Last week, the influential New England Journal of Medicine published an article by Bruce Vladek entitled "Fixing Medicare's Physician Payment System."(1)  Although only identified as working for Nexara, a health consulting business, Mr Vladek was a former administrator of what was then called the Health Care Financing Administration (HCFA) of the US Department of Health and Human Services (DHHS), the part of the department that then ran the US Medicare program.  Vladek thus can reasonably be viewed as an expert on Medicare. 

Vladek identified two main problems with the current way physicians are paid by Medicare.  First,

Medicare is captive to an arbitrary, if elegantly conceived, formula for total payments to physicians — the sustainable growth rate (SGR). In the alternate reality of the Congressional budget process, the SGR will reduce Medicare's physician payments, which already trail those from private insurers, as far into the future as the eye can see.

Second,

there is widespread consensus that the relative fees in the current system are a significant cause of the growing imbalance in supply and utilization between primary care and specialty services in the U.S. health care system. That imbalance, in turn, is widely perceived as a major cause of both excessive costs and inadequate quality of care. This is not just a Medicare problem: the Medicare Resource-Based Relative Value Scale is used by most private insurers to set relative prices for physicians.

Vladek expanded on the second point as follows

the basic mechanics of the Medicare Physician Fee Schedule, which was supposed to change physician payment to increase rewards for primary care services at the expense of procedural and interventional services, appears to have gone totally off track. For various reasons, the fee schedule, which originally did increase the prices of evaluation and management services relative to those of surgery or invasive procedures, turned in the other direction through the process of annual updating of relative value units. Surgeons, radiologists, and some medical specialists are now paid two to three times as much per hour as providers of cognitive services, which is about where we began 20 years ago; this was the situation that the fee schedule was supposed to fix.

The question of the relative virtues of primary versus specialty care can be debated ad nauseam, but in other wealthy countries that serve their populations at least as well as we do, the ratio of primary care physicians to specialists is much higher than in the United States, and the gap in compensation is much smaller or the poles even reversed. Young physicians, burdened by increasing educational debts, may well choose a career path on the basis of a major difference in compensation, especially when the better-compensated positions require less ongoing responsibility for patients and offer better working hours.

This is about all that Vladek wrote about how the imbalance between how Medicare pays for primary care and other "cognitive services," and for procedures came about. Vladek, and many others have argued that this imbalance has lead to strong financial incentives that have been slowly destroying primary care, and strong incentives that have lead to the use of too many procedures, both strong drivers of rising costs in the most expensive health care system in the world.

Vladek noted vaguely that "through various reasons," the incentives were imbalanced by "the process of annual updating of relative value units."

However, as we have discussed in several blog posts, a lot more is known about how this process got "totally off track."

In fact, in 2007, an article by Bodenheimer et al in the Annals of Internal Medicine explained the problems in considerably more detail.(2)  As we wrote then, Its main points included

• Proceduralists are often able to learn how to do their procedures more quickly, and thus increase the volume of procedures done, while office and hospital visits can only be sped up so much.
• The process used to update the RBRVS system is biased towards procedures for three main reasons: 1. "specialty society influence in proposing RVU [relative value unit] increases," 2. the specialist-heavy RUC [Relative Value Scale Update Committee] membership," and 3. "the desire of RUC specialists to avoid increases in evaluation and management [that is, cognitive, or non-procedural] RVUs."
• Medicare now uses a formula to limit increases in overall spending. The use of this formula leads to across the board cuts in all reimbursements. Since cognitive services reimbursements were never high to begin with, and have rarely been individually increased, these cuts tend to have disproportionate decreases.
• Private insurers and managed care organizations tend to follow Medicare's lead in their reimbursement procedures, but tend to tilt the playing field even more in favor of procedures versus cognitive services. Several studies showed that such payers paid more for procedures than did Medicare, but about the same for office and hospital visits.

The role of the RBRVS Update Committee (RUC) is complex and in many ways mysterious.  As we wrote before, to update the system, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the RBRVS Update Committee. The RUC is a private committee of the AMA, touted as an "expert panel" that takes advantage of the organization's First Amendment rights to petition the government. Membership on the RUC is allotted to represent specialty societies, so that the vast majority of the members represent specialties that do procedures and focus on expensive, high-technology tests and treatments. However, the identities of RUC members are opaque, and the proceedings of the group are secret.

To expand on the penultimate point, the current page on the AMA web-site that describes the RUC only lists its members in terms of their specialties and organizational affiliation.  Their names do not appear.  A response to a previous post by me on the subject by the then Chair and Chair-Elect of the RUC suggested that the RUC membership is not quite secret. They stated that "a list of the individual members of the RUC is published in the AMA publication, Medicare RBRVS 2009: The Physicians Guide." This publication is available from the AMA here for a mere $71.95. However, the book is not on the web, or in my local or university library, and I have no other way to easily access it.  Thus, the RUC membership as at best relatively opaque.

To expand on the ultimate point, as Goodson(3) noted, RUC "meetings are closed to outside observers except by invitation of the chair." Furthermore, he stated, "proceedings are proprietary and therefore not publicly available for review."

The fog surrounding the operations of the RUC seems to have affected many who write about.  We have posted (here, here, and here) about how previous publications about problems with incentives provided to physicians seemed to have avoided even mentioning the RUC.  In 2010, post the US recent attempt at health care reform, the RUC seems to remain the great unmentionable.  Even the leading US medical journal seems reluctant to even print its name. 

Thus, as we noted before, however, the mysteries about it remain:

• How did the government come to fix the payments physicians receive? Government price-fixing has not been popular in the US, yet this has caused no outcry.
• Why is the process by which they are fixed allowed to be so opaque and unaccountable? Why are there no public hearings on the updates, and why is there no input from practicing physicians or organizations other than those related to the RUC?
• How did the RUC become de facto in charge of this process?
• Why does the AMA keep the membership on the RUC so opaque, and give no input into the RUC process to its general membership?
• Why is the RUC membership so dominated by procedural specialists? Why were primary care physicians, who made up at least a sizable minority of physicians when the update process was started, not represented according to their numbers?
• Why has there been so little discussion of the RUC and its responsibility for an extremely expensive health care system dominated by high-technology, expensive, risky and invasive procedures?

Without discussing how the incentives for physicians became so unbalanced, do we really expect we can fix them?  In this case, the persistence of the anechoic effect seems to be doing real damage to the discussion of the critical issues we in the US face today.

References

1. Vladek B. Fixing Medicare's physician payment system. N Engl J Med 2010; 362:1955-1957. (Link here.)

2. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. (Link here.)

3. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310.  (Link here.)

We have posted about cases in which hospitals or academic medical centers hired legislators to promote their political agendas. In one case in 2006, a former Rhode Island state legislator pleaded guilty to selling his influence to a local medical center, which submitted to a deferred prosecution agreement, and whose CEO was later convicted of conspiracy and fraud. (This conviction has been appealed.) In another case in 2008, a former New Jersey state legislator was convicted of fraud for selling his influence to a state health care university and academic medical center, which also had been operating under a deferred prosecution agreement.

The latest version of this type of scandal appeared towards the end of last month in the New York Times:

Saying that he knew his 'conduct was illegal and wrong,' a longtime Democratic member of the New York State Assembly, Anthony Seminerio, pleaded guilty on Wednesday to abusing his position by soliciting for himself an amount prosecutors estimated at $500,000.

Federal prosecutors said that for the last decade he traded upon his office, receiving 'corrupt payments' from people or organizations that had business before the state and sometimes threatening those who resisted his requests for money.

The payments were funneled into a company called Marc Consultants that Mr. Seminerio created to hide the income, prosecutors said.

Mr. Seminerio told Judge Naomi Reice Buchwald in Federal District Court in Manhattan that one of the organizations that paid him for wielding his political influence was Jamaica Hospital Medical Center, in Queens. It was the first public mention of Jamaica Hospital, which before the hearing had been referred to in court papers merely as 'a hospital in New York City.'

Appearing before the judge around noon on Wednesday, Mr. Seminerio, unshaven but wearing a blazer and a tie, declared in a firm voice that he was guilty of the charge of honest services fraud. In a brief statement he acknowledged that on July 10, 2008, he 'promoted the interests' of Jamaica Hospital in connection with state business and did not divulge that he had received payments from the hospital.

'My conduct had the effect of depriving others of honest services,' he said. Prosecutors stated that the hospital had paid Marc Consultants about $310,000 and that 'a separate, Medicaid-managed health care plan' affiliated with the hospital paid another $80,000. At the request of hospital officers, prosecutors said, Mr. Seminerio acted as an advocate with legislators and lobbied on their behalf with executive branch officials.

A criminal complaint states that on numerous occasions Mr. Seminerio 'took action in his capacity as a member of the Assembly to benefit the hospital at the same time that he was receiving payments from the hospital.'

The complaint also details recorded conversations in which hospital officials asked Mr. Seminerio to intervene in state budget decisions and in which Mr. Seminerio urged a Health Department official to help Jamaica Hospital take over another hospital.

There once was a time when health care was a calling, and when hospitals were considered charitable organizations which served the sick, and often the poor. Health care professionals and institutions were once held to a higher standard than, say, those who collected the garbage.

Jamaica Hospital Medical Center still proclaims its mission to be:

To serve our patients and the community in a way that is second to none

It is not clear how that squares with "corrupt payments" to a state legislator.

In my humble opinion, for health care to resolve its current crises, it will have to again be held to a higher standard. If we do not challenge the pervasive conflicts of interest within and across health care, and the outright corruption that has infected many health care institutions, none of the proposed manipulations of health care financing will make much of a dent in ever rising costs, declining access, or degrading quality.

But for this to happen, health care professionals and policy leaders will have to acknowledge how low the current standards are. As long as cases like those noted above are mentioned only in the local news media, but are not subjects for polite conversation in professional and policy venues, many will be able to cling to the illusion that things are not so bad.

In his recent review of Dr Ezekiel Emanuel's book, (Healthcare, Guaranteed: A Simple, Secure Solution for America,) Dr Arnold Relman, Editor-Emeritus of the New England Journal of Medicine, discussed the history of the deprofessionalization of American physicians.

The behavior of US physicians has been changed by the commercialization of medical care, and this too has increased costs. US medical practice has traditionally relied on fee-for-service, which has always given it some of the attributes and incentives of a business. However, the American Medical Association (AMA) maintained for many years that medical practice was a profession, not a business. The AMA's ethical guidelines therefore advised physicians to limit their income to reasonable earnings from the care of patients, and to refrain from advertising and from entering financial arrangements with drug and device manufacturers. Those restrictions were lifted after the US Supreme Court decided in 1975 that lawyers, and by extension members of other professions, including physicians, are engaged in interstate commerce and therefore must be subject to antitrust law (from which they had largely been exempt).(1)

This decision had an enormous effect on the medical profession, but its consequences have received relatively little public attention. Although the courts did not initiate the commercialization of medicine, they certainly accelerated it and gave it legal justification. In 1980, after medical organizations lost some costly antitrust trials, in which they were accused of such offenses as limiting doctor fees or denying staff privileges, the AMA changed its ethical guidelines, declaring medicine to be both a business and a profession. This lowered the AMA's barriers to the commercialization of medical practice, allowing physicians to participate in any legal profit-making business arrangement that did not harm patients.

Nearly a half-century ago, Stanford economics professor Kenneth Arrow, later a Nobel laureate, convincingly argued that medical care cannot conform to market laws because patients are not ordinary consumers and doctors are not ordinary vendors. He said that sick or injured patients must rely on physicians in ways fundamentally different from the price-driven relation between buyers and sellers in an ordinary market. This argument implied that, contrary to the assumptions of antitrust law, market competition among physicians cannot be expected to lower medical prices. And since physicians influence decisions to use medical services far more than patients do, the volume and types of services provided to patients—and hence total health costs—need to be controlled by forces other than the market, such as professional standards and government regulation. But Arrow's argument was largely ignored in the rush to exploit health care for commercial purposes that ensued after the passage of Medicare and Medicaid in 1965.(2)

Writing about the decline of physicians' professionalism in 2007 [ Relman AS. Medical professionalism in a commercialized health care market. JAMA 2007; 298: 2668-2670. [link here) ], Dr Relman had briefly alluded to the effect of the 1975 Supreme Court decision, (see our post here):

The law also has played a major role in the decline of medical professionalism. The 1975 Supreme Court ruling that the professions were not protected from anti-trust law undermined the traditional restraint that medical professional societies had always placed on the commercial behavior of physicians, such as advertising and investing in the products they prescribe or facilities they recommend. Having lost some initial legal battles and fearing the financial costs of losing more, organized medicine now hesitates to require physicians to behave differently from business people. It asks only that physicians' business activities should be legal, disclosed to patients, and not inconsistent with patients' interests. Until forced by anti-trust concerns to change its ethical code in 1980, the American Medical Association had held that 'in the practice of medicine a physician should limit the source of his professional income to medical services actually rendered by him, or under his supervision, to his patients' and that 'the practice of medicine should not be commercialized, nor treated as a commodity in trade.' These sentiments reflecting the spirit of professionalism are now gone.

It seems to me that Dr Relman has elucidated one of the "missing links" that help explain the current sorry state of physicians' core values, and the broader continuing health care crisis. I am amazed that this bit of history seems to have been so thoroughly forgotten. Dr Relman did write about it before 2007, but in publications that few physicians and other health care professionals were likely to see. Other than Dr Relman, almost no one writing in the medical and health care literature seems to have interest in this issue. (It has been discussed in the Journal of Health Politics, Policy and Law, and the Stanford Law Review by M. Gregg Bloche, but these unfortunately also could have easily been missed by nearly all physicians and health care professionals.) So we have another example of the anechoic effect.

Yet in my humble opinion, every physician and health care professional ought to know that the profession once foreswore the commercialization of medical practice, but gave up on its ability to police its own conflicts of interest after the US Supreme Court decided that professionals are subject to anti-trust law.

But knowing this important bit of history raises more questions than it answers:

• The Supreme Court decision apparently involved interpretation of law, not the constitution. Therefore, why didn't organized medicine pursue a change in the law that would allow physicians to continue to enforce their traditional professional values?
• The Supreme Court decision was primarily directed at lawyers, not physicians. Since the decision, to my knowledge, the law profession has maintained strict rules about conflicts of interest. (For example, no legal CME is sponsored by corporations whose products they seek to have the attendees favor.) Why did the decision wreck physicians' but not lawyers' abilities to regulate their own conflicts of interest?
• The Supreme Court decision only affects US law. Why have physicians in other countries also abandoned their traditional values about commercial entanglements?
• Why did this application of US antitrust law have such significant effects during an era when antitrust enforcement in health care was generally declining? (Insurance companies and hospitals that dominate local markets have not feared antitrust enforcement.)
• Why did only Dr Relman and Prof Bloche seem to care about this up to now?

Inquiring minds want to know.... And answering these questions might bring us back on the path of true medical professionalism.

Hat tip to Merrill Goozner in the GoozNews blog.

References (from Relman)

1. Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975).

2. Kenneth J. Arrow, "Uncertainty and the Welfare Economics of Medical Care," The American Economic Review, Vol. 53, No. 5 (December 1963).

We posted several times, most recently in 2009 (here and here), about misbehavior by the health insurance company/ managed care organization Wellcare. That year, the company settled criminal charges that it defrauded the Florida state Medicaid program by paying a fine and accepting a deferred prosecution agreement. Previously, the state of Connecticut had canceled its arrangement with Wellcare to run a Medicaid program in that state after the company refused to provide the state with requested data. Then the company signed a consent order with the Florida Elections Commission in which it admitted making "questionable" political contributions.

Then this year, it was announced that the company would settle additional civil charges, as per the St. Petersburg (FL) Times,

Tampa-based WellCare Health Plans Inc. has agreed to pay $137.5 million to the U.S. Department of Justice and other federal agencies to settle civil lawsuits accusing the company of overcharging for its Medicaid and Medicare programs.

Also,

Under the tentative deal, which must be approved in court, WellCare would have three years to make payments to the Justice Department's civil division, the U.S. Attorney's Office for the Middle District of Florida and the U.S. Attorney's Office for Connecticut.

WellCare said the payments will include the approximately $23 million owed to the Florida Agency for Health Care Administration for overpayments received by the company in 2005.

The civil settlement is separate from a deal struck last year on the criminal front. In that case, WellCare agreed to pay $80 million to settle a charge of conspiracy to defraud the Florida Medicaid program and the Florida Healthy Kids Corp.

It also previously agreed to a $10 million civil penalty settling an informal inquiry by the Securities and Exchange Commission that regulatory filings reflected more than $40 million in profits that WellCare failed to return to the Florida agencies from 2003 to 2007.

WellCare, which is Florida's largest Medicaid plan operator, has acknowledged that it overcharged Florida and Illinois health programs by about $46.5 million.

But wait, there is more. No sooner than this settlement been announced than it was challenged. While considering the settlement, the judge involved unsealed a set of complaints by whistle-blowers about Wellcare. First, as reported by the Miami Herald,

The complaint, filed by former WellCare financial analyst Sean J. Hellein, portrays a company so ethically challenged that it rewarded employees who dumped hundreds of sick newborns and terminally ill patients from the membership rolls, thereby pumping up profits by millions of dollars.

It describes a company that embraced fraudulent accounting as a business model, eventually stealing between $400 million and $600 million from Medicare and Medicaid programs in several states, perhaps most of it from Florida.

See these specifics:

Hellein, who wore a wire for more than a year to gather evidence for federal agents, says in the complaint that:

- WellCare moved money between accounts to make it appear that patients' treatment cost much more than it actually did. In some cases, the company made payments years in advance to jack up the apparent cost of care to fool states into increasing Medicaid premiums. It worked, he said.

- When states made overpayment errors, WellCare didn't pay the money back, as its contract requires. Florida Medicaid made a series of overpayment blunders that fattened WellCare's bottom line by many millions; those who made the errors included both state officials and contractors.

- Sometimes hospitals and physician groups helped WellCare hide its true spending from Medicaid programs by accepting payments through one account for expenses incurred by another. Sometimes they allowed WellCare to pay for future years' expenses to make it appear spending for the current year was higher than it actually was.

Hellein named two hospital systems - one in Illinois and one in Florida - that he said participated in the sham arrangement, but he said it was common.

WellCare pushed expenses into certain programs - behavioral health programs in Florida and Illinois and the Healthy Kids program in Florida, a program for uninsured children of families with modest incomes - because they required repayment if the cost of treatment fell below a certain threshold.

Florida public officials were repeatedly duped by WellCare. The director of the Florida Medicaid program from 2004 to 2007, while much of the alleged fraud was going on, was Tom Arnold. He currently is Secretary of the Agency for Health Care Administration.

Another agency that fell for WellCare's line was the Office of Insurance Regulation, where an actuary found nothing wrong with a WellCare subsidiary in the Cayman Islands acting as the company's reinsurer.

The reinsurance arrangement enabled WellCare to bank $5 for each insured while making it appear that the cost was just 11 cents, the complaint says.

After Wall Street analysts raised questions about the legality of the reinsurance arrangement in 2007, some thought it might be reviewed by Chief Financial Officer Alex Sink. But nothing ever came of it.

WellCare conducted a study to figure out which Medicaid recipients were profitable and which were not so that it could engage in "cherry-picking," a term for enrolling only the profitable members. The study found that disenrolling a baby born with health problems saved the company an average of $20,000; each terminally ill patient saved $11,500.

Those who were persuaded to resign from WellCare went into the general Medicaid or Medicare fee-for-service programs.

WellCare also restructured its benefit package to discourage the least-profitable Medicaid recipients from enrolling and encouraging those who were more profitable to sign up.

Low-income mothers and children yielded a net of only about 10 percent, while the physically and mentally disabled paid for by Medicare yielded a net of 30 percent, the complaint says.

The complaint names about 20 employees of WellCare who knew about the fraudulent activities. Only one, Gregory West, has been charged. He pleaded guilty in December 2007 but sentencing has been postponed several times.

No charges have been brought against three former executives of the company named in the complaint as orchestrating the fraud: President, CEO and Chairman Todd Farha, CFO Paul Behrens and General Counsel Thaddeus Bereday.

They all resigned in January of 2008, three months after the FBI and other law-enforcement agents raided the Tampa campus of WellCare and carted off computers and files.

The the St. Petersburg Times reported about two more complaints that were unsealed:

Clark J. Bolton, a former supervisor of special investigations at WellCare, said the insurer encouraged overbilling and refused to audit claims for fraud in order to curry favor with doctors and hospitals and build market share. The result was millions in excessive and illegal expenses passed through to federal Medicare and state Medicaid programs, Bolton said.

Eugene Gonzalez, a referral coordinator for seven years, claimed WellCare met government customer service standards only because it had employees create backdated documents and make bogus calls to the company's phone lines. Failure to meet these standards would have resulted in the loss of billions of dollars worth of Medicare and Medicaid contracts.

As we have before, we see a striking contrast between the scope of the allegations and the response by the government agencies that are supposed to regulate insurers, insure that public money is spent wisely, and investigate and seek punishment for illegal activities. As the latter St. Petersburg Times article noted,

U.S. Rep. Kathy Castor criticized the proposed settlement as wholly inadequate in a letter this week to Attorney General Eric Holder. 'Where is the penalty and punishment for such egregious actions?' she wrote. 'It appears that companies such as these simply build such payments into the 'cost of doing business.' We cannot allow this to continue.'

This notion should be familiar to readers of Health Care Renewal. The Wellcare case fits right into the parade of legal settlements we have discussed. As we have said again and again, the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior by health care organizations. Even large fines can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Also note that the case of Wellcare remains relatively anechoic. Despite the severity of allegations, and the national scope of the company, the case has only been mentioned in news stories, mainly in Florida where the company has its headquarters, and in a few health care trade publications. It, like many of the cases we discuss on Health Care Renewal, has not been mentioned in the medical/ health care research/ health care policy literature.

If we cannot even speak about the sort of very bad management that afflicted Wellcare as a cause of many of the ills of our health care system, how do we really expect to constructively reform that system?

A Denver Post article offered a brief glimpse into the health benefits of corporate leaders, on the unusual occasion of a former CEO now in legal fight for the health benefits in the style to which he had become accustomed:

Poor Joe. He's not getting the health-care benefits he was promised.

His former employer merged with another company, and then another, and then another. And, you know how it goes after a slew of mergers. Suddenly the new, conglomerated monster just doesn't care about retirees any more.

Joe isn't going to sit back and take it like an average Joe. He's suing his former employer in U.S. District Court in Manhattan for breach of contract, breach of faith, breach of fiduciary duty and even promissory estoppel.

The Joe in question was really:

Lord & Taylor's CEO.

Joseph E. Brooks of Greenwich, Conn., lorded over a fourfold increase in sales at Lord & Taylor, expanding to 46 from 19 locations.

His career and Lord and Taylor's course after that were checkered, perhaps contributing to the current dispute:

But that was a long time ago. And Macy's Inc., the current parent company, is resisting some of his medical claims.

Brooks didn't get a deal like this from Filene's, where he served as president before joining Lord & Taylor. Or Ann Taylor, where he went on to generate shareholder lawsuits and shopper hate mail after demanding lower prices from suppliers and higher prices from customers, destroying both quality and value at the same time.

Brooks also made his son president of Ann Taylor, sparking cries of nepotism. And then his son got snagged trying to slip by U.S. Customs without paying duties on pricey watches and was forced to resign. The senior Brooks subsequently resigned as well. A 1992 Newsday article called him 'as egotistical and extravagant as he was brilliant.'

What Health Care Benefits Do CEOs Get?

What had Brooks been promised as CEO of Lord and Taylor?

In 1983, Lord & Taylor's corporate parent told Brooks it sought to provide 'great comfort to executives knowing that their medical costs are fully reimbursed by the Corporation.' The company told Joe it was a lifetime guarantee.

CEOs should never, ever, have to worry about health care.

Here are some details about his benefits:

And for nearly 27 years, substantially all medical costs have been fully covered, even premiums.

We're not just talking doctors' visits, hospitals, medications and tests. We're talking all travel and ancillary expenses associated with care, too.

We're talking first-class transportation, accommodations and meals while being treated at the Mayo Clinic and the Duke Diet and Fitness Center. We're talking expenses for a companion or personal aide, too.

We're also talking 'cosmetic services (surgery, medications, injections, creams and the like)' dental care, gym memberships, personal trainers, vitamins, massages — all paid by Joe's former employer for the rest of Joe's life.

Oh, and if any of these benefits have tax consequences, we're talking gross-up payments to cover that, too.

Why should we be concerned about the extravagant health plans given to top corporate executives?

The Implications

We noted in 2009 that the Goldman Sachs 2009 proxy statement indicated that top executives of that now controversial company received health plans worth about $40,000 each.

My concern then were not how much the costs of the plans contribute to top corporate leaders' compensation packages. Such packages are generally already so outrageously huge that providing $40,000 rather than $13,000 worth of health insurance is a trivial increase. My concern was not that plan recipients' demands for health care will collectively increase health care costs, because they likely include only a tiny portion of the population.


My main concern, instead, was how much these plans further insulate already cocooned top executives from the vicissitudes of daily life, particularly related to coping with our current dysfunctional health care system. What benefits executive health care plans provided were not clear from the 2009 story about Goldman Sachs. However, this year's case of Joe Brooks does suggest that the plans paid for every expense that could be conceivably health related.

As I worried then, it now does appear that such plans could completely insulate executives from having to deal with the managed care/ health insurance bureaucracy which frustrates patients seeking particular services, but not necessarily the most expensive, or least beneficial services. Furthermore, such plans may completely insulate executives from the various other vicissitudes of managing our currently dysfunctional health care system. (By the way, that is why it seemed amazing that the CEO of Pfizer had to put up with some of the common vicissitudes when he went to a hospital for an elective procedure, an experience he publicly talked about with an almost charming naivete, given that he runs such a powerful health care organization which has been so influential in shaping our US "health care reform," see post here.)

Such executives isolated from the real world of health care might thus not have gut level appreciation of how dysfunctional the health care system has become for even insured patients. Since top executives often are disproportionately influential members of the "superclass," their disconnection from the realities of dysfunctional health care is likely to translate into little real support by the powers that be for meaningful health care reform. There support may be further retarded by the influence of their fellow superclass members whose personal fortunes depend on the status quo in health care.

Real improvement of health care may depend on finding leaders who have better understanding of the plight of real people.

Two Postscripts

Note: the Goldman Sachs 2010 proxy indicates that the executive health plans given to the five most highly paid executives cost up to $56,927.

Also note that despite the effect that executive health plans may have on the thinking of those with the most power to influence health care policy, the plans have been of little interest to health care services and policy researchers. I have not been able to find a single article in these literatures on the subject. This appears to be yet another version of the anechoic effect, that certain inconvenient truths (to borrow from former US Vice President Al Gore) are not subjects of polite discussion of health care, lest the results excessively disturb the powers that be.

We have frequently discussed the anechoic effect, how it is just not done to discuss certain topics, particularly those related to the adverse effects of bad (ill-informed, incompetent, self-interested, conflicted, or corrupt) leadership and bad (opaque, unaccountable, mission-hostile, unethical) governance of health care organizations. We have discussed many possible causes of the anechoic effect, but one particularly obvious cause is the silencing of dissenters and whistle-blowers.

Three recent stories illustrate old and new tactics to reinforce the anechoic effect.

A Classic Case - ValleyCare Medical System Nurse Fired

From the San Francisco Chronicle,

An Alameda County jury awarded more than $344,000 in damages this week against ValleyCare Medical System for refusing to rehire a Castro Valley operating nurse who claimed the hospital was retaliating against her for complaints she made about patient safety issues, including concerns about surgical equipment left inside patients.

Kristeen Klaas, a 15-year veteran at ValleyCare and a registered nurse for more than 30 years, sued the hospital system, which has services in Pleasanton and Livermore, after she quit in distress in May 2008 and hospital managers failed to respond to her request to be rehired days later.

The 54-year-old Klaas, who now works at Alta Bates Summit Medical Center in Oakland and San Leandro Hospital, had brought numerous safety complaints about the Pleasanton hospital to the attention of ValleyCare's management over the two years prior to her resignation.

Klaas complained about a fellow nurse who brought a dog into the operating team's break room and jumped rope with an electrical cord in the operating room, as well as a surgical technician who brought a rifle into the operating room office to sell. She also complained that a tip of a surgical instrument went missing during a surgery and was never found, and that an instrument was left in a patient because the hospital did not have a formal policy of counting instruments after surgery.

She also accused a supervisor of forging her signature on a performance evaluation after she refused to sign an evaluation that was backdated to comply with state regulations.

Here is the tactic allegedly used to silence the whistle-blowing nurse:

On her last day on the job, Klaas got permission from her supervising nurse to leave work because she was in distress after a colleague, the subject of three of her complaints, screamed at her.

'She realized, for the patient's safety, she couldn't continue to go forward that day in the operating room because she was so upset,' he said.

But then a supervisor called her at home and accused her of leaving without permission, prompting Klaas to resign, he said.

This is the classic, rather blunt way to do it: just make the would-be truth-teller's job experience so miserable that she quits.

Now we will present two examples of a more subtle approach, one directly from health care, one at least from a sphere with major health care implications.

A New Approach: A Contract Preventing Communication "Inimical" to a Pharmaceutical Company's Business

This case was documented by a personal narrative by Marc Lipsitch, a Professor of Epidemiology and the Harvard School of Public Health, published in the Chronicle of Higher Education,

I received a request from a large pharmaceutical company to assist in the design of a clinical trial, and the proposed terms seemed to require that I sign away my right to criticize the product. One provision would prohibit me from entering into 'any agreement or relationship to render services as ... adviser or consultant to, any other individual, firm, or corporation that would be inimical to or in conflict with' the aspects of the company's business covered by the agreement. Another would forbid me to engage, in any capacity, directly or indirectly, in "any business," with or without compensation, relating to the class of products under discussion—not just for the term of the contract, but for the year after as well. Those provisions could restrain me from providing candid advice to a regulator, a government official, or the editor of a peer-reviewed journal about the class of products on which I was consulting, even if the advice were based on publicly available information. I objected to those terms, as did a colleague who was offered the same arrangement.

Prof Lipsitch also noted that government research funding agencies and universities may not provide any protections to their faculty against such agreements. He also noted that the contract he was asked to sign was not one of a kind:

Discussions with my colleagues suggest that the problem is not limited to one pharmaceutical company ....

We and many others have frequently discussed the conflicts of interest that may be generated by physicians or health care academics having financial relationships with industry. The Institute of Medicine's definition of conflict of interest (in a health care context) found in its report, Conflict of Interest in Medical Research, Education, and Practice, is:

Conflicts of interest are defined as circumstances that create a risk that professional judgments or actions regarding a primary interest will be unduly influenced by a secondary interest. Primary interests include promoting and protecting the integrity of research, the quality of medical education, and the welfare of patients. Secondary interests include not only financial interests....

Thus the concern is that a faculty member,for example, who is paid to consult for a drug company might tend to favor the company, its products, or policies to its advantage in his or her clinical teaching, scholarly talks and writing, or public policy opinions. That might happen even if the consulting work is technical or scientific and not directly related to the particular topic about which communication might be influenced.

However, the situation described by Prof Lipsitch is much worse. Were he to have signed the contract, he would have been constrained by this legal agreement from writing or saying anything "inimical to or in conflict with" the company's business.

Last week, a similar, but more wide-spread example surfaced (pardon the pun) in a domain that is at least related to health care.

Another Version of the New Approach: the BP Consulting Contracts Making Any Communication Between the Company and the Consultant Confidential

Originally reported by the BBC,

The head of the American Association of Professors has accused BP of trying to 'buy' the best scientists and academics to help its defence against litigation after the Gulf of Mexico oil spill.

'This is really one huge corporation trying to buy faculty silence in a comprehensive way,' said Cary Nelson.

The BBC has obtained a copy of a contract offered to scientists by BP. It says that scientists cannot publish the research they do for BP or speak about the data for at least three years, or until the government gives the final approval to the company's restoration plan for the whole of the Gulf.

It also states scientists may perform research for other agencies as long as it does not conflict with the work they are doing for BP.

And it adds that scientists must take instructions from lawyers offering the contracts and other in-house counsel at BP.

Here are some examples of the wording of the contract as obtained by the BBC about confidentiality.

Confidentiality. All communications (including non-public information disclosed in such communications) between you (and your agents), BP Attorneys and/or other BP representatives in the course of your performance of the BP NRDA Services are deemed to be incidental to the rendering of legal services and are to be privileged and confidential. You shall maintain a strict confidentiality of such non-public communications and information unless or until a person from whom you are authorized to take instructions informs you in writing that this restriction is no longer applicable to any particular non-public communications and information. In the event you are required to disclose such privileged and confidential non-public communication and information by an order entered by a court or by similar judicial process, or by a judicial or administrative subpoena, you shall notify a person from whom you are authorized to take instructions as soon as practicable, and you are required to cooperate with BP if BP decides to seek relief from such required disclosure, including commencement of a legal or administrative proceeding to prevent or limit disclosure of such privileged or confidential information.

Here is the description of those from whom the signer of the contract must take orders.

Instructions. You agree to take your instructions only from me, from other lawyers in my firm, from Brian Israel or other lawyers in the Arnold & Porter law firm, and from Donna Ward or other in-house counsel at BP (collectively 'BP Attorneys').

Note that the contract defines privileged, confidential information as any communication between BP and its representatives and the contract signer. Thus, to make something confidential, all BP would have to do is mention it in a communication. It appears that this would allow BP to render off-limits any topic it chose. Also, since by the same mechanism, it appears that the contract itself, once signed, would also become privileged and confidential.

Summary

I submit that ideally medicine and health care ought to be a very transparent calling. Physicians are obliged to keep confidential the information disclosed to them by patients, enabling the patients to trust physicians sufficiently to provide them the accurate information needed for optimal care. However, it is hard to think of much other information or communication in health care that ought to be kept secret, (other than the processes used by commercial firms to manufacture drugs or devices.)

Yet as health care becomes more of a business and less of a calling, businesspeople's proclivity to keep as much as possible secret to avoid giving any advantage to a competitor has become more influential. Furthermore, those leading big organizations have realized that it is easier to maintain their power if they can keep their mistakes, if not misconduct secret. So businesspeople's proclivity to mount overwhelming legal defenses of their interests may lead to persuading or fooling people who might be inclined to delve into such mistakes and misconduct to sign contracts to keep them silent through confidentiality clauses, requirements to protect privileged or proprietary information, non-disparagement clauses and the like. The result will be better coddled self-interests, but more opacity that is inimical to good patient care, teaching, research, and public policy discussion.

To truly reform health care, we need more transparency. To produce more transparency, we need constraints on contracts that inhibit needed clinical, teaching, research and public policy communication.

Meanwhile, as my father, who was an attorney, done told me: "don't sign a contract you don't understand, and don't sign a contract giving away any right you need to keep."

Omnicare's Trail of Legal Settlements

Last year, we discussed a $98 million settlement made by Omnicare, US based corporation that manages pharmacy-benefits, of allegations that it received kickbacks from generic drug manufacturers for buying and recommending their drugs. Omnicare had previously submitted to a corporate integrity agreement in 2006, and paid $102 million to settle allegations it defrauded Medicaid. At the time, we noted that this was yet another of the many cases in which the organization alleged to be involved in wrong-doing paid a fine, but no one who authorized, directed, or implemented the bad behavior was subject to any negative consequences.

So last week, Cincinnati.com ran a story on the retirement of the CEO who presided over Omnicare during the time of the alleged misconduct.

Before reading further, would anyone care to guess whether the company's previous bad behavior would negatively impact his fortunes?

Contrasted with the Size of the CEO's Retirement Package

No exactamente:

As Omnicare Inc.'s new leadership begins to reshape its corporate culture - one that had included generous pay for senior executives - the Fortune 500 firm's exiting CEO stands to collect one of the largest payouts landed by a U.S. corporate executive in recent history.

Former president and CEO Joel Gemunder, who surprised analysts and investors when he retired on July 31, is in line to receive more than $130 million in severance, pension and departing payouts.

At 71, Gemunder had led Omnicare Inc., the nation's largest provider of pharmaceuticals for the elderly, for nearly 30 years.

On his retirement, Gemunder was up for a lump sum pension payment of more than $91 million. That's in addition to a monthly pension payment of $1,719 and roughly $5.38 million from a deferred compensation plan.

Gemunder also will receive $16.2 million in cash severance payable through next July. His 2.7 million in stock options and more than 705,100 shares of restricted common stock also became fully vested on his retirement. Collectively, the shares were worth more than $21.7 million, according to the company's most recent proxy.

To recapitulate so far: the company had to make two settlements of charges of kickbacks and fraud, totalling about $200 million, and accept a corporate integrity agreement. The CEO on whose watch this occurred left the company with a $130 million retirement package.

Can we spell "impunity?"

Protest from the Main-Stream Media

But this case was different from many of the legal settlements that we have chronicled in the past. In those previous cases, we noted how corporate bad behavior cost the organization as a whole, and hence collectively cost the stock-owners, the employees, and the customers/ clients/ patients involved, but not the leaders who authorized and directed the bad behavior, nor the particular people who implemented it. Hardly anyone else, however, took notice.

However, after Mr Gemunder's obese retirement package was made public, there was actually outrage in the opinion section of the Wall Street Journal:

Health-care costs, the national debt and taxes are all going up, and Joel Gemunder is one reason why.

Until Mr. Gemunder's abrupt retirement was announced on Monday, he was CEO of Covington, Ky.-based Omnicare, the nation's largest dispenser of pharmaceuticals to nursing homes.

Omnicare gets most of its revenue from Medicare, Medicaid and other companies sucking on these same government feeding tubes. Omnicare also lives up to its name, serving 1.4 million beds in 47 states.

Mr. Gemunder, 71, had been in charge since 1981, but now he's split with one of the largest lump-sum pension payouts in history, The Wall Street Journal reported. He's getting a $91 million pension payout, plus severance, vesting of restricted stock and other goodies that bring his final payday to at least $130 million. And that's on top of the $14 million he bagged last year.

As CEO, Mr. Gemunder touted 'cost reduction initiatives,' including salary cuts for employees, but these initiatives didn't apply to himself.

And what did the shareholders get for their money? Omnicare shares took a tumble last week after the company reported a shocking drop in the number of prescriptions it fills.

Omnicare stock peaked in March 2006 at more than $61, but now trades under $23. That's a drop of more than 60% -- versus a roughly 11% decline in the S&P 500 during the same period.

And what did the taxpayers and customers get? Omnicare has long been plagued by huge litigation costs amid allegations of kickback and billing schemes.

It's nice to have company. And it's very nice that the issue of the impunity enjoyed by leaders of top health care organizations has made it into the main-stream media. Now it is time to do something about it.

Summary

Let me say it again: The Omnicare settlement coupled with its CEO's outlandish retirement package fit right into the parade of legal settlements we have discussed. As we have said again and again, the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior by health care organizations. Even large fines can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Postscript: A Conflicted Board Member?

The Cincinati.com story described the bizarre process used to set the size of the Omnicare CEO's retirement package.

Just ahead of Gemunder on the big pension list is Thomas M. Ryan, president and CEO of CVS Caremark Corp. with $94.4 million at the end of 2009.

CVS posts annual sales in excess of $98 billion compared to Omnicare's $6.17 billion. Annual profit at CVS is $3.6 billion compared to $ 211 million at Omnicare.

Despite the sizable differences, CVS is among 40 companies whose CEOs pay is considered when Omnicare's executive compensation committee determines pay for its top executives, according to the firm's April proxy. The company's compensation committee, which declined comment for this story, is made up of three long-time directors Andrea R. Lindell, board chair John T. Crotty and Steven J. Heyer.

Other companies considered include New York-based Bristol-Myers Squibb Co. with $17.8 billion in sales; Dublin, Ohio-based Cardinal Health, Inc. with $99 billion in sales and New Jersey-based Medco Health Solutions, Inc. with $72 billion in sales.

'These companies are enormously bigger than you would expect for a comparative group' for Omnicare, Crystal said. 'It's the equivalent of the local ball team that's not in the major leagues using their comparative group as the New York Yankees.'

Note that one member of the compensation committee that used this absurd standard to set the CEO's compensation was one Andrea R Lindell. The above story did not identify her further, but as we noted last year, she "is also Dean of the College of Nursing at the University of Cincinnati. One would think that someone who thus boasts 'the success of our students, faculty, staff and alumni who work together to promote excellence in education, research, service and practice' needs to keep a closer eye on the ethical aspects of her company's management. But as the New York Times just noted on the front-page of last Sunday's business section, as another blow to the anechoic effect, "Academics may be trained to ask tough questions in their own fields, but when confronted with tricky business issues far above their level of expertise they 'often become as meek as church mice'...." and hence are just the sort of directors that self-interested CEOs intent on lining their own pockets love.

So this case becomes another reason to take seriously the increasingly frequent conflicts of interest generated when top leaders of non-profit health care organizations sit on boards of for-profit health care corporations. These conflicts may not only distract the leaders from the mission of the non-profit organizations, but also distract them from their fiduciary duties to the stock-holders of the for-profit corporations.

As we get closer to graduation season for most institutions of higher education, another story about the leadership and governance of higher education, involving an institution housing a prominent medical school, has come into view, albeit indirectly. Let me try to explain this complex story, which on its surface has something to do with the ongoing financial crisis, but nothing to to with academia, by quoting, as usual, from media coverage.

We start with an article from the New York Times last week:

The man leading the Obama administration’s efforts to restructure the auto industry has been described in Securities and Exchange Commission documents as having arranged for his investment firm to pay more than $1 million to obtain New York State pension business.

Although he is not named in the documents, a person with knowledge of the inquiry said the investment executive is Steven Rattner, co-founder of the Quadrangle Group, the prominent private equity firm.

The S.E.C. complaint, filed as part of an expansive state and federal investigation into corruption at the state pension fund, details the efforts of Quadrangle to gain business from the pension fund beginning in 2004.

The person who received most of the $1 million-plus payment has been indicted, accused of selling access to the fund.

Here are the details of allegations of how Mr Rattner interacted with intermediaries to get NY state pension fund investments into his company.

Investigators are scrutinizing the fees paid by investment firms to intermediaries who arranged deals with the $122 billion pension fund. While such payments are legal, they often raise questions about conflicts of interest and would be illegal if used to bribe public officials.

In a 123-count indictment issued last month, two aides to Mr. Hevesi were accused of selling access to the fund. The aides, Hank Morris, who was Mr. Hevesi’s top political consultant, and David Loglisci, the fund’s chief investment officer, have denied any wrongdoing.

The S.E.C. complaint, which was released Wednesday, describes steps undertaken by the Quadrangle executive to win $100 million worth of business from the pension fund in 2005. That amount accounted for nearly 5 percent of a Quadrangle private equity fund and helped the company raise money from other investment funds.

In October 2004, the executive met with Mr. Loglisci to seek the pension fund investment and Mr. Loglisci 'reacted favorably' and 'began taking the necessary steps to secure approval' for the investment, the complaint said.

Two months later, in December, the same executive met with Mr. Morris, who, according to prosecutors, was working in tandem with Mr. Loglisci to generate millions of dollars in fees from the investment firms, and within weeks had agreed to a deal to pay an obscure securities firm that employed Mr. Morris 1.1 percent of any money that the retirement fund invested with Quadrangle, as a placement agent fee. That worked out to $1.1 million, of which Mr. Morris received 95 percent.

The timing of the meeting with Mr. Morris was significant, the complaint indicated, because the Quadrangle executive had already met with Mr. Loglisci and would presumably not need a placement agent. In addition, Quadrangle had previously retained a separate placement agent.

The executive also met with Mr. Loglisci about a low-budget movie Mr. Loglisci was producing, 'Chooch.' Soon afterward, GT Brands Holdings, a company owned by one of Quadrangle’s private equity funds, made a deal to acquire the DVD distribution rights to 'Chooch,' an agreement that made the film’s producers nearly $90,000.

The Quadrangle executive called Mr. Morris after the distribution deal was closed, and told him of the deal’s 'connection to Loglisci.' Three weeks later, Mr. Loglisci 'personally informed the Quadrangle executive that the retirement fund would be making a $100 million investment' in Quadrangle, the complaint said.

Later, the Washington Post published an article which alleges possible conflicts of interest affecting Mr Rattner in his current position as "automobile czar,"

The questions around Quadrangle and Rattner follow others that came to light soon after he emerged as a candidate to lead the Obama administration's efforts to prop up Chrysler and General Motors.

Quadrangle was, at least indirectly, previously involved in a deal involving Chrysler's majority owner, Cerberus Capital Management, a private equity firm.

That connection has led some Chrysler investors to doubt whether Rattner can decide without bias how the government should aid Chrysler.

In the summer of 2007, Quadrangle purchased Dennis Publishing, the owner of magazines including Maxim and Blender. The estimated price was $250 million.

Quadrangle's new magazine company was renamed Alpha Media and it took a loan of $125 million, much of it coming from Cerberus.

A year after Quadrangle's purchase, the publishing company's profits began to plummet.

The company announced last month that it would cease publication of its Blender magazine. Quadrangle has written the Alpha Media investment down to zero on its books, and Cerberus, the company's major creditor, is now effectively in control of Alpha, a person familiar with the matter said.

This week, a NY Times article revealed that Mr Rattner and Quadrangle are facing a wider investigation, and may be a target of investor lawsuits:

Two months after Steven Rattner left Wall Street for Washington, his private investment company is facing a widening investigation into corruption in public pension funds — and fighting for its future.

As state and federal authorities examine Mr. Rattner’s dealings with the New York State retirement fund, questions are emerging about his efforts to gain business from several other public funds, including ones in New Mexico and New York City. His private investment firm, the Quadrangle Group, is moving to calm anxious pension managers, who have entrusted the firm with hundreds of millions of dollars.

Mr. Rattner, who is leading the Obama administration’s efforts to revamp the auto industry, has left his small but prominent firm in a bind. Because he was integral to Quadrangle, investors can try to withhold additional money that they have pledged to the firm now that he has left.

No charges have been filed against Mr. Rattner, who did not respond to e-mail messages on Tuesday, or against Quadrangle, whose executives declined to comment.

While Quadrangle’s funds have not suffered as much as some other private equity funds, its investors have suffered losses in other parts of their portfolios. Some of them might try to capitalize on the inquiry to avoid making good on their pledges.

Another crucial question, however, is whether money from one Quadrangle fund was used to lure investors to a second fund. That possibility that might expose Quadrangle to investor lawsuits.

Furthermore, a Washington Post article raised the question of a failure of honest disclosure:

Government officials are expanding their investigation of Quadrangle, the private-equity firm founded by the Obama administration's lead auto negotiator, as new details emerge about an alleged kickback scheme involving the New York state pension fund.

On Wednesday, the New York City Comptroller William C. Thompson Jr. said he is working with the state's attorney general, Andrew M. Cuomo, to determine whether the city's pension funds were 'intentionally misled or deceived' by Quadrangle's failure to disclose the use of a middleman who has since been indicted, Hank Morris.

New York City's comptroller on Wednesday said Quadrangle never disclosed that it had paid Morris fees in connection with the city pension funds' investment in Quadrangle. The city invested $85 million in 2005 and $40 million in 2006.

The city has a rule that use of placement agents must be disclosed, but that rule was implemented in 2008 and does not apply to the Quadrangle investments.

But as part of the due diligence for receiving the investment, Quadrangle said in writing at the time that it used only two placement agents, Monument Group and London-based Helix Associates, the comptroller's office said.

'We take any ethical lapses by our managers seriously and will consider any remedies available to investors,' Thompson, the city's comptroller, said in a statement.

In response to all this, New York state government officials decided to ban middle-men from influence over pension fund investment decisions, according to the Wall Street Journal:

New York state said its public pension fund, one of the nation's largest, would ban the use of middlemen to help private-equity funds and other investors secure its business.

The move marked a pivotal development in a burgeoning controversy that has grown from a local corruption probe to a broader examination of the tactics that investment firms used to win lucrative business from vast public pension pools.

In most states, charging placement fees is legal if they are disclosed as required. But potential conflicts of interest are rife, especially for officials with a legal obligation to make informed, well-intended decisions about how pension-fund money is spent. Lawyers say a gray area emerges when finder's fees are paid to individuals or firms that do little more than trade on their access to public-pension-fund executives.

Such alleged behavior is at the heart of the scandal unfolding in New York. The state attorney general and the SEC have accused a former top fund official and a political adviser of giving investment funds access to billions of dollars of state pension money, in exchange for kickbacks and other payments for personal and political gain. One such middleman already has pleaded guilty to securities-fraud charges.

Some officials across the country have expressed concern about so-called pay-to-play practices -- that is, paying to influence people who direct the investments of public-employee retirement funds. Pay-to-play can range from illegal kickbacks, which in some instances have led to jail time, to legal activities such as campaign contributions to elected officials on the boards of pension funds. Pension funds are especially vulnerable to such accusations because their boards are often populated by elected officials or people with limited financial experience who need to rely heavily on outside advisers.

New York state's comptroller, Thomas DiNapoli, said that in light of the allegations contained in the case brought by the state's attorney general and the SEC, 'the best way to restore the pension fund's reputation is to say we won't be involved with any transactions that involved placement agents.'

Meanwhile, several commentators raised questions about Mr Rattner's suitability to be "automobile czar."

David Rothkopf, the author of Superclass, dubbed Mr Rattner the "kickback czar" on the Foreign Policy blog,

Are you joking? The Obama Administration somehow thought that it was okay to give a pass to Steve Rattner? They thought it was okay to appoint a guy to a key job after he apparently acknowledged to them that he was under investigation for providing a million dollar payment to pension consultant in exchange for receiving an assignment to manage a big chunk of pension fund money for New York State?

They thought it was okay in the middle of a justified surge of global disgust with Wall Street to embrace a big time Wall Street player who is smart enough to be arguing the legal technicalities of the transaction but not smart enough to recognize that it might just seem to be sleazy, dubious and a gross disservice to the people who were depending on the State to use appropriate methods and metrics to find stewards for their retirement money?

They even thought it was okay when part of the deal involved payments to support a movie called 'Chooch.' (What’s worse than bad ethics and bad taste all wrapped up into one sordid exchange? The New York Post called 'Chooch' which scored an amazing 00 rating from Rotten Tomatoes “the kind of vanity project that gives amateurs a bad name.”) What's more they did all this while giving Rattner the job of auto czar for which he had no material auto industry experience? I thought the way high ethical standards worked was that you didn't just bar people convicted of crimes, you tried to weed out people who had done things that were wrong or contrary to the public interest.

On BlackStarNews, Edward Manfredonia wrote:

I believed Rattner’s efforts to take the Times private should have disqualified him from an appointment with the Obama Administration; especially the key post of trying to stabilize the collapsing auto industry.

The White House still insists that the Administration fully supports Rattner; that reminds me of Bush proclaiming backing for Don Rumsfeld when it was clear he should have been shown the door as defense secretary.

Here's why Rattner deserves the boot.

An even more egregious form of activity that what I previously covered has become public. Rattner, who has extensive ties to Bill and Hillary Clinton, has been identified in several published news reports as the Quadrangle Fund executive who paid $1.1 million to receive more than $100 million from New York State’s multi-billion dollar pension fund to manage. The manner in which the payments were made leaves no doubt that they were meant for 'pay to play', which is illegal in my opinion.

Not surprisingly, a NY Times editorial was milder, but did allow,

Mr. Rattner showed some bad judgment in the 'Chooch' deal, and the public has a right to expect more of him in his new, highly sensitive position.

It's an interesting story, with implications in many areas, and it has hardly played out. Anyone reading this far is probably wondering, however, what this has to do with leadership, governance, and ethics in health care. None of the articles quoted above mentioned anything related to health care, or academics for that matter.

Here is where I pull the rabbit out of the hat.

Steven Rattner, in fact, has an important leadership position relevant to academics, and to academic health care. He is a member of Brown University's Board of Fellows, the "upper house" in the university's bicameral board of trustees, called the Brown Corporation. Brown University includes the Alpert Medical School, and the Division of Biology and Medicine. (Full disclosure: I am an alumnus of the College at Brown, and of the Medical School. I am a former full-time Brown faculty member, and currently a voluntary Clinical Associate Professor.)

And thus the issue here is really about the anechoic effect. Even though this convoluted case raises issues about Mr Rattner's role at Brown analogous to the issues it raises about his role as "automobile czar," there has been to date not even any media mention of his role at Brown, much less discussion of its implications for the university, academic leadership and governance, etc.

To survey the local coverage, the Providence Journal has not published any relevant news stories so far. It did print an op-ed questioning Mr Rattner's suitability for the "automobile czar" position, which had to do with the lack of sympathy an "investment banker" might have for the United Auto Workers. The Boston Globe ran a story from the Washington Post about the case, but one that had nothing on the local, or the academic angle. The Brown Daily Herald published a two news stories (here and here) about Mr Rattner's appointment as "automobile czar," which did note he is a "corporation member," but has not covered the current controversy. I am aware of no recent open discussion, or any discussion at all of Mr Rattner as a member of the Board of Fellows, in light of the recent unpleasantness.

Thus, our local angle on the New York pension/ placement agents/ Quadrangle/ "Chooch" affair mainly demonstrates how at many academic institutions, it is simply not done to bring up issues that question leadership and governance, especially at the highest levels.

Parenthetically, we have posted many times, most recently here, about the leadership and governance of Dartmouth College. Some might have interpreted these posts as hostile to that institution. They were anything but. In fact, it has only been possible to discuss leadership and governance at Dartmouth so thoroughly because that institution is much more open about its leadership and governance than is the typical US academic institution. Half of the he Dartmouth Board of Trustees, as we noted, used to be elected by vote of the alumni. The alumni could nominate their own candidates for the Board, through a petition process. The successful attempt to decrease the overall proportion of elected Trustees sparked a tremendous amount of open discussion and debate. Issues of leadership and governance at Dartmouth seem to be frequently discussed in local publications, on blogs, and sometimes even in the national media. I suspect that a governance system at Dartmouth marked by more than average representativeness and accountability has lead to much more vigorous debate and discussion of academic governance and leadership than occurs at more typical universities. (Note that even after the "board packing," Dartmouth still has a larger proportion of alumni-elected trustees than does the typical university, and it is still possible for alumni to put people on the ballot via petition.)

Brown University, on the other hand, is lead by a Corporation most of whose members are appointed by the Corporation itself. While a minority (14 of 42) of the Board of Trustees (the lower house) of the Corporation are elected by alumni, to my knowledge, all the election candidates are hand-picked by the Brown Alumni Association, and there is no provision for petition candidates. Although a few fiesty students occasionally call for more light to shine on the Brown Corporation, (e.g., see here), for the most part, questioning the leadership and governance of the university is simply not done. Thus, Brown seems to be typical of most major US academic organizations.

However, more transparent, accountable, governance, clearly guided by ethical principles and the organization's mission might allow US academia, and academic medicine to address some of the problems that we too often have opportunities to discuss on Health Care Renewal.

The case of the deadly contaminated heparin sold by Baxter International has received much less attention than seems warranted given its human costs (81 lives). How the heparin was contaminated, and how the contaminated heparin ended up being sold as a US Food and Drug Administration approved American product are still unknown. Our most recent post, here, noted that an investigation into the contamination of the active pharmaceutical ingredient (API - actually the heparin itself) in China failed to produce any results, apparently because the Chinese government did not see fit to pursue it. (Note that a brief summary of the whole case is at the end of this post.)
Now a new story in the Wall Street Journal by Alicia Mundy explains even more about why we do not know more about the contaminated heparin:

Baxter International Inc. faces a new challenge in federal court in its bid to block disclosure of documents about the 2008 contaminated-heparin crisis.

Baxter and Scientific Protein Laboratories LLC are fighting a civil mass tort lawsuit alleging deaths and injuries from imported Chinese heparin in 2007 and 2008. A company that isn't party to that lawsuit says some of the information Baxter and SPL want to keep confidential is important to public health and drug safety, and could reveal information about the sources of toxic heparin in the Chinese supply chain.

The two companies want to keep under seal portions of depositions taken in the case, including those related to Momenta Pharmaceuticals Inc., which helped the U.S. government investigate the contamination. Baxter and SPL say they will be hurt if forced to disclose proprietary information.

They have denied that they were negligent in the deaths linked to the blood-thinning drug, widely used in cardiovascular and other conditions.

So,

On Aug. 3, federal Judge James Carr in Toledo, Ohio, ruled in favor of the confidentiality motion by Baxter and SPL.

On the other hand, there are arguments, admittedly by parties with relevant financial interests, for making more information public:

Last Friday, another company entered the fray, contending that the information in the depositions shouldn't be sealed. Amphastar Pharmaceuticals Inc. said public health could benefit if the depositions shed light on circumstances in China.

Amphastar, which has been competing with Momenta for approval to make a newer and more expensive form of heparin, said the information is also important to a congressional investigation into the Food and Drug Administration's handling of the heparin crisis. Republican leaders of a House committee say the FDA failed to trace the contamination in the Chinese heparin supply chain.

On July 23, the FDA granted approval to Momenta to make the special heparin called enoxaparin, while Amphastar's application remains on hold.

Amphastar said in its court filing that the 'serious safety concerns' involving heparin are relevant to enoxaparin because heparin is the starting material of enoxaparin's active ingredient. Most U.S. heparin supplies come from China.

Of course, the companies who want to keep as much about the case secret as they can are not talking about it:

Lawyers for Baxter and SPL declined to comment on their efforts to restrict information related to Momenta. They referred inquiries to Baxter, whose spokeswoman declined to comment.

So here is more about what we do not know about the deadly contaminated heparin from China. One reason that this case has remained so anechoic is that the companies that sold and processed the contaminated heparin, and are now defendants in lawsuits have used that situation as a rationale for keeping "proprietary" information secret. There clearly may be reasons that Baxter International, the company that sold the heparin under their (formerly?) prestigious US label wants to keep secret the details about what efforts it did or did not make to assure that the heparin it sold was pure and unadulterated. There clearly also may be reasons that Scientific Protein Laboratories LLC, the US based company that sold the heparin API to Baxter wants to keep secret the details about what efforts it did or did not make to assure that the heparin API was pure and unadulterated.

The ability of participants in lawsuits to keep "proprietary" information secret clearly adds to the anechoic effect. Ironically, it may be that civil legal action, which is sometimes the only way to impose negative consequences on health care organizations that have misbehaved, may have the adverse effect of further hiding information about the events in question.

However, to promote the safety of individual patients and the health of public, and to prevent another deadly case of drug contamination, understanding details about what happened is absolutely vital. The private pecuniary interests of Baxter International and Scientific Protein Laboratories LLC seem to be directly opposite to those of patients, physicians, and the public at large in this case. It is therefore disquieting to learn that the companies' wishes to keep information they declare is "proprietary" seem to have trumped individual patient safety and public health concerns. (Note that these concerns go beyond the commercial concerns of Amphastar Pharmaceutical, although in this case the pecuniary interests of that company do not seem to be opposed to patient safety and the public health.)

If we really want a health care system that improves the health of individuals and the public, we need it to put health and safety concerns ahead of the incomes of health care corporations. That such a statement seems not a platitude, but revolutionary is a mark of how our health care system has been turned on its head.

Case Summary


In summary, Baxter International imported the "active pharmaceutical ingredient" (API) of heparin, that is, in plainer language, the drug itself, from China. That API was then sold, with some minor processing, as a Baxter International product with a Baxter International label. The drug came from a sketchy supply chain that Baxter did not directly supervise, apparently originating in small "workshops" operating under primitive and unsanitary conditions without any meaningful inspection or supervision by the company, the Chinese government, or the FDA. The heparin proved to have been adulterated with over-sulfated chondroitin sulfate (OSCS), and many patients who received got seriously ill or died. While there have been investigations of how the adulteration adversely affected patients, to date, there have been no publicly reported investigations of how the OSCS got into the heparin, and who should have been responsible for overseeing the purity and safety of the product. Despite the facts that clearly patients died from receiving this adulterated drug, no individual has yet suffered any negative consequence for what amounted to poisoning of patients with a brand-name but adulterated pharmaceutical product.

Simply amazing. One of the richest and most "leading edge" IT companies in the world with almost unlimited resources and access to expertise commits one of the most fundamental biomedical information science (a.k.a. informatics) blunders, as in the taxonomy in my post here, at the level of "likely to cause patient harm in short term if uncorrected."

I have repeatedly written over at least the past ten years that applying the leadership and methodologies of business IT to clinical computing is both ill conceived and dangerous, as business computing and clinical computing are two very different computing subspecialties, the latter requiring quite specialized leadership and approaches.

I've written it at academic sites, in magazines, in newspapers, and other venues.

Yet, as we have observed at HC Renewal regarding other flavors of healthcare mismanagement and malfeasance, these words seem to suffer an anechoic fate.

Here we go again with another example of what appears to be gross mismanagement of clinical IT by business IT personnel and organizations. The following type of debacle is sooner or later going to kill patients and must end, immediately:

Boston Globe
Electronic health records raise doubt
Google service's inaccuracies may hold wide lesson ["may?" - ed.]
By Lisa Wangsness, Globe Staff
April 13, 2009

WASHINGTON - When Dave deBronkart, a tech-savvy kidney cancer survivor, tried to transfer his medical records from Beth Israel Deaconess Medical Center to Google Health, a new free service that lets patients keep all their health records in one place and easily share them with new doctors, he was stunned at what he found.

Google said his cancer had spread to either his brain or spine - a frightening diagnosis deBronkart had never gotten from his doctors - and listed an array of other conditions that he never had, as far as he knew, like chronic lung disease and aortic aneurysm. A warning announced his blood pressure medication required "immediate attention."

"I wondered, 'What are they talking about?' " said deBronkart, who is 59 and lives in Nashua.

DeBronkart eventually discovered the problem: Some of the information in his Google Health record was drawn from billing records, which sometimes reflect imprecise information plugged into codes required by insurers. Google Health and others in the fast-growing personal health record business say they are offering a revolutionary tool to help patients navigate a fragmented healthcare system, but some doctors fear that inaccurate information from billing data could lead to improper treatment.

(Addendum April 19: a first hand account of this problem is at e-patients.net here.)

What manner of amateurs made and approved the decision to map semantically and often medically imprecise, and often deliberately overstated or misused billing codes to diagnoses, and then display the diagnostic terms to a user - ANY user, patient or "learned intermediary" - in an electronic health record?

Not to mention how poorly conceived and implemented many of the HIT billing systems themselves are, making billing data even less trustworthy...

Injecting humor into a most somber post,
Homer succinctly summarizes the situation.

It is common knowledge to any competent person in healthcare informatics that doing what was done by Google Health is prone to create exactly the kind of situation that occurred.

Insurance data, by contrast, is already computerized and far easier and cheaper to download. But it is also prone to inaccuracies, partly because of the clunky diagnostic coding language used for medical billing, or because doctors sometimes label a test with the disease they hope to rule out, medical technology specialists say.

One does not have to be much of a "specialist" to make this realization. Almost anyone who's ever practiced medicine could probably have told Google's designers, developers and programmers this. This raises a number of questions, which also do not require a specialist to raise:

• What were the designers, implementers and management of this project thinking?
  
• Who was leading the project?
  
• What were there backgrounds?
  
• Who made the decision to implement in this manner?

Danny Sands raises the obvious:

"The problem is this kind of information should never be used clinically, especially if you don't have starting or ending dates" attached to each problem, said deBronkart's primary care doctor, Daniel Z. Sands, who is also the director of medical informatics at Cisco Systems.

Indeed.

Personal health records, such as those offered by Google Health, are a promising tool for patients' empowerment - but inaccuracies could be "a huge problem," ["could be?" - ed.] said Dr. Paul Tang, the chief medical information officer for the Palo Alto Medical Foundation, who chairs a health technology panel for the National Quality Forum.

For example, he said, an inaccurate diagnosis of gastrointestinal bleeding on a heart attack patient's personal health record could stop an emergency room doctor from administering a life-saving drug.

And when such an event occurs and a patient is harmed or killed, who then is held accountable - and who is held harmless? (Oh wait ... we know the answer to that question thanks to Koppel and Kreda...)

This "billing data" issue and other EHR issues like it are not rocket science, they are Medical Informatics 101.

I've seen such issues before, such as at "AOL kerfuffle: information technology vs. information science, a distinction lost at industry's peril" and at "On Intel's and Walmart's prescription for Healthcare IT."

I summed the problem up like this at the post "A Biomedical Informatics Manifesto":

Biomedical Informatics as a specialty might as well be invisible. Amateurs** rule HIT.

(** Amateur in the sense that I am a radio amateur, not a telecommunications professional and would not deem myself appropriate to design and run a critical telecommunications project).

Perhaps, though, I should have added "amateurs rule HIT, and even worse are too often managed by incompetents."

I believe Google should conduct a top to bottom investigation of the management chain and the decision making process that led to such a fiasco, which can only further erode public confidence in electronic health records at a time of national distrust in Big Business and Big Medicine.

Those who made such design and implementation decisions without appropriate input from those who know better, or worse, those who might have overridden or ignored such counsel, should be dealt with appropriately. (If it were me, I'd ask for their resignation, but that's my opinion.)

Clinical medicine, Electronic Health Records and patients' well being are not an information technologists' learning lab.

Also of concern to me, this is the type of data our government seems to be touting for use in Comparative Effectiveness Research. (It is also of concern to me in this regard that our new Secretary of HHS was the former Kansas commissioner for insurance from 1994 to 2002, and such billing data is likely where the majority of her experience with medical datasets resides.)

Finally, like the financial schemes of the past decade, I can only wonder when the computational House of Cards that is being built in healthcare as a result of the quasi-religious Syndrome of Inappropriate Overconfidence in Computing, and worship of its priests, the IT Whiz Kids and consultants to whom domain expertise is optional, will come crashing down.

-- SS

Addendum:

A physician correspondent who wishes to remain anonymous writes (emphases mine):

[The Boston Globe article] could not have come at a better time.

Just today, a spouse had his "home grown" PHR for his wife who was hospitalized with multiple medical problems, including advanced metastic breast cancer and complex vascular disease. He has an elaborate PHR with history, treatments, allergies, medication lists, etc.

It was so impressive that when this 80ish year old patient was admitted, he gave the medication list from the computer to the physicians and nurses. It appeared so reliable that not one health care professional bothered to question it or reconcile it with the labels on the bottles (everyone is so busy nowadays clicking and scrolling the computer silos for information).

As it turns out, he left out a decimal point on a dose of a potent medication that should have been 2.5 mg. The computer printed a legible list (with other errors too) stating the dose of this med was 25 mg per day (10 times too much). It was ordered that way by the doctors. It got to the pharmacy, but somewhere in this complex chain, a non physician non nurse individual got the dose to the patient correctly as 2.5 mg [fortunately, the error was caught, this time. What about next time? - ed.]

Being a detective with an eye for detail and a stickler for accuracy, I happened to notice the error when the spouse was showing off his PHR to me.

Again, this is one case with potentially dangerous consequences of a pervasive error generated in the PHR by flawed data entry. It was not a Google or Health Vault device, but I cannot believe that these companies have garbage filters on their devices to prevent the "garbage in, garbage out" syndrome. Good medical care is being subverted by these experimental devices.

Upon scratching the surface of PHR, EMR, and CPOE devices' functional impact on the administration of medical care, the dangers are widespread. This toxicity is covered up from scrutiny by the "non-disclosures" and "hold harmless" contractual obligations described in the Koppel and Kreda report.

One wonders how many incidents like this happen every day and are being concealed by the HIT industry and the pundits profiting handsomely from selling defective HIT devices. I am quite concerned that nobody really knows. This is not science.

On a final sobering note, as the "hold harmless" and "defects gag" clauses are purged from HIT contracting, which they will most certainly be, I would suggest the many amateurs in HIT obtain some very solid liability insurance covering patient harm related to their systems and their advice.

For they may just find themselves as defendants answering questions on the witness stand in front of a hungry plaintiff's attorney, a jury of average citizens, bereaved relatives of patients who were harmed via IT misadventure, and questions composed by people of my background. These questions will place the true nature of their expertise and qualifications to be tooling around with medical care under severe scrutiny.

That will likely not be very pretty.

April 22 addendum:

In comment #15 to this post Matthew Holt issued this filled with absolutes ad hominem comment ...

Seriously, MedInformaticsMD, you are so pissed off with everyone in IT [everyone? - ed.] that you're now part of the problem [problem of vendors creating bad IT? - ed.] Do you seriously think that the people at BIDMC, Google and everyone else in health IT (even Cerner) just dont give a shit? [I cannot read minds. I can only see results - ed.] Or do you think that they might be trying to figure out how to solve these problems [of course they're trying to solve problems, but good intentions without requisite ability and expertise are inadequate in healthcare - ed.], and perhaps could you some constructive help. Rather than a barrage of attacks on anything they try to do. [Anything? You mean, such as in this post praising Google in areas where they do leverage their expertise properly? -ed.]

Perhaps my direct Chairman of Medicine-after-patient-mishap tone in offering the most constructive of criticism - i.e., don't embark on medical projects in which you are over your head, find people who do know the domain and let them lead, don't release anything in medicine without appropriate, rigorous premarket trials - upset him. In addition to the inserts above, in the comments section I replied:

I'm sorry you feel that way.

I'm not sure what "problem" you're referring to, but if it's harming patients due to badly implemented HIT, I'm certainly not part of that problem.

As just one example, my website on HIT difficulties serves as a resource read internationally on how to best avoid HIT errors, has been online for a decade, and is quoted in one of the newest and best books on HIT, specifically "Medical Informatics 20/20."

Did anyone at BIDMC, Google or Cerner ever read it? Did you ever read it? If not, why not? It is in fact the first link that comes up on a google search on "healthcare IT failure", for example. Do they take it seriously? If not, why not?

I believe they were negligent on this project. This suggests they need to give a bit more of a s--- about their work, expecially since real, live patients are involved and the mistake made was so fundamental.

Finally, see my post "A Software Engineer's Eloquence on Health IT" for what I consider an attitude of someone who really does give a s--- about such matters.

Finally, I see no links to my decade-old academic website on HIT difficulties over at Matthew's blog. One wonders why. It may have to do with a tension between the statement that "the Health Care Blog (THCB) has acquired a reputation as one of the most respected independent voices in the healthcare industry" and the post "A Shout out to our sponsors."

Healthcare Renewal has no sponsors and does not take advertising. We report, you decide.