The Case of the Vanishing Graduate Medical Education Funds

While primary care falters in the US, those who teach it seem to feel increasingly poverty stricken.  Now it appears that one reason for this is an amazing example of multiple failures of transparency and accountability.  Let me work through it, begging your pardon for a little bit of "inside baseball," medical education style.  The results suggest how we desperately need some medical disciples of Sherlock Holmes.

Background

My personal experience and increasing data suggests that most medical school faculty believe that their teaching is not valued by their institutions because teaching brings in no external funds.  In 2004, Dr Catherine DeAngelis, then the editor of JAMA, wrote "few medical schools provide adequate, if any, reimbursement for teaching time."(1)  (See this 2005 post.)   This seems absurd on its face, since what are medical schools for if it is not to provide teaching. 

However, there is evidence of this mission-hostile behavior.  In 2007, we quoted from a revealing interview with Dr Lee Goldman, Executive Vice President for Health and Biomedical Sciences at Columbia University,(2) who stated that "taxpayers," faculty who "generate more [money] than they cost," are valued most, and implied that faculty who focus on teaching are regarded as "welfare recipients," who bring in less external funding, and are valued least.  In 2010, we noted the results of a large-scale survey presented by Dr Linda Pololi in which 51% of faculty felt that the administration only valued them for the money that they brought in, and half felt that their institutions did not value teaching.(3)

Yet while faculty seem to believe that educational institutions receive little if any money to pay for teaching, it is not clear why the believe something so counter intuitive, and it is less clear what money actually goes to pay for medical education.

US Government Funding for Graduate Medical Education

However, several recent publications affirm that actually a lot of money goes towards one important form of medical education, yet the specifics of the money flows are shrouded in secrecy.  In the May, 2012, SGIM Forum, Dr Mark Liebow and colleagues summarized some of what is known about federal support of graduate medical education, that is, education of interns, residents, and other house officers.(4)  There are two streams of money that flow from Medicare to US hospitals:

Direct GME (DGME) payments help hospitals pay the salaries of residents, teaching faculty, and support staff. DGME is the product of three numbers: a per resident amount that varies by hospital, adjusted annually for inflation; the number of residents in the hospital (capped for each hospital at 1997 levels); and the fraction of discharges from the hospital that are Medicare beneficiaries. The Indirect Medical Education (IME) payment is a percentage amount added on to each DRG payment. The percentage is calculated via a complex formula (the only US statute containing an exponent!), where the key factor is the ratio of interns/residents to beds (IRB ratio).

These two streams are of considerable size:

Of the $9.2 billion Medicare paid for GME in 2010, $3 billion was for DGME and $6.2 billion for IME. The money is paid to hospitals sponsoring training programs rather than to the training programs or other hospitals where training occurs. While about 1,100 hospitals receive GME payments, 66% goes to the 200 hospitals that have the largest numbers of residents.

So, the 200 largest hospitals get about $2 billion in direct GME money (and presumably about another $4 billion in indirect money). This averages then to about $10 million DGME and $20 million indirect GME per hospital.

Thus, teaching, at least the teaching of interns, residents, and other house-staff does pay, and much more than trivial amounts. (Note that these amounts are not for teaching of medical students, which ought to be supported by other funding streams.)

Why then do faculty think that teaching does not bring in any money?

The GME Money Vanishes

An article by Dr Saima I Chaudhry and colleagues in the American Journal of Medicine begins to explain, although the explanations are found between the lines.(5)

First of all, while the graduate medical education money is paid by the government to the hospitals, the government does not publish what it pays to individual hospitals:

It has been previously reported that the amount of GME funding individual hospitals receive is not publicly reported by the Centers for Medicare and Medicaid Services,....

The government also does not hold the hospitals accountable for how they spend this money, nor for the quantity or quality of education they supply in exchange for it.

Remarkably, Chaudhry et al imply that that the people who run graduate medical education teaching programs also may not know how much money their hospitals receive from the government to fund their programs. The introduction to their article noted:

It is unclear how much program directors know about the amount and flow of DME funds to their programs. Program directors' beliefs about the transparency of funding to their programs, or their desire to influence how funds are distributed to them, also are unknown.

The article reported on a survey of internal medicine residency program directors which asked about "their knowledge of D[G]ME funding for their programs, the transparency with which funds are distributed to them, and their desire to influence this disbursement." The researchers sent surveys to 372 member programs, representing 97.1% of all US internal medicine residencies. They got 268 responses, a 72.0% response rate.

The main results were that only 159/268 (59.3%) of program directors had tried to find out how much DGME money their programs received, and of those, only 84 (52.8% of those enquiring, but only 31.3% of all respondents) actually knew how much money their programs got.

Of the 92 program directors who did not even try to discover how much money their programs received, approximately 21% said that "no one would tell me," 21% said that the "information would be inaccurate," 14% said they "don't know who to ask," and 2% were "afraid to ask."

Summary

US medical school faculty, especially those in primary care, increasingly feel pressured to perform activities that they perceive brings in money from external sources. They tend to believe that their own teaching somehow does not bring in any money, and that their careers will fail if they do not put more emphasis on other activities that the institution views as more profitable.

However, literally billions of US government dollars go to support the education of house staff, including the salaries of faculty who teach interns and residents, who probably are the majority of physician faculty. Faculty probably do not know this, because the government does not publish the amounts given to individual hospitals, nor demand of the hospitals any accountability for how they spend the money they receive.

Presumably, the top executives of each hospital know how much money the government gives them. Nonetheless, the majority of physician leaders of residency programs are never told these amounts, apparently because their hospital executives kept the amounts secret. Many of those educators who have tried to find out the figures were unsuccessful. Some did not even try to find out based on beliefs that their attempts would be unsuccessful, any amounts they discovered would be inaccurate, the people who knew the amounts were hidden, or that it would be dangerous to their careers to even try.

Thus billions of dollars of money flowing from the government to fund graduate medical education seems to have vanished in an amazing example of widespread deficiencies in accountability and transparency.

There are many people who blame government for many social ills. In this case, one can blame the US Congress for not writing a law that makes the money flows transparent and hospitals accountable for providing good educational value for the money provided. One can also blame the executive branch, particularly the Center for Medicare and Medicaid Services (CMS) of the US Department of Health and Human Services (DHHS) for not making the money flows and the values received for them transparent.

There are a few people, including this author, who also blame the leadership of health care organizations for many of the problems besetting health care. In this case, one can blame top leadership, presumably CEOs and chief financial officers (CFOs) of hospitals for hiding the amounts of money they receive from Medicare to finance graduate medical education. One can also blame the physician leaders of residency programs for not insisting that they know the true sources of financial support for their programs, obtain budgets that reflect this support, and recognition that their faculty really do bring in external funds for their teaching of house staff (and are thus valuable "taxpayers" in Dr Goldman's parlance.)

It is amazing that such amounts of money have been flowing for years mostly in secret. The secrecy has fueled incorrect, and in retrospect, bizarre ideas about the funding of medical education, and the value of medical educators to their institutions. This secrecy, in turn, has helped suppress the morale of medical educators, support the control of managers of health care professionals, and distort the flow of money within academic institutions and to compensation for certain favored individuals.

Would our dysfunctional health care system not be better off if we demanded transparency and accountability from its leaders?  In particular, the US government should make payments to hospitals for graduate medical education completely transparent, and develop a system to hold these hospitals accountable for how they spend the money.  Meanwhile, top leaders of hospitals receiving this money should make the amounts transparent, first to the people who are supposed to be doing the education that the money pays for, and to the public at large.  This would allow those running the relevant educational programs to develop reasonable and realistic budgets, to treat their faculty with respect, and to demonstrate what value they provide for the money received. 
The ongoing anechoic effect, and related deception and secrecy fostered by leaders in health care are major reasons our health care system is so dysfunctional, that costs are so high, and access and quality so poor.  True health care reform would ensure health care leaders put the mission before their personal enrichment, and act ethically with accountability, transparency, and honesty. 
References
1.   DeAngelis CD. Professors not professing. JAMA 2004; 292: 1060-1.  Link here.
2.  Goldman L, Halm EA.  A view from the top: general internal medicine from the perspective of a chair and dean.  SGIM Forum, April, 2007.  Link here.
3.  Pololi L, Ash A, Krupat E.  Faculty Values in the Culture of Academic Medicine: Findings of a National Faculty Survey. Link here.
4.  Liebow M, Jaeger J, Schwartz MD. How does Medicare pay for graduate medical education? SGIM Forum, May, 2012.  Link here.
5. Chaudhry SI, Khanijo S, Halvorsen AJ, McDonald FS,Patel K. Accountability and transparency in graduate medical education expenditures. Am J Med 2012; 125: 517-522. Link here.

A Case Demonstrating Links Between Poor Governance, Conflicts of Interest, and Excess Executive Compensation at a Hospital System

The Salinas Valley Memorial Healthcare System in California first appeared on our radar in 2011 for not only giving an improbably large severance package to its CEO, but doing so two years before he actually retired.   At the time, hospital "officials" gave the usual sorts of justifications we see for huge executive compensation packages.  They suggested the CEO is brilliant, in particular, "gifted and experienced," and that to retain him they needed to pay "private sector-level benefits."  Then it turned out the system was rapidly raising the compensation of other executives while laying off employees who actually took care of patients. 

A Government Audit

Because the system, despite its title, is actually a local government agency, these controversies triggered not only outrage, but also a state audit.  The Los Angeles Times described its results. 

The audit found that the Salinas Valley Memorial Healthcare System regularly did business with firms that the board and top officials had financial stakes in — in some cases in apparent violation of state conflict-of-interest laws.

The report stated that Salinas Valley lacks sufficient safeguards against making decisions that violate conflict-of-interest laws, and that the district therefore can't guarantee 'that it's board members and executives do not experience personal financial gain from its transactions with businesses.'

The audit found 11 instances between 2006 and 2010 in which board members had reported economic ties — including stocks, salaries and other types of payments — to vendors with which the district did business.

Not all the cases represented violations of conflict-of-interest rules, state auditors said, but in two cases they found that officials may have broken the law.

One case involved former Chief Executive Samuel Downing, who had $50,000 in investments with 1st Capital Bank, an institution Salinas Valley and the executive agreed to deposit $1 million into.

In another case, the hospital made $5.6 million in disbursements to Rabobank, where a board member, Harry Wardwell, serves as a regional president and receives a salary of more than $100,000, according to his most recent statement of economic interest.

A San Jose Mercury News article listed some other problems found by the audit:

· Absence of a formal executive compensation policy despite paying its top administrators at the upper end of the industry scale. Downing received a nearly $5 million retirement payout, and other executives received generous pay topping out at $341,000 per year. The reported also cited supplemental pensions, which have been discontinued.

· Violations of state open-meeting laws as the board approved executive pay.

· Failure to ensure all employees who are required to file statements of economic interest had done so.

· Absence of a duly approved, legally binding conflict of interest code, which must be approved by the county Board of Supervisors. The report noted the hospital board instituted a properly approved code in December.

· Lack of proper documentation on the selection process for no-bid contracts, necessary to ensure the hospital gets the best value for its money. The report found only one of eight contracts reviewed during the audit included such documentation.

· Need for better oversight of hospital funding of community events, including the rationale for why and how they benefit Salinas Valley Memorial, to adhere to the ban on making gifts of public money. The report found the board delivered $54,000 to California Rodeo Salinas without any evidence it had considered how it furthered its public purposes.

Conclusions

First, this case should not be viewed as an indictment of hospitals run by local governments.  Rather than indicating that bad behavior is particularly likely at such hospitals, the fact that questionable behavior came to light at such a hospital is more likely due to better regulation of such hospitals leading to more transparency about them compared to other hospitals.  The regulations and laws governing the operations of non-profit hospitals not run by government agencies, or for-profit hospitals vary from US state to state.  To my knowledge, rarely do states strictly regulate conflicts of interest affecting, or require much transparency about governance at hospitals that are not government run.  There is a similar lack of state regulation of for-profit hospitals, and federal regulation of either non-profit or for-profit in these areas.  Thus it is extremely rare to see an audit or report about any non-governmental hospital like the one about Salinas Valley Memorial Healthcare.  Without the greater transparency produced by such investigations, there is little data about whether the practices seen at Salinas Valley are common at other hospitals, be they government run, non-profit and private, or for-profit.   

However, while this is just one case, it does allow an interesting comparison.  We have discussed the usual "talking points" proffered by management and boards to explain outsized compensation packages in health care.  They often include statements about the brilliance of the executives in question, almost never with any supporting evidence, and the need to pay "market" rates.  Although these, and other talking points may seem implausible, they are hard to challenge, because hospital and other health care organizations are usually able to conceal the processes which actually lead to compensation decisions. 

However, in this case there is documentation of problems with governance processes which may have plausibly enabled unjustified levels of compensation.  Failure to maintain processes to disclose and deal with conflicts of interest could increase the likelihood that conflicts would occur.  A board that included individuals who may have been personally profiting from their board membership might be inclined to go along to get along with the CEO.  Meeting in secret despite an open meeting law would prevent discovery of cronyism.

This case therefore suggests that governance that lacks transparency, accountability and integrity may lead to self-interested, conflicted leadership that responds to perverse incentives.  Such leadership is likely to pay more attention to its own interests than the health care mission, short-changing patients' and the public's health.

So once more with feeling.... 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. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

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.

Retreat Back to Regulatory Capture: US FDA, NIH, Department of Health and Human Services All Back Off

After some brave words about transparency, integrity and all that, US government officials seem to be running back to the arms of the health care corporate CEOs.

Weakening FDA Conflict of Interest Rules

As reported by Reuters,

U.S. lawmakers likely will change the criteria for advisers reviewing new medicines next year because of complaints that the rules meant to prevent conflicts of interest make it harder to find real experts.

Congressional lawmakers may require the Food and Drug Administration to relax the rules that bar advisers from reviewing a drug if they have even indirect financial ties to related manufacturers, as part of an FDA funding bill.

This was not purely an initiative of legislators, but was egged on by a top FDA administrator

The agency often must delay panel meetings while it searches for experts without conflicts, lawmakers and FDA officials say. Top doctors are usually the ones drugmakers hire as speakers or consultants.

'We have had difficulty in recruiting highly qualified people. And we've had delays in having panels because of this,' Dr. Janet Woodcock, head of the FDA's drugs center, told a House of Representatives hearing earlier this month.

The result is that 23 percent of FDA advisory panels have vacancies, more than double the agency's stated goal, according to the FDA's quarterly report at the end of May.

The rationale was that those paid by drug and device companies are the most expert:

The FDA tightened guidelines in 2007 to minimize industry ties that could sway a panelist's view, partly inspired by the scandal with Merck's pain reliever Vioxx.

Ten of the 32 panelists advising the FDA on the drug consulted for drugmakers. Nine of the 10 recommended putting the drug back on the market after it was pulled in 2004 over concerns about heart risk.

The restrictions go too far, say lawmakers who want the FDA to approve more new medicines, in part because they promote American jobs.

'No longer can we deny experts simply because they have ties to industry,' said Georgia Representative Phil Gingrey during a House of Representative hearing on FDA funding last month. The committee's chairman, Fred Upton from Michigan, called the conflict of interest rules 'rigid and unrealistic.'

Industry executives, who want the FDA to speed drug approvals, also support relaxing the rules. Biogen Idec CEO George Scangos said the guidelines 'exclude a lot of people who would be the best qualified.'

Of course, the drug and device companies have been touting their paid "key opinion leaders" as the best and the brightest for a long time. There is plenty of evidence, however, that they are mainly those whom those companies find the most compliant, and in many cases, those who are willing to be stealth marketers on those companies' payrolls. (See this post about those who recruit KOLs regarding them as salesmen, and more here.)  "Key opinion leaders" supported by commercial grant funding may seem like experts to academic medical institutions' leadership who now value outside funding more than teaching and research excellence (see this post).

Furthermore, as reported by Politco, the Project on Government Oversight, a watchdog group, chastised FDA leadership for exaggerating the difficulty of finding unconflicted experts, concluding in their letter to the FDA Commissioner, "to gain the public trust, we must ensure that the FDA relies on the best available information for its policies, rather than personal opinions and biases."

So far, government officials seem to be more worried about the opinions of corporate leaders than the public trust.

Weakening NIH Conflict of Interest

As discussed in Nature,

Francis Collins hailed it as a 'new era of clarity and transparency in the management of financial conflicts of interest' (S. J. Rockey and F. S. Collins J. Am. Med. Assoc. 303, 2400–2402; 2010). But the director of the US National Institutes of Health (NIH) may have spoken too soon when he described a new rule, proposed last year, that would require universities and medical schools to publicly disclose online any financial arrangements that they believe could unduly influence the work of their NIH-funded researchers.

Nature has learned that a cornerstone of that transparency drive — a series of publicly accessible websites detailing such financial conflicts — has now been dropped.

In more detail,

The NIH's parent agency, the Department of Health and Human Services (DHHS), proposed the new rule in May 2010, after congressional and media investigations revealed that prominent NIH grant recipients had failed to tell their universities or medical schools about lucrative payments from companies that may have influenced their government-funded research. The DHHS called the proposed websites 'an important and significant new requirement to … underscore our commitment to fostering transparency, accountability, and public trust'. Under the proposal, institutions with NIH-funded researchers would determine, grant by grant, if any financial conflicts existed for senior scientists on the grant. For example, these would include receiving consultancy fees, or holding shares in a company, 'that could directly and significantly affect the design, conduct, or reporting' of the research. The institutions would post the details online, where they would stay for at least five years.

But of course the medical schools decided that it would just be too much trouble to do all this:

'The websites don't appear out of nowhere,' says Heather Pierce, senior director of science policy at the Association of American Medical Colleges (AAMC) in Washington DC. They would 'require employees to not only create the website but to pull the information, review it, and make sure it is up to date and accurate'.

That is not the only objection from the powerful academic lobbies. During the public comment period last summer, the Association of American Universities and the AAMC submitted a joint statement saying: 'There are serious and reasonable concerns among our members that the Web posting will be of little practical value to the public and, without context for the information, could lead to confusion rather than clarity regarding financial conflicts of interest and how they are managed.'

Given how academic medical institutions have expanded their administrations and bureaucracy, the enormous amounts they spend on management, and the huge compensation they give their executives, and further given how much of their revenues come from government sources (Medicare, Medicaid money for patient care, Veterans Administration money supporting many faculty members, Medicare money funding graduate medical education, and NIH and other government research grants), the notion that getting a few staffers to process disclosures would be administratively or financially burdensome is just laughable.

At least Iowa's Republican Senator Charles Grassley, seemingly one of the last politicians in Washington who cares about the integrity of government programs and spending, is upset. As reported again by Nature,

The US Senate's leading advocate for government transparency wrote today to the White House's budget office, demanding that it protect a proposed rule that would obligate universities to post their publicly-funded biomedical researchers' financial conflicts on a publicly accessible website.

'The public's business should be public... I urge OMB to follow through and approve a rule that includes a publicly available website,' Senator Charles Grassley, Republican of Iowa ..., wrote in in this letter to Jacob Lew, the director of the White House's Office of Management and Budget (OMB).

Furthermore, he wrote:

I am troubled that taxpayers cannot learn about the outside income of the researchers whom the taxpayers are funding, and this flies in the face of President Obama's call for more transparency in the government.

We will see if his protest does any good, but again it appears that government officials are more worried about the revenues of big health care organizations than the needs of the public.

Retreating from Threats to Disbar Forest Laboratories CEO

We previously posted about how the US Department of Health and Human Services threatened to disbar the CEO of Forrest Laboratories from dealings with the government after his company pleaded guilty to obstruction of justice and misbranding, and paid a $313 million fine.

Now, per Alicia Mundy writing for the Wall Street Journal, things have changed:

The U.S. government dropped efforts to force the resignation of a prominent pharmaceutical-company chief executive, reversing course after protests from the company and major business groups.

The about-face on Forest Laboratories's longtime leader, Howard Solomon, represents a significant retreat by the Department of Health and Human Services, which has said it wants to step up punishments against drug-company executives when wrongdoing happens on their watch.

Forest agreed last year to plead guilty to misdemeanors involving marketing of its drugs including the antidepressant Celexa, and it paid $313 million to resolve the matter.

Mr. Solomon wasn't personally accused of any wrongdoing. Nonetheless, the government notified him in April that it was considering excluding him from jobs at health-care companies that sell to the U.S. government. It invoked a little-used clause in the Social Security Act that allows such an action against corporate leaders of companies found guilty of criminal misconduct, even if the leaders had no knowledge of the misconduct.

The exclusion move would have effectively forced Forest to remove Mr. Solomon from office, because Forest and other drug companies rely on business from U.S. government agencies such as Medicare and the Veterans Administration.

In a letter to Mr. Solomon on Friday, the office of the inspector general of the Department of Health and Human Services said, 'Based on a review of information in our file, and consideration of the information your attorneys provided to us both in writing and in an in-person meeting, we have decided to close this case.'

We have discussed - some might say endlessly - how despite numerous publicly reported cases of wrongdoing by health care organizations, hardly any individual who authorized, directed or implemented the bad behavior has ever faced any negative consequences. There have been recent fulminations by some government officials that this is going to change. The case of the Forest Laboratories CEO appeared to be an example of such change, but no more.

The Wall Street Journal went on to discuss why the government may have changed course:

The government's retreat came after a barrage of complaints from Forest and business groups including the U.S. Chamber of Commerce and the Pharmaceutical Research and Manufacturers of America, the drug industry's leading trade group.

In July, Forest spent $80,000 to hire former Louisiana Sen. John Breaux to lobby the government regarding exclusion, according to Senate records. Mr. Breaux didn't return a call requesting comment. Forest said earlier that it was just trying to make its case that this was a highly unusual action by the U.S. government.

Of course it was unusual. That is the whole problem.

In any case, it looked like the government was much more concerned about the coddling of corporate CEOs and their lobbyists' and cronies' opinions than about deterring bad behavior by large health care organizations.

Summary

After a bit of blustering by the current US administration about transparency and integrity it appears to be back to business as usual in the US capital. Over the last 20 years, government has increasingly answered to corporate CEOs instead of "we, the people." Protecting patients' and the public's health has given way to protecting the financial health of large health care organizations, and the compensation of rich CEOs. Federalism is giving way to corporatism. As long as this continues, expect our health care system to continue its slow collapse. Eventually, expect the CEOs to get in their private jets and escape while the rest of us picks up the pieces.

Until we dispel the fog of corporatism that has spread over the government that was once supposed to be of the people, by the people, and for the people, expect no real health care reform, and expect continuing rising costs, declining access, and worsening patient care. Obviously, true health care reform would start with the government and its officials putting patients' and the public's health first, way ahead of the financial comfort of corporate CEOs.

See also comments by Alison Bass.

What the Pfizer (II)? - Lack of Transparency About Dysfunctional Leadership

The recent in-depth investigation by Fortune reporters of 10 years of dysfunctional leadership at Pfizer, the "world's largest research-based pharmaceutical company," raises many issues about leadership and governance in health care (see our post here).  To continue what is likely to become a lengthy series, let us discuss the most obvious one, is the discrepancy between what appeared in Fortune and what Pfizer chose to make public about its leadership.

This discrepancy is most apparent when one compares official descriptions of executive performance with what the Fortune reporters found.  To illustrate, consider the official descriptions of the performance of former Pfizer CEOs Hank McKinnell and Jeffrey Kindler in the respective years in which they were forced out.

"Hank" McKinnell -2006

Mr McKinell was forced to retire in 2006.  The Fortune article described Mr McKinnell as a "desperate CEO" by 2002 because he could find no way to replenish the company's fading drug pipeline; who then became an absent CEO who "left a power vacuum" and then triggered internal political warfare by setting up a "bitter contest" over succession planning.

The 2006 Pfizer proxy statement  explained how the Board of Directors' Compensation Committee assessed Mr McKinnell's performance,

The Committee does not rely solely on predetermined formulas or a limited set of criteria when it evaluates the performance of the Chairman and CEO and the Company's other elected officers.

In 2005, the Committee considered management's continuing achievement of its short and long-term goals versus its strategic imperatives, including Dr. McKinnell's objectives which are shown below:

• Achieve specific revenue, EPS, operating cash flow per share, and merger-related synergy goals
• Effectively communicate strategy and financial results to increase shareholder value
• Deliver more new medicines more quickly to patients, through industry- leading R&D productivity and significant in-licensing activity
• Adapting to Scale
• Promote new directions in health and wellness
• Shape a positive environment for better healthcare
• Developing People, Talent, and the Organization

The Compensation Committee then assessed McKinnell's performance thus:

Financial and merger synergy goals

Overall, the financial targets, which reflected a significant stretch for the organization given the dynamic business environment and the loss of exclusivity for certain key products, were exceeded.

Communicate effectively

However, given the performance of the Company's stock price in 2005 when compared to prior years, the Committee felt that the goal of effectively communicating strategy and financial results to increase shareholder value was not met.

More medicines more quickly

All R&D productivity and licensing goals were met or exceeded, with, notably, five products under priority review at the FDA — an industry first. As the R&D organization continues to establish the industry standard in productivity, the Committee determined that performance against this objective significantly surpassed expectations.

Adapting to scale

In 2005, initiatives related to Adapting to Scale resulted in twice the cost reduction that had been estimated for the year, giving a very strong start to the Company's efforts to reduce the cost base and streamline the organization.

So,

the Committee believes that overall performance significantly surpassed the expected outcomes for this objective.

Promote new directions

In promoting new directions in health and wellness, Pfizer's newly launched Healthy Directions program for U.S. based colleagues far exceeded expectations.... the Committee determined that these goals were significantly exceeded.

Shape a positive environment

The Company is also leading efforts to rebuild trust in the industry and large companies in general.

So,

Overall, the Committee believes that the Company surpassed expectations of performance against this particularly challenging objective.

Developing people, talent, and the organization

With respect to the final objective for 2005 — Developing People, Talent, and the Organization — the Committee recognized that senior leadership of the Company has been instrumental in developing and implementing new People & Talent strategies related to long-term development planning for key talent, enhancing leadership skills for all 'people managers', and enabling Pfizer to become a global leader in attracting, developing, and engaging a diverse workforce that delivers superior business results. As a result, the Committee determined that the goals of this objective were surpassed.

So, according to the Committee, Mr McKinnell's performance was excellent in all areas but one.

Accordingly, based apparently on this stated "General Compensation Philosophy,"

The Committee believes that compensation paid to executive officers should be closely aligned with the performance of the Company on both a short-term and long-term basis....

So the present value of Mr McKinnell's total compensation was estimated to be $15,880,989.

Jeffrey Kindler - 2010

Kindler was forced to resign in 2010. The Fortune article also described Mr Kindler as "suddenly desperate" after two failures of drugs in development; someone who "just couldn't make up his mind," about acquisitions and spin-offs; "anguished" about research, leading to a "messy" overhaul; and putting "destructive" trust in a subordinate with previously described problems with "character, integrity and divisiveness" leading to loss of the loyalty of the executive team.

However, in the company's 2010 proxy statement, the Compensation Committee made this general assertion:

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

Then, Mr Kindler, like Mr McKinnell, was assessed against specific performance standards thus:

Financial Results

Despite the unprecedented challenges in the global macroeconomic environment and other challenges, the Company exceeded the target goals for 2009 set by the Committee for annual incentive purposes

Enhancing the Product Portfolio

Under Mr. Kindler's leadership and oversight, during 2009 we improved the product portfolio (early stage through late stage),...

People Management

In 2009, we met or exceeded each of our people management goals,...

Business Model Implementation

the Company remains on track to meet the various research and development goals announced in March 2009. Mr. Kindler also further strengthened the Company's leadership team through strategic hiring and the redeployment of key senior leaders across the Company.

Wyeth Transaction

During 2009, we devoted significant attention to the acquisition of Wyeth. Under Mr. Kindler's leadership, we finalized negotiations, gained regulatory approval and closed the $68 billion acquisition of Wyeth, all in an expeditious manner. During the year, Mr. Kindler oversaw a detailed review of Wyeth and its businesses and the development of an integration plan,...

So,

With the completion of the acquisition under Mr. Kindler's leadership, Pfizer is one of the largest biopharmaceutical companies in the world, as well as a more diversified company in the health care industry.

Industry Leadership

During 2009, Mr. Kindler was actively involved, through both Pfizer and external organizations, in developing and advancing U.S. and global public policies that serve the overall interests of our Company and our shareholders

In summary,

In view of Mr. Kindler's accomplishments noted above and the fact that he achieved all of his objectives and exceeded most of them, the Committee believes that Mr. Kindler successfully led the Company toward the achievement of its strategic goals during 2009....

Based on the same general compensation philosophy noted above, Mr Kindler's total compensation in 2009 was $14,898,038.

Summary

Anyone who depended on these proxy statements to assess the performance of the Pfizer CEOs in 2006 and in 2010 would have likely concluded that both CEOs exhibited exemplary performance. These impressions would have apparently been sharply discrepant with the realities inside the company at those times.

Like the children of Lake Woebegone, we have frequently noted how almost all CEOs seem to appear "above average" or better to their boards of directors or trustees. The case of Pfizer in 2006 and in 2010 shows a board of directors which painted a grossly optimistic view of CEO performance to the public. In both years, these views would almost immediately clash with the fates of the particular CEOs. Now, based on the Fortune investigative report, these views seem even more overblown if not absurd.

This case, which again concerns the "world's biggest research driven pharmaceutical company," suggests one should be very skeptical about evaluations of executive performance in proxy reports. Proxy reports now appear to be a very cloudy window through which to view how corporations are really run. However, in the US, proxy reports have legal standing and are supposed to be sources of definitive information for stockholders and anyone else interested in the corporations that produce them.

Thus, the large organizations that dominate US health care may be even less transparent than they appear. True health care reform requires true transparency, and meaningful deterrence of propaganda disguised as fact.

Global Fund Will Not Suppress Discussion of Health Care Corruption

Some good news to discuss, for a change....

We previously discussed losses from corruption reported by the Global Fund to Fight AIDS, Tuberculosis, and Malaria, and by the Health Alliance International here.  At the time, we noted that some experts in health care corruption praised the Global Fund for being transparent about the effects of corruption.

However, last week there was concern that some elements within the Global Fund thought that the best response to losses due to corruption would be hiding them.  As reported by the AP (via CBS): 

A global health fund championed by celebrities and world leaders is considering scaling back its groundbreaking philosophy of full transparency about how it spends billions of dollars in health care in poor countries. Its decision could have broad consequences for the ways international aid groups operate.

Revelations this year by The Associated Press about misspent funds and corruption among recipients of the money — and the donor backlash that has followed — have prompted leaders of the Global Fund to Fight AIDS, Tuberculosis and Malaria to propose scaling back on the investigations that uncovered the problems, and revealing less about them to donors and the public.

But hardly everyone within Fund leadership wanted to abandon transparency:

The Global Fund's internal watchdog fiercely opposes the proposed changes. In its latest progress report, obtained by the AP, Inspector General John Parsons warns the board that a move toward less transparency 'could be interpreted negatively and as a purposeful effort to suppress material information.'

Also,

The president of the board, Ethiopian Health Minister Tedros Adhanom Ghebreyesus, opposes any changes.


'Even the mere appearance of suppression of information is unacceptable. Scaling back, or the perception that we are retreating from, this commitment is something we simply cannot allow,' Tedros said. If anything, he added, 'we should increase our level of transparency.'

Now, it looks like the transparency advocates won, at least in part. As again reported by the AP (via CBS):

A multibillion-dollar fund that fights three killer diseases said Friday that it will make public more detailed information about money it has lost to corruption and mismanagement, but won't release other information critics have sought.

The board of the $22 billion Global Fund to Fight AIDS, Tuberculosis and Malaria met this week to address a backlash among major donors over revelations by The Associated Press that the fund's internal watchdog was turning up losses of tens of millions of dollars of grant money.

Board members decided to publish detailed accounting of losses and money recovered, the fund said, in an effort to distinguish between fraud and other problems such as poor accounting.

However,

The fund will not, however, provide other details from internal investigations and audits that might have made it possible to calculate how much of the money investigated is lost to corruption, or what percentage of the fund's overall disbursements are misspent.

Also,

The fund also is not making public an internal chart obtained by AP showing that in 12 nations where internal audits and investigations reviewed almost $576 million in spending, an average of 8 percent was lost to fraud, undocumented or unauthorized spending.

Still, it is very good news that transparency won out in this case. Maybe the Global Fund leaders' decision will encourage more discussion of the severity of global health care corruption and its negative effects.

On the other hand, it is bad news that even discussion of health care corruption remains controversial. In 2006, Transparency International's Global Corruption Report asserted in its executive summary, " the scale of corruption is vast in both rich and poor countries."  As we summarized here, the report discussed the scale and diversity of health care corruption, and the severity of its adverse effects.  Yet the very subject of global health care corruption remains as anechoic as many of the specific topics we discuss on Health Care Renewal.

Also, as we have noted before, recently here, there are very few if any meetings about global health care corruption, very few courses on it in medical or public health schools, no institutions specifically designed to address it, and no programs at the foundations and NGOs which are losing money to global health corruption to combat it.  Similarly, there are few efforts to promote accountability, integrity, transparency, honesty, and ethics in health care (aside from this blog and a few other similarly informal initiatives.) 

What is wrong with that picture?

We hope that the willingness of the Global Fund to discuss and admit it has a problem with health care corruption will make health care corruption a little less anechoic, and lead us closer to concrete steps to address it.

PS - If anyone in our vast audience does know about any additional anti-corruption or conflict of interest, or pro-accountability, integrity, transparency, honesty and ethics initiatives, courses, meetings relevant to health care, please let me know and I will do my best to disseminate the information.

[Posted on Health Care Renewal by Roy M. Poses MD]

The Institute of Medicine Releases Reports on Practice Guidelines and Systematic Reviews Which Generate Few Echoes

Two days ago, the prestigious US Institute of Medicine released two reports on important health care issues, clinical practice guidelines and systematic reviews.  Systematic reviews of the relevant clinical research have been advocated by evidence-based medicine proponents as the appropriate basis for clinical and policy decisions.  Clinical practice guidelines have been advocated by many health researchers, policy makers, and clinicians as the best way to encapsulate the evidence to inform clinical and policy decision making.  Both reports suggested series of standards for how systematic reviews and clinical practice guidelines should be developed. 

These topics are of general importance to clinicians, health services researchers, and health policy makers.  The Institute of Medicine, part of the US National Academy of Sciences, is one of the most authoritative sources of opinion on medicine and health care.  Therefore, one would think that these reports would have gotten wide notice, and would hardly required Health Care Renewal to create some echoes.

However, a Google News search today produced only six "hits" relevant to these reports, including the original press release.  All are in specialized medical/ health care news outlets.  None are in the national media, and none are from major medical/ professional journals or societies. 

Let me suggest a theory about why these two major reports have generated so few echoes so far.  Let me quote from the summary of the report on clinical practice guidelines:

Most guidelines used today suffer from shortcomings in development. Dubious trust in guidelines is the result of many factors, including failure to represent a variety of disciplines in guideline development groups, lack of transparency in how recommendations are derived and rated, and omission of a thorough external review process. To be trustworthy, clinical practice guidelines should:
• Be based on a systematic review of the existing evidence;
• Be developed by a knowledgeable, multidisciplinary panel of experts and representatives from key affected groups;
• Consider important patient subgroups and patient preferences, as appropriate;
• Be based on an explicit and transparent process that minimizes distortions, biases, and conflicts of interest;
• Provide a clear explanation of the logical relationships between alternative care options and health outcomes, and provide ratings of both the quality of evidence and the strength of recommendations; and
• Be reconsidered and revised as appropriate when important new evidence warrants modifications of recommendations.
Additionally, as reflected in the committee’s standards for developing trustworthy clinical practice guidelines, guideline development groups optimally comprise members without conflict of interest. The committee recognizes that in some circumstances, a guideline development group may not be able to perform its work without members who have conflicts of interest—for example, relevant clinical specialists who receive a substantial portion of their incomes from services pertinent to the guideline. Therefore, the committee specifies that members of the guideline development group who have a conflict of interest should not represent more than a minority of the group.

So it seems that the report on clinical practice guidelines emphasized two issues highly relevant to Health Care Renewal, the need for transparency in guideline development, and the need to avoid conflicts of interest affecting the development process. The two first standards for guidelines are about transparency and minimization of conflicts of interest.  Similarly, the report on systematic reviews also included fairly tough standards to minimize conflicts of interest.

We on Health Care Renewal go on and on about the need to maximize transparency in health care, and particularly in health care leadership and governance, and about the need to disassemble the now pervasive web of conflicts of interest that has entangled health care.  However, as we know, these are not popular topics among the leadership of health care, which includes many individuals who have greatly benefited from lack of transparency and pervasive conflicts of interest.  We know these topics make these leaders, and many of those who report to, or work or associate with them very uncomfortable.

So unfortunately, I am not surprised that the two new and likely authoritative reports from the Institute of Medicine, despite that organization's prestige, have started off relatively anechoic.  It also unfortunately likely that they will remain relatively anechoic. 

In 2009, the IOM issued an authoritative report on conflicts of interest in medicine and health care which suggested fairly tough standards to decrease such conflicts and their influence (also see post here).  Since 2009, I just found 53 citations to that report in the medical literature using the ISI Web of Science, for a rate of 27/year.  In 1999, the IOM issued a report on medical errors, "To Err is Human."  Since then, it has received 1374 citations, a rate of 115/year. 

As we noted above, the topic of conflicts of interest seems to make the powers that be in health care very uncomfortable.  In contrast, "To Err is Human" was widely interpreted to mean that physicians make a lot of dangerous errors, and the best way to decrease them is to impose more controls by bureaucrats, managers, and executives (even if that was not its intent).  Thus, that report could be twisted to fit the talking points of the powers that be, and hence has been anything but anechoic.

So while Health Care Renewal is hardly a powerful tool for creating publicity, I thought we should try to get the word out about the new IOM reports on clinical practice guidelines and systematic reviews.  Every little bit helps.

Meanwhile, the deathly quiet reception these reports have gotten so far emphasizes the need to combat the anechoic effect.  As long as the powers that be can command billions of dollars to influence the health care conversation through their marketing, public relations, and lobbying departments, expect the discussion not to question what they do, and how they benefit from the status quo to the financial and health detriment of patients and the population.

We will not be able to truly reform health care until we can speak openly about what threatens health care values and what needs to be done about these threats.

A New Venue From a Surprising Source to Discuss "External Threats to Good Decision-Making"

A new blog, entitled the Medical Professionalism Blog, signed on last week with a post emphasizing some themes that should be familiar to Health Care Renewal readers:

There is an increasing focus on the sustainability of the U.S. health care system based on current cost trends. Predictions are for the health care system to consume 19% of the GDP by 2019. How did we get here?

Some point to the overuse and misuse of health care services, inefficiencies and lack of care coordination. Others blame the lack of clinical evidence, primary care workforce and the external threats to good decision-making, such as a toxic payment system and the influence of pharmaceutical and device companies.

While there are many different ideas about what got us here and what should be done, there is wide consensus that physicians and other stakeholders must begin to develop new more effective and efficient systems of care and make wise choices that preserve our health care system’s sustainability.

We have been underlining concerns that health care professionals' values, the mission of academic medicine, and truly evidence-based practice are under a series of threats.  (For a recent, but already out of date list of threats to the academic medical mission, see this post.)  It is nice to see that that others are now alarmed by these threats and looking for ways to counter them.

So, our new colleague in the blog-sphere raised the following questions:

* What is the appropriate role of physicians and other stakeholders in preserving these resources?

* What behaviors foster and which threaten wise choices in medical decision-making?

* How can waste be removed from the system without sacrificing quality or safety?

* What system changes are needed to achieve better health care outcomes, reduce costs and improve the patient experience?

* What effect do the nature and performance of partnerships – clinician-patient, clinician-organization and clinician-society — have on professional behaviors and resource use?

Again, the importance of threats was emphasized, and concerns about conflicts of interest affecting physicians' professionals were implied. This blog will apparently have a unique focus which I hope will complement our approach on Health Care Renewal.

What we’re hearing from folks is the need to 'show me how' to answer these questions. Through analysis of promising practices, we hope to provide examples of what works – and what doesn’t.

So we welcome The Medical Professionalism Blog to our blog-roll and look forward to some interesting content.

For a final twist, I need to note that this blog's authorship appears to be unique. The Health Care Renewal bloggers, and most of our blogging friends mostly seem to include, in no particular order: academic physicians, often tenured or retired (and thus able to speak more freely), other generally senior or retired academics, independent or retired practicing physicians, journalists, independent consultants, some whistle-blowers and others who once worked in the health care establishment, and some very anonymous bloggers in the belly of the beast.  Thus, we are generally an very independent and iconoclastic, if a somewhat rag-tag lot.

However, the chief blogger on The Medical Professionalism Blog is Daniel Wolfson, who is Executive Vice President and Chief Operating Officer of the ABIM (American Board of Internal Medicine) Foundation,  and the blog itself is a project of the foundation.  Thus, this is a blog from the heart of the medical establishment, the powers that be, etc, etc.  No other blog on our blog-roll comes from a current leader of such an organization.  (One is written by someone who was a CEO of a major academic medical center/ hospital system, but who lost his job under controversial circumstances.)

It is truly refreshing to have a voice coming from the inside, so to speak, proclaim:

The Medical Professionalism Blog was created by the ABIM Foundation to stimulate conversation and highlight best practices related to professionalism....

Furthermore,

Open for considerable debate is my belief that physicians’ engagement in quality, safety and the management of health care resources ultimately improves the care they give their patients and adds to their joy of work. I look forward to hearing your point of view, even if it’s a dissenting one.

Lately, we have not heard a lot of calls for vigorous debate and dissent from the medical establishment, the powers that be, etc, etc. In fact, the anechoic effect is how we describe how such debate and dissent has been suppressed.

So it appears the The Medical Professionalism Blog may be a real breath of fresh air. We hope it can truly inspire some discussion, especially open discussion of issues which used to be not what one was supposed to talk about in polite health care company.  This could help advance the transparency which we have long been advocating.

"You Can't Say That" - Non-Disparagement Clauses and the Anechoic Effect

Here is another example of why health care organizations' leaders are different from you and me, and why that may not be a good thing for health care.  A few days ago, the San Jose (California) Mercury News reported on the upcoming departure of a local hospital CEO:

El Camino Hospital's handsomely-paid president and CEO Kenneth Graham is out of a job, the hospital announced Thursday afternoon.

Graham's contract will end June 30 'without cause, at the request of the hospital's Board of Directors,' according to a statement released to the media.

Until then, Graham will continue to fulfill his duties as the hospital's top administrator, according to the statement. Graham has been president and CEO of the hospital for 4½ years.

The brief statement did not explain why Graham has been ousted, focusing instead on his accomplishments. Graham earns an annual base salary of $632,640.

Not only was the CEO "handsomely paid," he will be handsomely paid to depart, as reported two days later by the same newspaper:

Former El Camino Hospital president and CEO Ken Graham may be out of a job, but he won't be hurting for a paycheck anytime soon.

Fired 'without cause' by the hospital's board of directors on Wednesday, Graham is now entitled to nearly $1 million in severance pay, according to his contract, which the hospital provided to The Daily News on Friday.

Specifically, the hospital will pay Graham a lump sum of 18 months' salary when he officially steps down June 30. Based on his annual salary of $632,640, he would receive $948,960.

The reporter could not get any clearer fix on the reason for his departure:

Hospital officials Friday were tight-lipped about their decision to drop Graham. Reached by phone, board Chairman Wesley Alles would only say it was 'without cause.'

'I guess as a generic (explanation) the only thing I can say is it's without cause, that (the board wants to take) some different directions, perhaps, as a generic (explanation),' Alles said.

El Camino Hospital spokeswoman Chris Ernst said she couldn't say more than what was written in a statement released to the media Thursday, which simply stated Graham's contract was ended 'without cause, at the request of the hospital's Board of Directors.'

'I know everyone wants to know if there's something really there, but it was clearly without cause,' Ernst said. 'It's not like you can point to one particular thing and say this is why this action was taken.'

Now wasn't that informative? It appears the CEO was let go "without cause." But reporter Diana Samuels did uncover why nobody was saying anything meaningful about this lucrative departure:

The contract also includes a 'non-disparagement' clause, which says the hospital and Graham cannot make any statements about each other that could cause 'any embarrassment or humiliation or otherwise reflect negatively on the other party(ies).'

I discussed the subject of executive contracts with one of our Health Care Renewal scouts who knows about such things. For high level executives in business, seemingly tidy severance packages are the rule.  We have discussed the problem with excess executive compensation in health care here.

Furthermore, various confidentiality, non-compete, and non-disparagement clauses are often common.

However, whether or not these are common practices in the larger business world, these contract provisions, especially non-disparagement clauses, pose problems in health care.  As we have discussed, there are lots of good reasons that the governance and leadership of health care ought to be maximally transparent.

Just to provide one example, consider the problem of medical errors, a subject which has received unending discussion since the report by Institute of Medicine entitled "To Err is Human."  One widely espoused doctrine about medical error prevention is that such errors ought to be disclosed and discussed openly so that their root causes can be found, and methods to prevent them developed.  Now suppose, for example, that the CEO of a hospital had discovered some medical errors, but made himself unpopular by pursuing them.  Were he to have a bilateral non-disparagement clause in his contract, and were this unpopularity to cause him to lose his job, he could say nothing about these errors, possibly allowing them to recur, but more seriously.  Of course, the example could be turned on its head.  Suppose the CEO had introduced a new process that was thought to be the cause of such errors.  Were he to lose his job because of this, hospital officials could say nothing about the problem, etc, etc.  Similarly, other problems at the hospital either discovered by the CEO or possibly caused by the CEO could remain anechoic due to non-disparagement clauses in hospital executives' contracts.

Of course, in the current case, the CEO might have left due to simple personality differences, and his departure might have nothing to do with medical errors, etc, etc.

However, this case suggests that the sort of non-disparagement clauses that may appear in contracts for executives in various type of businesses have metastasized to contracts for hospital executives.  These clauses, and their cousins, confidentiality clauses and non-compete clauses, may be major reasons for the anechoic effect, and the general lack of transparency of hospital leadership and governance. 

However, up to now, such clauses seem to be, you guessed it, anechoic in discussions of health care policy and health care reform. 

Thus, one step to true health care reform would be for there to be some open discussion of the reasons we cannot openly discuss many important issues in health care, particularly the likely increasing use of contractual clauses such as non-disparagement clauses.  Likely an even more important step would be discrediting such contractual provisions that reduce transparency.