Pharmacia, or Maybe Pfizer Settles, Only Eight Years Later

Didn't somebody say "justice delayed is justice denied?"* 

Here is a story for a Friday afternoon, via a press release from the New York state Attorney General's office, per Bloomberg:

Attorney General Eric T. Schneiderman today announced a multimillion dollar settlement with a pharmaceutical company that inflated the cost of drugs sold to state health programs. The company, Pharmacia Corporation, has paid $2.5 million to the New York Medicaid program and to the Elderly Pharmaceutical Insurance Coverage Program (EPIC), and also to cover the costs of the investigation.

Here is more information about the lawsuit:

The lawsuit, filed in 2003, charged that Pharmacia failed to report real and accurate prices, and did not take into account discounts, rebates, chargebacks and other price concessions to their wholesalers. As a result, New York's Medicaid Program and the EPIC program paid more for certain drugs manufactured by Pharmacia than those state programs should have.

This is an unusual entrant into our march of legal settlements. As noted above, this lawsuit took eight years to settle. The entity that made the settlement, Pharmacia, is actually long gone as an independent company. It merged into Pfizer in 2003 (see this). Despite the eight years of waiting, the settlement is extremely paltry compared to the size of the company to which the settlement now applies. According to Google Finance, in 2010, Pfizer's annual revenues were more than $67 billion.

This settlement adds in a small way to a series of settlements Pfizer has recently made.  Pfizer paid a $2.3 billion settlement in 2009 (see post here), and three other major settlements from then to early 2010 (see post here).  The company was listed as one of the pharmaceutical "big four" companies in terms of defrauding the government (see post here).  For other discussions of Pfizer on Health Care Renewal, look here. 

The New York Attorney General's press release claimed, "These are hard financial times for our state, and my office will do its part by uncovering every dishonestly claimed dollar, and holding those who take advantage of New York accountable."  Begging his pardon, but could he really have been serious that nicking Pfizer for $2.5 million eight years after the lawsuit was filed is really holding this giant company accountable?  Will this settlement make the company any more accountable than all those that came before, some almost one thousand times bigger?  Meanwhile, as is usually the case in these stories about the march of legal settlements in health care, no person who authorized, directed or implemented the questionable activity apparently paid any penalty or suffered any sort of negative consequences.

This week, Matt Taibi asked "why isn't Wall Street in jail?" in the title of his most recent Rolling Stone article.  I should also ask, why aren't some leaders of pharmaceutical, device, biotechnology, and managed care corporations in jail? 

Just as the leaders of big financial service firms seem to be completely unaccountable for the havoc they created in the global economy, and despite bluster by various government officials, the leaders of big health care corporations seem to be completely unaccountable for the unethical behavior of their companies that continue to inflate the health care bubble.

So for the nth time I will repeat:  we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Meanwhile, the continued unwillingness of government leaders to take on corporate leaders suggests how corporatist the US has become. Government for the corporations, by the corporations, and of the corporations, bodes no good for the people whose rights are increasingly being displaced.

Mr Taibi encapsulated the problem in a more colorful way, and I will end with his version, somewhat edited for this family publication:

Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.

'Everything's f***ed up, and nobody goes to jail,' he said. 'That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that.'

* - the quote has been attributed to William Gladstone in a 1868 speech. but may be older than that (link here)

Massive Nationwide Medicare Bust: 111 Charged For Scams Worth $225 Million

The article "Massive Nationwide Medicare Bust: 111 Charged For Scams Worth $225 Million" in the HuffPo reports that:

MIAMI — Federal authorities charged more than 100 doctors, nurses and physical therapists in nine cities with Medicare fraud Thursday, part of a massive nationwide bust that snared more suspects than any other in history.

More than 700 law enforcement agents fanned out to arrest dozens of people accused of illegally billing Medicare more than $225 million. The arrests are the latest in a string of major busts in the past two years as authorities have struggled to pare the fraud that's believed to cost the government between $60 billion and $90 billion each year. Stopping Medicare's budget from hemorrhaging that money will be key to paying for President Barack Obama's health care overhaul ...

Read the entire story at the link above.

As I wrote at my Feb. 15, 2010 post "Does Possible EMR-Facilitated Upcoding (Also Known as "Fraud") Need Investigation by CMS, And Could it Explain HIT Irrational Exuberance?", those "Federal authorities" need to look into how EHR's facilitate upcoding, which is a form of fraud that is likely worth far, far more than a mere $225 million:

(Click to enlarge. $225 million might be mere chicken feed. See here.)

Worse, without careful scrutiny, EHR-mediated fraud might not be as easily detected as the "conventional" Medicare fraud mills, where, for example, it can get highly obvious something's amiss:

... A Brooklyn, N.Y., proctologist was charged with billing $6.5 million for hemorrhoid removals, most of which he never performed.

Finally, one might wonder if any of those caught in this recent sting operation were using EHR's...

-- SS

After Manufacturing Problems, Genzyme CEO's Golden Parachute Means "Failure = Success"

In late 2009, I posted about problems at a Genzyme plant that manufactured some fabulously expensive drugs, e.g. Cerezyme whose cost to patients approximated $160,000 a year. We thought then that for a drug costing that much, the company ought to have figured out a conservative process to provide pure and unadulterated product. In a later post I asked why a company that could afford to make its CEO very rich could not afford to adequately maintain its manufacturing facilities. In May, 2010, I posted about a legal settlement of charges related to its manufacturing problems requiring Genzyme to pay a $175 million fine and function under US government supervision.  And in August, 2010, I posted about how this series of management missteps could lead to the company's CEO becoming even richer because they lead to a declining stock price, which increased the likely that the company would be bought out, which could trigger the CEO's golden parachute.  I suggested then that were this to happen, it would be a gross example of how massively perverse incentives stupendously reward the top brass of health care organizations for mediocre, or worse leadership and bad results for both patients/ clients/ customers and stock-holders alike.

Now it  looks like this will happen.  Yesterday, the Boston Globe reported:

Ggenzyme Corp., the largest biotechnology company in Massachusetts and one of the industry’s historic pioneers, has struck a definitive agreement to be bought by French pharmaceutical giant Sanofi-Aventis SA, in a deal valued at about $20.1 billion.

As a result of this deal,

Genzyme’s high-profile president and chief executive, Henri A. Termeer, who has run the company for 28 years, will resign following the close of the transaction. But he will advise Sanofi on integrating the two companies. Termeer built the company into a global operation with 10,000 employees worldwide and a business model that has been the envy of the biotechnology industry. He turns 65 on Feb. 28.

Termeer, though fiercely proud of Genzyme’s independence, stands to make more than $23 million when the sale is completed, according to a 'change of control' clause in his employment contract. In addition, as a major Genzyme shareholder, he would be in a position to cash out shares that last year were worth more than $275 million.

That and several other articles s noted that it was Genzyme's manufacturing problems that lead to the buy-out:

the string of events that made Genzyme vulnerable to a takeover began in the summer of 2009 when workers discovered viral contamination at Genzyme’s Allston Landing plant overlooking the Charles River.

Genzyme was forced to temporarily shut down and clean up the plant and ration shipments of its best-selling Cerezyme and Fabrazyme drugs, both of which treat enzyme deficiencies. The events created an opening for competitors such as Shire and Israel’s Protalix Biotherapeutics and sent Genzyme’s stock tumbling on the Nasdaq.

The dip in Genzyme’s share price drew activist investors, including Carl C. Icahn of New York and Ralph Whitworth of San Diego, who accumulated shares they hoped to sell at a rich premium. They pressured management to take steps to boost shareholder value, including a stock buyout and the elimination of 1,000 jobs worldwide.

Ultimately, the company gave Whitworth a seat on its board, and, after Icahn threatened to unseat Genzyme directors in a proxy battle, it granted two seats to his associates.

In many ways, industry watchers said, an acquisition became inevitable once Genzyme stumbled at its Allston plant.

A Bloomberg article noted that this sequence of events would lead to

The departure package [which] makes him 'one of the biggest all- time winners in biotech,' said [University of Michigan business professor Erik] Gordon, who has studied the pharmaceutical industry for three decades.

Our criticism of the Genzyme CEO's potential for reaping hugely perverse incentives was paralleled by Jim Edwards' critique of what actually happened:

Here’s how crazy CEO incentive compensation is: Genzyme (GENZ) CEO Henri Termeer walked away from his company with a payout that may be worth $300 million yesterday when Sanofi-Aventis (SNY) acquired his company. But the only reason Genzyme was acquired — triggering Termeer’s gargantuan change-of-control package — is because Termeer nearly ran his company into the ground, making his stock cheap enough for Sanofi to buy.

In other words, failure = success when it comes to change-of-control packages for CEOs.

So let me just repeat my conclusion from last August: As long as being a health care CEO is effectively a license to loot the company, is it any wonder that health care organizations continue to be badly lead, and health care costs soar while quality and access suffer?

Once more with feeling: real health care reform would require us to make health care executives truly accountable for their actions, and penalize them for those that are ill-informed, contemptuous of health care values, self-interested, or corrupt.

Does EHR-Incited Upcoding (Also Known as "Fraud") Need Investigation by CMS, And Could it Explain HIT Irrational Exuberance?

It has long puzzled me why an experimental technology that costs tens or hundreds of billions of dollars to roll out organizationally and nationally, that individual medical centers are spending upwards of $100 million or more upon, and that has a track record as poor as suggested in posts such as "An Updated Reading List on Health IT" and "MAUDE and HIT Risks: Mother Mary, What in God's Name is Going on Here?" is so popular.

At a Feb. 2010 post "A Lawsuit Over Healthcare IT Whistleblowing and Wrongful Discharge" I summed up other critical HIT issues succinctly, with abundant hyperlinks to other materials as below:

... I have written about health IT problems extensively on this blog and at my academic website on HIT failure. These include but are not limited to: medical informatics specialists ignored by nonclinician IT personnel [the link is to another case involving critical care]; inverted and paradoxical organizational structures where IT facilitators become HIT project leaders and clinical leaders become HIT project facilitators; ill-conceived and poorly implemented mission hostile health IT; perverse and in fact clinically cavalier IT "politics"; failure to obtain patient informed consent as if health IT is an elite world not subject to the same ethical obligations as medicine; probable violations of Joint Commission safety standards and hospital executive fiduciary obligations, and numerous others.

At a Jan. 2011 post "Healthcare IT Delirium" wrote that:

... On top of an irrational exuberance (see this blog query) largely unsupported by the literature (e.g. here), the technology is experimental, its rollout is a grand national experiment in social re-engineering of medicine, there is no patient informed consent, nobody is in control, and nobody is taking responsibility for regulating the domain despite known risks. The results will very likely reflect the Wild West free-for-all that is now extant.

Finally, at a Feb. 2011 post "An Updated Reading List on Health IT" I aggregated recent literature that sheds significant doubts on health IT beneficence.

Is the popularity of health IT as it exists in 2011 a paradox, or not?

When I was dealing with public employees in a transit authority several decades ago, I learned that mysterious circumstances and paradoxes were not paradoxes at all. The assumptions were simply wrong. Often, mysterious circumstances proved to be related to money (as in worker's comp fraud) and/or money related to [illegal] drugs.

Below are some charts and data from a HC Renewal reader, an ED physician, that may answer the mystery of the "irrational exuberance" exhibited by healthcare organizations towards clearly disruptive, medically risky and liability-provoking experimental technology. This is especially so in high risk areas such as an ED.

It should be noted that my recommendations as a CMIO a number of years ago in a very large regional medical center were that an ED would benefit best clinically from paper charts supplemented by document imaging, so that images of past charts could be instantly retrieved. ED's are busy places where clinicians have little time for distractions (such as computer data entry), but where access to past charts can be important. ED charts are also not generally very long or complex documents. Further, document imaging is a mature technology (e.g., Documentum).

Those ED recommendations still stand.

(Incidentally, a relative, injured in 2010 via an EHR issue, would certainly be in far better shape had this been the case. The error would not have occurred. I've worked in settings where document imaging systems were used.)

Note that the data and charts below are estimates only, pointing to a potentially huge problem -- with computer-assisted Medicare fraud implications -- if the projections are reasonable.

First, from the ED physician reader, a graph showing an increase in overall ED billing levels of 2002 versus 2008:

(E/M level increases, 2002 compared to 2008. Via CMS data; see below. Click to enlarge)

This appears to indicate a great increase in upper level (level 4 and 5) billings from 2002 to 2008 in ED's with increasing advent of EHR (part of this is likely due to "paper template" charting).

A very terse summary of these billing codes, for laypeople. Claims submitted to managed care organizations and States include the emergency levels of screening and treatment. They range from CPT 99281 ("straightforward medical decision making") to CPT 99285 ("medical decision making of high complexity"). These codes reflect not only the complexity of the treatment but also the time and difficulty of making a diagnosis:

• 99281 - level 1 - very short visit - low level service, minimal charge
• 99282 - level 2 - e.g. ankle sprain
• 99283 - level 3 - limited focus history & physical exam performed, e.g. physisian evaluation with additional tests such as an x-ray.
• 99284 - level 4 - significant history & physical exam performed, significant or major injury, often admission
• 99825 - level 5 - significant time, e.g., 45 minutes to an hour spent by physician. (Note that considering that a high % of ED visits are using that code, it might be physically impossible for ED physicians to be spending this much time seeing each patient.)

Second, a spreadsheet with some estimated numbers:

(Click to enlarge)

There appears to be an absolute increase in Medicare/Medicaid payments to ER doctors due to this billing-upcoding phenomenon from 2002 to 2008 (roughly $2 billion in payments, which at 80% allowed Medicare rate represents appx. a $2.6 Billion increase in billing)

The 2006-2008 billing levels for each specialty are public info on the CMS website. The hard part was obtaining earlier numbers. These were found in 2 papers from 2004 and 2006:

Variation in Coding of Evaluation and Management (E&M) Services by Hospital Emergency Departments
Paul Shoemaker, FACHE, President and CEO
American Hospital Directory, Inc.
Jan. 2004
http://www.ahd.com/EMstudy040108.pdf


Variations and Trends in the Coding of Evaluation and Management (E&M) Services by Hospital Emergency Departments
Paul Shoemaker, FACHE
Leatrice Ford RN, BSN, CCS, Founder, ConsultCare Partners, LLC
May 2006
http://www.ahd.com/EMstudy060530.pdf

Apparently Shoemaker and Ford were able to get CMS data for 2002 and 2004 and draw the conclusions that while some hospitals and ER groups were undercoding, there was a significant level of upcoding occurring.

Note that the above projections assume the same Medicare physician allowables for 2002 and 2008; lesser values in 2002 (compared to 2008) would push the 2008 payment increases upward.

Finally, some actual ED screens from a major HIT vendor, McKesson, that "encourage" physicians to upcode.

The "coding engine" of this ED EHR system produces "recommendations" for "additional documentation" to support a higher level of coding. Such incentives themselves might be legitimate, but can create moral hazard - and the means, motive and opportunity for "playing with the coding a little bit" - if physicians' coding levels are monitored by their organizations.

(Click to enlarge. An abscess. ED EHR advising physician to "provide more documentation" in order to upcode from level 2 based on the data entered, to level 5 or maximum, via unknown algorithms. A "Correct Deficiencies" button brings up screens with selections a physician can click on to "support" the cybernetic upcoding.)

(Click to enlarge. In this example an ED physician is begin cybernetically cajoled - uh, "reminded" - to enter data to support upcoding a sprained ankle evaluation from a level 3 to a level 5.)


It should be remembered that increased ED coding levels by ED groups, often contractors to hospitals, may permit hospitals to increase their own billing charges for services rendered to the ED patients.

In summary:

• With little solid evidence of major clinical benefit, ED physicians seem to be paradoxically "asked" to utilize distracting, often mission hostile, even hateful ED EHR systems that many despise, even in face of the critical nature of an ED environment and increased risks and liabilities that can occur with distractions such as data entry. This is a seeming paradox.

• The ED physicians, after automated coding algorithms analyze the clinical data entered, may be "reminded" that if they fill in a few more details, the visit might be significantly upcoded.

• Payers such as CMS have little or no way to ascertain the veracity of the additional entered information that may result.

• The ED physicians' coding levels may be monitored by their employer(s) i.e., group or hospital compared to the "possible" coding levels suggested by the vendor software algorithms. ED EHR software makes this easy. This would create the means, motive and opportunity for upcoding, so as to prevent negative repercussions on a "low coding" doctor. (The ED physician who submitted this data claims that this is so in his organization, and in others.)
  

While the above is not a rigorous analysis, if it overall reflects the current situation with ED and other EHR's in the field in 2011, we may be seeing:

• A significant explanation for "irrational exuberance" around health IT - which would actually not be so irrational after all (just unethical) - with potentially deadly results;

• A highly systematic, major fraud participated in by major stakeholders, from software vendor to purchaser to clinical user to biller. This would represent a cybernetically-facilitated swindle of major (and growing) proportions; and

• Claims of purported savings from health IT that we hear about from pundits and government officials being a rather pathetic joke.

Perhaps CMS (and other payers as well) could perform the needed rigorous investigation using their data and resources, to either confirm or disprove these findings. That's what we, the taxpayer, pay the government for.

-- SS