In January, 2009 we posted about how the CEO of Blue Cross Blue Shield (BCBS) of Massachusetts and of Partners HealthCare, made a secret oral agreement that BCBS would pay Partners at a higher rate than that given to other hospitals.

Why BCBS would want to pay so much to this one hospital system was never clear. Partners does include some extremely prestigious hospitals, including the Brigham and Womens Hospital, and the Massachusetts General Hospital, ("Man's Best Hospital" in the House of God), but there are some other very prestigious teaching hospitals in Boston that were not blessed by BCBS' largess.

We speculated about one possible cause: the leadership of the two organizations may have felt they had more in common with each other than with the constituencies of their own organizations. A few leaders of each organization had direct ties to the other. Many leaders of both organizations were simultaneously leaders of finance, the same sector that has brought us what is now called the Great Recession. Leadership of both organizations had conflicted loyalties. The organizations' CEOs at the time, and many members of their boards had divided loyalties and apparent conflicts of interest. For example, Jack Connors, the chair of the Partners HealthCare board, is also the Chairman Emeritus of marketing communications company Hill, Holliday, Connors, Cosmopoulos Inc, whose clients include pharmaceutical and pharmacy benefits manager CVS / Caremark, and is also a member of the board of directors of Covidien, a medical device company.

The Boston Globe just published a report that Mr Connors had even more intense conflicts that had not heretofore been made public.

He's chairman of New England's largest healthcare company, and that position atop Partners HealthCare has tested the limits of Jack Connors's considerable corporate dexterity.

Though he has no background in medicine, Connors has been Partners' chief overseer, champion, and its most public face for 13 years.

[One board member] is the cofounder and chairman emeritus of Partners' advertising firm. That would be Jack Connors. And that potential point of conflict has been disclosed....

But to the chagrin of some former board members, never brought up for board review was Connors's stake in a leading medical education firm whose sale in 2004 made Connors a very wealthy man.

Nor has the board notified public officials of Connors's ownership of a fledgling home healthcare firm that has directly solicited Partners' hospitals for business.

Connors and top Partners officials defended the decision not to publicly disclose Connors's potential conflicts, saying that because Partners did not directly contract with either of Connors's firms there were no conflicts to report. Connors also defended his right to be an entrepreneur in the healthcare business while also chairing Partners' board, and strongly denied ever using his position for personal or financial advantage.

The larger company, M/C Communications, grew to become the biggest commercial provider of continuing education to physicians in the decade between its inception in 1994 and when Connors sold it in 2004. It profited hugely from an exclusive commercial relationship it maintained with Harvard Medical School, whose faculty teach at seminars the company holds. Partners' signature institutions, Massachusetts General Hospital and Brigham and Women's Hospital, are major teaching affiliates of Harvard Medical School.

In addition, M/C Communications benefited financially from millions of dollars in sponsorship revenue paid it from major pharmaceutical firms eager to play to this professional audience.

Connors said he was under no obligation to disclose his ownership of M/C Communications to the Partners board. He said that while there is an 'affiliation' between Harvard Medical School and the two Partners hospitals, there is no formal contract between them.

Connors said he informed Partners executives of his ownership of M/C Communications, and that they determined it did not warrant disclosure to the full Partners board.

'There is no contract between Partners and Harvard,' Partners said in a statement to the Globe.

Connors made a name for himself as an executive with Hill, Holliday, Connors, Cosmopulos, the Boston advertising company that he helped found and guided throughout a long career. Less well known is that he made most of his fortune from M/C Communications, which he sold to Bain Capital for $450 million in 2004.

The sale was the largest of a private healthcare-related company in Massachusetts that year, according to TM Capital Corp., an investment banking company. Connors, who led an investor group that bought the firm outright for $13 million in 2000, made about $250 million from its sale.

After his 2004 windfall, he founded a company that helps elderly patients readjust to life at home after a hospitalization.

That company, Dovetail Health, has - Connors acknowledged - solicited business from hospitals owned by Partners. And Connors confirmed that after Dovetail executives failed to convince Blue Cross Blue Shield of Massachusetts to contract with the firm, he personally spoke to the giant insurer's president, Cleve L. Killingsworth, on Dovetail's behalf. Partners and Blue Cross Blue Shield regularly negotiate over $2.5 billion worth of medical business a year.

Connors acknowledged in an interview that it might have appeared 'inappropriate' to some for him to pitch Killingsworth. But he said the conversation stemmed from a shared belief that new ways must be found to reduce frequent return trips of elderly patients to the hospital. More recently, however, he said he does not believe his approach to Killingsworth was inappropriate.

So let's try to recap this.

While Jack Connors has been chairman of the board of Partners HealthCare, the largest and most prestigious hospital system in Massachusetts, he also ran an advertising agency that did business with Partners, and has been on the board of Covidien, a medical device company. Both of these relationships he disclosed to his fellow board members, although no one seemed troubled by them.

However, while a Partners board member, Connors was also the founder, and ultimately profited very handsomely from the sale of M/C Communications. M/C Communications apparently begat M/C Holding Corporation, which in turn owns M/C Communications and Pri-Med Institute LLC. M/C Communications now describes itself as " established in 1994 and has become a leading provider of medical education event management solutions for health care professionals and others around the globe." M/C Communications runs Pri-Med, which is described thus: "Pri-Med is a platform for science and medicine that includes meetings, resources, online, and new media tools designed to meet the information and education needs of today’s practicing physician." Pri-Med markets itself to industry, presumably the pharmaceutical, biotechnology, and device industry, "Sixty percent of doctors’ offices restrict rep access, making it more challenging than ever to get in front of your customers. But with Pri-Med, you get to meet clinicians in a professional environment where they seek you out. More than 66% of attendees say they come to Pri-Med events to meet you, industry representatives." So Connors' company was a medical education and communication company (MECC), which provided what appeared to be educational programs to physicians that in fact were also sold to the health care industry as marketing opportunities.

So Partners HealthCare, which includes two of the world's most prestigious teaching hospitals, has been run by the boss of a MECC? Say it ain't so.

Not only did Connors own a company that had an exclusive contractual relationship (as described above) with the Harvard faculty who staff the main Partners HealthCare hospitals, that company was engaged in marketing the products of sponsoring drug and device companies disguised as education. Finally, Connors denied that this presented any kind of conflict of interest, because Partners HealthCare has no explicit contract, just an "affiliation" with Harvard Medical School.

Finally, just to ice the cake, Connors' latest venture is a home health care company that did business with Partners, and tried to do business with BCBS, spearheaded by Connors' direct conversations with the BCBS CEO.

Jack Connors thus seems to have just become the latest poster boy for leaders of health care organizations who put their personal financial interests ahead of their responsibilities to those organizations, and function as a power elite whose collective interests trump those of the constituents of the organizations they run.

Quoting from BoardSource, the main duties of the leader of any US not-for-profit are:

Duty of Care

The duty of care describes the level of competence that is expected of a board member, and is commonly expressed as the duty of 'care that an ordinarily prudent person would exercise in a like position and under similar circumstances.' This means that a board member owes the duty to exercise reasonable care when he or she makes a decision as a steward of the organization.

Duty of Loyalty

The duty of loyalty is a standard of faithfulness; a board member must give undivided allegiance when making decisions affecting the organization. This means that a board member can never use information obtained as a member for personal gain, but must act in the best interests of the organization.

Duty of Obedience

The duty of obedience requires board members to be faithful to the organization's mission. They are not permitted to act in a way that is inconsistent with the central goals of the organization. A basis for this rule lies in the public's trust that the organization will manage donated funds to fulfill the organization's mission.

By leading companies that did direct business with Partners and its staff, and failing to disclose that he was doing so to his fellow Partners board members, Connors appeared to have violated the Duty of Loyalty.

By running a MECC that helps drug and device companies market to physicians in the guise of education, using faculty from the academic teaching hospitals that he lead, Connors seems to have mocked the mission of the academic hospitals within Partners, and thus appeared to violate the Duty of Obedience.

This episode certainly does suggest that health care, and the organizations involved in this case, are lead by an "old-boy network," as one person interviewed for the Globe article suggested. More than just an old-boy network, they seem to be lead by chummy members of the power elite whose collective personal interests supersede the missions of the organizations they are supposed to steward. When this happens, is it any surprise that health care becomes less accessible, more expensive, and of lower quality?

Yet challenging the power elite that are increasingly revealed as controlling much of health care seems to be something that one cannot talk about when discussing health care reform. However, failing to address this problem will likely doom any effort, no matter how well intentioned, to improve health care.

Hat tip to and see comments by Alison Bass on the Alison Bass Blog.

ADDENDUM (3 June, 2009) - See also comments by Dr Daniel Carlat on the Carlat Psychiatry Blog.

On The Torch blog, hosted by FIRE (Foundation for Individual Rights in Education), this post by Kyle Smeallie summarized the travails of "petition candidates" for the boards of trustees of two elite American universities (Dartmouth and Harvard). As we have noted, at most universities, the boards of trustees, the bodies ultimately responsible for upholding the universities' missions, are closed shops. At most universities, the boards appoint new members to replace departing ones, without input from alumni, parents, students, faculty or anyone else who might be considered constituents. Thus, at most universities, even though the boards are ultimately responsible for the stewardship of the institutions, and upholding the institutions' missions, practically, they are accountable to no one. At very few universities, there may be contested elections for a few board seats, and an opportunity for those outside the board, usually alumni, to place candidates on the ballot. However, even at those somewhat more enlightened universities, those candidates face an uphill battle. Thus, while Dartmouth and Harvard have somewhat more transparent, accountable, and representative governance than do most academic institutions, even that is under threat.

'Tis the season for deferred prosecution agreements for health care organizations. As reported by the Wall Street Journal:

WellCare Health Plans Inc. agreed to pay $80 million to settle a Florida Medicaid fraud investigation that has embroiled the company since the fall of 2007, previously prompting a management shake-up and restatement of more than three years of the company's earnings.

The settlement resolves federal and state criminal probes into allegations that WellCare defrauded Florida benefits programs for low-income adults and children of about $40 million by improperly inflating what it spent on care.

WellCare, based in Tampa, Fla., administers medical benefits for about 2.5 million enrollees in government-sponsored plans in several states.

Under a deferred prosecution agreement, the U.S. Attorney's Office for the Middle District of Florida in Tampa filed a fraud conspiracy charge against the company but said it wouldn't prosecute the case if WellCare meets all of the deal's terms.

U.S. Attorney A. Brian Albritton said in a news conference Tuesday that his office could have pursued a conviction but that it likely would have put the insurer out of business, hurting customers, innocent employees and shareholders. In penalizing the company, 'we have, at the same time, tried to avoid crushing it,' he said.

Under the terms, WellCare must forfeit $40 million and pay another $40 million in restitution to Florida's Medicaid and 'Healthy Kids' plans. WellCare also has agreed 'to accept and acknowledge full responsibility for the conduct that led to the government's investigations,' according to the deferred prosecution agreement. The company declined to elaborate.

In addition, the company also must retain an independent monitor to review its business operations, cooperate with the government's ongoing investigations and implement new procedures within 60 days to prevent future abuse or faulty reports to state health care programs.

This was not the first bit of trouble WellCare got itself into. We posted here about how the state of Connecticut stopped WellCare from running a plan for poor children after the company refused to reveal what it was paying physicians, and why it was failing to pay for particular services.

So, as we have found from blogging on Health Care Renewal for a while, organizations that are found to be committing one sort of mischief often are also found to be committing another sort.

We also see some other familiar patterns. While human beings authorized or committed the acts that got the organization in trouble, rarely do these people seem to suffer any negative consequences. At most, the organization may pay a seemingly large fine. This, however, may come out of dividends or the stock price, dispersing the cost to stock-holders, or out of salaries across the board. Thus, those who got the organization into trouble are unlikely to feel pain from it. Perhaps because of reverence for all organizations related to health care, and fear that the bankruptcy of any health care organization, even a health care insurance company, will leave patients in the lurch, prosecutors do not seem inclined to actually prosecute such organizations. The net effect, though, seems to be that dishonest executives of health care organizations can continue to act with impunity.

Until bad leadership of health care organizations leads to negative consequences for those practicing it, health care leadership can be expected to continuously degrade.

By the way, one member of the WellCare board of directors is Regina Herzlinger, a well known and prolific health policy expert, and holds the Nancy R. McPherson Professor of Business Administration Chair of the Harvard Business School. As far as I know, Prof Herzlinger is one of the many health policy experts who avoids discussing the sorts of problems with the accountability, integrity, and transparency of health care leadership which is grist for the mill here at Health Care Renewal. Yet under the stewardship of such an august expert, WellCare had to "accept and acknowledge full responsibility for ... conduct" that included fraud. Perhaps, Prof Herzlinger, like many other main stream health policy experts, should learn to acknowledge that health care leadership may be unaccountable, opaque, dishonest, and sometimes flagrantly corrupt. Furthermore, Prof Herzlinger, like many other well-paid board members of health care organization, should pay a bit more attention to the mischief being committed by those who answer to her.

We have been writing about conflicts of interest in health care now for a long time. We started with a focus on academic physicians' and leaders' financial ties to pharmaceutical/ biotechnology/ device companies, then went on to the intense conflicts generated by academic medical and other health care non-profit leader who also sit on boards of directors of for profit health care corporations, and to conflicts affecting various kinds of respected not-for-profit health care organizations, like medical societies and patient advocacy groups.

Meanwhile, we uncovered the curious dominance of the boards of some health care organizations by leaders in the finance world, including some of the leaders of the failed companies that brought us the "great recession." This did seem like a leadership problem for health care, in terms of the dominance of health care leadership by the elite of another industry that did not exactly seem to share the values we physicians swear to uphold. However, it did not seem to be a conflict of interest problem, until now.

The Chronicle of Higher Education just published an article by the director of a soon to be released documentary on conflicts of interest and academics, but this time academic economics.

Charles Ferguson, the author, used as an example the Larry Summers, the former President of Harvard University (and hence leader of the Harvard Medical School, School of Public Health, and Harvard's teaching hospitals). We had commented here about Summers' poor fit for the role of an academic medical leader, and here and here about the dominance of Harvard leadership by leaders of (sometimes failed) financial institutions. Ferguson summarized (bad pun, sorry) the problem thus:

Summers is unquestionably brilliant, as all who have dealt with him, including myself, quickly realize. And yet rarely has one individual embodied so much of what is wrong with economics, with academe, and indeed with the American economy.

The problem is essentially one of huge conflicts of interest:

the revolving door is now a three-way intersection. Summers's career is the result of an extraordinary and underappreciated scandal in American society: the convergence of academic economics, Wall Street, and political power.

Summers bear huge responsibility for the current economic mess:

Consider: As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy secretary of the treasury and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws.

Also,

Over the past decade, Summers continued to advocate financial deregulation, both as president of Harvard and as a University Professor after being forced out of the presidency.

Not only did Summers set up the structure that allowed reckless bets with other people' money on opaque financial derivatives by finance leaders who stood to make huge gains if they won their bets, but could foist all losses on others, but he actively attempted those who tried to warn us all of the impending economic collapse.

Summers remained close to Rubin and to Alan Greenspan, a former chairman of the Federal Reserve. When other economists began warning of abuses and systemic risk in the financial system deriving from the environment that Summers, Greenspan, and Rubin had created, Summers mocked and dismissed those warnings. In 2005, at the annual Jackson Hole, Wyo., conference of the world's leading central bankers, the chief economist of the International Monetary Fund, Raghuram Rajan, presented a brilliant paper that constituted the first prominent warning of the coming crisis. Rajan pointed out that the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other people's money, while imposing no penalties for any subsequent losses. Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a 'full-blown financial crisis' and a 'catastrophic meltdown.'

When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a 'Luddite,' dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector. (Ben Bernanke, Tim Geithner, and Alan Greenspan were also in the audience.)

Amazingly, rather than ending up an economic pariah after that, Summers regained power over the economy in the last few years.

Then, after the 2008 financial crisis and its consequent recession, Summers was placed in charge of coordinating U.S. economic policy, deftly marginalizing others who challenged him. Under the stewardship of Summers, Geithner, and Bernanke, the Obama administration adopted policies as favorable toward the financial sector as those of the Clinton and Bush administrations—quite a feat. Never once has Summers publicly apologized or admitted any responsibility for causing the crisis. And now Harvard is welcoming him back.

Summers was tightly aligned with the finance world, and benefited from the dominance of financial leaders on Harvard's board (see post here):

After Summers left the Clinton administration, his candidacy for president of Harvard was championed by his mentor Robert Rubin, a former CEO of Goldman Sachs, who was his boss and predecessor as treasury secretary. Rubin, after leaving the Treasury Department—where he championed the law that made Citigroup's creation legal—became both vice chairman of Citigroup and a powerful member of Harvard's governing board.

Yet in between his government and academic leadership roles, Summers got rich from finance firms' money.

Summers became wealthy through consulting and speaking engagements with financial firms. Between 2001 and his entry into the Obama administration, he made more than $20-million from the financial-services industry. (His 2009 federal financial-disclosure form listed his net worth as $17-million to $39-million.)

Ferguson went on to list several other conflicted academic economists:

The route to the 2008 financial crisis, and the economic problems that still plague us, runs straight through the economics discipline. And it's due not just to ideology; it's also about straightforward, old-fashioned money.

Prominent academic economists (and sometimes also professors of law and public policy) are paid by companies and interest groups to testify before Congress, to write papers, to give speeches, to participate in conferences, to serve on boards of directors, to write briefs in regulatory proceedings, to defend companies in antitrust cases, and, of course, to lobby. [Ed: they are thus the "key opinion leaders" of economics and economic policy.] This is now, literally, a billion-dollar industry. The Law and Economics Consulting Group, started 22 years ago by professors at the University of California at Berkeley (David Teece in the business school, Thomas Jorde in the law school, and the economists Richard Gilbert and Gordon Rausser), is now a $300-million publicly held company. Others specializing in the sale (or rental) of academic expertise include Competition Policy (now Compass Lexecon), started by Richard Gilbert and Daniel Rubinfeld, both of whom served as chief economist of the Justice Department's Antitrust Division in the Clinton administration; the Analysis Group; and Charles River Associates.

In my film you will see many famous economists looking very uncomfortable when confronted with their financial-sector activities; others appear only on archival video, because they declined to be interviewed. You'll hear from:

Martin Feldstein, a Harvard professor, a major architect of deregulation in the Reagan administration, president for 30 years of the National Bureau of Economic Research, and for 20 years on the boards of directors of both AIG, which paid him more than $6-million, and AIG Financial Products, whose derivatives deals destroyed the company. Feldstein has written several hundred papers, on many subjects; none of them address the dangers of unregulated financial derivatives or financial-industry compensation.

Glenn Hubbard, chairman of the Council of Economic Advisers in the first George W. Bush administration, dean of Columbia Business School, adviser to many financial firms, on the board of Metropolitan Life ($250,000 per year), and formerly on the board of Capmark, a major commercial mortgage lender, from which he resigned shortly before its bankruptcy, in 2009. In 2004, Hubbard wrote a paper with William C. Dudley, then chief economist of Goldman Sachs, praising securitization and derivatives as improving the stability of both financial markets and the wider economy.

Frederic Mishkin, a professor at the Columbia Business School, and a member of the Federal Reserve Board from 2006 to 2008. He was paid $124,000 by the Icelandic Chamber of Commerce to write a paper praising its regulatory and banking systems, two years before the Icelandic banks' Ponzi scheme collapsed, causing $100-billion in losses. His 2006 federal financial-disclosure form listed his net worth as $6-million to $17-million.

Laura Tyson, a professor at Berkeley, director of the National Economic Council in the Clinton administration, and also on the Board of Directors of Morgan Stanley, which pays her $350,000 per year.

Richard Portes, a professor at London Business School and founding director of the British Centre for Economic Policy Research, paid by the Icelandic Chamber of Commerce to write a report praising Iceland's financial system in 2007, only one year before it collapsed.

And John Campbell, chairman of Harvard's economics department, who finds it very difficult to explain why conflicts of interest in economics should not concern us.

I once naively thought that the primary conflict of interest problems affecting academia involved health care, the dependence of medical schools and academic medical centers on commercial research funding, the emphasis these schools placed on faculty ties to commercial firms, leading to faculty "key opinion leaders" functioning as marketers of drugs and devices operating under the cloak of academia, and the major conflicts of academic leaders who also sit on health care corporate boards.

Now I wonder if all this came to pass because academic leaders already were comfortable with conflicts of interest after having profited from conflicts generated by relationships with the finance industry.

This now suggests that the dominance of university boards of trustees by finance leaders is a conflict of interest issue, too.

It also suggests that we in medicine should be paying more attention to how conflicts of interest shape not only the marketing of drugs and devices, but the health care policy that has lead to our currently dysfunctional system. If economists paid by finance companies could have been a major cause of the global financial meltdown, could health care policy experts paid by health care corporations be a major cause of our collapsing health care system?

Hat tip to the Naked Capitalism blog. See additional comments on the University Diaries blog and on Felix Salmon's blog.