Thursday, July 20, 2017

Who Benefits from our Current Health Care Dysfunction? - Mallinckrodt's Leadership Maintains Impunity After Well Publicized Opioid Settlement

The Latest Mallinckrodt Settlement

Jeff Sessions, the current US Attorney General, is ginning up a lot of press coverage of his recent crackdown on makers of narcotics.  For example, per the Washington Post on July 11, 2017...

The Justice Department and Mallinckrodt Pharmaceuticals reached a $35 million settlement Tuesday to resolve allegations that the company failed to report signs that large quantities of its highly addictive oxycodone pills were diverted to the black market in Florida, where they helped stoke the opioid epidemic.

The agreement is the first with a major manufacturer of the opioids that have sparked a crisis of overdoses and addictions across the country. The Justice Department said the deal establishes 'groundbreaking' new standards that require the company to track its drugs as they flow through the supply chain to consumers in an effort to control the epidemic.

The company had argued that once it passed the drugs to wholesale distributors, it was not responsible for illegal diversion of the painkillers as they were sent to retailers and then pain patients.

'The Department of Justice has the responsibility to ensure that our drug laws are being enforced and to protect the American people,' Attorney General Jeff Sessions said in a statement. 'Part of that mission is holding drug manufacturers accountable for their actions. Mallinckrodt’s actions and omissions formed a link in the chain of supply that resulted in millions of oxycodone pills being sold on the street.'

A Slap on the Wrist with a Wet Noodle

Hold them accountable? With a $35 million dollar settlement? That should really strike fear into the hearts of evil-doers.  After all, this settlement is tiny compared to the magnitude of the behavior.

At one point, the government calculated that it could have assessed the company $2.3 billion in fines for nearly 44,000 violations of the federal Controlled Substances Act, according to confidential government documents obtained by The Post.


Between 2008 and 2012, about 500 million of Mallinckrodt’s pills ended up in Florida, 66 percent of all oxycodone sold in the state, The Post reported.

Nearly 180,000 people died of overdoses of prescription painkillers between 2000 and 2015, and the abuse of pharmaceutical opioids is widely blamed for a crisis that now involves many thousands of overdoses on heroin and fentanyl.

Then, the settlement is tiny compared with the company's revenues.  For example, according to a recent company press release, Mallinckrodt had

Fiscal 2016 net sales of $3.381 billion, up 15.7%, principally driven by volume in Specialty Brands;...

Furthermore, the settlement let the company deny wrongdoing, stating

'While Mallinckrodt disagreed with the U.S. government’s allegations, we chose to resolve the legacy matter in order to eliminate the uncertainty, distraction and expense of litigation and to allow the company to focus on meeting the important needs of its patients and customers,' Michael-Bryant Hicks, the company’s general counsel, said in the release.

In addition, as we have seen in many other legal settlements arranged by US authorities, no individual at the company who oversaw, authorized, directed, or implemented the questionable actions paid any penalty. In fact, top executives at Mallinckrodt continue to make out like proverbial bandits.  Earlier this year the St Louis Post-Dispatch reported:

Mallinckrodt Chief Executive Mark Trudeau's pay jumped 29 percent to $12.6 million as the company rewarded him for a year when profits more than doubled.

Mallinckrodt, a drug company that is legally Irish but has its headquarters in Hazelwood, disclosed details of its executive pay in a proxy statement last week.

Trudeau's pay included a salary of $1.04 million and a bonus of $1.6 million, which was 127 percent of the target amount. He also received $5.9 million in stock and $3.9 million in options, with some of the stock depending on Mallinckrodt's revenue growth and total shareholder return between 2016 and 2018.

An earlier stock award, from 2014, paid out at 200 percent of its targeted amount. That brought Trudeau shares worth $2.5 million at current prices.

Trudeau also received $101,003 in contributions to a supplemental savings plan and $16,535 in tax reimbursement. The tax reimbursement was for executives whose spouses or partners attended a national sales conference.
So Mr Sessions  thought he was holding them accountable?

At least the Washington Post coverage added some dissent,

Joseph T. Rannazzisi, who supervised DEA efforts to control diversion of opioids for a decade before he retired in 2015, said Tuesday that multimillion-dollar fines have not deterred large pharmaceutical corporations accused of failing to report suspicious orders of pain pills to the DEA.

'These fines mean nothing to Fortune 500 companies,' he said. 'Large corporations see these fines as the cost of doing business. Unless there are meaningful sanctions brought against these companies, they will continue to violate the law.'

So the extremetly lenient treatment of Mallinckrodt and its top executives in this case will likely not deter health care corporate leaders from pursuing future bad behavior that is in the their self-interest.  Plus this case provides another example of the impunity of big health care organizations and their top executives. 

Just the Latest Mallinckrodt Settlement

And wait, there is more.  The latest settlement did not seem to be informed by any knowledge of the company's previous transgressions.  Like many other big health care organizations, Mallinckrodt and its predecessors have a long history of bad behavior which at worst has resulted in previous lenient settlements, wrist slaps, and executive impunity.  Consider some examples from this decade alone. 

The 2013 Settlement of Kickbacks to Doctors

As we noted in this post, for a few million dollars, Mallinckrodt settled allegations that it gave kickbacks to physicians to prescribe its antidepressants and sleeping tablets.

The 2015 Questcor Shareholder Suit Alleging Deception

As reported by the St Louis Business Journal,
Mallinckrodt PLC (NYSE:MKN) has announced a preliminary $38 million settlement in a shareholder lawsuit related to Questcor Pharmaceuticals Inc.

The settlement is pending approval by the U.S. District Court for the Central District of California. Mallinckrodt, a Dublin, Ireland, company with its U.S. headquarters in St. Louis, acquired Questcor in 2014 for $5.6 billion.

The settlement would resolve a class action lawsuit brought against Questcor alleging misstatements from former company officers and directors related to H.P Acthar Gel. Acthar, a drug used to treat autoimmune and inflammatory conditions, generated net sales for Questcor of $761.3 million in 2013.

Again, no individual who presided over, authorized, directed or implemented the misstatements suffered any negative consequences.

Note that H. P. Acthar gel, when marketed by Questcor, was one of the earliest examples of a company gaming the system to increase the prices of an old drug to outrageous levels (see our posts here).

The Questcor Anti-Competitive Practices Settlement

Then in early 2017 Mallinckrodt settled a case involving unfair competition, as reported by Reuters,

Mallinckrodt Plc (MNK.N) has agreed to pay $100 million to settle allegations that a subsidiary broke U.S. antitrust law by sharply increasing the price of a multiple sclerosis drug while ensuring that no rival medicine appeared on the market, the Federal Trade Commission said on Wednesday.

Mallinckrodt's share price dropped sharply to just under $43 from above $49 on a report Wednesday, which proved incorrect, that the FTC would sue Mallinckrodt. It spiked above $50 after news of a settlement and closed at $46.53, down 5.8 percent.

In 2001, Questcor bought the rights to Acthar, a type of hormone-based drug used to treat infantile spasms as well as multiple sclerosis. Over time, the company raised the price from $40 per vial to more than $34,000, the FTC said. Questcor was acquired by Mallinckrodt in 2014.

Acthar, which is off patent, represented 34 percent of Mallinckrodt's $3.4 billion in net sales for fiscal 2016, the company said in a government filing.

Per patient, Medicare spent more on Acthar than for any other drug in 2015, putting out $504 million for just 3,104 patients, according to the Medicare Drug Spending Dashboard.

Several U.S. drug makers have been criticized for sharp increases in drugs, notably Turing Pharmaceuticals' Daraprim and Mylan's (MYL.O) EpiPen. The U.S. Centers for Medicare and Medicaid Services reported 11 drugs saw price increases of more than 100 percent in 2015.

'This is an egregious case of a monopolist doing a deal to eliminate potential competition and keep its power over pricing. It is abhorrent that lifesaving drugs cost New Yorkers tens of thousands of dollars,' said Attorney General Eric Schneiderman in a statement.

Again, Mallinckrodt denied all wrongdoing,

'We continue to strongly disagree with allegations outlined in the FTC's complaint, believing that key claims are unsupported and even contradicted by scientific data and market facts,' a company representative said in a statement.

And of course, to repeat, no one at the company who presided over, authorized, directed or implemented the anti-competitive practices suffered any negative consequences.

After that settlement, Sy Mukherjee wrote in Fortune that the

$100 million fine [was] for purposefully maintaining a monopoly on a drug that brought in one third of Mallinckrodt's $3.4 billion net 2016 sales. Although Mallinckrodt will have to sell off its U.S. license for the competing Novartis therapy, it has no obligation to lower Acthar's list price or hit pause on the price hikes since drug makers have carte blanche over their pricing in the U.S.

This highlights a critical moral hazard in the biopharma industry and the system of using fines to punish bad actors. Back when I was the editor of the trade publication BioPharma Dive, I had a fascinating conversation with Patrick Burns, Acting Executive Director and President of Taxpayers Against Fraud, a group that brings forward whistleblower cases under the anti-fraud False Claims Act. Burns argued that fines are ultimately ineffective because in the U.S., we 'privatize the profits and we communitize or communize, if you will, the costs.'

What Burns means is that, ultimately, news of a big fine can cause a short-term (and relatively insignificant) dent in a company's revenue stream and some PR backlash that can drive its stock price down (Mallinckrodt's shed about 7% of its market cap since the settlement). But ultimately, most of the people who suffer from that stock dip are the public and investors, not the executives who chose to engage in the bad behavior in the first place. That helps explain why some drug companies have been repeat offenders on practices like bribery and kickbacks.

Burns presented a much more provocative alternative to the fines system: ban the executives responsible for the fraud or other bad behavior from working in the industry for a number of years, or actually send them to jail.

Of course, that would be hard to do as long as our top political leaders are the best buddies of the multi-millionaires and billionaires who run the big pharmaceutical companies and other huge health care organizations that generate our health care dysfunction.

Summary and Discussion

Mallinkcrodt made settlements of four legal cases since 2010, involving kickbacks to physicians, various deceptions, and anti-competitive behavior.  The settlements never involved severe enough penalties to the company to really affect its bottom line, never required admission of responsibility, or any accountability by top executives whose huge remuneration were doubtlessly based on the revenues brought in by bad behavior.  Yet US Attorney General continued the Kabuki performance by proclaiming he would "hold them accountable."  Sessions just slapped the company on the wrist again, with a wet noodle.

That will show them.

This shows that despite all the hoopla lately about health care reform, our political debate completely misses most of the causes of our health care dysfunction.

There is suddenly a brief lull in the ongoing battle about whether to "repeal and replace Obamacare."  This was cast as a health care reform debate, but really at best "Obamacare" (the Affordable Care Act, or ACA) was a somewhat jury-rigged attempt to increase health insurance coverage without any substantial decrease in the US dependence on large often locally dominant for-profit insurance companies to provide health care insurance.  There was no serious discussion of alternatives, including "single-payer" government health insurance, much less a return to smaller non-profit insurance which might have some local accountability (see this post about Wendell Potter's Deadly Spin for an account of how non-profit insurance executives sold their organizations out to for-profits, greatly personally profiting from the process).

Even more to the point, there was no serious discussion of why US health care is the most expensive in the world, yet provides thoroughly mediocre service and outcomes, and still leaves many patients uninsured (see this LA Times article summarizing the latest Commonwealth Fund  report).

But while so many people are making fortunes from the current system, and are able to use their money to influence the ongoing debate, do not expect much change.  The case above is just one example showing how executives of big health care corporations can make millions while avoiding accountability for their actions.

As I have said until blue in the face,...

We will not make any progress reducing current health care dysfunction if we cannot have an honest conversation about what causes it and who profits from it.  True health care reform requires ending the anechoic effect, exposing the web of conflicts of interest that entangle health care, publicizing who benefits most from the current dysfunction, and how and why.  But it is painfully obvious that the people who have gotten so rich from the current status quo will use every tool at their disposal, paying for them with the money they have extracted from patients and taxpayers, to defend their position.  It will take grit, persistence, and courage to persevere in the cause of better health for patients and the public. 

Monday, July 17, 2017

Inexact Sciences

Thoughts on the place of science in an era of false conviction

Some recent articles, noted by a few of us in journals regularly monitored by HCR bloggers, provide real food for thought in our New World Order of alternate facts, fake news and truthiness.

In a recent number of the still intrepidly pay-wall-free Guardian,  development economist John Rapley summarizes his new book Twilight of the Money Gods. This summary is the best we in the colonies can do until this month's UK publication of the full volume makes it to our shores. (Rapley, a true globalist, both an academic and a public intellectual experienced at teaching in several countries, is also a not infrequent Guardian contributor.)

Comes Rapley now to hammer home the point that research domains--his focus is economics--can ossify to the point that they become more like religions or belief systems, pace Mary Douglas's classic work Purity and Danger, than anything resembling exact sciences. By abandoning humility to project rigor and group-think, they undermine their own credibility. Think about the following statements, then, and mentally substitute "academic medicine" for economics.
"... [academic] departments were increasingly hiring and promoting young economists who wanted to build pure models with little empirical relevance."
One thinks, for example, about all the spurious metrics currently being applied to the assessment of "meaningful use" in electronic health records. Rapley goes on to elaborate and pose a partial solution. He notes that...
"...[w]hen the church retains its distance from power, and a modest expectation about what it can achieve, it can stir our minds to envision new possibilities and even new worlds. Once economists apply this kind of sceptical scientific method to a human realm in which ultimate reality may never be fully discernible, they will probably find themselves retreating from dogmatism in their claims.
By "power" one can read the unholy alliances with Big Money and managerialism oft-decried in HCR. By "retreating from dogmatism" one can read a renewal of alliances instead--well, let's go with Rapley's words: with ", demographic and anthropological work, and [the need] to work more closely with other disciplines."

His solution, then, through such alliances, is the restoration of narrative to a central role for poo-bahs of some of the more overly sterile reaches of EBM, medical informatics, and decision analysis. He quotes the authors of the recent Phishing for Phools, for whom "storytelling is a 'new variable' for economics, since 'the mental frames that underlie people’s decisions' are shaped by the stories they tell themselves."

Harvard cardiologist Lisa Rosenbaum, who's produced some admirable and at times controversial writing for years in NEJM and elsewhere, has a new piece that appeared simultaneously with Rapley's. She offers a way of refracting some of these same ideas through the lens of scientific medicine--or, more particularly, the crisis of trust by a "weary public" in the scientific process. Dr. Poses, in these e-pages of HCR, has frequently addressed this same issue of relativism where, to use Rosenbaum's example, people (this includes people with major political power in today's US of A) will be damagingly dubious about issues such as climate change. Yet at the same time we seem them devouring (so to speak) the claims of nutritional charlatans. Here I suppose she's speaking mainly of the views of those who both fund and popularize medical science, and the way the traditional establishment of science has been dethroned or at least, by many, seriously questioned.

It's a conundrum. The mandarins of science build their ivory tower and labor mightily in the effort of boundary maintenance (says Rapley); and yet they've lost ground (says Rosenbaum). "The fear of venturing into the fray," she observes, "means that the public hears far more from science’s critics than its champions. This imbalance contributes to 'science is broken' narratives ranging from claims about the pervasiveness of medical error to the insistence that benefits of our treatments are always overhyped and their risks underplayed."

Yet the prescriptions Rapley and Rosenbaum both offer seem rather similar: go back to telling the story. And here one can only agree most heartily. Telling the story works at two levels. At the level of domain knowledge, whether we're talking about economic behavior, clinical decision making, or the interpretation of Big Data, we need more interdisciplinary efforts to connect the dots between physiological, psychological, social and economic processes. And, then, at the level of telling the story about science itself--something about which Rosenbaum herself is greatly concerned--individuals in all the domains of science and medicine need to "learn to tell stories that emphasize that what makes science right is the enduring capacity to admit we are wrong. Such is the slow, imperfect march of science."

Thursday, July 13, 2017

Gutting the Health Care Corporate Strike Force

Health care corruption is a severe problem in the US, and globally.

For years, we have ranted about the US government's lackadaisical - to use an execessively polite term - approach to wrongdoing by big health care organizations.  The trend really got started back in the day when now Governor Chris Christie (R - NJ), then a federal prosecutor, started making deferred prosecution agreements available to corporations which appeared to have committed white collar crimes.  However, these agreements were originally meant to give young, non-violent first offenders a second chance.

Since then, we have noted the continuing impunity of top health care corporate managers.  Health care corporations have allegedly used kickbacks and fraud to enhance their revenue, but at best such corporations have been able to make legal settlements that result in fines that small relative to their  multibillion revenues without admitting guilt.  Almost never are top corporate managers subject to any negative consequences.

The Health Care Corporate Strike Force

The US Department of Justice during the Obama administration made some modest attempts to decrease such impunity.  One such measure was the formation of a Health Care Corporate Strike Force.

As reported by,

the strike force was created in the fall of 2015, with five dedicated lawyers working on about a dozen of the most complex corporate fraud cases in the health care space.

Andrew Weissmann, the then-chief of the DOJ’s fraud section, told a health care conference in April 2016 that the section was placing 'a heightened emphasis' on corporate health care fraud investigations. He pointed to the recently established Corporate Fraud Strike Force that he said would focus resources in investigation and prosecution of larger corporate health care law violations, as opposed to smaller groups or individuals.
The Downsizing of the Health Care Corporate Strike Force

But now, after candidate Donald Trump promised to 'drain the swamp,'

and railed against the supposed corruption of former Secretary of State Hillary Clinton (leading tochants of 'lock her up'), the Trump administration will further diminish this tiny attempt to reduce impunity, the report stated:

the DOJ, under the Trump administration and new U.S. Attorney General Jeff Sessions, has announced new priorities: violent crime, drugs and illegal immigration.

In restructuring to focus on those priorities, the DOJ has gutted the Health Care Corporate Fraud Strike Force, according to at least two high-level sources who worked at the Justice Department until recently. The sources declined to be named, as being identified could affect their current jobs and clients.

The sources said the strike force has been cut from five full-time lawyers to only two – assistant chief Sally Molloy and trial attorney William Chang. And both are splitting their time in the strike force with other duties.

The DOJ declined an interview request for this story. But DOJ spokesperson Wyn Hornbuckle issued this statement: 'The Health Care Corporate Strike Force, as with the entire health care fraud unit, is going strong under steady leadership—continuing to vigorously investigate and hold accountable individuals and companies that engage in fraud, including tackling an opioid epidemic that claimed 60,000 American lives last year.'

The Task Force had resolved one major case against for-profit hospital chain Tenet.  The Task Force alleged but Tenet actually admitted its

supervisors lied to in-house counsel about the purpose of millions of dollars in contracts, which purportedly were for 'services' but really were bribes and kickbacks to clinics and doctors for sending Medicaid patients to Tenet hospitals.

While its settlement included a non-prosecution agreement, the Task Force actions also resulted in two convictions and a pending indictment of actual people.


The lawyer openings on the strike force were exacerbated when, on April 14, Sessions imposed a hiring freeze on the DOJ’s Criminal Division as well as on U.S. Attorney Offices, as reported by The New York Times, which obtained a copy of the freeze memo.

Some DOJ lawyers believe, sources said, that white-collar crime and corporate fraud resources are being shifted to cover Sessions’ new priorities of violent crime, drugs and illegal immigration. That emphasis, they said, can be seen in who runs the DOJ’s criminal division.

Under former U.S. Attorney General Eric Holder, himself a white-collar crime prosecutor and then corporate defense attorney, assistant attorney general Leslie Caldwell led the division. Caldwell specialized in securities fraud and white-collar crime, and had participated in the Enron Corp. prosecution.

Under Sessions, himself a former law and order prosecutor in Alabama, the criminal division now reports to deputy assistant attorney general Kenneth Blanco. Blanco has a long history of bringing cases centered on drugs and violent crime in the Miami-Dade State Attorney’s Office, in the U.S. Attorney’s Office in Southern Florida, and in Main Justice in Washington, D.C., where he served as chief of the narcotic and dangerous drug section at the DOJ.


So the Trump administration proposes two part time attorneys to drain the health care corporate swamp.  That seems like bailing out the Titanic with teaspoons. But should we expect anything else from an administration that is being increasingly identified with corruption and impunity itself?

We have frequently discussed outright corruption in health care as one of the most important causes of health care dysfunction.  Transparency International (TI) defines corruption as
Abuse of entrusted power for private gain

In 2006, TI published a report on health care corruption, which asserted that corruption is widespread throughout the world, serious, and causes severe harm to patients and society.
the scale of corruption is vast in both rich and poor countries.

Corruption might mean the difference between life and death for those in need of urgent care. It is invariably the poor in society who are affected most by corruption because they often cannot afford bribes or private health care. But corruption in the richest parts of the world also has its costs.

The report did not get much attention.  Since then, health care corruption has been nearly a taboo topic in the US.  When health care corruption is discussed in English speaking developed countries, it is almost always in terms of a problem that affects benighted less developed countries.  On Health Care Renewal, we have repeatedly asserted that health care corruption is a big problem in all countries, including the US, but the topic remains anechoic,. presumably mainly because its discussion would offend the people made rich and powerful by corruption.

As suggested by the recent Transparency International report on corruption in the pharmaceutical industry,  there is so much money to be made through pharmaceutical (and by implication, other health care corruption) that the corrupt have the money, power, and resources to protect their wealth accumulation by keeping it obscure.  In the TI Report itself,

However, strong control over key processes combined with huge resources and big profits to be made make the pharmaceutical industry particularly vulnerable to corruption. Pharmaceutical companies have the opportunity to use their influence and resources to exploit weak governance structures and divert policy and institutions away from public health objectives and towards their own profit maximising interests.

I might as well repeat myself once again.  As I wrote in 2015, if we are not willing to even talk about health care corruption, how will we ever challenge it? 

So to repeat an ending to one of my previous posts on health care corruption....  if we really want to reform health care, in the little time we may have before our health care bubble bursts, we will need to take strong action against health care corruption.  Such action will really disturb the insiders within large health care organizations who have gotten rich from their organizations' misbehavior, and thus taking such action will require some courage.  Yet such action cannot begin until we acknowledge and freely discuss the problem.  The first step against health care corruption is to be able to say or write the words, health care corruption.

Musical Interlude

What else, the Honey Island Swamp Band, playing "Prodigal Son,"

Friday, July 07, 2017

More Dumb Things Politicians and Political Appointees Say About Health Policy

As we previously discussed, the fierce debate about whether to revise, or "repeal and replace Obamacare", more formally, the Affordable Care Act, continues in the US.  The legislators in the US House of Representatives, and then the US Senate who have written "repeal and replace" bills have done so without any obvious input from health care professionals, health care policy experts, or patients, much less legislators from the opposition party, and so far have impeded any consideration of these bills by legislative committees.  Nonetheless, many of the politicians involved in the debates, and other politicians who have addressed relevant issues, seem to feel free to comment on health care policy issues with reckless abandon.

We have recently found some more remarkable examples, discussed in chronologic order. 

Senator Ron Johnson (R - Wisconsin): Someone with a Pre-Existing Condition is Like "Somebody Who Crashes Their Car"

As reported by RawStory on June 25, 2017,

The Wisconsin Republican pointed to Obamacare rules that forbid insurance companies from charging more for people with preexisting conditions.

'We know why those premiums doubled,' he opined. 'We’ve done something with our health care system that you would never think about doing, for example, with auto insurance, where you would require auto insurance companies to sell a policy to somebody after they crash their car.'

The last phrase suggests Senator Johnson might be talking about people who deliberately crash their cars, or at best people who were at fault in a car crash.  Setting aside the consideration that sometimes fault in a car crash is hard to assign, he seems to be implying that all people with pre-existing conditions are at fault for for their conditions.  Yet, accidents thay may cause permananent injury are accidental.  Diseases are caused by many factors, or by factors unknown to modern science.  It is very hard to think of a disease whose occurrence is purely caused by choices made by the patient who is afflicted with it.  So it appears that Senator Johnson's argument rests on a logical fallacy: false analogy, in this case between car accidents and pre-existing conditions.

Middletown, OH, Councilman Dan Picard: Town Emergency Medical Technicians Should Deny Naloxone Treatment to Narcotic Addicts Who Have Overdosed Two or More Times Previously

As reported by the Huffington  Post on June 26, 2017,

'I want to send a message to the world that you don’t want to come to Middletown to overdose because someone might not come with Narcan and save your life,' Picard told Ohio’s Journal-News. 'We need to put a fear about overdosing in Middletown.'


But Picard seems to believe that EMS crews are working a bit too hard to stem the tide of overdoses, and is upset that taxpayers are footing the bill to revive people, many of whom are transients and not residents of Middletown, he says.

Picard also proposed that instead of immediately arresting or jailing overdose victims, they should receive a court summons and be required to work off the cost of treatment by completing community service. But there’s a catch.

'If the dispatcher determines that the person who’s overdosed is someone who’s been part of the program for two previous overdoses and has not completed the community service and has not cooperated in the program, then we wouldn’t dispatch,' said Picard.

Narcotic overdoses left untreated are often fatal. The article also quoted

Martins Ferry Police Chief John McFarland said some people have begun taking these casualties as a foregone conclusion.

'You hear from the public, ‘Why don’t you let them die?’' McFarland told the Dispatch. 'We’re not God; we don’t decide who lives or dies. … We have the ability to save them, so we do.'

That is the point. Emergency medical services have a duty to attempt to treat people with acute conditions that can be immediately fatal, otherwise they would be "playing God."  At best, Mr Picard seems unaware of the mission of emergency health services. 

Note that a Washington Post story on Mr Picard's new policy idea, published June 28, 2017, which quoted this argument the Councilman made in favor of his proposal,

a decision to not save repeat overdosers would be one of many that communities make about how much care they'll provide to dying people.

'If you have a toothache and you call Middletown, we’re not coming,' he said. 'For your heart attack, we’re not going to do the stint or your bypass. Decisions have been made about what services we’re going to provide. We need to make a decision about overdoses.'

Of course, this is another, and whopping example of a false analogy. Revascularization procedures for myocardial infarctions (coronary artery stents or coronary artery bypass grafting) cannot be done by emergency medical technicians and must be done in a hospital given current technology. So decisions about when to deploy these treatments are not made by EMTs, or City Councilmen for that matter.

By the way, the Huffington Post article noted that Mr Picard was not the first one to come up with the policy of withholding Naloxone to save money.  Maine Governor Paul LePage (R) apparently floated something similar in 2016. As reportedy by the Huffington Post in April, 2016:

LePage explained Wednesday that he blocked a bill to increase access to a life-saving overdose medication because the people it could save are just going to die later anyway.

'Naloxone does not truly save lives; it merely extends them until the next overdose,' LePage wrote.

It was not the first time LePage had shared such a belief, but attaching it to his veto elevated it to a statement of official policy.

The state legislature later over-rode his veto. Note that Governor LePage apparently based his article on a faulty perception of the prognosis of patients who overdose.

'Creating a situation where an addict has a heroin needle in one hand and a shot of naloxone in the other produces a sense of normalcy and security around heroin use that serves only to perpetuate the cycle of addiction,' he wrote.

While a staggering number of people have died as the result of the heroin and opioid epidemic, many have also recovered, and many more are waging battles with addiction they will eventually win. LePage’s assertion that everyone who overdoses once and lives will surely overdose again, rather than seek treatment and recover, is divorced from reality.

Counselor to the President Kellyanne Conway: Instead of Getting Medicaid, Able-Bodied People Should Find Jobs "Then They'll Have Employer-Sponsored Benefits Like You and Me"

As reported by Fortune on June 26, 2017,

In an interview on ABC's This Week on Sunday, Conway, counselor to President Trump, said that Obamacare expanded Medicaid to those who did not truly need it, because they were able to work. She was defending the Senate's proposed health care bill, which would make big cuts to Medicaid, by lowering the income limit for those who qualify, among other measures.

'Obamacare took Medicaid, which was designed to help the poor, the needy, the sick, disabled, also children and pregnant women, it took it and went way above the poverty line and opened it up to many able-bodied Americans,' she said. Those 'should probably find other — at least see if there are other options for them.'

She continued:

'If they are able-bodied and they want to work, then they'll have employer-sponsored benefits like you and I do.'

This was just a straight-forward, but important factual error.  Per Fortune,

Many Americans who are covered by Medicaid are already working, often in lower-paying jobs that may not have health insurance benefits, according to a report by the Kaiser Family Foundation, cited by CNBC.

Representative Paul Ryan (R-Wisconsin): If Insurance Prices Go Up, "It's Not Like People are Getting Pushed Off the Plan, It's That People Will Choose Not to Buy Something That They Don't Like or Want"

As reported by RawStory on June 27, 2017,

During an interview that aired on Tuesday, Fox News host Brian Kilmeade asked Ryan to respond to a recent Congressional Budget Office (CBO) report that said there would be 22 million more people without health insurance by 2026 if the Senate’s version of the health care bill is signed into law.

'What they are basically saying at the Congressional Budget Office, if you’re not going to force people to buy Obamacare, if you’re not going to force people to buy something they don’t want, then they won’t buy it,' the Speaker opined. 'So, it’s not that people are getting pushed off a plan, it’s that people will choose not to buy something that they don’t like or want.'

'And that’s the difference here,' he added. 'By repealing the individual and employer mandate, which mandates people buy this health insurance that they can’t afford, that they don’t like — if you don’t mandate that they’re going to do this then that many people won’t do it.'

Please note that the mandate to which he refers is a relatively small tax under "Obamacare" paid by people who do not have health insurance. Further note that under the proposed Senate bill, many poorer people would lose substantial subsidies of their health insurance. So Mr Ryan seems to be using linguistic sleight of hand.  He accepts the term "mandate" as literally true, allowing him to claim that the negative financial incentive which the "mandate" imposes while the negative financial incentive caused by losses of subsidies and increases in insurance prices is not.  A rose is not a rose when it's called something else? This is the logical fallacy of ambiguity, using double meanings or ambiguity of meaning in language to disguise the truth. 


Whether to maintain our current - admittedly Rube Goldberg-esque - system of financing health care, or to radically change it is a serious question.  The answer will affect the wellbeing, health, and even lifespan of many people.  The question should not be taken lightly.

So what to make of so many politicans and political appointees making pronouncements on whether to keep, or "repeal and replace Obamacare" that are based on major factual errors and logical fallacies?  The last time I took this on, I speculated whether health care policy has sunk into a swamp of postmodernism generated by years of exposure to the post-modernist stance of many in academia.  That may have been fanciful.

On the other hand, another speculation is that this is the result of "managerialism."  We have discussed the doctrine promoted in business schools that people trained in management should lead every type of human organization and endeavor.  Management by people from the disciplines most relevant to the mission and nature of particular organizations should be eschewed.  So managers, not physicians or other health care professionals, should lead health care organizations.  Following that theme, managers, or those like them, rather than health care professionals and health policy experts should lead health policy. 

However, managers who run health care organizations, or make policy, have an unfortunate tendency to be ill-informed (as well as unsympathetic if not hostile to health care professionals' value and the health care mission, and subject to perverse incentives that often put short-term revenue ahead of the health of patients and the population.)  And in the latest health care reform debate, some of the politicians and political appointees who are the de facto managers of health policy have disdained the advice of health care professionals and health policy experts.  

The causes of this trend are certainly open to debate.  However, I believe we should all be really worried about continued health care policy making by people who are driven by factual errors and non-evidence rather than evidence, and logical fallacies rather than sound reasoning.  We need health policy leadership that is well-informed, understands the health care mission, avoids self-interest and conflicts of interest, and is accountable, ethical and honest.   (Of course, we have often said we need leadership of health care organizations with these characteristics.)  Right now, we are not coming close.  Woe is us.

Thursday, June 29, 2017

A $1.7 Million/ Year CEO of a Safety Net Hospital - Alleged to Have Hired a Dangerous Surgeon, Paid Unethical Bonuses, and Associated with Organized Crime

We have long contended that a major reason for health care dysfunction is perverse incentives, including those that allow top health care leaders to become rich by putting money ahead of patient care.  We have presented case after case supporting this point, most recently including a collection of generously compensated top executives of non-profit hospital systems whose pay seemed disproportionate to their personal achievement, and unrelated to their hospitals' clinical outcomes or quality of care.

Such cases, with their recitations of monetary amounts and repeated public relations talking points, can be rather dry.  So this week we present another case which is a bit more colorful.

The Reliably High Pay of the CEO of Bronx-Lebanon Hospital

The CEO of the Bronx-Lebanon Hospital in New York City has long been criticized for receiving millions from a hospital which mainly serves the poor.

In 2009, the New York Post published an article entitled "Sickening Bonuses" about how

hospital presidents and CEOs ... collect fat bonuses and 'incentive payments,' even as health-care systems cry poverty,...

In particular it noted that presumably pre the 2008 global financial crisis:

A $1.2 million bonus went to Miguel Fuentes Jr., CEO of the 958-bed Bronx-Lebanon Hospital. His $4.8 million package included $878,024 in salary and an $858,000 pre-retirement payout. He’s also set to get $1.8 million in retirement cash next year.

In 2013, after the great recession, the New York World reported on a measure proposed by New York Governor Andrew Cuomo to cap salaries at hospitals that receive significant amounts of money from Medicaid.  It stated:

The hospitals that will be targeted by Cuomo’s salary cap sit in poorer neighborhoods and serve large volumes of patients who depend on Medicaid. They include Bronx-Lebanon Hospital Center,...

At that time it was known that Mr Fuentes still was making a lot of money, although less than before:

Bronx-Lebanon Hospital Center ... President and CEO Miguel Fuentes made more than $1.7 million in 2011, according to tax records....

In 2014, Modern Healthcare published an article that questioned whether hospital CEO pay was justified by their or their hospitals' performance.  In particular, it quoted a JAMA Internal Medicine article that:

found no association between CEO pay and very important benchmarks, including a hospital's 'margins, liquidity, capitalization, occupancy rates, mortality rates, readmission rates, or measures of community benefit.'

Researchers found wide variation in what trustees chose to pay the CEOs of their not-for-profit hospitals.

It also noted

One community hospital is a perennial on the list [of those with highly paid executives]. Bronx-Lebanon Hospital Center's Miguel Fuentes Jr. has spent decades at his institution, and arguably needs no retention pay. His $1.8 million package includes about $200,000 in a supplemental retirement plan payment.

So what does a CEO have to do to earn millions at a safety-net hospital? Hospital boards and public relations officials often justify high CEO with standard talking points: their CEOs are brilliant, and such brilliant people must be paid well to be recruited and retained (look here).  However, I found no published record of any attempt to probe justifications for this particular CEO's pay.  Mr Fuentes does seem to have won an award from the local YMCA for "outstanding leadership" (look here).   In a 2015 news release about an affiliation between the Mount Sinai Health System and Bronx-Lebanon, the hospital was described as

a remarkable institution that has shown leadership through its commitment to delivering high quality care to patients and the communities in the Bronx

But I could not find anything in public about the particulars of this outstanding leadership.

Allegations of Organized Crime Ties

On the other hand, in June, 2017, the New York Post published two articles suggesting that Mr Fuentes' leadership might be a bit more dubious than advertised above.

The first article, published June 4, 2017, included allegations of shady dealings between the hospital and organized crime:

The mob turned taxpayer-backed Bronx-Lebanon Hospital expansion into its own piggy bank.

Construction expenses at the hospital’s new nine-story outpatient center ballooned by some $5 million — with cash allegedly ending up in the pockets of the Lucchese crime family and hospital executives, The Post has learned.

Lucchese underboss Steven 'Wonder Boy' Crea Sr. and associate Joseph Venice were charged with wire and mail fraud in connection with the project at 'a major New York City hospital,' according to a federal indictment unsealed last week in a major mob takedown. But the document didn’t identify the hospital or reveal the scheme’s dirty details.

No Bronx-Lebanon executives were named in the indictment, but the federal probe, which began four years ago, is ongoing, and focused on hospital honchos whose palms may have been greased.

Crea, 69, had close ties to Sparrow Construction, the Bronx firm in charge of building the $42 million annex at Bronx-Lebanon. He was a regular visitor to the firm’s offices while the center was under construction, a source told The Post.

Crea worked for Sparrow before he was busted in a 2000 state racketeering case. At that time, he was considered the acting boss of the Luccheses.

Work began on the outpatient center in 2009 and was supposed to take 19 months. But the Health and Wellness Center wasn’t finished until 2014 and was plagued with cost overruns.

Sparrow was the general contractor and billed the hospital $26 million for only $21 million worth of work, sources told The Post.

The heating and ventilation system cost $2.3 million to install. Yet 'the hospital still paid somebody $5 million' for it, the source said.

The alleged scheme was carried out through falsified invoices and change orders, the source said.

'The hospital didn’t question one change order,' the source said.

The bulk of the project was paid for through the sale of $36 million in state Dormitory Authority bonds. The hospital is paying back the Dormitory Authority over 25 years.

At the end of the article we found that Mr Fuentes' compensation has remained large, and stable.

Longtime CEO Miguel Fuentes’ total compensation came to $1.7 million in 2015, according to its latest tax filings.

But it added that he has had a lifestyle to match:

Fuentes lives a luxury lifestyle with a condominium on the Upper East Side and a Southampton retreat with a pool.
Allegations of Unethical Conduct to Enhance Revenue

A second article published June 24, 2017, raised further questions about Mr Fuentes' management.  First, it questioned his direct appointment of a chief of orthopedic surgery.

Hospital CEO Miguel Fuentes hired [Dr Ira] Kirschenbaum as a division chief without consulting Dr. John Cosgrove, who was then chief of surgery and would have overseen him, Cosgrove told The Post.

Cosgrove said he did not have a chance to vet Kirschenbaum.

The article suggested  that Dr Kirschenbaum was hired to push "moneymaking surgeries such as hip and knee replacements."  


The hospital lavished six-figure bonuses to its chief of orthopedics, Dr. Ira Kirschenbaum, despite brass being told of four deaths after he arrived in 2008 and about others patients who suffered serious complications, according to sources.

Kirschenbaum received a $314,210 bonus in 2014 and a $180,940 bonus in 2015, according to Bronx-Lebanon’s tax filings. The extra pay came on top of his $851,000 salary.

Seven hospital employees, who identified themselves as doctors, nurses and technicians, sent The Post a copy of a letter they said they presented to a state medical disciplinary panel to complain about patients more recently injured under Kirschenbaum’s care — including one who allegedly lost a leg.

The letter was sent anonymously, and the state Health Department would not comment on any complaints to the Office of Professional Medical Conduct.

Furthermore, Dr Cosgrove, who appears to have become a whistleblower, alleged dodgy payments to hospital employed physicians at the behest of Mr Fuentes, apparently to increase patient volume.

Cosgrove also said he saw another troubling practice at the hospital: bonus payments of up to $60 paid to doctors for each visit made to the institution’s clinics — in order to tout that it treated 1 million patients annually. The hospital realized that number in 2012, according to the MD.

'Seeing a patient in the clinic is your obligation as a hospital physician and that should not be incentivized,' Cosgrove said. 'Mr. Fuentes said at many meetings he wanted to hit a million-visit mark at their 55-or-so outpatient clinics.'

Doctors were already paid salaries by Bronx-Lebanon, and the clinic bounties came from the Medicaid reimbursements, according to Cosgrove.

Such an incentive system was ripe for abuse because it could entice doctors to schedule additional, and possibly unnecessary, visits, he said.

'It’s really counter to what we as doctors stand for,' said Cosgrove, who left the hospital in 2013 and is now chief of surgery at Eastern Long Island Hospital.

Finally,the article reiterated Mr Fuentes' total compensation of $1.7 million in 2017, but added that

He has a car and a driver — and a source described a $20,000 glass-and-tile shower for his office bathroom. The shower was removed because of concerns over how such an amenity might appear, the source said.


Fred Miller, a hospital lawyer, said Bronx-Lebanon doctors were not paid clinic bonuses, only salaries, and that compensation was 'consistent with Medicare/Medicaid principles.'

Miller acknowledged that a shower had been installed, but called it 'modest' and disputed its cost.


So the CEO of Bronx-Lebanon Hospital has been paid more than a million a year since at least 2008 (and much more than that in 2008 before the great recession), without any apparent public explanation for this pay, and particularly without any apparent attempts to  justify it based on quality of care or clinical outcomes.  Yet recently there have been allegations that the CEO was directly involved with efforts to increase revenue regardless of ethical or patient safety concerns.  Worse, there have also been allegations that organized crime has been allowed to create a "piggy bank" out of the hospital, perhaps in ways also benefiting top executives, although none of this has been proven in a court of law.

Nonetheless, it seems that high executive pay in health care, particularly at non-profit institutions serving the poor, should be justified by more than lack of proof that the executives broke the law. In fact, how could anyone justify paying the CEO of a non-profit hospital that primarily serves the poor using government money unless that person had a sterling record of accomplishment promoting the quality of clinical care at his or her institution, accompanied by integrity and accountability?

Instead, we get questions of mob influence and $20,000 showers.

So here we go again....

We will not make any progress reducing current health care dysfunction if we cannot have an honest conversation about what causes it and who profits from it.  True health care reform requires publicizing who benefits most from the current dysfunction, and how and why.  But it is painfully obvious that the people who have gotten so rich from the current status quo will use every tool at their disposal, paying for them with the money they have extracted from patients and taxpayers, to defend their position.  It will take grit, persistence, and courage to persevere in the cause of better health for patients and the public. 

Thursday, June 22, 2017

Follow the Money: Non-Profit Hospital CEOs Quietly Collect Their Millions While US Health Care Reform Battle Rages

In Washington, DC the health care policy wars continue, with a few Republican senators working behind closed doors on a bill to "repeal and replace" Obamacare, aka the Affordable Care Act, and Democrats decrying their secrecy.  Just as during the era in which Obamacare was enacted, there is constant discusison of how US health care costs continually rise, driving up insurance premiums, and how access to health insurance is continually in peril.

However, while the current Republican process to write new legislation seems strikingly opaque, in neither era has there been a frank discussion of why US health care costs are so amazingly high, and disproportionate to our mediocre health care outcomes. In particular, there has hardly been any discussion of just who benefits from the rising costs, and how their growing wealth may impede any real cost-cutting measures.

Extreme Compensation for Top Managers of Non-Profit Hospitals

An obvious example is the gravity defying pay given to top health care managers, particularly the top managers of non-profit hospital systems.

Such systems provide much of the hospital care to Americans, and most have declared their missions to be providing the best possible care to all patients, or words to that effect.  Many explicitly include care of the poor, unfortunate and vulnerable as a major part of their missions.  As non-profit organizations, their devotion of mission provides some rationale to their freedom from responsibility for federal taxes.

As we last discussed in detail in May, 2016, we have suggested that the ability of top managers to command ever increasing pay uncorrelated with their organizations' contributions to patients' or the public's health, and often despite major organizational shortcomings indicates fundamental structural problems with US health, and provides perverse incentives for these managers to defend the current system, no matter how bad its dysfunction.

In particular, we have written a series of posts about the lack of logical justification for huge executive  compensation by non-profit hospitals and hospital systems.  When journalists inquire why the pay of a particular leader is so high, the leader, his or her public relations spokespeople, or hospital trustees can be relied on to cite the same now hackneyed talking points.

As I wrote in 2015,  and in May, 2016,

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, 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 (and have to be to do such a difficult job).

Yet as we discussed recently, these talking points are easily debunked.  Additionally, rarely do those who mouth the talking points in support of a particular leader provide any evidence to support their applicability to that leader.

But since May, 2016, we have steadily accumulated more stories about million-dollar plus pay for CEOs and other top managers of non-profit hospitals and hospital systems.  The reports may be shorter than they used to be, as journalism comes under economic and other attack, and as more journalistic resources go to cover the current president.  Here are some examples, in chronologic order per the date of the published article, rather telegraphically.

Examples of High Executive Pay

Boston, Massachusetts area, August, 2016 (Per the Boston Business Journal)

Brigham and Women's Hospital CEO Dr Elizabeth Nabel, total compensation $5.5 million in 2014, 20% higher than 2013.  Talking points =  brilliant: "committed to retaining a team of top professionals," per Edward Lawrence, Chair, Partners Board of Trustees

Tufts Medical CEO Dr Michael Wagner, $1.1 million, 82% increase.

UMass Memorial Medical Center CEO Dr Eric Dickson, $1.6 million, 74% increase, Patrick Muldoon, President UMass Memorial Center's biggest hospital, $1.2 million, 67% increase

West New York State, August, 2016 (Per the Buffalo News)

Catholic Health System CEO Joseph D McDonald, $1.4 million.

Roswell Park Cancer Institute CEO Candace S Johnson, $1 million

Kaleida Health CEO Jody L Lomeo, $1 million:

Talking points = brilliant "few executives have the required skill set and experience to fill these posts"

New Jersey, September, 2016 (Per NJ Advance Media)

Top 10 hospital CEOs received total compensation from $1.94 million to $4.7 million

New Orleans, Lousisiana, September, 2016 (Per the Times-Picayune)

Ochsner Health System former CEO and board chair Dr Patrick Quinlan, $3.3 million in 2014, current CEO and board member Warner Thomas, $1.49 million.  Talking points = competitive rates and brilliant: "we must compete nationally to recruit top talent"

Touro Infirmary CEO James Montgomery, $1.3 million

Children's Hospital Inc Chief Medical Officer Alan Robson, $1.26 million

General talking points = competitive rates: "you're looking to attract hospital executives from Californai or New York where they're paid a lot of money"

Gastonia, North Carolina, February, 2017 (Per the Gaston Gazette)

CaroMont CEO Doug Luckett, $1.03 million in 2015.  Talking points = retain and brilliant "paying what it takes to ensure they attract and retain top-level talent that can help provide premiums health care"

Dayton, Ohio, March, 2017 (Per the Dayton Daily News)

Kettering Health System CEO Fred Manchur, $1.65 million in 2015, former president Terri Day, $1.23 million, current president Roy Chew, $1.07 million

Premier Health former CEO James Pancoast, $1.42 milllion (excluding retirement payments) in 2015. Talking points = brilliant "you've got one person at the top who's trying to provide oversight, direction, and strategy.  At the same time, health care continues to grow in scope, complexity, regulation, and compliance."

York County, Pennsylvania, April, 2017 (Per the York Daily Record)

WellSpan Health president Kevin Mosser, $1.6 million in 2014.  Talking points = competitive rates Forrest Brisco, associate professor, Penn State Smeal College of Business, "nonprofit hospitals are competing with for-profit hospitals"; brilliant: "If you are at the top of a health care organization, you're going to have pay that's higher than many members of the organization. The the skill and knowledge to understand and interact with surgeons and physicians can command a high salary" [ed note: which often seems higher than those of some surgeons and physicians, though]; also brilliant: Robert Batory, senior vice-president and chief human resources officer, Wellspan, "Kevin has 24/7 responsibility for Wellspan."

Ephrata Community Hospital (WellSpan subsidiary) CEO  and WellSpan Medical Group (WellSpan subisidiary) CEO  "more than $1 million"

Winston-Salem, North Carolina, May, 2017 (Per the Winston-Salem Journal)

Novant Health Inc CEO Carl Armato, $1.31 million in 2015.  Talking points = retain and brilliant "high compensation levels are necessary to recruit and retain executive to run a 'very complex organization'"

Tri-Cities region, Tennessee and Virginia, June, 2017 (Per WJHL)

Wellmont Health System CEO Bart Hove, $1.4 million in 2015.  Talking points = competitive rates: Wellmont board of trustees chair Roger Leonard, "we have to compete on a national level and we're competing not just with other non-profits, but we're competing with other for-profits"

Mountain States Health Alliance CEO Alan Levine, $1.3 million in 2015. Talking points = competitive rates: HSHA board of trustees chair Barbara Allen, "make sure CEO pay is comparable to similarly sized facilities across the country with similar complexities"; retain and brilliant, "we want to attract the best talent ... and be able to retain him."

Connecticut, June, 2017 (Per the Connecticut Post)

Yale New Haven Health System CEO Marna Borgstrom, $3.8 million in 2015.  Nine other employees paid over $1 million, including Bridgeport Hospital CEO William Jennings, $1.5 million, Greenwich Hospital CEO Norman Roth, $1.3 million.  Talking points = brilliant: Yale senior vice president of public affairs, "Yale New Haven Health is the largest and most complex health system in the state."

Also, a total of 39 people, including the above, received over $1 million in 2016.

General talking points = brilliant: "there are a limited number of executives experienced enough to guide a state-of-the-art hospital and growing healthcare system in an increasingly competitive and complex industry"; competitive rates: "pay and benefits for such executives need to be comparable to what they could receive at another leading national hospital system or another industry"  
Summary and Conclusions

The current inflamed discussion of "Obamacare" and Republican attempts to "repeal and replace" it focuses on the costs of care and how they affect individual patients.  Examples include concerns about health insurance premiums that are or could be unaffordable for the typical person; insurance that fails to cover many costs, and thus may leave patients at risk of bankruptcy due to severe illness; poor people unable to or who might become unable to obtain any insurance, and perhaps any health care.  Yet there is little discussion of what really drives high and ever increasing health care costs (while quality of health care remains mediocre).

That may be because those who are benefiting the most from the status quo want to prevent discussion of their role.  There are many such people, but top management of non-profit hospitals provide a ready example.  Their institutions' mission is to provide care to sick patients.  Many such hospitals specifically pledge to provide care to the poor, vulnerable, and disadvantaged.  Non-profit hospitals have no owners or stockholders to whom they owe revenue.

Yet these days the top executives of non-profit hospitals receive enough money to become rich.

See the examples above. 

The justification for such compensation is pretty thin.  Consider the talking points above.  Apparently hospitals are extremely concerned about paying top management enough to recruit and retain them.  Yet there is much less evident concern about paying a lot of money to recruit and retain the health care professionals who actually take care of patients to fulfil the hospitals' mission.  Hospital CEOs are frequently proclaimed to be brilliant, visionaries, or at least incredibly hard workers with very complex jobs.  I wonder if those who make such proclamations have any idea what it takes to be a good physician or a good nurse.  Yet such health care professionals' hard work, long training, devotion to duty, and ability to deal with trying situations and make hard decisions rarely inspire hospitals to shower them with money.

Furthermore, hospital CEO compensation is almost never justified in terms of their ability to uphold and advance the fundamental hospital mission, taking care of sick people.  The articles above do not contain any justifications of generous CEO compensation based on hospitals' clinical performance or health care outcomes.  At best, hospital executive pay seems to be justified by the hospitals' financial, not clinical performance.

So why do non-profit hospital CEOs get paid enough to become rich?  Apparently, because they can.

As we discussed here, there is a strong argument that huge executive compensation is more a function of executives' political influence within the organization than their brilliance or the likelihood they are likely to be fickle and jump ship for even bigger pay.  This influence is partially generated by their control over their institutions' marketers, public relations flacks, and lawyers.  It is partially generated by their control over the make up of the boards of trustees who are supposed to exert governance, especially when these boards are subject to conflicts of interest and  are stacked with hired managers of other organizations.

Furthermore, such pay may provide perverse incentives to grow hospital systems to achieve market domination, raise charges, and increase administrative bloat.  As an op-ed in US News and World Report put it about executive pay in general,

But the executive pay decisions made inside corporate boardrooms have an enormous impact in the outside world. Outrageous pay gives top executives an incentive to behave outrageously. To hit the pay jackpot, they'll do most anything. They'll outsource and downsize and make all sorts of reckless decisions that pump up the short-term corporate bottom line at the expense of long-term prosperity and stability.

So I get to recycle my conclusions from many previous posts....

We will not make any progress reducing current health care dysfunction if we cannot have an honest conversation about what causes it and who profits from it.  In a democracy, we depend on journalists and the news media to provide the information needed to inform such a discussion.  When the news media becomes an outlet for  propaganda in support of the status quo, the anechoic effect is magnified, honest discussion is inhibited, and out democracy is further damaged.

True health care reform requires publicizing who benefits most from the current dysfunction, and how and why.  But it is painfully obvious that the people who have gotten so rich from the current status quo will use every tool at their disposal, paying for them with the money they have extracted from patients and taxpayers, to defend their position.  It will take grit, persistence, and courage to persevere in the cause of better health for patients and the public. 

And for our musical interlude, the beginning of "For the Love of Money," sung by the O'Jays, used in the official intro of season 2 of guess what show?

Wednesday, June 14, 2017

Health Care Corruption No Longer a Taboo Topic?

We have been going on about the ruinous effects of health care corruption, the role of impunity in enabling worsening corruption, our lack of good ways to challenge these problems, and our ongoing inability to even discuss what amounts to taboo topics (which we dubbed the "anechoic effect.") But as  corruption, and crime are increasingly linked to the most powerful leaders in the US, it becomes harder to deny that we have a huge problem with corruption in general, and thus maybe it becomes harder to deny we have a huge problem with health care corruption (see also our posts on conflicts of interest, crime, and specifically bribery, extortion, fraud, and kickbacks in health care.)

US Governmental Corruption in the Headlines

Last month we noted that mainstream media are now beginning to discuss how the US has a history of not adequately investigating corruption, and has developed a culture of impunity that is fostering corruption.

Yesterday, the Washington Post reported that 200 US Representatives (all Democrats) filed a lawsuit charging the President of the US with accepting emoluments (payments or gifts meant to influence him, that is, the moral equivalent of bribes) from foreign governments, and charged that this violated the US Constitution.  While there is controversy about whether these lawmakers have the "standing" to pursue this lawsuit, at least some legal scholars insisted that it is corruption that is at issue:

Legal scholars consulted by the congressional plaintiffs said their complaint is distinctive because of the special standing granted to Congress.

'The Framers of our Constitution gave members of Congress the responsibility to protect our democracy from foreign corruption by determining which benefits the president can and cannot receive from a foreign state,' said Erwin Chemerinsky, the incoming dean of the law school at the University of California at Berkeley.

'When the president refuses to reveal which benefits he is receiving — much less obtain congressional consent before accepting them — he robs these members of their ability to perform their constitutional role,' Chemerinsky said. 'Congressional lawmakers . . . have a duty to preserve the constitutional order in the only way they can: by asking the courts to make the President obey the law.'

The same article noted that this is just the latest lawsuit on this matter:

News of the lawsuit emerged less than 24 hours after attorneys general in the District and Maryland, both Democrats, filed suit alleging that payments to Trump violated the Constitution’s anti-corruption clauses. In another lawsuit filed against Trump by business competitors, the Justice Department recently defended Trump’s actions, arguing that he violated no restrictions by accepting fair-market payments for services.

That article also explained that the lawsuit was about corruption, albeit not in so many words.

The conflicts created are so vast, Frosh said, that Americans cannot say with certainty whether Trump’s actions on a given day are taken in the best interest of the country or that of his companies.

'Constituents must know that a president who orders our sons and daughters into harm’s way is not acting out of concern for his own business,' Frosh said. 'They must know that we will not enter into a treaty with another nation because our president owns a golf course there.'
Recall that Transparency International (TI) defines corruption as

Abuse of entrusted power for private gain

In response to these lawsuits, today an op-ed in the Guardian asserted
We’re now witnessing kleptocracy on an unprecedented scale in America. And there’s barely even a fig leaf of cover. Trump has openly enmeshed his private financial interests in national policy. To say that this creates an appearance of corruption would be far too polite. This is the real deal: sketchy dealings all the way down.
Health Care Beginning to be Characterized by the Taboo Word "Corruption"  

Meanwhile, much more quietly, people in health care are starting to talk more openly about the possibility that health care corruption is as real a problem as government corruption.  Last November, I attended the first academic conference explicitly about health care corruption, albeit in Canada.  In May, I was on a panel at a plenary session entitled "Corruption and Patient Harm in the Medical-Industrial Complex" at the Lown Institute/ RightCare Conference in the Boston area (agenda here).

Late in May, the leaders of the Lown Institute and RightCare (Vikas Saini and Shannon Brownlee) published an article in the Huffington Post entitled, "Corrupt Health Care Practices Drive Up Costs And Fail Patients." The authors asserted:

'Corruption' is not a term most Americans would probably apply to what goes on inside American health care. But if corruption is defined as persons or institutions wielding power for their own gain, then our health care system is riddled with it. And it is not only costing us billions of dollars, it is harming untold numbers of patients like Ralph Weiss. Examples abound.

Also late in May, the Hastings Report included an article entitled "Closed Financial Loops: When They Happen in Government, They're Called Corruption; in Medicine, They're Just a Footnote" by Kevin De Jesus-Morales, and Vinay Prasad. The authors accused the medical profession from hiding true corruption in the guise of manageable conflicts of interest, per the abstract:

Many physicians are involved in relationships that create tension between a physician's duty to work in her patients’ best interest at all times and her financial arrangement with a third party, most often a pharmaceutical manufacturer, whose primary goal is maximizing sales or profit. Despite the prevalence of this threat, in the United States and globally, the most common reaction to conflicts of interest in medicine is timid acceptance. There are few calls for conflicts of interest to be banned, and, to our knowledge, no one calls for conflicted practitioners to be reprimanded. Contrast our attitudes in medicine with public attitudes toward financial conflicts among government employees. When enforcement of rules against conflict of interest slackens in the public sector, news organizations investigate and publish their criticism. Yet even when doctors are quoted in the media promoting specific drugs, their personal financial ties to the drug maker are rarely mentioned. Policies for governmental employees are strict, condemnation is strong, and criminal statutes exist (allowing for corruption charges). Yet the evidence that conflict is problematic is, if anything, stronger in medicine than in the public sector. Policies against conflicts of interest in medicine should be at least as strong as those already existing in the public sector.

I will just ignore the irony presented by our apparent inability so far to actually affect what appears to be massive corruption affecting the current US government.


We live in perilous times, but at least people are starting to recognize some perils, rather than hiding them with euphemisms or treating their very mention as taboo.  If the US republican experiment survives, at least maybe we can learn from the experience to address conflicts of interest, crime, and corruption in spheres outside of government, particularly health care.

 So to repeat an ending to one of my previous posts on health care corruption....  if we really want to reform health care, in the little time we may have before our health care bubble bursts, we will need to take strong action against health care corruption.  Such action will really disturb the insiders within large health care organizations who have gotten rich from their organizations' misbehavior, and thus taking such action will require some courage.  Yet such action cannot begin until we acknowledge and freely discuss the problem.  The first step against health care corruption is to be able to say or write the words, health care corruption.

Wednesday, June 07, 2017

Trumping Up a Health Care Charity - Trump Organization Received Increasing Revenue from a Children's Cancer Care Charity

While health and health care are clearly not central interests of the current US President, Donald J Trump, we have noted some disturbing stories about the effects of his leadership on health care.  Most importantly, prior to the election, a story appeared alleging that Mr Trump licensed his name, and actively supported the Trump Network, which sold dodgy vitamin supplements to gullible consumers based on the results of urine tests of unproven, at best, accuracy (look here). While Mr Trump is controversial, to say the least, on multiple levels, never in modern history can I recall a president who was alleged to have been a major player in what appears to be a health scam.

Moreover, since Mr Trump was elected we have noted his proposed and actual appointments to positions of power over health and health care people with severe conflicts of interest, sometimes with no or limited experience in and knowledge of health and health care, and sometimes who had acted against the values of health care professionals  (look here, here, here, here, here, here, here, here, and here ).  (Please note that since while our focus in health care dysfunction, we emphasize cases that are not extensively reported in the media and/or medical and health care literature.  So this list is hardly exhaustive.)

Now we have in the public arena a case in which Mr Trump apparently subverted the good intentions of a charity designed by his son to benefit children with severe illness, resulting in apparent private gain for Mr Trump.

The Beginnings of the Eric Trump Foundation and its Support of St Jude Childen's Research Hospital

An article in Forbes published this week recounted how Eric Trump set up a charity whose main goal was to support children's cancer care, and which would channel the maximum amount of money raised directly to reputable health care organizations.

Eric Trump set up his foundation as a public charity, a classification that allows it to raise most of its money from outside donors. In 2007, when he was 23, the first Eric Trump golf tournament took place, raising $220,000. A compelling sales pitch evolved--the free golf course and the donated goods and services assured donors that every penny possible went to charity. The Eric Trump Foundation employed no staff until 2015, and its annual expense ratio averaged 13%, about half of what most charities pay in overhead. His original seven-person board was made up of personal friends, an innocuous lot who helped sell tournament tickets, which last year ranged from $3,000 for a single all-day ticket to $100,000 for a pair of VIP foursomes.

For the first four years of the golf tournament, from 2007 to 2010, the total expenses averaged about $50,000, according to the tax filings. Not quite the zero-cost advantage that a donor might expect given who owned the club but at least in line with what other charities pay to host outings at Trump courses, according to a review of ten tax filings for other charitable organizations.

That is all admirable, to say the least. But apparently it was not to continue.

Donald Trump Demands His Pound of Flesh

Eric Trump's plans to minimize his charity's overhead soon collided with the wishes of his father, Donald J Trump, then CEO of the Trump Organization, now President of the United States.  Per Forbes, 

But in 2011, things took a turn. Costs for Eric Trump's tournament jumped from $46,000 to $142,000, according to the foundation's IRS filings. Why would the price of the tournament suddenly triple in one year? 'In the early years, they weren't being billed [for the club]--the bills would just disappear,' says Ian Gillule, who served as membership and marketing director at Trump National Westchester during two stints from 2006 to 2015 and witnessed how Donald Trump reacted to the tournament's economics. 'Mr. Trump had a cow. He flipped. He was like, 'We're donating all of this stuff, and there's no paper trail? No credit?' And he went nuts. He said, 'I don't care if it's my son or not--everybody gets billed.''

Katrina Kaupp, who served on the board of directors at the Eric Trump Foundation in 2010 and 2011, also remembers Donald Trump insisting the charity start paying its own way, despite Eric's public claims to the contrary. 'We did have to cover the expenses,' she says. 'The charity had grown so much that the Trump Organization couldn't absorb all of those costs anymore.' The Trump Organization declined to answer detailed questions about the payments.

Furthermore, the amount of money demanded by the Trump Organization rapidly increased.

The cost for Eric's golf tournament quickly escalated. After returning, in 2012, to a more modest $59,000--while the event brought in a record $2 million--the listed costs exploded to $230,000 in 2013, $242,000 in 2014 and finally $322,000 in 2015 (the most recent on record, held just as Trump was ratcheting up his presidential campaign), according to IRS filings. This even though the amount raised at these events, in fact, never reached that 2012 high.

The Forbes article alleges this occurred despite Eric's protestations to the contrary.

Remember, all those base costs were supposedly free, according to Eric Trump. The golf course? 'Always comped,' he says. The merchandise for golfers: 'The vast majority of it we got comped.' Drinks: 'Things like wine we were normally able to get donated.' And the evening performances from musicians like Dee Snider of Twisted Sister and comedians like Gilbert Gottfried: 'They did it for free.'

The Trump Organization Takes Over the Eric Trump Foundation

The move to claw back increasing amounts of charitable proceeds from the Eric Trump Foundation as payments to the Trump Organization seemed to coincide with a shift in the governance of the Eric Trump Foundation. Per Forbes,

In 2010, the year the economics of the tournament suddenly pivoted, four of the seven original board members, who were personal friends of Eric, left. Those 4 were eventually replaced by 14 new board members, the majority of whom owed all or much of their livelihoods to the Trump Organization. Six of them were effectively full-time employees, including Trump lawyer Michael Cohen and executive vice president Dan Scavino Jr., who both serve in political roles for President Trump. Another owns a company that billed the Trump campaign $16 million. Add in Eric himself, as well as his wife, Lara, and 9 of the 17 Eric Trump Foundation board members had a vested interest in the moneymaking side of the Trump empire. The foundation had become a de facto subsidiary of the Trump Organization.
'They were wearing two hats,' says Langan, the former director of golf, who says he sat in on meetings where he couldn't tell where the business ended and the charity began. 'You're dealing with people talking about the event and the charity who also at the same time are thinking about it as a corporation and as a business. It's a for-profit club. You know, they're trying to make money.'

Why this happened, and who orchestrated it were not clear. However, it does suggest that at best, the charitable nature of the Eric Trump Foundation was diluted, to the point that it conceivablye became a de facto part of the for-profit Trump Organization, a company whose majority owner was, and still is Donald J Trump.

Eric Trump Launches an Ad Hominem Attack Against Critics of His Charity

Within a day of the Forbes article, Eric Trump was interviewed by the British Tabloid, the Daily Mail. Its headline was:

Eric Trump says critics of his children's charity are 'sick' and 'disgusting' after news report clobbers him for paying his company $100K for expenses – and he insists there was 'zero profit' to his family

To make a long story short, Mr Trump perseverated about the total amount of money his charity brought to St Jude, and fixated on the amount of a single payment made by the Trump Organization to the charity of $100,000 supposedly to offset the bills sent to the charity from the Trump Organization.

But $100,000 in one year's revenues for his family's company pales in comparison to the millions the foundation raises each year for child cancer research.

He maintained that

none of the money resulted in actual profit to the Trump organization - only reimbursements for costs that couldn't be paid through specific donations.

However, the Daily Mail article included no discussion of the escalating payments after 2011, allegedly reaching as high as $322,000 in 2015, and no justification that these were required only to cover costs.  Calling critics "sick" or "disgusting" was an ad hominem attack.  However, Mr Trump never did contradict the rising unexplained payments made by his foundation to his father's company. 


Eric Trump ought to be commended for his original goal, to benefit pediatric cancer care through a charity which had minimal overhead expenses.  While he apparently was able to maintain this mission for several years, it appears that his father, Donald J Trump, CEO of the Trump Organization and now President of the United States, was able to siphon increasing amounts of money from the charity back into his family-owned corporation, and to position his cronies as trustees of his son's charity.

While the Eric Trump Foundation seems to be continuing to raise substantial money for pediatric oncology care, his claims that the organization has virtually no overhead, and his own control of the foundation now appear dubious.  His father's ability to convert donated money into corporate revenue appeared at the least to compromise the stated mission of the Foundation

to support St Jude Children's Research Hospital

In the last few years its mission also appeared to be to support the revenue of the Trump Organization. Thus the transformation of the Eric Trump Foundation seems to fit the ethical definition of corruption per Transparency International

the abuse of entrusted power for private gain

albeit that the Eric Trump Foundation was entrusted to support St Jude at minimal overhead cost, and that the gain accrued privately not to Eric Trump, but to the Trump Organization and presumably its principal owner at the time, Donald J Trump.

This case, of course, just adds to many others in which non-profit health care organizations threaten their own missions at the apparent behest of and/or for the apparent benefit of their leaders, and in this case, their leaders' relatives.  So I could simply again point out that we need leadership of health care organizations that puts mission, and patients' and the public's health ahead of all other considerations, including revenue enhancement, and particularly ahead of the leaders' enrichment.

This is a special case, though, because the person who seemed to gain the most benefit from the machinations was not just another corporate CEO, but the future president.  Now, as president, Donald J Trump is the de jure leader of the entire government health care apparatus, including the Department of Health and Human Services, and all its associated agencies, and is the de jure leader of the entire government law enforcement apparatus, including the Department of Justice.  The leader of the US Internal Revenue Service, which enforces the laws and regulations about non-profit organizations, incidentally also answers to the President.

Thus as an advocate for more functional health care, disquieting is far too polite a term to describe the presidency in the hands of someone who apparently so cavalierly re-engineered for his personal benefit a charitable foundation meant to help sick children, who so cavalierly supported conflicted and ill-informed leadership of government health care agencies, and who so cavalierly licensed his name to a sketchy vitamin sales scheme.