Why Trust Drug Company Executives After One Admits Commercially Sponsored Clinical Research Is All About "Competitive Advantage?"

Mickey, the semi-anonymous blogger on 1BoringOldMan, wrote a righteously angry post in support of transparent clinical research.  As we have noted frequently, clinical trials done on human subjects are often manipulated to increase the likelihood of results favorable to commercial sponsors, or suppressed when even such manipulation does not produce the desired results.

Note that such suppression and manipulation degrade the scientific value of the studies, impede the evidence-based medicine process to rationally apply clinical research evidence to improve the health of patients and the public, and violate the trust of research subjects who volunteer to participate based on the assumption that clinical research is meant to improve patient care and public health, and contribute to science, not just secure commercial advantage.  

A European initiative to combat suppression of clinical research has been opposed by a lawsuit from US pharmaceutical manufacturers AbbeVie, spun off from Abbott Laboratories, and Intermune.  The European Medicines Agency had been willing to to make public unpublished patient level data from commercially sponsored clinical trials.  The lawsuit has shut down the process, and is meant to shut it down permanently, claiming that the clinical data, obtained from volunteer research subjects, includes "trade secrets."

As summarized by Mickey, their motivation seems to be to conceal how pharmaceutical manufacturers and other commercial sponsors of human research use this research for promotional, rather than scientific purposes.

An AbbeVie lawyer asserted that some adverse effects data should be kept confidential, and that "internal tactical decisions on how we are going to run a study, engage with regulators, and confront and solve problems and challenges we have uncovered during clinical trials" should also be kept secret because revealing them could "give other companies a tremendous competitive advantage," never mind whether keeping secrets could undermine science, decrease the study's usefulness to aid clinical and policy decision making, and break the implicit contract between researchers and study subjects.

It is becoming more obvious that many drug company executives, and other leaders of large health organizations, may care more about "competitive advantage" than patients, science or the public good, as Mickey points out.  So much for that advertising puffery  about drug development to improve patient health.  Thus it may be ridiculous to think that these executives they will negotiate to improve transparency of clinical research in good faith when doing so could decrease such advantage, again no matter what the effect on patients, public health, or science.

On this case there is an opportunity to speak out, Dr David Healy has a petition up on Change.org to oppose the AbbeVie and Intermune lawsuit which might get some notice if there are enough signatures.

The Long Con - "Charitable" Hospitals Make Multimillionaires out of Their CEOs

The CEOs of ostensibly charitable hospitals founded to serve the poor continue to become rich.  

The latest reminders are in two articles from Maryland, from DelMarVaNow, and from the Baltimore Sun,.and one from the Boston Globe.

All this diligent reporting showed multimillion dollar executive compensation,  as usual not justified by evidence or logic, but also how executive compensation is becoming divorced from the ostensible charitable mission of non-profit hospitals.  

Most Hospital CEOs are Paid a Lot

So jin Maryland, we found via DelMarVaNow,

Peninsula Regional Medical Center paid its top executive and her immediate predecessor a total of $2.37 million in compensation in 2011 as the nonprofit hospital gained millions of dollars in profit.

In particular,

 The analysis shows that R. Alan Newberry was the third-highest paid hospital chief in Maryland, even though he has not run PRMC since 2009. In the year after formally stepping down from the hospital’s top job, Newberry received $1.57 million, about $600,000 more than he had while still working full time.

The Baltimore Sun summarized compensation given to multiple executives,

 Eleven executives earning seven-figure compensation packages including salary, bonus, retirement and other pay saw their total pay rise from as little as 0.13 percent to as much as 308 percent in the fiscal year that ended in 2012, according to tax filings. Another executive earning more than $1 million saw a pay cut.

In particular,

 The state's highest-compensated hospital executive that fiscal year was Kenneth A. Samet, the CEO of the 10-hospital MedStar Health system, who earned $6.3 million. More than half — $3.5 million — was money earned in a supplemental retirement plan during his 23 years of service. He won't get the money until he retires. His base pay was $1.2 million, and he received $1.5 million as a bonus and incentives.

The other top five highest-paid executives in Maryland are James Xinis, CEO at Calvert Memorial Hospital in Prince Frederick; Ronald A. Peterson, CEO of the Johns Hopkins Health Center Corp.; Robert A. Chrencik, CEO of the University of Maryland Medical System; and Thomas Mullen, CEO of Mercy Medical Center.

Xinis saw his compensation package jump 307.8 percent to $3.5 million, $2.8 million of which was a required distribution of vested retirement funds from a plan he begin contributing to in 2003, the hospital said in a statement. Xinis has served as CEO for 26 years and plans to retire in the next 18 months, the hospital said. His base salary in fiscal 2012 was $309,557.

Peterson, who oversees six hospitals, earned a $3.5 million compensation package. Peterson's 86.5 percent pay increase largely reflected pension benefits he'd earned during 40 years at Hopkins. His annual base salary increased about $49,500 to $1.1 million in fiscal 2012.

Chrencik, whose system has 12 hospitals, earned about $2.3 million. Chrencik's total pay grew 23.4 percent. Mercy's Mullen saw his pay rise 24 percent to $1.6 million for the fiscal year ending in 2012.

The one CEO earning more than $1 million who saw his compensation fall was Edward D. Miller, who retired in June 2012 as CEO of Johns Hopkins Medicine and dean of the university's medical school. His reported pay dropped to just over $1 million in fiscal 2012 from nearly $2.3 million the prior year, when he took a one-time retirement payout.

Also,

According to Saint Agnes tax filings, [CEO Bonnie] Phipps received $1.9 million in the 2012 fiscal year, 4.4 percent more compensation than a year earlier.

 Per the Boston Globe, local hospital executives also did really well

Chief executives at the Boston area’s largest nonprofit teaching hospitals drew pay packages of $1 million to $2.1 million in 2011, including salaries, bonuses, and compensation such as health and life insurance and retirement benefits.

Topping the list locally was Gary L. Gottlieb, chief executive of Partners HealthCare System, the state’s largest hospital and physicians organization, who received total compensation of $2.1 million in 2011, according to federal tax documents released Thursday by the nonprofits.

And,

The presidents of Partners-owned Massachusetts General and Brigham and Women’s hospitals also drew seven-figure packages in 2011, with Peter L. Slavin at Mass. General receiving a total of $1.7 million and Elizabeth G. Nabel at Brigham and Women’s a total of $1.9 million.

Also,

Tufts Medical Center reported that Ellen M. Zane, who served as chief executive through September 2011, had total pay of $1.6 million that year.

Eric J. Beyer, who took over from Zane in October, had total compensation of $744,722 that included pay for work as chief executive and at his previous job as president of the Tufts Medical Center Physicians Organization.

James Mandell, chief executive at Boston Children’s Hospital, was paid a total of $1.5 million in 2011. That was down from the $2 million he earned the prior year when he received two separate incentive awards, according to a hospital spokeswoman. Mandell plans to retire next month and will be succeeded by Sandra Fenwick, the hospital’s president and chief operating officer.

Total compensation for Boston Medical Center chief executive Kate Walsh was listed at nearly $1.4 million in 2011, an increase from $1.3 million in 2010.

At Dana-Farber Cancer Institute, chief executive Edward J. Benz Jr. received total compensation of nearly $1.3 million in 2011, up from $1.1 million in 2010.

Beth Israel Deaconess Medical Center paid three different top executives in 2011.

Eric Buehrens, who served as interim chief executive from February to October, drew total compensation of just over $1 million for that role and other executive jobs.

The Justification for this Pay is Stereotyped (and not Supported by Logic or Evidence)

The Usual Talking Points

The articles in combination provided the usual talking points as justification.  It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they are talking points, possibly crafted as a public relations ploy.   We first listed the talking points here, and then provided additional examples of their use here, here here, here, here, and here..   

They are:
- We have to pay competitive rates
- We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant.

As we have noted before, there is little evidence in support of these talking points.  What evidence there is on the topic suggests there is no real free market in interchangeable CEOs, and that CEOs are not very mobile, especially not across different kinds of organizations (look here).  There is little evidence that hospital (or other health care) executives are particularly brilliant, or any more brilliant than multitudes of physicians, nurses, and other health care professionals who work hard to make their institutions run.

True to form, the reporting from Maryland and Boston found that defenders of executive pay cited the talking points, but without any further logic or evidence. 

Competition

Re PRMC (from DelMarVaNow),

 'We’ve looked at about 17 like institutions. Eight are smaller than we are; eight are larger. Every hospital is different, so you have to always take into account there’s some variation, but we’ve always stayed in the middle. Our goal has been to stay in that 60 percent level as far as compensation goes,' said Martin Neat, chairman of PRMC’s board of directors, which oversees executives’ salaries.­

Note that in this case, no justification was provided for constantly setting the CEOs pay above the median.


Re Maryland, via the Baltimore Sun

 Hospitals argue that they have to offer competitive compensation to attract talent to run a complicated business.

Re Maryland and particularly UMMS, via the Sun,

 The medical institutions say they hire independent consultants and look at the pay of executives at comparable health systems when making their decisions.

Also,

UMMS hospital executives are compensated in line with national benchmarks,' [UMMS spokeswoman Mary Lynn] Carver said.

Note that there was no justification for the comparability of these institutions, or why a national versus regional comparison was made.

Retention

Re PRMC

 Above all, PRMC’s board of directors seeks to ensure that the hospital attracts and retains the best leaders.

Note that there was no evidence given that current leaders might leave were their compensation reduced.

 Brilliance

Re PRMC,

[Board Chairman Neat]  added: 'These are high-paid positions, but these are very capable people who could go elsewhere.'

Re Maryland, from the Baltimore Sun

 Executives need to understand everything from the latest health technologies to regulatory changes, including health reform.

So do doctors and nurses, so why do they not not get similar pay?

Also,

 [Carmela Coyle, CEO of the Maryland Hospital Association, said,] 'Hospital executives are in charge of incredibly complex organizations,' she said. 'They are organizations that are open 24 hours a day and are highly regulated. These are really difficult, difficult jobs'.

Note again the lack of comparison with the doctors and nurses who must staff the hospitals 24 hours a day, and make difficult decisions while caring for patients with sometimes life-threatening conditions.  How often does a hospital CEO get a call in the middle of the night, and how often does it require a decision in a life-and-death situation?

Re Mercy Medical Center,

 'As a result of Mr. Mullen's leadership, vision and skillful stewardship, Mercy has been an economic engine for the city, infusing additional jobs into the local economy,' the hospital said in a statement.

When in doubt, use the v (for visionary) word.  Note that this begs the questions of how many other people were responsible for the economic benefits, and whether such benefits, rather than, say ability to provide good care to patients, should be the main consideration.

Should Brilliance be Measured by Revenue?

At best, some defenders of high CEO pay seem to argue that the main measure of CEO brilliance ought to be their hospitals' financial performance. For example, the DelMarvaNow article included,

Fiscal health is one of the most important considerations in determining [new CEO Peggy] Naleppa's pay, [board chairman] Neat said. 

Also, he was quoted,

'There's no question that the financial performance of the institution is going to affect what you're going to pay', Neat said.

While,

Nationwide, hospital boards subscribe to a similar philosophy.  Financial health was cited by 100 percent of multi-hospital organizations in a 2006 survey as a factor in determining bosses' incentive plans.

Similarly, the Baltimore Sun quoted Dr Stephen F Jencks, "who serves on the board of the cost review commission,"

executives should be judged by whether they are running cost-efficient organizations

However, CEO pay seems to increase even at financially challenged institutions,  as the Baltimore Sun noted,

The CEO pay question — always a hot-button issue — is generating debate again this year after a state panel spurned a push by hospitals for higher rates, instead approving smaller increases and calling on them to do more to curb expenses. Hospitals have sought rate increases in each of the past three years, and this year at least one Baltimore-area hospital responded with layoffs in an effort to trim labor costs.

So,

'If they are laying off staff and decreasing what they invest in the community and executive compensation is increasing, that is a real question,' said Jessica Curtis, project director of the hospital accountability project at Community Catalyst, a national advocacy group that promotes wider access to affordable health care.

Even if one accepts that the compensation of leaders of organizations that take care of sick and injured patients ought to mainly depend on the brilliance of their leadership as measured by how much money the organizations make, rather than the quality of that care, it is not clear that all these leaders are brilliant in that sense.

The Charitable Mission and CEO Compensation

Essentially all US non-profit hospitals and hospital systems have a history of a charitable mission to improve the health of their patients and communities, even if that means taking care of poor people who cannot pay for these services.  Nearly all justify their legal status as non-profit corporations by stating this mission. 

For example, Peninsula Regional Medical Center, the main subject of the DelMarVaNow article, describes its mission thus in its US tax filing,

Peninsula Regional Medical Center is a not-for-profit 501 (c) 3 non-stock corporation founded in 1897 to serve the health care needs of the community.  The Hospital's primary purpose is to provide the highest [sic] primary, secondary, and selected tertiary health care services to residents of and visitors to the Mid-Delmarva Peninsula in a competent, compassionate, and cost effective manner designed to elicit a high degree of consumer satisfaction.  The Hospital's mission is to improve the health of the communities we serve....

Yet it appears that this mission is honored mainly in the breach, at least when it comes to CEO compensation. 

The DelMarVaNow article emphasized that hospitals' charitable functions are not seen as relevant by hospital boards when setting CEO compensation,

Despite the nonprofit status of the organizations they oversee, hospital boards don't appear to put weight toward the amount of free medical services and community outreach activities, good deeds collectively known as charity care, [executive vice president of Integrated Healthcare Strategies Kevin] Talbot

Also,

The head of the consulting firm that helps PRMC's board establish [current CEO] Naleppa's pay said community benefit shouldn't be part of the equation.

'In my over 25 years of consulting on hospital compensation, I have never seen community benefit used as a factor in determining executive pay,' Rian Yaffe said.  'Community benefit has nothing to do with how difficult a hospital is to manage and lead.'

However, community benefit is the mission of the hospital, and is justification for most US hospitals' non-profit status, which allows them to escape certain kinds of taxation, and for donors to make charitable, tax-advantaged contributions to the hospitals.  

The Baltimore Sun listed financial but not charitable performance as a justification for the compensation of a particular executive, the CEO of Johns Hopkins Medical Center, who is

'held responsible for stringent qualitative measures,'  in such areas as financial performance, patient safety and service excellence, [Johns Hopkins] spokeswoman Kim Hoppe said in a statement.

When asked by the Sun to comment, the advocacy group Community Catalyst stated

One of the factors that should be considered, it says, is the role of non-profit hospitals in the community and in providing charity care. 

Meanwhile, while the hospitals gain advantages from ostensibly focused on the mission of providing community care and benefit, not only are there leaders not given incentives to uphold this mission, they are explicitly compared to leaders of for-profit organizations who have no such missions, and who are primarily tasked with increasing short term revenue in this era of "financialization." 

In the Baltimore Sun,

Hospitals note that they compete with private sector businesses where their executives could choose to work instead.

Again, as noted above, there is little evidence that top hired managers are really that mobile, and less that a manager from one sector, e.g., non-profit hospitals, would be in great demand in another, e.g., a for-profit corporation.

The Boston Globe noted an argument made that implied no one should complain about how much non-profit hospital executives make, since executives of for-profit corporations make even more.

 'In a big successful teaching hospital, it’s very rare to see anything less than $1 million in total compensation for the chief executive, and $1.5 million to $2 million is the norm,' [managing director of consulting firm Compensation Resources Paul R] Dorf said. 'Executives at publicly traded pharma or medical device companies can make 10 times as much.'

So if there is little evidence for the mobility of top hired managers, there is less for the desirability of managers of non-profit hospitals as heads of large pharmaceutical or medical device companies.  But furthermore, in trying to justify, albeit illogically, outsize CEO compensation, the defenders of this compensation have provided evidence that the leaders and stewards of non-profit hospitals may no longer care about the hospitals' fundamental mission.  This suggests that hospitals' overt declarations of their mission, especially when used to obtain more donations and tax benefits, may amount to the ethical equivalent of a "long con," that is, a long-term confidence scheme.


Summary

While F Scott Fitzgerald noted that the very rich are different from you and me, it may now be more appropriate to say that top hired managers are very different from you and me.  Again and again we see that they play by very different sets of rules than do other people who work in health care.  Notably, while they often emphasize cost cutting, and may be quick to lay off or outsource other employees, their compensation increases year by year no matter how well their organizations are doing.  While other employees, increasingly now including doctors as well as other health care professionals, have to answer to the hired managers, the hired managers only answer to boards of directors or trustees who often act like their cronies, perhaps because they are often also current or retired hired managers.

Hired managers are subject to incentives that seem designed not to improve patients' and the public's health, but at best to improve the short-term revenue of health care organizations, and at worst to increase the wealth of hired managers.  Such perverse incentives risk promoting ill-considered, mission-hostile, or even corrupt management.  The sorts of people who aspire to be hired managers in such conditions are likely not the sort of people one would expect to really advance the health of patients or of the population.

As a first step to restoring health care leadership to some state of reasonable accountability and responsibility, we need to challenge the rules that only hired managers play by.  It would be nice to see articles in the media about health care CEO compensation that at least attempt to question the usual talking points.  All of us could think about how we could challenge our local million dollar plus hospital CEOs to justify why they should be treated so differently from all other hospital employees.

Since it seems that many hospitals no longer fit at least the spirit of the definition of not-for-profit organizations, even though they use this designation for financial advantage, we need policies to encourage them to uphold their mission, and that provide negative consequences if they do not. 

Pfizer May No Longer be Able to Delay Paying Its Asbestos Claims of Nearly $1 Billion

Pfizer, which claims to be the "world's largest research-based pharmaceutical company," is one step closer to paying a nearly one billion dollar settlement of legal claims of harms due to the asbestos products it used to manufacture.

Pfizer Settles - More or Less - Some of its Asbestos Liability

Most people would not think of Pfizer as a producer of asbestos.  However, the back-story, as reported in the Philadelphia Inquirer, and as we discussed here in 2011, is that

Pfizer used to have a minerals, pigments and metals division and, in 1968, it bought Quigley Company Inc., which made insulation for heavy industry.

Quigley's Insulag contained asbestos.

So,

Quigley stopped production at its facility in Old Bridge, N.J., in 1992.  When it filed for bankruptcy in 2004, Quigley faced more than 160,000 lawsuits, most related to asbestos product liability.

By apparently holding out the legal fiction that Quigley was an independent entity, Pfizer seemed to use to use the bankruptcy filing to delay making any payment of these claims, most of which likely involved illnesses due to asbestos exposure.  As the Inquirer article said,

Pfizer has spent the nine years since arguing that bankruptcy law protects it from such lawsuits.

notwithstanding the fact that Pfizer itself is hardly bankrupt.

But now, as Bloomberg reported (via the New London [CT] Day),

 Pfizer Inc.'s non-operating Quigley Co. won permission to end almost nine years in bankruptcy under a plan that resolves most asbestos claims against the former insulation maker and its parent, the world's largest drugmaker.

U.S. Bankruptcy Judge Stuart Bernstein in Manhattan Wednesday approved a Chapter 11 plan under which Pfizer will contribute assets worth $964 million. He rejected a prior plan almost three years ago, saying Pfizer was improperly using Quigley's bankruptcy to shield itself from asbestos claims.

Note that Pfizer has consistently argued that it should bear no responsibility for the effects of the asbestos made by its subsidiary:

'Pfizer has never been found derivatively or directly liable for injuries allegedly caused by Quigley's asbestos- containing products,' [Pfizer spokesman Christopher] Loder said.

Pfizer used to have a minerals, pigments and metals division and, in 1968, it bought Quigley Company Inc., which made insulation for heavy industry. Quigley's Insulag contained asbestos.
Read more at http://www.philly.com/philly/business/20130627_Drug-maker_Pfizer_fails_to_escape_costly_asbestos_case.html#AltGBB8oXa8YPkAC.99

Furthermore,

Pfizer has said throughout the case that it never made or sold Quigley's products and it doesn't have liability for them. Asbestos, once widely used as an insulator, was later shown to cause cancer.

Convenient Fictions

This case received little notice in 2011 and is receiving little notice now, and mainly for its business implications.  Yet the reporting does suggest  dots to connect to reveal some larger hypocrisies.

Dedicated to improving health and well being?

Pfizer asserts on its website that it

has remained dedicated to discovering and developing new, and better, ways to prevent and treat disease and improve health and well being for people around the world.[italics added]

Yet despite this supposed dedication to health and well-being, it has long delayed any possible compensation to people who may have acquired severe, if not fatal disease from contact with one of its products.

As per Bloomberg, note the examples of

people like Brenda Hagerich, 62, of Hot Springs, Ark., may get payments on their claims. Hagerich, whose father died in 1999 of mesothelioma, said she has been waiting for a second distribution of a $125,000 payment.

Ownership without responsibility

According to current media reports,  Pfizer attorneys repeatedly contended that because Quigley was a subsidiary of Pfizer, Pfizer could not be held accountable for its actions.  Yet Pfizer owned, and presumably thus gained all revenue from and chose the leadership of Quigley.  At best, maintaining this fiction seems heartless given Pfizer's stated interest in peoples' "health and well being."

Who knew asbestos was dangerous?

The current reports seem to imply that Pfizer's accountability should be mitigated because at the time it acquired Quigley, no one knew that asbestos was hazardous.  The Bloomberg report stated,

Quigley made asbestos-containing products from the 1940s to the 1970s, including Insulag, a powdered insulation. Pfizer, based in New York, bought the company in 1968.

But,

Pfizer has said throughout the case that it never made or sold Quigley's products and it doesn't have liability for them. Asbestos, once widely used as an insulator, was later shown to cause cancer.

The last sentence implies that asbestos was only shown to cause cancer after Pfizer acquired Quigley in 1968.  However, this suggests a lack of knowledge of medical history.

In fact, evidence that asbestos was dangerous would have been readily available in 1968. Pulmonary asbestosis was recognized in 1927.(1, noted in 2).  Furthermore, by 1952, as per Dr Richard Doll(3),

The majority of workers (cited by Hueper, 1952) consider that a causal relationship between asbestosis and lung cancer is either proved or is highly probable and the reality of the relationship was agreed at the recent International Symposium on the Epidemiology of Lung Cancer.

Doll reported further data in 1954 and concluded,

lung cancer was a specific industrial hazard of certain asbestos workers....

Summary

So while Pfizer officials ought to have known that in 1968 it was acquiring a company that made products that likely caused lung cancer, for more than 40 years, they have managed to stall payments to now mainly the heirs of people who acquired severe disease due to those products.  This clearly suggests that in this matter the company leadership has consistently put its revenue ahead of its ostensible dedication to peoples' health and well being.  Then again, this is hardly the first example of dubious ethical conduct by Pfizer.  See this post for a list of the 14 legal settlements of allegations of misconduct made by Pfizer since 2000, only one of which was related to the current case.

Furthermore, dedication to short-term revenue over everything else has resulted in huge wealth for Pfizer's hired managers.  Per the Wall Street Journal, only the latest example is,

The total 2012 compensation for Pfizer Inc. (PFE) Chief Executive Ian C. Read was valued at $25.6 million, up 2.5% from 2011, as the drug maker hit two out of three key financial objectives last year. 

Mr. Read's compensation was based partly on the company exceeding targets for total revenue and adjusted earnings-per-share, while missing its target for cash flow in 2012, Pfizer said in a proxy statement filed Thursday with the U.S. Securities and Exchange Commission.

Presumably, the total revenue target would have been a bit lower if Pfizer had managed to set aside assets to pay the asbestos related claims discussed above in 2012 rather than in 2013.

This relatively anechoic example shows how hollow ring most of the claims by leaders of big health care organizations that they value patients' and the public's health.  That may be convenient public relations puffery, but again and again the bottom line seems to matter more to them.  We have shown numerous examples of mission-hostile management, and of leaders compensated outrageously out of proportion to their contributions to patients' and the public's health.  Thus, why should health care professionals, or patients believe that anything they do puts patients ahead of money?

As we have said so often, health care professionals and society at large needs to hold large health care organizations' leadership accountable for their missions, and push out leaders who put their own pocketbooks and their organizations' revenue ahead of patients' and the public's health. 



References

1.  Cooke WE.  Pulmonary asbestosis.  Br Med J 1972; 2: 1024.
2.  Hasan FM, Nash G, Kazemi H. Asbestos exposure and related neoplasia: the 28 year experience of a major urban hospital.  Am J Med 1978, 65: 649-654. Link here.
3.  Doll R. Mortality from lung cancer in asbestos workers.  Br J Indust Med 1955; 12: 81-86.  Link here. 

Shut Up and Sell - the Corporate Physician's New Motto?

Evidence has been seeping into public view about the extent physicians who sign up to take care of patients as corporate employees give up their professionalism.

Shut Up...

In April, 2013, Medscape published an article whose striking title was "Can You Speak Out Without Getting Fired or Being Labeled a Troublemaker?"  The answer was basically "no."

Physicians often see problems at their workplaces relating to patient quality of care, financial practices, mistreatment of staff, and other issues. But as more doctors take jobs as employees of hospitals, medical groups, and other large organizations, they increasingly face the same dilemmas as millions of other working stiffs. When they come across actions or policies that they don't think are right, they have to decide whether it's worth it to speak out and get labeled as a troublemaker -- or perhaps even get fired.

 Across the country, a growing number of physicians are indeed losing their jobs -- and often their hospital staff privileges -- after protesting employment conditions. Such complaints may involve patient quality-of-care problems, short staffing, misallocation of funds, improper financial incentives, fraud and abuse, discrimination, overuse or withholding of medical services, or other misconduct, say organized medical groups, employment attorneys, and physician recruiters.

Of course, physicians swear oaths to put the needs of their individual patients first, and doing so within a large organization might well involve protesting conditions and practices that may affect the quality of care or even endanger patients.  But woe unto physicians who try to fulfill their professional responsibility when doing so goes up against the top executives to whom the physicians must now report.

'We were naive when we went into this,' says Maria Rivero, MD, who with her professional colleague and significant other Derek Kerr, MD, filed administrative complaints against their long-time hospital employer in 2010. 'We thought if we just brought it to people's attention, they would fix the problem and leave us alone. But if you blow the whistle on high-level executives, you need to prepare to be harassed and lose your job.'

Even working within the system to fix problems can lead to big trouble,

Still, the formal professional approach doesn't always work either. Cloyd Gatrell, MD, an emergency physician who was employed by EmCare, says that he and his wife Kathryn, a nurse, voiced concerns and presented data to executives at Carlisle Regional Medical Center in Pennsylvania in 2008 and 2009 on what they saw as inadequate nurse staffing levels that endangered patients.

After getting no results, Dr. Gatrell contacted the state health department, prompting a state inspection that found insufficient staffing. In 2010, he was fired by EmCare at the request of the hospital, according to his 2011 lawsuit against the hospital and EmCare claiming violation of whistleblower protection laws. His wife was fired earlier, and she sued separately. The hospital issued a statement declining comment on the litigation.

'We're supposed to be advocates for patients, but being employed puts us in a precarious position in taking a position on patient interests that's against what the hospital administration favors,' says Dr. Gatrell, whose suit is in the discovery stage. 'I think a physician still has that responsibility.'

Physicians who sign contracts with corporate employers, perhaps thinking that they will have less bureaucracy with which to contend and a more certain salary than they did in private practice, seem blissfully, or willfully unaware that those contracts may take away their ability to control their practices and stand up for their patients.

Still, federal and state whistleblower laws only provide protection from retaliation for physicians in certain situations, such as those employed by public entities or those who complain about civil rights violations or Medicare and Medicaid fraud and abuse. Otherwise doctors may have to rely on contract provisions or on state employment law, which may not offer much protection.

[An anesthesiologist on the AMA Board of Trustees and his hospital system's board,] Dr. Annis says that the AMA's new statement of principles for physician employment -- which asserts that physicians should not be retaliated against by their employers for speaking out on patient care issues -- provides support for doctors when they raise legitimate professional concerns with their employers. He says it's best for physicians to work through their medical staff organization.

But Dr. Gatrell points out that the AMA statement explicitly accepts that physician employment contracts may allow hospitals to strip doctors of their medical staff membership and clinical privileges at the same time they are terminated, known as a 'clean sweep' clause. 'If that's accepted by the AMA, the rest of the principles protecting physicians are meaningless," he argues. "If physicians can be fired without cause and then automatically lose their medical staff membership and its due process protection, how many will dare be a patient advocate?'

Some experts advise physicians not to sign employment agreements with such onerous provisions. But others say that physicians often have little leverage to remove them. 'It's not an equal negotiating table,' says Dr. Gatrell, who's now working for a small urgent care practice.

A May, 2013 article again in Medscape about the "4 Top Complaints of Employed Doctors," explained why physicians often see a lot they could or should protest to assure the quality of their patients' care,

 Some doctors report that hospital administrators treat them with a lack of respect. One female doctor said, also on condition of anonymity, that her biggest challenge on her job was 'how to handle nonphysician high school grads bossing you around when they function as your 'superiors' in your employer's organization. They manage their insecurities by bullying physicians and through passive aggressiveness, but always seem to gain the upper hand with those at the top.'

These are the sorts of brilliant administrators often hired by brilliant top executives, maybe at a cheap price to keep the bottom line and executive compensation healthy..  Furthermore, given that as we have discussed, "financialization" of hospital management often puts a bigger priority on short-term revenue than on quality care, as per one senior physician,

 'physicians are being increasingly targeted when they get in the way' of hospitals' agendas

To make more money faster, many hospital systems now seem to want physicians to only make referrals for lucrative tests and treatments within the system, even if some patients might be better served elsewhere,

The AMA recently issued guidelines for physician employment stating that 'a physician's paramount responsibility is to his or her patients.' Employers should not retaliate against physicians for asserting their patients' interests, according to these guidelines. 'In any situation where the economic or other interests of the employer are in conflict with patient welfare, patient welfare must take priority,' the AMA says.

The guidelines also call for employers and employed physicians to disclose to patients any agreements or understandings they have that restrict, discourage, or encourage particular treatment or referral options.

Nevertheless, employed physicians are often expected to refer patients within their own groups and send tests to a hospital laboratory or imaging center. Hospitals may tell employed surgeons which kinds of joint implants to use, and according to a New York Times article even whether to implant defibrillators in Medicaid patients. It's unclear how often any of this is disclosed to patients.

'What we doctors say is that we're ethically bound to our patients because we took an oath, and that's what our license is based on,' says Linda Brodsky. 'But many hospitals say, 'No, you're employed here, and what we say goes.'

Note that so far there seems to be little evidence that the AMA guidelines about physician employment are being honored other than in the breach.  It is also disappointing that the leadership of the medical society that represents internists seems so unworried,

 David L. Bronson, MD, President of the American College of Physicians, disputes Brodsky's assertion that hospitals tend to squelch doctors who criticize leadership for policies that they believe harm patient care. In fact, he says, healthcare organizations may identify outspoken physicians as potential leaders, 'as long as they're collaborative and trying to solve problems, and not just be a thorn in the side of everyone they know. Organizations are looking for physician leaders, and physicians who can collaborate and not just be adversarial can go far inside organizations.'

I would guess, having seen so many examples of generic management, mission-hostile management, management that seems more focused on the money than patient care, and management that seems to be able to make itself rich without evidence that it has done anything noteworthy to uphold hospitals' clinical missions, that hospital systems that promote physicians who are willing to speak out against hired executives are vanishingly rare.

And Sell

In June, 2013, Beckers Hospital Review published an article suggesting that now hospitals are going beyond just pressuring employed physicians to refer potentially profitable patients within the system, and now are pressuring physicians to act as salespeople to their colleagues,

 A few hospitals are beginning to train their employed physicians to "sell" the hospital, which involves asking referring doctors in the community to send patients their way....  the pressure to bring doctors into sales is mounting.

The author, the former publisher of Modern Healthcare, made a remarkable argument based on a definition that seems wildly optimistic,

 Customer service lies at the core of salesmanship. The Business Dictionary defines salesmanship as satisfying customer needs through a sincere and mutually beneficial process aimed at a long-term relationship.

Of course, skeptical physicians used to exposure to the sales tactics pharmaceutical and device companies use (look here, here, and here,  for example) might wonder why the author did not discuss such marketing tactics as the employment of half-truths and biased information, and the use of emotional appeals to trump reason and logic.

That the author was serious was shown by his list of seven pointers for hospitals seeking to transform its employed physicians into marketers.

Of course, physicians who are already "key opinion leaders" employed by drug and device companies, whose marketing executives may think. that "key opinion leaders were sales people for us," (see this post), might not be fazed by now being asked to market their own hospital.  Never mind about Principle II of the AMA Code of Ethics

II. A physician shall uphold the standards of professionalism, be honest in all professional interactions, and strive to report physicians deficient in character or competence, or engaging in fraud or deception, to appropriate entities.

The Moral of the Story

We have previously discussed various aspects of the travails of the brave new world of the corporate physician.  Physicians and other health professionals who sign on as full-time employees of large corporate entities have to realize that they are now beholden to managers and executives who may be hostile to their professional values, and who are subject to perverse incentives that support such hostility, including the potential for huge executive compensation.  Physicians seem to be willing to sign contracts that underline their new subservience to their corporate overlords, and likely trap them within confidentiality clauses that make blowing the whistle likely to lead to extreme unpleasantness.

It is disappointing that even medical societies that ostensibly support physicians' professional values have been afraid to warn against such employment, or do much to help physicians trapped within it.

Physicians who go to work for big corporations have to realize that they may be forced to put corporate executives' vested interests ahead of their patients.  Patients whose physicians work for big corporations must realize that their health care will now be corporate, with all that entails.

  As I have said before, we need to challenge the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

Is the Cystic Fibrosis Foundation a Charity or a Venture Capital Firm?

We have often discussed how health care organizations now seem prone to diversion from their stated missions, often when money is the object.  While the organizations in question are frequently academic, teaching hospitals, academic medical centers, or medical schools in particular, in May, the Milwaukee Journal Sentinel presented an example of a disease specific charity.  This article deserves considerably more attention than it apparently initially received.

Background

The background was,

What happens when a disease-fighting charity dives into venture capitalism?

In the first case of its kind, the results include one of the planet's most expensive pills, huge sales projections for a drug company and windfalls for executives who sold stock in the glow of enthusiastic news releases about the drug.

Kalydeco is a breakthrough drug designed from knowledge of the genetic roots of cystic fibrosis, a lung disease that kills most victims before they reach middle age. Developed by Vertex Pharmaceuticals with a $75 million investment from the Cystic Fibrosis Foundation, it is an early example of 'venture philanthropy,' where a nonprofit helps finance development of a treatment in return for a cut of sales.

Remember that while disease specific charities often sponsor basic and clinical research, in this case, the CFF sponsored drug development.  In fact, much of the research on which this development was based was sponsored by charities and the US National Institutes of Health:

In the 1980s, Francis Collins, now director of the National Institutes of Health, was a researcher at the University of Michigan and on his way to becoming a renowned gene hunter.

Collins and a team headed up by Lap-Chee Tsui at the Hospital for Sick Children in Toronto collaborated to identify the gene responsible for cystic fibrosis. That breakthrough involved funding from the NIH, the Cystic Fibrosis Foundation and the Howard Hughes Medical Institute, said Collins.

Another decade of intense basic science followed, much of it funded by NIH.

The Price to Patients 

Despite, or perhaps because of the funding provided by CFF, Vertex chose a stratospheric price for its new drug.

 Yet it costs each patient $307,000 a year to take two Kalydeco pills a day - a price borne by taxpayers through Medicaid and other government programs and by the workers and companies who finance employee health insurance plans.

In 2012, with less than a full-year on the market, Vertex sold $172 million worth of Kalydeco....

To put that in perspective, the yearly cost of Kalydeco is approximately six times the median family income in the US.


Minimizing the Harms

To put it further into perspective, keep in mind that for the moment, the data from the single best published clinical trial on Kalydeco suggests that while the drug seems to help the average patient, it is not without risks, and it is certainly not a cure.

The largest published trial that followed patients for a reasonable amount of time appeared in 2011 in the New England Journal of Medicine.  [Ramsey BW, Davies J, McElvaney G et al.  A CFTR potentiator in patients with cystic fibrosis and the G551D mutation. N Engl J Med 2011; 365: 1663-1672.  Link here.]  The study followed 161 patients for 48 weeks.  The patients treated with Kalydeco on average showed improved lung function (increase of FEV1 [forced expiratory volume in one second] of 10% compared to essentially no change (-0.2 percent) in the placebo group.  Treated patients were less likely to have an exacerbation of their pulmonary disease requiring hospitalization (31% vs 49%).  So the drug certainly seems to have benefits at least in the short term.  The number needed to treat to prevent one exacerbation requiring hospitalization in one year is five, which seems quite respectable.

On the other hand, the drug may have significant harms, even thought the report of the study seems to have attempted to minimize them.  The article stated

there was a lower rate of serious adverse events in the ivacaftor [Kalydeco] group than in the placebo group (24% vs 42%).  

However, this statement depended on a rather peculiar definition of severe adverse events.  In particular, pulmonary exacerbations of cystic fibrosis were included among severe adverse events.  Yet these are, as the term suggests, manifestations of the disease that is being treated.  Reduction of pulmonary adverse events should be and was considered a measure of efficacy.  So placing exacerbations within the definition of adverse events essentially double counts these incidents. 

Furthermore, the presence of these within the category of adverse events swamps out other events which may in fact be adverse results of the study drug.  If one subtracts pulmonary exacerbations and hemoptysis from the counts of serious adverse events, what remains is that patients on Kalydeco were more likely to have a serious adverse event (10%) than those on placebo (4%).  Thus the apparent number needed to harm was 17.  Thus, using this peculiar definition of adverse events appears to be a way to manipulate the analysis to minimize the apparent harmfulness of the drug.

While the study did appear to show that more patient received the benefit of avoiding a hospitalization due to a pulmonary exacerbation of cystic fibrosis than had a serious adverse event, the study did not show that the drug had overwhelming efficacy, or tremendous safety.   The study did not last long enough to show long term advantages, or to rule out rare but severe side effects.

This is the only drug available of this type, and it may well provide benefits that outweigh harms, at least over the short-term, but it is not a wonder drug, and the rationale to charge so much money for it, other than that is what the market will bear, is not obvious.  

A Windfall for Corporate Executives, and a Question of Insider Trading

The drug's approval has lead to a lot of financial success for stock holders, particularly Vertex executives:

 Last month, news about success of the drug sent Vertex stock soaring more than $6 billion in a single day. That surge and a similar one last May allowed top executives and directors of the company to sell stock and options worth more than $100 million.

The executives' lavish windfall occurred in somewhat questionable circumstances:

Vertex and its executives have benefited greatly from Kalydeco and foundation funding.

Last May, when Vertex and the foundation reported positive results from a clinical trial involving Kalydeco and whether it could be combined with another drug to treat more patients, the company's stock jumped more than 70%, from $37.41 to $64.85 a share.

Five executives and two directors sold off more than $35 million in shares, mainly at prices from about $55 to $64 a share. Many of the options were priced between $16 and $40 a share.

Three weeks later, the company said it overstated the effectiveness of the drug in that trial and the stock dropped about $7 a share, ultimately falling back under $40 by December.

Vertex spokeswoman Nikki Levy said in an email the company does not comment on individual stock sales.  She said the executive stock sales either were part of pre-existing 10b5-1 plans or followed the company's internal stock trading policy. A 10b5-1 plan is an automatic trading tool in which executives specify timing or pricing of sales to avoid questions about inside information the seller had at the time.

U.S. Sen. Chuck Grassley (R-Iowa) wrote a letter to the U.S. Securities and Exchange Commission, saying it could appear that Vertex executives took advantage of the situation, knowing the overstated clinical trial results would eventually be made public and cause the stock price to drop.

The letter said the stock sales were troubling for industry investors and the federal government, which pays billions of dollars a year for drugs through Medicaid and Medicare.

Judith Burns, a spokeswoman for the SEC, declined to comment on the Grassley letter.

Last month, the company's stock shot up more than 60% again, from $52.87 to $85.60, after positive early data from a clinical trial of Kalydeco and another drug it is developing with funding from the foundation. On April 19, the day after the news was released, the company's market value jumped by more than $6 billion.

That same day, two company executives sold huge chunks of stock options. Executive Vice President and Chief Financial Officer Ian Smith alone sold 745,685 shares worth more than $60 million. Most shares were sold at $81.50, with options purchased from $29 to $39.

So at least Senator Grassley raised the question of whether Vertex executives may have taken advantage of their insider knowledge to personally profit even more from this useful but not miraculous drug meant to be used on vulnerable patients.

Keep in mind that those huge trading gains were layered on top of already lavish compensation.  The 2013 Vertex proxy statement, the total compensation and stock holdings of its top executives in 2012 was:

Jeffrey M Leiden, CEO                                $5,656,684      441,160 shares
Ian F Smith, CFO                                           $3,109,193      795,434
Stuart A Arbuckle, Chief Commercial Officer   $4,808,697         66,477
Kenneth L Horton, Chief Legal Officer             $2,802,735         41,161
Peter Mueller, Chief Scientific Officer              $3,614,890        997,651
Matthew W Emmens, Former CEO                  $6,896,029    1,486,748
David T Howton Jr, Fomer Chief Legal Officer $3,447,898           3,105



So the top executives of Vertex, while their company got $75 million from an ostensible charity to develop what became an extremely expensive drug, got very rich in the process, although how they got rich may yet attract attention from the SEC.

A Windfall for the Cystic Fibrosis Foundation and its Executives

Furthermore, it appears that the supposedly charitable Cystic Fibrosis Foundation also made quite a bit of money, and its executives, while not getting quite as rich as their associates in Vertex, did not do at all badly.

As the Journal Sentinel noted,

the foundation cashed in by selling future royalties from the drug to an undisclosed firm for $150 million.

Keep in mind that since the CFF was to receive royalties, the money it gave for drug development was not a grant, but an investment.

Furthermore, according to the Foundation's 2011 form 990 (the latest available), its executives received the following total compensation from the foundation and its affiliated organizations:

Robert J Beall, CEO                                                      $1,073,725
C Richard Mattingly, COO                                              $759,799
Preston W Campbell MD, Exec VP of Medical Affairs     $736,031
Vera H Twigg, CFO                                                         $445,183
Ann Palmer, Senior VP                                                     $276,029 
Daniel Klein, Senior VP                                                    $277,300
Gregory August, CIO                                                       $262,698
David McLoughlin, Senior VP                                          $316,122
Glen Goldmark, VP                                                          $253,215
Amy DeMaria, Senior VP                                                 $241,672
Mary Dwight, Senior VP                                                   $246,232

These compensation amounts may be much lower than the gargantuan pay dealt out to for-profit health care corporate executives, but they are very high for those who are managing a supposed charity meant to help vulnerable patients.

A More Complex Web

While profiting from its underwriting of the development of Kalydeco, the CFF also sponsored guidelines about the treatment of cystic fibrosis, with not unexpected results.

Last month, new treatment guidelines for doctors who handle cystic fibrosis patients strongly recommended use of Kalydeco. The guidelines were funded by the Cystic Fibrosis Foundation.

Three of the 10 authors of the guidelines were employees of the foundation and four others worked for institutions that received grants from the foundation. The chairman, Peter Mogayzel, is a professor of pediatrics at Johns Hopkins University, which foundation tax records show received more than $2 million in grants from 2009 through 2011.

These guidelines hardly look like they would be deemed trustworthy according to the Institute of Medicine's standards (look here).  However, they certainly look like they might help sell ivacaftor, and hence help justify higher pay for the executives listed above.

Criticism of Venture Philanthropy

Merriam-Webster online suggests one definition of a charity is an institution funded by a gift for public benevolent purposes.

The Cystic Fibrosis Foundation appears to be such a charity, but now one that functions more as a venture capitalist.  In this case, it did provide venture capital to develop a new drug for its disease of interest.  However, the foundation appeared to have done so not to provide public benevolence, but to generate a  return on its investment.  It is using that return not for public benevolence, but to provide more venture capital to other drug companies, presumably with the goal of getting further returns.  Meanwhile, its executives make generous compensation for people who are supposed to be running a charity.  Finally, the drug has an astronomical price, and its pricing has helped make investors in and executives of the company supported by the CFF very rich.

This has not been lost on some dissidents, per the Journal Sentinel,

'The concept of a charitable, not-for-profit taking on the role of a venture capitalist is new and difficult to digest at the moment,' said Paul Quinton, a cystic fibrosis researcher at the University of California, Riverside and the University California, San Diego.

Quinton, who has cystic fibrosis, is one of 28 doctors and scientists who sent a letter to Vertex calling the price of Kalydeco 'unconscionable.' A copy of the letter was provided to the Journal Sentinel and MedPage Today. Kalydeco, the doctors wrote, costs 10 times more than what a typical cystic fibrosis patient pays in total drug costs.

'This action could appear to be leveraging pain and suffering into huge financial gain for speculators, some of whom were your top executives who reportedly made millions of dollars in a single day,' the doctors wrote.

Vertex responded with seeming contempt,

 Since receiving the letter last July, Vertex has raised the annual price of Kalydeco another $13,000.

The funding by the supposedly charitable CFF of guidelines that promote the drug it financed has also drawn criticism,

 'It is definitely a conflict of interest,' said Eric Campbell, an associate professor at Harvard Medical School who has researched conflicts of interest in patient treatment guidelines.

In the past, drug companies have been criticized for funding treatment guidelines that recommend their drugs. It is no different if the guidelines are funded by a foundation that gets royalties from drug sales, Campbell said.

Also,

'It is concerning that the organization now stands to profit when patients choose to use the drug,' ... [Prof Lisa Schwartz of Dartmouth Medical School] said. 'Financial entanglement with industry, even with the best of intentions, creates a conflict of interest.'

However, the very well paid CEO of the CFF pooh poohed concerns about conflicts of interest,

Robert Beall, president of the Cystic Fibrosis Foundation, said that without its financial support, drugs such as Kalydeco would never get to patients. Neither insurance companies nor patients have voiced any concern to him about conflicts of interest, he said.

'They applaud the decision and our business model to the utmost,' Beall said. 'The patients are excited.'

He rejected the idea of using the royalty money to help patients pay for the medical care, noting that the foundation needed the money to entice drug companies to get involved in risky cystic fibrosis drug research.

One wonders when patients would ever have the opportunity to voice any "concerns" to Mr Beall, who also disdained any restraints on the price of the drug,

.Beall said the foundation did not ask Vertex to price the drug more affordably.

'That would have been a deal-breaker,' he said.

That seems to put making money ahead of patients' needs.  Was this venture philanthropy, or vulture philanthropy? 

 Summary

We have discussed numerous cases in which non-profit health care organizations seem to put short term revenue ahead of their missions to further patients' and the public's health.  In this case, a disease specific charity seems to have foregone its mission to directly support patient care, teaching, or research to provide venture capital, an action which lead to a profit for the organization, huge profits for a drug company, large rewards for the charity's executives, and even greater wealth for the drug company's executives.  It did also lead to the marketing of a beneficial drug, but at a breathtaking price that no middle-class patient without exceedingly good insurance could afford.  

Where is the public benevolence here?  Where is the charity?  How much is about patients and how much is about  making insider executives wealthy? 

As we have said until blue in the face, true health care reform would ensure health care organizational leadership that upholds the health care mission, not their personal finances.  

Guest Post: A Physician Rebels Against Micromanagement by "'Leadership-Trained' Management Extenders"

Health Care Renewal presents a guest post by Dr Howard Brody, John P McGovern Centennial Chair of Family Medicine, Director of the Institute for Medical Humanities at University of Texas - Medical Branch at Galveston, and blogger at Hooked: Ethics, Medicine and Pharma.

I recently heard from a physician whom I knew well in an earlier stage of her training—I’ll call her Pauline. She completed her training at one of the top children’s hospitals in the US, and served in several capacities in academic medical centers before her most recent job with a physician-owned for-profit practice. She called me to express her frustrations and to ask if the right course for her was to quit doing clinical medicine.

Pauline had become skilled in her earlier jobs in providing primary care for children with severe chronic conditions. Her reputation was such that when she was settled in her current post, pediatric subspecialists started to refer their difficult cases to her for follow-up. This patient mix did not suit her current employer for two reasons. First, these children were hard to take care of and even though they could have their visits “up-coded” to reflect their complexity, the practice much preferred to see healthy children with colds and earaches that could be moved through quickly and who did not demand much staff time and attention. Second, most of these children with special needs were on state insurance, which did not pay as well (even after up-coding) as the private insurance the practice coveted.

Pauline found herself constantly struggling with her co-workers and superiors in order to deliver all of her patients—not just the special-needs kids—the quality of care she had been trained to demand. As far as the practice was concerned, it was Pauline, and the medically complex kids she was attracting into the practice, who were the problem.

One recent incident had especially concerned Pauline. She had set up a visit to see a new medically complex patient and had blocked off 40 minutes, the amount of time she felt she needed to do a good job. The child had a complex genetic disorder, cerebral palsy, and heart, lung, and kidney problems.  Both the cardiologist and the nephrologist had called asking her to take this patient.  She agreed.  After she had scheduled the visit, a manager called her and told her that she was being allowed only 15 minutes to see that patient. After some fruitless discussion with him, Pauline finally said, “Okay, I guess that means that you’ll be seeing the patient instead of me, right?” The shocked voice at the other end of the phone line replied, “What do you mean? I don’t know how to take care of patients.” “That’s exactly my point,” Pauline put in.

Pauline explained that this manager assigned to her office is not even a college graduate. Physicians cannot access the schedule electronically and have no control over scheduling. These functions are controlled by the office manager and (amazingly) by some of the medical assistants who have received some “leadership” training. These medical assistants are even allowed to evaluate the clinical competency and skills of the physicians.

Now, at this stage, I can imagine a response from a management-trained person. Pauline is obviously one of those starry-eyed idealist physicians who believe that money grows on trees and that costs should never be a factor in caring for patients. Somebody who actually knows what it means to make a payroll and keep the lights on has to step in and rein in these physicians. There has to be somebody in the system someplace with a head for business, who can recognize the stark realities of what today’s practice demands from all parties. Physicians should get off their high horses and stop imagining that they can give orders to everyone else.

So let me add a further nugget about Pauline’s background. In one of her previous jobs, she was made the manager of a pediatric outpatient center within a county hospital caring for a largely indigent population. This center had been running in the red for a good while. Pauline took over and within 28 months she’d streamlined the place and had them running well in the black, while still administering a quality of care that Pauline and her colleagues could be proud of. In short, Pauline could probably tell the managers of her current practice a thing or two about how to optimize patient scheduling without compromising care or cost —if they’d listen.

Pauline probably has a nearly-unique skill set in her community and has put in a lot of years of training and experience to get there. Due to the present state of American medicine, and those who want to run it as if it were an industrial operation to make a profit, Pauline is thinking about leaving clinical practice altogether despite her relatively young age – and she has several colleagues, who trained in the same way that she did, who are considering this option.

Fortunately, Pauline has at least for now postponed any final decision about leaving clinical medicine entirely. Here’s what she last told me:

I am leaving the organization - I cannot remain in an organization where profit comes ahead of quality - and as a former medical director who had financial accountability/responsibilities, I know it does not HAVE to be a choice.  I do not know what my next steps will be from here.  For me, working with integrity, compassion and a desire for excellence is not negotiable.

Physicians MUST become better advocates for our profession.  For too long, we have been asleep at the wheel while insurance companies and corporations shaped the environment in which we practice.  We cannot allow this to continue.  We are professionals, not vocationally educated medical automatons  who need every moment of work day micromanaged by 'leadership-trained' management extenders who have no idea what it means to take responsibility for patients.  

Dr Howard Brody

UnitedHealth CEO Continues to Prosper While His Company's Behavior Appears to Contradict its Mission Statement

Tis spring, the season in the US for legal settlements, government findings, and proxy statements revealing executive compensation.  Therefore, maybe there should be no surprise that we are seeing a series of cases in which health care corporate leaders continue to enrich themselves while their organizations' behavior raises ethical questions.

Following on the Amgen example, we now present the latest UnitedHealth example (in a post organized similarly.)

The CEO Gets Richer

Last week, the Associated Press (via the Washington Post) summarized UnitedHealth CEO Stephen J Hemsley's growing pile of money:

UnitedHealth Group Inc. kept CEO Stephen J. Hemsley’s salary stable in 2012 but bumped up his total compensation for a year in which the nation’s largest health insurer grew earnings and enrollment and launched a major acquisition.

The Minnetonka, Minn., insurer gave its top executive a compensation package valued at about $13.9 million last year, according to the company’s proxy statement filed with the Securities and Exchange Commission. That’s up 4 percent from the $13.4 million total he received last year.

Hemsley, 60, received a $1.3 million annual salary in 2012, like he has the past several years. He also received $7 million in stock awards, which is the same total as 2011. But his performance-based bonus climbed 7 percent to $5.3 million, and he received $287,443 in other compensation, up from $154,804 in 2011.

Other compensation included savings plan contributions and a $125,000 Hart-Scott-Rodino Antitrust Improvement Act filing fee payment UnitedHealth made on behalf of the CEO so he could maintain and increase his stock ownership in the company.

At the same time, Hemsley continued to cash in stock options which also added to his riches:
 

Outside AP’s calculation of his 2012 total compensation, Hemsley also acquired 284,836 shares that had vested with a value of $15.3 million. He also exercised options to acquire 600,000 shares and realized a value of $12.5 million. Those options and stock awards had been previously given to the executive.

The proxy said Hemsley directly owned UnitedHealth shares valued at about $140 million, as of March 1.

The Mission Promises Much but the Company Delivers Less

On one hand, the rate of rise of Hemsley's compensation at least seemed comparable to the company's financial performance:

Overall, UnitedHealth shares climbed 7 percent to close 2012 at $54.24, a smaller gain than the 13.4 percent advance from the Standard & Poor’s 500 index.

On the other hand, the largess given to the CEO ought to be contrasted with the how UnitedHealth failed to deliver what its mission promised.  

Most recently, a jury found the company failed to live up to its legal obligation (in the state of Nevada) to review the quality of the clinicians on its panel.  As reported by Bloomberg,

Two UnitedHealth Group Inc (UNH)  units must pay $24 million in damages for failing to properly monitor a doctor who gave two colonoscopy patients hepatitis C by employing substandard medical practices, a Nevada jury ruled.

Jurors in state court in Las Vegas deliberated about five hours over two days before finding officials of Health Plan of Nevada and Sierra Health Services were negligent in their oversight of Dipek Desai.  The former gastroenterologist has been blamed for infecting patients with hepatitis C by reusing vials of the anesthetic Propofol and failing to sterilize equipment.

The panel ordered the two UnitedHealth units to pay $15 million in compensatory damages to Bonnie Brunson and her husband and $9 million to Helen Meyer. The two women contend they got hepatitis during colonoscopy procedures at Desai’s clinic. Their lawyers said earlier in the case they may ask the jury to award more than $1 billion in punitive damages.

The verdict reflects 'what’s wrong with health insurance companies in the U.S.' Robert Eglet, Brunson’s lawyer, said in an interview after the verdict was announced. 'They put profit before patient safety.'

Note that the state of Nevada does explicitly hold managed care organizations accountable for the clinical quality of its health care professionals' practice,

 

Meyer and Brunson sued under a Nevada law requiring HMOs to file annual reports showing officials reviewed the quality of health services provided to their members.

The women’s lawyers argued officials of the UnitedHealth units knew Desai had a reputation for sloppy practice before giving him a contract to handle colonoscopies and then didn’t check the quality of his work. At one point, Desai was a member of Nevada's Board of Medical Examiners,  which oversees the licensing of doctors in the state.

The plaintiffs contend the insurer didn’t properly monitor Desai’s practices and procedures even though they received complaints about his practices.

During the trial, witnesses said Desai adopted a cavalier attitude toward patient safety, speeding through procedures so he could see as many as 20 patients in a three-hour period.

The women’s lawyers argued the insurers’ executives had an obligation to insure Desai was providing quality care to their HMO members and were required to vet his practices before hiring him.

Also note that managed care organizations and other health insurers often boast about the quality of their provider panels.
For example, see the UnitedHealth mission statement:

- Our mission is to help people live healthier lives. Our role is to help make health care work for everyone.
 - We seek to enhance the performance of the health system and improve the overall health and well-being of the people we serve and their communities.
- We work with health care professionals and other key partners to expand access to quality health care so people get the care they need at an affordable price.
- We support the physician/patient relationship and empower people with the information, guidance and tools they need to make personal health choices and decisions.

It seems reasonable to interpret the italicized parts above as a statement of accountability for the quality of care provided by the health care professionals within the United network.

To reinforce that accountability, a subsequent Bloomberg story added,

Two UnitedHealth Group Inc (UNH) units must pay $500 million in punitive damages for failing to oversee a doctor blamed for giving colonoscopy patients hepatitis C through shoddy medical practices, a Nevada jury found.

Jurors in state court in Las Vegas deliberated more than six hours yesterday before handing down the punitive-damages award against Health Plan of Nevada and Sierra Health Services for turning a blind eye to Dipak Desai's actions. 

Furthermore, the lofty UnitedHealth mission statement should be compared to two recent government findings.

In the state of California, as reported by the Los Angeles Times,

California Insurance Commissioner Dave Jones said the nation's largest health insurer, UnitedHealth Group Inc., is imposing unreasonable rate hikes on about 5,000 small businesses. 

Jones said Wednesday that UnitedHealth couldn't justify the average annual increase of nearly 8%, which reflects both higher premiums and a reduction in benefits. He said the rate hike, which went into effect Wednesday, affects up to 45,000 small-business employees and dependents and represents $12.5 million in higher costs.

'At a time when small businesses are struggling to survive, UnitedHealthcare's rate increase is just one more unwarranted economic burden on California's small business owners and their employees,' Jones said. 

Such behavior seems to contradict the mission statement's assurance that the company will seek to provide health care at "an affordable price."

Meanwhile, Bloomberg just published a story about how UnitedHealth has been running an insurance program for US military families.

The Pentagon rebuked UnitedHealth (UNH) Group Inc, the nation’s largest insurer, after military families began experiencing long delays getting medical-care referrals from the company. 

The backlogs occurred almost as soon as Minnetonka, Minnesota-based UnitedHealth took over a contract, valued as much as $20.5 billion, from TriWest Healthcare Alliance Corp. It assumed responsibility on April 1 for the western region of the military’s health-care system, known as Tricare.

UnitedHealth’s 'failure to meet contractor requirements' has prevented a large number of beneficiaries in one Tricare health plan from obtaining timely access to specialty care, Jonathan Woodson, assistant secretary of defense for health affairs, said in a memo yesterday to other military leaders.

Woodson, calling the situation 'extraordinary,' said the Pentagon stepped in to grant a temporary waiver so the plan’s members in the western region could get specialty care without UnitedHealth’s authorization and not incur penalties.. 

This behavior seemed to contradict the mission statement's assurance that the company seeks to "expand access to quality health care."

The Song Remains the Same 

Of course, UnitedHealth actually has a very long record of preaching about its aspirational mission, while paying its top hired managers extraordinary amounts and contradicting that mission, and at times ethical norms. Our posts on UnitedHealth are here. Recently we wrote,

 UnitedHealth would be the company whose CEO once was worth over a billion dollars due to back dated stock options, some of which he had to give back, but despite all the resulting legal actions, was still the ninth best paid CEO in the US for the first decade of the 21st century (look here). UnitedHealth would be the company whose then CEO made a cool $106 million in 2009 (look here).

Moreover, UnitedHealth would also be the company known for a string of ethical lapses:
- as reported by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."
- UnitedHalth promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post here);
- UnitedHealth's acquisition of Pacificare in California allegedly lead to a "meltdown" of its claims paying mechanisms (see post here);
- UnitedHealth's acquisition of Sierra Health Services allegedly gave it a monopoly in Utah, while the company allegedly was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post here)
- UnitedHealth frequently violated Nebraska insurance laws (see post here);
- UnitedHealth settled charges that its Ingenix subsidiaries manipulation of data lead to underpaying patients who received out-of-network care (see post here).
- UnitedHealth was accused of hiding the fact that the physicians it is now employing through its Optum subsidiary in fact work for a for-profit company, not directly for their patients (see post here).

Summary

The US dysfunctional health care system has produced a long string of big corporations that promise warm and fuzzy health care yet deliver something less, all the while mightily enriching their top hired managers. Given the deadly serious nature of the health care system, these companies' promises, marketing, public relations and mission statements cannot be dismissed as fluff and puffery. Market fundamentalists and executive apologists have touted our system as market based. If patients must act as consumers, they cannot make good consuming decisions if they are awash with deceptive marketing and advertising. It is one thing for Hollywood to advertise blockbuster movies that are duds. It is another for health care corporations to advertise quality care and deliver bad care.

As we have said far too many times, 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.