FDA: Software Failures Responsible for 24% Of All Medical Device Recalls

At "FDA: Software Failures Responsible for 24% Of All Medical Device Recalls" via Kapersky Labs, a software security company, it is observed (emphases mine):

Software failures were behind 24 percent of all the medical device recalls in 2011, according to data from the U.S. Food and Drug Administration, which said it is gearing up its labs to spend more time analyzing the quality and security of software-based medical instruments and equipment.

The FDA's Office of Science and Engineering Laboratories (OSEL) released the data in its 2011 Annual Report on June 15, amid reports of a compromise of a Web site used to distribute software updates for hospital respirators. The absence of solid architecture and "principled engineering practices" in software development affects a wide range of medical devices, with potentially life-threatening consequences, the Agency said. In response, FDA told Threatpost that it is developing tools to disassemble and test medical device software and locate security problems and weak design.

... "Manufacturers are responsible for identifying risks and hazards associated with medical device software (or) firmware, including risks related to security, and are responsible for putting appropriate mitigations in place to address patient safety," the agency said in an e-mail statement.

Health IT medical devices are the exception, of course.  A health IT virtual medical device is always of rock-solid architecture, always uses "principled engineering practices" in software development, and never has life-threatening consequences, of course.

Hence its special regulatory accommodations over non-virtual (tangible) medical devices.

-- SS

Hospital Executives - What Will They Think of Next?

Health care organizations are now most often run by people with management, not clinical backgrounds.  It seems like business schools have taught managers to sign on to whatever the latest management fashions are.  So what are the latest fashions in hospital management?  Here are a few hot items.

Retreading Pharmaceutical Representatives

My jaundiced reading of the business news suggests that most executives think that marketing is the most important part of their organizations, and that clever marketing can sell any product or service. For example, the pharmaceutical industry spends about twice as much on marketing as it does on research and development (despite pharma executives' protestations that they run research driven businesses) (see this post). So it should be no surprise that now hospitals are using "hospital representatives" to market referrals to their institutions to doctors.

From last week's USA Today:

n northwest Indiana, Carrie Sota visits five or six doctors' offices every workday as part of her new sales job.

But Sota isn't selling the physicians on a prescription drug or a medical device. She's promoting her hospital — the University of Chicago Medical Center.

Sota, 30, is one of four employees the academic medical center has hired in recent months to make 'sales calls' on physicians in the hope that they will send more patients to the hospital. 'We are trying to build meaningful relationships,' said Sota, who was previously a saleswoman for a small medical device company.

The University of Chicago Medical Center is one of a growing number of hospitals nationwide hiring former drug and device sales reps to visit doctors' offices to persuade them to use their services over competing facilities.

Rather than handing out samples of prescription drugs, the sales reps call on doctors armed with the latest information on how their facility is reducing hospital-acquired infections and improving patient-satisfaction scores.

In visits that can last five to 20 minutes, reps try to win doctors' loyalty by helping them get better times on operating room schedules or easier patient referrals to hospital-based specialists. The sales reps can also carry messages back to the hospital, such as a doctor's request for a new medical device to be available in surgery.

The article suggested a few problems with this approach. First, the point of the marketing is not to improve the match between patients' needs and the services the hospital provides. Rather, it is to generate referrals that have the potential to provide the maximum revenue:

While hospitals have always tried to woo doctors to refer patients to them, the institutions are growing more direct in their efforts. The hospitals mine data to see which doctors have the most profitable, well-insured patients, and then they assign those doctors to a sales rep.

So in particular,

Many of the physician liaisons focus on specialists, who bring in patients for services with the highest profit margins, including orthopedics, cardiac care and cancer care, [Duke University Health System physician liaison manager Christine] Perry said.

Second, the hospital reps have incentives based on revenue, not on value to the patient:

About two-thirds of Tenet's liaisons are former drug and device sales reps, and they can make tens of thousands of dollars in bonuses if doctors increase their referrals to the hospitals.

Third, across the system, the revenues generated may be much less than the costs incurred, since most of the marketing will only succeed in moving patients from one hospital to another:

Paul Ginsburg, president of the non-partisan Center for Studying Health System Change, said, 'When you look at the health system, this is a waste of resources. It's a zero-sum game.'

He added: 'The net results of changing physician-referral patterns is that one hospital gains at a cost of others, and all the hospitals burn resources to pay (sales)people who take up the doctor's time.'

Of course, the reps could succeed in persuading doctors to refer patients to specific hospitals for services the doctors originally did not think the patients needed. That would be good were the patients to need those services, but bad if they were not.
Fourth, we have discussed (for example, here and here) how pharmaceutical representatives use sophisticated psychological and emotional manipulation, despite claims that all they do is provide unbiased information and educational, to influence physicians to prescribe drugs. Again, this may result in patients getting drugs whose benefits do not outweigh their harms. It is possible that hospital representatives will do something similar:

'These people are really good and really assertive and very sophisticated,' said Stephen Newman, Tenet's chief operating officer.

Unbundling Payments

The airlines decided a while ago that they could make more money by charging passengers for each checked bag, and even for those little meals on plastic trays. It looks like hospital executives have discovered a new way to unbundle.

As reported last month by the St Louis Post-Dispatch, hospitals have begun charging often hefty "facility fees" for patients seen as outpatients in hospital clinics or hospital owned practices, even for very minor procedures or just office visits, and even for Medicare patients. (Private physicians who see patients in their own offices cannot charge such fees to Medicare patients, and most private insurance companies will not cover such fees.):

A few weeks after Allison Zaromb took her 4-year-old son Meir to see a dermatologist in an outpatient office at the SSM Cardinal Glennon Children's Medical Center campus, she received separate bills from the doctor and the hospital.

The cost for a 3-minute procedure to treat Meir's warts totaled $538, which included a $220 bill for physician services - and a separate bill for a $318 hospital 'facility fee.'

Zaromb, a periodontist who lives in University City, is now suing SSM Health Care Corp. and Cardinal Glennon Children's Medical Center in a proposed class action lawsuit on behalf of other patients

More generally,

With the proliferation of hospital-owned outpatient centers and hospital-owned physician practices, hospital 'facility fees' have become increasingly common. Such hospital facility fees often involve greater dollar amounts than the fees charged by physicians.

Technically, it all appears to be legal:

Under federal regulations, health systems are permitted to charge a hospital facility fee for an outpatient service if it's done in a clinic that is 'hospital-based' - meaning that the clinic is owned and operated as part of a hospital or health system, regardless of whether the clinic is physically located on the hospital grounds.

This technique does seem to be a way to increase revenue. But one person's revenue is another person's cost, so it also seems to be a great way to further increase the already high cost of US health care. It is not obvious, however, that these increased costs will lead to increased quality of care or value for the patient:

'From a consumer's perspective, when you go see your doctor, you go see your doctor - whether it's in an office inside a larger hospital complex or right across the street,' [Zaromb's lawyer John] Phillips said. 'The doctor's practice remains the same. ... They're making the doctor's office a ‘hospital-based' clinic for one reason: to make money by charging a facility fee, not to improve consumer service.'

Negotiating the Costs of Medical Devices

One of the favorite topics on Health Care Renewal, at least before we found even more outrageous subjects, was the stratospheric cost of medical devices. For example, look at posts from 2005 here, here, here, and here. So last month we found out that hospital executives have come up with a revolutionary idea to combat the high cost of devices. They will actually try to see what prices the device companies charge other hospitals, and then negotiate the prices down, as Reuters reported as big news in late November:

Implantable devices make up a sizable chunk of typical hospital budgets, and administrators are devising new ways to limit that cost as they brace for cuts to government reimbursement and treat more patients who can't pay for care.

That means methodically working through each category of device, from heart valve replacements and stents to spinal products, to see where they can negotiate lower prices. It also means creating databases of shared information on pricing between hospitals.

Imagine that! Of course, the notion that buyers ought to bargain with sellers to get the best price goes back a few years. However, only in 2011 did it apparently occur to hospital executives that they ought to negotiate the prices of one their most expensive purchases. This suggests that there has been something profoundly wrong with the basic assumptions underlying the commonly accepted wisdom that making the health care system more of a market will lead to more financially efficient care. 

Summary

In 1988, Alain Enthoven advocated in Theory and Practice of Managed Competition in Health Care Finance, a book published in the Netherlands, that to decrease health care costs it would be necessary to break up the "physicians' guild" and replace leadership by clinicians with leadership by managers (see 2006 post here). Thus from 1983 to 2000, the number of managers working in the US health care system grew 726%, while the number of physicians grew 39%, so the manager/physician ratio went from roughly one to six to one to one (see 2005 post here). Health care went from being controlled by clinicians to controlled by a growing volume of managers.  Most of these managers were generic, in that they had little if any knowledge of, experience in, or sympathy to the values of health care. These generic managers have used the same techniques advocated for the management of supermarkets or automobile manufacturers to manage health care organizations, despite all the obvious differences in context, goals, values, and people involved.

So these generic managers have brought us such "innovations" as the "hospital (marketing) representative," and the "facility fee" for outpatient visits, but only thought to negotiate device prices in 2011. But that is why we pay them the big bucks.

How many more arguments do we need that health care organizations ought to be lead by people who understand the health care context, share its core values, and are accountable for how these organizations affect patients' and the public's health?

Medtronic Settles, Yet Again

And the march of legal settlements continues... Circling around the block and coming in front of the viewing stand again is device manufacturer Medtronic. 

The Latest Medtronic Settlement

As Bloomberg reported:

Medtronic (MDT) Inc., the world’s biggest maker of heart rhythm devices, agreed to pay $23.5 million to settle claims it paid kickbacks to doctors who implanted its pacemakers and defibrillators in patients, the U.S. Justice Department said in a statement.

Medtronic agreed yesterday to settle two lawsuits filed in federal courts in California and Minnesota accusing the company of violating the federal False Claims Act by paying physicians $1,000 to $2,000 for each patient who was implanted with one of the company’s devices, according to the Justice Department.

'Patients who rely on their health-care providers to implant vital medical devices expect that those decisions will be made with the patients’ best interests in mind,' Tony West, assistant attorney general for the Justice Department’s Civil Division, said in an e-mailed statement. 'Kickbacks, like those alleged here, distort sound medical judgments with financial incentives paid for by the taxpayers.'

As usual, Medtronic did not admit doing anything wrong:

Medtronic said in an e-mailed statement that it makes no admissions that the studies were 'improper or unlawful.' The company also said it established a reserve for the anticipated payment in the fourth quarter of fiscal year 2011.

'We are happy that the investigation is behind us, so we can continue designing and executing clinical trials that generate evidence to improve patient care, outcomes and cost effectiveness,' Marshall Stanton, vice president of clinical research and reimbursement for the cardiac and vascular group....

Previous Legal Settlements by Medtronic
Note that this is not the first time Medtronic has been accused of paying doctors (kickbacks, this time, which seem to be the ethical equivalent of bribes) to use its products. The Bloomberg report also noted:

In 2006, Medtronic agreed to pay $40 million to settle allegations that its Sofamor Danek unit violated state laws and the False Claims Act by paying sham consulting fees and providing lavish trips to doctors who used its products from 1998 to 2003.

Perusing the Medtronic file on Health Care Renewal also showed that Medtronic has had to settle other lawsuits alleging misconduct:

- In 2008, Medtronic subsidiary Kyphon settled a suit for $75 million and signed a corporate integrity agreement for allegations that it defrauded Medicare through a scheme that lead to excessive hospitalization for patients who received the company's spine surgery device (link here)
- In 2010, Medtronic settled multiple civil lawsuits for $268 million for allegations that it marketed an implantable cardiac defibrillator with faulty leads whose failures lead to 13 deaths (link here)

Cases of Apparent Conflicts of Interest Generated by Medtronics' Payments
In fact, paging through the Medtronic file on Health Care Renewal, we also found these cases of apparent conflicts of interest that Medtronic caused by making payments to or otherwise creating financial relationships with:

- FDA advisory board members (2007 link here),
- health care professionals who appeared on public television programs about heart disease and treatments of it (2007 link here),
- members of a non-profit organization which was supposed to guide the FDA regarding drug development  (2007 link here),
- prominent academic orthopedic surgeons who were in positions to influence other physicians' choices of orthopedic devices (2008 link here and 2009 links here, here and here),
- a military surgeon who wrote questionable articles about the supposed virtues of a Medtronic bone growth product (2009 link here),
- a top leader of US Veterans Affairs Department who objected to the appointment of an industry critic as US Surgeon General (2010 link here),
- spine surgeons apparently who could promote Medtronics' spine surgery products in (2010 link here) and who did not disclose all such payments when writing ostensibly scholarly articles on the subject (2010 link here)

So prior to the current settlement for "alleged" kickbacks, Medtronic had a long history of allegations that it had financial relationships with physicians who were in a position to promote the use of its products or its policy interests.

Why the Bad Behavior Continues

The latest settlement by Medtronic illustrates why the anemic approach by US government agencies to health care corporate misbehavior does not deter bad behavior.

- The punishment was a fine not large enough to have any effect on the finances of the corporation.. Such a relatively small financial penalty might just be seen as a cost of doing business by company executives.  (See these comments on the current case by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.)
-  The punishment was not a result of any specific bad behavior.  In this case, like many others, the corporation did not have to admit to anything.  This leads to the paradox of a punishment meted out for apparently nothing other than "alleged" actions, making it appear that the actual punishment was just a payment by the company to allow it to continue the sorts of actions that were alleged with impunity.  (Such punishments without clear crimes happen all the time in cases affecting the finance sector.  See a federal judge's condemnation of this practice here.) 
-  The punishment seems unrelated to the corporation's historic behavior.  In this case, there was no reference to the company's previous settlements, or the other allegations of questionable payments to physicians and health care decision makers in other circumstances listed above.  (Keep in mind that Health Care Renewal strives to present interesting cases, but does not have the resources to report on every single case of bad behavior by health care organizations.  Hence the list above of apparent bad behavior may not be complete.)
-  The punishment applied to the corporation as a whole, and hence may disadvantage many people, stockholders and corporate employees in particular, who had nothing to do with the alleged bad behavior.  On the other hand, those who authorized, directed, or implemented the bad behavior were not subject to any negative consequences. 

So why on earth would corporate leaders cease bad behavior which could increase revenues short-term and hence increase their compensation (e.g., in 2011, the Medtronic CEO received $9,624,709 according to the 2011 proxy statement), when the likelihood of any negative consequences for them appears to be near zero? 

This would be bad enough if the bad behavior only causes financial disadvantage for stockholders or corporate employees.

However, the bad behavior in question seems to repeatedly involve paying physicians and other health care decision makers in ways likely to influence their decisions in favor of Medtronics' products and corporate well-being.  Making decisions this way, however, is unlikely to be good for patients' and the public's health, as it is likely to lead to excess use of expensive tests and treatments that may have adverse effects, sometimes severe.  Thus patients may suffer unnecessary morbidity and mortality, and the public at large may pay far too much for medical care.

So will we see in our lifetimes honest, tough policing of health care corporate behavior?  Will the punishments start to fit the crime, and will they be significant enough to deter future misbehavior?  Why do we continue to accept government actions that seem more solicitous of the executives of big corporations than the public for whose benefit government is supposed to be run?  Where is the outrage?   

So, once more, with feeling.... in my humble opinion, until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations.

ADDENDUM (15 December, 2011) - On the GoozNews blog, Merrill Goozner called Medtronic's actions "a crime against science."

RUCing About - Conflicts of Interest Affecting the Members of the RBRVS Update Committee

Since 2007, we have been writing about the secretive RUC (RBRVS Update Committee), the private AMA committee that somehow has managed to get effective control over how Medicare pays physicians. The RUC has been accused of setting up incentives that strongly favor invasive, high technology procedures while disfavoring primary care and other "cognitive medicine." Despite the central role of (perverse) incentives in raising health care costs while limiting access and degrading quality, there was surprisingly little discussion about the pivotal role played by the RUC until the formation of the "Replace the RUC" movement (see post here). 

Recently, the leaders of Replace the RUC scored a journalistic coup by putting the current list of RUC members publicly on-line.  As we have discussed, previously the membership of this committee was kept very obscure, although the committee argued it was not exactly secret. 

Some Google searching suggests one possible reason that the RUC was in no hurry to disclose its own membership.  It appears that many of the RUC members have significant conflicts of interest with respect to their roles as de facto setters of the rates at which physicians are paid by the government.

The RUC Members and Their Financial Relationships

Below is the list of the current RUC membership (from this link), and relevant conflicts of interest obtained by Google searching.  Note that for each member, I first give the name, affiliation relevant to the RUC, location, and first year of membership as provided by the link above.  Then I list relevant financial relationships that appear to present conflicts of interest.

- Barbara Levy, MD

Chair, RVS Update Committee
Federal Way, WA 2000

Consultant/Advisory Boards: Conceptus; AMS; Covidien; Halt Medical; Gynesonics; Idoman Medical (hysteroscopic surgery and sterilization, endometrial ablation, electrosurgery, vaginal hysterectomy) per UptoDate

- Bibb Allen, Jr., MD
American College of Radiology (ACR)
Birmingham, AL 2006

- Michael D. Bishop, MD
American College of Emergency Physicians (ACEP)
Bloomington, IN 2003

- James Blankenship, MD
American College of Cardiology (ACC)
Danville, PA 2000

Lecture fees from Sanofi-Aventis per New England Journal of Medicine

- Robert Dale Blasier, MD
American Academy of Orthopaedic Surgeons (AAOS)
Little Rock, AK 2008

- Joel Bradley, MD
American Academy of Pediatrics (AAP)
Brentwood, TN 2008

Medical Director, Americhoice by UnitedHealthcare, per AAP conference brochure

- Ronald Burd, MD
American Psychiatric Association (APA)
Fargo, ND 2006

- William F. Gee, MD
American Urological Association (AUA)
Lexington, KY 2010

Member, Physician Advisory Board, Aetna per Aetna

- John O. Gage, MD
American College of Surgeons (ACS)
Pensacola, FL 1991

- David F. Hitzeman, DO
American Osteopathic Association (AOA)
Tulsa, OK 1996

- Peter A. Hollmann, MD
CPT Editorial Panel (AMA/CPT)
Providence, RI 2003

Medical Director, Blue Cross and Blue Shield of Rhode Island, per RI Medical Society

- Charles F. Koopmann, Jr., MD
American Academy of Otolaryngology-Head and Neck Surgery (AAO-HNS)
Ann Arbor, MI 1996

- Robert Kossmann, MD
Renal Physicians Association (RPA)
Santa Fe, NM 2009

Member of Advanced Renal Technologies Advisory Board, Network 15 Medical Advisory Board, Baxter Home Dialysis Advisory Board, Fresenius Medical Advisory Board per Renal Physicians Association

- Walter Larimore, MD
American Academy of Family Physicians (AAFP)
Colorado Springs, CO 2009

- Brenda Lewis, DO
American Society of Anesthesiologists (ASA)
Cleveland, OH 2009

- J. Leonard Lichtenfeld, MD
American College of Physicians (ACP)
Atlanta, GA 1994

Member, Physician Advisory Board, Aetna per Aetna

- Scott Manaker, MD, PhD
American College of Chest Physicians (ACCP)
Philadelphia, PA 2010

Consultant to Pfizer and Johnson and Johnson. Owns stock in Neose Technologies, Pfizer, Johnson & Johnson, and Rohm and Haas per Chest

- Bill Moran, MD
Practice Expense Review Committee
Oklahoma City, OK 2000

- Guy Orangio, MD
American Society of Colon & Rectal Surgeons (ASCRS)
Atlanta, GA 2009

- Gregory Przybylski, MD
American Association of Neurological Surgeons (AANS)
Edison, NJ 2001

Stock Ownership: United Healthcare (300 shares);  ...  Scientific Advisory Board: United Health Group (B, Spine Advisory Board) per NASS meeting

- Marc Raphaelson, MD
American Academy of Neurology (AAN)
Leesburg, VA 2009

personal compensation for activities with Jazz Pharmaceuticals and Medtronics as a speakers bureau member or consultant per AAN

- Sandra Reed, MD
American College of Obstetricians and Gynecologists (ACOG)
Thomasville, GA 2009

GlaxoSmithKline Consulting, $1750 in 2009, $1500 in 2010 per ProPublica Dollars for Docs search through here

- Daniel Mark Siegel, MD
American Academy of Dermatology (AAD)
Brooklyn, NY 2003

Vivacare Dermatology Advisory Board, 2006 – present. Photomedex Scientific Advisory Board, 2006-present, Ad Hoc consultant to ClickDiagnostics, per Encite CV
DermFirst-Shareholder, Logical Image – Consultant, Vivacare - Consultant per MOHS Surgery

- Lloyd S. Smith, DPM
Health Care Professionals Advisory Committee
Bethesda, MD 2007

- Peter Smith, MD
Society of Thoracic Surgeons (STS)
Durham, NC 2006

Eli Lilly, Consulting, $1500 in 2009, $1990 in 2010 per Pro Publica Dollars for Docs search through here
Advisor or consultant to Bayer per Medscape

- Susan Spires, MD
College of American Pathologists (CAP)
Lexington, KY 2007

- Arthur Traugott, MD
American Medical Association (AMA)
Champaign, IL 2006

- James Waldorf, MD
American Society of Plastic Surgeons (ASPS)
Jacksonville, FL 2008

- George Williams, MD
American Academy of Ophthalmology (AAO)
Royal Oak, MI 2009

Advisory Team, RetroSense Therapeutics
Shareholder and consultant for ThromboGenics Ltd. and holds intellectual property on the use of plasmin per Review of Opthamology
Alcon Laboratories, consultant, lecturer; Allergan, consultant, lecturer; Macusight, consultant, equity owner; Neurotech, consultant; Nu-Vue Technologies, equity owner, patent/ royalties; OMIC- Ophthalmic Mutual Insurance Company, employee; Optimedica, consultant, equity owner; Thrombogenics, consultant, equity owner per AAO meeting
Pfizer, “Professional Advising,” $5534 in 2009 per Pro Publica Dollars for Docs search through here

Summary

There you have it.  A substantial proportion, almost half, 14 of 29 members of the RUC have financial relationships with pharmaceutical companies, biotechnology companies, device companies, companies that directly provide health care, and health care insurance companies. 

As we have noted in our previous discussions of the RUC, that committee has been accused of being the de facto controller of how the US government pays physicians.  In that role, it has been accused of favoring procedural care rather than cognitive or primary care by increasing the relative financial incentives for the former over the latter.  This may be one of the most important reasons for the expensive, high-technology, procedural-heavy style of care in the US, which has likely been a major driver for increasing costs, declining access and stagnant quality.

It seemed obvious that a committee dominated by a majority of physicians who perform procedures would tend to favor bigger financial incentives for procedures.  But now it appears the committee also includes a substantial number of people who work part-time or have ownership interests in companies that also stand to benefit from increasing use of procedures.  Procedures drive increased consumption of drugs, supplies and devices, and lead to larger revenue for hospitals and clinics.  Thus these financial relationships could reasonably be suspected of even further distorting the committee's decision-making in favor of procedures.

I was surprised how many RUC members have financial ties to health care insurance companies.  Such companies are not usually thought of as beneficiaries of high-technology, procedural care.  However, if one conceives of their revenue as a percentage of health care costs, perhaps they are.  Furthermore, one can only wonder if the links between the RUC and health care insurance companies have anything to do with how such companies have apparently unquestioningly adapted the RBRVS system controlled by the RUC?

The prevalence of conflicts of interest among RUC members highlight the need for a more accountable, transparent and honest system to manage how the government pays physicians, and a need for more transparency and accountability in the relationship among the government, health care insurance, and physicians.

 As we have previously noted,  there are still many unanswered questions about the RUC:

- How did the government come to fix the payments physicians receive? Government price-fixing has not been popular in the US, yet this has caused no outcry.
- Why is the process by which they are fixed allowed to be so opaque and unaccountable? Why are there no public hearings on the updates, and why is there no input from practicing physicians or organizations other than those related to the RUC?
- How did the RUC become de facto in charge of this process?
- Why does the AMA [keep the membership of the RUC so opaque, and] give no input into the RUC process to its general membership?
- Why is the RUC membership so dominated by procedural specialists? Why were primary care physicians, who made up at least a sizable minority of physicians when the update process was started, not represented according to their numbers?
- Why has there been so little discussion of the RUC and its responsibility for an extremely expensive health care system dominated by high-technology, expensive, risky and invasive procedures?

Stay tuned, maybe these will be answered in our life-times....

Why Would Directors of Health Care Corporations Push for Bigger Pensions for Academic Administrators?

We recently posted about 36 well-paid top executives in the University of California system, including leaders of medical schools, academic medical centers, and public health, who threatened a lawsuit if their pensions were not increased according to what they claim was a promise made to them in 1999.

Riddle me this: why would a group of directors of for-profit corporations that provide health care goods and services. plus a director of a leading biotechnology trade group, and the director of a leading mutual fund family band together to support this demand, thus to push for bigger pensions for these top managers of the University of California system?

Here is a list of the directors, and their corporations:

-  Mark R Laret, director of Varian Medical Systems and Nuance Communications Inc, which provides numerous health care products 
- Dr David Feinberg, director of OSI Systems, whose Spacelabs Healthcare subsidiary manufactures medical devices
- Steven C Currall, director of Leadership in Medicine Inc, which claims to be a leading provider of intelligence about key opinion leaders (KOLs) in medicine and health care.  Its web-site asserts, "IF YOU NEED TO KNOW who are the most prominent, admired, and influential actors in healthcare, how they are interconnected, and why, you need our expertise.  Given how vastly complex are the relationships among providers, researchers, and other significant actors in healthcare, it is vital to focus on key opinion leaders (KOLs) at local, regional, and global levels, and to understand the ties among them."  (Note that we have often discussed how KOLs function as stealth marketers for pharmaceuticals and devices.)

They joined:
-  Robert S Sullivan, PhD - director of BIOCOM, whose web-site asserts it is the" largest regional life science association in the world, representing more than 550 member companies in Southern California."
-  Richard K Lyons, director of iShares, a leading provider of mutual funds.

The answer is simple.  All the corporate directors listed above are also members of the group of 36 litigious executives.  See their name on the list of 36 here in the San Francisco Chronicle.

- Mark R Laret, director of Varian Medical Systems and Nuance Communications Inc, which provides numerous health care products, is also CEO of UCSF Medical Center.
- Dr David Feinberg, director of OSI Systems, whose Spacelabs Healthcare subsidiary manufactures medical devices, is also CEO of the UCLA Hospital System
- Steven C Currall, director of Leadership in Medicine Inc, which claims to be a leading provider of intelligence about key opinion leaders (KOLs) in medicine and health care, is also Dean, and Professor of Management of the University of California - Davis Graduate School of Management.
Robert S Sullivan, PhD - director of BIOCOM, whose web-site asserts it is the" largest regional life science association in the world, representing more than 550 member companies in Southern California, is also Dean of the University of California - San Diego Rady School of Management.

- Richard K Lyons, director of iShares, a leading provider of mutual funds, is also Bank of America Dean and Professor of Business, University of California - Berkeley Haas School of Business.

Their inclusion within the larger group seems ironic, at best.  As corporate directors, they have outside income and have accumulated assets that will likely keep them out of poverty in their old age.  For example, Mr Laret had accumulated the equivalent of 37,168 shares of Varian, and was paid $267,300 a year for his services according to the company's 2010 proxy statement.

Furthermore, for those who directly lead health care institutions, Mr Laret and Dr Feinberg, their memberships on the boards of health care corporations, which imply fiduciary responsibilities to the companies and their stock-holders, conflict with their duties as leaders of academic health care to uphold teaching, research and patient care.  Dean Currall's responsibilities to an organization which seems entirely dedicated to helping drug, device, and biotechnology companies turn health care professionals and academics into stealth marketers at least seems unseemly given that his school is part of a university which also includes a medical school and academic medical center. 

Since our earlier post, it appears that the University of California president will not accede to the demands of the 36, as noted in the San Francisco Chronicle.  Their demands have continued to provoke outrage.  A recent discussion in Inside Higher Ed interviewed Emeritus Professor Helen Henry, a member of the University's Academic Senate, who posited:

the debate as part of a fundamental philosophical disagreement within the university. The signatories to the letter, many of whom are based in medicine or management, have a different view of the university than faculty from other disciplines, she said.

'I don’t think there’s any question but that there are these two different mindsets that are fighting for what the university should be. It’s transparent in this letter,' said Henry, a professor emeritus of biochemistry at the Riverside campus. 'They are running businesses. But there are those of us that don’t feel this is what the university should be.'

'This is absolutely a manifestation of that clash between the people who see UC as their business … and the people who see UC’s mission as teaching, and research and service to the state. That’s a dual personality that the university always has to live with.'

Five of the university leaders demanding higher pensions for themselves have responsibilities as directors of corporations that may conflict with their academic institutions' missions, while these corporate positions ought to insulate them from financial concerns about their retirement. This corroborates Prof Henry's notion that they see themselves as businesspeople whose role is separate from, and not necessarily supportive of the university mission.

I disagree, however, with Prof Henry's implication that the University has to live with such a split among its leadership. People who lead academic institutions have a primary responsibility to support the academic mission. Their goals should not be to maximize profits, much less to enrich themselves. Letting academia, and academic medicine be lead by leaders out to make money and line their own pockets will lead to just that, but hardly better teaching, research, and patient care.

Exactech Settles, Its Regional Sales Director Pleads Guilty

The march of legal settlements by health care organizations continues.  Here is a curious story in two parts.  The first part was reported in the most detail by the Gainesville (FL) Sun:

Gainesville-based Exactech must pay $3 million and submit to a year of federal monitoring under a settlement to avoid prosecution on charges that resulted from an investigation into whether orthopedic implant manufacturers were paying kickbacks to surgeons to use their products.

The company announced the deferred prosecution agreement Tuesday after three years of an expanded federal probe.

The U.S. Attorney's Office for the District of New Jersey agrees not to prosecute charges of conspiracy to violate federal anti-kickback laws if the company avoids any violations for a year.

What did Exactech do to wind up in this pickle? It is not really clear. The article noted:

What the U.S. Attorney calls kickbacks Exactech calls consulting fees to surgeons to help develop better products — a common practice in the medical product field.

One can get a little better idea of what was going on by seeing what changes the company agreed to make:

Exactech will continue using surgeons as consultants, but under a more rigorous process that verifies that the work is needed, tracks the surgeons' work and pays them fairly.

The article went out of its way to say:

In accepting the agreement, Exactech does not admit to any wrongdoing and the U.S. Attorney acknowledges that the company's conduct did not hurt patient health or patient care.

Meanwhile, however, a short article appeared in the Parsipanny (NJ) Daily Record:

A salesman from Chester pleaded guilty to conspiring to violate a federal anti-kickback statute by entering into illegal financial deals to get surgeons to use his company's products, the US Attorney's Office said Tuesday.

Douglass Donofrio, 45, director of sales for Exactech Inc.'s northeast region, entered his guilty plea Tuesday before District Judge Garrett E. Brown in Trenton.

Exactech, a publicly traded, Gainesville, Fla.-based national manufacturer and distributor of orthopedic implant devices and supplies, simultaneously agreed to 12-month deal with the justice department to federal monitoring.

'This is a reasonable resolution, giving Exactech credit for positive steps it has taken while requiring continued reform and compliance to avoid more serious consequences,' acting U.S. Attorney Gilmore Childers said in a statement released by his office. 'The agreement does not erase the past, but supports a future corporate culture that will not tolerate kickbacks as business as usual. Unlawful consulting relationships compromise the integrity of our healthcare system, and we will continue to hold institutions and individuals accountable who are willing to put profits over patients.'

Exactech is charged in a criminal court complaint with conspiring to violate the federal anti-kickback statute.

The complaint alleges that from 2002 through late 2008, Exactech entered into consulting agreements with certain orthopedic surgeons — deals which were designed and implemented, in part, to induce the surgeons to use, and cause the purchase of, Exactech's hip and knee reconstruction and replacement products, according to Childers' office.

Note that probably because this case was small in monetary terms, reporting about it was fragmented and brief, making it very difficult to get a sense of what really was going on. 

So, while Exactech did not admit to any wrong-doing, one of its mid-level managers admitted to apparently just the sort of wrong-doing of which the company was accused. If that manager was only a lone loose cannon, why would the company have been pushed to change how it uses surgeon consultants, and why would it need "support" for "a corporate culture that will not tolerate kickbacks as business as usual?"

Nonetheless, only that one mid-level manager admits he did anything wrong.  If anyone else did anything wrong, who they were, and what they did remains unclear, hidden within a swirl of legalese.  Maybe unethical practices occurred, and maybe the new deferred prosecution agreement will prevent further unethical practices, but who can tell? 

If anything unethical did happen, there seems to no longer be any mechanism in health care to find out and  do something about it. 

This case appears to be a good example of how language can be tortured by legalistic parsing that avoids the fundamental ethical problems that now plague health care. As Dr Bernard Carroll posted recently, "legalistic charges and defenses are not the right way to go in exposing and ejecting bad actors from our field," because this approach "favors the bad actors, who flaunt their constitutional protections with the taunt, prove it."  Instead, as Dr Carroll implied, the standard in health care should require more than just avoiding felony convictions.

Even though the current case is small in monetary terms, it is a marker of unethical behavior.  The ongoing parade of legal settlements and criminal pleadings and convictions involving health care organizations, when viewed in its entirety, should convince professionals and policy-makers that health care is undergoing an ethical meltdown. 

The fines imposed by the settlements have never been large enough to be more than costs of doing business, and hence are unlikely to change behavior.  The legalistic approach has not resulted in more than a few people who authorized, directed, or implemented the bad behavior that lead to the settlements paying any personal penalties.  If we want the bad behavior to stop, we clearly need some other way to deter it.  Until we come up with one, expect it to continue, and to continue driving up costs, driving down access, and making patients' outcomes worse.

BLOGSCAN - Medtronic's Multi-Million Dollar Payments to Spine Surgeons

Starting in 2007, we discussed the huge payments made by four medical device companies to orthopedic surgeons and medical organizations related to the use of hip and knee prostheses.  (See post here with links backward.)  Payments, in the millions of dollars per year range, went to surgeons including noted academics, and leaders of the main orthopedic physicians' society.  Payments went to medical schools, teaching hospitals, and professional societies.  Many of these financial relationships were not disclosed, and the disclosures that were made rarely indicated the amounts involved.

Now the Wall Street Journal reports millions being paid to spine surgeons by Medtronic in connection with devices used in spinal fusion.  See Dr Howard Brody's discussion here on the Hooked: Ethics, Medicine, and Pharma blog, and also Felix Salmon's discussion here on the Felix Salmon blog.

What seems lacking is a clear rationale for any payments, much less for payments of the sizes listed.  The WSJ article cited a Medtronic spokesperson, "surgeons' device-development work goes beyond mere consulting when the company deems that they are contributing valuable intellectual property to a product. But that intellectual property doesn't necessarily have to be patented."  The reporters found, "search of spine-device patents awarded to the Norton surgeons turned up about a dozen total for Drs. Puno, Johnson, Campbell and Dimar, most owned by companies other than Medtronic. The search turned up no patents for Dr. Glassman."  So what intellectual property that was not or could not be patented could be worth millions a year?

The Boards Who Ought to be Accountable for the Misbehavior of Health Care Corporations

I recently posted about the multiple conflicts of interest affecting a university health sciences leader.  While he was supposed to be running a medical school and an academic medical center, he was also responsible for the stewardship, as a board member, of three health major health care corporations, and a food and beverage corporation (whose products have bearing on nutrition and public health.)  .

This one case suggested how pervasive are conflicts of interest affecting the people at the top of health care leadership in the US, and also how such conflicts may be associated with problems for all the organizations involved.  The story originally came to my attention because students were demonstrating against the lavish compensation given the health sciences leader at a time of university cutbacks, suggesting that university leaders were paying more attention to their own enrichment than to the mission of the university.  At the same time, one of the corporations which he was stewarding (Genzyme) had to shut down a factory because the extremely expensive drug it was producing was found to be impure and adulterated, while its CEO continued to be compensated lavishly.  The other corporation (Medtronic) had to settle litigation accusing it of manufacturing defective products for hundreds of millions of dollars, while its CEO again continued to be compensated lavishly. 

So I thought it might be interesting to see who are the other stewards of these troubled corporations.  I consulted the official biographies of their board members from their 2010 proxy statements (Genzyme here, Medtronic here).  I looked for board members who also held leadership positions in other health care organizations whose interests may not be aligned with the two corporations of interest.  I also looked for those who held leadership positions in the discredited financial services corporation who helped usher in the global financial collapse.

The specifics of what I found follow.

Genzyme

Genzyme had 10 directors in 2010.  The following directors had relationships of interest:

-  Douglas A Berthiaume is "Chairman of the Children's Hospital (Boston) Trust Board, a member of the Children's Hospital board of trustees, and a Trustee of the University of Massachusetts Amherst Foundation."  Children's Hospital is a teaching hospital.  The University of Massachusetts includes a medical school. 
-  Robert J Bertolini "retired from Schering-Plough Corp following its merger with Merck & Co in November, 2009."  Schering-Plough was a large pharmaceutical company now combined with Merck to form an even larger company.
-  Gail K Boudreaux "has served since May 2008 as an Executive Vice President of United Health Group Incorporated."  Also, "she serves on the board of directors of America's Health Insurance Plans...."  UnitedHealth is one of the US' largest health insurance/ managed care corporations.  Incidentally,it has frequently misbehaved, as can be seen in this set of posts.  AHIP is the health insurance corporations' trade associations.
-  Robert J Carpenter "is Chairman of Hydra Biosciences Inc... He is also a trustee of the Immune Disease Institute, a non-profit institute affiliated with Children's Hospital in Boston...." 
-  Charles L Cooney "is a director of India-based Biocon Limited, a biotechnology healthcare company."
-  Victor J Dzau MD (discussed in the earlier post) is "Chancellor for Health Affairs and President and Chief Executive Officer of Duke University Health System...."  He "sits on the board of directors of Pepsico Inc, Anylam Inc, Medtronic Inc, and the Duke University Health System."
-  Senator Connie Mack III is "Chairman Emeritus of the parent board of the H. Lee Moffitt Cancer Center and Research Institute...."  He also is director of "EXACT Sciences Corporation and Moody's Corp."  EXACT Sciences is a biotechnology company that develops diagnostic test technology.  Moody's Corp is a financial ratings agency whose lax ratings of financial derivatives, perhaps arising from conflicts of interest produced by payments from the producers of the derivatives, have been implicated as a major cause of the global financial collapse.
-  Richard E Syron was from "January 2004 to September 8, 2008 ... Chairman and Chief Executive Officer of the Federal Home Loan Mortgage Corporation, commonly referred to as Freddie Mac...."    Freddie Mac as bailed out and taken over by the US government when he departed, or was forced out.  Freddie Mac, was a "government-sponsored enterprise," (GSE) one of another group of companies whose enthusiastic participation in securitizing dubious mortgages was implicated as a major cause of the global financial collapse.
- Henri A Termeer (CEO of Genzyme) is a "director of Massachusetts General Hospital, a board member of Partners HealthCare, and a member of the board of fellows of Harvard Medical School." 

So the box score for Genzyme's 10 directors: six have leadership positions at teaching hospitals, academic medical centers, medical schools or their parent universities (some such institutions are lead by more than one Genzyme director).  Seven have leadership positions in other drug, device or biotechnology corporations.  One have leadership positions in health insurance/ managed care corporations.  Two had or have leadership positions in discredited financial services corporations that were implicated in the global financial collapse.

Medtronic

Medtronic had 11 directors in 2010.  The following directors had relationships of interest:

- Richard H Anderson "was Executive Vice President of UnitedHealth Group Incorporated."  As above, UnitedHealth is a health insurance/ managed care corporation.
- Victor J Dzau (see above) is "Chancellor for Health Affairs at Duke University and President and Chief Executive Officer of the Duke University Health System."  He is "a director of Alnylam Pharmaceuticals Inc, ... PepsiCo Inc, and Genzyme Corporation." (See discussion above.)
- James T Lenahan "served as President of Johnson & Johnson from 2002 until June 2004...."  He is "director of Telecris Biotherapeutics Inc, Alton Pharma Inc and Imacor Inc."  Johnson & Johnson is a large drug, device, and biotechnology company.  Telecris, and Alton Pharma are biotechnology pharmaceutical companies.  Imacor is a medical device company.
- Denise M O'Leary "is a director of Lucille Packard Children's Hospital and Stanford Hospitals and Clinics."  Also, "she was a member of the Stanford University Board of Trustees from 1996 through 2006, where she chaired the Committee of the Medical Center...."
-  Robert C Pozen is "an advisor to Gelesis Inc."  Gelesis is a biotechnology company.
-  Jack W Schuler "has been a director of Stericycle Inc since March 1990...."  He is a "director of Quidel Corporation and Elan Corporation plc...."    Stericycle company disposes of medical waste, including that produced by medical devices.  Quidel is a biotechnology and (medical diagnostic) device company.  Elan is an multinational biotechnology and pharmaceutical company.

So the box score for Genzyme's 11 directors is: Two have leadership positions at teaching hospitals, academic medical centers, medical schools or their parent universities (some such institutions are lead by more than one Genzyme director). Ten have leadership positions in other drug, device or biotechnology corporations. One has a leadership position in health insurance/ managed care corporations. None had or have leadership positions in discredited financial services corporations that were implicated in the global financial collapse.

Summary

Just to summarize the sorts of conflicting interests these relationships suggest. 

Teaching hospitals and medical schools are supposed to provide unbiased teaching, including about issues relevant to drug and device corporations, such as choice of diagnostic strategies and treatments, and relevant health policy.  They are supposed to perform unbiased research, including research that evaluates drugs and devices.  They are supposed to provide the best possible patient care at a reasonable cost, which relates to choices of and prices paid for drugs and devices. 

Other drug, device, and biotechnology corporations may be producing, or developing products that compete with those of the index corporations.

Health insurance companies ostensibly try to control costs and improve quality in part by reducing excess utilization and bargaining down prices of drugs and devices. 

So this limited case study of the boards of directors, that is, the ostensible stewards of two health care corporations, selected because they have a common member who is the leader of a large medical school and academic medical center, and which both have histories of poor management or ethical missteps showed  - that the leadership of health care organizations is incredibly interrelated, interlocked, incestuous. 

This gave an example of how pervasive are the conflicts of interest that affect all kinds of health care organizations.  Companies that ought to be competing have interlocked directors.  Companies that ought to be negotiating at arms length have interlocked directors.  Not-for-profit academic medical institutions have leaders who are also directors of companies whose drugs their patients may take, whose devices their patients may receive, whose insurance their patients may buy, and whose products and services they may teach about and evaluate through clinical research and policy research. 

This also gives an example of how the failed culture of finance may be linked to the culture of medicine and health care.  Some of the stewards of health care organizations were also the stewards of financial services corporations whose reckless, if not arrogant, greedy and amoral leadership is widely believed to have caused the global financial collapse and our ongoing economic problems. 

Finally, this suggests how top leaders of various health care organizations may be more familiar with and identify more with each other than with their organizations, their organizations' missions, and their organizations' professionals, staff, students, clients, and patients. 

What is to be done?

I strongly believe that there needs to be much more investigation, academic, journalistic, and perhaps legal, of the identity, nature, and culture of the leaders of health care, and their relationships.  A few bloggers cannot do it all.  Obviously, the anechoic effect mitigates against medical and health care academics looking into their own leaders.  However, failing to understand who is leading our march to the brink of health care failure ought not to be something such academics would want on their conscience.

Finally, and obviously, health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment.  Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. 

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.