I had the pleasure of attending the Ending iCorruption Conference, the capstone conference for the Edmond J Safra Research Lab on Institutional Corruption, held at the Harvard Law School on May 1-2, 2015. The conference included much material relevant to health care corruption and related topics, and provided some innovative approaches that could be used to address these issues. I list these below, with citations or links when available. At some point in the future, all conference proceedings should be available on video from the Safra Center.
Uncovering Data on Conflicts of Interest
Unearth: Using PubMed to Uncover Conflicts of Interest Affecting Clinical Research
Unearth is a browser extension now available for Google Chrome, and soon to become available for other browsers, e.g., Firefox. It works on PubMed searches, scraping funding and conflict of interest data from the body of articles and adding them to abstracts. We have often discussed such conflicts of interest, and their relationship to manipulation of clinical research. Unearth could make such conflicts more salient, making it easier to discriminate unconflicted from conflicted research. (See this post on the Bill of Health blog.) This application was developed during the Safra Center Hacking iCorruption Event.
Open Think Tanks: Uncovering Think Tank Funding
Think tanks often publish findings on and make recommendations about health care. However, think tanks are often opaque, and any institutional conflicts of interest they have may not be easily apparent. Open Think Tanks currently shows donations from government entities outside the US to US based think tanks. Enhancements to include various kinds of private donations are likely in the future. This application was also developed during the Hacking iCorruption Event.
Finding Unconflicted Academics
As we have discussed, the majority of medical academics have conflicts of interest, which may affect their research, teaching and patient care. Yet these conflicts are not always disclosed. Furthermore, finding experts without conflicts is not easy. ProfessorCert is a website that allows academics who have no conflicts of interest to register as such. The website was developed by the Academic Independence Project.
Improving Integrity
Putting Consumers in the FDA and Other Regulatory Agencies
We have frequently discussed regulatory capture, how government health care regulatory agencies, like the US Food and Drug Administration (FDA), often seem to end up more concerned about the financial health of those they are supposed to regulate than patients' and the public's health. Harvard Prof Daniel Carpenter, collaborator in Safra Center research, talked about the problem of "cultural capture" of regulatory agencies, in which the regulators' thinking is influenced by outside vested interests. He proposed that regulatory agencies need to put consumers, or presumably other stakeholders like unconflicted health care professionals, "into the room."
Putting Ethicists in the C- Suite
We have frequently criticized the leadership of hospitals and hospital systems. In particular, we have discussed instances in which these leaders seem to have gone directly against the mission of their own organizations, which we termed mission hostile management. Safra Lab Network Fellow James Corbett, now Senior Vice President for Centura Health, proposed that ethicists who also understand the language of finance and management be present among the top leadership of hospital systems.
Licensing Executives
As noted above, a major theme of the Health Care Renewal blog is the shortcomings of the leadership of large health care organizations. Top leaders often have business training, but may be ill-informed about health care, and ignorant or unsupportive of or even hostile to its values. Wellesley College Professor Emerita Ann Congleton's 2014 article in the Journal of Business Ethics, entitled Beyond business ethics: an agenda for the trustworthy teachers and practitioners of business, proposed requiring that corporate executives, including executives of health care corporations, be licensed in order to lead their organizations. I proposed licensing of leaders of large health care organizations as early as 2008 (here).
Pharmaceutical Research Uninfluenced by the Pharmaceutical Industry
Because clinical research meant to evaluate drugs or devices sponsored by manufacturers of the relevant products has shown to be frequently manipulated, or even suppressed, many people have suggested banning such sponsorship and direct influence of such manufacturers. (For example, see the book and blog, both entitled "Hooked," written by Dr Howard Brody, and see Health Care Renewal blog posts, e.g., here.)
Safra Center Network Fellow and Rowan University Professor Donald Light's book in press, Good Pharma, basically offers proof of the concept that high quality clinical research on pharmaceuticals can be accomplished without industry money or influence, albeit in Italy, at the Mario Negri Institute.
Summary
The project on institutional corruption at the Safra Center produced a burst of innovation meant to address this pervasive project, and thus provided much of value to those who want to challenge health care corruption. I hope this innovation will turn out to be truly disruptive. It is regretful that this project has come to an end. We can only hope others pick up the banner.
Showing posts with label health care corruption. Show all posts
Showing posts with label health care corruption. Show all posts
Sunday, May 3, 2015
Monday, April 13, 2015
"God Damn the Pusher Man" - Especially when Enabled by the FDA Revolving Door
Who is watching the watchers? A story this week involving "speed" like drugs added to "dietary supplements" suggests how far the once respected US Food and Drug Administration has fallen.
An Amphetamine-Like Drug Spiking "Nutritional Supplements"
The story began with a paper by Cohen and colleagues published a relatively obscure medical journal, and then picked up by the news media.(1) The main points of the article were:
But,
However,
So Cohen et al undertook to identify "nutritional supplements" said to contain acacia rigidula and test them for BMPEA. They found 21 such supplements, all of which tested positive. The authors then recommended,
Since BMPEA is apparently not found in nature, and was not sold prior to 1994, putting BMPEA in a "dietary supplement" appears to be adulteration.
The Risks of BMPEA in Nutritional Supplements
The study was then picked up by the media. In the Los Angeles Times, Pieter Cohen, the lead author of the journal article,
Furthermore, in a CBS report,
The point is that while it has never been tested fully on humans, there is every reason to suspect that BMPEA acts very similarly to amphetamine, colloquially called "speed." Amphetamines, as we discussed here, have dangerous side effects, including severe blood pressure elevations, and increased risks of stroke, myocardial infarction (heart attack), and other cardiac events. The drugs also have a high potential for abuse.
Why Did the FDA Do Nothing?
Despite the likely riskiness of BMPEA, the FDA did nothing when it found it in numerous dietary supplements in 2013, and has not indicated that it will do anything now. According to the LA Times,
In a Consumers Report item, Dr Cohen responded to that,
A post in the NY Times Well blog reiterated,
Yet while the FDA had authority to do something, it did nothing.
Was the Revolving Door the Reason?
Back in 2014, we posted about two transitions through the revolving door by the FDA official in charge of the regulation of nutritional supplements. We reproduce the relevant section of the post below:
This round trip through the door was noted rather obliquely in a New York Times article in late April, 2014, focused on how slowly the FDA has reacted to apparently dangerous "dietary supplements,"
The article had previously identified Dr Fabricant as
But,
While the NY Times article thus mentioned as an aside that a government official with major responsibility for regulating dietary supplements had these relationships with the dietary supplement industry, it did not then question whether that relationship had anything to do with slow responses by the FDA to reports of toxic dietary supplements.
In 2014, the Times drew no conclusions about Mr Fabricant's career trajectory. However, this time
Summary
To summarize, from 2011 to now, the leadership of the part of the FDA that is supposed to regulate dietary supplements was dominated by former top executives of the Natural Products Association, the trade organization for dietary supplement manufacturers. In 2013, FDA scientists found that multiple dietary supplements contained BMPEA, a compound closely related to amphetamines, and hence potentially dangerous and addictive, although it had never been tested on or previously used by humans. Although the FDA had authority to do something about this apparent adulteration of these products, it so far had done nothing. Thus it appears that the currently legal revolving door that allows government regulation to be run by people who come directly from the industries that government is supposed to regulate could be responsible for exposing people to dangerous, addictive drugs.
Remember, BMPEA is a first cousin of amphetamine, amphetamine is "speed," and as the drug epidemics of the 1960s and 1970s showed us, "speed kills." So a plausible argument is that the revolving door, as relevant to FDA, has enabled manufacturers of nutritional supplements to become the "pusher man," a la the Steppenwolf sound track of Easy Rider,
As we noted here, some experts consider the revolving door per se to be corruption, not merely conflict of interest. The current case plausibly suggests not only that the revolving door is corrupt, but that when applied to health care can pose dangers to patients, not merely danger to government finances, government ethics, and the integrity of representative democracy. Nonetheless, up to now, a few people have decried the revolving door (and very occasionally in health care), but nothing has been done about it.
So it is surprising that today (13 April, 2015), the New York Times published an editorial inspired by the BMPEA case, which concluded
As a minimum, that would be a good start. Unfortunately, even a NY Times editorial hardly guarantees action. At least, however, the problem of the revolving door as a danger to patients has gotten a little less anechoic.
As we last wrote, the continuing egregiousness of the revolving door in health care shows how health care leadership can play mutually beneficial games, regardless of the their effects on patients' and the public's health. Once again, true health care reform would cut the ties between government and corporate leaders that have lead to government of, for and by corporate executives rather than the people at large.
ADDENDUM (20 April, 2015) - This post was republished on Naked Capitalism.
Reference
1. Cohen PA, Bloszies C, Yee C, Gerona R. An amphetamins isomer whose efficacy and safety in humans has never been studied, beta-methylphenylethylamine (BMPEA), is found in multiple dietary supplements. Drug Testing Analysis 2015; DOI: 10.1002/dta.1793 Link here.
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An Amphetamine-Like Drug Spiking "Nutritional Supplements"
The story began with a paper by Cohen and colleagues published a relatively obscure medical journal, and then picked up by the news media.(1) The main points of the article were:
BMPEA (beta-methylphenylethylamine) is a compound first synthesized in the 1930s as a "potential replacement" for amphetamines. Animal tests revealed amphetamine-like properties. The compound was never tested on humans, and never marketed.
But,
BMPEA remained known only as a research chemical until early 2013 when the FDA identified BMPEA in multiple supplements labelled as containing ‘Acacia rigidula’, even though the stimulant has never been identified or extracted from Acacia rigidula, a shrub native to Texas.
However,
More than two years after the FDA's discovery, the FDA has yet to warn consumers about the presence of the amphetamine isomer in supplements.
So Cohen et al undertook to identify "nutritional supplements" said to contain acacia rigidula and test them for BMPEA. They found 21 such supplements, all of which tested positive. The authors then recommended,
that supplement manufacturers immediately recall all supplements containing BMPEA, and that the FDA use all its enforcement powers to eliminate BMPEA as an ingredient in dietary supplements. Consumers should be advised to avoid all supplements labelled as containing Acacia rigidula. Physicians should remain alert to the possibility that patients may be inadvertently exposed to synthetic stimulants when consuming weight loss and sports supplements.Note that while the power of the FDA to regulate "nutritional supplements" is limited by a 1994 law, Cohen and colleagues wrote that it
is tasked with identifying and removing mislabelled, adulterated, and dangerous dietary supplements from the marketplace.
Since BMPEA is apparently not found in nature, and was not sold prior to 1994, putting BMPEA in a "dietary supplement" appears to be adulteration.
The Risks of BMPEA in Nutritional Supplements
The study was then picked up by the media. In the Los Angeles Times, Pieter Cohen, the lead author of the journal article,
said that while the effects of BMPEA are unknown, the compound is potentially dangerous. He said the FDA's failure to act is 'completely inexcusable.'
Furthermore, in a CBS report,
BMPEA has not been tested in humans, but led to increased blood pressure in cats and dogs.
'These are things that are signals that in humans will later turn into heart attacks, strokes and maybe even sudden death,' Cohen said.
The point is that while it has never been tested fully on humans, there is every reason to suspect that BMPEA acts very similarly to amphetamine, colloquially called "speed." Amphetamines, as we discussed here, have dangerous side effects, including severe blood pressure elevations, and increased risks of stroke, myocardial infarction (heart attack), and other cardiac events. The drugs also have a high potential for abuse.
Why Did the FDA Do Nothing?
Despite the likely riskiness of BMPEA, the FDA did nothing when it found it in numerous dietary supplements in 2013, and has not indicated that it will do anything now. According to the LA Times,
FDA spokeswoman Juli Putnam acknowledged that the agency published research on the occurrence of BMPEA in Acacia rigidula supplements in 2013.
'While our review of the available information on products containing BMPEA does not identify a specific safety concern at this time, the FDA will consider taking regulatory action, as appropriate, to protect consumers,' she said.
In a Consumers Report item, Dr Cohen responded to that,
'It’s mind boggling,' said Pieter Cohen, M.D., the Harvard physician who is the lead author of the new study, published online in the journal Drug Testing and Analysis. 'The companies think they have complete impunity. They assume the FDA will do nothing about it. And they’re right.'
A post in the NY Times Well blog reiterated,
Under federal law, dietary supplements — with some exceptions — can contain only ingredients that are part of the food supply or that were already on the market before 1994. Dr. Cohen said that BMPEA has never been sold as a food or supplement, and as a result any product that contains it is considered adulterated, which would give the F.D.A. the authority to send warning letters to companies that add it to their supplements.
Yet while the FDA had authority to do something, it did nothing.
Was the Revolving Door the Reason?
Back in 2014, we posted about two transitions through the revolving door by the FDA official in charge of the regulation of nutritional supplements. We reproduce the relevant section of the post below:
This round trip through the door was noted rather obliquely in a New York Times article in late April, 2014, focused on how slowly the FDA has reacted to apparently dangerous "dietary supplements,"
Before joining the F.D.A. in 2011, Dr. [Daniel] Fabricant was a top executive at an industry trade group, the Natural Products Association.
The article had previously identified Dr Fabricant as
the director of the division of dietary supplement programs in the agency’s Center for Food Safety and Applied Nutrition.
But,
The F.D.A. recently announced that Dr. Fabricant is leaving the agency this month to return to the trade group as its chief executive.
While the NY Times article thus mentioned as an aside that a government official with major responsibility for regulating dietary supplements had these relationships with the dietary supplement industry, it did not then question whether that relationship had anything to do with slow responses by the FDA to reports of toxic dietary supplements.
In 2014, the Times drew no conclusions about Mr Fabricant's career trajectory. However, this time
But public health experts contend that the F.D.A.’s reluctance to act in this case is symptomatic of a broader problem. The agency is not effectively policing the $33 billion-a-year supplements industry in part because top agency regulators themselves come from the industry and have conflicts of interest, they say. In recent years, two of the agency’s top officials overseeing supplements — including one currently on the job — were former leaders of the largest supplement industry trade and lobbying group.
Daniel Fabricant, who ran the agency’s division of dietary supplement programs from 2011 to 2014, had been a senior executive at that trade group, the Natural Products Association, which has spent millions of dollars lobbying to block new laws that would hold supplement makers to stricter standards. He left the F.D.A. last year and returned to the association as its chief executive. His current replacement at the F.D.A.’s supplement division also comes from the trade group.'To have former officials in the supplement industry become the chief regulators of that industry at the F.D.A. is like the fox guarding the hen house,' said Michael F. Jacobson, the executive director of the Center for Science in the Public Interest, a consumer advocacy group.
Also, the new Well blog post noted
Shortly before Dr. Fabricant left the F.D.A. in 2014 to return to the association, the F.D.A. hired another official from the group, Cara Welch. She is now the acting director of the agency’s supplement division. Dr. Cohen, who is also an internist at the Cambridge Health Alliance, said he repeatedly wrote to Dr. Welch asking what the agency was going to do about BMPEA, and that she did not respond.
Dr. Welch declined repeated requests for interviews. In a statement, Juli Putnam, an F.D.A. spokeswoman, said that the agency 'has found that hiring experienced leaders with diverse backgrounds in public health, industry, academia, and science enriches the professional environment and leads to the best health policy outcomes for the American public.'Before joining the F.D.A., Dr. Welch was the vice president of scientific and regulatory affairs at the Natural Products Association, where she was a staunch defender of the supplement industry. When JAMA, a leading medical journal, raised concerns in a 2011 editorial that the federal law allowed the supplements industry to police itself, Dr. Welch responded that the industry had 'an excellent safety record.''The industry itself supports and has implemented strong self-regulatory mechanisms,' she said in an industry news release at the time.
Summary
To summarize, from 2011 to now, the leadership of the part of the FDA that is supposed to regulate dietary supplements was dominated by former top executives of the Natural Products Association, the trade organization for dietary supplement manufacturers. In 2013, FDA scientists found that multiple dietary supplements contained BMPEA, a compound closely related to amphetamines, and hence potentially dangerous and addictive, although it had never been tested on or previously used by humans. Although the FDA had authority to do something about this apparent adulteration of these products, it so far had done nothing. Thus it appears that the currently legal revolving door that allows government regulation to be run by people who come directly from the industries that government is supposed to regulate could be responsible for exposing people to dangerous, addictive drugs.
Remember, BMPEA is a first cousin of amphetamine, amphetamine is "speed," and as the drug epidemics of the 1960s and 1970s showed us, "speed kills." So a plausible argument is that the revolving door, as relevant to FDA, has enabled manufacturers of nutritional supplements to become the "pusher man," a la the Steppenwolf sound track of Easy Rider,
As we noted here, some experts consider the revolving door per se to be corruption, not merely conflict of interest. The current case plausibly suggests not only that the revolving door is corrupt, but that when applied to health care can pose dangers to patients, not merely danger to government finances, government ethics, and the integrity of representative democracy. Nonetheless, up to now, a few people have decried the revolving door (and very occasionally in health care), but nothing has been done about it.
So it is surprising that today (13 April, 2015), the New York Times published an editorial inspired by the BMPEA case, which concluded
consumer advocates are surely right that putting the industry in charge of supplement regulation is like appointing the fox to guard the henhouse. Clearly, the F.D.A. should not allow industry insiders to fill key positions. A permanent solution is for Congress to enact conflict-of-interest laws forcing employees above a certain grade level at any agency to recuse themselves from official actions that affect a former employer or client, including trade associations and their members.
As a minimum, that would be a good start. Unfortunately, even a NY Times editorial hardly guarantees action. At least, however, the problem of the revolving door as a danger to patients has gotten a little less anechoic.
As we last wrote, the continuing egregiousness of the revolving door in health care shows how health care leadership can play mutually beneficial games, regardless of the their effects on patients' and the public's health. Once again, true health care reform would cut the ties between government and corporate leaders that have lead to government of, for and by corporate executives rather than the people at large.
ADDENDUM (20 April, 2015) - This post was republished on Naked Capitalism.
Reference
1. Cohen PA, Bloszies C, Yee C, Gerona R. An amphetamins isomer whose efficacy and safety in humans has never been studied, beta-methylphenylethylamine (BMPEA), is found in multiple dietary supplements. Drug Testing Analysis 2015; DOI: 10.1002/dta.1793 Link here.
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Wednesday, April 1, 2015
The Troubles at Cooper Continue, Lately Gruesomely, But Will Its Leadership and Governance Change This Time? - Part I: Historical Background
Allegations of Murder-Suicide by a Hospital System CEO
This will be a hard series of posts to write. It wa triggered by the latest, and perhaps most gruesome chapter in the troubled history of the leadership of Cooper Health, the largest hospital system in southern New Jersey (known locally as South Jersey). As reported by the Philadelphia Inquirer on March 28, 2015,
The Story in Context: a Long History of Leadership and Governance Problems
We have often discussed bad leadership of health care organizations, and written a lot about the contrast between the munificent compensation paid to non-profit hospital CEOs and the lack of evidence justifying such pay. However, a murder-suicide allegedly perpetrated by the CEO of a large non-profit hospital system is way at the tail of the curve of questionable managerial behavior.
But it turns out that Cooper Health System has a very long record of leadership and governance troubles. The current chapter is the latest, and possibly most gruesome, in this sorry series. However, the context of this history has been lacking in the recent coverage, which has been so far limited to local media. The history deserves a more complete discussion, and maybe then it could lead to some reconsideration at least of this one institution's leadership and governance, and perhaps the larger troubles in leadership and governance in health care.Thus this post will summarize the history that I could find up to 2005. A second post will summarize more recent history up to and through the terrible deaths of John and Joyce Sheridan.
In the interests of full disclosure, I started my faculty career at what was then Cooper Hospital - University Medical Center, the main teaching hospital for the University of Medicine and Dentistry of New Jersey (UMDNJ) - Robert Wood Johnson Medical School (RWJMS) branch at Camden, NJ. During my four years there, 1983-87, I was impressed with the dedication of the physicians, nurses and other health care professionals there. However, even given my naivete at a young faculty member, the leadership of the institution, which was one of the early adapters of the generic management model, seemed strange. Little did I know how strange it was.
In the late 1990s, when I became seriously concerned about what I know call leadership and governance problems in health care, I ran into some folks from South Jersey who told me that Cooper had a tumultuous history since I left. I got around to researching it, leading to an article in our local American College of Physicians newsletter. The article, to which I had linked here, is no longer available on the internet. So I have reposted it below, with some minor modifications, put in square brackets . Again, the history is of major problems with leadership and governance at Cooper that had inspired no reconsideration by 2005.
The Curiously Quiet Case of Cooper’s Corrupt CFO
Embezzlement by Top Management
In 1994, two powerful executives at Cooper admitted their guilt in an elaborate embezzlement scheme. In 1978, John H. Crispo, the owner of Financial Management Corporation Inc., to keep his contract with the hospital, began paying monthly kickbacks of $2500-$10,000 to John M. Sullivan, the Cooper Executive Vice President for Finance. Sullivan then referred delinquent hospital accounts for collection to a new company Crispo set up. In turn, Crispo repaid him $340,000 in more kickbacks. Sullivan recruited Cooper’s Controller, P. John Lashkevich, and the three devised a scheme to defraud the hospital using fabricated bills, established a fictitious company to launder money, and falsified tax returns. A prosecutor claimed “Mr Sullivan blew this money on wine, women, parties, and a lavish lifestyle,”which included trips with girlfriends to the Plaza Hotel, and jewelry shopping at Tiffany’s. Sullivan had driven a Porsche, and lived in a $700,000 house. The conspirators also bought cars, boats, and racehorses.
Other conspirators were also found and prosecuted. Helene Weinstein admitted to helping establish a shadow company as a conduit for Sullivan to send money from the hospital to his estranged wife, Elarba Pagan. Pagan was accused of receiving money sent by Sullivan from Cooper to another firm. Weinstein testified that Pagan carried “briefcases of cash from the hospital to shop in New York for $1500 shoes.” Also, Cooper’s Vice President for Finance, Robert Schmid Jr, admitted embezzling money from Cooper to pay for home improvements. Finally, Thomas J. Damadio admitted helping launder up to $600,000 stolen from Cooper, and evading income taxes.
Sullivan was sentenced to 55 months in federal prison, Lashkevich, 25, Pagan, eight, Weinstein, three years of probation, Damadio, six months of house arrest. Crispo died before serving prison time.
The Internal Report, and the Murder Conviction of One of Its Authors
After these stories became public in 1994, Cooper’s Board of Trustees established a special committee to investigate its financial operations, which included Peter E. Driscoll, Chairman of the Board, Kevin G. Halpern, Chief Executive Officer (CEO), and a local Rabbi, Fred Neulander. The hospital pledged to make its investigation public, but then fought to keep it secret. Its report was finally released in 1998, after a discovery motion in a civil lawsuit. Prior to then, the Philadelphia Inquirer had revealed numerous financial conflicts of interest affecting Board members, including those on the special committee. For example, Cooper paid the law firm of Archer & Greiner, of which Driscoll was a senior partner, $2.1 million over three years from 1993-96.
The report revealed that the conspiracy had bilked the hospital of at least $21.8 million from 1987 to 1994, while “Cooper has been the victim of a massive crime wave.” It stated Sullivan, Lashkevich, and Crispo “had unrestrained and absolute control of virtually all the important financial functions at Cooper and they took full criminal advantage....” It also noted that “employees who became suspicious and questioned the accounting practices or tried to alert management were intimidated, transferred, or dismissed by the high-ranking executives.” Furthermore, it suggested “the ability to bypass or defeat controls grew from an institutional culture that delegated and outsourced too much responsibility, without developing effective controls....” The report also raised questions about how the internal investigation was conducted. It noted that Driscoll and Halpern “often locked horns with [the other] committee members....” Driscoll had objected when other board members called for an independent investigation. Halpern and Driscoll resigned their positions within days of the forced release of the report.
One member of the special committee became particularly notorious. Soon after the internal investigation was set in motion in 1994 Rabbi Neulander’s wife had been murdered. Soon after, Neulander had failed a polygraph test when questioned about it. He then resigned his clerical position after his extramarital affairs with members of his congregation were revealed. In September, 1998, he was charged with hiring the “hit men” who committed the murder. In 2002, he was convicted and sentenced to life in prison.
The Aftermath, Financial Woes and Impact on Patient Care
By 1997, Cooper was in financial trouble, although none of its managers ever admitted a connection to the conspiracy and resulting losses. However, during a related civil lawsuit, Cooper officials alleged “the hospital’s general operating fund was depleted” by the conspiracy. Cooper began merger discussions with several partners, including AHERF, although none were ultimately successful. Physicians started leaving in 1997, when all but one full-time cardiologists announced their resignations. Cooper revealed a $16 million loss for 1998, the largest ever incurred by a New Jersey hospital. Its bonds were down-graded to junk. The hospital then announced that it would stop accepting uninsured patients for elective treatments, departing from its historic mission of charitable care. Losses continued in 1999, again totaling $16 million, leading to additional budget cuts. [CEO Halpern and Chairman of the Board Driscoll resigned within days of each other in 1999, both denying their actions were related to the report.] By 2000, the hospital had cut its work-force to 3100, from 4000 in early 1999. and had closed various clinical sites and units. Only thereafter did Cooper began posting budget surpluses. [By 2002, more physicians quit Cooper en bloc, and the hospital was on its second new CEO since Mr Halpern.]
The Lurid Stories Remain Anechoic
The only published reaction to Cooper’s woes came from the related legal proceedings. The prosecutor in Sullivan’s trial claimed that his thefts were so big that they “threatened the financial stability of the hospital,” and “hurt the image of the city as a whole.” At Pagan’s sentencing hearing, Judge Joseph H. Rodriguez stated “society could not tolerate a system in which hospital executives ‘rake millions off the top’ that were intended for medical care for the poor.”
It does seem likely that Cooper’s scandals had major effects on its patient care and academic missions. Yet, I could find nothing published about such effects. Despite the luridness of this case, I also found no reaction from local or national medical groups, from academic organizations, accrediting groups, or government agencies.
Summary
In 2005, I wrote,... The case of Cooper’s corrupt executives can be viewed as the forerunner to the even more massive bankruptcy of AHERF [Allegheny Health Education and Research Foundation, see posts here]. One can only speculate that learning the lessons of the Cooper case could have mitigated the AHERF disaster. However, as noted in my last article, the lessons from AHERF are also not widely known. Yet, as George Santayana wrote, “Those who cannot learn from history are doomed to repeat it.”
As I will address in another post, events at Cooper after 2005 also generated few echoes, up to the latest tragedy. These events did not suggest much had been learned from the events through 2005.
So the unfortunate, and sometimes terrible case of Cooper Health has become one of the longest running examples - starting in 1978 - of the troubles with leadership and governance of large health care organizations, the bad effects of these problems on health care and the values of health care professionals, the lack of public attention to and discussion of these problems and their effects, and the failure of organizations to address on their own their problems with leadership and governance.
True health care reform, as we have said endlessly, requires governance that is accountable, transparent, true to the organization's mission, and honest, ethical, and without conflicts of interest; and leadership that understands health care, upholds its values, is honest, ethical, and without conflicts of interest, is transparent and open, and is willing to be accountable and subject to appropriate incentives.
References
Embezzlement....
Lewis L. Former official gets jail term for bilking Cooper: John M. Sullivan was sentenced to 55 months - the scheme netted $4 million. He spent his take lavishly. Philadelphia Inquirer, April 26, 1996.
Graham M. New panel at Cooper plans review: embezzling of $3.8 million by two former top aides and a vendor prompted the study. Philadelphia Inquirer, July 27, 1994.
Lewis L. Ex-hospital executive gets 2 years: he helped steal $4 million from Cooper Hospital - his lawyer said the investigation was going to spread. Philadelphia Inquirer, November 9, 1996.
Graham M, Turcol T. Inquiry widens into finances at Cooper Hospital: a federal grand jury subpoenaed several officials this month - the inquiry was spurred by testimony from two former Cooper executives indicted for fraud. Philadelphia Inquirer, February 27, 1996.
Lewis L. Woman admits role in bilking Cooper Hospital. Philadelphia Inquirer, September 6, 1996.
Lewis L. Ex-hospital executive admits theft: Robert Schmid Jr. pleaded guilty to embezzling about $50,000 from Cooper Hospital. Philadelphia Inquirer, September 24, 1996.
Lewis L. More charged in theft at hospital: six people have now been indicted in the embezzlement at the Camden facility. Philadelphia Inquirer, December 12, 1996.
Lewis L. Ex-wife of jailed Cooper Hospital official sentenced in scam: Elarba Pagan bought $1,500 shoes with medical center money, her business partner said. Philadelphia Inquirer, July 2, 1998. P. B5.
Lewis L. Business owner pleads: Thomas J. Damadio said he helped Cooper Hospital executives launder stolen money. Philadelphia Inquirer, January 18, 1997.
The Internal Report...
Anonymous. Cooper forms committee. PR Newswire, July 26, 1994.
Graham M. FBI is probing Cooper Hospital for violation of securities laws. Philadelphia Inquirer, April 3, 1997. P. A1.
Hollreiser E. Cooper urged to release audit results. Philadelphia Business Journal, May 30, 1997.
Graham M. Hospital gives state its audit: Cooper complied after the state threatened to withhold funding - the report will be kept secret. Philadelphia Inquirer, May 14, 1997, P. B1.
Graham M. N.J. finds nothing amiss at Cooper: the Attorney General’s office reviewed an internal hospital audit - no criminal wrongdoing was uncovered. Philadelphia Inquirer, July 11, 1997. P. A1.
Graham M, Cusick F. Listing Cooper’s board deals: companies associated with the hospital’s trustees have gotten some of its largest contracts. Philadelphia Inquirer, June 15, 1997. P. A1.
Anonymous. Report says Rabbi failed polygraph on wife’s death. The (Bergen County) Record, September 5, 1996.
Burney M. Rabbi charged in wife’s killing. Associated Press State & Local Wire, September 10, 1998.
Mulvihill G. Judge declares mistrial in case of Rabbi charged with arranging wife’s murder. Associated Press State & Local Wire, November 13, 2001.
Bell T. Rabbi found guilty of murder in wife’s 1994 death. Associated Press State & Local Wire, November 20, 2002.
Mulvihill G. Jury spares life of rabbi in wife’s murder; faces life in prison. Associated Press State & Local Wire, November 22, 2002.
The Aftermath...
Uhlman M. Cooper talks with Allegheny: the Camden hospital wants a partner, and the Pa. chain plans a further push into South Jersey. Philadelphia Inquirer, May 20, 1997. P. C1.
Gerlin A. Philadelphia hospital raids New Jersey system’s cardiology staff. Philadelphia Inquirer, September 27, 1997.
Kastor JA. Governance of Teaching Hospitals: Turmoil at Penn and Hopkins. Baltimore: Johns Hopkins Press, 2004. P. 41.
Goodman H. As Cooper suffers loss, it says care won’t suffer. Philadelphia Inquirer, February 11, 1999.
Rizzo N. Cooper Hospital announces cuts in staff. Associated Press State & Local Wire, March 18, 1999.
Goodman H. Cooper Health system cuts 103 employees: financial problems were cited - about 400 jobs could be lost this year, and uninsured care will be curtailed. Philadelphia Inquirer, March 19, 1999. P. A1.
Anonymous. As losses mount, Cooper Hospital’s debt rating falls. Associated Press State & Local Wire, April 16, 1999.
Goodman H. Cooper’s debt rating tumbles as losses rise: the 1998 figure is twice as bad as estimated - the poor rating means the hospital must pay more to borrow. Philadelphia Inquirer, April 16, 1999. P. B1.
Kent B. In Camden, a hospital finds itself seriously ill: Cooper, the city’s biggest employer, has ‘heavy losses.’ New York Times, May 9, 1999.
Anonymous. Cooper Hospital announces more cuts in staff. Associated Press State & Local Wire, May 20, 1999.
Anonymous. Camden hospital posts $16 million loss: president sees turnaround. Associated Press State & Local Wire, February 23, 2000.
Kiely E. Cooper Hospital to forgo charity-care payments - the state will not reimburse the Camden facility for uninsured patients for four months - the reason: the beleaguered hospital received the money from the state in advance last year. Philadelphia Inquirer, April 11, 2000. P B1.
Anonymous. Cooper Hospital president quitting. Philadelphia Business Journal, January 15, 2002.
Anonymous. Hospital company sues six departing surgeons. Associated Press State & Local Wire, July 4, 2002.
This will be a hard series of posts to write. It wa triggered by the latest, and perhaps most gruesome chapter in the troubled history of the leadership of Cooper Health, the largest hospital system in southern New Jersey (known locally as South Jersey). As reported by the Philadelphia Inquirer on March 28, 2015,
Cooper University Health System CEO John P. Sheridan Jr. stabbed his wife to death, set their bedroom on fire, and then took his own life, authorities have concluded, closing a six-month investigation into the deaths that shocked New Jersey's political and civic communities.
The Somerset County Prosecutor's Office announced its results in a news release Friday, citing forensic evidence and a lengthy probe that included more than 180 interviews.
But it offered no conclusive motive to explain why Sheridan, described by family and friends as mild-mannered, would brutally stab his wife and kill himself.
'Many possible scenarios and theories were considered,' the prosecutor's office said in a statement after months of virtual silence. The evidence 'supports the conclusion that John Sheridan fatally stabbed Joyce Sheridan, set the fire, and committed suicide.'
The Story in Context: a Long History of Leadership and Governance Problems
We have often discussed bad leadership of health care organizations, and written a lot about the contrast between the munificent compensation paid to non-profit hospital CEOs and the lack of evidence justifying such pay. However, a murder-suicide allegedly perpetrated by the CEO of a large non-profit hospital system is way at the tail of the curve of questionable managerial behavior.
But it turns out that Cooper Health System has a very long record of leadership and governance troubles. The current chapter is the latest, and possibly most gruesome, in this sorry series. However, the context of this history has been lacking in the recent coverage, which has been so far limited to local media. The history deserves a more complete discussion, and maybe then it could lead to some reconsideration at least of this one institution's leadership and governance, and perhaps the larger troubles in leadership and governance in health care.
In the interests of full disclosure, I started my faculty career at what was then Cooper Hospital - University Medical Center, the main teaching hospital for the University of Medicine and Dentistry of New Jersey (UMDNJ) - Robert Wood Johnson Medical School (RWJMS) branch at Camden, NJ. During my four years there, 1983-87, I was impressed with the dedication of the physicians, nurses and other health care professionals there. However, even given my naivete at a young faculty member, the leadership of the institution, which was one of the early adapters of the generic management model, seemed strange. Little did I know how strange it was.
In the late 1990s, when I became seriously concerned about what I know call leadership and governance problems in health care, I ran into some folks from South Jersey who told me that Cooper had a tumultuous history since I left. I got around to researching it, leading to an article in our local American College of Physicians newsletter. The article, to which I had linked here, is no longer available on the internet. So I have reposted it below, with some minor modifications, put in square brackets . Again, the history is of major problems with leadership and governance at Cooper that had inspired no reconsideration by 2005.
The Curiously Quiet Case of Cooper’s Corrupt CFO
Embezzlement by Top Management
In 1994, two powerful executives at Cooper admitted their guilt in an elaborate embezzlement scheme. In 1978, John H. Crispo, the owner of Financial Management Corporation Inc., to keep his contract with the hospital, began paying monthly kickbacks of $2500-$10,000 to John M. Sullivan, the Cooper Executive Vice President for Finance. Sullivan then referred delinquent hospital accounts for collection to a new company Crispo set up. In turn, Crispo repaid him $340,000 in more kickbacks. Sullivan recruited Cooper’s Controller, P. John Lashkevich, and the three devised a scheme to defraud the hospital using fabricated bills, established a fictitious company to launder money, and falsified tax returns. A prosecutor claimed “Mr Sullivan blew this money on wine, women, parties, and a lavish lifestyle,”which included trips with girlfriends to the Plaza Hotel, and jewelry shopping at Tiffany’s. Sullivan had driven a Porsche, and lived in a $700,000 house. The conspirators also bought cars, boats, and racehorses.
Other conspirators were also found and prosecuted. Helene Weinstein admitted to helping establish a shadow company as a conduit for Sullivan to send money from the hospital to his estranged wife, Elarba Pagan. Pagan was accused of receiving money sent by Sullivan from Cooper to another firm. Weinstein testified that Pagan carried “briefcases of cash from the hospital to shop in New York for $1500 shoes.” Also, Cooper’s Vice President for Finance, Robert Schmid Jr, admitted embezzling money from Cooper to pay for home improvements. Finally, Thomas J. Damadio admitted helping launder up to $600,000 stolen from Cooper, and evading income taxes.
Sullivan was sentenced to 55 months in federal prison, Lashkevich, 25, Pagan, eight, Weinstein, three years of probation, Damadio, six months of house arrest. Crispo died before serving prison time.
The Internal Report, and the Murder Conviction of One of Its Authors
After these stories became public in 1994, Cooper’s Board of Trustees established a special committee to investigate its financial operations, which included Peter E. Driscoll, Chairman of the Board, Kevin G. Halpern, Chief Executive Officer (CEO), and a local Rabbi, Fred Neulander. The hospital pledged to make its investigation public, but then fought to keep it secret. Its report was finally released in 1998, after a discovery motion in a civil lawsuit. Prior to then, the Philadelphia Inquirer had revealed numerous financial conflicts of interest affecting Board members, including those on the special committee. For example, Cooper paid the law firm of Archer & Greiner, of which Driscoll was a senior partner, $2.1 million over three years from 1993-96.
The report revealed that the conspiracy had bilked the hospital of at least $21.8 million from 1987 to 1994, while “Cooper has been the victim of a massive crime wave.” It stated Sullivan, Lashkevich, and Crispo “had unrestrained and absolute control of virtually all the important financial functions at Cooper and they took full criminal advantage....” It also noted that “employees who became suspicious and questioned the accounting practices or tried to alert management were intimidated, transferred, or dismissed by the high-ranking executives.” Furthermore, it suggested “the ability to bypass or defeat controls grew from an institutional culture that delegated and outsourced too much responsibility, without developing effective controls....” The report also raised questions about how the internal investigation was conducted. It noted that Driscoll and Halpern “often locked horns with [the other] committee members....” Driscoll had objected when other board members called for an independent investigation. Halpern and Driscoll resigned their positions within days of the forced release of the report.
One member of the special committee became particularly notorious. Soon after the internal investigation was set in motion in 1994 Rabbi Neulander’s wife had been murdered. Soon after, Neulander had failed a polygraph test when questioned about it. He then resigned his clerical position after his extramarital affairs with members of his congregation were revealed. In September, 1998, he was charged with hiring the “hit men” who committed the murder. In 2002, he was convicted and sentenced to life in prison.
The Aftermath, Financial Woes and Impact on Patient Care
By 1997, Cooper was in financial trouble, although none of its managers ever admitted a connection to the conspiracy and resulting losses. However, during a related civil lawsuit, Cooper officials alleged “the hospital’s general operating fund was depleted” by the conspiracy. Cooper began merger discussions with several partners, including AHERF, although none were ultimately successful. Physicians started leaving in 1997, when all but one full-time cardiologists announced their resignations. Cooper revealed a $16 million loss for 1998, the largest ever incurred by a New Jersey hospital. Its bonds were down-graded to junk. The hospital then announced that it would stop accepting uninsured patients for elective treatments, departing from its historic mission of charitable care. Losses continued in 1999, again totaling $16 million, leading to additional budget cuts. [CEO Halpern and Chairman of the Board Driscoll resigned within days of each other in 1999, both denying their actions were related to the report.] By 2000, the hospital had cut its work-force to 3100, from 4000 in early 1999. and had closed various clinical sites and units. Only thereafter did Cooper began posting budget surpluses. [By 2002, more physicians quit Cooper en bloc, and the hospital was on its second new CEO since Mr Halpern.]
The Lurid Stories Remain Anechoic
The only published reaction to Cooper’s woes came from the related legal proceedings. The prosecutor in Sullivan’s trial claimed that his thefts were so big that they “threatened the financial stability of the hospital,” and “hurt the image of the city as a whole.” At Pagan’s sentencing hearing, Judge Joseph H. Rodriguez stated “society could not tolerate a system in which hospital executives ‘rake millions off the top’ that were intended for medical care for the poor.”
It does seem likely that Cooper’s scandals had major effects on its patient care and academic missions. Yet, I could find nothing published about such effects. Despite the luridness of this case, I also found no reaction from local or national medical groups, from academic organizations, accrediting groups, or government agencies.
Summary
In 2005, I wrote,... The case of Cooper’s corrupt executives can be viewed as the forerunner to the even more massive bankruptcy of AHERF [Allegheny Health Education and Research Foundation, see posts here]. One can only speculate that learning the lessons of the Cooper case could have mitigated the AHERF disaster. However, as noted in my last article, the lessons from AHERF are also not widely known. Yet, as George Santayana wrote, “Those who cannot learn from history are doomed to repeat it.”
As I will address in another post, events at Cooper after 2005 also generated few echoes, up to the latest tragedy. These events did not suggest much had been learned from the events through 2005.
So the unfortunate, and sometimes terrible case of Cooper Health has become one of the longest running examples - starting in 1978 - of the troubles with leadership and governance of large health care organizations, the bad effects of these problems on health care and the values of health care professionals, the lack of public attention to and discussion of these problems and their effects, and the failure of organizations to address on their own their problems with leadership and governance.
True health care reform, as we have said endlessly, requires governance that is accountable, transparent, true to the organization's mission, and honest, ethical, and without conflicts of interest; and leadership that understands health care, upholds its values, is honest, ethical, and without conflicts of interest, is transparent and open, and is willing to be accountable and subject to appropriate incentives.
References
Embezzlement....
Lewis L. Former official gets jail term for bilking Cooper: John M. Sullivan was sentenced to 55 months - the scheme netted $4 million. He spent his take lavishly. Philadelphia Inquirer, April 26, 1996.
Graham M. New panel at Cooper plans review: embezzling of $3.8 million by two former top aides and a vendor prompted the study. Philadelphia Inquirer, July 27, 1994.
Lewis L. Ex-hospital executive gets 2 years: he helped steal $4 million from Cooper Hospital - his lawyer said the investigation was going to spread. Philadelphia Inquirer, November 9, 1996.
Graham M, Turcol T. Inquiry widens into finances at Cooper Hospital: a federal grand jury subpoenaed several officials this month - the inquiry was spurred by testimony from two former Cooper executives indicted for fraud. Philadelphia Inquirer, February 27, 1996.
Lewis L. Woman admits role in bilking Cooper Hospital. Philadelphia Inquirer, September 6, 1996.
Lewis L. Ex-hospital executive admits theft: Robert Schmid Jr. pleaded guilty to embezzling about $50,000 from Cooper Hospital. Philadelphia Inquirer, September 24, 1996.
Lewis L. More charged in theft at hospital: six people have now been indicted in the embezzlement at the Camden facility. Philadelphia Inquirer, December 12, 1996.
Lewis L. Ex-wife of jailed Cooper Hospital official sentenced in scam: Elarba Pagan bought $1,500 shoes with medical center money, her business partner said. Philadelphia Inquirer, July 2, 1998. P. B5.
Lewis L. Business owner pleads: Thomas J. Damadio said he helped Cooper Hospital executives launder stolen money. Philadelphia Inquirer, January 18, 1997.
The Internal Report...
Anonymous. Cooper forms committee. PR Newswire, July 26, 1994.
Graham M. FBI is probing Cooper Hospital for violation of securities laws. Philadelphia Inquirer, April 3, 1997. P. A1.
Hollreiser E. Cooper urged to release audit results. Philadelphia Business Journal, May 30, 1997.
Graham M. Hospital gives state its audit: Cooper complied after the state threatened to withhold funding - the report will be kept secret. Philadelphia Inquirer, May 14, 1997, P. B1.
Graham M. N.J. finds nothing amiss at Cooper: the Attorney General’s office reviewed an internal hospital audit - no criminal wrongdoing was uncovered. Philadelphia Inquirer, July 11, 1997. P. A1.
Graham M, Cusick F. Listing Cooper’s board deals: companies associated with the hospital’s trustees have gotten some of its largest contracts. Philadelphia Inquirer, June 15, 1997. P. A1.
Anonymous. Report says Rabbi failed polygraph on wife’s death. The (Bergen County) Record, September 5, 1996.
Burney M. Rabbi charged in wife’s killing. Associated Press State & Local Wire, September 10, 1998.
Mulvihill G. Judge declares mistrial in case of Rabbi charged with arranging wife’s murder. Associated Press State & Local Wire, November 13, 2001.
Bell T. Rabbi found guilty of murder in wife’s 1994 death. Associated Press State & Local Wire, November 20, 2002.
Mulvihill G. Jury spares life of rabbi in wife’s murder; faces life in prison. Associated Press State & Local Wire, November 22, 2002.
The Aftermath...
Uhlman M. Cooper talks with Allegheny: the Camden hospital wants a partner, and the Pa. chain plans a further push into South Jersey. Philadelphia Inquirer, May 20, 1997. P. C1.
Gerlin A. Philadelphia hospital raids New Jersey system’s cardiology staff. Philadelphia Inquirer, September 27, 1997.
Kastor JA. Governance of Teaching Hospitals: Turmoil at Penn and Hopkins. Baltimore: Johns Hopkins Press, 2004. P. 41.
Goodman H. As Cooper suffers loss, it says care won’t suffer. Philadelphia Inquirer, February 11, 1999.
Rizzo N. Cooper Hospital announces cuts in staff. Associated Press State & Local Wire, March 18, 1999.
Goodman H. Cooper Health system cuts 103 employees: financial problems were cited - about 400 jobs could be lost this year, and uninsured care will be curtailed. Philadelphia Inquirer, March 19, 1999. P. A1.
Anonymous. As losses mount, Cooper Hospital’s debt rating falls. Associated Press State & Local Wire, April 16, 1999.
Goodman H. Cooper’s debt rating tumbles as losses rise: the 1998 figure is twice as bad as estimated - the poor rating means the hospital must pay more to borrow. Philadelphia Inquirer, April 16, 1999. P. B1.
Kent B. In Camden, a hospital finds itself seriously ill: Cooper, the city’s biggest employer, has ‘heavy losses.’ New York Times, May 9, 1999.
Anonymous. Cooper Hospital announces more cuts in staff. Associated Press State & Local Wire, May 20, 1999.
Anonymous. Camden hospital posts $16 million loss: president sees turnaround. Associated Press State & Local Wire, February 23, 2000.
Kiely E. Cooper Hospital to forgo charity-care payments - the state will not reimburse the Camden facility for uninsured patients for four months - the reason: the beleaguered hospital received the money from the state in advance last year. Philadelphia Inquirer, April 11, 2000. P B1.
Anonymous. Cooper Hospital president quitting. Philadelphia Business Journal, January 15, 2002.
Anonymous. Hospital company sues six departing surgeons. Associated Press State & Local Wire, July 4, 2002.
Monday, February 23, 2015
Timing Discharges to Maximize Revenue - "Corruption" of Corporate Long-Term Hospitals?
A recent Wall Street Journal article that focused on a quirk in US Medicare payment rules that may be gamed by long-term hospitals also revealed the plight of physicians employed by such hospitals, and worse, the danger posed by such gaming to patients.
Discharging Patients at Particular Times Maximizes Hospital Revenue
Here is how the rule works:
Systemic Evidence that Discharges are More Likely to Occur at Times that Maximize Revenue
Thus the Medicare rules provides financial incentives for discharging patients at particular times during their admissions. The reporters found some systemic evidence that patients were more likely to be discharged at those times:
The issue here is that the decision to discharge a patient from any kind of hospital should be made by health care professionals and their patients, sometimes with the input of the patients' families. The decision should depend on the patients' medical status, the availability of follow-up care, and the patients' wishes and values. Hospital managers should have no direct influence on these decisions. So why would patient discharges occur more often at the times when they are most financially advantageous for the hospitals?
An Illustrative Case
The Wall Street Journal article opened with an illustrative anecdote.
Furthermore,
Note that Mr Beard was apparently discharged during the window of maximum revenue for the hospital, but there was no obvious medical reason for his discharge on that particular day.
Evidence that Hospital Managers Pressure Health Care Professionals to Discharge Patients at Times that Maximize Revenue
The WSJ statistical analysis suggested that Kindred and other for-profit long-term hospital corporations are particularly prone to discharge patients at times that maximize revenue.
The WSJ also found evidence that managers at two for-profit long-term hospital systems pushed health care professionals to discharge patients at the most profitable times.
So the WSJ article presented statistical analysis that patients are more likely to be discharged on the days that are most advantageous from the standpoint of hospital revenue than on other days. The WSJ article also presented narratives by several people that suggest that top managers gave incentives to lower level managers to maximize the number of discharge on the most financially advantageous days, and that managers tried to directly influence physicians, presumably those employed by the hospital systems, to discharge patients on the most financially advantageous days.
The Private Gain of Mangers of Long-Term Corporate Hospital Systems
I do not know a way to determine how much money Kindred and Select may have made from the practice of timing long-term hospital discharges for maximum revenue, but there is certainly evidence that the top managers of these corporations do very well.
Based on the most recent available (2014) proxy statement from Kindred, its CEO, Paul J Diaz, received $4,303,072 in 2013, and all listed managers received more than $1 million that year. Based on the most recent available (2014) proxy statement from Select Medical Holdings Inc, its CEO, Robert A. Ortenzio, received $3,557,860 in 2013, and its executive chairman, Rocco A Ortenzio, received $2,701,916 in 2013, and all listed managers more than $1.5 million that year
Revenue Maximization as "Corruption"
The WSJ reporters interpreted their findings as "a sign that financial incentives in the Medicare system may shape patient care." It thus implied that a reasonable policy response to this problem would be to change the Medicare rules for paying for long-term care. However, left unwritten was that only in a health care system in which managers feel that short-term revenue may trump the best interests of patients, and in which managers are empowered to influence, if not override physicians' decision-making would such financial incentives have any major effect.
The WSJ article did include an expert's opinion that it was unethical, or worse, for hospital managers to pressure physicians to discharge patients at times that maximized revenue, rather than times that were optimal for the patients' medical care and well being.
Recall that the Transparency International (ethical, not necessarily legal) definition of corruption is abuse of entrusted power for private gain. Physicians are entrusted to make decisions on behalf of their individual patients, so as best to improve their patients' health and health care outcomes. Hospitals are entrusted to provide the settings in which physicians can act in the best interests of their patients. So it seems clear that pressuring physicians to discharge patients so as to maximize hospital revenue regardless of the effect of such discharges on patients is corruption in this sense, health care corruption.
Note that health care corruption has generally been a taboo topic, especially when the corruption occurs in developed countries. It is notable that the WSJ article made that topic slightly less anechoic.
Furthermore, framing this problem as health care corruption that endangers patients suggests that the issue goes far beyond a Medicare policy that is easy to game, and that another policy response, such as an investigation to see if such actions were legal, might be more to the point than adjusting the Medicare payment formula.
Beyond that, there are lessons for doctors and more globally for policy makers. We have previously discussed the plight of the corporate physician, caught between his or her oath to put care of individual patients above all other concerns, and effective subservience to managers who may well put short-term corporate revenue, and growing their own incomes, ahead of all other concerns, including patients' and the public's health. Health care professionals should not hold any illusions that they can take jobs with corporate health care providers and uphold their own values.
Furthermore, the plight of the physicians, and more importantly, the patients at corporate long-term hospitals raises a bigger policy question. In my humble opinion, is it now time to end our badly conceived experiment with gilded age health care. In the US, we have decided that the "free market" can solve all of our health care problems, disregarding the near impossibility of maintaining a real free market in health care. Instead, we now have health care dominated by poorly regulated large corporations in an era when top managers believe they have a mandate to do anything to improve short-term revenue, and often conveniently increase their own wealth. It appears to be time to bring back the old laws against the corporate practice of health care, and consider whether we should allow hospitals and other health care organizations that provide direct patient care to be for-profit enterprises.
Meanwhile, patients and health care professionals, you should realize that you approach corporate hospitals and other corporate health care providers at your own risk.
Discharging Patients at Particular Times Maximizes Hospital Revenue
Here is how the rule works:
Under Medicare rules, long-term acute-care hospitals like Kindred’s typically receive smaller payments for what is considered a short stay, until a patient hits a threshold. After that threshold, payment jumps to a lump sum meant to cover the full course of long-term treatment.
That leaves a narrow window of maximum profitability in caring for patients at the nation’s about 435 long-term hospitals, which specialize in treating people with serious conditions who require prolonged care.
Systemic Evidence that Discharges are More Likely to Occur at Times that Maximize Revenue
Thus the Medicare rules provides financial incentives for discharging patients at particular times during their admissions. The reporters found some systemic evidence that patients were more likely to be discharged at those times:
The Journal analysis of claims Medicare paid from 2008 through 2013 found long-term hospitals discharged 25% of patients during the three days after crossing thresholds for higher, lump-sum payments. That is five times as many patients as were released the three days before the thresholds.
The issue here is that the decision to discharge a patient from any kind of hospital should be made by health care professionals and their patients, sometimes with the input of the patients' families. The decision should depend on the patients' medical status, the availability of follow-up care, and the patients' wishes and values. Hospital managers should have no direct influence on these decisions. So why would patient discharges occur more often at the times when they are most financially advantageous for the hospitals?
An Illustrative Case
The Wall Street Journal article opened with an illustrative anecdote.
A Kindred Healthcare Inc. hospital in Houston discharged 79-year-old Ronald Beard to a nursing home after 23 days of treatment for complications of knee surgery.
The timing of his release didn’t appear to correspond with any improvement in his condition, according to family members. But it did boost how much money the hospital got.
Kindred collected $35,887.79 from the federal Medicare agency for his stay, according to a billing document, the maximum amount it could earn for treating most patients with Mr. Beard’s condition.
If he had left just one day earlier, Kindred would have received only about $20,000 under Medicare rules. If he had stayed longer than the 23 days, the hospital likely wouldn’t have received any additional Medicare money.
Furthermore,
Between mid-2011 and the end of 2013, the Kindred hospital that treated Mr. Beard discharged eight times as many Medicare patients on the day they reached their threshold as on the day before. In the days immediately after the lucrative three-day window, discharges plummeted. Kindred acquired the hospital, which has two campuses, in the summer of 2011.
Mr. Beard, a retired drilling-equipment salesman, was discharged from Kindred’s facility on Nov. 12, 2011. His family says his condition had deteriorated at the hospital and they wish he had been released sooner.
Mr. Beard was admitted to Kindred Hospital Town and Country in Houston in late October 2011 after surgeons found the site of an earlier knee surgery had become infected with drug-resistant bacteria called MRSA. He was sent to the Kindred facility that Oct. 20 for a course of antibiotics, according to the records and Ms. Beard.
On his fourth day at the Kindred hospital, nurses administered the drug Remeron to treat sleeplessness. Mr. Beard’s wife says he had an allergy to that drug—documented at the time on a wristband provided by another hospital—and he went into a coma for a time.
'I wished then that I could take him somewhere else,' says Ms. Beard, now 77 years old.
Over the next two weeks, Mr. Beard’s condition deteriorated as he received treatments from a dozen doctors. A Medicare document provided by his wife shows he received an hour and a half of 'critical care' services on Nov. 9, three days before Kindred discharged him.
When he left the facility in a transport van on Nov. 12, bound for a nursing home, he complained of nausea, his wife says. The van driver called for an ambulance from a gas station. The ambulance took him to the emergency room at a general hospital in Katy, Texas.
Ms. Beard says doctors determined that, aside from low blood pressure, he was stable. She drove him to the nursing facility herself, but because Kindred’s discharge papers had been left behind in the van, the nursing facility declined to accept him. He wound up back at the Katy hospital to begin an additional three-day hospitalization, where doctors performed tests to monitor an existing heart condition, the billing documents show.
Ms. Beard says she doesn’t regret that her husband left Kindred’s hospital when he did, despite the chaos of those days. 'I think if he had stayed at Kindred, he would have laid there and died,' she says.
Note that Mr Beard was apparently discharged during the window of maximum revenue for the hospital, but there was no obvious medical reason for his discharge on that particular day.
Evidence that Hospital Managers Pressure Health Care Professionals to Discharge Patients at Times that Maximize Revenue
The WSJ statistical analysis suggested that Kindred and other for-profit long-term hospital corporations are particularly prone to discharge patients at times that maximize revenue.
For-profit companies such as Kindred and Select were more likely to discharge patients during the most-lucrative window than nonprofit competitors, the Journal’s analysis shows. Nonprofits discharged 16% of people during the window, compared with 27% at for-profits.
The WSJ also found evidence that managers at two for-profit long-term hospital systems pushed health care professionals to discharge patients at the most profitable times.
Former long-term-hospital executives say they sometimes called the threshold the 'normal low' or 'five-sixth date,' referring to the Medicare formula. The Journal interviewed 16 people who have worked at facilities operated by Kindred or rival for-profit system Select Medical Corp. in 10 states, including former hospital administrators, doctors and case managers who oversaw discharges. Those two publicly traded companies billed Medicare for 42% of all long-term-hospital claims it processed during the period the Journal studied.
The former administrators say their corporate bosses exerted pressure to discharge as often as possible during the most lucrative days, rewarding managers who succeeded and questioning those who didn't.
'You’d hear from the powers that be if your hospital was not…hitting a pretty high percentage of your patients for Medicare' soon after the payment threshold, says Karen Shammas, who was chief executive of a Kindred hospital in Peoria, Ariz., until late 2013, when she retired.
Ms. Shammas, like some other long-term-hospital administrators who were interviewed, described meetings in which hospital staffers would discuss plans for each patient at the facility—armed with printouts from a computer tracking system that included, for each patient, the date at which reimbursement would shift to a higher, lump-sum payout.
Ms. Shammas says she never kept patients hospitalized for financial reasons if they were medically ready to leave.
Kindred declined to comment in detail on discharge patterns or corporate policies.
Former executives at both Kindred and Select say doctors, pressured by hospital administrators, sometimes ordered extra care or services intended in part to retain patients until they reached their thresholds, or discharged those who were costing the hospitals money regardless of whether their medical conditions had improved.
Former executives at hospitals run by each chain say their bonuses depended in part on maintaining a high share of patients discharged at or near the threshold dates to meet earnings goals.
In some cases, their bosses gave them specific targets for discharge rates during the most lucrative days, the former hospital executives say. When they missed their targets, some of the executives say, their bosses asked for explanations as to why individual patients weren’t released during the target window.
\
Select said in a written statement that its long-term hospitals discharge patients 'based on their medical condition and not on the Medicare reimbursement system' and 'do not manipulate discharge timing based on financial considerations.' The company said bonuses are based on 'overall financial performance,' among other factors, and not the share of patients discharged near the threshold.
Select’s corporate managers were 'very intense about managing that length of stay really effectively to maximize the profit potential for any particular patient, says Robert Marquardt, former CEO of a Select hospital in Fort Wayne, Ind.
If a patient was two days from the threshold, 'you were incentivized to see if you couldn’t find a reason to keep them for two more days,' says Mr. Marquardt, who left the company in December to work as a consultant.
Mr. Marquardt says he didn’t believe the efforts caused harm. 'You might play the game a bit, but you would never put a patient at risk,' he says.
Select said while it monitors discharge dates and other metrics and seeks to understand deviations from norms, it doesn’t set discharge targets. It said efforts to prolong a patient’s stay or discharge a patient early would be a violation of Select’s policies.'
So the WSJ article presented statistical analysis that patients are more likely to be discharged on the days that are most advantageous from the standpoint of hospital revenue than on other days. The WSJ article also presented narratives by several people that suggest that top managers gave incentives to lower level managers to maximize the number of discharge on the most financially advantageous days, and that managers tried to directly influence physicians, presumably those employed by the hospital systems, to discharge patients on the most financially advantageous days.
The Private Gain of Mangers of Long-Term Corporate Hospital Systems
I do not know a way to determine how much money Kindred and Select may have made from the practice of timing long-term hospital discharges for maximum revenue, but there is certainly evidence that the top managers of these corporations do very well.
Based on the most recent available (2014) proxy statement from Kindred, its CEO, Paul J Diaz, received $4,303,072 in 2013, and all listed managers received more than $1 million that year. Based on the most recent available (2014) proxy statement from Select Medical Holdings Inc, its CEO, Robert A. Ortenzio, received $3,557,860 in 2013, and its executive chairman, Rocco A Ortenzio, received $2,701,916 in 2013, and all listed managers more than $1.5 million that year
Revenue Maximization as "Corruption"
The WSJ reporters interpreted their findings as "a sign that financial incentives in the Medicare system may shape patient care." It thus implied that a reasonable policy response to this problem would be to change the Medicare rules for paying for long-term care. However, left unwritten was that only in a health care system in which managers feel that short-term revenue may trump the best interests of patients, and in which managers are empowered to influence, if not override physicians' decision-making would such financial incentives have any major effect.
The WSJ article did include an expert's opinion that it was unethical, or worse, for hospital managers to pressure physicians to discharge patients at times that maximized revenue, rather than times that were optimal for the patients' medical care and well being.
The pattern of discharging patients at the most lucrative juncture is 'troubling and disturbing,' says Tom Finucane, a doctor and professor at Johns Hopkins University School of Medicine, after learning of the Journal’s findings. 'The health-care system should serve the patients and try to improve their health, and any step away from that is a corruption.'
Dr. Finucane and other medical experts say longer-than-necessary hospital stays increase risks for medical errors, infection and unnecessary care. Discharges that come too early can mean patients don’t get care they need.
Recall that the Transparency International (ethical, not necessarily legal) definition of corruption is abuse of entrusted power for private gain. Physicians are entrusted to make decisions on behalf of their individual patients, so as best to improve their patients' health and health care outcomes. Hospitals are entrusted to provide the settings in which physicians can act in the best interests of their patients. So it seems clear that pressuring physicians to discharge patients so as to maximize hospital revenue regardless of the effect of such discharges on patients is corruption in this sense, health care corruption.
Note that health care corruption has generally been a taboo topic, especially when the corruption occurs in developed countries. It is notable that the WSJ article made that topic slightly less anechoic.
Furthermore, framing this problem as health care corruption that endangers patients suggests that the issue goes far beyond a Medicare policy that is easy to game, and that another policy response, such as an investigation to see if such actions were legal, might be more to the point than adjusting the Medicare payment formula.
Beyond that, there are lessons for doctors and more globally for policy makers. We have previously discussed the plight of the corporate physician, caught between his or her oath to put care of individual patients above all other concerns, and effective subservience to managers who may well put short-term corporate revenue, and growing their own incomes, ahead of all other concerns, including patients' and the public's health. Health care professionals should not hold any illusions that they can take jobs with corporate health care providers and uphold their own values.
Furthermore, the plight of the physicians, and more importantly, the patients at corporate long-term hospitals raises a bigger policy question. In my humble opinion, is it now time to end our badly conceived experiment with gilded age health care. In the US, we have decided that the "free market" can solve all of our health care problems, disregarding the near impossibility of maintaining a real free market in health care. Instead, we now have health care dominated by poorly regulated large corporations in an era when top managers believe they have a mandate to do anything to improve short-term revenue, and often conveniently increase their own wealth. It appears to be time to bring back the old laws against the corporate practice of health care, and consider whether we should allow hospitals and other health care organizations that provide direct patient care to be for-profit enterprises.
Meanwhile, patients and health care professionals, you should realize that you approach corporate hospitals and other corporate health care providers at your own risk.
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