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Showing posts with label hospitals. Show all posts
Showing posts with label hospitals. Show all posts
A long time ago, in a universe far, far away, hospitals had relatively small administrations, usually lead by a older physician or nurse who served as executive director or superintendent.  Leading a hospital was seen as a calling, not a means to become rich.  With the rise of generic management, hospital management grew, and became dominated by generic managers who were trained as managers, not as health care professionals.

So if hospitals are now usually lead by generic managers, it should be no surprise that hospital organizations are lead by generic managers.  So it should be no surprise that the current CEO of the American Hospital Association, Richard J. Umbdenstock, was formerly " executive vice president of Providence Health & Services and president and chief executive officer of the former Providence Services, Spokane, Washington." (Look here.)

What should be a surprise, however, is what was just reported in Modern Healthcare,

The American Hospital Association has chosen Richard Pollack, its longtime lead lobbyist, to succeed Richard Umbdenstock as CEO. Hospital leaders say Pollack is the right pick, even though he never led a hospital or health system.

Pollack, 59, has been with the AHA for more than three decades and has served as the group's executive vice president for advocacy and public policy since 1991. He will take over the top post in September, the AHA announced Monday during its annual meeting in Washington.

Pollack has developed a sterling reputation for pressing the hospital group's agenda on Capitol Hill and beyond. He's played an integral role in top healthcare policy discussions in recent years, including passage of the Affordable Care Act.

Chip Kahn, president of the Federation of American Hospitals, which represents investor-owned hospitals, called Pollack a 'wise Washington hand.'

In addition,

John Rother, president of the nonpartisan National Coalition on Health Care, noted that it's an unusual pick in the sense that Pollack has not overseen a major hospital system. Before joining the AHA, Pollack served as a lobbyist for the American Nurses Association. The Brooklyn native started his professional career in 1977 as a legislative assistant for Rep. David Obey (D-Wis.)


So, the incoming American Hospital Association CEO is not a doctor or a nurse.  He has not had any known direct experience in patient care.  He has no training or experience in public health or biomedical sciences.  Furthermore, he has no direct experience working, even just as a manager, in a hospital or any organization that provides patient care or for the public health.

His entire experience is in Washington, DC, first as a legislative staffer, and then - not to put too fine a point on it - as a lobbyist.

This would make sense if he were going to lead a lobbying firm.  However, the AHA says:

In summer 1995, after regional policy board (RPB) review, the Board of Trustees approved vision and mission statements:

Vision: The AHA vision is of a society of healthy communities, where all individuals reach their highest potential for health.

Mission: To advance the health of individuals and communities. The AHA leads, represents and serves hospitals, health systems and other related organizations that are accountable to the community and committed to health improvement.

So now we have hospitals largely run by generic managers.  Furthermore, hospital associations, whose members are largely represented by generic managers, now may be run by lobbyists, people even more removed from actual health care.  Hence, perhaps too archly, I suggest that Mr Pollack is the first known example of a second order generic manager.

Summary

 In 1988, Alain Enthoven advocated in Theory and Practice of Managed Competition in Health Care Finance, a book published in the Netherlands, that to decrease health care costs it would be necessary to break up the "physicians' guild" and replace leadership by clinicians with leadership by managers (see 2006 post here). Thus from 1983 to 2000, the number of managers working in the US health care system grew 726%, while the number of physicians grew 39%, so the manager/physician ratio went from roughly one to six to one to one (see 2005 post here). As we noted here, the growth continued, so there are now 10 managers for every US physician.

The managers who first took over health care may have had some health care background.  Now it seems that health care managers are decreasingly likely to have any health care background, and increasingly likely to be from the world of finance.  Meanwhile, for a long time, business schools seem to have been teaching managers that they have a God given right to manage every organization and every aspect of society, regardless how little they know about what the particular context, business, calling, etc involves.  Presumably this is based on a faith or ideology that modern management tools are universally applicable and nigh onto supernatural in their powers.  Of course, there is not much evidence to support this, especially in health care.

We have discussed other examples of bizarre proclamations by generic managers and their supporters that seem to corroborate their belief in such divine powers.  Most recently, there was the multimillionaire hospital system CEO who proclaimed new artificial intelligence technology could replace doctors in short order (look here).   Top hospital managers are regularly lauded as "brilliant," or "extraordinary," often in terms of their managerial skills (look here), but at times because of their supposed ownership of all aspects of patient care, e.g., (look here)


They literally are on call 24/7, 365 days a year and they are running an institution where lives are at stake....

As noted above, if the new generic managers work in offices that are physically, intellectually and spiritually distant from the real world of health care, a lobbyist running a hospital association would be at best distant even from the management suite.

It is way past time for health care professionals to take back health care from generic managers.  True health care reform would restore leadership by people who understand the health care context, uphold health professionals' values, are willing to be held accountable, and put patients' and the public's health ahead of self-interest.
6:49 AM
To the tune of "Dirty Laundry," by Don Henley, some more of health care's dirty laundry...
We have frequently discussed the seemingly unstoppable rise of compensation given to top hired managers of health care organizations.  Their compensation seems to rise regardless of the financial status of their organizations, much less how well their organizations are caring for patients or otherwise fulfilling the mission.  Top hired managers of other organizations, particularly big for-profit corporations, have seen similar enhancements of their personal wealth, leading to the charge that they are acting as "value extractors," rather than responsible leaders.
  
Justifications for this rise are superficial, often limited to talking points we have repeatedly discussed, (first  here, with additional examples of their use here, here here, here, here, here, here, and here.)  They are:
- We have to pay competitive rates
  We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).

The notion that top hired managers are entitled to rich compensation no matter what now seems to have metastasized to medium-sized and even small US non-profit hospitals and other health care provider organizations.  Three relevant examples have appeared so far in February, 2015, listed in alphabetical order by state.

Georgia - West Georgia Health

West Georgia Health is a health system that includes a single hospital, West Georgia Medical Center, in LaGrange, Georgia, a town with a population of approximately 30,000 located southwest of Atlanta.This story comes courtesy of the LaGrange (GA) News.  Here are the essentials regarding compensation given the CEO.

About a month ago, someone at WGMC went into the doctors’ and surgeons’ lounges and anonymously posted pages of the hospital’s publicly available 2012 IRS 990 form, according to a confidential source who is a local doctor.

On the surface, they appear condemning. The pages showed compensation for CEO Fulks and other top hospital management. By the numbers, Fulks was compensated $1,989,538 during fiscal year 2012. On top of that, the hospital also paid $90,867 in travel expenses for Fulks and his wife, Cindy. It didn’t stop there: they also paid his monthly dues at a country club, according to the 990s obtained by the Daily News.

In years prior, Fulks was compensated $469,785 with $88,637 in travel expenses and $470,814 with $86,210 in travel for 2011 and 2010, respectively.

In 2012, Fulks’ base salary was $375,812, but with the $1.6 million “payout” and other compensation, such as nontaxable benefits and deferred compensation, the hospital actually gave Fulks more than $2 million in compensation.

In contrast, the News reported that the health system has been running deficits, decreasing services, and laying off employees.


Between the years of 2010 and 2013, West Georgia Medical Center on Vernon Road listed revenue deficits each year — sometimes as high as nearly $6.2 million dollars as in 2013, according to publicly available IRS filings by WGMC.

A round of layoffs in August of 2014 and the sale of its dialysis center in 2012 wasn’t enough to turn the tide, and hospital officials have said publicly they’ve hired a firm to shop around for what they’re calling a 'strategic partner' for a potential merger.

Seeking an explanation of a million dollar plus payout to the CEO when the system was running deficits, reducing services and laying off employees, Reporter Tyler Jones was able to do what reporters in larger markets rarely can do, get a response from the CEO himself,

'It’s … 10 years worth of funding 457(f) retirement plan vested for me during that year and I took it and paid the taxes on it and continued with investments,' he said.

When asked if it was appropriate for him to take such a large lump sum of money when the hospital was doing so poorly financially, Fulks balked.

'I don’t determine what my income is,' he said. 'There is a process that involves bringing in an outside consultant who does surveys and can report what the compensation is for higher compensated executives compared to the region.'

'Part of the answer to your question is that money was accumulated over a 10-year period, which included up and down periods in terms of financial performance. It was already funded. It’s not like they took it out of operations, it had been written through the books already. So, it was part of my employment contact arrangement with the board.'

The CEO did not explain, however, why his retirement benefits were so high relative to his base salary (apparently averaging $160,000/ year, at least 40% of base salary), and how they compared to the benefits given other employees.  Note that he did invoke, however, one of the talking points commonly used to justify large payments to hired management even by financially stressed organizations.  This was the "we have to pay competitive rates" argument.

In summary, despite financial stress causing recurring deficits, and leading to layoffs, service reductions and merger discussions, the CEO of a single hospital health system in a small town in Georgia recently had a base salary exceeding $300,000, got retirement benefits at least worth about 40% of his salary, and extra perks such as country club dues.   

Idaho -  St Luke's Health System, Saint Alphonsus Health System

Boise, Idaho is a city with a population over 200,000.  The Idaho Statesman recent published a story about executive compensation at Idaho hospital systems.   Key points about compensation were:

The latest tax filings by St. Luke's Health System, Saint Alphonsus Health System and their hospitals show that pay boosts at the top exceeded overall raises the systems reported for employees, and for Idaho workers.

Total compensation - including salary, bonuses, retirement and other pay - rose an average of 14 percent for the six CEOs. St. Luke's Health System CEO David Pate again led the pack. His total compensation rose 19 percent to $1.2 million, mainly because of other compensation, including retirement pay.

The second-highest paid CEO was Sally Jeffcoat, of St Alphonsus Health System, who received $849,880.  The highest paid executive who was not a CEO was Gary Fletcher, Chief Operating Officer of St Lukes, who received $1.08 million.

However, neither St Lukes nor St Alphonsus has been doing particularly well financially as of late.

St. Luke’s Regional Medical Center lost almost $6 million in fiscal 2013 — a drastic change from recent years. St. Luke’s local operations had reported net income of $39 million to $58 million since fiscal year 2010.

The St. Luke’s cancer center, Mountain States Tumor Institute, also lost money in fiscal 2013 for the first time in at least five years. Expenses overran revenues by $10 million.

Also,

Net revenues at Saint Alphonsus Medical Center-Nampa also declined in fiscal year 2013, though the hospital did not lose money. The decline was due to fewer emergency visits and inpatient admissions at the Nampa hospital, said Saint Alphonsus Health System CFO Blaine Petersen.

Furthermore, note that the St Luke's mentioned above is the same St Luke's that recently was found by a court to have violated antitrust laws in the course of its takeover of physicians' practices, and that ruling was just affirmed by an appeals court (see this post, and this Associated Press story via MagicValley.com) Also note that St. Luke's strenuously tried to keep details of the litigation out of the public eye, including details suggesting that the main goal of St Luke's actions was increased revenue, not better patient care. 

The Idaho Statesman article included only this brief justification of rising executive compensation in the face of declining revenues,


Hospital officials say the raises were deserved.

'There are people here working really hard, and I think we have a lot to be proud of,' said Jeff Taylor, St. Luke's chief financial officer. 'Our board is actively involved in setting (executive) compensation, and we are transparent about it.'

Note that this is a brief version of the "brilliance" talking point, and the person making it presumably reports directly to the CEO who received so much.  Given the results of the antitrust case noted above, I wonder specifically what he was proud of?

Vermont -  Health Care and Rehabilitation Services of Southeastern Vermont

This story came by way of the Barre Montpelier (VT) Times-Argus.  It described Health Care and Rehabilitation Services thus,

HCRS is one of five 'designated agencies' in the state that provides mental health services to people in crisis, school-based mental health services, and programs such as the Kindle Farm, a private school for troubled boys in Newfane and Townshend, and the Hilltop Recovery Residence in Westminster.

The issue was again a lump-sum retirement payment given a former CEO

A $650,000 compensation package for the retired CEO of Health Care and Rehabilitation Services of Southeastern Vermont has raised eyebrows from Montpelier to Springfield.

Judith Hayward left HCRS after 17 years as CEO on July 1, 2014, with a $650,000 cash golden parachute that HCRS officials said compensated her for the organization’s lack of a pension plan.

Hayward oversaw an agency with a $41 million budget with 600 employees, with offices in Springfield, Brattleboro and White River Junction. She was paid $162,000 annually.

The details of the special retirement package were,

The HCRS board approved a $450,000 compensation package, in addition to Hayward’s $162,000 annual salary in June 2010, he said. But when the agency’s auditors said the finance package had been poorly designed, forcing Hayward to pay a higher rate of taxes on the deferred compensation, the board added another $200,000 to the package for a total of $650,000

He said the most recent filing showed Hayward was paid a total of $497,000 in 2012.

The contrast between the payment and the current financial status of the organization was:

The package comes as its hundreds of employees didn’t receive a wage increase in 2014, and the state faces an anticipated $100 million funding shortfall.

According to HCRS tax forms, in 2012, the first year of the extra payments to Hayward, the agency had a revenue shortfall of $102,000, while in 2013, it had a surplus of $99,000 on a budget of $41 million.

An article from the Brattleboro (VT) Reformer, via the Valley News, contains the justification for the payout,

'Everyone on the board thought she did a tremendous job. She brought the organization out of bankruptcy, developed new programs and everyone who had contact with her, including people from the state, thought she did a magnificent job,' said J. Allen Dougherty, former HCRS Chairman of the Board of Trustees who signed off on the package. 'She never had a retirement package and the board thought this was a way we could make it up to her.'

Again, this was a version of the "brilliance" talking point. 

A blog post in the Nonprofit Quarterly downplayed the amount of the payout as excusable, given the CEO's long tenure.  However, it also acknowledged that the amount may have seemed excessive to other employees,

[Current CEO]  Karabakakis said staff have been 'disappointed, angry and outraged.'

'Some people may see it as excessive,” he said. “If we’re going to provide a deferred compensation package, it’s important that we look at the industry standard, and make sure that we do have a culture of openness and transparency.'

But the staff were unlikely to have been solely concerned about transparency. The other thing a board needs to ensure is that fair retirement benefits extend to all workers. The notion of caring only about the old age comfort of top employees is, naturally, abhorrent and insulting to many others. It’s no surprise, and in times where income inequality begs for our attention, our organizations should try not to mimic the bad policies of the larger economy.

Summary

Here were more instances of generous compensation given to CEOs and other top executives of small to medium sized non-profit hospitals and health care provider organizations.  In all cases, the pay seemed disproportionate given the financial situations of the organization, the pay and benefits given to other employees, or the services provided to patients.  In all cases, justifications provided were perfunctory, and were at best based on talking points used before to justify executive pay, but without supporting evidence or logic.

In a 2014 interview, corporate governance experts Robert Monks and Nell Minow, Monks said,

Chief executive officers' pay is both the symptom and the disease.

Also,

CEO pay is the thermometer. If you have a situation in which, essentially, people pay themselves without reference to history or the value added or to any objective criteria, you have corroboration of... We haven't fundamentally made progress about management being accountable.

The symptom and the disease have metastasized to health care, from huge for-profit corporations now also to even small non-profit hospitals.   Thus, like hired managers in the larger economy, even managers of small non-profit hospitals have become "value extractors."  The opportunity to extract value has become a major driver of managerial decision making.  And this decision making is probably the major reason our health care system is so expensive and inaccessible, and why it provides such mediocre care for so much money. 

One wonders how long the people who actually do the work in health care will suffer the value extraction to continue?

So to repeat, true health care reform would put in place leadership that understands the health care context, upholds health care professionals' values, and puts patients' and the public's health ahead of extraneous, particularly short-term financial concerns. We need health care governance that holds health care leaders accountable, and ensures their transparency, integrity and honesty.

But this sort of reform would challenge the interests of managers who are getting very rich off the current system.

As Robert Monks also said in the 2014 interview,

People with power are very reluctant to give it up. While all of us recognize the problem, those with the power to change it like things the way they are.


So I am afraid the US may end up going far down this final common pathway before enough people manifest enough strength to make real changes. 

For our musical interlude,...

11:43 AM
A report from Health Leaders Media, a prominent media site about health care management, shows how non-profit hospital executive compensation continues to levitate.  In general,

For not-for-profit CEOs nationwide the median total cash compensation (base plus incentives) increased 3% to 6.7% over last year, and these organizations' senior leadership teams gained similar pay increases,...

The specifics included

Health system CEOs' median base salaries increased to $717,500 (2012) from $650,000 (2011), while independent hospital CEOs' median base salaries rose to $506,100 from $472,000 during that period, according to IHS. Comparatively, Sullivan, Cotter and Associates shows the base pay for system CEOs nationwide increased while the TCC declined slightly—base pay increased to $334,700 from $325,000, while TCC decreased to $411,100 from $412,100 from 2012 to 2011, respectively. Unlike their health system counterparts, independent hospital CEOs' base pay and TCC climbed between 2011 and 2012—base pay went up to $530,000 from $504,000 (a 4.9% gain) and TCC jumped 4.3% to $600,000 from $574,000.

The report also showed that pay increased for some species of top executives.  CIOs (chief information officers) did the best,

Nationally, system CIOs received one of the largest TCC increases year over year, according to Sullivan, Cotter and Associates (5.8%). IHS reported a median base salary increase of (3.5%).

These increases ought to be compared to the base rate for the population.  In September, the Census Bureau reported that median family income dropped in 2011 (per the New York Times):

 Median household income after inflation fell to $50,054, a level that was 8 percent lower than in 2007, the year before the recession took hold.

The actual decline from 2010 to 2011 was 1.5% (look here).

So executive compensation in health care continues to defy gravity, even as the income of the typical family does the opposite. 

Will the Circle be Unbroken?

Conveniently, the day before, another well regarded site for hospital management information, Becker's Hospital Review, provided a rationale for current health care executive compensation, based on a blog post from Integrated Healthcare Strategies, which claims to be one of the largest US healthcare consulting firms.

The Review article first noted that "executive compensation is a delicate subject," without explaining why it was more delicate than the compensation given to other people.  It then answered the question its title posed, "are hospital executives paid too much?"  In summary,

compensation levels are currently appropriate, on the whole, because employers are generally keeping them on the job with such consistent pay levels.

The syntax is a little difficult, but I believe the translation is the circular cliche, "it is what it is."  More formally, this appears to be a version of begging the question, or circular reasoning.

The Integrated Healthcare Stragies blog post by David Bjork, "thought leader," Senior Vice President and Senior Advisor, who authored two books on executive compensation in health care, rotated this again.
ARE EXECUTIVES PAID TOO MUCH?  The short answer is no. Executives are not overpaid. If they were, employers would not willingly pay them as much as they do.
And again

the intrinsic value of a job can be quantified. Economists and most workers judge the value of a job by how much it pays. A job is worth what an employer is willing to pay an employee to do it, or what an employee is willing to accept as payment for the job. Virtually no one doubts that principle—except when it comes to executive jobs.

Have we got that?  Bjork argued that executive pay is self-justifying.  All executives are worth what they are paid because that is what they are paid.

Another way to understand the fallaciousness of this argument is to try to apply it to jobs other than executive positions.  Presumably, it would mean that everybody's pay is appropriate, and hence nobody's pay could ever be changed.  But one's head begins to hurt just trying to think about this.

Yet those were the main arguments that Mr Bjork made to justify his contention that

There is no rational basis for the view that executives should not be paid as much as they are paid, just a personal attitude, generally held by someone who is paid less.

A Side Trip to the Fallacy of Composition

Mr Bjork did make an attempt to supplement that argument.  For example, he wrote "labor market forces drive pay for executives," without explaining how much they do so, or the nature of the market for executive pay.  Later, he wrote,

Hospitals and health systems continually look for ways to reduce their costs. When they come across jobs that cost more than they are worth, they eliminate the jobs and either eliminate the work, redistribute it to other employees, or outsource it to cheaper labor. They view executive jobs the same way. When hospitals and health systems find an executive job that seems to cost more than it is worth, they eliminate it if they can and redistribute the work to other managers.

Let us unpack this a bit.  First, hospital and health systems are organizations composed of humans.  They do not look for anything, but the executives who run them may certainly look for ways to reduce costs and eliminate apparently unnecessary jobs.  Confusing hospital executives with the organizations they run appears to be a version of the fallacy of composition, which "arises when a person reasons from the characteristics of individual members of a class or group to a conclusion regarding the characteristics of the entire class or group (taken as a whole)."

Taken literally, this paragraph suggested that executives could decide their own jobs "cost more than they are worth," and then fire themselves and give their work to someone else.   

Nonetheless, were this targument to be true, it in fact contradicts the conclusion based on this argument that appeared two sentences later
Therefore, executives must be worth what they are paid, because employers keep them on the job and willingly continue to pay what¬ever they are paid.

Note that this conclusion is yet another restatement of the circular argument above.  . 

Summary

We have noted that logical fallacies are increasingly deployed to defend the status quo in health care, and particularly to defend the interests of those who are profiting the most from the current dysfunctional system.  In our latest example we find some particularly ripe repitition of a fundamentally fallacious argument to support ever rising compensation for health care executives.  It is distressing that the arguments were made by a prominent health care management consultant and published author on the subject of health care executive pay, and was picked up without question by a prominent health care management media site.  It suggests, like other posts we have written about the generous use of logical fallacies to protect the powers that be, that these eminences really may have not the slightest idea what they are doing, and have truly risen to their level of incompetence, if not ridiculousness; or else, they do know what they are doing, but have nothing but contempt for the reasoning powers of anyone outside their circle, and feel no need to justify their actions to such hoi polloi.

The sheer foolishness of arguments made to protect the status quo ought to lead the rest of us, particularly health care professionals, to question that status quo further. 

The ability of top executives of many, probably most health care organizations to collect bloated paychecks out of proportion to, if not despite their performance attracts the wrong people to lead these organizations, and provides incentives for even the right people to lead badly.

Until we make health care leaders accountable, and until their incentives reflect their ability to uphold the health care mission, expect more unaccountable leadership that subverts the health care mission, and hence continually rising costs, declining access, and deteriorating quality.
1:55 PM
A recent article in Becker's Hospital Review entitled, "6 Traits That Define a Great Hospital CFO" [Chief Financial Officer] was most remarkable for what traits were not included.

The Six Traits

Based on interviews with a managing director of health care recruiting for a large executive search firm, and an experienced CFO of large hospital system, the included traits were:
- "Conviction," including "some type of conviction and confidence that their decision-making abilities will lead the hospital to great healthcare outcomes, a healthy population and — as a result — a more financially stable organization."
- "Nimbleness and flexibility"
- "Calm demeanor"
- "Willingness to understand the clinical aspects," in particular, the ability to "at least understand the [clinical] processes from a layperson's point of view, and the most effective CFOs have great working relationships with physicians, nurses, technicians and others."
- "Ability to think long term"
- "Sense of humor"

To be fair, I am glad to see expectations that hospital leaders, even chief financial officers, know something about clinical care, and that they have some sort of commitment to it. This seems to be in contrast to our frequent posts about how the leadership of health care organizations often seems ignorant and uncaring about the health care context and health care values. (However, the phrase above about conviction was not clearly worded. In particular, it did not explicitly suggest quality clinical care ought to be a higher priority than revenue, and could have been read to mean that good care is just a means to increase revenue.)

I am also glad that the article promoted long-term thinking. It also seems to contrast with concerns (e.g., here) about how health care leadership may put short-term revenue ahead of all other goals, also called "financialization." However, again, the article did not explicitly give long-term goals a higher priority than short-term ones.

What was Missing

However, what was more striking were the dogs that did not bark. In particular, transparency, honesty and integrity or even being law-abiding were not on the list of key traits for a CFO. This is particularly noteworthy given how often we have discussed bad behavior by large health care organizations, including various kinds of deception and dishonest behavior, as well as outright crime, such as fraud, bribery or kickbacks, etc.

Also, the list of important traits did not include responsibility or accountability.   This is also noteworthy given that rarely if ever have the leaders of these organizations taken any responsibility or paid any penalty for bad behavior occurring on their watches. Although may large health care organizations have made numerous legal settlements of accusations that include fraud, kickbacks, etc, the leadership almost never admitted wrongdoing in any of them, and almost never had to accept any financial penalty form the organization. This parallels how the US legal system has rarely sought to punish any leader of a large health care organization in such cases, suggesting that health care leaders now have developed impunity.

Given that the article appeared in Becker's Hospital Review, a leading publication for hospital leaders, its apparent cynicism about what once were considered indispensable characteristics of good leadership was disturbing.  It is also disturbing that at the time this was written, the only comment on the on-line version of the article, also the only comment to note this lack, was written by your this humble scribbler.

Summary

This may test some CFOs' sense of humor, but instead let me propose my hopes for better health care leadership. To truly reform health care we should seek reasonable leadership that draws on the collective knowledge and values of health care professionals, and that shows accountability, integrity, transparency, honesty, and ethics.  Not asking our leaders to be honest, ethical and accountable just enables the current dysfunction. 
10:51 AM
While primary care falters in the US, those who teach it seem to feel increasingly poverty stricken.  Now it appears that one reason for this is an amazing example of multiple failures of transparency and accountability.  Let me work through it, begging your pardon for a little bit of "inside baseball," medical education style.  The results suggest how we desperately need some medical disciples of Sherlock Holmes.

Background

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

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

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

US Government Funding for Graduate Medical Education

However, several recent publications affirm that actually a lot of money goes towards one important form of medical education, yet the specifics of the money flows are shrouded in secrecy.  In the May, 2012, SGIM Forum, Dr Mark Liebow and colleagues summarized some of what is known about federal support of graduate medical education, that is, education of interns, residents, and other house officers.(4)  There are two streams of money that flow from Medicare to US hospitals:
Direct GME (DGME) payments help hospitals pay the salaries of residents, teaching faculty, and support staff. DGME is the product of three numbers: a per resident amount that varies by hospital, adjusted annually for inflation; the number of residents in the hospital (capped for each hospital at 1997 levels); and the fraction of discharges from the hospital that are Medicare beneficiaries. The Indirect Medical Education (IME) payment is a percentage amount added on to each DRG payment. The percentage is calculated via a complex formula (the only US statute containing an exponent!), where the key factor is the ratio of interns/residents to beds (IRB ratio).

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

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

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

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

The GME Money Vanishes

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

First of all, while the graduate medical education money is paid by the government to the hospitals, the government does not publish what it pays to individual hospitals:
It has been previously reported that the amount of GME funding individual hospitals receive is not publicly reported by the Centers for Medicare and Medicaid Services,....

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

Remarkably, Chaudhry et al imply that that the people who run graduate medical education teaching programs also may not know how much money their hospitals receive from the government to fund their programs. The introduction to their article noted:
It is unclear how much program directors know about the amount and flow of DME funds to their programs. Program directors' beliefs about the transparency of funding to their programs, or their desire to influence how funds are distributed to them, also are unknown.

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

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

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

Summary

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

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

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

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

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

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

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

Would our dysfunctional health care system not be better off if we demanded transparency and accountability from its leaders?  In particular, the US government should make payments to hospitals for graduate medical education completely transparent, and develop a system to hold these hospitals accountable for how they spend the money.  Meanwhile, top leaders of hospitals receiving this money should make the amounts transparent, first to the people who are supposed to be doing the education that the money pays for, and to the public at large.  This would allow those running the relevant educational programs to develop reasonable and realistic budgets, to treat their faculty with respect, and to demonstrate what value they provide for the money received. 
The ongoing anechoic effect, and related deception and secrecy fostered by leaders in health care are major reasons our health care system is so dysfunctional, that costs are so high, and access and quality so poor.  True health care reform would ensure health care leaders put the mission before their personal enrichment, and act ethically with accountability, transparency, and honesty. 
References
1.   DeAngelis CD. Professors not professing. JAMA 2004; 292: 1060-1.  Link here.
2.  Goldman L, Halm EA.  A view from the top: general internal medicine from the perspective of a chair and dean.  SGIM Forum, April, 2007.  Link here.
3.  Pololi L, Ash A, Krupat E.  Faculty Values in the Culture of Academic Medicine: Findings of a National Faculty Survey. Link here.
4.  Liebow M, Jaeger J, Schwartz MD. How does Medicare pay for graduate medical education? SGIM Forum, May, 2012.  Link here.
5. Chaudhry SI, Khanijo S, Halvorsen AJ, McDonald FS,Patel K. Accountability and transparency in graduate medical education expenditures. Am J Med 2012; 125: 517-522. Link here.
1:02 PM
Here is the latest story of health care corruption, this one involving a state legislator and a big hospital, as reported by the Newark Star-Ledger,


Former state senator Joseph Coniglio, who funneled more than $1 million in public funding to Hackensack University Medical Center after it gave him a high-paying consulting job, was convicted yesterday on six counts of fraud and extortion.

The jury of seven men and five women, who issued a split decision and were deadlocked on one of the nine counts, found Coniglio guilty on nearly all the charges involving the exchange of money.

The verdict, coming after four days of deliberations, found Coniglio guilty on five counts of defrauding the public and one count of extortion. He was acquitted on two mail fraud counts; the jury said it was unable to reach a verdict on a third mail fraud charge.

Coniglio, a retired union plumber elected to the Senate in 2001, first met in early 2004 with Hackensack University Medical Center's chief executive, John P. Ferguson -- about the time he was appointed to a seat on the influential Budget and Appropriations Committee -- and began negotiating for a $5,000-a-month consulting contract to do work that was never clearly defined. The consulting agreement was signed in May 2004 and Coniglio subsequently began lobbying to help secure a series of grants for the medical center's programs for abused children, its cancer center and children's hospital.

Prosecutors argued the consulting work was simply a guise to pay off Coniglio in exchange for his support for funding millions in special earmarks.

Assistant U.S. Attorney Rachael Honig, who agreed the case was circumstantial, told jurors corruption is secret and there is never a roadmap to detail it. 'People don't get paid to do nothing,' she said.

No hospital officials were charged, but one medical center executive had negotiated a non-prosecution agreement in exchange for testimony.


Note that this case is very similar to one in my state of Rhode Island. In that case, both a state legislator and a hospital CEO have been found guilty. (The CEO was just sentenced, as reported here in the Providence Journal.)

These cases are a reminder of the prevalence of out and out corruption in US health care. Indeed, Transparency International's 2006 Global Corruption Report argued that health care corruption is common throughout the world, in nearly all countries, regardless of their wealth, or the organization of their health care systems. Corruption misdirects health care resources, raising costs for all, and indirectly leads to restricted access to care. I submit that the corruption of people with decision making power in health care likely taints all their decisions, often to the detriment of patients and health care professionals.

Although not all health care corruption is discovered and successfully prosecuted, even those cases that result in convictions are often anechoic. If we cannot even talk about health care corruption, how are we ever going to do anything about it? But if we are not resolved to at least confront corruption, should we be whining about increasing costs, and declining access and quality?
1:14 PM
From the New York Daily News, here is a new twist on the conflicts of interest story. This is about two leaders of Wyckoff Medical Center in my hometown of Brooklyn, NY, the hospital's chief of surgery, Dr Addagada Rao, and its CEO, Rajiv Garg.

It turns out that Dr Rao has another position, this one far away at Spartan Health Sciences University, a medical school located on the Caribbean island of St Lucia:

The $400,000-a-year chief of surgery at Brooklyn's Wyckoff Heights Medical Center heads a Caribbean medical school that hopes will funnel medical students - and their money - back to New York, the Daily News has learned.

The surgeon, Dr. Addagada Rao, is the president of Spartan Health Sciences University in sunny St. Lucia. Last year he became one of a handful of owners in hopes of bringing third- and fourth-year medical students to Wyckoff to train - and to aid its ailing coffers.

'My association with Spartan is to fulfill my lifelong goal to educate all who are able and willing to pursue a career in medicine...' Rao is quoted on the medical school's Web site.

Mr Garg also has a role at Spartan,

Garg, 49, has been Wyckoff's $500,000-per-year CEO since November and is also an investor in Spartan. He told The News he stepped down as Spartan's chief operating officer after he got the top job at Wyckoff.


Meanwhile, the Daily News alleged:

Rao, 67, is in a position to make hundreds of thousands of dollars from the dual relationships.

The ability to train in New York is a big draw for offshore medical schools - especially if the school has an established connection with a hospital, experts said.

The state has approved Spartan students to do only 12-week stints in New York hospitals. Students pay between $4,000 and $5,000 for the training.

Wyckoff - and Rao - could make far more money if the state okays a pending request for Spartan students to do their full two years training at New York hospitals.


Dr Rao was asked about these relationships, and responded,

he saw nothing wrong with having outside financial interests.

'I disclosed this to the hospital,' he said, but declined to offer further details.

Asked if the hospital's board of trustees, of which Rao and Garg are members, approved the arrangement, he said: 'That was not necessary.'


It is still a little hard for me to understand how someone could be chief of surgery at a NY hospital and simultaneously the president of a Caribbean medical school, but setting that aside...

This story illustrates another twist on conflicts of interest affecting the leaders of not-for-profit health care organizations. Many of the smaller not-for-profit hospitals, of which there are thousands in the US, may have minimal conflict of interest policies, which may be minimally enforced, without much transparency or accountability. The coziness of the leadership culture of such smaller institutions may preclude anyone within the culture from asking tough questions. The results may be total confusion as to whose interests particular leaders are serving. In particular, the interests of each hospital's patients may get lost in the shuffle. In this case, the interests of medical students may also get lost in the shuffle. Although the institutions involved may be small, and hence the conflicts may seem small in terms of their monetary value, they aggregate to contribute to the moral miasma that now is the atmosphere of health care.
1:22 PM
Two recent articles featured more about gravity-defying compensation given to the leaders of not-for-profit health care organizations. We had recently posted about how the CEO of one not-for-profit health care insurer rose while the organization's revenue and enrollment fell. Similarly, from the Detroit News,


Blue Cross Blue Shield of Michigan -- the state's largest insurer -- gave pay hikes to six top-level executives in 2008 and doled out generous retirement packages for four former senior vice presidents, despite the nonprofit organization's loss of $144 million last year.

The organization's deteriorating financial health, a justification for Blue Cross officials wanting to raise rates on its line of individual insurance policies, had prompted widespread job cuts at the Detroit-based insurer.

In January, Blue Cross said it needed to eliminate about a 1,000 positions.

Despite those cuts, CEO Daniel Loepp received a compensation package of base salary, bonuses and other compensation totaling $1.8 million in 2008, up from $1.7 million in 2007.

The CEO's bonus last year was $727,575, up from $696,777 in 2007, according to documents filed last week with the Michigan Office of Financial and Insurance Regulation.

Blue Cross spokesman Andrew Hetzel said the 2007 to 2008 increase was to help bring Loepp's total compensation in line with CEOs at other comparable-size Blue Cross organizations nationwide.

The retirement packages -- ranging from $3.1 million to $994,132 depending on the executive -- were for four senior vice presidents who'd each been with the organization an average of nearly two decades, Hetzel said.

Hetzel added that all the senior level executives are taking pay cuts this year -- including a 5 percent reduction in their base salary.

And the compensation packages for 2008 were set by the Blue Cross board at the end of 2007, Hetzel added, well before the organization saw need to cut its work force.


Note how the pay of the top leaders of many health care organizations seems to defy gravity, going up faster than inflation, going up even when the organizations lose money, going up even when the organizations have to lay off workers. There is always an excuse. But in this case, once the miserable results of 2008 became clear, why could the board not re-assess the CEO's pay? Finally, note that even if there is a decrease in 2009, it is a decrease only compared to the elevated 2008 level.

Locally, the Boston Phoenix assessed the pay of the CEOs and other top leaders of all the states not-for-profit hospitals. Some of its main findings were -

The compensation of the CEO of the state's biggest hospital system is higher than any other New England hospital CEO:


Receiving almost $3 million in annual salary and benefits in each of the last two years, Lifespan CEO George Vecchione is the highest-paid health-care executive in New England. Vecchione collects almost $1 million more each year than the CEO at the region’s largest health care network, Partners HealthCare System in Boston, although Lifespan is much smaller than Partners, and New England’s second largest network, Caritas Christi Health Care, also in Boston. In 2007, only Lahey Clinic CEO David Barrett approached Vecchione’s compensation, thanks to a one-time supplemental retirement benefit of $1.5 million; even with that payment, Barrett received $300,000 less than the Lifespan leader.


The compensation of many RI hospital CEOs, and of other RI hospital leaders is high compared with peers in other states, and has risen much faster than inflation:


Modern Healthcare's executive compensation survey suggests that Vecchione is not the only Rhode Island health-care CEO who is paid well above the national median. When benefits, expenses, and long-term incentive plan payments are subtracted from Care New England CEO John Hynes's compensation package, the remaining $911,562 is well above the $570,000 median base pay and bonus paid to the 60 CEOs of small hospital networks surveyed in 2007.

Once benefits, long-term incentive pay, and terminated life insurance payments are subtracted, Women & Infants Hospital CEO Constance Howes received $481,625 in 2007, and Kent County Memorial Hospital's Mark Crevier collected $551,799. Meanwhile, salary and bonuses for Rhode Island Hospital's Amaral ($693,477) and Miriam's Hittner ($572,132), were more than $100,000 above the national median.

Several other Lifespan administrators received more than $500,000 in compensation in 2007: general counsel Kenneth Arnold ($623,902); treasurer Mary Wakefield ($672,057); chief physician Arthur Klein ($935,291); senior vice president for shared services Frederick Macri ($569,777); and Lifespan Physician Service Organization CEO Joel Kaufman ($542,162). No other Rhode Island hospital executives listed on the tax returns received more than $500,000.

Salaries at the smaller community hospitals present a mixed picture. Modern Healthcare's 2007 median compensation at independent hospitals with revenues under $200 million is $350,500. The CEOs of Westerly and South County hospitals and Roger Williams Medical Center were well below the median, while St. Joseph's John Keimig was slightly above. The 2007 salary and bonuses, however, for Memorial Hospital's Francis Dietz ($572,000), Landmark Medical Center's Gary Gaube ($673,164), and Rehabilitation Hospital of Rhode Island's Richard Charest (440,593) were considerably above the median.

Not only are compensation packages high, they have increased at incredible rates for some executives. Two Care New England executives watched their pay more than double over the last seven years, in part due to long-term incentive plan payments in 2007.

Butler Hospital CEO Patricia Recupero's compensation grew 117 percent, while Hynes' pay increased 107 percent. In addition, Landmark Medical Center CEO Gaube's compensation increased 107 percent as his hospital slid into financial insolvency. The compensation for three other CEOs, Memorial Hospital's Dietz, Emma Pendelton Bradley Hospital's Daniel Wall, and Lifespan's Vecchione, increased between 90 and 99 percent over the last seven years.

Three CEOs of Lifespan hospitals received lesser raises since 2000: Amaral (65 percent), Hittner (62 percent) and Newport Hospital's Arthur Sampson (55 percent). St Joseph Health Service CEO Keimig, who, like Amaral and Gaube, has resigned, received a 72 percent pay increase over seven years.


CEO compensation has risen quickly even at institutions whose finances are failing:


Increases in compensation for Gaube and Charest are among the most notable. In a December 2008 report, the state Department of Health labeled Landmark Rhode Island's financially weakest hospital. Landmark ran a small profit in 2004, but starting in 2005, the Woonsocket hospital slid into insolvency.

In June 2008, the Rhode Island Superior Court appointed a special master to run the troubled institution. Landmark also owns 50 percent of the Rehabilitation Hospital of Rhode Island
, where Charest served as president, as well as second in command to Gaube at Landmark.

While the hospital ran in the red, however, Gaube and Charest continued to receive raises. A review of the hospital's tax returns indicates that Gaube's compensation increased 37 percent, or almost $200,000, from 2005 to 2007. Over the same two-year period, Charest's pay increased 32 percent, or more than $100,000.


The article does provide some insight into the thinking of those in charge of awarding these bloated pay packages. For example, regarding the pay received by the Care New England CEO:


'John Hynes earns every penny,' says Care New England board chairman Jonathan Farnum, adding, that few people have the skill set to handle the job. He describes Hynes and Vecchione as workaholics who are always on call and constantly handling crises. 'The people are well-served,' Farnum says. 'I don't think they're [the CEOs] driven to maximize their own personal salaries.'

What a peculiar argument to make in a health care context. Lots of people in health care work long hours and are on call frequently, and unlike a hospital CEO, may have to handle life and death decisions in the wee hours of the morning. And most of them make far less than Hynes, who was still not the highest paid leader in the Phoenix article. What really seems to be the rationale, in my humble opinion, is the belief that the work of executives is somehow much harder and more deserving than the work of anyone else, including physicians.

Those who set executive pay were unmoved by the arguments that medicine and health care are callings, and that not-for-profit should not pay their executives comparably to the richest for-profit corporations:


With 10,000 employees and $1 billion in revenue, Lifespan is more like a for-profit health-care institution, [Lifespan board chairman Alfred] Verrecchia says, adding, 'We wouldn't be paying any different if we were for-profit or not-for-profit.'

Verrecchia also disputes the idea that high CEO salaries may discourage donations to the hospital. 'We're not receiving funds to manage day-to-day operating procedures at the hospitals,' he says. Fundraising pays for specific programs, he explains, like a new emergency or operating room.


In response, let me just quote more of the Phoenix article:


'They may be able to persuade donors of that,' counters Alan Sager, a Boston University professor of health policy and management, 'but money is fungible. Money can be moved.' Sager adds, 'If the CEO gets $2.9 million, that's money the hospital can't use to underwrite care for uninsured or underinsured people.'

Sager notes that 30 nurses could be hired with Vecchione's salary. 'Does this person do as much good in the world as 30 nurses?' he asks. 'I find that hard to believe.'


The follow up to that may make the most important point of all:


As president and CEO at Pawtucket-based toymaker Hasbro, Verrecchia was paid $8.4 million in 2006, and $16.5 million in 2007, according to Security and Exchange Commission documents. This is another part of the problem, says Sager: The corporate lawyers and executives who sit on hospital boards form 'a club' with the hospital executives, in which six- and seven-figure salaries are normal. The result, he says, is a 'financially combustible combination' for nonprofit hospitals.


That really seems to be the bottom line. As hospitals become more like big businesses, their leaders identify more with the power elite, or the "superclass," than with their staff, much less their patients. Their sense of entitlement grows, and their understanding of the problems of ordinary people wanes. Whether their devotion to the healing (and sometimes academic) missions of their organizations can survive under these circumstances is open to question.

(Note, for full disclosure: I am a part-time voluntary teaching attending at one of the Lifespan hospitals, if my position survives this posting.)
10:51 AM