University of Virginia, GE settle $47M suit over EMR implementation

The following Keystone Kops story of healthcare IT dysfunction brings to life (like the old GE slogan) the types of mismanagement I've written about at my site "Common Examples of Healthcare IT Difficulties":

From 1982 GE commercial - "We Bring Good Things to Life"

Clown pun not intentional - but perhaps apropos, not just with reference to GE but to U. Va's health IT leadership team as well.  It seems both parties might have had a role in this debacle (see additional links in the article below).

University of Virginia, GE settle $47M suit over EMR implementation

FierceEMR.com
July 13, 2012

By Dan Bowman

The University of Virginia this week reportedly has settled a $47 million civil suit against GE Healthcare over what it believes was sloppy--and ultimately incomplete--development and implementation of an electronic medical record system. The case, which originally was filed in 2009, had been set to go to trial this week. When FierceHealthIT checked on Friday, the case had yet to be entered into the circuit court clerk's records. In 1999, UVa hired IDX Systems Corporation to develop an integrated healthcare information management system, according to The Daily Progress. Amendments to the contract in 2002 divided the project into four phases, with the first two focusing on implementation of the records management software, and the last two focusing on billing and logistics. After acquiring IDX in 2006, GE was tasked with hitting the milestones outlined through Phase 2 by June 2008; UVa claims it never did, and in February 2009 asked for a refund of more than $20 million. At that time, UVa also awarded a $60 million contract to Epic to perform the same tasks, according to C-Ville.com [see note 1]. GE swiped back, blaming UVa for the delays in implementation, and saying that by going with Epic, the school "failed to perform its obligations under the agreement, breaching its contract," according to a filing obtained by the Daily Progress. The case isn't too surprising, considering that GE Healthcare has had issues since purchasing IDX. In a KLAS report from August 2010, author Kent Gale said there was a "downward trend in GE's meeting commitments" to its customers. Besides what was undoubtedly a huge waste of money and resources, what is missing from this story is the possible impact of this debacle on patient care.  Not "hitting the milestones" of phase 1 and 2 ("focusing on implementation of the records management software") and peforming "sloppy and incomplete" work can probably be translated as having had "bull in a china shop" effects on records management. Perhaps the morbidity and mortality rates at U. Va during the period of EHR mayhem need to be examined. -- SS Notes: [1] From the link to C-Ville.com:  "According to UVA’s complaint, the deal dates to 1999, when UVA contracted with tech firm IDX to develop an electronic medical record system, or EMR, for its hospital. But problems started early, UVA claimed, with IDX failing to hit milestones on the multi-phase project. When technology company GE took over IDX in 2006, the parties got together to rework the contract. But UVA said the issues continued, and it ultimately pulled the plug, saying GE failed to meet its obligations. GE, meanwhile, claimed it was UVA that broke contract. The two parties had agreed to work together on the complicated project, according to the company’s counterclaim. UVA was to act as a development partner, collecting and processing two decades’ worth of patient data and building and testing the system. But the medical center didn’t hold up its end of the bargain, said GE, making it impossible for the company to stay on schedule."

To all physicians: Fools hiring amateurs, to control you and land you in court?

Health IT systems will be/are used to control you - a medical professional - in your treatment of patients, and could land you in court if they contribute to your making a medical mistake.

They could also land you in a sham peer review for being a "disruptive" physician if you complain about a poor EHR.

Here's an example of who gets hired to run such systems. Note the "Education" and "Qualifications Knowledge, Skills, and Abilities Required" I bolded.

This job description is not atypical of many "clinical informatics" job descriptions:

HCA

Clinical Informaticist(Job Number: 25388-35620)

https://hca.taleo.net/careersection/0hca/jobdetail.ftl?lang=en&job=1112401&src=JB-11444

More About HCA.....

• HCA has been Recognized in Computerworld Magazine's Top 100 Workplaces to work for Information Technology Professionals for the 3^rd consecutive year, coming in this year at #32.
• HCA has been recognized by the Ethisphere Institute as one of the 2011 World's Most Ethical Companies.

Summary of Duties

The Clinical Informaticist is accountable for driving successful adoption and clinical process optimization of clinical information systems. This is done through the application Clinical Adoption Methodology, incorporating best practice and evidence-based knowledge. Utilizes the knowledge and skills of clinical practice to determine clinical functions that are suitable for computer application and to ensure the information systems are consistent with professional standards of clinical practice. Acts on behalf of the Director of Applications in absence of said director.

Duties Include But Are Not Limited To

• Facilitates knowledge of current state, desired state, and gap analysis of core clinical processes that are enabled by clinical information technology, being mindful of operational requirements/ constraints and conflicts. Works collaboratively with QA to evaluate outcomes, and opportunities for improvement.
• Maintains a trusting and effective relationship with all customers. Assists clinical managers in identifying information systems needs and project management related to information systems.
• Maintains membership or consultation to appropriate committees, work groups or task forces as needed to facilitate the ongoing process of the design, implementation, and revision of the automated and manual components of the clinical information system. Conducts meetings and presentations, effectively and professionally.
• Maintains a current knowledge of a) trends and issues in health care, nursing practice, healthcare informatics, regulatory/accreditation requirements; b) organizational policies and procedures related to clinical practice and the legal implications of the clinical information system; c) structure and hierarchy of the organization.
• Functionality expertise for clinical applications supporting core patient care processes and their relationship to other organizational information systems.
• Works closely with counterparts in appropriate user organizations to ensure consistent and effective use of technology resources and optimization of installed applications and sustainability.
• Adheres to Code of Conduct and Mission & Value Statement. Understands the personal obligation to report any activity that appears to violate applicable laws, rules regulations or the Code of Conduct itself. Maintains confidentiality, promotes system security to promote compliance.
• As facility-care-area based position must learn and comply with System and facility safety policies and rules; must use appropriate safety equipment and procedures at all times; must immediately report all unsafe conditions to supervisors; must be familiar with all safety features of equipment, tools or materials encompassed by job duties; and must check with supervisors (prior to job performance) if there is a question as to the safe procedure to be used for any job function.
• Participate in special projects as needed and performs other duties as assigned.

Qualifications Knowledge, Skills, and Abilities Required

• Membership in an appropriate organization is required (HIMSS, AMIA, for example) that is specifically targeted to informatics in healthcare
• Working knowledge of Microsoft Office products (WORD, EXCEL, PowerPoint, Project Plan, and VISIO)
• Strong oral, written, and interpersonal communication skills; strong analysis/problem solving and critical thinking; strong leadership, facilitation and coaching skills; current knowledge of patient care practices; clinical expertise; ability to work in multi-disciplinary teams.

Preferred:

• Knowledge and skill in selection, implementation, and training of clinical information systems
• Project management skills
• Previous experience utilizing Meditech documentation system
• Previous experience with Quality Improvement initiatives and clinical process re-engineering

Education

• BSN or Bachelors degree in other Allied Health Professional degree from an accredited college
• Current (10/08) department incumbents must achieve Bachelors requirement by 12/31/2012

Wow...

BSN, allied health bachelors, or "must achieve Bachelor's by 12/31/12"?

Some (at best) MBA-level fool wrote this 'description' for the hiring of some amateur with a BS - or no degree - to perform functions that will seriously affect how you, with 4 years college, four years med school, PGY internship, residency, perhaps fellowship or other post doctoral experience, perform your profession?

Your kids may have more professional education and qualifications than your hospital's "health computing experts." Fantastic.

I add this:

Health IT cannot be made to work properly - ever - when being mismanaged by fools and amateurs.

-- SS

What is Life is Really Like in Pharma? - These xtranormal Video Cartoons Come Close.

Sadly, the 'xtranormal' video cartoons at the following URL capture all too well what life is like in the pharmaceutical industry - buzzwords, neologisms, nouns turned into verbs, new paradigms, team players - and per the site, endless inane "initiatives" and related threats to sanity.

I've been there; while a parody, these videos are uncomfortably close to reality.

http://www.youtube.com/user/ZombieSymmetry/feed

"I'll have to ideate on that for awhile, Mike"

Even sadder are managers who believe their own babble.

-- SS

"Barbarians at the Gate" - Making Private Equity Less Private, and Understanding Its Effects on Health Care

One good byproduct of the tumultuous everlasting 2012 campaign for the US presidency has been to shed light on a number of political and economic issues that had previously been ignored, especially those relating to the global financial crisis or great recession.  In turn, many of these issues may be relevant to our understanding of our ongoing health care dysfunction. 

The latest issue to achieve prominence was the nature of private equity firms.  Current presidential contender Mitt Romney used to work for Bain Capital, a private equity group.  As we discussed here, Bain Capital owned a variety of companies, including some important health care corporations.  More importantly, attacks on Mr Romney's record at Bain by other candidates have lead to a broader discussion of the nature of private equity.  This discussion is very relevant to health care, since private equity firms have taken over a number of important health care corporations, and more recently, have begun to take over formerly non-profit health care organizations.

Therefore, we will summarize what has become known about private equity, and then consider its implications for health care.

Understanding Private Equity as Re-Branded Leveraged Buy-Out Firms

- Private Equity Firms are Just Re-Branded Leveraged Buyout Firms

The first good statement to this effect I found was by Merrill Goozner in the Fiscal Times(1):

Private equity is actually a misnomer, since the modus operandi of those investors is no different than the leveraged buyout firms that pioneered junk-bond financing in the 1980s.

As reported by the Los Angeles Times(2):

'Being known as a leveraged-buyout-deal shop wasn't the most attractive label out there,' said Colin Blaydon, director of the Center for Private Equity and Entrepreneurship at Dartmouth's Tuck School of Business. 'Private equity has a much nicer ring to it.'

In fact, according to Forbes columnist Robert Lenzer,(3) the famed investor Warren Buffet called this re-branding

'Orwellian': Buffett wrote that 'private equity' is a 'name that turns facts upside-down: A purchase of a business by these firms almost invariably results in dramatic reductions in the equity portion of the acquiree’s capital structure compared to that previously existing.'

I must admit I always thought private equity firms simply collected large amounts of capital from investors, then used the pooled capital to buy out troubled firms. I assumed that because these investors therefore had a large personal stake in these firms, they would want to increase at least their financial value. I also thought that leveraged buy-out firms ceased to exist after all the bad press they got in the 1980s. It turns out I was wrong on all counts. Probably, a lot of other peoples' beliefs about private equity were similarly wrong.

Once the equation of private equity and leveraged buyout firms is made, understanding what they do and its implications are easier.

- Leveraging the Buy-Out

The modus operandi of leveraged buyout firms is to make their purchases of troubled corporations mainly with borrowed money. As Merrill Goozner put it(1),

Private equity firms generally finance anywhere from 60 to 90 percent of their purchases with borrowed cash.

Note that,

Interest payments on those debts are treated just like any other expense, and are therefore deductible from earnings.

- Then Leveraging the Acquired Company

If this leveraging were the only leveraging done in a leveraged buy-out, the implications might not be that big, except for the acquiring firm. After all, when the leveraged buy-out firm borrows the money, it then becomes obligated to pay it back. However, then comes the tricks.

One important trick was described in the following example by economist Dean Baker on the Beat the Press blog(4),

To take a simple example, suppose a public company (let's call it Gingrich Inc.), has $1 billion a year in profits. If Gingrich Inc. paid taxes at the full 35 percent rate (fat chance), it would have $650 million [thanks Robert] a year to either keep as retained earnings or to pay out as dividends to its shareholders.

Now suppose that a PE company (we'll call it Romney Capital) steps in. The current price to earnings ratio in the stock market is around 14, so Gingrich Inc. would have a pre-takeover market value of approximately $9.2 billion (14*$650 million). Romney Capital then arranges for Gingrich Inc. to borrow $6 billion which it pays out as a dividend to itself. This means that the Romney Capital has just gotten back almost two-thirds of its investment.

A somewhat less vivid description of the process appeared in a post by Robert K Lifton on the Huffington Post(5):

Most often, in order to increase the return on capital invested by the fund, the fund will borrow a significant portion of the purchase price of the business. And sometimes, if it can, the fund will take back as a distribution immediately upon closing the purchase of the business, a portion of its investment in the purchase price, reducing its own investment and enhancing its return on the investment left in the business. This distribution may come from the company's existing cashable assets or from money that the company is caused to borrow.

Thus, it appears that while the leveraged buy-out (or private equity) firm borrowed money to finance the purchase of a company, it can almost immediately get out of its obligation to pay off that loan, by making the acquired company its own loan, and using proceeds from that to end the LBO firm's debt. The leverage, and the obligation to pay back a debt has almost magically been transferred from the LBO or private equity firm to the acquired company. That has big implications, as Lifton wrote(5):

This additional leverage also creates additional risk; if things don't go right the business will not be able to pay the carrying costs of the debt, the lender will take over the business and the fund will lose its investment. Sometimes, that results in the acquired company placed in bankruptcy proceedings either to liquidate its assets to pay off the debt or to restructure, a process Bain also experienced.

- Selling Assets to Further Reduce the Private Equity Firm's Debt

LBO firms have another trick up their collective sleeves. As Dean Baker continued his example(4),

Now suppose that the Romney Capital arranges to sell off some of Gingrich Inc.'s assets, such as real estate or a highly profitable subsidiary, and then uses the proceeds to make a payment to the Romney Capital rather than leaving the money under the control of Gingrich Inc. Such sales may allow Romney Capital to recoup the rest of its investment and possibly more.

Of course, the result is

Gingrich Inc. is then left as a highly indebted company with few assets.

In this story, Romney Capital may have earned a substantial profit on a limited investment (it recouped most of its money almost immediately when it loaded Gingrich Inc. with debt), without doing anything to improve the operation of Gingrich Inc. If Gingrich Inc. manages to stay in business and generate profits, then this will increase the return. Romney Capital may be able to resell the company and treat the whole sale price as profit.

On the other hand, if Gingrich Inc. goes bankrupt, this will primarily be a problem for creditors, since Romney Capital has already gotten its investment back. In effect, Romney Capital might have secured large gains entirely by financial engineering, while creating no value whatsoever.

Let me underscore that. The LBO model (now also the private equity model) enables the acquiring LBO firm to avoid any losses, by shifting all the risk and obligations to the acquired firms. This puts these firms at considerable jeopardy.

- Tactics to Prepare Acquired Firms for Sale

Of course, LBO/ private equity firms want to do more than not lose money. To make real money, they must be able to sell off the firms they acquire. To do so, they must make these firms, or their components, seem attractive, at least in the short term. To do this, they employ a standard set of tactics out of the generic management playbook.

So, per the LA Times(2),

layoffs are part of the playbook that elite investment firms use to squeeze cash out of struggling companies.

Also, per Lifton(5),

To increase the profits of the acquired company, the fund may reduce the number of employees, reduce pay levels or curtail work time.

In addition, per Josh Barro writing for the Forbe blog(6), other tactics can include

downsizing, increased automation, offshoring, and the like.

- The Private Equity/ Leveraged Buy-Out Version of the Anechoic Effect

It is striking that while Mitt Romney worked at Bain Capital in the last century, and private equity has been around, if not growing, since then, the current presidential campaign seems to be the first occasion which prompted any real public discussion about the nature of private equity, and its significance for the larger political economy. Thus private equity/ LBO seem to have been anechoic for a very long time (like much about how our current health care system operates seems to be anechoic.)

This version of the anechoic effect seems to have been deliberately created by the private equity/ LBO firms.

A Washington Post commentary(7) quoted Mitt Romney,

You know I think it's fine to talk about those things in quiet rooms,...

As a New York Times story(8) put it, these firms are lead by

a group of Wall Street executives who prefer to operate out of the spotlight

A story in Politico(9) called private equity/ leveraged buy-out firms

one of the most secretive redoubts of the American economy

The article went on to suggest that these firms may well have something to hide:

Josh Kosman, author of 'The Buyout of America: How Private Equity Is Destroying Jobs and Killing the American Economy.' [said] 'Most private equity firms are because once you look behind the numbers, there is much they don’t want you to see.'

Furthermore,

Private equity companies often tend to have confidentiality agreements with their investors (Bain would not comment on what agreements it has). Several equity experts interviewed for this story thought any disclosures from Bain were likely to spook its investors.

The private equity business model is based on taking companies out of the public markets, where reporting requirements are strict and investors punishing, making changes that will hopefully make them more profitable and then selling them or taking them public through an IPO.

The part that happens behind the curtain is not always pretty, and private equity firms have learned over the years that it’s hard to tell a complicated story in the media. The goal of private equity is to keep things private.

'It’s had very little consciousness in the political realm until Romney came along because these guys are smart enough not to try to become Treasury secretaries,' said Bill Cohan, a former Wall Street banker-turned-investigative journalist who wrote 'Money and Power: How Goldman Sachs Came To Rule The World.'

In addition, Dean Baker suggested that the confidentiality is used to hide how private equity/ leveraged buy-out firms remove capital from acquired companies(4),

The sort of asset stripping described here, which harms creditors by taking away potential collateral for their loans, violates the law. However it is extremely difficult to prevent, especially with private equity companies that have to make few public disclosures.

Thus secrecy/ confidentiality/ deception should be regarded as one of the main tactics used by private equity/ leveraged buy-out firms.

Implications for Health Care

Mitt Romney's candidacy has generated a surprising amount of discussion about the effects of private equity/ leveraged buy-out firms on the political economy. Many are worried that despite his claims, such firms cause more job loss than job creation. In the Huffington Post(10), Robert Creamer wrote that private equity/ LBOs have contributed to the sense that ordinary people who play by the rules suffer while well-connected insiders prosper:

It just doesn't make sense to them that a relatively tiny number of people -- who don't build a product or create a service -- can make massive amounts of money, while ordinary people who work hard and play by the rules see their incomes flat-line.

Their view is simple. They create cars, or food, or houses or computers -- or they provide police protection, or care for sick people, or teach our kids. Why should they be asked to sacrifice when guys who basically gamble for a living -- as Wall Street speculators -- make incomprehensibly large sums of money?

There seems to be a good argument that the tactics used by private equity/ leveraged buy-out firms might be bad for the general political economy.

Moreover, these firms often take over health care corporations, drug and device companies, health care information technology companies, health insurance companies, for-profit hospital chains, etc. There is reason to think that their standard tactics used on such targets are likely to be particularly bad for health care.

Many health care corporations depend on a long-term view to be successes. To develop new products, drug, device, and health care IT companies must pursue research and development projects that take years. All health care companies depend on highly trained, specialized workers and professionals. To sustain these sorts of employees requires a long-term attention to their development. So private equity/ leveraged buy-out firms' short-term focus, transfer of debt and risk to the acquired companies, and emphasis on short-term generic management cutting costs techniques including lay-offs, outsourcing, etc clash with the sophisticated long-term focus these companies require.

These health care organizations often require the complex interplay of many components. Private equity/ leveraged buy-out firms' efforts to sequester and sell particular assets may disturb this complex system.

Health care quality, and successful research and development require transparency. Extreme emphasis on secrecy by private equity/ leveraged buy-out firms threatens such transparency.

Even more pointed concerns may arise when private equity/ leveraged buy-out firms endeavor to take over non-profit health care organizations. We plan to discuss these in a subsequent post.

The NY Times(g) noted that in the 1980s, leveraged buy-out firms

were branded as 'barbarians at the gate' - the title of a book [by Burrough and Helyar, link here] about the takeover of RJR Nabisco by Kohlberg Kravis Roberts.

Now 30 years later we are finally having a conversation about the role of these firms in the greater political economy. We in health care should be having a parallel discusion about their role in our sphere. I submit that their role was not likely productive. Since health care should not merely be looked upon as a means to make money, but as a public good, we ought to be talking about how to restrain private equity/ leveraged buy-out firms from doing it more damage.

References

1. Goozner M. Private equity's edge: buy now, deduct taxes later.  Fiscal Times, Jan 9, 2012.  Link here.
2, Hamilton W. Private equity industry: a bad rep, but is it deserved. Los Angeles Times, Jan 12, 2012. Link here.
3. Lenzer R. Why Warren Buffet disdains the private equity crowd. Forbes, Jan 14, 2012. Link here.
4. Baker D. NPR does fluff piece for private equity. Beat the Press, Jan 13, 2012. Link here.
5. Lifton RK. Mitt Romney and Bain Capital: understanding the reality. Huffington Post, Jan 13, 2012. Link here.
6. Barro J. The discussion we should be having about Bain. Forbes, Jan 12, 2012. Link here.
7, Robinson E. Reexamining the myth of no-fault capitalism. Washington Post, Jan 16, 2012. Link here.
8. Lattman P, Lowrey A. As Romney advances, private equity becomes part of the debate. New York Times, Jan 10, 2012. Link here.
9. Hagey K. Mitt Romney's Bain Capital days: a black box. Politico, Jan 11, 2012. Link here.
10 Creamer R. Why the Bain Capital controversy is so damaging to GOP chances this fall. Huffington Post, Jan 16, 2012. Link here.

The Corporate Psychopaths Theory of Health Care Dysfunction

A new article in the Journal of Business Ethics suggested that the global financial crisis, or great recession, was primarily due to a fundamental flaw in the leadership of financial organizations, one that has important implications for health care organizations. 

The article, Boddy CR. The corporate psychopaths theory of the global financial crisis.  J Bus Ethics 2011; 102: 255-259 is here.  Its premise was:

The Corporate Psychopaths Theory of the Global Financial Crisis is that Corporate Psychopaths, rising to key senior positions within modern financial corporations, where they are able to influence the moral climate of the whole organisation and yield considerable power, have largely caused the crisis.

Note that in 2004 we first posted about the possibility that a proportion of corporate managers, including those in health care, could be psychopaths, raised then by two experts on psychopathy, Paul Babiak and Robert Hare. In 2006, they published Snakes in Suits, about the dangers of psychopaths as executives and managers (see post here). However, the issue got scant attention in those days of letting the good times roll.

Defining Corporate Psychopaths

Boddy described psychopaths as:

the 1% of people who have no conscience or empathy and who do not care for anyone other than themselves. Some psychopaths are violent and end up in jail, others forge careers in corporations. The latter group who forge successful corporate careers is called Corporate Psychopaths.

Corporate Psychopaths as Leaders

Such people do not make good leaders:

Although they may look smooth, charming, sophisticated, and successful, Corporate Psychopaths should theoretically be almost wholly destructive to the organizations that they work for. The probable mal-effects of the presence of psychopaths in the workplace have been hypothesized about in recent times by a number of leading experts and commentators on psychopathy.

Researchers report that such malevolent leaders are callously disregarding of the needs and wishes of others, prepared to lie, bully and cheat and to disregard or cause harm to the welfare of others. Corporate Psychopaths are also poorly organized managers who adversely affect productivity and have a negative impact on many different areas of organizational effectiveness.

How Corporate Psychopaths Could Have Become Prevalent
Despite the dangers posed by such leadership, corporate psychopaths may rise quickly in management:

Psychologists have argued that Corporate Psychopaths within organizations may be singled out for rapid promotion because of their polish, charm, and cool decisiveness. Expert  ccommentators on the rise of Corporate Psychopaths within modern corporations have also hypothesized that they are more likely to be found at the top of current organisations than at the bottom.

The nature of current corporate culture may facilitate the rise of corporate psychopaths:

These Corporate Psychopaths are charming individuals who have been able to enter modern corporations and other organisations and rise quickly and relatively unnoticed within them because of the relatively chaotic nature of the modern corporation. This corporate nature is characterized by rapid change, constant renewal and quite a rapid turnover of key personnel. These changing conditions make Corporate Psychopaths hard to spot because constant movement makes their behaviour invisible and combined with their extroverted personal charisma and charm, this makes them appear normal and even to be ideal leaders.

The destabilization of modern corporations likely lead to the ascendancy of the corporate psychopath:

However, once corporate takeovers and mergers started to become commonplace and the resultant corporate changes started to accelerate, exacerbated by both globalisation and a rapidly changing technological environment, then corporate stability began to disintegrate. Jobs for life disappeared and not surprisingly employees’ commitment to their employers also lessened accordingly. Job switching first became acceptable and then even became common and employees increasingly found themselves working for unfamiliar organisations and with other people that they did not really know very well.

Rapid movements in key personnel between corporations compared to the relatively slower movements in organisational productivity and success made it increasingly difficult to identify corporate success with any particular manager. Failures were not noticed until too late and the offending managers had already moved on to better positions elsewhere. Successes could equally be claimed by those who had nothing to do with them. Success could thus be claimed by those with the loudest voice, the most influence and the best political skills. Corporate Psychopaths have these skills in abundance and use them with ruthless and calculated efficiency. In this way, the whole corporate and employment environment changed from one that would hold the Corporate Psychopath in check to one where they could flourish and advance relatively unopposed.

The Harms Caused by Corporate Psychopaths as Executives

Thus, Boddy hypothesized the rise of management by corporate psychopaths lead directly to the global financial crisis or great recession:

As evidence of this, senior level remuneration and reward started to increase more and more rapidly and beyond all proportion to shop floor incomes and a culture of greed unfettered by conscience developed. 

Corporate Psychopaths are ideally situated to prey on such an environment and corporate fraud, financial misrepresentation, greed and misbehaviour went through the roof, bringing down huge companies and culminating in the Global Financial Crisis that we are now in.

Writing in 2005, this author commentating on Corporate Psychopaths predicted that the rise of Corporate Psychopaths was a recipe for corporate and societal disaster. This disaster has now happened and is still happening.

What Could be Next

Worse, if this hypothesis is true, as long as it is not addressed, things will get worse:

The very same Corporate Psychopaths, who probably caused the crisis by their self-seeking greed and avarice, are now advising governments on how to get out of the crisis. That this involves paying themselves vast bonuses in the midst of financial hardship for many millions of others, is symptomatic of the problem. Further, if the Corporate Psychopaths Theory of the Global Financial Crisis is correct then we are now far from the end of the crisis. Indeed, it is only the end of the beginning.

Some Agreement

The plausible theory that corporate psychopaths ascending to top management positions in finance caused the global financial crisis has been noticed by a few prominent financial pundits. Writing in Bloomberg, William D Cohan agreed with Boddy's suggestion that "anyone who makes decisions that affect significant numbers of other people, concerning issues of corporate social responsibility or toxic waste, for example, or concerning mass financial markets or mass employment, should be screened to make sure that they are, at the very least, not psychopaths and at most are actually people who care about others."

Brian Besham, writing in the Independent, suggested that Richard Fuld, former CEO of Lehman Brothers, whose bankruptcy kicked off public awareness of the global financial collapse, saying he wanted to eat the hearts of those selling his company's stock short (see this post), was a "terrifying" example of corporate executive psychopathy. Worse, Besham noted that he had discovered an case of an investment bank which "psychometric testing to recruit social psychopaths because their characteristics exactly suited them to senior corporate finance roles."  It may be that corporate psychopaths are actively recruiting their fellows.

Implications for Health Care

This is chilling. It also unfortunately is highly relevant to health care. As we noted, most recently here, leaders of big finance firms, including those whose failures were most spectacular, now often sit on boards of trustees of hospitals, academic medical centers, medical schools, and their parent universities. Thus, the likelihood that a good proportion of the stewardship of our most prominent not-for-profit health care organizations may be in the hands of psychopaths is not negligible.

Furthermore, health care organizations have become as unstable and chaotic, in the way these terms were used by Boddy, as finance firms. This would suggest that their current nature would make it as easy for psychopaths to rise to positions of power in them as they may have in financial firms. In health care we certainly have seen the consequences he suggested were due to psychopathic managers, including

- intimidation (per Boddy, corporate psychopaths are "prepared to lie, bully and cheat and to disregard or cause harm to the welfare of others");
- self-interest ("pursuit of self-enrichment and self-aggrandizement") leading to outrageous executive compensation ("senior level remuneration and reward started to increase more and more rapidly and beyond all proportion to shop floor incomes")
- fraud and other crime ("corporate fraud, financial misrepresentation, greed and misbehaviour went through the roof,... ")

So as we noted in 2006, "a high prevalence of psychopathic managers could explain the prevalence of mismanagement, conflicts of interest, and corruption in the leadership of health care organizations that we have often discussed on Health Care Renewal."

Boddy's first suggestion to deal with the problem in finance was:

Measures exist to identify Corporate Psychopaths. Perhaps it is time to use them.

However, it is as hard to imagine top health care leaders willingly and honestly submitting to the use of instruments designed to identify psychopaths as it is to imagine finance leaders doing so. Furthermore, it is easy to imagine how corporate psychopaths in positions of leadership would ruthlessly deploy their legions of public relations personnel and lawyers to quash any challenge should the notion that they are so dominant gain any credibility.

However, if there is any significant prevalence of corporate psychopaths among the leaders of health care, woe will be unto us until we identify and remove them.

Blast from the Anechoic Past: Former UCI Fertility Doctor Arrested in Mexico

Soon after we started Health Care Renewal, we ran a series of posts about the University of California-Irvine (UCI) medical school and medical center, featuring stories of mismanagement of major programs, especially those involving organ transplantation (liver, kidney, and bone marrow) while the top executives who presided over the mess received generous compensation, sometimes in strikingly irregular ways, and while at least one whistle-blower alleged he lost his job for complaining about safety issues.  Some of the stories went back another 10 years, to 1995.  One particularly striking story involved the UCI infertility program.  Three physicians were accused of stealing ova from some women to implant in others.  One physician was convicted, and two fled the country (see post here).

One of those physicians just turned up.  As reported by ABC News at the end of 2010:

U.S. authorities are working to extradite one of the doctors accused of being behind of the biggest fertility scandals in history. Mexican authorities arrested Dr. Ricardo Asch last month.

Back in the 1990s, Asch and another fertility doctor, Jose Balmaceda, were charged with stealing embryos and eggs belonging to dozens of women who sought treatment at the University of California-Irvine Center for Reproductive Health and implanting them into other women.

They are also accused of not reporting more than $1 million in earnings, and fleeing the country to avoid prosecution.

Marla McCutcheon is one of the women who says she was victimized by Asch. She was one of his patients until she decided to switch physicians because she said she found him 'uncaring.'

McCutcheon, from Irvine, Calif., says she found out years later that after she'd left Asch's care that there were leftover eggs she didn't know about. To this day, she doesn't know what happened to those eggs.

'I would have done anything for those eggs at that time. It's still hard for me to grasp that there might be something to my eggs. Someone may have been able to get pregnant from them,' McCutcheon said.

At the time of the scandal, ABC News saw documents showing that more than 60 other women who were patients at the fertility center had eggs taken from them without their consent. Asch, however, said he knew nothing about it. During the time the incidents occurred, it was not illegal to transfer human tissue without consent.

The case had major repercussions for how fertility clinics operate:

The scandal allegedly involving Asch, Balmaceda and another doctor, Sergio Stone, rocked the field of reproductive medicine, and doctors say they still feel its effects.

'Reproductive medicine is very new. It's come a long way and we've made tremendous progress, but because of scientific advances, it's very high-profile,' said Dr. Jani Jensen, a Mayo Clinic reproductive endocrinologist in Rochester, Minn. 'Whenever there are publicized incidents like this that involve ethical issues, it's sometimes difficult to engender the public's trust.'

Dr. Howard Zacur, director of the Division of Reproductive Endocrinology and Infertility at the Johns Hopkins Fertility Center in Baltimore, Md., said patients still want reassurance their eggs and embryos will be protected from these types of incidents.

It is now against the law in California to take eggs from a woman without her consent.

Note that the disconnect between problematic quality of care at UCI and the generous compensation afforded its top leaders continued through 2010, as this post discussed.

Aside from its colorfulness, there are other reasons to recall the story of the stolen ova and the subsequent troubles at UCI.  First, the list of problems over 15 years discussed in our series of posts suggests an institution whose leadership culture is seriously disturbed.  I cannot view the institution from a distance and figure out what the fundamental problems are with its leadership and governance, but there must be some.  (Note that per a 2006 post, an internal report did fault lack of accountability, leadership by people with no medical background, absence of clear reporting lines, and the overlooking of whistleblowers, but these are just descriptions of bad management and governance, not explanations of them.  Furthermore, it is not clear whether there have been any fundamental changes in leadership or governance since then.  If there readers know there is more to this, please let me know in the comments section below.)

Second, this case illustrates how the anechoic effect has decreased recognition that the problems at UCI may be part of more systemic problems.  Despite the number of problems that occurred, their vividness, and their coverage in local media, the troubles at UCI have not gotten national media attention, nor as far as I can tell, have they ever been discussed in the medical, health care, health services research, or health policy literature.  (I have tried multiple Google scholar searches using the institution's name, and keywords including "scandal," and the names of some of the physicians most prominently named in our series of posts, and have found nothing relevant.)  The 15 year history has produced almost no echoes, and hence now has become as striking a black hole in the annals of bad health care leadership and governance as was the case of the fall of the Allegheny Health Education and Research Foundation (AHERF). 

Certain issues that we discuss on Health Care Renewal have become less anechoic, in particular, conflicts of interest caused by academic physicians financial ties to the drug, biotechnology and device industries.  However, the larger issues of mismanagement by lavishly compensated, and hence perversely incentivized executives remains relatively anechoic.  I am not sure how big a scandal it will take to remove the taboo from discussing it. 

Health Insurers Sanctioned, Fined

It has not been a good few weeks for big US health insurance companies.  First was a report (e.g., per the Wall Street Journal) that three companies had been suspended from selling Medicare Advantage plans:

The U.S. government's Medicare program has ordered three health insurers--Universal American Corp. (UAM), Health Net Inc. (HNT) and Arcadian Health--to stop marketing to and enrolling new members in their Medicare Advantage health and prescription-drug plans, saying the companies violated regulations.

In particular,

Universal American was told to stop marketing to and enrolling people in its Medicare Advantage plans effective Dec. 5. The action doesn't affect current members or the enrolling of beneficiaries in the company's stand-alone Medicare prescription-drug plans.

Health Net had to suspend the marketing of and enrollment in its Medicare Advantage plans and stand-alone Medicare prescription-drug plans as of Friday, as the government said the company's conduct poses a 'serious threat' to enrollees. The sanction doesn't affect the status of current enrollees, however.

In a letter Friday to Theodore Carpenter, head of Universal American's Medicare Advantage business, the Centers for Medicare and Medicaid Services alleged the company has a 'longstanding pattern of prohibited marketing practices targeted to highly vulnerable populations in violation' of federal law and guidelines as well as contractual terms with CMS.

Universal American is a 'chronic poor performer' with respect to the regulations, according to CMS, which said the company's agents engaged in aggressive sales tactics and abusive behavior, and misled or confused beneficiaries or misrepresented the plan.

The agency's letter to Health Net government-programs executive Scott Kelly said the company's conduct 'poses a serious threat to the health and safety of its enrollees,' as a result of the company's 'intractable failure to provide its enrollees with prescription drug benefits in conformance" with laws, guidelines and contract terms.' CMS cited a 'history of non-compliance.'

Then, the state of California fined and ordered restitution from multiple companies, as reported by the San Francisco Chronicle:

State regulators Monday fined seven of California's largest health insurers nearly $5 million for systematically failing to pay doctors and hospitals fairly and on time.

The California Department of Managed Health Care issued the fines following an 18-month audit in which investigators looked at a small but statistically significant sample of claims. The investigation found the plans were paying on average about 80 percent of the claims correctly, far below the legal threshold of 95 percent.

'Our clear and consistent message is that California's hospitals and physicians must be paid fairly and on time,' said Cindy Ehnes, director of the Department of Managed Health Care, which is charged with regulating the states' health maintenance organizations, or HMOs.

In addition to the fines, the companies must pay the doctors and hospitals restitution that is expected to run into the "tens of millions of dollars," Ehnes said. The plans will also be required to come up with a plan to correct the problem and submit to future audits.

Failing to pay providers properly makes it tougher for them to survive in the struggling economy, Ehnes said. 'If providers are not paid, patient care and access suffer,' she said.

Regulators fined Anthem Blue Cross and Blue Shield of California $900,000 each. United/PacifiCare was fined $800,000 and Kaiser Foundation Health Plan and Health Net were both hit with fines of $750,000.


The fines for Cigna and Aetna were $450,000 and $300,000, respectively, for a total of $4.85 million.

Please note that some of these companies have become "frequent flyers" on the Health Care Renewal blog.  Anthem Blue Cross in California is a subsidiary of WellPoint. WellPoint, in particular, just appears again and again on Health Care renewal.  A list of all posts about that company is here, and see this post for a list of past ethical and management missteps.  Health Net appeared in both stories above, and appeared on Health Care Renewal here.  Posts on Aetna are here.

Having been writing for this blog now for several years, I am struck by how often the conduct of particular health care organizations has been discredited, without any discernible effect on the organization's leadership or course.  It is particularly striking how the attention paid and pay given to the leaders of some health care organizations contrasts with the public record of their organization's bad behavior.

In particular, contrast the long catalog of misbehavior by WellPoint, noted above, with the enormous earnings of the company's CEO (more than $13 million in 2009), and her status as a prominent speaker on health care policy (see post here). 

In the laissez faire, anything goes, wild, wild west economy of today, spearheaded by the financial service companies that lead us to the global economic collapse, it seems that ethical leadership counts for nothing.  This is bad when it applies to the leadership of financial services, whose bad leadership can cost us all a lot of money.  It is worse when it applies to health care, whose bad leadership can cost us our health and our lives.

As I have said ad infinitum, to really reform health care, we will need to get accountable, ethical, transparent leadership of health care organizations.

St. Vincent's Goes Bankrupt, Executives Earn Millions

St. Vincent's Hospital in the Greenwich Village section of New York City was a landmark institution which filed for bankruptcy in April, 2010, and then closed its doors. 

Background

A New York Times article written earlier this year described an institution "threatened with extinction" because it stuck to its mission of "compassionate care" in a health care environment that values "fancy equipment and celebrity doctors."  Thus, "officials blamed a high rate of poor and uninsured patients as well as cuts in Medicare and Medicaid and the hospital's inability to negotiate favorable contracts with health insurance companies...." 

Painting Another Picture

However, a story this week in the grittier New York Post painted a different picture:

St. Vincent's Hospital was looted by execs and consultants in the two years before it closed, then grossly exaggerated its debt, according to blockbuster papers set to be filed tomorrow in Manhattan Supreme Court.

The filing, a petition that seeks to force the state Health Department to turn over documents on the closing, says the defunct medical center blew through millions in 'highly questionable' expenses, including $278,000 for a golf outing, while paying its top 10 executives a combined $10 million a year.

It also shelled out $17 million for 'management consultants,' $3.8 million on 'professional fund-raising' and a staggering $104 million on unspecified costs it listed simply as 'other' on its federal tax returns, the petition says.

But even with all that money going out, St. Vincent's wasn't nearly as cash strapped as it claimed, say the court papers, prepared by a law firm working for doctors and nurses formerly employed there and the hospital's West Village neighbors.

Its crushing debt of about $1 billion, which the hospital blamed for having to close its doors in April, was bloated by hundreds of millions of dollars in loans dumped on St. Vincent's from other medical entities run by the Archdiocese of New York, starting in 2001, after the other institutions merged with the hospital, the papers say.

'The debt of the hospital was specifically exaggerated by numerous factors, including the transfer of debt from other Catholic medical centers and mismanagement by the board of directors,' the documents say. 'These transfers . . . remain undisclosed to the public.'

Historical Parallels
These accusations parallel themes that appeared towards the end of the February, 2010, NY Times piece. First, regarding the transfer of debt:

To remain competitive, in 2000 St. Vincent’s merged with several other Catholic hospitals to form St. Vincent Catholic Medical Centers.

Along with the flagship hospital in the Village, it ran seven other hospitals: Bayley Seton and St. Vincent’s on Staten Island; Mary Immaculate, St. John’s and St. Joseph’s in Queens; St. Mary’s in Brooklyn; and St. Vincent’s Westchester, in Harrison, N.Y. It was also affiliated with St. Vincent’s Midtown, formerly St. Clare’s, in Midtown Manhattan.

The merger was conceived as a way to streamline management and give the hospitals pricing leverage, but it was troubled from the beginning. After closings and sales, the network was left with just one New York City hospital, the flagship; a psychiatric and substance abuse treatment hospital in Westchester; and several nursing homes and other outpatient facilities. Some of St. Vincent’s debt was inherited from the closed hospitals.

Second, regarding mismanagement:

In 2004, St. Vincent’s turned over management to Speltz & Weis, the first in a series of turnaround consultants. It paid the firms millions of dollars a year to run the hospital and hired their officials as hospital executives. The system filed for Chapter 11 bankruptcy protection in early July 2005, when it appeared, according to court papers filed by hospital creditors, that it would be unable to make its payroll.

In a lawsuit filed in 2007, some of the hospital’s creditors painted a picture of a hospital system trapped between unscrupulous consultants and a passive or gullible board. The lawsuit accused David E. Speltz and Timothy C. Weis, the hospital system’s former chief executive and chief financial officer, of delaying the bankruptcy organization while they and their consulting firm collected millions of dollars in fees.

The lawsuit accused them of hiring high-priced contractors and padding their fees, instead of using hospital employees to do work. And it says they leveraged their positions with the hospital to negotiate the sale of their consulting company to Huron Consulting Group, in Chicago, also a defendant in the case.

The outcome of that earlier lawsuit was unclear.  It does suggest that St. Vincent's may have been chronically bled by greedy managers and consultants.

Contrasting Financial Health and Executive Compensation

Of course, as one of our unofficial legal consultants noted, anyone can file a lawsuit. However, perusal of the latest 990 form filed with the Internal Revenue Service by St Vincent Catholic Medical Centers for calendar year 2008 did reveal a disquieting contrast.

That form stated that the the hospital lost over $65 million in 2008, and over $34 million in 2007. However, in 2008, here were the compensation of its highest paid managers

- Brian Fitzsimmons, Executive Director, $2,135,401
- Bernadette Kingman-Bez, Senvior Vice President, CCO (?), $1,520,841
- Paul Rosenfeld, Executive Director, CC, $1,196,458
- Henry Amoroso, CEO, $1,081,592

In addition, seven current and former executives at the Senior Vice President of Vice President level earned over $500,000 that year, and another 13 earned over $250,000.

Summary

So clearly, while the hospital was hemorrhaging money, and a little more than a year away from bankruptcy, this not-for-profit hospital whose mission emphasized serving the poor served a large corps of  executives very large amounts of money.  So we see again the pattern of top managers rewarding themselves disproportionately (here, grossly so) given the mission and financial status of their organizations.  The picture is of pay entirely independent of performance, and leaders who are ultimately only in it for the money.

How many more examples like this do we need until there is resolve that real health care reform will make top health care leaders accountable for their performance, and provide them incentives that are fair and rational, rather than perverse?

Post-Script

Of course, if we regard the fall of institutions whose mission was to do good as inevitable in our Darwinian world, an explanation that earlier coverage of this story suggested, all we can do is to throw our hands up.  However, the inevitability argument is often made by those who are benefiting from the current way of doing things.  A more skeptical view of this case, and related health policy issues, may suggest a different approach. 

$4 Billion Military EMR "AHLTA" to be Put Out of Its Misery? Also, Does the VA Have $150 Million to Burn on IT That Was Never Used?

I have heard from numerous reliable sources that the military's $4 billion+ EMR known as "Armed Forces Health Longitudinal Technology Application" (AHLTA) is to be declared a failure, and replaced.

I'd written about AHLTA's considerable problems at the post "If The Military Can't Get Electronic Health Records Right, Why Would We Think Conflicted EHR Companies And IT-Backwater Hospitals Can?" at http://hcrenewal.blogspot.com/2009/06/if-military-cant-get-electronic-health.html .

From that post:

[AHLTA has been described as] difficult for physicians to use. Intolerable. Slow. Unreliable. Frequently crashes. Near mutiny. Morale. Affecting patient care, decreasing patient load. Can it get worse?

Yes ... When the Army's Surgeon General observes that clinicians "spend as much or more time working around the system as they do with the system", and that the superusers are not enthusiastic about the system, and a Congressional hearing is held entitled "where do we go from here?" (it's clear to this author that they have no clue), one should start to very critically question basic assumptions about health IT.

One wonders if anyone responsible for AHLTA ever read my now decade-old site on health IT dysfunction, now at this link at Drexel University, or its many hyperlinks to additional resources.

Meanwhile, the VA is having its own problems as noted on the HISTalk blog:

[HISTalk News 6/30/10] Back in March, I dug out a juicy nugget from an internal VA report: it was scrapping a $150 million patient scheduling system without ever bringing it live. The GAO weighs in with its official report (warning: PDF), pegging the cost at $127 million and saying “VA has not implemented any of the planned system’s capabilities and is essentially starting over.” The contractor that developed the system with “a large number of defects” walks away with $65 million. GAO finds much to criticize about the VA’s involvement: lack of competitive bidding, sloppy specs, unreliable status reports, and lack of action by project oversight groups when the project started tanking.

The linked PDF report from the U.S. Government Accountability Office (GAO), entitled "INFORMATION TECHNOLOGY - Management Improvements Are Essential to VA’s Second Effort to Replace Its Outpatient Scheduling System", reveals errors that cause me to question whether the project leadership ever passed their introductory undergraduate IT courses (assuming they had any).

From that report:

VA’s efforts to successfully complete the Scheduling Replacement Project were hindered by weaknesses in several key project management disciplines and a lack of effective oversight that, if not addressed, could undermine the department’s second effort to replace its scheduling system:

• VA did not adequately plan its acquisition of the scheduling application and did not obtain the benefits of competition.
• VA did not ensure requirements were complete and sufficiently detailed to guide development of the scheduling system.
• VA performed system tests concurrently, increasing the risk that the system would not perform as intended, and did not always follow its own guidance, leading to software passing through the testing process with unaddressed critical defects.
• VA’s project progress and status reports were not reliable, and included data that provided inconsistent views of project performance.
• VA did not effectively identify, mitigate, and communicate project risks due to, among other things, staff members’ reluctance to raise issues to the department’s leadership.
• VA’s various oversight boards had responsibility for overseeing the Scheduling Replacement Project; however, they did not take corrective actions despite the department becoming aware of significant issues.
  

The impact of the scheduling project on the HealtheVet initiative cannot yet be determined because VA has not developed a comprehensive plan for HealtheVet that, among other things, documents the dependencies among the projects that comprise the initiative.

My question is:

By what miracle of God will the military's AHLTA's and the VA's scheduling system "replacements" be any better than what now exists? Through reliance on commercial EMR vendors and management consultant "experts", perhaps?

If so, I wish the military and VA the best of luck. They will need it.

The problems with computing in complex settings such as medicine are pervasive, far beyond the military. It is increasingly clear that the leadership of the healthcare IT ecosystem (and probably even the broader IT ecosystem) consists of recycled incompetents, never held accountable for project failures, even massive ones, instead moving on to wreak mayhem elsewhere. This has certainly been my own experience in both the hospital and pharma sectors.

Competent experts who actually try to do meaningful work (a.k.a. "rock the boat" or "non-team players" in the parlance of the incompetent and/or the power seekers) have become hopelessly marginalized - or unemployed. See the post "Edwin Lee on the Tiger We Are Now Riding" by Roy Poses. Our economy and even society is falling apart as a result of these leadership problems; Lee's post "Lightweight oil executives produce worthless disaster plans" as linked above is pathognomonic of these failures. Writes Lee:

... This week the executives of the other major oil companies (besides BP) presented their oil spill contingency plans to Congress. Several things were immediately evident: the plans were all grossly inadequate and carelessly done, they were all developed by the same outside consulting firm and they were essentially carbon copies of BP’s nearly useless plans. In other words, they were empty “cover your ass” documents rather than serious contingency plans. Some people may find this surprising. From my experience, it’s what we can and should expect from the vast majority of large, public institutions because of a universal and deeply flawed process for selecting their leaders.

... Those who are chosen to lead fit a mold: mediocre, short term thinkers with similar work experiences, outlooks, temperaments and personal incentives. Disaster response, creative thinking and fundamental changes are outside their limited range of interests or competencies.

Here is the major problem in a nutshell: no real accountability where it matters.

What follows from this is a first principle:

Recycled incompetents will never produce good information systems.

Major health IT commercial vendor CEO's have been reported as making statements that health IT usability -- one of AHLTA's major deficiencies - "will be part of certification over her dead body" (as described in my post at http://hcrenewal.blogspot.com/2010/05/did-epic-ceo-judy-faulkner-of-epic.html).

Why don't we recycle physicians with track records of killing patients? Better yet, make them Chairs of clinical departments?

The answer is obvious, but the IT culture seems immune to such considerations.

The UK's National Programme for IT in the NHS (NPfIT) is AHLTA on a national scale:

The UK Public Accounts Committee report on disastrous problems in their £12.7 billion national EMR program is here.

Gateway reviews of the UK National Programme for IT from the Office of Government Commerce (OGC) are here (released under the UK’s Freedom of Information Act), and a summary of 16 key points is here.

My prediction is this:

I do not believe health IT has advanced enough beyond the experimental stage for clinically efficacious, safe, cost effective mass dissemination.

Further, I do not believe that the human capital necessary to make such dissemination happen in a clinically efficacious, safe, cost effective manner exists in the IT industry.

Talent management in that industry -- based on cheap, just-in-time, "programming language/platform du jour", "smart people cannot or should not learn but should be declared obsolete", and Bart Simpson-style attitudes about ability and expertise -- does not allow the needed human capital to exist. A remarkable and revealing example comes from an article about health IT leadership a number of years ago in the journal “Healthcare Informatics”:

I don't think a degree gets you anything," says healthcare recruiter Lion Goodman, president of the Goodman Group in San Rafael, California about CIO's and other healthcare MIS staffers. Healthcare MIS recruiter Betsy Hersher of Hersher Associates, Northbrook, Illinois, agreed, stating "There's nothing like the school of hard knocks." In seeking out CIO talent, recruiter Lion Goodman "doesn't think clinical experience yields [hospital] IT people who have broad enough perspective. Physicians in particular make poor choices for CIOs. They don't think of the business issues at hand because they're consumed with patient care issues," according to Goodman.

The "management improvements" sought by the VA may simply not be possible, until the IT field undergoes something comparable to the "Flexner report" that the medical professions and their educational programs underwent a century ago.

And perhaps until health IT leadership personnel begin to lose their homes and fortunes in court to harmed patient plaintiffs, to the point where the leadership start begging competent, marginalized professionals who actually know what they're doing to save their sorry asses.

-- SS

7/6 addendum:

For more on the topic of dinosaur-era attitudes about Medical Informatics that lead to such debacles, see my July 5, 2010 post "Jurassic Attitudes about Medical Informatics: in the U.S. Navy?"

WellPoint: Don't Know Much About Computer Programming; Aetna: Don't Know Much About Mathematics

Big US based health care insurance companies have not been covering themselves in glory in the last week.

Aetna's Math Errors

First, there was the case of Aetna's mathematical prowess, e.g., as reported by the Los Angeles Times:

A second insurance company in California has killed plans for double-digit rate hikes for individual policyholders because of errors in its filing that would have inflated premiums, state regulators said Thursday.

Connecticut-based Aetna Inc. had sought an average 19% increase in rates for its 65,000 individual customers, but pulled back after multiple math errors in its paperwork were found by its own staff and by an independent consultant working for the state.

Aetna's decision follows a similar move by Anthem Blue Cross, which canceled a rate increase of as much as 39% for many of its 800,000 California policyholders in April after the state consultant found calculation errors in its filing with the California Insurance Department.

Of course, Aetna tried to minimize the story:

An Aetna spokeswoman said the company found 'a miscalculation not previously detected' when it conducted a third round of internal reviews.

'This was a simple human error,' said spokeswoman Anjanette Coplin, who did not elaborate.

However,

'There were multiple errors … in the way [Aetna] annualized premiums and in the compounding of the rate increase,' said state Insurance Department spokesman Darrel Ng.

Of course, somehow the errors all were in Aetna's favor:

Even with the new disclosure requirements, regulators have limited authority to block rate increases. They can do so only if insurers fail to spend at least 70% of their premiums on medical claims.

In Aetna's recent rate filing, the insurer said its plan met the 70% minimum. But once the errors were identified, medical-claim spending fell below the 70% requirement. The proposed rates were higher than they should have been, officials said.

WellPoint's Computer Errors

A few minutes ago, the Associated Press reported:

WellPoint Inc. has notified 470,000 individual insurance customers that medical records, credit card numbers and other sensitive information may have been exposed in the latest security breach of the health insurer's records.

The Indianapolis company said the problem stemmed from an online program customers can use to track the progress of their application for coverage. It was fixed in March.

Spokeswoman Cynthia Sanders said an outside vendor had upgraded the insurer's application tracker last October and told the insurer all security measures were back in place.

But a California customer discovered that she could call up confidential information of other customers by manipulating Web addresses used in the program. Customers use a Web site and password to track their applications.

Note that this security breach was potentially serious:

WellPoint's security breach doesn't crack the top 10 in terms of number of people who may have had information exposed, said Paul Stephens, the [Privacy Rights Clearinghouse]organization's director of policy and advocacy. Even so, he labeled the breach 'very serious' because it possibly involved both financial and medical information.

This is not the first time WellPoint's computers and software have violated the privacy of its applicants or customers:

Two years ago, WellPoint offered free credit monitoring after it said personal information for about 128,000 customers in several states had been exposed online. In 2006, backup computer tapes containing the personal information of 200,000 of its members were stolen from a Massachusetts vendor's office.

Summary

Of course, everyone makes mistakes.  However, one would expect that at least health insurance companies/ managed care organizations ought to be able to do the math necessary to support their rate proposals correctly, and keep their policy-holders' and applicants' personal information confidential.  These would seem to be fundamental competencies that such organizations ought to display.  Of course, one can find other examples of lack the lack of competency (and worse) displayed by both Aetna and WellPoint. 

Furthermore, anyone can make mistakes, but in the real world, those who preside over such mistake-prone enterprises often do not do too well.  However, in the bizarre world of large health care organizations, the executives who preside over the ongoing bumbling just make more and more money, under the pretense that their continuing brilliant leadership just leads to one triumph after another. 

As we noted here, WellPoint CEO Angela Braly's total compensation increased in 2009 to an outsized $13.1 million, with the executives just underneath her paid proportionately well.  Per its 2010 proxy statement, WellPoint's

Total Rewards compensation program is designed to attract, engage, motivate and retain a talented team of executive officers and to appropriately reward those executive officers for their contributions to our business and our members. We seek to accomplish this goal in a way that is closely aligned with the long-term interests of our shareholders and the expectations of our members and health care providers.

I suspect that WellPoint's members' expectations did not include the three computer security breaches noted above.

Similarly, according to its 2010 proxy statement, Aetna CEO Ronald A Williams' total compensation in 2009 was a mere $18,058,162. Other top executives made proportionate amounts, from more than $1 million to more than $12 million. The rationale underlying executive compensation includes:

We seek to implement a pay-for-performance philosophy by tying a significant portion of our executives’ compensation to their achievement of financial and other goals that are linked to the Company’s business strategy and each executive’s contributions towards the achievement of those goals.

To me, avoiding mathematical errors in calculating policy premiums ought to be part of the company's goals linked to its business strategy.

An old rock song that starts with "don't know much about history," may have a certain charm.  Health insurance companies that cannot accurately calculate premiums or protect the confidentiality of policy-holders' computerized data has none. 

As long as "imperial CEOs" can continue to get extremely rich while presiding over incompetence and stupidity, if not worse (see here), we can expect the foolishness to continue.  Meanwhile, the foolishness drives up costs and drives down quality of health care for the poor suffering patients, let alone the physicians and other health care professionals who must deal with it.

To really reform health care, we need to provide incentives for competent, honest leadership, and make that leadership accountable for its shortcomings.

Abbott's TriCor Fails To Beat A Sugar Pill in Diabetics - And In Pharma's Current Death Spiral, Forget About a Drug That Will

In numerous national publications today, we are once again reminded that lowering the risk of diabetics for vascular events (MI/heart attack, CVA/stroke etc.) and death is far more complex than lowering measures such as cholesterol and blood pressure.

Note these articles:

Abbott's TriCor Fails To Beat A Sugar Pill
March 14, 2010 - 9:58 am
Matthew Herper
Forbes.com

ATLANTA -- A popular triglyceride-lowering drug that has been taken by millions of Americans failed to prevent heart disease in a big federal study being presented today.

The drug, TriCor from Abbott Laboratories, has been used for over a quarter of a century to lower levels of fatty particles in the blood called triglycerides. The presumption has been that doing so would prevent heart attacks or heart-related deaths. TriCor has annual sales of more than $1 billion.

But the new study being presented at the American College of Cardiology meeting casts doubt on this. In the study, funded by the National Heart, Lung and Blood Institute, 5,500 patients with diabetes got either TriCor or a placebo. After five years, there was no difference in the rate of heart attacks, strokes and deaths in the patients who got Tricor versus those who took a sugar pill.

and

Search for Better Diabetes Therapy Falls Short
Mar. 14, 2010, 9:39 P.M. ET
Ron Winslow
Wall Street Journal

Current Treatments, While Effective, Failed to Also Help Prevent Heart Attacks and Stroke

ATLANTA—New strategies to prevent and treat diabetes and heart disease failed to improve care in two major studies, frustrating researchers' efforts to find more-effective approaches to the world's burgeoning diabetes epidemic.

The studies are among the first large trials to test whether treatments recommended for diabetes patients also reduce the risk of heart attacks and strokes. Diabetics are between two and four times as likely to die of cardiovascular causes as nondiabetics. The lack of data on whether strategies to treat diabetes actually lower heart risk is of growing concern to physicians, researchers and regulators.

One new study, called Accord, found that treating blood pressure to lower levels than recommended in current practice doesn't further reduce risk of death, heart attack and stroke among people with diabetes. The same study also found that the drug Tricor, marketed by Abbott Laboratories, failed to prevent such events even though it lowered levels of blood fats called triglycerides that are associated with high diabetes risk.

In the other report, dubbed Navigator, a diabetes drug called Starlix failed to prevent people at high risk of diabetes from progressing to the disease. The blood-pressure medicine Diovan did modestly reduce risk of developing diabetes in the same study, but neither drug significantly cut the risk of heart-related deaths, heart attacks and strokes. Both pills in this study are sold by Novartis SA of Switzerland.

There is a meta-issue I wish to bring up:

It's clear there are many phenomena going on in diabetes and other metabolic disorders that we simply do not understand.

It's also very likely that there are new drugs, yet undiscovered, that could be developed and that would improve mortality and morbidity.

It's too bad the pharmaceutical industry is now largely run by dyscompetents, incompetents, and other management charlatans, not to mention those responsible for questionable or outright criminal behaviors (such as here, here).

This privileged class has apparently so demoralized pharma rank and file including the very soul of drug discovery (chemists) - based for example on "layoff thread" comments on a very popular blog for medicinal, synthetic and other chemists such as here - that these new drugs are increasingly unlikely to be developed at all.

The industry in its current anti-intellectual, "lay them off and watch the stock price rise", short-term narrow-minded idiocy-driven death spiral is basically good for nothing except money games.

Pity.

-- SS

The Argument Over Insurance Rate Hikes: A Systemic Problem with Health Care Organizations' Leadership and Governance?

There has been a tremendous amount of news coverage of a large rate increase proposed by Anthem Blue Cross, a subsidiary of WellPoint, in California.  For example, the Los Angeles Times reported last week,

Congress opened an investigation Tuesday into Anthem Blue Cross' impending rate increases in California as President Obama cited the premium hikes -- some as high as 39% -- in his bid to pass national healthcare legislation.

The House Committee on Energy and Commerce and its Subcommittee on Oversight and Investigations announced they were examining the increases, which are set to take effect March 1. The subcommittee has scheduled a Feb. 24 hearing in Washington, while an Assembly committee in Sacramento has set a hearing for Feb 23.

'Reports of premium increases up to 39% are deeply troubling,' Rep. Henry A. Waxman (D-Beverly Hills), who chairs the energy committee, said in a statement. 'At a time when millions of Americans are struggling to keep their health insurance, we need to know what possible justification there could be for increases of this magnitude.'

Anthem of Woodland Hills is the state's largest for-profit insurer and a unit of Indianapolis health insurance giant WellPoint Inc.

At issue are increases in monthly premiums for many of Anthem's estimated 800,000 customers with individual health insurance policies who are not part of group coverage.

Anthem began informing individual policyholders last month that prices would go up March 1 and could be adjusted 'more frequently' than typical yearly increases.

The company would not say how high the rates could go or how many customers would be affected. Brokers and policyholders said many of the anticipated increases were 30% to 39%, the largest they could recall. The brokers said other insurers also were raising rates by double digits.

Anthem maintains that its increases are necessary to meet growing healthcare costs, even as it voices sympathy for policyholders whose premiums are rising.

In addition, per again a Los Angeles Times article this week,

Executives from California health insurance giant Anthem Blue Cross, under fire for scheduled rate hikes of up to 39%, insisted Tuesday that their premiums were fair and legal, and they told lawmakers they expected that the increases would go forward.

Appearing before the state Assembly's health committee, the officials said that they believed rate increases for individual health insurance policies, delayed until May 1 while being reviewed by the Department of Insurance, would survive scrutiny by regulators

In Sacramento, Anthem's president, Leslie Margolin, told the committee that much of the public frustration over the rate hikes was misdirected and should be aimed at the nation's healthcare system.

'This debate and this inquiry cannot and should not be just about the insurance industry or the delivery system or regulators or legislators or customers or brokers,' Margolin said.

'We have wasted precious time and precious resources doing battle with each other,' she added. 'We must come together collaboratively and strategically to address the distressing symptoms of our troubled system -- rising premiums, for example -- and to address the fundamental underlying causes of our collective failure.'

As we have discussed time after time on Health Care Renewal, there are multiple fundamental problems with health care in the US (and around the world.) The Anthem President above did not apparently specify what she thought these problems are. We have discussed in particular problems that arise out of abuse and concentration of power in health, particularly problems with the leadership and governance of health care organizations. We have suggested that such problems are major causes of the ever rising costs of, declining access to, and stagnant quality of health care in the US.

These problems do not seem to particularly afflict WellPoint more than most other organizations, and certainly do afflict the other organizations with which WellPoint has to deal.  On the other hand, WellPoint has certainly had its own share of issues. These have been sufficient to raise questions about the organization's leadership's transparency, ethics, and management abilities. While WellPoint perhaps should not be singled out for these sorts of problems, the extent they may have contributed to the costs it imposes, and its ability to manage its relationships with other organizations should be a source of skepticism about the idealized pronouncements of its leaders.

For a recent example, the Los Angeles Times also just reported,

California's largest for-profit health insurer violated state law more than 700 times over a three-year period by failing to pay medical claims on time and misrepresenting policy provisions to customers, the state's insurance commissioner said Monday.

Anthem Blue Cross of Woodland Hills could face fines of up to $7 million stemming from the alleged violations from 2006 to 2009. Commissioner Steve Poizner said the insurer repeatedly failed to respond to state regulators in a 'reasonable time' as they investigated complaints over the last year.

'We believe there is evidence to suggest there are serious issues with how Anthem Blue Cross pays claims,' Poizner said at a Sacramento news conference. 'Most disturbing to us is that they don't even respond' to the Department of Insurance 'in a timely way.'

Furthermore, WellPoint...

• settled a RICO (racketeer influenced corrupt organization) law-suit in California over its alleged systematic attempts to withhold payments from physicians (see post here).
• subsidiary New York Empire Blue Cross and Blue Shield misplaced a computer disc containing confidential information on 75,000 policy-holders (see story here).
• California Anthem Blue Cross subsidiary cancelled individual insurance policies after their owners made large claims (a practices sometimes called rescission).  The company was ordered to pay a million dollar fine in early 2007 for this (see post here).  A state agency charged that some of these cancellations by another WellPoint subsidiary were improper (see post here).  WellPoint was alleged to have pushed physicians to look for patients' medical problems that would allow rescission (see post here).  It turned out that California never collected the 2007 fine noted above, allegedly because the state agency feared that WellPoint had become too powerful to take on (see post here). But in 2008, WellPoint agreed to pay more fines for its rescission practices (see post here).  In 2009, WellPoint executives were defiant about their continued intention to make rescission in hearings before the US congress (see post here).
• California Blue Cross subsidiary allegedly attempted to get physicians to sign contracts whose confidentiality provisions would have prevented them from consulting lawyers about the contract (see post here).
• formerly acclaimed CFO was fired for unclear reasons, and then allegations from numerous women of what now might be called Tiger Woods-like activities surfaced (see post here).
• announced that its investment portfolio was hardly immune from the losses prevalent in late 2008 (see post here).
• was sanctioned by the US government in early 2009 for erroneously denying coverage to senior patients who subscribed to its Medicare drug plans (see post here).
• settled charges that it had used a questionable data-base (builty by Ingenix, a subsidiary of ostensible WellPoint competitor UnitedHealth) to determine fees paid to physicians for out-of-network care (see post here). 

So, WellPoint's subsidiary Anthem President Margolin was right in that her company, or insurance and managed care companies should not be blamed for all of our health care woes.  But I submit that her company should no less have to address concerns about the transparency, honesty, and skill of its management, and how problems in these areas have driven up costs, decreased access, threatened quality, and demoralized health care professsionals  than do leaders of other health care organizations.  At the moment, such concerns are at best peripheral to the ongoing debate on health care reform in the US.  I suggest they ought to be central.

ADDENDUM (24 February, 2010) - see also comments on the Covert Rationing Blog, and on the Managed Care Matters blog.