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JAMA Article Begs Key Questions About Case of Contaminated Heparin

There was a recent reminder of the case of the tainted heparin, which begged more questions than it answered.  (A case summary is appended to the end of this post, and nearly all our posts are <a href="http://hcrenewal.blogspot.com/search/label/heparin">here</a>.)  The case is of fundamental importance because it involves the failure of pharmaceutical companies to fulfill their core mission, to supply pure, unadulterated drugs.   Three years later, how the heparin was adulterated, and who was responsible are still unknown. JAMA just published a major news article (Kuehn BM. As production goes global, drug supply faces greater risks to safety, quality.  JAMA 2011; 306: 811-813.  Link <a href="http://jama.ama-assn.org/content/306/8/811.full">here</a>.) This, in turn, was based on a five page case study of the heparin incident in a report by the Pew Health Group entitled "After Heparin: Protecting Consumers from the Risk of Substandard and Counterfeit Drugs" (link <a href="http://www.prescriptionproject.org/assets/pdfs/Pew_Heparin_Round4b_SinglePgs_b.pdf">here</a>).  Reading between the lines, the Kuehn article raised several questions which it did not seek to answer, but which we have raised previously. Why Didn't Baxter Look the Gift Horse in the Mouth? The JAMA article noted that in general, "pharmaceutical companies are shifting the production of drugs and drug ingredients to emerging economies - primarily India and China - to save money."  [italics added for emphasis]  Also, "Many emerging economies do not have robust regulatory systems, and regulators from the United States or other countries may face hurdles in trying to oversee production in these nations." Why were Baxter International executives not concerned about the quality of a drug offered cheaply from firms in countries with little regulatory oversight?  Note that we have been asking versions of this question since 2008, e.g., "How hard did Baxter scrutinize the production of the drug? How hard did SPL scrutinize its production? Did Baxter, SPL and/or the FDA realize the drug was being produced in an unlicensed Chinese chemical factory which had never been inspected by the Chinese or US government? If they did, why did they accept its product? If they didn't, why didn't they know?" - from <a href="http://hcrenewal.blogspot.com/2008/02/in-middle-of-all-those-pigs-in-china.html">this post</a> on February, 16, 2008. Who Is Responsible for the Complexity and Opacity of the Out-Sourced Supply Chain? The article stated, "In addition to becoming more global, the drug supply chain has also become more complex, .... Drug ingredients are now imported from 150 countries, and multiple suppliers, producers, and distributors may be involved in the production and import of a single drug."  In particular, the article noted that "Baxter relied on the assessment of another company when it began receiving heparin from the plant through which the adulterated drug came."  (The nameless other company was Scientific Protein Laboratories.)  Also, it noted that the supply chain began at "the primitive workshops that extract heparin crude by cooking and drying pig intestines" and proceeded to "the companies that consolidate materials from many such workshops and sell them to the factories that produce heparin."  The article did not discuss how this particular supply chain came into existence. Did not drug companies in developed countries, like Baxter International in this case, create these convoluted supply chains (mainly to save money, as noted above)?  If not, did they not at least enable the creation and operation of these chains by purchasing their products without asking too may questions?  In any case, the supply chain's complexity and opacity arose out of individual humans' decisions, not an act by a deity.  Why Have no Individuals Been Held Accountable?  The article noted that the Pew report suggested, "increasing the financial penalties and allowable prison terms for individuals and companies who violate the rules from their current maximums of $10 000 or 3 years in prison." The implication was that these penalties have proven insufficient.  However, the article failed to note that so far in the case of the tainted heparin, no such penalties have even been sought.  To my knowledge, neither Baxter International, Scientific Protein Laboratories, nor any individual who worked for them has ever been charged with any violation of "the rules" that could result in any penalty as much as "$10 000 or 3 years in prison."    I have asked repeatedly why so far there has been no obvious effort to hold any individual accountable for the contaminated heparin?  (see <a href="http://hcrenewal.blogspot.com/2010/07/prosecuting-doctors-for-importing-iuds.html">this post</a> from July 19, 2010, in which I noted legal actions against doctors who implanted IUDs imported from and approved in Canada and asked, "why are we so vigorously pursuing individual doctors for an apparently technical violation of laws that did patients no apparent harm, when we are not pursuing health care corporate executives for selling adulterated drugs that likely killed patients?  Why Are the Key Issues In This Case Still So Anechoic? Neither the JAMA article nor the heparin case study in the underlying Pew report directly addressed these questions.  The JAMA article also omitted such details as the name of the company from which Baxter directly purchased the heparin (Scientific Protein Laboratories) and the total number of deaths that may have been related to the heparin.  (It only mentioned 3 deaths related to heparin, while the Pew Report noted the FDA got reports of 68, six more of which it allowed were "possibly caused by the adulterant, 24 were unlikely, and 35 were unassessable.")  As mentioned above, the JAMA article seemed to imply that criminal penalties have been applied to corporate executives whose companies may have profited from cheap but defective out-sourced drugs (but none have been applied in the heparin case).   Ironically, while the JAMA article identified the "culprit" for the adverse events in the heparin case, it used the word to refer to the compound that adulterated the heparin, not those who added it, or who enabled its addition.  Summary Thus, the public discussion in the main-stream medical media of the case of the adulterated heparin is still remarkably squeamish even three plus years after it first became public.  While the heparin case has made it into major medical journals, it still simply is not done to even publicly discuss whether the leaders of health care organizations who become rich partly as a result of decisions such as the unsupervised, uninspected, apparently barely considered out-sourcing of heparin to be accountable when these decisions turn out to have adverse effects on patients. If we cannot even discuss the accountability of leaders of health care organizations, how can we hope to actually hold them accountable?   To repeatedly reiterate, as long as the leaders of health care organizations are not held accountable for the results of their decisions on health care quality, cost, and access (even in such extreme quality violations as those resulting in multiple patient deaths), we can expect continuing decisions that sacrifice quality, increase costs, and worsen access, but that are in the self-interest of the people making them. To really reform health care, we must hold health care organizations and their leaders accountable (and not blame all the problems on doctors, other health care professionals, patients, and society at large). Case Summary - We have posted several times, recently <a href="http://hcrenewal.blogspot.com/2011/06/first-contaminated-heparin-case-verdict.html">here</a> about the tragic case of suddenly allergenic heparin. Although heparin, an intravenous biologic anti-coagulant, has been in use for over 70 years, serious allergic reactions to it had heretofore been rare. Starting late in 2007, hundreds of such reactions, and 21 deaths were reported in the US after intravenous heparin infusions.All the heparin related to these events in the US was made by Baxter International. - We then learned that although the heparin carried the Baxter label, it was not really made by Baxter. The company had outsourced production of the active ingredient to a long, and ultimately mysterious supply chain. Baxter got the active ingredient from a US company, Scientific Protein Laboratories LLC, which in turn obtained it from a factory in China operated by Changzhou SPL, which in turn was owned by Scientific Protein Laboratories and by Changzhou Techpool Pharmaceutical Co. Changzhou SPL, in turn, got it from several consolidators or wholesalers, who in turn got it from numerous small, unidentified "workshops," which seemed to produce the product in often primitive and unsanitary conditions. None of the stops in the Chinese supply chain had apparently been inspected by the US Food and Drug Administration nor its Chinese counterpart. (See posts <a href="http://hcrenewal.blogspot.com/2008/02/in-middle-of-all-those-pigs-in-china.html">here</a> and <a href="http://hcrenewal.blogspot.com/2008/03/heparin-in-era-of-hogwash.html">here</a>.) - We found out that the Baxter International labelled heparin was contaminated with over-sulfated chondroitin sulfate, a substance not found in nature, but which mimics heparin according to the simple laboratory tests used in the Chinese facilities to check incoming heparin. (See post <a href="http://hcrenewal.blogspot.com/2008/03/fake-heparin-then-sick-and-dead.html">here</a>.) Further testing revealed that the contamination seemed to have taken place in China prior to the provision of the heparin to Changzhou SPL. (See post <a href="http://hcrenewal.blogspot.com/2008/03/who-was-responsible-for-purity-of.html">here</a>.) It is not clear whether Baxter International or Scientific Protein Laboratories had inspected most of the steps in the supply chain, or even knew what went on there. - The Baxter and Scientific Protein Laboratories CEOs did not seem aware of where they got the heparin on which the Baxter International label was eventually affixed. But one report in the New York Times alleged that Scientific Protein Laboratories would not pay enough for heparin to satisfy any sources other than the small "workshops." - Leaders of all organizations involved, Baxter International, Scientific Protein Laboratories, Changzhou SPL, the Chinese government, and the US Food and Drug Administration, and the US Congress assigned blame to each other, but none took individual or organizational responsibility. (See post <a href="http://hcrenewal.blogspot.com/2008/05/blaming-some-dude-for-contaminated.html">here</a>.)  Note that SPL was recently bought out and taken private, making its current leadership even less transparent (see post <a href="http://hcrenewal.blogspot.com/2010/10/more-contaminated-heparin-but-who-leads.html">here</a>).  A 2010 inspection of an SPL facility by the FDA revealed ongoing manufacturing problems (see post <a href="http://hcrenewal.blogspot.com/2011/02/fda-to-scientific-protein-laboratories.html">here</a>). - Researchers (who turned out to have financial ties to a company which is developing an anti-coagulant drug that could compete with the heparin made by Baxter International) investigated the biological mechanisms by which the contamination of the heparin lead to adverse effects, but no one investigated further how the contamination occurred, or who was responsible. (See post <a href="http://hcrenewal.blogspot.com/2009/08/who-investigated-case-of-deadly.html">here</a>.) - Hundreds of lawsuits against Baxter have now been filed, so far without resolution. (See post <a href="http://hcrenewal.blogspot.com/2010/01/blog-post.html">here</a>.)  Efforts to make documents to be used in these cases public so far have not succeeded (see post <a href="http://hcrenewal.blogspot.com/2010/08/proprietary-information-confidentiality.html">here</a>). - A government report which attracted little attention warned of the dangers of pharmaceutical ingredients made in China and subject to virtually no oversight. (See post <a href="http://hcrenewal.blogspot.com/2010/04/another-echo-of-case-of-deadly-heparin.html">here</a>.) -  Despite requests from the US, the Chinese government did not investigate the production of the heparin that lead to the deaths (see post <a href="http://hcrenewal.blogspot.com/2010/07/more-about-what-we-dont-know-about.html">here</a>.) -  In February, 2011, a congressional investigation of the case was announced, but results are so far unavailable (see post <a href="http://hcrenewal.blogspot.com/2011/02/three-years-later-congressional.html">here</a>.) -  In June, 2011, a jury returned the first verdict in a civil case about the contaminated heparin, awarding money from Baxter International and Scientific Protein Laboratories to the estate of a man who apparently died due to tainted heparin (see post <a href="http://hcrenewal.blogspot.com/2011/06/first-contaminated-heparin-case-verdict.html">here</a>).

JAMA Article Begs Key Questions About Case of Contaminated Heparin

There was a recent reminder of the case of the tainted heparin, which begged more questions than it answered. (A case summary is appended t...

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Will Hired Executives Let "Healing Prevail Over Profit?" - Questions from Public and Catholic Non-Profit Health Systems

Hospital - noun, 1.  a charitable institution for the needy, aged, infirm or young  2.  an institution where the sick or injured are given medical or surgical care, <a href="http://www.merriam-webster.com/dictionary/hospital">Merriam-Webster</a>              - noun.  1.  an institution providing medical and surgical treatment and nursing care for sick or injured people, <a href="http://oxforddictionaries.com/definition/hospital?region=us">Oxford Dictionary</a> Two recent NY Times articles raise concerns that changes in leadership may cause hospitals to stray from their original purpose.  Cook County Health and Hospitals System The first NY Times <a href="http://www.nytimes.com/2011/08/19/us/19cnchealth.html">article</a> discussed leadership of Cook County Health and Hospitals System (in the Chicago, IL area). This is a public health system whose mission was traditionally "to serve Cook County's neediest patients." The management of the system, however, is now increasingly in the hands of paid consultants. For example, until recently, its COO (chief operating officer) was: <blockquote>Mr. [Tony] Tedeschi, [who] like other of the system’s recent top managers, works for the Sibery Group, which has had contracts with the system to provide temporary executive talent.</blockquote> Furthermore, his successor was <blockquote>Ms. [Carol] Schneider, whose contract runs through December, works for the Washington Group Ltd., a consulting company that provides administrative help to the system. </blockquote> Furthermore, <blockquote>PricewaterhouseCoopers has a three-year, $50 million contract calling for it to save the system $300 million or bring in the equivalent in new revenue.</blockquote> Not to mention, <blockquote>consultants from the Sibery Group, which is based in Oak Brook, [were appointed] to top management posts within County Health. For example, a Sibery employee, Robert Hamilton, was until recently chief operating officer of Provident Hospital. Another, David Sibery, was until recently head of support services for the health system. </blockquote> Turning leadership over to executives hired by outside, commercial firms has lead to concern. <blockquote>The role consultants play at County Health is the object of strong criticism from doctors, nurses and other staff members who say they fear that consultants driven by the bottom line are at odds with the system’s obligation to serve Cook County’s neediest patients. Hundreds of front-line staff members have been laid off in the last two years. </blockquote>One particular concern was the lay-offs directed by yet another group of consultants. <blockquote>The county decided to close Oak Forest based in part on the advice of Navigant Consulting, which in a 2009 report found that Cook County’s hospitals were overstaffed compared to those of other health systems. Navigant’s assessment also formed the basis for the layoff of 1,350 people systemwide in the last two years. Doctors, nurses and union leaders argued that Navigant’s calculations were flawed. </blockquote> Most troubling are allegations that outsourced leadership by commercial consultants is stifling health care professionals' input into the system, including perhaps whistle-blowing about threats to its core mission: <blockquote>A doctor at a county clinic who would not let his name be used because he feared losing his job said consultants were 'coming at it like our county system is a system that could make money.' The purpose of the system 'is to take care of people regardless of their ability to pay,' the doctor said. 'If they want to get out of that commitment, that’s fine, but they’re going to leave people in the dust.' </blockquote> In addition, <blockquote>A nonunion supervisor, who would speak only on the condition that her name not be used for fear of retaliation, said the constant presence of consultants — and a lack of clear results — was undermining staff morale. 'I’ve never seen employee morale as low as it is now, at all levels,' the supervisor said. A survey of employees conducted by management in January found that fewer than a third of health system employees think senior managers are 'trustworthy' or have 'a sincere interest in the well-being of employees.' The survey also found that more than half of employees do not think they can voice their opinion without fear of retaliation. Dr. Richard David, co-director of neonatal intensive care at Stroger Hospital, said doctors were frustrated that Pricewaterhouse consultants had not sought their advice and seemingly ignored opinions offered by medical staff members. Dr. David said cuts most likely recommended by consultants were interfering with patient care in his unit. He cited calls from other doctors that go unanswered because staff reductions have left only one desk clerk, who also covers another unit. </blockquote>So it appears that through the miracle of out-sourcing, nominally public hospitals can now be lead by hired executives from commercial firms, whose corporate culture may be more about laissez faire capitalism than serving the poor.  SSM Health Care The <a href="http://www.nytimes.com/2011/08/21/us/21nuns.html">second</a> NY Times article was about the exit of nuns as leaders of Catholic hospitals and health systems.  In summary, <blockquote>In 1968, nuns or priests served as chief executives of 770 of the country’s 796 Catholic hospitals, according to the Catholic Health Association. Today, they preside over 8 of 636 hospitals. ... only 8 of 59 Catholic health care systems are directed by religious executives. </blockquote> The focus of the article was on the retirement of Sister Mary Jean Ryan as CEO of SSM Health Care, (SSM honors Sisters of St. Mary, a predecessor of the Franciscan Sisters of Mary, the Sister's order). Sister Mary Jean Ryan was not a typical hospital system CEO: <blockquote>her legacy ... extends to preaching about the dignity of patients, paying blue-collar workers above scale, making her hospitals smoke-free, banning the use of foam cups and plastic water bottles, and insisting on gender-neutral and nonviolent language. There are no 'bullet points' in SSM presentations, and photographs are 'enlarged,' never 'blown up.' Even Sister Mary Jean can struggle to define precisely what the nuns brought to their hospitals. 'There is this thing called presence, she said, explaining that she was trained to see Jesus in the face of every patient....</blockquote> Also, her leadership: <blockquote>meant turning away business arrangements with doctors who decline to accept Medicaid. It has meant discounting treatment for the poor and offering charity care to the uninsured, just as the order’s founders did. The St. Louis nuns’ earliest ledgers denoted patients unable to pay as 'Our dear Lord’s.' </blockquote> But Sister Mary Jean has left, and this, and the general loss of religious leadership of Catholic hospitals and health systems: <blockquote>has stirred angst in many Catholic hospitals about whether the values imparted by the nuns, concerning the treatment of both patients and employees, can withstand bottom-line forces without their day-to-day vigilance. Although their influence is often described as intangible, the nuns kept their hospitals focused on serving the needy and brought a spiritual reassurance that healing would prevail over profit, authorities on Catholic health care say. </blockquote> Money is likely to become much more important at SSM: <blockquote>Mr. William P Thompson, Sister Mary Jean’s handpicked successor, said he planned to hold fast to her commitment to patients, the environment and nonviolence. But he also acknowledged that he would be 'trying to drive more efficiencies in the system.' </blockquote> One cannot help but wonder if these "efficiencies" will resemble those deployed by the outsourced consultant leadership of Cook County.  On Private Equity and Catholic Hospitals Furthermore, there is reason to think that Catholic, non-profit hospitals and health care systems may become even more like commercial firms. An <a href="http://www.healthleadersmedia.com/page-1/FIN-269977/Private-Equity-Interest-In-Nonprofit-Hospitals-Growing">article</a> in HealthLeaders Media about the increasing interest by private equity firms in non-profit hospitals and health care systems noted, <blockquote>[A] well-publicized deal was the buyout of Massachusetts-based Caritas Christi Health Care, which was a nonprofit, by Cerberus Capital Management. [see our posts <a href="http://hcrenewal.blogspot.com/search/label/Caritas%20Christi">here</a> and <a href="http://hcrenewal.blogspot.com/search/label/Steward%20Health%20Care">here</a>] The 2010 sale not only gave Caritas a cash infusion, but altered its tax status to for-profit. These acquisitions moved to center stage the use of private equity capital as a strategic opportunity for healthcare leaders. For instance, this past February, the nation's largest Catholic health system, Ascension Health, partnered with the Stamford, CT–based private equity firm Oak Hill Capital Partners, embarking on a joint venture to buy Catholic hospitals. Leo P. Brideau, FACHE, president and CEO of the St. Louis–based Ascension Health Care Network, says the joint venture allows the organization to provide an alternative funding source for the acquisition of Catholic healthcare entities.</blockquote> Then, <blockquote>Brideau says seeing other Catholic hospitals financially flounder—only to be sold to non-Catholic entities—aligns with the organization's mission to grow its network of Catholic hospitals. The vision to strengthen Catholic healthcare was another driver for Ascension's partnership with Oak Hill Capital. </blockquote> However, the article raises further concerns about whether private equity's interest in non-profit, particularly Catholic hospitals will help these institutions' missions.  The thinking of one private equity expert was: <blockquote>The core goal of a nonprofit hospital or health system is to provide patients with high-quality, cost-effective care, while earning a healthy margin; private equity firms have a different end goal. The general aim of a private equity firm is to achieve a large return on investment in the form of capital gains. How the private equity firm achieves those ends is where hospitals need to do their homework, [managing partner of Linden Capital Partners Brian] Miller says. </blockquote> Despite what private equity gurus may think, non-profit hospitals' missions never used to make a goal "earning a healthy margin" co-equal with that of taking good care of patients. It does not appear that achieving "a large return on investment" will be compatible with the traditional culture of Catholic hospitals in which "healing would prevail over profit." Nor does it appear compatible with the recent words of Pope Benedict XVI (as reported by the AP, <a href="http://articles.boston.com/2011-08-18/news/29901339_1_young-people-pope-benedict-xvi-ethics">via</a> the Boston Globe): <blockquote>'The economy doesn’t function with market self-regulation but needs an ethical reason to work for mankind,' he told reporters traveling aboard the papal plane. 'Man must be at the center of the economy, and the economy cannot be measured only by maximization of profit but rather according to the common good.' He said the current crisis shows that a moral dimension isn’t 'exterior' to economic problems but 'interior and fundamental.'</blockquote> Summary As hospitals and health systems are increasingly lead by people from the world of business, at a time when business culture increasingly believes "greed is good," the fundamental values of hospitals and health care professionals are more often ignored, if not directly threatened.  To repeat, 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. If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

Will Hired Executives Let "Healing Prevail Over Profit?" - Questions from Public and Catholic Non-Profit Health Systems

Hospital - noun, 1. a charitable institution for the needy, aged, infirm or young 2. an institution where the sick or injured are given m...

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Why Cultivate Weldon's Confidence? - CEO Goes to White House Days After His Company's Latest Guilty Plea Announced

Earlier this month, US President Barack Obama met "with eight business leaders to hunt for ideas to revive the economy," <a href="http://online.wsj.com/article/SB10001424053111904006104576504261025589134.html">according to</a> the Wall Street Journal.  At the session, the President asked "what he and his administration could do to improve their confidence...."  The reporters' White House informants emphasized that the point was "listening to the CEOs and not telling them what to do." Included amongst the eight CEOs was "Bill [William] Weldon of Johnson & Johnson."  Why would the US President want to improve Mr Weldon's confidence? Johnson and Johnson's Latest Guilty Plea After all, two days earlier, Bloomberg <a href="http://www.bloomberg.com/news/print/2011-08-09/j-j-reaches-tentative-agreement-with-u-s-on-risperdal-criminal-charge.html">noted</a> how Mr Weldon's company was ready to plead guilty, yet again. <blockquote>Johnson & Johnson (JNJ) said it reached an agreement to settle a misdemeanor criminal charge related to marketing of its antipsychotic drug Risperdal. The U.S. has been investigating its Risperdal sales practices since 2004, including allegations the company marketed the drug for unapproved uses, J&J said in its quarterly filing yesterday. The Justice Department and the U.S. attorney in Philadelphia 'are continuing to pursue both criminal and civil actions,' the company said. </blockquote> In particular, <blockquote>The agreement in principle on the criminal charge is 'pursuant to a single misdemeanor violation of the Food, Drug and Cosmetic Act,' the company said. </blockquote> Other Recent Johnson and Johnson Legal Misadventures This would be just the latest in a string of adverse legal results for Johnson and Johnson. As Bloomberg noted regarding Risperdal: <blockquote>Last year, jurors in Louisiana ordered the drugmaker to pay almost $258 million to state officials for making misleading claims about the antipsychotic’s safety. J&J has appealed. [see our post <a href="http://hcrenewal.blogspot.com/2010/10/last-weeks-scandals.html">here</a>] In June, a South Carolina judge ordered J&J officials to pay $327 million in penalties for deceptively marketing the medicine. J&J has asked the judge to throw that verdict out. [see our post <a href="http://hcrenewal.blogspot.com/2011/03/jury-finds-johnson-and-johnsons.html">here</a>] 'The attorneys general of approximately 40 other states have indicated a potential interest in pursuing similar litigation against' the Janssen unit, J&J said.</blockquote> Furthermore, the company has been in legal hot water regarding how it sold other products: <blockquote>In April, in a separate case, J&J agreed to pay $70 million to resolve criminal and civil charges after admitting it bribed doctors in Europe and paid kickbacks in Iraq to win contracts and sell drugs and artificial joints. As part of a deferred prosecution agreement, J&J subsidiary DePuy was charged with conspiracy and violations of the Foreign Corrupt Practices Act. [see our post <a href="http://hcrenewal.blogspot.com/2011/04/johnson-and-johnson-runs-afoul-of.html">here</a>] In May 2010, J&J’s Ortho-McNeil Pharmaceutical LLC pleaded guilty to a misdemeanor charge of selling a misbranded drug, admitting it illegally marketed its Topamax epilepsy drug. J&J paid $81 million to resolve criminal and civil cases. [see our post <a href="http://hcrenewal.blogspot.com/2010/05/sunday-settlement-and-guilty-plea.html">here</a>]</blockquote> Johnson and Johnson's 25 Recalls And just a few days after President Obama's meeting with Mr Weldon and his fellow CEOs, just the latest in the string of recalls of apparently defective products was announced by Johnson and Johnson. Tylenol, made by the McNeil Consumer Healthcare division of Johnson and Johnson, was the recalled product this time, <a href="http://blogs.wsj.com/health/2011/08/15/jj-recall-watch-tylenol-cold-gelcaps-pulled/">per</a> the Wall Street Journal Health Blog. Note that this post was part of the blog's now long-running J+J Recall Watch feature, and the post cataloged 25 separate recalls of Johnson and Johnson products since 2009, including previous recalls of various versions of Tylenol, and a June, 2011, recall of Risperdal. We have written several times about the inability of Johnson and Johnson management to fulfill a core component of any drug company's mission, to produce pure, unadulterated products (look <a href="http://hcrenewal.blogspot.com/2011/01/why-is-johnson-and-johnson-spinning-out.html">here</a>, <a href="http://hcrenewal.blogspot.com/2010/09/should-president-of-university-of.html">here</a> and <a href="http://hcrenewal.blogspot.com/2010/07/are-ill-informed-leaders-cause-of-drug.html">here</a>). We have also noted several times (e.g., <a href="http://hcrenewal.blogspot.com/2011/04/johnson-and-johnson-runs-afoul-of.html">here,</a> <a href="http://hcrenewal.blogspot.com/2011/03/jury-finds-johnson-and-johnsons.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2011/03/despite-recalls-legal-settlements.html">here</a>) how CEO William Weldon continues to get richer and richer despite his company's guilty pleas, product recalls, and other questionable behavior (for more details about the latter, look <a href="http://hcrenewal.blogspot.com/search/label/Johnson%20and%20Johnson">here</a>). Whose Confidence to Cultivate? So again I ask, why would the US President want to cultivate William Weldon's confidence?  At best, I can only hope that Mr Weldon was invited to the White House because its staff did not do their homework, and only noted the size of the company he leads, rather than the rate of its blunders and misdeeds.  There is already too much evidence that government is excessively cozy with the leaders of big health care (and other) corporations, and gets too much of advice from them rather than from less well-heeled citizens.  At least, if the President is going to get advice from corporate CEOs, he should try to find some whose companies appear to be better lead.     Maybe the difficulty he would have finding such CEOs in the health care field would provide a clue that true health care reform requires better leadership and governance of health care organizations.

Why Cultivate Weldon's Confidence? - CEO Goes to White House Days After His Company's Latest Guilty Plea Announced

Earlier this month, US President Barack Obama met "with eight business leaders to hunt for ideas to revive the economy," according...

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Quis Custodiet Ipsos Custodes? Redux

Revised HHS Rules for Conflict of Interest Fall Short This morning NIH Director Dr. Francis Collins announced <a href="http://freepdfhosting.com/3dde31520d.pdf">revisions</a> to the existing 1995 regulations on objectivity in research that is funded by the Public Health Service. The focus is on significant financial interests (SFI) and on financial conflicts of interest (FCOI). The regulations illustrate the 3-way dance involving academic institutions (the grantees), NIH (the grantor) and academic scientists (the investigators). Thanks to Senator Grassley (R-Iowa) and his investigator Paul Thacker, headlined revelations in recent years about unacceptable management of FCOI at places like Stanford (Alan Schatzberg), Emory (Charles Nemeroff) and Harvard (Joseph Biederman) forced these revisions of the NIH regulations. The general initial reaction to the new rules has been critical – <a href="http://www.pharmalot.com/2011/08/nih-issues-new-conflict-of-interest-rules/">here</a> and <a href="http://pogoblog.typepad.com/pogo/2011/08/the-national-institutes-of-health-new-ethics-rules-a-swing-and-a-miss.html">here</a>, for instance. Many stakeholders had urged the NIH to require that institutions make the disclosed FCOI of their investigators available on a public website. Dr. Collins had intimated that we could expect to see this change, so there is consternation that it somehow became derailed by institutional lobbying in recent months. The stated concern was that institutions would feel burdened by the need to maintain these data bases. Instead, if citizens wish to inquire about FCOI involving PHS-derived research funding, they will need to write to the institution, which is obliged to respond within 5 days. That’s not exactly user friendly. POGO today made the smart <a href="http://pogoblog.typepad.com/pogo/2011/08/the-national-institutes-of-health-new-ethics-rules-a-swing-and-a-miss.html">suggestion</a> that the data could easily be attached to information about awarded funds on the <a href="http://projectreporter.nih.gov/reporter.cfm">NIH RePORTER</a> website, that already exists. A second failing is that the revised regulations do not close the regulatory loophole through which Charles Nemeroff strolled when he moved from Emory to the University of Miami. We covered that incident <a href="http://hcrenewal.blogspot.com/#uds-search-results">several times</a> on this blog last year. Though Nemeroff was under a 2-year sanction and banned from participating in NIH-funded research at Emory, his friend Thomas Insel, Director of NIMH, assured the dean of the medical school at Miami that Nemeroff was in good standing to apply for NIH funding when he moved from Emory. To underline the point, Insel displayed the bad judgment of appointing Nemeroff to 2 new NIMH review committees. Do today’s revised regulations prevent a repeat of this administrative travesty? No, they don’t. There is some mention of ensuring oversight if a sanctioned investigator wishes to transfer a grant to a new institution, but nothing to prevent the Nemeroff-Insel dance from being repeated. Here is the relevant section of today’s <a href="http://freepdfhosting.com/3dde31520d.pdf">announcement</a> (page 89): We did, however, agree with one respondent that it would be helpful to clarify, in the grants context in particular, that institutional sanctions against an Investigator can travel with the Investigator upon his or her transfer to another Institution. Specifically, we have revised 42 CFR 50.606, paragraph (a), as follows: “If the failure of an Investigator to comply with an Institution’s financial conflicts of interest policy or a financial conflict of interest management plan appears to have biased the design, conduct, or reporting of the PHS-funded research, the Institution shall promptly notify the PHS Awarding Component of the corrective action taken or to be taken. The PHS Awarding Component will consider the situation and, as necessary, take appropriate action, or refer the matter to the Institution for further action, which may include directions to the Institution on how to maintain appropriate objectivity in the PHS-funded research project. The PHS may, for example, require Institutions employing such an Investigator to enforce any applicable corrective actions prior to a PHS award or when the transfer of a PHS grant(s) involves such an Investigator.” This revision is intended to reference the range of options for the PHS Awarding Component to consider, depending on the specific circumstances at issue. For example, PHS may decide to initiate government-wide suspension or debarment of the Investigator under 2 CFR Part 376; or to use enforcement measures under 45 CFR 74.62, e.g., perhaps to make the approval of a transfer contingent upon the former Institution’s disclosure of the corrective action- including the specific sanctions against the Investigator- to the new Institution; and/or to use special award conditions under 45 CFR 74.14, e.g., perhaps to make the new Institution agree to take the same or similar action against that Investigator or explain to the PHS Awarding Component in writing why such action was not taken and what alternative measures will be used to ensure compliance. What’s wrong here? Everything is optional; everything is discretionary; everything is contextual – that is a formula for NIH and the academic institutions to just look the other way. And if a Nemeroff decides just to relocate without transferring a grant then he is free to start reapplying again right away. Miami would not be required to continue applying the Emory sanction banning him for 2 years from involvement in federal grants. The PHS Awarding Component (NIMH in this case) may or may not get involved, or it may pass the buck to the new institution. So what has changed? If it is left up to compromised federal bureaucrats like Thomas Insel, and institutional administrators like Pascal Goldschmidt at Miami, then nothing has changed. It's business as usual, folks. Dr. Collins, you have not done what you set out to do. Too bad.

Quis Custodiet Ipsos Custodes? Redux

Revised HHS Rules for Conflict of Interest Fall Short This morning NIH Director Dr. Francis Collins announced revisions to the existing 199...

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More Executives Prospering Despite the Financial Distress of their Hospitals

Cases that demonstrate the contrast between compensation given to the hired executives of health care organizations and their or their organizations' performance continue to appear.  Last week we <a href="http://hcrenewal.blogspot.com/2011/08/what-goes-up-non-profit-hospital-ceo.html">discussed</a> how freely million dollar plus compensation is given to executives of nominally non-profit hospitals, and <a href="http://hcrenewal.blogspot.com/2011/08/best-and-brightest-behaving-badly.html">discussed</a> how well some executives were paid just prior to charges of financial mismanagement, arrests or guilty pleas that drove them from their jobs. I have also found a series of cases of executives whose pay seemed disproportionate in the context of their institutions' financial difficulties.  Here they are, discussed in alphabetical order. Greenwich Hospital, Connecticut <a href="http://www.greenwichtime.com/news/article/Greenwich-Hospital-announces-layoffs-program-1614583.php">According to</a> GreenwichTime.com, here is the context: <blockquote>Greenwich Hospital went under the knife on Wednesday, announcing the layoffs of 36 employees and a series of cutbacks to what it characterized as non-core programs to offset the loss of revenue from a newly implemented state hospital tax. A Yale-New Haven Health System affiliate and the town's largest employer, the hospital estimated it needs to make up for $8.5 million in lost revenue. The hospital's top administrator blamed the situation on the state, which now gets a 4.6 percent cut of all hospital income as part of a flat tax enacted on July 1.</blockquote> While the CEO announced cuts in services, he was not about to cut his own compensation: <blockquote>'If they're doing so much cost-cutting, what are they doing about [hospital CEO Frank] Corvino's $1.5 million salary?' [former town first selectman Richard] Bergstresser said. 'It seems to me that they should do some trimming before they do layoffs.'</blockquote> Note that a hospital public relations official had the usual explanation: <blockquote>Yale New Haven Health System uses a third-party consultant to gauge executive compensation levels, according [hospital spokesman George]Pawlush, who said that Corvino wears two hats. In addition to his duties as hospital president and chief executive, Corvino is executive vice president of Yale New Haven Health System. 'Each organization contributes half of Frank's total earnings,' Pawlush said. 'Frank's experience in hospital administration has given him the skills needed to successfully balance both of these highly demanding roles simultaneously.'</blockquote>So in summary, the CEO of a hospital forced to make lay-offs and close popular programs was paid more than $1 million a year because of his great "skills." Hoboken University Medical Center (HUMC), New Jersey The context here is a bit complicated. First, <a href="http://www.nj.com/hobokennow/index.ssf/2011/03/no_conflicts_of_interest_and_n.html">according to </a>the Jersey Journal, <blockquote>The Hoboken hospital was ... in a sea of debt when it was called St. Mary Hospital. In early 2008 the city took over the hospital and its $52 million debt, but the city has never sought to remain in the business of running a hospital.</blockquote> So, <blockquote>The HMHA, the board that oversees the operations and sale of the HUMC, is in exclusive negotiations with HUMC Holdco, whose proposal was chosen over seven others last month.</blockquote> As negotiations about the sale of the distressed hospital continued, the Jersey Journal then <a href="http://www.nj.com/hobokennow/index.ssf/2011/08/state_health_planning_board_ap.html">reported</a>, <blockquote>the hospital's manager, Hudson Healthcare Inc., recently declared bankruptcy. Earlier this week, HMHA Chairperson Toni Tomarazzo said that declaring bankruptcy was a necessary step in facilitating the sale,</blockquote> However, just before then, as a reporter from the Newark Star-Ledger <a href="http://www.nj.com/news/index.ssf/2011/08/hoboken_university_hospital_ch.html">found out</a>, <blockquote>Less than three weeks before the operator of the city-owned Hoboken University Hospital filed for bankruptcy — putting millions of dollars in taxpayer money and union pension funds at risk — the hospital’s chief executive received a six-figure payout, records show. Spiros Hatiras, 46, stepped down as chief executive on July 16 after two years on the job with a severance package that includes $600,000 in compensation and full medical benefits for a year, according to records obtained under the Open Public Records Act.</blockquote> In addition, <blockquote>A physical therapist who rose through the hospital’s ranks, Hatiras was earning a $400,000 a year and incentive bonuses at the time of his resignation, records show; his contract was set to expire in five months, and called for a severance payment only in the event the hospital terminated the contract. The package was negotiated by Hudson Healthcare Inc., the current operator of the hospital that filed for bankruptcy protection, and was approved by the Hoboken Municipal Hospital Authority.</blockquote> Initially, no one could come up with a clear explanation. First, <blockquote>Doug Petkus, a spokesman for the authority, said officials 'cannot' comment on the issue.</blockquote> Then, the Hoboken mayor made this attempt, <a href="http://www.nj.com/hobokennow/index.ssf/2011/08/hoboken_taxpayers_on_hook_for.html">per</a> the Jersey Journal, <blockquote>Asked why the HMHA decided to give Hatiras the generous severance even though it didn't have to, Mayor Dawn Zimmer, also an HMHA commissioner, skirted the question. 'Given the totality of the circumstances, this was the best way to save our hospital and relieve our taxpayers of a $52 million bond guarantee. Asked if that meant the sale of the hospital was contingent upon Hatiras receiving the lucrative severance, Zimmer said 'Given the totality of the circumstances, this was the best way to save our hospital and relieve our taxpayers of a $52 million bond guarantee.'</blockquote> Finally, the Jersey Journal <a href="http://www.nj.com/jjournal-news/index.ssf/2011/08/hoboken_municipal_hospital_aut_1.html">reported</a> this version: <blockquote>The Hoboken Municipal Hospital Authority (HMHA) was obligated to pay out a $600,000 severance package to the former Hoboken University Medical Center CEO because he met the conditions of his contract for the lucrative parting gift, according to HMHA chairwoman Toni Tomarazzo. Tomarazzo refuted stories that appeared in The Jersey Journal, Star-Ledger, and online at NJ.com that said the HMHA, the city entity that runs the hospital, was not bound to pay Spiro Hatiras the severance amount because he resigned. Hatiras’ contract called for payment of the severance package 'upon termination, non-renewal or expiration of the term of Employment Agreement,' according to the HMHA resolution authorizing payment. 'It was a contractual obligation,' Tomarazzo said. 'There was nothing we could do about it.' The resolution said 'even though the employment ended through a mutual agreement to step aside and cease to serve as CEO that shall be documented in a resignation letter...' the HMHA agreed that Hatiras 'is entitled to' the severance package.</blockquote>So, in summary, the CEO of  a public hospital deeply in debt, and which had to be sold to a for-profit corporation, received a substantial golden parachute just prior to its operating authority's bankruptcy filing.  The only explanation was that this payment was a contractual obligation, which, of course, begged some questions: knowing that the hospital was in a perilous financial condition, why did the authority write such severance into the contract, and if it did not intend that severance should be paid under the conditions which finally obtained, why is the authority not disputing the payments? Kingsbrook Jewish Medical Center, New York <a href="http://www.nydailynews.com/blogs/dailypolitics/2011/08/the-4-million-hospital-boss">According to </a>the New York Post, here is the context. <blockquote>The 326-bed facility is considered one of five Brooklyn hospitals that advocates fear is in danger of being shuttered by Gov. Cuomo's medical redesign team. Many of Kingsbrook's patients are Medicaid recipients.</blockquote> Furthermore, in 2009, <blockquote>the hospital was forced to close a clinic and lay off workers and staff members took furloughs because of budget tightening.</blockquote> However, <blockquote>hospital officials defended Brady's compensation, noting she was paid $1,094,443 in base salary in 2009 - and that $2,891,335 will be doled out as retirement and deferred compensation she accumulated from 30 years of service. Brady also received $215,241 in bonuses and nontaxed benefits in 2009.</blockquote> The Post asserted that her total compensation of over $4 million was "more than any other nonprofit hospital executive in the state." Her previous two years' compensation was slightly more modest, but still greater than the magic $1 million a year: <blockquote>In 2008, Brady took home $1,054,406 in base pay plus an additional $137,335 in deferred compensation and nontaxable benefits, tax records show. In 2007, she hauled in $1,023,452 in base salary plus $195,661 in deferred compensation, the records show.</blockquote> The chairman of the hospital board's finance committee offered the usual rationalization: <blockquote>'Dr. Brady's compensation is, in fact, at market rate and reflects the board's full faith in her abilities and execution of her job,' said Ed Lieberstein, chairman of the Kingsbrook board of trustees' finance committee.</blockquote>So, in summary, the CEO of a small non-profit hospital threatened with closure and forced to lay-off workers and close programs was paid over $4 million, supposedly the "market rate."  One wonders if the "market" here was that including small, financially distressed hospitals? MetroHealth Medical Center, Ohio This public, not for profit Cleveland, Ohio health care system has had its share of troubles lately, as the Cleveland Plain Dealer <a href="http://www.cleveland.com/healthfit/index.ssf/2011/08/metrohealths_leader_fears_taxp.html">noted</a>, <blockquote>MetroHealth, the county's safety-net hospital, has faced a myriad of economic hurdles and is still undergoing what its leaders call a turnaround: The system reported a $2.2 million loss on net income in 2007. It continued to bleed money in early 2008, losing $11 million in the first quarter, according to long-time trustee and now MetroHealth Board Chair Ron Fountain. </blockquote> So, when a new CEO, Mark Moran, was hired to turn the system around, <a href="http://www.cleveland.com/healthfit/index.ssf/2011/08/metrohealth_agreed_to_pay_more.html">per</a> the Plain Dealer, <blockquote>'At MetroHealth, starting in 2008, we turned over every chief -- the chief financial officer, chief executive, chief operating officer, chief medical officer, everybody,' said MetroHealth board member Thomas McDonald, who has been on the voluntary board since March 2008. 'We had to get the ship righted.' </blockquote> While doing so, however, the new leadership saw fit to reward those it pushed out the door, <blockquote>The MetroHealth System has agreed to pay more than $4 million for consulting contracts in lieu of severance to top executives and high-level employees who have left the county-owned hospital since 2008. The contracts, similar to the one the hospital granted to departing Chief Financial Officer Sharon Kelley, have provided salary and benefits, in some cases up to one year, to dozens of departing employees. The deals also include up to $114,000 in performance bonuses for three executives. The agreements allow for continued accrual of vacation pay benefits and continued contributions to the Ohio Public Employees Retirement System. The work required of employees under the contracts is not specified. </blockquote> CEO Moran later acknowledged that the "consulting agreements" really did not require any consulting to be done, again <a href="http://www.cleveland.com/healthfit/index.ssf/2011/08/metrohealths_leader_fears_taxp.html">in</a> the Plain Dealer, <blockquote>Awarding what Moran called 'employee transition contracts' lowered the risk of potential litigation and provided access to the institutional knowledge of the departing employees. He acknowledged, however, that most of the employees 'probably didn't' do any work.</blockquote> Mr Moran explained the need for such severance packages thus: <blockquote>the amount MetroHealth pays its executives, including severance, is necessary to compete against the Cleveland Clinic and University Hospitals for qualified professionals.</blockquote> However, MetroHealth was not exactly competing to keep these executives, it was trying to get them to leave. Furthermore, while the health care system has just gotten beyond its financial distress, the compensation given to its current executives has surged ahead, again <a href="http://www.cleveland.com/healthfit/index.ssf/2011/08/metrohealth_executive_compensa.html">according to </a>the Plain Dealer, <blockquote>The pay packages of MetroHealth System's top-tier executives -- base salary plus potential incentives -- ranks near the top 25 percent when compared to that of similarly sized health systems, according to a report by a national compensation adviser. The report, completed in April and provided to The Plain Dealer last week, provides an inside-look at the way MetroHealth pays 18 executives when county leaders and the public have questioned the spending practices of the county-owned health system. MetroHealth hired Mercer, as it has for at least four years, to review the system's executive-level pay and severance policy to determine if they were in line with industry averages. What Mercer found this year was a staff with "more competitive pay levels than has historically been the case" -- including one salary so high that the firm suggested a review of whether it was "reasonable." </blockquote> That concerned one board member, <blockquote>MetroHealth board member John Moss, who reviewed the report for the first time late last week, called it "disconcerting." He was particularly bothered by the salaries, saying the health system's administration had told the board that the compensation was "closer to the middle." "They seem to be closer to the top 25 percentile," Moss said. "[It's] not what we've been told." </blockquote> Can anyone guess the justification for the lucrative payments given by the CEO? <blockquote>Moran goes on to write that the contracts 'support our ability to recruit the best and brightest talent.' </blockquote>So, in summary, many executives of a public hospital that had been in financial distress were discharged, but given large "consulting payments" which appeared to be golden parachutes.  The new executives were paid at very high rates compared to some sort of market because they were "the best and the brightest." Summary So we see more cases of executive exceptionalism.  The hired executives of health care organizations, including non-profit and public hospitals, seem to prosper financially regardless of their organizations' financial status.  The executives, their boards of trustees and the hospitals' own hired public relations staff may justify the financial success of their leaders by referring to "market" conditions, which do not seem to be references to "markets" consisting of financially troubled hospitals, and by praising their leaders' abilities, including literally calling them "the best and the brightest," without any obvious evidence supporting their claims. To an outsider, it just seems like the hospitals are now run primarily for the financial benefit of their hired leaders.  The problems seem to be: -  Paying the leaders so well (and supporting the public relations staff who sing their praises) costs money that could better be used to provide actual health care. -  Providing such perverse incentives, which seem entirely unrelated to the hospitals' ability to uphold their primary patient care  and public health missions (and academic mission if applicable), is likely to detract from the hospitals' ability to support these missions. -  It is likely that employees of such institutions who actually try to uphold the mission will be demoralized by the realization that their leaders' enrichment comes first, further damaging the hospitals' ability to uphold the mission. -  Finally, it is possible that such perverse incentives attract leaders who are particularly unsuited to the task of upholding the mission. One cannot help but notice that the quaint notion that hospitals exist to uphold patient care, public health, or academic missions rarely is acknowledged nowadays in discussion of hospital leadership. Turning blue in the face, I say again... 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. If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

More Executives Prospering Despite the Financial Distress of their Hospitals

Cases that demonstrate the contrast between compensation given to the hired executives of health care organizations and their or their organ...

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What Goes Up - Non-Profit Hospital CEO Compensation Continues to Defy Gravity

We have frequently discussed the disconnect between incentives, particularly <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">total compensation</a>, given to the leaders of health care organizations and their roles, or lack thereof, in improving the health care of their patients or the public. One measure of that disconnect is how leaders' pay continues to defy gravity while the economy continues to suffer, and health care dysfunction continues to fester. In particular, total compensation given to CEOs of ostensibly not-for-profit hospitals and hospital systems is increasingly passing the magic $1 million mark. A round up including two recent articles and others from the last four months that we have not discussed before revealed more "million dollar babies" amongst the ranks of these leaders.  (Note that most of the data came from 2009, not a particularly good year for the economy as a whole.) UA Healthcare, Phoenix area, Arizona - $1.7 million As <a href="http://azstarnet.com/news/local/govt-and-politics/article_d29148ec-9f3b-56c7-8ab0-8847a71bf68e.html">reported</a> by the Arizona Daily Star in April, "UA Healthcare interim CEO Kevin Burns received a financial package worth about $1.7 million when he left his post last week, the chairman of the UA Healthcare board said. Under terms of his contract, Burns qualified for two years' base pay plus benefits when he left his position. His annual base pay as interim CEO was $620,000, said Granger Vinall, UA Healthcare board chair." Baptist Health, Jacksonville area, Florida - $1.2 million <a href="http://jacksonville.com/news/health-and-fitness/2011-05-31/story/first-coast-hospital-ceos-pay-complex-formula">According to </a>the Florida Times-Union in May, Hugh Green, CEO of the Baptist Health system, made $1.2 million. Florida Hospital Waterman, Orlando area, Florida - $1.7 million As <a href="http://articles.orlandosentinel.com/2011-04-08/news/os-lk-lauren-ritchie-hospital-adminis20110408_1_waterman-employees-hospital-district-three-hospitals">reported</a> by the Orlando Sentinel in May, in 2009, Ken Mattison, president and CEO of Florida Hospital Waterman had total compensation of $1.7 million, which included "a lump sum pay-out of pension monies." Multiple hospitals, Boston, Massachusetts - $1.2 - $2.1 million <a href="http://articles.boston.com/2011-08-16/business/29893104_1_compensation-teaching-hospital-top-executives">According to </a>an August Boston Globe article, in 2009, reported salaries of CEOs at Boston hospitals including: for the late CEO of Partners HealthCare, "then-chief executive James J. Mongan earned a total of $2.1 million, including salary, bonus, and other compensation"; for CEOs of two Partners hospitals, "current Partners chief executive, Gary L. Gottlieb, earned $1.6 million in 2009 as president of Brigham and Women’s, the same amount he got in 2008. Peter L. Slavin, president of Mass. General, earned $1.4 million in 2009, also the same as the year before"; "Elaine S. Ullian, former chief executive of Boston Medical Center, a Boston University teaching hospital, drew total compensation of $1.8 million in 2009"; and "Tufts Medical Center paid its chief executive, Ellen M. Zane, about $1.2 million in 2009, equal to her 2008 compensation." Multiple hospitals, mid-west US - $1.8 - $6 million <a href="http://www.medcitynews.com/2011/08/nonprofit-hospital-ceo-salaries-in-the-midwest-whos-on-top/">Per</a> MedCity News in August, "Nine percent of nonprofit hospital chief executives in the Midwest are paid more than $1 million a year, according to a new report." The top 20 CEOs in terms of compensation, based on the latest (2008 or 2009) figures were: <blockquote>Randall O’Donnell; Children’s Mercy Hospital and Clinics; Kansas City, Missouri: $6 million Javon Bea; Mercy Health System; Janesville, Wisconsin: $4.5 million James Skogsbergh; Advocate Health Care; Oak Brook, Illinois: $4 million Dean Harrison; Northwestern Memorial Hospital; Chicago, Illinois: $3.4 million Richard Pettingill; Allina Health System; Minneapolis, Minnesota: $3.3 million Joseph Swedish; Trinity Health; Novi, Michigan: $2.7 million Lowell Kruse; Heartland Regional Medical Center; St. Joseph, Missouri: $2.5 million Steven Lipstein; BJC Health System; St. Louis, Missouri: $2.2 million Kevin Schoeplein; OSF Healthcare System; Peoria, Illinois: $2.2 million Thomas Sieber; Genesis Healthcare System; Zanesville, Ohio: $2.1 million Paul Pawlak; Silver Cross Hospital; Joliet, Illinois: $2 million Toby Cosgrove; Cleveland Clinic; Cleveland, Ohio: $1.9 million William Petasnick; Froedtert Memorial Hospital; Milwaukee, Wisconsin: $1.9 million Fred Manchur; Kettering Medical Center; Dayton, Ohio: $1.9 million Patrick Magnon; Children’s Memorial Hospital; Chicago, Illinois: $1.8 million Kenneth Hanover; University Hospital; Cincinnati, Ohio: $1.8 million J. Luke McGuinness; Central Dupage Hospital; Winfield, Illinois: $1.8 million Daniel Evans Jr.; Clarian Health Partners; Indianapolis, Indiana: $1.8 million James Madera; University of Chicago Medical Center; Chicago, Illinois: $1.8 million James Anderson; Cincinnati Children’s Hospital Medical Center; Cincinnati, Ohio: $1.8 million</blockquote> Where All CEOs Are Above Average A repeated theme of these articles was that CEO pay continues to rise because those who set it often seem to believe that their CEOs, like the children of mythical Lake Woebegone, are above average, or at least that they are never below average. For example, in the Arizona Star article we learn: <blockquote>UMC Corp. raised Burns' pay after consulting with a third-party compensation and benefits expert, and the salary is in approximately the 25th percentile when compared to like institutions on a national basis, [UA Healthcare board of trustees chair Granger] Vinall said. He said that UA Healthcare board's approved policy is to pay in the 50th percentile</blockquote> In addition, in the [Jacksonville, FL] Times-Union article we find this about Baptist CEO Hugh Greene: <blockquote>He deserves more because he doesn't just manage one hospital, said Robert Hill, chairman of the Baptist board. Greene oversees a complex health system that includes four adult hospitals, a children's hospital, a large physician network and other subsidiaries. 'We think he's an exceptional CEO,' said Hill, CEO of sales and marketing company Acosta.</blockquote> That article also included this summary: <blockquote>hospital boards, which usually consist of community heavy-hitters and local business leaders, often rely on consultants to help set CEO pay. 'The consultants survey the field, looking at salaries of CEOs at nonprofit and for-profit institutions, see what the 50th percentile is and then in many cases offer 20 percent or 30 percent above to qualified candidates,' Maggie Mahar of the nonpartisan think tank the Century Foundation wrote in a recent blog. There's a problem with this system, she added: 'Mathematically, this keeps the 50th percentile moving up, and what the IRS considers 'reasonable' also moves up.'</blockquote> Furthermore, the report on mid-west CEOs in the MedCity News provided this opaquely worded corroboration: <blockquote>'It seems there is a possibility that when executive compensation firms are hired by boards and/or CEOs to provide multiple examples of comparable compensation, the firms may report out the higher end of the comparables,' said Pamela Knecht, president of Accord Limited, a Chicago-based healthcare governance consulting firm, in the report.</blockquote> Summary I am willing to admit that it may make sense to set compensation for hospital (and other health care) leaders in the context of what the population of such leaders are paid.  However, it makes no logical sense for the boards of trustees who set non-profit hospital CEOs' pay to deny the possibility that some of these CEOs must be below average.  Yet boards never seem to allow that their CEOs could be below average at the times when the pay decisions are made.  The only times we seem to hear about less than average CEOs are when their performance has been publicly embarrassing enough for them to lose their jobs, if not go to jail.  Even in such situations, the bad behavior never seems to have been foreshadowed in any way, particularly not by previous pay cuts (see <a href="http://hcrenewal.blogspot.com/2011/08/best-and-brightest-behaving-badly.html">this post</a> for recent examples.)  So why do hospital (and other health care) boards seem to deny the possibility that their CEOs may be below average, or worse?  As we have <a href="http://hcrenewal.blogspot.com/2010/07/where-no-hospital-ceos-are-below.html">discussed before</a>, perhaps it is due to ego bias.  Judgment and decision psychologists have shown that people often overestimate their own performance, or the performance of those with whom they are affiliated.  Also, the boards of trustees who are supposed to steward hospitals and other health care non-profits are often made up of current or retired CEOs or other top leaders of other organizations.  They may overestimate the performance of fellow members of the C-level officers' guild, or be afraid to criticize it. In any case, we are seeing more and more flagrant examples of the perverse incentives existing in health care, especially as given to health care leaders, resulting in worsening accountability and increasing sense of entitlement.  So I say again....  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. If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

What Goes Up - Non-Profit Hospital CEO Compensation Continues to Defy Gravity

We have frequently discussed the disconnect between incentives, particularly total compensation , given to the leaders of health care organi...

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The Best and the Brightest Behaving Badly

To err is human, and any group of humans can be expected to include those who stray.  However, the constant spin that surrounds most top leaders of health care organizations seems to suggest that these people are different.  In particular, the lavish compensation given leaders of health care organizations is often justified by claims that those in leadership positions are the best and the brightest.  Catching up after a vacation afforded me the opportunity to go through a large volume of news stories, leading to a collection of those from the last year that showed the contrast between such compensation and behavior that was far from the "best and the brightest. " North Memorial Health Care CEO Pleads Guilty to Engaging in Prostitution As <a href="http://blogs.citypages.com/blotter/2011/02/david_cress_guilty_prostitution.php">reported</a> by the Minneapolis Star-Tribune, after David Cress "was arrested Sept 1 [2010] during a vice operation."  The plea bargain will allow that "the charge against him will be vacated in a year." According to the health care system's <a href="http://www.guidestar.org/FinDocuments/2009/410/729/2009-410729979-069d9e95-9.pdf">2009 IRS form 990</a>, Mr Cress total compensation was then $984,412.  In addition, that year he received a SERP [ supplemental executive retirement plan] payment of $3,393,712. Childrens' Hospital of Philadelphia Chief Counsel Pleads Guilty to Theft As <a href="http://articles.philly.com/2011-07-13/news/29769347_1_guilty-today-fake-invoices-thefts-first">reported</a> by the Philadelphia Inquirer: <blockquote>Roosevelt Hairston Jr., 46, the former general counsel of Children's Hospital of Philadelphia, pleaded guilty today to stealing $1.7 million from the institution. He could face six or more years in federal prison.</blockquote> Although his attorney claimed that Hairston is not "a greedy person," he did live "in a 7,000-square-foot home."  The hospital's <a href="http://www.guidestar.org/FinDocuments//2010/231/352/2010-231352166-073cf591-9.pdf">2009 IRS form 990</a> showed that Hairston's total compensation then was $602,982. Franciscan Hospital for Children CEO Dismissed for Financial Irregularities As <a href="http://articles.boston.com/2011-07-16/business/29782055_1_severance-franciscan-hospital-largest-hospitals">reported</a> by the Boston Globe, <blockquote>The board of Franciscan Hospital for Children in Boston, one of the country’s largest hospitals for severely disabled children, has fired its longtime chief executive, Paul J. DellaRocco, citing financial irregularities. Board chairman Robert Needham said yesterday in written comments to the Globe that DellaRocco was 'inappropriately submitting and documenting expenses.' 'This type of behavior is clearly at odds with both our policies and our nonprofit mission,' he said. 'We therefore took proactive steps to remove him from the position.'</blockquote> This seems worse because of the hospital's difficult financial position: <blockquote>Franciscan, which has relied on donations and state Medicaid funding to cover its costs for most of its 60-year history, had struggled financially in recent years. In 2009, the hospital laid off 40 people, or 10 percent of its workforce, and asked all employees, including DellaRocco, to take a 2 to 3 percent pay cut.</blockquote> Nonetheless, "the hospital had loaned DellaRocco $150,000 a year earlier to help him finance construction of a retirement home on the Caribbean island of St Martin...." Furthermore, findings released after divorce litigation revealed DellaRocco's lavish lifestyle apparently at the hospital's expense: <blockquote>DellaRocco owns a company, Haelen Health Systems Inc., which has a management contract with Franciscan. He used Haelen’s assets to pay for many of his personal expenses, including entertainment and interest on his personal loan from Franciscan, according to Judge Dorothy M. Gibson of Middlesex Probate and Family Court in her findings of fact in the divorce. He and his wife invested more than $1.8 million in the St. Martin villa, much of it coming from Haelen, the judge wrote. In the divorce, Gibson noted the 'upper middle-class lifestyle' the DellaRoccos enjoyed. They honeymooned for a month in Tahiti, Thailand, Bali, Singapore, and Australia. He furnished their $950,000 Weston home with more than $85,000 in furniture, jewelry, electronics, and antiques. DellaRocco’s compensation from Franciscan was $225,000 in the fiscal year that ended in September 2009, according to the hospital’s most recent filings with the Massachusetts attorney general’s office. His total income, including wages from the hospital, capital gains, and profits from his company, was about $674,000 in 2007 and about $348,000 in 2008.</blockquote> Slidell Memorial Hospital CEO Fired After Second DWI Arrest As <a href="http://www.nola.com/northshore/index.ssf/2011/07/slidell_memorial_hospital_ceos.html">reported</a> by Nola.com, <blockquote>Slidell Memorial Hospital's chief executive officer lost his job Thursday after a recent drunken driving arrest, his second in six years. The nine members of the public, not-for-profit hospital's board of commissioners fired Robert Hawley Jr. at the end of a regular public meeting held at a cancer treatment complex he helped build. Immediately after his fate was decided, Hawley left the room silently, rode an elevator to the bottom floor, climbed into the passenger seat of a sport-utility vehicle waiting for him in the parking lot and drove off. 'Mr. Hawley's ... arrest ... made this decision necessary,' board Chairman Larry Englande said. 'As a community hospital, we insist upon the highest standards of care for the patients and families we serve.' 'We require that our physicians, nurses, employees and management team live up to those high standards. We must expect no less from our chief executive officer.'</blockquote> The account of his arrest was as follows: <blockquote>On the day he was jailed, Hawley drove a blue, convertible BMW past crossover No. 1 near the end of the northbound Causeway about 4 a.m. A bridge police officer reportedly noticed him weaving in and out of his lane. The officer got behind Hawley, but Hawley allegedly changed lanes and accelerated to about 80 mph, or 15 mph over the speed limit, still swerving, bridge general manager Carlton Dufrechou has said. The officer turned his patrol lights on and pulled over Hawley immediately after they exited the Causeway. Hawley had bloodshot eyes and the smell of alcohol on his breath, the officer reported. He also allegedly swayed when he got out of the car, told the officer he was going home after 'having a couple of beers' on the south shore and performed poorly in a field sobriety test, Dufrechou said Thursday. Hawley underwent a breath test. Although his precise blood-alcohol level has not been publicized, the test indicated that 'he was impaired,' or over the state's limit of 0.08, Dufrechou added. It was Hawley's second DWI arrest since 2005. A state trooper pulled him over on the early morning of March 13 that year for supposedly driving left of center on U.S. 190 south of Interstate 12 near Mandeville. State Police alleged Hawley had an open alcoholic beverage in his car. He submitted to a breath test, registered 0.124 and spent several hours in jail. Court records do not show how the case was disposed of. Hawley has declined to discuss it.</blockquote> I cannot find any public record of Mr Hawley's compensation. Summary As noted earlier, we are all human, and we are all prone to failings.  That health care organizational executives sometimes are also prone to failings should not be news.  It is only because their fawning public relations departments and cozy boards have insisted they have no failings, which is why they are paid so much more than most of their dedicated employees who actually care for patients. We should not expect health care leaders to be perfect.  However, we also should not award them power and pay as if they were.

The Best and the Brightest Behaving Badly

To err is human, and any group of humans can be expected to include those who stray. However, the constant spin that surrounds most top lea...

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