A New Low - A Hospital CEO Got a "Golden Parachute" for A Merger that Never Occurred

We recently posted about how top hospital managers are often the first to benefit from mergers and acquisitions, which once again have become fashionable in management circles.  Now it appears that top executives can benefit even from failed mergers, as reported by the Daytona Beach (Florida) News-Journal,

Five months after Bert Fish Medical Center's failed merger, one board member said he was surprised to learn payments are still being made toward the $1 million buyout of the former hospital CEO.

Hospital board member Joe Benedict said he didn't know former hospital Chief Executive Officer Bob Williams, who steered the board into the illegal deal with Adventist Health System, is due to receive his $289,000-a-year salary until 2014 –– paid through the publicly owned hospital.

At the time the merger was announced, a memorandum of understanding with Williams became public and showed the deal had triggered a three-year buyout clause in Williams' contract. Starting July 1, 2010, the Adventist agreement paid him his salary for three years, as his contract required, plus seven months and eight days –– a deal worth $1 million and benefits.

'That man has got away with a lot more than he should have,' said Benedict, a former County Council member, explaining that he considers Williams as responsible for the failed merger as Jim Heekin, the board's former attorney.

These payments were made to the former CEO despite the cost of the failure of the merger:

The hospital district incurred $3.4 million in administrative and legal fees as a result.

Apparently, there are allegations that the merger failed because former CEO Williams agreed to keep the board meetings of this public hospital secret, which was illegal:

The hospital board has voted to pursue a legal malpractice lawsuit against Heekin, of the Orlando firm Lowndes, Drosdick, Doster, Kantor & Reed, for his advice to keep the public out of talks about merging the New Smyrna Beach hospital with a partner. The 21 closed meetings that were held over 16 months were called 'so much darkness for so long' they couldn't be cured, according to a ruling earlier this year from Circuit Judge Richard Graham, who threw out the merger.

Also,

Williams is quoted in transcripts of the closed meetings telling board members not to tell anyone Adventist had been chosen as Bert Fish's partner

Other contractual provisions for golden parachutes exist, but have yet to be activated:

Benedict said he's still hopeful he can undo other buyout clauses in hospital contracts he believes obligate the hospital to pay more than is allowed, under state law, for the departure of Bert Fish Medical Center administrators. According to the current contracts, provided to the News-Journal, the hospital's current CEO, chief financial officer and chief of nursing must be paid 24 months' salary should they be dismissed from their positions through no fault of their own. Their departures could be a possibility if Bert Fish were to seek another merger partner who doesn't want to keep them on.

The contracts were executed June 30. On July 1, a new state law went into effect that limits the buyout of public employees to 20 months.

Summary

So, a hospital CEO had a contract that made him eligible to begin receiving "golden parachute" payments just because a merger was in process, and these payments could not be stopped even though the merger was declared illegal, and hence never occurred. We noted recently that CEOs and other top officials of health care organizations are often the first to benefit financially from mergers and acquisitions, even when such transactions to not prove so beneficial to the affected institutions, much less patients' and the public's health in the long run. Here is a case in which a CEO could get extra money just because a merger was contemplated. This is some sort of new record for health care leaders personally profiting from their insider positions.

There has been growing public outrage about how ordinary people who play by the rules are disadvantaged in today's economy, while insiders profit from their positions. There ought to be equal outrage in health care over its version of this pheonomenon.

As long as health care leaders can continue to put their self-interest ahead of the health care mission in this way, is it any wonder that health care costs continue to rise while access and quality suffer? When will would be health care reformers realize that to truly reform health care, we will have to reform health care leadership? We need health care leaders who understand and uphold the mission, are accountable for how well they do so, and whose incentives depend on how they do so. We do not need leaders who put their self-interest first. Right now, however, that seeems to be the leadership we have.

George Lundberg, MD: The Promise of Health IT, and a Caveat

I was cited yesterday in a Medpage TODAY video by medical internet pioneer George Lundberg, MD, also former editor of the Journal of the American Medical Association (JAMA). A link was made to Healthcare Renewal as well.

Health IT: Garbage In, Garbage Out

By George Lundberg, MD, Editor-at-Large, MedPage Today
November 15, 2011

http://www.medpagetoday.com/Columns/29688 (video and transcript)

Click on picture to link to article/video

Transcript:

Hello and Welcome. I'm Dr. George Lundberg and this is At Large at MedPage Today.

I started working with computers in medicine in 1963. I was a Captain in the United States Army Medical Corps in San Francisco when a Lieutenant Colonel told me to "automate the California Tumor Tissue Registry."

I said, "Yes, Sir. How would I do that?" He told me to walk across the Presidio parking lot and go into a building that had a big machine in it that is called a computer.

I did that, and for the next three months, I took the information that was on a bunch of 3 by 5 cards and converted that data into punch cards, which were then fed into the computer and out came an automated California Tumor Tissue Registry.

I was hooked and, although never a "techie," I never stopped finding ways to use computers in medicine. The goal was always better, faster, cheaper.

I remain a strong advocate, and have worked in a string of jobs that strived for that goal. One of the truths I learned early on was "G I G O" -- Garbage In; Garbage Out. That has not changed.

There are indeed a huge number of medical tasks that computers can do very well if properly programmed, managed, and utilized. The eminent UCSF academic clinician Dr. Bob Wachter was early in recognizing that there were also significant downsides in applying computers in practice.

Physicians are very smart. They will quickly adopt new technology that helps them get their job done if it does not waste their time.

Most American physicians have dragged their feet on implementing computers into their practices, and with good reasons. But now they should get on with it.

I write this column as it has been announced that 100,000 U.S. physicians and hospitals have signed up for the "meaningful use" incentive program and thus been able to take the government's money to help automate their organizations.

I think this is good and I praise Dr. David Blumenthal for his major efforts to make this happen.

However, there is another harsh critic worth listening to.

His name is Dr. Scot Silverstein, and he seems to have made it his life's work to call attention to really bad problems that he discovers in this mass move to automation.

Heed his cautions. They are real.

But also recognize that where there is progress, there is trouble; but it can be worth the price.

That's my opinion. I'm Dr. George Lundberg, At Large for MedPage Today.

I thank Dr. Lundberg for his caveat, citing me, and agree with his position.

My father died in 2000 due to complications of failure to diagnose bilateral renal adenocarcinomas (malignant tumors of both kidneys) for about two years despite numerous warning signs. This occurred in a hospital without electronic medical records and was in part due to impaired clinician communications. His life could have been longer, and with far less suffering, had there been a safe and effective EHR.

Once discovered -- only due to my insistence on a renal arteriogram -- the doctors told my father he could not be treated and to "get his affairs in order." (They lost the later malpractice case that ensued.)

I was able to prolong my father's life for a few years by removing him from that hospital, "hospital A" and taking him to another hospital where he underwent bilateral heminephrectomies and other treatment. Let's call the other hospital "hospital B."

On the other hand...a caveat of my own:

Ironically and tragically, my mother died in June 2011 from complications of a medical error at "hospital B" that was due to impaired clinician communications -- caused by an EHR that was itself unsafe and ineffective. See "A Diary of EHR-Initiated Tragedy."

Therefore, my caveat is that we must be very mindful of the adage "where there is progress, there is trouble; but it can be worth the price."

The price must respect medical ethics. It must not involve using patients, especially patients who have not been given informed consent and opt-out choices, as test subjects for software debugging.

As I wrote back to Dr. Lundberg:

Many thanks George. I agree with your assessments [on EHRs].

Now we have to work to ensure the pitfalls are habitually avoided.

Regards,

Scot Silverstein

Here is a memorial bench I had erected to my parents at their grave last month, near where they ran a small community pharmacy for almost four decades. My father, a pharmacist, was a go-to source for health information in the once-bucolic community of Somerton, in far Northeast Philadelphia, long before chain drugstores appeared in the region.

The inscription atop the bench reads "Owners of Lumar Pharmacy. Served This Community 1954 -1991."

They, like I, also toiled to safeguard and improve the health of the public.

May they rest in peace:

Click to enlarge.

-- SS

Novel Idea on Healthcare IT: Worth a Billion Dollars!

From an AMIA announcement:

CMS Innovation Center Announces $1 Billion Funding Opportunity:

CMS announced a new initiative, the Health Care Innovation Challenge, which will provide grants for new ideas to improve care and lower costs for those in Medicare, Medicaid and CHIP. CMS will award up to $1 billion in grants for a 3 year period and is encouraging providers, payers, local government, public-private partnerships and multi-payer collaboratives to develop new and innovative ways to improve care. To learn more about the grants and application process, check out the CMS Innovation Center website and be sure to register for the CMS webinar on Thursday.

CMS, I have an idea!

It's a really, really novel idea!

"Let's regulate HIT to improve its safety, usability, usefulness, fitness for purpose, effectiveness, etc." ™

That will lower healthcare costs! Save lives, too!

----------------------------------

Can I have my Billion Dollars now?

You can do a lot in health IT with a billion dollars - if you're not the HIT industry, that is, that has squandered a large wad of these over the past several decades.

-- SS

Abbott Laboratories to Settle for $1.3 Billion Allegations Including Giving Doctors Kick-Backs and Training Them to Make False Diagnoses

It looks like the march of billion dollar legal settlements by health care organizations is on its way again. 

The Proposed Abbott Laboratories Settlement

Last month Bloomberg reported:

Abbott Laboratories (ABT) agreed to pay at least $1.3 billion to settle claims by the U.S. government and 24 states alleging the company illegally marketed its Depakote epilepsy drug, people familiar with the accords said.

Abbott executives, federal prosecutors and state officials reached a tentative agreement calling for the drugmaker to pay about $800 million to resolve civil claims over Depakote and about $500 million in criminal penalties for marketing the epilepsy medicine for unapproved uses, said three people familiar with the settlement who declined to be identified because the agreement hasn’t been made public. Abbott said earlier this week it was reserving $1.5 billion to cover costs of the potential settlement.

A billion here, and billion there, it begins to add up:

The settlement would be the third-largest illegal pharmaceutical marketing accord in U.S. history, behind the $2.3 billion Pfizer paid in 2009 over the marketing of its Bextra painkiller and other drugs and the $1.4 billion Eli Lilly & Co. paid the same year over sales of its Zyprexa anti-psychotic medicine.

Encouraging Dishonesty, Giving Kick-Backs

The Bloomberg report only briefly discussed the behavior by Abbott that lead to the settlement:

In February, the government joined cases brought by former Abbott employees alleging the company engaged in so-called off-label marketing starting in the late 1990s. The suits contend the illegal sales practices resulted in false claims being submitted to government health programs.

The whistle-blowers claim the drugmaker marketed Depakote for unapproved uses including agitation and aggression in patients with dementia, autism, sexual compulsion and other disorders.

However, an article published last week in the Chicago Tribune further described the allegations made by the whistle-blowers. In summary,

The lawsuits against Abbott allege that the company encouraged and trained sales reps to market Depakote off-label to nursing home directors, geriatric doctors and other long-term care facilities. The company also gave doctors illegal kickbacks to talk about off-label uses of the drug in an effort to boost sales, according to the lawsuits, which were filed in federal courts in Virginia, Illinois and the District of Columbia.

The FDA approved Depakote in 1983 to treat certain seizures in adults and children over 10. Since then, the drug has received approval for the treatment of other types of seizures, manic episodes of bipolar disorder and the prevention of migraine headaches.

However, Depakote was never approved to treat Alzheimer's disease or other types of dementia or for general treatment of bipolar disorder.

According to the whistle-blower lawsuits, though, Abbott sales reps specifically marketed Depakote to treat agitation and aggression associated with dementia.

One whistle-blower alleged that Abbott encouraged doctors to make false diagnoses that would enable the government to pay for the use of Depakote:

During a nationwide conference call in 2007, an Abbott trainer allegedly coached sales reps on how to explain to doctors that they could miscode a patient's illness in order to bypass federal regulations. For example, a physician could code a patient as having 'late onset of bipolar' or 'underlying seizure disorder' instead of 'agitation associated with dementia,' according to her complaint.

Abbott held training sessions focused on off-label promotion but brought in outside consultants and held the training away from its North Chicago headquarters.

At one training event, McCoyd and another sales representative allegedly were asked to share their techniques for off-label marketing but were forbidden from preparing or distributing any written materials about the topic.

Upper-level management who attended the sales training purposely left the room when the off-label training sessions began, according to the complaint.

The whistle-blowers also alleged that Abbott gave kick-backs (presumably the same idea as bribes) to doctors for prescribing Depakote:

The complaints also allege that doctors were given kickbacks to talk about off-label uses of Depakote.


According to McCoyd's filing, Abbott salespeople were given about $20,000 to $30,000 each year to 'educate' physicians and other heath care providers about off-label use of Depakote.

Abbott paid doctors who promoted the drug between $500 and $2000 per speech, the complaint states. The money allegedly was funneled through intermediaries and associations, including the Alzheimer's Association, although the association told the Tribune it has 'no knowledge' of such activities.

Using the organizations to pay doctors was done to 'disguise the direct payments to doctors and Abbott's substantial and direct involvement' in the events, the complaint alleges.

Summary

So it appears that Abbott is about to settle a case involving some very serious allegations, including training physicians to make false diagnoses, and giving physicians kick-backs. These sort of actions seriously subvert physicians' core values (and any physicians who made such false diagnoses or accepted such kick-backs would have seriously violated core ethical principles.)

These actions also may have directly harmed patients. There appears to be no good evidence that Depakote has benefits that exceed its harms for patients with dementia, autism, etc. So encouraging doctors to prescribe the medicine for these patients was likely to have subjected some patients to side-effects without providing them any benefit. That would contradict the physicians' obligations to put the interests of individual patients first, and to avoid harming them. As the Tribune article noted,

[Dr Adriane} Fugh-Berman, with PharmedOut, said companies put patients at risk when they promote drugs that haven't gone through the FDA's regulatory process.

'These drugs are being promoted for conditions they have not been shown to be effective, and they might be dangerous,' she said.

So a $1.3 billion penalty would actually be a cheap price to pay for such ethical offenses. Note that the Bloomberg report did mention "criminal penalties," so this may be one of the infrequent cases in which a big health care organization actually would plead guilty to some crime.

Note however that neither article mentioned anything about any individual who authorized, directed, or implemented the conduct in question suffering any negative consequence or paying any penalty. These reports are preliminary, so it may be that such penalties are part of the final settlement. But it is also possible that this settlement becomes another, and particularly flagrant example of health care corporate executive impunity.

If no one turns out to have to pay a penalty for training physicians to lie to the government, and giving them kick-backs to prescribe a possibly useless and likely harmful medicine, what will deter other executives from authorizing and directing such actions again to make more money? Note in the Bloomberg article:

Sales of Depakote 'rocketed to over $1.4 billion per year' as a result of improper marketing, according to a complaint filed in February by ex-Abbott sales representative Meredith McCoyd. 'Compensation for senior executives soared as well.'

Furthermore, if no one turns out to have to pay a penalty for these actions, this case will just contribute to the ongoing demoralization of health care professionals. It will be another example of how insiders take advantage of the system for their personal gain, to the disadvantage of patients, and at further cost to an already overly expensive health care system that fails to provide adequate access and quality care.

So I repeat, repeat, repeat... to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.