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A New Low - A Hospital CEO Got a "Golden Parachute" for A Merger that Never Occurred

We recently <a href="http://hcrenewal.blogspot.com/2011/11/ceos-first-to-benefit-from-for-profit.html">posted</a> about how top hospital managers are often the first to benefit from mergers and acquisitions, which once again have become fashionable in management circles.  Now it appears that top executives can benefit even from failed mergers, as <a href="http://www.news-journalonline.com/news/local/east-volusia/2011/11/12/ideas-run-the-gamut-on-future-of-bert-fish-medical-center.html">reported</a> by the Daytona Beach (Florida) News-Journal, <blockquote>Five months after Bert Fish Medical Center's failed merger, one board member said he was surprised to learn payments are still being made toward the $1 million buyout of the former hospital CEO. Hospital board member Joe Benedict said he didn't know former hospital Chief Executive Officer Bob Williams, who steered the board into the illegal deal with Adventist Health System, is due to receive his $289,000-a-year salary until 2014 –– paid through the publicly owned hospital. At the time the merger was announced, a memorandum of understanding with Williams became public and showed the deal had triggered a three-year buyout clause in Williams' contract. Starting July 1, 2010, the Adventist agreement paid him his salary for three years, as his contract required, plus seven months and eight days –– a deal worth $1 million and benefits. 'That man has got away with a lot more than he should have,' said Benedict, a former County Council member, explaining that he considers Williams as responsible for the failed merger as Jim Heekin, the board's former attorney. </blockquote> These payments were made to the former CEO despite the cost of the failure of the merger: <blockquote>The hospital district incurred $3.4 million in administrative and legal fees as a result. </blockquote> Apparently, there are allegations that the merger failed because former CEO Williams agreed to keep the board meetings of this public hospital secret, which was illegal: <blockquote>The hospital board has voted to pursue a legal malpractice lawsuit against Heekin, of the Orlando firm Lowndes, Drosdick, Doster, Kantor & Reed, for his advice to keep the public out of talks about merging the New Smyrna Beach hospital with a partner. The 21 closed meetings that were held over 16 months were called 'so much darkness for so long' they couldn't be cured, according to a ruling earlier this year from Circuit Judge Richard Graham, who threw out the merger. </blockquote> Also, <blockquote>Williams is quoted in transcripts of the closed meetings telling board members not to tell anyone Adventist had been chosen as Bert Fish's partner</blockquote> Other contractual provisions for golden parachutes exist, but have yet to be activated: <blockquote>Benedict said he's still hopeful he can undo other buyout clauses in hospital contracts he believes obligate the hospital to pay more than is allowed, under state law, for the departure of Bert Fish Medical Center administrators. According to the current contracts, provided to the News-Journal, the hospital's current CEO, chief financial officer and chief of nursing must be paid 24 months' salary should they be dismissed from their positions through no fault of their own. Their departures could be a possibility if Bert Fish were to seek another merger partner who doesn't want to keep them on. The contracts were executed June 30. On July 1, a new state law went into effect that limits the buyout of public employees to 20 months. </blockquote> Summary So, a hospital CEO had a contract that made him eligible to begin receiving "golden parachute" payments just because a merger was in process, and these payments could not be stopped even though the merger was declared illegal, and hence never occurred. We noted recently that CEOs and other top officials of health care organizations are often the first to benefit financially from mergers and acquisitions, even when such transactions to not prove so beneficial to the affected institutions, much less patients' and the public's health in the long run. Here is a case in which a CEO could get extra money just because a merger was contemplated. This is some sort of new record for health care leaders personally profiting from their insider positions. There has been growing public outrage about how ordinary people who play by the rules are disadvantaged in today's economy, while insiders profit from their positions. There ought to be equal outrage in health care over its version of this pheonomenon. As long as health care leaders can continue to put their self-interest ahead of the health care mission in this way, is it any wonder that health care costs continue to rise while access and quality suffer? When will would be health care reformers realize that to truly reform health care, we will have to reform health care leadership? We need health care leaders who understand and uphold the mission, are accountable for how well they do so, and whose incentives depend on how they do so. We do not need leaders who put their self-interest first. Right now, however, that seeems to be the leadership we have.

A New Low - A Hospital CEO Got a "Golden Parachute" for A Merger that Never Occurred

We recently posted about how top hospital managers are often the first to benefit from mergers and acquisitions, which once again have beco...

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George Lundberg, MD: The Promise of Health IT, and a Caveat

I was cited yesterday in a <a href="http://www.medpagetoday.com/" style="font-weight: bold;">Medpage TODAY</a> video by medical internet pioneer <a href="http://www.medscape.com/public/bios/bio-georgelundberg" style="font-family: arial;">George Lundberg, MD</a>, also former editor of the Journal of the American Medical Association (<a href="http://jama.ama-assn.org/">JAMA</a>). A link was made to Healthcare Renewal as well.   <div style="font-family: arial;"><div style="color: black; direction: ltr; font-family: Arial; font-size: 13px;"> <h1 dir="ltr" style="color: #003399; font-size: 18px; margin-top: 0px;"> </h1><blockquote>Health IT: Garbage In, Garbage Out By George Lundberg, MD, Editor-at-Large, MedPage Today November 15, 2011 <a href="http://www.medpagetoday.com/Columns/29688">http://www.medpagetoday.com/Columns/29688</a> (video and transcript) <div style="text-align: center;"><a href="http://www.medpagetoday.com/Columns/29688"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5675586219048368530" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhDX_mb_kfYLRA-Yy8d1h1ZIIgjwrZWTev8fCqjRHe0PzceTlZ1rWc0O6m_8LN71p0jSu586pkchWFeq-Ue5hnbguBdwJfghUvZlA9UxQxpaH7g10m-Z06-uEhLLyQzLafRx_o26YRhwrMZ/s320/lundberg.jpg" style="cursor: pointer; display: block; height: 181px; margin: 0px auto 10px; text-align: center; width: 222px;" /></a>Click on picture to link to article/video</div> Transcript: Hello and Welcome. I'm Dr. George Lundberg and this is At Large at MedPage Today. I started working with computers in medicine in 1963. I was a Captain in the United States Army Medical Corps in San Francisco when a Lieutenant Colonel told me to "automate the California Tumor Tissue Registry." I said, "Yes, Sir. How would I do that?" He told me to walk across the Presidio parking lot and go into a building that had a big machine in it that is called a computer. I did that, and for the next three months, I took the information that was on a bunch of 3 by 5 cards and converted that data into punch cards, which were then fed into the computer and out came an automated California Tumor Tissue Registry. I was hooked and, although never a "techie," I never stopped finding ways to use computers in medicine. The goal was always better, faster, cheaper. I remain a strong advocate, and have worked in a string of jobs that strived for that goal. One of the truths I learned early on was "G I G O" -- Garbage In; Garbage Out. That has not changed. There are indeed a huge number of medical tasks that computers can do very well if properly programmed, managed, and utilized. The eminent UCSF academic clinician Dr. Bob Wachter was early in recognizing that there were also significant <a href="http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1785161/">downsides in applying computers in practice</a>. Physicians are very smart. They will quickly adopt new technology that helps them get their job done if it does not waste their time. Most American physicians have dragged their feet on implementing computers into their practices, and with good reasons. But now they should get on with it. I write this column as it has been announced that 100,000 U.S. physicians and hospitals have signed up for the <a href="http://www.ihealthbeat.org/articles/2011/10/6/more-than-100000-health-providers-sign-up-for-meaningful-use.aspx">"meaningful use" incentive program</a> and thus been able to take the government's money to help automate their organizations. I think this is good and I praise Dr. David Blumenthal for his major efforts to make this happen. However, there is another harsh critic worth listening to. His name is Dr. Scot Silverstein, and he seems to have made it his life's work to call attention to really <a href="http://hcrenewal.blogspot.com/2011/09/sweet-death-that-wasnt-very-sweet-how_24.html" style="font-weight: bold;">bad problems</a> that he discovers in this mass move to automation. Heed his cautions. They are real. But also recognize that where there is progress, there is trouble; but it can be worth the price. That's my opinion. I'm Dr. George Lundberg, At Large for MedPage Today. </blockquote><div dir="ltr"> </div></div></div> I thank Dr. Lundberg for his caveat, citing me, and agree with his position. My father died in 2000 due to complications of failure to diagnose bilateral renal adenocarcinomas (malignant tumors of both kidneys) for about two years despite numerous warning signs. This occurred in a hospital without electronic medical records and was in part due to impaired clinician communications. His life could have been longer, and with far less suffering, had there been a safe and effective EHR.   Once discovered -- only due to my insistence on a renal arteriogram -- the doctors told my father he could not be treated and to "get his affairs in order." (They lost the later malpractice case that ensued.) I was able to prolong my father's life for a few years by removing him from that hospital, "hospital A" and taking him to another hospital where he underwent bilateral heminephrectomies and other treatment. Let's call the other hospital "hospital B." On the other hand...a caveat of my own: Ironically and tragically, my mother died in June 2011 from complications of a medical error at "hospital B" that was due to impaired clinician communications -- caused by an EHR that to my observation was itself unsafe and ineffective. Therefore, my caveat is that we must be very mindful of the adage "where there is progress, there is trouble; but it can be worth the price." The price must respect medical ethics. It must not involve using patients, especially patients who have not been given informed consent and opt-out choices, as test subjects for software debugging. As I wrote back to Dr. Lundberg: <blockquote> Many thanks George. I agree with your assessments [on EHRs]. Now we have to work to ensure the pitfalls are habitually avoided. Regards, Scot Silverstein</blockquote> Here is a memorial bench I had erected to my parents at their grave last month, near where they ran a small community pharmacy for almost four decades. My father, a pharmacist, was a go-to source for health information in the <a href="http://articles.philly.com/1986-03-25/business/26081235_1_kelsey-hayes-city-material-manufacturer/2">once-bucolic</a> community of Somerton, in far Northeast Philadelphia, long before chain drugstores appeared in the region. The inscription atop the bench reads "Owners of Lumar Pharmacy. Served This Community 1954 -1991." They, like I, also toiled to safeguard and improve the health of the public. May they rest in peace: <div style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEic0QrFaMJTrHh8lqnr-yXq49hhStOs_KyhL3qpreHoOXjf7sNOjmARDOdsoyHVNb9u5WwTmlVSn_gSp6V4l1950vlGPSOxAkpETxlBgat2RTg1c6Bd3lYYBqi3a6tEBVeFQ7bLvAOvnn24/s1600/Bench.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5675584399345929698" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEic0QrFaMJTrHh8lqnr-yXq49hhStOs_KyhL3qpreHoOXjf7sNOjmARDOdsoyHVNb9u5WwTmlVSn_gSp6V4l1950vlGPSOxAkpETxlBgat2RTg1c6Bd3lYYBqi3a6tEBVeFQ7bLvAOvnn24/s320/Bench.jpg" style="cursor: pointer; display: block; height: 241px; margin: 0px auto 10px; text-align: center; width: 320px;" /></a>Click to enlarge.</div> -- SS

George Lundberg, MD: The Promise of Health IT, and a Caveat

I was cited yesterday in a Medpage TODAY video by medical internet pioneer George Lundberg, MD , also former editor of the Journal of the ...

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Novel Idea on Healthcare IT: Worth a Billion Dollars!

From an <a href="http://www.amia.org/">AMIA</a> announcement: <blockquote>CMS Innovation Center Announces $1 Billion Funding Opportunity: CMS announced a new initiative, the Health Care Innovation Challenge, which will provide grants for new ideas to improve care and lower costs for those in Medicare, Medicaid and CHIP. CMS will award up to $1 billion in grants for a 3 year period and is encouraging providers, payers, local government, public-private partnerships and multi-payer collaboratives to develop new and innovative ways to improve care. To learn more about the grants and application process, check out the CMS Innovation Center website and be sure to register for the CMS webinar on Thursday.</blockquote> CMS, I have an idea! It's a really, really novel idea! "Let's regulate HIT to improve its safety, usability, usefulness, fitness for purpose, effectiveness, etc." ™ That will lower healthcare costs! Save lives, too! ---------------------------------- Can I have my Billion Dollars now? <div style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhinLWA0LEqtIx0hVUJ7BPLp62RwF2t6YjMjk5lObwSrXxX4ixGktTylUJpX3p3Fs1ty_pliiW-F7mrn6m4CFH1GqwZ4cfVYxz-97Vv0EJUIKBKGhfWEZr2hwI8k42p1RGUSDY2Q-L4TEW/s1600/Billion_Front.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5675578351849844338" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhinLWA0LEqtIx0hVUJ7BPLp62RwF2t6YjMjk5lObwSrXxX4ixGktTylUJpX3p3Fs1ty_pliiW-F7mrn6m4CFH1GqwZ4cfVYxz-97Vv0EJUIKBKGhfWEZr2hwI8k42p1RGUSDY2Q-L4TEW/s320/Billion_Front.jpg" style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 310px; height: 134px;" /></a>You can do a lot in health IT with a billion dollars - if you're not the HIT industry, that is, that has squandered a large wad of these over the past several decades. </div> -- SS

Novel Idea on Healthcare IT: Worth a Billion Dollars!

From an AMIA announcement: CMS Innovation Center Announces $1 Billion Funding Opportunity: CMS announced a new initiative, the Health Care ...

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Abbott Laboratories to Settle for $1.3 Billion Allegations Including Giving Doctors Kick-Backs and Training Them to Make False Diagnoses

It looks like the march of billion dollar <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> by health care organizations is on its way again.  The Proposed Abbott Laboratories Settlement Last month Bloomberg <a href="http://www.bloomberg.com/news/2011-10-21/abbott-said-to-agree-to-pay-1-3-billion-to-end-depakote-suits.html">reported</a>: <blockquote>Abbott Laboratories (ABT) agreed to pay at least $1.3 billion to settle claims by the U.S. government and 24 states alleging the company illegally marketed its Depakote epilepsy drug, people familiar with the accords said. Abbott executives, federal prosecutors and state officials reached a tentative agreement calling for the drugmaker to pay about $800 million to resolve civil claims over Depakote and about $500 million in criminal penalties for marketing the epilepsy medicine for unapproved uses, said three people familiar with the settlement who declined to be identified because the agreement hasn’t been made public. Abbott said earlier this week it was reserving $1.5 billion to cover costs of the potential settlement. </blockquote> A billion here, and billion there, it begins to add up: <blockquote>The settlement would be the third-largest illegal pharmaceutical marketing accord in U.S. history, behind the $2.3 billion Pfizer paid in 2009 over the marketing of its Bextra painkiller and other drugs and the $1.4 billion Eli Lilly & Co. paid the same year over sales of its Zyprexa anti-psychotic medicine. </blockquote> Encouraging Dishonesty, Giving Kick-Backs The Bloomberg report only briefly discussed the behavior by Abbott that lead to the settlement: <blockquote>In February, the government joined cases brought by former Abbott employees alleging the company engaged in so-called off-label marketing starting in the late 1990s. The suits contend the illegal sales practices resulted in false claims being submitted to government health programs. The whistle-blowers claim the drugmaker marketed Depakote for unapproved uses including agitation and aggression in patients with dementia, autism, sexual compulsion and other disorders. </blockquote> However, an <a href="http://articles.chicagotribune.com/2011-11-13/business/ct-biz-1113-abbott-20111113_1_whistle-blower-epilepsy-drug-illegal-marketing">article</a> published last week in the Chicago Tribune further described the allegations made by the whistle-blowers. In summary, <blockquote>The lawsuits against Abbott allege that the company encouraged and trained sales reps to market Depakote off-label to nursing home directors, geriatric doctors and other long-term care facilities. The company also gave doctors illegal kickbacks to talk about off-label uses of the drug in an effort to boost sales, according to the lawsuits, which were filed in federal courts in Virginia, Illinois and the District of Columbia. The FDA approved Depakote in 1983 to treat certain seizures in adults and children over 10. Since then, the drug has received approval for the treatment of other types of seizures, manic episodes of bipolar disorder and the prevention of migraine headaches. However, Depakote was never approved to treat Alzheimer's disease or other types of dementia or for general treatment of bipolar disorder. According to the whistle-blower lawsuits, though, Abbott sales reps specifically marketed Depakote to treat agitation and aggression associated with dementia.</blockquote> One whistle-blower alleged that Abbott encouraged doctors to make false diagnoses that would enable the government to pay for the use of Depakote: <blockquote>During a nationwide conference call in 2007, an Abbott trainer allegedly coached sales reps on how to explain to doctors that they could miscode a patient's illness in order to bypass federal regulations. For example, a physician could code a patient as having 'late onset of bipolar' or 'underlying seizure disorder' instead of 'agitation associated with dementia,' according to her complaint. Abbott held training sessions focused on off-label promotion but brought in outside consultants and held the training away from its North Chicago headquarters. At one training event, McCoyd and another sales representative allegedly were asked to share their techniques for off-label marketing but were forbidden from preparing or distributing any written materials about the topic. Upper-level management who attended the sales training purposely left the room when the off-label training sessions began, according to the complaint.</blockquote> The whistle-blowers also alleged that Abbott gave kick-backs (presumably the same idea as bribes) to doctors for prescribing Depakote: <blockquote>The complaints also allege that doctors were given kickbacks to talk about off-label uses of Depakote. According to McCoyd's filing, Abbott salespeople were given about $20,000 to $30,000 each year to 'educate' physicians and other heath care providers about off-label use of Depakote. Abbott paid doctors who promoted the drug between $500 and $2000 per speech, the complaint states. The money allegedly was funneled through intermediaries and associations, including the Alzheimer's Association, although the association told the Tribune it has 'no knowledge' of such activities. Using the organizations to pay doctors was done to 'disguise the direct payments to doctors and Abbott's substantial and direct involvement' in the events, the complaint alleges.</blockquote> Summary So it appears that Abbott is about to settle a case involving some very serious allegations, including training physicians to make false diagnoses, and giving physicians kick-backs. These sort of actions seriously subvert physicians' core values (and any physicians who made such false diagnoses or accepted such kick-backs would have seriously violated core ethical principles.) These actions also may have directly harmed patients. There appears to be no good evidence that Depakote has benefits that exceed its harms for patients with dementia, autism, etc. So encouraging doctors to prescribe the medicine for these patients was likely to have subjected some patients to side-effects without providing them any benefit. That would contradict the physicians' obligations to put the interests of individual patients first, and to avoid harming them. As the Tribune article noted, <blockquote>[Dr Adriane} Fugh-Berman, with PharmedOut, said companies put patients at risk when they promote drugs that haven't gone through the FDA's regulatory process. 'These drugs are being promoted for conditions they have not been shown to be effective, and they might be dangerous,' she said.</blockquote> So a $1.3 billion penalty would actually be a cheap price to pay for such ethical offenses. Note that the Bloomberg report did mention "criminal penalties," so this may be one of the infrequent cases in which a big health care organization actually would plead guilty to some crime. Note however that neither article mentioned anything about any individual who authorized, directed, or implemented the conduct in question suffering any negative consequence or paying any penalty. These reports are preliminary, so it may be that such penalties are part of the final settlement. But it is also possible that this settlement becomes another, and particularly flagrant example of health care corporate executive impunity. If no one turns out to have to pay a penalty for training physicians to lie to the government, and giving them kick-backs to prescribe a possibly useless and likely harmful medicine, what will deter other executives from authorizing and directing such actions again to make more money? Note in the Bloomberg article: <blockquote>Sales of Depakote 'rocketed to over $1.4 billion per year' as a result of improper marketing, according to a complaint filed in February by ex-Abbott sales representative Meredith McCoyd. 'Compensation for senior executives soared as well.' </blockquote> Furthermore, if no one turns out to have to pay a penalty for these actions, this case will just contribute to the ongoing demoralization of health care professionals. It will be another example of how insiders take advantage of the system for their personal gain, to the disadvantage of patients, and at further cost to an already overly expensive health care system that fails to provide adequate access and quality care. So I repeat, repeat, repeat... to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Abbott Laboratories to Settle for $1.3 Billion Allegations Including Giving Doctors Kick-Backs and Training Them to Make False Diagnoses

It looks like the march of billion dollar legal settlements by health care organizations is on its way again. The Proposed Abbott Laborato...

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The Parallels Between Health Care and Financial Dysfunction: Leadership's Impunity as Demonstrated by the Citigroup Case

For years, we have noted the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">parade of legal settlements</a> made by large health care organizations.  The parade is notable on one hand because it illustrates how often some of our best known health care corporations and institutions behave badly.  Impunity for Health Care Leaders It is notable on the other hand because it illustrates how the leaders of these organizations have virtual impunity.  In very few cases has any person who authorized, directed, or implemented bad behavior faced any negative consequences.  The executives of these organizations often have gotten to continue making millions of dollars while the financial costs of settlements are borne by the company as a whole, and hence by all the employees, no matter how poorly paid or uninvolved, and all stockholders, no matter how powerless they were to prevent the bad behavior. The legal settlements that now seem to be the only effort made by the government to ensure fairness, honesty, and a level playing field in the health care "industry" seem to have no deterrent effect.  Some of the most famous health care companies have been subject to successive settlements, each of which failed to deter the next bout of bad behavior.  For example, we just <a href="http://hcrenewal.blogspot.com/2011/10/what-pfizer-v-few-consequences-for-long.html">posted</a> about NINE separate settlements made by global pharmaceutical giant Pfizer Inc from 2002 to 2011, the largest for $2.3 billion.  Yet a succession of Pfizer CEOs made tens of millions a year, and left with golden parachutes (see post <a href="http://hcrenewal.blogspot.com/2011/08/what-pfizer-iii-enormous-pay-for-poor.html">here</a>).  Johnson and Johnson subsidiaries have settled with corporate guilty pleas to several misdemeanors, while the company CEO made tens of millions a year and served as an adviser to the President.  (See summary of offenses<a href="http://hcrenewal.blogspot.com/2011/10/exporting-us-health-ecosystem-and-its.html"> here</a>, CEO's compensation <a href="http://hcrenewal.blogspot.com/2011/03/despite-recalls-legal-settlements.html">here</a>, and his White House role <a href="http://hcrenewal.blogspot.com/2011/08/why-cultivate-weldons-confidence-ceo.html">here</a>.)  With the rise of the "Occupy Wall Street" movement and its spin-offs, and the resurgence of the global financial crisis now threatening the Euro-zone in particular, the discussion of how the world's finance system has become fiercely dysfunctional that should have occurred after the crisis began in 2008 is now starting.  That discussion has now focused on the relative impunity of the leadership of finance firms, a striking parallel to what has gone on in health care. The Citigroup Settlement The case that has created headlines is that of Citigroup, and a new settlement of allegations brought against it by the US Securities and Exchange Commission (SEC).  A <a href="http://www.bloomberg.com/news/2011-11-02/citigroup-finds-obeying-the-law-is-too-darn-hard-jonathan-weil.html">commentary</a> by Jonathan Weil in Bloomberg explained it thus: <blockquote>Five times since 2003 the Securities and Exchange Commission has accused Citigroup Inc’s main broker-dealer subsidiary of securities fraud. On each occasion the company’s SEC settlements have followed a familiar pattern. Citigroup neither admitted nor denied the SEC’s claims. And the company consented to the entry of either a court injunction or an SEC order barring it from committing the same types of violations again. Those 'obey-the-law' directives haven’t meant much. The SEC keeps accusing Citigroup of breaking the same laws over and over, without ever attempting to enforce the prior orders. The SEC’s most recent complaint against Citigroup, filed last month, is no different. </blockquote> As in most of the health care cases, Citigroup has been subject to multiple legal settlements, each of which apparently failed to deter the next bit of bad behavior. Also, while the SEC made the company promise in particular settlements not to misbehave again, the SEC never held the company accountable for these promises. Other features of the Citigroup settlement paralleled many of those in health care. The company was never made to admit bad behavior. No top executive ever paid any penalty. However,unlike many health care cases, the Citigroup case produced an uproar, partially because the presiding judge refused to accept the settlement without questions. A Judge Questions the Settlement Instead, the judge had caustic questions for both the SEC and Citigroup. For example, as <a href="http://www.washingtonpost.com/business/economy/judge-chafes-over-citigroup-settlement/2011/11/09/gIQAQ13m6M_story.html">reported</a> by the Washington Post, <blockquote>A federal judge Wednesday challenged the SEC’s plan to settle a fraud case against Citigroup for $285 million, saying that the deal would recoup only a fraction of investors’ losses and would leave the firm free to proclaim its innocence in private lawsuits over the remaining damages. The judge used the Citigroup case to mock the SEC’s traditional way of doing business — allowing defendants to settle without admitting or denying wrongdoing. The unproven allegations, U.S. District Court Judge Jed S. Rakoff said, 'are no better than rumor or gossip.' 'Does not the SEC of all agencies have an interest in establishing what the truth is?' Rakoff asked.</blockquote> Also, he mocked the SEC practice of requiring promises of good behavior, that go unenforced, <blockquote>SEC settlements routinely include court orders prohibiting defendants from committing similar violations in the future and exposing them to potentially severe consequences if they do. However, the agency has refrained from enforcing those injunctions against repeat offenders. Citigroup was subject to two injunctions that predated the current case, SEC chief litigation counsel Matthew T. Martens said. Rakoff suggested that the injunctions are 'just for show.' The SEC lawyer said the agency takes past offenses into account when determining an appropriate penalty. Other SEC officials said after the hearing that past injunctions can be enforced only when the SEC catches a defendant in an ongoing violation. The proposed settlement also calls for Citigroup to take remedial steps to reduce the risk of future violations; Rakoff asked if those were merely 'window dressing.'</blockquote> This unusual hearing was covered by the Wall Street Journal, the New York Times, Bloomberg, and other major media outlets. Finance's Own Parade of Settlements Meanwhile, the NY Times did some in-depth reporting to show that the Citigroup case was hardly a fluke. There has been a parade of legal settlements of bad behavior by finance firms paralleling <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">the parade we have discussed by health care organizations</a>, although the former occurred without there being a "Finance Renewal" blog to comment on them. As <a href="http://www.nytimes.com/2011/11/08/business/in-sec-fraud-cases-banks-make-and-break-promises.html">written</a> by Edward Wyatt, <blockquote>Citigroup is far from the only such repeat offender — in the eyes of the S.E.C. — on Wall Street. Nearly all of the biggest financial companies, Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America among them, have settled fraud cases by promising the S.E.C. that they would never again violate an antifraud law, only to do it again in another case a few years later. A New York Times analysis of enforcement actions during the last 15 years found at least 51 cases in which 19 Wall Street firms had broken antifraud laws they had agreed never to breach. </blockquote> In particular, <blockquote>Of the 19 companies that the Times found to be repeat offenders over the last 15 years, 16 declined to comment. They read like a Wall Street who’s who: American International Group, Ameriprise, Bank of America, Bear Stearns, Columbia Management, Deutsche Asset Management, Credit Suisse, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, Putnam Investments, Raymond James, RBC Dain Rauscher, UBS and Wells Fargo/Wachovia.</blockquote> The NY Times article also found some experts willing to criticize the current effeteness of government regulation and law enforcement: <blockquote>Senator Carl Levin, a Michigan Democrat who is chairman of the Senate permanent subcommittee on investigations and has led several inquiries into Wall Street, said the S.E.C.’s method of settling fraud cases, is 'a symbol of weak enforcement. It doesn’t do much in the way of deterrence, and it doesn’t do much in the way of punishment, I don’t think.' Barbara Roper, director of investor protection for the Consumer Federation of America, said, 'You can look at the record and see that it clearly suggests this is not deterring repeat offenses. You have to at least raise the question if other alternatives might be more effective.' </blockquote> Also, <blockquote>some experts view many settlements as essentially meaningless, particularly since they usually do not require a company to admit to the accusations leveled by the S.E.C. Nearly every settlement allows a company to 'neither admit nor deny' the accusations — even when the company has admitted to the same charges in a related case brought by the Justice Department....</blockquote> Summary As we learn more about what has gone wrong with our political economy, the parallels with what has gone wrong with health care become more obvious. Of course, health care must operate within a larger environment, and there has been increasing overlap between the leadership of finance and of health care. As the economy continues to sag, with rising unemployment and under-employment, increasing foreclosure, homelessness and poverty, and the decreasing likelihood of an even minimally comfortable retirement for many, it appears peoples' minds are increasingly focused on what has gone wrong, and particularly how ill-informed, incompetent, self-interested, conflicted and corrupt leadership of financial firms has lead to this severe economic dysfunction. I also hope that as the health care crisis continues to worsen, with rising costs, decreasing access, and degrading quality, peoples' minds will also increasingly focused on what has gone wrong, and particularly, as we have been saying for nearly seven years, how ill-informed, incompetent, self-interested, conflicted and even corrupt leadership of health care organizations has lead to this severe health care dysfunction. Maybe someone will now take seriously our calls for... true health care reform that requires competent, ethical leadership that upholds health care's core values within a governance structure of accountability, integrity, transparency, and honesty. Tackling the deep problems in health care will require tackling the deeper problems in the global political economy which helped to generate them.

The Parallels Between Health Care and Financial Dysfunction: Leadership's Impunity as Demonstrated by the Citigroup Case

For years, we have noted the parade of legal settlements made by large health care organizations. The parade is notable on one hand becaus...

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EHRevent.org Leadership: "Heck, getting out of bed in the morning is dangerous- it just beats the alternative"

I have posted about the organization EHRevent.org on numerous occasions. I expressed concerns that this organization's representation as an alternative aggregator of health IT difficulty cases, compared to established organizations and resources such as FDA's Medwatch and MAUDE database, was probably not a good idea: <blockquote>November 15, 2010: <a name="5203906860886106791"></a><a style="FONT-WEIGHT: bold" href="http://hcrenewal.blogspot.com/2010/11/ehreventorg-web-site-to-collect-ehr_15.html">EHRevent.org: Web Site to Collect EHR Safety Reports </a> November 16, 2010: <a style="FONT-WEIGHT: bold" href="http://hcrenewal.blogspot.com/2010/11/emrevent-survey-amateurism-bias-or.html">EHRevent: survey amateurism, bias, or something else?</a> November 17, 2010: <a style="FONT-WEIGHT: bold" href="http://hcrenewal.blogspot.com/2010/11/some-answers-about-ehreventorg-for.html">Some answers about new site "EHRevent.org" for health IT and drug adverse event reporting</a> November 22, 2010: <a href="http://hcrenewal.blogspot.com/2010/11/ehreventorg-ceo-edward-fotsch-md-real.html">EHRevent.org CEO Edward Fotsch MD: The Real Challenge with EHRs is -- User Error? </a> July 24, 2011: <a href="http://hcrenewal.blogspot.com/2011/07/ehrevent-and-national-database-of-ehr.html">EHRevent.org and "The National Database of EHR Errors Being Called For" - Where's the Beef?</a></blockquote> The Nov. 22, 2010 post "<a href="http://hcrenewal.blogspot.com/2010/11/ehreventorg-ceo-edward-fotsch-md-real.html">EHRevent.org CEO Edward Fotsch MD: The Real Challenge with EHRs is -- User Error? </a>" is particularly relevant to this one. I saw the following remarkable comment by EHRevent.org CEO Edward Fotsch MD on the <a href="http://www.histalk.com/">HISTalk</a> blog. It was in a comment section regarding the new Institute of Medicine report "Health IT and Patient Safety: Building Safer Systems for Better Care" on health IT risks (my initial post on that topic is <a href="http://hcrenewal.blogspot.com/2011/11/iom-report-on-health-it-safety-nix-fda.html">here</a>): <blockquote><a href="http://histalk2.com/2011/11/08/news-11911-2/#comment-18043">ed fotsch Says</a>: Re: the IOM/ONC report it seems to me that the IOM started with the wrong question. Question #1 posed should have been- ‘Are Health IT/EHR systems, when implemented appropriately, safer and better than the current paper system in most hospitals and MD offices; as opposed to the question that apparently was posed: ‘are EHRs safe.’ Heck, getting out of bed in the morning is dangerous- it just beats the alternative. Once question #1 HAD been answered, question #2 could have been tee’d up- ‘How can we make EHRs better?” But that ship has sailed and now they and we in Tidy-Bowl mode. The wrong question was asked so we’re dealing with what may be the right answer to the wrong question. And it will be hard to get the toothpaste back in the tube, worms back in the can, etc. on this one from an ONC/IOM standpoint- and yes the press will have a field day, those running for office will have more fodder and Republicans (no issue per se with Republicans BTW) who are pushing for less (not more) government regulation will have a field day with this set of recommendations. November 8th, 2011 at 10:53 pm</blockquote> While I do not know Dr. Fotsch, my questions about this comment are as follows: <ul> <li>Are its viewpoints entirely objective with regard to health IT? </li> <li>Is it consistent with a physician-executive who thinks critically about risk, and knows the literature (such as <a href="http://hcrenewal.blogspot.com/2011/02/updated-reading-list-on-health-it.html">here</a>), or with someone who leans toward technologically deterministic views about healthcare IT?</li> <li>Is it a reasonable view from the CEO of an organization seeking a position of enormous public responsibility as the "central place for reporting adverse EHR events or near misses or potential problems or issues with electronic health records", as described of EHRevent.org in the aforementioned Nov, 22, 2010 post?</li> <li>It is an appropriate comment for someone holding such a position?</li></ul> These questions repeat some of the concerns as expressed in my previous posts. I <a href="http://histalk2.com/2011/11/08/news-11911-2/#comment-18171">responded as follows</a> at HIStalk in the same comment thread. Emphases in the original: <blockquote>To Dr. Fotcsh: My opinion differs. I believe the IOM asked the correct questions. The answer to your proposed question “‘Are Health IT/EHR systems, when implemented appropriately, safer and better than the current paper system in most hospitals and MD offices” is – nobody really knows. The IOM explicitly acknowledges this: ---------------------------------- … “For example, the number of patients who receive the correct medication in hospitals increases when these hospitals implement well-planned, robust computerized prescribing mechanisms and use barcoding systems. But even in these instances, the ability to generalize the results across the health care system may be limited. For other products— including electronic health records, which are being employed with more and more frequency— some studies find improvements in patient safety, while other studies find no effect. More worrisome, some case reports suggest that poorly designed health IT can create new hazards in the already complex delivery of care. Although the magnitude of the risk associated with health IT is not known, some examples illustrate the concerns. Dosing errors, failure to detect life-threatening illnesses, and delaying treatment due to poor human–computer interactions or loss of data have led to serious injury and death.” ---------------------------------- The technology is experimental. In my opinion, that invokes the medical adage “First, do no harm.” There exist protocols for human subjects experimentation. The health IT industry has exempted itself from those protocols. My overall thoughts on the IOM report are at <a href="http://hcrenewal.blogspot.com/2011/11/iom-report-on-health-it-safety-nix-fda.html">http://hcrenewal.blogspot.com/2011/11/iom-report-on-health-it-safety-nix-fda.html</a> </blockquote> -- SS

EHRevent.org Leadership: "Heck, getting out of bed in the morning is dangerous- it just beats the alternative"

I have posted about the organization EHRevent.org on numerous occasions. I expressed concerns that this organization's representation as...

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CEOs First to Benefit from For-Profit Takeovers of Non-Profit Hospitals

Last year, we <a href="http://hcrenewal.blogspot.com/2010/03/now-private-equity-jumps-into-health.html">noted</a> concerns about the againy fashionable practice of for-profit corporations taking over previously not-for-profit hospitals and hospital systems. Two examples we cited were the planned acquisitions of Detroit Medical Center (DMC) by Vanguard Health, which was owned by the Blackstone Group, and of Caritas Christi Health Care by Cerberus Capital Management. At the time, we noted, "for-profit leaders tend to expect even larger compensation than not for-profit CEOs. Their decisions tend to be driven by their short-term compensation, rather than the good of the organization." So we asked, "will making a not-for-profit health care organization into a for-profit corporation really lead to more efficiency and lower costs?" In a <a href="http://hcrenewal.blogspot.com/2010/04/more-doubts-about-private-equity-taking.html">later post</a>, we worried about "ever-increasing executive compensation while making money becomes the overwhelming priority for the organization, completely eclipsing such quaint concepts as quality of care, reasonable costs, or adequate access." About one and one-half years later, we have some follow-up from the media about the results of these deals, especially as they pertain to executive compensation. Detroit Medical Center, Vanguard Health Systems, Blackstone Group Our <a href="http://hcrenewal.blogspot.com/2010/03/now-private-equity-jumps-into-health.html">post</a> last year quoted then Mike Duggan, then CEO of DMC, that "We were being choked to death by the nonprofit business model." This month, the Detroit Free Press <a href="http://www.freep.com/article/20111103/BUSINESS06/111030446/DMC-CEO-Mike-Duggan-make-2-41-million-pay-bonuses-stock-options">reported</a>, <blockquote>Detroit Medical Center CEO Mike Duggan's total compensation this year from Vanguard Health Systems, the private health care company that bought the DMC, is $2.41 million in pay, bonuses and several years of stock options, up from the $1.98 million in 2009 when DMC was a nonprofit, according to public documents. About $1.3 million of Duggan's total compensation is in stock options that he would start receiving next year through 2019, the documents show. </blockquote> Note also that, <blockquote>The package also calls for Duggan to get $1 million if he's fired or $5 million if Vanguard sells the DMC to another company -- fairly common conditions in contracts, experts said. Duggan's new compensation package puts him in the top tier of local health care executives. </blockquote> It seems like Mr Duggan is no longer being "choked to death." Cursory review of the media reveals that since the acquisition, DMC has some major construction projects planned. However, I saw nothing yet about whether the acquisition has decreased costs, increased access, or improved the quality of care. I should note that Mr Duggan appears just a bit uncomfortable with his generous compensation in this era of anger about the power of the one percent: <blockquote>Duggan said he agreed with Occupy Wall Street protesters who point to the growing gap between the poor and rich: "I do believe people should be able to work hard and earn a lot of money. (But) the gap between the top and the bottom is not fair in this country," he said. "I don't have the ability to fix the world, but my wife and I are making a gesture that's appropriate for us. If people say we get paid a lot of money, I think they are right. I'm trying to do something to share some of the benefit."</blockquote> The gesture mentioned above would be <blockquote>he and his wife plan to create a foundation next year to hold the stock earnings, after taxes, for scholarships for children of DMC employees.</blockquote> Whether it is carried out, of course, remains to be seen. Caritas Christi Health Care, Steward Health Care, Cerberus Capital Management The initial <a href="http://www.boston.com/business/healthcare/articles/2010/03/25/equity_firm_set_to_buy_caritas/">story</a> about the proposed take-over in the Boston Globe noted that one rationale was how: <blockquote>Caritas has long struggled financially, but since coming to the chain two years ago, [CEO Dr Ralph] de la Torre has worked to strengthen its financial position by aggressively cutting costs and boosting revenue from medical care. It posted operating income of $30.5 million for the fiscal year ending last Sept. 30 compared with a $20.5 million loss the prior year.</blockquote> The aim would be: <blockquote>to provide quality community-based care at a reasonable cost.</blockquote> Some specific goals of the proposed take-over would be <blockquote>Under the agreement, Cerberus will invest $430 million to $450 million immediately to pay off Caritas debt, finance renovation projects, and provide working capital, while also assuming its pension liability.</blockquote> To pursue all this, <blockquote>While de la Torre and other senior executives will retain their current salaries and benefits, they would be eligible for additional compensation from Cerberus based on the financial performance of the hospitals, Caritas officials said. They said the details of those financial incentives have yet to be worked out.</blockquote> Last month, a Boston Globe <a href="http://articles.boston.com/2011-09-15/yourtown/30160931_1_compensation-hospital-executive-teaching-hospital">article</a> provided a little more clarity about these compensation arrangements: <blockquote>Ralph de la Torre, former chief executive of Boston-based Caritas Christi Health Care, drew a total pay package of $2.2 million from the Catholic hospital system in 2009, making him the best-compensated hospital executive in Boston that year, according to documents filed with the state attorney general’s office. The package, which included base salary, a performance bonus, and incentive compensation linked to improving finances at the hospital chain, marked an increase from the $1.2 million de la Torre earned from Caritas in 2008.</blockquote> Note that after the take-over, the Caritas Christi system was renamed as Steward Health Care. So prior to the actual take-over by Cerberus, but presumably while initial negotiations about it were going on, Dr de la Torre had already become the best paid hospital CEO in Boston. Becker's Hospital Review <a href="http://www.beckershospitalreview.com/compensation-issues/caritas-christis-2010-form-990-shows-executive-pay-before-for-profit-conversion.html">noted</a> that De la Torre's 2010 total compensation was exactly $2,270,076. The Caritas Christi 2010 <a href="http://www.beckersasc.com/media/CC_2010Filing.pdf">IRS form 990 </a>also listed 19 executives who received more than $400,000. Of these, 11 received more than $600,000. Meanwhile, according to this form, the system's losses were accelerating, going from -$6,583,625 in 2008 to -$23,858,733 in 2009. So, it seems that Dr De la Torre became significantly richer in anticipation of the proposed (and now accomplished) take-over of Caritas Christi by Cerberus Capital Management, even though his hospital system's hemorrhaging of money was increasing at that time. Again, I was not able to find any clear evidence whether the take-over had decreased costs, increased access, or improved quality of care. I did find one report suggesting that some Steward Health nurses did not think that it had stabilized their pensions as promised. <a href="http://www.bizjournals.com/boston/news/2011/10/28/steward-employees-to-protest-today.html">According to </a>the Boston Business Journal, <blockquote>Nurses and other health care workers from several of the hospitals owned by the for-profit Steward Health Care, plan to protest outside the company's Boston headquarters today at 1:30. They include nurses from St. Elizabeth’s Medical Center, Brighton, Norwood Hospital, Good Samaritan Hospital in Brockton, Morton Hospital in Taunton, Quincy Medical Center Carney Hospital in Dorchester, Holy Family Hospital in Methuen and Merrimack Valley Hospital in Haverhill. Nurses argue that Steward, owned by New York private equity firm Cerberus Capital Management, has not honored agreements to the workers, including a commitment to create a defined-benefit pension plan. They also say that Steward has threatened to eliminate essential services in retaliation for the nurses demand for the pension plan.</blockquote> Summary Two acquisitions by private equity firms of non-profit hospital systems have resulted in increased compensation for the systems' CEOs, and perhaps other top executives.  These increases predated any recognizable improvements in quality or access, or decreases in health care costs. Acquisitions of non-profit hospitals and hospital systems by for-profit entities, including private equity firms, is one of the newly fashionable ways our health care leaders have promised to improve care, increase access and control costs. The evidence about whether this tactic accomplishes these aims is not yet in. However, it appears that this tactic may be another, and a rapid way for top health care executives to increase their personal incomes. Health care professionals, patients, and the public at large ought to be increasingly skeptical of the latest fashions in health care management, especially those that have potential to further enrich managers. As we recently <a href="http://hcrenewal.blogspot.com/2011/11/health-care-also-needs-to-challenge.html">noted</a>, more people in the US and other countries are frustrated that their attempts to work hard and follow the rules of the economic system yield less rewards. Meanwhile, it appears that well-connected insiders are increasingly gaming the system for their personal profit. We have noted how health care executives' compensation seems independent of their talent, skill, or innovation, much less their ability to uphold the values and fulfill the mission of their organizations. Their compensation often seems to rise inexorably, regardless even of the financial status of their organizations. Now it appears that inflating compensation in anticipation of or due to a merger or acquisition is another mechanism by which insider executives gain, while others in health care lose. Once more with feeling .... true health care reform requires competent, ethical leadership that upholds health care's core values within a governance structure of accountability, integrity, transparency, and honesty. Tackling the deep problems in health care will require tackling the deeper problems in the global political economy which helped to generate them.

CEOs First to Benefit from For-Profit Takeovers of Non-Profit Hospitals

Last year, we noted concerns about the againy fashionable practice of for-profit corporations taking over previously not-for-profit hospita...

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