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"Engaging Excellence" while Engaging Secret Paychecks - The Rise and Fall of the Upstate Medical University President

Yet another leader of a big health care organization seems to have acquired the excessively entitled CEO syndrome. Another Brilliant, Fearless Leader When Dr David R Smith was appointed President of Upstate Medical University, a part of the State University of New York (SUNY) system located in Syracuse, he got the usual rave reviews from the school's board of trustees, <a href="http://www.suny.edu/sunyNews/News.cfm?filname=2006-06-27BOTApprovesSmith.htm">according to a university press release</a>: <blockquote class="tr_bq">'David Smith rose to national prominence through his leadership ability, experience in children’s medicine, public health policy, and as the chancellor of the Texas Tech University system. We are very pleased to have a one of the country’s foremost educators and health-care professionals lead Upstate Medical University,' said Board Chairman Thomas F. Egan. 'The State University of New York continues to enjoy an excellent record of success in attracting top academic and administrative talent from all over the country.' 'My colleagues and I are very impressed by Dr. Smith’s tremendous record of success and pleased that the Upstate Medical University search committee and University Council have brought Dr. Smith to New York. I am confident that Dr. Smith will excel as the next president of Upstate Medical Center,' said Ryan.</blockquote> By 2012, Dr Smith's <a href="http://www.upstate.edu/president/biography.php">official presidential biography on the university web-site</a> trumpeted, <blockquote class="tr_bq">Since coming to Central New York, Dr. Smith has reenergized the Upstate campus in a time of dwindling State resources with an aggressive program of patient revenue and research growth. The Upstate campus has emerged as one of the true economic engines of the region. There are now over 9,200 State, research and contract jobs on campus and an all-funds budget that exceeds $1.3 billion. Dr. Smith has built upon a vigorous expansion and renewal of campus facilities with 'The Upstate Initiative' which is achieving $600 million worth of bricks-and-mortar projects. Included in that is a long-awaited repurposing of several neglected properties within the City of Syracuse. At the start of his presidency, Dr. Smith launched the Engaging Excellence campaign as his invitation to the entire SUNY Upstate community to achieve and recognize work of the highest standard. The centerpiece of Engaging Excellence was the development of a 10-year strategic plan for purposeful campus growth. </blockquote>They must have used a thesaurus to generate all those superlatives. As we have mentioned in discussions of the <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">outsize compensation</a> now routinely given to the leaders of big health care organizations, the boards of trustees or directors that govern such institutions almost always seem to think their presidents and CEOs are brilliant, or at least, like the children of Lake Woebegone, above average (look <a href="http://hcrenewal.blogspot.com/2013/08/the-long-con-charitable-hospitals-make.html">here</a> for recent example).  Such leaders usually command <a href="http://hcrenewal.blogspot.com/search/label/public%20relations">public relations</a> teams whose job is to continually reinforce impressions of their brilliance.  Of course, anyone who starts an "excellence" campaign has to be excellent, doesn't he? Yet not every leader can be above average, much less excellent or brilliant.  In fact, the need for such leaders to have public relations apparati constantly touting their excellence suggests the opposite.   Secret Paychecks In any case, Dr Smith thus seemed to be collecting all the usual accolades acquired by top health care leaders, and appeared poised to take on an even bigger position when it all came to a crashing halt. As <a href="http://www.timesunion.com/local/article/SUNY-president-got-349-295-on-side-4958828.php">reported</a> first by the Albany (NY) Times-Union, <blockquote class="tr_bq">The president of the State University of New York's upstate medical campus ruined his chance to become the 18th president of Pennsylvania State University and has been placed on leave after SUNY leaders learned he has been padding his state pay without authorization, two state officials familiar with the matter said. SUNY headquarters is reviewing all sources of compensation for SUNY Upstate Medical University President David R. Smith and is threatening more severe measures, according to a letter obtained by the Times Union on Tuesday. Smith, who is based in Syracuse, was put on paid leave Tuesday. Penn State trustees were close to announcing that Smith would be the next president at the home of the Nittany Lions, according to the people familiar with the search. Instead, the public announcement planned for last Friday was canceled after questions about Smith's compensation in New York arose. A search firm working for Penn State, which also works for SUNY, found out about extra pay Smith arranged through outside companies linked to his school, the people familiar with the situation said. The search firm contacted SUNY officials about Smith's additional income. Several members of his executive team at Upstate Medical — the biggest employer in the Syracuse region — may also have been receiving unapproved extra pay from the outside companies, according to the sources. Smith, a pediatrician, became president of Upstate Medical in 2006 after five years as chancellor of Texas Tech University. SUNY pays Smith $625,000, including $315,000 in salary plus a $60,000 housing stipend approved by the SUNY trustees, plus $250,000 from the SUNY Research Foundation. Smith is a member of the Research Foundation's board of directors. </blockquote> However, in addition to that <blockquote class="tr_bq">Smith's outside money has been coming from two companies during recent years that are linked to SUNY Upstate: Medbest Medical Management Inc. and Pediatrics Service Group LLP. Officials with the companies did not respond to emails and calls on Tuesday. Smith's unapproved arrangements added substantially to his pay, according to a Nov. 1 letter to Smith from SUNY Chancellor Nancy Zimpher. In the letter, she alerts Smith to a recent review of his income and says he accepted $349,295 from the outside sources without Zimpher's approval.</blockquote> I could not find a web-page for the Pediatric Services Group LLC. Medbest did not list Dr Smith as a member of its <a href="http://medbest.org/pages/page.cfm?pageid=3">administrative team</a>. A Conflict of Interest? As <a href="http://www.syracuse.com/news/index.ssf/2013/11/union_upstate_medical_pay_investigation_shows_institution_needs_to_be_more_trans.html">reported</a> by the Syracuse Post-Standard, it does not appear that the interests of Upstate are precisely aligned with those of at least one of the companies that was paying Dr Smith on the side, Medbest. <blockquote class="tr_bq">Susan Kent, president of the New York State Public Employees Federation, which represents 1,430 workers at Upstate, said Upstate has been hiring non-union nurses employed by MedBest to fill jobs traditionally filled by union nurses. 'It's being done in a very sneaky backdoor fashion,' Kent said. 'We see it as their (Upstate's) way of trying to drive down wages and not use public sector workers.' MedBest, headquartered at 251 Salina Meadows Parkway in Liverpool, provides billing and other practice management services for doctors affiliated with Upstate. It also provides staffing. On its website, the company says it employs more than 500 people. </blockquote> Also, <blockquote class="tr_bq">Bobbi Stafford, a registered nurse and PEF representative at Upstate, said Upstate has been filling positions formerly held by union nurses with MedBest nurses in outpatient clinics to save money on retirement costs and other benefits. 'It's just a matter of time before they (MedBest employees) weasel their way into the hospital,' she said. Kent said using MedBest may not be a savings to Upstate if the intent of the arrangement is to increase the pay of Upstate administrators. </blockquote> The implication is that while outsourcing nursing services may cut how much the university pays nurses, the financial gain may be used as a rationale to increase payments to administrators, and not, for example, to decrease costs to patients.. Thus the revelations about the Upstate Medical University President's sources of income raise not only questions about his honesty, since he did not see fit to reveal these payments until the search firm found them, and about whether they are conflicts of interest. Ending the "Distraction" Supposedly to end the "distraction" causes by pondering such questions, Dr Smith just announced he will resign his executive position, <a href="http://blog.timesunion.com/capitol/archives/199003/suny-upstate-president-resigns-amid-compensation-review/">according to</a> the Albany Times-Union, <blockquote class="tr_bq">To avoid further distraction for the University from its important mission, I intend to submit my resignation as president of SUNY Upstate Medical Center, so that this great institution can move on to even greater success. </blockquote> Summary This case provides another reason to be very skeptical of the hype now that constantly emerges from health care organizations' public relations and communications departments about their managements', particularly their top managements' brilliance. Consider waiting for real results before believing in the next Excellent program to Excellently Promote Excellence.   Furthermore, I wonder if Dr Smith had come to believe all the hype about him.  Top leaders of big organizations often seem to exist in a bubble created by people who keep telling them what they want to hear, and protect them from anything that might discomfit them.  Many of the bubble keepers are dependent on the leaders for their own exalted administrative pay.  Other bubble keepers who are members of governing boards supposedly entrusted with stewardship of the organization may want to bask in the reflected glory of a brilliant leader renowned for encouraging "excellence," and also certainly to do not want to be seen as supporting an average or mediocre leader. In this bubble, it must be very hard not to take on a sense of entitlement.  I can only speculate that such a sense of entitlement may lead to feeling entitled to receive enough money from whatever the source to get close to the magic $1 million a year figure that CEOs now seem to regard as the minimum acceptable. How many more examples do we need of the currently "toxic" culture that surround the leadership of health care organizations  (to borrow a term from Prof Alan Sager, look <a href="http://www.golocalprov.com/news/rhode-island-non-profit-hospital-ceos-criticized-for-big-paychecks/">here</a>) to motivate action to change this culture, and how such organizations are lead.  Breaking up market dominant organizations, and thus dispersing the power of their leadership, and finding ways to make leaders accountable for putting patients' and the public's health first would be true health care reform.  Hat tip to <a href="http://www.margaretsoltan.com/?p=41906">University Diaries</a>.

"Engaging Excellence" while Engaging Secret Paychecks - The Rise and Fall of the Upstate Medical University President

Yet another leader of a big health care organization seems to have acquired the excessively entitled CEO syndrome. Another Brilliant, Fearle...

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A New, and Huge ($2.2 Billion) Settlement for Johnson and Johnson, but "No Individuals were Charged with Wrongdoing"

The march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements </a>made by big health care organizations has resumed with a bang.  As reported in most major media outlets, giant drug/ device/ biotechnology company Johnson and Johnson has made a big settlement with the US Department of Justice. The Basics of the Settlement As <a href="http://www.businessweek.com/news/2013-11-04/j-and-j-settlement-over-risperdal-said-to-be-announced-later-today">reported</a> by Bloomberg / Businessweek, <blockquote class="tr_bq"><div class="">Johnson & Johnson agreed to resolve criminal and civil probes into the marketing of Risperdal, an antipsychotic drug, and other medicines by paying more than $2.2 billion, one of the largest U.S. health-fraud penalties. </div><div class=""> </div>J&J’s Janssen unit will plead guilty to a misdemeanor criminal charge over misbranding Risperdal for uses not approved by the Food and Drug Administration, including treating elderly patients with dementia. Under a plea agreement announced today, Janssen will pay a $334 million fine and forfeit $66 million. Janssen also settled civil claims that it marketed Risperdal without approval for the elderly, children and the mentally disabled, and that it paid kickbacks to physicians and to Omnicare Inc., the largest pharmacy for nursing homes. The civil accord covered off-label marketing of Risperdal; Invega, another antipsychotic; and Natrecor, a heart drug.</blockquote> This settlement covered conduct that health care professionals ought to find particularly disturbing, including marketing Risperdal for elderly people with dementia without an approved indication, despite evidence that it could be particularly harmful to those patients; marketing Risperdal to adolescent boys without an indication, again despite evidence that it could be particularly harmful to those patients; and using kickbacks to market Risperdal. Promoting Risperdal for Dementia Despite Increased Risk of Death This issue was best <a href="http://online.wsj.com/news/articles/SB10001424052702303936904579177630737380104">summarized</a> by the Wall Street Journal, <blockquote class="tr_bq">Prosecutors alleged that J&J's Janssen Pharmaceuticals unit promoted Risperdal to elderly patients suffering from dementia, despite no approval for that use. Prosecutors also alleged that J&J's 'ElderCare' sales force pushed Risperdal for use in these elderly patients, and sales representatives' bonus awards failed to distinguish prescriptions for schizophrenia or the unapproved dementia use. In 2005, the FDA required the label warn that elderly patients suffering from dementia-related psychosis were at a higher risk of death.</blockquote> The New York Times <a href="http://www.nytimes.com/2013/11/05/business/johnson-johnson-to-settle-risperdal-improper-marketing-case.html">added</a>, <blockquote class="tr_bq"><div itemprop="articleBody"> Johnson & Johnson officials tried to expand the market for Risperdal to older dementia patients soon after the drug was approved in 1993 to treat symptoms of psychiatric disorders, <a href="http://www.justice.gov/opa/documents/jj/janssen-info.pdf" title="The Justice Department filing (PDF). ">according to federal court filings</a>. </div><div itemprop="articleBody"> </div><div itemprop="articleBody">The drug, whose generic name is risperidone, was primarily tested in schizophrenia patients, and the Federal Drug Administration repeatedly rejected efforts by the company to expand the drug’s use to older dementia patients, according to the filings. </div><div itemprop="articleBody"> </div><div itemprop="articleBody">But Johnson & Johnson, federal officials said, actively pursued the market for geriatric patients. The company created a dedicated sales force, ElderCare, to promote the drug and others to doctors who primarily treated older patients. </div><div itemprop="articleBody"> </div><div itemprop="articleBody">The drug, the company claimed, could address symptoms that made treating these patients a challenge, especially in a nursing home setting, including agitation, confusion, hostility and impulsiveness. The company’s sales brochures highlighted these symptoms and minimized the fact that the drug was approved to treat schizophrenia, according to federal documents.</div><div itemprop="articleBody"> </div><div itemprop="articleBody"> Federal officials said the company knew that Risperdal posed serious health risks for older adults, like an increased risk of strokes, but it played them down. The drug’s label was later updated to warn against the use of the drug in older patients with dementia.</div></blockquote><div itemprop="articleBody"> </div><div itemprop="articleBody">So the allegations were that the company pursued an elaborate and deceptive strategy to promote the drug for elderly dementia patients despite knowledge that the drug was particularly risky for such patients. </div> Promoting Risperdal for Adolescent Boys Despite Increased Risk of Gynecomastia Again, per the WSJ, <blockquote class="tr_bq">Prosecutors also alleged that J&J promoted Risperdal for use by boys suffering from mental disabilities despite knowing that use could raise levels of a hormone stimulating breast development.</blockquote> The NYT added, <blockquote class="tr_bq"><div itemprop="articleBody">Federal prosecutors also say, as part of the civil settlement, that Johnson & Johnson promoted the use of Risperdal in people with mental disabilities and children, even though the company did not receive F.D.A. approval to market to children until 2006. Janssen told its sales representatives to visit child psychologists and mental health facilities that mainly focused on children, promoting the drug as a safe treatment for disorders like attention deficit hyperactivity disorder and obsessive-compulsive disorder, the government said. </div><div itemprop="articleBody"> </div><div itemprop="articleBody">Johnson & Johnson knew that children were susceptible to certain health risks from taking Risperdal, including the possibility that boys could develop breasts through elevated production of the hormone prolactin, federal officials said. </div></blockquote><div itemprop="articleBody"> </div><div itemprop="articleBody">Again, the allegations were that the company pursued an elaborate deceptive strategy to market the drug for children despite knowledge that the drug was particularly risky for such patients.  </div><div itemprop="articleBody"> </div><div itemprop="articleBody">No Executives were Discomfited by the Disposition of This Case</div><div itemprop="articleBody"> </div><div itemprop="articleBody">The company took pains to emphasize that the settlement only required a single guilty plea to a misdemeanor by a company subsidiary, and did not involve any other admissions of guilt, or any penalties to specific human beings.  For example, per Bloomberg/ Business Week,</div><div itemprop="articleBody"> </div><blockquote class="tr_bq">'Today we reached closure on complex legal matters spanning almost a decade,' Michael Ullmann, J&J’s general counsel, said in a statement. 'This resolution allows us to move forward and continue to focus on delivering innovative solutions that improve and enhance the health and well-being of patients around the world.' While Janssen 'accepts accountability' for the actions described in the misdemeanor plea, the civil settlement 'is not an admission of any liability or wrongdoing, and the company expressly denies the government’s civil allegations,' J&J said.</blockquote> So why give up a perfectly good $2.2 billion (minus $400 million fine and forfeiture by the Janssen subsidiary for the single misdemeanor)?  Was "closure" all that valuable? In addition, in the NY Times we found , <blockquote class="tr_bq">Ernie Knewitz, a spokesman for Johnson & Johnson, noted that the misdemeanor charge was being entered on behalf of the company and no individuals were charged with wrongdoing. 'Mr. Gorsky [current CEO] has been an outstanding Johnson & Johnson leader for more than 20 years,' he said. </blockquote>Would you expect someone who works for Mr Gorsky to say otherwise?  Yet it was on Mr Gorsky's watch that much of the alleged bad conduct actually happened.  <blockquote class="tr_bq">Alex Gorsky was promoted to chief executive officer of J&J in April 2012, in part because of his record of generating sales as leader of Janssen Pharmaceuticals. </blockquote> Furthermore, the Inquirer noted that Mr Gorsky was deposed in one of the many civil lawsuits filed by patients against Johnson and Johnson. <blockquote class="tr_bq">The 60-page transcript of Gorsky's deposition in one of the Philadelphia suits was part of the publicly available court record. In the transcript, McCormick walks Gorsky through discussions from 2001 with Joseph Biederman, a Harvard medical school professor and a Massachusetts General Hospital pediatric psychiatrist who gained fame - and criticism - for advocating the use of pharmaceuticals to treat children with perceived mental illness. That was before the U.S. Food and Drug Administration approved, in still-limited ways, drugs such as Risperdal for children. In a one-page letter dated Dec. 7, 2001, Biederman requested $500,000 to start what became the Johnson & Johnson Center for the Study of Pediatric Psychopathology. Gorsky said in the deposition that he approved that payment. Gorsky was asked whether he had been hoping Biederman and, by extension, Massachusetts General Hospital and Harvard, would help J&J to get wider diagnosis and treatment for child and adolescent mental disorders. 'I think our goal was to, yes, have better diagnostic criteria for children who are in need of treatment and to have better therapeutic options for children who are in need of treatment,' Gorsky said. Also in the transcript, McCormick discussed with Gorsky a document called the 'Annual Report 2002: The Johnson & Johnson Center for Pediatric Psychopathology at Massachusetts General Hospital.' Biederman was the director of the center, and one of the goals of its research, according to the report, was that 'it will move forward the commercial goals of J&J.'</blockquote> Thus this testimony seems to imply that current Johnson and Johnson CEO Gorsky was involved in making large payments to an important key opinion leader (KOL) who was supposed to use his academic gravitas to "move forward the commercial goals" of Johnson and Johnson, specifically by promoting Risperdal for children. Yet, as we discussed above, neither Mr Gorsky nor any other person at Johnson and Johnson who might have authorized, directed, or implemented the alleged conduct which was the subject of the settlement, conduct which Johnson and Johnson of course denies was misconduct, suffered any negative consequences. Mr Gorsky's total compensation as CEO in 2012 was $10,977,109 according too the <a href="http://www.investor.jnj.com/secfiling.cfm?filingID=1193125-13-104341">company's 2013 proxy statement</a>. The retiring CEO, William Weldon, on whose overall watch the alleged events occurred, received $29,838,259 that year.  We last discussed their compensation and its contrast with the company's ethical track record <a href="http://hcrenewal.blogspot.com/2013/07/johnson-and-johnson-settles-suit.html">here</a>. These payments also occurred despite all the other settlements Johnson and Johnson has had to make because of allegations about its marketing of Risperdal.  As described by Bloomberg/ Businessweek, <blockquote class="tr_bq">The settlement won’t resolve suits brought by attorneys general in Arkansas, Louisiana and South Carolina, where the company has appealed or has said it will appeal judgments over Risperdal sales. Judges or juries in those states have ordered J&J to pay a total of about $1.8 billion in damages and fines over Risperdal marketing campaigns that were found to have misled doctors and patients about the drug’s health risks and effectiveness. In 2012, a judge in Arkansas ordered the drugmaker to pay $1.2 billion in fines over Risperdal marketing. That verdict came three months after J&J decided to end a trial in Texas over the drug’s sales with a $158 million settlement. The Arkansas judge also awarded the state $180 million in attorney fees, J&J said in an August regulatory filing. The company is appealing the judgment. In June 2011, a judge in South Carolina ordered J&J to pay $327 million in penalties for deceptively marketing the medicine. Ten months earlier, jurors in Louisiana ordered the drugmaker to pay almost $258 million to state officials over J&J’s Risperdal marketing campaign in the state. A Louisiana judge later ordered the drugmaker to pay an additional $73.3 million in attorney fees and costs. </blockquote> The payments further occurred despite a previous settlement involving another drug whose marketing was at issue in the current settlement, according to Bloomberg / Businessweek, <blockquote class="tr_bq">In October 2011, J&J’s Scios unit pleaded guilty to a misdemeanor violation over Natrecor and paid an $85 million criminal fine. </blockquote> Finally, the compensation was given despite other legal actions not having to do with Risperdal, Invega or Natrecor, as we most recently summarized, - A guilty plea for misbranding Topamax in 2010 (look <a href="http://hcrenewal.blogspot.com/2010/05/sunday-settlement-and-guilty-plea.html">here</a>) - Guilty pleas to bribery in Europe in 2011 by J+J's DePuy subsidiary (look <a href="http://hcrenewal.blogspot.com/2011/04/johnson-and-johnson-runs-afoul-of.html">here</a>)  - Accusations that the company, which makes smoking cessation products, participated along with tobacco companies in efforts to lobby state legislators (see post <a href="http://hcrenewal.blogspot.com/2011/09/smart-alecs-strange-bedfellows.html">here</a>) Summary The latest settlement in the parade is another marker of the sort of conduct that big health care organizations have exhibited to increase revenue, and to use that revenue as a rationale for making their top insiders very rich.  The particular conduct alleged here could have put patients at risk, partly by deceiving health care professionals.  Yet in their wisdom, top US law enforcement saw fit not to try to hold any individuals accountable for this conduct, and allowed the company to deny any misconduct other than a single misdemeanor by a subsidiary.  This occurred despite the company's history of multiple legal settlements and findings of guilt in various courtrooms. Yet none of these actions has resulted in any negative consequences for any individual within the company.  No one who authorized, directed, or implemented bad behavior will pay any penalty, even were the bad behavior to have lead to significant personal enrichment. As we have said ad infinitum, and <a href="http://hcrenewal.blogspot.com/2012/09/how-many-legal-settlements-does-it-take.html">on the occasion of a previous Johnson and Johnson settlement</a>, many of largest and once proud health care organizations now have recent records of repeated, egregious ethical lapses. Not only have their leaders have nearly all avoided penalties, but they have become extremely rich while their companies have so misbehaved. These leaders seem to have become like nobility, able to extract money from lesser folk, while remaining entirely unaccountable for bad results of their reigns. We can see from this case that health care organizations' leadership's nobility overlaps with the supposed "royalty" of the leaders of big financial firms, none of whom have gone to jail after the global financial collapse, great recession, and ongoing international financial disaster (look <a href="http://hcrenewal.blogspot.com/2012/08/duchess-of-wellpoint-abdicates-likely.html">here</a>). The current fashion of punishing behavior within health care organization with fines and agreements to behave better in the future appears to be more law enforcement theatre than serious deterrent.  As Massachusetts Governor Deval Patrick exhorted his fellow Democrats, I exhort state, federal (and international, for that  matter) law enforcement to "<a href="http://www.washingtonpost.com/blogs/election-2012/wp/2012/09/04/patrick-it-is-time-for-democrats-to-grow-a-backbone/">grow a backbone</a>" and go after the people who were responsible for and most profited from the ongoing ethical debacle in health care. As we have said before, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior. Addendum - Other Comments See also similar sentiments <a href="http://1boringoldman.com/index.php/2013/11/04/an-ending/">from 1BoringOldMan</a>, <blockquote class="tr_bq"> J&J closes out the escrow fund set aside for this settlement. Alex Gorsky goes to his West Point Anniversaries and Boy Scout Board meetings an ongoing success story [<a href="http://1boringoldman.com/index.php/2012/09/18/shoveling/" target="_blank">shoveling…</a>]. And what was this all about? </blockquote><div><blockquote><div align="right">This is the way the world ends</div><div align="right"> This is the way the world ends</div><div align="right"> This is the way the world ends</div><div align="right"> Not with a bang but a whimper</div></blockquote></div> and in a <a href="http://www.citizen.org/pressroom/pressroomredirect.cfm?ID=4012">press release from Public Citizen</a>, <blockquote class="tr_bq">Until more meaningful penalties and the prospect of jail time for company heads who are responsible for such activity become common, companies will continue defrauding the government and putting patients’ lives in danger.</blockquote>

A New, and Huge ($2.2 Billion) Settlement for Johnson and Johnson, but "No Individuals were Charged with Wrongdoing"

The march of legal settlements made by big health care organizations has resumed with a bang. As reported in most major media outlets, gian...

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What Me Worry? - American Legacy Foundation Executives' Relaxed Response to a $3 Million Plus Fraud

A Washington Post <a href="http://www.washingtonpost.com/investigations/inside-the-hidden-world-of-thefts-scams-and-phantom-purchases-at-the-nations-nonprofits/2013/10/26/825a82ca-0c26-11e3-9941-6711ed662e71_story.html">investigation</a> into diversion of money from US not-for-profit organizations provided a striking case study showing the apparently relaxed approach taken by managers to apparent wrongdoing by one of their own.  Background: the American Legacy Foundation The Post noted that <blockquote class="tr_bq">The American Legacy Foundation is a revealing case study. While some challenges it faced were uncommon, fraud examiners said many resemble those they see time and again. Legacy was founded as a nonprofit organization in 1999 out of the Master Settlement Agreement that resolved health claims brought against cigarette companies on behalf of the public by authorities in 46 states and the District. With $50 million in annual expenditures and $1 billion in assets, Legacy is perhaps best known for its edgy anti-tobacco advertising campaign known as 'Truth.' </blockquote> The Foundation's governance is provided by some top government leaders, including leaders of law enforcement. <blockquote class="tr_bq">Its board includes Idaho Attorney General Lawrence Wasden (R), its chairman; Missourci Gov. Jay Nixon (D), Utah Gov Gary R Herbert (R), and Iowa Attorney General Tom Miller (D).  Janet Napolitano, the recently departed U.S. secretary of homeland security, served on the board, and Sen Thomas R. Carper (D-Del) was Legacy’s founding vice chairman.</blockquote> Outline of a Diversion The alleged culprit at the ALC  was <blockquote class="tr_bq">Deen Sanwoola, ... a charismatic computer specialist who was Legacy’s sixth hire. He was tasked with building the organization’s information technology department. No one realized, during Legacy’s frenetic early days, that the department had been formed without adequate financial controls, Legacy officials said. Or that Sanwoola had been placed in charge of both ordering electronic equipment and logging it as having been received — a mix of responsibilities that an outside auditor later described as a classic error that placed Legacy at risk.</blockquote> So, <blockquote class="tr_bq">After Sanwoola’s arrival in October 1999, Legacy’s IT department began spending freely on computers, monitors and software, much of it purchased from a single company in suburban Maryland, [Legacy President and CEO Cheryl] Healton said. Thanks to the court settlement, Legacy enjoyed a tremendous flow of cash, with revenue exceeding $320 million. The first questionable purchase came in December 1999, according to a forensic audit conducted years later. 'The fraudulent billing started almost immediately on his arrival,' said [Idaho Attorney General Lawrence] Wasden, the board chairman. In that first transaction, the foundation paid more than $18,000 for a computer processor and related equipment that auditors concluded should have retailed for less than $7,000. Data, documents and a summary of findings that Wasden provided to The Post show that questionable purchases of printers, software and servers steadily increased in size and frequency, peaking with 49 charges in 2006. In some instances, Legacy appeared to have paid many times an item’s worth, auditors said. In others, auditors said Legacy paid an inflated price for 'phantom purchases' of equipment that apparently never arrived. Over years, Sanwoola is thought to have generated as many as 255 invoices for computer equipment sold to the foundation, Legacy officials said; 75 percent of them later were deemed by the foundation to have been fraudulent. </blockquote> A Relaxed Response Sanwoola left AFC in 2007, <blockquote class="tr_bq">In early 2007, Sanwoola, by then an assistant vice president with a $180,000 compensation package, announced he was leaving. It jolted [AFC President and CEO Cheryl] Healton, who said she 'begged' him to stay. [ALC CFO Anthony T[ O’Toole recalled Sanwoola saying that his wife wanted to raise their children in Nigeria and that the move would allow him to help his ailing mother.</blockquote> But then, <blockquote class="tr_bq">six months later, when an executive at Legacy approached O’Toole and told him he was unable to locate computer equipment listed in the inventory.  O’Toole said he waved away the complaint without bothering to investigate. 'He just pooh-poohed it,' Healton said of O’Toole, who received current and deferred compensation totaling $568,000 in fiscal 2012.</blockquote> The Post previously noted that <blockquote class="tr_bq">Sanwoola developed close personal ties to Legacy’s chief financial officer, Anthony T. O’Toole. 'Everybody loved Deen,' O’Toole acknowledged.</blockquote> After a second complaint, managers took a bit more notice, <blockquote class="tr_bq">Three years later, the same employee — Legacy officials describe him as a whistleblower — again raised an alarm. This time, he bypassed O’Toole and took his concerns to a staffer close to Healton. The response this time was different. Within days, Legacy hired forensic examiners to investigate and Healton notified the board. One of the outside auditors’ first reactions, Healton recalled, was, 'There’s no way an organization like yours could spend this much on IT.' Auditors interviewed employees, reviewed invoices and recovered deleted files from a backup computer server in Chicago. Auditors found a template for invoices from the outside supply company, Legacy officials said, as well as computer code that showed the template had been designed and generated by someone using Sanwoola’s log-in. Officials concluded that of $4.5 million in checks and credit card charges associated with the Maryland IT supply company, $3.4 million had been fraudulent. </blockquote>  In late 2010 or early 2011, <blockquote class="tr_bq">foundation executives asked Miller, the Iowa attorney general on Legacy’s board, to call the office of the U.S. attorney.</blockquote> However, despite the fact that it was ALC money that had been lost, ACL managers thereafter seemed to take little interest in the case, <blockquote class="tr_bq">Legacy officials said they had made no attempt to contact Sanwoola, based on a request from federal prosecutors. In a statement for this article, the U.S. Attorney’s Office responded that they had made no such request.</blockquote> They also were in no hurry to disclose the foundation's loss, <blockquote class="tr_bq">Word that millions of dollars were thought to be missing remained largely within Legacy until it came time in 2011 to file its annual disclosure, a public document signed under penalty of perjury. <a data-xslt="_http" href="https://www.documentcloud.org/documents/777449-american-legacy-foundation-2011.html#document/p38/a119573">The disclosure</a> said that the 'fraud' of more than $250,000 did not 'meet other materiality tests for financial reporting' and that the organization had told its board and law enforcement. It also said Legacy had filed an insurance claim that had been 'successfully settled.' The document did not reveal that the settlement fell far short of the loss. When first approached by The Post, Legacy general counsel <a data-xslt="_http" href="http://www.legacyforhealth.org/about/senior-leadership/vargyas-ellen" target="_blank">Ellen Vargyas</a> said the organization had no obligation to identify the full estimate of the loss and stressed that more information was in the foundation’s 2012 filing. That filing included a reference to $1.3 million in miscellaneous revenue from an insurance settlement, without saying what it was for. 'I do think it was a full and appropriate disclosure,' Vargyas said. Legal specialists consulted by The Post disagreed. 'Those suffering a diversion are obligated to report the dollar amount,' said <a data-xslt="_http" href="http://garyrsnyder.com/A_Bio_of_Gary_Snyder_W34Q.html" target="_blank">Gary R. Snyder</a>, a charity consultant who tracks fraud. Federal filing <a data-xslt="_http" href="http://www.irs.gov/pub/irs-tege/f990partvi_instructions2008.pdf" target="_blank">instructions</a> direct nonprofits to 'explain the nature of the diversion, amounts or property involved . . . and pertinent circumstances.' Charity specialists said there is no established penalty for a nonprofit that fails to follow the instructions. A day after declining to disclose the amount to The Post, Vargyas reconsidered. 'Our best estimate of the full loss comes to this: $3,391,648,' she wrote in an e-mail. She said her initial reluctance to disclose an amount was because Legacy’s number was based on estimates that had 'never been tested in a court of law. Wasden added that the absence of a total dollar figure in its public filing was the foundation’s way of being restrained in describing its loss, in deference to the then-continuing federal investigation. The U.S. Attorney’s Office stressed, however, that it did not suggest that Legacy play down the size of the loss in its disclosure. Legacy officials said they were told in March, for the first time, that there would be no charges. The U.S. Attorney’s Office disputed that, saying the FBI informed Legacy in February 2012 that the investigation had been closed because, despite warnings, Legacy had taken more than three years to report the missing computers and lacked reliable records of what it owned. </blockquote> It appears that there will be no further action in this case.  The statute of limitations has passed for any further criminal or civil actions, according to the Post.  And Mr Sanwoola seems to be comfortably ensconced in Lagos, Nigeria.  Summary The American Legacy Foundation case showed that a "charismatic" management insider (who finished his career as an assistant vice president with a $180,000 compensation package according to the Post), who had "close personal ties" with the organization's CFO (who "received current and deferred compensation totaling $568,000 in fiscal 2012" according to the Post), was apparently able to embezzle something like $3.4 million dollars, then walk away.  Initial whistleblowing was ignored by the CFO (who received compensation of $729,000 in 2012 according to the Post), apparently delaying any action for three years.  A second complaint to the CEO provoked a response, but not exactly an urgent one.  While law enforcement was notified, there is no evidence that any foundation managers followed up on it, nor did they see fit to disclose much detail about the loss on their watch.  As a result, no one seems to have been held responsible, and only some money was recovered, but from insurance. Now we understand why these managers made the relatively big bucks. By the way, the Post article included a l<a href="http://www.washingtonpost.com/wp-srv/special/local/nonprofit-diversions-database/">ink to a database </a>of other diversions of money from non-profit organizations, including many prominent health care organizations (e.g., Memorial Sloan-Kettering Cancer Center, Children's Hospital of Pennsylvania, NYU Hospitals Center, Shands Jacksonville Medical Center, Harvard Medical School Faculty Physicians at Beth Israel Deaconess Hospital, and the Society for Academic Emergency Medicine).  Whether the circumstances of the diversions they suffered were anything like those affecting the ALC is unknown pending further investigation of their disclosures. Again, the top executives of a non-profit organization are supposed to put the organization's mission ahead of personal gain. Yet in this case, executives seemed more interested in keeping quiet about an apparent fraud by one of their own than in recovering the money or holding anyone accountable. This is yet another instance of top leaders in health care seeming to be more loyal to "managers' guild" than their own organizations, their organizations' mission, or patients' and the public's health in general.   A while ago, chief architect of "managed competition," (and former architect of body counts during the Vietnam War, look <a href="http://www.motherjones.com/politics/1993/05/motherjones-mj93-godfather-managed-competition">here</a>) Alain Enthoven admitted, but only to a European audience, that he wanted to end the influence of the "physicians' guild," which he blamed for rising health care costs, and turn health care over to managers (look <a href="http://hcrenewal.blogspot.com/2006/03/consequences-of-breaking-physicians.html">here</a>).  That "managers' coup d'etat" seems to have been accomplished.  The result, however, is that health care is now lead by people who seem sworn only to promote their own interests, while hiring public relations and marketing folks to make it appear otherwise. While many people debate health care reform in terms of the details of health insurance, true health care reform would restore control of health care to people held accountable for putting patients' and the public's health ahead of their personal enrichment.

What Me Worry? - American Legacy Foundation Executives' Relaxed Response to a $3 Million Plus Fraud

A Washington Post investigation into diversion of money from US not-for-profit organizations provided a striking case study showing the app...

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Australian Medical Association on EHR rollout: 'Hard to use, increases workload, hard to find data, we just don't seem to have got the outcome we were looking for.'

Some familiar themes from the Australian Medical Association on their attempt at a National Programme for Health IT: <blockquote class="tr_bq">Electronic health records rollout has not met expectations, Australian Medical Association says <a href="http://www.abc.net.au/news/2013-11-04/ama-says-rollout-of-electronic-health-records-needs-work/5066680">http://www.abc.net.au/news/2013-11-04/ama-says-rollout-of-electronic-health-records-needs-work/5066680 </a> <div class="published">Updated Mon 4 Nov 2013, 8:59am AEDT </div> <div class="first">The Australian Medical Association says the rollout of electronic health records has not met expectations.</div> Federal Health Minister Peter Dutton has announced an independent review of the project to see how it can be improved. AMA national president Dr Steve Hambleton, one of the panel members for the review, says e-health records need to be made easier for doctors to use.</blockquote> Ease of use seems a constant, unremitting problem.  An independent review (if truly independent) is a wise move - and sorely needed in this country, where the narrative is controlled by the industry and its government sponsors/cheerleaders. A bit of wisdom comes to mind, from (of all people) weapons inventor Mikhail Kalashnikov:  "All that is too complex is unnecessary, and it is simple that is needed." (Satirically speaking, would it be helpful  if health IT designers, when suffering from, say, acute renal colic, or Bornholm disease a.k.a. devil's grip, <a href="http://en.wikipedia.org/wiki/Bornholm_disease">http://en.wikipedia.org/wiki/Bornholm_disease</a>, were made to wait for treatment until the doctors and nurses navigated every single tab, menu, pulldown, selection list, etc. to enter all of their data? Perhaps that would be an educational experience for them ... ) <blockquote class="tr_bq">"It's certainly timely to actually have a look at the e-health records and just see where it is, where it's going, whether it's actually achieved what it set out to do and what we need to do to actually make it work," he said. </blockquote> I think the question of  "whether it's actually achieved what it set out to do" was meant as rhetorical. <blockquote class="tr_bq">"The profession's always supported this, we just don't seem to have got the outcome we were looking for."</blockquote> That's because the profession - both in Australia and the U.S. - has abdicated leadership of healthcare informatics efforts, instead delegating it to those without domain expertise, and/or the incompetent. This is a sure path to the results we now are getting both here and Down Under. From a recent essay at the "Sultan Knish" Blog by writer Daniel Greenfield (<a href="http://sultanknish.blogspot.com/2013/10/government-is-magic.html">http://sultanknish.blogspot.com/2013/10/government-is-magic.html</a>) on competence and the Obamacare insurance website debacle: <blockquote class="tr_bq">... Modernity has to be built. It has to be constructed brick by bit by rivet by cable by people who know what they are doing. Modernity without competence is as worthless as the ObamaCare website which looked pretty enough to give the illusion of technocratic modernity, but didn't actually work. Competence is the real modernity and it has very little to do with the empty trappings of design that surround it. In some ways the America of a few generations ago was a far more modern place because it was a more competent place. For all our nice toys, we look like primitive savages compared to men who could build skyscrapers and fleets within a year... and build them well.</blockquote> Unfortunately, there is no easy solution to this problem, since in this industry, failure is an option, and a profitable one at that. <blockquote class="tr_bq">Mr Dutton says a lot of money has been spent on the project, but that the take up rate has been low.</blockquote> In the U.S., the takeup rate has been artificially accelerated by economic incentives and penalties (via the HITECH Act of 2009).  Australia seems to lack such a plan at present. <blockquote class="tr_bq">Concerns were raised in July that the new system, which was trialled in parts of New South Wales, Queensland and Victoria, <a href="http://www.abc.net.au/news/2013-07-16/e-health-flaws-adding-to-gp-stress/4822186" target="_self" title="">makes it difficult for doctors to access updated information</a>. </blockquote> I opine that it takes remarkable incompetence to design software using computers that can store, retrieve and process data at speeds unimaginable just a few years ago, that actually make it difficult for users to access current information. <blockquote class="tr_bq">Doctors also complained that the e-health program, designed to link a patient's medical records between doctors, hospitals and other providers, was increasing their workload.</blockquote> From the linked article "E-Health Flaws Adding to GP Stress", <a href="http://www.abc.net.au/news/2013-07-16/e-health-flaws-adding-to-gp-stress/4822186">http://www.abc.net.au/news/2013-07-16/e-health-flaws-adding-to-gp-stress/4822186</a>: <blockquote class="tr_bq">Many Newcastle GPs say the system is adding to stress levels and making their workloads excessive. They are complaining the E-health program unworkable in its present form and is increasing their workload by up to two hours a day. </blockquote> For little benefit, I add. <blockquote class="tr_bq">... Dr Hambleton says the initial version of the system has several strong aspects and is safe and secure, but that key changes will benefit doctors. "Clinical utility means that it decreases the search time and that we've got accurate information there. Those are the things that'll make clinicians want to use it and be able to use it." </blockquote> Translation: major changes might actually make the systems useful, instead of a time-sapping annoyance (at best), and a danger (at worst). -- SS

Australian Medical Association on EHR rollout: 'Hard to use, increases workload, hard to find data, we just don't seem to have got the outcome we were looking for.'

Some familiar themes from the Australian Medical Association on their attempt at a National Programme for Health IT: Electronic health recor...

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More "anecdotes" of health IT-related errors - System errors with Victoria's trouble-plagued HIT program caused more than 100 medication mix-ups at two Melbourne hospitals

There are those in the field of health IT who see every health IT-related mishap as an "anecdote" - the "<a href="http://hcrenewal.blogspot.com/2010/09/health-it-on-anecdotalism-and.html">anecdotalists</a>" - and every "positive" study, no matter how weak, as "solid evidence" of the technology's beneficence and efficacy. See "Anecdotes and Medicine, We are Actually Talking About Two Different Things" at <a href="http://hcrenewal.blogspot.com/2011/08/from-senior-clinician-down-under.html">http://hcrenewal.blogspot.com/2011/08/from-senior-clinician-down-under.html</a> for more on the risk management/scientific method confusion it represents, from a clinician Down Under. More "anecdotes" from Down Under to make the anecdotalists' heads explode: <blockquote class="tr_bq"><a href="http://www.theage.com.au/victoria/computer-errors-blamed-for-medication-mixups-20131030-2wgzs.html">Computer errors blamed for medication mix-ups</a> The Age.com (Australia) October 30, 2013 Kate Hagan System errors with Victoria's trouble-plagued health technology program have caused more than 100 medication mix-ups at two Melbourne hospitals and need to be fixed urgently, the state's Auditor-General has found. ... Auditor-General John Doyle said problems at three hospitals were putting patients at risk of missing prescribed medications or receiving incorrect doses, in a report tabled in Parliament on Wednesday. </blockquote> [Note: the full government audit report is available at <a href="http://www.audit.vic.gov.au/reports_and_publications/latest_reports/2013-14/20131030-clinical-ict-systems.aspx">http://www.audit.vic.gov.au/reports_and_publications/latest_reports/2013-14/20131030-clinical-ict-systems.aspx</a> in fulltext and PDF.  Other risks besides medication errors were found.  The general problems it reports in the Victoria health IT program were written about here since 2004 and at my Drexel site since 1998 - poor planning and an inadequate understanding of system requirements, underestimated project scope, costs and time lines, as well as underestimations of the required clinical workflow redesign and change management efforts. More on this in a future post.] <blockquote class="tr_bq">Problems included HealthSMART recording patients as having being discharged when they had only moved within the hospital, and difficulties for doctors in recording complex medications in the system. Mr Doyle said a voluminous medication list meant doctors sometimes [picked whatever was easy -ed.] [and] printed out an incorrect prescription and then changed it manually, resulting in an inaccurate electronic record.  </blockquote> The doctors likely did this on order to be able to actually see patients and not fiddle with the computer incessantly. <blockquote class="tr_bq">He said incident reports at two hospitals had recorded "more than 100 reported incidents of missed or nearly missed medication, as well as medicines being administered at a higher dose than prescribed". They included incidents in which "pain relief, antibiotics and other medication were given twice or not at all due to this issue".</blockquote> That's a good way to injure or kill people.  Trust me, <a href="http://hcrenewal.blogspot.com/2011/06/my-mother-passed-away.html">I know</a> - personally. <blockquote class="tr_bq">... He said hospitals had put manual measures in place to mitigate risks but they were not fail-safe, created inefficiencies and did not provide a long-term solution.</blockquote> Workarounds always introduce new risk.  I also remind that one should never need to work around something that's not in your way. <blockquote class="tr_bq">"As a result, there is continuing potential risk to patient safety that needs to be closely monitored by both [the Victorian Health Department] and the relevant health services," he said.</blockquote> At least in Australia they state the truth, clearly, as opposed to Americans, who make excuses (see for example my Sept. 16, 2013 post "An Open Letter to David Bates, MD, Chair, ONC FDASIA Health IT Policy Committee on Recommendations Against Premarket Testing and Validation of Health IT" at <a href="http://hcrenewal.blogspot.com/2013/09/an-open-letter-to-david-bates-md-chair.html">http://hcrenewal.blogspot.com/2013/09/an-open-letter-to-david-bates-md-chair.html</a>). At least there's this: <blockquote class="tr_bq">Health Minister David Davis said this week that Victoria had "learnt the lessons from the flawed HealthSMART program" and promised that hospitals and health professionals would have more say on future projects, which would be based on sound business cases.</blockquote> In my view we don't need non-clinician hospital management (including and especially the business computing personnel) to "have more say", we need the health professionals to predominantly have that role. For those who've never completed medical/nursing school nor completed a medical internship/residency/practice, only the exceptional can comprehend the true complexities of healthcare and health IT to support it [see note 1].  As observed in "Hiding in plain sight: What Koppel et al. tell us about healthcare IT", Nemeth & Cook, Journal of Biomedical Informatics 38 (2005) 262–263 at <a href="http://www.wapatientsafety.org/downloads/article-8.pdf">http://www.wapatientsafety.org/downloads/article-8.pdf</a>: <blockquote class="tr_bq">... On the surface, healthcare work seems to flow smoothly. That is because the clinicians who provide healthcare service make it so. Just beneath the apparently smooth-running operations is a complex, poorly bounded, conflicted, highly variable, uncertain, and high-tempo work domain. The technical work that clinicians perform resolves these complex and conflicting elements into a productive work domain. Occasional visitors to this setting see the smooth surface that clinicians have created and remain unaware of the conflicts that lie beneath it. The technical work that clinicians perform is hiding in plain sight. Those who know how to do research in this domain can see through the smooth surface and understand its complex and challenging reality. Occasional visitors cannot fathom this demanding work, much less create IT systems to support it. </blockquote> Unfortunately, the truly exceptional in hospital management are few and far between, despite the Lake Woebegon stories seen about them in their P.R. (See Roy Poses' post "Where No Hospital CEOs are Below Average" at <a href="http://hcrenewal.blogspot.com/2010/07/where-no-hospital-ceos-are-below.html">http://hcrenewal.blogspot.com/2010/07/where-no-hospital-ceos-are-below.html</a>.) It's becoming clearer the "anecdotalists" were quite wrong about health IT and its propensity to cause or contribute to medical error, especially when done poorly, i.e., is bad health IT which is all too common.  I attribute this to conflict of interest and fairy tale views about IT. From my <a href="http://cci.drexel.edu/faculty/ssilverstein/cases/">teaching site</a>: <blockquote class="tr_bq">Good Health IT ("GHIT") provides a good user experience, enhances cognitive function, puts essential information as effortlessly as possible into the physician’s hands, can be easily, substantively and cost-effectively customized to the needs of medical specialists and subspecialists, keeps eHealth information secure, protects patient privacy and facilitates better practice of medicine and better outcomes. Bad Health IT ("BHIT") is ill-suited to purpose, hard to use, unreliable, loses data or provides incorrect data, is difficult and/or prohibitively expensive to customize to the needs of different medical specialists and subspecialists, causes cognitive overload, slows rather than facilitates users, lacks appropriate alerts, creates the need for hypervigilance (i.e., towards avoiding IT-related mishaps) that increases stress, is lacking in security, compromises patient privacy or otherwise demonstrates suboptimal design and/or implementation.   </blockquote> -- SS [1] A corollary is as seen in a comment By Bruce Landes MD <a href="http://healthblog.ncpa.org/the-tyranny-of-electronic-systems/comment-page-1/#comment-212802">here</a> in what he calls the Landes EHR rule: "The enthusiasm for EHRs increases with the square of the distance from actual medical practice."

More "anecdotes" of health IT-related errors - System errors with Victoria's trouble-plagued HIT program caused more than 100 medication mix-ups at two Melbourne hospitals

There are those in the field of health IT who see every health IT-related mishap as an "anecdote" - the " anecdotalists ...

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Presto Chango - UPMC Tries to Make its Employees All Disappear

This story is just in time for Halloween.  The Lawsuit Challenging the Non-Profit Status of UPMC Back in March, 2013, we <a href="http://hcrenewal.blogspot.com/2013/03/the-push-back-continues-mayor-of.html">discussed</a> a lawsuit initiated by the then Mayor of Pittsburgh that challenged the tax-exempt, non-profit status of giant hospital system UPMC.  The suit charged that UPMC functions more like a for-profit corporation based on its large surplus (recently $1 billion), larger reserves ($3 billion), minimal commitment to charitable care, and generous executive pay (recently $5.9 million  to CEO Jeffrey Romoff, 19 executives paid more than $1 million, and ownership of a jet aircraft).  By the way, Romoff's latest total compensation was said to be $6.1 million (look <a href="http://hcrenewal.blogspot.com/2013/08/should-we-cry-for-non-profit-hospital.html">here</a>), and UPMC just bought an even fancier corporate jet, a Bombardier Global Express worth $51 million (look <a href="http://www.post-gazette.com/business/2013/10/25/New-jet-to-fly-UPMC-corporate-flag/stories/201310250134">here</a>). The Employees Vanish The Pittsburgh Post-Gazette just <a href="http://www.post-gazette.com/business/2013/10/22/UPMC-says-it-does-not-have-employees-1/stories/20131022033">described</a> UPMC's remarkable response to the lawsuit. <blockquote class="tr_bq"> For purposes of the city's payroll taxes, [an attorney representing UPMC] Mr. [William] Pietragallo explained, UPMC's subsidiaries -- like UPMC Shadyside and Western Psychiatric Institute and Clinic -- file separate forms. Employees work for those legal subsidiaries. But UPMC itself? 'We don't have employees,' Mr. Pietragallo said. The question is central to the city's suit to strip UPMC of its status as a purely public charity. UPMC argues the city can't challenge its exemption from payroll taxes because it technically has no employees. It's a case where the legal reality may differ significantly from the one that UPMC, which on its website claims to have 55,000 employees, markets on a regular basis. 'You can't pay employment taxes unless you have employees,' Mr. Pietragallo said.</blockquote> This is not the first time UPMC has made this claim in response to a legal action, <blockquote class="tr_bq">Earlier this year, when UPMC faced 80 complaints of unfair labor practices, it argued that it was only a holding company and did not technically employ those in the complaints. The complaints alleged, among other things, that UPMC employees were being punished for attempting to unionize. UPMC ultimately settled.</blockquote> Obvious Contradictions These claims of invisible employees appear to be contradicted by UPMC's own public relations, <blockquote class="tr_bq"> UPMC touts it large workforce. Its 2012 annual report, for example: 'The economic impact of UPMC is more substantial than most people realize. The organization is the largest nongovernmental employer in the Commonwealth of Pennsylvania, and more than $6.2 billion in total labor income can be attributed directly or indirectly to UPMC.' UPMC's website and media releases say the hospital giant employs in the range of 55,000 people. And when UPMC made the top rankings of U.S. News & World Report's Best Hospitals, it did so as a conglomeration of several facilities attorneys are now arguing are separate subsidiaries.</blockquote> Also, <blockquote class="tr_bq">[An attorney representing the city of Pittsburgh, Ronald]   Barber argued that even for tax purposes, UPMC has documented having employees. In a Form 990 filed for the 'UPMC Group,' the hospital network said it employed around 52,000 people.</blockquote> A few days later, the Post-Gazette <a href="http://www.post-gazette.com/business/2013/10/28/City-of-Pittsburgh-fires-back-against-UPMC-claim-of-not-having-employees.print">reported</a> that the city responded to these UPMC claims in matter-of-fact way, <blockquote class="tr_bq"> On its website, in its annual report and in some tax filings, UPMC purports to have employees -- sometimes tens of thousands of them, the city of Pittsburgh's attorneys said in a court filing.</blockquote> Furthermore, <blockquote class="tr_bq"> The city also argued that those working for subsidiaries are UPMC employees as well, pointing to UPMC's 2012 Annual Report and website, which tout the hospital system as one of the state's largest employers. Attorneys also pointed to a lawsuit in which UPMC claimed to 'extend offers of employment.'</blockquote> How Complexity Benefits Bureaucrats and Managers It is Halloween coming up, not April Fool's Day, and the claims made on behalf of UPMC do not appear to be jokes.  Instead, I believe they underline two serious problems with how large health care organizations are currently lead. The first is that health care organizations often have exceedingly complex structures for reasons that have nothing to do with fulfilling their health care mission.  One reason may be that the complexity creates options for plausible deniability.  In particular, when such organizations are accused of bad behavior, as they now often are, subsidiaries may be set up to "take the rap."  For example, we <a href="http://hcrenewal.blogspot.com/2013/06/pfizer-may-no-longer-be-able-to-delay.html">discussed</a> how Pfizer Inc has been using the bankruptcy filing of its Quigley subsidiary made as if that subsidiary were independent to delay resolution of claims that the subsidiary sold hazardous asbestos products.    This tactic of having the subsidiary take the rap may be particularly useful when taking the rap may lead to a severe penalty for the organization, such as disbarring it from being paid by the government.  A disbarred subsidiary may simply be dissolved and its work transferred to other parts of the organization.  For example, in May, 2013 we <a href="http://hcrenewal.blogspot.com/2013/05/ghosts-in-criminal-machine-how-drug.html">discussed</a> a settlement in which Baush and Lomb subsidiary Ista Pharmaceutical would be disbarred from participation in government programs.  However, Baush and Lomb itself would not be disbarred, and would be able to "wind down" Ista's operations and transfer its products to other parts of the larger company.  The current example appears to be a more creative use of subsidiaries to claim deniability, although whether the arguments about disappearing employess above are even plausible is open to question. Complex organizations also offer many opportunities to employ and enrich administrators, bureaucrats and managers, and to justify ever larger <a href="http://hcrenewal.blogspot.com/search/label/executive%20compensation">compensation for the top executives</a> who purport to run the whole thing.  That such proliferation of management and management compensation may detract from the mission does not appear to be a big concern of the sorts of people who now run health care. Contempt for Truth The second problem is that the leadership of large organizations seem to have little use for the truth.  Instead, they may put lots of faith in their marketers, public relations people, and legal staff to obfuscate the truth in pursuit of ever more revenue and executive enrichment.  As management becomes less and less reality-based, however, it may be less likely to be able to respond to the very reality-based needs of patients and the public. Conclusion I hope that the outlandish claims now being sanctioned by UPMC leadership may raise awareness of what is going wrong with the leadership of health care organizations in general.  As we have been saying for years, health care leadership that puts its self-interest ahead of patients and the public, and which disregards the truth in service of self-interest may be the biggest cause for ever increasing health care costs, and ever declining access and regard for the health of patients and the public.  True health care reform would encourage leadership that puts the mission ahead of self-interest, and values honesty more than personal profit. It would promote regulation that holds top leadership of organizations accountable for their organizations' actions and not allow the leadership to hide behind complex organizational structures.

Presto Chango - UPMC Tries to Make its Employees All Disappear

This story is just in time for Halloween. The Lawsuit Challenging the Non-Profit Status of UPMC Back in March, 2013, we discussed a lawsui...

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Proof positive of government incompetence and recklessness in information technology - H.R.3303 - Bipartisan call for exemption of health IT from the FD&C Act

Here's proof positive of government incompetence and recklessness in information technology. A new proposed bill that would exempt health IT from the Food, Drug & Cosmetic Act and FDA regulation. Rep. Marsha Blackburn (R-TN) calls for exemption of healthcare software from FDA regulation with bipartisan co-sponsorship from Reps. Gene Green (D-TX), Phil Gingrey, M.D. (R-GA), Diana DeGette (D-CO), Greg Walden (R-OR) and G.K. Butterfield (D-NC). H.R.3303 - SOFTWARE Act of 2013 - referred to House Energy & Commerce on 10/22/2013 <a href="http://beta.congress.gov/bill/113th/house-bill/3303/text">http://beta.congress.gov/bill/113th/house-bill/3303/text</a> This remarkable and unprecedented regulatory accommodation is based on nebulous, speculative and largely imaginary grounds that translate to - just because:   <blockquote class="tr_bq">... (c) Sense of Congress.--It is the sense of the Congress that--             (1) clinical software and health software (as defined in         section 201(tt) of the Federal Food, Drug, and Cosmetic Act, as         added by subsection (a)) [can]--                     (A) advance the goals of enhanced patient safety                 and continued innovation;                     (B) hold much promise to lower costs and improve                 the health of patients; and                     (C) can improve the quality and efficacy of health                 care provider services </blockquote> This is despite known defects and harms in-the-now (e.g., ECRI Deep Dive Study with 8 injuries and 3 possible deaths in 9 weeks from 171 health IT 'mishaps', voluntarily reported in just 36 hospitals,<a href="https://www.ecri.org/EmailResources/PSRQ/ECRI_Institute_PSO_Deep%20Dive_HIT_TOC.pdf"> https://www.ecri.org/EmailResources/PSRQ/ECRI_Institute_PSO_Deep%20Dive_HIT_TOC.pdf</a>; Emergency Department EHR dangers as at <a href="http://hcrenewal.blogspot.com/2013/10/quality-and-safety-implications-of.html">http://hcrenewal.blogspot.com/2013/10/quality-and-safety-implications-of.html</a>; innumerable "glitches" that can kill, <a href="http://hcrenewal.blogspot.com/search/label/glitch">http://hcrenewal.blogspot.com/search/label/glitch</a> and <a href="http://hcrenewal.blogspot.com/2011/01/maude-and-hit-risk-mother-mary-what-in.html">http://hcrenewal.blogspot.com/2011/01/maude-and-hit-risk-mother-mary-what-in.html</a>; baby deaths, <a href="http://hcrenewal.blogspot.com/2011/06/babys-death-spotlights-safety-risks.html">http://hcrenewal.blogspot.com/2011/06/babys-death-spotlights-safety-risks.html</a> etc.) Instead this group of intrepid Cybernetic Crusaders, to whom your life is valuable (as a guinea pig, it seems) call for -- <blockquote class="tr_bq">"the President and the Congress [to] work together to develop and enact legislation that establishes a risk-based regulatory framework for such clinical software."</blockquote> With the Obamacare/Obamaware debacle still in progress ... (see "Drudge Report, Oct. 10, 2013, 9 AM EST: All that needs to be said about government, computing and healthcare" at <a href="http://hcrenewal.blogspot.com/2013/10/drudge-report-oct-10-2013-9-am-est-all.html">http://hcrenewal.blogspot.com/2013/10/drudge-report-oct-10-2013-9-am-est-all.html</a>) ... All I can say is: REALLY? -- SS p.s. perhaps I should have entitled this post "Look, Ma, No Regulation!" (See <a href="http://hcrenewal.blogspot.com/2011/06/my-mother-passed-away.html">http://hcrenewal.blogspot.com/2011/06/my-mother-passed-away.html</a>.) -- SS

Proof positive of government incompetence and recklessness in information technology - H.R.3303 - Bipartisan call for exemption of health IT from the FD&C Act

Here's proof positive of government incompetence and recklessness in information technology. A new proposed bill that would exempt healt...

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