Sunday, April 26, 2015

More Barbarians at the Gates: Private Equity Puts Primary Care in Play

There are still some idealistic physicians who enter primary care practice as a calling.

The usual informal definition of primary care is care which is continuous, coordinated, comprehensive and compassionate.  The official definition used by the American Academy of Family Physicians (AAFP) is:

Primary care is that care provided by physicians specifically trained for and skilled in comprehensive first contact and continuing care for persons with any undiagnosed sign, symptom, or health concern (the 'undifferentiated' patient) not limited by problem origin (biological, behavioral, or social), organ system, or diagnosis.

Primary care includes health promotion, disease prevention, health maintenance, counseling, patient education, diagnosis and treatment of acute and chronic illnesses in a variety of health care settings (e.g., office, inpatient, critical care, long-term care, home care, day care, etc.). Primary care is performed and managed by a personal physician often collaborating with other health professionals, and utilizing consultation or referral as appropriate.Primary care provides patient advocacy in the health care system to accomplish cost-effective care by coordination of health care services. Primary care promotes effective communication with patients and encourages the role of the patient as a partner in health care.

Private Equity Firms are Buying Out Primary Care Practices

However, an article this week in Modern Healthcare described how primary care in the US is getting a rude surprise.  Apparently, primary care practices are now "in play," (using the terminology for the classic 1987 movie Wall Street, in which Gordon Gekko declared that greed is good).



The argument was that there is

a small but growing number of investments that private-equity firms are making in primary-care physician practices that are ahead of the curve in offering new care delivery and payment models. Investors see an opportunity in being early participants in value-based care, even as the business case is still unclear given mixed results in Medicare's payment and delivery reform demonstrations so far.

But the niche is well-suited for private-equity firms, which feed on uncertainty, said Todd Spaanstra, a partner at Crowe Horwath, an accounting and consulting firm. 


This is not about quality of care, it is about the idea that business people think that "value-based care" and "risk-based contracting" are the current rages, and so there is money to be made investing in entities that seem to fit in with these fashions.

said Slava Girzhel, managing director at KeyBanc Capital Markets. 'There's a lot of discussion about private-equity investing in risk-based models, and I do think we'll see more of that.'

Continuous, coordinated, comprehensive and compassionate care may suffer when the time horizons are not that long, and the owners of the practice are ultimately looking to sell it. 

The long-term opportunity for private-equity firms is the ability to sell these managed-care-savvy medical groups to insurers or health systems, which may pay a premium for the care-coordination expertise and data analytics these practices offer.

Also,

The typical private-equity investment timetable is short—about five years. At that point, the firm would probably look to sell the practice, ideally to an insurance company or a health system, said Dan Hosler, a principal at private-equity firm Sterling Partners.

Furthermore, why private equity may be interested in primary care now, continuing interest will depend on the numbers, not on the benefits to patients

'This is an area where there are winners and losers,' said Dr. Andrei Gonzales, director for value-based reimbursement initiatives at McKesson Health Solutions. 'It's everyone trying to get a slice of the pie that's getting smaller.'
What Happens When the Barbarians are at the Gate

Conspicuously absent from this article was discussion of aspects of the private equity modus operandi which are even more at odds with primary care values than the short time horizon noted above.  We previously warned about the perils of private equity employing physicians (look here.)  The main points were:

-  Private equity is just the new name for leveraged buyout firms (the type of firm described the book, Barbarians at the Gate.)

-  Therefore, when they buy out firms (e.g., the primary care practices discussed above), they use borrowed money.

-  But they leverage in two senses.  Once firms are bought, the private equity owners makes the firms take out further loans, and the money from them may go back to the owners, usually in the form of a special dividend, to pay down the debt originally incurred by the private equity owners.  This leaves the bought out firms heavily in debt, but frees the private equity firm from its original debt.  If the firm is eventually sold, the new buyers take over the debt.  In a worst case scenario, however, the bought out firm goes bankrupt, the private equity's firm stock in it becomes worthless, but the private equity firm need not be responsible for its financial obligations.

-  If the private equity firm desires more money while it still owns the acquired firm, it may sell parts of it off.

-  To make the finances of the acquired firm look more attractive to the next buyer, the private equity firms often undertakes short term cost cutting measures that may involve layoffs, increased workload on remaining workers, etc.

Other dark aspects of private equity are discussed on the Naked Capitalism blog here.

Summary

Primary care physicians thinking about selling their practices to private equity ought to think at least twice before doing so, assuming the physicians are serious about upholding the values of primary care.  Private equity firms are in it for the money, and in the relatively short term.  Private equity firms are unlikely to care about the mission of primary distinct from the ability of primary care practices to make the firms richer.  Therefore, practices owned by private equity may well not provide the best possible care for their patients.  In any case, the physicians working for such practices may be answering to owners who are very explicitly only in it for the money.  They will have become corporate physicians, possibly in the most pessimistic sense of the term.

In general, Dr Arnold Relman reminded us that physicians used to shun the commercial practice of medicine (look here).  Physicians and other health professionals who sign on as full-time employees of large corporate entities have to realize that they are now beholden to managers and executives who may be hostile to their professional values, and who are subject to perverse incentives that support such hostility, including the potential for huge executive compensation.  It is not clear why physicians seem to be willing to sign contracts that underline their new subservience to their corporate overlords, and likely trap them within confidentiality clauses that make blowing the whistle likely to lead to extreme unpleasantness.

Things are likely to be even worse for corporate physicians who are employed by firms owned by private equity. Because of the way private equity operates, primary care practices owned by such firms are liable to be very unstable.  At best, they are liable to be sold to totally new owners in a relatively short time frame, and those owners are likely to be those who will pay the highest price, not necessarily those who will provide the best stewardship for the practices.

Furthermore, primary care practices owned by private equity are likely to end up heavily indebted and subject to strict cost cutting measures that may decrease care quality, decrease access, increase patients' out of pocket costs, and demoralize providers.  Practices acquired by private equity may be broken up and sold as separate pieces.  Should the debt be too high, and the cost cutting not be sufficient, such practices could end up bankrupt and possible completely defunct. 

Do not say I did not warn you.

Physicians need to realize that to fulfill their oaths to put patients first, they have to reduce the influence of rich and powerful organizations with other agendas, like health care corporations, and especially corporations owned by private equity.  The metastasis of private equity into primary care should make us all rethink the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

 

Saturday, April 25, 2015

Open Letter to Minnesota's Heath Commissioner Dr. Edward Ehlinger on ill-informed health IT puff piece

Minnesota's Heath Commissioner Dr. Edward Ehlinger penned a puff piece on EHRs entitled "Electronic health records advance quality care for all Minnesotans" (Minn Post, 4/23/15, http://www.minnpost.com/community-voices/2015/04/electronic-health-records-advance-quality-care-all-minnesotans).

It constains all the usual baloney (being kind here) about this technology:

It starts with this:

As Minnesota’s health commissioner, I work to improve the health of all Minnesotans. As a physician, I’m dedicated to providing the best care possible to patients. Secure electronic health records help achieve both goals by enhancing the safety, effectiveness, and efficiency of our health care system. With that in mind, I have been concerned to see some recent pushback on Minnesota’s requirement that all health care providers use electronic health records (EHR) by 2015 ... All Minnesota patients, whether they visit a small clinic, need mental health treatment, or receive care from multiple providers, stand to benefit from EHRs and the improved care coordination they make possible.

"Pushback", he writes?

The implication seems clear - 'fear mongering' by Luddite clinicians is responsible.  See my March 2012 post "Doctors and EHRs: Reframing the 'Modernists v. Luddites' Canard to The Accurate 'Ardent Technophiles vs. Pragmatists' Reality" at http://hcrenewal.blogspot.com/2012/03/doctors-and-ehrs-reframing-modernists-v.html on that antediluvian, tired old issue.

Note also the terminology "stand to benefit" - a typical weasel phrase just in case things don't work out as intended.

Not mentioned are the harms.

Rather than plow through yet another puff piece by someone either misinformed or just way behind the current medical literature on this experimental technology, I provide the letter I wrote to Dr. Ehlinger and several other Minnesota cabinet members, including Commissioner Kevin Lindsey of the Dept. of Human Rights, Commissioner Lucinda Jesson of the Dept. of Human Services, and Chair Adam Duininck, Chair of the Metropolitan Council:

The letter:

From: Silverstein,Scot
Sent: Saturday, April 25, 2015 7:00 AM
To: health.commissioner@state.mn.us
Cc: info.mdhr@state.mn.us; dhs.info@state.mn.us; public.info@metc.state.mn.us
Subject: "Electronic health records advance quality care for all Minnesotans" - really?
Congratulations Dr. Ehlinger.  With your puff piece "Electronic health records advance quality care for all Minnesotans" (http://www.minnpost.com/community-voices/2015/04/electronic-health-records-advance-quality-care-all-minnesotans) you just flunked my introductory course in Medical Informatics.

Kindly refrain from writing on subjects about which your knowledge clearly lags common knowledge in healthcare information technology (IT).

You must not know about the following, although you should have known, or should have made it your business to know, about these at the very least:

  1. ECRI Institute Deep Dive Study on Health IT risks (2012) http://www.healthit.gov/facas/sites/faca/files/STF_Deep_Dive_Health_Information_Technology_2014-06-13.pdf
  2. Letter to ONC from 37 Medical Societies (January 2015)       http://mb.cision.com/Public/373/9710840/9053557230dbb768.pdf
  3. Joint Commission Sentinel Events Alert on Health IT (March 2015)    http://www.jointcommission.org/assets/1/18/SEA_54.pdf
  4. Accenture - Despite Increased Use of Electronic Medical Records, Fewer U.S. Doctors Believe It Improves Health Outcomes (April 2015)                     www.businesswire.com/news/home/20150413005148/en/Increased-Electronic-Medical-Records-U.S.-Doctors-Improves

I don't mean to sound insulting, but it is earned on your part.  My mother is deceased in 2011 as a result of an EHR error.

When did you plan on informing the citizens of your state about the risks of bad health IT?

Not giving your citizens opportunity for informed consent regarding the use of these medical devices in their care seems a violation of human rights.  The most impacted are the disadvantaged, who go to organizations with lesser budgets to make the IT work safely, I add.

Sincerely,

Scot Silverstein

----------------------------------------------------------------

Scot M. Silverstein, MD

Consultant/Independent Expert Witness in Healthcare Informatics (May 2010-present)
Adjunct faculty in Healthcare Informatics and IT (Sept. 2007-present)
Assistant Professor of Healthcare Informatics and IT, and Director, Institute for Healthcare Informatics (2005-7)
Drexel University
College of Computing and Informatics
(formerly College of Information Science and Technology)
3141 Chestnut St., Philadelphia, PA 19104-2875

I did not mention the horrible track record of breaches (e.g., as retrieved by query link http://hcrenewal.blogspot.com/search/label/medical%20record%20privacy).  Close calls, maiming and death is enough for one letter.

It is truly unnerving to see a physician responsible for the heath of the citizens of an entire state so seriously misinformed.

-- SS

Sunday, April 19, 2015

On Generic Management in Health Care: Hospital Chief Information Officers (CIOs) Say Patient Engagement is All About ... Themselves?


To laugh or to cry? - now it seems that hospital CIOs think they "own" patient engagement. 

An article in Medscape summarized a presentation at the Healthcare Information and Management Systems Society (HIMSS) Annual meeting that provided a surprising insight into how some hospital managers think.  The survey focused on the concept of patient engagement:

In separate surveys, researchers polled a national sample of 125 chief information officers, 359 primary care physicians, and 2567 patients who visited their doctor in the previous 90 days. Questions centered on beliefs about engagement, the perceived roles of the stakeholders, and barriers.

The patients seemed to have a sensible idea about their own engagement,


From the patient perspective, getting help from a provider they trust is most important, said Mazi Rasulnia, PhD, from M Consulting LLC, who is cofounder of Pack Health, a patient-activation company in Birmingham, Alabama.

What they expect most, according to the survey, is a provider who listens to them and helps them understand treatment options before they make a decision.

'Patients want questions answered around the specificity of their own health, not just what generally happens with 'patients like you' or from a population standpoint,' Dr Rasulnia said.

'What they don't really care for or expect is for providers to 'give me a website so I can access my medical information'.' That, and asking patients about their personal life, ranked lowest on patients' lists of expectations.

They want providers to help them navigate not only their disease, but also the health system. Providing access is important, but that alone won't help patients engage, he explained.

The article did not provide much information about the physicians' responses, but did suggest

When physicians talk about patient engagement, they tend to think in terms of the doctor–patient relationship,...

So in general, the doctors and patients were on the same page, but

doctors believe patients need to take more responsibility for their outcomes, and patients say they can't because their doctors, who are responsible for engaging them, don't spend enough time with them.

Setting aside the causes and approaches to the problem of insufficient time during patient encounters, the chief information officers (CIOs), had a radically different idea,

when healthcare executives talk about the patient engagement envisioned under the Affordable Care Act, they think in terms of transactions,...

Furthermore,

 Chief information officers believe they are responsible because patient engagement involves technology,...

Also,

The chief information officers surveyed 'clearly saw themselves as the owners of patient engagement,' said Lorren Pettit, MBA, vice president of market research for HIMSS Analytics, who reported on the systems perspective.

When chief information officers were asked who is most accountable for patient engagement in their organizations, 46.4% said they were, but 14.4% thought nurses were accountable for patient engagement, not physicians or patients.


Comment - on the Hubris of Generic Managers

I have to assume that the article, presentation, or the survey were hopelessly garbled. If not, what on earth were the chief information officers thinking?

Chief information officers think they are the "owners of patient engagement?"  While "patient engagement" does not seem to be a well-defined term (look here), and seems like an example of bureaucrat speak or politically correctness, it surely seems to be related to communication between patients and health care professionals.  It surely does not seem to be directly about information technology. At best, the health care information technology CIOs manage could support patient engagement.    Furthermore, the explanation apparently offered by the CIOs, that patient engagement involves technology, is not helpful because at this time, all of medicine and health care to some extent "involves technology."

So why would CIOs claim to "own" patient engagement?  Maybe they are simply clueless about what patient engagement really involves.  CIOs rarely interact with patients.  Most CIOs have no direct health care experience, and are not trained as doctors or nurses.  For example, a recent list of "100 Hospital and Health System CIOs to Know" included only 10 with health professional degrees (seven MDs, three RNs).

Why then, not simply admit that the issue is out of their area of expertise, rather than claiming "ownership."  My best guess is this is the bravado, or arrogance of generic managers.

In 1988, Alain Enthoven advocated in Theory and Practice of Managed Competition in Health Care Finance, a book published in the Netherlands, that to decrease health care costs it would be necessary to break up the "physicians' guild" and replace leadership by clinicians with leadership by managers (see 2006 post here). Thus from 1983 to 2000, the number of managers working in the US health care system grew 726%, while the number of physicians grew 39%, so the manager/physician ratio went from roughly one to six to one to one (see 2005 post here). As we noted here, the growth continued, so there are now 10 managers for every US physician.

The managers who first took over health care may have had some health care background.  Now it seems that health care managers are decreasingly likely to have any health care background, and increasingly likely to be from the world of finance.  Meanwhile, for a long time, business schools and the like seem to have teaching managers that they have a God given right to manage every organization and every aspect of society, regardless how little they know about what the particular context, business, calling, etc involves.  Presumably this is based on a faith or ideology that modern management tools are universally applicable and nigh onto supernatural in their powers.  Of course, there is not much evidence to support this, especially in health care.

We have discussed other examples of bizarre proclamations by generic managers and their supporters that seem to corroborate their belief in such divine powers.  Most recently, there was the multimillionaire hospital system CEO who proclaimed new artificial intelligence technology could replace doctors in short order (look here).   Top hospital managers are regularly lauded as "brilliant," or "extraordinary," often in terms of their managerial skills (look here), but at times because of their supposed ownership of all aspects of patient care, e.g., (look here)

They literally are on call 24/7, 365 days a year and they are running an institution where lives are at stake....

If hospital CEOs, who spend lots of time in offices, at meetings, and raising money, really see themselves as perpetually on call, and directly responsible for patients' lives, then maybe it's not surprising that their CIOs think they own patient engagment.

So in summary this latest survey shows the continued hubris of the generic manager, and hence their continued unsuitability to run health care organizations.  It is time for health care professionals to take back health care from generic managers.  True health care reform would restore leadership by people who understand the health care context, uphold health professionals' values, are willing to be held accountable, and put patients' and the public's health ahead of self-interest. 

ADDENDUM (20 April, 2015) - This post was republished on Naked Capitalism

Monday, April 13, 2015

"God Damn the Pusher Man" - Especially when Enabled by the FDA Revolving Door

Who is watching the watchers?  A story this week involving "speed" like drugs added to "dietary supplements" suggests how far the once respected US Food and Drug Administration has fallen.

An Amphetamine-Like Drug Spiking "Nutritional Supplements"

The story began with a paper by Cohen and colleagues published a relatively obscure medical journal, and then picked up by the news media.(1)  The main points of the article were:

BMPEA (beta-methylphenylethylamine) is a compound first synthesized in the 1930s as a "potential replacement" for amphetamines.  Animal tests revealed amphetamine-like properties.  The compound was never tested on humans, and never marketed.

But,

BMPEA remained known only as a research chemical until early 2013 when the FDA identified BMPEA in multiple supplements labelled as containing ‘Acacia rigidula’, even though the stimulant has never been identified or extracted from Acacia rigidula, a shrub native to Texas.

However,

More than two years after the FDA's discovery, the FDA has yet to warn consumers about the presence of the amphetamine isomer in supplements.

So Cohen et al undertook to identify "nutritional supplements" said to contain acacia rigidula and test them for BMPEA.  They found 21 such supplements, all of which tested positive. The authors then recommended,

that supplement manufacturers immediately recall all supplements containing BMPEA, and that the FDA use all its enforcement powers to eliminate BMPEA as an ingredient in dietary supplements. Consumers should be advised to avoid all supplements labelled as containing Acacia rigidula. Physicians should remain alert to the possibility that patients may be inadvertently exposed to synthetic stimulants when consuming weight loss and sports supplements.
Note that while the power of the FDA to regulate "nutritional supplements" is limited by a 1994 law, Cohen and colleagues wrote that it

is tasked with identifying and removing mislabelled, adulterated, and dangerous dietary supplements from the marketplace.

Since BMPEA is apparently not found in nature, and was not sold prior to 1994, putting BMPEA in a "dietary supplement" appears to be adulteration. 


The Risks of BMPEA in Nutritional Supplements

The study was then picked up by the media.  In the Los Angeles Times, Pieter Cohen, the lead author of the journal article,

said that while the effects of BMPEA are unknown, the compound is potentially dangerous. He said the FDA's failure to act is 'completely inexcusable.'

Furthermore, in a CBS report,


BMPEA has not been tested in humans, but led to increased blood pressure in cats and dogs.

'These are things that are signals that in humans will later turn into heart attacks, strokes and maybe even sudden death,' Cohen said.


The point is that while it has never been tested fully on humans, there is every reason to suspect that BMPEA acts very similarly to amphetamine, colloquially called "speed."  Amphetamines, as we discussed here, have dangerous side effects, including severe blood pressure elevations, and increased risks of stroke, myocardial infarction (heart attack), and other cardiac events.  The drugs also have a high potential for abuse. 


Why Did the FDA Do Nothing? 

Despite the likely riskiness of BMPEA, the FDA did nothing when it found it in numerous dietary supplements in 2013, and has not indicated that it will do anything now.  According to the LA Times,


FDA spokeswoman Juli Putnam acknowledged that the agency published research on the occurrence of BMPEA in Acacia rigidula supplements in 2013.

'While our review of the available information on products containing BMPEA does not identify a specific safety concern at this time, the FDA will consider taking regulatory action, as appropriate, to protect consumers,' she said.

In a Consumers Report item, Dr Cohen responded to that,

'It’s mind boggling,' said Pieter Cohen, M.D., the Harvard physician who is the lead author of the new study, published online in the journal Drug Testing and Analysis. 'The companies think they have complete impunity. They assume the FDA will do nothing about it. And they’re right.'

A post in the NY Times Well blog reiterated, 

Under federal law, dietary supplements — with some exceptions — can contain only ingredients that are part of the food supply or that were already on the market before 1994. Dr. Cohen said that BMPEA has never been sold as a food or supplement, and as a result any product that contains it is considered adulterated, which would give the F.D.A. the authority to send warning letters to companies that add it to their supplements.

Yet while the FDA had authority to do something, it did nothing.

Was the Revolving Door the Reason?

Back in 2014, we posted about two transitions through the revolving door by the FDA official in charge of the regulation of nutritional supplements.  We reproduce the relevant section of the post below:

This round trip through the door was noted rather obliquely in a New York Times article in late April, 2014, focused on how slowly the FDA has reacted to apparently dangerous "dietary supplements,"

Before joining the F.D.A. in 2011, Dr. [Daniel] Fabricant was a top executive at an industry trade group, the Natural Products Association.

The article had previously identified Dr Fabricant as

the director of the division of dietary supplement programs in the agency’s Center for Food Safety and Applied Nutrition.

But,

The F.D.A. recently announced that Dr. Fabricant is leaving the agency this month to return to the trade group as its chief executive.

While the NY Times article thus mentioned as an aside that a government official with major responsibility for regulating dietary supplements had these relationships with the dietary supplement industry, it did not then question whether that relationship had anything to do with slow responses by the FDA to reports of toxic dietary supplements. 

In 2014, the Times drew no conclusions about Mr Fabricant's career trajectory.  However, this time

But public health experts contend that the F.D.A.’s reluctance to act in this case is symptomatic of a broader problem. The agency is not effectively policing the $33 billion-a-year supplements industry in part because top agency regulators themselves come from the industry and have conflicts of interest, they say. In recent years, two of the agency’s top officials overseeing supplements — including one currently on the job — were former leaders of the largest supplement industry trade and lobbying group.

Daniel Fabricant, who ran the agency’s division of dietary supplement programs from 2011 to 2014, had been a senior executive at that trade group, the Natural Products Association, which has spent millions of dollars lobbying to block new laws that would hold supplement makers to stricter standards. He left the F.D.A. last year and returned to the association as its chief executive. His current replacement at the F.D.A.’s supplement division also comes from the trade group.

'To have former officials in the supplement industry become the chief regulators of that industry at the F.D.A. is like the fox guarding the hen house,' said Michael F. Jacobson, the executive director of the Center for Science in the Public Interest, a consumer advocacy group.

Also, the new Well blog post noted 

Shortly before Dr. Fabricant left the F.D.A. in 2014 to return to the association, the F.D.A. hired another official from the group, Cara Welch. She is now the acting director of the agency’s supplement division. Dr. Cohen, who is also an internist at the Cambridge Health Alliance, said he repeatedly wrote to Dr. Welch asking what the agency was going to do about BMPEA, and that she did not respond.

Dr. Welch declined repeated requests for interviews. In a statement, Juli Putnam, an F.D.A. spokeswoman, said that the agency 'has found that hiring experienced leaders with diverse backgrounds in public health, industry, academia, and science enriches the professional environment and leads to the best health policy outcomes for the American public.'

Before joining the F.D.A., Dr. Welch was the vice president of scientific and regulatory affairs at the Natural Products Association, where she was a staunch defender of the supplement industry. When JAMA, a leading medical journal, raised concerns in a 2011 editorial that the federal law allowed the supplements industry to police itself, Dr. Welch responded that the industry had 'an excellent safety record.'

'The industry itself supports and has implemented strong self-regulatory mechanisms,' she said in an industry news release at the time.

Summary

To summarize, from 2011 to now, the leadership of the part of the FDA that is supposed to regulate dietary supplements was dominated by former top executives of the Natural Products Association, the trade organization for dietary supplement manufacturers.  In 2013, FDA scientists found that multiple dietary supplements contained BMPEA, a compound closely related to amphetamines, and hence potentially dangerous and addictive, although it had never been tested on or previously used by humans.  Although the FDA had authority to do something about this apparent adulteration of these products, it so far had done nothing.  Thus it appears that the currently legal revolving door that allows government regulation to be run by people who come directly from the industries that government is supposed to regulate could be responsible for exposing people to dangerous, addictive drugs.

Remember, BMPEA is a first cousin of amphetamine, amphetamine is "speed," and as the drug epidemics of the 1960s and 1970s showed us, "speed kills."  So a plausible argument is that the revolving door, as relevant to FDA, has enabled manufacturers of nutritional supplements to become the "pusher man," a la the Steppenwolf sound track of Easy Rider,


As we noted here, some experts consider the revolving door per se to be corruption, not merely conflict of interest.  The current case plausibly suggests not only that the revolving door is corrupt, but that when applied to health care can pose dangers to patients, not merely danger to government finances, government ethics, and the integrity of representative democracy.  Nonetheless, up to now, a few people have decried the revolving door (and very occasionally in health care), but nothing has been done about it.   

So it is surprising that today (13 April, 2015), the New York Times published an editorial inspired by the BMPEA case, which concluded

consumer advocates are surely right that putting the industry in charge of supplement regulation is like appointing the fox to guard the henhouse. Clearly, the F.D.A. should not allow industry insiders to fill key positions. A permanent solution is for Congress to enact conflict-of-interest laws forcing employees above a certain grade level at any agency to recuse themselves from official actions that affect a former employer or client, including trade associations and their members.

As a minimum, that would be a good start.  Unfortunately, even a NY Times editorial hardly guarantees action.  At least, however, the problem of the revolving door as a danger to patients has gotten a little less anechoic.

As we last wrote, the continuing egregiousness of the revolving door in health care shows how health care leadership can play mutually beneficial games, regardless of the their effects on patients' and the public's health.  Once again, true health care reform would cut the ties between government and corporate leaders that have lead to government of, for and by corporate executives rather than the people at large.

ADDENDUM (20 April, 2015) - This post was republished on Naked Capitalism


Reference

1.  Cohen PA, Bloszies C, Yee C, Gerona R. An amphetamins isomer whose efficacy and safety in humans has never been studied, beta-methylphenylethylamine (BMPEA), is found in multiple dietary supplements.  Drug Testing Analysis 2015; DOI: 10.1002/dta.1793  Link here.

Wednesday, April 08, 2015

Three More Settlements by Medtronic of Allegations of Deceptive Behavior, but No Umpire Says "You're Out"

Medtronic, the giant, previously US based device maker settled three lawsuits, all alleging deceptive practices, over three months in early 2015.  I will summarize the settlements in chronological order.

Medtronic Subsidiary EV3 Settled Suit Alleging it Coached Hospitals about How to Overbill Medicare

This was actually an old case, originally against a company that Medtronic bought out, but only settled this year, in February.  As reported by the Minneapolis Star-Tribune,


A Plymouth medical device company owned by Medtronic has agreed to pay $1.25 million to settle a federal lawsuit alleging that it wasted Medicare dollars.

The medical device company EV3 is settling a whistleblower’s claims that in 2006 and 2007, a company it acquired improperly coached hospitals across the country on how to overbill Medicare for minimally invasive procedures to remove hardened plaque from patients’ arteries using one of its devices, called the Silver Hawk.

Specifically, former sales representative Amanda Cashi alleged that the company told hospitals that 80 percent of their patients for the Silver Hawk procedure should stay overnight in the hospital following an atherectomy, leading to higher Medicare payments. The promises of higher reimbursement were intended to drive sales of Silver Hawk devices. Cashi and federal prosecutors who joined her lawsuit said most of the patients should have gotten lower-paying same-day procedures in an outpatient setting.

As is standard operating procedure for such litigation,

[Irish Medtronic subsidiary] Covidien, which negotiated the settlement agreement, is not admitting wrongdoing and specifically denies the allegations in the six-year-old lawsuit, the settlement agreement says.

'Medtronic is committed to the highest standards of ethical conduct, and we take responsibility for delivering outstanding results to our partners, patients and colleagues,' a company statement said. 'The case relates to historical conduct that took place under Fox Hollow. … We are pleased to have the matter resolved.'

Of course, there may be a bit of irony there, since I doubt that the original manufacturer of Silver Hawk, FoxHollow, or its successors were pushing to get the case resolved quickly, and Medtronic likely ultimately financially benefited from the prolonged delay. 

Note that in 2005 we first posted about the questionable clinical research data that FoxHollow used to promote the device

Medtronic Settled Suit Alleging it Gave Kickbacks to Doctors to Promote Unjustified Procedure that Used Medtronic Neuromodulation Device

Just two days later, the Star-Tribune reported,

Medtronic PLC will pay $2.8 million to the U.S. Justice Department to settle a false-claims case that alleged that the Minnesota devicemaker made illegal payments to doctors to recommend a medical procedure that was neither safe nor effective.

In particular,

The case surrounds allegations of corporate promotion of uses of a neurostimulation device that were not approved by the U.S. Food and Drug Administration. The Justice Department said Medtronic paid doctors in 20 states 'tens of thousands of dollars' to encourage health providers to use the device off-label.

This 'created a new, rapidly expanding market for their devices and a potentially huge source of profit for themselves at the expense of the federal Treasury,' the government said in a federal lawsuit.

As in the previous case, the settlement allowed Medtronic to deny "it did anything wrong."

Medtronic Settled Suit that Alleged it Sold Chinese or Malaysian Spinal Surgery Devices as Made in the USA

Finally, in April, 2015, the Star-Tribune again reported,

In its third federal settlement in two months, Medtronic PLC has agreed to pay $4.4 million to settle allegations that it deliberately violated U.S. law requiring that devices sold to the military be manufactured in the United States or its international trading partners.

The False Claims Act lawsuit, handled by Minnesota U.S. Attorney Andrew Luger’s office, alleged among other things that the formerly Fridley-based med-tech company brought spinal surgery devices in from China and then relabeled them 'Manufactured in Memphis, TN,' where its spinal division is based, before selling them to the government.

Of course,

Medtronic spokeswoman Cindy Resman said that although the company has since improved its country-of-origin disclosures in government contracts, it 'makes no admission that any of its activities were improper or unlawful.'

The settlement focused on 'a limited number of accessories and surgical instruments used in spinal surgeries that were provided to Medtronic by third-party suppliers and were manufactured in China or Malaysia. The overwhelming majority of Medtronic’s products are manufactured in the United States or its trading partners, such as Mexico or Ireland,' she said in an e-mail.

But can you believe them now?

Discussion

Medtronic made three settlements over three months, all of allegations that it deceived, directly or indirectly, doctors, patients, or the government.  These settlements were not isolated events.  In June, 2014 we discussed a settlement Medtronic made of allegations that  Medtronic gave kickbacks (that is, bribes) to doctors to get them to use its cardiac devices.  Previously, as we noted then, ...   As Bloomberg summarized,


 Medtronic agreed in 2007 to pay about $130 million to settle consumer suits accusing the device maker of hiding defects in its defibrillators. The company agreed to a $268 million settlement of suits in 2010 over allegations that fractured wires in another line of defibrillators caused at least 13 patient deaths.

In fact, Medtronic has provided our blog with lots of material.  We first discussed detailed and vivid allegations that Medtronic had been paying off doctors starting in 2003 here in 2006.  Medtronic has been involved in other lawsuits alleging various kinds of deception.
-  In 2011, it settled for $23.5 million two other federal lawsuits alleging it paid kickbacks to encourage physicians to implant its devices (look here).  
- In 2008, Medtronic subsidiary Kyphon settled a suit for $75 million and signed a corporate integrity agreement for allegations that it defrauded Medicare through a scheme that lead to excessive hospitalization for patients who received the company's spine surgery device (link here)
- In 2006, Medtronic subsidiary Sofamor Danek settled for $40 million allegations that it gave kickbacks to doctors in the form of sham consulting fees and lavish trips (look here).

One loses count of all the settlements and cases in which Medtronic was accused of deceptive practices.  Some settlements were for larger amounts, some for smaller.  Yet none of the settlements were large enough to really affect a company which reported earnings of just under $1 billion in 2014 (per this WSJ article.)   None of the later legal settlements seem to have taken into account the company's previous record.

But this is typical of how legal settlements made by large health care corporations are handled.  Almost never is the settlement big enough to have deterrent value.   

The revenues of the company could very well have been increased by the activities alleged to have occurred in the course of this litigation, and these revenues were likely used to justify outsize compensation for top corporate managers.  According to the company's 2014 proxy statement, in fiscal 2014, CEO Omar Ishrak got $12,118,846 in total compensation.  All other listed executives got at least $3.5 million.  In none of these cases did anyone at the company who might have authorized, directed, or implemented bad, and particularly deceptive behavior suffer any negative consequences.   

But this is typical of the impunity seemingly granted to top health care organizational managers.

In baseball, it's three strikes and you're out.  For the leaders of big health care corporations, however, no matter how many strikes your company makes, you never seem to be out.  Despite a continuing stream of ethical issues occurring on their watch, management usually succeeds in becoming filthy rich.


Maybe that would change if the public, or health care professionals, knew all about such things.  However, these settlements remain anechoic.  Although the latest Star-Tribune article did note that the latest 2015 settlement occurred after two previous settlements this year, none of the reporting about these settlements seems to have noted all the previous settlements.  Finally, the discussion of these cases involving a prominent device company and multiple allegations of deceptive, dishonest, unethical behavior never seems to go beyond business sections of media outlets.  Even though such continuing dishonest behavior could have corrosive cumulative effects on health care ethics, the morale of health professionals who have to deal with such deception, and patients' and the public's health, discussion of it never makes it into the medical and health care literature, a striking example of the anechoic effect.

Maybe if more health care professionals, and the public at large, knew the story better, they might ask what sort of stewardship was exerted by the Medtronic board of directors? Maybe they could ask current Medtronic board members, like Rensellaer Polytechnic Institute President Shirley Ann Jackson, and  former US Secretary of Health and Human Services Michael O Levitt,  and former board members, like Dr Victor J Dzau, who was pressured to leave the Medtronic board after he became President of the Institute of Medicine and this membership was noticed (look here)  These board members were making over $200,000 a year, and piling up Medtronic stock, supposedly for exerting stewardship over the company.

But typically board members of big health care organizations remain unaccountable.  

There seems to be increasing recognition that the continuing rise in US health care costs is unsustainable, and that these costs are not buying us good health care.  There are calls to avoid unnecessary, and sometimes harmful care.  Yet there is a persistent disconnect between how continuing dishonest behavior by health care organizations, impunity of their leaders, and lack of accountability by their board members fuel rising costs, shrinking access, and bad outcomes for patients.

To truly reform health care, we will have to at least recognize the causes of the current dysfunction.  Recognizing how health care dysfunction is created by unaccountable, dishonest leadership should lead to true reform that would promote well-informed, honest, accountable leadership that puts patients' and the public's health ahead of personal gain.  

Tuesday, April 07, 2015

Not with a bang but with a whimper

This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but with a whimper
     -- T. S. Eliot, The Hollow Men, 1925

Those across the Commonwealth of Pennsylvania who lived through the disaster known as AHERF, the story of the Allegheny Health and Education Research Foundation, ending in one of the biggest non-profit health care bankruptcies in US history, may now note in passing the death some months ago--just recently announced--of its architect, one Sherif Abdelhak.

Many books and articles have been written about this hubristic exercise in go-go corporatism. It was a fiasco that left many endowments decimated and the remnants of two Philadelphia medical schools in shreds.

For those who lived through that era, the death of "the sheriff" is bittersweet. It has passed virtually unnoticed until now. But it's worth remarking, not just for its local but also its national meaning. By the high-rolling mid-1990s, tellingly, the Association of American Medical College's prestigious Cooper Lectureship led through the following roster. Here is the list for the decade commencing 1985 and leading to its 1995 apogee

  • 1985 John A. D. Cooper
  • 1986 Paul B. Beeson
  • 1987 Uwe E. Reinhardt
  • 1988 Henry G. Cisneros
  • 1989 Lauro F. Cavazos
  • 1990 John F. Sherman
  • 1991 Margaret Catley-Carlson
  • 1992 Leroy Hood
  • 1993 Bruce M. Alberts
  • 1994 Merwyn R. Greenlick
  • 1995 Sherif S. Abdelhak

A nice progression. Three years later, in 1998, AHERF and Allegheny University of the Health Sciences, went belly up. Its successors are still recovering. But too many parts of our health educational and health care systems still show signs of the sheriff's avaricious behavior.

Friday, April 03, 2015

The Troubles at Cooper Continue, Lately Gruesomely, But Will Its Leadership and Governance Change This Time? - Part II: the History since 2005

In our most recent post, we noted the latest tragic, and gruesome development at Cooper Health System, the largest hospital system in southern New Jersey.  Months after the system CEO, John F Sheridan, and his wife Joyce were found dead after a fire in their home, local law enforcement concluded that Mr Sheridan murdered his wife, set fire to the house, then committed suicide.  It turns out this is just the latest, albeit possibly most tragic and grisly, troubling news from that health care system.

Our last post summarized the history from 1978, including:
-  Seven people, including the hospital system chief financial officer, confessed to and/or found guilty of participating in an embezzlement scheme that cost the hospital more than $21 million
-  An internal investigation was suppressed for years, but later revealed several severe management problems
-  The media revealed multiple conflicts of interest affecting the system's board of trustees, including members of the committee that performed the investigation
-  One member of the board of trustees who participated in the internal investigation was later convicted of arranging his wife's murder
-  Resulting financial losses caused layoffs and service reductions, some of which affected the hospital system's charitable mission
-  The stories received little attention outside the region, and apparently did not result in any fundamental changes in governance or the structure of leadership.

Since 2005, there have been other troubles at Cooper.

Conflicts of Interest Involving Local and State Politics

Board Chairman George E Norcross III

In 2006, the Philadelphia Inquirer found close ties between NJ politicians and hospital leaders (see this post).  In particular, the story noted "the board of South Jersey's major hospital, Cooper University Hospital in Camden, is chaired by the region's most powerful political figure, Democratic power broker George E. Norcross III."

In 2012, as we posted here, Mr Norcross' relationships became more evident.   The New York Times reported that a story about his conflicts of interest had been held from publication by the Inquirer because Mr Norcross was part of a business group seeking to purchase that newspaper.  When the Inquirer story finally came out, it stated firms with financial relationships to the hospital under Norcross had donated generously to Norcross' political allies, and that Norcross had influenced the creation of relationships with these firms.  It suggested that Norcross' political influence had resulted in an unusual level of state financial support for the hospital system.  It noted that the law firm for which Cooper CEO John F Sheridan had previously worked did lobbying for the hospital.  It noted that the hospital did millions of dollars of business with firms tied to hospital trustees, including Mr Norcross.

Trustee Emeritus Peter Driscoll

Recent reporting after Mr Sheridan's death suggested the rehabilitation of former board chairman Peter Driscoll under Chairman Norcross.  Mr Driscoll was the former board chair who resigned in 1999 after the embezzlement scandal report and revelations about conflicts of interest affecting the board were finally made public, and the hospital system was in financial difficulty.  However, by 2014, he was identified by the board as a "trustee emeritus."  Per the Philadelphia Inquirer, after the fire at the Sheridan house was attributed to arson,

'If they had died because the house was on fire, that would be a terrible, terrible tragedy,' said Cooper Health System trustee Peter E. Driscoll, a senior member of the Haddonfield law firm of Archer & Greiner. '. . .I don't know what to make of it. I can't imagine anybody that would want to do something like this.'
New Vice President Kevin O'Dowd and his Family

Also after Mr Sheridan's death, the hospital system hired a new top manager with his own extensive political connections and conflicts of interest.  Per the Inquirer,

Gov. Christie's chief of staff, Kevin O'Dowd, will step down this month to work for Cooper University Hospital in Camden, nearly a year after the governor named O'Dowd his pick for attorney general.

O'Dowd, whose selection as attorney general never moved forward after controversy arose over lane closures on the George Washington Bridge, will serve as senior executive vice president and chief administrative officer at Cooper, where he will focus on business development, Christie officials said. He will start at Cooper in January.

The conflict was

 O'Dowd's wife, Mary, serves as commissioner of the state Department of Health.

A NJ.com story made that more explicit,

 State Health Commissioner Mary O’Dowd will refrain from making decisions that would directly affect Cooper University Hospital in Camden after her husband accepted a senior management job there, officials said Friday night.

The move was made to avoid any conflicts of interest as the state Department of Health licenses and inspects hospitals, and doles out money to compensate them for treating uninsured charity care patients. Cooper will receive $37.3 million in charity care payments from the state this year, the fifth highest amount in the state.

A story in the NJ Spotlight suggested that would not solve the problem,


The question that the O’Dowds will have to face is whether they can overcome even the perception of a conflict of interest when their jobs so pervasively present opportunities for such a situation.

'It’s a very, very tenuous situation,' said William Schluter, a former longtime member of the State Ethics Commission and state senator.

He noted that nearly everything that senior hospital executives do in their jobs is influenced by state regulations.

'It’s a situation that I sure as heck wouldn’t want to be in,' said Schluter, adding that he expects second-guessing in the media and by elected officials as the state handles issues affecting Cooper.

Just to ice the cake for Mr O'Dowd, the Courier-Post noted that Mr O'Dowd's job at Cooper could be considered an example of the revolving door, albeit delayed,

O'Dowd, previously the governor's deputy chief counsel, also worked under Christie at the U.S. Attorney's Office for New Jersey.

During seven years as an assistant United States attorney, O'Dowd oversaw a securities and healthcare fraud unit. He also prosecuted cases ranging from child pornography distribution, cybercrime and drug trafficking.

O'Dowd served earlier as a state Deputy Attorney General, where his responsibilities included providing legal counsel to the state Department of Health.

As US Attorney, Christie, possibly with the aid of Mr O'Dowd, pursued a deferred prosecution agreement for UMDNJ, then Cooper's primary academic affiliation, for a complicated set of allegations that we discussed extensively in the past (look at this post and follow links backward).  

Late CEO John F Sheridan and Family


Apparently only after Mr Sheridan's death did the media report extensively on his political connections.  The earliest report I found was in the Philadelphia Inquirer from September 28, 2014.  He served

on Gov. Christie's health-care transition subcommittee in 2010.

The statement said he was New Jersey commissioner of transportation under Gov. Thomas H. Kean and served as New Jersey deputy attorney general and assistant counsel for the New Jersey Turnpike Authority, and was counsel for the New Jersey Senate majority.

Also,

 his son Mark - a prominent lawyer ... has represented Christie in the Bridgegate scandal 

NJ.com added,

John Sheridan Jr., the CEO of Cooper University Health System ... previously spent 40 years in New Jersey government

Also,

He has held positions on Gov. Thomas Kean's cabinet as transportation commissioner and chairman of the New Jersey Transit board, as well as held roles on transition teams for Gov. Chris Christie and Gov. Christine Todd Whitman. 

Furthermore,

 Earlier in his career, he served as Deputy Attorney General of the State of New Jersey, Assistant Counsel to Gov. William T. Cahill, General Counsel to the New Jersey Turnpike Authority and Counsel to the New Jersey Senate Majority.

Finally, his son

Mark Sheridan, a partner at Squire Patton Boggs, acts as general counsel for the New Jersey Republican State Committee.

 So, in the years since conflicts of interest at the board of trustees level were noted as part of the investigation after the management embezzlement scandal at Cooper, many more apparent conflicts affecting top managers and board members have appeared, most recently in late 2014. 


Settlement of Allegations of Kickbacks

In 2013, the media reported that Cooper settled federal allegations that it gave kickbacks to doctors to induce referrals.  As reported by the Inquirer,


The Cooper Health System in Camden has agreed to pay $12.6 million to settle a whistle-blower lawsuit alleging that it made improper payments to doctors in an effort to build its cardiology business, the U.S. attorney for the District of New Jersey said Thursday.

From October 2004 through 2010, local doctors were paid $18,000 to attend four meetings of the Cooper Heart Institute Advisory Board in any given year under 'consulting' and 'compensation' agreements, in possible violation of antikickback laws, state and federal law enforcement officials contended.

The whistle-blower was South Jersey cardiologist Nicholas L. DePace. He attended an advisory board meeting in 2007 and was convinced that the board's purpose was not to provide advice to Cooper, but to be a source of patient referrals to the Heart Institute, according to a lawsuit he filed in 2008.

'He was invited to be a member of the advisory board. He attended a meeting and it quickly became apparent to him what the advisory board really was. It was sitting and listening to lectures and not providing advisory services,' said Michael A. Morse, a partner in Pietragallo, Gordon, Alfano, Bosick & Raspanti L.L.P. in Philadelphia, one of DePace's lawyers.

As is typical of legal settlements involving prominent health care organizations,


Cooper admitted no liability.

'After more than three years of extended discussions with government lawyers, we decided, in the best interests of Cooper, to settle our dispute without the admission of wrongdoing to avoid the burdens and uncertainties of a protracted litigation,' Cooper president and chief executive officer John P. Sheridan Jr. said. 'This allows us to focus our full energies on serving our community.'

In a note to Cooper employees, Sheridan said the board was established to 'improve the quality and responsiveness of our cardiac programs' and 'was reviewed by outside legal counsel before it began operations.

However, given that the Inquirer reported that "the $12.6 million penalty is financially significant for Cooper," one wonders why it was made if hospital leadership felt that the case against it was poor.  

So years after the embezzlement scandal, another scandal involving allegations of illegal behavior was settled.  This time, there was no trial, but since the settlement was financially burdensome for the hospital, it is plausible that it resulted from managers' realization that they would not have a good defense against the charges at trial. 

The Death of the Sheridans

Mr Sheridan became CEO of Cooper in 2008.  As noted in the Gloucester County Times,

On Feb. 7 John P. Sheridan Jr., was appointed president and chief executive officer of The Cooper Health System by the Cooper Board of Trustees. Sheridan joined Cooper as senior executive vice president in July 2005 and has served as president of Cooper University Hospital since September of 2007.

'Cooper has grown dramatically in recent years and is positioned as the academic medical leader of South Jersey,' said George E. Norcross III, chairman of the Board of Trustees at Cooper.  'John Sheridan is a proven leader. He has the skills required to build-out our $500 million health care campus in Camden, implement our suburban strategy and achieve our vision of creating the premier academic health care system in South Jersey and the Delaware Valley.'

As of early 2014, he was getting substantial compensation typical for a hospital system CEO, per NJBiz, "John T. Sheridan Jr. (of the $913 million Cooper Health System) received $963,433."

In late September, 2014, Mr Sheridan and his wife were found dead in a house fire.  Initial reports suggested the fire was accidental.  Then it was declared to be arson.  Then Joyce Sheridan's death was found to be the result of a homicide.  Finally, as we posted here, law enforcement declared that Mr Sheridan killed his wife, set the fire, and then committed suicide.

That news was so horrendous that it dumbfounded Cooper insiders.  As reported by the Inquirer,

 'It's not something I can imagine,' said Peter Driscoll, a Cooper Health System trustee emeritus and a senior member of the Haddonfield law firm Archer & Greiner. 

Also,


In a brief statement, Cooper University Health Care called the prosecutor's findings 'unfathomable to us.'

I can only hope that they will get over their shock and realize that the institution really has some big problems. 

Summary

Since 1978, there have been multiple stories about mismanagement, conflicts of interest affecting managers and board members, and crimes committed or alleged to have been committed by management and at least one trustee at Cooper Hospital/UMC which then became Cooper Health System.  Despite these often lurid stories, there is no indication that there has been a fundamental change in the governance of the institution.  While managers have come and gone, sometimes under difficult circumstances, there is no indication that how managers were hired has changed.  Since the early 1990s, there has been no obvious effort made by management or board members to change, at least not one announced publicly.  There has been no outside investigation.

Given that the hospital system has long enjoyed a cozy relationship with state government, including both the legislative and executive branch, maybe it has been easy to go along to get along.  More cozy relationships, including some with ownership of the news media, may have helped to keep this story anechoic outside of the region.

Yet the cumulative story is so striking that it should prompt national attention, and inspire some real hard thought about how health care leadership and governance has gotten so bad.

To repeat what I have said all too often, and I admit with little impact so far....

True health care reform requires governance that is accountable, transparent, true to the organization's mission, and honest, ethical, and without conflicts of interest; and leadership that understands health care, upholds its values, is honest, ethical, and without conflicts of interest, is transparent and open, and is willing to be accountable and subject to appropriate incentives. 





Wednesday, April 01, 2015

The Troubles at Cooper Continue, Lately Gruesomely, But Will Its Leadership and Governance Change This Time? - Part I: Historical Background

Allegations of Murder-Suicide by a Hospital System CEO

This will be a hard series of posts to write. It wa triggered by the latest, and perhaps most gruesome chapter in the troubled history of the leadership of Cooper Health, the largest hospital system in southern New Jersey (known locally as South Jersey).  As reported by the Philadelphia Inquirer on March 28, 2015,

Cooper University Health System CEO John P. Sheridan Jr. stabbed his wife to death, set their bedroom on fire, and then took his own life, authorities have concluded, closing a six-month investigation into the deaths that shocked New Jersey's political and civic communities.

The Somerset County Prosecutor's Office announced its results in a news release Friday, citing forensic evidence and a lengthy probe that included more than 180 interviews.

But it offered no conclusive motive to explain why Sheridan, described by family and friends as mild-mannered, would brutally stab his wife and kill himself.

'Many possible scenarios and theories were considered,' the prosecutor's office said in a statement after months of virtual silence. The evidence 'supports the conclusion that John Sheridan fatally stabbed Joyce Sheridan, set the fire, and committed suicide.'

The Story in Context: a Long History of Leadership and Governance Problems 

We have often discussed bad leadership of health care organizations, and written a lot about the contrast between the munificent compensation paid to non-profit hospital CEOs and the lack of evidence justifying such pay.  However, a murder-suicide allegedly perpetrated by the CEO of a large non-profit hospital system is way at the tail of the curve of questionable managerial behavior.

But it turns out that Cooper Health System has a very long record of leadership and governance troubles.  The current chapter is the latest, and possibly most gruesome, in this sorry series.  However, the context of this history has been lacking in the recent coverage, which has been so far limited to local media.  The history deserves a more complete discussion, and maybe then it could lead to some reconsideration at least of this one institution's leadership and governance, and perhaps the larger troubles in leadership and governance in health care.
Thus this post will summarize the history that I could find up to 2005.  A second post will summarize more recent history up to and through the terrible deaths of John and Joyce Sheridan.  

In the interests of full disclosure, I started my faculty career at what was then Cooper Hospital - University Medical Center, the main teaching hospital for the University of Medicine and Dentistry of New Jersey (UMDNJ) - Robert Wood Johnson Medical School (RWJMS) branch at Camden, NJ.  During my four years there, 1983-87, I was impressed with the dedication of the physicians, nurses and other health care professionals there.  However, even given my naivete at a young faculty member, the leadership of the institution, which was one of the early adapters of the generic management model,  seemed strange.  Little did I know how strange it was.

In the late 1990s, when I became seriously concerned about what I know call leadership and governance problems in health care, I ran into some folks from South Jersey who told me that Cooper had a tumultuous history since I left.  I got around to researching it, leading to an article in our local American College of Physicians newsletter.  The article, to which I had linked here, is no longer available on the internet.  So I have reposted it below, with some minor modifications, put in square brackets .  Again, the history is of major problems with leadership and governance at Cooper that had inspired no reconsideration by 2005.

The Curiously Quiet Case of Cooper’s Corrupt CFO

Embezzlement by Top Management

    In 1994, two powerful executives at Cooper admitted their guilt in an elaborate embezzlement scheme.  In 1978, John H. Crispo, the owner of Financial Management Corporation Inc., to keep his contract with the hospital, began paying monthly kickbacks of $2500-$10,000 to John M. Sullivan, the Cooper Executive Vice President for Finance.  Sullivan then referred delinquent hospital accounts for collection to a new company Crispo set up.  In turn, Crispo repaid him $340,000 in more kickbacks.  Sullivan recruited Cooper’s Controller, P. John Lashkevich, and the three devised a scheme to defraud the hospital using fabricated bills, established a fictitious company to launder money, and falsified tax returns.  A prosecutor claimed “Mr Sullivan blew this money on wine, women, parties, and a lavish lifestyle,”which included trips with girlfriends to the Plaza Hotel, and jewelry shopping at Tiffany’s.  Sullivan had driven a Porsche, and lived in a $700,000 house.  The conspirators also bought cars, boats, and racehorses.

    Other conspirators were also found and prosecuted.  Helene Weinstein admitted to helping establish a shadow company as a conduit for Sullivan to send money from the hospital to his estranged wife, Elarba Pagan.  Pagan was accused of receiving money sent by Sullivan from Cooper to another firm.  Weinstein testified that Pagan carried “briefcases of cash from the hospital to shop in New York for $1500 shoes.”  Also, Cooper’s Vice President for Finance, Robert Schmid Jr, admitted embezzling money from Cooper to pay for home improvements. Finally, Thomas J. Damadio admitted helping launder up to $600,000 stolen from Cooper, and evading income taxes.  

    Sullivan was sentenced to 55 months in federal prison, Lashkevich, 25, Pagan, eight, Weinstein, three years of probation, Damadio, six months of house arrest.  Crispo died before serving prison time.

The Internal Report, and the Murder Conviction of One of Its Authors

    After these stories became public in 1994, Cooper’s Board of Trustees established a special committee to investigate its financial operations, which included Peter E. Driscoll, Chairman of the Board, Kevin G. Halpern, Chief Executive Officer (CEO), and a local Rabbi, Fred Neulander.  The hospital pledged to make its investigation public, but then fought to keep it secret.  Its report was finally released in 1998, after a discovery motion in a civil lawsuit.  Prior to then, the Philadelphia Inquirer had revealed numerous financial conflicts of interest affecting Board members,  including those on the special committee.  For example, Cooper paid the law firm of Archer & Greiner, of which Driscoll was a senior partner, $2.1 million over three years from 1993-96.

    The report revealed that the conspiracy had bilked the hospital of at least $21.8 million from 1987 to 1994, while “Cooper has been the victim of a massive crime wave.”  It stated Sullivan, Lashkevich, and Crispo “had unrestrained and absolute control of virtually all the important financial functions at Cooper and they took full criminal advantage....” It also noted that “employees who became suspicious and questioned the accounting practices or tried to alert management were intimidated, transferred, or dismissed by the high-ranking executives.”  Furthermore, it suggested “the ability to bypass or defeat controls grew from an institutional culture that delegated and outsourced too much responsibility, without developing effective controls....” The report also raised questions about how the internal investigation was conducted.  It noted that Driscoll and Halpern “often locked horns with [the other] committee members....”  Driscoll had objected when other board members called for an independent investigation.  Halpern and Driscoll resigned their positions within days of the forced release of the report.


    One member of the special committee became particularly notorious.  Soon after the internal investigation was set in motion in 1994 Rabbi Neulander’s wife had been murdered.  Soon after, Neulander had failed a polygraph test when questioned about it.  He then resigned his clerical position after his extramarital affairs with members of his congregation were revealed.  In September, 1998, he was charged with hiring the “hit men” who committed the murder.  In 2002, he was convicted  and sentenced to life in prison.

The Aftermath, Financial Woes and Impact on Patient Care

    By 1997, Cooper was in financial trouble, although none of its managers ever admitted a connection to the conspiracy and resulting losses.  However, during a related civil lawsuit, Cooper officials alleged “the hospital’s general operating fund was depleted” by the conspiracy.  Cooper began merger discussions with several partners, including AHERF, although none were ultimately successful. Physicians started leaving in 1997, when all but one full-time cardiologists announced their resignations.  Cooper revealed a $16 million loss for 1998, the largest ever incurred by a New Jersey hospital.  Its bonds were down-graded to junk. The hospital then announced that it would stop accepting uninsured patients for elective treatments, departing from its historic mission of charitable care.  Losses continued in 1999, again totaling $16 million, leading to additional budget cuts.  [CEO Halpern and Chairman of the Board Driscoll resigned within days of each other in 1999, both denying their actions were related to the report.]  By 2000, the hospital had cut its work-force to 3100, from 4000 in early 1999. and had closed various clinical sites and units.  Only thereafter did Cooper began posting budget surpluses.  [By 2002, more physicians quit Cooper en bloc, and the hospital was on its second new CEO since Mr Halpern.]

 The Lurid Stories Remain Anechoic

    The only published reaction to Cooper’s woes came from the related legal proceedings.  The prosecutor in Sullivan’s trial claimed that his thefts were so big that they “threatened the financial stability of the hospital,” and “hurt the image of the city as a whole.”  At Pagan’s sentencing hearing, Judge Joseph H. Rodriguez stated “society could not tolerate a system in which hospital executives ‘rake millions off the top’ that were intended for medical care for the poor.”

    It does seem likely that Cooper’s scandals had major effects on its patient care and academic missions.  Yet, I could find nothing  published about such effects.  Despite the luridness of this case, I also found no reaction from local or national medical groups, from academic organizations, accrediting groups, or government agencies.

Summary

In 2005, I wrote,...  The case of Cooper’s corrupt executives can be viewed as the forerunner to the even more massive bankruptcy of AHERF [Allegheny Health Education and Research Foundation, see posts here].  One can only speculate that learning the lessons of the Cooper case could have mitigated the AHERF disaster.  However, as noted in my last article,  the lessons from AHERF are also not widely known.  Yet, as George Santayana wrote, “Those who cannot learn from history are doomed to repeat it.”

As I will address in another post, events at Cooper after 2005 also generated few echoes, up to the latest tragedy.  These events did not suggest much had been learned from the events through 2005. 

So the unfortunate, and sometimes terrible case of Cooper Health has become one of the longest running examples  - starting in 1978 - of the troubles with leadership and governance of large health care organizations, the bad effects of these problems on health care and the values of health care professionals, the lack of public attention to and discussion of these problems and their effects, and the failure of organizations to address on their own their problems with leadership and governance.

True health care reform, as we have said endlessly, requires governance that is accountable, transparent, true to the organization's mission, and honest, ethical, and without conflicts of interest; and leadership that understands health care, upholds its values, is honest, ethical, and without conflicts of interest, is transparent and open, and is willing to be accountable and subject to appropriate incentives. 

References

Embezzlement....

Lewis L. Former official gets jail term for bilking Cooper: John M. Sullivan was sentenced to 55 months - the scheme netted $4 million.  He spent his take lavishly. Philadelphia Inquirer, April 26, 1996.

Graham M. New panel at Cooper plans review: embezzling of $3.8 million by two former top aides and a vendor prompted the study. Philadelphia Inquirer, July 27, 1994.

Lewis L. Ex-hospital executive gets 2 years: he helped steal $4 million from Cooper Hospital - his lawyer said the investigation was going to spread.  Philadelphia Inquirer, November 9, 1996.

Graham M, Turcol T. Inquiry widens into finances at Cooper Hospital: a federal grand jury subpoenaed several officials this month - the inquiry was spurred by testimony from two former Cooper executives indicted for fraud. Philadelphia Inquirer, February 27, 1996.

Lewis L. Woman admits role in bilking Cooper Hospital. Philadelphia Inquirer, September 6, 1996.

Lewis L. Ex-hospital executive admits theft: Robert Schmid Jr. pleaded guilty to embezzling about $50,000 from Cooper Hospital. Philadelphia Inquirer, September 24, 1996.

Lewis L. More charged in theft at hospital: six people have now been indicted in the embezzlement at the Camden facility. Philadelphia Inquirer, December 12, 1996.

Lewis L. Ex-wife of jailed Cooper Hospital official sentenced in scam: Elarba Pagan bought $1,500 shoes with medical center money, her business partner said. Philadelphia Inquirer, July 2, 1998. P. B5.

Lewis L. Business owner pleads: Thomas J. Damadio said he helped Cooper Hospital executives launder stolen money.  Philadelphia Inquirer, January 18, 1997.

The Internal Report...

Anonymous. Cooper forms committee. PR Newswire, July 26, 1994.

Graham M. FBI is probing Cooper Hospital for violation of securities laws. Philadelphia Inquirer, April 3, 1997.  P. A1.

Hollreiser E. Cooper urged to release audit results. Philadelphia Business Journal, May 30, 1997.

Graham M. Hospital gives state its audit: Cooper complied after the state threatened to withhold funding - the report will be kept secret.  Philadelphia Inquirer, May 14, 1997, P. B1.

Graham M. N.J. finds nothing amiss at Cooper: the Attorney General’s office reviewed an internal hospital audit - no criminal wrongdoing was uncovered. Philadelphia Inquirer, July 11, 1997. P. A1.

Graham M, Cusick F. Listing Cooper’s board deals: companies associated with the hospital’s trustees have gotten some of its largest contracts. Philadelphia Inquirer, June 15, 1997. P. A1.

Anonymous. Report says Rabbi failed polygraph on wife’s death. The (Bergen County) Record, September 5, 1996.

Burney M. Rabbi charged in wife’s killing. Associated Press State & Local Wire, September 10, 1998.

Mulvihill G. Judge declares mistrial in case of Rabbi charged with arranging wife’s murder. Associated Press State & Local Wire, November 13, 2001.

Bell T. Rabbi found guilty of murder in wife’s 1994 death. Associated Press State & Local Wire, November 20, 2002.

Mulvihill G. Jury spares life of rabbi in wife’s murder; faces life in prison.  Associated Press State & Local Wire, November 22, 2002.

The Aftermath...

Uhlman M. Cooper talks with Allegheny: the Camden hospital wants a partner, and the Pa. chain plans a further push into South Jersey. Philadelphia Inquirer, May 20, 1997. P. C1.

Gerlin A. Philadelphia hospital raids New Jersey system’s cardiology staff.  Philadelphia Inquirer, September 27, 1997.

Kastor JA. Governance of Teaching Hospitals: Turmoil at Penn and Hopkins. Baltimore:  Johns Hopkins Press, 2004. P. 41.

Goodman H. As Cooper suffers loss, it says care won’t suffer. Philadelphia Inquirer, February 11, 1999.

Rizzo N. Cooper Hospital announces cuts in staff. Associated Press State & Local Wire, March 18, 1999.

Goodman H. Cooper Health system cuts 103 employees: financial problems were cited - about 400 jobs could be lost this year, and uninsured care will be curtailed. Philadelphia Inquirer, March 19, 1999. P. A1.

Anonymous. As losses mount, Cooper Hospital’s debt rating falls. Associated Press State & Local Wire, April 16, 1999.

Goodman H. Cooper’s debt rating tumbles as losses rise: the 1998 figure is twice as bad as estimated - the poor rating means the hospital must pay more to borrow. Philadelphia Inquirer, April 16, 1999. P. B1.

Kent B. In Camden, a hospital finds itself seriously ill: Cooper, the city’s biggest employer, has ‘heavy losses.’  New York Times, May 9, 1999.

Anonymous.  Cooper Hospital announces more cuts in staff.  Associated Press State & Local Wire, May 20, 1999.

Anonymous.  Camden hospital posts $16 million loss: president sees turnaround.  Associated Press State & Local Wire, February 23, 2000.

Kiely E.  Cooper Hospital to forgo charity-care payments - the state will not reimburse the Camden facility for uninsured patients for four months - the reason: the beleaguered hospital received the money from the state in advance last year.  Philadelphia Inquirer, April 11, 2000. P B1.

Anonymous.  Cooper Hospital president quitting.  Philadelphia Business Journal, January 15, 2002.

Anonymous.  Hospital company sues six departing surgeons.  Associated Press State & Local Wire, July 4, 2002.