Corporate Proxies Suggest CEOs Rewarded for Influencing Health Care Reform

We have frequently discussed the often outsized, if not outrageous compensation awarded to top leaders of health care organizations.  Such compensation may seem disproportionate to the leaders' real-world achievements, and may contrast with organizational actions that seem inept, mission-hostile, or unethical.

In perusing this year's crop of proxy statements from some of the biggest US health care corporations, I noted that some provide some narrative, qualitative justification for their top leaders pay.  I was struck by three similar statements:

Johnson and Johnson

We recently discussed the contrast between Johnson and Johnson CEO William Weldon's gargantuan compensation and his detached response to the findings of an inspection of one of his company's factories that lead to its shutdown and the recall of its products.   According to the company's 2010 proxy statement, Mr Weldon's total compensation approved  in 2010 was $19,847,026.   The proxy statement included this overview of his performance:

The Board believes that Mr. Weldon generally exceeded expectations despite substantial economic, political, regulatory and competitive challenges as well as significant patent expirations. As referenced in the table above, the Company delivered solid financial results and positioned itself for future growth.

Under "strategic results" was this statement:

Mr. Weldon played an effective role in helping shape health care policy around the world and has been very involved with efforts on U.S. Health Care Reform. Mr. Weldon’s personal involvement with key leaders and organizations has ensured the interests of the Company are well represented.

Pfizer

We recently discussed the contrast between Pfizer Inc CEO Jeffrey Kindler's sizable compensation and the number and size of lawsuits alleging unethical conduct that the organization has settled, and its criminal conviction as a "racketeering influenced and corrupt organization" (RICO). According to the company's 2010 proxy statement, Mr Kindler's total compensation in 2009 was $14,898,038. The proxy statement included an Executive Compensation Discussion and Analysis. Its summary of Mr Kindler's performance was:

The committee believes that Mr Kindler's leadership was a significant factor in the continued progress made by Pfizer in 2009 in strengthening the foundation for future growth and long-term success.

It also specifically addressed Mr Kindler's "industry leadership":

During 2009, Mr Kindler was actively involved, through both Pfizer and external organizations, in developing and advancing US and global public policies that serve the overall interest of our Company and our shareholders, as well as doctors and patients. These efforts included constructive participation in the US legislative process to advance Pfizer's goals of achieving a more rational operating environment....

UnitedHealth Group

We recently discussed the contrast between UnitedHealth Group CEO Stephen J Helmsley's large total compensation and the profit he recently made from the sale of stock options and various questions raised about his company's ethical performance.  According to the company's 2010 proxy statement, his 2009 total compensation was $8,901,916. The company's 2010 proxy statement stated his compensation was based upon a variety of factors, including:

Positive participation and leadership of the Company in the health care reform and modernization debate

Summary

We have noted how health care organization may be gripped by "compensation madness," caused by "insiders hijacking established organizations for their personal benefit."  One could view the statements above as just one form of post-hoc justification for compensation madness.  It is possible that timid, if not crony boards are simply getting more inventive in their rationalizing CEOs' imperial pay scales.  On the other hand, those justifying the compensation of three extremely well-compensated health care corporate CEOs may really believe what they wrote about their CEOs roles in health care reform. 

We have posted little about the US health care reform effort because so much of it seemed irrelevant to the concerns mentioned on Health Care Renewal.  Health care reform legislation did little to address problems with health care leadership, governance and ethics, and how they challenge health care professionals' values and lead to higher costs, declining access, poor health care quality and disgruntled health care professionals (see this summary).  Maybe one reason this was so was that the top leaders of health care organizations did a good job pushing their personal and organizational priorities into the reform legislation, meanwhile discouraging any provisions that might threaten the way they were leading their organizations, and how much they were making while doing so. 

There a many reasons for the popular dissatisfaction with the recently enacted US health care reform legislation.  The influence of the leadership of top health care corporations in promoting their, rather than the populace's goals, ought to be a topic of further inquiry.  Meanwhile, it may be that the "superclass" has struck again. 

Pfizer Settles One Lawsuit, Loses Another, Pays its CEO $13.7 Million

It's deja vu all over again for Pfizer Inc, the world's largest pharmaceutical company.

Settlement of Suit Alleging Neurontin Risks Concealed

Pfizer has kept busy in court defending against charges that a company it acquired promoted Neurontin (gabapentin) for uses not approved by the US Food and Drug Administration (FDA), and not well supported by the evidence.  Most recently, it was convicted by a jury in California of being a racketeering influenced and corrupt organization (RICO) because of a long-term "racketeering conspiracy" involving Neurontin marketing (see post here). Now additionally, according to the Wall Street Journal,

Pfizer Inc. said it reached a settlement agreement in a wrongful-death lawsuit brought by a woman who claimed her husband's use of the antiseizure drug Neurontin caused him to commit suicide in 2002.

The suit was brought by Linda Shearer of Berkshire County, Mass., whose husband, Hartley Shearer, was prescribed Neurontin to control the effects of his paralysis. The suit alleged Pfizer promoted this use of the drug even though it wasn't approved by U.S. regulators. The suit alleged Pfizer knew the drug was associated with a risk of suicide, but failed to properly warn of the risk.

The new wrinkle here is that Pfizer did not defend a suit that alleged the company knew of a potentially fatal side-effect of the drug, but failed to disclose that risk.

Jury Awarded Damages for Treatment of Whistle-Blower

Meanwhile, the Hartford Courant reported:

A former Pfizer scientist who claims she has been paralyzed by a virus designed at the pharmaceutical company's laboratory in Groton was awarded $1.3 million by a federal jury in Hartford Thursday following a trial that raised questions about safety practices in the dynamic field of genetic engineering.

The amount of the settlement awarded to molecular biologist Becky McClain of Deep River will likely increase in coming days. After about day of deliberation, the jury also awarded McClain punitive damages, to be determined by U.S. District Judge Vanessa L. Bryant, and awarded fees to McClain's two Connecticut lawyers, Bruce E. Newman and Stephen J. Fitzgerald.

McClain claimed in her suit that she was inadvertently exposed through work by a former Pfizer colleague in 2002 or 2003, to an engineered form of the lentivirus, a virus similar to the one that can lead to acquired immune deficiency syndrome, or AIDS.


She further claimed that Pfizer wrongly fired her in 2005 for complaining about laboratory safety to the U.S. Occupational Safety and Health administration and to co-workers.

Ultimately, the jury was not permitted during the 12-day trial to hear argument supporting McClain's claim of a causal link between her disability and virus research done at her laboratory in Groton.

The jury based its verdict on evidence concerning McClain's two remaining claims: that her dismissal violated Connecticut's whistle blower law and McClain's free speech right. Her lawyers contended her complaint to federal safety regulators amounted to a whistle blower complaint and that her discussion of safety issues with fellow workers was free speech.

So, after being convicted by a jury of being a "racketeering influenced and corrupt organization," (RICO), and settling civil and criminal fraud charges for an unprecedented $2.3 billion (see post here), and after many other allegations, settlements, and convictions (look here),  Pfizer failed to defend one action, and lost another that argued Pfizer tried to hide information which put the company and/or its products in an unfavorable light.

In fact, Even Pfizer CEO Jeffrey Kindler could not put much of a spin on the company's recent record. As reported by Duff Wilson in the New York Times,

The world’s largest drug company, Pfizer, has handled mergers badly, invented too few drugs and left its reputation in disrepair after two criminal cases.

And that is the assessment of its own chief executive.

CEO's Multi-Million Dollar Compensation
But while all this was going on, the company did disclose (as mandated by the US Securities and Exchange Commission [SEC]) that CEO Kindler is continuing his acquisition of riches.  As reported by the AP (via USAToday).

The chief executive of drug giant Pfizer Inc., Jeffrey Kindler, received a 2009 compensation package valued by The Associated Press at $13.7 million, down 7.6% from 2008, as the board reduced the stock awards he received, citing economic pressures.

The world's biggest drugmaker paid Kindler, 54, a salary of $1.6 million, up just $25,000 from the year before. But his performance bonus was bumped up to $3.5 million from $3 million in 2008, according to a filing this week with the Securities and Exchange Commission.

Most of Kindler's compensation comes from long-term awards of stock options and restricted shares. The total fell 17% to $8.1 million in 2009, from $9.8 million, even though they were granted in late February, a month after Kindler announced plans to buy Wyeth for $68 billion, a sound strategy to counter Pfizer's looming revenue plunge.

Kindler's other compensation — a variety of perks — totaled $449,731. That included $190,725 for Kindler's use of corporate aircraft as required by Pfizer's board, $43,099 for use of a car, $7,690 for financial counseling and $1,217 for home security.

Even admitting that Kindler's compensation last year was slightly decreased from last year's not so small fortune, there still seems to be a huge disconnect between the company's ethical woes, legal settlements, and guilty pleas and its CEO's rewards. Once again, it seems that leaders of large health care organizations never face real accountability for their company's bad behavior. It almost goes without saying that in the two cases summarized above, no one who authorized, directed, or implemented the actions leading to the settlements or damages seems to have had any negative consequences.

So once more with feeling.... In the US, we have put much of our health care system in the hands of very large organizations, for-profit and not-for-profit, without holding these organizations and their leaders accountable for their actions. The results have been increasingly rich leaders who often behave like a new aristocracy, and repeated bad behavior by the organizations they lead.

Our latest effort at health care "reform" has continued to rely on large private organizations, while so far not adding to their or their leaders' accountability. In my humble opinion, if we really want to reform health care so as to improve quality, increase access, control costs, and support professionalism, we will have to make our new health care oligarchs accountable.

Postscript - Pay for Health Care Reform Lobbying?

By the way, a commentary in The [New London, CT] Day suggested an explanation for why Kindler was so richly paid last year:

It takes pages and pages of a company securities filing to explain and justify all the bells and whistles of Kindler's 'annual incentive award,' a complicated stew of stock options and deferred payments and plain old salary.

From all of this, Timothy P. Carney of the Washington Examiner found one juicy tidbit, which especially titillated industry bloggers.

It turns out Kindler's salary increase, from $1.57 million to $1.6 million, was based in part, the compensation committee suggested, on his success in making a deal with President Obama that protected the drug industry from some of the more onerous proposals of health care reform.

Praising Kindler as an effective lobbyist in, among other things, heading off legislation that would allow the importing of cheaper prescription drugs, the committee said: 'These efforts included constructive participation in the U.S. legislative process to advance Pfizer's goals of achieving a more rational operating environment.'

Or, he kept a finger in the dike against health care reform.

Indeed, a recent report by the Sunlight Foundation, a private nonprofit dedicated to more transparency in government, indicates Kindler's extensive role in negotiating a deal for the drug companies with the Obama administration and Senate Finance Committee Chairman Max Baucus.

It turns out Kindler's name turns up four times on last year's White House visitor logs.

The final deal Kindler helped craft promised $80 billion in cost cutting by the drug companies but blocked much more onerous reform measures for the industry, like lowering prescription drug prices through Medicare negotiations, re-importation of drugs from other countries with lower prices and quicker release of generics onto the market.

The cost-saving of such measures, if allowed to occur, could have been in the hundreds of billions of dollars, according to government analysis.

Kindler, as the pay committee says, did good.

Several of our fellow bloggers have suggested that an installment of the Public Broadcasting Service (PBS) program "Frontline" will show just how much of the recent US health care reform effort was the product of health care corporate CEOs (e.g., see this post on GoozNews, and this post on Managed Care Matters). We shall see once the program airs, but maybe Mr Kindler's salary was a good value for Pfizer, but a very bad one for the rest of the country.

The Health Care Reform Bill and Health Care Renewal

I have not written much about the seemingly endless health care reform debate in the US, because much of it has not been relevant to the issues we discuss on Health Care Renewal.  Now that the current phase of the debate is done, and legislation has been passed, let me offer my opinions on the few aspects that do seem relevant to this blog.

The Sunshine Act

For Health Care Renewal readers, the most important part of the legislation is that containing the provisions of the Sunshine Act, championed by Senators Grassley and Kohl.  (See this summary on Postscript, the Prescription Project blog.)  The act requires that all drug, device, biologic, and medical supply manufacturers report essentially all payments to physicians or teaching hospitals to the goverment, and on the internet.  It does not appear that the rules apply to other health care related non-profit organizations, e.g., medical schools, disease advocacy groups, health care related charities, medical societies, etc, or to payments made by for-profit health insurers, clinical research organizations, and some other corporations.  Unfortunately, the provisions only take effect in 2013.  However, despite these quibbles, this still may be one of the most important advances promoting disclosure of health care related conflicts of interest made in the 21st century.

Comparative Effectiveness Research

As best as I can tell at this point, the current legislation used the wording from the bill previously passed in the US Senate, which we discussed here and here, regarding comparative effectiveness research.  Although its goal of setting up a not-for-profit comparative effectiveness organization seems laudable, the devil will be in the details.  The Senate version gave considerable oversight of this organization to those with vested interests in selling particular products or services, threatening the impartiality of the organization and the research it would sponsor, and perhaps thus wholly defeating its ostensible purpose.  Furthermore, the Senate bill included curious wording that seems to threaten the ability of those getting funding from the organization to express views that might disturb the organization's leadership, again threatening the integrity of their dissemination of its work, and perhaps violating the First Amendment of the US Constitution.  Whether these provisions provide benefits that outweigh their harms is highly questionable.

Payments to Physicians

We have criticized how the process of setting payments to physicians by the US Medicare system has been captured by a secretive committee of the American Medical Association that is dominated by physicians who do procedures, the RBRVS Update Committee, or RUC.  The results have been payments for primary care and other cognitive services that have failed to keep up with inflation, a major cause of the continuing decline of generalist/ primary care medicine in the US.  (See most recent post here about this.)  According to the summary provided by the American College of Physicians (here), the new legislation would enable review of  payments made for specific services, and would reconsideration of the process used to set physician payments by an independent advisory group.  However, the bill would not mandate any changes in payments, or in the processes used to set them, including the pivotal role of the RUC.   So there is some chance that the legislation would lead to a more transparent, accountable, honest, and rational process for setting physician payments and hence eliminating perverse incentives, but no guarantee of such favorable changes.

Summary

The legislation seemingly will result in one major advance fostering disclosure of some conflicts of interest, and perhaps some progress in terms of reducing perverse incentives generated by Medicare's payments to physicians, and possibly reducing regulatory capture of this process.  It likely will result in more comparative effectiveness research, but how badly it will be biased in favor of vested interests is unclear.  As far as I can tell, the legislation will leave most of the other problems we discuss on Health Care Renewal untouched.  We thus have one or two small steps for mankind, but no reason for complacency.

the news is not bad, but we are still a long way from meaningfully addressing concentration and abuse of power in health care.  There will be no rest for the weary bloggers of Health Care Renewal.

Also, see comments here and here by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.

ADDENDUM (25 March, 2010) - Also see comments on the Sunshine Act by Alison Bass on the Alison Bass Blog.

The Health Care Bubble: Parallels with the Global Financial Meltdown

The global financial melt-down, or great recession, or whatever it will be called was a big surprise in September, 2008, to those of us not immersed in finance. A year later there is an opportunity to at least better understand the events leading up to it.  I have managed to read two focused books on aspects of the melt-down, (House of Cards, by William D Cohan, and Fool's Gold by Gillian Tett) and am in the midst of what may be the best general narrative of it published to date, The Sellout, by Charles Gasparino.

Reading the recent history of the meltdown makes me uncomfortably aware of parallels between these events and the current dysfunction of the health care system.  In his discussion of the run-up to the crash, Mr Gasparino emphasized a number of issues which I will catalog along with their health care parallels.

Prices Always Go Up

The prices in question were those of real-estate, and the notion that they would always go up helped to fuel would an explosion of mortgage loans made to people who had little chance of fully repaying them.  When housing prices reached an unsustainable level and started to fall, the melt-down began.

-  It is a cliche that overall health care costs in the US have been going up much faster than inflation for as long as most of us can remember (at least since the 1970s), creating the expectation that they always will go up.   

Products were Over-Rated by the Apparent Experts

Mortgages made to people who were unlikely to be able to pay them back were sold by irresponsible originators, and then packaged into financial derivatives by finance firms.  Many of these derivatives were rated "AAA" by trusted rating firms, even though they contained multiple individually risky mortages.  The rating firms boasted of expertise, and used complex mathematical models supposedly based on evidence to make their ratings. 

-  In health care, we have come to trust expert professionals' assessments of products (like drugs and devices) and services based on their expertise and clinical research evidence. 

Evidence Used to Rate Products was Suspect

The mathematical models used to predict risk were based on limited data and assumptions.  In particular, they did not account for the possibility that real-estate prices might go down, or that particular circumstances might cause multiple home-owners to default on their mortgages at the same time.  The increasing level of defaults, signaling that the derivatives based on the mortgages might be riskier and less valuable than previously thought, caused the melt-down to accelerate.

-  We have discussed how the clinical evidence may be manipulated by those with vested interests in selling products or services.  When manipulation  does not yield the result desired by the marketers, the results of the research may be entirely suppressed.  One particularly telling example was the suppression of research  unfavorable to new anti-depressant medications as documented in part by Erick Turner et al.  When all suppressed research was taken into account, the drugs appeared much less effective than was previously believed.

The Experts were Conflicted

The rating agencies were paid by the finance firms which sold the derivatives.  Ratings agencies that did not deliver sufficiently good ratings were likely to lose business.  "By 2005 triple-A ratings were being handed out like candy: underwriters could nearly demand they wanted on a deal and did."

-  We have discussed how physicians and medical academics frequently have conflicts of interest due to their financial ties to pharmaceutical/ biotechnology/ device and other health care companies.  August academic medical institutions have come to depend on money from industry to support research and education.  Distinguished academics are often paid key opinion leaders for drug and device marketers.

Deceptive Marketing

Per The Sellout, "On Wall Street, complexity isn't something to be avoided - it allows smooth-talking salesmen to obscure simple concepts like risk and losses."

- We have written again and again about deceptive marketing practices, how marketing is disguised as medical education, the use of stealth marketing, etc to promote often overpriced tests and treatments that are often less effective and/or more hazardous than they are advertised to be. 

Politicians Pushed Access without Regard to Consequences

US politicians from both parties pushed ever more accessible mortgages for the laudable goal of making better housing available to the less advantaged, but seemed unconcerned about how they would eventually pay back the loans.

-  The driving motivation for most current health care reforms efforts in the US seems to be to provide "access," now redefined as some sort of health insurance, without much attention to the reasons health care has become so inaccessible in the first place.

Major Organizations Lead by the Clueless

The Sellout provided some notable vignettes, including those about Jimmy Cayne, the CEO of Bear Stearns, who did not understand the complex derivatives his firm bought and sold, or the level of risk the firm was assuming; Stan O'Neal, the CEO of Merrill Lynch, whose tenure was "one of the strangest, most volatile, and ultimately most disastrous that Wall Street had ever seen;" and Charles Prince, the CEO of Citigroup, who apparently was a good lawyer, but had "little experience running a business," much less one as complex as Citigroup.

-  We have repeatedly discussed how large health care organizations are now often mismanaged, at times by people with little knowledge of or experience in the health care context.

Overpaid, Isolated, Arrogant, Imperial CEOs

The Sellout provided more notable vignettes.  Jimmy Cayne (see above), was at one point worth more than US $1 billion.  He spent more and more time playing bridge, and less managing his company.  Stan O'Neal (see above), would often vanish to play golf.  The leadership of Richard Fuld, the CEO of Lehman Brothers, "was more like that of a cult leader than even that of an imperial CEO."

-  We have repeatedly discussed how large health care organizations' leaders may be overpaid (some making nearly as much as the leaders of some financial firms before the collapse), arrogant imperial CEOs, some aspiring to be members of the superclass.  One striking example was the former CEO of UnitedHealth, Dr William McGuire, who was once worth more than US $1 billion before it became apparent that some of his fortune was based on back-dated stock options. 

Sycophantic Cronies as "Stewards"

The Sellout discussed how members of the boards of directors of financial firms were mostly chosen by the CEOs they were supposed to supervise.  For example, Jimmy Cayne, who had "a firm grip over his board of directors," noting "my board is my board."

-  We have often discussed poor governance of health care organizations, and specifically how boards of directors or trustees of health care organizations are similarly unlikely to challenge the CEOs they are supposed to supervise.  We also have noted how health care organizations' are often lead by the same Masters of the Universe who brought us the global financial collapse.  For example, Cornell's Weill Medical School was named after former trustee Sanford Weill, who constructed the giant conglomerate Citegroup, but did not figure out how to make its pieces fit together, and was forced "to step down as CEO as the research scandal [investigation] initiated by [former New York state Attorney General] Spitzer snared its highest-profile target, Weill himself." (from The Sellout, p. 187.)

Suppression of Dissent

The Sellout noted how increasingly arrogant leaders of financial firms ignored advice of more conservative or risk-adverse employees.  Dissenters were often afraid to speak out, and some were fired.  For example, at Bear Stearns, Jimmy Cayne increasingly marginalized "Ace" Greenberg, who was wary of excess risk.  At Lehman Brothers, the cult of personality that surrounded Fuld suppressed dissent and debate.

-  We have discussed the anechoic effect, the lack of discussion surrounding important health care issues, seemingly enabled by the sense that one simply does not talk about such issues.  Whistle-blowers are often ostracized, or worse, and academic freedom and free speech may be frankly threatened.

Ineffective, or Captured Regulators

From the 1980s onward, deregulation of the financial industry advanced.  The Sellout discussed how the Federal Reserve, lead by Allan Greenspan, enabled if not cheer-lead for the bubble.  The  Securities and Exchange Commission (SEC) was often ineffectual at best.

-  We have discussed how the FDA got conflicted advice and often seemed to feel that drug and device manufacturers, rather than the public were its clients.  We just noted that one version of health care reform would put control of a comparative effectiveness research institute in the hands of industry, and would empower its leaders to suppress research which offends them.

Summary

We have discussed the impetus to make physicians give up their professionalism ostensibly to increase competition (see post here), and to then hand over control of health care to managers ostensibly to reduce costs.  Since the 1980s, health care has increasingly been dominated by large organizations run as businesses by business managers.  It should therefore be no surprise that the ethos of health care management has come to resemble the ethos of business management in general.  Thus, maybe the parallels between some of the issues related to the global financial meltdown and the issues related to current health care dysfunction should not be surprising.

A few other bloggers and business writers have referred to a health care bubble in the last few years.  Notably, Dr Wes advanced the concept in 2008.  Dr Rich spoke out in early 2009, and Dr George Lundberg added to it later in 2009. 

So I make a fearless assertion and prediction.  Health care dysfunction has lead to a health care bubble, which is likely to burst soon with considerable adverse consequences.  Perhaps a controlled deflation of the bubble would be possible, but would require more courage and clear thinking than most of our political and health care leaders have exhibited so far.  We have repeatedly noted how current efforts to reform health care have ignored most of the issues discussed above and documented repeatedly on Health Care Renewal.  If one of the currently proposed versions of health care reform becomes law, it may postpone for a while the popping of the bubble.  However, the longer the bubble grows, the nastier the bursting of it.

Do not say we did not warn you.

Who Should Sponsor Comparative Effectiveness Research?

We have tried to argue why comparative effectiveness research is a good idea. To cut and paste what I wrote in a previous post,

Physicians spend a lot of time trying to figure out the best treatments for particular patients' problems. Doing so is often hard. In many situations, there are many plausible treatments, but the trick is picking the one most likely to do the most good and least harm for a particular patient. Ideally, this is where evidence based medicine comes in. But the biggest problem with using the EBM approach is that often the best available evidence does not help much. In particular, for many clinical problems, and for many sorts of patients, no one has ever done a good quality study that compares the plausible treatments for those problems and those patients. When the only studies done compared individual treatments to placebos, and when even those were restricted to narrow patient populations unlike those patient usually seen in daily practice, physicians are left juggling oranges, tomatoes, and carburetors.
Comparative effectiveness studies are simply studies that compare plausible treatments that could be used for patients with particular problems, and which are designed to be generalizable to the sorts of patients usually seen in practice. As a physician, I welcome such studies, because they may provide very useful information that could help me select the optimal treatments for individual patients.

Because I believe that comparative effectiveness studies could be very useful to improve patient care, it upsets me to see this particular kind of clinical study get caught in political, ideological, and economic battles.

In particular, we have discussed a number of high profile attacks on comparative effectiveness research, which often have featured arguments based on logical fallacies. While some of the people making the attacks have assumed a conservative or libertarian ideological mantle, one wonders whether the attacks were more driven by personal financial interests. For example, see our blog posts here, here, here, and here. On the other hand, we discussed a clear-headed defense of comparative effectiveness research by a well-known economist most would regard as libertarian here.

Comparative effectiveness research has been discussed as an element of health care reform in the US. It turns out that the current version of the health care reform bill in the US Senate has a provision to create a Patient Centered Outcome Research Institute, which presumably would become the major organization which could sponsor comparative effectiveness research.

This institute, however, would not be a government agency (despite the name that makes it sound like it would be part of the National Institutes of Health). Moreover, here is a description of the Board of Governors who would run the institute from the current version of the bill :

BOARD OF GOVERNORS.—
(1) IN GENERAL.—The Institute shall have a Board of Governors, which shall consist of 15 members appointed by the Comptroller General of the United States not later than 6 months after the date of enactment of this section, as follows:
(A) 3 members representing patients and health care consumers.
(B) 3 members representing practicing physicians, including surgeons.
(C) 3 members representing private payers, of whom at least 1 member shall represent health insurance issuers and at least 1 member shall represent employers who self-insure employee benefits.
(D) 3 members representing pharmaceutical, device, and diagnostic manufacturers or developers.
(E) 1 member representing nonprofit organizations involved in health services research.
(F) 1 member representing organizations that focus on quality measurement and improvement or decision support.
(G) 1 member representing independent health services researchers.

Thus, only 3/15 members of the governing board would represent the patients who ultimately reap the benefits or suffer the harms produced by medical diagnosis and treatment. Further, 6/15 members represent for-profit corporations which stand to make more or less money depending on how particular comparative effectiveness studies come out. Also, 3/15 members would be physicians, some of who may get paid more to deliver particular treatments (e.g., procedures) than others (e.g., providing advice about diet and exercise).

We often discuss how clinical research sponsored by organizations with vested interest in the research turning out to favor their products or services may be manipulated to favor these interests, and sometimes suppressed if it does not. In the US, there are few unconflicted sources of sparse funds to support comparative effectiveness research. (The most significant current source is the Agency for Healthcare Research and Quality, AHRQ. For full disclosure, I have been an ad hoc reviewer of grants for that agency.)

The current draft of legislation would create the largest potential sponsor for comparative effectiveness research, but would make that organization report to representatives of for-profit companies whose profits may be affected by the results of such research. In my humble opinion, this is not much of an advance. Comparative effectiveness research controlled by corporations that stand to profit or lose depending on its results will forever be suspect.

If the government is going to support comparative effectiveness research, it ought to make sure such research is not run by people with vested interests in the outcomes coming out a certain way. I may be biased myself, but why not let the research be sponsored by AHRQ, an agency with relevant experience and no axe to grind vis a vis any particular product or service?

Whose Voices do US Congresspeople Hear on Health Care Reform?

Earlier today, we posted about the final version of the settlement of lawsuits against the global health care insurance company/ managed care organization, UnitedHealth Group. The lawsuits charged that the company had deceptively backdated stock options given to its former CEO.

We previously wondered whether the tawdry leadership exemplified by this backdated stock option scandal had lead to UnitedHealth's reputation for patient-, employer-, or physician-unfriendliness. For example,

• as reported by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."
• UnitedHalth promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post here);
• UnitedHealth's acquisition of Pacificare in California allegedly lead to a "meltdown" of its claims paying mechanisms (see post here);
• UnitedHealth's acquisition of Sierra Health Services allegedly gave it a monopoly in Utah, while the company allegedly was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post here)
• UnitedHealth frequently violated Nebraska insurance laws (see post here);
• UnitedHealth settled charges that its Ingenix subsidiaries manipulation of data lead to underpaying patients who received out-of-network care (see post here).

One would think that such a reputation would decrease the company's influence on health policy. However, last week, Business Week reported that UnitedHealth has developed a powerful voice on health care reform in the US.

As the health reform fight shifts this month from a vacationing Washington to congressional districts and local airwaves around the country, much more of the battle than most people realize is already over. The likely victors are insurance giants such as UnitedHealth Group (UNH), Aetna (AET), and WellPoint (WLP). The carriers have succeeded in redefining the terms of the reform debate to such a degree that no matter what specifics emerge in the voluminous bill Congress may send to President Obama this fall, the insurance industry will emerge more profitable.

The industry has already accomplished its main goal of at least curbing, and maybe blocking altogether, any new publicly administered insurance program that could grab market share from the corporations that dominate the business. UnitedHealth has distinguished itself by more deftly and aggressively feeding sophisticated pricing and actuarial data to information-starved congressional staff members. With its rivals, the carrier has also achieved a secondary aim of constraining the new benefits that will become available to tens of millions of people who are currently uninsured. That will make the new customers more lucrative to the industry.

UnitedHealth has managed to cozy up to many pivotal congresspeople, like Representative Jim Matheson.

Impressing fiscally conservative Democrats like [Jim] Matheson, a leader of the House of Representatives' Blue Dog Coalition, is at the heart of UnitedHealth's strategy. It boils down to ensuring that whatever overhaul Congress passes this year will help rather than hurt huge insurance companies.

Matheson, whose Blue Dogs command 52 votes in the House, can't offer enough praise for UnitedHealth, the largest company of its kind. 'The tried and true message of their advocacy,' he says, 'is making sure the information they provide is accurate and considered.'

Also, Representative Mike Ross,

an Arkansas Democrat who leads the Blue Dogs' negotiations on health reform, also welcomes input from UnitedHealth. 'If United has something to offer on cutting costs, we should consider it,' says Ross, a former small-town pharmacy owner. 'We need more examples that work, and everything should be on the table.'

Not to mention Senator Mark R Warner (D- Virginia),

UnitedHealth's relationship with Democratic Senator Mark R. Warner of Virginia illustrates the industry's subtle role. Elected last fall, Warner, a former governor of his state and a wealthy ex-businessman, received a choice assignment as the Senate Democrats' liaison to business. The rookie senator landed in the center of a high-visibility political drama—and in a position to earn the gratitude of a health insurance industry that has donated more than $19 million to federal candidates since 2007, 56% of which has gone to Democrats.

UnitedHealth has periodically served as a valuable extension of Warner's office, providing research and analysis to support his initiatives. Corporations and trade groups play this role in all kinds of contexts, but few do it with the effectiveness of the insurers. In June, Warner introduced legislation expanding government-backed Medicare and Medicaid coverage for hospice stays for the terminally ill and other treatment in life's final stages. The issue isn't a top UnitedHealth priority. But the corporation wanted to help Warner with his argument that in the long run, better hospice coverage would save money. UnitedHealth prepared a report for lawmakers finding that 27% of Medicare's budget is now spent during the last year of older patients' lives, often on questionable hospital tests and procedures. Expanded hospice coverage and other services could save $18 billion over 10 years, UnitedHealth asserted.

When Warner went to the Senate floor on June 15 to offer his bill, he cited those exact figures. He thanked the company for its support and put a letter from UnitedHealth applauding him in the Congressional Record.

Warner acknowledges in an interview that he worked on the hospice-care legislation with UnitedHealth executives. But he stresses that he has long experience with health issues and has formed his own views. The senator echoes UnitedHealth's contention that a so-called public option could be a 'Trojan horse for a single-payer system,' meaning government-run medical care. Warner has heard from some of UnitedHealth's largest employer clients, such as Delta Air Lines (SWY). Delta CEO Richard H. Anderson, a former UnitedHealth executive, has told Warner and other lawmakers that big companies don't want government to limit their flexibility in crafting employee health benefits.

Despite the fact that UnitedHealth subsidiary Ingenix just settled lawsuits alleging it had manipulated data, legislative leaders have come to rely on data it produced,

Warner and other opponents of a public plan have relied on an estimate by John Sheils, an actuary who says that 88 million people, or 56% of those with employer-provided coverage, would desert private insurance for a government-run program. That would destabilize the marketplace and potentially kill the private insurance industry, according to Sheils, who works for the Lewin Group, a corporate consulting firm in Falls Church, Va.

UnitedHealth lobbyists routinely cite Lewin's work, as do Senator Orrin G. Hatch (R-Utah), the second-ranking Republican on the Senate Finance Committee, and Eric Cantor (R-Va.), the House Republican Whip. Left out of these testimonials or buried in the fine print is that a UnitedHealth unit owns the Lewin Group and thus is ultimately responsible for Sheils' paycheck. In an interview, Sheils says UnitedHealth gives him and the Lewin firm complete independence: "We call it like we see it," he adds.

Why UnitedHealth wields such influence despite the numerous questions raised above about its leadership and ethics remains a mystery.

However, the clout of UnitedHealth and other large health care organizations with questionable leadership and ethics over US health care policy certainly explains why almost nobody talks about restraining concentration and abuse of power, or improving health care organizations' leadership and governance as parts of health care reform.

However, on Health Care Renewal, we have shown numerous examples of unrepresentative, unaccountable, opaque and ethically unconstrained governance of health care organizations. Such governance enables ill-informed, incompetent, conflicted, or even corrupt leadership. Such leadership may use tactics including deception, dishonesty and disinformation; intimidation and coercion; creation of perverse incentives; development of conflicts of interest; and outright fraud and corruption. We believe these are major causes of increasing costs, worsening access, declining quality, and demoralized health care professionals. (See our archives for numerous examples.)

As long as the foxes advise and influence the hen house guards, the likelihood of health care reform that will actually improve health and health care remains low.

Final Settlement of UnitedHealth Backdating Case

Last year, we discussed a preliminary settlement of allegations against the leadership of one of the US (and the world's) biggest health care insurance companies/ managed care organization. Now the settlement appears final, as reported by the AP (and published in the NY Times),

UnitedHealth Group Inc. moved closer to finally putting its stock options backdating problems behind it Tuesday, when a federal judge approved a class-action settlement of more than $925 million.

Minnetonka, Minn.-based UnitedHealth will pay $895 million toward a settlement for shareholders. Former Chairman and CEO William McGuire contributes $30 million and cancels 3.6 million stock options.

The insurer's former general counsel, David J. Lubben, will pay $500,000.

The parties first agreed to this settlement more than a year ago, and U.S. District Court Judge James M. Rosenbaum granted preliminary approval in December. He then approved it in an order filed Tuesday.

The settlement is one of the largest involving options backdating cases if not the largest, said Peter Henning, a law professor at Wayne State University in Detroit.

The lawsuit centered on a scandal over stock options backdating that forced McGuire to step down from both roles in 2006.

The litigation claimed investors were hurt because UnitedHealth and McGuire didn't really grant stock options when they said they did in the late 1990s and early 2000s.

Backdating involves manipulating the timing of options grants so they look as though they were made on days when the stock's value was lower. Doing this can boost a recipients' windfall when they sell the stock.

The practice is not illegal if it is properly disclosed. But concealing it can hide the true costs a company incurred, inflating its profits and possibly its stock price.

UnitedHealth wiped out more than $1.5 billion in past profits when it acknowledged that it backdated stock options.

This was the second approval granted this summer for a large settlement involving UnitedHealth stock options. Last month, Rosenbaum also approved the resolution of a derivatives case that pitted UnitedHealth shareholders against McGuire and several other company executives.

The shareholders had accused the executives of failing to fulfill their fiduciary duties by allowing the backdating. They recovered mostly options and cash for the company.

Court papers put the value of that settlement, which also was approved by a Minnesota state judge, at around $718 million in January.

Note that this year we discussed a settlement made by UnitedHealth's Ingenix subsidiary.

Here on Health Care Renewal, we discuss problems afflicting the leadership and governance of health care organizations. So, we have discussed a seemingly endless parade of legal settlements of allegations of unethical behavior by health care leaders, and even outright criminal behavior. These cases suggest that the leadership culture of many health care organizations accepts unethical, and sometimes even criminal behavior, at least as long as their leaders bring in money in the short-term. Yet shouldn't health care organizations, which are supposedly about helping patients, improving health, preventing disease, etc, be held to a higher standard of ethics than, for example, garbage hauling firms? The parade of stories about misbehavior among health care leaders suggest that some of their organizations do not even rise to the ethical standards of trash haulers.

Further, it is reasonable to hypothesize that unethical and at times criminal leadership is bad for health care, bad for patients, and bad for the public health. It likely is an important cause of rising health care costs, declining health care access, and poor health care quality.

However, despite the ongoing storm of discussion and opinion about health care reform here in the US, few would-be health care reformers are addressing these issues. What discussion there is of "fraud and abuse" seems to be about low-level offenses, not about leadership. In fact, influential voices in the discussion come from leaders of some of the same organizations that have made huge settlements of allegations of bad behavior, accepted deferred prosecution agreements, or have seen previous leaders resign in disgrace or go to jail.

I respectfully suggest that meaningful health care reform is unlikely unless we deal with the problem of conflicted, unethical, and sometimes corrupt leadership of health care organizations.

SGIM Urges "Chuck the RUC"

This week, Society of General Internal Medicine (SGIM) members received the 5 August, 2009, Update in Health Policy that urged we "chuck the RUC," (quoted in its entirety below, italics added for emphasis):

Who will assign the value of primary care services? Chuck the RUC!

How does Medicare determine physician payment rates? The answer to this question is a core element of the ongoing debate about health care reform. Changing how Medicare sets payment rates for physicians is especially critical since Medicare rates also guide the rates set by private insurers. Since 1992, Medicare has paid physicians according to the Resource Based Relative Value Scale (RBRVS), a fee schedule that multiplies relative values for physician services by a conversion factor to determine the amount of payment. The Centers for Medicare and Medicaid Services (CMS) has historically used the Relative Value Scale Update Committee, or RUC, as the sole source of recommendations. This committee within the AMA performs broad reviews of the RBRVS every five years. Twenty three of the RUC's twenty nine members are appointed by major national medical specialty societies, including those that account for high percentages of Medicare expenditures for procedures. All meetings are closed and discussions are confidential. The over-representation of procedure-driven subspecialties and under-representation of generalist physicians in the RUC has contributed to the current undervalued cognitive services (especially for primary care) and over-valued reimbursement for procedures. In March 2007, the Medicare Payment Advisory Commission (MedPAC) identified the RUC process as a major reason for undervalued primary care services and a significant contributor to the crisis in primary care. MedPAC has recommended that an independent expert panel of economists, technology experts, physicians and private citizens be created to supplement the RUC's recommendations to CMS regarding fee schedules. Health reform discussions have included moving MedPAC into the executive branch and giving it authority to review and recommend Medicare payment policy, thus reducing the RUC's influence. Not surprisingly, both the AMA and the American College of Surgeons have opposed this proposal. Groups representing primary care physicians, including SGIM, are in favor of this proposal which could ensure fair and unbiased assignment of work RVUs to all the service codes used by physicians. We believe that this will correct the payment inequalities of the current fee scale and ultimately renew trainees' interest in primary care. In the coming weeks, SGIM may ask you to act on this issue and contact your legislators to urge them to support these transformative proposals for primary care. Please monitor your e-mail for action alerts and be prepared to act.

We have previously posted (most recently here in considerable detail) about the perverse incentives given US physicians by the payment schedule dictated by the US Medicare system. These incentives have been largely responsible for the increasingly dire status of primary care/ generalist care in the US. Revisions to the Resource-Based Relative Value System (RBRVS) disproportionately reward physicians for performing procedures and diagnostic tests instead of talking with, examining, thinking about, diagnosing, recommending decisions for, and counseling patients. The US Center for Medicare and Medicaid Services (CMS) uses the RBRVS Update Committee (RUC) de facto as its sole source for advice on revising the system. The RUC is dominated by representatives of medical societies whose members predominantly perform procedures and do diagnostic tests. The RUC is secretive. The identities of its individual members are difficult to ascertain. Its proceedings are secret.

Thus, the RBRVS updating process run by the RUC is opaque, unaccountable, and not representative of patients and "cognitive" physicians. The result of this process has been perverse incentives that have driven up health care costs without obvious improvements in quality or outcomes.

I applaud SGIM for being the first medical society to challenge how the RUC controls payments to physicians, and the perverse incentives the RUC process has generated.

As the Update above says, meaningful health care reform in the US will not occur unless we address the perverse incentives that drive up costs without improving care.

How "Independent" a Source of Health Care Reform Data?

This week, a Washington Post article discussed who provides the data being cited in the ongoing US debate about health care reform.

The political battle over health-care reform is waged largely with numbers, and few number-crunchers have shaped the debate as much as the Lewin Group, a consulting firm whose research has been widely cited by opponents of a public insurance option.

To Rep. Eric Cantor (Va.), the House Republican whip, it is 'the nonpartisan Lewin Group.' To Republicans on the House Ways and Means Committee, it is an 'independent research firm.' To Sen. Orrin G. Hatch (Utah), the second-ranking Republican on the pivotal Finance Committee, it is 'well known as one of the most nonpartisan groups in the country.'

But how independent is the Lewin group?

Generally left unsaid amid all the citations is that the Lewin Group is wholly owned by UnitedHealth Group, one of the nation's largest insurers.

More specifically, the Lewin Group is part of Ingenix, a UnitedHealth subsidiary that was accused by the New York attorney general and the American Medical Association of helping insurers shift medical expenses to consumers by distributing skewed data. Ingenix supplied UnitedHealth and other insurers with data that allegedly understated the 'reasonable and customary' doctor fees that insurers use to determine how much they will reimburse consumers for out-of-network care.

In January, UnitedHealth agreed to a $50 million settlement with the New York attorney general and a $350 million settlement with the AMA, covering conduct going back as far as 1994.

Ingenix's chief executive, Andrew Slavitt, said the company's data was never biased, but Ingenix nonetheless agreed to exit that particular line of business. 'The data didn't have the appearance of independence that's necessary for it to be useful,' Slavitt said.

Lewin Group Vice President John Sheils said his firm had nothing to do with the Ingenix reimbursement data. Lewin has gone through 'a terribly difficult adjustment' since it was bought by UnitedHealth in 2007, he said, because the corporate ownership 'does create the appearance of a conflict of interest.'

'It hasn't affected . . . the work we do, and I think people who know me know that I am not a good liar,' Sheils said.

Is it only an appearance of conflict, and how objective is the Lewin Group's work?

Lewin's clients include the government and groups with a variety of perspectives, including the Commonwealth Fund and the Heritage Foundation. A February report by the firm contained information that could be used to argue for a national system known as single-payer, the approach most threatening to insurers, Sheils noted.

But not all of Lewin's reports see the light of day. 'Let's just say, sometimes studies come out that don't show exactly what the client wants to see. And in those instances, they have [the] option to bury the study,' Sheils said.

So, in summary, a group providing ostensibly "independent" data and opinions about an important health care policy debate is actually a subsidiary of a commercial managed care organization/ health care insurance company which clearly has vested interests in certain policy options. While the consulting group apparently struggles to be objective, its top leader reported that is fashions its reports at the behest of its clients, and that clients can "bury" reports that offend them, possibly because they do not serve their vested interests.

It is not surprising that participants in the current, noisy debate about health care reform, like many other health policy debates, have vested interests, and that their positions are likely to promote these interests. However, what should at least be disturbing is how often those with vested interests try to appear to be disinterested and independent. Should we trust "independent" voices that actually are conflicted, or those who cite "independent" views that actually come from interested parties?

By the way, we first posted about the Lewin Group's actual status as an Ingenix, and hence UnitedHealth subsidiary here in January, 2009, and first posted about how its contribution to the current health care reform debate was being touted as independent here in April, 2009. That a news organization with the status of the Washington Post is now picking up this story suggests a little optimism that the anechoic effect might be weakening.

Pseudo-Evidence Based Medicine Threatens Health Care Reform Based on "What Works"

As I posted yesterday, the increasingly noisy debate about health care reform in the US has not dealt much with the issues we often discuss on Health Care Renewal. These include problems in how health care organizations are led which threaten physicians' and other health care professionals' core values using tactics including perverse incentives, deception, and intimidation.
Last night, however, President Obama held a news conference mostly devoted to health care issues, in which he stressed the importance of changing not just how health insurance works, but how health care decisions are made. As Newsweek's "The Gaggle" blog reported,

Can I guarantee that there are going to be no changes in the health care delivery system? No. The whole point of this is to try to encourage changes that work for the American people and make them healthier. The government already is making some of these decisions. More importantly, insurance companies right now are making those decisions. And part of what we want to do is to make sure that those decisions are being made by doctors and medical experts based on evidence, based on what works, because that's not how it's working right now.

So what the President seems to be advocating is making health care more evidence-based, perhaps in the formal sense of evidence-based medicine.

As a card-carrying evidence-based medicine advocate, I certainly agree, but let me reiterate that evidence-based medicine is not just medicine based on some sort of evidence. As Dr David Sackett, and colleagues wrote [Sackett DL, Rosenberg WM, Muir Gray JA, Haynes RB, Richardson WS. Evidence-based medicine; what it is and what it isn't. BMJ 1996; 312: 71-72. Link here. ]

Evidence based medicine is the conscientious, explicit, and judicious use of current best evidence in making decisions about the care of individual patients. The practice of evidence based medicine means integrating individual clinical expertise with the best available external clinical evidence from systematic research. By individual clinical expertise we mean the proficiency and judgment that individual clinicians acquire through clinical experience and clinical practice. Increased expertise is reflected in many ways, but especially in more effective and efficient diagnosis and in the more thoughtful identification and compassionate use of individual patients' predicaments, rights, and preferences in making clinical decisions about their care. By best available external clinical evidence we mean clinically relevant research, often from the basic sciences of medicine, but especially from patient centred clinical research into the accuracy and precision of diagnostic tests (including the clinical examination), the power of prognostic markers, and the efficacy and safety of therapeutic, rehabilitative, and preventive regimens.

Furthermore,

Evidence based medicine is not 'cookbook' medicine. Because it requires a bottom up approach that integrates the best external evidence with individual clinical expertise and patients' choice, it cannot result in slavish, cookbook approaches to individual patient care. External clinical evidence can inform, but can never replace, individual clinical expertise, and it is this expertise that decides whether the external evidence applies to the individual patient at all and, if so, how it should be integrated into a clinical decision.

One can find other definitions of EBM, but nearly all emphasize that the approach is designed to appropriately apply results from the best clinical research, critically reviewed, to the individual patient, taking into account that patient's clinical characteristics and personal values.

So far, so good. I believe the proper application of "real" (as described above) evidence-based medicine has the potential to improve patient outcomes while moderating health care costs. However, we have pointed out how problems arising from concentration and abuse of power in health care threaten the evidence-based medical ideal.

First, there are major problems with the development of the sort of clinical research evidence required by the EBM process. We have discussed how clinical research is frequently manipulated by those with vested interests in producing results that favor the products or services that they sell. The critical review process inherent in EBM is meant to cope with less than optimally designed and implemented research. However, the process was designed to cope with honest mistakes and inevitable trade-offs, not deliberate manipulation by vested interests.

Worse, we have discussed how vested interests may engineer the suppression of research when manipulation fails to produce the desired results. The EBM process assumes that the research on which decisions should be based is an unbiased sample of research that was done (and done to advance science, not commercial or ideological interests). When research whose results are unwanted by vested interests is suppressed, the resulting distortion of the evidence base may irretrievably bias the EBM process.

Finally, we have posted about how vested interests have distorted the discussion, dissemination, and teaching of the results of clinical research. They may develop systematic stealth marketing campaigns, often employing supposed "key opinion leaders," who are paid on the side by marketers, and using "medical education and communication companies"as marketing fronts whose publication strategies include deceptive tactics such as "ghost-writing."

Thus, a rising tide of "pseudo-evidence based medicine" threatens to overwhelm even the most conscientious physicians trying to practice evidence-based medicine.

So, while I applaud President Obama's advocacy of reforming health care to emphasize what the best evidence suggests really works, I do not think this effort will get far unless we deal with the rising tide of pseudo-evidence based medicine. As a minimum, we need full and detailed disclosure of all the relationships among vested interests and medical research and education, and a much greater role for research and education that is not subsidized by corporations bent on using research and education to market their products and services.

What Health Care Reformers Don't Discuss

Health care reform is now the big health care story in the US. Discussion of various health care reform proposals regularly lead in print and electronic media. Yet we have been very quiet here on Health Care Renewal about health care reform.

I personally have written little, because it seems to me that hardly any of the discussion swirling around relates to the concerns we discuss on this blog. We write about the bad effects of continuing concentration and abuse of power in health care on physicians' and other health care professionals' core values. We note instances of ill-informed, incompetent, self-interested, conflicted, or even corrupt leaders of health care organizations. We discuss how problems with the governance of health care organizations allow such leadership. We comment on instances in which bad leaders use tactics such as deception, creation of perverse incentives, and intimidation. And we address how all this can lead to higher costs, decreasing access, poor patient outcomes, and demoralized professionals.

For example, just in this month, July, 2009, we posted about:

How Trusted Health Care Institutions are Lead by the Conflicted

• One of the largest and most respected medical societies gets three times as much income from the pharmaceutical, biotechnology and device industries as from membership dues, and its current generously salaried president just asks the public to "trust us, we're doctors" (link here);
• The White House health care reform czar just stepped off the board of directors of a health care corporation accused of "ruthless" behavior and making patients feel they are only equivalent to "dollars" (link here);
• An award-winning show on public television featured remarks favoring drug treatment of psychiatric illness by an academic "key opinion leader" without disclosing his multiple financial ties to the pharmaceutical industry (link here);
• A state legislator pleaded guilty to selling his services to an academic medical center (link here);
  

Health Care Leaders Do Not Share Physicians' Traditional Values

• Leaders of the university that employs the academic "key opinion leader" mentioned above intimidated another of its professors because he wrote a blog critical of the pharmaceutical industry (link here);
• A study showed that primary care doctors burn out not just because they think their pay is low, but because they work in "chaotic" environments, lead by people who do not inspire trust and whose values are not aligned with those of the physicians (link here);

And our archives, going back now to the end of 2004, include much more.

For the most part, however, these are not the issues discussed in the great health care reform debate.

There does seem to be, at the margins, some discussion of a few productive approaches, which deserve credit. These include the Sunshine bill, which would improve disclosure of conflicts of interest generated by health care corporations' payments to health care professionals and academics; the push to support some comparative effectiveness research; and some attempts to address the perverse incentives built into the system used by Medicare to pay physicians. It is not clear, however, whether these efforts are going to get very far, and in any case, they remain peripheral to fervent discussions of health care financing, which seems to be the only topic of interest to most would-be health care reformers.

I believe that the US health care reform will not produce good results if it fails to address the issues we discuss on Health Care Renewal.

But discussion of them, of course, may threaten many with vested interests, and lots of people who have been made rich and powerful by the current system.

So look forward to endless debates about whether the "public option" for health insurance is a good or bad idea, but nothing about how the insurance industry is lead, much less how pharmaceutical, biotechnology, device companies, hospitals and academic medical centers, medical not-for-profit organizations, health care information technology companies, and government agencies are lead, and how bad leadership facilitated by bad governance will continue to make things worse.

Meet the New Boss, Same as the Old Boss? - Health Care Reform to be Lead by a Director of Boston Scientific, Cerner, and Medco

Today we learned that President Obama has announced his new picks for Secretary of Health and Human Services and for Director of the White House Office for Health Reform. The choice of Nancy-Ann DeParle for the latter position raises some issues. The NY Times provides some background:

He also named Nancy-Ann DeParle to coordinate health policy for the administration. Her position, counselor to the president and director of the White House Office for Health Reform, is not subject to Senate confirmation.

Ms. DeParle was commissioner of the Tennessee Department of Human Services from 1987 to 1989. Under President Bill Clinton, from 1997 to 2000, she was administrator of the Health Care Financing Administration, now known as the Centers for Medicare and Medicaid Services.

Since then, she has gained extensive experience in the business world. That experience, though seen as an asset by many, prompted questions from some of the people vetting personnel for Mr. Obama, supporters of Ms. DeParle said.

Ms. DeParle has been a director of large health care companies including Medco Health Solutions, a pharmacy benefit manager; Cerner, a supplier of health information technology, including electronic medical records; Boston Scientific, a medical device company; DaVita, which runs kidney dialysis centers; and Triad Hospitals.

In addition, according to the Washington Post,

DeParle, 52, was previously commissioner of the Department of Human Services in Tennessee. During the Clinton administration, she worked in the Office of Management and Budget and later oversaw Medicare and Medicaid as the administrator of the Health Care Financing Administration.

DeParle currently is managing director of CCMP Capital, a private equity firm. She also serves on the boards of several firms related to health care. A White House spokesman said she is in the process of resigning all those positions.

Administration spokespeople apparently brushed aside any questions about Ms DeParle's conflicts of interest. A separate article in the NY Times noted:

In picking Nancy-Ann DeParle to champion an overhaul of the nation’s health system, President Obama selected someone with deep roots in the Washington bureaucracy, an intimate familiarity with health policy and respect on both sides of the political aisle — not to mention degrees from Harvard Law School and Oxford University.

But in putting Ms. DeParle in charge of an issue that has bedeviled presidents for decades, Mr. Obama also chose to overlook Ms. DeParle’s business ties to companies that have a direct stake in the health care debate.

In announcing her appointment Monday as the director of the White House Office of Health Reform, Mr. Obama expressed 'absolute confidence' in Ms. DeParle, who ran the agency that oversaw Medicare and Medicaid during the Clinton administration. But the White House instantly faced questions about whether her appointment was skirting the spirit, if not the letter, of the president’s tough conflict-of-interest policy.

Since leaving the Clinton administration, Ms. DeParle has been managing director of a private equity firm, CCMP Capital, and a board member of companies like Boston Scientific, Cerner and Medco Health Solutions. White House officials said Ms. DeParle was severing ties with those companies and would recuse herself from participating in any matter that was 'directly or substantially' related to former clients or employers.

'It is our view, and the view of counsel here, that the incidence of that will be very low,' an administration official said of the need for Ms. DeParle to recuse herself from decisions. The official, who was not authorized to speak publicly, said Ms. DeParle would be working mostly with federal agencies and lawmakers, and not directly with companies.

MedInformaticsMD just posted about his concerns specifically vis a vis Ms DeParle's current position as a leader of Cerner.

My main concern here is that Ms DeParle's ties to multiple health care corporations are so strong as to jeopardize her ability to be the new leader of health care reform for the whole country.

To review, Ms DeParle is currently a member of the boards of three health care corporations, Boston Scientific, Cerner, and Medco. As we have discussed many times previously, a corporate director has a legal obligation to advance the profits and financial fortunes of the corporation he or she serves. As Robert AG Monks put it, corporate directors are supposed to "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.] As compensation for that loyalty, corporate directors are usually exceedingly well-paid for the nominal hours they spend in their meetings.

In particular, per the company's 2008 proxy statement, in 2007, Ms DeParle received $160,338 in total compensation from Boston Scientific, and held 62,020 of its shares. Further, per the Cerner 2008 proxy statement, in 2007 she received $195,051 from that company, and held 27,000 of its shares. Ms DeParle was just elected to the Medco board in 2008, so her compensation and stock holdings were not listed in that year's proxy statement, but presumably her total compensation would mirror what other directors received in 2007: a retainer of $50,000, and an annual grant of shares and options worth $175,000 at the time it would be granted.

Given her previous obligation of "unyielding loyalty"to and generous compensation from major health care corporations, it might be hard to suddenly be indifferent to their interests.

Of course, a White House spokesperson pledged that Ms DeParle would "recuse herself from any matter that was 'directly or substantially' related to former clients or employers." The problem is that most of the issues that might come up in discussions of health care reform might be directly and substantially related to the interests of the companies Ms DeParle now leads. For example, one obvious way to control costs in a reformed health care system would be to reduce the current reimbursement system's bias in favor of procedures over cognition. Boston Scientific makes much of its money selling devices that are used during such procedures. Any general shifting of reimbursement more in favor of cognition rather than procedures could reduce Boston Scientific's profits, profits which Ms DeParle is currently sworn to protect. So would Ms DeParle recuse herself from all discussions of reimbursement?

I submit that if Ms DeParle recused herself from discussion of all issues that might affect the interests of Boston Scientific, Cerner, and Medco, let alone the private corporations she directs whose interests might be less easy to define, and let alone the corporations which she used to direct, she would have very little to do in her new position.

On the other hand, were Ms DeParle to be an active Director of the White House Office of Health Care Reform, would the reform be in the interests of all the US people, or in the interests from the large and powerful corporations whose interests she was so recently pledged to protect? Does this new appointment truly reflect President Obama's statement that he did not come to Washington "to work for the powerful and well-connected interests who have run this city for too long?"