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Health Care Dysfunction Explained by the Fallacy of "Maximizing Shareholder Value"

Over the last two weeks, the <a href="http://nakedcapitalism.com/">Naked Capitalism blog</a> ran a multi-part series (1-4) on what has gone wrong with US public for-profit corporations.  Although not targeted specifically on health care, the series included several themes we have discussed on <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a>, and suggested some important new ones.  So let us review the most relevant topics. "Financialization," and the Exclusive Ostensible Focus on Shareholder Value In the first post,(1) William Lazonick explained how corporations gave up their devotion to societal values to ostensibly focus only on the interests of shareholders:  <blockquote>What went wrong? A fundamental transformation in the investment strategies of major U.S. corporations is a big part of the story. A generation or two ago, corporate leaders considered the interests of their companies to be aligned with those of the broader society. In 1953, at his congressional confirmation hearing to be Secretary of Defense, General Motors CEO Charles E. Wilson was asked whether he would be able to make a decision that conflicted with the interests of his company. His famous reply: 'For years I thought what was good for the country was good for General Motors and vice versa.'</blockquote> However, then(1) <blockquote>the U.S. business corporation has become in a (rather ugly) word 'financialized.' It means that executives began to base all their decisions on increasing corporate earnings for the sake of jacking up corporate stock prices. Other concerns — economic, social and political — took a backseat. From the 1980s, the talk in boardrooms and business schools changed. Instead of running corporations to create wealth for all, leaders should think only of 'maximizing shareholder value.' </blockquote> This was formalized in the the scholarly management literature,(1) <blockquote>But in 1983, two financial economists, Eugene Fama of the University of Chicago and Michael Jensen of the University of Rochester, co-authored two articles in the Journal of Law and Economics which extolled corporate honchos who focused on 'maximizing shareholder value' — by which they meant using corporate resources to boost stock prices, however short the time-frame. In 1985 Jensen landed a higher profile pulpit at Harvard Business School. Soon, shareholder-value ideology became the mantra of thousands of MBA students who were unleashed in the corporate world.</blockquote> Ignoring the Interests of Employees: Cost Cutting, Layoffs, Off-Shoring Maximizing shareholder value only really seems to mean maximizing shareholder value in the short run, often by short-term cost-cutting that will reduce the ability to improve existing or develop new products and services. Hence, now(1) <blockquote>When the shareholder-value mantra becomes the main focus, executives concentrate on avoiding taxes for the sake of higher profits, and they don’t think twice about permanently axing workers. They increase distributions of corporate cash to shareholders in the forms of dividends and, even more prominently, stock buybacks. When a corporation becomes financialized, the top executives no longer concern themselves with investing in the productive capabilities of employees, the foundation for rising living standards for all. They become focused instead on generating financial profits that can justify higher stock prices....</blockquote> Furthermore,(1) <blockquote>n the name of shareholder value, by the 1990s U.S. corporations seized on these changes in competition and technology to put an end to the norm of a career with one company, ridding themselves of more expensive older employees in the process. In the 2000s, American corporations found that low-wage nations like China and India possessed millions of qualified college graduates who were able and willing to do high-end work in place of U.S. workers. Offshoring put the nail in the coffin of employment security in corporate America.</blockquote> Thus, "maximizing shareholder value" was the rationale for a variety of short-term cost-cutting approaches that turned employees (excepting, of course, the hired executives and their favorites) not merely into the makers of widgets, but into widgets themselves. By extension, this attitude that all employees (again, with the exception of top management and their cronies) are interchangeable applied even to highly skilled professional, technical and scientific employees, e.g., research scientists in a pharmaceutical company. By further extension, as we have<a href="http://hcrenewal.blogspot.com/2006/03/consequences-of-breaking-physicians.html"> noted</a>, health care organizations, including non-profit institutions like hospitals, insurance companies, and academic medical institutions, have been taken over by hired managers who are decreasingly health care professionals. Such hired <a href="http://hcrenewal.blogspot.com/search/label/generic%20managers">generic managers</a> have carried the latest fashionable management ideas into health care with them. Thus, in my experience, even experienced academic physicians began hearing that they had no individual value, were interchangeable and could easily be replaced starting in the 1990s. For organizations that depend on highly trained, dedicated technical, scientific, and/or professional workers, devaluing and demoralizing such employees wold appear to be the height of foolishness. As Lazonick pointed out in a later post(3), treating workers as interchangeable can be the death knell for innovation: <blockquote>As is generally recognized by employers who declare that 'our most important assets are our human assets', the key to successful innovation is the extra time and effort, above and beyond the strict requirements of the job, that employees expend interacting with others to confront and solve problems in transforming technologies and accessing markets. Anyone who has spent time in a workplace knows the difference between workers who just punch the clock to collect their pay from day to day and workers who use their paid employment as a platform for the expenditure of creative and collective effort as part of a process of building their careers. As members of the firm, these forward-looking workers bear the risk that their extra expenditures of time and effort will not yield the gains to innovative enterprise from which they can be rewarded. If, however, the innovation process does generate profits, workers, as risk-bearers, have a claim to a share in the forms of promotions, higher earnings and benefits. Instead, shareholder-value ideology is often used as a rationale for laying off workers whose hard and creative work has contributed to the company’s success. That’s grossly unfair. </blockquote> A Fallacious Rationale: Only Stockholders at Risk However, the reasoning, such as it was, behind the "maximizing shareholder value" mantra contained a rationale for so devaluing and demoralizing even the most dedicated and well-trained employees. As Prof Lazonick explained,(1) <blockquote>Proponents of the Fama/Jenson view argue that for superior economic performance, corporate resources should be allocated to maximize returns to shareholders because they are the only economic actors who make investments without a guaranteed return. They say that shareholders are the only ones who bear risk in the corporate economy, and so they should also get the rewards.</blockquote> He then went on to easily explain why this was complete rubbish(1): <blockquote>But this argument could not be more false. In fact, lots of people bear risks of investing in the corporation without knowing if they will pay off for them. Governments in the U.S., funded by the body of taxpayers, are constantly making investments in physical infrastructures and human capabilities that provide benefits to businesses, but without a guaranteed return to taxpayers. An employer expects workers to give time and effort beyond that required by their current pay to make a better product and boost profits for the company in the future. Where’s the worker’s guaranteed return? In contrast, most public shareholders simply buy and sell shares of a corporation on the stock market, making no contribution whatsoever to investment in the company’s productive capabilities.</blockquote> By Extension, In Health Care, Ignoring the Interests of Patients and the Values of Health Care Professionals If one believes only stockholders are at risk and hence only stockholders deserve benefit from corporate activities, by extension this eliminates the interests of patients and the values of health care professionals from consideration by the leadership of health care corporations. Of course, in health care, the patients may be the ones most at risk from corporate activities. For example, think of a patient who pays a large amount out of pocket for a drug that fails to benefit him or her. Worse, patients are not only at financial risk, but are at physical risk. For example, think of a patient who suffers an unusual, but severe adverse reaction to a drug. In addition, in health care, health care professionals who do not work for a particular health care corporation may be at risk from its activities. For example, think of a physician who is fooled by a pharmaceutical company's <a href="http://hcrenewal.blogspot.com/search/label/manipulating%20clinical%20research">manipulation of clinical research</a> into believing a drug is effective and safe when it is actually useless and harmful. We have documented numerous instances of <a href="http://hcrenewal.blogspot.com/search/label/suppression%20of%20medical%20research">suppression of clinical research</a>, <a href="http://hcrenewal.blogspot.com/search/label/manipulating%20clinical%20research">manipulation of clinical research</a>, <a href="http://hcrenewal.blogspot.com/search/label/ghost%20writing">ghost writing</a>, deceptive <a href="http://hcrenewal.blogspot.com/search/label/stealth%20marketing">stealth marketing</a>, and other tactics used by pharmaceutical, biotechnology and device companies to deceive physicians about the effectiveness and safety of drugs and devices. Physicians who have been thus deceived are at risk of violating their fundamental responsibility to put individual patients' interests first. Subverting the Mission of Non-Profit Health Care Organizations As we mentioned earlier, there is ample evidence that non-profit organizations are now most often lead by hired managers who have brought the latest management with them, rather than health care professionals. It is therefore likely that the dominant notion of "maximizing shareholder value" has been operationalized even in non-profit organizations that do not have shareholders. Most likely it has been transformed into simply maximizing short-term revenue. We have certainly seen many instances of leaders of such health care organizations who seem mainly preoccupied with short-term financial goals. Bad as this is for a public for-profit corporation, it is potentially disastrous for a non-profit organization which is supposed to put upholding its mission ahead of financial concerns (see examples of such mission-hostile management <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management">here</a>). Interests of Shareholders or Interests of Executives? It is terribly ironic that in practice "maximizing shareholder value" turns out to mean maximizing executive compensation. In retrospect, this mantra looks entirely self-serving.  As Prof Lazonick noted in a second post, executive compensation has soared in recent years(2) <blockquote>When all the data from corporate proxy statements are in within the next month or so, they will show that 2011 was another banner year for top executive pay. Over the previous three years the average annual compensation of the top 500 executives named on corporate proxy statements was 'only' $17.8 million, compared with an annual average of $27.3 million for 2005 through 2007. Yet even in these recent 'down' years, the compensation of these named top executives was more than double in real terms their counterparts’ pay in the years 1992 through 1994. It might surprise you to learn that in the early 1990s, executive pay was already widely viewed as out of line with what average workers got paid. In 1991 Graef Crystal, a prominent executive pay consultant, published a best-selling book, In Search of Excess: The Overcompensation of American Executives, in which he calculated that over the course of the 1970s and ’80s, the real after-tax earnings of the average manufacturing worker had declined by about 13 percent. During the same period, that of the average CEO of a major US corporation had quadrupled! </blockquote> We have documented seemingly endless examples of <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">bloated executive compensation</a> in health care. In fact, as Prof Lazonick noted in his first post(1), by increasing stock prices short-term, executives of for-profit corporations can markedly boost their own compensation, <blockquote>When a corporation becomes financialized, the top executives no longer concern themselves with investing in the productive capabilities of employees, the foundation for rising living standards for all. They become focused instead on generating financial profits that can justify higher stock prices – in large part because, through their stock-based compensation, high stock prices translate into megabucks for these corporate executives themselves. </blockquote> The Conspiracy to Increase CEO Compensation As CEO compensation climbed, they and their supporters have invoked a market-based rationale, as Prof Lazonick described in his third post,(3): <blockquote>You often hear that stratospheric executive pay is the result of some inexorable law of supply and demand. If we don’t give top executives their multimillion dollar compensation, they won’t be willing to come to work and do their jobs. They are supposedly the bearers of 'scarce talent' that demands a high price in the market place. Even Robert Reich, Secretary of Labor in the Clinton administration and a critic of U.S. income inequality, has justified the explosion in executive pay, arguing that intense competition makes it much more difficult than it used to be to find the talent who can manage a large corporation (Supercapitalism, 2008, pp 105-114).</blockquote>We have provided many examples of similar talking points used to support fat compensation for health care leaders (e.g., <a href="http://hcrenewal.blogspot.com/2012/03/example-of-how-complex-takes-control.html">here</a>. <a href="http://hcrenewal.blogspot.com/2011/09/more-repeats-of-talking-points.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2011/09/talking-points-sans-original-thought-to.html">here</a>). However, as we described here, the mechanism that executives have developed to set their own pay in line with the supposed market does nothing like that,(3) <blockquote>That is not what determines executive pay. Here is how it works: Top executives select other top executives to sit on “their” boards of directors. These directors hire compensation consultants to recommend an executive pay package, which consists of salary, bonus, incentive pay, retirement benefits, and all manner of other perks. The consultants look at what top executives at other major corporations are getting, and say that, well, this executive should get more or less the same. Since the directors are mostly these very same “other executives”, they have no interest in objecting – and if any of them were to do so, they would find that they are no longer being invited to sit on corporate boards. Meanwhile, given the preponderance of stock-based compensation (especially stock options) in executive pay, whenever there is speculative boom in the stock market, top executives of the companies with most rapidly rising stock prices make out like bandits. The higher compensation levels then create a 'new normal' for executive pay that, via the compensation consultants and compliant directors, ratchets up the pay of all the top dogs. And, when the stock market is less speculative, these corporate executives do massive stock buybacks to push stock prices up. What we have here is not 'market forces' at work but an exclusive club that promotes the interests of the 0.1%. All too often executives allocate corporate resources to benefit themselves rather than to invest in innovation and job creation.</blockquote>We have discussed similar mechanisms at work in health care, for example, <a href="http://hcrenewal.blogspot.com/2011/10/peer-benchmarking-lake-wobegone-effect.html">here</a>. In other words, <blockquote>almost unanimously, corporate executives proclaim that they run their companies for the sake of shareholders. In fact, their personal coffers pumped up with stock-based compensation, our business 'leaders' have increasingly run the corporations for themselves.</blockquote> Were contemporary management of health care be only based on maximizing shareholder value or short-term revenue, that would be bad enough. However, it appears that it is really based simply on maximizing executive compensation. Health care, and our society as a whole has been turned into something like a feudal state, in which hired managers have become the new aristocracy. The Rise of the Generic Manager The likelihood that "maximizing [supposed] shareholder value" would lead to bad ends is increased by the decreasing likelihood that the managers who set out in this direction would know anything about the specific context in which they were working or other goals they ought to attempt. As Prof Lazonick pointed out, even before the rise of the "maximizing shareholder value" mantra,(1) <blockquote>The beginnings of financialization date back to the 1960s when conglomerate titans built empires by gobbling up scores and even hundreds of companies. Business schools justified this concentration of corporate power by teaching that a good manager could manage any type of business — the bigger the better. </blockquote> This was the notion of the <a href="http://hcrenewal.blogspot.com/search/label/generic%20managers">generic manager</a>. In health care, generic managers who have little specific health care knowledge or experience, and little understanding of or sympathy for the values of health care professionals might be particularly ruthless about putting short-term financial goals ahead of everything else. Summary On Health Care Renewal, we have focused on problems with health care leadership and governance. We have discussed the rise of <a href="http://hcrenewal.blogspot.com/search/label/generic%20managers">generic managers</a>, a focus on short-term revenue sometimes leading to <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management">mission-hostile management,</a> the <a href="http://hcrenewal.blogspot.com/search/label/perverse%20incentives">perverse incentives</a> generated by<a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation"> executive compensation</a> that is unrelated to achievement of the health care mission's goals, lack of executive <a href="http://hcrenewal.blogspot.com/search/label/accountability">accountability</a>, and sometimes executives' complete <a href="http://hcrenewal.blogspot.com/search/label/impunity">impunity</a>. It now appears that health care's leadership and governance problems simply reflect larger problems in the society as a whole. Maybe it should be a relief that we in health care are not uniquely cursed. However, the immensity of the problems faced by our society as a whole will not make it easier to solve the problem of health care dysfunction. I do feel better that our focus has been correct. Furthermore, I feel more confident asserting once again that true health care reform would put in place leadership that understands the health care context, upholds health care professionals' values, and puts patients' and the public's health ahead of extraneous, particularly short-term financial concerns. We need health care governance that holds health care leaders accountable, and ensures their transparency, integrity and honesty. Maybe realizing that health care's problems are a part of society's problems will lead to more support for their solutions. References 1.  Lazonick W. How American corporations transformed from producers to predators.  Naked Capitalism, April 2, 2012.  Link <a href="http://www.nakedcapitalism.com/2012/04/how-american-corporations-transformed-from-producers-to-predators.html">here</a>. 2. Lazonick W. How high CEO pay hurts the 99 percent. Naked Capitalism, April 3, 2012. Link <a href="http://www.nakedcapitalism.com/2012/04/william-lazonick-how-high-ceo-pay-hurts-the-99-percent.html">here</a>. 3. Lazonick W. Three corporate myths that threaten the wealth of the nation. Naked Capitalism, April 6, 2012. Link <a href="http://www.nakedcapitalism.com/2012/04/three-corporate-myths-that-threaten-the-wealth-of-the-nation.html">here</a>. 4. Parramore L. Capitalism's dirty secret: corporations don't create jobs, they destroy them.  Naked Capitalism, April 5, 2012.  Link <a href="http://www.nakedcapitalism.com/2012/04/lynn-parramore-capitalisms-dirty-secret-corporations-dont-create-jobs-they-destroy-them.html">here</a>.

Health Care Dysfunction Explained by the Fallacy of "Maximizing Shareholder Value"

Over the last two weeks, the Naked Capitalism blog ran a multi-part series (1-4) on what has gone wrong with US public for-profit corporati...

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There They Go Again - Pfizer CEO Compensation Triples, Ordinary Employees' Severance Cut

In mid-March, Pfizer, which used to proclaim itself to be the world's largest research-based pharmaceutical company, announced in a regulatory filing a huge increase in total compensation for its relatively new CEO.  Per the AP, <a href="http://online.wsj.com/article/AP2d98c5770af7413191c6c05d66a564f7.html">via</a> the Wall Street Journal: <blockquote>Pfizer Inc. nearly tripled CEO Ian Read's compensation in 2011, his first full year as top executive of the world's largest drugmaker, which has been cutting costs and making other moves to compensate for generic competition hurting sales of top medicines. Read, 58, received compensation worth a total of $18.12 million in 2011, up from $6.42 million in 2010, according to an Associated Press analysis of a regulatory filing Thursday by the maker of Viagra and cholesterol fighter Lipitor. The total includes a salary of $1.7 million, up 42 percent, stock awards and option awards totaling about $12.5 million, a $3.5 million incentive award and about $319,000 in other compensation. The last category ranges from use of company aircraft and a car and driver to contributions to Read's retirement savings.</blockquote> Contrast: Decreasing Research and Development Spending, Facilities, Employment Mr Read seems to have been rewarded for decreasing the scope of research and cutting research spending: <blockquote>Over the past year, Read has narrowed the focus of Pfizer's huge research operations to diseases with big sales potential or few existing treatment options, trimming the research budget significantly in the process.</blockquote> Reuters <a href="http://www.reuters.com/article/2012/03/15/pfizer-compensation-idUSL4E8EF78Y20120315">noted</a> that involved sweeping layoffs and the closure of multiple research facilities: <blockquote>Pfizer said it had improved its performance during 2011 by reducing research spending by nearly $1 billion. That feat came, however, at the expense of thousands of Pfizer researchers, whose jobs are being eliminated along with numerous laboratories in an effort to ultimately slash Pfizer research spending by up to $2 billion a year.</blockquote> Contrast: Long-Term Shareholder Value Read traded research capacity, and presumably the long-term value of the company, for an immediate boost in the stock price, <blockquote>Pfizer, under Read, has narrowed its focus to five main therapeutic areas and is considering either selling or spinning off its nutritional products and animal health units. Proceeds from the transactions will likely be used to buy back company shares, Read has said, delighting investors and helping boost company shares almost 27 percent in the past twelve months.</blockquote> On the other hand, a quick look at <a href="http://www.google.com/finance?q=pfizer">Google Finance</a> reveals that while the stock price is higher than it has been since 2009, it is roughly half of what it was from the late 1990s until 2004. On <a href="http://www.pfizer.com/about/">its web-site</a>, the company still proclaims, however, <blockquote>we at Pfizer are committed to applying science and our global resources to improve health and well-being at every stage of life. </blockquote> Contrast: Treatment of Other Employees Note that Mr Read is an employee of Pfizer, albeit its most highly paid employee by a huge margin. Other employees are not being treated so well. The massive increase in CEO compensation should also be contrasted with the company's new severance policies, as explained in <a href="http://www.theday.com/article/20120410/BIZ02/304109921/-1/BIZ">an article</a> from last week in The (New London, CT) Day, <blockquote>Pfizer Inc. personnel being laid off at the company's Groton laboratories after May 14 will receive less money than previous waves of departing workers have received. Pfizer, at the tail end of a planned 1,100 layoffs locally, said in a memo released last week that in the future people leaving the company will receive eight weeks of severance in addition to two weeks for every year served with the company. The pharmaceutical giant had previously offered at least 12 weeks of severance to employees, and before acquiring Wyeth Pharmaceuticals in 2009 had handed out three weeks of pay for every year served.</blockquote> Summary While Pfizer recently has made an amazing series of ethical missteps (look <a href="http://hcrenewal.blogspot.com/2011/10/what-pfizer-v-few-consequences-for-long.html">here</a>), a decreasing drug pipeline, lost half of its stock price since its peak, and decreased its ability to develop new products, it has quickly returned to its previous ways of making its top hired executives very rich. (No matter, by the way, that Mr Read ought to bear some responsibility for the company's previous problems, since as the AP pointed out, he "has spent his entire career at the New York-based drugmaker, became Pfizer's CEO in December 2010 after running its worldwide pharmaceutical business since 2006.") This is just the latest of many, many examples of how top hired executives of health care organizations are not like you and me. Whatever is happening to their organization, whatever its faithfulness to its mission, its performance, its value, its treatment of employees in general, many CEOs just get to take more and more off the top. Given this perverse incentive structure, is there really any question why most health care organizations do not always seem to put patients' or the public's health, or health care professionals' values, or their employees' welfare, or even their owners' financial interests (when they are publicly held for-profit corporations) first?  Or why health care costs steadily increase while quality and access decrease? Repeat after me - we will never solve the problem of health care dysfunction until we assure that the leaders of health care organizations are well-informed about the context of health care, uphold health care professionals' values, put patients' and the public's health first, are accountable and transparent, and receive reasonable incentives based on all the above.

There They Go Again - Pfizer CEO Compensation Triples, Ordinary Employees' Severance Cut

In mid-March, Pfizer, which used to proclaim itself to be the world's largest research-based pharmaceutical company, announced in a regu...

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The Pittsburgh Experiment - II - Another Echo of the Fall of AHERF

We recently <a href="http://hcrenewal.blogspot.com/2012/04/pittsburgh-experiment-i-caught-in.html">started</a> a series of posts about the battle for domination of health care in western Pennsylvania.  The contenders are the UPMC hospital system, the dominant hospital system in the region, and Highmark, the dominant health insurer in the region.  While these two health care behemoths fight, patients, health care professionals, and the public seem to be caught in the <a href="http://hcrenewal.blogspot.com/search/label/cross%20fire">crossfire</a>. There is something of history repeating itself in this battle. The biggest bone of contention in it is Highmark's attempt to purchase the struggling West Penn Allegheny hospital system.  UPMC leadership seemed to feel that this would put the insurer in direct competition with it, even though UPMC already provides a health insurance product, the <a href="http://www.upmchealthplan.com/">UPMC Health Plan</a>. West Penn Allegheny, in turn, is struggling because it is a remnant of a previous attempt by a single organization to dominate the health care system in this area.  As we <a href="http://hcrenewal.blogspot.com/2011/07/restless-shade-of-aherf-and-return-of.html">wrote</a> in 2011,  West Penn Allegheny was formed from some components of what used to the be the Allegheny Health Education and Research Foundation, AHERF.   AHERF was a large integrated health care system formed out of multiple mergers.  AHERF went bankrupt in 1998, leading to massive layoffs, hospital closures, and the near dissolution of a medical school (which ended up taken over by Drexel University). As we <a href="http://hcrenewal.blogspot.com/2008/07/10-years-later-eerie-echo-of-fall-of.html">noted</a> in 2008, although the AHERF bankruptcy appears to be the largest failure of a not-for-profit health care corporation in US history, its story has produced remarkably few echoes for doctors, other health care professionals, health care researchers, and health policy makers. I often use the fall of AHERF as major example in talks, at least the few talks I am allowed to give on such unpleasant subjects. Rarely have more than a few people in the audience heard of AHERF prior to my discussion of it. I only could locate <a href="http://content.healthaffairs.org/cgi/reprint/19/1/7.pdf">one article </a>in a medical or health care journal that discussed the case in detail, albeit incompletely since it was written before Abdelhak's guilty plea [Burns LR, Cacciamani J, Clement J, Aquino W. The fall of the house of AHERF: the Allegheny bankruptcy. Health Aff (Millwood) 2000; 19: 7-41.] I doubt the case is used for teaching in most medical or public health schools. (There is a new book out about the case, Merger Games, by Judith Swazey, available <a href="http://muse.jhu.edu/books/9781439907191">here</a> as  a set of PDF files from Project Muse for those with the proper password, but it has not yet had much of an impact, and I confess I have not yet read it.)  The lack of discussion of such a significant case is a prime example of the <a href="http://hcrenewal.blogspot.com/2007/08/bling-bling-poltical-correctness-and.html">anechoic effect</a>. Therefore, let me summarize some of important points about AHERF not found above (see also <a href="http://www.acponline.org/chapters/ri/nl-fall04.pdf">this narrative</a>, starting on page 5): <ul><li>AHERF, one of the largest health care systems of its day, was built by the poster-boy for health care imperial CEOs, Sherif Abdelhak.</li><li>Abdelhak, who <a href="http://www.post-gazette.com/aherf/part2.asp">started as food services purchasing manager </a>at Allegeheny General Hospital, was repeatedly hailed as a "visionary" (<a href="http://www.acponline.org/journals/news/mar97/phillymc.htm">in the March, 1997, ACP Observer</a>) a "genius," and the like. His plans to create a huge integrated health care system were part of the wave of the future. Abdelhak was even invited to give the prestigious John D Cooper lecture at the annual meeting of the American Association of Medical Colleges (AAMC), which was published in Academic Medicine [Abdelhak SS. How one academic health center is successfully facing the future. Acad Med 1996; 71: 329-336.] He proclaimed that "we will need to create new forms of organization that are more flexible, more adaptive, and more agile than ever before." And he announced that "my aim as chief executive has been to unleash the creativity and productive potential of every individual and to provide an environment that encourages teamwork" </li><li>While Abdelhak was making these grandiose promises, he paid himself and his associates very well. For example, he received $1.2 million in the mid-1990s, more than three times the average then for a hospital system CEO. He lived in a hospital supplied mansion worth almost $900,000 in 1989. Five of AHERF's top executives were in the top 10 best paid hospital executives in Philadelphia.</li><li>Although Abdelhak talked of teamwork, he warned the combined faculty of the new Allegheny University of the Health Sciences (AUHS): <a href="http://www.post-gazette.com/aherf/part6.asp">"Don’t cross me or you will live to regret it."</a></li><li>As AHERF was hemorrhaging money, Abdelhak continued to pay himself and his cronies lavishly.</li><li>After the AHERF bankruptcy, which was at the time the second largest bankruptcy recorded in the US, Abdelhak was charged with numerous felonies involving receiving charitable assets. In a plea bargain, <a href="http://www.post-gazette.com/localnews/20020830abdelhak0830p4.asp">he pleaded no contest </a>to misusing charitable funds, a misdemeanor, and was sentenced to more than 11 months in county prison.</li></ul>The story of AHERF is not merely that of an unlucky bankruptcy. It shows what can go wrong when health care adopts business practices such as jumping the latest management band-wagons and genuflecting before imperial CEOs.  It also shows what happens when a single health care organization, and the person who leads it, becomes too powerful. If either UPMC or Highmark definitively wins their current battle, the winner will become at least as locally dominant as AHERF.  As we shall see in the posts to come in this series, the leadership of both organizations has already demonstrated a certain arrogance.  Yet since 2008 we have not progressed to the point of controlling the tendency of a laissez faire health care system to approach monopoly, nor the monopolist's tendency to put his self-interest ahead of all else.  If nothing else, maybe the messiness of the fight between UPMC and Highmark will remind more people of AHERF, hence the need not to let our health care leadership and governance problems remain anechoic, hence the need for true health care reform that would constrain health care leaders to put patients' and the public's health before their narrow self-interest.

The Pittsburgh Experiment - II - Another Echo of the Fall of AHERF

We recently started a series of posts about the battle for domination of health care in western Pennsylvania. The contenders are the UPMC ...

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The Pittsburgh Experiment - I - Caught in the Crossfire

In our increasingly dysfunctional health care system, patients, health care professionals and the public are often caught in the crossfire between big health care organizations.  Such organizations are often led by people who do not seem to put the interests of patients and the public, and the values of professionals first.  (Note that we have been writing about this since at least 2003, when the concept appeared in my article: Poses RM. A cautionary tale: the dysfunction of the American health care system. Eur J Int Med 2003; 14: 123-130. Link <a href="http://www.ejinme.com/article/S0953-6205%2803%2900029-3/abstract">here</a>.) Last week, Anna Wilde Matthews and John W Miller <a href="http://online.wsj.com/article/SB10001424052702303812904577295901619123904.html">wrote in the Wall Street Journal</a> about an amazing example of such a crossfire that pitted the two dominant health care organizations in Western Pennsylvania against each other.  The case turns out to touch on many of the most dysfunctional aspects of US health care.  So rather than try to cram it into an overly long blog post, I plan to periodically discuss it over the next few weeks, starting now with an overview of the grappling titans. The Basic Conflict Per the Wall Street Journal article, <blockquote>In Pittsburgh, the acrimonious battle between <a href="http://hcrenewal.blogspot.com/search/label/Highmark">Highmark</a>, the region's most powerful health insurer, and <a href="http://hcrenewal.blogspot.com/search/label/UPMC">UPMC</a>, the dominant health-care provider, is drawing national attention as a test case on the impact of consolidation in the health-care industry. At the heart of the dispute is Highmark's effort to acquire a financially troubled local hospital group, West Penn Allegheny Health System, as the centerpiece of what it says will be a lower-cost and more efficient health-care operation. UPMC, which has its own insurance arm as well as 19 area hospitals and 3,240 doctors, says it doesn't want to bolster a company it now considers a direct rival. It has vowed not to sign a new contract to treat patients covered by Highmark, which would mean those patients generally would pay high out-of-network rates to use UPMC hospitals and doctors.</blockquote> As we will see, the dispute is between a dominant hospital system that is trying to muscle into the insurance business, and a dominant insurer that is trying to muscle into the hospital business. If either were to succeed, it would become the dominant health care organization in the Pittsburgh area. A Personal Fight Amongst Two CEOs However, the fight soon seemed to be more among the CEOs of the two organizations. Per the WSJ, <blockquote>In Pittsburgh, the battle has become unusually bitter, spearheaded by the two companies' chief executives, UPMC's Jeffrey A. Romoff, 66, and Highmark's Kenneth Melani, 58. Mr. Romoff, who has built UPMC into a $9 billion juggernaut and put its initials on the tallest skyscraper in the city, calls Highmark a 'monopoly.' Dr. Melani uses the same term in warnings about UPMC's power and referred to Mr. Romoff in a local newspaper as 'trying to rape the commercial marketplace to build his empire.'  (A spokesman for Mr. Romoff said the comment 'lacked both substance and dignity.')</blockquote> An <a href="http://www.pittsburghlive.com/x/pittsburghtrib/news/pittsburgh/s_771458.html">article</a> from December, 2011 in the Pittsburgh Tribune-Review had illustrated other aspects of the bitterness about and between the CEOs. <blockquote>UPMC CEO Jeffrey Romoff's satiric, fake Twitter profile lists his favorite games as Monopoly and Risk. In recent tweets, the anonymous author wrote under his name, 'New York State, here we come!' and said he wants to take Highmark CEO Dr. Kenneth Melani 'outside to settle things -- but it would be unfair competition if (we) could BOTH use our fists.' The month-old Fake Jeffrey Romoff persona, whose author declined to be interviewed but said it's 'no laughing matter,' depicts the head of Western Pennsylvania's dominant health care system as a greedy tyrant with an angry avatar. It counts fewer than 40 followers, but its existence points to a public relations failure for UPMC in its fight with Highmark Inc., media experts say. 'Nobody feels sorry for Romoff,' said Andrea Fitting, president of Downtown marketing firm Fitting Group. 'If you ask anyone on the street, they'll say Romoff is a monster. There's no person who's trustworthy and sympathetic who they've enlisted as a spokesman.' Romoff could not be reached for comment. UPMC spokesman Paul Wood said he is not concerned about the profile's effect on the hospital network's image. 'Not something that has virtually no followers,' he said. There's no fake Twitter handle lampooning Melani, but experts say the state's largest insurer is not doing a great job of managing its public image either.</blockquote> As found in the WSJ article, <blockquote>'There's no white hat here,' says Don White, a Republican who chairs the state Senate committee overseeing insurance. 'They're both concerned about their self-preservation and domination.' </blockquote> Neither CEO seems satisfied that his organization has become dominant in its field, and both seem to resent the success of the other organization in another field. Let us briefly review the backgrounds of both systems. UPMC as Dominant Hospital System The WSJ article started to probe the complexity of the situation: <blockquote>The struggle in Pittsburgh has roots that go back decades. UPMC, led since 1992 by Bronx native Mr. Romoff, has grown on his watch to $9 billion in annual revenue from $797 million when he took over. Today, UPMC has around 58% inpatient market share in Allegheny County and a brand buoyed by its identification with nationally known research and treatment centers like Hillman Cancer Center, where Ms. Wyckoff is being treated. The nonprofit system, with around $406 million in operating income in its most recent fiscal year ended June 30, is also Pennsylvania's biggest private employer. UPMC's initials dominate the Pittsburgh skyline from the top of the U.S. Steel Tower, the city's tallest building. The nonprofit leases a private jet that is used to fly executives and doctors to its facilities in Ireland and Italy. Mr. Romoff has become one of the city's most prominent business leaders. Poking fun at a local nickname for his boss, a staffer once presented Mr. Romoff with a Darth Vader action figure. In 2009, UPMC published a glossy history of its own expansion titled 'Beyond the Bounds.'</blockquote> Highmark as Dominant Insurer On the other hand, <blockquote>As UPMC grew, its main hospital rival, West Penn Allegheny, withered. The five-hospital group emerged from the ashes of a Pennsylvania hospital system that filed for bankruptcy in 1998 after piling on too much debt and acquiring money-losing assets. It struggled for years. By 2011, West Penn Allegheny was in the red, with heavy debt and pension obligations. To cut costs, it shut down much of its Western Pennsylvania Hospital. At one point, filmmakers took over its empty intensive-care unit to film a scene for a coming Tom Cruise movie. In June, Highmark's Dr. Melani unveiled his plan to acquire West Penn Allegheny for a combination of loans and grants valued at as much as $475 million. Like UPMC, nonprofit Highmark was a dominant presence in its market, formed from the merger of a Blue Cross and a Blue Shield plan in 1996. By 2011, it had market share of around 60% in Allegheny County, with annual revenue of $14.8 billion, and it was sitting on reserves of about $4.1 billion. Still, it was a bold and risky stroke for Dr. Melani, a blunt-spoken internal-medicine physician who himself trained at West Penn.</blockquote> Marketing Rather than Substance The two sides launched a marketing and public relations battle which did not seem to have much to do with quality of, access to, and cost of health care. As the WSJ article noted, <blockquote>The spat quickly got nasty. Highmark highlighted UPMC's rate request in ads, and hired a Washington lobbying firm to pull together a coalition of churches, patient groups and others that would press for a deal. UPMC's own ad campaign urged patients to 'Keep your doctor. Check your plan.' Highmark sued, arguing the ads were misleading. UPMC bought Google ads that called up its site when a user searched for 'Highmark.'</blockquote> The Pittsburgh Tribune-Review article included, <blockquote>Public relations experts agree that Highmark faces a daunting challenge: People might see UPMC -- and by extension, Romoff -- as a bully, but they don't want to lose access to the system's 19 hospitals and 3,000 doctors in Western Pennsylvania. UPMC's 'Keep Your Doc' ad campaign, produced by South Side agency GatesmanMarmion+Dave, is successful because it furthers the organization's business objectives, said Dale Leibach, an associate with Prism Public Affairs in Washington. This year, for the first time, UPMC gave four national insurers full access to its facilities and doctors, an arrangement previously granted only to Highmark. 'I would give points to UPMC for consistency and transparency, in promising more competition and then delivering on that promise by giving people in Pittsburgh and in the region many more options in terms of insurance providers,' said Leibach, who reviewed news accounts about the dispute. David Kosick Sr., senior associate at KMA Public Relations in Canonsburg, takes the opposite stance, saying Highmark receives greater sympathy from a public that views UPMC as an insensitive corporate titan. Mullen Advertising in the Strip District produces Highmark's 'Accepted. Everywhere' ad campaign for TV, radio, publications, billboards and the Internet. 'Highmark's winning the PR battle,' Kosick said, citing threats by state lawmakers to intervene and public criticism directed at UPMC, including Allegheny County Council's refusal last month to issue $335 million in bonds for UPMC because of public opposition. Wood said the health system recognizes its reputation 'may have taken a bit of a short-term hit locally,' but 'UPMC is focused on the longer term.' 'We've used our PR and marketing to fundamentally change the health care market in Western Pennsylvania,' Wood said. Gene Grabowski, senior vice president of Washington-based public relations firm Levick Strategic Communications, said that strategy could backfire.</blockquote> Also, <blockquote>In addition to online social media, the public relations campaigns have ramped up on television and in other advertising. UPMC placed its TV ads on major networks and cable and estimates they will reach the average Pittsburgh viewer four times a week, Wood said. He declined to say how much UPMC is spending on the ad campaign or what it budgets for advertising, but he said the budget has not changed since last year. The ads, Fitting said, target 'what people are really worried about.' Highmark stepped up its campaign in response to UPMC's, Weinstein said. He would not say how much Highmark pays Mullen Advertising or what it budgets for advertising. 'UPMC launched an aggressive, multifaceted misinformation campaign targeted at employers and consumers who subscribe to Highmark's health plans,' Weinstein said.</blockquote> Caught in the Crossfire Meanwhile, of course, patients and doctors are trying to avoid being stomped by the wrestling titans. The Wall Street Journal article opened with this theme, <blockquote>Trish Wyckoff is struggling with stage-four breast cancer, but now the 53-year-old Pittsburgh resident has another worry: a possible divorce between the hospital system that is treating her, the University of Pittsburgh Medical Center, and Highmark Inc., the health insurer that pays for her care. If the two companies can't agree, she fears she won't be able to keep seeing the doctors who she believes are keeping her alive. 'We are absolutely stuck in the middle,' she says. This is a really scary time.' </blockquote> Here is another anecdote, <blockquote>With local newspapers chronicling each tit-for-tat, Pittsburgh residents like Dan Glasser say they have been acutely aware of the battle. Mr. Glasser, a 46-year-old lawyer, says he is alarmed and annoyed at the potential split between his insurer and UPMC. If forced to choose a side, he says, he would switch health plans to ensure access to UPMC. He has been seeing the same doctor there since he graduated from law school. 'That's almost my whole adult life,' he says.</blockquote> Doctors are equally unhappy. <blockquote>For his part, Kenneth Gold, Mr. Glasser's primary care physician, says he has been telling worried patients that 'all of us are pawns in this fight,' which he hopes gets resolved. If Highmark and UPMC do break up, 'it is going to be mass chaos,' he says. </blockquote> Even employers are unhappy, <blockquote>Employers, for their part, say they feel trapped in the middle, worried about health-care costs and also under pressure from employees to lock in access to UPMC. Cheryl Melinchak, director of benefits at Pittsburgh-based Westinghouse Electric Co., says the firm is likely to offer a new health plan this fall, in addition to Highmark and a high-deductible Aetna version, to ensure workers can use UPMC. The standoff is 'frustrating,' she says. 'We need competition on both sides,' insurers and health providers. </blockquote> Summary So here we have the brave new world of the US health care system, a system that some people in other countries seem to think is worthy of emulation. Increasing <a href="http://hcrenewal.blogspot.com/search/label/concentration%20of%20power">concentration of power</a> has lead to health care dominated by ever larger organizations lead by ever more egocentric executives. Organizations that are dominant in one area seek to dominate other areas. Caught in the crossfire are patients, doctors, employers, and the public. While more money goes to advertising, public relations, and lawyers, nothing about the fight seems to be about improving care or making it more accessible. Further considering how this particular fight came to be will reveal various interlocking facets of health care dysfunction. If we can start to address them, we may be able to accomplish real health care reform.  Clearly we need health care organizations to concentrate on health care, not on increasing their power and domination.  We need them using most of their resources for health care, not on marketing, public relations, legal services, administrative support, and executive compensation.  Stay tuned to <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a> as we continue this series.

The Pittsburgh Experiment - I - Caught in the Crossfire

In our increasingly dysfunctional health care system, patients, health care professionals and the public are often caught in the crossfire b...

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More "You're Too Negative, And You Don't Provide The Solution To The Problems You Critique", This Time re: Pharma

I think it worth noting that critical writers about both health IT and pharma attract a similar phenomenon: the anonymous attack accusing them of 'negativity' and not providing 'solutions.' One excellent blog I read, as a former director of a pharmaceutical R&D department that supported, among others, medicinal chemists, is Derek Lowe's "<a href="http://pipeline.corante.com/">In the Pipeline</a>." In the comment thread at his 'In the Pipeline' understatement-of-the-year post "Taking the Ax to the Scientists Is Probably a Mistake" (<a href="http://pipeline.corante.com/archives/2012/04/02/taking_the_ax_to_the_scientists_is_probably_a_mistake.php">link</a>), I posted numerous links to various Healthcare Renewal posts on pharma's current travails related to that theme, and to other forms of pharma mismanagement. The comment thread is below the post itself at the aforementioned link. I post as "MIMD" and frequently link here and to my Drexel academic site, so I am anything but anonymous. Invariably, a response (anonymous, of course!) of the type we've seen here at Healthcare Renewal (such as <a href="http://hcrenewal.blogspot.com/2010/01/electronic-medical-records-and-going.html?showComment=1264052395182#c3086217865260584599">here</a> and in a more extreme example, <a href="http://hcrenewal.blogspot.com/2010/01/more-on-perversity-in-hit-world.html">here</a>) has appeared. Various logical fallacies are used as a form of argument. Emphases and red comments mine: <a href="http://pipeline.corante.com/archives/2012/04/02/taking_the_ax_to_the_scientists_is_probably_a_mistake.php#885215"></a><blockquote><a href="http://pipeline.corante.com/archives/2012/04/02/taking_the_ax_to_the_scientists_is_probably_a_mistake.php#885215">74. </a>Reply to MIMD [how's that for anonymity - a screen name of "Reply to MIMD"? - ed.] on April 4, 2012 3:44 AM writes... MIMD, you have commented at length on this post blaming various parties for the industry's woes [i.e., you're too negative - ed.], dismissing other points of view [that are almost always unsubstantiated; I provide hyperlinks to posts at this blog and others regarding pharma mismanagement and malfeasance to justify my views - ed.] out of hand [well, no, actually - ed.] and offering nothing in the way of new ideas or solutions. [Except for the myriad aforementioned links and clearer identification of the problems - ed.] And then, this: "If I were still in pharma and had kids in college and a mortgage, and a hope for a pension, I'd literally be keeping my head low. And certainly not writing the types of posts I do here and on the blog I often link to!" [Pharma is as retaliatory of its internal critics and "whistleblowers" as is clinical medicine, except doesn't even bother with sham "peer review"; they just send people out the door. I do not believe pharma management understands or cares about the implications to people who are not wealthy. Discreetness and timing are everything for putative internal medchem change agents in this environment - ed.] I'd just like to get your thoughts on the delicious irony of this post in the middle of your long-winded and boring commentary. [Approaching ad hominem - ed.] As far as I understand, you're advocating that pharma scientists blame anything that breathes for the problems whilst [seems to be from UK or related country - ed.] actively avoiding attempting to find a solution. [Classic strawman argument - ed.] Weirdo [another anonymous poster, possibly the same person as this - ed.] commented on this, and you laughably dismissed it out of hand so I expect no more. [I opined that a naïvely idealistic and/or cruel Marie Antoinette-like suggestion that laid-off medicinal chemists simply just set up their own drug discovery shops to show Big Pharma how it 'should be done', as if doing so were a realistic option financially for mostly middle class people strapped by being laid off mid-career, was a useless suggestion - ed.] But if you do fancy dropping a few more 'pearls of wisdom' our way I'd be fascinated to read them! I think it was Homer Simpson that said "It's everybody's fault but mine". Seems apt, no? [No, in fact - ed.] <a href="http://pipeline.corante.com/archives/2012/04/02/taking_the_ax_to_the_scientists_is_probably_a_mistake.php#885215">Permalink to Comment</a></blockquote> My reply was: <a href="http://pipeline.corante.com/archives/2012/04/02/taking_the_ax_to_the_scientists_is_probably_a_mistake.php#885615"></a><blockquote><a href="http://pipeline.corante.com/archives/2012/04/02/taking_the_ax_to_the_scientists_is_probably_a_mistake.php#885615">75. </a>MIMD on April 4, 2012 9:49 AM writes... Re: #74 Regarding your comments, I offer a hearty "so what?" In your comment I see no meaningful critiques of any of the volumes of writing I've posted links to, other than the hackneyed, quasi-ad hominem, without-merit statement about "dismissing other points of view out of hand and offering nothing in the way of new ideas or solutions." That's disappointing. I also must point out this classic example of the strawman fallacy: you're advocating that pharma scientists blame anything that breathes for the problems whilst actively avoiding attempting to find a solution I do believe they teach better debating skills in the Commonwealth realms. Finally, when you come out from behind your cloak of anonymity, I'll consider answering in more depth. Who are you? What agenda are you hiding? My bio is on the site I often link to, as well as at <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/" rel="nofollow">here</a>. <a href="http://pipeline.corante.com/archives/2012/04/02/taking_the_ax_to_the_scientists_is_probably_a_mistake.php#885615">Permalink to Comment</a></blockquote> Derek Lowe's blog is a serious site for medicinal chemists and like-minded scientists currently being discarded by pharma; a perfect place for anonymous pharma sockpuppets to intersperse their materials. Although I doubt it, it will be interesting to see if the anonymous poster reveals exactly who they are and what their agenda is. I add that in an industry plagued with scientific <a href="http://hcrenewal.blogspot.com/search/label/ghost%20writing">ghostwriting</a>, <a href="http://hcrenewal.blogspot.com/search/label/suppression%20of%20medical%20research">suppression of negative research</a>, misleading <a href="http://hcrenewal.blogspot.com/search/label/marketing">marketing</a>, an endless parade of "<a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a>" for various forms of malfeasance, mass <a href="http://hcrenewal.blogspot.com/2008/06/gsk-whacks-its-employees-hard.html">layoffs</a> and other troublesome practices, I find "ghost commenters" who attack the industry's detractors from behind cloaks of anonymity quite suspect. (Unless, of course, and ironically, the writer is afraid of pharma retaliation.) Finally, I can understand how pharma executives might find detailed stories about pharma mismanagement and leadership thought errors profoundly disturbing. They are usually protected from such candid material in their dystopic, highly remunerative cocoons surrounded by ear-pleasing consultants and employee sycophants rightly fearing career termination. -- SS

More "You're Too Negative, And You Don't Provide The Solution To The Problems You Critique", This Time re: Pharma

I think it worth noting that critical writers about both health IT and pharma attract a similar phenomenon: the anonymous attack accusing t...

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Divide by Zero: Weird Math in CMS Clinical Quality Measure (CQM) Criteria

From the CMS "<a href="https://www.cms.gov/EHRIncentivePrograms/Downloads/EP_Attestation_User_Guide.pdf">Medicare Electronic Health Record (EHR) Incentive Program - ATTESTATION USER GUIDE For Eligible Professionals (EPs)</a>" (warning: large PDF), page 41/64: <blockquote>... Step 25 – Core Clinical Quality Measures (CQMs 1 of 3) EPs must report calculated CQMs directly from their certified EHR technology as a requirement of the EHR Incentive Programs. Each EP must report on three core CQMs (or alternate core) and three additional quality measures. If one or more core CQMs is outside your scope of practice, you will have to report on an equal number of alternate core CQM(s). If the denominator value for all three of the core CQMs is zero, an EP must report a zero denominator for all such core measures, and then must also report on all three alternate core CQMs. If the denominator value for all three of the alternate core CQMs is also zero an EP still needs to report on three additional clinical quality measures. Zero is an acceptable denominator provided that this value was produced by certified EHR technology.</blockquote> Now, while I had an "800" in the math section of the SAT, where I believed that a fraction with a denominator of zero had a value of either infinity or 'undefined', that was many moons ago. Perhaps my knowledge of mathematics is now obsolete... Wait - I tried this simple program on an old Microsoft MS-DOS GWBASIC interpreter, ported ca. 1981 to the Intel 8086/88 from Bill Gates' original 8080-based MBASIC, that I have laying around on my PC: <blockquote>10 INPUT X 20 LET Y=X/0 30 PRINT Y 40 END</blockquote> and got this warning/error message, right from Bill Gates: "Division by zero" and the answer: 1.701412E+38 (infinity in the 8/16-bit world from where GWBASIC sprang). So ... allow me to say I find CMS math just a bit puzzling. Wait ... now I understand. Infinite quality! :-) But thank heavens the zero denominator is only accepted when produced by <a href="http://hcrenewal.blogspot.com/2012/02/hospitals-and-doctors-use-health-it-at.html">'certified' health IT</a>. Uncertified health IT is liable to produce a denominator of "i" (that is, the square root of -1). -- SS Addendum: since I am not a government math genius, I checked with <a href="http://en.wikipedia.org/wiki/Fraction_%28mathematics%29">Wikipedia</a>: <blockquote> ... A common fraction (also known as a vulgar fraction or simple fraction) is a <a href="http://en.wikipedia.org/wiki/Rational_number" title="Rational number">rational number</a> written as a/b or <img alt="\tfrac{a}{b}" class="tex" src="http://upload.wikimedia.org/wikipedia/en/math/e/c/3/ec3e447b2dcda3eb68860a5cb3780bf7.png" />, where the <a href="http://en.wikipedia.org/wiki/Integer" title="Integer">integers</a> a and b are called the numerator and the denominator, respectively.<a href="http://en.wikipedia.org/wiki/Fraction_%28mathematics%29#cite_note-0">[1]</a> The numerator represents a number of equal parts and the denominator, which cannot be zero, indicates how many of those parts make up a unit or a whole.</blockquote> -- SS Addendum: This post is partly satire. I was a day late for April 1 but... -- SS

Divide by Zero: Weird Math in CMS Clinical Quality Measure (CQM) Criteria

From the CMS " Medicare Electronic Health Record (EHR) Incentive Program - ATTESTATION USER GUIDE For Eligible Professionals (EPs) ...

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University of Arizona Medical Center, $10 million in the red in operations, to spend $100M on new EHR system

In my Oct. 2006 post "<a href="http://hcrenewal.blogspot.com/2006/10/70-million-for-electronic-medical.html">$70 million for an Electronic Medical Records system?</a>" I wrote: <blockquote> ... healthcare doesn’t have the capital for clinical IT misadventures, and I believe when the issues become more public in this industry sector and information flows about mismanagement and abuses (as is happening in the UK ’s <a href="http://www.manchestereveningnews.co.uk/news/health/s/219/219945_leaked_papers_reveal_nhs_computer_problems.html" target="blank">Connecting for Health </a>project) [now abandoned <a href="http://hcrenewal.blogspot.com/2011/09/npfit-programme-going-pffft.html">as described here</a> - ed.], the fallout won’t be pretty. </blockquote> Here's an example of an organization in profound ardent technophile-driven <a href="http://hcrenewal.blogspot.com/2012/02/health-it-ddulites-and-irrational.html">Ddulite mode</a>: <blockquote> <a href="http://azstarnet.com/business/local/ua-medical-center-to-spend-m-on-new-records-system/article_a0866af4-9890-502f-8454-530cebf71bcf.html?mode=story">UA Medical Center to spend $100M on new records system</a> Tucson's largest health-care organization expects to spend upward of $100 million on getting its two hospitals talking to each other. Right now, the inpatient medical record systems at the University of Arizona Medical Center's two campuses aren't speaking to each other. The lack of communication is resulting in more work for healthcare providers in the University of Arizona Health Network. [How much more work, exactly, and how much would a non-cybernetic solution cost? These issues seem never to be mentioned - ed.] The $1.2 billion, nonprofit company employs nearly 7,000 people. The network is installing a new, uniform electronic medical records system for all patients at its two hospitals - UA Medical Center - University Campus and UA Medical Center - South Campus - and at outpatient centers as well. ... Project leaders predict it will result in a more efficient organization with fewer medication errors and better patient care. ... The new system's benefits will certainly trickle down to patients, said Clint Hinman, an experienced pharmacy director within the network who is directing the computer upgrade program. [Note once again the absolutist statements of deterministic benefit and beneficence, based on scant supportive evidence and increasing contradictory evidence, that I bolded above - ed.] </blockquote><div style="overflow: hidden; color: rgb(0, 0, 0); background-color: rgb(255, 255, 255); text-align: left; text-decoration: none; border: medium none;">I note that $100 million+ is probably enough to pay for AN ENTIRE NEW HOSPITAL or hospital wing ... or a lot of human medical records professionals. Executives and project leaders have probably never read any of the literature at the reading list <a href="http://hcrenewal.blogspot.com/2011/02/updated-reading-list-on-health-it.html">here</a> or at my academic site <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/">here</a>, or if they have, choose to be blind to it and trusting of literature such as ONC's sloppy-science "should not have been published in its present form" health IT cheerleading <a href="http://hcrenewal.blogspot.com/2011/03/benefits-of-health-information.html">here</a>. Most important of all: It's not advisable to gamble with $100 million in that fashion, especially under these conditions: <blockquote>... BUDGET ISSUES Spending $100-million-plus on electronic medical records is a lot of money for a network that as of mid-January was at $10 million in the red in operations, BUT network spokeswoman Katie Riley said the electronic medical records are not to blame. [Capitalization and emphasis of the "but" mine - ed.] </blockquote> This statement is both representative of a healthcare system gone overboard - you don't spend on luxuries when you're $10 million in the red - and is a non-sequitur. Who cares if the EHR's are not to blame for the system being $10 million in the red? That does not seem like a good reason to go ahead and spend $100 million (which will probably balloon to several times that figure, hence I will use $100 million++) on a very risky gamble. Further, all it will take is a few of <a href="http://hcrenewal.blogspot.com/2012/03/expensive-healthcare-computing-mistake.html">these mishaps</a> to put the system further in the red. I should also ask: will medical and other staff be laid off to afford the new systems, in effect trading people for computers? To spend $100 million++ on HIT when you're already $10 million in the red on operations is, in my view, financially reckless. -- SS </div>

University of Arizona Medical Center, $10 million in the red in operations, to spend $100M on new EHR system

In my Oct. 2006 post " $70 million for an Electronic Medical Records system? " I wrote: ... healthcare doesn’t have the capital fo...

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