The Failure of "Success Healthcare" - When Financial Maneuvering Takes Precedence Over the Health Care Mission

In the last few years, it seems that the whole world got tangled up in a web of complex financial dealings that mostly benefited those moving the money and paper, but often harmed everyone else.  So it should be no surprise that health care was similarly affected. 

A story from the St. Louis Post-Dispatch provided an illustrative case.  The news article began discussing the current difficulties of two local St Louis hospitals, then provided an explanation in what amounted to a series of flashbacks. Let me re sequence it a bit, starting with the background of two local hospitals that got caught up in web.

Background

For several decades, Forest Park Hospital — founded in 1889 as Deaconess Central Hospital — was one of the city’s leading community hospitals, serving a broad spectrum of patients including many African-American residents from north St. Louis.

But in recent years, the hospital’s revenues and its number of patient visits had waned because, in part, of the emergence of major hospitals in west St. Louis County and its decision in 2006 to discontinue obstetric services.

As the hospital struggled, it continued to be passed along from one owner to the next. In 2004, it was acquired by Argilla Healthcare Inc. Argilla merged with Doctors Community Healthcare Corp. of Scottsdale, Ariz., which became Envision Hospital Corp.

Former board member Buford said Forest Park’s downfall began several years ago when Envision executives made the decision to use the hospital’s profits to help prop up a faltering hospital that Envision owned in Washington.

In 2005, Envision sold the buildings and land of Forest Park Hospital and St. Alexius Hospital to Medline Industries, the Illinois manufacturer of surgical supplies.

How the Hospitals were Sold to Success Healthcare LLC

To address its financial problems, Envision decided to sell its accounts receivable to a firm in Florida. Here is the rationale:

Less successful hospitals operate on razor-thin profit margins, waiting for slow-paying state and federal agencies to provide Medicaid and Medicare reimbursements. Such hospitals have difficulty obtaining financing and lack dependable cash flow.

To provide support to a distressed hospital, the Florida partners would purchase its accounts receivables at a discount. For instance, if the government, a health insurer or patient owed a hospital for services, the partners would purchase that invoice for less money. The hospital, in turn, would have cash in hand.

Note that "hospitals tend to avoid such cash-flow companies, because some of them use heavy-handed collection tactics." However,

For struggling Forest Park and St. Alexius, selling their accounts receivables was an alluring option.

So,

Forest Park also was dogged by creditors and having difficulty making its payroll and paying utility bills.

That’s when Envision began doing business with one of the Florida partners’ firms, Sun Capital Healthcare Inc., which purchased $61 million in receivables from Forest Park and St. Alexius.

When Envision defaulted on its sales agreement in September 2008, the Florida partners formed Success [Healthcare LLC] to purchase the two hospitals for $39.5 million.

The Promise of a Turn Around

To the public and the struggling hospitals, the purchase by Success Healthcare LLC seemed a promise of deliverance:

Eighteen months ago, the new buyers of Forest Park Hospital vowed to revive the beleaguered institution.


They voiced optimism that the once-thriving, 450-bed medical center could be saved by fresh capital and determined leadership. They seemed equally enthusiastic about their other acquisition — St. Alexius Hospital in south St. Louis. Even the name of their company — Success Healthcare LLC — evoked the sense that better days were ahead.

Also,

When Success Healthcare bought Forest Park Hospital in December 2008, company officials spoke of transitions, not cutbacks.

In a statement, the company called Forest Park and St. Alexius hospitals important community assets, saying that it planned to enact a 'turnaround plan and financial strategy' in the next six months “that will support the immediate and long-term objectives for the hospitals.'

The Actual Results

Better days were not ahead.  Instead, as summarized by the Post-Dispatch article,

But the three partners from South Florida were ill-prepared to make good on their words. In reality, they were already deep in a financial scandal that involved the potential loss of more than $500 million in investor funds, the suicide of an investment manager in Bermuda, and allegations of fraud and self-dealing.

The mess resulted from the involvement of what became Success Healthcare LLC and an off-shore financier. First, here is some information on the history of the ironically named Success Healthcare LLC:

In recent years, [Peter] Baronoff, [Howard] Koslow and [Lawrence] Leder had built a small empire of health-related companies, whose holdings include at least 18 hospitals, and two finance firms. The firms share an office building at 999 Yamato Road in Boca Raton, Fla.

Baronoff, a former deputy mayor of Boca Raton, had worked as a wine and spirits importer. Koslow had experience in financial services and real estate. Leder, an accountant, was a former supervisory auditor for the U.S. General Accounting Office.

The partners marketed themselves as 'rescuing health care clients in financial emergencies,' including providers that file for bankruptcy protection or are considering such a filing.

Then enter the off-shore financier:

Court records indicate that the Florida partners approached [William] Gunlicks in 1999 to invest in the health care receivables business. Two of the partners — Koslow and Baronoff — formed a Bermuda-based venture with Gunlicks in December 2009 called Stewards & Partners Ltd. to attract offshore investors.

But between 1999 and December, 2009, things had had gone bad,

The first sign of serious problems appeared in April 2009, when the Securities and Exchange Commission filed a case against money manager William Gunlicks, a former Chicago banker whose investment funds provided hundreds of millions of dollars to the Florida partners to help finance their ventures. The SEC accused Gunlicks of placing at risk about $550 million in investor funds, including $5 million invested by the archdiocese of New Orleans.

Soon after, Gunlicks’ fund manager in Bermuda killed himself with an overdose of pills, upset that he had lured investors to the troubled fund, according to media reports. Gunlicks, who declined to comment, settled the SEC case — agreeing not to operate another investment fund.

In July 2009, a receiver appointed by a federal judge — whose mission is to recover Gunlicks’ investor’s money — sued the Florida partners’ finance companies for allegedly defaulting on loan payments to Gunlicks. The receiver accused the partners of fraudulently transferring hundreds of millions of dollars to purchase or prop up distressed hospitals that they owned. Investors also have sued the Florida partners.

The troubles afflicting Success Healthcare LLC quickly affected the hospitals they had promised to save:

There are conflicting accounts about the financial strength of the Florida partners, but this is clear: They do not appear to have the wherewithal to operate Forest Park as a full-service hospital, and their financial troubles could also negatively affect St. Alexius, which reported in 2008 a bare-bones profit margin of 1.38 percent.

Daniel Newman, the court-appointed receiver, has asserted that the Florida partners’ finance firms 'had long been insolvent ... and had been losing money.' He has accused them of overstating their revenues and assets to conceal at least $50 million in losses in recent years.

The results on local health care were not good:

By April of this year, Forest Park Hospital had laid off about three-quarters of its staff and reduced its operations to a small emergency department, 20-bed psychiatric ward, laboratory and pharmacy.

'It’s a very dire situation,' said Dr. James Buford, president of the Urban League and a former member of the Forest Park Hospital’s board. 'It wouldn’t surprise me if the hospital went under. There hasn’t been a necessary infusion of capital to make it work.'

Today, Forest Park Hospital is an almost empty landmark that overlooks the renovated Highway 40 (Interstate 64). The hospital is trying to use only one of its six floors and staffs a few dozen patient beds. Meanwhile, St. Alexius Hospital continues to offer a range of patient services, though it staffs only about one-third of its 456 licensed beds.

Summary

First, I must admit that it is possible that the two St Louis hospitals could not have been maintained in their original configurations by even the most knowledgeable, dedicated, and visionary leadership. It may be that there location was untenable, given the growth of powerful competitors.

However, it is hard to believe that the complex financial maneuvers in which they were caught up provided any benefits to patients, health care, or health professionals. Instead, it is likely that these maneuvers provided considerable personal gains to the people behind them (although these were not investigated in the St Louis Post Dispatch story).

The big lesson: be very skeptical of glorious promises, especially those that come from new health care leaders who turn out to have no knowledge or background in health care. (Note that the leaders of Success Healthcare had no apparent background in actually providing health care, and no apparent commitment to the values health care professionals ought to support.) When you meet the new boss, assume at best he or she will be "same as the old boss," (to the lyrics of "Won't Get Fooled Again.")  We seem to be caught up in a business culture in which every new leader and fashionable management strategy is hyped and spun, and somehow people believe it all, forgetting how badly the previously hyped leaders and strategies crashed.

How many times have we health professionals been told the new CEO, the new corporation taking over, the new business strategy will make everything better? How often has that been true?

Health care desperately needs leadership that understand the context, and believes in the values.  The quick buck artists have been making themselves rich, while health care on the ground becomes poor.  How much money goes into the pocket of the clever leaders for their fancy financial maneuvers, rather than to provide patient care?  The answer might explain why US health care is the most expensive in the world, while primary care, and in this case, basic hospital acute care becomes less available.

HealthSouth's "Digital Hospital," from the "Era of Cyber Hospitals" to an Unfinished "Pipe Dream"

The trial for a civil law-suit against Richard Scrushy, the former CEO of for-profit rehabilitation hospital chain HealthSouth, is currently in progress. One bit of testimony provided a reminder about how supposed "innovations" in health care are uncritically accepted. As reported by the Birmingham (Alabama, US) News:

HealthSouth Corp. Chief Executive Jay Grinney has concluded his testimony in the Richard Scrushy civil trial, ending with a devastating critique of the so-called 'digital hospital.'

'It was a very bad business decision that made no sense,' Grinney said of the half-completed Scrushy brainchild on U.S. 280 he inherited when he took over in 2004.

Ending his sixth hour of testimony over two days, Grinney said the hospital had an original budget of $200 million, and that much had already been spent when the the project was stopped halfway through. Another $200 million was required, he said.

When it came time to cut the $3.5 billion of debt that was burdening the company, Grinney said he had no hesitation about selling the building. Scrushy had envisioned the medical center as a 200-bed centerpiece of the HealthSouth empire, and called it the 'digital hospital' because of its planned technology component.

The building has been sold to real-estate developers,....

Scrushy is on trial in Jefferson County Circuit Court after being sued by HealthSouth shareholders. They are seeking $2.6 billion in damages from him for costs related to accounting fraud, corporate waste and insider stock trading while he ran the physical therapy company from 1996 through 2002

The 56-year-old Selma native is in the Shelby County Jail awaiting his court appearance in the case. He was brought to Birmingham from federal prison in Texas, where he is two years into a seven-year sentence for bribing former Alabama Gov. Don Siegelman.

In additional coverage by a local television station (NBC13.com),

When asked about the unfinished digital hospital on Highway 280, Grinney said, 'It was a pipe dream and a figment of the imagination. It never had a chance.'

Grinney testifed on Wednesday that HealthSouth would have had to forego investments in all of the company’s other 93 hospital for 2 to 3 years to finish the digital hospital.

What a contrast this was to the hype that surrounded the announcement of Scrushy's intention to build the "digital hospital." Let me provide some samples.

ComputerWorld allowed Scrushy to wax eloquent:

Hospital chain HealthSouth Corp. and software manufacturer Oracle Corp. are teaming to build what they say is the world's first all-digital, automated hospital.

The technological features will include patient beds with display screens connected to the Internet; electronic medical records storage; digital imaging instead of traditional X-ray film; and a wireless communications network that will allow doctors, nurses and other health care professionals to securely update and access patients' medical records using handheld devices.

'This will be the hospital model for the world,' HealthSouth Chairman and CEO Richard Scrushy said in the statement. 'By creating the first automated hospital ... we will demonstrate how technology can lower health care costs, greatly reduce human errors and provide patients with the best medical care available.'

Bio-Medicine gushed:

The project will be fast tracked and hopefully completed by 2003. From the moment a patient registers at the hospital, every blood test and MRI will be recorded in a central patient record, and pharmacy visits will be tracked. All charting will be done at the patient's bedside, 'getting the nurses' back to the patient's side' and making doctors more efficient. Oracle will provide the technology that will allow Health South to improve record-keeping and patient care, officials of the two companies said in a briefing on Monday. Ultimately, they said, the improvements will reduce the overall cost of care. It was also added at the briefing that another 10 sites where the hospital can be duplicated have been identified. Its now the era of cyber hospitals!!!

Managed Care Magazine was only somewhat more measured:

The promise of HealthSouth's digital hospital is great. By planning for integration on a common platform with all suppliers involved from the start, HealthSouth is maximizing the likelihood of success.

Also, HealthSouth is attempting to make the physical facility as flexible as possible to allow for the adoption of additional new technologies as they become available.

If this hospital works, it is likely to set standards for a high level of patient care. HealthSouth is anticipating that the increased efficiency of the new facility will translate into a decrease in overall length of stay.

On the other hand, everything is still in the planning stages, and details are scarce. HealthSouth has no agreements in place with insurers. Of course, the paperless hospital evokes memories of the heralded paperless office of a generation ago — and we're still waiting.

The cutting edge can be painful. But the concept of the digital hospital, automating care and administrative operations, is so appealing, we can only hope it will succeed. Time will tell.

An article in the MIT Technology Review was just a little bit skeptical:

While others have previously failed to carry off such grand visions of high-tech medicine, the deep pockets of HealthSouth and Oracle could give them a fighting chance.

But the article's conclusion was less cautious:

Not only could electronic information management help eliminate errors, it could also eliminate two to three hours a day that nurses spend charting patient data, and dramatically improve communication between different departments. The bottom line: it could save lives.

Finally, I was able to find some discussion of the proposed "digital hospital" in a scholarly publication, in fact, in probably the most authoritative and well-read journal on health care policy in the US, Health Affairs. [Burns LR, Pauly MV. Integrated delivery networks: a detour on the road to integrated health care? Health Affairs 2002; 21: 128-143.] I would not call it gushy, but it hardly seemed skeptical:

The most radical development is the incorporation of all of these technological advances into newly designed and built 'digital hospitals.'HealthSouth, traditionally a provider of integrated rehabilitation services, has announced plans to build several digital acute care hospitals over the next decade (the first is now under way in Birmingham, Alabama). The publicity surrounding the new hospital and its partnership with Oracle not only has attracted other prominent product vendors but also has enabled HealthSouth to negotiate large discounts on all equipment supplied—in effect, lowering the cost of construction.

What are the likely prospects for this intervention, either at these beta-test
sites or diffused more generally? It is plausible (although difficult to demonstrate so far) that routine patient medical and billing records can be stored or exchanged electronically. It is less obvious that this technology should lead to changes in the cost of care or help to integrate different providers of service. Indeed, the biggest chasm to bridge may be the office systems of different physicians. Kaiser Permanente is reportedly struggling to develop a clinical information system that covers its thousands of physicians and other clinicians. The (as yet undocumented) benefits will likely depend on the ability to harness technological interventions with managerial innovations and interorganizational networks, in effect creating 'socio-technical systems of care.'

So we have gone from "the hospital model for the world," with great "promise," which "could save lives," proclaiming the "era of cyber hospitals," to a "pipe dream," just the shell of half-finished building.

So I wonder, if one were to identify every highly hyped, rapidly spun, magic new "innovation" promising to revolutionize patient care, and follow them forward in time, how many would even marginally improve health care, or provide benefits that marginally out-weighed their harms? How many would never come to be, or prove to be unworkable, useless, or even harmful?

But the short-term incentives for leaders of health care organizations push them to announce innovation after innovation, collect their bonuses and perks, and be somewhere else by the time their wondrous innovations prove to be not so good.

Keep in mind that some heavily promoted innovations, such as new pharmaceuticals, must be subject to randomized controlled trials and government approval. Yet, as perusing Health Care Renewal will show, many pharmaceutical companies have managed to make their glitzy innovations appear more efficacious and less hazardous by lavish, shrewd, and sometimes deceptive marketing, and by manipulating clinical research, and sometimes suppressing results. Medical devices are not subject to as much scrutiny. Health care information technology, and programmatic innovations by hospitals, health systems, managed care and health insurance companies can appear without any research evidence to support them.

This is why we all should be extremely skeptical of whatever new "innovations" our multi-million dollar health care CEOs and their cronies are hawking these days.

Questions of Benefits vs Risks for the UPMC Liver Transplant Program

Last week, the Wall Street Journal published an investigative report on the liver transplant program at the University of Pittsburgh Medical Center which provided a troubling view of some the issues affecting US health care.

Let me summarize the main points, as I would like to organize them, using quotes from the article, and my parenthetic comments.

Liver Transplantation Strategies at UPMC were Aggressive and Risky

Earlier this decade, UPMC made an aggressive bid to reclaim its leadership by hiring an innovative surgeon named Amadeo Marcos, who promised to double the number of liver transplants the hospital did.

Dr. Marcos delivered on his pledge. In doing so, however, he resorted to practices that some colleagues found questionable.

These practices included:

Lowering Standards for Donor Livers

To overcome a perennial shortage of organs, he used more livers from older donors.

Also,

A shortage of transplantable organs from cadavers is a perennial constraint on the number of liver transplants. Dr. Marcos overcame this in part by using organs from so-called expanded-criteria donors -- deceased people who had been older or sicker than preferred liver donors.

In the 2½ years before Dr. Marcos joined UPMC, the average age of its deceased liver donors was 41, according to UNOS. By 2003, it was 47, or nine years above the national average.

And while in 2000 and 2001, UPMC used an average of only 10 livers a year from patients older than 65, it used 45 in 2003.

Performing Transplants on Less Sick Patients (Who Are Less Likely to Benefit)

He transplanted some of these into relatively healthy patients for whom the risk-reward calculation was less certain.

In particular,

Dr. Marcos put some of these organs into patients who were in the early stages of liver disease, say Dr. Fung and Howard Doyle, who then worked in UPMC's transplant intensive-care unit. These were patients, they say, who sometimes didn't need a transplant.

'For the first time in years, we had people dying on the operating table or in the ICU,' says Dr. Doyle, now director of surgical critical care at Montefiore Medical Center in New York. At times, according to him, patients healthy enough to walk into the hospital before being transplanted died 'because they had a high-risk liver put into them.'

Data from the Scientific Registry of Transplant Recipients show that during Dr. Marcos's time at UPMC, 30 liver recipients died within two days of surgery. That was a death rate of 2.4%, versus a national average of 1.6%.

Also

Liver patients are ranked by how advanced their disease is. Based on a series of blood tests called MELD, scores range from 40 for the sickest to six for the healthiest. Most experts now believe the risks of a transplant generally outweigh the benefits for patients with MELD scores of 14 or lower.

During Dr. Marcos's nearly six years at UPMC, it performed 441 liver transplants on patients with scores of 14 or lower, according to UNOS. That was 35% of the liver transplants performed during his tenure, and compares with fewer than 7% in the 2½ years before he arrived.

Using Live Donors (Who Donate Part of Their Livers, and Also Are At Risk From the Procedure)

He used partial livers from living donors, and then understated complications from the controversial procedure.

In particular,

Dr. Marcos sharply increased the number of transplants from living donors. In these, part of the liver of a healthy person is cut off and grafted into a sick patient. If all goes well, both pieces eventually grow to normal size. The procedure is controversial because it could be risky for the otherwise healthy donor.

UPMC did 150 such surgeries while Dr. Marcos was there, according to UNOS. No donors died. However, in 69% of the cases, the recipient had a MELD score of 14 or lower -- suggesting that UPMC was putting some living donors at risk to do transplants on patients in which the risks of the operation may have outweighed the benefits.

In addition, Dr Thomas Starzl, the liver transplantation pioneer for whom the UPMC center is named,

became suspicious of the low complication rates Dr. Marcos was reporting in adult living-donor liver transplants, say people familiar with the matter. In a textbook Dr. Marcos co-wrote, he said UPMC's rate of serious complications was zero for donors and 34% among a subset of recipients.

Dr. Starzl reviewed the 121 transplants UPMC had done involving removal of the donor's right lobe, a typical procedure in adult-to-adult living-donor liver transplants. Dr. Starzl's finding, according to people with knowledge of it: Though recipients' survival rate was only slightly lower than the national average, 60% of the recipients suffered life-threatening complications, ranging from bile-duct leaks to blood-supply problems -- nearly double the rate Dr. Marcos reported.
Dr. Starzl raised his concerns with UPMC chief Mr. Romoff and other officials, including the head of the department of surgery, Timothy Billiar, say the people familiar with the situation.

A tense six-month standoff ensued. Dr. Starzl, worried that UPMC was covering the matter up, sent his findings to a medical journal, according to people familiar with the events. Dr. Billiar asked it not to publish, on the ground that Dr. Starzl hadn't obtained patient authorization to collect the data. Dr. Billiar says that Dr. Starzl's paper would have jumped the gun on a peer-reviewed internal study he had requested from another surgeon, Wallis Marsh.

UPMC and Dr. Starzl compromised: Dr. Starzl would wait for the internal study, which would be reviewed by Pierre-Alain Clavien, a Zurich surgeon who pioneered a scale to measure complications in living-donor liver transplants. UPMC's final conclusions would be published.

In January, Dr. Marsh and Dr. Clavien confirmed Dr. Starzl's finding of a 60% rate of serious complications among recipients, documents seen by The Wall Street Journal show. The review also concluded that about 10% of the living donors had suffered serious complications, belying Dr. Marcos's claim that this number was zero.

Liver Transplantation Strategies at UPMC were Expensive

Hospitals charge $400,000 to $500,000 for a liver transplant. UPMC's transplant program produced $130 million of revenue in its latest fiscal year.

There Was No Evidence that the Liver Transplantation Strategies at UPMC Provided Benefits Outweighing Their Potential Harms

The WSJ article quoted many UPMC doctors, and gave Mr Paul Wood, the UPMC Vice President for Public Relations, multiple chances to rebut the articles' findings. Mr Wood did declare, "our core mission is nothing less than providing the best and most appropriate care for patients."

However, no one quoted in the article was willing to assert, much less justify, a claim that the aggressive tactics used during Dr Marcos' time at UPMC provided benefits that outweighed their risks, including in some cases their risks to donors as well as patients.

Another news article on the UPMC controversy published by the Pittsburgh Tribune-Review quoted Dr James Trotter, an investigator in the Adult-to-Adult Living Donor Living Transplant Cohort, did state "there's a survival advantage for people who undergo live-donor liver transplant versus waiting on the transplant list."

A quick look at the literature revealed an article from the UPMC program reporting a case-series of patients who received transplants from living donors.(1) The article showed that their survival rate was comparable to that for patients who received cadaver transplants. However, it did not include a control group, and therefore could nor provide even weak evidence that outcomes for patients receiving transplants from living donors are superior to those receiving them from cadavers. In addition, there is evidence that the risks to living donors are clinically significant. For example, a systematic review suggested that donor mortality may be more than 0.2%, and donor morbidity ranged from 0% to 90% in several studies, with a median of 16%.(2)

Thus, no defender of the strategies previously used at UPMC, nor any clinical research that I found provided strong evidence that the benefits of the use of living donors outweighed their risks to the donors, or to the recipients. Furthermore, no one put forward any evidence that the aggressive approach pushed by Dr Marcos generally provided benefits to patients that either exceeded those of a more conservative approach, or outweighed its apparent risks.

Perverse Incentives Favored an Aggressive, Risky Approach

As I noted above, the UPMC liver transplant program brought in a large amount of money, especially considering that the program provided transplants to nver more than 300 patients a year, according to a chart provided in the WSJ article. This enabled Dr Marcos to make a generous salary and maintain a lavish lifestyle.

UPMC set out to hire a surgeon who could restore the program to its former glory. It settled on Dr. Marcos, a dashing Venezuelan with a taste for Ferraris and Porsches, who specialized in the emerging field of transplants from living donors.

Furthermore,

UPMC offered Dr. Marcos $500,000 a year and "additional incentive payments," a letter dated June 21, 2002, shows. Dr. Marcos came aboard as director of clinical transplantation....

This was in a context of a medical center run by businesspeople instead of clinicians, who were increasingly richly rewarded, a context that should be familiar to Health Care Renewal readers.

UPMC is a nonprofit hospital system whose income is largely exempt from taxes. Yet, it is increasingly run like a for-profit company, paying its executives high salaries, jumping into new activities and expanding abroad. Its quest to ramp up its transplant business shows how a drive for higher revenue, now common at nonprofit hospitals, could risk compromising patient care.

Also,

Dr. Marcos's nearly six years at UPMC coincided with rapid growth at the medical center. UPMC is one of the nation's most financially successful nonprofit hospital systems, with operations ranging from Pennsylvania to Ireland and Qatar. Even though three-quarters of its $7 billion in annual revenue is exempt from federal and local taxes, UPMC has acquired many of the trappings of large, for-profit corporations.

Its chief executive, Jeffrey Romoff, earned $4 million in the fiscal year ended June 30, 2007, and 13 other employees earned in the roughly $1 million to $2 million range. For their transportation, UPMC leases a corporate jet. Earlier this year, UPMC relocated its headquarters into Pittsburgh's tallest skyscraper, the 62-story U.S. Steel Tower.

Interval Summary

So, in my humble opinion, the UPMC liver transplant story illustrates how in the US we richly reward aggressive, high-technology, cutting edge and risky care, even in the absence of any good evidence that such care provides benefits to patients that outweigh its risks. Thus, is it any surprise that we provide a lot of expensive, risky care, but may have little to show for it?

Furthermore, breaking up the medical "guild" and handing control of health care over to bureaucrats, managers, and executives paved the way for a business culture of health care that richly rewards those on top, and enables cults of personality and imperial CEOs. This has lead to a culture that puts the self-interest of leaders over the mission to care for patients. The leader-centric culture also has proved intolerant of any criticism leveled at the fearless leaders. This leads me to my last point.

A Failed Attempt to Manage the Message

We blogged earlier about how the leaders of health care organizations try to "manage the message" so as to glorify themselves and hide their own flaws. In the coverage of the UPMC liver transplant service there was plenty of attempted message managing.

First, note that no one in the UPMC leadership who bore responsibility for the transplant program was willing to say anything. Dr Marcos appeared to be in an undisclosed location.

Dr. Marcos, 46 years old when he left UPMC, did not respond to numerous attempts to reach him, including a letter sent to his home. A lawyer who represented him in a court case last year said he hadn't been in contact with Dr. Marcos for months.

Justifications of the lavish compensation given to the CEOs of health care and other large organizations often includes their heavy responsibilities. Yet the CEO of UPMC was also unavailable for comment.

UPMC declined to make Mr. Romoff available for an interview.

Instead, it was left to Mr Wood to defend the UPMC program, not only in the WSJ article, but now in several letters to the editor. Unfortunately for him, he had little ammunition for this cause.

One example was how he had to respond to the issue of whether UPMC performed transplants on patients whose liver problems were not severe enough to make them the most appropriate transplant candidates. Note that the WSJ article stated that 35% of transplant recipients during the time of Dr Marcos' leadership had MELD scores less than 15, indicating that they had favorable prognoses (without transplant.) Mr Wood responded in the WSJ article,

it wasn't until 2006 that the transplant community coalesced around a score of 15 as a cutoff to allocate organs. 'It would be unrealistic to expect a physician to practice according to yet-to-be-discovered criteria,' he said.

Actually, prioritizing liver transplants according to the recipients' MELD scores became the policy of the Organ Procurement and Transplant Network (OPTN) of the United Network for Organ Sharing (UNOS) in 2002. An article documenting the network's experience during the first year of this policy showed that the proportion of patients with mean MELD scores less than 15 ranged from about 5% to 25% across the 11 OPTN regions, with an average of about 15%.(3) This suggested there was a clear consensus to minimize the number of transplants for patients in this most favorable prognosis group by 2002. Sorry, Mr Wood.

Furthermore, yesterday Mr Wood published a letter in the Wall Street Journal in response to its article. In it, he did not provide any specific justification for the aggressive transplant policies that was based on evidence of benefits from these policies. At best, he could say,

As the pioneer and acknowledged leader in transplantation surgery, UPMC is continually exploring and testing new life-saving procedures. The use of expanded criteria organs is an attempt to alleviate a critical nationwide shortage. This alone was a compelling reason for developing a potentially groundbreaking program in living-donor liver transplant, but clearly there are risks involved whenever new procedures are developed.

This completely begged the question of whether the benefits were sufficient to offset the risks.

Furthermore, he noted,

To suggest that medical decisions are made on the basis of revenues and profits is simply ludicrous. Transplantation procedures account for less than 2% of UPMC's $7 billion in annual revenues, a fact the reporter mostly chose to ignore.

One would think an organization boasting "50,000 employees ... [and which] comprises 20 tertiary, specialty, and community hospitals, 400 outpatient sites and doctors’ offices" would pay attention to a mere 200 patients a year which provide 2% of its revenue.

He had to end up with this bit of puffery,

The real story at UPMC -- one that would clearly be of interest and importance to your readers -- is how a small, regional psychiatric hospital in Western Pennsylvania transformed itself into a self-sustaining global health enterprise that provides the highest quality medical care to patients around the world.

The advent of the internet age makes it much easier to see through attempts by health care leaders to "manage the message" (in this case, and usually by proxy) to insulate them from criticism for their actions. Maybe in the near future we can dream of health care in which incentives are made proportional to effort, ability, and most importantly the ratio of benefits to harms provided to patients.

ADDENDUM (26 November, 2008) - We were first alerted by issues with the UPMC liver transplant program in a comment on this Health Care Renewal post.

References

1. Taioli E, Marsh W. Epidemiological study of survival after liver transplant from a living donor. Transpl Int 2008: 21(10):942-7.

2. Middleton PF, Duffield M, Lynch SV, Padbury RT, House T, Stanton P, et al. Living donor liver transplantation--adult donor outcomes: a systematic review. Liver Transpl 2006; 12(1):24-30.

3. Freeman RB, Wiesner RH, Edwards E, Harper A, Merion R, Wolfe R et al. Results of the first year of the new liver allocation plan. Liver Transpl 2004; 10: 7-15.

Silverglate on How Corporate Academic Leaders Try to Control the Message

In the US, and most countries, academic medicine, including medical schools and teaching hospitals, are situated within larger universities. The leaders of academic medicine report to university presidents, who in turn report to university boards, who are ultimately responsible for upholding the universities' mission.

Perhaps one reason that universities, and their academic medical components seem to have worsening difficulties upholding their missions is that their top leaders increasingly are people to whom the academic mission may be a foreign concept. For example, we recently discussed how the board of trustees of one prominent university with a prominent medical school has been taken over by leaders from the finance sector, the same sector which brought us all the global financial collapse.

In an article in the Boston Phoenix, civil liberties expert Harvey Silverglate discussed some other aspects of academic integrity failures, that is, how academic institutions now operate counter to their fundamental mission.

Harvard is accustomed to turning other universities green with envy. So it comes as no surprise that its alumni publication, Harvard magazine, which is largely financially self-sufficient and editorially independent of the university, has become a model to which other universities aspire. But rather than take pride in the bi-monthly’s stellar 108-year-old reputation, university administrators effectively declared war on Harvard magazine earlier this year when they brought out an in-house competitor. The new rag, The Yard — which Harvard sends four times a year to alumni, big donors, and parents of students — strikes a decidedly more self-flattering tone than its independent counterpart.

Why the change, and why now? In a word, the answer is: fundraising. As the Wall Street Journal reported in June, 'fund-raisers determined that Harvard magazine was no longer serving their best interests.'

In an era when corporations and politicians pay public-relations consultants big bucks to control the 'message,' one would hope that universities, devoted to the 'free marketplace of ideas,' would resist the trend. Yet in recent years, Harvard, like almost all universities, has been eager to limit how much the public in general, and alumni in particular, learn about what’s really happening on campus. This is especially true as many universities continue to sacrifice traditional academic values — free speech, academic freedom, and fair disciplinary proceedings — in favor of censorship and closed administrative proceedings that function as kangaroo courts, in a misguided attempt to avoid controversies that might gain public attention.

The reality is that alumni fund a major portion of private universities’ budgets, and even public institutions are increasingly dependent on former students to supplement stagnant or decreasing state education budgets.

Growing increasingly anxious, officials at public universities turned toward upbeat alumni mags to buoy fundraising efforts. Over the past 15 years, schools that had never previously published alumni mags began cranking out thousands of the things....

The image-above-all mentality is part of a lamentable trend 'Freedom Watch' has long identified as 'the corporatization of higher education.' Increasingly, university presidents operate more like CEOs than academic leaders: they emphasize the bottom line, large endowments, U.S. News and World Report rankings, and highly visible campus construction (and donor-naming) projects, while they neglect or marginalize academic excellence, intellectual inquiry, academic freedom, and students’ rights.

A sampling of local [to Boston] alumni glossies reveals a near-universal practice of praising the university, even if it means demeaning the intelligence of alums.

As Alan Charles Kors and I pointed out in our 1998 book, The Shadow University: The Betrayal of Liberty on America’s Campuses, academic freedom is being sacrificed so that academic administrators can play-act as empire-builders and careerists rather than serve as educators. The typical modern college president’s goal is to have no controversy, no trouble 'on my watch,' we wrote.

This article suggests several important points.

First, there is a growing realization that academia's mission is being increasingly subverted as the leadership of academic organizations, including, in particular, academic medicine, increasingly resembles corporate leadership. (We, of course, have repeatedly discussed the prominent movement in health policy in the 1980s that advocated breaking the "medical guild" while handing power over health care to bureaucrats and managers.)

Second, there is a growing realization that academic leaders who ape their corporate peers have a penchant for propaganda promoting their interests, and for suppressing discussion of their faults. Clearly these are causes of the anechoic effect. Never mind that controlling speech and communication in this manner is antithetical to the fundamental academic mission to discover and disseminate the truth in the spirit of free enquiry.

A practical lesson for those interested in what is going wrong with academic medicine. Do not expect to find much out about what is going wrong from academic medical institutions themselves, and particularly from the publications and media they sponsor. Just because academic medical institutions are supposed to promote discussion of important issues in medicine, health, and health policy, do not expect them to allow discussion of issues that reflect baldly on their fearless leaders.

But Silverglate warned administrators intent on controlling the message:

For administrators to think that they can mold alumni opinion by monopolizing the universities’ messages sent to grads ignores the growing realities of our increasingly sophisticated and informed electronic-media-saturated culture.

Now that no-nonsense alumni are seeing through the smoke and mirrors, cutting off donations and asserting control of alumni associations and boards of trustees, colleges may have no choice but to pay attention to the rising chorus of voices saying 'enough!'

We hope that Health Care Renewal and some of the blogs to which we link are part of an "increasingly sophisticated and informed electronic media" which will help people see through the "smoke and mirrors," and encourage them to say "enough."

10 Years Later, An Eerie Echo of the Fall of AHERF

This week, as reported by Steve Twedt in the Pittsburgh Post-Gazette, accounting irregularities were found at the West Penn Allegheny Health System,

An independent review of West Penn Allegheny Health System finances has found that it overstated payments from vendors and patients by $73 million over the past two years, a move that is expected to result in substantial operating losses.

'This is significant,' said analyst Jeff Schaub of Fitch Ratings in New York, who spoke to WPAHS officials yesterday.

WPAHS President and Chief Executive Officer Dr. Christopher Olivia sent a system-wide e-mail yesterday morning assuring staff that the reductions 'have no direct implications on the System's pension plan' and that WPAHS has 'now adopted an industry 'best practice' accounting methodology to help ensure a mistake of this nature does not reoccur.'

Mr. Schaub said hospitals have to estimate revenues for patient services because payments generally don't match hospital charges, but in this case West Penn Allegheny used a flawed methodology to make those estimates.

While it's not unusual for those estimates to be off somewhat, a $73 million adjustment 'is not a trivial amount,' he said, particularly for a system that has relied on investment earnings to stay in the black.

Yesterday's announcement carries uneasy echoes of the 1998 financial meltdown of Allegheny General Hospital's former parent, Allegheny Health and Education Research Foundation, which aggressively expanded into the Philadelphia market only to end up in bankruptcy. Two years later, AGH merged with West Penn Hospital to create the West Penn Allegheny Health System.

In fact, last week, Moody's Investor Service issued a report on the 10 year anniversary of the fall of the house of AHERF (the Allegheny Health Education and Research Foundation). Per an article again by Steve Twedt in the Pittsburgh Post-Gazette, who also wrote a significant series in the same newspaper summarizing the collapse of AHERF,

From the distance of 10 years, the historic bankruptcy of Allegheny General Hospital's then-parent organization still offers valuable lessons for today's health-care industry, says a new report by Moody's Investor Service.

'AHERF left such a stain, such an indelible mark on hospital management teams, they realized that if one of the big systems can fail, no one is immune,' said Lisa Goldstein, leader of the Moody's health-care team that produced the report.

On July 21, 1998, Allegheny Health and Education Research Foundation (AHERF) defaulted, resulting in what is still the largest bankruptcy ever among the 560 Moody's-rated not-for-profit health-care entities. At the time, AHERF had $2 billion in revenue and $555 million in outstanding debt, according to the Moody's report.

Analyst Lisa Martin, who wrote the report, says industrywide forces converged with 'the organization's own management and governance failures' to cause the foundation's failure.

The external forces included Medicare reimbursement cuts -- still an issue a decade later -- and highly competitive markets in both Pittsburgh and Philadelphia.

But, she added, 'we believe its ultimate downfall was driven more by decisions of the organization itself -- weak governance, poorly executed strategies, lack of refined leadership, and absence of methodical execution.'

Although the AHERF bankruptcy appears to be the largest failure of a not-for-profit health care corporation in US history, its story has produced remarkably few echoes for doctors, other health care professionals, health care researchers, and health policy makers. I often use the fall of AHERF as major example in talks, at least the few talks I am allowed to give on such unpleasant subjects. Rarely have more than a few people in the audience heard of AHERF prior to my discussion of it. I only could locate one article in a medical or health care journal that discussed the case in detail, albeit incompletely since it was written before Abdelhak's guilty plea [Burns LR, Cacciamani J, Clement J, Aquino W. The fall of the house of AHERF: the Allegheny bankruptcy. Health Aff (Millwood) 2000; 19: 7-41.] I doubt the case is used for teaching in most medical or public health schools. The lack of discussion of such a significant case is a prime example of the anechoic effect.

Therefore, let me summarize some of important points not found above (see also this narrative, starting on page 5):

• AHERF, one of the largest health care systems of its day, was built by the poster-boy for health care imperial CEOs, Sherif Abdelhak.
• Abdelhak, who started as food services purchasing manager at Allegeheny General Hospital, was repeatedly hailed as a "visionary" (in the March, 1997, ACP Observer) a "genius," and the like. His plans to create a huge integrated health care system were part of the wave of the future. Abdelhak was even invited to give the prestigious John D Cooper lecture at the annual meeting of the American Association of Medical Colleges (AAMC), which was published in Academic Medicine [Abdelhak SS. How one academic health center is successfully facing the future. Acad Med 1996; 71: 329-336.] He proclaimed that "we will need to create new forms of organization that are more flexible, more adaptive, and more agile than ever before." And he announced that "my aim as chief executive has been to unleash the creativity and productive potential of every individual and to provide an environment that encourages teamwork"
• While Abdelhak was making these grandiose promises, he paid himself and his associates very well. For example, he received $1.2 million in the mid-1990s, more than three times the average then for a hospital system CEO. He lived in a hospital supplied mansion worth almost $900,000 in 1989. Five of AHERF's top executives were in the top 10 best paid hospital executives in Philadelphia.
• Although Abdelhak talked of teamwork, he warned the combined faculty of the new Allegheny University of the Health Sciences (AUHS): "Don’t cross me or you will live to regret it."
• As AHERF was hemorrhaging money, Abdelhak continued to pay himself and his cronies lavishly.
• After the AHERF bankruptcy, which was at the time the second largest bankruptcy recorded in the US, Abdelhak was charged with numerous felonies involving receiving charitable assets. In a plea bargain, he pleaded no contest to misusing charitable funds, a misdemeanor, and was sentenced to more than 11 months in county prison.
  

The story of AHERF is not merely that of an unlucky bankruptcy. It shows what can go wrong when health care adopts business practices such as jumping the latest management band-wagons and genuflecting before imperial CEOs.

Yet since the fall of AHERF, we are still hearing breathless stories about the latest wonderful plans to save health care (think about, for example, electronic medical records, pay for performance schemes, etc), and the brilliant CEOs (think about, for example, William McGuire, the former CEO of UnitedHealth) who will be our saviors.

We health care professionals need to stop falling for this hype and spin. Saving health care will take clear thinking and hard work by a lot of people. The "visionaries," if we let them, are likely to depart with a huge cache of money, leaving us and health care worse off. If it is just "not done" to talk about cases such as that of AHERF, and other examples of "recent unpleasantness," how will be learn not to fall for the propaganda?

Of course, it is those who benefit from the propaganda who do not want us catching on to their game.

If physicians, health professionals, health care researchers, and health policy makers do not learn the lessons of the fall of AHERF, they will be doomed to see its repetitions. What just happened to West Penn Allegheny Health Systems is only a small example of all the things that can go wrong.