A Legal Settlement of One Aspect of the Fall of AHERF, Only 15 Years Later

It only took 15 years, but litigation related to one of the most important, but obscure cases of bad health care leadership and governance from the 1990s was finally settled.   

Background

The Allegheny Health Education and Research Foundation (AHERF) was a large integrated health care system formed out of multiple mergers.  AHERF went bankrupt in 1998, leading to massive layoffs, hospital closures, and the near dissolution of a medical school (which ended up taken over by Drexel University).  We last discussed the case in 2012 here.. A summary of other important points about it is appended below. 

As we noted in 2008, although the AHERF bankruptcy appears to be the largest failure of a not-for-profit health care corporation in US history, its story has produced remarkably few echoes for doctors, other health care professionals, health care researchers, and health policy makers. I often use the fall of AHERF as an example in talks, at least the few talks I am allowed to give on such unpleasant subjects. Rarely have more than a few people in the audience heard of AHERF prior to my discussion of it.

I only could locate one article in a medical or health care journal that discussed the case in detail, but was written too early to address it very completely [Burns LR, Cacciamani J, Clement J, Aquino W. The fall of the house of AHERF: the Allegheny bankruptcy. Health Aff (Millwood) 2000; 19: 7-41.]  I doubt the case is used for teaching in most medical or public health schools, although it.was a formative influence on my 2003 article on health care dysfunction [Poses RM. A cautionary tale: the dysfunction of American health care. Eur J Int Med 2003; 14: 123-130] and on this Health Care Renewal blog.  (A book about the case, Merger Games, by Judith Swazey, was published in 2012, and is available here as  a set of PDF files from Project Muse for those with the proper password, but it has not yet had much of an impact, and I confess I have not yet read it.)  The lack of discussion of such a significant case is a prime example of the anechoic effect. 

One Legal Settlement, 15 Years Later, for a Secret Amount

But a brief echo of the case did appear in a brief article in the Pittsburgh Tribune Review published in April, 2013:

Lawyers would not say Tuesday how much money an accounting firm will pay to settle a 13-year-old lawsuit claiming it helped destroy one of the state's largest health care systems. 

'It will result in a very significant recovery,' James Jones, one of the lawyers representing the unsecured creditor of the Allegheny Health Education and Research Foundation, said during a settlement hearing in Pittsburgh federal court.

The creditors in 2000 sued Coopers & Lybrand LLP, the predecessor of PricewaterhouseCoopers LLP, claiming that if auditors in 1996 and 1997 had informed AHERF's board about the foundation's true financial condition, it would have acted to avoid a bankruptcy that resulted in huge losses. The foundation's assets included the Allegheny General Hospital system.

It seems only fitting, given how anechoic this case has been, that much about this settlement remains obscure,

U.S. District Judge David Cercone, in a joint session with U.S. Bankruptcy Judge Judith Fitzgerald, approved the settlement with PricewaterhouseCoopers. 

The company disputes the method the committee used to calculate losses and denies liability in the settlement.

Joseph McDonough, a lawyer for PricewaterhouseCoopers, agreed the settlement amount is significant. He and Jones declined comment.

Jones said during the hearing that a trial could have lasted 40 days. Preparation for the case generated more than 200 depositions, 19 expert opinions and more than a million documents, he said.

The committee sent more than 3,500 notices to creditors about the proposed settlement, and none objected, he said.

Both sides agreed to keep the amount secret, and they discussed with Fitzgerald how to avoid releasing the amount in filings for related bankruptcy action.

Maybe if the case had somehow generated more echoes, health care professionals and policy makers, and patients and the public at large might have learned some of its lessons.  The story of AHERF is not merely that of an unlucky bankruptcy. It shows what can go wrong when health care is taken over by generic managers who adapt the latest management fads, and health care decision making is ruled by marketing, public relations and propaganda instead of evidence and logic, and allows power to be concentrated in organizations run by imperial CEOs.  .

 

We did not get a chance to learn this history, so we seem bound to repeat it.  

Appendix

Some important points about AHERF not found above (see also this narrative, starting on page 5):

• AHERF, one of the largest health care systems of its day, was built by the poster-boy for health care imperial CEOs, Sherif Abdelhak.
• Abdelhak, who started as food services purchasing manager at Allegeheny General Hospital, was repeatedly hailed as a "visionary" (in the March, 1997, ACP Observer) a "genius," and the like. His plans to create a huge integrated health care system were part of the wave of the future. Abdelhak was even invited to give the prestigious John D Cooper lecture at the annual meeting of the American Association of Medical Colleges (AAMC), which was published in Academic Medicine [Abdelhak SS. How one academic health center is successfully facing the future. Acad Med 1996; 71: 329-336.] He proclaimed that "we will need to create new forms of organization that are more flexible, more adaptive, and more agile than ever before." And he announced that "my aim as chief executive has been to unleash the creativity and productive potential of every individual and to provide an environment that encourages teamwork"
• While Abdelhak was making these grandiose promises, he paid himself and his associates very well. For example, he received $1.2 million in the mid-1990s, more than three times the average then for a hospital system CEO. He lived in a hospital supplied mansion worth almost $900,000 in 1989. Five of AHERF's top executives were in the top 10 best paid hospital executives in Philadelphia.
• Although Abdelhak talked of teamwork, he warned the combined faculty of the new Allegheny University of the Health Sciences (AUHS): "Don’t cross me or you will live to regret it."
• As AHERF was hemorrhaging money, Abdelhak continued to pay himself and his cronies lavishly.
• After the AHERF bankruptcy, which was at the time the second largest bankruptcy recorded in the US, Abdelhak was charged with numerous felonies involving receiving charitable assets. In a plea bargain, he pleaded no contest to misusing charitable funds, a misdemeanor, and was sentenced to more than 11 months in county prison.

Posted by Roy M. Poses MD to the Health Care Renewal blog

A New ECRI Institute Study On Health Information Technology-Related Events

As I wrote here, I was a reviewer of the report in the PA-based, ECRI Institute-conducted study "The Role of the Electronic Health Record in Patient Safety Events."  ECRI studied the Pennsylvania Patient Safety Reporting System database for HIT-related errors.   

The ECRI Institute is an independent organization renowned for its safety testing of medical technologies and reporting on same, and that "researches the best approaches to improving the safety, quality, and cost-effectiveness of patient care."  I've mentioned it and its bylaws in this blog in the past as a model for independent, unbiased testing and reporting of healthcare technologies.

The full report in PDF is at this link.  In the report, the Pennsylvania Patient Safety Authority analyzed reports of EHR-related events from a state database (the Pennsylvania Patient Safety Reporting System or PA-PSRS, pronounced "PAY-sirs") of reported medical errors and identified several major themes.

My review input led to a discrete "limitations" section.  Also, my invited July 2012 presentation to the PA Patient Safety Authority "Asking the Right Questions: Using Known HIT Safety Issues to Improve Risk Reporting and Analysis" with ECRI in attendance (link to PPT here) on the danger of limited datasets due to systematic impediments to information diffusion was apparently taken seriously. 

ECRI decided to do something about the knowledge gap, and they asked the right questions.

They've just released this summary of a new study they conducted.  I have a few comments which follow:
  

ECRI Institute PSO Uncovers Health Information Technology-Related Events in Deep Dive Analysis

Data transfer, data entry, system configurations, and more identified as serious problem areas
 
PLYMOUTH MEETING, Pa., Feb. 6, 2013 /PRNewswire-USNewswire/ -- The federal government is spending about $19 billion to encourage hospitals, physician practices, and other healthcare organizations to invest in their health information technology (HIT) infrastructure with the goal of improving patient safety and quality through the Health Information Technology for Economic and Clinical Health (HITECH) Act.

Concerned about the unintended consequences of HIT and the potential for errors to cause patient harm, ECRI Institute Patient Safety Organization (PSO) recently conducted a PSO Deep Dive™ analysis on HIT-related safety events. Their just-released 48-page report identified five potential problem areas, which can be assessed with the accompanying toolkit. The report and toolkit are available for purchase [appx. $350 U.S. - ed.] without membership in ECRI Institute PSO.

"Minimizing the unintended consequences of HIT systems and maximizing the potential of HIT to improve patient safety should be an ongoing focus of every healthcare organization," says Karen P. Zimmer , MD, MPH, FAAP, medical director, ECRI Institute PSO.

Based on [voluntary - ed.] reports submitted to the PSO from participating organizations, ECRI Institute PSO experts identified the following key HIT-related problems:

• inadequate data transfer from one HIT system to another
• data entry in the wrong patient record
• incorrect data entry in the patient record
• failure of the HIT system to function as intended
• configuration of the system in a way that can lead to mistakes

To collect enough reports for meaningful evaluation, ECRI Institute PSO asked participating organizations to submit standardized data about HIT events during a nine-week period. This enabled ECRI Institute PSO to identify patterns and trends from the aggregated data and share the findings, as well as its recommendations. The data in the PSO Deep Dive represents only that collected using the Agency for Healthcare Research and Quality (AHRQ) HIT Common Formats.  [Not the improved formats developed by AHRQ in their IT Hazards Manager project, still in development - ed.]  ECRI Institute PSO data encompasses over 800 HIT-related events.

According to the report, HIT must be considered in the context of the environment in which it operates during the three phases of any HIT project: planning for new or replacement systems, system implementation, and ongoing use and evaluation of the system. "Shortsighted approaches to HIT can lead to adverse consequences," caution the authors.

"Healthcare organizations should consider the findings and recommendations in the PSO Deep Dive as part of their effort to achieve those goals," adds Zimmer.

The HIT PSO Deep Dive findings were published in a 48-page report and toolkit with self-assessment questionnaire and action plan form available to all ECRI Institute PSO Members and its partner PSO members. The table of contents of the report is available for free viewing/download. Additional information will be presented in ECRI Institute PSO's Monthly Brief free e-newsletter March edition; go to www.ecri.org/psobrief to sign up. The full report and toolkit are also available for purchase.

For questions about this topic, or for information about purchasing the report, please contact ECRI Institute PSO by telephone at (610) 825-6000, ext. 5558; by e-mail at pso@ecri.org; by fax at (610) 834-1275, or by mail at 5200 Butler Pike, Plymouth Meeting, PA 19462-1298, USA.

From the free linked TOC document:

Key Recommendations

• Enlist leaders’ commitment and support for the organization’s health IT projects.

• Involve health IT users in system planning, design, and selection.

• Conduct a review of workflow and processes to determine how they must be modified.

• Evaluate the ability of existing IT systems within the organization to reliably exchange data with any health IT system under consideration.

• Conduct extensive tests before full implementation to ensure that the health IT system operates as expected.

• Provide user training and ongoing support; educate users about the capabilities and limitations of the system.

• Closely monitor the system’s ease of use and promptly address problems encountered by users.

• Introduce alterations to a health IT system in a controlled manner.

• Monitor the system’s effectiveness with metrics established by the organization.

• Require reporting of health IT-related events and near misses.

• Conduct thorough event analysis and investigation to identify corrective measures.

My comments are these:

• The ECRI study, report and recommendations are quite welcome.

• The case reports received were apparently voluntary and probably "conservative" and understated as hospitals are not happy to release data on problems and harms that can lead to, or support, litigation.  

• The study was just 9 weeks long, and with a limited set of healthcare organizations participating.  800 HIT-related events were identified. 

•  The relevant issues discovered in the events, as summarized in the bullet points above, are capable of causing clinician distraction, incorrect decisions, "use error" (as opposed to "user error", see here), patient harm, and death.  (I am aware of such issues in the press including harms and deaths, as readers here have read at links such as these and these and these and these, and others about which I am providing expert-witness consultation and cannot share.)
  

• I believe ECRI has now begun to peer below the water level, through the muck of industry control of the narrative, of what FDA CDRH leader Jeffrey Shuren MD JD referred to as "the tip of the iceberg" - i.e., the current level of knowledge of health IT difficulties, defects and harms. 

• The report is yet another red flag for a far more robust (and mandatory, in my view) post-marketing surveillance of health IT.  

• Those who claim these findings are "anecdotes" (as here) are looking increasingly foolish and cavalier.

Finally, readers of this blog have been reading about these issues for years.  You heard it here first.

-- SS 
 

A Condemnation of Suppression of Medical Research... by Ben Goldacre in the New York Times

Amazingly, this topic now seems to be in the mainstream.

The Goldacre Version in the New York Times in 2013

In his op-ed, Ben Goldacre introduced it thus:

the entire evidence base for medicine has been undermined by a casual lack of transparency. Sometimes this is through a failure to report concerns raised by doctors and internal analyses, as was the case with Johnson & Johnson. More commonly, it involves the suppression of clinical trial results, especially when they show a drug is no good.

He noted that this problems was supposed to be fixed by the registration of clinical trials, and by changes in editorial policies at medical journals:

many in the industry now claim it has been fixed. But every intervention has been full of loopholes, none has been competently implemented and, lastly, with no routine public audit, flaws have taken years to emerge.

 The Food and Drug Administration Amendments Act of 2007 is the most widely cited fix. It required that new clinical trials conducted in the United States post summaries of their results at clinicaltrials.gov within a year of completion, or face a fine of $10,000 a day.  But in 2012, the British Medical Journal published the first open audit of the process, which found that four out of five trials covered by the legislation had ignored the reporting requirements. Amazingly, no fine has yet been levied. 

An earlier fake fix dates from 2005, when the International Committee of Medical Journal Editors made an announcement: their members would never again publish any clinical trial unless its existence had been declared on a publicly accessible registry before the trial began. The reasoning was simple: if everyone registered their trials at the beginning, we could easily spot which results were withheld; and since everyone wants to publish in prominent academic journals, these editors had the perfect carrot. Once again, everyone assumed the problem had been fixed. 

But four years later we discovered, in a paper from The Journal of the American Medical Association, that the editors had broken their promise: more than half of all trials published in leading journals still weren’t properly registered, and a quarter weren’t registered at all. 

Goldacre's conclusions were:

Withholding data not only misleads doctors and patients; it’s an insult to the patients who have participated in clinical trials, believing that they were helping to improve medical knowledge. 

Medicine routinely overcomes enormous technical challenges, and there is nothing complicated about the changes needed to prevent Johnson & Johnson, or Roche — or anybody — from withholding information.

Hear, hear!

Our Version, Starting in 2003

Note that 10 years ago, in 2003, in my article on American health care dysfunction that could have been only published in Europe, (Poses RM. A cautionary tale: the dysfunction of American health care. Eur J Intern Med 2003 Mar;14(2):123-130.  Link here)  I noted that an important cause of this dysfunction is that:

the scientific basis of medicine is increasingly under attack.

The integrity of medical research has been violated by the deliberate suppression of its results.

At that time, I suggested one solution would be:

Medical schools and universities must re-affirm their support of scholarly work in the spirit of free enquiry,...

Furthermore, in one of our first posts on Health Care Renewal in December, 2004, in the context of the discovery of internal company documents (in this case, from Eli Lilly) that showed that information about the adverse effects of a drug (in this case, increased aggression associated with fluoxetine, that is, Prozac), we wrote,

The increasingly complex story of suppression of SSRI research seems to be part of a growing epidemic of suppression of medical research.

Let's say it again. Withholding data from clinical research is unethical because:
1. it breaks the promise to research subjects that their voluntary participation has scientific or social value, but undisseminated research has no value; (See Emanuel EJ et al. What makes clinical research ethical? JAMA 2000; 283: 2701-2711.)
2. it impedes scientific progress;
3. it prevents patients from receiving the best possible medical care.

But until this unethical behavior starts having negative consequences for its perpetrators, the epidemic of research suppression is likely to continue. 

Note the similarity to what Goldacre published in the Times yesterday.  You heard it here first.

Summary

To date we have published 102 posts with the label "suppression of medical research."  Obviously, Ben Goldacre's NY Times op-ed shows that suppression of research still rarely leads to negative consequences for its perpetrators.  Obviously, by making drugs, devices, and other health care interventions appear safer and more effective than they really are, suppression of medical research has lead to huge revenues for health care corporations, and has made many health care executives exceedingly rich, and many of the health care professionals and academic leaders who have enabled or implemented research suppression somewhat rich.  In the face of such perverse incentives, until we end the impunity of those who suppress medical research (and by the way, those who authorize, direct, or implement all sorts of other unethical, criminal and corrupt behavior we discuss on Health Care Renewal) things will not get better.  I can only hope that having this subject appear in a New York Times op-ed may lead to some real progress.

ADDENDUM (2 February, 2013) - see also comments on 1BoringOldMan blog. 

US Senate Subcommittee Asks What the RUC is About

It has been a long time coming, but the issue of how the US Medicare and Medicaid system sets the fees it pays doctors, and hence sets the incentives on doctors that drive their health care decisions, finally got some public attention again.

 The background is complex, and may glaze the eyes of readers hoping for simple solutions to simple problems.  One wonders if the complexity was deliberately created to discourage solutions.  Yet we have created a complex, obscure, opaque health care system.  If we want to meaningfully improve it, we must address its "inside baseball" qualities.  Those already familiar with and interested in the topic, skip the following section.

Background - the Resource Based Relative Value System Update Committee (RUC)

We have frequently posted, first here in 2007, and more recently here,  here, here, and here, about the little-known group that controls how the US Medicare system pays physicians, the RBRVS Update Committee, or RUC.

Since 1991, Medicare has set physicians' payments using the Resource Based Relative Value System (RBRVS), ostensibly based on a rational formula to tie physicians' pay to the time and effort they expend, and the resources they consume on particular patient care activities. Although the RBRVS was meant to level the payment playing field for cognitive services, including primary care vs procedures, over time it has had the opposite effect, as explained by Bodenheimer et al in a 1997 article in the Annals of Internal Medicine.(1) A system that pays a lot for procedures, but much less for diagnosing illnesses, forecasting prognoses, deciding on treatment, and understanding patients' values and preferences when procedures and devices are not involved, is likely to be very expensive, but not necessarily very good for patients.

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 were opaque for a long time, and the proceedings of the group are secret.  As Goodson(2) 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."

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

That changed in October, 2010.  A combined effort by the Wall Street Journal, the Center for Public Integrity, and Kaiser Health News yielded two major articles about the RUC, here in the WSJ (also with two more spin-off articles), and here from the Center for Public Integrity (also reprinted by Kaiser Health News.) The articles covered the main points about the RUC: its de facto control over how physicians are paid, its "secretive" nature (quoting the WSJ article), how it appears to favor procedures over cognitive physician services, etc.

In 2011, after the "Replace the RUC" movement generated some more interest about this secretive group, and its complicated but obscure role in the health care system, the current RUC membership was finally revealed.  It was relatively easy for me to determine that many of the members had conflicts of interest (beyond their specialty or sub-specialty identity and their role in medical societies that might have institutional conflicts of interest, and leaders with conflicts of interest).  

Then that year a lawsuit was filed by a number of primary care physicians that contended that the RUC was functioning illegally as a de facto US government advisory panel.  It appeared that things might change.  However, it was not to be.  A judge dismissed the lawsuit in 2012, based on his contention that the law that set up the RBRVS system prevented any challenges through the legal system to the mechanism used to set payment rates.  The ruling did not address the legality of the relationship between the RUC and the federal government.  And then everything was quiet again, until....

A Senate Committee Takes Up the RUC

Meanwhile, after the attempt at health care reform made by the Affordable Care Act (aka "Obamacare"), which aimed to increase insurance coverage, there has been growing concern that there will not be enough primary care physicians available to manage the larger insured patient population.  So, as reported by the Washington Times, a US Senate committee published a report on this issue:

The United States needs 16,000 more primary care physicians to meet its current health care needs, a problem that will only get worse if nothing is done to accommodate millions of newly-insured residents under President Obama’s health care law in the coming decade, according to a Senate report released Tuesday.

Mirable dictu, the report cited the influence of the RUC as part of the problem:

Mr Sanders said some of the blame appears to rest with a board of 31 physicians who make reimbursement recommendations to the Centers for Medicare and Medicaid Services (CMS), which private insurers frequently adopt as well.

The American Medical Association's Relative Value Scale Update Committee, or RUC, is populated by many more specialists that primary care physicians, multiple witnesses said Tuesday.

'Therefore, it should come as no surprise that it has accelerated higher payments — larger paychecks — to specialists over primary care doctors,' Mr Sanders' report said.

Senator Sanders' subcommittee then held a hearing during which the RUC came up for more criticism, as reported by MedPage Today:

Sen. Bernie Sanders (I-Vt.), chair of the Senate Health, Education, Labor and Pensions Subcommittee on Primary Health and Aging, criticized the American Medical Association's Relative Value Scale Update Committee (RUC), which develops annual recommendations on physician pay updates for Medicare.

Sanders noted that the RUC is dominated by specialists, whose opinions are accepted by Medicare more than 90% of the time.

'Specialists sitting on the committee determine reimbursement rates,' he said during the hearing on the physician shortage that is anticipated as more people become insured under the Affordable Care Act (ACA). 'We have to look at that.'

Several witnesses identified problems with the RUC:
 

Andrew Wilper, MD, acting chief of Medicine at the Department of Veterans Affairs Medical Center in Boise, Idaho, told the senators that Congress could mandate further oversight of the RUC and create greater separation between physicians and the boards that dictate their payment rates.

'At a minimum, the public deserves transparency in decision making from the RUC,' Wilper said. 'We should set a process for rate-setting that is not encumbered by conflicts of interest and is not favoring specialties. A rational observer might conclude that the federal government and AMA are plotting to bring an end to the primary care workforce in the U.S.'

Also Modern Healthcare reported (subscription required) that Dr Wilper

described the RUC as 'a secretive group of physicians that wield tremendous influence.'

Furthermore,

Uwe Reinhardt, economics professor at Princeton University, said in addition to adding primary care physicians to the RUC, the panel needs a third party to perform outside audits of the AMA panel's recommendations

However, the AMA was there to provide their usual defense of the RUC, as per Medpage Today,

'The RUC is an independent group of physicians from many specialties, including primary care, who use their expertise on caring for Medicare patients to provide input to CMS [the Centers for Medicare and Medicaid Services],' RUC chair Barbara Levy, MD, said in a statement. 'More than 300 people participate in a typical RUC meeting and information on the panel is publicly available.'

Levy noted that 'CMS recently adopted RUC recommendations for the creation of codes to recognize the value of the work, often done by primary care providers, in transitioning patients from one care setting to the next.'

The AMA also added two primary care-related seats to the RUC last February: a representative from the American Geriatrics Society and a rotating seat for a practicing primary care physician.

Note that this brief response did not add anything to the more voluminous response the AMA made in 2009 to some of my posts on the RUC, all of which were easily countered (look here).  

 After the hearing, per MedPage Today,

The problems with the RUC are 'one of the more important issues that arose out of this hearing,' Sanders told MedPage Today after it was over. 'I don't think we have the transparency we need.'

Legislation to address the RUC -- as well as other factors exacerbating the PCP shortage -- is expected to come 'quickly' said Sanders.

Comments

I salute Senator Sanders and his subcommittee for addressing the obscure and often quite anechoic topic, getting it some public attention, and at least raising the possibility of a legislative solution.

However, this is just a baby step.  The hearing and report generated minimal media coverage (I included links to the most visible above).  Given that Senator Sanders is widely regarded as well to the left of most of his legislative colleagues, the likelihood that any measure he would craft on this would be passed is minimal.

Meanwhile, questions we have raised again and again, most recently here in 2011, remain unanswered.

 - 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 of 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?

Economists have beaten us over the head with idea that incentives matter.  The RUC seems to embody a corporatist approach to fixing prices for medical services to create perverse incentives for physicians to do more procedures, and do less conversing with and examining patients, examining the best clinical research evidence about their problems, and rigorously thinking about how best to help them.  More procedures at higher prices helps physicians who do procedures.  It may help even more the corporations that provide the devices and drugs whose use is necessitated by such procedures, and the hospitals who can charge a lot of money as sites for performance of procedures.  It may even help insurance companies by driving ever more money through the health care system, and thus allow rationalization for higher administrative expenses as a function of overall money flow.

Yet incentives favoring procedures over all else may lead to worse outcomes for patients, and more costs to patients and society.  If we do not figure out how to make incentives given to physicians more rational and fair, expect health care costs to continue to rise, while access and quality continue to suffer.  

ADDENDUM (1 February, 2013) - see also comments by Brian Klepper on the Care and Cost blog.

ADDENDUM (3 February, 2013) - see also comments by Austin Frakt in the Incidental Economist blog.
 

References

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

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

Twilight of the Anechoic Effect? - New England Journal of Medicine Article Discusses Previously Taboo Topic of Bad Corporate Health Care Leadership

We have often complained of the anechoic effect, that the issues we discuss on Health Care Renewal often do not seem to be considered topics of polite conversation.  Any discussion that might question the brilliance, integrity, dedication, or selflessness of the leaders of health care organizations seems particularly taboo. 

So a major aim of this blog has been to discuss the numerous publicly available examples of leadership that is ill-informed, uncaring about or hostile to the values of health care professionals, incompetent, self-interested, conflicted, or outright corrupt, and of governance that lacks accountability, transparency, integrity, honesty, or ethics.  We have postulated that such problems with leadership and governance are not only causes, but the major causes of the increasing dysfunction of our health care system.  That discussing these issues is simply not done in many contexts, including academic health care, medical and health care journals, and health policy fora has only accelerated health care dysfunction.

The New England Journal on Punishing Health Care Fraud

Therefore, I note with some surprise that the New England Journal of Medicine just published an article (online first) that implicitly challenged the leadership of some large health care organizations. [Outterson K. Punishing health care fraud - is the GSK settlement sufficient.  N Engl J Med 2012; 367: 1082 - 1085.  Link here.]

The article summarized the record settling legal settlement agreed to by GlaxoSmithKline (see this post).  It noted that the company pleaded guilty to three criminal charges.  It then noted that while this was the largest recent legal settlement by a pharmaceutical company, "it would be a mistake to assume that GSK was an outlier in the global pharmaceutical and medical-device industries. Indeed, many of the major companies have settled with the Department of Justice in recent years."  It included a table of the largest pharmaceutical company settlements with the US government from 2009 to now.

Based on this background, the article dared to question whether such settlements deter bad behavior:

But questions remain about the efficacy of fines and corporate integrity agreements in deterring corporate misbehavior. The 2012 fines against Abbott Laboratories and GSK represent a modest percentage of those companies' revenue. Companies might well view such fines as merely a cost of doing business — a quite small percentage of their global revenue and often a manageable percentage of the revenue received from the particular product under scrutiny. If so, little has been done to change the system; the government merely recoups a portion of the financial fruit of firms' past misdeeds.

Even more daring was its challenge to top executives of pharmaceutical corporations,

One partial solution would be to impose penalties on corporate executives rather than just the company as a whole. Boston whistleblower attorney Robert M. Thomas, Jr., embraces this approach: 'GSK is a recidivist. How can a company commit a $1 billion crime and no individual is held responsible?'

A Taboo Broken

Having blogged on Health Care Renewal for nearly eight years, I recall very few, if any instances in which leaders of health care organizations were described as deserving punishment, or perhaps even guilty of crimes within large circulation medical journals, and within the New England Journal of Medicine, the most prominent US journal in particular. While discussion of misbehavior within health care organizations has slowly been seeping into the medical and health care literature, delicate phrasing has often been employed that leaves unclear whether top executives have any accountability for this behavior. (For example, while the Lancet editorial on the GSK settlement condemned "GSK's fraud," accused GSK of "actively encouraging off-label prescription," and asserted that "GSK and other drug companies have come adrift from standards of the societies they seek to serve," it never said anything about GSK's leaders or whether they in paticular had anything to do with the company's bad behavior. [Anon. Moral decaly at GSK reaps record US$# billion fine. Lancet 2010; 380: 2. Link here.])

So it is a big step for the NEJM to publish an article that suggests corporate executives might deserve penalties. I hope that this publication might lead to a bit of discussion of these issues within the larger medical and health care communities, the vast majority of whom have likely never heard of this blog and may have never seen anything other than an occasional news article in local media questioning the leadership of large health care organizations.

Things are Even Worse

Unfortunately, I need to end with the observation that the problems are even worse than what the NEJM article implies. Legal settlements of allegations of bad behavior by large health care organizations are much more numerous than those mentioned in this article (look here for examples).

Many of the largest and most prestigious organizations actually have histories of multiple settlements, guilty pleas, and related legal and governmental findings. For example, look here for Pfizer's record, here for Johnson and Johnson's record, here for Abbott's record, and here for Wellpoint's record. Pfizer was even found by a jury to be a racketeering influenced and corrupt organization (RICO)(see post here).

Despite these records of recidivism, no leaders of these companies have paid any individual penalties, and none of these organizations have had any restructuring or leadership changes imposed. This is even more disturbing when this kid-glove treatment of misbehavior by big health care organizations is contrasted with the severe penalties imposed on individuals or leaders of small companies found guilty of health care fraud (look here).

You Heard It Here First

However, in 2003 we first published documentation of individual physicians' concerns that ill-informed, incompetent, self-interested, or even corrupt leadership was threatening their core values [Poses RM. A cautionary tale: the dysfunction of American health care. Eur J Int Med 2003; 14: 123-130. Link here.] Furthermore, since 2008 we have been stating that corporate fines do not deter bad behavior.

It is not that law enforcement does not have the power to seek penalties on individuals. As we noted here, a Supreme Court case from 1943 empowered the government to seek penalties against responsible corporate officers (the "responsible corporate officer doctrine") who were in a position to stop a fraud that resulted in a guilty plea or conviction, particularly for the selling of misbranded or adulterated drugs into interstate commerce under the US Food and Drug Act.  (This was exactly the situation dealt with by the GSK settlement.)  Despite a threat made in 2010 by the chief counsel of the Inspector General's office of the US Department of Health and Human Services to use such legal authority to "get high level executives out of companies," nothing of the sort has happened.

So now that it is no longer taboo to question the pretensions of some leaders of health care organizations to near divine purity, let me state as I did in 2008,

As long as health care leaders can shrug off the consequences of unethical behavior merely as acceptable costs of doing business, absent any serious attempts to get health care organizations to enforce internal codes of ethical behavior or to avoid hiring ethically challenged leaders, the procession will likely continue. The effects will be continually rising costs, declining quality, shrinking access, and rising numbers of demoralized health professionals.

As I wrote in 2009,

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

Dartmouth's Governance and Wall Street

While the money spent on health care in the US continues to increase, care becomes less accessible and its quality becomes more dubious.  Most public health care discourse seems at a loss to explain how we can keep spending more to get less.

Of many possible explanations, one that has become more credible is continuing erosion of health care stewardship.  The boards of trustees of health care organizations, those charged with their stewardship, seem increasingly preoccupied with self-interest rather than the health care mission.  As more information about how such boards currently operate sneaks into public view, the problems appear more serious and salient.

New information about the governance of Dartmouth College, an issue we have followed since 2007, is illustrative.

The Case So Far

The problems at Dartmouth were notable because in many ways its governance was superior to that of many US higher educational and health care institutions.  At the time we first stumbled on these problems, Dartmouth was unusual in that nearly half of its board of trustees were elected by alumni, rather than being self-appointed.  That made its governance both more representative  and more accountable. 

In 2007, however, a dispute was ongoing about the extent that the institution's board of trustees ought to represent the alumni at large, or instead, ought to be a self-elected body not clearly accountable to anyone else.  The unelected, or "charter" board members were pushing to increases their numbers.  In 2007, what really got our attention was the stated rationale for this push towards less representative and accountable governance. Mr Charles Haldeman, then the chairman of the board of trustees, announced a smaller proportion of elected trustees would ensure that the board "has the broad range of backgrounds, skills, expertise, and fundraising capabilities needed," and that the board members would possess "even more diverse backgrounds."  However, despite his appeal to diversity, Mr Haldeman seemed most intent on reducing "divisiveness," especially dissent that challenged his own authority.  At the time, we thought his argument for more diversity to reduce dissent and increase his own authority seemed Orwellian.

Yet when we examined the backgrounds of the self-appointed trustees, we found that they exhibited little diversity. Furthermore, rather than resembling followers of Ingsoc, they resembled more the group that the radical left traditionally reviled.  Remarkably, three-quarters (6/8) were leaders of the finance sector, of what is popularly called "Wall Street." In 2007, they seemed not very diverse, but why the majority should be in the financial sector, and what implications that had, was then obscure.

After the fall of Lehman Brothers and the onset of the global financial collapse/ great recession, the implications of this Wall Street majority on the board of an institution of higher education became more troubling.  Since 2008, growing concerns about the extent that finance is driven by a "greed is good" culture increasingly suggest that domination of university, medical school, or hospital boards by leaders in the finance sector may increasingly divorce boards from the missions which they are supposed to uphold.

Yet in 2008, the unelected "charter" members of the Dartmouth board succeeded in increasing their numbers, and hence their proportion of total board seats.  The new board was no more diverse.  Of its 13 charter members, 9 were from finance, and one more was the CEO of a corporation with a major finance subsidiary.  (Look here.)  By 2009, the charter board members had succeeded in ousting a dissident alumni-elected member, labeling him a member of a "radical cabal," and rewriting a board loyalty oath apparently to discourage further dissent.  (Look here.)

All this spoke to the increasing power of the culture of finance among members of the board.  Perhaps, though, there were reasons that the financial majority on the board wanted to suppress dissent other than to make themselves more comfortable with their own dominant culture,  In 2010, as the global financial crisis continued, "Educational Endowments and the Financial Crisis: Social Costs and Systemic Risks in the Shadow Banking System," published by the Center for Social Philanthropy, Tellus Institute, focused on how prominent educational institutions, including Dartmouth College, came to invest much of their endowments in risky, illiquid "alternative" investments, the sort provided by the "shadow banking system."  (See this post.)  The report noted extensive conflicts of interest on the Dartmouth board involving trustees who were also leaders of finance.  Their firms, it turned out, were managing a substantial fraction of the money in the college's endowment.  Half of the charter trustees were also being paid to manage the finances of the institution for whose stewardship they were responsible. 

Trustees of non-profit organizations are supposed to exhibit a duty of loyalty, that is, they "must give undivided allegiance when making decisions affecting the organization."  (For a summary of their duties, look here.)   In 2010, I noted, "letting a board member's firm manage millions of dollars worth of the institution's endowment portfolio seems an obvious violation of the duty of loyalty."  So, "these sorts of conflicts of interest may be another 'missing link' explaining why the leadership and governance of health care organizations has gone so far astray."  I then posited, "as disclosure continues, maybe enough outrage will ensue so that improved leadership and governance will become possible.

The Friends of Eleazar Wheelock Charge Corruption

Now there seems to be more outrage.  Last month, the dissident Dartblog broke the story of a letter sent in February, 2012 to the New Hampshire Attorney General by an anonymous group called the "Friends of Eleazar Wheelock."  (Wheelock was the founder of the college.)  To the the letter was appended a report that included an even more extensive list of conflicts of interest affecting Dartmouth trustees, the college's Finance Committee and Investment Committees, and their friends and relatives. 

The letter also added

The mismanagement extends beyond the investments and endowment. 1) Over a period of seven years The College engaged Lehman Brothers in six 'interest rate swaps' totaling $550 million dollars. The current value of these 'swaps' is now in excess of two hundred million dollars. That is what Dartmouth owes on these bets. These losses are not reported in the College’s financial statements. 2) The College’s 'cash' was invested in six hedge funds. Up to 40% of it was lost. Again, this was not reported. This comprises grant money for research, advances to faculty, and other working capital which should have been invested in the safest of money market instruments. 3) over 50% of the endowment is invested with Trustees, Investment Committee members, or their friends.

The report summary stated,

The pattern that the Dartmouth trustees and members of the Endowment/Investment committee have engaged in for decades is clear. That pattern is that a donor/investment manager’s pledge to support Dartmouth is reciprocated with an investment of ever increasing proportions in the donor’s firm, lending the credibility of an Ivy League institution to the firm. The investment returns are of little import; most of these alum/donor/investment manager returns are average to poor.

It rhetorically asked how the college came into

the grip of a club of investment manager alums who have invested almost six hundred million dollars in their very own funds and directed over one billion dollars to their friends? And who have taken almost one hundred million dollars in fees to manage the endowment, often with poor results culminating in the twenty three per cent loss in 2008 and the worst performance of all the Ivies in 2011?

The letter charged that there has been a

quiet takeover of this great College by a cabal of external, wealthy alumni/ae of the college. They have mortgaged the College’s future through borrowing heavily in the tax exempt marketplace under NH HEFA (Health and Education Facilities Authority). They have simultaneously directed the College’s three billion dollar endowment to themselves, their firms, and their friends. They have furthered their own self-interest at the expense of the College and the Upper Valley. They have abused the non-profit status of Dartmouth College. They have enriched themselves through managing and directing Dartmouth’s three billion dollar endowment. In all cases they have taken gargantuan fund management fees through 'Private Equity', 'Venture Capital', and 'Hedge Funds' investments which they, themselves, manage and are the owners of.

Summary

A post on the American Thinker blog noted that the letter alleged "corruption." It is impossible to tell whether these expanded allegations will result in any charges, much less convictions. The state Attorney General is currently looking into this (see Reuters). Certainly, the allegations are at least of ethical corruption as it is defined by Transparency International, "abuse of entrusted power for private gain."

The revelations since 2007 (and I could argue beginning with my finding that the majority of the supposedly "diverse" charter trustees were leaders of finance) first raised questions whether Dartmouth governance's was attentive to the mission, then, whether it was conflicted, and now, whether it is corrupt.

That these questions can be credibly raised about one of our most prestigious institutions of higher education and health care demonstrates the depth of our health care crisis. It also demonstrates how the health care crisis seems inextricably linked to the financial crisis, and to a fundamental crisis about our society and its commitment to democracy and fairness.

A fair and thorough enquiry about the mess at Dartmouth, resulting in clear actions to uphold the institution's mission and ethics, and, if applicable, the law, would start us down the path of true health care reform.

However, if this just gets swept under the rug, we will not have reached the bottom of our descent.

ADDENDUM (2 June, 2012) - Note that Dartmouth's most recent President, Jim Yong Kim, who was appointed by and served under the Trustees in question above, is now President of the World Bank (see this LA Times article.)

See also comments in the University Diaries blog.

Another Cautionary Tale about Conflicts of Interest: the CEO's Stretch Limousine, Golden Parachute, and Slush Fund

It remains fashionable in academic medicine to tolerate, if not celebrate conflicts of interest as necessary to support the "collaboration" needed for "innovation," while minimizing their risks (e.g., look here). 

Recently, another cautionary tale about how conflicts of interest signal the risk of all sorts of unpleasantness has appeared in the media.

A Sentinel Event: the First Conflicts Uncovered

In 2009, we wrote about some conflicts of interest at Wyckoff Heights Medical Center in my hometown of Brooklyn, NY.  The New York Daily News had reported that Dr. Addagada Rao, the hospital's chief of surgery was simultaneously the president and part-owner of a Caribbean medical school that funneled medical students to clerkships at Wyckoff.  The hospital's CEO, Rajiv Garg, was an investor in the same school.  At the time, I wrote,

This story illustrates another twist on conflicts of interest affecting the leaders of not-for-profit health care organizations. Many of the smaller not-for-profit hospitals, of which there are thousands in the US, may have minimal conflict of interest policies, which may be minimally enforced, without much transparency or accountability. The coziness of the leadership culture of such smaller institutions may preclude anyone within the culture from asking tough questions. The results may be total confusion as to whose interests particular leaders are serving. In particular, the interests of each hospital's patients may get lost in the shuffle. In this case, the interests of medical students may also get lost in the shuffle. Although the institutions involved may be small, and hence the conflicts may seem small in terms of their monetary value, they aggregate to contribute to the moral miasma that now is the atmosphere of health care.

You heard it here first.

The CEO's Golden Parachute

Fast forward to 2012. In January, the Daily News again reported that CEO Garg had been ousted, but that

Trustees at Wyckoff Heights Medical Center asked to consider a whopping $875,000 severance payout for its former CEO are balking at the package....

It seems that Garg's attorney claimed

They were on the verge of bankruptcy when he arrived. He reduced the debt by tens of millions of dollars.

However,

the hospital’s financial situation remains grim. According to the work group’s final report, Wyckoff’s liabilities are $91 million greater than its assets and it is saddled with $114 million in long-term debt.

So here is yet another example of a CEO personally profiting while his or her organization's finances fester.

The Chauffeured Cars, the Stretch Limousine

The the Daily News began chipping away at the other ways CEO Garg benefited from his leadership of the fiscally troubled hospital. A notable symbol of these benefits was a stretch limousine:

The ousted CEO of a debt-riddled Brooklyn hospital had his security guards ferry friends to the U.S. Open and his wife around town in a stretch limo, the Daily News has learned.

Rajiv Garg, the disgraced honcho of Wyckoff Heights Medical Center, also enjoyed his own commutes in the hospital-issued ride — a sleek, black $33,000 Lincoln Royale.

Garg rolled in style,

The beleaguered hospital bought the fancy car — equipped with a mini-bar, four champagne flutes and a fridge for chilling Dom Pérignon — last summer for Garg It also owned two other cars for his use, sources said.

Several times a week, the limo was dispatched to take Garg’s wife from her job near the hospital to the couple’s midtown apartment, said an employee.

Sometimes, it picked her up and then swung by the hospital to get Garg and whisk them to dinner before dropping them home, sources said. Two or three times a month, the limo picked her up at home and took her shopping.

'I haven’t had a raise in seven years,' said the employee. 'They always tell us they don’t have any money. They spent it on cars.'

The limo has comfy leather seats with room to spare for six passengers and a stereo system capable of drowning out highway noise when Garg and his wife were driven in it to Washington.

More Conflicts of Interest Discovered

Then the Daily News started to reveal conflicts of interest beyond the ones we discussed in 2009:

Then-trustee Frank Chiarello was in a partnership that loaned money to hospital entities, according to a list of board members’ conflicts the Daily News eyeballed. The $2.5 million loan had an 18% interest rate, sources said, costing the hospital hundreds of thousands of dollars.

Chiarello, a real estate exec, resigned from the board last week.

Another trustee who quit the board last week, attorney John Rucigay, serves as a lawyer for other trustees, owns real estate with other trustees, and rents space to the Polish and Slavic Federal Credit Union — whose head of operations is yet another Wyckoff trustee, Agnieszka Poslednik.

Additional trustees on the conflicts list first reported by Crain’s New York Business, include Andrew Boiselle, whose Cebco Check Cashing Corp. does check-cashing business with hospital employees, and attorney Fred Haller, who provides legal services to Wyckoff employees about issues not related to the hospital.

Slush Funds and Bribes

Last week, the Daily News reported about findings by a judge that the CEO kept slush funds used to pay bribes:

Wyckoff Heights Medical Center kept a secret bank account that a former CEO used to bribe a disgraced state assemblyman, an upstate judge said in a court decision.

Orange County Supreme Court Judge Elaine Slobod’s decisionk brought to light new details about the Bushwick hospital’s alleged dealings with Tony Seminerio (D-Far Rockaway), who died in a North Carolina prison last year.

The bank account used for the Stockholm St. hospital’s payoffs to the corrupt pol belonged to 397 Himrod Corporation.

Former Wyckoff board chairman Emil Rucigay originally set up the company to buy real estate for the hospital to turn into a parking lot, the judge’s order said.

The bank account was kept active — though the corporation was dissolved in 2001. The bank account still had approximately $130,000 in it in 2008.

“[Wyckoff’s] CEO was using monies in the Himrod account to bribe Seminerio,” Slobad wrote in her decision last week, referring to Dominick Gio, who was the hospital’s head honcho at the time.

Gio refused to talk a reporter last week. Wcykoff’s interim CEO Ramon Rodriguez also declined to comment.

Money from the Himrod account was used to make payments totaling $15,000 to Seminerio, other court filings charge.

A Lexus, a Bentley, Oh My

Then the story really hit the big time when the New York Times picked it up yesterday. That report added some colorful details about how magnificently the CEO traveled:

In August 2009, Mr. Garg said, he fell asleep at the wheel and crashed his Lexus into a truck. He then lost his license. Asked why in the interview, he said he was not certain, though he offered several explanations, including unpaid tickets and previous accidents.

He then used the hospital’s cars — a Lincoln Town Car and a Cadillac Escalade — for himself and his family around the clock. They were driven by two security guards on overtime, a hospital official said.

He parked his other car, the $160,000 Bentley, at Wyckoff and had the hospital put the vehicle on its own insurance policy.

The limo only came later,

Mr. Garg said in the interview that he suspected that the drivers of the Town Car and the Escalade were eavesdropping on his conversations. So he had the hospital purchase a used stretch limousine for about $33,000.

Yet More Conflicts of Interest Discovered

The Times story also found more conflicts of interest. Some involved CEO Garg:

Mr. Garg introduced hospital officials to Skyscape, a provider of mobile medical references, in which he had a financial interest. Wyckoff signed a contract with the company worth at least $38,700, hospital records show, though the deal eventually fell through.

Others involved hospital trustees. This example might have affected patient care at the hospital:

Dr. Theophine Abakporo arrived at Wyckoff in 1996 from Harlem Hospital to work in emergency medicine. Originally from Nigeria, he said he found his way to the top blocked by what he believed was a clique of doctors at Wyckoff.

In 2009, according to data provided by MapLight.org, Dr. Abakporo, an American citizen, began donating money to the campaign of Representative Edolphus Towns, the Democrat who represents a nearby area. Mr. Towns, a longtime board member of Wyckoff, had by then been replaced by his chief of staff, Albert Wiltshire, on the board.

Dr. Abakporo gave $1,000 to the Towns campaign, then $750, according to election records.

With Mr. Wiltshire’s support, Dr. Abakporo became chairman of emergency medical services.

This example might also have affected patient care:

With his solicitous manner and tailored sport jackets, Gary Goffner, a pharmacist who serves on Wyckoff’s board, has long endeared himself to customers and doctors alike.

He inherited his pharmacy, Kraupner, from his father, a prominent Bushwick landlord as well as a pharmacist, who died recently. It is an old-fashioned store, crammed with supplies, the opposite of an orderly Rite Aid.

It is also a half-mile walk from Wyckoff, a disadvantage Mr. Goffner overcame through a contract that gave him exclusive access to Wyckoff patients as they were being discharged, and allowed him to keep an employee at the hospital to promote his business.

In summary, the Times found,

According to internal hospital documents, 13 of the hospital’s 22 board members declared at least one conflict of interest.

Summary

So, from a single story about conflicts of interest affecting the CEO and a medical leader at the hospital, we have gone to stories about widespread conflicts of interest affecting the hospital's board and leadership, about lavish payments and benefits to the CEO while the hospital's finances suffered, and allegations (by a judge) of bribes and slush funds. 

Recall that the Institute of Medicine's report on conflicts of interest in medicine and health care defined conflicts of interest as “circumstances that create a risk that professional judgments or actions regarding a primary interest will be unduly influenced by a secondary interest.” While no particular conflict of interest is guaranteed to cause someone to abuse entrusted power, conflicts of interest create the risk of such abuse. The case of the leadership and governance of Wyckoff Heights Medical Center shows how such risks may manifest.

Yet we have noted again and again how leaders of supposedly mission-oriented non-profit medical organizations seem to be ignoring these risks while pursuing ever more money from health care corporations. We noted how the Chancellor of the University of California-San Francisco "has no qualms" about faculty's financial relationships with industry. Just this week at Brown University, my alma mater, while discussing a new conflicts of interest policy, we heard,

'People do have conflicts of interest, and it’s not the end of the world,' said Janet Blume, associate dean of the faculty.

Conflicts of interest may not lead to the apocalypse. However, they certainly may lead to all sorts of unpleasantness. As Joe Collier stated, “people who have conflicts of interest often find giving clear advice (or opinions) particularly difficult." Conflicts of interest clearly lead to conflicted, and confused thinking, and such thinking may lead to bad decisions, and hence bad outcomes for patients' and the public's health. Worse, as the IOM asserted, conflicts of interest are a risk factor for outright corruption.

True health care reform might start with a reasoned discussion, based as much as possible on evidence, about the risks as well as the supposed benefits of conflicts of interest affecting those who make decisions about individual patients' health care, and about public health and health care policy.

Will the Citigroup Ruling Challenge Health Care Leaders' Impunity?

A federal judge's refusal to approve yet another cozy settlement that was supposed to resolve allegations of wrong-doing by a giant corporation has left the financial world atwitter.  It may be that this ruling will also affect the coziness between giant health care corporations and government regulators. 

Summary of the Citigroup Case

We first discussed this case twp weeks ago here.  Here is a summary of the government's (in this case, the Securities and Exchange Commision's) original allegations from the New York Times.

According to the Securities and Exchange Commission, Citigroup stuffed a $1 billion mortgage fund that it sold to investors in 2007 with securities that it believed would fail so that it could bet against its customers and profit when values declined. The fraud, the agency said, was in Citigroup’s falsely telling investors that an independent party was choosing the portfolio’s investments. Citigroup made $160 million from the deal and investors lost $700 million.

The Problems with the Proposed Settlement
Judge Jed Rakoff refused to approve the settlement because of a series of problems, listed below as summarized by the Schumpeter columnist in the Economist.

Mr Rakoff faulted the SEC for prosecuting Citigroup for negligence when a fraud prosecution was warranted; for failing to provide the court with 'any proven or admitted facts upon which to exercise even a modest degree of independent judgment'; for erroneously contending that 'public interest…is not part of [the] applicable standard of judicial review'; and for wrongly arguing that 'if the public interest must be taken into account, the SEC is the sole determiner'.

Furthermore,

Mr Rakoff also attacked a second condition of the settlement. Citigroup had agreed to operate under a court injunction if it ever violated the deal, which could lead to contempt charges. Whatever threat this carried, Mr Rackoff wrote, it was mitigated because Citigroup, as other financial firms, had been cited similarly over the past decade—and never faced any consequences.

The Parallels with Legal Settlements Made by Health Care Organizations

Several of the features of the settlement that the Judge found so objectionable are commonly also features of the settlements we have seen involving health care organizations. Government regulators often seem to make much milder charges that were warranted by the apparent facts. They make the organizations party to corporate integrity or deferred prosecution agreements, even though sometimes the same corporations were already subject to such agreements when they appeared to misbehave again. The agreements often allow the organizations to neither admit to or deny any charges, leaving the facts of the case forever in doubt.

Matt Taibi in the Rolling Stone provided some pithy comments on these commonly seen features of legal settlements.

By accepting hundred-million-dollar fines without a full public venting of the facts, the SEC is leveling seemingly significant punishments without telling the public what the defendant is being punished for. This has essentially created a parallel or secret criminal justice system, in which both crime and punishment are adjudicated behind closed doors.

This system allows for ugly consequences in both directions. Imagine if normal criminal defendants were treated this way. Say a prosecutor and street criminal come into a judge’s chamber and explain they’ve cooked up a deal, that the criminal doesn’t have to admit to anything or plead to any crime, but has to spend 18 months in house arrest nonetheless.

What sane judge would sign off on a deal like that without knowing exactly what the facts are? Did the criminal shoot up a nightclub and paralyze someone, or did he just sell a dimebag on the street? Is 18 months a tough sentence or a slap on the wrist? And how is it legally possible for someone to deserve an 18-month sentence without being guilty of anything?

Such deals are logical and legal absurdities, but judges have been signing off on settlements like this with Wall Street defendants for years.

As we have said numerous times before, (starting here in 2008) the current manner of regulation, in which organizations pay fines (and sometimes submit to corporate integrity or deferred prosecution agreements), rarely admit any guilt, but in which individuals who directed, authorized or implemented the alleged misbehavior almost never suffer any negative consequences, fails to deter future bad behavior. We have noted that the costs of the settlements are paid by the organization as a whole, and thus simply regarded as costs of doing business by executives. The leaders' impunity will allow the bad behavior to be repeated again and again.

Here is how Taibbi and Rakoff put it:

these crappy settlements have evolved into a kind of cheap payoff system, in which crimes may be committed over and over again, and the SEC’s only role is to take a bribe each time the offenders slip up and get caught.

If you never have to worry about serious punishments, or court findings of criminal guilt (which would leave you exposed to crippling lawsuits), then there’s simply no incentive to stop committing fraud. These SEC settlements simply become part of the cost of doing business, as Rakoff notes:

As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. This, indeed, is Citigroup's position in this very case.

That line, 'a cost of doing business imposed by having to maintain a working relationship with a regulatory agency,' is one of the more brutally damning things you’ll ever see a judge write. Rakoff is essentially saying that these fines are payoffs to keep the SEC off the banks’ backs. They’re like the pad that numbers-runners or drug dealers pay to urban precinct-houses every month to keep cops from making real arrests. That's what he means when he refers to 'maintaning a working relationship.' It's heavy stuff.

What the Judge appears to be saying is that the whole system stinks of regulatory capture, and that the settlements paid by the organizations are the moral equivalent of bribes paid to government officials. That is indeed "heavy stuff."

Now that Occupy Wall Street has made it socially acceptable to discuss the economic dysfunction that lead to the great recession or global financial collapse, I can only hope that this discussion will lead to a parallel discussion about health care dysfunction. It certainly seems that the regulatory capture that seems to be part of the dismantling of regulation of finance is similar to regulatory capture affecting health care. But I await someone beyond us few lonely bloggers to take up this topic.

I might as well end with this sentiment from 2009 regarding another case over which Judge Rakoff presided:
Again, in my humble opinion, until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations.

The UC-Davis Pepper-Spray Case as Illustrative of Problems with the Leadership of Health Care

The aggressive actions by University of California-Davis police against unarmed, peaceful student protesters turn out to be the latest illustration of the problems with leadership and governance we discuss on Health Care Renewal. 

The University of California - Davis Pepper Spray Incident

To summarize the current episode, I start with quotes about its background from Reuters,

Student protesters at Davis had set up an encampment in the university's quad area earlier this month as part of the nationwide Occupy movement against economic inequality and excesses of the financial system.

Their demonstrations, which had been endorsed by a faculty association, included protests against tuition increases and what they viewed as police brutality on University of California campuses in response to recent protests.

The students had set up roughly 25 tents in a quad area, but they had been asked not to stay overnight and were told they would not be able to stay during the weekend, due to a lack of university resources, [university Chancellor Linda] Katehi said.

Some protesters took their tents down voluntarily while others stayed.

Then,

The pepper spray incident appeared to take place on Friday afternoon, when campus police moved in to forcibly evict the protesters.

Then, as per the (London, UK) Independent,

A police officer saunters up to a group of young protestors who are sat in a line on the ground, with their arms linked. Then he removes a canister of pepper spray from his belt, with a flourish, before casually proceeding to unload its contents into their faces.

The demonstrators remain silent and motionless, with their heads bowed. So the policeman carries on, methodically covering them, from point blank range. By the time he’s finished, their heads and faces are covered in a thick layer of the toxic red liquid.

The actual video is below:


The UC-Davis Chancellor's Defense of the Police Actions

The Independent's coverage emphasized that initially the leadership of the campus police defended the use of pepper spray on apparently unarmed, peaceful students:

Annette Spicuzza, the head of the UC Davis Campus Police, who were responsible for Friday’s incident .... told reporters that her officers had been 'forced' to use the pepper spray, after demonstrators surrounded them. Lt Pike gave his victims sufficient warning of the impending attack, she added, and emptied the canister with a sweeping motion, in keeping with official procedures.

'When you are encircled by 200 individuals, I don’t know if I want to say ‘afraid,’ but I think they were quite concerned about their safety,' she said, regarding the circumstances her officers faced. 'There was no way out of that circle... It's a very volatile situation.'

That coverage also made clear that the directive to clear the demonstrators came from the top:

Linda Katehi, the Chancellor of UC Davis ... had asked the police to clear demonstrators from her campus, a couple of hours north of San Francisco. In the aftermath of the incident, she had initially joined Spicuzza in defending the force's methods, saying that they had 'no option' but to adopt a hard line.

Ms Katehi later backed off, but only after her first response

sparked immediate outrage, and within hours, the university’s Faculty Association, representing Ms Katehi’s employees, issued a statement called for her resignation, saying that her authorisation of 'excessive' force had amounted to a 'gross failure of leadership.'

Nathan Brown, an assistant English professor who witnessed the incident, wrote in an open letter: 'Several of these students were hospitalized. Others are seriously injured. One of them, forty-five minutes after being pepper-sprayed down his throat, was still coughing up blood... You are responsible.'

Other comments likened the police actions to something "coming from some riot-control unit in China, or in Syria," [James Fallows in the Atlantic] called them indicative of "a police state in its pure form," [Glenn Greenwald in Salon], or otherwise denounced them as "outrageous" or "awful." (Clark McPhail, professor emeritus of sociology at the University of Illinois, and Greg Lukianoff, President of the Foundation for Individual Rights in Education, respectively, via Inside Higher Ed.)

This aggressive, violent response to peaceful protest seems to be the latest example of the arrogance of some current leaders of our important organizations.

Our Previous Discussion of the Chancellor in Health Care Renewal

This case appears directly related to the problems in leadership and governance we discuss on Health Care Renewal Ms Katehi has the distinction of having been already written up twice on Health Care Renewal for questions about her leadership.

On her arrival at UC-Davis in 2009, she promised to "help UC Davis to become more aggressive in taking new biotechnology and agriculture products to market." This indicates at best ignorance of, at worst hostility to the fundamental university mission, which is hardly developing and particularly marketing products, but discovering and disseminating knowledge (see this post).

At that time, I called this an example of "how the leaders of academic institutions seem to be forgetting or radically deconstructing their academic missions."

In 2011, Ms Katehi defended the payment to the medical center CEO, whom she called a "great CEO,' of nearly a million dollars yearly in compensation. However, that CEO was part of a group of top university leaders demanding large increases in their pensions at a time when the university was under great financial distress. For that, some called them not great leaders, but greedy and "despicable." Thus, Ms Katehi seemed to stand up for top leaders' privilege and exceptionalism, including their entitlement to huge compensation whatever the circumstance, even in a time of financial travail (see this post).

I could not have predicted that Chancellor Katehi would preside over the pepper spraying unarmed students for peaceful, legitimate protest. However, it is not surprising that a leader who does not understand the fundamental academic mission and who supports executive privilege and exceptionalism would foster an authoritarian climate in which such an incident could happen.

This example clearly illustrates the issues we have been discussing on Health Care Renewal for a long time. In particular, leaders who are more dedicated to their own and their fellow executives' privilege and exceptionalism than their organizations' missions are likely to end up promoting actions that threaten those  missions.

The Moral of the Story

Instead, as we have been preaching endlessly,... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

You heard it here first on Health Care Renewal .

Keep your eye on Health Care Renewal for continued discussion of parallels between problems in health care and in the larger political economy.