddly enough, published the 'science' Medtronic needed to sell a product,' says Paul Thacker, a former aide to Sen. Charles Grassely…'</blockquote> Chantix's Cardiac Adverse Effects In the July 5 <a href="http://online.wsj.com/article/SB10001424052702304803104576425634260856212.html">story</a>, "Pfizer Drug Tied To Heart Risk" by Thomas M. Burton covers the increased cardiovascular problems with Chantix that only now seemingly have become evident. <blockquote>However, J. Taylor Hays, a Mayo Clinic doctor who has received funding from Pfizer for research on Chantix, responded in a commentary, 'The risk for serious cardiovascular events is low and is greatly outweighed by the benefits of diminishing the truly 'heartbreaking' of smoking.'</blockquote>The article then continues: <blockquote>'Some people have had changes in behavior, hostility, agitation, depressing mood, suicidal thoughts or actions while using Chantix to help them quit smoking,' Pfizer says in safety information.</blockquote> Overuse of Cardiac Stents In the July 6 <a href="http://online.wsj.com/article/SB1000142405270230476060457642832.html">article</a>, "Heart Treatment Overused" by Ron Winslow and John Carreyrou we find the over use of stents and the profit potential for doctors and hospitals. <blockquote>Outside of heart attacks, doctors are often quick to use a common $20,000 procedure to treat patients suffering from coronary artery disease, a new study suggest.</blockquote> Untested Imported Drug Ingredients In the July 6 <a href="http://online.wsj.com/article/SB10001424052702303339904576406163574698.html">Op-ed</a>, "Beware the Risk of Generic Drugs" by Roger Bate reinforces a point made often on Health Care Renewal when he covers the importation of untested or tainted product used in our pharmaceuticals. <blockquote>China is now the largest supplier of pharmaceutical chemicals – hundreds of tons annually – to the world. And pharmaceutical companies that buy these chemicals do not test them.</blockquote> Moving on to widely read blogs, Ghost Writing and Risperdal 1BoringOldMan in his <a href="http://1boringoldman.com/index.php/2011/07/03/bipolar-kids-postscript-detestable/">post</a> on bipolar kids and the doctors involved in the Harvard debacle discussed an article favorable to the drug ostensibly written by Harvard Professor Josephy Biederman: <blockquote>This covers the reworking of a previously done study to promote the use of drugs in children with this printed at the bottom of the first page: “"Printed in the USA. Reproduction in whole or part is not permitted. Copyright © 2006 Excerpta Medica, Inc."</blockquote> 1BoringOldMan continues with this <a href="http://1boringoldman.com/index.php/2011/07/06/in-tears-and-despair">post</a> that since we have identified children as bipolar we are free to ignore other factors and simply medicate them to death. <blockquote>As reported by '60 Minutes' in September of last year, Rebecca Riley died on December 13, 2006, at her home in Hull, Massachusetts, due to an overdose of psychiatric drugs. The drugs — Depakote (divalproex; Abbott), Seroquel (quetiapine; AstraZeneca), and clonazepam — were prescribed by Tufts psychiatrist Kayoko Kifuji for the child’s bipolar disorder, which was diagnosed at the age of 2 years.</blockquote>This covers the death of a child, a child, using the above ghost written drug information. Bayer's Use of Social Media to Market Drugs Pharma does adjust to the times and market, if it is not explicitly forbidden then it is fair game. Per a <a href="http://www.pharmalot.com/2011/07/bayer-is-scolded-for-tweeting-new-medicines/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Pharmalot+%28Pharmalot%29">post</a> in Pharmalot entitled, "To Tweet or not to Tweet" <blockquote>'To Tweet or not to Tweet?' That is a question that Bayer Healthcare will be pondering for some time. The drugmaker was upbraided by the UK’s Prescription Medicines Code of Practice Authority for recently Tweeting about two medicines, which was deemed to be a cause for concern since the information went directly to the public.</blockquote> Much like shooting a gun into a crowd and then claiming they had no way of knowing they would injure someone, a tweet is sent with the full knowledge the first thing everybody will do is hit the forward to all button. Pharma's Public Relations People Infiltrate Patient Support Groups Per a <a href="http://www.healthnewsreview.org/blog/2011/07/creepy-invasion-of-pharma-into-patient-targeted-social-media-space.html">post</a> on the HealthReviewNews Blog we have one of the most frightening posts possible since it shows pharma following individuals and a willingness to intrude into their personal lives. Marilyn Mann is approached on her Facebook page set up to support parents of children with lipid disorders by a drug PR person to promote a drug. <blockquote>Hi Marilyn, A few months ago, I had emailed you about some research I was doing about a new treatment for FH. I am now working with a pharmaceutical company, and the company currently has a drug in development to help treat people with severe FH that may not be responding to current therapies.</blockquote> In the comment section we find this: <blockquote>I'm a communications consultant to many big pharma firms and I'm not sure the PR person in this case did anything wrong. She was upfront and polite about her role, and asked if any patients would do what many have done, and be interviewed to raise the profile of FH. The owner of the group politely declined as was her right. It would have been a different case if there had been any subterfuge involved, but there wasn't. I think on this occasion you have aimed at the wrong target. Good luck with future postings.</blockquote> What do all of these references have in common? Senior executives, and health care academics, removed from the day to day work of helping people being able to claim they are not responsible while making ever larger incomes. Natrecor Shown Not to Work The corporate culture of medicine has become so perverse that even selling a drug that has no benefit becomes acceptable. Per this <a href="http://www.everydayhealth.com/heart-health/0707/study-finds-heart-failure-drug-ineffective.aspx?xid=aol_eh-cardio_24-_20110704&aolcat=ESR&icid=main%7Chtmlws-main-n%7Cdl6%7Csec3_lnk3%7C218187">item</a> in the Heart Health Center Health Day News: <blockquote>Study Finds Heart Failure Drug Ineffective Billions wasted on Natrecor in decade it took to find out it doesn't work, expert says. By Steven Reinberg, HealthDay News WEDNESDAY, July 6 (HealthDay News) — The heart failure drug Natrecor (nesiritide) is ineffective and linked to increased rates of potentially dangerous low blood pressure, a new study finds.</blockquote> Summary: The Most Dangerous Game So, back to my original question: Has medicine become dysfunctional or dangerous? I would contend dangerous. There is nothing magical about the above listed articles or posts. I am not a professional medical person, nor an academic, only someone concerned by the continued decline of medicine and medical care due to a corporate culture that promotes profit above all else. When I meet doctors socially they all speak of being small businessmen. Time and time again we see hospital administrators of all types speaking about being the CEO’s of multi-billion dollar organizations. Drug companies speak of blockbuster drugs as being those with sales of over one billion dollars and fines become the cost of doing business. Today we have a small, but vocal group of people who feel all drugs should be offered to the public and it is up to them to decide if they are appropriate. They also want the government and insurance companies to pay for this return to the pre-FDA days. How will the FDA itself withstand the onslaught of new technologies given out current Federal budget concerns? Tweets and Facebook represent only the beginning of a whole new wave of ways to communicate. My personal opinion is this is a very dangerous time for doctors and patients. Doctors are being pushed into corporate practices where financial gain is the main driver, not health care. Information given to doctors can be so tainted by commercial interest as to be of no value. Patients have no way of knowing where the doctor’s loyalty lies, with them or the practice? DTC ads are full of half truths and fear mongering. Patients need to bring even more information and skepticism to the doctor/patient relationship. I fear we do live in dangerous times. The word “good” has left much of medicine. Steven Lucas MBA

Guest Blog: Health Care in Dangerous Times

Health Care Renewal presents another guest blog by Steve Lucas, a retired businessman who formerly worked in real estate and construction wh...

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Being a Non-Profit Hospital CEO Means Never Having to Say You Are Sorry

When my arm was twisted heartily to see the movie "Love Story" a very long time ago, I could never understand why so many audience members sighed upon hearing that immortal line, "love means never having to say you're sorry."  I could not understand it then, and still cannot. However, it seems that for reasons that are not any more clear, being the CEO of a not-for-profit hospital or hospital system also means never having to say you are sorry, as shown in some recent stories from the media. Not Sorry for Leaving Originally <a href="http://www.inforum.com/event/article/id/323133/">published</a> in the Fargo (ND) InForum: <blockquote>The merger 1½ years ago of Sanford Health and MeritCare created a new entity that doubled in size and covers a service area of more than 130,000 square miles. But the unified health care giant needed only one top executive, and the departing chief administrator received a $1 million contract buyout, according to documents obtained by The Forum. Dr. Roger Gilbertson, a neuroradiologist who had served as MeritCare’s top executive since its founding 17 years earlier, received a 'separation payment' provided by his contract of $1,000,920, according to a report Sanford filed with the Internal Revenue Service that recently became available.</blockquote> Not only did Dr Gilbertson not have to say he was sorry for leaving, he collected what amounted to a million dollar plus bonus just for going out the door. Not Sorry for Leaving Amidst Financial Losses A long <a href="http://www.ajc.com/news/atlanta/hospital-ceo-pay-has-997155.html">story</a> in the Atlanta Journal Constitution discussed compensation for a number of Atlanta area hospital and hospital system CEOs.  For example, <blockquote>Edward Bonn of Southern Regional Health System, which operates Southern Regional Medical Center and two affiliated facilities, made $2,610,175 in fiscal 2009. Bonn left the system that year and received his pay of $421,822 plus $2.2 million from a retirement plan. Hospital CEOs commonly receive extra pay from retirement plans when they leave. Bonn did not receive a bonus because the hospital system lost $12 million that year, the hospital said.</blockquote> Mr Bonn apparently did not need to say he was sorry for collecting over $2 million when that amount was equal to about one-sixth of his system's yearly loss. Not Sorry for Financial Losses Plus a "Culture of Entitlement" This <a href="http://www.thepeterboroughexaminer.com/ArticleDisplay.aspx?e=3053430">story</a> was in the Peterborough (NH) Examiner: <blockquote>Former Peterborough Regional Health Centre CEO Paul Darby was given at least $340,126 plus benefits as a financial package after his retirement in December 2009. He didn't work a single day or offer a single service in 2010 while earning the second top salary at PRHC, just behind current CEO Ken Tremblay. 'The compensations with Paul were in line with similar arrangements with other CEOs and other public hospitals which include support to the executive following the employment period,' board chairwomen Barb Cameron said. 'It is important that we are able to make transitions between leaders smoothly and these kinds of arrangements with the executive allow us to do that.' Darby retired before a whirlwind of controversy hit the hospital last year including a scathing peer-review report blaming hospital top brass for a 'culture of entitlement' leading to spiraling, cumulative debt. When Darby left, the hospital faced a growing deficit of just under $25 million. He was paid $364,275 in 2009, $310,983 in 2008 and $269,419 in 2007.</blockquote>At least his severance package was less than one-sixth of the deficit. Not Sorry for Not Even Revealing One's Salary Here is a local Rhode Island <a href="http://blogs.wpri.com/2011/06/22/hospital-group-care-ne-wont-reveal-new-ceos-pay-package/">story</a> reported by WPRI: <blockquote>The nonprofit group that runs three Rhode Island Hospitals including Women & Infants won’t say whether its new chief executive will receive a seven-figure pay package that matches his predecessor’s. Care New England tapped Cambridge Health Alliance CEO Dennis Keefe as its new president and CEO this week. He will succeed John Hynes, who is retiring, in August. Care New England spokeswoman May Kernan said the organization would not release details about Keefe’s compensation. 'Other than complying with public reporting requirements as part of the federal [IRS] 990 forms, we do not disclose personal salary information,' she told WPRI.com in an email. Hynes’ compensation totaled $1.5 million in 2008-09, up from $873,332 in 2007-08, tax records show.</blockquote>Note that the hired executives of big for-profit corporations also are increasingly uncomfortable about public discussion of their compensation (see<a href="http://hcrenewal.blogspot.com/2011/06/ceo-compensation-nothing-to-see-here.html"> this post</a>). Where All CEOs Are Above Average The rationales presented for such apparently exceptional treatment given non-profit hospital CEOs (and other hired health care managers) are those we have heard before. The most prominent rationale for exceptional treatment of an individual CEO is that he (or rarely she) was such an exceptional leader. This would be more believable if it was not used so often, suggesting that those who defend these leaders, often including the boards of trustees who are supposed to supervise them, believe all hospital CEOs, like the mythical children of Lake Woebegone, are above average. For example, the InForum article provided this explanation of Dr Gilbertson's compensation: <blockquote>The only comment Sanford provided The Forum was a statement about Gilbertson’s contributions to MeritCare over his long tenure. 'Dr. Gilbertson’s gift to this region is invaluable – 30 years in medicine and 17 years as President/CEO of MeritCare only glance the surface,' said Andrew Richberg, a Sanford executive vice president. 'His vision for health care integration, medical knowledge and dedication to patients made him a pillar in our industry.' Gilbertson’s legacy, Richberg added, is 'strong, safe and sustainable health care for all people, in their hometowns, all across the region.'</blockquote> While the article did not suggest Dr Gilbertson's leadership was poor, it is hard to believe that he alone was responsible for "strong, safe and sustainable health care for all people ... all across the region." I am sure there are many other health care professionals in North Dakota who have worked for many years, and who have a strong vision, good medical knowledge, and dedication to patients.  I am sure almost none got $1 million severance packages.  If health care in North Dakota is really that good, is that not because of a lot of hard work by a lot of health care professionals? The rationale of exceptional treatment for exceptional individuals would also be more believable if it was not used to defend CEOs whose organization performed poorly under their leadership. For example, in the Peterborough Examiner: <blockquote>'I would like to acknowledge that these are big salaries, but they are big positions in a large hospital involving large responsibilities and requiring unique skills,' [hospital board of trustees chairwoman] Cameron said,.... </blockquote> Would not having the large responsibility for a large deficit argue against a large severance package? The Market Made Us Do It Despite substantial evidence and strong arguments (see <a href="http://hcrenewal.blogspot.com/2010/08/how-fallacy-of-perfect-health-care.html">here</a>) that health care cannot approach being an ideal free market, another favorite rationale for CEO exceptionalism is that the market made us do it. For example, per the AJC: <blockquote>The number of people who can manage these facilities is limited and recruitment is competitive, [Georgia Hospital Association President Joseph] Parker said. Qualified leaders will gravitate to other fields over time if compensation for nonprofit CEOs is decreased, [executive search consulting company Mercer Inc partner Jose] Pagoaga said. The 'substandard leadership' that replaces them will degrade the quality of medical care for the community. There’s debate on the issue. It’s hard to believe that people who choose the field of charitable medical care would leave because they make only $800,000 a year instead of $1.5 million, said Mark Rukavina, executive director of the Access Project, a Boston patient advocacy organization. But Pagoaga said nonprofit hospitals cannot count on their charitable duty to attract and retain the best administrators. 'Yes, it’s a social mission, but this is not the priesthood and these people have not taken a vow of poverty,' he said. 'You can’t discount the views of people that look at this as an altruistic mission and think that pay should therefore be limited. All I’m saying is there is an entirely different point of view based on free-market principles.'</blockquote> In the real world, of course, poverty would hardly be defined as an income less than $1 million a year. Mr Pagoaga never explicated the point of view based on "free-market principles," but I wonder if it can be summarized as "greed is good?"  It would be interesting to see how Mr Pagoaga could explain how health care is like unto an ideal free market.   Non-Profit Organizations are Not Very Different from For-Profit Perhaps the most intriguing argument was found in the AJC article: <blockquote>Pay in excess of $1 million a year may seem high for an organization subsidized by taxpayers, but hospital executives and industry representatives said the public should think of these hospitals not as charities, but as complex, billion-dollar organizations. Georgia hospitals report to 27 state and federal agencies and engage in multimillion-dollar building projects. The larger hospital systems have billions in revenue and are among the largest employers in their communities. Many also operate for-profit subsidiaries. 'You can’t lose sight of the fact that it’s not an ice cream shop on the side of the street,' said Joseph Parker, president of the Georgia Hospital Association.</blockquote>Note that currently US non-profit organizations do not have to report much data on their for-profit subsidiaries.  The above argument suggests they deserve considerably more scrutiny. Of course, that last explanation begs the question of why the compensation of for-profit hired executives should be even higher, with CEO compensation often well more than two orders of magnitude, that is, hundreds of times higher than that of the lowest paid also hired employees (see <a href="http://hcrenewal.blogspot.com/2011/06/ceo-compensation-nothing-to-see-here.html">this post</a>). Summary I submit that non-profit hospitals and hospital systems do have a "social mission," which ought to be upheld by their leadership. Despite the rationales supplied above, the leaders ought to be accountable, which may sometimes mean having to say they are sorry. As I have repeated endlessly,... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior. What Is to Be Done? Based on our ever enlarging <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">file of cases on compensation</a> of the top hired managers of non-profit health care organizations, let me make some concrete suggestions, based on my humble opinion. A step forward would be to make the finances and compensation arrangements of health care non-profit organizations at least as transparent as those of large public for-profit organizations. So my big idea is: - Non-profit health care organizations above a reasonable threshold size should provide prompt, public, annual reports analogous and very similar to the reports required by the US Securities and Exchange Commission of public, for-profit companies. These reports should include, at a minimum, a summary of financial and operational status, an audited financial report, an explanation and accounting for any for-profit subsidiaries and any interlocking non-profit organizations, the compensation given to the CEO and some minimum number of the top-paid officers and employees, a detailed explanation and rationale for the pay of these individuals, and a listing of other affiliations and all conflicts of interest affecting them. If need to supply such information causes non-profit health care organizations' hired executives and boards of trustees some cognitive dissonance, that would be a good thing.

Being a Non-Profit Hospital CEO Means Never Having to Say You Are Sorry

When my arm was twisted heartily to see the movie "Love Story" a very long time ago, I could never understand why so many audience...

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Law firms as enablers of HIT experiments? Familiar law firm now regular reader of Healthare Renewal

It continues to amaze me that unregulated, unvetted healthcare information technology of unproven benefit and proven harm continues to spread like wildfire. This occurs even when people are killed, such as the infant deaths I outlined <a href="http://hcrenewal.blogspot.com/2011/06/babys-death-spotlights-safety-risks.html">at this post</a> being defended by obstructionist law firms. This phenomenon has enablers. Among those, which include HIT vendors, their marketing arm HIMSS, large consultant companies, HIT pundits, the government, etc., law firms seem to have become enablers of hospitals' experiments with unproven, unqualified, unregulated healthcare information technology - in part by defending the medical mistakes that result. Lawyers defending blatant IT-related errors impede correction of the defects and impaired "<a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=ecosystem">HIT ecosystem</a>" that causes the problems. After all, they can simply tell a hospital a case is not defensible (and, for example, advise them to settle). Accepting cases is entirely voluntary. For example, take the law firm of MARSHALL,DENNEHEY,WARNER,COLEMAN defending the hospital that caused my mother's IT-related year-long suffering starting May 2010, and then death exactly one month ago on June 6, 2011. They have become a regular reader of Healthcare Renewal, and I can believe it's not to help the hospital improve its HIT. It's not as if lawyers are not writing on these issues, such as Case Western School of Law's Sharona Hoffman in "<a href="http://works.bepress.com/sharona_hoffman/7/" target="_blank">E-Health Hazards: Provider Liability and Electronic Health Record Systems</a>". That work is a comprehensive analysis of the liability risks associated with use of clinical IT. <div style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCRFz75Cia3uR-_cGJZZq9m__nHNAo4hVOEyOr54_1QaPF9gbFpGYfe4kLCvicqhOKb4bhQoECn8f1A6x1wgIyPJTVDprUocf1_2xH79kbxSGMsc-0RdVkShYV7EY0UZG8CyljWVLUdpqT/s1600/coffin.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5626254650137511602" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCRFz75Cia3uR-_cGJZZq9m__nHNAo4hVOEyOr54_1QaPF9gbFpGYfe4kLCvicqhOKb4bhQoECn8f1A6x1wgIyPJTVDprUocf1_2xH79kbxSGMsc-0RdVkShYV7EY0UZG8CyljWVLUdpqT/s320/coffin.jpg" style="cursor: pointer; display: block; height: 108px; margin: 0px auto 10px; text-align: center; width: 281px;" /></a>The real-world result of health IT interfering in simple care processes. Law firms that defend HIT-caused medical errors are enablers in use of these experimental technologies.</div> Perhaps they should have advised their clients of the risks of health IT before my mother was maimed? Or did they not know of these risks, something any law firm advising healthcare clients in 2010-2011 <a href="http://hcrenewal.blogspot.com/2011/02/updated-reading-list-on-health-it.html">knew, should have known, or should have made it their business to know</a>? Some tracking examples among a larger set: <blockquote>Today: Domain Name (Unknown) IP Address 12.104.41.# (MARSHALL,DENNEHEY,WARNER,COLEMAN) ISP AT&T WorldNet Services Location Continent : North America Country : United States (Facts) Language English (U.S.) en-us Operating System Macintosh WinNT Browser Safari 1.3 Mozilla/5.0 (Windows NT 6.1) AppleWebKit/535.1 (KHTML, like Gecko) Chrome/13.0.782.41 Safari/535.1 Javascript version 1.5 Monitor Resolution : 1280 x 1024 Color Depth : 32 bits Time of Visit Jul 6 2011 10:08:54 am Last Page View Jul 6 2011 10:30:45 am Visit Length 21 minutes 51 seconds Page Views 5 Referring URL <a href="http://www.google.com/search?sourceid=chrome&ie=UTF-8&q=there%27s%20also%20been%20a%20baby%20death%20locally%20to%20me%20that%20is%20allegedly%20due%20to%20HIT%20PACS%20interference%20in%20otherwise%20simple%20care">http://www.google.com/search?sourceid=chrome&ie=UTF-8&q=there%27s%20also%20been%20a%20baby%20death%20locally%20to%20me%20that%20is%20allegedly%20due%20to%20HIT%20PACS%20interference%20in%20otherwise%20simple%20care</a> Search Engine google.com Search Words there's also been a baby death locally to me that is allegedly due to hit pacs interference in otherwise simple care Visit Entry Page http://hcrenewal.blogspot.com/2011/06/babys-death-spotlights-safety-risks.html Visit Exit Page <a href="http://hcrenewal.blogspot.com/2011/06/babys-death-spotlights-safety-risks.html">http://hcrenewal.blogspot.com/2011/06/babys-death-spotlights-safety-risks.html</a> Out Click Time Zone UTC-5:00 Visitor's Time Jul 6 2011 10:08:54 am Visit Number 902,836</blockquote> <blockquote>Yesterday: Domain Name (Unknown) IP Address 12.104.41.# (MARSHALL,DENNEHEY,WARNER,COLEMAN) ISP AT&T WorldNet Services Location Continent : North America Country : United States (Facts) Language English (U.S.) en-us Operating System Macintosh WinNT Browser Safari 1.3 Mozilla/5.0 (Windows NT 6.1) AppleWebKit/535.1 (KHTML, like Gecko) Chrome/13.0.782.41 Safari/535.1 Javascript version 1.5 Monitor Resolution : 1280 x 1024 Color Depth : 32 bits Time of Visit Jul 5 2011 9:07:13 am Last Page View Jul 5 2011 9:08:46 am Visit Length 1 minute 33 seconds Page Views 4 Referring URL h<a href="ttp://www.google.com/search?sourceid=chrome&ie=UTF-8&q=health%20care%20renewal">ttp://www.google.com/search?sourceid=chrome&ie=UTF-8&q=health%20care%20renewal</a> Search Engine google.com Search Words health care renewal Visit Entry Page <a href="http://hcrenewal.blogspot.com/">http://hcrenewal.blogspot.com/</a> Visit Exit Page <a href="http://hcrenewal.blogspot.com/2011/06/electronic-medication-prescribing-magic.html">http://hcrenewal.blogspot.com/2011/06/electronic-medication-prescribing-magic.html</a> Out Click Time Zone UTC-5:00 Visitor's Time Jul 5 2011 9:07:13 am Visit Number 902,285</blockquote> and an older one: <blockquote>Domain Name (Unknown) IP Address 12.104.41.# (MARSHALL,DENNEHEY,WARNER,COLEMAN) ISP AT&T WorldNet Services Location Continent : North America Country : United States (Facts) Language English (U.S.) en-us Operating System Macintosh WinNT Browser Safari 1.3 Mozilla/5.0 (Windows NT 6.1) AppleWebKit/534.24 (KHTML, like Gecko) Chrome/11.0.696.28 Safari/534.24 Javascript version 1.5 Monitor Resolution : 1280 x 1024 Color Depth : 32 bits Time of Visit Apr 4 2011 12:12:05 pm Last Page View Apr 4 2011 12:33:44 pm Visit Length 21 minutes 39 seconds Page Views 30 Referring URL Visit Entry Page <a href="http://hcrenewal.blogspot.com/">http://hcrenewal.blogspot.com/</a> Visit Exit Page <a href="http://hcrenewal.blogspot.com/2009/03/malpractices-of-multitudes-mission.html">http://hcrenewal.blogspot.com/2009/03/malpractices-of-multitudes-mission.html</a> Out Click Time Zone UTC-5:00 Visitor's Time Apr 4 2011 12:12:05 pm Visit Number 860,621</blockquote> Note 30 page views in the latter data. -- SS

Law firms as enablers of HIT experiments? Familiar law firm now regular reader of Healthare Renewal

It continues to amaze me that unregulated, unvetted healthcare information technology of unproven benefit and proven harm continues to sprea...

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Here Comes Your New Doctor, Brought to You By UnitedHealth

A long time ago, practicing physicians were mainly self-employed solo practitioners. As health care became more bureaucratic, physicians formed group practices as partnerships, which sometimes employed additional junior or part-time physicians. Some physicians worked for non-profit practice foundations, often affiliated with academic medical institutions, sometimes with non-profit physician-run health insurers, like some Kaiser plans. However, traditionally, almost no practicing physicians were employed by for-profit corporations. In fact, until about 30 years ago, it was considered unethical for physicians' practices to be "commercialized, or treated like a commodity in trade." (See posts <a href="http://hcrenewal.blogspot.com/2007/12/relman-in-jama-on-threats-to-physicians.html">here</a> and <a href="http://hcrenewal.blogspot.com/2009/06/why-did-us-physicians-give-up-their.html">here</a>.) That is all changing, and apparently quickly. We recently <a href="http://hcrenewal.blogspot.com/2010/03/now-private-equity-jumps-into-health.html">discussed</a> how a private equity company, Cerberus Capital Management, bought out a formerly non-profit hospital system, Caritas Christi, and its associated physicians' practices. Thus, what were formerly Caritas Christi physicians ended up employed by for-profit Steward Health Care, owned entirely by Cerberus (see <a href="http://hcrenewal.blogspot.com/2011/02/new-steward-health-care-will-superbowl.html">this post</a>). For-Profit Health Insurance Companies Hiring Physicians to Take Care of Their Patients Not it is commercial health insurance companies rushing to hire physicians, as <a href="http://www.washingtonpost.com/insurers-quietly-gaining-control-of-doctors-covered-by-companies-plans/2011/06/29/AG5DNftH_story.html">reported</a> by the Washington Post and Kaiser Health News: <blockquote>United health services wing is quietly gaining control of doctors who treat patients covered by United plans — buying medical groups and launching physician management companies, for example. It’s the latest sign that the barrier between companies that provide health coverage and those that provide care is crumbling. Other large insurers, including Humana and WellPoint, have announced deals involving doctors in recent months, part of a strategy to curb rising health costs that could cut into profits and to weather changes to their business arising from the federal health law. But United is the biggest insurer by revenue, making the trend much more significant. </blockquote> As they are supposed to do, the reporter clearly included both sides of the story, including how UnitedHealth justified its new business strategy: <blockquote>Employers and other customers 'are saying, I want more value for the dollars I spend in health care,' said Dawn Owens, chief executive officer of OptumHealth, United’s health services subsidiary. But, 'there’s also a realization that the delivery system isn’t ready for that kind of change. That’s where we come in.' The tools needed to control costs and improve care are things insurers have 'invested in over the years,' she said. 'The provider community doesn’t have those tools.'</blockquote> The article even got a UnitedHealth board member to provide a somewhat confusing defense of the new practice: <blockquote>Gail Wilensky, a United board member and health official in President George H.W. Bush’s administration, said the insurer doesn’t seek to control every doctor who sees patients enrolled in its health plans. Typically, insurers contract with doctors to care for their policyholders. She also cautioned the strategy is in the early stages and has not yet proven its success. 'It’s just trying many different ways to see what appeals to the American public and what adds value,' she said. 'Whether it will actually mark the trend of the future, I don’t know.'</blockquote>"Incentivizing" Doctors to Do Less At least the WaPo/ Kaiser Health News story cautiously tip-toed up to the obvious potential downside of commercial health insurers employing doctors to see patients, the issue of whose interests such employed physicians might put first: <blockquote>Many patients insured by these companies are going to see much tighter management of their care. 'Health-care costs are still going to rise,' said Wayne DeVeydt, chief financial officer of WellPoint, which entered the business of running clinics in June with the announcement that it would acquire CareMore, a health plan operator based near Los Angeles that owns 26 clinics. 'But the only way to stem those costs in the long term is to manage care on the front end.' That means enlisting doctors. Their orders drive most health-care spending, including the wasteful share: treating heart patients with expensive stents when cheaper drugs might work, or overusing high-tech imaging devices, for example. By managing doctors directly, insurers believe they can reshape the practice of medicine — and protect their profits. For instance, Cigna, another large insurer, saves 9 percent on patients treated by doctors in a Phoenix medical group it controls, said Stephanie Gorman, president of Cigna Arizona. Cigna has expanded the group over the past 18 months in response to the health law, and it now serves patients at 32 locations. 'The doctors, at the end of the day, control the patients, and currently they’re financially incentivized to do more tests, more procedures,' said Chris Rigg, a Wall Street analyst for Susquehanna Financial Group. 'But, if they’re employed by a managed care company, they’re financially incentivized' to do less. That thought unnerves consumer advocate Anthony Wright of Health Access in Sacramento, who worries that profit pressure could affect care. But Wright also said there may be upsides to more tightly managed care: 'No patient wants to get more procedures than they actually need.'</blockquote>How Doing Less Can Harm Patients Let us look at that from a different angle. Commercial insurance companies increase revenue when they decrease their "medical losses," that is, the money they pay for policy-holders' care. Physicians employed by such companies, but who take care of patients who may be those companies' policy-holders, could be "'incentivized' to do less." That is more than "unnerving." It is widely accepted that many patients get tests and treatments whose benefits do not outweigh their harms, and the costs of such interventions increase the costs of health care while doing patients no good, and perhaps harm. If we could eliminate those unneeded tests and treatments, we could decrease costs and improve patients' outcomes. Yet another important driver of health care costs are tests and treatments whose benefits outweigh their costs, but which are priced much higher than could be justified by their benefit/harm ratio. It could also be that many tests and treatment are priced fairly. So "incentivizing" physicians to do less across the board could very well harm patients by depriving them of interventions whose benefits outweigh their harms. It appears that for-profit insurers who hire physicians are likely to place their physician employees in a situation in which incentives to do less may conflict with the physicians' duties to do what is best for each patient. That is more than unnerving. Hiding Physicians' Commercial Employment That this new sort of employment requires much more scrutiny very quickly is also suggested by how the commercial health insurance companies are trying to hide their new relationships with physicians. As reported in the article, UnitedHealth Group's subsidiary: <blockquote>Optum and its Collaborative Care unit have acquired Memorial Healthcare IPA and AppleCare Medical Management in Orange County, Calif., as well as WellMed Medical Management, which runs clinics in Texas and Florida. Collaborative Care also launched Lifeprint in Phoenix. In some cases, the company obscured its role. For instance, a Collaborative Care business, NextDoor Health, which is partnering with a local doctors group to open retail clinics at Wal-Mart stores in Texas and other states, describes itself on its Web site as 'a privately held LLC based in Minneapolis.' United is based just outside of Minneapolis.</blockquote>The Mirror Image: "Leakage Reduction" Note that the essential conflict caused by a doctor hired to take care of patients by a company that profits from decreasing care across the board is the mirror image of the conflict caused by a doctor hired by a for-profit hospital system. In the latter case, the doctor is hired by a company which profits from increasing those services which are particularly well reimbursed. So we <a href="http://hcrenewal.blogspot.com/2011/02/new-steward-health-care-will-superbowl.html">noted previously </a>that doctors hired by the for-profit Steward Health Care system were being pushed to reduce "leakage," that is, referral of patients outside of the system for well-reimbursed services. "Leakage reduction" could also harm patients, although in a more subtle way, perhaps. Doctors incentivized to refer more patients within the system for well-reimbursed services, which are now mostly invasive procedures and high-technology tests may get patients to undergo interventions which are unnecessary, and sometimes whose harms outweigh their benefits, thus leading to adverse effects without any benefits. Summary So in my humble opinion, the sudden rush of for-profit health care companies to hire doctors to take care of patients ought concern patients, health care professionals, and health care policy makers a lot. Physicians employed by for-profit corporations whose revenues are affected by their own decisions have serious conflicts of interest. Just how bad these conflicts are may be difficult to determine, because there seems to be little public knowledge about how physicians are actually "incentivized" by these corporations. Note that the WaPo article never discussed the details of the incentives the insurance companies imposed on their employed physicians. Note also that our previous discussion of "leakage" reduction was not based on any public knowledge about how the employed physicians might have been influenced to reduce leakage. Also, just how frequent these conflicts may be may also be difficult to determine, because it appears that employed physicians do not always reveal who their employers are. What is To Be Done? I strongly suggest that Patients: - Find out if their physicians are employed, and if so, by whom. - Find out what incentives their physicians have, if employed, to recommend more or less care of certain types. -  Find out whether other aspects of the physicians' employment arrangements, e.g., contractual confidentiality clauses, could affect his or her relationships with patients - Avoid doctors employed by for-profit companies who have incentives to provide more or less care than what may be best for the patient Physicians: - Do not accept any employment offer or contract which has incentives to provide more or less care than is best for individual patients - Who are already employed disclose to their patients such employment, and any incentives it may provide to provide more or less care Policy-makers: - Rapidly investigate the extent that for-profit companies whose revenues depend on physicians' decisions are hiring physicians to take care of patients, and the incentives and influences that these companies use to affect physicians' decisions - Develop regulations that force disclosure of all such employment and relevant incentives and influences - Consider whether such "commercial practice of medicine" ought to be once again banned.

Here Comes Your New Doctor, Brought to You By UnitedHealth

A long time ago, practicing physicians were mainly self-employed solo practitioners. As health care became more bureaucratic, physicians for...

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Nice post-holiday story with a happy ending

Nice post-holiday story with a happy ending

Totally unrelated to medicine, but a nice post-holiday story with a happy ending as a break from our routine of grim news. Kitten rescue fro...

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BLOGSCAN: Forensic Statistics

Several interesting points are raised in the newsletter of the <a href="http://www.aapsonline.org/">American Association of Physicians and Surgeons</a> (AAPS) in a post entitled "Forensic Statistics" in their <a href="http://www.aapsonline.org/index.php/site/article/aaps_news_july_2011_-_numbers/">July 2011 newsletter</a> headlined "Numbers." Healthcare Renewal is cited: <blockquote>Forensic Statistics While claims from RCTs fail to replicate about 20% of the time, the problem with epidemiology is so bad as to constitute a crisis, writes S. Stanley Young (“<a href="http://nisla05.niss.org/talks/Young_Safety_June_2008.pdf" style="color: rgb(128, 0, 0); text-decoration: underline; font-weight: normal;" target="_blank">Everything Is Dangerous: a Controversy</a>,” National Institute of Statistical Sciences, June 2008, <a href="http://www.niss.org/" style="color: rgb(128, 0, 0); text-decoration: underline; font-weight: normal;" target="_blank">www.niss.org</a>). Fewer than 20% of nonrandomized trials [e.g., observational studies - ed.] replicate; i.e. 80%-90% of epidemiologists’ claims are false. More than $1 billion in grant/tax money flows to institutions with reproducibility problems, Young states. A fundamental flaw in their methodology is to ask multiple, often hundreds to thousands of questions, of the same data set. It’s like playing “maverick solitaire”: given 25 randomly selected cards from a deck of 52 playing cards, the probability of being able to arrange them into 5 “pat hands” (e.g. a full house) is 98%. Since data miners are good at concealing their footsteps, critics need full access to the raw data and the code used for the statistical analysis—often not forthcoming. The EHR software that is supposed to support all this “research” and to guide medical treatment also needs a forensic evaluation, writes Scot Silverstein, M.D., of Drexel University (see <a href="http://hcrenewal.blogspot.com/2011/03/on-emr-forensic-evaluation-from-down.html" style="color: rgb(128, 0, 0); text-decoration: underline; font-weight: normal;" target="_blank">http://hcrenewal.blogspot.com</a>). He cites such an evaluation of the Cerner FirstNet system used in New South Wales, Australia, done by Prof. Jon Patrick. The authoritarian implementation processes of the governmental HIT “support” staff were familiar to Silverstein, such as disenfranchising the clinical staff and failing to acknowledge the validity of complaints. “Healthcare reform” demands acceptance because it claims to be based on science. But then, so did Communism.</blockquote> The "maverick solitaire" data mining issues (to be used, no doubt, in future "comparative effectiveness research" based on EHR data) are a additional concern to those I raised in an essay "<a href="http://www.jpands.org/vol14no2/silverstein.pdf">The Syndrome of Inappropriate Overconfidence in Computing: An Invasion of Medicine by the Information Technology Industry?</a>" in the AAPS journal several years ago (PDF). I can also add: where are the RCT's of EHR/CPOE systems? -- SS

BLOGSCAN: Forensic Statistics

Several interesting points are raised in the newsletter of the American Association of Physicians and Surgeons (AAPS) in a post entitled ...

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