Insurers' diversification creating monopoly power and conflict of interest - quoted in the Washington Post

I am quoted in a Washington Post article today on potential conflicts of interest when medical payers/insurers acquire the firms that hospitals and doctors use to challenge medical payment denials:<br /><br /><blockquote class="tr_bq"> <b><a href="http://www.washingtonpost.com/health-insurance-companies-push-to-diversify-raises-concerns/2012/04/27/gIQAWoSkoT_story.html" target="_blank">"Health insurers’ push to diversify raises ethical concerns" </a><br /><br />Washington Post <br />Jay Hancock, Sunday, April 29 </b><br /><br />Like hospitals and doctors everywhere, Banner Health fights a daily battle to get paid by insurance companies and government agencies for the care it delivers.  So the hospital system hired a company called Executive Health Resources to fight back against the likes of Medicare and UnitedHealthcare when they deny claims or pay bills for less than what Banner thinks it is owed.</blockquote><br />Fair enough.<br /><br /><blockquote class="tr_bq">But Banner executives began to worry about EHR’s independence when the firm was acquired in 2010 by UnitedHealth Group, UnitedHealthcare’s parent. </blockquote><br />Issues can get a bit sticky under such an arrangement.<br /><br />I put it this way:<br /><blockquote class="tr_bq"><br />Critics call United’s ownership of EHR a troubling conflict of interest that could give it confidential information about rivals as well as patients and limit EHR’s power to demand payment from its much larger corporate sister. “How is that ownership going to affect the mission of a company whose business is to extract more money from payers?” said Scot Silverstein, a physician and specialist in medical software and patient records at Drexel University. <b>“Imagine going to a plaintiff’s lawyer to take your malpractice case and not knowing that plaintiff’s lawyer actually works for the hospital that you’re suing.”</b></blockquote><br />When payers acquire those who would challenge their payment denials, I worry about the consolidation of power being too great for the public good.<br /><br />As we learn, the relationship is somewhat stealthy:<br /><br /><blockquote class="tr_bq">... There is no mention of EHR’s ownership in the “Corporate Overview” section of its Web site or elsewhere on the site. Nor did the American Hospital Association identify EHR as a United subsidiary in September when it renewed its exclusive endorsement of EHR’s denial-fighting services. EHR pays the hospital association a fee for the endorsement. The group declined to disclose the amount.  </blockquote><br />The plot thickens:<br /><br /><blockquote class="tr_bq">Claims consultants such as EHR<b> typically gain access to millions of patient records and confidential contracts between hospitals and insurers</b>, industry officials say. If UnitedHealthcare, United’s insurance wing, gained access to that data,<b> it would obtain “a huge business advantage” over insurance rivals as well as the hospitals</b>, Kofman said.</blockquote><br />In today's healthcare business environment, "if" seems to me to be optimistic.<br /><br />Hancock goes further in the article:<br /><blockquote class="tr_bq"><br />As insurers eager to add revenue streams convert themselves into diversified health-services companies,<b> they often buy traditional business adversaries</b>, including physician groups and hospital consultants such as EHR. They’re also buying technology companies and research firms that serve medical-care providers,<b> raising questions not only about independence but about the privacy of patient information. </b></blockquote><br />A Georgetown professor, formerly a state insurance superintendent, gets to the heart of the matter, using United as but one example:<br /><blockquote class="tr_bq"><br />“I am not convinced that, even with proper disclosure, that an entity owned by United could aggressively advocate against United’s interests,” said Mila Kofman, a Georgetown professor who was Maine’s insurance superintendent.</blockquote><br />This factoid is eye-opening:<br /><blockquote class="tr_bq"><br />Appealing claims denials has become a huge, high-tech business, reflected in the more than $1 billion that United reportedly paid for EHR [Executive Health Resources].</blockquote><br />You might think there were better things to do with $1 billion besides administrative bloat - such as taking care of patients. <br /><br />We probably need new laws to catch up with the flurry of M&A's going on in healthcare between payers, the healthcare delivery sector, and the "referees" that mediate between them when disputes arise.<br /><br />Read the entire article at the WaPo link above.  The examples get even more convoluted.<br /><br />-- SS<br /><br />Addendum:<br /><br />Roy Poses notes:<br /><br /><blockquote class="tr_bq">This appears to be a newly recognized type of conflict of interest that contributes to the concentration of power in the US commercialized health care system.  While many people tout how our health care system is "competitive" and a "free market," it is ever more dominated by a decreasing number of enlarging organizations.  True health care reform would break up health care oligopolies. </blockquote><br />-- SS

Insurers' diversification creating monopoly power and conflict of interest - quoted in the Washington Post

I am quoted in a Washington Post article today on potential conflicts of interest when medical payers/insurers acquire the firms that hospit...

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Using a computer called “Blue Balls” to track whether ED patients seeking care paid their bills

I could not make this up if I tried regarding hardball tactics to collect money when patients are at their most vulnerable. <br /><br />From Bloomberg News:<br /><blockquote class="tr_bq"><h1> <a href="http://www.bloomberg.com/news/print/2012-04-29/accretive-says-it-s-working-to-address-minnesota-concerns-1-.html" target="_blank"><span style="font-size: small;">Accretive Says It’s Working to Address Minnesota Concern</span></a></h1><div id="story_meta"><cite class="byline"> By <span class="author">Dan Hart and Alex Wayne</span> - <span class="datestamp">Apr 29, 2012</span> </cite> </div><br /><a class="web_ticker" href="http://www.bloomberg.com/quote/AH:US" title="Get Quote">Accretive Health Inc. (AH)</a>, a hospital billings-collection company, said it’s working with advisers to address concerns raised by the Minnesota attorney general’s office that it puts bedside pressure on patients to pay bills.<br /><br />The claims “grossly distort and mischaracterize” its revenue cycle services, the company said today in a statement. The suggestion Accretive puts bedside pressure on patients to pay their bills out of pocket are a “flagrant distortion of fact,” the company said.<br /><br />... Accretive shares tumbled by the most ever on April 25, just after Minnesota Attorney General Lori Swanson issued a report alleging Accretive violated U.S. and state patient-privacy and debt-collection laws. <b>She said patients at Fairview Health Services, a Minnesota hospital chain, were pressured for payment before they received care in some cases and that Accretive’s debt collectors didn’t properly disclose their role. </b>Swanson filed a lawsuit on Jan. 19 against Accretive.<br /><br />Chicago-based Accretive said in today’s statement it doesn’t deny access to patient care and the allegation is “flatly untrue.”</blockquote><br />There appears to be something to the allegations, though... <br /><blockquote class="tr_bq"><h2> <span style="font-size: small;"> Credit Scores </span></h2>[Minnesota Attorney General ] Swanson said last week employees at Fairview, a nonprofit chain of seven hospitals based in <a href="http://topics.bloomberg.com/minneapolis/"></a>Minneapolis, <b>were required to use a computer system derisively called “Blue Balls” to track whether patients paid their bills.</b> The payment system began after Fairview hired Accretive in May 2010, Swanson said in her <a href="http://www.ag.state.mn.us/" rel="external" title="Open Web Site">report</a> describing the companies’ relationship.<br /><br />Actions that Accretive used at Fairview included issuing emergency room employees <b>“scripts” for conversations with patients that “can lead a patient or her family to believe the patient will not receive treatment until payment is made,”</b>Swanson said.<br /><br />Employees were instructed to ask for credit card payments, tell patients they’d wait for them to <b>retrieve their checkbooks from their cars, or if the patients said they couldn’t pay, remind them that debt-collection activities “can affect your credit score,”</b> according to the scripts. </blockquote><br />Considering the setting, that sounds like a technique more suited for a movie about mid-30's Chicago then a 21st century hospital.  It seems a not so subtle form of strong-arming someone when they're down.<br /><br /><blockquote class="tr_bq">Accretive said late on April 27 that Fairview had canceled its contract with them, adding it didn’t know yet how the cancellation would affect its business. Accretive said it would provide an update on its May 9 quarterly financial call.<br /><br />Earlier that same day, Representative Pete Stark, a California Democrat, asked U.S. health officials to investigate Accretive’s practices.<br /><br />Federal law prohibits hospitals from denying emergency care to anyone, regardless of their ability to pay. </blockquote><a class="web_ticker" href="http://www.bloomberg.com/quote/AH:US" title="Get Quote"></a><br />While no statement is made in this article about care denial, Federal law should prohibit strong-arm tactics and psyops at a time when patients are most vulnerable.  The unpleasantness and added stress are certainly not good for outcomes in the vulnerable.<br /><br />I note a site has appeared related to this issue, at this link:  <a href="http://www.mn-healthcare.com/links">http://www.mn-healthcare.com/links</a><br /><br />-- SS

Using a computer called “Blue Balls” to track whether ED patients seeking care paid their bills

I could not make this up if I tried regarding hardball tactics to collect money when patients are at their most vulnerable. From Bloomberg N...

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Don't Worry, Your Records are Safe - Part IV

At past posts "<a href="http://hcrenewal.blogspot.com/2012/03/at-my-oct.html" target="_blank">Don't Worry, Your Electronic Medical Records Are Getting Safer With Every Passing Day</a>", "<a href="http://hcrenewal.blogspot.com/2011/09/another-episode-of-dont-worry-your.html" target="_blank">Another Episode of "But Don't Worry, Your Records are Safe...</a>" and "<a href="http://hcrenewal.blogspot.com/2011/10/still-more-ehr-chaos-pandemonium-bedlam.html">Still More Electronic Medical Data Chaos, Pandemonium, Bedlam, Tumult and Maelstrom: But Don't Worry, Your Data is Secure</a>", I wrote on the issue of medical record security.<br /><br />Security from prying eyes, that is.<br /><br />I didn't include security of data from placement into <a href="http://en.wikipedia.org/wiki//dev/null" target="_blank">/dev/null</a> (that is, destruction).<br /><br />There's this email, received by East coast physicians not long ago from a claims processing company (identities redacted):<br /><br /><blockquote class="tr_bq">Dear Provider,<br /><br />As you may be aware, we experienced a significant problem with our computer system during a software maintenance function on XX/XX/2010.<br /><br />In addition to the network issue, we discovered that the <b>redundant back-up systems were not operating as reported.  <i style="color: red;">["Reported" when, and by whom, one wonders? - ed.]</i></b><br /><br />We had two on-site back-up systems that were monitored daily and which were historically reported as successful.  We have since learned that these <b>internal back-up functions were not operating as reported and the on-site back-ups were not entirely successful</b>. <i style="color: red;"><b>[Meaning, they were not successful, period - ed.]</b></i><br /><br />Also, our software vendor, [major EHR vendor], was providing two additional remote back-ups on servers located in [city, state] and [city, state]. [EHR vendor] has informed us that <b>these remote back-ups were not initiated as represented. </b> <i style="color: red;"><b>[Meaning, they screwed up - ed.]  </b></i>Therefore, when our computer network system malfunctioned, there was <b>no readily available back-up data on-site or at the remote redundant back-up servers.</b><br /><br />Please be aware that we have replaced hardware components and were able to recreate the data bases and we are billing.  However, we are still unable to access data that was stored on our servers prior to XX/XX/2010.<br /><br />[EHR vendor] is diligently working to retrieve the data from the hard drives, back-up tapes, and through other means.  Please be assured that all files will be restored, if the files cannot be fully restored electronically, then they will be fully restored manually.<br /><br />At [our claims processing company], we are truly saddened by the fact that we have disappointed clients and we sincerely apologize for any inconvenience experienced by you, your staff, or your patients.<br /><br />We have always appreciated your loyalty as a valued client and will continue to keep you informed of the progress. </blockquote><br />The levels of information technology and data management incompetence exhibited in this message are stunning.  <br /><br />The confidence it imparts regarding the safety of our critical medical data from destruction, and its availability when truly needed, is less than stellar.<br /><br />A major problem is that the health IT industry has no accountability.  <br /><br />I believe the Food, Drug and Cosmetic Act needs to be amended to become the "Food, Drug, Cosmetic, and Cybernetic" Act. <br /><br />-- SS<br /><br />

Don't Worry, Your Records are Safe - Part IV

At past posts " Don't Worry, Your Electronic Medical Records Are Getting Safer With Every Passing Day ", " Another Episod...

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Another Legal Settlement for Tenet, Another $10 Million Plus for its CEO

Yet another large health care organization has added to its collection of legal settlements.  <br /><br />Reuters briefly <a href="http://www.reuters.com/article/2012/04/10/us-tenet-medicare-idUSBRE8390UZ20120410">noted</a> Tenet Healthcare's latest scuffle with the law:<br /><blockquote><em>Tenet Healthcare Corp has agreed to pay almost $43 million to settle allegations that it overbilled the federal Medicare healthcare program</em> for treating patients at certain rehabilitation facilities, the Justice Department said on Tuesday.<br /><br />The company was accused of improperly billing Medicare between May 2005 and December 2007 for<em> treating people at inpatient rehabilitation facilities when they did not qualify for such an admission,</em> the Justice Department said.<br /><br />Tenet agreed to $42.75 million to resolve the allegations, which were made under the U.S. False Claims Act. Medicare is the federal healthcare program for the elderly.</blockquote><br />While this story appeared briefly and without context in a few business news outlet, it really is part of a much bigger picture.<br /><br /><strong>National Medical Enterprises</strong><br /><br />Published in 2006, Maggie Mahar's <em>Money Driven Medicine</em> was one of the important early works on health care dysfunction (see post <a href="http://hcrenewal.blogspot.com/2006/08/money-driven-medicine.html">here</a>, the web-site of the documentary film based on it <a href="http://www.moneydrivenmedicine.org/">here</a>).  One of the striking cases it discussed was that of Nartional Medical Enterprises.  NME was charged not only with run of the mill offenses like over-billing, but more exotic ones like kidnapping patients. NME eventually settled with federal authorities in 1994 for $379 million, and pleaded guilty to a variety of charges. The results were similar to many more recent cases. No one went to jail, and the CEO walked away with a golden parachute.  Despite the seriousness of the offenses, NME did not go out of business.  It simply changed its name - to <a href="http://www.tenethealth.com/pages/home.aspx">Tenet Healthcare</a>.<br /><br /><strong>Legal Problems in the 21st Century</strong><br /><br />The "new" Tenet continued to have legal issues.  These included a $395 million settlement of the Redding Medical Center unnecessary heart surgery scandal in 2004 (look <a href="http://articles.sfgate.com/2004-12-22/news/17458067_1_redding-medical-center-steven-campanini-unnecessary-heart">here</a>), and a $21 million settlement of US government charges of kickbacks (look <a href="http://www.nytimes.com/2006/05/18/business/18tenet.html">here</a>), a $7 million settlement with the government of Florida of charges of fraudulent billing (look <a href="http://www.bizjournals.com/stlouis/stories/2006/02/20/daily31.html">here</a>), and a $900 million settlement of federal over-billing complaints (look <a href="http://articles.latimes.com/2006/jun/30/business/fi-tenet30">here</a>, and see our post <a href="http://hcrenewal.blogspot.com/2006/07/echos-of-previous-scandals-in-for.html">here</a>), all in 2006.  There was an apparent lull, and then in 2011 the company settled a class action suit brought after the deaths of 34 patients in a Tenet facility in New Orleans after Hurricane Katrina (see Bloomberg story <a href="http://www.bloomberg.com/news/2011-03-23/tenet-healthcare-settles-class-action-lawsuit-over-katrina-hospital-deaths.html">here</a>.)<br /><br />Again, while this substantial string of settlements suggest a pattern of repeated misbehavior, as in many other legal resolutions in health care (look <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">here</a>), the cost of financial penalties was diffused across the organization.  No individuals seemed to suffer any negative consequences from any of these episodes.<br /><br /><strong>No Consequences for Hired Managers</strong><br /><br />Instead, despite this evidence of repeated misbehavior, now extending over nearly 20 years and across two centuries, the top hired leaders of Tenet continued to flourish.  Earlier this month Becker's Hospital Review <a href="http://www.beckershospitalreview.com/compensation-issues/tenet-ceo-trevor-fetters-total-compensation-exceeds-107m-in-2011.html">announced</a> the compensation received by Tenet's CEO in 2011:<br /><blockquote>Total compensation for Trevor Fetter, president and CEO of Dallas-based Tenet Healthcare, <em>dropped 12 percent from 2010 to <strong>$10.74 million</strong> in 2011</em>, according to documents from the U.S. Securities and Exchange Commission.<br /><br />Mr. Fetter's base salary in fiscal year 2011 was $1.08 million, the same as the previous two years. He received $4.88 million in stock awards, $2.67 million in non-equity incentive plan compensation and $1.93 million of accumulated benefits under his supplemental executive retirement plan. Mr. Fetter also received more than $142,000 for personal use of Tenet's aircraft.</blockquote><br />Despite the small dip last year, Mr Fetter's total compensation has generally increased  over the years, from $6.12 million in 2003 (<a href="http://articles.latimes.com/2004/apr/06/business/fi-tenet6">via</a> the LA Times), to $9.7 million in 2008 (AP <a href="http://www.foxnews.com/wires/2009Mar26/0,4670,TenetExecutiveCompensation,00.html">via</a> Fox News).<br /><br /><strong>Summary</strong><br /><br />One would think that Tenet's record of legal trouble would have turned it into a pariah, or led to its corporate demise.  However, like many other large health care organizations, the organization has been able to shrug off evidence of a deeply flawed culture, and within such a culture, its leaders have continued to enrich themselves with seeming impunity. <br /><br />Such cases should raise many questions - Why are repeated offenses by the same well known health care organizations barely considered news?   Why do repeat offenses not generate at least increasing financial penalties?  Why do the organizations' stake-holders, particularly as represented by their boards, not show more concern?  Why has the regulation of health care organizations devolved into Kabuki theater? <br /><br />So, I once again insist, 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.

Another Legal Settlement for Tenet, Another $10 Million Plus for its CEO

Yet another large health care organization has added to its collection of legal settlements.  Reuters briefly noted Tenet Healthcare's ...

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Allscripts shares plunge on weak outlook, board changes, unhappy customers - but mostly unhappy customers, I surmise

Glen Tullman is CEO of the health IT seller Allscripts-Misys Healthcare.  He was an <a href="http://blogs.wsj.com/health/2009/01/26/allscripts-ceo-urges-one-two-punch-on-electronic-medical-records/" target="_blank">advisor to the Obama campaign</a> on health information technology issues.<br /><br />My organization had to sue his company for non-working products a few years ago (<a href="http://www.ischool.drexel.edu/faculty/ssilverstein/DUCOM_EMR_Complaint.pdf" target="_blank">link to PDF of civil complaint</a>) .<br /><br />Apparently other customers were unhappy as well.  This from Reuters:<br /><br /><blockquote class="tr_bq"><span style="font-weight: bold;"></span><a href="http://www.reuters.com/article/2012/04/27/us-allscripts-shares-idUSBRE83Q0PL20120427" target="_blank"><span style="font-weight: bold;">Allscripts shares plunge on weak outlook, board changes</span></a> <br /><br />Fri Apr 27, 2012 9:24am EDT<br /><br />(Reuters) - <a href="http://www.allscripts.com/" target="_blank">Allscripts</a> Healthcare Solutions Inc's shares plunged 42 percent in premarket trade on Friday, after the company forecast weak full-year earnings, hurt by software development costs and weaker bookings.<br /><br />On Thursday, the healthcare information technology provider reported a lower-than-expected quarterly profit and also announced the resignation of its CFO, three directors and board Chairman Phil Pead.<br /><br />Citigroup analyst George Hill said the results were strongly disappointing and downgraded the company's stock to "neutral" from "buy."<br /><br />Hill said he was most troubled by the loss of long tenured CFO Bill Davis, who had been the public face of Allscripts to investors for many years.<br /><br />"We suspect CEO Glen Tullman won a power struggle at the 11th hour leading to the board departures," Hill said.<br /><br /><b>"Too few customers are buying its products, due to lack of confidence or satisfaction," Barclays Capital analyst Lawrence Marsh wrote in a note.</b><br /><br />Allscripts shares were trading at $9.27 in premarket trade. They had closed at $16.02 Thursday on the Nasdaq.<br /><br />(Reporting by Shailesh Kuber in Bangalore; Editing by Joyjeet Das)</blockquote><br />The statement 'too few customers are buying its products, due to lack of confidence or satisfaction', speaks volumes about the state of health IT in general in 2012.<br /><br />That state includes eventual regulation after an <a href="http://hcrenewal.blogspot.com/2011/11/iom-report-on-health-it-safety-nix-fda.html" target="_blank">IOM report on dubious safety</a>, mission hostile user interfaces as <a href="http://hcrenewal.blogspot.com/2011/10/nist-on-ehr-mission-hostile-user.html" target="_blank">identified by NIST</a> and others that will require expensive remediation (due to the industry arrogantly ignoring this crucial issue for decades), <a href="http://hcrenewal.blogspot.com/2011/11/lifespan-rhode-island-yet-another.html" target="_blank">'glitches'</a> due to poor or non-existent validation and quality control that will increasingly result in expensive litigation when <a href="http://hcrenewal.blogspot.com/2011/06/babys-death-spotlights-safety-risks.html" target="_blank">patients are harmed</a>, likely government investigations and clawbacks due to <a href="http://hcrenewal.blogspot.com/2011/02/does-emr-facilitated-upcoding-formely_15.html" target="_blank">EHR-promoted upcoding</a>, and an increasing awareness that many of the so-called miracle 'revolutionary' gains (as opposed to facilitation of medical practice) are largely <a href="http://hcrenewal.blogspot.com/2011/02/updated-reading-list-on-health-it.html" target="_blank">illusory</a> industry-promoted memes not based on robust, scientifically-generated evidence.<br /><br />I'd pull out of this market - if I had any money invested in it.  I have none, and never have, because I have great lack of confidence in the industry that began when I was first exposed to it and its leaders - that being in 1992.<br /><br />I note that the <a href="http://www.hipaasurvivalguide.com/hitech-act-summary.php" target="_blank">HITECH</a> component of ARRA, containing incentives and penalties related to health care information technology designed to accelerate the adoption of EHR systems, was advanced largely via advice to the President on the wonders of health IT.  (I thought HITECH was a <a href="http://hcrenewal.blogspot.com/2009/01/i-ask-again-should-us-call-moratorium.html" target="_blank">reckless, premature move</a> destined to waste billions of dollars as did the erstwhile <a href="http://hcrenewal.blogspot.com/2011/09/npfit-programme-going-pffft.html" target="_blank">NPfIT in the NHS</a>, and I still stand by that prediction.)<br /><br />-- SS<br /><br /><b>4/27/12 Addendum:</b><br /><br />EHR glitches like <a href="http://hcrenewal.blogspot.com/2011/05/twelve-hour-health-it-glitch-at.html" target="_blank">this</a> and <a href="http://hcrenewal.blogspot.com/2011/11/lifespan-rhode-island-yet-another.html" target="_blank">this</a> never seem to affect patients... <br /><br />-- SS<br /><blockquote class="tr_bq"></blockquote>

Allscripts shares plunge on weak outlook, board changes, unhappy customers - but mostly unhappy customers, I surmise

Glen Tullman is CEO of the health IT seller Allscripts-Misys Healthcare.  He was an advisor to the Obama campaign on health information t...

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Some of WellPoint's Owners (Stockholders) Allege Their Hired Executives Hid Political Contributions

We have frequently had reason to question the actions of WellPoint, the second largest for-profit health insurance company/ managed care organization in the US.  <br /><br /><strong>Hidden Political Contributions</strong><br /><br />The Washington Post <a href="http://www.washingtonpost.com/politics/wellpoint-is-focus-of-aggressive-effort-to-force-political-spending-disclosures/2012/04/18/gIQAT9KvRT_story.html">reported</a> yet another one,<br /><blockquote><em>Health insurance giant WellPoint is the latest target of an increasingly aggressive campaign to force disclosure of corporate political and lobbying expenditures</em>, including payments to the U.S. Chamber of Commerce, which has become more active in elections over the past decade.<br /><br />The WellPoint campaign, set to be formally announced Thursday by a coalition of activist investor groups, <em>demands the resignation of two WellPoint board members, including Susan Bayh, the wife of former senator Evan Bayh (D-Ind.), for allegedly failing to oversee 'high risk political spending.</em>'<br /><br />The shareholder coalition <em>cited WellPoint’s reluctance to answer questions about a transfer of $86 million from the health insurers trade association to the U.S. Chamber of Commerce in 2010, when the Chamber was actively opposing President Obama’s health-care overhaul. WellPoint is a member of the association, America’s Health Insurance Plans.</em><br /><br />'This is the most egregious clandestine campaign funding we have ever seen,' said Michael Pryce-Jones of the CtW Investment Group, a labor-affiliated organization that is part of the shareholders’ coalition, referring to the payments from the trade association to the Chamber of Commerce.</blockquote><br />However,<br /><blockquote>At WellPoint, officials dismissed the notion that the company has been secretive about its political giving. On the contrary, spokeswoman Kristin Binns said, the firm discloses a great deal on its Web site.<br /><br />'WellPoint complies with all disclosure requirements under federal, state and local laws,' she said, noting that <em>the company publishes a 'very extensive' annual report on its political contributions.</em></blockquote><br />But,<br /><blockquote><em>That report does not include details of the sort of special payment that the shareholders coalition said WellPoint made to the health insurers association</em>.</blockquote><br />So, to summarize, WellPoint management is accused of spending tens of millions on political lobbying while hiding the spending from the public and from the company's nominal owners, that is, its stock-holders, by laundering it through a third party. <br /><br /><strong>WellPoint's Sorry Ethical Record</strong><br /><br />This is just the latest questionable behavior by WellPoint we have discussed. Previously, we have noted incidents in which the company  ...<br />  <br /><br /><ul><li><em>settled a RICO (racketeer influenced corrupt organization) law-suit</em> in California over its alleged systematic attempts to withhold payments from physicians (see 2005 post <a href="http://hcrenewal.blogspot.com/2005/07/wellpoint-settles-rico-law-suit.html">here</a>).</li><li>subsidiary New York Empire Blue Cross and Blue Shield<em> misplaced a computer disc containing confidential information </em>on 75,000 policy-holders (see 2007 story <a href="http://www.nytimes.com/2007/03/14/business/14insure.html">here</a>).</li><li>California Anthem Blue Cross subsidiary <em>cancelled individual insurance policies after their owners made large claims</em> (a practices sometimes called rescission).  The company was ordered to pay a million dollar fine in early 2007 for this (see post <a href="http://hcrenewal.blogspot.com/2007/03/wellpoint-fined-1-million-for-canceling.html">here</a>).  A state agency charged that some of these cancellations by another WellPoint subsidiary were improper (see post <a href="http://hcrenewal.blogspot.com/2007/07/more-than-half-of-wellpoints-policy.html">here</a>).  WellPoint was alleged to have pushed physicians to look for patients' medical problems that would allow rescission (see post <a href="http://hcrenewal.blogspot.com/2008/02/wellpoint-halts-attempts-to-have.html">here</a>).  It turned out that California never collected the 2007 fine noted above, allegedly because the state agency feared that WellPoint had become too powerful to take on (see post <a href="http://hcrenewal.blogspot.com/2008/07/wellpoint-settles-but-has-it-become-too.html">here</a>). But in 2008, WellPoint agreed to pay more fines for its rescission practices (see post <a href="http://hcrenewal.blogspot.com/2008/07/fines-re-statements-and-more-fines-just.html">here</a>).  In 2009, WellPoint executives were defiant about their continued intention to make rescission in hearings before the US congress (see post <a href="http://hcrenewal.blogspot.com/2009/06/managed-care-executives-will-not-limit.html">here</a>).</li><li>California Blue Cross subsidiary allegedly attempted to <em>get physicians to sign contracts whose confidentiality provisions would have prevented them from consulting lawyers</em> about the contracts (see 2007 post <a href="http://hcrenewal.blogspot.com/2007/11/physicians-and-contracts-cautionary.html">here</a>).</li><li>formerly acclaimed <em>CFO was fired</em> for unclear reasons, and then <em>allegations from numerous women of what now might be called Tiger Woods-like activities surfaced</em> (see post <a href="http://hcrenewal.blogspot.com/2008/01/more-managed-care-management-mumbo.html">here</a>).</li><li>announced that its <em>investment portfolio was hardly immune from the losses</em> prevalent in late 2008 (see post <a href="http://hcrenewal.blogspot.com/2008/10/if-this-is-how-wellpoint-has-managed.html">here</a>).</li><li>was sanctioned by the US government in early 2009 for <em>erroneously denying coverage</em> to senior patients who subscribed to its Medicare drug plans (see 2009 post <a href="http://hcrenewal.blogspot.com/2009/01/wellpoint-sanctioned.html">here</a>).</li><li><em>settled charges that it had used a questionable data-base</em> (builty by Ingenix, a subsidiary of ostensible WellPoint competitor UnitedHealth) to determine fees paid to physicians for out-of-network care (see 2009 post <a href="http://hcrenewal.blogspot.com/2009/02/wellpoint-settles.html">here</a>).  </li><li><em>violated state law more than 700 times over a three-year period</em> by failing to pay medical claims on time and misrepresenting policy provisions to customers, according to the California health insurance commissioner (see 2010 post <a href="http://hcrenewal.blogspot.com/2010/02/argument-over-insurance-rate-hikes.html">here</a>). </li><li><em>exposed confidential data from about 470,000 patients</em> (see 2010 post <a href="http://hcrenewal.blogspot.com/2010/06/wellpoint-dont-know-much-about-computer.html">here</a>) and settled the resulting lawsuit in 2011 (see post <a href="http://hcrenewal.blogspot.com/2011/10/still-more-ehr-chaos-pandemonium-bedlam.html">here</a>).</li><li><em>fired a top executive who publicly apologized for the company's excessively high charges</em> (see 2010 post <em>here</em>).</li><li>California Anthem subsidiary was fined for <em>systematically failing to make fair and timely payments</em> to doctors and hospitals (see 2010 post <a href="http://hcrenewal.blogspot.com/2010/12/health-insurers-sanctioned-fined.html">here</a>).</li></ul>Yet despite this amazing recent record, WellPoint's top executives continue to prosper.  Earlier this month the Indianapolis Star <a href="http://www.indystar.com/article/20120405/BUSINESS/204050363/WellPoint-s-CEO-saw-drop-compensation">reported</a> that WellPoint Chair and CEO Angela,<br /><blockquote><em>Braly, 50, received 2011 compensation valued at <strong>$13.2 million</strong>,</em> according to an Associated Press analysis of the Indianapolis company's annual proxy statement. That represents a 2 percent drop compared with 2010.<br /><br />Braly, who has served as CEO for nearly five years, received a $1.1 million salary in 2011, a total that has stayed flat since 2008. Her compensation also included a performance-related bonus of nearly $1.9 million, stock and option awards totaling about $10 million and $216,279 in other compensation.</blockquote><br />While her compensation dropped 2%, <br /><blockquote>WellPoint's earnings fell in the final three quarters of last year compared with 2010, capped by a 39 percent drop in the fourth quarter. In total, <em>the insurer's earnings sank 8 percent compared with 2010.</em></blockquote><br />The compensation above did not take into account that<br /><blockquote>Braly also made about $6.9 million last year mostly from previously awarded restricted stock units that had vested.</blockquote><br /><strong>Summary</strong><br /><br />WellPoint CEO Angela Braly, like many of her fellow top hired managers of health care organizations, has become more wealthy every year despite her company's record of questionable conduct, and out of proportion to her company's financial results. <br /><br />Based on illusory promises of greater efficiency that would benefit everyone, we have handed health care over to large, increasingly for-profit organizations, and we have handed control over these organizations to hired managers. We have made these managers accountable to no one, so they seem to run their organizations to benefit themselves first. Is it any surprise that organizations run to benefit top insiders do not much benefit patients' or the public's health?<br /><br />Maybe the campaign by some of WellPoint's nominal owners to at least make what the company pays to influence politics transparent is a tiny first step to making the leadership of health care organizations accountable both to the organizations' owners (when they exist) and to patients and the public at large. Until they become so accountable, do not expect any improvements in health care cost, quality or access.

Some of WellPoint's Owners (Stockholders) Allege Their Hired Executives Hid Political Contributions

We have frequently had reason to question the actions of WellPoint, the second largest for-profit health insurance company/ managed care org...

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The Spoils of a "Scorched-Earth Defense" - Merck CEO Got $13.3 Million in 2011

Last week, Bloomberg <a href="http://www.bloomberg.com/news/2012-04-19/merck-unit-s-plea-over-vioxx-investigation-accepted-by-judge.html">reminded us</a> of the legal baggage that pharmaceutical giant Merck is carrying. The company had announced yet another settlement of legal actions pertaining to its ill-starred but very profitable sales of now withdrawn Vioxx (rofecoxib) in 2011 (see post <a href="http://hcrenewal.blogspot.com/2011/12/merck-admits-little-while-settling.html">here</a>). Now the settlement, including a guilty plea was accepted by a judge. <br /><blockquote>A unit of Merck & Co. (MRK), the second- largest U.S. drugmaker, <em>pleaded guilty to a criminal misdemeanor charge as part of a $950 million settlement of a U.S. government probe of its illegal marketing of the painkiller Vioxx. </em><br /><br />An official of Merck Sharp & Dohme said today that the company agreed to plead guilty to one count of misbranding Vioxx. U.S. District Judge Patti Saris in Boston accepted the plea as part of the drugmaker’s agreement to pay a $321.6 million criminal fine and $628.3 million to resolve civil claims that it sold Vioxx for unapproved uses and improperly touted its safety. <br /><br />'I’m certainly going to accept this agreement because I think it’s in the public interest,' Saris said from the bench. 'I hope the size of this settlement and the fact that all these cases are being pressed by the federal and state governments -- the 44 states’ attorneys general -- will be a signal that <em>this isn’t acceptable conduct</em>.' </blockquote><br />But unacceptable conduct can lead to a great deal of revenue. As Bloomberg noted, <br /><blockquote>Approved by the Food and Drug Administration in 1999, Vioxx became Merck’s third-largest-selling drug by 2003, generating $2.5 billion in annual sales. The company pulled Vioxx off the market in 2004 after a study found it posed an increased risk of heart attacks and strokes. </blockquote><br />It can also lead to a great deal of personal profit for those at the company tasked with defending such "unacceptable conduct," and what has now been found to be criminal behavior. Writing in <a href="http://www.slate.com/articles/health_and_science/medical_examiner/2011/11/sandusky_cover_up_why_is_kenneth_frazier_leading_the_investigation_at_penn_state_.html">Slate</a>, <a href="http://www.snigdhaprakash.com/">Snigdha Prakash</a>, who wrote All the Justice Money Can Buy about the legal aftermath of Vioxx, identified the current Merck CEO and board chairman as the architect of the defense of Vioxx, as <br /><blockquote><em>best known for his phenomenal success in defending a sordid chapter in Merck’s recent past—its years-long silence about the safety problems of the popular painkiller Vioxx</em>. </blockquote><br />Furthermore, she wrote, <br /><blockquote>As he showed with the Vioxx litigation, <em>Frazier is adept at mounting a scorched-earth defense that minimizes payouts to potential plaintiffs. </em><br /><br />Tens of thousands of former Vioxx users sued Merck after it withdrew the drug, alleging Vioxx had caused them to suffer heart attacks and strokes. Frazier, then the company’s general counsel, declared Merck had done nothing wrong and refused to settle. 'We’ll fight every case,' he declared, and hired top-flight law firms in several East Coast cities, in the South, in Chicago, and Los Angeles, as well as a prominent New York firm to coordinate the overall strategy. It took three years and $2 billion in legal expenses for Frazier’s hard-nosed tactics to pay off. Merck settled in late 2007 for a relative pittance, resolving some 50,000 Vioxx cases for just under $5 billion. It was a far cry from the $25 billion to $50 billion in liability that analysts had predicted when Merck withdrew the drug. </blockquote><br />So it appears that Mr Frazier is now reaping his rewards. The Dow Jones News Service <a href="http://online.wsj.com/article/BT-CO-20120412-716176.html">reported</a> earlier in April, <br /><blockquote><em>Merck & Co.'s (MRK) leader received compensation valued at <strong>$13.3 million</strong> for 2011, up 41% from the year before</em>, reflecting his ascension to the drug maker's top post and Merck's ability to exceed certain internal performance targets. <br /><br />Kenneth Frazier, 57, became Merck's chief executive at the beginning of 2011 and chairman of the board in December. He was previously head of Merck's human health business. <br /><br />In a proxy statement filed Thursday with the U.S. Securities and Exchange Commission, Merck said certain elements of Frazier's compensation reflected growth in Merck's sales and adjusted earnings for 2011. <br /><br />In addition, Merck's board considered 'his performance, leadership, planning and oversight during a time of continued economic, regulatory and political challenges for the healthcare industry.' <br /><br />Earlier this year, Frazier acknowledged that Merck had a tough 2011. The company endured setbacks including negative clinical data for a once-promising heart drug, vorapaxar. Merck's full-year stock price performance lagged behind most of its large-pharmaceutical peers. <br /><br />But Merck of Whitehouse Station, N.J., continued to cut costs and was able to raise its dividend for the first time in seven years in 2011. Frazier said in January he was optimistic about 2012. <br /><br />Frazier's total compensation included: $1.5 million in salary, $3.1 million in stock awards, $3 million in option awards, $3.1 million in non-equity incentive plan compensation, and $2.6 million change in pension value and non-qualified deferred compensation earnings. </blockquote><br />So somehow a "tough 2011" for Merck's stockholders (Merck's stock price rose a mere 3.9%, from 36.29 to 37.70 through 2011) resulted in a cornucopia of riches for Mr Frazier. So rather than being rewarded for "maximizing shareholder value," (see post <a href="http://hcrenewal.blogspot.com/2012/04/health-care-dysfunction-explained-by.html">here</a>) maybe Mr Frazier was rewarded for, as Ms Prakash put it, "burying monumental corporate failures at Merck."<br /><br />Here is the latest version of how top health care organizational insiders manage to make even more money no matter what, in this case, no matter what happens to the fortunes of the nominal owners of the company, no matter what happens to the company's once proud reputation, and particularly no matter what happened to the patients unfortunate enough to suffer adverse effects from its drug. <br /><br />We will not be able to truly reform health care, to really improve outcomes, improve access, and control costs, until we hold the leaders of health care organizations accountable.

The Spoils of a "Scorched-Earth Defense" - Merck CEO Got $13.3 Million in 2011

Last week, Bloomberg reminded us of the legal baggage that pharmaceutical giant Merck is carrying. The company had announced yet another se...

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