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Blood Money at the Border - The Red Cross and a Local Blood Bank Fight Over Donors

Writing in our local Providence Journal, Felice Freyer <a href="http://www.projo.com/news/content/BLOOD_COLLECTION_DISPUTE_07-21-11_T5P9VUQ_v19.4357c.html">reported</a> on a story that becomes less bewildering when viewed in the context of how nominally not-for-profit health care organizations are now run.  The Border Dispute It seems that two such non-profits are having a border dispute: <blockquote>Two local charities are fighting for your blood. The Rhode Island Blood Center, long the sole blood-collection agency in the state, is objecting to incursions by the American Red Cross of Eastern Massachusetts, which recently started holding blood drives here. A war of words has resulted, with the blood center accusing the Red Cross of a 'campaign of misinformation,' and the Red Cross calling the blood center 'hypocritical.' The Hospital Association of Rhode Island entered the fray with a letter to blood donors urging loyalty to the Rhode Island center. The dispute might seem inconsequential to the typical blood donor, who is just trying to do a good deed and may not care or notice who collects the blood. But the Rhode Island Blood Center argues that it matters a great deal. The competition, blood center officials say, is threatening a carefully calibrated system that ensures a steady, predictable supply of blood. The hospitals in Rhode Island all rely on the blood center for 100 percent of their blood supply. The Red Cross says it just wants to give Rhode Islanders another way to support its mission. 'We are a humanitarian organization, a symbol of trust,' said spokeswoman Donna M. Morrissey. The Red Cross’ Rhode Island chapter does not collect blood. A chapter based in Dedham, Mass., started collecting blood here last fall. Since then, the Red Cross has collected 138 units of blood in Rhode Island — a drop in the bucket compared with the 90,000 units of whole blood that the Rhode Island Blood Center collects each year.</blockquote>High-Toned Missions On its surface, the whole thing is bewildering. Here are two non-profit organizations ostensibly dedicated to providing worthwhile health services for people in need. The American Red Cross' <a href="http://www.redcross.org/portal/site/en/menuitem.d229a5f06620c6052b1ecfbf43181aa0/?vgnextoid=f5195032f953e110VgnVCM10000089f0870aRCRD">mission</a> is to: <blockquote>provide relief to victims of disaster and help people prevent, prepare for, and respond to emergencies.</blockquote> The Rhode Island Blood Center's <a href="http://www.ribc.org/full/inner/annualReports.shtml">mission</a> is: <blockquote>to provide a safe, adequate and cost-effective blood supply for the patients and the hospitals we serve. </blockquote> Why can't we all just get along? Why should these organizations be fighting, especially over what amounts to market share? Wouldn't they be able to better support their missions by cooperating?  Where Does the Money Go? I cannot give a definitive answer to those questions. However, there are some clues. Let us look at the latest available (2008) US Internal Revenue Service <a href="http://www.guidestar.org/FinDocuments/2009/050/317/2009-050317817-066c6dad-9.pdf">form 990</a> from the Rhode Island Blood Center, and the latest available (2009) <a href="http://www.redcross.org/www-files/Documents/pdf/corppubs/ARC_990_2010.pdf">form 990</a> from the American National Red Cross, the parent of the eastern Massachusetts chapter. The ProJo article stated that the RI Blood Center collected some 90,000 units of blood last year. The most recent form 990 for that organization revealed that the RIBC had $33,043,096 in program service revenue from sale of blood or blood components for its 2008 tax year. Assuming that its blood collections were the same then as the ProJo reported, that means it got $367 in revenue per unit of blood it supplied. Note further that program service revenue accounted for about 88% of its total $37,478,357 revenue in 2008, revenue sufficient to create a $558,169 surplus So the sale of blood is lucrative. That may come as a big surprise to blood donors, who are unpaid, (and do not even get a tax-deduction for a charitable donation in the US). Now of course it may not be cheap to collect, test, store and distribute blood, that is, the core functions of the RIBC. But note further that in 2008, it was also lucrative to be an executive for RIBC. That year, Lawrence F Smith, the CEO, got $430,650 in total compensation; Scott J Asadorian, the COO, got $331,736, and Carolyn T Young, the CMO, got $273,052. Six other managers got more than $100,000. That seems to be very good pay for managers of a relatively small, regional non-profit whose revenues depend on voluntary donations of bodily fluids. There are parallels with the American Red Cross, parent organization of the local Massachusetts chapter. It got a whopping $2,219,161,636 in program service revenue from "biomedical products & services" in 2009, which was about two-thirds of its total revenue of $3,587,775,430, and which generated a $233,597,985 surplus. Being an executive of the American Red Cross was much more lucrative. In 2009, then CEO Gail McGovern received over a million in total compensation, $1,032,022 to be exact. Its President for Biomedical Services got $850,489. Its Executive VP for Biomedical Services got $596,309. Twelve other executives got more than $250,000. Of those, ten got more than $350,000. Summary This is all too reminiscent of a dispute we noted briefly <a href="http://hcrenewal.blogspot.com/2011/06/blogscan-another-health-care-foundation.html">here</a>, which involved threatened litigation by the large Susan G Komen For the Cure foundation against other charities that dared to use the word "cure" in their own campaigns to fight cancer. The current example does seem a bit more tawdry because the organizations in question depend for their revenue and to support their executives' posh pay on voluntary donations, not just of money, but of blood.  (And it is not the first example we have found that raises questions about non-profit blood banks, look<a href="http://hcrenewal.blogspot.com/2010/01/why-are-health-care-organizations.html"> here</a>.) We have gone on at great length about how health care organizations have been infected by the prevailing "greed is good" culture of US (and world) businesses. Some of the worst examples have come from for-profit companies, but nominally non-profit companies (NGOs, outside of the US) have become part of the epidemic. Instead of cooperating to do good works, some have taking to fighting over market share. We have shown numerous examples in which the leaders of health care non-profits got <a href="http://hcrenewal.blogspot.com/search/label/perverse%20incentives">incentives unrelated</a> to the degree they uphold their institutions' high-toned missions, (<a href="http://hcrenewal.blogspot.com/2011/07/being-non-profit-hospital-ceo-means.html">here</a> is a recent example) and seem happy to do what it takes to keep their compensation high. So, once more with feeling.... 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 file of cases on compensation 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 the 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.

Blood Money at the Border - The Red Cross and a Local Blood Bank Fight Over Donors

Writing in our local Providence Journal, Felice Freyer reported on a story that becomes less bewildering when viewed in the context of how ...

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BLOGSCAN - Bleeding Heart Prosecutors in the Thrall of "Economism"?

BLOGSCAN - Bleeding Heart Prosecutors in the Thrall of "Economism"?

On the Hooked: Ethics, Medicine and Pharma blog, Dr Howard Brody further analyzed the case of the soft-hearted prosecutors, which we discus...

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Health Care for the Very Rich is Different from That for You and Me - the Case of the CEO's Six-Figure Hip Replacement

Another glimpse of health care for the very rich comes by way of a BNet <a href="http://www.bnet.com/blog/drug-business/whats-wrong-with-solomon-forest-labs-spent-316k-on-ceos-medical-bills/9014">post</a> by Jim Edwards about the beleaguered CEO of Forest Laboratories. The background is that: <blockquote>The CEO is fighting to retain his place atop the company against both investor Carl Icahn, who wants his own directors on Forest’s board, and the Department of Health & Human Services, which wants to exclude Solomon from the drug business as a punishment for the company settling a $313 million investigation by the Department of Justice over its illegal marketing of Levothroid and other drugs.</blockquote> We had posted about the government threat to disbar him from government business after his company <a href="http://hcrenewal.blogspot.com/2011/05/logical-fallacies-to-defend-ceos-from.html">here</a>. Edwards noted that despite these setbacks, Solomon's total compensation actually increased: <blockquote>Forest Labs (FRX) reported that CEO Howard Solomon earned $8.9 million in fiscal 2011, 7 percent more than last year,...</blockquote> This is par for the course for <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">executive compensation</a> in health care. We have discussed numerous instances in which such pay defies gravity, rising even when serious questions have been raised about the performance of the executives and the organizations they lead. We most recently belabored this issue <a href="http://hcrenewal.blogspot.com/2011/07/being-non-profit-hospital-ceo-means.html">here</a>. However, Edwards also wrote <blockquote>The company also spent $316,638 on medical expenses for the 83-year-old CEO, up from $56,571 in 2010. The company’s proxy disclosure did not say what was wrong with Solomon. UPDATE: A spokesperson for the company said: Mr. Solomon is in excellent health and has no ongoing medical conditions that would impair his ability to continue functioning as the Company’s CEO. A good portion of last year’s expense was related to hip replacement following a fall when he was playing tennis – which he has now reluctantly discontinued.</blockquote> Later, he summarized the amounts the company paid for Mr Solomon's medical care in previous years: <blockquote>Here’s how Solomon’s medical bills have increased over the last few years. 2011: $316,638 2010: $56,571 2009: $28,000 2008: $25,000 </blockquote> Mr Solomon is 83 years old, and therefore qualified years ago for Medicare, the US single payer health insurance system for the elderly and disabled. Medicare serves as the primary health insurance for many elderly people, and it covers hip replacements for quite a few of them. A <a href="http://www.zimmer.com/web/enUS/pdf/Hip_Coding_Guide_Revised_121108.pdf">publication</a> by Zimmer, one of the larger manufacturers of prosthetic hips, noted that Medicare payment rates in 2009 for hip replacement were up to about $25,000 for hospitals, and up to about $1500 for surgical fees. Yet Forest Laboratories increased its payments to Mr Solomon for health care by about $250,000 due to his hip replacement. This amount is obviously an order of magnitude bigger than the usual Medicare payments for hip replacements, and presumably was paid in addition to the amounts Medicare paid for this surgery. Nothing in Mr Edwards' post, or in the proxy statement from which the numbers came explains the use to which the $250,000 was put. The size of the amount does suggest that Mr Solomon received some sort of health care much more expensive than that available to the general public. We have previously noted a few instances (e.g. <a href="http://hcrenewal.blogspot.com/2009/07/are-health-plans-of-very-rich-different.html">here</a>)  suggesting that the amounts large corporations pay for their top executives' health care are far larger than even the high prices charged by commercial health insurers.  Information from litigation suggested that one retired corporate CEO was entitled to payments for all sorts of amenities, such as first-class transportation, services of personal aides and trainers, cosmetic procedures, etc in conjunction with his health care (see post <a href="http://hcrenewal.blogspot.com/2010/07/not-your-average-joes-health-plan.html">here</a>).  The case of the Forest Laboratories CEO provides more evidence that top corporate leaders receive health care in what amounts to a system separate from and in a tier above what even supposedly well-insured "regular people" can access.  The existence of this separate health care system for very rich corporate executives may provide yet another explanation of why real health care reform is so difficult.  We have frequently suggested that those who have become rich from the current health care system are likely to strongly resist any changes to that system that might threaten their continued accumulation of wealth.  These peoples' riches provide them with the resources to fight such changes, e.g., through stealth policy advocacy (see posts <a href="http://hcrenewal.blogspot.com/2011/02/health-care-corporate-disinformation.html">here</a> and <a href="http://hcrenewal.blogspot.com/2011/02/wendell-potters-deadly-spin.html">here</a>).  Furthermore, these peoples' access to a separate health care system for the very rich makes it extremely unlikely that they or their families will ever experience the problems that drive many common folk to despair about our current health care dysfunction. Perhaps some intrepid investigative reporter will write a Pulitzer prize-worthy story about the parallel health care system for the very rich.  Perhaps some honest health services researcher will study how the existence of such a system affects policy-makers. At the least, we deserve health care policy informed by how the health care affects real people, and not made solely by those who are sheltered from he vicissitudes of the real, and currently dysfunctional health care system.

Health Care for the Very Rich is Different from That for You and Me - the Case of the CEO's Six-Figure Hip Replacement

Another glimpse of health care for the very rich comes by way of a BNet post by Jim Edwards about the beleaguered CEO of Forest Laboratorie...

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Would You Like Fries With That? - The Fast Food Model for the Corporate Physician

Allegations that suggest the continuing degradation of the professionalism of employed physicians just <a href="http://www.palmbeachpost.com/news/state/ex-solantic-doctor-tells-of-intense-pressure-on-1596934.html">appeared</a> in the Palm Beach (FL) Post.  A former physician employee of Solantic Urgent Care, a for-profit chain of urgent care clinics, described to state investigators the life of employed physicians there. Putting Revenue First Physicians answered to managers who put revenue first: <blockquote>Thirty-something business graduates lacking in any medical training supervised the clinics' doctors and were encouraged to maintain an adversarial relationship with them, Prokes said. Those clinic managers' raises and bonuses depended on their achieving ambitious goals for patient visits, labor and overhead costs, per-patient revenues and customer satisfaction. Prokes said clinic manager turnover was high, and a succession of managers wrote him up for a variety of infractions: arriving five minutes late, failing to suggest Solantic's pharmacy at three points of contact and suggesting a patient might want to return later, when there would be less of a wait.</blockquote> As is common elsewhere, there was pressure to see as many patients as possible: <blockquote>Prokes told state investigators that he found the atmosphere increasingly untenable, as he was pressed to see 70 to 90 patients each day. 'They actually told us not to sit down for 14-hour shifts,' Prokes told state investigators. '[Former Solantic CEO Rick] (Scott) does not care about the quality of medicine. They care about how fast you see people.'</blockquote> A Business Model from the Fast-Food Industry A former Solantic executive admitted that the business model came straight from the fast-food industry: <blockquote>[Former Solantic Chief Operating Officer Shaun] Ginter said the retail concept that he, Scott, and then-CEO Karen Bowling created drew on lessons from the fast food and other retail industries. Counters were built at standing height, for example, because it speeded workflow, he said. 'The culture, the workflow, were all streamlined for a more efficient delivery, a more efficient method of care,' said Ginter, who had previously managed drug stores with small clinics within. 'The name of the game is keeping your costs tight, and Rick, Karen and myself were very focused on keeping costs down.'</blockquote> Up-Selling Unneeded Services Just as in the fast food industry, the help was expected to up-sell. In particular, Dr Prokes charged that physicians were strongly pushed to suggest services patients did not need, but that brought in more revenue: <blockquote>Doctors were monitored with cameras in the clinics' common areas, [Dr Randy] Prokes told investigators. Staff were expected to suggest extras, including vitamins and probiotics, and a colon cancer screening test considered unreliable and outdated by CDC officials.</blockquote> The Background: Rick Scott, Columbia/HCA, and the State of Florida Note that Rick Scott just sold Solantic LLC to private equity group Welsh, Carson, Anderson & Stowe, <a href="http://www.bizjournals.com/jacksonville/news/2011/06/29/investor-group-buys-out-solantic.html">per</a> the Jacksonville (FL) Business Journal. Note further that Scott was the former CEO of Columbia/ HCA, which ultimately paid a huge fine for fraudulant practices: <blockquote>John Schilling was working as reimbursement supervisor for Columbia/HCA's Southwest Florida division, where he oversaw Medicare and Medicaid compliance and the cost reporting. 'Before HCA, when it was just Columbia, the CEOs of the hospitals were making up to 100 percent of their salaries as a bonus; the CFOs made 50 percent. Even some of the directors were making 25 percent bonuses,' Schilling said. It drove a do-anything-to-make-the-numbers mentality, he said. Schilling now runs a firm called Ethics Solutions, where he helps potential whistleblowers. 'There were no incentives for being in compliance with Medicare and Medicaid rules,' Schilling said. 'It was about, how are we going to make it profitable, and if we meet our goals, it means we get our bonuses.' He found that the hospitals in his area kept two sets of books. The one for Medicare auditors showed inflated costs, so that hospitals could justify higher reimbursement rates to take advantage of a funding formula that has since changed. The hospitals also kept 'real' books with different numbers. The discovery put him in an ethical bind, he said. When he took his concerns to a supervisor, he was told not to rock the boat. Ultimately, his whistleblower lawsuit proved among the most damaging to his employer, which eventually paid $1.7 billion to the federal government to settle criminal fraud and abuse charges. Scott, who wanted to fight the charges rather than settle, was never charged, and said he was unaware of what his managers had been doing.</blockquote> After Scott left Columbia / HCA, he used the riches he acquired as its hired executive to help fund an ultimately successful campaign for the governorship of Florida, his current office. (See posts <a href="http://hcrenewal.blogspot.com/2011/03/conflicts-of-interest-government.html">here</a> and <a href="http://hcrenewal.blogspot.com/2010/05/how-did-ceo-who-presided-over-company.html">here</a>.) Summary We have previously posted, most recently <a href="http://hcrenewal.blogspot.com/2011/07/here-comes-your-new-doctor-brought-to.html">here</a>, about how physicians are increasingly becoming <a href="http://hcrenewal.blogspot.com/search/label/corporate%20physician">employees of for-profit corporations</a>. We have discussed other instances in which such corporations are appearing to pressure physicians to provide "care" to patients in such a manner as to increase corporate revenue, whether or not it is good for patients. We noted that when insurance companies hire physicians, they are likely to push them into providing less care across the board, since the insurers are paid per patient, not for what is done to each patient. When hospitals, hospital systems, and other entities that directly provide care hire physicians, they are likely to push them into channeling patients to get tests, drugs, and procedures for which the corporations are most highly paid. In this current case, the allegations fit the latter pattern. Furthermore, At least one former executive admitted that "the name of your game is keeping your costs tight," not providing the best patient care. There is more and more evidence that doctors who provide direct patient care as employees of for-profit corporations, and possibly other large organizations, are being increasingly pushed to put corporate revenue ahead of their patients' best interests. It should be obvious that this is unethical. Doctors swear oaths to put their patients' interests first. Patients should be extremely wary of the care provided by doctors who are employed by large organizations. Doctors should be extremely wary of working for such organizations to provide direct patient care. Below, I have repeated my humble suggestions from last week, with some additions, for What Is to Be Done? 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 - Urge professional societies, and certifying and accrediting organizations to further investigate threats to physicians' professionalism arising from employment, and develop strategies to mitigate such threats 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 further regulation of organizations that so employ physicians - Consider whether such "commercial practice of medicine" ought to be once again banned. ADDENDUM (12 July, 2011) -  See also this related <a href="http://www.kevinmd.com/blog/2011/07/professional-status-physicians-risk.html">post</a> on KevinMD.

Would You Like Fries With That? - The Fast Food Model for the Corporate Physician

Allegations that suggest the continuing degradation of the professionalism of employed physicians just appeared in the Palm Beach (FL) Post...

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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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