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Another Story of Unaccountable Leadership from UC-Davis: "World Famous" Neurosurgeon Banned from Research, but Still Department Chair

The University of California - Davis just keeps supplying us with lessons about problems with leadership and governance in major health care organizations. Our latest example comes from <a href="http://www.sacbee.com/2012/07/22/v-print/4648415/2-uc-davis-neurosurgeons-accused.html">a story</a> in the Sacramento (CA) Bee. A Bizarre Series of Surgical Experiments It started with two neurosurgeons who embarked on an extremely unorthodox treatment program, <blockquote>Documents show the surgeons got the consent of three terminally ill patients with malignant brain tumors to introduce bacteria into their open head wounds, under the theory that postoperative infections might prolong their lives. Two of the patients developed sepsis and died, the university later determined.</blockquote> First, <blockquote>In 2008, the doctors proposed treating a glioblastoma patient with bacteria applied to an open wound to 'attack the tumor,' then later withholding antibiotics and letting the bacteria do its work.</blockquote> The FDA responded that animal studies would have to be done before any human research could be considered. Apparently the surgeons intended to do some animal research, but what they did, and what its results were remain unclear. Nevertheless, <blockquote>Between October 2010 and March 2011, the physicians went forward with three procedures on humans with malignant brain tumors, surgically introducing probiotics into their open head wounds.</blockquote> One surgeon did get <blockquote>IRB permission to move forward on Patient No. 1 with a 'one-time procedure' that was 'not associated with any research aim,' the letter states. University documents show that the physicians believed they had been given the go-ahead for all three surgeries, but officials later determined that they had been misinformed or were misunderstood by the doctors.</blockquote> No patient lived very long. Two developed sepsis before they died. After hearing that the surgeons were then planning to do the procedure on five more patients, <blockquote>The university threw on the brakes. On March 17, 2011, the IRB director ordered the doctors to immediately stop their probiotic treatments, according to university documents.</blockquote> I should point out that deliberately introducing bacteria into an otherwise sterile surgical site is a very radical and seemingly periolous step. Furthermore, a <a href="http://www.nature.com/news/can-bacteria-fight-brain-cancer-1.11080">blog post</a> in Nature News suggests that the reasoning used by the surgeons to support this approach was based on extremely weak evidence, <blockquote>researchers at the Catholic University of Rome examined the records of 197 patients treated for glioblastoma between 2001 and 2008, of which ten developed pathogenic infections after surgery. Those patients had a median survival rate of 30 months, whereas patients who did not become infected had a median survival rate of 16 months. However, the authors concluded that the association was 'not definitive'. [De Bonis, P. et al. Neurosurgery 69, 864–868 (2011). Link <a href="http://dx.doi.org/10.1227/NEU.0b013e318222adfa">here</a>. ] A 2009 report considered 382 patients with malignant brain cancer, 18 of whom developed infections. Infected patients lived longer on average, but the difference was not statistically significant. What’s more, the researchers reasoned that infection may correlate with longer survival not because infection prolongs survival but because patients who live longer are more likely to develop infections. [Bohman, L. E. et al. Neurosurgery 64, 828–834 (2009). Link <a href="http://dx.doi.org/10.1227/01.NEU.0000343525.89321.C5">here</a>. ]</blockquote> The University Investigation Then, <blockquote>The internal investigation began. Six months later, the university concluded its probe – ordering the doctors to halt all human research activity 'except as necessary to protect the safety and welfare of research participants.' In the case of Patient No. 1, the investigation found, ... [one surgeon] had made an 'incorrect statement' about restrictions on the bacteria's use, leading IRB staff to incorrectly conclude that such review was not necessary, Lewin told the FDA. As for Patients 2 and 3, the university found that treating them with an 'unapproved biologic' amounted to human-subjects research – and thus required prior review and approval.</blockquote> The junior neurosurgeon defended their conduct by claiming <blockquote>We believed that this was innovative treatment, not research, and that IRB approval was not needed</blockquote> The senior surgeon asserted that he <blockquote>believed the FDA gave its permission early on, if the doctors thought the treatment was 'beneficial to the patients.' He described the research ban as an "overreaction" by the university. 'And I understand it,' he said. There are people who blatantly break the rules that endanger all of their research programs. We certainly didn't blatantly trample any rules.'</blockquote> However, <blockquote>A renowned U.S. bioethicist, describing the alleged violations as 'a major penalty,' said the university's IRB was right to intervene – and quickly. Arthur Caplan, director of medical ethics at New York University's Langone Medical Center, said that desperate people are especially vulnerable and need added protections. 'If you're dying, you're kind of like reaching out to anything that anybody throws in front of you,' said Caplan</blockquote> Furthermore, per a Sacramento Bee <a href="http://www.sacbee.com/2012/07/28/4668495/uc-davis-neurosurgeon-department.html">follow-up article</a>, Elizabeth Woeckner, founder and director of Citizens for Responsible Care and Research, or CIRCARE, said the surgeons' "experiment" was <blockquote>the worst thing I've seen in my 12 years with CIRCARE</blockquote> An Overreaction, or an Under reaction? So far, this story seems different from many of those discussed on <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a>. The questionable conduct it describes, after all, appears to have resulted in serious negative consequences. Furthermore, it seems to have been conduct by two loose cannons, rather than to be a sign of systemic problems with leadership or governance. However, there is more to the story. First, the senior surgeon held a substantial leadership position at the time the events in question occurred. He is <blockquote>[Dr J Paul] Muizelaar, 65, who has been a department chairman at the School of Medicine since 1997</blockquote> He is pretty well paid, earning <blockquote>more than $800,000 a year as chairman of the department of neurological surgery</blockquote> In fact, a <a href="http://www.sacbee.com/2012/07/22/4648465/banned-ucd-doctor-is-one-of-ucs.html">companion article</a> in the Sacremento Bee noted, <blockquote>In 2010 – the same year Dr. J. Paul Muizelaar first performed an experimental treatment on a dying brain cancer patient at UC Davis Medical Center – the neurosurgeon made more money than 99.9 percent of all employees in the University of California system. With a total compensation package of $801,841 in 2010, he was the 35th highest earner, behind 27 other physicians, four athletic coaches and three executives, according to the most recent UC salary data.</blockquote> More importantly, even though the university's internal investigation was done in the fall of 2011, and at that time Dr Muizelaar was immediately banned from human research, he did not lose his leadership position. Instead, according to the first Sacramento Bee <a href="http://www.sacbee.com/2012/07/22/v-print/4648415/2-uc-davis-neurosurgeons-accused.html">article</a>, <blockquote>Despite the disciplinary action imposed last fall, Muizelaar was honored this spring with an additional academic role at UC Davis. He was named the first holder of the Julian R. Youmans endowed chair in the department of neurological surgery, according to an April 19 news release from the UCD School of Medicine.</blockquote> It is not the first time he has received special treatment. The <a href="http://www.sacbee.com/2012/07/22/4648465/banned-ucd-doctor-is-one-of-ucs.html">companion article </a>noted that Dr Muizelaar was able to attain and keep his position even though he never obtained a state medical license, <blockquote>Muizelaar, who previously was a professor of neurosurgery at Wayne State University in Detroit, was hired directly into the top post at UC Davis – even though he lacked a California medical license. A native of the Netherlands, where he was educated, Muizelaar was brought into the UC Davis School of Medicine under a 'special faculty permit' issued by the Medical Board of California. The provisional permit allows a foreign doctor who has been recognized as 'academically eminent' in a specific field to practice at a sponsoring California medical school and its formally affiliated hospitals. Currently, only 15 doctors at six of California's eight medical schools eligible to receive them hold special faculty permits.</blockquote> When asked why he never bothered to obtain a California medical license <blockquote>Muizelaar said he has not gotten a California license because he already works 80 to 100 hours a week and the step is 'not necessary.' 'I'll be frank with you, I'm world famous, so they gave me the license to practice here,' he said. 'I can go sit for the exams, but why would I do that?'</blockquote> Although Dr Muizelaar continued as department chair and in his endowed professorship for approximately 10 months after he was banned from human research, things happened fast after the stories appeared in the local media. Again <a href="http://www.sacbee.com/2012/07/25/4657366/uc-davis-chancellor-orders-review.html">according to</a> the Sacramento Bee, three days later, the CEO of the UC-Davis campus, Chancellor Linda P B Katehi <blockquote>ordered a top campus official to conduct a 'comprehensive review' of accusations that two university neurosurgeons conducted unauthorized research on dying brain cancer patients, as reported in Sunday's Bee. Ralph J. Hexter, the provost and executive vice chancellor, will lead another investigation into the actions of Dr. J. Paul Muizelaar, the longtime chairman of the department of neurological surgery, and his colleague, Dr. Rudolph J. Schrot, according to a university spokesman.</blockquote> A day after that, the Sacramento Bee <a href="http://www.sacbee.com/2012/07/28/4668495/uc-davis-neurosurgeon-department.html">reported</a>, <blockquote>A UC Davis neurosurgeon accused of performing unauthorized research on humans has 'temporarily relinquished' his position as chairman of the department of neurological surgery, the university confirmed Friday.</blockquote> However, do not expect to hear much more about this, <blockquote>A spokeswoman for UC Davis Health System said 'there will be no further system statement on this or other personnel actions.'</blockquote> Summary: A Culture of Unaccountable Leadership To sum up, the highly paid chair of neurosurgery at UC-Davis performed bizarre, and potentially dangerous experiments on three patients with terminal cancer, all of whom died, without obtaining permission from the institutional review board. After internal investigation, the chair was banned from performing further human research, but kept his well-paid position, and was given a new endowed professorship.  He only was forced to temporarily step down about nine months later, after reports of the affair appeared in the media.  So, a la George Orwelll's <a href="http://en.wikipedia.org/wiki/Animal_Farm">Animal Farm</a>, doctors may think themselves as equals, but doctors who are health care leaders are more equal than others. After conduct that would likely lead to the dismissal of more ordinary doctors, those who are also in high management positions may just collect more honors.  Then again, Dr Muizelaar considered himself to be "world famous," so why should be be expected to play by the rules under which the common folk labor? This story also suggests a more general culture of unaccountable leadership at University of California - Davis. Note that the Chancellor who let the neurosurgeon continue in his leadership role despite his strange research conduct and the consequent research ban has appeared in Health Care Renewal before. Specifically, she attained some notoriety last year after campus police who report to her pepper-sprayed unarmed and apparently non-violent students at her own institution who were protesting as part of the "occupy" movement at that time. (See post <a href="http://hcrenewal.blogspot.com/2012/04/will-uc-davis-chancellor-be-held.html">here</a>.) A later investigation of the incident blamed Chancellor Katehi and her subordinates for "poor decision making," and some editorialists concluded that she showed "incompetence," or worse. Yet Chancellor Katehi retains her top leadership position. We have discussed how leaders of other health care organizations are rarely held accountable for bad behavior by their organizations. At times, this bad behavior has been criminal, and the leaders' unaccountability has seemed more like <a href="http://hcrenewal.blogspot.com/search/label/impunity">impunity</a>.  This seems to parallel a larger phenomenon in society.  Increasingly the wealthy and powerful seem unrestricted by the rules that us common folk are expected to follow.  As Charles Fergusson famously <a href="http://www.nakedcapitalism.com/2011/02/matt-stoller-a-very-political-oscars-%E2%80%93-not-a-single-executive-has-gone-to-jail.html">noted</a> on receiving his Oscar, <blockquote>three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail and that’s wrong</blockquote> Health care, particularly in the US, continues to be increasingly expensive and inaccessible, yet its quality appears increasingly dubious. True health care reform would hold health care leaders accountable for upholding the health care mission.

Another Story of Unaccountable Leadership from UC-Davis: "World Famous" Neurosurgeon Banned from Research, but Still Department Chair

The University of California - Davis just keeps supplying us with lessons about problems with leadership and governance in major health care...

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Where is the risk?

That’s the question Thomas Cox, an RN with insurance experience and expertise, says should be asked about any health care financing mechanism. The whole idea of insurance is distributing risk widely so that it can be shared over a wide group of people and thus become manageable. That’s why people need insurance at all, and that’s also why schemes that put too much of the onus on individuals are a very bad idea – as has happened in recent years to a number of people,  the “insured” individual can incur costs that are more than he or she can bear. In general, insurance is most solid when it’s over a larger group. Each major increase in group size distributes the risk further and makes the healthcare financing system stronger. Cox has an <a href="http://www.afn.org/~sfcommed/JSM2011PaperFinal.pdf" target="_blank">interesting paper on this</a> which he presented at an American Statistical Association meeting. In general, large insurers are an order-of-magnitude more sound than small ones, and nationwide insurance systems (such as Medicare) have a distinct actuarial edge over state-based insurance (think, for example, California earthquake). For this reason, it’s a shame that the Affordable Care Act (ACA) has state exchanges as its primary mechanism rather than one single federal exchange; risk dispersal is inferior. Looking at the risk question, there’s a real problem with affordable care organizations (ACOs), which are one of the primary ways the ACA aims to keep down future costs. Essentially, ACOs are a form of capitation, and (Cox maintains and I think he’s right) capitation is essentially a mechanism to push risks down from the insurer or from Medicare to providers. Pushing risks to smaller groups is a terrible idea and will worsen the system. With ACOs having  smaller covered populations, they are far more subject to being the victim of events they can’t control, whether that’s having a large number of huge-cost, high-needs patients in a single year or having a large number of patients affected by an epidemic or natural disaster. Providers are not trained or qualified to manage risk well, nor do they have the financial reserves to do so.  Cox calls this <a href="http://www.biomedcentral.com/1472-6939/5/3/comments" target="_blank">“professional caregiver insurance risk.”</a>  Burdening providers with a task they are very ill-suited for is a truly bad idea. As Cox comments: <blockquote class="tr_bq">Pushing risks elsewhere removes the only real function we are paying insurance companies for.  If insurance companies are pushing down their risks elsewhere, we are paying them money for nothing of value. Insurance companies don’t provide healthcare – if they don’t manage risk either, what good are they? Of course, if they can sit there and siphon off profits without taking risks, it may not trouble profit-making insurers . . . but it should trouble the public [if they are] issuing policies, passing the insurance risks on to health care providers, and walking off with guaranteed profits year after year.</blockquote> And (particularly for the ACO that has been “unlucky” and has incurred larger-than-expected costs), the financial risk can be a force for corruption, pushing organizations toward denying care and undertreatment. Of course, with the enormous amount of unnecessary care and overtreatment in the US medical system today, some ACOs may indeed manage to give really good care for quite a while provided they are reasonably lucky. But this is a strategy with diminishing returns (as unneeded care dwindles in amount). At root, pushing down insurance risk to smaller entities is, Cox has persuaded me, a fundamentally flawed direction. And I’ll never look at a health care financing proposal in future without asking myself: “Where is the risk?”

Where is the risk?

That’s the question Thomas Cox, an RN with insurance experience and expertise, says should be asked about any health care financing mechanis...

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Productive Employment

With desultory interest, I picked up a 1993 novel at the library, The Surgical Arena, by Peter Grant, M.D., “a former navy pilot who became a surgeon.” The following snippet, on page 18, says a lot in a nutshell: <blockquote class="tr_bq">“We’ve got one shot at getting into medical school and that means getting our grades into the top twenty.” “Why don’t we all just quit and take some gut courses that will prepare us to be brokers,” said Beckwith, one of the veterans. “We can sit on our asses and make a lot of dough.” “You have to be a crook to be successful in that field,” said Norman. “Besides, you’ll never get any satisfaction out of life unless you put something worthwhile back into it.  I didn’t fight in the infantry to come back and become a broker.”</blockquote> 1993 was the same year that a short-sighted Congress cancelled the Texas supercollider project.  It’s <a href="http://www.salemnews.com/opinion/x1058727128/Higgs-discovery-highlights-a-missed-opportunity-here/print" target="_blank">been correctly noted</a> that had that not happened, the recent Higgs-Boson particle observation might have occurred here rather than in Switzerland.  A number of the now-unemployed physicists involved were hired by Wall Street firms. Although basic banking DOES perform a socially useful function -- firms and individuals DO need capital -- it is very questionable what if anything “banking innovations” (CDOs, derivatives, very rapid short-term computerized trading, etc.) that have proliferated since 1993 have contributed to society.   As <a href="http://www.telegraph.co.uk/finance/comment/rogerbootle/6316529/Does-banking-contribute-to-the-good-of-society.html%20%20" target="_blank">Roger Bootle wrote</a>: <blockquote class="tr_bq">For m]uch of what goes on in financial markets . . . [t]he gains to one party reflect the losses to another, and the vast fees and charges racked up in the process end up being paid by Joe Public, since even if he is not directly involved in the deals, he is indirectly through the costs and charges that he pays for goods and services.</blockquote> In 1995, the assets of the six largest bank holding companies was no more than 17% of GDP, but at the end of 2010, the assets of the six largest bank holding companies were valued at  just over 63 percent of GDP. This financialization of the economy has been <a href="http://baselinescenario.com/2012/02/29/why-is-finance-so-big/" target="_blank">at the expense of the rest of us</a>. And finance is now the top area where graduates of Ivy League universities find jobs. As Dale Carnegie points out, all people – even gangsters like Al Capone – think of themselves as “good guys”.  Lloyd Blankfein, Goldman Sachs’ CEO, is probably sincere when he says he is “doing God’s work”.  But many of us do not agree. Things work as well as they do only because many people are actually still working hard at useful jobs that do contribute to society.  My thanks go to those – and not to the so-called “wealth creators.”

Productive Employment

With desultory interest, I picked up a 1993 novel at the library, The Surgical Arena , by Peter Grant, M.D., “a former navy pilot who became...

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Private Equity vs Patient Care - a Bainful Example

A long <a href="http://www.salon.com/2012/07/18/dark_side_of_a_bain_success/singleton/">investigative report</a> in Salon summarized allegations about the quality of care in various treatment centers owned by Aspen Education, and its parent company, CRC Health Group, in turn wholly owned by a private equity firm, Bain Capital.  The article provides examples of what can go wrong when health care organizations are taken over by remote leadership focused overwhelmingly on short-term revenue.    A Death from a Treatable Disease The report opened with the investigation of a 14 year old resident at Youth Care, in Salt Lake City, and Aspen Education treatment center.  Brendan Blum "died of a twisted-bowel infaction," according to the local medical examiner, which allegedly went untreated because "two poorly paid monitors on duty," were slow to seek approval to call for emergency services, and "were too low on the totem pole to call 911 themselves." The article cited "previously unreported allegations of abuse and neglect in at least 10 CRC residential drug and teen care facilities across the country."  It charged, "such incidents have largely escaped notice because the programs are, thanks to lax state regulations, largely unaccountable."  Allegations of Toxic Corporate Culture The article noted numerous other reports of unexplained and allegedly wrongful deaths, and other allegations of mistreatment of patients. Furthermore, the article noted allegations "that such incidents reflect, in part, a broader corporate culture at Aspen's owner, CRC Health Group, a leading national chain of treatment centers.  Lawsuits and critics have claimed that CRC prizes profits, and the avoidance of outside scrutiny, over the health and safety of its clients."  We have frequently discussed how the corporate culture of the <a href="http://hcrenewal.blogspot.com/search/label/finance">finance industry</a>, the industry that brought us the global financial collapse/ great recession, has influenced health care, and how this culture may be related to extensive problems with the leadership of health care, including lack of understanding of or even outright <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management">hostility to the health care mission</a>, the prioritization of self-interest over the mission, <a href="http://hcrenewal.blogspot.com/search/label/conflicts%20of%20interest">conflicts of interest</a>, and even outright <a href="http://hcrenewal.blogspot.com/search/label/crime">criminal behavior</a>, such as <a href="http://hcrenewal.blogspot.com/search/label/fraud">fraud</a>, and <a href="http://hcrenewal.blogspot.com/search/label/kickbacks">kick-backs</a> (<a href="http://hcrenewal.blogspot.com/search/label/bribery">bribery</a>).  One way that finance may influence health care is the presence of finance leaders on the boards of trustees of non-profit health care institutions (see recent examples <a href="http://hcrenewal.blogspot.com/2012/06/dartmouths-governance-and-wall-street.html">here</a> and <a href="http://hcrenewal.blogspot.com/2012/01/new-york-presbyterian-hospital-trustee.html">here</a>).  A more direct way the culture of finance can influence health care is for <a href="http://hcrenewal.blogspot.com/search/label/private%20equity">private equity</a> firms (that is, re-branded leveraged buyout firms, look here) to purchase organizations that actually take care of patients.  The Salon article noted: <blockquote>CRC’s corporate culture, in turn, reflects the attitudes and financial imperatives of Bain Capital, the private equity firm founded by Mitt Romney. (The Romney campaign also did not reply to written questions.) Bain is known for its relentless obsession with maximizing shareholder value and revenues. Indeed, this has become a talking point of late on the Romney campaign trail; he bragged to Fox in late May that '80 percent of them [Bain investments] grew their revenues.' CRC, a fast-growing company then in the lucrative field of drug treatment, was perhaps a natural fit when Bain acquired it for $720 million in 2006. In conversations with staff and patients who spent time at CRC facilities since the takeover, there are suggestions that the Bain approach has had its effects. 'If you look at their daily profit numbers compared to what they charge,' Dana Blum [the mother of the boy who died in the incident discussed above] said of CRC’s Aspen division in 2009, 'it’s obscene.' That point, ironically enough, was underscored by the glowing reports in the trade press about its profitability.</blockquote> The article discussed how Bain Capital's acquisition of CRC Health Group further tilted the balance towards short-term revenue and away from quality care: <blockquote>When Bain purchased CRC, it looked like an investment masterstroke. The company, founded in the mid-’90s with a single California treatment facility, the Camp Recovery Center, had quickly grown into the largest chain of for-profit drug and alcohol treatment services in the country, with $230 million in annual revenue. Under Bain’s guidance, its revenue has nearly doubled, to more than $450 million. CRC now serves 30,000 clients daily — mostly opiate addicts — at 140 facilities across 25 states. In the first five years after its acquisition, Bain had already extracted nearly $20 million in management-related fees from the chain, although Bain investors haven’t cashed in yet through dividends or an IPO. Bain’s purchase, a leveraged buyout, also saddled CRC with massive debt of well over $600 million. According to company executives and independent analysts, hands-on oversight of subsidiary companies is a hallmark of both Bain and CRC. Romney’s campaign literature boasts about Bain taking exactly this sort of direct role in helping to turn around failing companies. 'Over the life of an investment, they have a strong management team willing to participate,' Sheryl Skolnick, an analyst with CRT Capital, a leading institutional brokerage firm, says of Bain. The CRC acquisition immediately made Bain owner of the largest collection of addiction treatment facilities in the nation. Unlike some Bain Capital acquisitions, which led to massive layoffs, the company’s approach with CRC was to boost revenues by gobbling up other treatment centers, raising fees, and expanding its client base through slick, aggressive marketing, while keeping staffing and other costs relatively low. But that rapid pace of acquisition couldn’t be sustained in the mostly small-scale drug treatment industry alone. So Bain Capital and CRC set their sights on an entirely new treatment arena: the multibillion-dollar 'troubled teen' industry, a burgeoning field of mostly locally owned residential schools and wilderness programs then serving, nationwide, about 100,000 kids facing addiction or emotional or behavioral problems. One of CRC’s first acquisitions under Bain ownership was the Aspen Education Group. Founded in 1998 with about six schools, Aspen Education had expanded to 30 troubled-teen and weight-loss programs by 2006, including Youth Care of Utah. With Bain’s backing, CRC purchased Aspen for nearly $300 million in the fall of 2006. Less than a year later, Brendan Blum was dead. At the time of the CRC acquisition, Aspen already had a history of abuse allegations, including at least three lawsuits, and two known patient deaths, one by suicide. Featured on 'Dr. Phil,' it grew out of schools inspired by the 'tough-love' behavior-modification approach of the discredited Synanon program, which was eventually exposed as a cult. By 2006, Aspen was facing a wrongful death lawsuit, later settled, over an incident in 2004 in which a 14-year-old boy, Matthew Meyer, perished from heat stroke just eight days into his stay at its Lone Star Expeditions wilderness camp in Texas. </blockquote> This just underscores concerns we raised <a href="http://hcrenewal.blogspot.com/2012/01/barbarians-at-gate-making-private.html">here</a> about how ownership by private equity could undermine the ability of health care organizations to fulfill their missions. At the time we worried that private equity's short time horizon would clash with health care's long-term focus, how standardized cost-cutting approaches, including emphasis on individual employees' "productivity," could undermine patient care, and how private equity's obsession with secrecy is the antithesis of the transparency required to make health care accountable. The Increasing Influence of Private Equity Ironically, the reason that the problems at CRC have gotten such public attention is that the former leader of the private equity firm that controls it is now running for the US presidency. His candidacy emphasizes just how influential the culture of private equity has come. <blockquote>The purchase of CRC came seven years after [former Massachusets Governor and now Republican presidential hopeful Mitt] Romney publicly announced his retirement as CEO of Bain Capital, where he had been in charge since its founding in 1984. But at the time of his departure, Romney worked out an arrangement to continue to share in Bain’s profits as a limited partner in the firm. Today, he is still an investor in 48 Bain accounts. Though he has refused to disclose their underlying assets, some information about them can be gleaned. For example, he has reported at least $300,000 to $1.2 million, if not more, in fluctuating annual earnings from Bain Capital VIII, the convoluted $3.5 billion array of related funds that owns both name-brand companies such as Dunkin’ Donuts and the lesser-known CRC Health Group. Most of these funds were made more attractive to privileged investors by being registered in the Cayman Islands tax haven. And Romney’s connections to CRC run even deeper: Of the three Bain managing partners who sit on CRC’s board, two, John Connaughton and Steven Barnes (with his wife), gave a total of half a million dollars to Restore Our Future, the super PAC supporting Romney. They also each donated the $2,500 maximum directly to his campaign.</blockquote> Furthermore, it provides a warning about much more influential it might become, particularly in regard to health care: <blockquote>Romney has been outspoken about his belief that for-profit health care companies can flourish only without onerous regulations. 'I had the occasion of actually acquiring and trying to build health care businesses,' he said during a primary debate last year. 'I know something about it, and I believe markets work. And what’s wrong with our health care system in America is that government is playing too heavy a role.'</blockquote> The allegations against one of those health care businesses suggest another viewpoint. I have frequently repeated a contention that true health care reform would emphasize leadership of health care organizations that understand and uphold the values of health care, starting with prioritizing the needs of patients and the public's health over all other concerns. Instead, there is a danger that health care leaders will be ever more removed from patients and the public, and their health needs, while they become ever more concerned with making as much money as possible in the short-run, and after that, the Devil take the hindmost.

Private Equity vs Patient Care - a Bainful Example

A long investigative report in Salon summarized allegations about the quality of care in various treatment centers owned by Aspen Education...

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Health IT FDA Recall: Philips Xcelera Connect - Incomplete Information Arriving From Other Systems

Another health IT FDA recall notice, this time on middleware, an interface engine that routes data: <a href="http://www.accessdata.fda.gov/scripts/enforcement/enforce_rpt-Product-Tabs.cfm?action=select&recall_number=Z-1942-2012&w=07112012&" target="_blank">Week of July 11 </a> Product description:   Philips Xcelera Connect, Software R2.1 L 1 SP2, an interface engine for data exchange [a specialized computer and accompanying software package - ed.]. Philips Xcelera Connect R2.x is a generic interface and data mapping engine between a Hospital Information System (HIS), Imaging Modalities, Xcelera PACS and Xcelera Cath Lab Manager (CLM). This interface engine simplifies the connection by serving as a central point for data exchange. The data consists only of demographic patient information, schedules, textual information and text reports. Classification:  Class II <table border="1" class="ProductInfo"><tbody><tr><th scope="row">Reason For Recall </th><td>Xcelera Connect R2.1 L 1 SP2 , incomplete information arriving from unformatted reports interface </td></tr></tbody></table> The data consists "only" of demographic patient information, schedules, textual information and text reports? This is a dangerous fault mode, indeed. "Incomplete information" moving between a hospital information system, imaging systems, a PACS system used to manage the images, and a cardiac cath lab can lead to very bad outcomes (and million dollar lawsuits), such as at "<a href="http://www.chicagotribune.com/health/ct-met-technology-errors-20110627,0,5447654.story">Babies' deaths spotlight safety risks linked to computerized systems</a>", second example. Note that the interface engine is in release 2.1, level 1, service pack 2. In other words, a critical hardware/software product such as this undergoes constant tweaking (like Windows). As a Class II device, at least the <a href="http://en.wikipedia.org/wiki/Medical_device#Class_II:_General_controls_with_special_controls" target="_blank">software is vetted to some degree by FDA</a>: <blockquote class="tr_bq">Class II devices are those for which general controls alone are insufficient to assure safety and effectiveness, and existing methods are available to provide such assurances.<a href="http://en.wikipedia.org/wiki/Medical_device#cite_note-classification-7">[8]</a><a href="http://en.wikipedia.org/wiki/Medical_device#cite_note-controls-9">[10]</a> In addition to complying with general controls, Class II devices are also subject to special controls.<a href="http://en.wikipedia.org/wiki/Medical_device#cite_note-controls-9">[10]</a> A few Class II devices are exempt from the premarket notification.<a href="http://en.wikipedia.org/wiki/Medical_device#cite_note-controls-9">[10]</a> Special controls may include special labeling requirements, mandatory performance standards and <a href="http://en.wikipedia.org/wiki/Postmarketing_surveillance" title="Postmarketing surveillance">postmarket surveillance</a>.<a href="http://en.wikipedia.org/wiki/Medical_device#cite_note-controls-9">[10]</a> Devices in Class II are held to a higher level of assurance than Class I devices, and are designed to perform as indicated without causing injury or harm to patient or user. Examples of Class II devices include powered wheelchairs, infusion pumps, and surgical drapes.<a href="http://en.wikipedia.org/wiki/Medical_device#cite_note-classification-7">[8]</a><a href="http://en.wikipedia.org/wiki/Medical_device#cite_note-controls-9">[10]</a></blockquote> One wonders how testing of tweaks and updates to this product is done, if at all, other than on live and unsuspecting patients. When you go into the hospital you are not just putting your life in the hands of the doctors and nurses, you're putting your life into the hands of computer geeks and software development experiments. -- SS July 25, 2012 Addendum: The WSJ covered this here:  <a href="http://blogs.wsj.com/cio/2012/07/20/philips-recalls-flawed-patient-data-system/">http://blogs.wsj.com/cio/2012/07/20/philips-recalls-flawed-patient-data-system/</a>.  From their report: <blockquote class="tr_bq"> ... The problem that led to the recall: hitting the “enter” button, to start a new paragraph, in the summary field of heart test reports, sometimes caused the text entered below that point to be stripped from the report as it was transmitted into the patient’s electronic health record. And doctors later reviewing the patient’s electronic health record would not necessarily know they had received only part of the report, which could lead them to make “incorrect treatment decisions,” Philips said in a letter to hospitals. ...  Mike Davis, managing director at The Advisory Board Company, a healthcare research firm, says in the case of the Xcelera Connect, Philips should have caught the problem in testing. “How the hell does this get out? It shows there wasn’t good quality assurance processes in place.”</blockquote> Indeed. -- SS

Health IT FDA Recall: Philips Xcelera Connect - Incomplete Information Arriving From Other Systems

Another health IT FDA recall notice, this time on middleware, an interface engine that routes data: Week of July 11 Product description: P...

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Vermont: Despite $70 million investment, health IT systems a long way from prime time - "Problems are appropriate"

<div style="color: red; text-align: center;">Preliminary note:  This post is rich with hyperlinks.  At minimum I recommend opening them in another window and at least scanning their contents - SS</div> No surprises in this article, including an amorality alien to the healing professions, but common in technology circles: <blockquote class="tr_bq"> <a href="http://vtdigger.org/2012/07/18/despite-70-million-investment-health-it-systems-a-long-way-from-prime-time/" target="_blank">Despite $70 million investment, health IT systems a long way from prime time</a> VTDigger.org Andrew Nemethy July 18, 2012 The state’s efforts to digitize the world of health information, a costly multi-year endeavor that is approaching a $70 million pricetag, got a lousy diagnosis Tuesday. Instead of creating cost efficiency and improving payment flow to doctors and treatment for patients, it’s creating stress and a lot of headaches for physicians, according to both lawmakers and state officials overseeing the effort. [It's also creating increased risk for patients, a factor - the most crucial factor - rarely mentioned in articles such as this - ed.]</blockquote> Money, of course, grows on trees, and physicians, hospitals and government have nothing better to do with $70 million than conduct experiments on patients with alpha and beta software ... There's the usual excuses from the usual actors: <blockquote class="tr_bq">But Health Information Technology (HIT) coordinator Hunt Blair said that’s to be expected considering the difficulty of the “incredibly challenging” task of getting such disparate groups as doctors, hospitals, other health care providers, insurance companies, the state and federal government on the same digital page. </blockquote> Let alone (per <a href="http://www.dlib.org/dlib/january99/kling/01kling.html" target="_blank">Social Informatics</a>) the organizational and sociological challenges of implementing any new information or communications technology (ICT), that's somewhat akin to saying it's hard to get people to consume arsenic as an aphrodisiac.  Not mentioned is the deplorable state of health IT in terms of quality, safety, usability, unregulated nature etc. <blockquote class="tr_bq">“We’re talking about an extremely complex undertaking and I think it’s important to recognize the state of Vermont was way out in front,” Blair said. “We’re on the bleeding edge,” he told a legislative Health Care Oversight Committee Tuesday at the Statehouse. That prompted Sen. Claire Ayer, D-Addison, the panel’s chairwoman, to ask him to clarify if he meant “leading.” He stuck with “bleeding.”</blockquote> "Bleeding edge?" Aside from the very poor choice of terms, this attitude is the polar opposite of the culture of "first, do no harm."  It is not a clinician's attitude.  It is an attitude of someone who seems to forget that patients are at the receiving end of the "bleeding edge" (which usually implies a rocky course) technology: <blockquote class="tr_bq"><a href="http://en.wikipedia.org/wiki/Bleeding_edge_technology" target="_blank">Bleeding edge technology</a> is a category of technologies incorporating those so new that they could have a high risk of being unreliable and lead adopters to incur greater expense in order to make use of them.  The term bleeding edge was formed as an allusion to the similar terms "leading edge" and "cutting edge". It tends to imply even greater advancement, albeit at an increased risk of "metaphorically cutting until bleeding" because of the unreliability of the software or other technology.The phrase was originally coined in an article entitled "Rumors of the Future and the Digital Circus" by Jack Dale, published in Editor & Publisher Magazine, February 12, 1994.<a href="http://en.wikipedia.org/wiki/Bleeding_edge_technology#cite_note-0"></a></blockquote> Wonderful. Considering the risks to patients, this claim brings to mind the definition I posted of the <a href="http://hcrenewal.blogspot.com/2012/03/doctors-and-ehrs-reframing-modernists-v.html" target="_blank">health IT Ddulite</a> ("Luddite", the common canard against cautious doctors, with the first four letters reversed): <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> On the other hand, did critic VT Sen. Kevin Mullin read my <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/" target="_blank">Drexel website on health IT failure and mismanagement</a>? <blockquote class="tr_bq">That doesn’t surprise Sen. Kevin Mullin, R-Rutland, who had tough questions about the state’s effort to oversee and promote use of electronic medical health records and a statewide health information exchange. “I hear genuine frustration from providers who are spending time and resources trying to modernize and make their offices more efficient, and prepare for the future, and yet every one of them feels like they’ve been burned,” he said. “Basically we’re not getting any results for these millions and millions of dollars that have been pumped into IT (information technology),” he said after the meeting. “We should be a lot further along,” he said. “I just don’t think the leadership’s in place.”</blockquote> He's on the right track, but I'm not sure Vermont (or any state government) really understands what levels of leadership are truly needed, e.g., as outlined by ONC a few years ago <a href="http://hcrenewal.blogspot.com/2009/12/onc-defines-taxonomy-of-health-it.html" target="_blank">here</a>. More excuses: <blockquote class="tr_bq">... Mark Larson, commissioner of the Vermont Health Access Department and a former House representative from Burlington, oversees management of Vermont’s publicly funded health insurance programs and the effort on digital medical records and a new medical information exchange. ... Larson told lawmakers he hears the same message they do, that there’s “a lot of confusion in the field.” He said that is an inevitable part of the complex process. “These are not systems where you just plug that in and they work perfectly on day one,” he said. “Problems are appropriate along the path to get where we want." [I note this is an implicit admission that experimentation is being performed - ed.] “We just have to work through that,” he said. </blockquote> "Problems are appropriate?"  ... Really?  In a mission critical field such as medicine?  That's a maddeningly reckless and cavalier ideology, to put it mildly.   In what other safety-critical domain would such a happy-go-lucky attitude that "problems are appropriate", outside of the laboratory, be tolerated?  "We just have to work through that?" ... "Just work through that?"  Really? That should be really easy,  just like the failed £12.7bn (~ US $20 billion) National Programme for IT (NPfIT) in the NHS, a <a href="http://hcrenewal.blogspot.com/2011/09/npfit-programme-going-pffft.html" target="_blank">program that went "Pffft"</a> last year. <blockquote class="tr_bq">... Based on testimony Tuesday, the issues that medical practitioners and the industry face in digitizing information are familiar ones for anyone who deals with technology: Software that is problematic, digital files that don’t translate and can’t be read by other systems, lost time spent on technological issues that detract from what doctors are paid to do, which is treat their patients. [And create increased risk that leads to maimed or dead patients - ed.]</blockquote> "Familiar to anyone who deals with technology?"  As in, say, mercantile/management computing that runs Walmart's stock inventory system, or the Post Office?  Is that an <a href="http://www.nizkor.org/features/fallacies/appeal-to-common-practice.html" target="_blank">appeal to common practice</a> of some type?  This brings to life my observation that there is an utter lack of recognition (either due to ignorance, or opportunism) that HIT systems are not business management systems that happen to be used by clinicians, they are virtual clinical tools (with all that implies) that happen to reside on computers. How utterly amoral and alien to the ethics of medicine these attitudes are.  No regulation of the technology is in place.  No systematic postmarket surveillance of patient harm or death is conducted.  Further, the <a href="http://hcrenewal.blogspot.com/2011/02/updated-reading-list-on-health-it.html" target="_blank">literature on health IT</a> is not entirely as optimistic and tolerant as the VT government. Is the VT government aware of that literature? Just a few specific examples - the National Research Council wrote that  "<a href="http://www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=12572" target="_parent">Current Approaches to U.S. Healthcare Information Technology are Insufficient</a>", do not support clinician cognitive processes (then what, exactly, is health IT supposed to do?) and may result in harm.  The <a href="http://hcrenewal.blogspot.com/2012/03/ecri-institutes-top-health-technology.html" target="_blank">ECRI Institute</a> indicates health IT systems are among the top ten technology risks in healthcare. Reports from the <a href="http://www.jointcommission.org/assets/1/18/SEA_42.PDF" target="_blank">Joint Commission</a>, <a href="http://hcrenewal.blogspot.com/2010/08/smoking-gun-internal-fda-memorandum-of.html" target="_blank">FDA </a>and <a href="http://healthit.ahrq.gov/AppendixB_HIT_Hazard_Manager_Beta_Test.pdf" target="_blank">AHRQ</a> indicate that risk is known, but magnitude of risk unknown ("<a href="http://hcrenewal.blogspot.com/2010/02/fda-on-health-it-adverse-consequences.html" target="_blank">tip of the iceberg</a>" per FDA). A report from <a href="http://hcrenewal.blogspot.com/2011/10/nist-on-ehr-mission-hostile-user.html" target="_blank">NIST</a> indicates that usability is lacking and promotes "use error" (technology-promoted error, as opposed to "user error"). A report from <a href="http://hcrenewal.blogspot.com/2011/11/iom-report-on-health-it-safety-nix-fda.html" target="_blank">IOM</a> on safety of health IT states that: <blockquote class="tr_bq">... While some studies suggest improvements in patient safety can be made, others have found no effect. Instances of health IT–associated harm have been reported. However, little published evidence could be found quantifying the magnitude of the risk. Several reasons health IT–related safety data are lacking include the absence of measures and a central repository (or linkages among decentralized repositories) to collect, analyze, and act on information related to safety of this technology. Another impediment to gathering safety data is contractual barriers (e.g., nondisclosure, confidentiality clauses) that can prevent users from sharing information about health IT–related adverse events. These barriers limit users’ abilities to share knowledge of risk-prone user interfaces, for instance through screenshots and descriptions of potentially unsafe processes. In addition, some vendors include language in their sales contracts and escape responsibility for errors or defects in their software (i.e., “hold harmless clauses”). The committee believes these types of contractual restrictions limit transparency, which significantly contributes to the gaps in knowledge of health IT–related patient safety risks. These barriers to generating evidence pose unacceptable risks to safety. (Institute of Medicine, 2012. <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/Patient%20Safety%20and%20Health%20IT%20prepub.pdf" target="_blank">Health IT and Patient Safety: Building Safer Systems for Better Care</a>. PDF.  Washington, DC: The National Academies Press, pg. S-2.) </blockquote> <a href="http://www.hhs.gov/ohrp/archive/nurcode.html" target="_blank">Human subjects protections</a>?  Not needed here ... it's just one big, unconsented, happy $70 million medical experiment. What is not mentioned, and either deliberately ignored or lost on these politicians, is the effects of this turmoil on patient care in terms of risk and adverse outcomes, and that being on the "bleeding edge" in this experimental technology is not desirable.   Slow, skeptical and cautious approaches are essential.  Physician education on health IT risks and patient informed consent might be nice, too. It seems mass social re-engineering experiments are fine, even if the consequences include wasted resources the healthcare delivery system can ill afford, physicians being distracted by <a href="http://hcrenewal.blogspot.com/2011/01/maude-and-hit-risk-mother-mary-what-in.html" target="_blank">major defects</a>, and outcomes like <a href="http://hcrenewal.blogspot.com/2011/06/babys-death-spotlights-safety-risks.html" target="_blank">baby deaths</a>, <a href="http://hcrenewal.blogspot.com/2011/09/sweet-death-that-wasnt-very-sweet-how_24.html" target="_blank">adults suffocating at the bedside</a>, and <a href="http://hcrenewal.blogspot.com/2011/06/my-mother-passed-away.html" target="_blank">graveyards</a>. -- SS

Vermont: Despite $70 million investment, health IT systems a long way from prime time - "Problems are appropriate"

Preliminary note: This post is rich with hyperlinks. At minimum I recommend opening them in another window and at least scanning their con...

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Steward Health Care vs Rhode Island Blue Cross Blue Shield: How Public Relations Twists the Narrative

Negotiations between a local RI hospital system and the largest RI health insurer have now become very public. An advertising campaign by the larger hospital system that is set to absorb our local one provides lessons on how important health care policy issues are publicly discussed. Simplified Background Landmark Medical Center is a small health care system in northern Rhode Island.  It has been in financial difficulty, and hence <strike>management negotiated a buyout </strike> [see comment of 19 July, 2012 below] while in receivership a buyout was negotiated.  It is now in the process of being acquired by Steward Health Care, a regional hospital system based in Massachusetts (summarized <a href="http://www.beckershospitalreview.com/hospital-transactions-and-valuation/steward-healthcare-merger-with-landmark-medical-center-approved.html">here</a> and <a href="http://www.woonsocketcall.com/node/5343">here</a>).  Meanwhile, Landmark has been in negotiations with Rhode Island Blue Cross Blue Shield, the largest RI health insurance company.  The negotiations have not been going well, so RI BCBS notified its policy-holders that it is possible Landmark will not be in its network in the future.  This difficult negotiation prompted Steward Health Care to make the discussion more public. The Steward Health Care Advertisements Steward Health Care has run a series of full-page advertisements in the Providence Journal.  One advertisement that has run at least three times, by my count, includes the following text: <blockquote>WHAT KIND OF CHARITABLE ORGANIZATION SPENDS $120 MILLION ON ITS HEADQUARTERS BUT DENIES SERVICES TO ITS POOREST COMMUNITIES? Blue Cross & Blue Shield of Rhode Island is designated as a "charitable organization." But they certainly don't spend like one. They invested a small fortune on their opulent corporate offices in Providence. They dish out million each year in executive salaries. And for all that exorbitant spending, they pay absolutely nothing in Rhode Island state taxes. Then, in May of this year, they refused to give Landmark Medical Center in Woonsocket a long-term contract without Steward Health Care participating. Steward, trying to be helpful, proposed base rates that were 5% below the state median, quality metrics used by the federal government, and a commitment to payment reform. But suddenly, the coffers had run dry. Blue Cross refused to even discuss the proposal. Instead, they issued their response: Terminate Landmark Medical Center. <div class="separator" style="clear: both; text-align: center;"></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;">Never mind the residents who would lose their only hospital, the employees who would lose their jobs, or the elderly who would have to travel for care. Blue Cross was only interested in protecting the one group they serve most effectively, themselves.</div></blockquote><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"> </div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyHp68yOTeSo9IIvou_JmYYFrTb-bgCI-OulDd830tpAP65qS9JTCvwPMRFIUNU3VfhcYIGtYR23inXiUu83rDqNUKueVS__zFIiDG_Pz8C5KFENyIbpCI2rKlL27eI69w7Vtj2-EmKBSj/s1600/StewardBCBSAdvertisement%25280712%2529.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" hda="true" height="225" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyHp68yOTeSo9IIvou_JmYYFrTb-bgCI-OulDd830tpAP65qS9JTCvwPMRFIUNU3VfhcYIGtYR23inXiUu83rDqNUKueVS__zFIiDG_Pz8C5KFENyIbpCI2rKlL27eI69w7Vtj2-EmKBSj/s320/StewardBCBSAdvertisement%25280712%2529.gif" width="320" /></a></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"> </div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"> </div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;">This pretty plainly was a David vs Goliath narrative, with poor, small Landmark Medical Center and Steward Health Care, whose only goals were to serve local residents, as David, and huge, wealthy Blue Cross Blue Shield of RI, whose only goal is allegedly to serve its executives' interest, as Goliath.</div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"> </div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;">Given that we have frequently discussed how self-interested, <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">over-compensated</a> executives may fail to uphold, or may even <a href="http://hcrenewal.blogspot.com/search/label/mission-hostile%20management">undermine their health care organizations' missions</a>, this seemed like a narrative primed for further discussion on Health Care Renewal. In addition, Blue Cross Blue Shield of Rhode Island was beset by a scandal before we began Health Care Renewal (look <a href="http://hcrenewal.blogspot.com/2004/12/mismanagement-are-us.html">here</a>), involving allegations of excess compensation given to and conflicts of interest affecting its CEO.</div> Blue Cross Blue Shield of RI: Executive Compensation, Budget and Taxes In fact, the most recent figures made public by RI BCBS on executive compensation showed that CEO Peter Andruszkiewicz was offered total compensation of $600,000 a year when he started in 2011 (look <a href="http://blogs.wpri.com/2011/04/26/new-blue-cross-ri-ceo-will-earn-600000-a-year/">here</a>.)  Also, as suggested by the advertisement above, there has been considerable local controversy about the size, scale, and price of the new RI BCBS headquarters (e.g., <a href="http://evantrowbridge.com/2010/07/21/bill-lynch-condemns-blue-cross-blue-shield-for-layoffs/">here</a>).   Apparently, however, Blue Cross Blue Shield of Rhode Island does pay state taxes (per <a href="http://www.publicbroadcasting.net/wrni/news.newsmain/article/0/0/1801809/Healthcare/RI.Blue.Cross.Blue.Shield.seeks.rate.increase">this report</a>). On the other hand, keep in mind that RI BCBS is one of the few health insurance companies to provide community (age-adjusted only) rated individual health insurance even for people with pre-existing conditions, (look <a href="https://www.bcbsri.com/shop-for-plan/plan-medical/individuals?order=title&sort=asc">here</a>) at the behest of state law, to be sure. So perhaps RI BCBS is not quite the ogre oppressing the poor that the advertisement implies it to be. But wait, there is more. This all started as a contract negotiation between a health insurer and a local hospital system which is about to be acquired by a regional hospital system. If Steward Health Care saw fit to bring up the executive compensation practices, budget, and taxes of Blue Cross Blue Shield of Rhode Island as relevant to the dispute, might Steward Health Care's executive compensation practices, budget, and taxes also be relevant? Steward Health Care and Cerberus Capital Management: Executive Compensation, Budget, and Taxes The problem is that we know very little about Steward Health Care's executive compensation practices, budget, and taxes. While the advertisement above (and Steward's own web address, steward.org) imply that Steward is only about providing health care to the poor and needy, and perhaps that Steward, like Rhode Island BCBS, is non-profit, neither is quite true. In fact, Steward Health Care is the new name for what was once Caritas Christi Health Care, formerly a Catholic non-profit health system that was acquired in 2010 by Cerberus Capital Management, a private equity firm (look <a href="http://steward.org/news/Caritas-Christi/Acquisition-of-Caritas-Christi-Now-Complete">here</a>). Private equity firms are notably secretive. Neither Cerberus, nor its new health care acquisition, has seen fit to publish any details about executive compensation practices, budgets, or taxes. We do have a few clues, however. Executive Compensation Caritas Christi at the time it was acquired by Cerberus was lead by CEO Ralph de la Torre.  His compensation in 2009 prior to the acquisition was $2.2 million a year.  He is still leading Steward Health Care. It is reasonable to expect that his compensation is not less than it was before, and probably more (look <a href="http://hcrenewal.blogspot.com/2011/11/ceos-first-to-benefit-from-for-profit.html">here</a>).  It is reasonable to guess that Dr de la Torre's total compensation is currently several times larger than that of the BCBS of RI CEO.  The leadership of Cerberus Capital Management includes, according to<a href="http://www.cerberuscapital.com/team/senior_executive_leadership"> its web-site</a>, John W Snow, chairman and senior managing director.  Mr Snow, former Secretary of the US Treasury, was listed in 2009 on the <a href="http://www.virginiabusiness.com/index.php/news/article/the-virginia-100/">Virginia 100 web-site</a> as having a net worth of approximately $90 million, although not with much confidence in the precision of the figure.  He is also a director of the Marathon Petroleum Corporation, from which he received $300,000 in compensation in 2011, according to the company's <a href="http://www.marathonpetroleum.com/content/documents/investor_center/annual_reports/2011ProxyStatement.pdf">proxy statement</a>, and of Amerigroup, from which he received at least $170,000 in equities, and additional amounts in fees and deferred compensation in 2011, per that company's <a href="http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1odHRwOi8vaXIuaW50Lndlc3RsYXdidXNpbmVzcy5jb20vZG9jdW1lbnQvdjEvMDAwMTE5MzEyNS0xMi0xODY2MDEvZG9jL0FNRVJJR1JPVVBDb3Jwb3JhdGlvbl9ERUYxNEFfMjAxMjA0MjcucGRmJnR5cGU9MiZmbj1BTUVSSUdST1VQQ29ycG9yYXRpb25fREVGMTRBXzIwMTIwNDI3LnBkZg==">proxy statement</a>.  Stephen A Feinberg, founder, CEO, and senior managing director, <a href="http://dealbook.nytimes.com/2008/04/15/cerberus-recluse-lifts-the-veil-a-little/">described</a> as a "recluse" in the New York Times, was listed as number 21 on a list of the 25 most powerful businessmen in 2007 <a href="http://money.cnn.com/galleries/2007/fortune/0711/gallery.power_25.fortune/21.html">by Fortune</a>, at that time running through Cerberus 50 companies with total revenues of $120 billion.  <a href="http://en.wikipedia.org/wiki/Steve_Feinberg">On Wikipedia</a>, his net worth was estimated as $2 billion in 2008.  These figures suggest that leaders of Cerberus Capital Management can make very large amounts of money, orders of magnitude larger than the compensation of the BCBS of RI CEO. Budget There is little public information on the budget of Cerberus Capital Management, but note again the estimate above that in 2007, it controlled 50 companies with $120 billion in revenues.  There is also little public information about the budget of its subsidiary, Steward Health Care.  Estimates from a recent <a href="http://www.commonwealthmagazine.org/News-and-Features/Features/2012/Summer/001-Cerberuss-health-care-play.aspx">article</a> in Commonwealth suggested that Cerberus invested $251.5 million in Steward, but that Steward's 2011 budget had a net loss of $57 million.  <a href="http://www.woonsocketcall.com/node/5343">According to the Woonsocket Call</a>, an apparently short-term balance sheet from March 31, 2012 showed that Steward Health Care had assets of $1.1279 billion, liabilities of $1.0259 billion, and stockholder equity of $102 million. Taxes There seems to be no significant public information on taxes paid by Steward Health Care or Cerberus Capital Management.  According to Chareles Ferguson in <a href="http://www.randomhouse.com/book/213722/predator-nation-by-charles-h-ferguson">Predator Nation</a>, Cerberus chairman John W Snow resigned as Treasury Secretary "in 2006 only because it was revealed that he had not paid any taxes on $24 million in income from CSX, which had forgiven Snow's repayment of a gigantic loan that the company had made to him." So while RI BCBS can be faulted for paying relatively high executive compensation, using its funds to build a rather lavish headquarters building, but not for failing to pay RI taxes, at least all these have been issues for public discussion. Furthermore, Cerberus Capital Management, and Steward Health Care which is its creature, while explicitly bringing these issues into the public debate about the Landmark negotiation with Blue Cross Blue Shield of RI, have not seen fit to reveal their own executive compensation, budget, or taxes. There is reason to think that their executive compensation and management budgets could be far more bloated that those of RI BCBS. We have no idea whether they have paid what might be considered their fair share of taxes, but note that their current chairman has had issues in the past with his personal tax payments. Summary The vigorous advertising/ public relations campaign by Landmark Medical Center, Steward Health Care, and ultimately Cerberus Capital Management to get a more successful outcome of the negotiation between Landmark and RI BCBS seems to be an example of the tactics used in support of the public relations by large, for-profit health care organizations. In the absence of any transparency about the executive compensation, budget, and tax payments by Cerberus Capital Management and its subsidiary, Steward Health Care, lavish public advertising faulting the executive compensation, budget, and tax payments of its counter-party suggests a rather crude attempt to twist the narrative so as to divert public attention from relevant issues. If this was not the intention, perhaps Cerberus and Steward will make their executive compensation, budgets, and tax returns fully transparent?  We wait with bated breath. In the absence of such transparency, skepticism about their public discourse remains warranted. There is more and more public discussion of health policy from the local to the global levels. Much of this discussion, like much political discussion in general, seems dominated by expensive public relations efforts on behalf of the richer health care organizations. Physicians, other health care professionals, health policy researchers and leaders, and the public at large should be alert to the possibility that these communications will use psychological manipulation to divert its narratives in directions favored by these large health care organizations. Anyone listening or viewing communications coming out of such public relations efforts ought to consciously think about the relevant facts and issues they ignore, and why they may have been consciously omitted.

Steward Health Care vs Rhode Island Blue Cross Blue Shield: How Public Relations Twists the Narrative

Negotiations between a local RI hospital system and the largest RI health insurer have now become very public. An advertising campaign by th...

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