Senate Investigates Hospital Group Purchasing Organizations

Almost four years ago, we posted about the strange world of hospital group purchasing organizations (GPOs). These organization purchase large volumes of medical products for member hospitals, but a "safe harbor provision" in federal law allows them to charge the vendors, not the hospitals for their services. In fact, it is legal for hospitals to share in fees the vendors give these organizations, and to award contracts to vendors who pay the largest fees.

Our 2005 post focused on allegations about the operations of a single GPO, Novation. We noted "several cases in which Novation's actions seemed to have denied hospitals access to the best products, or have increased, rather than ratcheted down the cost s of supplies and equipment."

Now, the US Senate is investigating a group of the largest GPOs. According to the New York Times,

Lawmakers eager to broaden health care coverage while holding down costs are examining the institutional market for medical supplies, a largely unseen $60 billion-a-year realm where things like bedpans and heart implants change hands.

Senators from committees like finance, judiciary and aging are investigating the practices of companies that represent big networks of hospitals, nursing homes and other institutions. These group purchasing organizations select 'preferred' manufacturers and negotiate the prices of medical products, which are a closely held secret. They then use a variety of carrots and sticks to make sure their hospitals buy those brands at the contracted price.

The senators are concerned that these groups’ practices may be inflating health costs at taxpayer expense. Much of the cost is borne by the government, as it reimburses hospital expenses through the Medicare program.

On Wednesday, the senators sent letters to the seven biggest group purchasing organizations, known as G.P.O.’s, demanding detailed information about their business practices, including how they are paid, what services they perform besides picking brands and negotiating prices, and how their revenues are affected when an affiliated hospital buys supplies on its own instead of using the group contract.

The senators also asked for copies of contracts, something not normally made public.

For years, there have been complaints that the buying process is opaque and unfair. The purchasing companies’ operating expenses are usually paid by the manufacturers sitting across the bargaining table, leaving them open to accusations of steering huge blocks of institutional business to the vendors willing to pay the most.

The group purchasing organizations deny this, saying they award contracts on the merits and help hospitals get good deals, saving the government money.

The savings are hard to verify, because the market’s opacity makes price comparisons nearly impossible.

Normally, Medicare’s law against kickbacks would bar vendors from paying the companies that award them contracts, but Congress granted the industry a special 'safe harbor' many years ago, in the belief that volume purchasing saved money. The senators seem to want to test that belief and perhaps change or abolish the safe harbor, something that would turn the industry on its head.

Some of the group purchasing organizations have been in the spotlight before. Premier and Novation were the subject of articles in The New York Times in 2002, which prompted Congressional hearings and the issuance of an industry code of conduct. But Senate aides said they were still hearing reports of possible abuse....

What I wrote about group purchasing organizations four years ago still seems apt.

In summary, although GPOs were ostensibly set up simply to save hospitals money when purchasing supplies and equipment, these organizations have turned into huge, complicated and opaque entities whose actions are hidden, but which seem to be conveying large amounts of money back and forth among suppliers, hospitals, and the GPOs themselves. It is not at all clear that the GPOs save the hospitals money, nor get them the best possible supplies for the money they spend.

The leaders of the hospitals, including some of the countries most prestigious teaching hospitals, that own Novation and other GPOs ought to explain what these organizations really are doing, and particularly how they are supporting the hospitals' missions.

Again, this is another example of how opaque and unaccountable hospital leadership may be. But, the less transparent and accountable are health care leaders, the more the health care mission is at risk.

Finally, I applaud the Senators for taking this up at this time. To have meaningful health care reform, we need to address issues such as the opacity and unaccountability of the leadership of health care organizations, particularly not-for-profit hospitals that are supposed to put their patient care (and academic, if applicable) missions ahead of enhancing their financial surpluses and their executives' compensation.

ADDENDUM (19 August, 2009) - See interesting comments on this post, including some important information from the trade organization for group purchasing organizations.

Who Investigated the Case of the Deadly Contaminated Heparin?

A year and a half ago, we posted quite a bit about the case of the deadly contaminated heparin. In retrospect, what is most amazing is how quickly this case fell off the radar screen.

Summary of the Case of the Deadly Contaminated Heparin

Here is a summary:

- We have posted several times, recently here and here, about the tragic case of suddenly allergenic heparin. Although heparin, an intravenous biologic anti-coagulant, has been in use for over 70 years, serious allergic reactions to it had heretofore been rare. Starting late last year, hundreds of such reactions, and now 21 deaths were reported in the US after intravenous heparin infusions.All the heparin related to these events in the US was made by Baxter International.
- We then learned that although the heparin carried the Baxter label, it was not really made by Baxter. The company had outsourced production of the active ingredient to a long, and ultimately mysterious supply chain. Baxter got the active ingredient from a US company, Scientific Protein Laboratories LLC, which in turn obtained it from a factory in China operated by Changzhou SPL, which in turn was owned by Scientific Protein Laboratories and by Changzhou Techpool Pharmaceutical Co. Changzhou SPL, in turn, got it from several consolidators or wholesalers, who in turn got it from numerous small, unidentified "workshops," which seemed to produce the product in often primitive and unsanitary conditions. None of the stops in the Chinese supply chain had apparently been inspected by the US Food and Drug Administration nor its Chinese counterpart.
- Most recently, we found out that the Baxter International labelled heparin was contaminated with over-sulfated chondroitin sulfate, a substance not found in nature, but which mimics heparin according to the simple laboratory tests used in the Chinese facilities to check incoming heparin. (See post here.) Further testing revealed that the contamination seemed to have taken place in China prior to the provision of the heparin to Changzhou SPL. (See post here.) It is not clear whether Baxter International or Scientific Protein Laboratories had inspected most of the steps in the supply chain, or even knew what went on there.
- The Baxter and Scientific Protein Laboratories CEOs did not seem aware of where they got the heparin on which the Baxter International label was eventually affixed. But one report in the New York Times alleged that Scientific Protein Laboratories would not pay enough for heparin to satisfy any sources other than the small "workshops."
- Leaders of all organizations involved, Baxter International, Scientific Protein Laboratories, Changzhou SPL, the Chinese government, and the US Food and Drug Administration, and the US Congress assigned blame to each other, but none took individual or organizational responsibility. (See post here.)

Since we last posted about the case, three prominent articles by one research group appeared that addressed how contamination of the heparin with oversulfated chondroitin sulfate lead to adverse reactions, some fatal (1-3). An editorial in the New England Journal of Medicine congratulated all the scientists on quickly figuring out the nature of the problem, "allowing heparin to come clean," but did not comment on what the case might mean for drug regulation, or the leadership of health care organizations.(4) The case was used to illustrate the difficulties of national regulation of an increasingly out-sourced pharmaceutical industry.(5) Dr Jerry Avorn did call for more effective, better funded and up to date pharmaceutical regulation.(6)

At the time, I thought that the most striking feature of this case, beyond the deaths of many real patients, was how every leader involved tried to dodge accountability for it. Now, in August, 2009, I have been unable to discover whether any of them subsequently took accountability for it. And in this post global financial collapse world, I would now add that the case also exemplifies the adverse effects of the single-minded pursuit of short-term profit and economic efficiency.

However, in retrospect, the most distressing aspect of this case is its lack of repercussions, specifically, the lack of any inquiry into how the oversulfated chondroitin sulfate got into the supposedly pure heparin given to patients, and how such adulteration of pharmaceuticals could be prevented in the future.

Allegations of Conflicts of Interest Affecting the Scientific Investigation of the Case

This week, however, the case has an eerie echo. The Wall Street Journal just reported allegations that the US FDA official involved in the case has conflicts of interest.

The investigation of Janet Woodcock, the director of the FDA's Center for Drug Evaluation and Research, stems from an ethics complaint filed by Amphastar Pharmaceuticals Inc., a California company that says it has been delayed in its six-year effort to win approval for a generic version of Lovenox, a multi-billion-dollar blood thinner.

In its complaint, Amphastar alleges that its competitor had special access to Dr. Woodcock at critical times in the prolonged approval process, which is ongoing. Amphastar points out that Dr. Woodcock co-authored a scientific paper with scientists at Momenta Pharmaceuticals Inc. while both companies were battling to win FDA approval of their generic blood thinners.

Amphastar contends that Dr. Woodcock's collaboration with Momenta is a conflict of interest and has asked that she recuse herself from the entire matter at the FDA.

Both Amphastar and Momenta, which is based in Cambridge, Mass., submitted applications seeking FDA approval of their generic versions of Lovenox heparin sold by Sanofi-Aventis SA. Amphastar applied in 2003, two years before Momenta.

Lovenox, a low-molecular-weight heparin, is a blockbuster biologic drug that brought in $3.5 billion in world-wide sales last year.

The specific allegations were:

Amphastar, in letters sent to the FDA in April and June, cited some public contacts and email between Dr. Woodcock and one of Momenta's founders, Massachusetts Institute of Technology biological engineering professor Ram Sasisekharan, beginning in February 2007. Among those contacts were their attendance at an international medical conference in Thailand in November 2007.

Mainly, however, Amphastar points to Dr. Sasisekharan's appointment to lead an FDA task force in early 2008, which put him and Momenta in regular contact with the agency. That task force was investigating tainted Chinese-made heparin, a crisis that led to nearly 100 deaths.

Drs. Woodcock and Sasisekharan, along with other Momenta scientists, then co-authored two medical journal articles last year identifying the cause of the contaminated Chinese heparin imports, a finding that won scientific -- as well as Wall Street -- kudos for Momenta.

It is unusual for FDA officials to co-author journal articles with industry researchers....

In April 2008, after the tainted-heparin article was published, an investment report from Morgan Stanley cited Momenta's FDA connection as a 'game-changer,' and Momenta's stock jumped 17% in a day.

So, Dr Woodstock arranged for the scientific investigation of the contaminated heparin to be carried out mainly by people employed by or with financial relationships with Momenta Pharmaceuticals. The (actually three) articles published as a result of this investigation (1-3), disclosed most of these relationships, but seemed to minimize the relationship of the senior author of all three articles, Dr Ram Sasiskekharan, to the company. Although he was actually a co-founder of the company, and has been on the board of directors of the company since 2001,
none of the articles mentioned the former relationship, and only one specifically mentioned the latter. Although the two New England Journal of Medicine articles referred to Momenta Pharmaceuticals' abilities to analyze "complex mixtures, including heparin," none mentioned that the company is developing two anticoagulant products, M-enoxaparin and M118, which could compete with heparin (as described in the company's investor relationships web-page).

On the other hand, the Nature Biotech article(3) noted that Dr Sasiskekharan and one other author have "served as scientific advisors to Scientific Protein Laboratories," and a third author was a scientific advisor to Baxter International. The relationship between Dr Sasiskekharan and SPL was noted by two of the New England Journal articles(1-2).

Questions Raised

So the complaint about Dr Woodcock by Amphastar raises multiple questions about the investigation of the case of the deadly contaminated heparin.

• Why did the FDA put the scientific investigation of Baxter International/ Scientific Protein Laboratories / Changzhou SPL contaminated heparin in the hands of multiple employees, and the co-founder and board member of Momenta Pharmaceuticals, a company that applied to market a product to compete with heparin?
• Was the nature of this apparent conflict clear to the federal agencies that also funded the investigation, which included the National Institutes of Health (NIH) and the Centers for Disease Control (CDC)?
• Did the federal agencies involved also realize that several of the investigators, including the apparent senior investigator, also had ties to two companies (Baxter International and Scientific Protein Laboratories) involved in the production of the contaminated heparin?
• If the federal agencies did not know of the conflicts, why not? And what will they do about them now?
• If the federal agencies did know of all the conflicts, why did they allow such a conflicted group of scientists to investigate one of the most important cases of drug adulteration of the new century?

Although there has now been a scientific investigation into the nature of the contamination of the deadly heparin, there has not been any formal inquiry of which I am aware into the actions, decisions and events that allowed the case to unfold. Now that the case seems to involve not only questionable business management decisions, but also a conflicted scientific investigation, maybe someone in authority will see to it that such an investigation occurs.

Finally, the case of the deadly contaminated heparin now becomes another illustration of how the complex web of conflicts of interest that pervades our health care system may muddle efforts to protect the public from adulterated medicines, one of the more fundamental public health responsibilities of the government.

Hat tip to and see further comments by Prof Margaret Soltan in the University Diaries blog.

References

1. Kishimoto TK, Viswanathan K, Ganguly T, Elankumaran S, Smith S, Pelzer K et al. Contaminated heparin associated with adverse clinical events and activation of the contact system. N Engl J Med 2008; 358: 2457-67. [Link here.]
2. Blossom DB, Kallen AJ, Patel PR, Elward A, Robinson L, Gao G et al. Outbreak of adverse reactions associated with contaminated heparin. N Engl J Med 2008; 359: 2674-84. [Link here.]
3. Guerrini M, Becaati D, Shriver Z, Naggi A, Viswanathan K, Bisio A et al. Oversulfated chondroitin sulfate is a contaminant in heparin associated with adverse clinical events. Nature Biotech 2008; 26: 669-675. [Link here.]
4. Schwartz LB. Heparin comes clean. N Engl J Med 2008; 358: 2505-9. [Link here.]
5. Schweitzer SO. Trying times at the FDA - the challenge of ensuring the safety of imported pharmaceuticals. N Engl J Med 2008; 358: 1773-7. [Link here.]
6. Avorn J. Coagulation and adulteration - building on science and policy lessons from 1905. N Engl J Med 2008; 358: 2429-31. [Link here.]

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.

Are EMR's More Secure and Trustworthy Than Paper Records?

Contrary to utopian praise of EMR's as more secure than paper records:

Routine complication from surgery turns fatal
Lance Williams, Chronicle Staff Writer
Monday, August 10, 2009

A hospital patient suffers excruciating pain from what turns out to be a routine complication from elective surgery.

As her condition deteriorates, she and her family plead to see the doctor. But no doctor examines her until the next morning, when she goes into shock, is rushed into intensive care and dies.

Then, after her death, the hospital deletes portions of the woman's medical file in what the woman's family says is an attempt to cover up its horrendous mistakes.

Is this possible? Read on:

The allegations, contained in a lawsuit filed in Santa Clara County Superior Court, describe events that seemingly could occur only at an institution that provides medical care at its worst. Instead, the claims concern a 2007 fatality at what is regarded as one of the best hospitals on the West Coast - Stanford University Medical Center in Palo Alto.

The case of Diane Stewart, 70, who died of a bowel obstruction after knee replacement surgery, shows that bad mistakes and worst-case outcomes are possible even at world-renowned hospitals, said her family's lawyer, Christopher Dolan of San Francisco.

Medical errors occur because "we have corporatized medicine and marginalized the professional's role," Dolan said. "We took the same principles used in automation, to do the job cheaper and faster, and applied it to medicine."

Healthcare IT notwithstanding, I believe those observations are accurate. However, a more serious issue is the role of HIT in marginalizing the medical professional with respect to the IT professional, in what I've called (in this blog and elsewhere) a cross-occupational invasion of medicine by the IT profession.

"I believe Stanford is making a concerted effort to obstruct our family from learning the truth about what happened to our mom," he wrote in a complaint to the state Medical Board. In 2008, investigators from the state Department of Public Health found that "relevant" portions of Diane Stewart's computer file had been deleted after her death and that a supervisor instructed a nurse to make postmortem "late entries" to describe her care.

This may be a case where the CIO and other IT leaders need to be called to the stand to testify, possibly on criminal charges, since some cooperation from such personnel would be required if there is merit to allegations of post-death EMR alterations/erasures.

In a written statement, the hospital said that only temporary notes that were never intended to become part of Diane Stewart's permanent record had been discarded.

Never intended to become part of her medical record?

This "Watergate 18 minute gap"-reminiscent explanation raises a number of questions:

• How did these "Temporary Notes" come to be discarded?
• What was temporary about them?
  
• Does Stanford's EHR have a "Discard Temporary Notes" button?
• What authority and authentication is required in order for "Temporary Notes" to be discarded?
• What is Stanford's definition of a "Temporary Note" in an EHR?
• What might such notes contain?
• Who might they have been written by, and for what purpose(s)?
  
• If they involve decisions made in healthcare, why are they considered "temporary?"
• Are there notes made in a paper record that are considered "temporary" that can legitimately be discarded after a suspicious patient death?
• Are there backups that contain these notes, or were they erased too?
• Was such backup erasure initiated manually (e.g., by a human) or automatically?

Since these notes were discarded (erased), of course, we may never know what they contained.

Electronic records leave no erasure marks, and with collusion of the appropriate personnel, reality can be whatever one wants it to be in the electronic world. This represents yet another sociotechnical obstacle standing in the way of achieving a computer-based utopia in healthcare.

-- SS

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.

Shareholders Take Notice That Patients Used As Unconsented Guinea Pigs, Physicians as Bank by Health IT Vendors

At my Jan. 2009 post "Waste Feared in Digitizing Patient Records: Wall Street Journal" and others I have written about the illegitimacy of the abuse of patient rights, as well as abuse of clinician trust committed by health IT vendors using patient care settings as an unconsented software development laboratory and beta testing site. I wrote:

The IT industry uses hospitals, doctor offices and patients as alpha and beta test sites and subjects, unregulated by the FDA or other agency. When HIT fails, there is no central agency to report the failures to, only the vendor. Fixes go into a "queue" for remediation, with priority level decided by the vendor.

Clinicians are also used by HIT vendors as a form of bank and insurance company. HIT vendors depend on (free!) physician and nurse ingenuity in finding workarounds to the ill-conceived design and user experience (link to my eight part series on this issue) that their products usually present so that their products can even be salable. This, of course, taxes and tires clinicians at the expense of patients and hampers and complicates EHR diffusion. Clinicians become, in effect, unpaid development consultants to HIT companies (or, perhaps more accurately, since EHR's do become essential to medical practice, indentured servants to the HIT vendors).

Also, under the unethical, Joint Commission-violating and executive fiduciary responsibility-violating "Hold Harmless" and "Defects Nondisclosure" HIT contracting clauses, clinicians pay the price for bad patient outcomes, even if the causative factor was HIT errors. (See Health IT Hold Harmless and Defects Gag Clauses: Have Hospital Executives Violated Their Fiduciary Responsibilities By Signing Such Contracts?, and my July 22, 2009 JAMA letter to the editor on this issue.) Thus, clinicians become an insurance company, bank and risk safety net (a term that might not be inappropriate is "suckers") for the HIT vendors. This is not an optimal way to treat one's ultimate customers.

HIT is a mess, but that doesn't stop HIT vendors from simply lying about their financial status and future projected business to the investor community.

Now, HIT company shareholders are taking note of these industry (mal)practices. These (mal)practices are hitting shareholders where it really hurts - in the pocketbook. My comments in [red italics]:

Allscripts shareholders file class action suit
Healthcare IT News
August 05, 2009 | Bernie Monegain, Editor

CHICAGO – Allscripts shareholders have filed a lawsuit alleging the company broke federal securities laws when it went live with the newest version of its EHR clinical software, Touchworks [i.e., a "version" that had not been thoroughly tested and validated outside hospital walls, a practice HIT vendors get away with due to the near spinelessness of regulators such as the Joint Commission, FDA, and others - ed.] .

Allscripts officers say the suit is without merit.

[As I pointed out at "Do Healthcare Organizations Truly Want Electronic Health Records To Succeed?" regarding the lawsuit my own organization filed against this company and its partner Medicomp Systems (civil complaint PDF here), where incomplete, untested and non-functional software was sold by this company for use by our physicians, I'd say the allegations do deserve further investigation - ed.]

"We are aware of the lawsuit and have reviewed the complaint," Allscripts officials said Wednesday. "While it is our policy not to comment on the substance of pending litigation, we believe the lawsuit is without merit and will vigorously defend the allegations."

The lawsuit, which seeks class action status, has been filed in the United States District Court for the Northern District of Illinois on behalf of those who purchased the common stock of Allscripts-Misys Healthcare Solutions, Inc. (formerly known as Allscripts Healthcare Solutions, Inc.) between May 8, 2007 and Feb. 13, 2008. It names Allscripts-Misys Healthcare Solutions, CEO Glen Tullman and Chief Financial Officer William J. Davis as defendants.

At a user conference in Orlando, Fla., July 30-31, Allscripts CEO Glen Tullman told some of the attendees that Allscripts might have rushed version 11 of Touchworks to market too quickly.

["Might have" rushed it out too quickly? It had, in fact, been delayed several months according to the lawsuit. "Perhaps" the delays needed to be lengthier. In other words, f*** the doctors and patients, we're getting this cr** out the door so as to not further injure our profits with further delays - ed.]

He said the company was caught off guard by providers who found new uses for the product.

["New uses?" (We all know that when companies sell broken HIT, it's always the doctors' fault) ... Likely translation: clinicians tried to practice medicine the way they saw best, not the way the Allscripts software designers saw best or "approved of." (Arrogance, anyone?) The clinician users tried to use the software in a real-world setting while applying the improvisations needed for proper patient care in a poorly bounded, uncertain environment (per Nemeth and Cook) and found the software's support of the uncertainties and realities of the clinical environment, and likely the software's stability itself, poor - ed.]

Tullman and Faisal Mushtaq, the company's senior vice president of product development, said Allscripts has invested roughly $14 million to improve stability and performance [after throwing the doctor and patient test subjects to the wolves after a "might have rushed it out" premature rollout - ed.], and they expect the next version, to be rolled out soon, to work more smoothly.

[I really despise the "version 1.1 will be much better" in healthcare settings, as it goes back to the issue of sick patients as unconsenting subjects in a software testing lab, and physicians as a bank and insurance company for the vendors when things go wrong -ed.]

The complaint alleges that defendants failed to disclose the following adverse facts:

* Allscripts lacked the necessary resources [i.e., smart, a.k.a expensive, people who actually know what they're doing thanks to the appropriate informatics education and expertise. Were the ones they did have tied up in patchwork remediation and crisis management? - ed.] to install V-11 software at customer sites; Allscripts had no historical basis to estimate the completion of V-11 or the impact V-11 sales might have on the company's 2007 revenues and earnings [if they made stuff up, that would not be too uncommon in today's financial environment. Also, the "lack of necessary resources", not unique to Allscripts, portends quite poorly for the planned, manic rush to national EHR by the cavalierly short deadline of 2014 - ed.]

* The complexity of V-11 had materially and adversely lengthened the sales cycle and revenue recognition cycle for the company's V-11 sales contracts [Another instantiation of my belief that business IT sales practices are inappropriate for clinical IT, where there are unconsenting "customers" with special rights - patients. One also wonders: did clinicians balk at a Rube Goldberg contraption but hospital executives purchase it anyway? - ed.];

* Allscripts was currently experiencing adverse and continuing delays in the installation of V-11 software systems [which were perhaps not revealed by clients, thanks to secrecy clauses regarding defects and problems as noted by Penn's Koppel and Kreda in JAMA? - ed];

* Based on the foregoing, defendants had no reasonable basis for their statements concerning Allscripts' current and future financial performance and projections.

The law firm of Izard Nobel LLP, based in West Hartford, Conn. announced the class action lawsuit on Wednesday.

Click here to read the complaint: http://www.izardnobel.com/allscriptsmisyshealthcare/ .

The PDF of this class action complaint is here.

So, it seems entirely possible the defects nondisclosure clauses promulgated by these vendors, and accepted by meek hospital executives and CIO's, may have supported and/or led to a situation of shareholder fraud.

It would be ironic indeed if these cavalier HIT practices end, and the HIT vendors began to adhere to principles of responsibility and resilience engineering, not due to regulatory pressures but due to shareholder lawsuits.

Finally, Allscripts CEO Tullman was a campaign adviser to the President on healthcare. It's perhaps due to advisers like this that national plans for healthcare reform are sinking like the Titanic. As per my Feb. 18, 2009 Wall Street Journal letter:

... it is the government that has been deceived [rather than the public] by the HIT industry and its pundits. Stated directly, the administration is deluded about the true difficulty of making large-scale health IT work. The beneficiaries will largely be the IT industry and IT management consultants ... The government has bought the IT magic bullet exuberance hook, line and sinker.

-- SS

addendum:

Perhaps I should self-turn in this post as "fishy" to the healthcare reform snitch line at "flag@whitehouse.gov"?

Sixth International Congress on Peer Review and Biomedical Publication

I just found out that the program of this year's Sixth International Congress on Peer Review and Biomedical Publication, to be held on September 10-12, 2009, in Vancouver, BC, Canada is likely to be of great interest to Health Care Renewal readers. The conference is held every four years on topics relevant to medical journal editors and reviewers, but previous conferences emphasized topics as impact factors, blinded review, open publishing, etc. This year, however, there will sessions on:

• Authorship and Contributorship - including 3 of 4 presentations on ghost-writing
• Data Sharing and Conflicts of Interest - including 4 of 5 presentations on conflicts of interest in research
• Publication Bias - including 3 of 3 presentations which appear to discuss research manipulation and suppression
• Rhetoric - including 3 of 3 presentations apparently about how articles reporting original research may exaggerate or distort the results

There will also be poster presentations on relevant topics. See this link for further information and registration information.

This conference program seems to have a higher concentration of Health Care Renewal relevant topics than any conference of which I am aware to date.