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There They Go Again - Omnicare to Settle for $120 Million

The march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> seems to be on its way again. The Latest Settlement The details, per Reuters, <blockquote class="tr_bq">n">Omnicare, Inc, a leading U.S. provider of pharmacy services to the elderly, has agreed to pay the U.S. government $120 million to settle allegations the company gave nursing homes steep discounts on prescription drugs in exchange for patient referrals. Cincinnati-based Omnicare announced the settlement on Wednesday in a filing with the U.S. Securities and Exchange Commission, but denied any wrongdoing. The lawsuit, filed in 2010 by former Omnicare employee Donald Gale, had been scheduled to go to trial on October 28. Gale accused the company of engaging in a kickback scheme called 'swapping' in which Omnicare allegedly gave nursing homes heavily discounted prescription drugs for inpatients covered by Medicare Part A. That federal benefit program pays skilled nursing facilities a fixed fee per patient, per day, for the first 100 days of a patient's stay, according to court filings. In exchange, the nursing homes allegedly referred their other patients, many covered by other federal benefit programs, allowing Omnicare to bill the full price of their prescription drugs and pharmacy services, the lawsuit said.</blockquote> As is usually the case,  <blockquote class="tr_bq">Omnicare's vice president of investor relations, Patrick Lee, said in an emailed statement that the company did not admit liability in settling the lawsuit.</blockquote> <blockquote> 'The Company agreed to settle the matter in order to avoid continued litigation and to focus on its mission of helping to ensure the health of seniors and other patient populations in a cost-effective manner,' he said.</blockquote> He did not comment on the discrepancy between the alleged kickback scheme apparently meant to increase company revenue and that bit about ensuring health in "a cost-effective manner." Will There be Still Others? In addition, the Cincinnati Business Courier <a href="http://www.bizjournals.com/cincinnati/news/2013/10/23/omnicare-to-pay-120-million-to-settle.html">quoted</a> another Omnicare executive, <blockquote class="tr_bq">'This settlement is not an admission of liability, and Omnicare continues to deny that there was any wrongdoing,' <a href="http://www.bizjournals.com/cincinnati/search/results?q=Robert%20Kraft">Robert Kraft</a>, chief financial officer for Omnicare, said Wednesday in a conference call with market analysts regarding the company’s third-quarter earnings. 'When we agree to settle these types of matters, we have and will continue to make decisions in the best interest of our shareholders. …' 'We operate in a highly regulated industry, and we believe additional matters will likely arise against the company in the future,' Kraft said. 'We believe the matters of which we are now aware, including the aforementioned settlement, are manageable given the company's financial position and cash-flow characteristics.'</blockquote> Was that an admission that the company often violates regulations?  It is hard to tell.  However, it is clear that this is not the first settlement of allegations of bad behavior that the company has made. The Previous Settlements The Cincinnati Business Courier article also stated,   <blockquote class="tr_bq"><a href="http://www.bizjournals.com/cincinnati/news/2013/08/16/omnicare-agrees-to-167-million.html?page=all">I reported in August on the settlement of a lawsuit filed on behalf of Omnicare,</a> which had alleged that a former president and CEO as well as some other former officers or directors of the company had violated federal laws related to kickbacks and false claims.</blockquote> That settlement was for a mere $16.7 million. In addition, as we <a href="http://hcrenewal.blogspot.com/2010/08/2-legal-settlements-1-corporate.html">discussed </a>in 2010, in 2009, we <a href="http://hcrenewal.blogspot.com/2009/11/omnicare-ivax-settle.html">discussed</a> a $98 million settlement made by Omnicare, US based corporation that manages pharmacy-benefits, of allegations that it received kickbacks from generic drug manufacturers for buying and recommending their drugs.  Omnicare had previously submitted to a corporate integrity agreement in 2006, and paid $102 million to settle allegations it defrauded Medicaid. So the count so far is four settlements for a total of approximately $337 million, and one corporate integrity agreement. Summary So Omnicare is yet another of the many large health care organizations which have been subject to various legal actions suggesting diverse kinds of bad behavior.  Omnicare, like many of these, has paid penalty upon penalty, yet each settlement seems to be made in a vacuum without reference to prior events.  Furthermore,  almost no settlement, and no settlement made by Omnicare, ever either imposed a large enough penalty on the company to deter further problems, or imposed any - I repeat any - negative consequences on anyone at the company who authorized, directed, or implemented the bad behavior.  So, as obliquely stated by the Omnicare CFO in this case, expect further "matters" to be addressed in the future. So as we<a href="http://hcrenewal.blogspot.com/2010/08/2-legal-settlements-1-corporate.html"> said</a> on the subject of Omnicare in 2010, <blockquote class="tr_bq"> the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior by health care organizations. Even large fines can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. </blockquote> By Roy M. Poses on Health Care Renewal

There They Go Again - Omnicare to Settle for $120 Million

The march of legal settlements seems to be on its way again. The Latest Settlement The details, per Reuters, Omnicare, Inc, a leading U.S....

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Justice Delayed - Two Device Companies Still Settling Cases from 10 Plus Years Ago

Here we go again.  After a hiatus during which the US media and perhaps parts of the government were preoccupied with such issues as the ongoing controversy over health care reform, and a government shutdown apparently arising out of this controversy, the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">march of legal settlements</a> involving big health care organizations has resumed. In alphabetical order,... Boston Scientific <a href="http://www.startribune.com/business/228211891.html">From</a> the Minneapolis Star-Tribune on 17 October, 2013, an account of a settlement arising from alleged misbehavior that started in 2002, <blockquote class="tr_bq">A $30 million settlement between the U.S. Department of Justice and Boston Scientific will likely end a case involving the sale of defective heart devices from 2002 through 2005 by subsidiaries Guidant, Guidant Sales and Cardiac Pacemakers.</blockquote> Note that the allegations were particularly egregious since they involved a company selling products they knew to be defective in ways that could prove fatal as if they were quite safe, <blockquote class="tr_bq">The settlement closes a fraudulent-claims lawsuit that alleged Guidant knowingly sold defective implantable defibrillators to health care facilities that implanted them into thousands of Medicare patients. </blockquote> In particular, <blockquote class="tr_bq">The government’s complaint said that Guidant knew as early as April 2002 that its Prizm 2 line of devices was defective and knew in November 2003 that its Renewal 1 and 2 devices were capable of short-circuiting and delivering an electric shock that 'arcs' back onto the device instead of being directed to an irregularly beating heart. According to Boston Scientific’s website, 83 malfunctions and nine reported deaths have been connected with the Renewal devices and 40 confirmed malfunctions and five patient deaths have been associated with the Prizm devices. About 500 Renewal devices remain implanted worldwide; about 1,400 Prizm devices remain in patients, according to the website. Although Guidant took action to fix the defects, the government alleged that the company continued to sell its remaining stock of the old, defective versions of the devices. In fact, federal officials say that as Guidant learned about the cause of the defect, it took steps to hide the problem from patients, doctors and the Food and Drug Administration. According to the government, Guidant did not fully disclose the problem until May 2005, when two Minneapolis doctors publicly aired their concerns about one of the defibrillators after it failed to revive a 21-year-old Grand Rapids, Minn., patient. Guidant later admitted it had known for three years that the device could short-circuit, but chose not to alert doctors or the public.</blockquote> This is only the latest settlement made by Boston Scientific since 2005, <blockquote class="tr_bq">Boston Scientific paid $27.5 billion to acquire Guidant in 2006. It has been paying quite a bit since in relation to Guidant’s defective defibrillators. In 2007, Boston Scientific paid $240 million to settle claims with thousands of patients who had sued Guidant after the defective devices were recalled. Later, in February 2010, Guidant pleaded guilty to misleading the FDA about problems with the devices and paid a fine of $296 million.</blockquote> In fact, the then case of the allegedly concealed implantable cardiac defibrillators (ICD) was one of the first cases of apparently unethical health care corporate management behavior leading to bad patient outcomes we <a href="http://hcrenewal.blogspot.com/2005/05/guideants-short-circuit.html">discussed</a> on Health Care Renewal.  (Look <a href="http://hcrenewal.blogspot.com/2011/01/guidant-boston-scientific-gets.html">here</a> for a more recent summary of this case.) Yet despite the fact that this apparently deeply unethical conduct lead to patient deaths, no individual who authorized, directed or implemented the bad behavior has suffered any negative consequences for it over the eight years since the details first became public. One physician who helped bring this case to light was also apparently concerned about the impunity of those responsible, <blockquote class="tr_bq"> Dr. Robert Hauser, one of the doctors who went public back in 2005, criticized the settlement on Thursday. 'The $30 million should have little impact on their business,' Hauser said in an e-mail. 'I find it very disturbing that such a small settlement was accepted by the DOJ in view of the magnitude of wrongdoing by Guidant management.' </blockquote> Stryker Corp This week, MLive.com <a href="http://www.mlive.com/business/west-michigan/index.ssf/2013/10/stryker_to_pay_132_million_to.html">reported</a> on another settlement involving allegations of unethical behavior by a device company dating back to 2003, <blockquote class="tr_bq"> An investigation by federal authorities found that Stryker Corp. subsidiaries in five foreign countries made illicit payments and tried for several years to bribe doctors, health care professionals and government-employed officials in order to obtain or retain business. Stryker <a href="http://topics.mlive.com/tag/Stryker/index.html"> </a>has agreed to pay more than $13.2 million to settle the charges. The SEC charged the Kalamazoo-based medical technologies company with violating the Foreign Corrupt Practices Act,  alleging that its subsidiaries in Argentina, Greece, Mexico, Poland and Romania made illicit payments totaling approximately $2.2 million 'that were incorrectly described as legitimate expenses in the company’s books and records.' The SEC said descriptions of the payments varied from a charitable donation to consulting and service contracts, travel expenses, and commissions. The SEC states that Stryker made about $7.5 million in illicit profits as a result of the improper payments. It did not specify during what year all of the events occurred, but indicated some as far back as 2003.</blockquote> Note that the payments seemed deliberately designed to corrupt health care professionals and managers, for example, <blockquote class="tr_bq">According to the SEC’s order, Stryker’s subsidiary in Greece made a purported 'donation' of nearly $200,000 in 2007 to a public university in Greece to fund a laboratory that was a pet project of a public hospital doctor. In exchange for the payment, the doctor agreed to provide business to Stryker.</blockquote> Also, <blockquote class="tr_bq">The SEC stated that its investigation also found that Stryker subsidiaries bribed foreign officials by paying their expenses for trips that lacked any legitimate business purpose. 'For example, in exchange for the promise of future business from the director of a public hospital in Poland, Stryker paid travel costs for the director and her husband in May 2004,' according to the SEC. 'This included a six-night stay at a New York City hotel, attendance at two Broadway shows, and a five-day trip to Aruba.'</blockquote> As in the case above, it appears that no individual who authorized, directed or implemented the questionable payments will suffer any negative consequences.  In fact, as is usual in such cases, <blockquote class="tr_bq"> The settlement does not not require Stryker to admit or deny the allegations,...</blockquote> However, an SEC official did say, <blockquote class="tr_bq"> Stryker’s misconduct involved hundreds of improper payments over a number of years during which the company’s internal controls were fatally flawed. Companies that allow corruption to occur by failing to implement robust compliance programs will not be allowed to profit from their misconduct.</blockquote> While Health Care Renewal has not discussed this particular case before, it is hardly the first case of bad conduct by Stryker that we have discussed.  In the past we noted -  In 2012, a Stryker subsidiary pleaded guilty to misbranding in response to allegations that its marketers conspired to defraud physicians in order to sell a product to promote bone growth that proved harmful to patients (look <a href="http://hcrenewal.blogspot.com/2012/01/unequal-justice-under-law-comparing.html">here</a>). -  In 2010, Stryker settled a case alleging unfair and deceptive sales practices again used for bone growth accelerators (look <a href="http://hcrenewal.blogspot.com/2010/09/at-end-of-summer-everybody-well-nearly.html">here</a>).   -  In 2009, some apparently low-level Stryker employees pleaded guilty to promoting off-label use of these same products (look <a href="http://hcrenewal.blogspot.com/2009/02/three-troubled-device-companies.html">here</a>).  - In 2007, Stryker made an agreement allowing federal supervision after charges one of its units had violated anti-kickback laws when making supposed "royalty" payments, often huge, to orthopedic surgeons in connection with its production of prosthetic hips and knees.  Several other device companies signed deferred prosecution agreements, and as a result, for a time all had to make public their payments to doctors and various non-profit organizations.  (See summary <a href="http://hcrenewal.blogspot.com/2007/11/more-about-surgeons-who-received-large.html">here</a>.)  Summary  This recent crop of settlements has some features in common.  The settlements involved multinational device companies.  The settlements occurred at least a decade after the alleged bad behavior started.  The settlements required only small payments - at least on a corporate scale -from the companies involved, but no negative consequences for anyone who authorized, directed, or implemented the bad behavior.  Finally, the settlements were made by companies who had striking past records of previous settlements of bad behavior. The <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">march of legal settlements</a> demonstrates the pervasiveness of unethical behavior, often involving harm to patients or sullying of health care professionals, involving large, rich health care corporations.  It also demonstrates the impunity of the top leaders of such corporations who often make huge amounts of money despite, or perhaps because of their companies' misconduct.  Despite intermittent threats by US government officials to get tough with unethical behavior by health care corporations, this pattern has continued for years, as we have documented.  True health care reform would hold leaders of health care organizations accountable for their organizations' behavior, and its effects on patients and health care professionals.

Justice Delayed - Two Device Companies Still Settling Cases from 10 Plus Years Ago

Here we go again. After a hiatus during which the US media and perhaps parts of the government were preoccupied with such issues as the on...

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Former FDA Commissioner, CMS Administrator McClellan adds Johnson and Johnson Board Membership to Positions with General Atlantic LLC, Capital Royalty, Castlight Health, and AvivReit

Our latest example of the interchangeability of top insiders within corporate health care and the government agencies that are supposed to regulate corporate health care comes via an <a href="http://www.investor.jnj.com/releaseDetail.cfm?ReleaseID=796836&year=2013">announcement</a> from Johnson and Johnson, <blockquote class="tr_bq">Johnson & Johnson (NYSE: JNJ) announced today that Mark B. McClellan, M.D., Ph.D., Senior Fellow in Economic Studies, and Director of the Initiative on Value and Innovation in Health Care, Brookings Institution, will join the Board of Directors on October 15, 2013.  Dr. McClellan will serve on the Regulatory, Compliance & Government Affairs Committee and the Science, Technology & Sustainability Committee of the Board. As former commissioner of the U.S. Food and Drug Administration (FDA) from 2002 to 2004, and as the former administrator of the Centers for Medicare & Medicaid Services for the U.S. Department of Health and Human Services from 2004 to 2006, Dr. McClellan has more than two decades of public service and academic research experience. From 2001 to 2002, he served as a member of the President's Council of Economic Advisers and senior director for health care policy at the White House. During President William J. Clinton's administration, Dr. McClellan held the position of deputy assistant secretary of the Treasury for economic policy.</blockquote> So Dr McClellan has gone from running the US Food and Drug Administration, the primary government regulator of the pharmaceutical industry, to stewardship of one of the biggest pharmaceutical (and biotechnology and device) companies. Not noted in that announcement was that Dr McClellan has been collecting positions in health care corporations since at least 2009.  The examples I found included in chronological order: 2009 - General Atlantic LLC This appears to be a private equity firm which <a href="http://www.generalatlantic.com/about-us/a-proud-legacy/">claims</a> to be a "leading global investment firm." From a 2010 a Mergers & Acquisitions <a href="http://www.themiddlemarket.com/news/General-Atlantic-Adds-Healthcare-Vet-201877-1.html">article</a>, <blockquote class="tr_bq">A year ago, the firm hired Dr Mark McClellan, previously a commissioner of the Food & Drug Administration, to its healthcare practice as a special advisor.</blockquote> According to the firm's <a href="http://www.generalatlantic.com/people/special-advisors/">current website</a>, he is still a special advisor.   2010 - Capital Royalty LP In a 2010 <a href="http://www.capitalroyalty.com/news/item/firm-news/capital-royalty-establishes-strategic-advisory-committee/">press release</a>, this apparently private equity firm claimed to be <blockquote class="tr_bq">a market pioneer and innovator in healthcare investing with a focus on intellectual property investments in FDA-approved biopharmaceutical assets</blockquote> In that release, it announced the creation of a Strategic Advisory Committee that included Dr Mark McClellan.  He <a href="http://www.capitalroyalty.com/about-us/strategic-advisory-committee/dr.-mark-mcclellan-md-phd/">still sits</a> on that committee.  2012 - Castlight Health In a 2012 <a href="http://www.castlighthealth.com/2012/mark-mcclellan-joins-castlight-health%E2%80%99s-advisory-board/">press release</a>, this firm claimed to be <blockquote class="tr_bq">developer of a personalized health care shopping portal offering unbiased information about health care cost and quality</blockquote> That press release announced the addition of Dr McClellan to the firm's Advisory Board, <a href="http://www.castlighthealth.com/company/advisory-board/">on which</a> he still sits.  2013 - AvivReit This firm "specializes in the ownership and triple-net leasing of post-acute and long-term care skilled nursing facilities (SNFs)" per its <a href="http://www.avivreit.com/about-aviv/">website</a>. Dr McClellan is currently on its <a href="http://ir.avivreit.com/od.aspx?iid=4328838">board of directors</a>.  He apparently was appointed in 2013.  Notably, I did not see anything in any of these firms' announcements about Dr McClellan or their biographies of him that noted his board or advisory committee positions with other firms. Summary Dr Mark McClellan rose through the ranks in the US executive branch ending with positions as FDA commissioner and administrator of the Center for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services (DHHS).  He served under two presidents, Clinton and George W Bush.  Within 3 years of exiting DHHS, he picked up his first important commercial position, at General Atlantic LLC, and then added other positions with Capital Royalty, Castlight Health, AvivReit, and now the biggest of all, Johnson and Johnson.  Meanwhile he apparently continues at the Brookings Institution.  He must be one very busy man. This case could be lumped with those of another former FDA commissioner and Secretary of Health and Human Services who ended up as a Director of Medtronic (see <a href="http://hcrenewal.blogspot.com/2011/10/former-us-secretary-of-health-and-human.html">this post</a>),  another Secretary of DHHS who ended up on the boards of multiple health care corporations (see <a href="http://hcrenewal.blogspot.com/2011/06/embedded-networks-of-influence-in.html">this post</a>), a director of the National Institutes of Health (NIH) who became a Sanofi executive, etc, etc (see <a href="http://hcrenewal.blogspot.com/2010/12/former-nih-director-spins-trhough.html">this post</a>). While some might argue whether his acquisition of a leading advisory position with a private equity firm three years after he left DHHS technically constituted a spin through the <a href="http://hcrenewal.blogspot.com/search/label/revolving%20doors">revolving door</a>, Dr McClellan's cumulative acquisition of four more such positions within the following four years certainly demonstrates how our corporate dominated health care system and the government agencies which are supposed to be regulating it to assure the health and safety of patients, and the maintenance of the public health seem to be run by an interchangeable cast of insiders.  We have asked before whether we can trust federal regulators to put patients' and the public's health first when they know they could easily become  candidates for lucrative private positions in the companies they regulate, or which are affected by their regulations, presumably assuming they have not done too much during their time in government to offend the leaders of such companies. We have noted that the system in which government and big corporations largely overlap in terms of their leadership and presumably goals is called <a href="http://hcrenewal.blogspot.com/search/label/corporatism">corporatism</a>.  One can argue that such systems end up being run primarily for the benefit of corporate and government insiders.  Until we dispel the fog of corporatism that has spread over the government that was once supposed to be of the people, by the people, and for the people, expect no real health care reform, and expect continuing rising costs, declining access, and worsening patient care. Obviously, true health care reform would start with the government and its officials putting patients' and the public's health first, way ahead of the financial comfort of corporate leaders. I would note that neither the currently controversial and now operational Affordable Care Act, nor any of its opponents schemes for alternatives addresses this issue. by Roy M. Poses MD for Health Care Renewal

Former FDA Commissioner, CMS Administrator McClellan adds Johnson and Johnson Board Membership to Positions with General Atlantic LLC, Capital Royalty, Castlight Health, and AvivReit

Our latest example of the interchangeability of top insiders within corporate health care and the government agencies that are supposed to r...

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A new and very interesting EMR "glitch" - no warnings on stopping a medicine that diminishes the effects of a second medication

A new and very interesting EMR "glitch" from a report I received recently: <blockquote class="tr_bq">... I found a glitch with my [name redacted] EMR. It probably happens with all EMRs. I had a patient on primidone (<a href="http://en.wikipedia.org/wiki/Primidone">http://en.wikipedia.org/wiki/Primidone</a>) for essential tremor. Later, his primary care put her on warfarin [a "blood thinner" - ed.] for atrial fibrillation. Some time after that, I took her off of primidone.  Her INR jumped to 7 or 8. [High - ed.] What happens is that the EMRs warn a physician pretty well if you START a medicine that interacts with warfarin, but fails to warn if you STOP a medicine that interacts with warfarin. If you are used to relying on your EMR to warn you about drug interactions, you can fall into this trap easily, as I found out. Luckily, the patient was not harmed. </blockquote> In other words, if a medication that interacts with another medication by suppressing the latter's effects to some degree is discontinued, EMRs may not warn of it.  Stopping the former can accentuate the effects of the latter, and disaster can result.  A primidone metabolite, phenobarbital, decreases INR and the anticoagulant effects of warfarin (<a href="http://www.medscape.com/viewarticle/745645_3">http://www.medscape.com/viewarticle/745645_3</a>).  Stop primidone, but continue warfarin, and ... wham. The alert algorithms were apparently not designed with this eventuality in mind ... probably because the designers never thought of this issue.  Medicine is not as easy as it might appear to the outside, non-expert observer. -- SS

A new and very interesting EMR "glitch" - no warnings on stopping a medicine that diminishes the effects of a second medication

A new and very interesting EMR "glitch" from a report I received recently: ... I found a glitch with my [name redacted] EMR. It pr...

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The Mystery of the Fugitive Founder (and Longterm President of an Offshore Medical School for US Students)

We recently <a href="http://hcrenewal.blogspot.com/2013/09/quality-vs-costs-of-us-corporate-owned.html">wrote</a> about for-profit medical schools located offshore from the US, but catering to American students, not students from the countries in which they operate.  Now some new media reports raise further questions, if not mysteries about another set of such schools.   Two Bloomberg articles on a trial underway focused on the alleged use of offshore accounts to avoid US taxes.  These accounts were connected to the former long-term President and founder of two offshore medical schools, and his spouse, a dean at one of the schools.   The <a href="http://www.bloomberg.com/news/2013-10-08/caribbean-medical-school-founder-faces-trial-over-swiss-accounts.html">first Bloomberg article</a> opened thus: <blockquote class="tr_bq">Patricia Hough, according to her lawyers, is an altruistic psychiatrist who helped her husband build two Caribbean medical schools. To prosecutors, she is a tax cheat who used offshore accounts to avoid paying taxes on millions of dollars from the schools’ sale. Jury selection began today in federal court in Fort Myers, Florida, where Hough, 67, is accused of using accounts at UBS AG, the largest Swiss bank, and elsewhere to hide assets and income from the Internal Revenue Service, including almost $34 million she and her husband made when the schools were sold in 2007. </blockquote> The Bloomberg article asserted, <blockquote class="tr_bq"> At the heart of the case is whether she misused accounts associated with the Saba University School of Medicine Foundation. </blockquote> The main question to me is not whether Dr Hough is guilty or innocent, which I cannot tell.  There are more intriguing  mysteries raised by this case. How Did Non-Profit Medical Schools Become For-Profit?   According to Bloomberg, <blockquote class="tr_bq">  Hough’s lawyers say she helped [her husband, David] Fredrick build Saba University School of Medicine, on the island of Saba in the  Netherland Antilles, and the Medical University of the Americas, or MUA, on Nevis in the West Indies.</blockquote> To do so, <blockquote class="tr_bq"> Through the Saba foundation, which they first funded in 1988, according to a government trial brief filed Oct. 3, the couple opened the Saba University School of Medicine in 1993. Fredrick served as president and a foundation director. Hough was associate dean for clinical medicine. </blockquote> Also, <blockquote class="tr_bq">In 1999, Fredrick and Hough began the Medical University of the Americas, a for-profit school on Nevis in the West Indies, according to the government filing. </blockquote>There seems to be no question that the schools were started by a foundation based in the Netherland Antilles.  A <a href="http://www.mbc.ca.gov/applicant/site_visits_saba.pdf%E2%80%8E">report of a site visit</a> of the Saba University School of Medicine by the Division of Licensing of the Medical Board of California in 2004 summarized this history, <blockquote class="tr_bq">In 1986, the government of the Netherlands Antilles proposed to a group of American educators that a medical school be established on the small island of Saba, N.A.  It was to be relatively small, of high quality and established for the dual ppurpose of benefiting the economy of the island (of only 1500 population) and attracting N.A. citizens to medical careers in the N.A. A committee of Dutch citizens from Curacao, the seat of the N.A. government, approved the preliminary plans and the school was founded as a non-profit foundation under Dutch law....</blockquote> The Saba University <a href="http://www.saba.edu/saba/index.php/about-saba/about-saba-university/accreditations">website</a> still states that the school is accredited in the Netherlands, <blockquote class="tr_bq">Saba University School of Medicine’s Doctor of Medicine (M.D.) program is accredited by the <a href="http://nvao.net/" target="_blank">NVAO</a> (in Dutch: Nederlands-Vlaamse Accreditatieorganisatie). The NVAO is the Accreditation Organization of the Netherlands and Flanders. This organization was established by international treaty and ensures the quality of higher education in the Netherlands and Flanders.</blockquote> So apparently Saba University was started as a non-profit organization meant to focus on medical education for the Netherlands Antilles, and thus accredited there.  But then, somehow,  according to Bloomberg. <blockquote class="tr_bq">Equinox Capital, a private-equity firm based in Greenwich, <a href="http://topics.bloomberg.com/connecticut/">Connecticut</a>, bought the Saba school and MUA for $36 million in 2007. The transaction included $34 million for land held in the name of Fredrick’s daughter from an earlier marriage, according to prosecutors. Hough and Fredrick didn’t tell the IRS about most of the proceeds of the sale and transferred money among various undeclared accounts to buy the plane and real estate, make gifts to family members and pay personal expenses, prosecutors said.</blockquote> There also seems to be no question that Equinox Capital did buy the schools.  The <a href="http://mandasoft.com/1/13007/equinox_capital_inc_acquired_saba_university_school_of_medicine">summary of a 2007 press release</a> from the company stated, <blockquote class="tr_bq"> Equinox Capital III, L.P. announced that it has completed the recapitalization of Saba University School of Medicine B.V. ('Saba'). Founded in 1986, Saba is a leading for-profit university that awards four-year graduate degrees in Doctors of Medicine (M.D.). </blockquote> A <a href="http://www.prairie-capital.com/mobile/funds/r3.html">statement from Prairie Capital,</a> which is now an investor in the schools, noted that now <blockquote class="tr_bq"> R3 Education is a Massachusetts-based holding company that controls The Saba University School of Medicine ('Saba'), The Medical University of the Americas ('MUA') and St. Matthew University ("SMU").</blockquote> After, <blockquote class="tr_bq"> Prairie Capital partnered with Equinox Capital to acquire the three universities. </blockquote> It is enough to cause some dizziness.  Let me recap.  Mr Fredrick and Dr Hough somehow founded two medical schools apparently under the auspices of a foundation, the Saba University School of Medicine Foundation, which the couple ran.  The goal of the foundation was to attract Netherland Antilles citizens to medical careers in the NA.   However, the Saba University school became an off-shore facility for US medical students.  The two schools were later acquired by Prairie Capital and Equinox Capital, and they are now run as for-profit operations by R3 Education. So somehow Saba University transitioned from being a non-profit meant to serve the medical education needs of the Netherlands Antilles to a for-profit owned by US private equity firms (and apparently now focused on serving Americans.) How did that happen?  What was the rationale for the change?  Did any Dutch authorities consider the implications for their country?  Did any American organizations concerned with the quality of education and credentials of US physicians consider the implications? Where Did the Money Go? According to Bloomberg, US prosecutors made some striking allegations, <blockquote class="tr_bq"> Both the foundation and MUA failed to tell the IRS about accounts held at UBS, Liechtenstein Landesbank and other banks, the U.S. charges. Singenberger and Luetolf helped the foundation and MUA move money through British Virgin Islands or Hong Kong entities they controlled called Top Fast Finance Ltd., Ample Dynamic Trading Ltd., New Vanguard Holdings Ltd. and Apex Consultants Ltd., according to prosecutors. 'Hough and Fredrick were the beneficial owners of and had signatory authority over all over these accounts and owned and controlled each of them,' prosecutors said in their brief. </blockquote> The prosecution also alleged that Mr Fredrick and Dr Hough spent the money they allegedly got from selling the two medical schools rather lavishly.  Per the <a href="http://www.bloomberg.com/news/2013-10-08/caribbean-med-school-founder-didn-t-cheat-irs-jury-told.html">second Bloomberg article</a>, <blockquote class="tr_bq">[Prosceutor] Kessler said Hough and her husband used the proceeds of the school sales to buy a $1.6 million airplane, a $1.1 million house in Asheville, North Carolina, a $590,000 house in Greenville, North Carolina, and an $800,000 condominium in Sarasota, Florida. She said they also gave money to relatives. </blockquote> The prosecutors charged that the money the private equity firms paid went to Mr Fredrick and Dr Hough.  But while Mr Fredrick was President of Saba University, and apparently ran the foundation that was supposed to support it, he did not own either.  So why would the money go to him, and his wife?  If the money did not go to them, where did it go? As the trial continued, as documented in a <a href="http://www.businessweek.com/news/2013-10-08/caribbean-med-school-founder-didn-t-cheat-irs-jurors-told">second Bloomberg article</a>, Dr Hough's lawyer denied that she got the money, <blockquote class="tr_bq">Dan Saunders, an attorney for Hough, said his client never believed the money held at UBS AG (UBSN), the largest Swiss bank, and in other offshore banks belonged to her. Rather, he said, she thought it belonged to the foundation that ran the schools. 'It wasn’t her money, and she never believed it was,' Saunders said in his opening statement. </blockquote> If that is true, however, why is money that supposedly belongs to a foundation sitting quietly in a Swiss bank? Dr Hough's lawyer said, <blockquote class="tr_bq"> Saunders said the accounts did serve a business purpose: to protect the assets of their nonprofit foundation from people attempting a hostile takeover.</blockquote> Hostile takeovers of publicly held corporations do occur, of course.  However, how could a hostile takeover of a foundation occur, and who would possibly want or be able to do so? So thus far, no one has offered a rationale explanation for how the schools were sold, why they were sold, and where the money resulting from the sale went. Where in the World is Mr Fredrick? So far, while the defendant is Dr Hough, the role of her husband, Mr Fredrick, apparently the President of Saba University from its founding at least until 2007, seems key.  Yet little of the coverage focused on Mr Fredrick.  The reason for that suggests the next mystery, per  the first Bloomberg article, <blockquote class="tr_bq">Fredrick vanished after the indictment, leaving Hough to face trial alone. U.S. District Judge John Steele, who is overseeing the trial, has declared Fredrick a fugitive.</blockquote> So why did Mr Fredrick flea, and of course, where did he go? Obviously, the fact that Mr Fredrick, who was the President of Saba University for many years, chose not to defend himself against charges that he hid the money he somehow obtained from the sale of that and another medical school, but rather fled, suggests that he may not have had a very good defense against those charges.  What does that say about the leadership of these medical schools?  Summary So the coverage of this intriguing trial, when added to some other publicly available information, suggests a wealth of mysteries about the founding, current nature, and leadership of two Caribbean medical schools which currently are run as for-profit firms and owned by US private equity firms, and whose student bodies come almost exclusively from the US. So the really big mysteries are those about the implications for the medical education these schools provide, the students they attract, the physicians who graduate from their programs, the US patients of such physicians, and the US government which largely provides the loans which paid for these students' education (look <a href="http://www.bloomberg.com/news/2013-09-10/devry-lures-medical-school-rejects-as-taxpayers-fund-debt.html">here</a>). Despite the extraordinary nature of this case (again, involving the longterm president of an offshore medical school that sought to educate a substantial number of US physicians, and who is now a fugitive from justice), the only interest in it so far seems to be its implications for US prosecutions of hidden offshore accounts. This case illustrates why we must reexamine our fascination for "market based" approaches to health care, when almost nothing about any part of health care resembles, or could resemble a free market (see <a href="http://hcrenewal.blogspot.com/2010/08/how-fallacy-of-perfect-health-care.html">this post</a>).  We need to make health care more transparent, and shine more sunshine on the nooks and crannies, like off-shore but US corporate owned medical schools.  We need to facilitate health care leadership and governance that puts patients' and the public's health first, way ahead of the personal enrichment of the participants.   ADDENDUM (29 October, 2013) - Dr Hough was convicted of defrauding the IRS and income tax evasion, see the <a href="http://www.bloomberg.com/news/2013-10-24/caribbean-medical-school-founder-guilty-at-florida-tax-trial-1-.html">Bloomberg article</a>.  So far I see no response, certainly no apology or disavowal, by the current managers and owners of the medical school.

The Mystery of the Fugitive Founder (and Longterm President of an Offshore Medical School for US Students)

We recently wrote about for-profit medical schools located offshore from the US, but catering to American students, not students from the c...

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Louise Schaper, PhD, CEO, Health Informatics Society of Australia: "What's Missing From the Health IT Investment? - Health Informatics"

Louise Schaper, PhD, CEO of the Health Informatics Society of Australia (HISA, <a href="http://www.hisa.org.au/">http://www.hisa.org.au/</a>), graciously extended an invitation in 2011 that I could not attend, and again in 2012 (that I accepted) to give a keynote presentation at HISA's annual convention, Healthcare Informatics Conference (HIC).  A writeup of my HIC2012 presentation in Sydney is at <a href="http://hcrenewal.blogspot.com/2012/08/my-presentation-to-health-informatics.html">http://hcrenewal.blogspot.com/2012/08/my-presentation-to-health-informatics.html</a>. I unfortunately could not make it Down Under for HIC2013 in Adelaide.  However, HISA has posted videos of a number of presenters. One of the presenters is Dr. Schaper.  Her presentation "Health Informatics: A megatrend driving investment, careers & delivering the future of healthcare" is at <a href="http://www.hisa.org.au/page/hic2014videos">http://www.hisa.org.au/page/hic2014videos</a> (bottom video).  It is well worth watching. <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/AVvXsEgtb74lZXAe1diMqwSJ8Nh11TljYQA3a9eG0zcSSZCmTvUsW1j3QWjHr4C_R07npu3SqbGa7olG-QMFLGFBygsO6e4l5ucGzyT6ACyIe7tEg4Ia3AulBRshz-tCBQvjME5Rlso_X65vobWD/s1600/schaper_louise.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtb74lZXAe1diMqwSJ8Nh11TljYQA3a9eG0zcSSZCmTvUsW1j3QWjHr4C_R07npu3SqbGa7olG-QMFLGFBygsO6e4l5ucGzyT6ACyIe7tEg4Ia3AulBRshz-tCBQvjME5Rlso_X65vobWD/s200/schaper_louise.jpg" width="152" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Louise Schaper PhD, CEO, Health Informatics Society of Australia</td></tr></tbody></table> After reviewing the potential benefits of heathcare IT, Dr. Schaper asks what I consider the most critical question of all. At 08:20 she asks:  "What's missing from this [multi-billion dollar] investment?" <div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYPjXC9te_7YpCosQhbRBYckorMvRZTXeCMvtJaYGopDXMrFiQYw5w0Hsa_gF8HnVoqqR9vETX6fPwgfqP9WXx0Nn3RF9Mr-_rmBYDwFkSHv6GYoMykqKJDHWEXot7lPb074Q01cgNH8Ab/s1600/whats_missing1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYPjXC9te_7YpCosQhbRBYckorMvRZTXeCMvtJaYGopDXMrFiQYw5w0Hsa_gF8HnVoqqR9vETX6fPwgfqP9WXx0Nn3RF9Mr-_rmBYDwFkSHv6GYoMykqKJDHWEXot7lPb074Q01cgNH8Ab/s400/whats_missing1.jpg" width="400" /></a></div> The answer is "Health Informatics." Dr. Schaper then indicates the real-world implications of the field of commercial health IT largely missing its critical founding scientific discipline: <div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEie2q-fIpGGRJYOnqjN5GOjMKeoiJJqLjSYpFBKR23egeQoA0H0Y85IpcpMgAeNkzgfsO4eVk4soHm7GLy5dJc5OO3_ZBJYxyd191_hGmPRpCqiSH7ZO39f0jsWjLtifGkEnm9bivs4ZyfN/s1600/whats_missing2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="290" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEie2q-fIpGGRJYOnqjN5GOjMKeoiJJqLjSYpFBKR23egeQoA0H0Y85IpcpMgAeNkzgfsO4eVk4soHm7GLy5dJc5OO3_ZBJYxyd191_hGmPRpCqiSH7ZO39f0jsWjLtifGkEnm9bivs4ZyfN/s400/whats_missing2.jpg" width="400" /></a></div> At 13:00 she amplifies the point further:  We are not learning our lessons!  The themes of that slide are familiar to readers of this blog, and to current health IT users: <div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6WEbveq_WErWzYy8pmfhKxv-6HHyQCMdwqb_pfPM2hSuHyYbxOa4wBtFzI_PDqj8GZMhRao2_0sDEhcVqqpPWUhuLddFuR3sqfkhRHFR0IA94ZC4hGX9TnezRPoFMHTQYmwQdq8d6nFNv/s1600/whats_missing3.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="275" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6WEbveq_WErWzYy8pmfhKxv-6HHyQCMdwqb_pfPM2hSuHyYbxOa4wBtFzI_PDqj8GZMhRao2_0sDEhcVqqpPWUhuLddFuR3sqfkhRHFR0IA94ZC4hGX9TnezRPoFMHTQYmwQdq8d6nFNv/s400/whats_missing3.jpg" width="400" /></a></div> Dr, Schaper then goes on to cover some real-world issues related to impediments to meaningful health informatician engagement in health IT design, implementation and other aspects of leadership. The presentation is worth watching in its entirety.  The issues in health IT of meaningful involvement and leadership by those with expertise in healthcare informatics (as compared to, for example, those in manufacturing, mercantile, and management computing whose experience is often ill-suited for high-level roles in healthcare projects) are truly international. Finally, for those in the U.S. not used to Australian accents, Dr. Schaper's is quite enjoyable to listen to. -- SS

Louise Schaper, PhD, CEO, Health Informatics Society of Australia: "What's Missing From the Health IT Investment? - Health Informatics"

Louise Schaper, PhD, CEO of the Health Informatics Society of Australia (HISA, http://www.hisa.org.au/ ), graciously extended an invitation...

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Drudge Report, Oct. 10, 2013, 9 AM EST: All that needs to be said about government, computing and healthcare

Per <a href="http://www.drudgereport.com/">Drudge Report</a>. Oct. 10, 2013, 9 AM EST: From the same people who brought us HITECH, the stimulus bill for rapid rollout of commercial electronic medical records, order entry, results reporting and other components of enterprise clinical "command and control" software for hospitals through which every transaction of care must pass. More IT malpractice.  The Drudge links, as they appear on the page: <blockquote class="tr_bq"><a href="http://www.digitaltrends.com/opinion/obamacare-healthcare-gov-website-cost/">Obamacare website cost more than FACEBOOK, TWITTER, LINKEDIN, INSTAGRAM...</a> <a href="http://thehill.com/video/house/327489-boehner-obamacare-threatens-fines-but-fails-to-deliver-care">'How can we tax people for not buying a product from a website that doesn't work?'</a> <a href="http://www.elpasotimes.com/politics-national/?third_party=many-tried-to-warn-officials-of-obamacare-website-jam"> Major insurers, Dem allies repeatedly warned Obama admin...</a> <a href="http://www.foxnews.com/tech/2013/10/09/3-million-obamacare-website-may-face-months-glitches-experts-warn/">REPORT: WH knew site might not be ready...</a> <a href="http://bigstory.ap.org/article/poll-rollout-health-exchanges-gets-thumbs-down#overlay-context=article/anti-government-protesters-dog-taiwan-national-day">POLL: Just 1 in 10 report success...</a> <a href="http://www.mediaite.com/tv/debbie-wasserman-schultzs-shocking-insufficient-rambling-response-to-msnbc-on-obamacare-enrollees/">DNC head says site designed for 50,000 max...</a> <a href="http://www.infowars.com/once-you-get-into-the-obamacare-website-you-cant-get-out/">Once you get in, you can't get out...</a> <a href="https://www.healthcare.gov/marketplace/global/en_US/registration.js">Crazzzzzzzy code...</a> <a href="http://www.cbsnews.com/8301-505269_162-57606633/obamacare-website-looks-like-nobody-tested-it-programmer-says/">'It looks like nobody tested it'...</a> <a href="http://www.washingtonpost.com/business/technology/some-say-health-care-sites-problems-highlight-flawed-federal-it-policies/2013/10/09/d558da42-30fe-11e3-8627-c5d7de0a046b_story.html?hpid=z3">WASHPOST: Not code, but 'outdated, costly, buggy technology'...</a> <a href="http://washington.cbslocal.com/2013/10/09/carney-i-dont-know-if-obama-has-used-health-care-website/">CARNEY: 'I Don’t Know' If Obama Has Tried Website...</a> <a href="http://washington.cbslocal.com/2013/10/10/hawaii-relaunching-obamacare-exchange-after-not-selling-any-health-insurance-due-to-software-problems/">Hawaii forced to relaunch after zero sign-ups...</a></blockquote> I won't comment any further; I don't think I need to. <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/AVvXsEioxvlYhb12vWVBwgfbAaRyFwgypKV8y0E58B8ndx9GQ10QJ2Z_aOyJsdVFRsFs6jv8GM3TsIVJ06wIU3ADiSUO8Kh8uOVTzEVjheehWDk6xSre92w_Rlew0e-EPt9MY09j06M1CL-ekt02/s1600/drudge_computers.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="260" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioxvlYhb12vWVBwgfbAaRyFwgypKV8y0E58B8ndx9GQ10QJ2Z_aOyJsdVFRsFs6jv8GM3TsIVJ06wIU3ADiSUO8Kh8uOVTzEVjheehWDk6xSre92w_Rlew0e-EPt9MY09j06M1CL-ekt02/s400/drudge_computers.jpg" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Drudge Report, Oct. 10, 2013, 9 AM EST.  Click to enlarge.</td></tr></tbody></table> Of course, the Anecdotalists [1] and Denialists [2] will probably say this is all a "glitch" and that things will be great in ver. 2.0. Fools all. Oh, and the cost, via Drudge, per the linked story.  A mere: <div style="text-align: center;"><tt><tt><a href="http://weaselzippers.us/2013/10/09/gross-u-s-taxpayers-shelled-out-634320919-to-build-obamacare-website/">$634,320,919</a></tt></tt> </div> -- SS [1]  See "Health IT: On Anecdotalism and Totalitarianism" at  <a href="http://hcrenewal.blogspot.com/2010/09/health-it-on-anecdotalism-and.html">http://hcrenewal.blogspot.com/2010/09/health-it-on-anecdotalism-and.html</a>) [2]  See "The Denialists' Deck of Cards: An Illustrated Taxonomy of Rhetoric Used to Frustrate Consumer Protection Efforts" by Chris Jay Hoofnagle, available at <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962462">http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962462</a>) Oct. 10, 2013 addendum: Also see "Analysis: IT experts question architecture of Obamacare website" at <a href="http://uk.reuters.com/article/2013/10/05/us-usa-healthcare-technology-analysis-idUKBRE99407T20131005">http://uk.reuters.com/article/2013/10/05/us-usa-healthcare-technology-analysis-idUKBRE99407T20131005</a>.  If the allegations here are even partially true, every programmer and manager who ever worked on this system should be summarily fired and never permitted to touch another computer involved in healthcare - ever. -- SS

Drudge Report, Oct. 10, 2013, 9 AM EST: All that needs to be said about government, computing and healthcare

Per Drudge Report . Oct. 10, 2013, 9 AM EST: From the same people who brought us HITECH, the stimulus bill for rapid rollout of commercial e...

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