No Skin in the Game - A Private Health System for the Very Rich

We have noted occasional hints that the very rich may have a separate health care system which may shield them from the vicissitudes of our dysfunctional health care system. A broader hint came in an interview in the Wall Street Journal.

The Company

 The subject of the interview was Leslie Michelson, the CEO of Private Health Management.  The activities of the company were defined somewhat vaguely,

an ultra high-end company that borrows from concierge medicine, managed care, applied-sciences research and information technology while fitting into no neat category. The best analogue might be the investment and tax specialists that the affluent employ to run their finances; Mr. Michelson does the same for their health care. 'Like private wealth management, just far more important,' he quips in his modern Beverly Hills offices, all green glass and steel, white walls, white floors.

The Clientele

The company manages health care for a select clientele:

Private Health caters to 'high net worth individuals' and to businesses that retain its services for their executives as a benefit. Mr. Michelson says he serves between 12,000 and 15,000 clients, 'principally in private equity, hedge funds, professional and financial services firms.'

Note that the clientele seem to come mainly from the ranks of top executives of financial firms, probably some of the richest of the rich in the US.

Rapid Response Team for Acute Illness

Private Health Management's most distinctive service is the rapid response team it can "parachute in" to provide care for an acute illness,

whenever one of its patients has a medical emergency or complex condition, say, a traumatic brain injury or newly diagnosed cancer. A personal-care team parachutes in, led by a clinician employed by the company, and compiles a brief on the patient. They centralize and digitize the patient's medical records, usually dog-eared paper piles that can run to thousands of pages. Research scientists immerse themselves in the latest findings and treatment regimens for the particular condition involved.

Tests are double-checked—biopsy tissues are sent to an outside pathologist, MRIs to another radiologist. For an era of targeted therapies, Private Health runs a full battery of molecular diagnostics 'to sequence the entire three billion base pairs of somebody's DNA in a couple of hours,' Mr. Michelson marvels.

The goal is to ensure an accurate diagnosis and lay out all the treatment options. Private Health functions as a kind of running, independent second opinion.

Physician Network

In addition, Private Health Management provides access to a network of ostensibly the very best physicians,

Mr. Michelson built a series of proprietary algorithms to distinguish 'the few who are the very best' from 'the many who are very good,' based on 'the factors that predict excellence.' For example, the premier caregivers for metastatic cancer are usually academic researchers on the cutting edge, not general oncologists. The best orthopedic surgeons perform many procedures as they master the clinical learning curve, ideally for a single injury.

His referral database includes 2,200 specialists across 160 medical fields, 'reified into far finer groupings of disease than is standard practice.' He says that 'the world becomes so much clearer when you are able to identify the physician with the deepest and narrowest expertise in exactly what you need.'

Mr. Michelson says doctors like to belong to his informal network because they're 'interested in excellence and what we stand for.'

However, next,

 He adds, with more than a little euphemism, 'In a world in which 98% of the conversations are about cost containment, it's a joy for them to have somebody who's focused on enhancing quality only.' No doubt true, though it probably doesn't hurt that providers also like to have a relationship with his client base, the sort of people who become university patrons or donate a hospital wing.

This raises the question of whether doctors in his network may exhibit some greed along with their putative excellence.

Questions Begged About How it Works

The article actually devoted more space to Mr Michelson rationalizing his business as part of his overall interest in reforming health care than to discussion of how it works and what its implications are.  The short description of the processes above actually raised more questions about how the Private Health System works than it answered.  Some examples are: how could an optimal rapid response team be quickly mobilized given that the nature of acute illnesses may not be immediately apparent?  How would such a team interact within a hospital setting, or does the company have its own parallel hospital system?  What about the rest of medicine and health care outside of acute and intensive care, particularly primary care and management of chronic disease?  How does the referral data base function, and how would a classification that seems focused on the "narrowest expertise" cope with patients with multiple common illnesses or patients with undefined or undiagnosed problems?  These begged questions suggest there may actually be much more to the Private Health Management system than was discussed in the article.

Perhaps instead the care provided by Private Health Management might not actually result in better outcomes for its patients.  Consider some other questions: given how hard it is to assess physician performance and measure quality of care, how can Private Health Management be assured that its physicians are really the best of the best?  Given the apparent financial incentives for participating in the system, would the doctors who most appreciate these incentives be likely to provide the best care?  Would the apparent bias of the system toward high technology and super specialized care, would the system over-treat most of its patients? 


Summary and Implications

Nonetheless, the article provides more evidence that the US has a secretive parallel health care system for the very rich.  The most important implication is that such a system could protect the very rich from the access problems and bureaucratic annoyances that plague ordinary patients in larger dysfunctional health care system.  By thus having "no skin in the game," those among the very rich who are not themselves directly involved with health care would have little reason to care or want to do anything about the problems besetting the larger health care system.  Since the very rich have become increasingly politically powerful, the absence of such interest or motivation for change among them would make true health care reform much more difficult. 

If there is a parallel health care system for the very rich, its real effects on health and health care are unknown.  As best as I can tell, the very concept is almost entirely anechoic except for our very limited discussions on Health Care Renewal.  The subject cries out for investigative reporting, and consideration by health care policy, research, and ethics experts. 

Not Your Average Joe's Health Plan

A Denver Post article offered a brief glimpse into the health benefits of corporate leaders, on the unusual occasion of a former CEO now in legal fight for the health benefits in the style to which he had become accustomed:

Poor Joe. He's not getting the health-care benefits he was promised.

His former employer merged with another company, and then another, and then another. And, you know how it goes after a slew of mergers. Suddenly the new, conglomerated monster just doesn't care about retirees any more.

Joe isn't going to sit back and take it like an average Joe. He's suing his former employer in U.S. District Court in Manhattan for breach of contract, breach of faith, breach of fiduciary duty and even promissory estoppel.

The Joe in question was really:

Lord & Taylor's CEO.

Joseph E. Brooks of Greenwich, Conn., lorded over a fourfold increase in sales at Lord & Taylor, expanding to 46 from 19 locations.

His career and Lord and Taylor's course after that were checkered, perhaps contributing to the current dispute:

But that was a long time ago. And Macy's Inc., the current parent company, is resisting some of his medical claims.

Brooks didn't get a deal like this from Filene's, where he served as president before joining Lord & Taylor. Or Ann Taylor, where he went on to generate shareholder lawsuits and shopper hate mail after demanding lower prices from suppliers and higher prices from customers, destroying both quality and value at the same time.

Brooks also made his son president of Ann Taylor, sparking cries of nepotism. And then his son got snagged trying to slip by U.S. Customs without paying duties on pricey watches and was forced to resign. The senior Brooks subsequently resigned as well. A 1992 Newsday article called him 'as egotistical and extravagant as he was brilliant.'

What Health Care Benefits Do CEOs Get?

What had Brooks been promised as CEO of Lord and Taylor?

In 1983, Lord & Taylor's corporate parent told Brooks it sought to provide 'great comfort to executives knowing that their medical costs are fully reimbursed by the Corporation.' The company told Joe it was a lifetime guarantee.

CEOs should never, ever, have to worry about health care.

Here are some details about his benefits:

And for nearly 27 years, substantially all medical costs have been fully covered, even premiums.

We're not just talking doctors' visits, hospitals, medications and tests. We're talking all travel and ancillary expenses associated with care, too.

We're talking first-class transportation, accommodations and meals while being treated at the Mayo Clinic and the Duke Diet and Fitness Center. We're talking expenses for a companion or personal aide, too.

We're also talking 'cosmetic services (surgery, medications, injections, creams and the like)' dental care, gym memberships, personal trainers, vitamins, massages — all paid by Joe's former employer for the rest of Joe's life.

Oh, and if any of these benefits have tax consequences, we're talking gross-up payments to cover that, too.

Why should we be concerned about the extravagant health plans given to top corporate executives? 

The Implications

We noted in 2009 that the Goldman Sachs 2009 proxy statement indicated that top executives of that now controversial company received health plans worth about $40,000 each. 

My concern then were not how much the costs of the plans contribute to top corporate leaders' compensation packages. Such packages are generally already so outrageously huge that providing $40,000 rather than $13,000 worth of health insurance is a trivial increase. My concern was not that plan recipients' demands for health care will collectively increase health care costs, because they likely include only a tiny portion of the population.


My main concern, instead, was how much these plans further insulate already cocooned top executives from the vicissitudes of daily life, particularly related to coping with our current dysfunctional health care system. What benefits executive health care plans provided were not clear from the 2009 story about Goldman Sachs.  However, this year's case of Joe Brooks does suggest that the plans paid for every expense that could be conceivably health related. 

As I worried then, it now does appear that such plans could completely insulate executives from having to deal with the managed care/ health insurance bureaucracy which frustrates patients seeking particular services, but not necessarily the most expensive, or least beneficial services. Furthermore, such plans may completely insulate executives from the various other vicissitudes of managing our currently dysfunctional health care system.  (By the way, that is why it seemed amazing that the CEO of Pfizer had to put up with some of the common vicissitudes when he went to a hospital for an elective procedure, an experience he publicly talked about with an almost charming naivete, given that he runs such a powerful health care organization which has been so influential in shaping our US "health care reform," see post here.)

Such executives isolated from the real world of health care might thus not have gut level appreciation of how dysfunctional the health care system has become for even insured patients. Since top executives often are disproportionately influential members of the "superclass," their disconnection from the realities of dysfunctional health care is likely to translate into little real support by the powers that be for meaningful health care reform. There support may be further retarded by the influence of their fellow superclass members whose personal fortunes depend on the status quo in health care.

Real improvement of health care may depend on finding leaders who have better understanding of the plight of real people.
 
Two Postscripts
 
Note: the Goldman Sachs 2010 proxy indicates that the executive health plans given to the five most highly paid executives cost up to $56,927.  
 
Also note that despite the effect that executive health plans may have on the thinking of those with the most power to influence health care policy, the plans have been of little interest to health care services and policy researchers.  I have not been able to find a single article in these literatures on the subject.  This appears to be yet another version of the anechoic effect, that certain inconvenient truths (to borrow from former US Vice President Al Gore) are not subjects of polite discussion of health care, lest the results excessively disturb the powers that be.