Conflicts of Interest, Government Leaders, and Private Health Care Organizations

There seems to be a small surge of stories about conflicts of interest regarding health care affecting government leaders who can affect health care. 

The Institute of Medicine defined conflict of interest in medicine as "circumstances that create a risk that professional judgments or actions regarding a primary interest will be unduly influenced by a secondary interest."  So we will summarize these stories by first showing what each leader's secondary interests are, and then show how they may influence carrying out his leadership responsibilities.  (We used "his" because all examples are of male leaders.)

Florida: Governor Scott and Solantic

Rick Scott, the new Florida Governor, apparently still has strong ties to a for-profit chain of urgent care centers, as reported by the Palm Beach Post:

As Florida Gov. Rick Scott reorganizes health agencies, cuts spending and pushes for new free-market health policies, his ownership of Solantic, the urgent care chain, increasingly poses conflict of interest questions.

Solantic co-founder Karen Bowling says Scott has taken steps to distance himself from the chain. He stopped regular business calls with her after he was elected.

'I don't talk to him anymore. Not since November. Really not much since April,' Bowling said.

Scott left the privately held company's board of directors in January 2010, during his campaign.

But the most important step the governor must take to avoid a conflict of interest, some ethics experts say, is to divest his Solantic interests.

In January, Scott did transfer his Solantic stock - to his wife.

There were obvious questions raised whether this transfer mitigated the conflict of interest:

Scott's efforts to distance himself appear to be designed to meet the letter of Florida ethics laws, if not the spirit.

They may not succeed if challenged, warned legal and ethics expert Marc Rodwin, a law professor at Suffolk University who is the author of several books on health care and conflicts of interest.

'Placing his ownership in the name of his wife is not an effective way to control for conflicts of interest and not generally accepted because they are personally related,' Rodwin said.


Rodwin said Scott's blindness to Solantic's daily business decisions likewise does not relieve his conflict.


'His family still benefits from it,' he said.

There are a number of issues before Florida government about which there appears to be a risk that Governor Scott's actions could be unduly influenced by his family's ownership interest in Solantic:

From the moment he was elected, Scott has said government has no business providing primary care.


His budget proposal eliminated state support for the clinics. The county's health department director warns that may leave 30,000 adults without a medical home.

Scott's decisions as governor are likely to affect Solantic in other, perhaps more significant ways.

Scott's budget would curb growth in Medicaid spending, the state-federal safety net insurance program, by requiring most recipients to join private HMOs. Solantic accepts Medicaid HMO reimbursements, but not state Medicaid, so adding clients could broaden the clinics' customer base.

But the greatest benefit for Solantic could come from Scott and other Republican governors' lobbying efforts in Washington.

They want the Obama administration to give states waivers from the Affordable Care Act, and provide them with a massive block grant to expand health coverage in the way they deem best for their states. Money slated to go to business' health insurance tax credits and lower income consumers' insurance subsidies could pay for the grants - to the tune of billions.

Obama has said he's willing to give the states waivers on a speeded-up timetable. His administration Thursday published new rules on how states could get that waiver.

Scott's health policy adviser Michael Cannon, an economist with the Cato Institute in Washington, favors giving consumers health vouchers that they would use either as cash for direct-pay medical care or to buy insurance.

The possible effect on Solantic and similar clinics could be huge, said Rodwin, the legal ethics expert.

'You have a major owner-operator of a set of clinics on the state level, and a major policy figure on a state level, making major changes that affect whether that kind of business will thrive or not, what their competition will be, and really reforming the whole health sector,'  Rodwin said. That's in my view a very dangerous role.'

Note that this is not the first whiff of scandal regarding Rick Scott's leadership role in health care.  As the article noted, Scott:

resigned as CEO of Columbia/HCA amid a federal billing fraud investigation. Columbia/HCA ultimately agreed to the nation's largest Medicare fraud settlement, a $1.7 billion criminal and civil penalty.

Although the company had admitted to criminal wrongdoing, Scott himself was never charged, and he has denied knowledge of the illegal activities.

Scott left Columbia/HCA with more than $5 million in severance and $300 million worth of stock and options.

See our most recent detailed post on Mr Scott's history here.

Massachusetts: House Health Finance Committee Chair Walsh and Health Care Industry Lobbyists

The newly appointed chair of the Massachusetts House committee on health care finance has strong relationships to health care industry lobbyists, according to an editorial in the Boston Globe:

Speaker Robert DeLeo has chosen a health-finance committee chairman, Steven M. Walsh of Lynn, whose family is to lobbying what the Mannings are to NFL quarterbacking. Walsh’s father-in-law represents the state’s health insurers, while his uncle’s firm blocks and tackles for Steward Health Care, new owners of the Caritas chain of Catholic hospitals.

Again, there are a number of issues before the Massachusetts legislature about which there appears to be a risk that Representative Walsh's actions could be unduly influenced by his family's lobbying work:

Next to the budget, the thorniest issue the Legislature will deal with this year will be changes in health care financing. Lawmakers will consider bills that may completely change how health care providers are paid. That shift — from fee-for-service payments towards a system based more on per-capita reimbursements — will set off a free-for-all among insurers, doctors, and hospitals.

So,

Walsh’s admirable efforts ... [to improve legistlation regarding lobbying] don’t erase the conflict of interest he faces on health care issues. Walsh can try to separate family feelings and events from his official role, but the companies paying his uncle’s firm and his father-in-law are still expecting them to use every opportunity to make the strongest possible case for their clients. And it’s no exaggeration that these clients — the state’s insurers and its newest hospital chain — have hundreds of millions of dollars at risk in the new payment system Walsh will be vetting.

Perhaps if the stakes were lower or the relationships more distant, Walsh could chair the health-finance committee without risking public confidence. But as it is, he will be in a position of representing the taxpayers’ interests against those of his close relatives.

Note that we discussed Steward Health's possibly revolutionary role in commercializing physicians' practices here, and how a former Massachusetts government health care agency official exited via the revolving door to join Steward Health Care here.
New York: Governor Cuomo's Advisor and Major Hospital Systems

New York Governor Andrew Cuomo has a close advisor whom he just appointed to a "Medicaid redesign team" whose clients include large academic medical centers/ hospital systems, per the New York Times:

When Andrew M. Cuomo married Kerry Kennedy in 1990, Jeffrey A. Sachs served as an usher. When Mr. Cuomo’s daughter Michaela was born, he asked Mr. Sachs to be her godfather. When his marriage fell apart years later, Mr. Cuomo stayed in Mr. Sachs’s triplex near the United Nations.

Since Mr. Cuomo’s election as governor last fall, Mr. Sachs, 58, has taken on a powerful role among his health care advisers as the administration confronts crucial decisions, including how to overhaul New York’s $53 billion Medicaid program.

But at the same time, Mr. Sachs, known to many in Albany as 'Andrew’s best friend,' is working as a paid consultant to some of the biggest players in the New York health care industry, including Mount Sinai Medical Center, NYU Langone Medical Center and the state’s largest association of nursing homes, all of which have financial interests at stake in the coming Medicaid changes.

Mr. Sachs, whose firm is named Sachs Consulting, has never registered as a lobbyist, which would require him to divulge his clients and fees to the state ethics commission.

Again, there are a number of issues before New York government about which there appears to be a risk that Governor Cuomo's actions could be unduly influenced by his friend, advisor, and committee member's consulting relationships with major hospital systems.

Mr. Sachs was also an early advocate of the “Wisconsin model” of Medicaid, under which the governor would set a target for spending reductions and then appoint a task force of industry stakeholders to apportion the cuts. The approach has political appeal for the governor, in that it entices would-be opponents of spending reductions to participate in the plan rather than protest it. But it also endows the unelected team members with immense power.

Mr. Sachs made recommendations to Mr. Cuomo and his aides about whom to appoint to the Medicaid team, which Mr. Cuomo formed through an executive order in January. During the transition, Mr. Sachs also helped assemble a four-person policy team to begin meeting with state agencies about the best approach to reducing Medicaid spending

Moreover, the Times article recounted cases in which Mr Sachs appeared to influence policy in ways that benefited his consulting clients. For example:

While he was helping Mr. Cuomo assemble his health care staff, Mr. Sachs’s name arose in an unusual personnel matter, one that held great interest for one of his clients, NYU Langone Medical Center.

For at least a year, NYU Langone had had strained relations with Dr. Harold S. Koplewicz, a well-known psychiatrist who founded the hospital’s child psychiatry center but left in 2009 to start a competing research and clinical center.

Relations worsened because Dr. Koplewicz, who also served as director of the Nathan S. Kline Institute for Psychiatric Research, a state-run psychiatric center in Rockland County that also has a research affiliation with NYU, refused to allow NYU to screen those he hired at the institute, among other issues.

During an October meeting between Mr. Sachs and Dr. Koplewicz, Mr. Sachs suggested the doctor resign from the Kline Institute, people briefed on the meeting said. Should he lobby too aggressively to keep his job, Mr. Sachs warned, Mr. Cuomo, then widely expected to win election, might choose to close down the institute.

In a later meeting in December, Michael F. Hogan, state commissioner of mental health, told Dr. Koplewicz that he had been warned by Mr. Sachs that his reappointment by Mr. Cuomo would be jeopardized if Dr. Koplewicz did not resign, according to the people briefed.

Afterward, Dr. Koplewicz wrote Dr. Hogan a letter detailing his accomplishments as director of the institute and complaining of the pressure being exerted by Mr. Sachs.

'As you explained — and I appreciate your candor — you have been pressured by NYU through Jeff Sachs to have me resign as a condition for your reappointment as commissioner of mental health,' Dr. Koplewicz wrote in the letter.

In a response sent the following day, Dr. Hogan did not dispute Dr. Koplewicz’s account but suggested that he had been insufficiently cooperative with NYU and the Office of Mental Health.

'Accordingly, your service as director, Psychiatric Research Institute, will end effective Jan. 13, 2011,' Dr. Hogan wrote.

Dr. Koplewicz and Dr. Hogan both declined to comment, though neither disputed the authenticity of the letters.

This case is particularly disquieting because of Governor Cuomo's former role as a tough state attorney general who targeted white collar crime.

Summary

US health care is hugely complex. The interests of its increasingly large commercial players can be strongly affected by the actions of government at local, state and national levels.

We have previously discussed the pervasiveness of conflicts of interest throughout health care. It should come as no surprise that there are important conflicts affecting government leaders who have power over health care issues.

Although there may actually be more laws and regulations about conflicts of interest affecting government leaders than about those affecting, say, leaders of academic medical institutions, the increasingly incestuous nature of health care leadership seems to add impetus to entwine the system in ever increasing strands of conflict.

So, I humbly suggest, as a variation on a theme I have sounded before, that governmental leaders who have power over health care should put the health of patients and the population first, and should not have relationships that risk this mission in service of private gain.  Furthermore, leaders of civilian health care organizations, especially of hospitals, hospital systems and physicians' groups whose mission is also to improve care of individuals and society, should not seek to entangle government leaders in conflicts meant to serve private financial interests. 

Health Care Executives' Compensation: Head's, They Win, Tail's, You Lose

It seems to be the season for stories about the pay of health care leaders to appear in the press. Here is our latest round-up.

Novant Health

First the Winston-Salem (NC) Journal reported hefty pay received by executives of a regional hospital system:

Four of the top five executives at Novant Health Inc. received substantial salary increases during 2010, according to the health-care system.

However, the overall compensation and benefits for the top three executives were down for the fiscal year.

Paul Wiles, the chief executive and president of the not-for-profit system, got a $129,000 raise, or 14 percent, to $1,029,000 in salary. He got a bonus of $836,800, up $9,338. His total compensation was down 3 percent to a little more than $2 million.

Also,

Greg Beier, the president of Novant Health Operations, received a 15 percent salary increase to $659,000, but total compensation was down 8 percent to $1.48 million.

Carl Armato, the president of Novant Health Markets, got a 5 percent salary increase to $638,000, but total compensation decreased 3 percent to $1.26 million.

Jacque Gattis, the system's chief administrative officer, had a 19 percent salary increase to $490,000 and a 5 percent total compensation increase to $951,975.


Stephen Wallenhaupt, its chief medical officer, received a 20 percent increase in salary to $481,000 and an 8 percent increase in total compensation to $935,525.

This article made it seem that the substantial compensation received by these executives was related to the system's financial performance:

[Senior Vice President of marketing and communication Jim] Tobalski said Novant will release its fiscal 2010 financial report in April. The system likely will report a better overall performance because of the stock market's surge in 2010.

However, as reported eight days later again by the Winston-Salem (NC) Journal, there are other ways to look at these executives' compensation. First, their bonuses can be compared to those given less exalted employees:

Novant Health Inc. has paid two separate bonuses, including a one-time 'thank you' offering, to its Forsyth Medical Center employees recently, but that has not dampened the complaints of some employees that executive payments were too high.

Jeff Lindsay, the hospital's president, notified employees of the bonuses in an internal memo Feb. 28.

Lindsay's memo said the thank-you bonus was for 'efforts above and beyond the achievement of our 2010 goals.' It was worth $120 for employees who worked more than 1,500 paid hours in 2010 and $60 for those who worked 750 to 1,499 paid hours.

Novant also paid a 'discretionary' bonus ranging from $120 to $300, depending on the employee's length of service and employment status. That bonus was contingent on Novant achieving goals in quality, financial vitality, employee commitment and patient satisfaction.

By comparison, the top five executives of Novant received a combined $2.62 million in executive bonuses for 2010. The combined bonuses were up $151,713 from 2009.

Furthermore, it is not clear that the system's financial performance has been as good as its spokesman implied above:

Several Forsyth Medical employees criticized Novant's decision to pay the executive bonuses after the hospital cited financial challenges and lower demand for services in cutting 48 jobs there in July.

'How can any executive with a conscience accept a $129,000 raise and an $836,800 bonus while the company lays off employees who desperately need income to support their families?' said one posting to JournalNow.com.

So, in summary, some useful comparisons are: top executives' bonuses were approximately one-thousand times the size of those given to regular employees; and top executives' total compensation was justifed by "financial performance" during a year the system had to lay off workers due to "financial challenges."

University of Massachusetts Medical Center

The Worcester (MA) Telegram reported on the leader's compensation contrasted with the hospital's financial status:

While facing a $54 million budget shortfall for next fiscal year, the University of Massachusetts last month hiked UMass Medical School Chancellor Michael F. Collins’ salary by more than $60,000 a year — almost a 12 percent pay raise.

The three-year contract signed by Dr. Collins and outgoing University of Massachusetts President Jack Wilson on Feb. 14 raises the medical school chancellor’s annual base salary and deferred compensation from $524,300 to $585,290.

Under the deal, Dr. Collins will no longer get a separate $32,000-a-year housing allowance and instead is required to live rent-free in the furnished and remodeled Grenon House on Flagg Street. The five-bedroom, four-bathroom home has an assessed value of $736,600 and is owned by the University of Massachusetts Foundation, according to city property records.

Dr Collins' total compensation, however, will be considerably larger than his salary:

Dr. Collins, who also serves as the university’s senior vice president for health sciences, will continue to be eligible for additional performance pay of up to 30 percent of his base salary a year, which works out to $164,100 in potential performance pay in the new contract, up from $147,000 under his previous salary.

The chancellor also will continue to receive $15,000 a year for his choice of life insurance or an extended care health insurance policy, as well as supplemental retirement contributions totaling $98,000 a year — the IRS maximum for those type of retirement accounts, according to the contract and the medical school.

All together, the chancellor’s compensation package and benefits could be worth as much as $862,000 a year if he receives the maximum performance pay. That figure does not include the value of living at Grenon House.

His raise can be contrasted with those received by lower-level employees:

The chancellor’s pay hike stands in contrast to 2 percent raises negotiated late last year with some union workers at the medical school and with a previous salary freeze for all university employees earning $120,000 a year or more.

In announcing that pay freeze two years ago, Mr. Wilson noted, 'We are living at a time when few people are seeing their financial circumstances improve and most are happy to preserve what they have as we ride out the current fiscal and economic storm.'

Despite the budget short-fall, and consequent salary freezes, the criterion for the Chancellor's salary seemed to be what other top executives were getting at other organizations, even if those organizations were having better financial results:

'The university does try to set salaries for senior administrators in relation to what people are paid for discharging comparable duties at comparable institutions,' [university spokesman] Mr. Connolly said. 'In this case, Chancellor Collins would be slightly under the median salary paid at comparable institutions.'

Another university spokesman justified the Chancellor's compensation by citing his performance:

'The chancellor has a record of success in Worcester,' said [university spokesman] Mr. Keohane, who provided an eight-page medical school report titled 'Accomplishments of Michael F. Collins, MD.'

The report lists dozens of improvements to the medical school during the tenure of Dr. Collins, including items such as: leading the campaign to make the university a partner in the state’s $1 billion life sciences initiative; increasing medical school class enrollments by 25 percent; presiding over improving academic performance; growing revenue by more than 27 percent; instituting more formal performance reviews among executive staff; and improving collaboration with UMass Memorial Health Care Inc.

Oddly enough, he did not mention UMass Memorial's aggressive recruiting campaign for bone marrow donors in part implemented by "flirtatious models" that failed to disclose how the donors would be charged for their generosity as one of the Chancellor's achievements related to "improving collaboration" with UMass Memorial (see this post).

So, in summary, a budget shortfall was the justification for freezing line employees' pay, but not the Chancellor's pay, which was raised.  One rationale for the raise was that the Chancellor's pay had to be increased to keep up with pay of executives elsewhere, but the pay of line employees was not compared with such employees elsewhere.  Another rationale for the raise was a list of positive developments at the medical center, but negative developments were ignored, as were the contributions of any employees other than the Chancellor to the positive developments.

Summary: Head's, They Win, Tail's, You Lose 

Juxtaposing these two examples shows how justifications for executive compensation in health care often seem to be ad hoc, after the fact, and inconsistent with any rationale for compensation for more mundane employees.  If outcomes have been good lately, then the good outcomes may be the rationale for better executive compensation.  If the outcomes have been bad, then the executives must deserve more because they are struggling so hard under tough conditions. 

The rules for everyone else, of course, seem to be more stark. 

So, once more with feeling, as we have said before, far too often the leaders of not-for-profit health care institutions seem more interested in padding their own bottom lines than upholding the institutions' missions. They often seem entirely unaware of their duty to put those missions ahead of their own self-interest. Like the financial services sector in the era of "greed is good," health care too often seems run by "insiders hijacking established institutions for their personal benefit." True health care reform would encourage leadership of health care who understand health care and care about its mission, rather than those who see a quick way to make a small fortune.

Medical Data Breach of the Month Department: Health Net Once Again a Star in the Healthcare Renewal Theatre

I have written frequently about the breaches of electronic information security, such as at my posts:

"Networked EMR's and Healthcare Information Security: Practical When Massive IT Security Breaches Continue?"

"Networked, Interoperable, Secure National Medical Records a Castle in the Sky?"

"Operation Aurora And a Widespread Reluctance to Discuss IT Flaws: Is Universal Healthcare IT Really a Good Idea in 2010?"

Medical data breach of the week - but your EMR data is secure, trust us, we're IT experts

and others.

This latest medical information breach only affected a mere 2 million people this time.

Perhaps we should go for 20 million next time?

And then - there were substantial delays in notification (to give identity thieves time to get rich?)

Health Net Delays Notification of Data Breach Involving 2 Million People

By: Brian T. Horowitz
2011-03-16

Insurer Health Net waited until March 14 to disclose a data breach discovered on Jan. 21 involving the loss of nine server drives and the data of 2 million customers, employees and health care providers.

Health Net, a provider of health insurance to about 6 million people across the United States, has come under fire for reporting the loss of nine server drives at its data center in Rancho Cordova, Calif., nearly two months after it occurred.

More than 2 million Health Net members, employees and health care providers may have been affected by the data breach, including about 845,000 California policyholders, according to The San Francisco Chronicle. California regulators are investigating the breach, the newspaper reports.

How did this happen?

The insurer found out about the security lapse on Jan. 21, when IBM, which manages the company's IT infrastructure, informed Health Net that it was unable to locate server drives, according to a recording on Health Net's data breach hotline (855-434-8081).

These drives perhaps are of a new technology, with motorized robotic legs that allow them to walk away.

Or perhaps the drives were like this, where the round drive platter stacks perform double duty as wheels:

A "mobile" hard drive. Click to enlarge.

The drives just rolled away - to the tune of Steppenwolf's "Born to be Wild" ...

These drives were just Born to be Wild! Click to play.

Get your motor runnin' ... head out on the highway ...

The health benefits provider began its investigation at that time and learned that the nine drives included personal information for former and current Health Net members, employees and health care providers. The company didn't report the breach to the public until March 14.

Gee, thanks.

Health Net spokesman Brad Kieffer declined eWEEK's request for additional information on the breach but said, "We continue investigating unaccounted for server drives, and out of an abundance of caution we are notifying our members."

"Abundance of caution" and an almost 2-month delay do not belong in the same news story.

... "Given the size and type of data lost, this is a serious breach, and those affected should have been notified and protected immediately when IBM notified Health Net of the loss," Rob Enderle, principal analyst for the Enderle Group, wrote in an e-mail to eWEEK.

Indeed.

"While the delay was likely due to the belief that these drives were either misplaced or reused and not logged and the hope they would turn up on a maintenance rotation, the exposure to those that may have been compromised is excessive, and for an insurance company not to immediately mitigate this exposure—unforgivable," Enderle said.

"Hope/keeping your fingers crossed" and "due diligence/corporate responsibility" also do not belong in the same paragraph.

Information included names, addresses, health information, Social Security numbers and/or financial information, Health Net reports. .

All the news that's fit to print.

The Health Net breach could be the most serious health care data breach since 2008, when incidents affected 2.2 million people at the University of Utah and 2.1 million people at the University of Miami, according to the San Francisco Chronicle report.

Since 2008, eh, way back when, ancient history, when dinosaurs ruled the earth?

In May 2009, Health Net suffered another security breach in which a portable disk drive holding the medical and financial data on 1.5 million members disappeared from its Connecticut headquarters.

The portable disk drives must have robotic legs, too.

Data breach penalties for Health Net could be severe, according to Enderle.

Perhaps that's why they were crossing their fingers hoping the drives would turn up somehow?

Finally, I note that this company has also been busy in recent years making a name for themselves in the Healthcare Renewal Theatre in other ways. They're stars! See http://hcrenewal.blogspot.com/search/label/Health%20Net

-- SS

Despite Recalls, Legal Settlements, Guilty Plea, Johonson & Johnson Board Paid CEO $29 Million, Says He "Met Expectations"

For our latest story about the tremendous disconnect between the pay and performance of leaders of health care organizations, we turn to Reuters. 

Astronomical Pay

Despite having a very bad 2010, Johnson and Johnson continued to reward its CEO royally:

After a year in which Johnson & Johnson's product quality control was deemed such a shambles that the U.S. government will oversee some plants, the board had praise for Chief Executive William Weldon and awarded him almost $29 million in overall compensation.

The once golden reputation of the diversified healthcare giant was severely tarnished by seemingly endless recalls of widely used consumer products as well as recalls of medical devices and products from other units in 2010.

U.S. consumer product sales fell by more than 19 percent in 2010 and the company's 2011 forecast for earnings growth of only 1 percent to 3 percent fell shy of Wall Street projections.

Weldon's compensation was trimmed 7 percent, but in what appears to be a disconnect with the reality of its situation, J&J's (JNJ.N) board, in a year-end regulatory filing, said his performance 'generally met expectations' despite a year in which 'operational sales declined and fell below the goals for the year.'

'The board believes that Mr Weldon provided strong leadership during a very demanding year and has worked to resolve multiple challenging issues and position the company for future growth,' it said in the filing.

The rash of consumer medicine recalls in 2009 and 2010 were largely responsible for the first back-to-back years of company sales declines since World War Two.

Last week, U.S. health regulators filed a consent decree against J&J's McNeil consumer unit that will put some of its manufacturing plants under government supervision for at least five years.
The McNeil unit has recalled more than 300 million bottles and packages of Tylenol, Motrin, Rolaids, Benadryl and other products in the past year over faulty manufacturing and quality control problems.
The recalls cost the company $900 million in sales last year and hurt earnings, and Weldon was called to testify before Congress about problems that left pharmacy and supermarket shelves without Children's Tylenol.

But Weldon's 2010 compensation fell just 7 percent to $28.7 million from the $30.8 million he received in 2009. His performance bonus for 2010 was down 45 percent to $1.98 million.

The Wall Street Journal article on Weldon's pay also mentioned that Weldon also received " perquisites and other benefits in 2010 [which] included personal use of company aircraft, valued at $89,796; a car and driver for commuting and other personal transportation valued at $29,635; and a nominal amount of home security system monitoring fees."

The 2011 Johnson and Johnson proxy statement also noted that the other four of the five most highly paid Johnson and Johnson executives received compensation valued from $5,632,285 to $8,851,965 in 2010. In particular, Ms Colleen A Goggins, who retired under fire as head of the embattled Johnson and Johnson consumer group, walked away with $7,738,614 in 2010.

Other Aspects of Bad Company Performance

The WSJ Health Blog has been keeping an eye on the running total of Johnson and Johnson recalls. On 9 March, 2011, the list included 18 separate recalls of various different drugs and devices since July, 2009, from over-the-counter cold medications to sutures and hip replacements.

While suffering such a massive breakdown of the ability to perform the company's most basic function, to supply pure, unadulterated medicines and well-made devices, the company has also suffered from ethical lapses which were not listed in the Reuters article. In 2010, these included a jury verdict that the company had committed marketing fraud in its promotion of the atypical anti-psychotic drug Respirdal (see post here), and a guilty plea to a misdemeanor for and civil settlement of charges of "misbranding" Topamax by Johnson and Johnson subsidiary Ortho-McNeil-Janssen Pharmaceuticals (see post here).

Of course, we once speculated that the Johnson and Johnson CEO commanded such astronomical pay in part based on his ability to influence US government health policy in favor of his and his company's interests (see this post).

Who Made Up the Board Who Was Responsible?

Responsible for the astronomical amounts paid to Mr Weldon despite his company's ongoing inability to make pure, unadulterated medicines, and to other executives who presided over the company's recalls, guilty plea, and legal settlements was the company's board of directors.  Its members are listed below.  For explanation of the color coding, see the explanation below:

• Mary Sue Coleman - President, University of Michigan.
• James G Cullen - Retired Chairman and CEO, Bell Atlantic Corp
• Ian E L Davis - Senior Advisor, Apax Partners; Former Chairman and Worldwide Managing Director, McKinsey & Company, non-executive director, BP plc
• Michael M E Johns - Chancellor, Emory University, Past Chair of the Council of Teaching Hospitals, member of the editorial board, JAMA, chair of the publication committee, Academic Medicine
• Susan L Lindquist - Member and Former Director, Whitehead Institute for Biomedical Research, Co-Founder of FoldRx Pharmaceuticals, Inc, a subsidiary of Pfizer Inc.
• Anne M Mulcahy - Former Chairman and CEO, Xerox Corp, director of the Washington Post Company, previously director of Citigroup Inc, and Federal National Association (Fannie Mae)
• Leo F Mullin - Retired Chairman and CEO, Delta Airlines, director of Education Management Corporation
• William D Perez -Senior Advisor, Geenhill & Co, Inc, Trustee of Cornell University and Northwestern Hospital
• Charles Prince - Senior Counselor, Albright Capital Management LLC, Retired Chairman and CEO, Citigroup
• David Satcher - Director, Center of Excellent on Health Disparities, Director, Satcher Health Leadership Institute and Poussaint-Satcher-Crosby Chair in Mental Health, Morehouse School of Medicine, and trustee of the Kaiser Family Foundation

Of Johnson and Johnson's 10 directors (excluding its CEO), four have leadership positions at teaching hospitals, academic medical centers, medical schools or their parent universities.  Of these, two also had leadership positions at other influential non-profit health care organizations, including medical journals, a teaching hospital association, and a charitable foundation.

One had a management position at a competing pharmaceutical company.

Four had leadership positions in  financial services corporations, including some that were implicated in the global financial collapse, and/or required massive federal bail-outs to avoid collapse.

Three had had leadership positions in other organizations now under fire , that is, McKinsey, for the role of one of its former executives in an alleged insider trading scandal (e.g., latest coverage in the NY Times); several for-profit higher education companies caught up in allegations of luring students destined to fail in order to collect tuition funded by government loans;  and BP, under investigation for its role in a massive oil spill.

Summary

So here we have the latest striking case that indicates the confluence of forces that can lead to health care dysfunction.  Not only has the compensation given to health care leaders got so large that it is per se a cause of increased health spending, but also, and more importantly, such compensation often provides perverse incentives that perpetuate mismanagement, raising costs and lowering quality.  This situation appears to be enabled by governance by individuals who are often fellow members of the CEOs' club, and hence who may feel more sympathy with the executives they are supposed to supervise than the stockholders whose financial interests they are supposed to protect, or the public whom the companies' products and services are supposed to benefit.  Moreover, these individuals often have conflicts of interest which may mitigate against objective scrutiny of the executives they are supposed to oversee.  Finally, these individuals often may come from corporate cultures which do not espouse the values that we in health care are supposed to uphold.  (See this post and its links for other examples of the sorts of people who are supposed to provide stewardship to health care organizations.)

So to repeat once more-

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

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

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

ADDENDUM (17 March, 2011) - Also see comments on by Jim Edwards on the Placebo Effect blog: "heads he wins, tails shareholders lose," as do patients and doctors.