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Malpractice Attorney Puts ONC-Authorized Testing and Certification Bodies (ATCBs) at Risk of Litigation?

I am jet-lagged after returning from Sydney, Australia, where I delivered one of the keynote addresses at the Health Informatics Society of Australia annual conference, HIC 2012 (<a href="http://www.hisa.org.au/page/hic2012/">http://www.hisa.org.au/page/hic2012/</a>). My theme in a talk entitled "Critical Thinking on Building Trusted, Transformative Medical Information:  Improving Health IT as the First Step" was health IT trust and safety.  I was actually invited in 2011 but could not attend; I was helping care for my mother, who was severely injured due to a HIT-related mishap in 2010.  Her death in 2011 allowed me to attend now on re-invitation. More on my presentation later. <table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6lP4Fd1BwQ4z78pmsNlemesGCSJIe0BQFak7ql6oxzhL6857puno0QD9JORCr47hnUV926YrdPBT8Z4V5zh9mbuE9XPum50jj09EuGgKG7rsAWkyydCgkh9U74CRujIVwVvNZKLE3F0Og/s1600/bridge.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6lP4Fd1BwQ4z78pmsNlemesGCSJIe0BQFak7ql6oxzhL6857puno0QD9JORCr47hnUV926YrdPBT8Z4V5zh9mbuE9XPum50jj09EuGgKG7rsAWkyydCgkh9U74CRujIVwVvNZKLE3F0Og/s320/bridge.JPG" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">A beautiful view of the Sydney Harbour Bridge and Opera House, taken with a mere Canon SX110IS.  Click to enlarge.</td></tr></tbody></table> In the meantime, I returned to the U.S. to find that the defense attorney for the hospital where my mother was severely injured, and then died as a result, is once again raising an absurd issue in objections to the medical malpractice Complaint that was refiled within the Statute of Limitations for technical reasons.   The President Judge of the county where the case is filed had dismissed this complaint (among many others) some time ago: <blockquote class="tr_bq">(ii) Plaintiffs Software Design Defect Claims are Preempted by the Federal HITECH Act ... To the extent Plaintiff attempts to bring a common law product liability claim against [name redacted] Hospital for required use of EMR software, such a claim is barred due to Federal Preemption of this area with the passage of the Health Information Technology for Economic and Clinical Health (HITECH) Act. 42 U.S.C. 201, 300, et seq. Specifically, the design, manufacture, specification, certification and sale of EMR in the United States is a highly regulated industry under the jurisdiction of the Department of Health and Human Services (HHS). The HHS draws its statutory authority to design and certify EMR as safe and effective under the HITECH act as amended. Id. The Supremacy Clause of the United States Constitution, article VI, clause 2, preempts any state law that conflicts with the exercise of federal power. Fid. Fed. Say. & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 102 S. Ct. 3014 (1982). “Pre-emption may be either express or implied, and ‘is compelled whether Congress’ command is explicitly stated in the statute’s language or implicitly contained in its structure and purpose.” Matter of Calun Elec. Power Co-op., Inc., 109 F.3d 248, 254 (5th Cir. 1997) citing Jones v. Rath Packing Co., 430 U.s. 519, 525 (1977). In this case, to impose common law liability upon [name redacted] Hospital for using certified EHR technology, which was in compliance with federal law and regulations for Health Information Technology, would directly conflict with Congress’ statutory scheme for fostering and promoting the implementation and use of EHR  </blockquote> I really don't think Congress intended HIT to maim and kill patients with impunity.  In any case, this assertion was thrown out in its entirety several months ago, but here it is again in a new set of objections.  I find its reappearance remarkable.  I also wonder if the industry is behind it. As per numerous posts in this blog, such assertions are false - and likely knowingly so in this situation.  (In that case, this would be an even more serious matter.) For example as I pointed out at my Feb. 2012 post <a href="http://hcrenewal.blogspot.com/2012/02/hospitals-and-doctors-use-health-it-at.html" target="_blank">Hospitals and Doctors Use Health IT at Their Own Risk - Even if "Certified"</a>, ONC-Authorized Testing and Certification Bodies (ATCB's) answered my questions about safety, legal indemnification etc.  Their work has nothing to do with certifying HIT as safe by their own admission. Also, as in my April 2011 post <a href="http://hcrenewal.blogspot.com/2011/04/fda-decides-regulating-implantable.html" target="_blank">FDA Decides Regulating Implantable Defibrillator Medical Devices a "Political Hot Potato"; Demurs</a> and my Nov. 2011 post <a href="http://hcrenewal.blogspot.com/2011/11/iom-report-on-health-it-safety-nix-fda.html" target="_blank">IOM Report - "Health IT and Patient Safety: Building Safer Systems for Better Care</a>, the HIT industry is unregulated. On the HIT regulation issue, IOM has itself stated in no uncertain terms that HIT is non-regulated (not "a highly regulated industry") in their report to HHS.  For instance, in the aforementioned 2012 report they state (as one example): <blockquote class="tr_bq">... If the Secretary [of HHS] deems it necessary for the FDA to regulate EHRs and other currently nonregulated health IT products, clear determinations will need to be made about whether all health IT products classify as medical devices for the purposes of regulation. If FDA regulation is deemed necessary, the FDA will need to commit sufficient resources and add capacity and expertise to be effective. </blockquote> I won't even address the claim that the HITECH Act represents or intended to represent Federal pre-emption of state common law rights.   It's without merit, and actually absurd. Worst of all, statements in legal dockets that "HHS draws its statutory authority to design and certify EMR as safe and effective under the HITECH Act" (in reality, private non-governmental ONC-Authorized Testing and Certification Bodies or ATCB's are appointed by ONC to "certify" HIT features and functionality to be compliant with "Meaningful Use" guidelines and do not test for safety or efficacy) potentially puts those private ATCB's at risk for being named defendants in lawsuits where HIT was found unsafe and/or ineffective if upheld. I am sure the ATCB's and ONC would not be happy about that. -- SS

Malpractice Attorney Puts ONC-Authorized Testing and Certification Bodies (ATCBs) at Risk of Litigation?

I am jet-lagged after returning from Sydney, Australia, where I delivered one of the keynote addresses at the Health Informatics Society of ...

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Private Equity, Obfuscatory Advertising, and Making Health Care a Commodity: Lessons from Cerberus Capital Management

The use of advertising by Steward Health Care, currently a regional hospital system here in New England, continues to provide lessons about how public relations and marketing may be used to shape the health care policy debate.  Stand by because the story is convoluted. Steward Promotes "New Health Care," Whatever That May Be This week, Commonwealth <a href="http://www.commonwealthmagazine.org/News-and-Features/Online-exclusives/2012/Summer/010-Steward-ads-promote-its-new-health-care.aspx">reported</a> on Steward's latest high profile advertising campaign in the Boston area, <blockquote>Steward Health Care is using the Olympics to hone its image. The Boston-based chain of 10 community hospitals, many of which were on the verge of going under when Steward acquired them, is running a series of ads on WHDH-TV (Channel 7) during Olympics coverage that cast the company as a delivery system for a new type of world-class health care.</blockquote> While visible, the advertisements are notably vague. One features <blockquote>a Steward employee who says she believes 'world class health care is here.' Another of the initial ads features individual doctors and technicians pledging to be stewards of 'the new health care,' which is the tagline for all of the Steward ads. What the 'new health care' means is never fully explained in the ads</blockquote> One local health care expert <blockquote>Paul Levy, the former CEO of Beth Israel Deaconness Medical Center, said he thinks the ads are part of a campaign by [Steward Health Care owner] Cerberus [Capital Management] to make Steward more attractive to would-be buyers. 'This has very little to do with anything other than establishing the image and the brand of the Steward hospitals so when the day comes when Cerberus sells the company it will be better received in the public markets,' Levy said.</blockquote> The article had noted that <blockquote>Cerberus Capital Management, a New York private equity firm, owns Steward,...</blockquote> So it is possible that no one at Steward really has any idea what sort of "new health care" the organization is promoting Steward's CEO Promotes Health Care as a Commodity However, there is reason to think that the top leadership of Steward, and probably of Cerberus Capital Management, the private equity group that owns it, actually does have a clear idea what new health care they are promoting. Almost simultaneous with the Commonwealth article and the Olympic advertising campaign an <a href="http://management.fortune.cnn.com/2012/08/02/steward-health-de-la-torre">interview</a> appeared with Steward's CEO in Fortune. CEO Dr Ralph de la Torre first pitched medicine as science, <blockquote>A lot of us physicians went into medicine because we loved the art aspect of it. There wasn't a lot of real hard-core science when many of today's doctors went into medicine. It was your intuition, your abilities, the gestalt of what was going on. But something happened in medicine along the way. It started becoming a real science, and a lot of studies have come out that guide what we do and how we do it. We as a society need to understand that science has to guide our practice of medicine. Not everyone with a headache needs a CAT scan; not everybody with a sprained ankle needs an MRI.</blockquote> This sounds like it could be an affirmation of evidence-based medicine, the approach that attempts to base medicine on systematic search for and critical review of the best clinical research, among other things. However, De la Torre takes it a big step further, citing: <blockquote>In deference to those who love the individual hospital, you have to look back at America and the trends in industries that have gone from being art to science, to being commodities. Health care is becoming a commodity. The car industry started off as an art, people hand-shaping the bodies, hand-building the engines. As it became a commodity and was all about making cars accessible to everybody, it became more about standardization. It's not different from the banking industry and other industries as they've matured. Health care is finally maturing as an industry, and part of that maturation process is consolidation. It's getting economies of scale and in many ways making it a commodity.</blockquote> Apparently Dr De la Torre does not see a distinction any longer between health care, or to use an old-fashioned word, medicine, traditionally considered an art or practice of caring for individual patients, and making automobiles on an assembly line. Dr De la Torre may be deeply misinterpreting evidence-based medicine, which is about evidence from clinical research, but also much more. Consider how the Cochrane Collaboration <a href="http://www.cochrane.org/about-us/evidence-based-health-care/">discusses it</a>: <blockquote>Evidence-based health care Evidence-based health care is the conscientious use of current best evidence in making decisions about the care of individual patients or the delivery of health services. Current best evidence is up-to-date information from relevant, valid research about the effects of different forms of health care, the potential for harm from exposure to particular agents, the accuracy of diagnostic tests, and the predictive power of prognostic factors [1]. Evidence-based clinical practice is an approach to decision-making in which the clinician uses the best evidence available, in consultation with the patient, to decide upon the option which suits that patient best [2]. Evidence-based medicine is the conscientious, explicit and judicious use of current best evidence in making decisions about the care of individual patients. The practice of evidence-based medicine means integrating individual clinical expertise with the best available external clinical evidence from systematic research [3]. [1] Cochrane AL. Effectiveness and Efficiency : Random Reflections on Health Services. London: Nuffield Provincial Hospitals Trust, 1972. Reprinted in 1989 in association with the BMJ. Reprinted in 1999 for Nuffield Trust by the Royal Society of Medicine Press, London, <a href="http://www.rsmpress.co.uk/bkcochra.htm">ISBN 1-85315-394-X.</a>[2] Gray JAM. 1997. Evidence-based healthcare: how to make health policy and management decisions. London: Churchill Livingstone. [3] Sackett DL, Rosenberg WMC, Gray JAM, Haynes RB, Richardson WS. 1996. Evidence based medicine: what it is and what it isn't. BMJ 312: 71–2 [3] [<a href="http://www.bmj.com/cgi/content/full/312/7023/71">Full text</a>]</blockquote> Note the emphasis on making decisions for individuals based on what is best for each, and the integration of evidence from clinical research with clinical expertise. This is far from commoditization. Nonetheless, Dr De la Torre seems to envision "new health care" like a 1930s automobile assembly line, with the physicians and other health professionals cast as assembly line workers, and the patients cast as automobiles. Our next example may provide some explanations for this point of view. Steward's Advertising Raises Questions of Whose Hands Should be on Health Care As we <a href="http://hcrenewal.blogspot.com/2012/07/steward-health-care-vs-rhode-island.html">discussed earlier</a>, Steward Health Care has been working on acquiring a struggling local Rhode Island hospital system, and in doing so is in a dispute with the statewide non-profit Blue Cross health insurance company. Steward had been putting daily full-page advertisements in the local paper. A recent version (27 July, 2012), had this text: <blockquote>RHODE ISLAND TO BLUE CROSS: GET YOUR HANDS OFF OUR HOSPITALS With 80% of the market under its control, Blue Cross & Blue Shield of Rhode Island thinks it can decide which hospitals survive or fail. The people of Rhode Island beg to differ. For the past decade, they've watched Blue Cross starve Landmark Medical Center of its funding. And this year, when Blue Cross issued an ultimatum to terminate the hospital, Rhode Islanders heard enough. <div class="separator" style="clear: both; text-align: center;"></div>In a poll conducted this week by John Marttila, a nationally recognized leader on public attitudes concerning health care, 76% of respondents said that Blue Cross shouldn't be allowed to use their monopoly to dictate the fate of Rhode Island hospitals. They also felt, by a 2-1 margin, that if Landmark did indeed close, Blue Cross would be to blame.</blockquote> <div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEik-dnE6y2ihGLxzXIj8PiyX2dNd6bOnzodaTIVxmP8RXQHBDCe4P3W9mJpZQpDYYimKwXpzK2z3ldDZIVz8FHREcjMsOrOr9Sg0FFhoCt7WAQGIzWw37tJoK4aHvZwcXoT8EhbU_2_4A5h/s1600/StewardBCBSAdvertisement2%2528072712%2529.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" eda="true" height="233" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEik-dnE6y2ihGLxzXIj8PiyX2dNd6bOnzodaTIVxmP8RXQHBDCe4P3W9mJpZQpDYYimKwXpzK2z3ldDZIVz8FHREcjMsOrOr9Sg0FFhoCt7WAQGIzWw37tJoK4aHvZwcXoT8EhbU_2_4A5h/s320/StewardBCBSAdvertisement2%2528072712%2529.gif" width="320" /></a></div>However, soon after, investigative <a href="http://digital.olivesoftware.com/Olive/ODE/ProJo/LandingPage/LandingPage.aspx?href=VFBKLzIwMTIvMDcvMjc.&pageno=MTE.&entity=QXIwMTEwMQ..&view=ZW50aXR5">reporting</a> by the Providence Journal's Ms Felice Freyer revealed that maybe the poll should have been interpreted differently. Not unexpectedly, Ms Freyer revealed the poll to have been "commissioned by Steward." Its basic results were really: <blockquote>Just over half the respondents knew that Landmark was being sold to Steward, and of those, 58 percent did not have an opinion, 29 percent supported the sale, and 13 percent opposed it. However, among those who knew about the sale and also live in northern Rhode Island, the approval rating was higher –– 37 percent support the sale, with 15 percent disapproving and 48 percent having no opinion. </blockquote> The pollster than provided prompting, perhaps in an attempt to get results more favorable to its client: <blockquote>One of the questions starts with this statement: 'Blue Cross Blue Shield provides health insurance to 80 percent of Rhode Island. By refusing to negotiate on reimbursement rates, Blue Cross can essentially determine if hospitals in the state stay open or if hospitals close.' Based on that statement, 76 percent of respondents agreed that 'Blue Cross should not be allowed to use its monopoly to dictate which hospitals stay open and which close their doors.' </blockquote> Unfortunately, it appears that the prompting statement was perhaps not fully accurate: <blockquote>In 2011, Blue Cross covered 66 percent of Rhode Islanders with private health insurance, not 80 percent, according to a report by the Office of the Health Insurance Commissioner. Blue Cross denies that it has refused to negotiate. 'We have negotiated in good faith and have offered a fair contract to Landmark Hospital that is consistent with our reimbursement arrangements for other independent hospitals,' Blue Cross said in a statement. 'Unfortunately, Steward has been unwilling to enter into a contract under those conditions.' </blockquote> While they touted probably methodologically biased survey results, Steward's local advertising campaign's headline might prompt some people to think about whose hands should really be on their health care. The advertising tries to limit this question to Blue Cross' influence. However, one might also ask whose hands control Steward Health Care? Whose Hands are on Steward Health Care? As the Commonwealth article above pointed out, Steward Health Care is a wholly owned subsidiary of Cerberus Capital Management, a New York based private equity firm. Cerberus' <a href="http://www.cerberuscapital.com/team/senior_executive_leadership">top leadership </a>includes - CEO Steven A Feinberg, who, as we <a href="http://hcrenewal.blogspot.com/2012/07/steward-health-care-vs-rhode-island.html">noted</a> previously, 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. - Chairman John W Snow, who, as we <a href="http://hcrenewal.blogspot.com/2012/07/steward-health-care-vs-rhode-island.html">noted</a> previously, resigned as Treasury Secretary in the administration of President George W Bush "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," according to Chareles Ferguson in <a href="http://www.randomhouse.com/book/213722/predator-nation-by-charles-h-ferguson">Predator Nation</a>. - Chairman, Cereberus Global Investments J Danforth Quayle, the controversial former US Vice President during the George H W Bush administration. Furthermore, Cerberus Capital Management, which wholly owns Steward Health Care, owns several other businesses.  As we noted <a href="http://hcrenewal.blogspot.com/2011/05/continuing-parade-of-legal-settlements.html">here</a>, these include, DynCorp (see <a href="http://www.dyn-intl.com/history.aspx">their web-site</a>), which has been called one of the "leading mercenary firms," by <a href="http://www.thenation.com/blog/mercenary-owners-they-are-changin-sort">an article</a> in the Nation.  As reported <a href="http://www.bloomberg.com/news/2011-04-22/dyncorp-to-pay-7-7-million-for-inflated-claims-on-iraq-work-u-s-says.html">by Bloomberg</a>, DynCorp, and hence indirectly about Cerberus, and Steward Health Care, in 2011 settled accusations that it overbilled the US government for construction work in Iraq.   Furthermore, as we noted <a href="http://hcrenewal.blogspot.com/2011/02/send-mercenaries-guns-and-money.html">here</a>, Cerberus also owns the biggest manufacturer of firearms and ammunition in the US. As <a href="http://www.businessweek.com/magazine/content/10_33/b4191041673261.htm">reported</a> by BusinessWeek in 2010, Cerberus owns 13 brands of fire-arms and munitions under the umbrella Freedom Group. So while Cerberus Capital Management would like us to believe that Rhode Island residents question the hands of Blue Cross Blue Shield of Rhode Island on a struggling local hospital system, it seems to be trying to avoid questions about whose hands would be on the hospital system were Cerberus Capital Management's subsidiary Steward Health Care to acquire it.  Summary So, to recapitulate this winding story....   A regional hospital system has been pushing its "new health care" idea.  However, its former surgeon CEO promotes new health care as commoditized health care, assembly line health care, in which doctors become assembly line workers and patients become widgets.  This seems bizarre until one realizes that the CEO actually works for a huge private equity firm whose goal is to make a lot of money in the short-term.  Standardized, commoditized health care is likely to be cheaper to provide than individualized health care.  Private equity firms thrive by cutting their subsidiaries' costs, and then selling them quickly, sometimes before the long-term consequences of these cuts become apparent.  (Look <a href="http://hcrenewal.blogspot.com/2012/01/barbarians-at-gate-making-private.html">here</a>.) So there are two lessons. To repeat the lesson from our <a href="http://hcrenewal.blogspot.com/2012/07/steward-health-care-vs-rhode-island.html">earlier post</a>, everybody, doctors, other health care professionals, health policy makers, patients, and the public ought to be extremely skeptical of the marketing and public relations efforts of big health care organizations.  Based on the examples above, they ought to be particularly skeptical of organizations that are overtly for profit, and/or have a clear focus on short-term revenue generation.  As a society we need to think about how to best counter these biased, incomplete, sometimes grossly deceptive efforts to manipulate public psychology and opinions through our rights to free speech and a free press. To add a lesson, everybody, doctors, other health professionals, health policy makers, patients and the public ought to be extremely wary of the ongoing corporatization of medicine and health care.  Corporate leaders who often get large incentives for maximizing short term revenue are likely to be enthused about turning our health care into a commodity.  Doctors and health care professionals should not want to be assembly line workers, and patients surely should not want to be widgets.

Private Equity, Obfuscatory Advertising, and Making Health Care a Commodity: Lessons from Cerberus Capital Management

The use of advertising by Steward Health Care, currently a regional hospital system here in New England, continues to provide lessons about ...

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More "Visionary" Leadership That Turned Out to be "More Interested in Flash than Substance" - Continuing Troubles at the University of Miami

Over the last 20 years or so, health care organizational leaders somehow ceased to be mere mortals, and became visionaries.  The latest example of how their visions turned out to be cloudy <a href="http://www.miamiherald.com/2012/07/22/2918375/um-med-schools-big-ambitions-led.html">appeared</a> in the Miami Herald. Background: Donna Shalala as "Visionary" President of the University of Miami Donna Shalala, formerly the US Secretary for Health and Human Services, became President of the University of Miami in 2001 (see her official biography).  She has since been hailed literally for her "visionary leadership" (as <a href="http://www.med.miami.edu/news/view.asp?id=466">recipient</a> of the Health Leadership Award from the National Hispanic Medical Association in 2005).  In 2008, then US President George W Bush <a href="http://weblogs.sun-sentinel.com/news/politics/dcblog/2008/06/bush_awards_donna_shalala_meda_1.html">awarded</a> her the US Medal of Freedom, the highest US civilian award, as "one of our nation’s most distinguished educators and public officials. She has worked tirelessly to ensure that all Americans can enjoy lives of hope, promise and dignity.") At the University of Miami, as <a href="http://chronicle.com/article/Fast-Growth-Strategy-Has-Its/127941/">described</a> in a detailed investigative report by Paul Basken in the Chronicle of Higher Education in 2011, Ms Shalala pursued a grand strategic vision to " bring the University of Miami into the ranks of the nation's elite research universities."  In an interview at that time, she claimed to have had "a very disciplined strategic plan to make this place much, much better, to move into the top ranks of American universities." Cracks in the Wall Appear in 2011 However, Mr Basken reported that by 2011, that strategy was showing signs of failure.  He noted problems including rising deficits and a worsening credit rating; allegations that the university was failing to meet the needs of the poor patients for whom its doctors had traditionally cared for at Jachson Memorial Hospital while favoring paying patients at its newly acquired medical center; and concerns about conflicts of interest affecting top leadership of the university, including Ms Shalala (see our post <a href="http://hcrenewal.blogspot.com/2011/06/embedded-networks-of-influence-in.html">here</a>).  At the time, university leadership scoffed at the importance of these problems.  For example, Ms Shalala ridiculed doctors "who gripe" that the university had become over-extended by pushing research over patient care as "these people complaining they want to live their little lives without being researchers."  After the 2011 report came out, Ms Shalala <a href="http://chronicle.com/article/Shalala-Articles-Conclusions/128021/">ridiculed</a>  it in print as "a shocking example of irresponsible and lazy reporting." Note that on Health Care Renewal, we had previously raised questions about Ms Shalala's conflicts of interests, particularly her role on the board of UnitedHealth at the time its CEO was receiving hundreds of millions in back-dated stock options (in 2006, look <a href="http://hcrenewal.blogspot.com/2006/03/questionable-timing-of-unitedhealth_20.html">here</a>); and about her priorities, including the contrast between her lavish compensation, which encompassed her residence in a fully-staffed mansion, and how the university treated its low level workers, particularly its janitors who did not receive health insurance (also in 2006, look <a href="http://hcrenewal.blogspot.com/2006/02/tale-of-three-ironies-university-of.html">here</a>).  The Cracks Widen in 2012 In retrospect, Mr Basken's article appears quite responsible and accurate.  Last week the Miami Herald <a href="http://www.miamiherald.com/2012/07/22/2918375/um-med-schools-big-ambitions-led.html">reported</a> that Ms Shalala's "ambitious moves vaulted UM’s medical school to the national stage — but they may also have seriously damaged it."  Soon after Ms Shalala ridiculed the Chronicle of Higher Education article, already internal reports showing even more trouble were appearing.  <blockquote>As far back as October, billionaire car dealer Norman Braman wrote in a memo to fellow UM trustees that he and colleagues had been receiving anonymous letters for months 'outlining a host of wrongdoings, mostly at the medical school. Braman and others closely tied to the school warned UM officials the medical school was spending too much, too fast in the push to build a world-class medical center.</blockquote> There were problems beyond those described by the CHE article: <blockquote>The medical school also had major problems of its own. According to internal documents, the school suffered from bloated staffing, a faulty billing system and prices that sometimes ran much higher than at other South Florida hospitals. Internal controls apparently were weak at best: A whopping $14 million in expensive cancer drugs disappeared from a UM pharmacy over three years before an employee was charged with theft in June 2011. The medical school’s difficulties even began to impede its relationship with the ailing, taxpayer-financed Jackson Health System, endangering a decades-long partnership with the public hospital system.</blockquote> The Herald article includes substantially more detail to support these assertions. Trustee Braman summarized it thus: <blockquote>Poorly conceived decisions by the medical school administration have put the university at significant risk and, at the same time, injured Jackson Memorial Hospital.</blockquote> As we <a href="http://hcrenewal.blogspot.com/2012/06/university-of-miami-lays-off-800-cuts.html">noted</a>, earlier this year the university's financial problems lead to layoffs, but at the same time, the university was building an even fancier mansion for President Shalala. After the lay-offs, Braman said they were: <blockquote>a real tragedy that never should have happened. ... The people at the top were very much more interested in flash than substance.</blockquote> Summary Since the early 1990s we have suffered the rise of extremely confident, extremely well-paid, "visionary" health care leaders. Anyone within the organization who doubted their visions risked being labeled a malcontent or worse. Any skeptic outside the organization might be met by a barrage of propaganda from the organization's well financed public relations operation. Yet the visions these leaders produced often appeared to be clouded at best. One of the most striking early examples remained anechoic for a long time. The then CEO of the Allegheny Health Education and Research Foundation, Sharif Abdelhak, was publicly labeled a "visionary" and "genius" for assembling a large, vertically oriented health care system, which eventually went bankrupt. Abedlhak went to jail. (Look <a href="http://hcrenewal.blogspot.com/2012/04/pittsburgh-experiment-ii-another-echo.html">here</a> for summary). In the greater business world, whose culture now seems to rule health care, there are other examples of such failed visionaries (look <a href="http://hcrenewal.blogspot.com/2012/05/ceo-as-false-messiah.html">here</a>).  Yet this case, and other since, have largely been ignored. However, as the case of the leadership of the University of Miami now seems to show in retrospect, many people seem to fall again and again for the now tired hucksterism of the "visionary," or "genius" leader selling grandiose and often self-serving pipe dreams. Maybe it would be enough in health care to simply aspire to good patient care, responsible education, and honest research. Meanwhile, health care professionals, health policy leaders, and the public at large should start showing appropriately pointed skepticism of our current self-proclaimed "visionary" leadership.

More "Visionary" Leadership That Turned Out to be "More Interested in Flash than Substance" - Continuing Troubles at the University of Miami

Over the last 20 years or so, health care organizational leaders somehow ceased to be mere mortals, and became visionaries. The latest exam...

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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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