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The Case of the Vanishing Graduate Medical Education Funds

While primary care falters in the US, those who teach it seem to feel increasingly poverty stricken.  Now it appears that one reason for this is an amazing example of multiple failures of transparency and accountability.  Let me work through it, begging your pardon for a little bit of "inside baseball," medical education style.  The results suggest how we desperately need some medical disciples of Sherlock Holmes. Background My personal experience and increasing data suggests that most medical school faculty believe that their teaching is not valued by their institutions because teaching brings in no external funds.  In 2004, Dr Catherine DeAngelis, then the editor of JAMA, wrote "few medical schools provide adequate, if any, reimbursement for teaching time."(1)  (See<a href="http://hcrenewal.blogspot.com/2005/01/medical-schools-charge-more-for.html"> this 2005 post</a>.)   This seems absurd on its face, since what are medical schools for if it is not to provide teaching.  However, there is evidence of this mission-hostile behavior.  In 2007, we <a href="http://hcrenewal.blogspot.com/2007/04/medical-schools-to-faculty-show-me.html">quoted </a>from a revealing interview with Dr Lee Goldman, Executive Vice President for Health and Biomedical Sciences at Columbia University,(2) who stated that "taxpayers," faculty who "generate more [money] than they cost," are valued most, and implied that faculty who focus on teaching are regarded as "welfare recipients," who bring in less external funding, and are valued least.  In 2010, we <a href="http://hcrenewal.blogspot.com/2010/12/american-medical-schools-are-only-in-it.html">noted</a> the results of a large-scale survey presented by Dr Linda Pololi in which 51% of faculty felt that the administration only valued them for the money that they brought in, and half felt that their institutions did not value teaching.(3) Yet while faculty seem to believe that educational institutions receive little if any money to pay for teaching, it is not clear why the believe something so counter intuitive, and it is less clear what money actually goes to pay for medical education. US Government Funding for Graduate Medical Education However, several recent publications affirm that actually a lot of money goes towards one important form of medical education, yet the specifics of the money flows are shrouded in secrecy.  In the May, 2012, SGIM Forum, Dr Mark Liebow and colleagues summarized some of what is known about federal support of graduate medical education, that is, education of interns, residents, and other house officers.(4)  There are two streams of money that flow from Medicare to US hospitals: <blockquote>Direct GME (DGME) payments help hospitals pay the salaries of residents, teaching faculty, and support staff. DGME is the product of three numbers: a per resident amount that varies by hospital, adjusted annually for inflation; the number of residents in the hospital (capped for each hospital at 1997 levels); and the fraction of discharges from the hospital that are Medicare beneficiaries. The Indirect Medical Education (IME) payment is a percentage amount added on to each DRG payment. The percentage is calculated via a complex formula (the only US statute containing an exponent!), where the key factor is the ratio of interns/residents to beds (IRB ratio).</blockquote> These two streams are of considerable size: <blockquote>Of the $9.2 billion Medicare paid for GME in 2010, $3 billion was for DGME and $6.2 billion for IME. The money is paid to hospitals sponsoring training programs rather than to the training programs or other hospitals where training occurs. While about 1,100 hospitals receive GME payments, 66% goes to the 200 hospitals that have the largest numbers of residents.</blockquote> So, the 200 largest hospitals get about $2 billion in direct GME money (and presumably about another $4 billion in indirect money). This averages then to about $10 million DGME and $20 million indirect GME per hospital. Thus, teaching, at least the teaching of interns, residents, and other house-staff does pay, and much more than trivial amounts. (Note that these amounts are not for teaching of medical students, which ought to be supported by other funding streams.) Why then do faculty think that teaching does not bring in any money? The GME Money Vanishes An article by Dr Saima I Chaudhry and colleagues in the American Journal of Medicine begins to explain, although the explanations are found between the lines.(5) First of all, while the graduate medical education money is paid by the government to the hospitals, the government does not publish what it pays to individual hospitals: <blockquote>It has been previously reported that the amount of GME funding individual hospitals receive is not publicly reported by the Centers for Medicare and Medicaid Services,.... </blockquote> The government also does not hold the hospitals accountable for how they spend this money, nor for the quantity or quality of education they supply in exchange for it. Remarkably, Chaudhry et al imply that that the people who run graduate medical education teaching programs also may not know how much money their hospitals receive from the government to fund their programs. The introduction to their article noted: <blockquote>It is unclear how much program directors know about the amount and flow of DME funds to their programs. Program directors' beliefs about the transparency of funding to their programs, or their desire to influence how funds are distributed to them, also are unknown.</blockquote> The article reported on a survey of internal medicine residency program directors which asked about "their knowledge of D[G]ME funding for their programs, the transparency with which funds are distributed to them, and their desire to influence this disbursement." The researchers sent surveys to 372 member programs, representing 97.1% of all US internal medicine residencies. They got 268 responses, a 72.0% response rate. The main results were that only 159/268 (59.3%) of program directors had tried to find out how much DGME money their programs received, and of those, only 84 (52.8% of those enquiring, but only 31.3% of all respondents) actually knew how much money their programs got. Of the 92 program directors who did not even try to discover how much money their programs received, approximately 21% said that "no one would tell me," 21% said that the "information would be inaccurate," 14% said they "don't know who to ask," and 2% were "afraid to ask." Summary US medical school faculty, especially those in primary care, increasingly feel pressured to perform activities that they perceive brings in money from external sources. They tend to believe that their own teaching somehow does not bring in any money, and that their careers will fail if they do not put more emphasis on other activities that the institution views as more profitable. However, literally billions of US government dollars go to support the education of house staff, including the salaries of faculty who teach interns and residents, who probably are the majority of physician faculty. Faculty probably do not know this, because the government does not publish the amounts given to individual hospitals, nor demand of the hospitals any accountability for how they spend the money they receive. Presumably, the top executives of each hospital know how much money the government gives them. Nonetheless, the majority of physician leaders of residency programs are never told these amounts, apparently because their hospital executives kept the amounts secret. Many of those educators who have tried to find out the figures were unsuccessful. Some did not even try to find out based on beliefs that their attempts would be unsuccessful, any amounts they discovered would be inaccurate, the people who knew the amounts were hidden, or that it would be dangerous to their careers to even try. Thus billions of dollars of money flowing from the government to fund graduate medical education seems to have vanished in an amazing example of widespread deficiencies in accountability and transparency. There are many people who blame government for many social ills. In this case, one can blame the US Congress for not writing a law that makes the money flows transparent and hospitals accountable for providing good educational value for the money provided. One can also blame the executive branch, particularly the Center for Medicare and Medicaid Services (CMS) of the US Department of Health and Human Services (DHHS) for not making the money flows and the values received for them transparent. There are a few people, including this author, who also blame the leadership of health care organizations for many of the problems besetting health care. In this case, one can blame top leadership, presumably CEOs and chief financial officers (CFOs) of hospitals for hiding the amounts of money they receive from Medicare to finance graduate medical education. One can also blame the physician leaders of residency programs for not insisting that they know the true sources of financial support for their programs, obtain budgets that reflect this support, and recognition that their faculty really do bring in external funds for their teaching of house staff (and are thus valuable "taxpayers" in Dr Goldman's parlance.) It is amazing that such amounts of money have been flowing for years mostly in secret. The secrecy has fueled incorrect, and in retrospect, bizarre ideas about the funding of medical education, and the value of medical educators to their institutions. This secrecy, in turn, has helped suppress the morale of medical educators, support the control of managers of health care professionals, and distort the flow of money within academic institutions and to compensation for certain favored individuals. Would our dysfunctional health care system not be better off if we demanded transparency and accountability from its leaders?  In particular, the US government should make payments to hospitals for graduate medical education completely transparent, and develop a system to hold these hospitals accountable for how they spend the money.  Meanwhile, top leaders of hospitals receiving this money should make the amounts transparent, first to the people who are supposed to be doing the education that the money pays for, and to the public at large.  This would allow those running the relevant educational programs to develop reasonable and realistic budgets, to treat their faculty with respect, and to demonstrate what value they provide for the money received.  The ongoing anechoic effect, and related deception and secrecy fostered by leaders in health care are major reasons our health care system is so dysfunctional, that costs are so high, and access and quality so poor.  True health care reform would ensure health care leaders put the mission before their personal enrichment, and act ethically with accountability, transparency, and honesty.  References 1.   DeAngelis CD. Professors not professing. JAMA 2004; 292: 1060-1.  Link <a href="http://jama.ama-assn.org/cgi/content/extract/292/9/1060">here</a>. 2.  Goldman L, Halm EA.  A view from the top: general internal medicine from the perspective of a chair and dean.  SGIM Forum, April, 2007.  Link <a href="http://www.sgim.org/userfiles/file/Forum/2007/Forum200704.pdf">here</a>. 3.  Pololi L, Ash A, Krupat E.  Faculty Values in the Culture of Academic Medicine: Findings of a National Faculty Survey. Link <a href="https://www.aamc.org/download/154216/data/your_career_is_more_than_your_specialty_-_246.pdf">here</a>. 4.  Liebow M, Jaeger J, Schwartz MD. How does Medicare pay for graduate medical education? SGIM Forum, May, 2012.  Link <a href="http://www.sgim.org/userfiles/file/May%202012%20Forum/May2012-09.pdf">here</a>. 5. Chaudhry SI, Khanijo S, Halvorsen AJ, McDonald FS,Patel K. Accountability and transparency in graduate medical education expenditures. Am J Med 2012; 125: 517-522. Link <a href="http://www.amjmed.com/article/S0002-9343%2812%2900071-X/fulltext">here</a>.

The Case of the Vanishing Graduate Medical Education Funds

While primary care falters in the US, those who teach it seem to feel increasingly poverty stricken. Now it appears that one reason for thi...

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More Rising Compensation for Executives at Financially Challenged Hospitals, Justified by More Talking Points

In the spring, leaves turn green, and executive compensation turns greener.  The media has provided another set of stories about the inexorable rise of compensation for executives of non-profit hospitals, presented in order of the stories' appearance. Westchester Medical Center The Journal-News <a href="http://www.lohud.com/article/20120401/NEWS02/304010064/At-Westchester-Medical-Center-executives-get-raises-others-lose-jobs">reported</a> in April, <blockquote>A Journal News analysis of salary data, obtained through a Freedom of Information request, revealed that 20 hospital administrators received increases in their total compensation for 2010, including one employee whose pay package jumped 18 percent.</blockquote> Also, <blockquote>The newspaper’s analysis of data for 2010, the latest year available, shows that 26 administrators at the medical center would have exceeded Gov. Andrew Cuomo’s limit of $199,000 a year for executive compensation. Cuomo signed an order, scheduled to take effect April 15, that restricts the amount of state money that nonprofit organizations can use toward salaries and benefits. Overall, the medical center spent $11.8 million in compensation to 44 executives in 2010, during which three administrators resigned and three others had their titles downgraded to the director level. The executive payroll rose 11 percent between 2008 and 2010.</blockquote> In particular, <blockquote>Administrators who received increases in their total compensation included CEO Israel, who earned the top salary of $1.3 million in total compensation; the chief financial officer; an executive vice president and several senior vice presidents.</blockquote> However, the fortunes of the top executives were rising at a time of financial trouble for the institution: <blockquote>That same year, the medical center laid off 130 workers, instituted a hiring freeze and announced an $18 million budget cut for the following year. 'There is no shared sacrifice, there is no appearance of a shared sacrifice,' said Jayne Cammisa, a union representative and a registered nurse in the hospital’s transplant unit. </blockquote> Those who defended the executives' compensation sounded familiar themes: <blockquote>Hospital boards rely on compensation committees, outside consultants and market analysis and documentation to justify how much they pay administrators. The medical center uses an outside firm to analyze compensation packages, which are based on market values, [Senior Vice President for Communications Kara] Bennorth said. The only way to keep the institution and be financially viable is you have to have top management,' [Chairman of the Board Mark] Tulis said. </blockquote>Note that we briefly mentioned the CEO's compensation in <a href="http://hcrenewal.blogspot.com/2012/02/bloat-continues-more-tales-of-non.html">this post</a>. Connecticut In May, the Hartford Courant <a href="http://articles.courant.com/2012-05-08/business/hc-hospital-executive-compensation-20120508_1_median-compensation-top-executives-executive-director">reported</a>, <blockquote>The health care system may be ailing, but newly compiled data show that compensation for top executives at Connecticut hospitals remains healthy. Eighteen executives at the state's 30 hospitals made more than $1 million in 2009-10, according to information the hospitals reported to the Internal Revenue Service. </blockquote> Some of the more notable examples included, <blockquote>Hartford Hospital's outgoing chief executive officer, John J. Meehan, was the highest paid in Connecticut and one of the highest paid nationally. His compensation totaled $6.98 million – all but $1.1 million of it nontaxable and retirement benefits, according to the hospital.</blockquote> Also, <blockquote>In addition to Meehan, Connecticut's 10 highest paid administrators were two Yale-New Haven Health System executives, the departing CEOs at the Hospital of Central Connecticut and the Hospital of St. Raphael, the departing treasurer of Hartford Hospital, the treasurer of the Hospital of Central Connecticut and the presidents of Stamford, Yale-New Haven and St. Francis Hospital and Medical Center. All made more than $1.59 million in 'reportable' W-2 and 1099 miscellaneous compensation. A few executives had significant 'non-reportable' compensation in addition to W-2 and 1099 pay. The outgoing president at William Backus Hospital in Norwich had $2.2 million in deferred compensation related to his retirement, for total pay of nearly $3 million, according to a C-HIT analysis of the data. The chief operating officer at the Hospital of Central Connecticut had $472,443 in reportable pay and $838,880 in other compensation, for a total of $1.3 million.</blockquote> Again, there were complaints that executive compensation had nothing to do with the performance of the executives' organizations, <blockquote>'I don't understand what the hospitals are getting for their money. Some of the highest paid are the worst performing,' said Ellen Andrews, executive director of the Connecticut Health Policy Project in New Haven. 'The system isn't working for anyone – for the state, for the hospitals or for consumers.'</blockquote> Note, however, that the system is working for the top hired executives. In response to these complaints, the Courant cited the usual defenses of executive pay: <blockquote>Others say the compensation reflects the complexity of the health care business, keen national competition for good leaders, and the uncertain future that executives face when they sign on for top-level positions in an industry undergoing enormous change. Pay needs to be competitive to attract and retain key executives, they say – even for nonprofits that are struggling to find their place. 'Hospital executives are responsible for extremely complex organizations,' said Michele Sharp of the Connecticut Hospital Association. In addition to managing advanced medical services and technology, a skilled staff and extensive physical plants, hospital CEOs are often responsible for an array of services beyond the hospital, such as primary care clinics, home health organizations and surgery centers. They work in a highly regulated environment and must comply with demanding standards in areas that range from patient safety and financial performance to institutional stability and community health, Sharp said. 'When you bring in exceptional talent, you can manage effectively and efficiently,' said Vin Petrini, senior vice president for public affairs atYale-New Haven Hospital. 'It's a very complicated and complex industry. We need to be thoughtful about how we manage and retain and recruit talent.'</blockquote> Wake Forest Baptist The Winston-Salem Journal <a href="http://www2.journalnow.com/news/2012/may/15/wake-forest-baptist-ceo-mcconnell-receives-nearly--ar-2280364">uncovered</a> the compensation of several local executives, <blockquote>A commitment Wake Forest Baptist Medical Center made to Dr. John McConnell, its chief executive, when he was recruited led to a nearly 50 percent increase in his total compensation for fiscal year 2010-11, the center reported Tuesday. McConnell was paid almost $2.5 million in total compensation, compared with $1.68 million for fiscal 2009-10.</blockquote> The total included essentials such $25,560 for moving expenses and $9,568 for country club dues. Other executives did well too: <blockquote>Donny Lambeth, former president of N.C. Baptist Hospital, had a 36 percent increase in total compensation to $1.16 million. Lambeth now serves as president of Davie County Hospital and Lexington Medical Center. His salary dropped 11 percent to $537,997, while his bonus and incentive compensation rose 165 percent to $186,261. Dr. Thomas Sibert, president of Wake Forest Baptist Health and chief operating officer, received a 2 percent increase in total compensation to $995,133, including $545,517 in salary and $166,027 in bonus and incentive compensation. Sibert took over his role in September 2010. Edward Chadwick, chief financial officer, received a 32 percent increase in total compensation to $974,587. His salary rose 71 percent to $503,663 in salary, while his bonus and incentive compensation fell 42 percent to $200,000. Dr. William Applegate, retired president of Wake Forest University Health Sciences and dean of its medical school, was paid $743,541 in total compensation, down 25 percent. His salary dropped 3 percent to $518,231, while his bonus and incentive compensation fell from $378,900 to $99,900. Doug Edgeton, former president of Piedmont Triad Research Park, received a 38 percent decrease in total compensation to $655,048. His salary fell 1 percent to $484,360, and his bonus and incentive compensation fell from $361,600 to $111,700.</blockquote> However, a Winston-Salem Journal <a href="http://www2.journalnow.com/news/2012/apr/13/wake-forest-baptist-to-aggressively-reengineer-ove-ar-2160506">article</a> in April noted that the same CEO, Mr McConnell would be aggressively cutting costs and possibly laying off employees: <blockquote>Wake Forest Baptist Medical Center has told employees it is considering reducing its workforce as part of a major initiative aimed at improving patient outcomes at a lower cost. The center confirmed Friday a memo sent April 2 by Dr. John McConnell, its chief executive, which addressed what the center is calling 'accelerated transformational initiatives.'</blockquote> In particular, <blockquote>In a separate statement, the center said it is looking at expense-reduction opportunities that include 'energy conservation, cost savings through supply chain management, revenue-cycle improvements, efficiencies such as reducing length of stay, reduction in discretionary spending, and managed employment through attrition, retirements, eliminating duplication and process redesign.'</blockquote>"Managed employment" seems to be the latest circumlocution for layoffs. The largess given to top executives at a time when lesser employees may be sacked was explained by trotting out the usual suspects, <blockquote>Wake Forest Baptist said the center is a 'very complex organization that requires a special set of skills and experience to manage relationships with physicians and researchers, the university, its patients and community.'</blockquote>I wonder if "complexity" comes from a set of talking points, since it gets aired so often in this context. Note that we discussed compensation given to Wake Forest executives the year before, and its relationship, or lack thereof to the quality of their leadership <a href="http://hcrenewal.blogspot.com/2011/09/highly-paid-skilled-executives-and.html">here</a>. Summary There they go again. We have the latest additions to what has become a long series of <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">examples of executive exceptionalism </a>in health care organizations. Top hired executives, be they of for-profit health care corporations, or non-profit organizations, tend to be <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">paid very well</a>, even when their organizations perform poorly or are financially threatened. The same rationales are cited repeatedly to justify their treatment. Executives are said to have very difficult jobs, Competitive pay is necessary to hire the brilliant people required.  Left unsaid, however, is how difficult these managerial positions are in comparison to the demanding work and sometimes life or death responsibilities of health professionals, how brilliant executives are in comparison to such well trained professionals, and why the executives deserve competitive pay when other employees may be laid off. Perhaps the close ties of those making the arguments to the executives explains the questions they beg. So it is time to say it again,....  Health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior. If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

More Rising Compensation for Executives at Financially Challenged Hospitals, Justified by More Talking Points

In the spring, leaves turn green, and executive compensation turns greener. The media has provided another set of stories about the inexora...

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Wall Street Journal Defends Hired WellPoint Executives' Lack of Accountability to the Company's Owners

The lack of accountability of the hired managers (or executives or bureaucrats) of health care organizations came into sharper focus thanks to a bizarre, in my humble opinion, <a href="http://online.wsj.com/article/SB10001424052702304746604577381882918797726.html">Wall Street Journal editorial</a> from last week.  Background: Shareholder Campaign for Oversight of Hired Executives Use of Corporate Money for Political Purposes In the background is the campaign by some of the owners, that is, shareholders of giant publicly held for-profit insurance company WellPoint to make its executives' attempts to involve the company in politics more transparent and accountable.  (See our previous post <a href="http://hcrenewal.blogspot.com/2012/04/some-of-wellpoints-owners-stockholders.html">here</a>.)  As noted more recently in Fortune (<a href="http://management.fortune.cnn.com/2012/05/08/wellpoint-faces-shareholder-ire-over-political-spending/">by way of CNN</a>), <blockquote>shareholders and major U.S. companies have been meeting behind the scenes to discuss improvements in oversight and disclosure practices. 'Companies need to remember that shareholders have a right to know how their money is being spent,' wrote Eric Sumberg, spokesperson for New York State Comptroller Thomas P. DiNapoli, representing the New York State pension fund, in an email. 'Transparency and full disclosure will help to deter high risk political spending that could hurt shareholder value.' Aetna and WellPoint are two companies contending with shareholder proposals on political spending disclosure this year. The Center for Public Accountability (CPA) rates the disclosures at Aetna and WellPoint as having 'room for improvement.' Both WellPoint and Aetna have disclosure practices that 'leave significant room for serious misrepresentation of the company's political spending through trade associations,' according to the Center's Political Accountability and Transparency Reports. According to the Center reports, both companies gave money to AHIP (American Health Insurance Plans). And $86 million in funds from AHIP were allegedly funneled to the Chamber of Commerce to lobby against health care reform, according to reports from Bloomberg and the National Journal.</blockquote> Note that this money was supposedly used by WellPoint executives to undermine the Obama administration's health care reform proposals while the company was publicly supporting aspects of these proposals. The Wall Street Journal Says Hired Executives Not Accountable to Shareholders The Wall Street Journal's editorial page's <a href="http://online.wsj.com/article/SB10001424052702304746604577381882918797726.html">denunciation</a> of this campaign by corporate owners to assert their rights, and the accountability of hired managers opened thus, <blockquote>The campaign to intimidate companies from exercising their free-speech rights is in high gear as shareholder proxy season arrives, and the most prominent early target is health-insurer WellPoint. The arc of this attack will be one of the election year's political leitmotifs, and it should be on the radar of every corporate boardroom. In the favored new tactic of the left, unions and activists are using politicized shareholder resolutions to send a message to corporations: Drop support for free-market and conservative causes, or you'll take a political beating. </blockquote>The Journal conveniently ignored that the campaign is not from outside the corporation, but from its very owners, and that the people they are supposedly trying to intimidate are actually supposed to be responsible to them.  In addition, it begged the question of how political spending by hired corporate bureaucrats unaccountable to the people who own the company could possible have anything to do with free markets. If some owners do not think that executives should be spending company money on political causes (especially presumably causes that the executives favor, or that reflect the executives' self-interest), they have a perfect right to think so, and to act on their thoughts. Then the  Journal went on to assail the shareholders' challenge to some members of the WellPoint board of directors.  After first defining Change to Win as a "union front group," - <blockquote>Change to Win is now targeting WellPoint's annual meeting on May 16 when it will demand that shareholders vote against board members Julie Hill and Susan Bayh (wife of former Indiana Democratic Senator Evan Bayh) because the company has refused to disclose or stop all of its political spending. Among the company's crimes? Corporate funding of, you guessed it, ALEC.</blockquote>Now let us back up a minute. This is about a campaign by stockholders, that is, people who are owners, albeit fractional owners of WellPoint. It is some shareholders who want to vote against the particular board members.  WellPoint directors are supposed to have a fiduciary duty to represent the stockholders', that is, the owners' financial interests. If stockholders think members of the board of directors are not representing the stockholders' interests, the stockholders have a perfect right to vote against them.  However, the Journal fulminated, <blockquote>The union attack on WellPoint is notable for targeting two board members by name and the effort to make extra hay out of Susan Bayh's political profile. (Added frisson: Evan Bayh has worked as a consultant to the Chamber.) The ad hominem attack is right out of the Saul Alinsky playbook and is intended as a warning to other corporate directors that their personal reputation will be damaged if they don't force companies to stop donating to industry groups. </blockquote> Note further that all stockholders are owners, whether they are also union members, or have green hair. Note further that the owners again have a perfect right to criticize or vote against board members who they believe are not properly exercising their fiduciary responsibilities to stockholders, that doing so has nothing to do with the <a href="http://www.nizkor.org/features/fallacies/ad-hominem.html">ad hominem fallacy</a>, and that this right is not nullified for stockholders with particular political opinions, or stockholders whom the Wall Street Journal does not like. Summary So we see the Wall Street Journal, supposed defender of capitalism, attacking a fundamental part of capitalism, the right of ownership, corporate ownership in this case. Instead, presumably, the Journal editorialists thinks that hired corporate executives ought to be completely unaccountable to the stockholders, and able to do whatever they want, including to do what is in their self-interest but not the owners' interests. So this is how far the coup d'etat by hired executives/ managers/ bureaucrats has progressed. Supposed defenders of capitalism are now defending the rule of hired corporate insiders, completely disregarding the rights of owners. All we are lacking is a catchy name for rule by the hired managers/ bureaucrats/ executives. I am open to suggestions. We have long criticized leaders of health care organizations who are ill-informed, unaware or hostile to health care professionals' core values, self-interested, or even corrupt.  We have discussed how bad leadership has advanced as leaders have become less accountable.  It appears that the lack of accountability of health care leaders, and their tendencies to put their own interests first, is part of a larger problem.  This is the take-over by most of society's important organizations by the managers, bureaucrats, and executives who were hired to run them.  For profit corporate hired leaders have become unaccountable to the corporations' owners.  Non-profit organizations' hired leaders have become unaccountable for the mission, or for their organizations' stakeholders.  If we want health care, and democratic society to survive, we need to counter the managers' coup d'etat and make leaders accountable once again.

Wall Street Journal Defends Hired WellPoint Executives' Lack of Accountability to the Company's Owners

The lack of accountability of the hired managers (or executives or bureaucrats) of health care organizations came into sharper focus thanks ...

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The CEO as False Messiah

Why is the leadership of health care organizations so bad?  An <a href="http://www.informationweek.com/thebrainyard/news/industry_analysis/232901524">important explanation</a> of one part of the puzzle appears on InformationWeek's Brainyard blog written by Venkatesh Rao.  The Visionary, Charismatic, or Messianic Leader In "The Fall of the Messiah Leader," Rao described the rise of the concept of "visionary" leadership: <blockquote>we'll look at the rise in the 1980s and impending fall of the idea of 'Leadership' as a pop business construct. The role of visionary leader emerged to make up for the apparent failure of the manager mind, but it evolved into something very different, illustrated in the picture below: a role dedicated mainly to creating and maintaining an illusion of control in the markets interspersed with occasional Big Bold crisis management moves that generally fail.</blockquote> Rao suggested that the first example of the messianic organizational leader was former General Electric CEO Jack Welch: <blockquote>Welch was the first modern example of 'charismatic leadership,' and his was the first widely recognized business name since the robber barons. I challenge you to name, off the top of your head, one "celebrity" business name between Rockefeller and Welch that the average man on the street would have recognized. </blockquote> Rao described the charismatic, or visionary leader in truly messianic terms: <blockquote>one savant-like figure can intuitively read market conditions, spot brilliant strategic opportunities, create clarity of purpose in pursuit of that opportunity, and steer by an innate sense of True North, without a compass. Oh yeah, and while performing this miracle routinely, the leader also models virtues and values that would put saints to shame. This idealized leader sparks a pursuit of corporate greatness with a brilliant strategic insight every few years, and he ensures that the pursuit is conducted in accordance with values so noble you feel like writing epic poems in his honor. These charismatic figures are supposed to be capable of intuitively cutting through complexity and producing visionary decisions that make the managers' jobs tractable again. </blockquote> In case this description of supposedly messianic leaders of recent years sounds far-fetched, recall the example of the failed, then eventually jailed CEO of what was once the Allegheny Health Education and Research Foundation (AHERF), one of the largest vertically integrated health care systems of the 1990s. (Currently, we call such organizations accountable care organizations, or ACOs.) Abdelhak was described in an American College of Physicians publication as a "visionary." (See the summary beginning on p 5 <a href="http://www.acponline.org/about_acp/chapters/ri/nl-fall04.pdf">here</a>.) Abdelhak had previously been called a "visionary" or a "genius" in the media. [Gaul GM. Creator of a cross-state health system despite personal and financial questions, Sherif Abdelhak has boldly expanded from Pittsburgh to Philadelphia. Philadelphia Inquirer, March 4, 1991. P. D1. Gaul GM. The new prescription for health care: Hahnemann’s merger dwarfs - and frightens - many local rivals. Philadelphia Inquirer, November 21, 1993. P. E1.]  For more recent examples of how health care leaders may be described in messianic terms, look <a href="http://hcrenewal.blogspot.com/2011/09/more-repeats-of-talking-points.html">here</a>, <a href="http://hcrenewal.blogspot.com/2011/09/talking-points-sans-original-thought-to.html">here</a>, and <a href="http://hcrenewal.blogspot.com/2011/12/more-tales-of-hospital-ceo-compensation.html">here</a>. The False Messiahs Just as Abdelhak proved to be not a messiah, but a criminal, most messianic leaders are anything but. As Rao put it, <blockquote>Do these Messiahs actually do the job required of them--relieve beleaguered mere-mortal managers and steer the company toward greatness? Nine out of 10 times, they do nothing of the sort. What they do is convince people that they're in control. </blockquote> His main point is that the "messiahs" are just people playing at that role, supported by public relations, if not propaganda and disinformation: <blockquote>Heroic, charismatic leadership in the context of large public companies is mostly a myth. What makes it a myth isn't that such figures don't exist (there have been a handful, such as Welch himself, Jobs, and Bezos), but the idea that the phenomenon can be studied in general terms, codified, and turned into a teachable skill. True leaders are born, not manufactured. And they're quite rare. What the leadership cottage industry can manufacture are false leaders: People who can act like leaders. That theater has two audiences: the media and Wall Street. The psychological allure of 'leadership' as a concept is almost entirely due to its profitability as a business-writing cottage industry, which in turn is based almost entirely on appealing to the vanities of wannabe-Messiahs. On the other side, there's an entire shadow world devoted to manufacturing perceptions of Messianic capabilities, by 'proving' claims to charismatic leadership using hagiographic narratives. </blockquote> Rao claimed that the rise of such falsely messianic leadership was due to the ability of such leaders to bewitch investors: <blockquote>The de facto job of a leader is to manage perceptions on Wall Street and thereby manage the stock price. Projecting an image of charismatic leadership is the easiest way to do that. Managers fight fires out of sight, creating a perception of corporate normalcy and control, and the Glorious Leader uses that blank canvas of apparent normalcy to spin tales that mesmerize Wall Street.</blockquote> Who Else Benefits Rao wrote mainly in the context of understanding the stresses and challenges of managers (who he sees as distinct from leaders in the context above). Thus he may not have written about other factors in the etiology of falsely messianic leaders. I hypothesize that such leaders are not only good at bewitching investors, but bewitching other constituencies and stakeholders. Most health care organization now must deal with government agencies. Non-profit health organizations must deal with groups that are interested in their ostensibly charitable missions. Having a apparently messianic leader makes it possible to bewitch these groups. Furthermore, I hypothesize that falsely messianic leaders greatly benefit two groups within their organizations. The first is obviously their apostles, often the top layers of organizational executives just below the CEO. Such positions are now almost as personally remunerative as are CEO positions. The second is obviously the spin-doctors, that is mainly the public relations and sometimes the marketing people who help produce the theatre that creates the perception of messianic qualities. The Final Common Pathway Rao suggests that falsely messianic leaders are likely to lead their organizations to a bad end, even if they themselves may escape the consequences: <blockquote>Charismatic theater-leadership is about to die a messy death, like Qadaffi, because the sheer amount of chaos converging in a bottom-up torrent to the CEO's office will become unmanageable very soon. The theater will become increasingly hard to sustain. Leaders fail when their managers fail to keep up with the fire-fighting. Once the fires become visible externally, the apparent normalcy necessary for the leader to manage perceptions is gone. At this point, the leader is an impossible situation, but the theater must continue. And so we're treated to the grand finale of the tenure of a CEO: the Big Bold Move, the Bet The Company moment. The Big Bold Move is usually a Big Dumb Move--deciding to go after large new markets, taking on bold new product initiatives costing hundreds of millions of dollars, making major acquisitions. It's a high-stakes game with a billion-dollar ante. And usually these moves fail because charismatic leaders are forced to make them at terrible times, with bad data, when growth has stagnated or is plummeting, and there's a need for an 11th hour business model shift to replace hundreds of millions of dollars of collapsing revenue streams. A case of too much, too late. The leaders who fail are sacked, land safely with golden parachutes, and proceed to loudly blame 'culture' (read: 'incompetent middle management') for the failure.</blockquote> Rao is writing for a general business audience. The outcomes of such failures when the falsely messianic leader is in charge of a health care organization can obviously be even worse, leading to rising health care costs, declining access and quality, and threats to patients' and the public's health. Summary We have seen many health care leaders praised for their brilliance and paid royally despite leadership resulting in financial distress, <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management">threats to the organizations' health care missions</a>, poor patient care, unethical behavior, or even <a href="http://hcrenewal.blogspot.com/search/label/crime">crime</a>. (The most recent example as of the time this was written was <a href="http://hcrenewal.blogspot.com/2012/04/2011-best-paid-us-ceos-companys-latest.html">here</a>. For other examples look <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">here</a>.)   Yet health care CEOs are just people, sometimes smart, but almost never brilliant.  Promoting them as messianic to bewitch key constituencies, justify the remuneration of other top managers, and the hiring of more public relations flacks is likely to lead to the sort of organizational disasters and system-wide dysfunction we discuss on Health Care Renewal.  The rise of the falsely messianic leader may allow the entry of the most dangerous false messiahs, the psychopathic ones.  (We discussed the likelihood that some health care leaders are actually psychopaths <a href="http://hcrenewal.blogspot.com/search/label/psychopaths">here</a>.) Rao's theory of falsely messianic leadership (and related, and also religiously allusional theories of the "divine rights of CEOs," look <a href="http://hcrenewal.blogspot.com/2012/03/golden-calf-explains-how-economism-lead.html">here</a> and <a href="http://hcrenewal.blogspot.com/2012/03/why-health-care-leaders-remain.html">here</a>), suggest that the better paid the CEO, and the more expansive the descriptions of the CEOs talents, the more skeptical we ought to be.  In the secular occupation of health care, we ought not to yearn for messiahs, but hope for reasonable leadership that draws on the collective knowledge and values of health care professionals rather than dubious "visions," and that show accountability, integrity, transparency, honesty, and ethics.

The CEO as False Messiah

Why is the leadership of health care organizations so bad? An important explanation of one part of the puzzle appears on InformationWeek...

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ONC's "Health Data Palooza" - A Title of Exceptionally Bad Taste, For a "See No Evil" Meeting

The Office of the National Coordinator of Health IT has sent out this announcement: <div style="color: #16588b; font-family: Arial, Helvetica, sans-serif; font-size: 20px;">Subject: HEALTH DATA PALOOZA III: Unleashing the Power of Data to Improve Health From:    ONC Health IT <onchealthit .="." service.govdelivery.com="service.govdelivery.com"> Date:    Thu, May 10, 2012 10:36 am </onchealthit></div><div style="color: #16588b; font-family: Arial,Helvetica,sans-serif; font-size: 20px;"> </div><div style="color: #16588b; font-family: Arial,Helvetica,sans-serif; font-size: 20px;">HEALTH DATA PALOOZA III: Unleashing the Power of Data to Improve Health</div><div style="text-align: center;"> June 5-6th, Washington DC Health Data and Innovation Week <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTIwNTEwLjc0NDU0MDEmbWVzc2FnZWlkPU1EQi1QUkQtQlVMLTIwMTIwNTEwLjc0NDU0MDEmZGF0YWJhc2VpZD0xMDAxJnNlcmlhbD0xNjk4NDczMyZlbWFpbGlkPXNjb3RzaWx2QGFvbC5jb20mdXNlcmlkPXNjb3RzaWx2QGFvbC5jb20mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&101&&&http://www.hdiforum.org" target="_blank">www.hdiforum.org</a> | #healthdata CONFIRMED SPEAKERS Kathleen Sebelius, Secretary of Health and Human Services Marc Bertolini, CEO Aetna Thomas Goetz, Execuitve Editor of WIRED Atul Gawande, surgeon and author Bill Frist, former Republican Majority Leader Dominique Dawes, two time gold medal winner Todd Park, US Chief Technology Officer Hear from Farzad Mostashari, National Coordinator for Health IT on data liberation ONC will host breakout sessions on Consumer e-Health, HealthData.gov, and Uses of Data by ACOs ONC will release nine challenges during this year’s event! </div><div style="text-align: center;"> </div><div style="text-align: left;"> </div><div style="text-align: left;">This title for a government-sponsored meeting is bizarre and tasteless in my opinion.  What is deemed by ONC to be the major source of this data?  Health IT.</div><div style="text-align: left;"> </div><div style="text-align: left;">"Palooza?"</div><div style="text-align: left;"> </div><div style="text-align: left;">From Urban Dictionary:</div><div style="text-align: left;"> </div><blockquote dir="ltr" style="margin-right: 0px;"><div>Palooza - <a href="http://www.urbandictionary.com/define.php?term=palooza">http://www.urbandictionary.com/define.php?term=palooza</a></div><div class="definition"></div></blockquote><blockquote dir="ltr" style="margin-right: 0px;"><div class="definition">An all-out crazy party; partying at one place with a ton of people like there's no tomorrow; The art of throwing a very drunken extravagant party with a plethora of friends</div></blockquote><div></div><div></div><div> "Data Liberation?"    </div><div></div><div> What about "patient liberation" -- from risk? </div><div></div><div> Considering it unlikely that issues in the bulleted points below, commented on in detail in past posts on this blog, will be discussed at this meeting, the title of the meeting is especially tasteless:</div><div></div><div style="font-family: Arial,Helvetica,sans-serif;"><ul><li>There is a markedly unscientific "irrational exuberance" pushing clinical IT into wide use at a dangerously rapid pace. This exuberance is contradicted by a growing body of literature that shows the benefits are likely far less than stated, e.g., by way of example, the ad-hoc set at <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=readinglist">http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=readinglist</a>  </li><li>The technology remains experimental, its rollout is a human subjects experiment on a massive scale lacking nearly all the protections of other human subjects experimentation and for IT in mission critical settings (e.g., informed consent, formal quality control/validation/regulation, formal postmarket surveillance and reporting) due to extraordinary legal and regulatory special accommodations afforded the technology and its purveyors; </li><li>Defects of in-use systems are rampant, inappropriately turning patients and clinicians into software alpha and beta testers (e.g., as in the voluntary FDA MAUDE database, <a href="http://hcrenewal.blogspot.com/2011/01/maude-and-hit-risk-mother-mary-what-in.html">http://hcrenewal.blogspot.com/2011/01/maude-and-hit-risk-mother-mary-what-in.html</a> which contains information for just one HIT vendor, Cerner, who voluntarily reports such issues); </li><li>The technology is unsupportive of clinician cognitive needs (2009 National Research Council study, which also stated that accelerating interdisciplinary research in biomedical informatics, computer science, social science, and health care engineering will be essential to perfect this technology); </li><li>The roles of <a href="http://hcrenewal.blogspot.com/2011/08/from-senior-clinician-down-under.html" target="_blank">scientific discovery and anecdote</a> have been turned on their heads. RCT's of clinical IT are nearly non-existent and lower-level evidence (e.g., weak observational, pre-post, qualitative, and other study types) are cited as "scientific proof" of efficacy and safety justifying hundreds of billions of dollars of taxpayer (or is it Chinese loan?) expenditures.  Yet, risk management-relevant case reports of harmful events and near misses, crucial to help organizations and regulatory agencies understand risks are dismissed as "anecdotal" (e.g., Blumenthal: "The [ONC] committee [investigating FDA reports of HIT endangement] said that nothing it had found would give them any pause that a policy of introducing EMR's could impede patient safety," he said, while ONC issued an article based on questionable research methods entitled "<a href="http://content.healthaffairs.org/content/30/3/464.full.html">The Benefits Of Health Information Technology: A Review Of The Recent Literature Shows Predominantly Positive Results</a>" extolling the virtues of HIT, written about at <a href="http://hcrenewal.blogspot.com/2011/03/benefits-of-health-information.html">http://hcrenewal.blogspot.com/2011/03/benefits-of-health-information.html</a>). </li><li>Risks are definite, with known patient injury and death, but the magnitude is admittedly unknown by JC (2008 Sentinel Event Alert), FDA (2010 Internal memo on HIT risks and statements of Jeffrey Shuren MD JD about known harms likely being "the tip of the iceberg"), IOM (2011 report on HIT risk), ECRI Institute (Top ten healthcare technology hazards for 2011 and 2012), NORCAL Mutual Insurance Company 2009 report on EHR risks, others; </li><li>Existence of severe impediments to information diffusion about risks explicitly admitted by FDA (2010 memo), IOM (2011 report), others; </li><li>Usability of commercial products in real world settings is often poor (e.g., NIST 2011 study on usability), promoting "use error" (user interface designs that engender users to make errors of commission or omission, where many errors are due not to user error per se but due to designs that are flawed, e.g., poorly written messaging, misuse of color-coding conventions, omission of information, etc.) </li><li>These systems promote capture and display of clinically irrelevant information in the interest of charge capture, and result in <a href="http://hcrenewal.blogspot.com/2011/02/electronic-medical-records-two-weeks.html" target="_blank">reams of "legible gibberish"</a> with many negative characteristics that make it difficult for other clinicians and reviewers to establish a cohesive, definitive narrative of clinical events and timelines.</li></ul></div><div></div><div> Health IT and health data issues are not 'partying' affairs. An un-seriousness about anything related to health IT seems in vogue of late. Finally, I ask:  does this "Health Data Palooza" bring my <a href="http://hcrenewal.blogspot.com/2012/02/health-it-ddulites-and-disregard-for.html" target="_blank">Ddulite</a> term to life?</div><div></div><div> <blockquote>Ddulite: Hyper-enthusiastic technophiles who either deliberately ignore or are blinded to technology's downsides, ethical issues, and repeated local and mass failures. </blockquote> A Ddulite Palooza.  How charming. Like the recent extravagances of other government agencies such as <a href="http://www.cnn.com/2012/04/16/politics/gsa-hearing/index.html" target="_blank">GSA in Las Vegas</a> and the <a href="http://worldnews.msnbc.msn.com/_news/2012/05/07/11575731-prostitute-at-center-of-secret-service-scandal-agents-were-stupid-brutes?lite" target="_blank">Secret Service in Colombia</a>, let's hope this Data Palooza is a Palooza in name only. In light of those recent scandals, calling a government sponsored meeting a "Palooza" seems inappropriate on that basis as well. -- SS 5/13/12  Addendum: A commenter pointed this flyer out: <div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTPbMy_j7ie4KaNq3KWvaVvz0U-dCbEJ6UFSqTSyAmbRjMgptx5t_RbH8VRoBEsC_HQnKX-0E0NlppsCpdARzpzgLCAXPfRFN5WhNbiifkKQBMqONs_ORtXBGiny-6_XxVVycRVkTM8CG1/s1600/Health_Datapalooza_Poster_4.25_large.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTPbMy_j7ie4KaNq3KWvaVvz0U-dCbEJ6UFSqTSyAmbRjMgptx5t_RbH8VRoBEsC_HQnKX-0E0NlppsCpdARzpzgLCAXPfRFN5WhNbiifkKQBMqONs_ORtXBGiny-6_XxVVycRVkTM8CG1/s320/Health_Datapalooza_Poster_4.25_large.jpg" width="247" /></a></div><div style="text-align: center;">(click to enlarge)</div><div style="text-align: center;"> </div><div style="text-align: left;">I post it here with no additional comments.</div><div style="text-align: left;"> </div><div style="text-align: left;">-- SS</div></div>

ONC's "Health Data Palooza" - A Title of Exceptionally Bad Taste, For a "See No Evil" Meeting

The Office of the National Coordinator of Health IT has sent out this announcement: Subject: HEALTH DATA PALOOZA III: Unleashing the Power o...

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Abbott Pleads Guilty, Settles for $1.6 Billion, but No Individuals Suffer Negative Consequences

Once again, another big US health care organization is set to make a (monetarily) huge <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlement</a>.  As <a href="http://www.businessweek.com/news/2012-05-07/abbott-to-pay-1-dot-6-billion-to-settle-depakote-marketing-claims">reported</a> by Bloomberg, Abbott Laboratories will settle allegations about its marketing of Depakote (valproic acid), nominally an anti-seizure medication: <blockquote>Abbott Laboratories (ABT) (ABT) said it will pay $1.6 billion to settle federal and state claims resulting from an investigation into its epilepsy medication Depakote, the second-largest drug-marketing settlement in U.S. history. The company will pay $800 million to resolve civil allegations split among federal and state governments, $700 million for a criminal penalty, the Justice Department said in a statement. Abbott marketed the drug, approved for epilepsy, bipolar mania and migraine prevention, for unapproved uses including dementia, the U.S. said. </blockquote> Note that we discussed preliminary reports of this settlement <a href="http://hcrenewal.blogspot.com/2011/11/abbott-laboratories-to-settle-for-13.html">here</a>. Huge, but not Compared to Sales The story included all the obligatory pieces. The settlement is huge, the second largest such financial settlement made by a drug company. However, compared to the money made by the product in question, it was not so large, as <a href="http://online.wsj.com/article/SB10001424052702304451104577390182002017146.html">noted</a> by the Wall Street Journal, <blockquote>Depakote was once one of Abbott's best-selling drugs, racking up $1.6 billion in sales for 2007, before patent expirations cleared the way for cheaper generic copies.</blockquote> A Guilty Plea, of Sorts The settlement did require the company to <blockquote>plead guilty to a criminal misdemeanor violation of a federal drug law</blockquote>per the WSJ, but not to a felony. Nor did it appear that any individual would be charged with anything in connection with this settlement. Admitting to Deception, Covering Kickbacks This was so even though the allegations involved more than "misbranding." In fact, the Bloomberg story stated that the company admitted to active deception of physicians and health professionals, <blockquote>'Abbott admits that from 1998 through 2006, the company maintained a specialized sales force trained to market Depakote in nursing homes for the control of agitation and aggression in elderly dementia patients, despite the absence of credible scientific evidence that Depakote was safe and effective for that use,' the Justice Department said in its statement today. Abbott also marketed the drug to be used with certain antipsychotic drugs to treat schizophrenia, 'even after its clinical trials failed to demonstrate that adding Depakote was any more effective than an atypical antipsychotic alone for that use,' the Justice Department said. </blockquote> In addition, the settlement also "covers" allegations of what amounts to bribery. <blockquote>The settlement also covers allegations that Abbott paid kickbacks to health-care professionals and long-term care pharmacy providers to induce them to promote or prescribe Depakote, the Justice Department said in its statement today. </blockquote> We Promise Not to Do Such Bad Things for Five Years Yet despite these implications of massive deception and bribery of health care professionals, the only other punishment is a sort of probationary period during which the company promises not to do such things, per the WSJ. <blockquote>Under the settlement, Abbott agreed to a five-year probationary period. During this term, Abbott will report any probable violations of the Food, Drug and Cosmetic Act to the probation office, according to the Justice Department. Also, its chief executive will certify compliance with this reporting requirement, and its board will report annually on the effectiveness of the company's compliance program. In addition, Abbott agreed not to compensate sales reps for off-label sales and take other steps during the probationary period. </blockquote> A Bland Admission of Nothing As is customary, an Abbott spokesperson provided a bland, positive statement that admitted no wrong-doing, per the WSJ, <blockquote>'We are pleased to resolve this matter and are confident we have the programs in place to satisfy the requirements of this settlement,' Abbott General Counsel Laura Schumacher said in a news release. 'The company takes its responsibility to patients and health care providers seriously and has established robust compliance programs to ensure its marketing programs meet the needs of health care providers and legal requirements.'</blockquote> Previous Misbehavior Apparently not taken account into stories about or the crafting of the current settlement was Abbott's previous record of legal misadventures: Obstructing Justice - In 2003, an Abbott subsidiary settled civil allegations and pleaded guilty to obstructing a federal criminal investigation of its marketing practices, resulting in fines of $614 million (mentioned in <a href="http://hcrenewal.blogspot.com/2010/12/abbott-laboratories-and-pig-roasts.html">this post</a>, and see <a href="http://articles.latimes.com/2003/jul/24/business/fi-abbott24">the Los Angeles Times</a>.) Suppressing Reports of Drug Contamination - In 2009, the FDA charged that an Abbott subsidiary failed to report bacterial contamination of an optic product (see post <a href="http://hcrenewal.blogspot.com/2009/06/original-excuse.html">here</a>). Blocking Generic Competition - In 2010, Abbott settled with the New York state Attorney General allegations that the company conspired to block generic competition for its lipid lowering drug TriCor (see <a href="http://www.reuters.com/article/2010/01/07/abbott-tricor-idUSN0720003720100107">Reuters</a> and our post <a href="http://hcrenewal.blogspot.com/2010/01/abbott-laboratories-settles.html">here</a>). Inflating Charges - In 2010, Abbott also settled with the US Justice Department for $421 million charges that it defrauded Medicare and Medicaid (see post <a href="http://hcrenewal.blogspot.com/2010/12/abbott-laboratories-and-pig-roasts.html">here</a>). Paying Kickbacks to Doctors - In 2010, an Abbott subsidiary also settled with the US government charges it paid kickbacks to physicians to prescribe other cholesterol lowering drugs (see post <a href="http://hcrenewal.blogspot.com/2010/12/abbott-laboratories-and-pig-roasts.html">here</a>). Anti-Competitive Pricing Practices - In 2011, Abbott settled lawsuits alleging that its anti-competitive practices inflated prices of anti-viral drugs (see post <a href="http://hcrenewal.blogspot.com/2011/04/abbott-laboratories-settles-again.html">here</a>). More Richs for the CEO Despite this now long record of ethical missteps, the Abbott CEO gets richer every year. In 2009, his total compensation was over $26 million (see <a href="http://hcrenewal.blogspot.com/2010/12/abbott-laboratories-and-pig-roasts.html">this post</a>). According to the company's <a href="http://media.corporate-ir.net/media_files/irol/94/94004/Proxy_Page/Proxy2012.pdf">2012 proxy statement</a>, his pay has gone down ever so slightly, from $25,564,283 in 2010 to $24,010,902 in 2011, but still approximately 480 times the median earning of a US family. Summary The <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">march of legal settlements</a> progresses. Despite its showy finery of legal language, it fails to include meaningful negative consequences for any individuals, and particularly for those who authorized, directed or implemented unethical actions. It provides the illusion of financial punishment of the organizations involved. However, the amounts paid, albeit large, never approach how much money was brought in by the bad behavior. Furthermore, the costs are diffused among many employees, and for publicly held for-profit corporations, among the nominal owners, the stock-holders. Yet the top executives who personally gained the most almost never have had to answer for the misbehavior, and despite of, or perhaps because of the misbehavior continue to collect voluminous compensation. Despite promises of tougher action, nothing seems to be changing in this parade. However, without real penalties for individuals involved in bad behavior, expect to deterrent of future bad behavior. So once more,.... if we really want to reform health care, we must make the leaders of health care organizations accountable for their organizations' effects on patients' and the public's health, and make sure they get reasonable, not royal compensation reasonably related to their organizations' performance, including ethical performance.

Abbott Pleads Guilty, Settles for $1.6 Billion, but No Individuals Suffer Negative Consequences

Once again, another big US health care organization is set to make a (monetarily) huge legal settlement . As reported by Bloomberg, Abbott...

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From Serving the Poor to Paying Executives Millions - Carolinas HealthCare System

A striking contrast between a large health care organization's historic mission and its current practices appeared in a series published by the Charlotte News-Observer called "<a href="http://www.newsobserver.com/prognosisprofits/">Prognosis: Profits</a>" about the Carolinas HealthCare System. A Historical Mission to Serve the Poor The system evolved from a public hospital meant to serve the poor.  In particular,(1) <blockquote>Only 30 years ago, it was a charity hospital called Charlotte Memorial – a crowded, dreary place that lost money every year because most of its patients couldn’t pay their bills.</blockquote>The hospital system is actually "a public, tax-exempt entity called a hospital authority". Because of this special status, it has the power of eminent domain, the ability to seize property albeit with compensation, and its employees have "more privacy protection that those of other public agencies." However, in the "greed is good" 1980s, the hospital began a transformation, <blockquote>The board hired [Harry] Nurkin in 1981 to revamp Charlotte Memorial’s image, attract paying patients and avoid the fate of struggling public hospitals in Atlanta and Chicago. Until then, patients with insurance mostly chose Presbyterian Hospital or Mercy Hospital, with stately buildings at the edge of Myers Park. With a vision of building one of the Southeast’s finest medical centers, Nurkin paid attention to details, such as wallpaper, plants and furniture. And he put the hospital in the black by improving collections from patients and insurers. In 1983, when Nurkin unveiled the hospital’s first long-range plan, some board members sat in wonder at a slide show that accompanied his bold outline, according to 'A Great Public Compassion,' a book by writer Jerry Shinn. The plan called for a heart institute, a doctors’ building and an 11-story, $40 million tower that would replace a 1940s wing. All of that came true – and more.</blockquote> Now a Huge Hospital System From those humble origins, Carolinas HealthCare System has now become(2) <blockquote>a juggernaut. It’s now the country’s second-largest public hospital system, behind only the nationwide system of Veterans Affairs hospitals. One of the benefits of that growth is access to quality medical care. Carolinas HealthCare offers one of five organ transplant programs in the state and operates the region’s most comprehensive trauma center, where accident victims frequently arrive via medical helicopter. Five-year-old Levine Children’s Hospital has brought new pediatric specialties to Charlotte, and Levine Cancer Institute has recruited specialists from such respected institutions as the Cleveland Clinic. With nearly $7 billion in annual revenue, Carolinas HealthCare runs about 30 hospitals and owns more than $1 billion worth of property in Mecklenburg County alone. It has more than $2 billion in investments. In the five-year period ending in 2011, it spent $1.8 billion on capital projects.</blockquote> Forgetting the Mission: Suing Poor Patients However, as the system grew, its mission seems to have been forgotten. In particular, Carolinas HealthCare seems to now have a penchant for suing poor patients who cannot pay its bills. A Charlotte Observer article documented that while the hospital does not refuse poor patients care, it may later pursue them if they cannot pay. The article noted the case of a woman who was assured that the hospital had funds to pay for patients like her, but who then faced a lawsuit for $34,000 and a lien on her house. In general(3) <blockquote>most N.C. hospitals are tax-exempt – a distinction that saves them millions each year. In exchange, these nonprofits are expected to provide financial help to those without the means to pay. But thousands of times a year, hospitals are suing patients instead, an investigation by the Charlotte Observer and The News & Observer of Raleigh found. An in-depth look at some of those cases suggests most of the patients were uninsured, and that a significant number of them should have qualified for free hospital care. Critics contend those hospitals are financially ruining people they could afford to help. Carolinas HealthCare System, the multibillion-dollar public enterprise that owns CMC-Mercy, has generated average annual profits of more than $300 million over the past three years. During the five years ending in 2010, N.C. hospitals filed more than 40,000 lawsuits to collect on bills. Most of those suits were filed by just two entities: Carolinas HealthCare and Wilkes Regional Medical Center in North Wilkesboro. Each filed more than 12,000 suits over the five-year period, according to state courts data. Wilkes Regional, which is managed by Carolinas HealthCare, appears to be the state’s most litigious individual hospital.</blockquote> In addition, <blockquote>Often, the lawsuits hit people who are among those paying the highest rates for hospital care: the uninsured. Bills for uninsured patients are usually higher because they don’t have insurance companies to negotiate discounts on their behalf. It’s unclear how many of the patients sued in North Carolina lacked health insurance and substantial income or assets. But in interviews with 25 of those patients, the newspapers found 17 of them were uninsured; 10 said they were never told about the hospitals’ financial assistance programs.</blockquote> An editorial summarized the contrast between Carolinas HealthCare historic mission and its current practices(4) <blockquote>Carolinas HealthCare, once a small, struggling operation, has become one of the top hospital systems in the country. Novant Health, owner of Presbyterian Hospital, has grown into a powerful and respected health care provider. Their successes have come thanks to an aggressive philosophy of accumulation and growth, which has led to patients in the Charlotte region having access to the latest in medical technology and research, as well as top doctors in a diversity of medical fields. But that accumulation has contributed to the high cost of health care in North Carolina, and that growth has caused the hospitals to stray at times from their non-profit charitable mission. A Charlotte Observer and News & Observer investigation that begins today details how a hunger for money and power has caused the two hospitals to sometimes lose their way, contributing to the region’s health care cost woes and leaving thousands of patients with financially crippling bills.</blockquote> Opaque, Unaccountable Governance While the Charlotte Observer did not provide opinions about the reasons that this large health care organization appears to have forgotten its raison d'etre, its reporting suggests some familiar elements. The governance of the organization may have been appropriate for a small, struggling public hospital, but as the system grew, lack of accountability and transparency may have become more important. It is easier to lose one's way when no one is observing one's actions.(1) <blockquote>Most hospital business gets done quietly – until there is a well-planned announcement. The system’s self-perpetuating board includes top community and business leaders whose nominations get approval from the Mecklenburg commissioners’ chairman. Quarterly hospital system board meetings, at 7 a.m., are polite and scripted. Votes are unanimous on everything from building new hospitals to borrowing millions of dollars. Questions are worked out in private discussions, closed-door committee meetings or executive sessions. Meetings aren’t widely publicized. Except for a couple of newspaper reporters, only board members and hospital officials attend. Future meeting dates are provided to those who attend board meetings or call the system’s main office. State law requires public organizations with websites to post meeting times. Carolinas HealthCare had not been doing that until last week, after an Observer reporter asked about it. The board’s agenda sets no time for public comment.</blockquote> While operating so quietly, the board appears to have become a very cozy little group, <blockquote>The 1943 hospital authority law intentionally kept elected officials and politics out of operations. The link is that the commissioners’ chairman must sign off on hospital board nominees. It has been a rubber stamp. County officials remember once in 30 years that a proposed board member was rejected. That was in 2008 when nominees included Gloria Pace King, who had been ousted as CEO of the United Way of the Central Carolinas because of public outcry over her $2 million pension package. In December 2008, the board renominated King for a new term. But hospital officials say Roberts, then commissioners’ chairwoman, objected, and King wasn’t reappointed. Over the years, the board has included city leaders, such as bank CEOs Hugh McColl and Ed Crutchfield, and Stuart Dickson, the retired head of the company that owns Harris Teeter. His father, Rush S. Dickson, was an original board member whose name is on the entrance to what is now Carolinas Medical Center.</blockquote> Lavish CEO Compensation As noted earlier, not only are the actions of the hospital system's governing body kept secret, but up to recently, compensation paid to all employees, including top executives was also secret.(1) <blockquote>State law gives its employees more privacy protection than those of other public agencies. For example, salaries of all state, county and city government employees are public. That’s not true for public hospital employees. Until a 2009 change in state law, Carolinas HealthCare had for years refused to make public the total compensation for top executives. They said state law precluded them from disclosing more than basic salary. As a result, the public hospital system wasn’t disclosing as much detail as its private counterpart, Novant Health, does in publicly available reports to the IRS. At the urging of the Observer and other state newspapers, legislators broadened the law in 2009 to require disclosure of total compensation for top executives at public hospitals.</blockquote> So it should not be any surprise that an opaque, unaccountable board run by a cozy group of insiders saw fit to allow its friends in the management make some money, a lot of money. The Charlotte Observer reported that there were nine hired managers with total compensation greater than $1 million in 2011.(5) <blockquote>Michael Tarwater CEO, Carolinas HealthCare System Total 2011 compensation: $4,236,305 Percentage increase over prior year: 14.10% Joseph Piemont President/Chief Operating Officer, Carolinas HealthCare System Total 2011 compensation: $2,536,792 Percentage increase over prior year: 19.70% Greg Gombar CFO, Carolinas HealthCare System Total 2011 compensation: $1,751,798 Percentage increase over prior year: 8.90% Laurence Hinsdale Executive Vice President, Carolinas HealthCare System Total 2011 compensation: $1,693,314 Percentage increase over prior year: 44.10% Paul Franz Executive Vice President, Carolinas HealthCare System Total 2011 compensation: $1,575,927 Percentage increase over prior year: -1.30% Dennis Phillips Executive Vice President, Carolinas HealthCare System Total 2011 compensation: $1,351,138 Percentage increase over prior year: 12.20% John Knox Chief Administrative Officer, Carolinas HealthCare System Total 2011 compensation: $1,197,528 Percentage increase over prior year: 11.80% Roger Ray Chief Medical Officer, Carolinas HealthCare System Total 2011 compensation: $1,080,159 Percentage increase over prior year: No data for prior year Russ Guerin Executive Vice President, Carolinas HealthCare System Total 2011 compensation: $1,060,931 Percentage increase over prior year: 3.00%</blockquote> Should it be surprising that executives who can become so rich, and who are subject to so little oversight, are more interested in preserving the hospital system's operating margin which supports their wealth than in providing the care to poor people that was the hospital system's original reason to exist? Summary As the local NAACP pointed out, the hospital system should better uphold its mission(6) <blockquote>'The Bible says we’re not supposed to burden the poor and the sick and the afflicted. We’re supposed to lift them and help them and heal them,' NAACP President the Rev. William Barber said during the Charlotte stop of a statewide tour designed to bring attention to the struggles of low-income people. '(Carolinas HealthCare) is a group with money hounding people who are just trying to make it.'</blockquote> However, I submit that restoration of this organization's mission will require more than exhortation. The governance of this organization, like that of many others we have discussed, needs to regain accountability, transparency, integrity, and ethics. It must insist that the leaders it hires uphold the mission ahead of other concerns, particularly personal enrichment. It must provide these leaders with realistic incentives based on how well they uphold this mission, not on revenue or operating margin. Until such changes are accomplished, expect this hospital system, like many other health care organizations, to contribute only to our ever rising prices, declining access, and stagnating health care quality. References 1.  Garloch K, Alexander A. Carolinas HealthCare System's evoluation: public hospital with private attitude.  Charlotte Observer, April 21, 2012.  Link <a href="http://www.charlotteobserver.com/2012/04/21/3189730/public-hospital-with-private-attitude.html">here</a>. 2. Alexander A, Garloch K, Neff J. Nonprofit hospitals thrive on profits. Charlotte Observer, April 21, 2012. Link <a href="http://www.charlotteobserver.com/2012/04/21/3189821/nonprofit-hospitals-thrive-on.html">here</a>. 3. Alexander A, Raynor D. Hospital suits force new pain on patients. Charlotte Observer, April 23, 2012. Link <a href="http://www.charlotteobserver.com/2012/04/23/3193509/hospital-suits-force-new-pain.html">here</a>. 4. Anonymous. Money over mission at non-profit hospitals. Charlotte Observer, April 22, 2012. Link <a href="http://www.charlotteobserver.com/2012/04/22/3189118/money-over-mission-at-non-profit.html">here</a>. 5. Anonymous. Million-dollar hospital executives in North Carolina. Charlotte Observer, April 21, 2012. Link <a href="http://www.newsobserver.com/2012/04/22/2019568/million-dollar-hospital-executives.html">here</a>. 6. Alexander A. Stop suing patients, NAACP tells Carolinas HealthCare System. Charlotte Observer, May 2, 2012. Link <a href="http://www.charlotteobserver.com/2012/05/02/3211943/stop-suing-patients-naacp-tells.html">here</a>.

From Serving the Poor to Paying Executives Millions - Carolinas HealthCare System

A striking contrast between a large health care organization's historic mission and its current practices appeared in a series published...

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