"Living High Life on Money to Treat the Poor"

Here is another story that has developed over the last week about questionable goings on at a not-for-profit health care organization.  The organization in question this time was the not-for-profit, but state government supported Medicaid managed care organization/ health insurer for the Louisville, Kentucky region.  The details came from a Louisville (Kentucky) Courier-Journal article about a state auditor's report on the Passport Health Plan:

The organization providing Medicaid services in Jefferson and surrounding counties has spent lavishly on such things as travel, meals, salaries, bonuses and lobbying in recent years, the state auditor’s office said in a report released Tuesday.

The scathing report, which Gov. Steve Beshear described as 'disheartening,' said two Passport Health Plan officials — Executive Vice President Shannon Turner and Associate Vice President Nici Gaines — were paid well, ate well and traveled extensively.

'Lodgings were often luxury spas and resorts,' the report said. 'The executives used limousine services and dined at expensive restaurants. While these types of expenditures may be routine for many private, for-profit companies, they should not be typical in nonprofit, health care organizations.'

The report also said Passport made extraordinary efforts to burnish its public image and gain political support by spending $1 million since 2007 on lobbying and public relations, as well as $423,000 in donations and sponsorships.

Many of the donations had no connection with health care, the report said — including $600 to sponsor a reception for the Senate Republican majority in 2009, $10,000 to sponsor an 'inflatable character' for the Kentucky Derby Festival's Pegasus Parade, and contributions to the Boy Scouts, Kentucky Opera, Volunteers of America and others.

Here are some more specifics about amounts spent:

Travel: Passport spent $106,722 on more than 36 trips including trips to conferences at resorts in New Orleans, Key West, Las Vegas, Seattle, Philadelphia, Tucson, Washington and Coeur d'Alene, Idaho.
Meals: Spent $72,994 on 753 meals for groups large and small. These were mostly at Louisville restaurants but included tabs at some famous restaurants outside Kentucky, such as Emeril's and Commander's Palace in New Orleans.
Limo services: Five uses of limos totaling $3,996.
Lobbying and public relations: Spent $1 million.
Donations and sponsorships: Spent $423,000, some with no connection to health care, including $10,000 to be an “Inflatable Character Sponsor” for the Kentucky Derby Festival.
Gifts: Spent $9,311 for 95 gifts, which included flowers and Christmas gifts.
Salaries: Paid salary and bonuses of $303,750 to Executive Vice President Shannon Turner and $156, 000 to Associate Vice President Nici Gaines in most recent year.

Here are more specifics about conflicts of interest:

Conflicts of interest: Both Turner and Gaines received additional compensation in contracts with subcontractor they were overseeing, AmeriHealth Mercy. Also, Larry Cook, Passport's chairman and CEO, had divided loyalties because he serves as an executive vice president of U of L. He also was reimbursed $1,717 by AmeriHealth for expenses for a trip to Ireland in 2007.
Grants: Many grants were made by Passport to groups with ties to staff and/or board members

The organization also was charged with distributing additional funds to area health providers based on their initial investment in the not-for-profit managed care organization, but not on the amount of care they were providing to Medicaid patients:

[State Senator Tim] Shaughnessy was particularly concerned about distributions of $10 million in excess funds in late 2008 and again in and 2009 to the large Jefferson County health-care providers that formed Passport.

These distributions were reported to the Kentucky Department of Insurance as grants to cover indigent care costs incurred by Passport's provider partners — University Medical Center, University Physician Associates, Norton Healthcare, Jewish Hospital and St. Mary's Healthcare, and the Louisville/Jefferson County Primary Care Association.

But the auditor’s report said the money was distributed based on the percentage of the providers' initial investments to create Passport — not the amount of indigent care they provided. And the report said this money was placed in the general funds of these providers 'rather than specifically set aside for uncompensated indigent care.'

Finally, it appears that Passport tried to block disclosure of important information, including the compensation of its executives, even though it is a not-for-profit organization entirely funded by the government:

Early this year The Courier-Journal filed a request under the state open records law seeking Passport records on compensation of its executives and minutes of its board meetings. But Passport refused to release them, claiming that the law did not apply.

The attorney general's office disagreed, saying that Passport is 100 percent publicly funded and must release the records. But Passport again refused and took the matter to Jefferson Circuit Court, where it is pending.

So again we have the same tiresome features of leaders who apparently regard their organization as their own personal sandbox: lavish compensation, given the context, luxuries supplied the leadership out of organizational funds, conflicts of interest that apparently increased further the leaders' personal gains, and attempts to keep the whole thing secret. As a Lexington (Kentucky) Herald-Leader editorial ("Living High Life on Money to Treat the Poor") noted, given the mission of the organization, this sort of sleaze is particularly unfortunate:

In one way, though, Passport's profligacy deserves special condemnation. Every dollar Passport executives spent on their own pleasurable pursuits, on lobbying to insure tax money kept flowing their way, on buying goodwill in the Louisville area or on any other unnecessary expense was a dollar taken away from providing Medicaid services to the most vulnerable, needy members of society.

This case resembles one we discussed previously, that of the non-profit community health agency in Florida whose leaders again seemed to regard their job as an opportunity for personal enrichment.  It seems that even leaders of non-profit organizations whose mission is to help the needy may seem to put their own needs before those of their disadvantaged constituents.  Of course, given they may have seen leaders of not-for-profit universities and hospital systems making millions, and leaders of for-profit pharmaceutical, device, and especially managed care organizations/ health insurers making tens of millions, and conclude that their six-figure salaries and occasional luxuries were barely adequate compensation.

As we have noted before, the "executives take all" mentality of an era economically dominated by financiers as aristocrats seems to have infected health care.  Somehow we have to restore the idea that executives and managers  like doctors and nurses, should regard their work as calling meant to put the needs of patients and public health first, rather than a quick way to get rich. 

State, City Settle Case Alleging Medicaid Fraud

We have posted on a variety of settlements of cases alleging health care fraud, but this one has a new twist, as reported by the NY Times,

New York State and New York City officials agreed this week to repay the federal government for more than half a billion dollars in improper Medicaid claims, averting a potential court battle but adding more red ink to the state’s and city’s finances.

The settlement, which federal officials said was the largest recovery of Medicaid funds in history, ends a lengthy dispute with the federal government over whether school districts around the state improperly sought Medicaid payments for speech therapy and other services dating to the early 1990s.

Under the agreement, which was announced Tuesday, the city will repay about $100 million. The state will pay about $332 million in 10 installments over the next five and a half years and will also give up $107.9 million worth of Medicaid claims now owed by the federal government.

Though neither city nor state officials are required to admit wrongdoing under the agreement, it does require the state’s Department of Education to submit to independent monitoring of its Medicaid-financed programs.

Since the 1980s, Medicaid has helped school districts pay for the cost of services like speech therapy and psychological counseling for schoolchildren, including the cost of transportation to therapists’ offices. School districts in New York have been among the most aggressive in the country in seeking such aid: one federal study found that New York accounted for 44 percent of all student health services.

Those lawsuits, filed under the federal False Claims Act, spurred several audits by the Department of Health and Human Services of city and state programs that finance speech therapy and other programs for disabled children. Those audits found substantial potential for fraud, reporting that a vast majority of the claims submitted did not meet federal requirements, and that in many cases there was no evidence that the services had actually been provided.

This may be the first settlement of health care fraud allegations we have discussed in which all the involved parties were government agencies.

The current fervent debate in the US about health care reform has focused on ever rising health care costs. However, this debate has largely ignored the ethics of health care, and the sorts of leadership of health care organizations that has lead to rampant and costly mischief, of which this case is just the latest example. How can we control costs while so many health care leaders are seeking every angle to make more money, whatever the consequences?

Sanofi-Aventis Settles

Here is another addition to the parade of multi-million dollar legal settlements by health care corporations. As reported by the AP:

Drugmaker Sanofi-Aventis has agreed to pay nearly $100 million to settle allegations it cheated Medicaid on the cost of nasal sprays.

The Justice Department said Aventis Pharmaceutical Inc., a wholly owned subsidiary of Sanofi-Aventis U.S. LLC, has agreed to pay the government $95.5 million to settle the charges.

The government charged that between 1995 and 2000, Aventis and its corporate predecessors did not offer Medicaid the best prices for the sprays Azmacort, Nasacort and Nasacort AQ.

In reaching the settlement, Sanofi-Aventis U.S. did not admit any wrongdoing. The company, based in Bridgewater, N.J., issued a statement saying it believed the old pricing system was legal.

Under the law, the company was required to tell Medicaid the lowest price that it charged companies for those products, and offer state Medicaid programs rebates based on those prices.

Prosecutors contend that in order to dodge that obligation, Aventis entered into a private deal with the HMO Kaiser Permanente that repackaged Aventis drugs under a new label, allowing them to overcharge Medicaid programs for the same product.

It seems that scarcely a week goes by without a settlement of charges of unethical behavior by some major health care organization. The ongoing parade of such cases ought to inspire some worry about the ethics of the leaders of such organization. Given the current very public discussion of how expensive health care has become, one would think that there would be some discussion of how much of this expense is due to various kinds of deceptive and unethical behavior by some of the biggest, richest, and most powerful health care organizations. But perhaps that would be too upsetting for those who make so much money running these organizations.

As we have said before, most recently here, while human beings authorized or committed the acts that got the organization in trouble, rarely do these people seem to suffer any negative consequences. At most, the organization may pay a fine. In this case, the fine was, in corporate terms, of modest size. However, even a large fine, may come out of dividends or the stock price, dispersing the cost to stock-holders, or out of salaries across the board, dispersing the cost to all employees. Thus, those who got the organization into trouble are unlikely to feel pain from it. Perhaps because of reverence for all organizations related to health care, and fear that the bankruptcy of any health care organization will leave patients in the lurch, prosecutors do not seem inclined to actually prosecute such organizations. The net effect, though, seems to be that dishonest executives of health care organizations can continue to act with impunity.Until bad leadership of health care organizations leads to negative consequences for those practicing it, health care leadership can be expected to continuously degrade.

ADDENDUM (2 June, 2009) - See these comments on the Effect Measure blog.

Healthcare scandal-of-the-week: Merck settles Medicaid lawsuits

They come fast and furious.

It was with sadness that I saw this article in the Philadelphia Inquirer today:

Posted on Fri, Feb. 8, 2008

Merck settles Medicaid lawsuits

It will pay $671 million in alleged overcharging.

By Karl Stark, Inquirer Staff Writer

Merck & Co. Inc. agreed yesterday to pay $671 million to settle allegations that it overcharged the Medicaid program and gave doctors junkets, dinners and other inducements to promote three of its drugs.

The payments stem from two settlements, announced yesterday by U.S. attorneys in Philadelphia and New Orleans, that together show Merck executives' offering low prices to hospitals to induce them to use its drugs heavily, and then failing to acknowledge those low prices to Medicaid, the health program for the poor, as required by law.

The cases also show the company's rewarding doctors with a panoply of favors, from lavish stays in exotic locales to payments for allowing salespeople to shadow them for a day.

I used to work for this company supporting R&D. I was struggling to increase funding to fill some critical informatics gaps in support of drug discovery, clinical trials and safety monitoring to help assure the company would not one day be "trying to do doing business from an empty wagon."

However, it seems some folks in marketing had different ideas about how to conduct business.

Merck agreed to pay $399 million plus interest to settle the Philadelphia case. Because the matter involved 49 states, New Jersey will get $7.4 million and Pennsylvania will get $8.5 million.

The firm will also pay $250 million to settle similar allegations in a separate lawsuit in Louisiana involving Pepcid, the firm's heartburn drug. That suit was originally brought by a doctor, William St. John LaCorte. With interest, the two settlements come to $671 million.

The case resolved yesterday in Philadelphia started with H. Dean Steinke, a Merck district sales manager in rural Michigan, who became a whistle-blower over the firm's marketing of its withdrawn pain reliever Vioxx and the anticholesterol drug Zocor. Steinke could not be reached yesterday.

... His attorney, Mark Kleiman of Los Angeles, said his client began to doubt the company when he was asked to authorize a $75,000 payment to an HMO in 1999. The HMO complained that Zocor cost too much and threatened to remove the drug from its approved list.

Merck did not want to lower the price, because that would have lessened how much it could charge other payers, including Medicaid, Kleiman said. So, he added, the company disguised the payment as an education grant to the HMO.

After Steinke declined to authorize the payment, "his relationship with the company was never the same," Kleiman said.

In other words, he was marginalized for taking an unpopular, "unbusinesslike" stand.

All I'd asked for was an increase of a few million annually to support R&D. After a long bureaucratic battle with the former CEO of a failed computer company, who'd come into pharma at a high level while lacking experience in biomedicine and in information science, I got a third of that.

One might think some of the windfall from marketing efforts such as in this story could have been directed to R&D, but perhaps there other priorities at the time besides discovering new drugs:

Kleiman, the whistle-blower's attorney, said hospitals were also getting up to 10,000 free Zocor pills in stock bottles in the late 1990s. They were typically sent directly to hospital departments, bypassing the pharmacies, to encourage the drug's use, he maintained.

Who, exactly, was then making the decisions on drug administration? Drug reps, perhaps? If the pharmacy is not monitoring drug dispensation carefully, that is a potential source of error, such as drug-drug interaction, allergy, or ADE's. One wonders what effects this practice of bypassing pharmacy might have had on patient safety.

The federal settlement details nine techniques sales representatives used to influence doctors. One was a "preceptorship" in which a salesperson would shadow the doctor around, supposedly to learn more about medicine. The doctors would get $300 for a half-day or $500 for a full day of this work, Kleiman said.

Another big effort was "tutorials" in which doctors were paid several hundred dollars to evaluate sales presentations by the company.

Doctors could be paid $1,000 or more to speak at dinners attended by other physicians. And the biggest prescribers got rewarded with junkets to resorts, Kleiman said.

The "preceptorship" plan sounds great in practice. I've been a preceptor during my clinical years for medical students, a Mennonite minister in training, and others. However, the potential for conflict of interest in "mentoring" of drug reps are great. Who's teaching whom, and who "vetted" this practice in pharma and more importantly, in the hospitals? Further, could paying docs for evaluation of sales pitches be accurately described as "sleazy?" I'm not sure what area of biomedical science this draws upon, although it's perhaps more clearly part of "marketing science."

Steinke, who pursued this case under the False Claims Act for seven years, will receive $44.7 million from the federal share and $23.5 million from the states' share.

Considering what he probably went though as hinted in a companion article here, it sounds like he earned it the very old fashioned way - through sticking up for his beliefs in the face of potentially career ending opposition. That's perhaps America at its best.

-- SS