The Corporate Physicians' Dilemma - Three Hospital Systems Settle Cases Alleging Pressure on Employed Physicians to Refer Patients Within the System

Physicians are sworn to provide the best possible care to each individual patient.  Yet in the US, physicians increasingly practice as employees of large organizations, sometime for-profit corporations.  Physicians may be in a bind when their bosses pressure them to make patient level decisions so as to increase revenue, regardless of their effects on the patients.

In particular, physicians' oaths may suggest that patients who require referrals for consultation, diagnosis or treatment should go to the professionals and facilities best suited to their particular problems.  However, physicians bosses may want physicians to refer patients within their organizations.

Three recent cases illustrate this sort of bind for corporate physicians.  All cases involved large monetary settlements by hospital systems of allegations that they paid physicians incentives to refer patients within the system, apparently without regard to patients' needs.  They are discussed in roughly   chronological order of media coverage.

Broward Health  (North Broward Hospital District)

The reports of the settlement appeared in mid-September, 2015.

The Actual Settlement

According to the Miami, FL, Sun-Sentinel,

Broward Health, the taxpayer-financed system of hospitals and health care facilities, will pay $69.5 million to settle federal charges that it made illegal payments to staff physicians, using a secret compensation system that rewarded doctors for patient referrals and penalized them for accepting charity cases.

In addition, according to the Miami Herald,

Broward Health Chief Executive Dr. Nabil El Sanadi signed a 46-page Corporate Integrity Agreement with the Department of Health and Human Services (HHS) that requires the district to establish a compliance program. Among other things, the agreement imposes new duties on both commissioners and staff to monitor, report and certify that its financial arrangements with physicians and vendors meet federal requirements.

Note, however, that the Adventist system admitted only to "oversights."

Physicians' Incentives

According to the Sun-Sentinel, the filing by whistle-blower Dr Michael Reilly stated,

the hospital district maintained secret compensation records called Contribution Margin Reports for cardiologists, oncologists and orthopedic surgeons, who collected salaries of $1 million and higher. These records rewarded physicians for referrals to hospital services, such as radiology and physical therapy, and penalized them for taking on low-paying charity cases. Tying compensation to referrals could raise medical costs by generating unnecessary work and could compromise patient care, the lawsuit stated.

In one case, the lawsuit stated, orthopedic surgeons expressed concern about the quality of the hospital district's radiology and MRI services and tried to refer patients to outside providers. But they were pressured by the district's financial officials to keep the referrals within the district.

'Broward Health's scheme to overcompensate physicians in exchange for referrals over the last eight years has been a deliberate strategic plan to boost hospital admissions and outpatient visits for all paying patients, including patients with Medicare and Medicaid coverage,' the lawsuit states. 'Broward Health's financial strategists have personally profited from bonus payments based in part on hospital revenues.'

Furthermore, according to a later Sun-Sentinel article,

The title of medical director brought salary increases to several cardiologists at Broward Health, topping off pay packages that often went north of $1 million.

But according to a whistleblower's lawsuit that led to a $69.5 million settlement with the federal government this week, these doctors did little work for their extra compensation from the tax-supported hospital system.

The medical directors' contracts provided hourly compensation for work done in that position and required them to submit time records. One physician counted his personal exercise routine as his medical director's time, according to the lawsuit. Another double-dipped by counting time spent performing medical procedures that would have been performed anyway. Such 'medical director' jobs, the lawsuit said, were 'largely sham arrangements designed to boost physician compensation with little or no substantive work required in return.'

 Failure of Oversight

Also according to the Sun-Sentinel,

Reilly said he first learned of the compensation agreements when he considered taking a job with the district. When his lawyer saw the proposed contract, he told him to tear it up and stay away from such compensation schemes.

He said he brought up the issue in two public meetings and in a private conversation with the district's then-CEO, and was brushed off. He blamed 'the ignorance that made them interpret the law to fit their financial interests and the arrogance to think they could get away with it.'

Adventist Health System

This case came to light a few days later, as reported by the Orlando Sentinel, and was conceptually similar,

The Actual Settlement

In what's considered one of the largest health-care-fraud settlements involving physician referrals to hospitals, Adventist Health System is paying the U.S. government and four states, including Florida, a $118.7 million settlement.

A large portion of the settlement amount — $47 million — is based on allegations involving Florida Hospital Medical Group, which is owned by Adventist, and nearly three dozen Florida Hospitals in the state. That includes the Florida Hospitals in Orlando, Altamonte, Apopka, Celebration, east Orlando, Kissimmee and Winter Park.

Physicians' Incentives

Again from the Orlando Sentinel,

The complaints allege that Adventist initiated a corporate policy that directed its hospitals to purchase physician practices and group practices or employ physicians in their surrounding areas in order to control all patient referrals in those locations.

'To convince doctors to sell their practices to Adventist hospitals or to become hospital employees, Adventist hospitals allegedly provided excessive compensation, perks and benefits to the physicians,' according to the Phillips & Cohen complaint. 'The hospitals were willing to pay doctors more compensation than considered fair market value and absorb persistent losses in those deals because of the revenue the doctors' stream of referrals generated for Adventist from government healthcare programs and elsewhere.'

The complaint listed a number of ways Adventist allegedly rewarded doctors, including leasing a BMW and a Mustang for a surgeon; a $366,000 base salary for a family physician because of his high level of referrals for X-rays and blood tests; and a bonus of $368,000 for a dermatologist who worked only three days a week.

 To conceal this and avoid refunding payments, the health system then falsely said that the services identified in its annual cost reports were in compliance with the federal law, the lawsuits allege.

Failure of Oversight

Sherry Dorsey, who joined Adventist in 2012, was a corporate vice president whose responsibilities included oversight of physician compensation, and she found widespread problems with how the nonprofit health system compensated doctors who referred patients to Adventist hospitals, according to a statement by Marlan Wilbanks of Wilbanks & Gouinlock in Atlanta who represented Dorsey.

She complained to top health-system officials 'to no avail,' said Wilbanks.

More details  about the goings on at the local Adventist owned Park Ridge Hospital were reported by the Asheville (NC) Citizen-Times,

Hospital executives knew about serious billing and miscoding problems on Medicare and Medicaid cases, as well as overcompensation of doctors, and one executive even expressed concerns about possible jail time, terming as 'insane' the amount of money Park Ridge would owe the federal government if overbilling came to light.

Tuomey Healthcare System

This case has been in the works for years, but an apparently final outcome was announced in October, 2015.

The Actual Settlement

 As reported by the Charleston (SC) Regional Business Journal,

The Justice Department said it has resolved a $237 million judgment against Sumter-based Tuomey Healthcare System for illegally billing the Medicare program for services referred by physicians with whom the hospital had improper financial relationships.

Under the terms of the agreement, the United States will receive $72.4 million....

Unlike the other two cases, this one involved a jury finding of guilt,

On May 8, 2013, after a month-long trial, a South Carolina jury determined that the [hospital's contracts with physicians]  ... violated the Stark Law. The jury also concluded that between 2005 and 2009 Tuomey had submitted 21,730 false claims to Medicare with a total value of $39,313,065.

On Oct. 2, 2013, the district court trebled the actual damages and assessed an additional civil penalty under the False Claims Act in favor of the United States for a total of $237 million.

The United States Court of Appeals for the Fourth Circuit affirmed the judgment on July 2.

Having to pay the $237 million fine would force it to file for bankruptcy, Tuomey officials said.

The Physicians' Incentives

 The case arose from a lawsuit filed on Oct. 4, 2005, by Michael K. Drakeford, an orthopedic surgeon who was offered, but refused to sign, one of the illegal contracts.

So,

 The government argued that Tuomey, fearing that it could lose lucrative outpatient procedure referrals to a new freestanding surgery center, entered into contracts with 19 specialist physicians that required the physicians to refer their outpatient procedures to Tuomey and, in exchange, paid them compensation that far exceeded fair market value and included part of the money Tuomey received from Medicare for the referred procedures.

Failure of Oversight

The government argued that Tuomey ignored and suppressed warnings from one of its attorneys that the physician contracts were 'risky' and raised 'red flags.'

Summary

In the US, physicians increasingly practice medicine as employees, often of large organizations, rather than as individual professionals or within professional groups.  Such employed practitioners must answer to leaders who are now usually generic managers rather than health care professionals.

In three recent legal cases, there was evidence that a hospital system provided financial incentives for employed physicians to refer patients within the system, apparently without regard to the appropriateness of such referrals to individual patients.  In several cases, hospital management ignored physicians' protests, or lawyers' or even their own middle managements' warnings.  In one case, hospital middle managers seemed to acknowledge the problematic nature of physician's incentives, but seemed powerless to protest to higher managers.   In one case, there was a jury finding of violation of US law.

These three cases, all announced within a few weeks, suggest that US hospital system management may frequently push employed physicians to keep referrals within the system , regardless of  individual patients' conditions or needs.  The reason may be to increase system revenue, and sometimes to increase the managers' own compensation.

This is another reason to think that the corporate practice of medicine, which was once banned in the US, is an increasing threat to physicians' values and an increasing cause of health care dysfunction.

Dr Arnold Relman reminded us that physicians used to shun the commercial practice of medicine (look here).  Physicians and other health professionals who sign on as full-time employees of large corporate entities have to realize that they are now beholden to managers and executives who may be hostile to their professional values, and who are subject to perverse incentives that support such hostility, including the potential for huge executive compensation. 

Neoliberals promised us that treating health care like a business, and an unregulated one at that, would lead to a new golden age.  The age has been golden, but mainly for the top managers of corporate medicine. 

The recent flurry of cases alleging that corporate physicians may be pushed by management into inappropriate referrals to make more money for their employees is another reason to rethink whether corporate practice of medicine should again be banned

2:14 PM

You Can Check Out Any Time You Like, But You Can Never Leave - Duke and UNC Allegedly Agreed Not to Hire Each Other's Faculty

We have intermittently discussed the worsening plight of physicians trying to provide clinical care as employees of large organizations.  Such corporate physicians are likely to be squeezed between professional values that put the patient first, and management that puts revenue first.   Physicians employed by large corporations may find their values increasingly at risk as these organizations adapt the tactics of the robber barons.

Now it appears that even ostensibly genteel academic medical institutions may be adapting these tactics.

Allegations of Anti-Competitive Faculty Employment Practices at Duke and University of North Carolina Medical Schools


The story first appeared with little fanfare in the (Duke) Chronicle in June.  An assistant professor at the UNC School of Medicine was interested in a position, also at the assistant professor level, at nearby Duke.

[Dr Danielle] Seaman had been in email communication with UNC’s Chief of Cardiothoracic Imaging beginning in 2011, when she expressed interest in a radiology position at the UNC School of Medicine, and the chief of the division encouraged her to apply, the case file describes. In 2012, Seaman was invited to visit the campus and toured the radiology department at UNC.

However,

When Seaman expressed interest in the assistant professor position again in early 2015, however, the chief responded in an email by saying he had just received confirmation that 'lateral moves of faculty between Duke and UNC are not permitted' as per a 'guideline' set by the schools’ deans.

In a later email, the chief also described to Seaman the reason the agreement was created—Duke had tried several years ago to recruit the entire bone marrow transplant team from UNC, and UNC was forced to pay them a large retention package to keep them.

Both emails are included in the filing by Dr Seaman's lawyers.


Imagine the nerve of medical faculty thinking they should be paid more by the current employer because another institution was willling to recruit them and pay them that much.
 
An Agreement Comfortable for the Deans, but Disadvantageous for Their Faculty

An August article in the Chronicle suggested that the top leaders of the two medical schools felt that the "no-poaching" agreement was mutually beneficial. 

According to the case file, Seaman became aware of the policy earlier this year, but the UNC chief of cardiothoracic imaging—who is unnamed in the file—believed the policy had been in place for several years after Duke had previously tried to recruit the entire bone marrow transplant team from UNC.

'The general rule was that we didn’t recruit there and they didn’t recruit at Duke—it certainly was in the years I was in the administration,' said John Burness, former senior vice president for public affairs and government relations from 1991 to 2008. 'I don’t know if it’s ever been a formal agreement, but it’s certainly been a practice over a long period of time.'

Burness—now a visiting professor of the practice in the Sanford School of Public Policy—noted that he could not recall an instance in which a faculty member from UNC was recruited to Duke during Nannerl Keohane’s tenure as president of the University from 1993 to 2004. Keohane also confirmed that during her time as president the University avoided poaching of UNC faculty.

Also,

'The question of whether Duke and UNC [or N.C. State] should attempt to recruit faculty from the other campus was always somewhat delicate,' Keohane, now Laurance S. Rockefeller distinguished visiting professor of public affairs at Princeton University, wrote in an email.

The Chronicle found a Duke Law professor who provided a comfortable rationale for the agreement between the two schools,

Despite the case file’s claims that such a policy is detrimental to faculty from both schools, Clark Havighurst—a former professor in the Duke University School of Law who taught healthcare policy and antitrust law for more than 40 years—also believes that this agreement would be beneficial to both institutions in the long run.

'You’d probably find relatively few instances where Duke and Carolina have poached each other’s faculty,' Havighurst wrote in an email. 'This is probably a matter of mutual restraint as much as explicit agreement, however, as each school or department would hesitate to irritate the faculty at the neighboring institution, thus undermining collegial and personal relations that are undoubtedly beneficial to each.'


What the soothing words about mutual benefit and collegiality leave out is that while the school administrations benefit from less disruption, they also likely benefited by being able to pay their faculty, especially junior faculty less. As Dr Seaman argued in her filing, as per the June Chronicle article,

The suit—filed June 9 in the United States District Court for the Middle District of North Carolina—contends that the no-hire agreement had the “intended and actual effect” of suppressing competition and employee wages, therefore violating federal and state anti-trust laws.

An Aside, the Non-Poaching Agreement Defended by One of the Key Advocates for Market Fundamentalism in Medicine

As an aside, Professor Havinghurst turns out to be one of key architects of the transformation of the US health care from a regulated system emphasizing health care provided by individual professionals and small non-profit institutions to our current laissez faire commercialized system.  It is more than ironic that while Prof Havinghurst now scoffs at applying anti-trust law to alleged collusion by big employers, per M Gregg Bloche in the Stanford Law Review(1),

Since the mid- 1970s, market-oriented scholars have challenged a broad range of legal principles previously assumed to sustain the trustworthiness of physicians and health systems. Doctrines shielding physicians from antitrust law, insulating them from insurers' and hospitals' influence over clinical practice, and reinforcing the precept of undivided clinical loyalty to patients came under attack as protection for the medical profession at consumers' expense. These scholars, including Clark Havighurst, Richard Epstein, and Mark Hall, urge contractual ordering of clinical standards of care; relationships among physicians, hospitals, and health care payers; and physicians' conflicting obligations to patients, payers, and other third parties.

Again, Havinghurst appears to have been one of the principal, if not the principal advocate to use anti-trust law against small groups of physicians, and against the notion that physicians can promulgate their own codes of ethical conduct.  In an introduction to an article by Havinghurst in Health Affairs in 1983.(2)

For a decade or more, Clark Havighurst has been a philosophical thorn in the side of organized medicine, preaching a view of the health sphere that rejects decision making by professional self-regulation in favor of a system based on marketplace principles.

Note that in retrospect, this article seemed to stake out Health Affair's position as an important organ to promote market fundamentalism in health care. 

How convenient that Prof Havinghurst is still affiliated with Duke and in a position to defend his university's treatment of other faculty.


I urge you to scan Health Care Renewal to see how the change from professional self-regulation of ethics to the free rein of the laissez faire marketplace turned out. Look here for our first reporting on the late Dr Arnold Relman's discussion of how medicine was pressured to accept commercialization, and how that acceptance has since decimated our core values.  Look here for our discussion of the fallacy of the perfect market in health care.  Look here for a rebuttal from an authority we do  not often quote of the concept of health care as a commodity versus a calling. 

Summary

Note that the outcome of the lawsuit against Duke and UNC is unknown.  The allegations it makes are not proven.  However, I chose to discuss it because the evidence, particularly the emails reproduced in the court filing, seems pretty strong that the two schools did have an actual agreement not to compete in the hiring of faculty, and the argument that his suppressed faculty wages and opportunity is prety strong and obvious.

Academic physicians, particularly at elite institutions, may feel they are in a rarefied atmosphere separate from the hurley burley or everyday health care.  They may feel they are protected from, and can even ignore the health care dysfunction we discuss on Health Care Renewal.  They certainly may not think of themselves as "wage slaves" from the era of trusts, monopolies, and robber barons.

But this case exhibits that academic medical institutions are getting closer to the ruthless world of poorly regulated, commercialized, market fundamentalist health care.  Talk about collegiality is nice, but it seems pretty clear that the "non-poaching" agreement between Duke and UNC may have reflected collegiality among top medical school leadership, but limited their faculty salaries and individual faculty members' choices and opportunities.  This seems like another example, however soft spoken and genteel, of the leaders of health care organizations putting the interests of their own ingroup ahead of the interests of the larger organizations and the mission they are supposed to serve.

It is time for even academic physicians to realize that they are not protected from the troubles of the larger world.  If they truly believe in their professional values, if they really care about patients' and the public's health, and about medical and health care science and education, they will have to start speaking up, or they will end up wage slaves of the new health care robber barons along with nearly everyone else.   

To lighten things up at the end, the Eagles doing Hotel California live in 1977 -



"We are all prisoners here, of our own device"

References
1.  Bloche MG. Trust and betrayal in the medical marketplace.  Stanford Law Review 2002; 55: 919-954.  Link here.
2.  Havinghurst C. The doctors' trust.  self-regulation and the law.  Health Affairs 1983; 2: 64-76.  Link here.

12:11 PM

More Barbarians at the Gates: Private Equity Puts Primary Care in Play

There are still some idealistic physicians who enter primary care practice as a calling.

The usual informal definition of primary care is care which is continuous, coordinated, comprehensive and compassionate.  The official definition used by the American Academy of Family Physicians (AAFP) is:

Primary care is that care provided by physicians specifically trained for and skilled in comprehensive first contact and continuing care for persons with any undiagnosed sign, symptom, or health concern (the 'undifferentiated' patient) not limited by problem origin (biological, behavioral, or social), organ system, or diagnosis.

Primary care includes health promotion, disease prevention, health maintenance, counseling, patient education, diagnosis and treatment of acute and chronic illnesses in a variety of health care settings (e.g., office, inpatient, critical care, long-term care, home care, day care, etc.). Primary care is performed and managed by a personal physician often collaborating with other health professionals, and utilizing consultation or referral as appropriate.Primary care provides patient advocacy in the health care system to accomplish cost-effective care by coordination of health care services. Primary care promotes effective communication with patients and encourages the role of the patient as a partner in health care.

Private Equity Firms are Buying Out Primary Care Practices

However, an article this week in Modern Healthcare described how primary care in the US is getting a rude surprise.  Apparently, primary care practices are now "in play," (using the terminology for the classic 1987 movie Wall Street, in which Gordon Gekko declared that greed is good).



The argument was that there is

a small but growing number of investments that private-equity firms are making in primary-care physician practices that are ahead of the curve in offering new care delivery and payment models. Investors see an opportunity in being early participants in value-based care, even as the business case is still unclear given mixed results in Medicare's payment and delivery reform demonstrations so far.

But the niche is well-suited for private-equity firms, which feed on uncertainty, said Todd Spaanstra, a partner at Crowe Horwath, an accounting and consulting firm. 

This is not about quality of care, it is about the idea that business people think that "value-based care" and "risk-based contracting" are the current rages, and so there is money to be made investing in entities that seem to fit in with these fashions.

said Slava Girzhel, managing director at KeyBanc Capital Markets. 'There's a lot of discussion about private-equity investing in risk-based models, and I do think we'll see more of that.'

Continuous, coordinated, comprehensive and compassionate care may suffer when the time horizons are not that long, and the owners of the practice are ultimately looking to sell it. 

The long-term opportunity for private-equity firms is the ability to sell these managed-care-savvy medical groups to insurers or health systems, which may pay a premium for the care-coordination expertise and data analytics these practices offer.

Also,

The typical private-equity investment timetable is short—about five years. At that point, the firm would probably look to sell the practice, ideally to an insurance company or a health system, said Dan Hosler, a principal at private-equity firm Sterling Partners.

Furthermore, why private equity may be interested in primary care now, continuing interest will depend on the numbers, not on the benefits to patients

'This is an area where there are winners and losers,' said Dr. Andrei Gonzales, director for value-based reimbursement initiatives at McKesson Health Solutions. 'It's everyone trying to get a slice of the pie that's getting smaller.'

What Happens When the Barbarians are at the Gate

Conspicuously absent from this article was discussion of aspects of the private equity modus operandi which are even more at odds with primary care values than the short time horizon noted above.  We previously warned about the perils of private equity employing physicians (look here.)  The main points were:

-  Private equity is just the new name for leveraged buyout firms (the type of firm described the book, Barbarians at the Gate.)

-  Therefore, when they buy out firms (e.g., the primary care practices discussed above), they use borrowed money.

-  But they leverage in two senses.  Once firms are bought, the private equity owners makes the firms take out further loans, and the money from them may go back to the owners, usually in the form of a special dividend, to pay down the debt originally incurred by the private equity owners.  This leaves the bought out firms heavily in debt, but frees the private equity firm from its original debt.  If the firm is eventually sold, the new buyers take over the debt.  In a worst case scenario, however, the bought out firm goes bankrupt, the private equity's firm stock in it becomes worthless, but the private equity firm need not be responsible for its financial obligations.

-  If the private equity firm desires more money while it still owns the acquired firm, it may sell parts of it off.

-  To make the finances of the acquired firm look more attractive to the next buyer, the private equity firms often undertakes short term cost cutting measures that may involve layoffs, increased workload on remaining workers, etc.

Other dark aspects of private equity are discussed on the Naked Capitalism blog here.

Summary

Primary care physicians thinking about selling their practices to private equity ought to think at least twice before doing so, assuming the physicians are serious about upholding the values of primary care.  Private equity firms are in it for the money, and in the relatively short term.  Private equity firms are unlikely to care about the mission of primary distinct from the ability of primary care practices to make the firms richer.  Therefore, practices owned by private equity may well not provide the best possible care for their patients.  In any case, the physicians working for such practices may be answering to owners who are very explicitly only in it for the money.  They will have become corporate physicians, possibly in the most pessimistic sense of the term.

In general, Dr Arnold Relman reminded us that physicians used to shun the commercial practice of medicine (look here).  Physicians and other health professionals who sign on as full-time employees of large corporate entities have to realize that they are now beholden to managers and executives who may be hostile to their professional values, and who are subject to perverse incentives that support such hostility, including the potential for huge executive compensation.  It is not clear why physicians seem to be willing to sign contracts that underline their new subservience to their corporate overlords, and likely trap them within confidentiality clauses that make blowing the whistle likely to lead to extreme unpleasantness.

Things are likely to be even worse for corporate physicians who are employed by firms owned by private equity. Because of the way private equity operates, primary care practices owned by such firms are liable to be very unstable.  At best, they are liable to be sold to totally new owners in a relatively short time frame, and those owners are likely to be those who will pay the highest price, not necessarily those who will provide the best stewardship for the practices.

Furthermore, primary care practices owned by private equity are likely to end up heavily indebted and subject to strict cost cutting measures that may decrease care quality, decrease access, increase patients' out of pocket costs, and demoralize providers.  Practices acquired by private equity may be broken up and sold as separate pieces.  Should the debt be too high, and the cost cutting not be sufficient, such practices could end up bankrupt and possible completely defunct. 

Do not say I did not warn you.

Physicians need to realize that to fulfill their oaths to put patients first, they have to reduce the influence of rich and powerful organizations with other agendas, like health care corporations, and especially corporations owned by private equity.  The metastasis of private equity into primary care should make us all rethink the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

ADDENDUM (28 April, 2015) - This post was re-published on the Naked Capitalism blog.  

7:24 AM

Timing Discharges to Maximize Revenue - "Corruption" of Corporate Long-Term Hospitals?

A recent Wall Street Journal article that focused on a quirk in US Medicare payment rules that may be gamed by long-term hospitals also revealed the plight of physicians employed by such hospitals, and worse, the danger posed by such gaming to patients.

Discharging Patients at Particular Times Maximizes Hospital Revenue

Here is how the rule works:

Under Medicare rules, long-term acute-care hospitals like Kindred’s typically receive smaller payments for what is considered a short stay, until a patient hits a threshold. After that threshold, payment jumps to a lump sum meant to cover the full course of long-term treatment.

That leaves a narrow window of maximum profitability in caring for patients at the nation’s about 435 long-term hospitals, which specialize in treating people with serious conditions who require prolonged care.

Systemic Evidence that Discharges are More Likely to Occur at Times that Maximize Revenue

Thus the Medicare rules provides financial incentives for discharging patients at particular times during their admissions. The reporters found some systemic evidence that patients were more likely to be discharged at those times:

The Journal analysis of claims Medicare paid from 2008 through 2013 found long-term hospitals discharged 25% of patients during the three days after crossing thresholds for higher, lump-sum payments. That is five times as many patients as were released the three days before the thresholds.

The issue here is that the decision to discharge a patient from any kind of hospital should be made by health care professionals and their patients, sometimes with the input of the patients' families. The decision should depend on the patients' medical status, the availability of follow-up care, and the patients' wishes and values. Hospital managers should have no direct influence on these decisions. So why would patient discharges occur more often at the times when they are most financially advantageous for the hospitals?

An Illustrative Case

The Wall Street Journal article opened with an illustrative anecdote.

A Kindred Healthcare Inc. hospital in Houston discharged 79-year-old Ronald Beard to a nursing home after 23 days of treatment for complications of knee surgery.

The timing of his release didn’t appear to correspond with any improvement in his condition, according to family members. But it did boost how much money the hospital got.

Kindred collected $35,887.79 from the federal Medicare agency for his stay, according to a billing document, the maximum amount it could earn for treating most patients with Mr. Beard’s condition.

If he had left just one day earlier, Kindred would have received only about $20,000 under Medicare rules. If he had stayed longer than the 23 days, the hospital likely wouldn’t have received any additional Medicare money.

Furthermore,

Between mid-2011 and the end of 2013, the Kindred hospital that treated Mr. Beard discharged eight times as many Medicare patients on the day they reached their threshold as on the day before. In the days immediately after the lucrative three-day window, discharges plummeted. Kindred acquired the hospital, which has two campuses, in the summer of 2011.

Mr. Beard, a retired drilling-equipment salesman, was discharged from Kindred’s facility on Nov. 12, 2011. His family says his condition had deteriorated at the hospital and they wish he had been released sooner.

Mr. Beard was admitted to Kindred Hospital Town and Country in Houston in late October 2011 after surgeons found the site of an earlier knee surgery had become infected with drug-resistant bacteria called MRSA. He was sent to the Kindred facility that Oct. 20 for a course of antibiotics, according to the records and Ms. Beard.

On his fourth day at the Kindred hospital, nurses administered the drug Remeron to treat sleeplessness. Mr. Beard’s wife says he had an allergy to that drug—documented at the time on a wristband provided by another hospital—and he went into a coma for a time.

'I wished then that I could take him somewhere else,' says Ms. Beard, now 77 years old.

Over the next two weeks, Mr. Beard’s condition deteriorated as he received treatments from a dozen doctors. A Medicare document provided by his wife shows he received an hour and a half of 'critical care' services on Nov. 9, three days before Kindred discharged him.

When he left the facility in a transport van on Nov. 12, bound for a nursing home, he complained of nausea, his wife says. The van driver called for an ambulance from a gas station. The ambulance took him to the emergency room at a general hospital in Katy, Texas.

Ms. Beard says doctors determined that, aside from low blood pressure, he was stable. She drove him to the nursing facility herself, but because Kindred’s discharge papers had been left behind in the van, the nursing facility declined to accept him. He wound up back at the Katy hospital to begin an additional three-day hospitalization, where doctors performed tests to monitor an existing heart condition, the billing documents show.

Ms. Beard says she doesn’t regret that her husband left Kindred’s hospital when he did, despite the chaos of those days. 'I think if he had stayed at Kindred, he would have laid there and died,' she says.

Note that Mr Beard was apparently discharged during the window of maximum revenue for the hospital, but there was no obvious medical reason for his discharge on that particular day.

Evidence that Hospital Managers Pressure Health Care Professionals to Discharge Patients at Times that Maximize Revenue

The WSJ statistical analysis suggested that Kindred and other for-profit long-term hospital corporations are particularly prone to discharge patients at times that maximize revenue.

For-profit companies such as Kindred and Select were more likely to discharge patients during the most-lucrative window than nonprofit competitors, the Journal’s analysis shows. Nonprofits discharged 16% of people during the window, compared with 27% at for-profits.

The WSJ also found evidence that managers at two for-profit long-term hospital systems pushed health care professionals to discharge patients at the most profitable times.

Former long-term-hospital executives say they sometimes called the threshold the 'normal low' or 'five-sixth date,' referring to the Medicare formula. The Journal interviewed 16 people who have worked at facilities operated by Kindred or rival for-profit system Select Medical Corp. in 10 states, including former hospital administrators, doctors and case managers who oversaw discharges. Those two publicly traded companies billed Medicare for 42% of all long-term-hospital claims it processed during the period the Journal studied.

The former administrators say their corporate bosses exerted pressure to discharge as often as possible during the most lucrative days, rewarding managers who succeeded and questioning those who didn't.

'You’d hear from the powers that be if your hospital was not…hitting a pretty high percentage of your patients for Medicare' soon after the payment threshold, says Karen Shammas, who was chief executive of a Kindred hospital in Peoria, Ariz., until late 2013, when she retired.

Ms. Shammas, like some other long-term-hospital administrators who were interviewed, described meetings in which hospital staffers would discuss plans for each patient at the facility—armed with printouts from a computer tracking system that included, for each patient, the date at which reimbursement would shift to a higher, lump-sum payout.

Ms. Shammas says she never kept patients hospitalized for financial reasons if they were medically ready to leave.

Kindred declined to comment in detail on discharge patterns or corporate policies.

Former executives at both Kindred and Select say doctors, pressured by hospital administrators, sometimes ordered extra care or services intended in part to retain patients until they reached their thresholds, or discharged those who were costing the hospitals money regardless of whether their medical conditions had improved.

Former executives at hospitals run by each chain say their bonuses depended in part on maintaining a high share of patients discharged at or near the threshold dates to meet earnings goals.

In some cases, their bosses gave them specific targets for discharge rates during the most lucrative days, the former hospital executives say. When they missed their targets, some of the executives say, their bosses asked for explanations as to why individual patients weren’t released during the target window.
\
Select said in a written statement that its long-term hospitals discharge patients 'based on their medical condition and not on the Medicare reimbursement system' and 'do not manipulate discharge timing based on financial considerations.' The company said bonuses are based on 'overall financial performance,' among other factors, and not the share of patients discharged near the threshold.

Select’s corporate managers were 'very intense about managing that length of stay really effectively to maximize the profit potential for any particular patient, says Robert Marquardt, former CEO of a Select hospital in Fort Wayne, Ind.

If a patient was two days from the threshold, 'you were incentivized to see if you couldn’t find a reason to keep them for two more days,' says Mr. Marquardt, who left the company in December to work as a consultant.

Mr. Marquardt says he didn’t believe the efforts caused harm. 'You might play the game a bit, but you would never put a patient at risk,' he says.

Select said while it monitors discharge dates and other metrics and seeks to understand deviations from norms, it doesn’t set discharge targets. It said efforts to prolong a patient’s stay or discharge a patient early would be a violation of Select’s policies.'

So the WSJ article presented statistical analysis that patients are more likely to be discharged on the days that are most advantageous from the standpoint of hospital revenue than on other days.  The WSJ  article also presented narratives by several people that suggest that top managers gave incentives to lower level managers to maximize the number of discharge on the most financially advantageous days, and that managers tried to directly influence physicians, presumably those employed by the hospital systems, to discharge patients on the most financially advantageous days.

The Private Gain of Mangers of Long-Term Corporate Hospital Systems

I do not know a way to determine how much money Kindred and Select may have made from the practice of timing long-term hospital discharges for maximum revenue, but there is certainly evidence that the top managers of these corporations do very well.

Based on the most recent available (2014) proxy statement from Kindred, its CEO, Paul J Diaz, received $4,303,072 in 2013, and all listed managers received more than $1 million that year. Based on the most recent available (2014) proxy statement from Select Medical Holdings Inc, its CEO, Robert A. Ortenzio, received $3,557,860 in 2013, and its executive chairman, Rocco A Ortenzio, received $2,701,916 in 2013, and all listed managers more than $1.5 million that year

Revenue Maximization as "Corruption"

The WSJ reporters interpreted their findings as "a sign that financial incentives in the Medicare system may shape patient care."  It thus implied that a reasonable policy response to this problem would be to change the  Medicare rules for paying for long-term care.  However, left unwritten was that only in a health care system in which managers feel that short-term revenue may trump the best interests of patients, and in which managers are empowered to influence, if not override physicians' decision-making would such financial incentives have any major effect.


The WSJ article did include an expert's opinion that it was unethical, or worse, for hospital managers to pressure physicians to discharge patients at times that maximized revenue, rather than times that were optimal for the patients' medical care and well being.

The pattern of discharging patients at the most lucrative juncture is 'troubling and disturbing,' says Tom Finucane, a doctor and professor at Johns Hopkins University School of Medicine, after learning of the Journal’s findings. 'The health-care system should serve the patients and try to improve their health, and any step away from that is a corruption.'

Dr. Finucane and other medical experts say longer-than-necessary hospital stays increase risks for medical errors, infection and unnecessary care. Discharges that come too early can mean patients don’t get care they need.

Recall that the Transparency International (ethical, not necessarily legal) definition of corruption is abuse of entrusted power for private gain. Physicians are entrusted to make decisions on behalf of their individual patients, so as best to improve their patients' health and health care outcomes. Hospitals are entrusted to provide the settings in which physicians can act in the best interests of their patients. So it seems clear that pressuring physicians to discharge patients so as to maximize hospital revenue regardless of the effect of such discharges on patients is corruption in this sense, health care corruption.

Note that health care corruption has generally been a taboo topic, especially when the corruption occurs in developed countries.  It is notable that the WSJ article made that topic slightly less anechoic.

Furthermore, framing this problem as health care corruption that endangers patients suggests that the issue goes far beyond a Medicare policy that is easy to game, and that another policy response, such as an investigation to see if such actions were legal, might be more to the point than adjusting the Medicare payment formula.

Beyond that, there are lessons for doctors and more globally for policy makers.  We have previously discussed the plight of the corporate physician, caught between his or her oath to put care of individual patients above all other concerns, and effective subservience to managers who may well put short-term corporate revenue, and growing their own incomes, ahead of all other concerns, including patients' and the public's health.  Health care professionals should not hold any illusions that they can take jobs with corporate health care providers and uphold their own values.

Furthermore, the plight of the physicians, and more importantly, the patients at corporate long-term hospitals raises a bigger policy question.  In my humble opinion, is it now time to end our badly conceived experiment with gilded age health care.  In the US, we have decided that the "free market" can solve all of our health care problems, disregarding the near impossibility of maintaining a real free market in health care.  Instead, we now have health care dominated by poorly regulated large corporations in an era when top managers believe they have a mandate to do anything to improve short-term revenue,  and often conveniently increase their own wealth.  It appears to be time to bring back the old laws against the corporate practice of health care, and consider whether we should allow hospitals and other health care organizations that provide direct patient care to be for-profit enterprises.

Meanwhile, patients and health care professionals, you should realize that you approach corporate hospitals and other corporate health care providers at your own risk. 

8:45 AM

Time to "Look for the Union Label?" - "First US Doctors' Strike in Decades," at University of California Student Health

The First US Doctors' Strike in Decades

A few news media outlets in California have reported on what has been up to now a very rare event - a strike by physicians.  An initial summary was in an article in the San Diego Union - Tribune, whose title was

First U.S. Doctors' Strike in Decades

A handful of doctors providing medical services to students at UC San Diego — and their colleagues at nine other University of California campuses — went on strike Tuesday.

It's the first time in 25 years that fully licensed doctors are picketing a U.S. employer, according to the Union of American Physicians and Dentists, which represents the physicians at the UC schools.

The work stoppage began at 7:30 a.m. and is scheduled to last one day. It involves 150 health center doctors who manage the primary care and mental health needs of students.

A second article in the Union-Tribune suggested that the point of contention between the union and the University of California administration was not primarily wages,

Collective bargaining has not gone smoothly for UC student services doctors who voted to join the Union of American Physicians and Dentists in November 2013. The two sides have not been able to agree on a contract. Union members voted for the one-day strike after accusing the university system of refusing to provide key financial information that would aid their negotiations.

An article in the East Bay Express clarified that, 

The central unfair labor practice complaint centers on the university's refusal to disclose basic financial data to doctors as part of the negotiations, according to Dr. Jeff Nelson, a UC Berkeley physician and a member of the bargaining team.

'We have asked UC for financial information as to where their funding sources are and what kind of finding they have, and they're not giving that, even though as a public institution, they're required to,' Nelson told me this morning at a rally outside the Tang Center where UC Berkeley students receive health services. Citing the $3.1 billion fundraising campaign UC Berkeley completed last year, he added: 'They have an awful lot of money.'

Without the financial statistics the union has requested, UAPD can't fairly negotiate and settle a contract, said Sue Wilson, a UAPD spokesperson. 'We have a right to certain information that we need in order to bargain a contract.' For example, she said, the union has sought information about the recently approved 20 percent salary increases for chancellors, but hasn't had any luck getting the details it requested. Wilson said the union has also filed an unfair labor practice charge regarding UC's recent decision to require UAPD doctors to contribute more money to their pensions, despite the fact that university officials originally said they would make those changes through the contract negotiations. 'It shows a lack of respect,' she said.

Apparently, the striking doctors want more money not for salaries, but to improve services to patients, as discussed in the second Union-Tribune article,

Dr. Amol Doshi, one of the staff physicians who didn’t report to work Tuesday, said his decision to join the union and to strike came down to disagreements with management over how student health services is run. 

He said only about 15 minutes is provided for each patient, regardless of whether that student has one or several medical issues that need to be addressed.

'We feel like our professional autonomy is being compromised in how we can take care of our patients. We feel that the number of patients that we’re asked to see, many of whom have mental health concerns, require more time and more staffing,' Doshi said.

The East Bay Express noted the UC administration's response did not deal with the substance of these issues,

Reached for comment today, a UC Berkeley spokesperson referred me to the UC Office of the President. Shelly Meron, a spokesperson for that office, dismissed the union's complaints in a phone interview this morning.'"They say this is about unfair labor practice charges. We believe this is simply a negotiation tool.'  Meron said the president's office does not comment on the specifics of unfair labor practice charges and declined to answer questions about the union's claims regarding financial disclosures and the pension policy.

Note that so far this story has been reported nationally only in one small item by Reuters.

Unions as One Method to Address the Plight of the Corporate Physician

So, to summarize, a small group of unionized physicians employed by the student health services of the University of California called a one day strike to protest infringements of their autonomy, particularly requirements that they see patients too quickly for what they believe to be the patients' good, and failure to provide budgetary information relevant to the university's financial capacity to provide better services.  The physicians suspect the university has sufficient money to do so, especially given generous raises given to university managers.

The issues these physicians seem to be facing are familiar aspects of the plight of the American corporate physician.  To recap the background, decades ago, most US physicians worked as solo entrepreneurs, or for small, physician owned groups.  Those few who were employed worked for small non-profits, like the local teaching hospital, or local or US government.  That has all changed.

Now increasing numbers of physicians are employed by increasingly large non-profits, such as hospital systems, or for-profit corporations. A 2013 Medscape article reported that the then current rate of employment was over 50%.

As such these physicians often report ultimately to managers, administrators, bureaucrats, and executives (MABEs).  Many of the people they report do may not be physicians or health care professionals.  Instead, they are likely to be generic managers, trained in business and management schools, with no direct experience in health care, and unclear commitment to its value.  (The 2013 Medscape article cited above included results of survey suggesting the top complaint of employed physicians was being "bossed around by less-educated admins.")

Worse, many generic managers have bought into the primacy of short-term revenue over all other considerations, including patients' and the public's health.  Examples of mission hostile management in health care thus now abound.

In parallel, most top corporate leaders have received increasingly generous compensation, far more generous than non-management employees, including health care professionals get, and that compensation seems to rise regardless of the quality of health care their organizations provide, or even their organizations' financial performance.  (For example, see this post.) 

In the media, and even the medical and health care literature, the rise of the employed, corporate physician has been celebrated, or at least accepted as inevitable. For example, see this post on a Forbes blog by a non-physician pundit with the title, "Physicians want employment, not Marcus Welby MD," implying that choice was completely voluntary.   This attitude may be a product of the long domination of market fundamentalism in the US, in which markets are seen as the solution to all social problems, so neither the outcomes of the "free market" or corporate management are to be questioned. 

However, one would think that contemporary employed physicians are increasingly in a predicament, caught between their professional oaths to put individual patients first, and their generic manager bosses pushing to increase revenue no matter what.  Yet for the corporate physician, protest might jeopardize their livelihood, or worse.  Such physicians may feel captive of the restrictive clauses, such as confidentiality agreements and non-disparagement clauses, in the contracts they signed, possibly often under pressure and without adequate legal counsel.  For example, a 2013 Medscape article was entitled, "Can you speak out without getting fired or being labeled a troublemaker?"  The answer was at best, only sometimes. 

Even in the limited coverage of the California student health doctors' strike, there were references to some of these issues.  These included  what could be mission-hostile management (shrinking visit times regardless of patient needs), and excess compensation to top management (particularly, the Chancellors' pay raises.)   The anechoic nature of the strike, that is, the lack of media coverage so far, seems to reflect the now prevailing market fundamentalist dogma that is generally hostile to workers' rights and organization. 

Nonetheless, the doctors of the University of California student health services did organize, and now they have taken the unheard of step of calling a strike.  That this did not happen sooner is a testament to the enormous power, enforced by billions in public relations and marketing, of the dogma of market fundamentalism.  However, given that most physicians are now employees, and have not been having an easy time of it, this strike may be just the beginning.

In any case, organization of employed workers, collective bargaining, and even strikes, while being anathema to market fundamentalists, may be much better for society than even more radical responses to the ongoing plight of workers.  Remember, it was robber baron capitalism not much different from today's market fundamentalism, that inspired not only the rise of trade unions, but unfortunately, the rise of Marxism and ultimately Communism.

So maybe we should start looking for the "union label" more often in health care.



ADDENDUM (2 February, 2015) - See also post entitled, "Why Physicians Must Unionize" on the On Health Care Technology blog.

11:40 AM

The Rise of the Corporate Physician, and the "Metastasis of Big Corporations"

Public discussion has raised more questions over the last few months about physicians taking care of patients as corporate employees. 

More Physician Practices Taken over by Large Corporations

This year, more stories have appeared about large corporations taking over physician practices.  In February, there was an account of efforts by competing nominally non-profit health insurance company Highmark and nominally non-profit hospital system UPMC in Pittsburgh in a "race to gobble up private physician practices," per the Pittsburgh Tribune-Review.  In March, the Washington Post featured a first-person account of what it is like for a physician in a private practice to try to hold out against the trend towards corporate practice.  In May, the Los Angeles Times noted how for-profit dialysis provider Da Vita purchased a large, but already for-profit operator of physician groups.  In October, Reuters reported how the recently announced acquisition by giant for-profit insurance company UnitedHealth of the biggest Brazilian for-profit managed care company will result in UnitedHealth owning an operating a Brazilian network of hospitals and clinics.

Concerns about Concentration of Market Power and Prices

In an increasingly financialized country, the media has featured concerns that the trend towards corporate physician practice might result in increasing market power for a few large corporations, and hence increased prices.  For example, in August, Anna Wilde Matthews reporting for the Wall Street Journal, noted

 Hospitals say the acquisitions will make health care more efficient. But the phenomenon, in some cases, also is having another effect: higher prices. 

As physicians are subsumed into hospital systems, they can get paid for services at the systems' rates, which are typically more generous than what insurers pay independent doctors. What's more, some services that physicians previously performed at independent facilities, such as imaging scans, may start to be billed as hospital outpatient procedures, sometimes more than doubling the cost.
 
The result is that the same service, even sometimes provided in the same location, can cost more once a practice signs on with a hospital.

Major health insurers say a growing number of rate increases are tied to physician-practice acquisitions. 

As Ms Matthews also reported for the Wall Street Journal, state regulators are beginning to worry about acquisitions of doctors' practices by hospital systems may drive up prices.

California's attorney general has launched a broad investigation into whether growing consolidation among hospitals and doctor groups is pushing up the price of medical care, reflecting increasing scrutiny by antitrust regulators of medical-provider deals.

Concerns about Care Quality

Concerns about whether physicians who must practice under the command of corporate executives will be able to put patient care ahead of corporate interests are also appearing, but not yet as prominently.

For example, Steve Twedt, writing for the Pittsburg Post-Gazette in September, looked into whether the multiple practice acquisitions by the area's two biggest ostensibly non-profit health care corporations might affect patient care.  He first noted "competition between Highmark and UPMC for doctors, and health care overhaul that is steering doctors into larger systems...."  Then he suggested that this has lead to marked discontinuities in patient care when physicians switch employment,

Out of the blue, people will learn their doctor has left a practice with little or no explanation, and without a forwarding address. When a physician effectively disappears, the cause usually is tied to the physician's employment contract, says a local health care attorney.

These cases of apparently vanishing physicians may be due to the contracting practices of physician employers, particularly large health care corporations.  The lawyer Mr Twedt interviewed explained,

most physician contracts now contain clauses that prohibit doctors from soliciting patients if they leave a practice.

While it's not always clear what constitutes 'solicitation,' it generally means departing physicians cannot contact their patients to invite or entice patients to follow them to their new location. They also cannot take their patient list with them, since that is property of the practice.

'I would imagine the doctor wouldn't contact them because he can't, or he doesn't have their address,' said Mr. Cassidy.

Contracts also often require that doctors cannot practice medicine within 10 miles of the previous practice office, and sometimes the required distance is even greater. Nor can they give out information about the practice they're leaving. Violating these contract terms could mean a financial penalty, such as loss of severance pay.

Finally, and most troubling, cardiologist blogger Dr Melissa Walton-Shirley recounted in some much more colorful language some consequences of cardiology practices which were acquired by large hospital systems.  She noted...

 

Referral Decisions Influenced by Management Edicts, but Maybe Not Patients' Needs

 

Physicians may be

sweating bullets over whether they are going to hit their benchmarks to retain their salaries. My anxious friends are now calling me for more referrals and more practice support.  They take any transfer I give them....

They may

 morph from human flesh into a Rubik's cube of relative value units (RVUs), the formula through which all future salaries and bonuses are calculated.

Resulting Loss of Continuity

Independent cardiologists opened office doors to find their patients who were anticipating decisions on timing of defibrillators, caths, or medical therapy had undergone testing at other facilities. Those tests were interpreted by cardiologists who were in no way connected to their care, their referrals to unfamiliar testing venues now incentivized by hidden contractual microformulas. They were evaluated far away from the familiar eye of their long-time cardiologists.

Summary

Back in the day, most physicians who took direct care of patients did so out of practices they or other physicians ran and owned.  The majority of physicians who took care of physicians as employees worked for the military or the Veterans Administration, or took care of patients only part-time as faculty of medical schools.  In a country increasingly prodded by market fundamentalism, the last few years has seen a major change in health care:  more and more physicians are taking care of patients as employees of large corporations, more often for-profit.

 I should add, though, that the recent push towards corporate practice was not just due to market fundamentalism, but also seems to in part be due to provisions of the recent attempt at US health care reform, the Affordable Care Act, which called for care by large organizations called accountable care organizations (ACOs).   However, like some other major changes in health care in the US over the last few years pushed by the increasing dominance of large corporations, this one happened without any rigorous assessments of whether the benefits for individual patients or public health would outweigh the harms, and justify the costs. 

Justified by the realization, now mostly forgotten, that health care is nothing like an ideal free market (look here), direct health care used to be almost entirely provided by health care professionals, often working in small, non-profit community hospital settings.  In fact, the American Medical Association used to condemn the corporate practice of medicine.  In addition, the corporate practice of medicine used to be illegal in many US states (look here).

We have changed all that, without too much thought, and without any rigorous assessment.  Now it seems increasingly likely that these changes are just increasing health care costs, and probably will cause worsening patient care and will worsen patients' and the public's health. 

As Dr Melissa Walton-Shirley wrote more vividly,

Monopolies never meant to be planted in gardens so small grew like bull thistles, literally overtaking all the good things that small community medicine had to offer. They are now barely recognizable small towns with the crabgrasslike metastasis of big corporations....

Will there be time to rethink this headlong rush before our health care options are restricted to that provided by one of a few huge corporations?  

True health care reform would reverse the trend to organize health care within ever larger, more bureaucratic, more monolithic, more dominant organizations.  Such reform is unlikely to happen until we see the nadir produced by the current bandwagon. 

9:38 AM

Paging Doctor EBDITA - How Private Equity May Push Hospitals to Put Revenue Ahead of Patient Care

Issues raised by the increasing influence of private equity firms in the direct care of patients were illuminated by a series of articles about the for-profit hospital chain HCA.

Quality Problems

The articles highlighted a series of concerns about quality problems affecting the chain's patients. 

Cardiac Overtreatment

First, a New York Times article described problems in the care of cardiac patients. 

HCA, the largest for-profit hospital chain in the United States with 163 facilities, had uncovered evidence as far back as 2002 and as recently as late 2010 showing that some cardiologists at several of its hospitals in Florida were unable to justify many of the procedures they were performing. Those hospitals included the Cedars Medical Center in Miami, which the company no longer owns, and the Regional Medical Center Bayonet Point. In some cases, the doctors made misleading statements in medical records that made it appear the procedures were necessary, according to internal reports.

More specifically, at one hospital, cardiac catheterizations seemed to occur to often: "about half the procedures ... were determined to have been done to patients without significant heart disease." Two patients at another hospital had severe adverse effects after cardiac procedures that seemed unnecessary in retrospect. There were "incidents at Bayonet Point where patients were treated for multiple lesions, or blockages, even when 'the second lesion (or third) did not appear to have significant disease....' [In] 'several cases'  ... patients were treated even though their arteries did not have significant blockages." Then,

HCA brought in an external company, CardioQual Associates of Franklin, Mich., in 2004 to examine medical records from Bayonet Point. In a confidential memo prepared in December 2004 and reviewed by The Times, CardioQual concluded that as many as 43 percent of 355 angioplasty cases, where doctors performed invasive procedures to open up a patient’s arteries, were outside reasonable and expected medical practice. Worse, the investigation revealed that some physicians had indicated in medical records that the patients had blockages of 80 to 90 percent when a later, more scientific analysis of a sampling of cases revealed the blockages had ranged from 33 to 53 percent.

Possible Undertreatment of Acute Illness

Then, a second NY Times article found that

HCA decided not to treat patients who came in with nonurgent conditions, like a cold or the flu or even a sprained wrist, unless those patients paid in advance. In a recent statement, HCA said that of the six million patients treated in its emergency rooms last year, 80,000, or about 1.3 percent, 'chose to seek alternative care options.'

Of course, the problem with this approach is that it is not always possible to tell how severe an acute illness is without a more complete evaluation than can be done in emergency department triage. There is anecdotal evidence that HCA turned away some patients who actually had serious illness:

Regulators in several states have taken HCA hospitals to task over screening out patients too aggressively, including situations where the screening missed serious conditions.

In early 2010, an uninsured patient who entered HCA’s TriStar Skyline Medical Center in Nashville, complaining of 'pain when breathing,' was sent away. An hour and a half later, at another hospital, the same patient was found to have pneumonia, according to the results of a Medicare investigation. Regulators cited Skyline for having 'failed to ensure that an appropriate medical screening examination was conducted.'

This year, the Office of Inspector General fined HCA’s Northside Hospital in St. Petersburg, Fla., $38,000 for sending home a feverish patient with an artificial heart valve. Two days later, the patient reappeared with the flu and severe respiratory problems. The following day, he died.

Undertreatment of Bed Sores

The second Times article also suggested that decreased nurse staffing at HCA hospitals lead to worse treatment of bed sores (decubitus ulcers):

Experts say there is often a direct correlation between bedsores and the quality of hospital staff levels. 'Staffing is critical,' said Courtney H. Lyder, the dean at the UCLA School of Nursing and an expert on wound care. 'When you see high levels of wounds, you usually see a high level of dysfunctional staff,' he said.

HCA owned eight of the 15 worst hospitals for bedsores among 545 profit-making hospitals nationwide, each with more than 1,000 patient discharges, tracked by the Sunlight Foundation using Medicare data from October 2008 to June 2010. HCA’s West Houston Medical Center and CJW Medical Center in Richmond, Va., landed near the top of the list.

HCA says it has increased its nursing staff at its hospitals each year over the last five years. But an examination of lawsuits shows bedsore problems have been persistent at several HCA facilities. In Portsmouth Regional Hospital in New Hampshire, a 60-year-old woman died in 2009 after her bedsores went untreated for three days and became infected, according to a wrongful-death lawsuit filed in the spring of 2011 in federal court against the hospital.

One HCA hospital

was cited twice by Florida regulators, in 2008 and 2010, for having inadequate numbers of nurses on its staff to oversee wound care for patients. During the 2010 examination, regulators noted that Memorial had less than the equivalent of two full-time nurses who specialized in wound care to treat the 132 patients who required aid.

'The system of treatment for wound care places patients at risk for additional medical complications,' the examiners said.

So, in summary, there is reason for concern about overtreatment of cardiac disease, and undertreatment of acute illness and bedsores at HCA hospitals. However, no hospital and no doctor is perfect. Everyone makes mistakes, and many decisions can be questioned in retrospect. Instead

Putting Money Ahead of Quality

Instead, the articles suggested they were part of a pattern in which concerns about short-term revenue trumped concerns about patient care.

Cardiac Procedures to Generate More Revenue

The article about cardiac care noted that one of the physicians who allegedly was doing too many cardiac procedures

was highlighted by the hospital in a 2009 business plan as being the most profitable doctor at the facility. 'Our leading EBDITA MD,' the plan described him. (Ebitda, or earnings before interest, taxes, depreciation and amortization, is a measure of corporate earnings.)

On the other hand, according to the Tampa Bay Times, some of the doctors whom HCA suspended for doing too many percutaneous cardiac revascularization procedures charged that the issue was that

far from concern over the cost of stents — Bayonet Point was upset that stents were replacing more expensive bypass surgeries.

The first NY Times article also suggested that HCA executives did their best to keep the issue quiet so as not to affect revenue. First,

HCA declined to provide evidence that it had alerted Medicare, state Medicaid or private insurers of its findings, or reimbursed them for any of the procedures that the company later deemed unnecessary, as required by law.

Also,

HCA also declined to show that it had ever notified patients, who might have been entitled to compensation from the hospital for any harm.

The Times uncovered internal HCA communications suggesting that obfuscation was deliberate:

In January 2005, David Williams, who was then the chief executive of Bayonet Point, wrote in an e-mail: 'Clearly, we have protected ourselves under the peer review umbrella and have released very little information.' The recipients of his message included Dan Miller, who then oversaw HCA’s hospitals in western Florida, and Charles R. Evans, a Nashville executive who was president of all of HCA’s hospitals on the eastern side of the country.

In his response, Mr. Evans thanked Mr. Williams for the update and asked for a 'summary as to the business impact.'

Furthermore, as the last sentence above indicated, review of internal emails suggested that executives were more worried about revenue than quality of care or patient outcomes:

A review of those communications reveals that rather than asking whether patients had been harmed or whether regulators needed to be contacted, hospital officials asked for information on how the physicians’ activities affected the hospitals’ bottom line.

Avoiding Caring for Poor Patients in the Emergency Department

On the other hand, the impetus for triaging away apparently less acutely ill patients from the Emergency Department was to avoid such patients who could not pay. The second NY Times article noted there was a way for supposedly less ill patient to get Emergency Department treatment,

Patients whose ailments were not deemed urgent were told to go somewhere else, like a free clinic, or that they could be treated if they paid the co-payment for their insurance or around $150 in cash.

In addition, there is reason to think that HCA management pushed health care professionals to put off increasing numbers of patients, regardless of their clinical problems,

Several former emergency department doctors at Lawnwood Regional Medical Center in Fort Pierce, Fla., said they frequently had felt compelled to override the screening system in order to treat patients.

Also,

'Physicians had a really, really hard time with it,' said Dr. J. Patrick Pearsall, who worked for an emergency physician group based in Houston that worked in HCA hospitals. When the doctors failed to meet the hospital’s goals for how many patients should be considered emergencies, 'they really started putting pressure on.'

One emergency room doctor who worked at an HCA Florida hospital said doctors had been told they had targets to hit. The doctors’ concerns about the screening policy were acknowledged in an e-mail reviewed by The Times that was sent to the doctors at the hospital in early 2008 by an outside company that worked in the emergency room.

The doctors were told HCA’s regional executives were 'quite intent on pursuing this program at least for the time being and fully expects us to comply. Their expectations are that approximately 15 percent of all patients are to be screened and of those screened no more than 35 percent overridden.'

Keep in mind that variations in patient populations over time and across geographic areas means that the proportions of more and less severely ill patients showing up at individual Emergency Departments will vary substantially. Pressuring health care professionals to turn away a minimum percentage of people will make it very likely that at some times severely acutely ill patients will not be seen.

So it appears that at HCA, patients sometimes were overtreated, and sometimes were undertreated, and that executives trying to increase revenue may have been more responsible for both than simple human error.

Finally, there is reason to think that the take-over of HCA by private equity (that is, leveraged buy-out) firms further increased the for-profit corporation's emphasis on short-term revenue leading to worsening quality of care.

Private Equity Pushed for Even More Short-Term Revenue

The second NY Times article first noted,

During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.

In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.

The big winners have been three private equity firms — including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate — that bought HCA in late 2006.

HCA’s robust profit growth has raised the value of the firms’ holdings to nearly three and a half times their initial investment in the $33 billion deal.

The financial performance has been so impressive that HCA has become a model for the industry.

Note that the private equity firms extracted a considerable amount of cash from HCA at the time they turned it back into a publicly held for-profit corporation:

In 2010, buoyed by robust growth in profit, HCA was able to issue billions of dollars in debt that was used to pay funds overseen by the three buyout firms nearly $1 billion in dividends — each. In the spring of 2011, in one of the most closely watched public offerings since the financial crisis, HCA became a public company once again. Its three buyout owners each sold another $500 million worth of stock, allowing them to recoup all their initial investment.

By thus increasing the new public corporation's debt load, they further increased pressure on its executives to bolster short-term revenue.

However,

As HCA’s profits and influence grew, strains arose with doctors and nurses over whether the chain’s pursuit of profit may have, at times, come at the expense of patient care.

Summary:  Why No Hospital Should be For-Profit?

Among all developed countries, I believe only the US has such a high proportion of for-profit hospitals, and physicians employed by for-profit corporations to take care of patients.

However, in summary, this case shows there is evidence that
- The management of one for-profit hospital chain was pushed to focus even more on short-term revenue by a leveraged buy-out engineered by private equity firms
- This focus lead management to pressure health care professionals to increase revenue, even if that required over- or under-treating patients
- The resulting over- and under-treatment likely harmed patients.

As a Tampa Bay Times editorial put it,

the allegations suggest a disturbing pattern of endangering patients, and they again expose the weaknesses of a health care system driven by volume and profit rather than efficiencies and patient outcomes.

In a column in Forbes, Steve Denning warned,

The hospitals owned by private equity are making money in the short-term at the expense of Medicare and the economy. But when the private equity firms depart, as they plan to do, they leave the hospitals with a load of debt, dispirited doctors and nurses, and a bankrupt Medicare system, with serious questions as to whether overall care has been maintained, let alone improved.

The current bonanza for private equity from milking Medicare is a bubble that cannot be sustained.

We have noted how health care organizations have increasingly been "financialized," lead by executives who put short-term revenue generation ahead of all other goals, including good patient care. Furthermore, hospitals are increasingly likely to be formally for-profit, and hence likely to be lead by such executives. Worse, hospitals are increasingly likely to be owned by private equity firms, further increasing the emphasis on short-term money making. Even worse, physicians are now more frequently employed by such organizations, which may pressure them to do what it takes to increase revenue, no matter what the effect on patients' and the public's health.

The probably effects on the quality of care, access, and costs are obvious.

In my humble opinion, before the health care bubble bursts, we need to challenge the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. Before market fundamentalism became so prominent, many stated prohibited the corporate practice of medicine, and the American Medical Association forbade the commercialization of medicine. It is time to heed that wisdom. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

As Todd Hixon wrote, surprisingly in Forbes,

I believe a big part of the answer lies in changing the idea that health care should be a path to riches. There are professions, like university teaching and research, where a big part of the motivation is helping people and gaining respect in the community. If we could shift the balance for health care providers in that direction, solving problems like the one manifest at HCA would be a lot more possible.

True health care reform will require an end to market fundamentalism in health care.

Note - See also comments by Paul Levy in the Not Running a Hospital Blog.

11:33 AM