"Phony Consulting and Royalty Agreements," "Chocolate" Bribes, a Sales Representative Doubling as a Stripper, Oh My - Three Settlements for Othrofix

On this US election day, we seem to be in a mini-squall of cases involving unethical, deceptive, and now very colorful marketing practices used to push drugs and devices. 

We recently discussed a settlement of allegations of deceptive marketing practices and kickbacks by pharmaceutical company Boehringer-Ingelheim (here), a US congressional report alleging deceptive influence by Medtronic marketers over ostensibly scholarly publications (here), a study of documents released after litigation that appear to show how Pfizer had a systemic marketing campaign that used controlled trials as deceptive marketing vehicles (here),

Now three separate settlements by device/ biotechnology company Orthofix have come to light.

Settlement 1 - "Phony Consulting and Royalty Agreements," and Prostitution as Kickbacks, and a Sales Representative as Stripper

A Bloomberg article outlined Orthofix's two latest settlements.  The newest seems the most audacious, or bodacious,

Orthofix International NV, (OFIX) a maker of spinal implants, agreed to pay the U.S. $30 million to settle claims that a subsidiary paid illegal kickbacks and provided prostitutes to doctors in return for orders.

The subsidiary, Blackstone Medical Inc., paid kickbacks to spinal surgeons in the form of phony consulting and royalty agreements, and travel and entertainment to entice them to use its products, the U.S. Justice Department said in a statement today.

This case adds to the mounting pile of evidence that many of the financial relationships among physicians and health care academics and drug, device, biotechnology and other health care corporations are not merely conflicts of interest incidental to innovation.  In particular, Bloomberg reported,

[Whistle blower Susan] Hutcheson alleged that officials of Blackstone, purchased by Orthofix in 2006, violated kickback and false-claim laws by setting up a system to compensate doctors under sham consulting agreements and phony research grants, according to court filings. The sales executive said the company also offered lavish travel opportunities to doctors who implanted its products, the filing said.

Some doctors were paid as much as $8,000 a month under the fictitious consulting agreements, Hutcheson said in her suit, filed in federal court in Massachusetts. Orthofix’s U.S. unit is based in Lewisville, Texas. Some also received phony research grants for as much as $18,000, the suit added.

Then there was this colorful detail,

Blackstone salespeople also were urged to take surgeons out for expensive dinners, escort them to strip clubs and pay for liaisons with prostitutes to get their business, Hutcheson said in the suit.

One female sales manager in Dallas agreed to disrobe and join strippers on stage at the request of two surgeons to whom she was pitching the company’s products, Hutcheson said in her suit. The sales manager was demoted, not fired, over the incident, Hutcheson said in the suit.

We often hear from drug, device, and biotechnology companies that their sales efforts are all about providing needed information to physicians, information they could not otherwise obtain.  In this case, the information appeared to be rather anatomical, but also rather personal.

The AP coverage of this store (here, via Businessweek) also noted that the settlement involved a corporate integrity agreement.  Neither story mentioned any admissions made by the company.  As far as I could tell, no corporate executives suffered any consequences as part of this settlement.

Settlement 2 - Fraud, Obstructing the US Government, and Less Colorful Kickbacks to Promote Bone Growth Stimulators

The article did nor provide any helpful photographs, but it did note that Orthofix recently made a second settlement.

The settlement’s approval comes after Orthofix officials agreed to pay $42 million to resolve a separate whistle-blower suit and a criminal probe of allegations it paid kickbacks to doctors who used its bone-growth stimulators.


One of its units will plead guilty in federal court in Boston federal court to a single felony count of obstructing a U.S. government audit and pay a $7.8 million fine, according to a June 7 regulatory filing. Orthofix also will pay $34.2 million to resolve whistle-blower claims that the company defrauded the federal Medicare program over bone-growth stimulators, which patients wear after surgery to speed healing.

Amazingly, unlike the first settlement, and unlike most settlements we have discussed,

Five Orthofix employees have pleaded guilty to criminal charges in connection with probes of the kickback allegations. Thomas Guerrieri, an Orthofix vice president, pleaded guilty in April to violating the federal anti-kickback statute by setting up fake consulting agreements for doctors who used the company’s products.

Note that we discussed a surgeon who pleaded guilty to accepting kickbacks from multiple device companies, including the Blackstone subsidiary of Orthofix, here in 2008.

Settlement 3 - "Chocolate" Bribes to Mexican Government Officials

Finally, the AP story noted in passing "the recent resolution of a federal Foreign Corrupt Practices action" against the company.  I could not find any news coverage of that, but in July there did appear a SEC press release.

The Securities and Exchange Commission today charged Texas-based medical device company Orthofix International N.V. with violating the Foreign Corrupt Practices Act (FCPA) when a subsidiary paid routine bribes referred to as 'chocolates' to Mexican officials in order to obtain lucrative sales contracts with government hospitals.

The SEC alleges that Orthofix’s Mexican subsidiary Promeca S.A. de C.V. bribed officials at Mexico’s government-owned health care and social services institution Instituto Mexicano del Seguro Social (IMSS). The 'chocolates' came in the form of cash, laptop computers, televisions, and appliances that were provided directly to Mexican government officials or indirectly through front companies that the officials owned. The bribery scheme lasted for several years and yielded nearly $5 million in illegal profits for the Orthofix subsidiary.


Orthofix agreed to pay $5.2 million to settle the SEC's charges.

Also,

Orthofix also disclosed today in an 8-K filing that it has reached an agreement with the U.S. Department of Justice to pay a $2.22 million penalty in a related action.

Summary  

So the box score here includes settlements of legal actions alleging bribery and kickbacks, a corporate integrity agreement, a guilty plea by a company subsidiary to obstructing the US government, and multiple guilty pleas by company executives.  The bribes and kickbacks were provided in various colorful forms.  

The variety of unethical behaviors unearthed suggests a company with a seriously deranged corporate culture.  Whether the various actions taken against it, including the very unusual punishments meted out to some of its apparently mid-level executives will change its behavior, or serve as a lesson to other companies and their leaders is not clear.  Whether they are sufficient to suggest anyone should trust this company, its leaders, or its products seems questionable.   

This story adds to our various compilations of legal settlements and tales of crime, including bribery, kickbacks and fraud involving major health care organizations which suggest serious, deep afflictions within the culture of our commercialized health care system.  Yet almost nowhere, except here on Health Care Renewal are there calls for serious reforms to restore trust in our health care organizations and their leaders.

As we have said endlessly, up to now, such legal settlements seemingly have had no effect on the bad behavior of big health care organizations, while they continually erode trust in these organizations and their leadership, and trust in physicians to put patients ahead of personal gain.

Furthermore, these cases seem to be part of a larger social problem. It seems that nowadays the leadership of large, powerful organizations feels free to promote their own interests using psychologically sophisticated but deceptive marketing and public relations strategies no matter what their effect on the public welfare.

Again as we have said all too many times before, 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.

Maybe after all the election hoopla dies down here in the US, we can finally have a serious conversation about health care reform that will make our health care system more trustworthy. 

Just Another Day at the Office: Boehringer Ingelheim Settles Allegations of Deceptive Off-Label Marketing, Kickbacks

Legal settlements by pharmaceutical companies for less than $100 million now seem to barely rate as news in the US. The best report, albeit short, of a by Boehringer Ingelheim for a mere $95 million, seems to be in the Hartford (CT) Courant. The summary was:

Boehringer Ingelheim, a German company with U.S. headquarters in Ridgefield, has agreed to pay $95 million to settle allegations that it promoted four drugs for uses unsupported by research, and that it paid kickbacks to doctors to prescribe the drugs, the U.S. Department of Justice has announced.

It included most of the usual elements.

Off Label Marketing

Two of the drugs in the case are for treating chronic bronchitis and emphysema, and were suggested for children with asthma and coughs from the flu. The drugs had not been tested on children.

'I was concerned that doctors were basing their treatment decisions on false information,' [former Boehringer Ingelheim pharmaceutical representative and whistle blower Ron] Heiden said in the released statement. 'Promoting off-label treatments with potential serious consequences just to increase sales is heinous behavior.'

I note parenthetically that some industry apologists belittle the possible harms of truthful off-label marketing (e.g., look here).  However, at least in this case, the marketing was alleged to be based on falsehoods. 

Furthermore, some industry apologists may also decry the regulation of off-label marketing as a violation of the US Constitutional guarantees of freedom from government infringement on individual free speech.  Note, however, that Boehringer Ingelheim in this case got exclusive rights to market these drugs for many years from the government.  In exchange for these rights, the law restricted their right to market the drugs to approved indications.  

Promotion Beyond the Evidence

The company told doctors Aggrenox was better than Plavis to reduce the risk of heart attacks, but there was no evidence to support that claim, the Justice Department said. The drug had FDA approval to prevent secondary strokes.

Again, the truthfulness of the premises underlying the marketing apparently was questionable, to use charitable phrasing.  

Kickbacks to Physicians

This information came from the AP version of the story, here via the Washington Post:

the settlement resolved allegations that Boehringer Ingelheim paid kickbacks to health care professionals to induce them to prescribe all four of the drugs. These kickbacks included payments for participating in advisory boards, speakers’ training programs, speaker programs and consultant programs.

 Note further that apologists for industry also belittle the importance of the effects of conflicts of interest on health care (e.g., look here).  In this case, activities that are often referred to as species of conflicts of interest, e.g., advisory board membership, speakers board membership, consulting, apparently were meant as vehicles for payments to induce prescribing.  That is, apparently what some might have called conflicts of interests were allegedly kickbacks, or bribes.  As we have discussed before, it is one thing to be paid for legitimate clinical, educational, or scientific activity when such payments might influence professional, educational, or scientific judgments or activities about other matters.  It is entirely another thing to be paid a kickback to favor a drug company's marketing campaign instead of making decisions that put patients first.

A Corporate Integrity Agreement

[From the Hartford Courant]

Also as part of the settlement, Boehringer agreed to enter into an expansive Corporate Integrity Agreement to avoid such marketing in the future.

 We have noted before that such agreements do not seem to deter future bad behavior, (e.g., look here).

No Admission of Wrongdoing by the Company

[from the AP]

'The pharmaceutical industry as a whole has undergone significant changes over the past decade and continues to be under intense scrutiny,' said Greg Behar, president and chief executive officer of Boehringer Ingelheim. 'Likewise, our internal processes and compliance practices have evolved significantly over the years.' The company said it has been cooperating with the government investigation.

Again, if there is no acknowledgement by the company that it did wrong, do we expect it not to do wrong in the future?

Summary

Here was yet another legal settlement that documents the pervasiveness of the influence of marketing and public relations over physicians' professional responsibilities.  This is just one of several recent posts (e.g., here and here) about the malevolent influence of deceptive marketing or public relations on the evidence that health care professionals should be using to make the best possible decisions for individual patients.

Such legal settlements seemingly have had no effect on the bad behavior of big health care organizations, while they continually erode trust in these organizations and their leadership, and trust in physicians to put patients ahead of personal gain. 

Furthermore, these cases seem to be part of a larger social problem.  It seems that nowadays the leadership of large, powerful organizations feels free to promote their own interests using psychologically sophisticated but deceptive marketing and public relations strategies no matter what their effect on the public welfare.

As we have said all too many times before, 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.

New York Times Agrees: Medicare Bills Rise as Records Turn Electronic

At my Sept. 19, 2012 post "Cracking the Codes" I wrote about an investigation entitled "Growth of electronic medical records eases path to inflated bills" by Fred Schulte at the Center for Public Integrity.  I observed:

The new article focuses on the role of electronic medical records systems and associated software in promoting upcoding - billing at higher rates - through features such as documentation cloning, templates, facility of making it look like work not done was actually performed, and deliberate algorithmic prompting of users to "do more" to "get more."

Now just a few days later, the New York Times reports similar, independently-reached concerns:

Medicare Bills Rise as Records Turn Electronic

By REED ABELSON, JULIE CRESWELL and GRIFFIN J. PALMER

New York Times

September 21, 2012

When the federal government began providing billions of dollars in incentives to push hospitals and physicians to use electronic medical and billing records, the goal was not only to improve efficiency and patient safety, but also to reduce health care costs.

But, in reality, the move to electronic health records may be contributing to billions of dollars in higher costs for Medicare, private insurers and patients by making it easier for hospitals and physicians to bill more for their services, whether or not they provide additional care.

Hospitals received $1 billion more in Medicare reimbursements in 2010 than they did five years earlier, at least in part by changing the billing codes they assign to patients in emergency rooms, according to a New York Times analysis of Medicare data from the American Hospital Directory. Regulators say physicians have changed the way they bill for office visits similarly, increasing their payments by billions of dollars as well.

I am commenting on a few points that the NYT piece amplifies, and some interesting quotes from individuals:

Over all, hospitals that received government incentives to adopt electronic records showed a 47 percent rise in Medicare payments at higher levels from 2006 to 2010, the latest year for which data are available, compared with a 32 percent rise in hospitals that have not received any government incentives, according to the analysis by The Times.

Correlation is not proof of causation, but considering the issues I raised in my Feb, 2011 post "Does EHR-Incited Upcoding (Also Known as "Fraud") Need Investigation by CMS", and considering that physicians know EHRs facilitate grading of their performance as organizational "taxpayers" (i..e, bringing in revenue), and the feature of EHR's illustrated at that post on "encouraging" users to "do more to get more", I think further federal inquiry is justifiable.

Critics say the abuses are widespread. “It’s like doping and bicycling,” said Dr. Donald W. Simborg, who was the chairman of federal panels examining the potential for fraud with electronic systems. “Everybody knows it’s going on.”

The same applies for health IT safety risks, I add.  Healthcare has a number of "anechoic" issues ongoing in addition to the ones already covered at this blog site.

When Methodist Medical Center of Illinois in Peoria rolled out an electronic records system in 2006, Dr. Alan Gravett, a former emergency room physician, quickly expressed alarm.

He said the new system prompted doctors to click a box that indicated a thorough review of patients’ symptoms had taken place, even though the exams were rarely performed, while another function let doctors pull exam findings “from thin air” and include them in patients’ records.

In a whistle-blower lawsuit filed in 2007, Dr. Gravett contended that these techniques drove up Medicare reimbursement levels substantially. According to the lawsuit, Dr. Gravett was eventually fired for ordering too many tests. He says he was retaliated against for complaining about the new system. The Justice Department is weighing whether to join an amended suit in Federal District Court in Central Illinois.

Retaliation against health IT whistle blowers is another "anechoicism."  See for instance this essay about a physician/informaticist who complained that a new ICU system would kill people.  

... Many doctors and hospitals were actually underbilling before they began keeping electronic records, said Dr. David J. Brailer, an early federal proponent of digitizing records and an official in the George W. Bush administration. [As the first Chair of ONC - ed.]

Where is data to support that contention?

Lacking such data, the rationale for such a statement, on its face, seems to be that increased billing with EHR's shows there must have been underbilling without EHR's - a logical fallacy  (a particularly bizarre type of circular argument).

But Dr. Brailer, who invests in health care companies, acknowledged that the use of electronic records “makes it faster and easier to be fraudulent.” 

Then, one might ask, why is the Federal Government hell-bent on pushing the technology before these issues are dealt with?

A spokesman for the Health and Human Services Department, however, said electronic health records “can improve the quality of care [not "will", as stated by ONC - ed.], save lives and save money.” Medicare, he added in an e-mailed statement, “has strong protections in place to prevent fraud and abuse of this technology that we’re improving all the time.”

Those statements are speculative, the money savings in doubt (e.g., see the Sept. 17 WSJ Op Ed "A Major Glitch for Digitized Health-Care Records" by Ross Koppel and Stephen Sumerai),  and the "strong protections" obviously not so strong, or not used and/or enforced, or all of the above.

Some contractors handling Medicare claims have already alerted doctors to their concerns about billing practices. One contractor, National Government Services, recently warned doctors that it would refuse to pay them if they submitted “cloned documentation,” while another, TrailBlazer Health Enterprises, found that 45 out of 100 claims from Texas and Oklahoma emergency-department doctors were paid in error. “Patterns of overcoding E.D. services were found with template-generated records,” it said.

I have seen cloned progress notes and other documentation with my own two eyes, unfortunately in charts where grievous patient harms occurred in part as a result of other clinicians being misled by cloned notes of normalcy.

The Office of Inspector General is studying the link between electronic records and billing.

Maybe OIG can also investigate links between electronic records and adverse medical events.

One sophisticated patient witnessed the overbilling firsthand. In early 2010, Robert Burleigh, a health care consultant, came to the emergency room of a Virginia hospital with a kidney stone. When he received the bill from the emergency room doctor, his medical record, produced electronically, reflected a complete physical exam that never happened, allowing the visit to be billed at the highest level, Mr. Burleigh said.

The doctor indicated that he had examined Mr. Burleigh’s lower extremities, but Mr. Burleigh said that he was wrapped in a blanket and that the doctor never even saw his legs.

It's a good thing his legs were not a problem.

“No one would admit it,” Mr. Burleigh said, “but the most logical explanation was he went to a menu and clicked standard exam,” and the software filled in an examination of all of his systems. After he complained, the doctor’s group reduced his bill.

Which then can cause or contribute to others further down the continuum of care failing to perform their own exams, on the basis of believing the falsely documented exam, thus missing abnormalities. 

As software vendors race to sell their systems to physician groups and hospitals, many are straightforward in extolling the benefits of those systems in helping doctors increase their revenue. In an online demonstration, one vendor, Praxis EMR, promises that it “plays the level-of-service game on your behalf and beats them at their own game using their own rules.”

I'm again stunned at the levels of arrogance of the health IT sellers; what were they thinking?  These "promises" could expose them to, say, RICO issues.

But others place much of the blame on the federal government for not providing more guidance. Dr. Simborg, for one, said he helped draft regulations in 2007 that would have prevented much of the abuse that now appears to be occurring. But because the government was eager to encourage doctors and hospitals to enter the electronic era [e.g., via HITECH - ed.], he said, those proposals have largely been ignored.

“What’s happening is just the problem we feared,” he said.

This brings to life my observation that HITECH Act was ill-timed and represents social policy malpractice.

It appears OIG has their work cut out for them.

-- SS

How Big Health Care Charities Rely on Lying Telemarketers

A modern day Diogenes searching for an honest organization in health care would have a very hard time.  Close to the "you can't make this stuff up" category is a new investigative report from Bloomberg on deceptive - to use a polite word - practices at some of the US' biggest health care charities.

Using Commercial Telemarketing Firms that Keep Nearly All Money Raised

The report showed how major US health care charities use privately held for-profit telemarketing firm InfoCision Management Corp to raise money, but most of the money raised went back to InfoCision.  The opening example was of a particular telemarketing call:

A woman named Robin said she was representing the American Diabetes Association.

Robin didn’t ask for money. She asked Patterson to stamp and mail pre-printed fundraising letters to 15 neighbors. Both of Patterson’s parents and one grandmother had been diabetic, so she agreed to do it, Bloomberg Markets magazine reports in its October issue.

'I thought since it does run in the family, it wouldn’t hurt for me to help,' says Patterson, 64, a retired elementary school teacher. She guessed, based on what she knew about charity fundraising, that about 70 to 80 percent of the money she brought in would be used for diabetes research.

The truth was almost the exact opposite. The vast majority of funds Patterson, her neighbors and people like them throughout the country would raise -- almost 80 percent -- would never be made available to the Diabetes Association. Instead, that money collected from letters sent to neighbors would go to the company that employed Robin and an army of other paid telephone solicitors: InfoCision Management Corp.

Just 22 percent of the funds the association raised in 2011 from the nationwide neighbor-to-neighbor program went to the charity, according to a report on its national fundraising that InfoCision filed with North Carolina regulators.

So while some American health care charities boast that most of the money they receive goes to programming, not management or fund raising, in this case, the opposite was true.

Many of the Biggest US Health Care Charities Were Involved

As the article stated,

Many of the biggest-name charities in the U.S. have signed similarly one-sided contracts with telemarketers during the past decade. The American Cancer Society, the largest health charity in the U.S., enlisted InfoCision from 1999 to 2011 to raise money.

Also,

In the past decade, many of the nation’s biggest health charities have hired InfoCision, including the American Heart Association, American Lung Association, American Society for the Prevention of Cruelty to Animals, March of Dimes Foundation and National Multiple Sclerosis Society.

Note that the Bloomberg article was focused on InfoCision. I suspect that if one were able to look at arrangements with similar telemarketing firms made by all US health care charities, the results might be even more extreme.

The Fund Raisers and the Charities Lied

The article contained instances in which the telephone callers lied about who they were or about where the money they were trying to collect would go.

First, regarding who the callers were:

The ruse begins with the name that flashes on your caller ID when a telemarketer is phoning on behalf of a charity. It’s the charity’s name that often shows up, not that of the telemarketing firm.

The misrepresentation can continue on the call itself. Solicitors in recordings obtained by the Ohio Attorney General’s Office sometimes identify themselves to potential donors as 'volunteers.' They’re not; they’re paid employees of InfoCision.

Second, regarding where the money would go:

The bigger lie telemarketers tell is what they say about how much money will go to the charities they’re working for.

According to documents obtained through an open records request with the Ohio attorney general, the Diabetes Association approved a script for InfoCision telemarketers in 2010 that includes the following line: 'Overall, about 75 percent of every dollar received goes directly to serving people with diabetes and their families, through programs and research.'

Yet that same year, InfoCision’s contract with the association estimated that the charity would keep just 15 percent of the funds the company raised; the rest would go to InfoCision.

This deception appears to be sanctioned by the leaders of the charities for whom InfoCision worked,

[American Diabetes] Association Vice President [Richard] Erb offers no apologies for the script, saying the association runs many fundraising campaigns and, overall, about 75 percent of the money goes to its programs. He acknowledges that the contract with InfoCision estimated that the telemarketer would get to keep 85 percent of the funds it raised.

Erb also says he isn’t happy that volunteers are upset upon learning the truth.

'Obviously, if people feel betrayed or that we’re not being honest with them, it doesn’t make me feel well,' he says.

The American Cancer Society similarly seemed to sanction deceptive fund raising practices.

The Cancer Society, in a Sept. 1, 2009, contract with InfoCision, estimated that the charity would get 44 percent of the amount the company collected in the following fiscal year.

The telemarketer script for the same year approved by the society for InfoCision asks solicitors to say something different: 'Overall, about 70 cents of every dollar received goes to the programs and services that we provide.'

Predictably, an executive for the society dodged responsibility for such lying:

[Greg] Donaldson, the society’s senior vice president, declined to comment on the contradiction between the contract and the script, saying the society doesn’t provide 'proprietary competitive information regarding individual programs.'

The Telemarketing Firm Stonewalls

While the Bloomberg reporters were able to get some health care "charity" executives to respond to the issues, InfoCision was not even slightly forthcoming. The best they could do was get an InfoCision executive to protest the company's importance for charity:

InfoCision Chief of Staff Steve Brubaker says his company is vital to the success of charity fundraising. Many nonprofits have stayed with InfoCision for more than 20 years, proving the firm offers value and integrity, he says.

'We’ve developed that high level of trust by being good stewards of their money and mission,' he says. Campaigns to develop new donors are more expensive than those seeking money from previous supporters, he says. He declined to answer specific questions, saying such information is proprietary to the company or its clients.

He turned down a request for interviews with Taylor and InfoCision executives.

Previously, the company owner had taken on the mantle now familiar in the current US election campaign, "job creator,"

[InfoCision founder Gary] Taylor was an outspoken opponent of efforts by the Federal Trade Commission in 2003 to begin the National Do Not Call Registry, allowing people to block calls from for-profit solicitors. In an interview with Customer Interaction Solutions, a trade journal, he said:

'The most pressing issue, without a doubt, is excessive governmental regulation. It seems that the politicians and regulators are ignoring the significant benefits we provide through job creation, economic growth and the goods and services we cost-effectively market for our clients.'

Keep in mind that the article documented how much of those jobs are minimum wage, and they may involve lying.

Note further that Taylor "got his start raising money for evangelical preachers." The company also " did fundraising for Citizens United, the conservative group best known as the plaintiff in the Supreme Court case that allowed unlimited independent spending by corporations and unions on behalf of political candidates."

Health Care Charities are Really Just "Businesses"

Underlying all this seems to be the transformation of health care from a calling to a business. While US health care charities have reputations as organizations out to do good, one executive, the American Diabetes Soceiety's Mr Erb, admitted that doing good was no longer really the focus,

'But the thing is, we’re a business. There has never been a time or a place where we said, 'Most of this money is coming to us.''

An expert the Bloomberg reporters interviewed said that the fund raising tactics these organizations used meant they were no longer charities. Per Ken Berger, "who runs Glen Rock, New Jersey- based Charity Navigator, the nation’s largest nonprofit watchdog group,"

'These organizations were created to provide public benefit,' he says. 'The fact that the vast majority of money is instead lining the pockets of telemarketers defies the whole reason behind the very creation of these charities.'

The Experts Say It's Fraud

Bloomberg reporters interviewed several experts on philanthropy and law. They were not amused. One suggested that the fund raising tactics described in the article were fraudulent:

Charities should be held accountable for deceptive fundraising done in their name, says James Cox, a professor at the Duke University School of Law in Durham, North Carolina, and co-author of 'Cox and Hazen on Corporations' (Aspen Publishers, 2003).

'If that’s what they do systematically, then they’re obtaining money under false pretenses,' he says. 'I don’t just think it’s incredible. I’d be surprised if it isn’t criminal.'

Another labeled the practices "deceitful."

Bloomberg cited a 2003 US Supreme Court decision:

While telephone solicitors have no obligation to volunteer what the firm’s cut is of each donation, they don’t have a constitutional right to lie, the court ruled in a 2003 Illinois case.

'States may maintain fraud actions when fundraisers make false or misleading representations designed to deceive donors about how their donations will be used,' the court said.

Summary

This horrendous story illustrates how the mission of health care has been undermined by the last 30 years' push to turn health care organizations into businesses at a time managers were indoctrinated that they only thing that matters is short-term revenue (that is, they have become "financialized," look here). Here we see ostensibly charitable organizations that solicit donations from the public supposedly to aid patients and support medical education and research willing to do whatever it takes to raise money, including deception, and what might be fraud. This is just disgusting.

In my humble opinion, patients, health care professionals, and the public should insist that health care non-profit organizations disclose their fund-raising tactics, and abandon any that are dishonest. Law enforcement should investigate to see if prosecutions for fraud or related crimes are warranted. Organizations that refuse to change their ways should lose their tax exempt status.

Meanwhile, I would suggest that everyone should be extremely skeptical of fund raising by major health care charities. In no instance should anyone give money solely based on telephone solicitations.

If we, health care professionals, patients, the public do not take our heads out of the sand and realize how dishonest health care has become, we will have only ourselves to blame when it collapses.

More Hospices Pretending Patients are Terminally Ill

In the US, we have been engaged in an experiment involving handing over an ever increasing proportion of direct patient care to for-profit corporations, and non-profit organizations that act increasingly like for-profit corporations (as opposed to mission oriented non-profit organizations or individual health care professionals).  The results have been particularly striking for the care of one of the most vulnerable patient groups, the chronically ill. 

Over the last months, a number of stories about the hospices enrolling patients who are not terminally ill have accumulated.  Keep in mind that hospices are supposed to provide compassionate palliative care to the terminally ill.  While they are supposed to make such patients as comfortable and free of pain as is possible, they are not supposed to otherwise aggressively treat other medical problems (based on the assumption that such treatment would benefit dying patients.)  However, such treatments could benefit, or even save the life of patients who are not dying.  (See posts here and here.)

Hospice of the Bluegrass

Back in March, there was very brief report on Kentucky.com that the non-profit Hospice of the Bluegrass "agreed to pay the federal government $685,000 for submitting claims to Medicare to receive reimbursements for services it provided patients who did not qualify for Medicare services,..."  Note that the main requirement for Medicare payments for hospice services is that the patients receiving these services have no more than six months of survival expected.

However, then in June a detailed investigative report also on Kentucky.com recounted numerous conflicts of interest affecting that hospice's board,

The non-profit Hospice of the Bluegrass has spent more than $1.82 million since 2005 on business deals with several of its board members and the spouses of its executives.

In particular,

On its tax returns from 2005 to 2010, Hospice reported paying at least:

■ $540,178 for political lobbying and legal representation to the law firm of McBrayer, McGinnis, Leslie & Kirkland. One of the firm's partners and co-owners, Lisa English Hinkle, was a Hospice board member and a former board chairwoman. Hinkle rotated off the board at the end of 2011. She was preceded on the board by another partner in the firm, James Frazier.

■ $837,999 for insurance to the firm of Powell-Walton-Milward, whose managing director, John Milward, is a Hospice board member. His brother Greg Milward, who also works at the insurance firm, previously was on the Hospice board and was board chairman in 2007.

■ $392,042 for printing to Pat Byrne Printing, owned by the husband of Deede Byrne, Hospice's chief clinical officer.

■ $22,506 for heating and air conditioning to Gary Merckle, husband of Carol Ruggles, Hospice's chief financial officer.

■ $28,577 for advertising to the Lexington Herald-Leader while then-editor Marilyn Thompson sat on the board.

The article also noted that the hospice CEO seems very well-paid given the context,

CEO Gretchen Marcum Brown, whose 2010 compensation was $238,650 in base pay, $10,570 in bonus pay and $84,978 in other reportable compensation. The other compensation included Hospice's payment into Brown's deferred-compensation account, from which she can draw in the future.

Hospice also paid for a membership in Brown's name at The Club at Spindletop Hall, which offers swimming, tennis and dining.

Such a pay package may provide incentives to maximize revenue by maximizing enrollment, regardless of whether enrolled patients really should be in hospice.
Hospice Family Care

As reported by the Phoenix Business Journal in May,

Hospice Family Care Inc. has agreed to pay the federal government $3.7 million to settle civil allegations that the Mesa-based company violated the False Claims Act by submitting false bills to Medicare.

Also,

The U.S. Attorney’s Office had alleged that Hospice Family Care submitted claims for payment to Medicare for patients who were either completely or partially ineligible for hospice,...

So this settlement is partly for charges that the hospice enrolled patients who were not terminally ill.

Note that in this particular case, the government made an effort to punish the owners of the company, who found a way to evade such punishment:

However, on the day the U.S. Attorney’s Office announced that settlement, Hospice Family Care’s owners closed on a deal to sell the company.

So,

Neither the company’s attorney, Frederick Petti, nor government officials would disclose the name of the buyer.

“Unfortunately, I can’t provide that information because it’s not in the public domain,” said Assistant U.S. Attorney Bill Solomon.

The company’s co-owners, Nancy Smith and Nancy Turner, deferred all comments to Petti.

'Believe me, if my clients weren’t in the process of selling this company, we would have fought this to the bitter end,' Petti said. 'We would have prevailed. This is a business decision.'

He emphasized that the settlement agreement was not an admission of guilt.

Smith and Turner agreed to be excluded from Medicare and Medicaid and all other federal health care programs for seven years, effective immediately. However, Petti said the company’s new owners will not be affected by that settlement agreement and will be free to accept reimbursement from government payers.

Such maneuvers obviously reduce any deterrent effect of settlements like this on bad behavior, and particularly on the behavior of enrolling patients who are not terminally ill in hospice.
Harden Healthcare

Then in June the Wichita (Kansas) Eagle reported,

A Kansas hospice care provider and its Texas-based parent company will pay $6.1 million to resolve allegations that they submitted false claims to the federal Medicare program. The case arose from a whistleblower lawsuit filed by a nurse more than six years ago, the U.S. Justice Department said Thursday.

Justice officials said in a news release that they hope the settlement with Wichita-based Hospice Care of Kansas LLC and Fort Worth-based Voyager HospiceCare Inc. will serve as a warning to other hospice providers.

Prosecutors alleged the companies submitted false claims to the federal health care program for the elderly and disabled between 2004 and 2008 for patients who weren’t expected to die in less than six months, a requirement for the benefits in question.

Note that this report makes very explicit the allegation that the hospice was enrolling patients who were not terminally ill. Further note that while the beginning of the report makes it appear that the company that owns the hospice is regional, it actually is larger

The agreement includes no admission or determination of wrongdoing, Harden Healthcare, the owner of Voyager HospiceCare and Hospice of Kansas, said in a statement.

Harden Healthcare, according to the Austin (Texas) Business Journal, is the largest private employer in that city, with over 3800 employees and revenues of over $810 million.

Hospice of the Comforter

The Orlando Sentinel reported in late August,

The federal government is taking over a whistleblower lawsuit against the Altamonte Springs-based Hospice of the Comforter — a suit that alleges the nonprofit routinely over-billed Medicare for patients who didn't qualify as terminally ill, sometimes keeping them in hospice care for as long as five years.

These are allegations of course, but it turns out that both sides of the action agree on certain facts of interest,

Both sides agree that Hospice of the Comforter officials discharged a large number of Medicare patients after the federal government began scrutinizing the ballooning number of hospice patients nationwide.

In fact, Stone said, the initial sampling by government auditors showed Hospice of the Comforter had an error rate of 18 percent, just slightly over the 15-percent rate the government allowed and therefore triggering a second, more intense review.

That phase, in January 2010, revealed a troubling 77 percent denial rate, Stone said — meaning that Medicare officials believed the hospice was improperly billing the government in 77 percent of the cases it reviewed. According to the government, hospice care should be limited to patients certified by a hospice physician as having six months or less to live.

Meanwhile, though, an internal hospice committee did its own review of patients, discharging more than 133 of them and noting they were, 'no longer terminally ill,' the lawsuit states. Some had been designated 'FOB' for 'Friends of Bob [Wilson, the CEO of the hopsice],' and Wilson later insisted some be readmitted and their care billed to Medicare, the lawsuit says.

Let me just note that for someone truly terminally ill, the way to become no longer terminally ill is to die.

A column in the Orlando Sentinel suggested that the hospice CEO had a strong personal incentive to enroll patients who were not terminally ill,

there are facts not in dispute — such as Wilson's financial incentive to keep his patient counts high: bonuses of $50,000 every three months on top of his base salary of $120,000.

Again, maintaining lucrative compensation could be an inducement for hospice executives to sanction enrollment of patients who were not really terminally ill.
Summary

Hospices arose to provide compassionate care for among the most vulnerable of patients, the terminally ill.  Hospices began as mission oriented non-profit organizations, often affiliated with hospitals or religious groups.  However, the generous payments for hospice care provided by Medicare and commercial insurance, and the increasingly laissez faire supposedly "market-based" health care context lead to the growth of for-profit hospices, and the emulation of their management by ostensibly non-profit organizations.  In the Orlando Sentinel, Scott Maxwell used the example of the Hospice of the Comforter to assert

you've been duped when it comes to waste, fraud and abuse in America's health-care system.

Politicians love to rant about it. They often do so when explaining why they're about to cut your benefits.

They're right that fraud happens. But the individual scammers they portray as the problem are nothing compared to the systemic white-collar fraud perpetrated by corporations — and, yes, faith-based nonprofits.

This is America's dirty little health-care secret.

We all know health-care costs are soaring. But we have done little to address the organized fleecing — often because the fleecers are either campaign donors or nonprofits wrapped in a cloak of altruism.

In this country, you can go to prison for stealing a TV. But if companies get caught stealing millions from taxpayers, the fines are simply viewed as the cost of doing business.

We have made similar assertions about systemic misbehavior in the US health care system, and how failure of local through national government to impose any penalties on the individuals who authorize, direct or implement bad behavior just allow the problem to get worse. However, the consequences of increasing hospice enrollment (hence short-term revenue, and hence the compensation of top hospice executives) by enrolling patients who are not terminally ill go well beyond just increasing health care costs. As we have said before, enrolling patients into hospice who are not already really doomed to die soon denies them the possibility of treatment for new acute illnesses and worsening of chronic illnesses, which then could hasten their deaths. (Pretending those patients were terminally ill could have fooled their relatives into thinking those deaths were inevitable, instead of results of bad practice and potentially fraud.)

So the pattern of fraud now increasingly documented to be taking place in for-profit and even non-profit hospices is particularly reprehensible. It preys on vulnerable patients, and may cost some patients their lives who otherwise might have lived for a long time. This is a prime example of what goes wrong when our main health care policy seems to be based on letting the good times roll.

I hope that the realization that enrollment of patients who are not terminally ill into hospices can result in their untimely death may lead to some reconsideration of our experiment in lightly regulated, "market based" health care. Those who directly care for patients ought to be motivated by professional values, not short-term revenue.

Once More with Feeling - Johnson and Johnson Found Guilty, Fined $1.1 Billion

The latest legal black eye for giant pharmaceutical and device company Johnson and Johnson appeared in an Arkansas court room.  As documented by Bloomberg, via NJ.com,

Johnson & Johnson was ordered to pay $1.1 billion by a state judge after an Arkansas jury found the company’s officials misled doctors and patients about the risks of the antipsychotic drug Risperdal.

Jurors in Little Rock yesterday said the company’s marketing campaign also violated consumer-protection laws. The panel deliberated about three hours before finding J&J and its Janssen unit engaged in 'false or deceptive acts' by sending a 2003 letter touting Risperdal as safer than competing drugs to more than 6,000 doctors across the state.

The prosecutors had alleged a variety of kinds of deceptions about Risperdal,

Along with contending that J&J and Janssen defrauded the Medicaid program by failing to properly outline the antipsychotic medicine’s risks, Arkansas officials alleged J&J officials deceptively marketed the drug as safer and better than competing medicines.

The state also argued the companies marketed the drug for 'unapproved uses, including various symptoms in children and the elderly' after being warned by federal authorities to halt such sales.

In summary,

Arkansas Attorney General Dustin McDaniel said in an e- mailed statement that he sued because residents in the state deserved to be protected from 'fraud and deceptive practices.'

He said that jurors found 'Johnson & Johnson and Janssen Pharmaceuticals lied to patients and doctors because they cared more about profits than people.'

Bloomberg noted that

It’s the third jury verdict against J&J, the second-biggest maker of health products, in cases where states alleged it hid Risperdal’s risks and tricked Medicaid regulators into paying more than they should have for the medicine. Louisiana and South Carolina juries also found the company’s Risperdal marketing violated consumer-protection laws.

In fact, this is just the latest in a remarkable string of legal cases suggesting an ongoing pattern of unethical and illegal behavior by this very large health care corporation. As we wrote recently, this included
- Convictions in two different states in 2010 for misleading marketing of Risperdal, as noted above
- A guilty plea for misbranding Topamax in 2010
- Guilty pleas to bribery in Europe in 2011 by J+J's DePuy subsidiary
- A guilty plea for marketing Risperdal for unapproved uses in 2011 (see this link for all of the above)
- Accusations that the company, which makes smoking cessation products, participated along with tobacco companies in efforts to lobby state legislators (see post here)
- A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post here)
- More recently, in 2012, testimony in a trial of allegations of unethical marketing of the drug Risperdal (risperidone) by the Janssen subsidiary revealed a systemic, deceptive stealth marketing campaign that fostered suppression of research whose results were unfavorable to the company, ghostwriting, the use of key opinion leaders as marketers in the guise of academics and professionals, and intimidation of whistleblowers. After these revelations, the company abruptly settled the case (see post here).
- Most recently, there are reports that the company is in negotiation with the US Department of Justice to settle other lawsuits about the marketing of Risperdal, perhaps for as much as $1.8 billion (see this BusinessWeek story.)

Meanwhile, as we also discussed recently, Johnson and Johnson seems to have lost the ability to manufacture high quality products. It has had to make 30 separate product recalls since 2009. The latest was Liquid Infant Tylenol. (The current WSJ Health Blog list of recalls can be found here.)

So the real question here is how many instances of manufacturing of defective, mislabeled, contaminated, or harmful products, and how many court cases showing unethical or illegal behavior will it take until the leadership and governance of this company improves (and by extension, the leadership and governance of other large health care corporations with similar bad records improves).

As we posted not long ago, the CEO who presided over most of these messes will be allowed to retire with a huge golden parachute.  His devotion to "making the numbers," that is, hitting short-term revenue targets ahead of all other goals, probably had something to do with a company once thought of as a paragon of corporate behavior turning so bad.  Yet he became extremely rich doing this, and neither his riches nor his legal status have ever been challenged.  His successor apparently will be another former sales representative who may be just as devoted to "making the numbers,."  Thus has the business school dogma that short-term financial results, prettied up as "shareholder value," is the only thing that should matter to corporate leadership (look here) poisoned health care.

How many more doctors and patients have to be deceived, how many products have to be contaminated or defectively made before we demand better leadership of health care organizations?  

Gentiva's Odyssey Healthcare Settles Again, Signs Yet Another Corporate Integrity Agreement

The Milwaukee Journal-Sentinel reported a legal settlement worth noting.  Here are the basics:

One of the nation's largest providers of hospice care has agreed to pay $25 million to settle a Medicare fraud case initiated after a former company nurse in Milwaukee filed a whistle-blower suit.

It was the second such settlement in six years for Odyssey Healthcare Inc., which paid the federal government $12.5 million in 2006 after another Wisconsin-based employee sued.

Also,

Medicare provides a benefit meant to cover hospice care for the terminally ill. It covers 24-hour in-home nursing service only during limited crisis periods. But from 2006 to 2009, Odyssey practiced a pattern of enrolling and recertifying non-terminal patients, and billing for continuous care that wasn't necessary or reasonable, according to the False Claims Act suit filed in 2008 but just unsealed Thursday.

As is usual in such cases, Odyssey's parent company denied that it did anything wrong:

Odyssey, which operates in 26 states, is now part of Atlanta-based Gentiva Health Services, which runs hospice offices in West Allis and Burlington. Gentiva officials declined to comment, but referred to an announcement it posted on its investor relations website last month.

'Gentiva cooperated fully with this investigation, which covered a period prior to our acquisition of Odyssey, and the settlement is consistent with our efforts to instill Gentiva's culture of compliance throughout the company,' said John Camperlengo, general counsel and chief compliance officer.

The statement said the firm is proud of the care its thousands of hospice clinicians provide, and of Gentiva's efforts to ensure strict compliance with all regulatory requirements.

The Implications of the Need for a New Corporate Integrity Agreement

However, there are some disturbing aspects of this case that require a bit more explanation. First, as noted by the Associated Press (in a story available here from the Dubuque [Iowa] Telegraph-Herald),

Besides agreeing to pay the $25 million settlement, Odyssey entered a five-year corporate integrity agreement with the federal government.

Now corporate integrity agreements are not known for their effectiveness. In fact, as we noted in this blog post, according to Gentiva's 2010 annual report, its Odyssey subsidiary had been subject to a corporate integrity agreement arising from its 2006 settlement, one which was apparently not effective in preventing its misbehavior from 2006 to 2009.

However, corporate integrity agreements do serve as markers for the need to improve the integrity of the corporations who need to make them. In this case, why would Gentiva be asked to sign such an agreement if its integrity were already beyond reproach? So Gentiva's current "culture of compliance" is open to question.

The Implications of "Enrolling and Recertifying Non-Terminal Patients"

A quick read of the Journal-Sentinel and Associate Press stories above might give the impression that what Odyssey did wrong involved a billing technicality, admittedly, one that allowed it to collect more money that that to which it would otherwise be entitled.

This story actually goes beyond the issue of fraud, and raises important concerns about patient care.

The enrollment  by a hospice of patients who are actually not terminally ill could have serious adverse effects on such patients. As we noted in this post, hospices are meant for patients with very limited life expectancies. The goal of hospice is to provide comfort and palliation, not active treatment of illnesses. So if patients who actually do not have such severely limited life expectancies are admitted to a hospice, they might be denied therapy that could actually make them feel better, or even cure acute illnesses or prolong their lives. For example, a hospice patient who developed an open wound might not get maximal wound therapy, as in an example (allegedly involving a different commercial hospice provider) in the post above.

So it is possible that Odyssey's enrolling and re-certifying of non-terminally ill patients could have lead to failure to provide some of these patients with the care they should have had. Whether this did or did not occur in individual cases, and what adverse effects may have been produced is not clear from the coverage of this case.  

Summary

As I wrote in 2011, .... There has been a lot of blather from politicians in the US about "death panels" in debates about health care reform. Many such politicians seem worried that the US government has or will have death panels under the new health care reform legislation. We have criticized that legislation for not addressing many important health care problems. No one, however, has convincingly demonstrated how its provisions would convene "death panels."


Wendell Potter argued in his book, Deadly Spin, (see this post) that for-profit insurance companies had their own "death panels." The Bloomberg article strongly suggests that for-profit hospices may also act like death panels. In search of more revenue, for-profit hospices may enroll patients who are not at the end of life, but then provide them only "comfort care," so that if they develop new conditions that are treatable, they are likely to die in the absence of treatment.

I am waiting for the politicians who so enthusiastically condemned the supposed "death panels" to be found in health care reform legislation to condemn for-profit hospices for behaving like death panels.

In my humble opinion, the case discussed above are the strongest argument yet that we need to reconsider our headlong rush to turn health care, particularly the direct care of patients, over to relatively unregulated, for-profit corporations. The cases above suggest that the pursuit of revenue ahead of patients' welfare by such organizations may lead to sick and dead patients.

I cannot see how for-profit direct patient care can be made safe for patients without intense government regulation. If any of those vocal advocates of "free market" health care (in the absence of any good explanation of how health care can ever be an ideal free market, see this post) can explain to me how for-profit hospices can be made safe for patients without such regulation, I would welcome their attempts.

Meanwhile, this just calls out for legislative and legal investigation, and urgent policy changes.
 
By the way, the case above also shows how the current approach used by the government to address misbehavior in health care does not work.  We have noted previously how these legal settlements often only lead to financial penalties imposed on companies, not individuals, which diffuses their impact, and provides no disincentives to future bad behavior by individuals.  Sometimes corporate integrity agreements are added, but as in the current case, they also seem not to deter future bad behavior.   So, I further conclude, de rigueur, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

True or Not? Death By Deletion, Adventist Health System IT Whistleblower Patricia Moleski Speaks Out

Not sure what to make of this yet:

Whistleblower Patricia Moleski speaks out about health IT abuses - play at http://workmancompensationlawyers.net/12/23/death-by-deletion-adventist-health-system-it-whistleblower-patricia-moleski-speaks-out/

A former hospital IT worker claims very deliberate mass spoliation (e.g., deletion) of electronic medical record evidence to limit her (ex)-employer's liability for EHR-related medical malpractice on patients and injured workers who were entitled to workers compensation, as well as EHR defects.

She alleges that IT personnel are used as naïve accomplices to perform the spoliation acts. She grew suspicious when she was asked to delete nursing information about a patient who committed suicide by jumping out a hospital window after an EHR-related drug overdose.

The video is over an hour long and is worth listening to.

She made these claims to the FBI and alleged to have suffered retaliation including firing, and possible terroristic activities directed against her.

A Feb. 2010 letter to Gov. Crist, Sen. Grassley and many other government officials, a 9th Judicial Circuit court document for Orange County, FL (PDF), and other details - some scary - can be found via a google search on this person's name: https://www.google.com/search?q=Patricia%20Moleski .

A Feb. 2010 letter to Sen. Grassley, former Fla. Governor Crist, various other senators, news media, etc. alleging serious, systematic, purposeful HIT evidence tampering and erasure. Click to bring up full letter.

This could be the "Libby Zion" (or Bernard Madoff?) case of the health IT world if these allegations are true.

-- SS

Three Facets of One Hospital: Coddling the Rich, Hounding the Poor, and Crooked Executives

Juxtaposing three news stories from the past few months raises disturbing questions about the priorities of the leaders of one of the US' more prestigious hospitals.

"Chefs, Butlers, Marble Baths: Hospitals Vie for the Affluent"

 This 21 January, 2012 article from the New York Times focused on the ritzy comforts now provided for wealthy (but perhaps not very sick) patients at the renowned New York Presbyterian/ Weill Cornell Hospital.  It opened,

The feverish patient had spent hours in a crowded emergency room. When she opened her eyes in her Manhattan hospital room last winter, she recalled later, she wondered if she could be hallucinating: 'This is like the Four Seasons — where am I?'

The bed linens were by Frette, Italian purveyors of high-thread-count sheets to popes and princes. The bathroom gleamed with polished marble. Huge windows displayed panoramic East River views. And in the hush of her $2,400 suite, a man in a black vest and tie proffered an elaborate menu and told her, 'I’ll be your butler.'

It was Greenberg 14 South, the elite wing on the new penthouse floor of NewYork-Presbyterian/Weill Cornell hospital. Pampering and décor to rival a grand hotel, if not a Downton Abbey, have long been the hallmark of such 'amenities units,' often hidden behind closed doors at New York’s premier hospitals. But the phenomenon is escalating here and around the country, health care design specialists say, part of an international competition for wealthy patients willing to pay extra, even as the federal government cuts back hospital reimbursement in pursuit of a more universal and affordable American medical system.

Additional amenities include:

A waterfall, a grand piano and the image of a giant orchid grace the soaring ninth floor atrium....

Also,

the visitors’ lounge seems to hang over the East River in a glass prow and Ciao Bella gelato is available on demand....

An architect who specializes in designing such luxury facilities for hospitals noted:

'These kinds of patients, they’re paying cash — they’re the best kind of patient to have,' she added. 'Theoretically, it trickles down.'

Note that the article also mentioned other hospitals which offered similar luxuries, including Johns Hopkins Hospital in Baltimore, Cedars-Sinai Medical Center in Los Angeles, and Mount Sinai Medical Center in New York.

On the other hand,....

Hounding the Poor for Payment While Getting Government Money for Indigent Care

On 12 February, the New York Times published an article about how New York Presbyterian/ Weill Cornell deals with patients with fewer resources than those discussed above:

For most of her life, Hope Rubel was a healthy woman with good medical insurance, an unblemished credit history and a solid career in graphic design. But on the day an ambulance rushed her to a Manhattan hospital emergency room shortly after her 48th birthday, she was jobless, uninsured and having a stroke.

Ms. Rubel’s medical problem was rare, a result of a benign tumor on her adrenal gland, but the financial consequences were not unusual. She depleted her savings to pay $17,000 for surgery to remove the tumor, and then watched, 'emotionally paralyzed,' she said, as $88,000 in additional hospital bills poured in. Eventually the hospital sued her for the money.

Yet that year the hospital, NewYork-Presbyterian/Weill Cornell, had already collected $50.2 million from the state’s so-called Indigent Care Pool to help care for people like Ms. Rubel who have no insurance and cannot pay their bills.

Note that the article also included other New York hospitals that allegedly used aggressive collection tactics on poor patients even though they too collected government money for indigent care. These included NYU Langone Medical Center and State University of New York Downstate Medical Center.

And one more...

Kickbacks for Hospital Executives

For some reason, the only media coverage of this story was not in New York, but by the Philadelphia Inquirer on 13 February, 2012.

The FBI said that ... [Michael Yaron] he received asbestos-removal and construction contracts at New York Presbyterian Hospital for two of his companies, Cambridge Environmental & Construction Corp. and Oxford Construction & Development Corp., because he paid about $2.3 million in kickbacks starting in 2000.

Neither Yaron, a resident of Meadowbrook, Montgomery County, nor his attorneys could be reached for comment yesterday. No one answered at Yaron Properties, his offices on Arch Street in Old City.

Bucks County native Moshe Buchnik, a president of two asbestos-abatement companies, was also convicted after the four-week trial. Santo Saglimbeni, a former vice president of facilities operations at the hospital, and Emilio 'Tony' Figueroa, a former director of facilities operations at the hospital, were also convicted. The FBI said the two former hospital employees steered contracts to Yaron and Buchnik in exchange for the kickbacks.

The Inquirer apparently covered the story because Yaron lives in Philadelphia. Thus it treated the convictions of a former vice president and former director of facilities operations at New York Presbyterian/ Weill Cornell Hospital as afterthoughts.

Summary

Thus, in the last six weeks, we have been treated to stories that showed how New York Presbyterian/ Weill Cornell Hospital has devoted substantial resources to create luxury suites for rich patients, presumably because they may pay cash; while simultaneously hounding poor patients who could not pay their large medical bills, even though the hospital was receiving government funds for indigent care; and until recently was employing some executives now shown to have abused their authority.

The themes of the three individual stories should be familiar.

The first story was a reminder that the very rich are different from you and me in how they interact with the health care system. In many ways, the rich and powerful - some might call them the one percent - are personally protected from various aspects of health care dysfunction. For example, here we have discussed how wealthy executives seem to be able to obtain health insurance with benefits unheard of by the more common folk, and here we discussed how the wealthy and influential may get preferential hospital treatment. Thus, even one percenters who are not otherwise involved in health care may not be inclined to lend their support to any efforts to really reform the system.

Aggressive bill collection practices by hospitals which are supposed to serve the poor are also old news. We first discussed such practices occurring in New York City in 2004 - yes, this blog is that old. We also discussed such practices in Baltimore in 2008. Such practices are an example of mission-hostile management.

Finally, we have commented many times about misbehavior by health care executives, and discussed examples of fraud, kickbacks, and health care corruption. It has been unusual, however, for individual executives to actually suffer negative consequences when they induce systemic misbehavior in their organizations. Instead, the results are often legal settlements that only lead to financial penalties on the organizations that are no more than costs of doing business.

However, the juxtaposition of stories that a hospital has been coddling the rich, and simultaneously hounding the poor while it was lead by at least a few criminal executives is unusual. One would think that they should lead to an in-depth look at the leadership and governance of the institution in question, perhaps even to some reform of same. (By the way, one area of interest to such an investigation should be the presence of several former and current leaders of some of the failed financial firms that lead us into the global financial crisis or great recession on the board of that hospital, as we discussed here and here.)

However, so far I seem to be only one to note the inter-relationships of these stories, and their implications, while obvious, therefore remain anechoic.

So I get to repeat.... Health care organizations need leadership that understands, and knowledgeably upholds the organizations' missions and patients and the public's health. The leaders should be subject to incentives that align with these responsibilities, and should not be given opportunities to personally profit from activities hostile to the mission.

Just Business - Employee Control Fraud, Gresham's Dynamic, and the Race to the Bottom in Health Care

Since Enthoven called for the break up of the physicians' "guild," and handing over its supposed power to managers, (see post here) managers have taken over from physicians and other health care professionals as leaders of health care organizations.  Unfortunately, most of these managers are generic, often lacking knowledge and experience in health care, and understanding of its core values.  Instead, such generic managers may rely on the current management dogma.  The perils of doing so are illustrated by an analysis of the recent expose of conditions at Apple manufacturing plants in China.

The Apple Expose

The New York Times summarized in a landmark article how bad it is to work in factories building Apple products under contract in China.  Workers endure harsh conditions, toiling up to six days a week, 12 hours a day.  Meanwhile, banners remind them to "work hard on the job today or work hard to find a job tomorrow."  Workers may be exposed to hazardous, even poisonous materials (like n-hexane used to clean components).  Workers have died in explosions due to inadequate control of combustible dust. Over 18 workers at one factory attempted or committed suicide within two years.

The article suggested that while Apple managers may be well-intentioned, and "want to improve conditions in factories," the bottom line is more important:

that dedication falters when it conflicts with crucial supplier relationships or the fast delivery of new products.

In fact, because of its rigid insistence on cost control, its suppliers are sorely tempted to push their workers too hard:

Apple typically asks suppliers to specify how much every part costs, how many workers are needed and the size of their salaries. Executives want to know every financial detail. Afterward, Apple calculates how much it will pay for a part. Most suppliers are allowed only the slimmest of profits.

So suppliers often try to cut corners, replace expensive chemicals with less costly alternatives, or push their employees to work faster and longer, according to people at those companies.

'The only way you make money working for Apple is figuring out how to do things more efficiently or cheaper,' said an executive at one company that helped bring the iPad to market. 'And then they’ll come back the next year, and force a 10 percent price cut.'

So,

'You can set all the rules you want, but they’re meaningless if you don’t give suppliers enough profit to treat workers well,' said one former Apple executive with firsthand knowledge of the supplier responsibility group. 'If you squeeze margins, you’re forcing them to cut safety.'

William Black's Analysis: Employee Control Fraud and the Race to the Bottom

Writing in the Huffington Post, William K Black showed how Apple executives' relentless focus on cost could drive a race to the bottom. He began by analyzing Apple executives' explanation for out-sourcing their production:

'We shouldn't be criticized for using Chinese workers,' a current Apple executive said. 'The U.S. has stopped producing people with the skills we need.'

He noted that it is absurd to suggest that the US does not have workers with the technical skills necessary to build Apple products. He suggests, however, that these are not the skills that matter.

The suppliers want engineers and managers who will selectively apply their substantive skills. American engineers and managers cannot be counted on to provide the necessary selectivity. Apple's suppliers' often seek managers willing to order their workers to exceed the lawful workweek, to refuse to pay them for significant portions of the wages they have earned, to unlawfully employ child labor, and even to coerce abortions.

So, in the n-hexane example,

The engineer did not order the workers to use the nerve poison because he hated the workers. It was 'just business.' The nerve poison reduced cleaning time, so an engineer knowingly ordered the workers to use it and scores of other engineers did nothing to prevent the usage.

Note that Black calls this employee control fraud, deceiving the employee that he or she is working in a reasonably safe environment, and that employee health and safety is a concern, when in truth the only concern is the bottom line.

So what Apple executives, and by analogy, other multi-national corporate executives want are underlings, particularly middle and line managers who will do anything, anything to cut costs and improve the bottom line. This will produce the race to the bottom:

What we are observing is the essence of a Gresham's dynamic in which bad ethics drives good ethics out of the market.

Two aspects of this Gresham's dynamic are obscene, and both are produced by neoclassical economics dogma. Calling this process 'creative destruction' is baseless and dishonest. It is the fraudulent destruction of honest businesses, professions, and labor.

Black concluded:

firms that are anti-employee control frauds are likely to commit other forms of control fraud. Apple and its Western counterparts have driven the creation of an Asian network of fraudulent firms that has distorted international trade, hollowed out U.S. manufacturing, and created a bizarre hybrid: quasi-communist crony capitalism. It boggles the mind that theoclassical economists celebrate the corrupt result as the essence of creative destruction. The network is corrupt. It will not play by the rules. Firms like Apple help create the perverse incentives that encourage the network to cheat. Surviving U.S. manufacturing firms are whipsawed by the powerful Gresham's dynamic that the frauds produce. U.S. firms and workers are constantly pressured to reduce wages and workforce to try to compete with the foreign frauds. This is the 'Road to Bangladesh' strategy that has caused U.S. working class wages to stall for decades. Europe is retreating along this same road at an even more rapid rate. The Gresham's dynamic tilts the world in favor of fraudulent firms operating in fraud-friendly nations.

The Race to the Bottom in Health Care
Note that we have written about numerous examples of executives of US health care organizations putting revenue ahead of the health care mission, ahead of workers' morale, ahead of patients' and the public's health. Some of these examples involve executives of nominally non-profit organizations that are supposed to have charitable purposes. (Look under our heading of mission-hostile management.)

In fact, just yesterday, Dr Carl Elliott, writing for the Chronicle of Higher Education, summarized how pharmaceutical companies have out-sourced clinical research. The resulting commercial clinical research have generated conditions as bad for the research subjects as those endured by the Chinese electronics workers above:

If the past decade had an emblematic moment for clinical research, it was probably November 12, 2005, the day when Bloomberg Markets published its cover story, “Big Pharma’s Shameful Secret.” In that issue, Bloomberg reporters laid out the story of SFBC International, a contract research organization in Miami that was paying undocumented immigrants to test the safety of new drugs in a seedy motel. The SFBC owners had converted the lobby into a large waiting area with plastic chairs, and they were housing their research subjects six to a room. The medical director of the research site was unlicensed to practice medicine; the Institutional Review Board that approved many of the studies was owned by the wife of the company vice-president; and the converted motel, which had been cited for fire and safety violations, was eventually demolished. Nonetheless, SFBC had become an astonishingly successful enterprise. Just a few years before the Bloomberg Markets report, Forbes had named SFBC one of the most admired small businesses in America. Virtually every major pharmaceutical company had tested drugs with the company. In fact, with 675 beds, the converted motel was the largest research facility in North America.

Note: see our relevant posts here on SFBC International, and on contract research organizations.

Moreover, such out-sourcing has produced the sort of race to the bottom described by Black, but this time involving one of the US most important health care institutions, academic health care:

the more important reason is money. In medical schools, faculty members are often expected to generate their own salaries, either by seeing patients or getting grants and contracts. Likewise, academic departments are often expected to be financially self-sufficient, with as little support as possible from central administration. 'Eat what you kill' is the phrase used, without irony, by medical school deans and department heads. And if you are not killing it with NIH grants, you probably need to be killing it with AstraZeneca or Pfizer.

This system has not been good for human subjects, but it has not been good for academic physicians either. According to a recent study of over 5,000 faculty members at U.S. medical schools, 51 percent of respondents said that the administration is only interested in me for the revenue I generate.' Thirty-one percent said that their institution discourages altruism; 27 percent said that it does not reward clinical excellence; and over half said that it does not value teaching. Nearly half of respondents were considering leaving their current jobs; almost a third were considering leaving academic medicine altogether. Asked if their values lined up with the medical schools where they worked, over half said no. And just in case you are wondering why these physicians are not standing outside the building with picket signs, protesting the injustice of the system, the survey offers another clue. Thirty percent of respondents agreed with the statement, 'I am reluctant to express my opinion for fear of negative consequences.' [This was from an abstract by Pololi L et al.  See our relevant post here.]

Of course, this survey does does not exactly match up with the happy propaganda disseminated by the media-relations offices at most medical schools. Instead, it offers a picture of alienated, demoralized physicians, unhappy in their jobs, pressed to work according to values that repel them in order to prop up an institution that views them primarily as instruments to generate profit. In this environment, contract research makes perfect sense. It may not require much intellectual work, but it pays the bills and keeps the authorities happy. And if medical schools don’t really value intellectual work anyway, that may well be enough.

So the pressures on medical school faculty are little different from those on corporate middle management.  Their only role is to make money, mainly so that the top leaders can become multi-millionaires, and woe unto them if they object.
Summary

What is missing in all this is any organized opposition to the race to the bottom. As long as top executives can make nearly unlimited money, as long as they can do so by making their subordinates put revenue ahead of all else, as long as there are no countervailing forces, the race to the bottom will continue.

To stop it, we need some combination of efforts by honest government regulators, professional and trade organizations, civil society organizations including non-profit organizations and NGOs that really care about patients' and the public's health, and finally an activated, and properly outraged public.

As long as we think that a laissez faire policy allowing continual market dysfunction to continue, the good times for executives will keep rolling, over all of the rest of us.

Legal Settlements Have Become So Common that They are Barely News

Legal settlements by big health care organizations have become so common that those of less than blockbuster size barely seem to qualify as news.  They have become "dog bites man" stories.  For example, the following stories barely got noticed in the media (presented chronologically).

Novartis Settles Price Misrepresentation Suit for $150 Million

This story was mentioned as an aside in a a news story covering a settlement by Watson Pharmaceuticals in September.  In slightly more detail, it has only appeared in PharmaLot in November.  In a very small nutshell,

the Sandoz unit of Novartis earlier this week agreed to pay $150 million to settle lawsuits filed by the states of Florida and California, as well as a whistleblower, to settle charges that it deliberately misreported pricing information in order to hike reimbursements from Medicaid.

By the way, per the settlement document, the allegations were that Novartis' subsidiary knowingly maintained, set or reported "false, fraudulent, and/or inflated Reported Prices," yet, as is typical of nearly all settlements, the settlement "shall not constitute or be construed as an admission of fault, liability, or unlawful conduct."

Roche Settles Off-Label Promotion, Physician Kickback Suit for $20 Million

This story was reported briefly in some blogs, including again PharmaLot, and in the most detail in the San Francisco Business Times. The basics of it were:

Genentech Inc. will pay $20 million to settle a whistleblower lawsuit around off-label marketing of the cancer-fighting drug Rituxan.

It only took eight years since a whistle-blower raised the issue:

John Underwood, ... was a senior manager of sales development from the start of Genentech’s oncology franchise in 1997.

When Underwood filed the suit in July 2003 in U.S. District Court for the Eastern District of Pennsylvania, he was a senior hospital systems specialist for Genentech.

This suit is actually of particular interest because it was not just about off-label promotion,

Genentech, the suit claimed, retained doctors to act as independent speakers on behalf of Rituxan and its off-label uses, paid kickbacks to doctors that were disguised as consulting payments, 'exerted significant pressure' on sales reps to increase off-label uses of Rituxan, and devised and conducted 'selling skills workshops' for sales reps devoted to non-label uses,

What’s more, the suit claimed, Genentech invited doctors to attend “medical education seminars” at 'luxurious locations' and gave financial incentives to sales reps to get doctors who sold the most Rituxan to attend the events.

These were serious allegations, involving allegedly direct efforts by the company to subvert physicians' ethics by tying their decisions for individual patients to payments for prescribing specific products whatever the benefits and risks of those products for those patients.  The allegations suggested that "consulting payments" to physicians may be nothing more than disguised bribes, and that the companies making these payments may be quite conscious of this. 

Nonetheless, as usual,

Genentech, the South San Francisco-based U.S. subsidiary of Swiss drug giant Roche, did not admit wrongdoing....

So, as in the famous recent Citigroup case (see this post), the settlement obfuscates the crucial question, did the corporation involved commit illegal acts? It seems likely that what they did was in some sense unethical, since they were willing to pay millions not make the matter go away.

By the way, one member of the Executive Committee of Genentech at the time these events were allegedly occurring is now the Chancellor of the University of California - San Francisco (See our post here). Maybe concerned students or faculty might ask her what really went on.

CVS Caremark Settles Fraud Suit for about $20 Million

As reported briefly in the Los Angeles Times,

Pharmacy and prescription drug management company CVS Caremark Corp. has agreed to pay nearly $20 million to settle three lawsuits involving allegations that the company defrauded pension systems in three states, including California’s giant pension fund, attorneys said.

The whistleblower lawsuits, filed by two former CVS Caremark pharmacists, accused the company of reselling returned drugs, changing prescription orders to make them more expensive and submitting false reports about how long it took to fill prescriptions.

Not the least bit surprisingly, the company did not admit liability in the settlement, and had no comment for the Times. Ho, hum, another big company paying millions to make allegations of fraud go away... nothing to see here, so we will just move on.

Merck Settles Fraud Suit for $24 Million

This story was picked up by AP, so a very brief version of it did appear in a variety of locations. A longer version was published by the Boston Globe,

At this point, it should be no surprise that it took a long time to get to this settlement, eight years in fact, just as in the case above,

Merck & Co. has agreed to pay $24 million to the state Medicaid program to settle long-running civil charges that it charged too much for some drugs, in the largest single-case Medicaid fraud settlement in Massachusetts history.

The agreement, unveiled yesterday by Attorney General Martha Coakley’s office, closes out a 2003 lawsuit....

Again, the allegations were of fraud,

Coakley said her office’s Medicaid fraud division wanted to hold accountable drug companies that defraud taxpayers.

Again, "hold accountable" did not translate into establish the allegations as true,

Ron Rogers, a spokesman at Merck corporate headquarters, said the drug company did not admit liability or wrongdoing in the settlement. He said Merck agreed to resolve the claims to put the matter behind it.

Nothing more to see here, so we will move on again.
Summary

Every month, it seems that more settlements are announced of cases alleging all sorts of wrongdoing by major health care organizations. Very often, the allegations are of wrongdoing that appears serious to the uninitiated. For example, most of the above cases involved allegations of fraud, and one involved allegations of kickbacks, that is, bribes to doctors.

Yet, in every one of these cases -
- The monetary penalties were barely more than pocket change for the corporations involved.
- The payments were made by the organization as a whole, and hence would disadvantage many people who were not involved in and did not benefit from the specific actions alleged. Such de facto victims of the settlement included company shareholders, employees, and probably patients (who may have paid prices raised to pay for settlements), and the public (who may have indirectly paid these higher prices through insurance premiums or taxes.)
- The organization did not have to admit any facts, leaving the record foggy, and clouding the chances for any people who might have been hurt by the actions to take legal action.
- No people who actually authorized, directed, or implemented the apparent bad behavior suffered any negative consequences.

Thus, these settlements, like many others we have discussed, did not appear to be any major deterrent of future bad behavior.

These settlements do provide a public, if largely ignored, record that suggests how a miasma of sleazy behavior, if not outright corruption has settled over health care. These settlements do provide the context for many pithy questions that could be asked of health care organizational leaders, if anyone dared to do so. The settlements do suggest a need for wholesale, real health care reform that would make health care leaders accountable for what their organizations do, particularly when these organizations misbehave.