Second Order Generic Management: Lobbyist Named CEO of American Hospital Association

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

For Whom Does the Center for the Protection of Patient Rights Advocate?

We have occasionally discussed the cases of  some patient advocacy organizations which seem to be influenced by substantial financial support from the health care industry.  For example, look here and here.  Related are "astroturf" organizations, which promote policies that may be favored by their industrial sponsors (e.g., here.)

Background on the Center for Protection of Patient Rights

The topic of this post is the Center for Protection of Patient Rights, which may have started out as something like an astroturf organization, but seems to have become something even more interesting.  The Center, which, by the way, seems not to have a web-site, was the subject of an investigative report in the Los Angeles Times in May, 2012.  Here is the article's description of how the Center began,

The Center to Protect Patient Rights was created in April 2009, just as the debate over the healthcare bill was heating up. The group's mission was to 'protect the rights of patients to choose and use medical care providers,' according to its corporate paperwork, filed in Maryland.

While never surfacing publicly, the center sent more than $10 million in its first year to groups such as Americans for Prosperity, which took a lead in protesting the measure.

'I think they saw what we were doing and liked it,' said Tim Phillips, president of Americans for Prosperity, which got $4.1 million. He said he did not know the source of the center's funding and declined to comment on whether it still supports his group.

So this group supported an advocacy position about health care reform, so perhaps it could be considered an astroturf organization, were we to know it was funded by the health care industry.  Many astroturf organizations do reveal support from particular corporations.  However, at the time the Los Angeles Times published the report, the source of the Center's funding was unknown. 

Secretive Leadership

Furthermore, while astroturf organizations may be eager to get more public notice, presumably so they can further their advocacy, the Center seemed oddly secretive.  Its executive director and president is one Sean Nobel.  However, as the LA Times article noted,

Noble did not respond to repeated phone calls and emails. Courtney Koshar, a Phoenix anesthesiologist and the organization's only other director, did not respond to requests for comment. And a Phoenix doctor who once sat on its board said he couldn't remember who asked him to join.

'I honestly played very little role,' said Dr. Eric Novack, who headed an organization called the US Health Freedom Coalition that received nearly its entire budget — $1.7 million — from the center to help pass a state ballot measure that aimed to block President Obama's healthcare overhaul.

Support for Political Organizations, not Health Care Advocacy

Even more curiously, despite its name, the most of the Center's spending was not for advocacy about health care reform, but went to organizations that  seemed to have little or nothing directly to do with health.  As the Times reported,

During the 2010 midterm election, the center sent more than $55 million to 26 GOP [Grand Old Party, that is, Republican Party] -allied groups, tax filings show, funding opaque outfits such as American Future Fund, 60 Plus and Americans for Job Security that were behind a coordinated campaign against Democratic congressional candidates.

It seemed that these grants were used for nothing that directly related to health.  For example,

The largest share of the center's money went to American Future Fund, a Des Moines-based group started by onetime GOP congressional aide Nick Ryan. The fund, which ran campaigns against two dozen Democrats in the 2010 election cycle, spent $23 million that period, tax filings show, with nearly $13 million coming from the center.

Its biggest target was an up-and-coming Iowa Democrat, Rep. Bruce Braley. In August 2010, American Future Fund launched an ad falsely claiming that Braley supported building a mosque at the former World Trade Center site in New York — the beginning of a $2-million fusillade that included radio ads, robo-calls and nine mailers.

A list of the recipients of the Center's 2010 grants was also publised in the LA Times here.

Where Did the Center Get its Support?

Just before this week's US election, the plot thickened.  The LA Times reported that because of the Center's obviously political activities in California, an effort was made to determine its source of funding, but that came up short.

After a frantic court battle, state election officials succeeded Monday in forcing an Arizona group to disclose the identities of contributors that provided $11 million to a California campaign fund.

But the revelations added little clarity for voters. The mystery donors turned out to be other nonprofits, whose individual contributors remained secret.

The money started with the Virginia-based Americans for Job Security and was transferred to a group called the Center to Protect Patient Rights. Over the course of a few days in October it was sent to the Arizona group, Americans for Responsible Leadership, and then transferred again to California.

Finding the source of the money 'becomes daunting,' said Derek Cressman of Common Cause, an activist organization that filed the original complaint about the donation. 'How many layers can you drill through?'

Note that in 2010, the Center for Protection of Patient Rights gave money to the Americans for Job Security, but in 2012, the latter organization gave money to the former - curiouser and curiouser. 

Allegations of Illegalities, Including Money Laundering

It turns out the Americans for Job Security has been in trouble before for activities that seemed contrary to state election law:

Americans for Job Security, one of the nonprofits involved in the $11-million donation, was investigated by Alaskan officials for its role in a 2008 mining referendum.

Authorities concluded that the organization's 'sole purpose is to allow individuals and corporations to financially support various causes without having to disclose that financial support.'

That investigation showed how a wealthy landowner sent $2 million to the group, which then funneled most of it back to Alaska to try to fend off construction of a mine near the landowner's property.

Americans for Job Security agreed to a settlement, paying a $20,000 fine and pledging 'not to engage in similar activity' again in Alaska.

In addition, the Mercury News reported allegations that the fund transfers by the Committee for the Protection of Patient Rights were illegal.

two conservative groups, Americans for Job Security and the Center to Protect Patient Rights, are part of a tangled web of so-called dark donors who operate largely out of public view, shielded by their status as nonprofit advocacy groups that are supposedly not involved primarily in politics.

While the groups have been identified, however, individual donors who have bankrolled them remain a mystery.

But 'this isn't going to stop here,' said Ann Ravel, chairwoman of the Fair Political Practices Commission, the state's political watchdog. 'They admitted to money laundering. We agreed to do this without an audit because we wanted to get information to the public before the election. But we in no way agreed this would preclude further action.'

The FPPC determined that the Arizona group, Americans for Responsible Leadership, had violated California campaign law.

Money laundering -- sending money through multiple sources to conceal the original donor -- is a misdemeanor. But a conspiracy to commit money laundering is a felony. It was not clear Monday whether the FPPC or the state Attorney General's Office will pursue criminal charges.

Summary

So the answer to the question posed in the title of this post is unknown.  At this point, there is nothing public that indicates for whom the Center for Protection of Patient Rights advocates.  However, it is hard to conceive that its advocacy is for patients. 

So rather than merely being an astroturf organization (a health care policy advocacy group funded by industry money), the benignly named Center for the Protection of Patient Rights appears to be a dark money group whose goals may have allegedly included money laundering to facilitate vast monetary influence on political campaigns by people and organizations whose identities remain secret.

We have often discussed the role of deception in health care, including stealth marketing, stealth public policy advocacy, and stealth lobbying.  Now we see health care being used as a vehicle for political deception, stealth political campaigns being disguised as stealth public relations campaigns.  The convolutions of the deceptions induce dizziness. 

Of course, this is the opposite of the sorts of transparency health care professionals and academics ought to support, and patients and the public ought to demand.  How will we ever improve health care when health care organizations are used to hide layer upon layer of deception?

Real improvements in health care require health care leadership dedicated to transparency, honesty, and accountability. 

1:55 PM

How Big Health Care Charities Rely on Lying Telemarketers

A modern day Diogenes searching for an honest organization in health care would have a very hard time.  Close to the "you can't make this stuff up" category is a new investigative report from Bloomberg on deceptive - to use a polite word - practices at some of the US' biggest health care charities.

Using Commercial Telemarketing Firms that Keep Nearly All Money Raised

The report showed how major US health care charities use privately held for-profit telemarketing firm InfoCision Management Corp to raise money, but most of the money raised went back to InfoCision.  The opening example was of a particular telemarketing call:

A woman named Robin said she was representing the American Diabetes Association.

Robin didn’t ask for money. She asked Patterson to stamp and mail pre-printed fundraising letters to 15 neighbors. Both of Patterson’s parents and one grandmother had been diabetic, so she agreed to do it, Bloomberg Markets magazine reports in its October issue.

'I thought since it does run in the family, it wouldn’t hurt for me to help,' says Patterson, 64, a retired elementary school teacher. She guessed, based on what she knew about charity fundraising, that about 70 to 80 percent of the money she brought in would be used for diabetes research.

The truth was almost the exact opposite. The vast majority of funds Patterson, her neighbors and people like them throughout the country would raise -- almost 80 percent -- would never be made available to the Diabetes Association. Instead, that money collected from letters sent to neighbors would go to the company that employed Robin and an army of other paid telephone solicitors: InfoCision Management Corp.

Just 22 percent of the funds the association raised in 2011 from the nationwide neighbor-to-neighbor program went to the charity, according to a report on its national fundraising that InfoCision filed with North Carolina regulators.

So while some American health care charities boast that most of the money they receive goes to programming, not management or fund raising, in this case, the opposite was true.

Many of the Biggest US Health Care Charities Were Involved

As the article stated,

Many of the biggest-name charities in the U.S. have signed similarly one-sided contracts with telemarketers during the past decade. The American Cancer Society, the largest health charity in the U.S., enlisted InfoCision from 1999 to 2011 to raise money.

Also,

In the past decade, many of the nation’s biggest health charities have hired InfoCision, including the American Heart Association, American Lung Association, American Society for the Prevention of Cruelty to Animals, March of Dimes Foundation and National Multiple Sclerosis Society.

Note that the Bloomberg article was focused on InfoCision. I suspect that if one were able to look at arrangements with similar telemarketing firms made by all US health care charities, the results might be even more extreme.

The Fund Raisers and the Charities Lied

The article contained instances in which the telephone callers lied about who they were or about where the money they were trying to collect would go.

First, regarding who the callers were:

The ruse begins with the name that flashes on your caller ID when a telemarketer is phoning on behalf of a charity. It’s the charity’s name that often shows up, not that of the telemarketing firm.

The misrepresentation can continue on the call itself. Solicitors in recordings obtained by the Ohio Attorney General’s Office sometimes identify themselves to potential donors as 'volunteers.' They’re not; they’re paid employees of InfoCision.

Second, regarding where the money would go:

The bigger lie telemarketers tell is what they say about how much money will go to the charities they’re working for.

According to documents obtained through an open records request with the Ohio attorney general, the Diabetes Association approved a script for InfoCision telemarketers in 2010 that includes the following line: 'Overall, about 75 percent of every dollar received goes directly to serving people with diabetes and their families, through programs and research.'

Yet that same year, InfoCision’s contract with the association estimated that the charity would keep just 15 percent of the funds the company raised; the rest would go to InfoCision.

This deception appears to be sanctioned by the leaders of the charities for whom InfoCision worked,

[American Diabetes] Association Vice President [Richard] Erb offers no apologies for the script, saying the association runs many fundraising campaigns and, overall, about 75 percent of the money goes to its programs. He acknowledges that the contract with InfoCision estimated that the telemarketer would get to keep 85 percent of the funds it raised.

Erb also says he isn’t happy that volunteers are upset upon learning the truth.

'Obviously, if people feel betrayed or that we’re not being honest with them, it doesn’t make me feel well,' he says.

The American Cancer Society similarly seemed to sanction deceptive fund raising practices.

The Cancer Society, in a Sept. 1, 2009, contract with InfoCision, estimated that the charity would get 44 percent of the amount the company collected in the following fiscal year.

The telemarketer script for the same year approved by the society for InfoCision asks solicitors to say something different: 'Overall, about 70 cents of every dollar received goes to the programs and services that we provide.'

Predictably, an executive for the society dodged responsibility for such lying:

[Greg] Donaldson, the society’s senior vice president, declined to comment on the contradiction between the contract and the script, saying the society doesn’t provide 'proprietary competitive information regarding individual programs.'

The Telemarketing Firm Stonewalls

While the Bloomberg reporters were able to get some health care "charity" executives to respond to the issues, InfoCision was not even slightly forthcoming. The best they could do was get an InfoCision executive to protest the company's importance for charity:

InfoCision Chief of Staff Steve Brubaker says his company is vital to the success of charity fundraising. Many nonprofits have stayed with InfoCision for more than 20 years, proving the firm offers value and integrity, he says.

'We’ve developed that high level of trust by being good stewards of their money and mission,' he says. Campaigns to develop new donors are more expensive than those seeking money from previous supporters, he says. He declined to answer specific questions, saying such information is proprietary to the company or its clients.

He turned down a request for interviews with Taylor and InfoCision executives.

Previously, the company owner had taken on the mantle now familiar in the current US election campaign, "job creator,"

[InfoCision founder Gary] Taylor was an outspoken opponent of efforts by the Federal Trade Commission in 2003 to begin the National Do Not Call Registry, allowing people to block calls from for-profit solicitors. In an interview with Customer Interaction Solutions, a trade journal, he said:

'The most pressing issue, without a doubt, is excessive governmental regulation. It seems that the politicians and regulators are ignoring the significant benefits we provide through job creation, economic growth and the goods and services we cost-effectively market for our clients.'

Keep in mind that the article documented how much of those jobs are minimum wage, and they may involve lying.

Note further that Taylor "got his start raising money for evangelical preachers." The company also " did fundraising for Citizens United, the conservative group best known as the plaintiff in the Supreme Court case that allowed unlimited independent spending by corporations and unions on behalf of political candidates."

Health Care Charities are Really Just "Businesses"

Underlying all this seems to be the transformation of health care from a calling to a business. While US health care charities have reputations as organizations out to do good, one executive, the American Diabetes Soceiety's Mr Erb, admitted that doing good was no longer really the focus,

'But the thing is, we’re a business. There has never been a time or a place where we said, 'Most of this money is coming to us.''

An expert the Bloomberg reporters interviewed said that the fund raising tactics these organizations used meant they were no longer charities. Per Ken Berger, "who runs Glen Rock, New Jersey- based Charity Navigator, the nation’s largest nonprofit watchdog group,"

'These organizations were created to provide public benefit,' he says. 'The fact that the vast majority of money is instead lining the pockets of telemarketers defies the whole reason behind the very creation of these charities.'

The Experts Say It's Fraud

Bloomberg reporters interviewed several experts on philanthropy and law. They were not amused. One suggested that the fund raising tactics described in the article were fraudulent:

Charities should be held accountable for deceptive fundraising done in their name, says James Cox, a professor at the Duke University School of Law in Durham, North Carolina, and co-author of 'Cox and Hazen on Corporations' (Aspen Publishers, 2003).

'If that’s what they do systematically, then they’re obtaining money under false pretenses,' he says. 'I don’t just think it’s incredible. I’d be surprised if it isn’t criminal.'

Another labeled the practices "deceitful."

Bloomberg cited a 2003 US Supreme Court decision:

While telephone solicitors have no obligation to volunteer what the firm’s cut is of each donation, they don’t have a constitutional right to lie, the court ruled in a 2003 Illinois case.

'States may maintain fraud actions when fundraisers make false or misleading representations designed to deceive donors about how their donations will be used,' the court said.

Summary

This horrendous story illustrates how the mission of health care has been undermined by the last 30 years' push to turn health care organizations into businesses at a time managers were indoctrinated that they only thing that matters is short-term revenue (that is, they have become "financialized," look here). Here we see ostensibly charitable organizations that solicit donations from the public supposedly to aid patients and support medical education and research willing to do whatever it takes to raise money, including deception, and what might be fraud. This is just disgusting.

In my humble opinion, patients, health care professionals, and the public should insist that health care non-profit organizations disclose their fund-raising tactics, and abandon any that are dishonest. Law enforcement should investigate to see if prosecutions for fraud or related crimes are warranted. Organizations that refuse to change their ways should lose their tax exempt status.

Meanwhile, I would suggest that everyone should be extremely skeptical of fund raising by major health care charities. In no instance should anyone give money solely based on telephone solicitations.

If we, health care professionals, patients, the public do not take our heads out of the sand and realize how dishonest health care has become, we will have only ourselves to blame when it collapses.

9:30 AM

When Does Lavish Executive Compensation Become "Embezzlement?"

A single article in the Miami Herald raises the question of when is excessive executive compensation in health care too excessive.  To set up the question, I will be quoting from the story in an order quite differently from how the story was presented.

Background

The story is about the executives of the Miami Beach Community Health Center, described thus:

Headquartered on Biscayne Boulevard in North Miami, the Miami Beach Community Health Center is one of the oldest and most well-respected public health clinics in Florida. It opened more than three decades ago, and now includes four locations, three on the Beach, including two sites that care for people with mental illness. The center employs more than 280 people, with a monthly payroll of around $1.2 million.

The health center’s annual budget is about $36 million — about one-third of which comes from private insurance, Medicaid, the state and federal health insurance for needy people, Medicare, the federal insurer for elders, and private payments.

The CEO's Compensation

Previous stories, and public records suggested that the Center's CEO, Kathryn Abbate, was very well compensated. First,

an October 2010 Miami Herald business story ..., relying on federal tax documents, reported Abbate’s compensation package as $824,000 in 2008. In the article, Abbate said the compensation package was inflated by cashed-out sick time, vacation time and a retirement account.

She did even better in subsequent years,

The Miami Beach Community Health Center’s federal tax report for 2010 indicates Abbate’s base salary was $261,165 — but includes an additional $956,584 in 'bonus and incentive' dollars that pushed her total compensation to more than $1.2 million. The center’s IRS disclosure for the prior year reported Abbate’s base salary as $970,532, and total compensation of $987,902. In 2008, Abbate’s total reported compensation was $824,686, records show.

The CEO got very generous compensation given the size of her organization.  This compensation was documented on forms the organization submitted to the IRS that were in the public domain.

However, as we have discussed many times before (look here), many leaders of health care organizations, including non-profit organizations, have been collecting very generous compensation.

The Role of the Board of Trustees

As we have discussed before, e.g., here, exceptional compensation for top hired managers is often justified by the governing boards, that is, boards of trustees or directors, to whom the hired managers nominally report.  These governing board members often seem to be working off a common set of "talking points." 

In this case, there was a difference. The Herald reported that the Centers board of trustees "never agreed to pay Abbate more than $300,000, [Center Chief Medical Officer Dr Mark] Rabinowitz said."

The board seemed totally unaware of what their organization was paying its CEO.

Rabinowitz and a health center spokeswoman, Alia Faraj-Johnson, said that board members they spoke to had not seen the [2010] newspaper story [about the CEO's 2008 compensation]until just recently, and acknowledged its content would have raised significant red flags.

'That would have tripped everybody’s light,' Rabinowitz said.

Why the board had never thought to look at the organization's own reports (990 forms) to the US Internal Revenue Service which detailed the executives' compensation, reports that were in the public domain, and are easily available online (look here), is unknown.

The article implied that the board was somehow not up to this task even though it has fiduciary responsibilities to oversee the top hired managers, oversee the overall budget, and try to maintain both the organization's mission and fiscal stability did not seem up to the task. The article noted,

board members remained unaware until last spring. Under federal law, at least half of the board members of federally subsidized health centers such as Miami Beach’s must be consumers of the clinic, and some of the clinic’s board members were simply ill-equipped to detect what the center calls a sophisticated financial crime.

The board members seemed to think that it was the job of the CEO's subordinates to keep tabs on her compensation,

'One of the sad things about this, regrettably, is that if the gatekeeper in this case, the chief financial officer, had done his job, a large portion of this would have been discovered a long time ago,' said Bill Dillon, a Tallahassee-based healthcare lawyer who is advising the center.

The Chief Financial Officer contended that he would not have been able to successfully blow the whistle:

[CFO Stanley] DeHart, who lives in Coral Springs, said he was aware of many of Abbate’s activities, but declined to alert the board of directors. 'The board of directors was very close to her, and I really thought they would not believe me,' DeHart said. 'They held her in very high esteem.'

DeHart and members of his staff 'discussed whistle-blowing,' he said, but they all agreed taking such an action was more likely to result in their firing than Abbate’s. 'I felt at the time, and I still feel, that I had no proof that the board of directors would accept.'

And, DeHart added, blame for the scandal should include outside auditors, who failed to raise any objections when Abbate wrote dozens of checks to herself for 'community development' — a department that regularly generated an enormous amount of 'abnormal activity.' DeHart said he told auditors he suspected something was amiss in the community development department.

'The external auditors had to have known about this,' DeHart said, 'because I laid it out to them in plain view. I did not hide anything.'

In fact, the CEO's total compensation, plus a variety of other payments she seemed to direct to herself, were not made clear until

May, after a routine audit required by federal funders turned up irregularities, said Mark Rabinowitz, an obstetrician and gynecologist who is the center’s chief medical officer. Abbate had written a check for $5,000 to herself, and cashed it, labeling the expenditure a 'community development' expense....

Only after that,

Calling the actions of their former administrator an 'outrageous betrayal of trust,' authorities with the Miami Beach Community Health Center are investigating what they call the theft of almost $7 million in taxpayer money by the center’s longtime chief executive.

Members of the health center’s board of directors fired Chief Executive Officer Kathryn Abbate, saying she diverted the nearly $7 million in money intended to provide healthcare for the needy to her personal use beginning in 2008.

Summary

So let me backtrack a bit. The board of a moderately big, non-profit community health center seemed to make no attempt to monitor the organization's finances, did not even review the organization's own filings with the US government, and therefore had no idea what they were paying their CEO. Nonetheless, they seemed to assume that the organization's finances would be kept in order by an executive who reported to that same CEO. When an audit ordered externally ordered revealed that the CEO was being paid much more than the board had assumed, they charged "embezzlement," again even though a good chunk of such payments were in the form of compensation reported to the US government.

The real distinction between this case and many other cases of huge executive compensation we have discussed is that in this one the board seemed to be trying to maintain "plausible deniability" of any knowledge of the CEO's compensation, even though supervising that compensation was its direct responsibility. In other cases, board seem fully aware of enormous compensation, but blithely dismissive of any concerns about it. 

So does this case could represent "embezzlement, " why were all the other cases of hired managers lavishly compensated not so regarded, even when their compensation was completely out of proportion to their known accomplishments, their organizations' financial performance, much less their organizations' fulfillment of their missions and positive impact on patients' and the public's health?  In many of those cases, the money paid out in executive compensation was also partially derived from taxpayers, and also was partially meant to "provide healthcare for the needy."

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


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

2:28 PM

Bloggers Can Spread the Word, Just Not About the Sponsors' Competitors

The internet, social media, web 2.0 etc have changed how important health care issues are discussed. So, it is not surprising that big health care organizations are trying to use these new media to promote their messages. New media, however, are no more immune from the effects of conflicts of interest than are old media.

An article from corporate communications company Ragan.com about how the American Heart Association (AHA) is using bloggers to get people interested in a heart-healthy diet and exercise program illustrates how even "civilian" bloggers can get caught up in the web of conflicts of interest that pervades health care. The background is:

Keeping track of the conversations on the array of social media networks can gobble up your workday. So why not find someone else to do it for you?

The American Heart Association did just that, approaching four established bloggers with a proposal: Write about our new campaign, Go Red For Women: BetterU, and we’ll link to your blog from our site. BetterU is a 12-week online nutrition and fitness program to improve heart health among women.

The blogs appear to be working. They’ve helped drive traffic to Go Red/BetterU since the program’s June 1 launch.

It did seem that the AHA went to considerable effort to make sure they had recruited just the right bloggers.

The AHA researched potential candidates with the help of agencies Edelman PR and Edelman Digital. After a month-and-a-half, they settled on four bloggers: Joshilyn, Nyasha, Stacey, and Nadia.

The criteria: The bloggers had to be female, have an enthusiastic following, be diverse in age and ethnicity, and have a high Technorati rating. Most important, their content and advertising had to align with the association’s values, says Director of Marketing Anu Gandhi.

'You’re really ultimately picking a spokesperson for Go Red for Women and the larger American Heart Association,' [senior manager for cause communications Megan] Lozito says. 'That’s a really important process for us — that it be correct and that it be the right people. So we spent a lot of time getting to know those ladies and making sure our mission would be aligned.'

More interesting was the values with which the bloggers were supposed to align, particularly those relating to the program's corporate sponsors (see the logos at the bottom right of the BetterU web-site).

From there, the association brought the bloggers to the Dallas headquarters for a full health screening at The Cooper Institute, a photo session, a preview of the BetterU program, and some message training.

Although the BetterU bloggers got some message training in Dallas, Gandhi says AHA has been hands off when it comes to what they can and can’t say about the program.

The bloggers are asked to post once a week about BetterU and follow basic guidelines—no profanity, no defamation, no writing about nor condoning any medications or treatments. She says they also ask bloggers not to talk about competitors of AHA’s two national sponsors: Macy’s and Merck Pharmaceuticals.

I would suspect that the explicit instruction not to favor Merck's competitors would also remind the bloggers not not do say anything that might make the giant pharmaceutical company unhappy.

Eight weeks into the program, they haven’t had any problems.

'There are things we don’t want them to write, like profanity, but that’s also part of the vetting in the beginning,' Lozito says. 'We wanted to find people who believe in our mission, who speak to the same type of audience, but at the same time we want them to have their own flavor and own tone, because it’s a blog.'

So the bloggers recruited by the AHA may be happy, since they now have a big organization's web-site driving traffic to their blogs. The AHA may be happy, since the bloggers can spread the word about their BetterU program. I imagine the marketers at Merck may be happy too, since the bloggers have been warned about the need to keep the corporate sponsors happy. However, what may be good for all the parties in this transaction may not be so good for the general public, as another opportunity for uninhibited, honest discussion of health care issues has been lost.

This is an explicit example of the adverse effects of commercial funding of not-for-profit disease advocacy groups. Corporate sponsors may not expect anything as gross as advertising in return for their money. However, they may expect something more subtle, a generally favorable attitude toward the sponsor, at least the disinclination to say anything that might put the sponsor in a negative light. After all, politeness requires that we be nice to the people who are nice to us. But being nice to sponsors may not be so nice for the people that a health care not-for-profit organization is supposed to serve.

PS - for those who like science fiction, see the preview of the new version of "V," in which Anna, the leader of the Visitors, an invasion force disguised as human-appearing, benign aliens, warns her television interviewer,

Just be sure not to ask anything that would put us in a negative light.

12:56 PM

"Man's Best Hospital," Run by the Boss of a MECC (Medical Education and Communications Company)?

In January, 2009 we posted about how the CEO of Blue Cross Blue Shield (BCBS) of Massachusetts and of Partners HealthCare, made a secret oral agreement that BCBS would pay Partners at a higher rate than that given to other hospitals.

Why BCBS would want to pay so much to this one hospital system was never clear. Partners does include some extremely prestigious hospitals, including the Brigham and Womens Hospital, and the Massachusetts General Hospital, ("Man's Best Hospital" in the House of God), but there are some other very prestigious teaching hospitals in Boston that were not blessed by BCBS' largess.

We speculated about one possible cause: the leadership of the two organizations may have felt they had more in common with each other than with the constituencies of their own organizations. A few leaders of each organization had direct ties to the other. Many leaders of both organizations were simultaneously leaders of finance, the same sector that has brought us what is now called the Great Recession. Leadership of both organizations had conflicted loyalties. The organizations' CEOs at the time, and many members of their boards had divided loyalties and apparent conflicts of interest. For example, Jack Connors, the chair of the Partners HealthCare board, is also the Chairman Emeritus of marketing communications company Hill, Holliday, Connors, Cosmopoulos Inc, whose clients include pharmaceutical and pharmacy benefits manager CVS / Caremark, and is also a member of the board of directors of Covidien, a medical device company.

The Boston Globe just published a report that Mr Connors had even more intense conflicts that had not heretofore been made public.

He's chairman of New England's largest healthcare company, and that position atop Partners HealthCare has tested the limits of Jack Connors's considerable corporate dexterity.

Though he has no background in medicine, Connors has been Partners' chief overseer, champion, and its most public face for 13 years.

[One board member] is the cofounder and chairman emeritus of Partners' advertising firm. That would be Jack Connors. And that potential point of conflict has been disclosed....

But to the chagrin of some former board members, never brought up for board review was Connors's stake in a leading medical education firm whose sale in 2004 made Connors a very wealthy man.

Nor has the board notified public officials of Connors's ownership of a fledgling home healthcare firm that has directly solicited Partners' hospitals for business.

Connors and top Partners officials defended the decision not to publicly disclose Connors's potential conflicts, saying that because Partners did not directly contract with either of Connors's firms there were no conflicts to report. Connors also defended his right to be an entrepreneur in the healthcare business while also chairing Partners' board, and strongly denied ever using his position for personal or financial advantage.

The larger company, M/C Communications, grew to become the biggest commercial provider of continuing education to physicians in the decade between its inception in 1994 and when Connors sold it in 2004. It profited hugely from an exclusive commercial relationship it maintained with Harvard Medical School, whose faculty teach at seminars the company holds. Partners' signature institutions, Massachusetts General Hospital and Brigham and Women's Hospital, are major teaching affiliates of Harvard Medical School.

In addition, M/C Communications benefited financially from millions of dollars in sponsorship revenue paid it from major pharmaceutical firms eager to play to this professional audience.

Connors said he was under no obligation to disclose his ownership of M/C Communications to the Partners board. He said that while there is an 'affiliation' between Harvard Medical School and the two Partners hospitals, there is no formal contract between them.

Connors said he informed Partners executives of his ownership of M/C Communications, and that they determined it did not warrant disclosure to the full Partners board.

'There is no contract between Partners and Harvard,' Partners said in a statement to the Globe.

Connors made a name for himself as an executive with Hill, Holliday, Connors, Cosmopulos, the Boston advertising company that he helped found and guided throughout a long career. Less well known is that he made most of his fortune from M/C Communications, which he sold to Bain Capital for $450 million in 2004.

The sale was the largest of a private healthcare-related company in Massachusetts that year, according to TM Capital Corp., an investment banking company. Connors, who led an investor group that bought the firm outright for $13 million in 2000, made about $250 million from its sale.

After his 2004 windfall, he founded a company that helps elderly patients readjust to life at home after a hospitalization.

That company, Dovetail Health, has - Connors acknowledged - solicited business from hospitals owned by Partners. And Connors confirmed that after Dovetail executives failed to convince Blue Cross Blue Shield of Massachusetts to contract with the firm, he personally spoke to the giant insurer's president, Cleve L. Killingsworth, on Dovetail's behalf. Partners and Blue Cross Blue Shield regularly negotiate over $2.5 billion worth of medical business a year.

Connors acknowledged in an interview that it might have appeared 'inappropriate' to some for him to pitch Killingsworth. But he said the conversation stemmed from a shared belief that new ways must be found to reduce frequent return trips of elderly patients to the hospital. More recently, however, he said he does not believe his approach to Killingsworth was inappropriate.

So let's try to recap this.

While Jack Connors has been chairman of the board of Partners HealthCare, the largest and most prestigious hospital system in Massachusetts, he also ran an advertising agency that did business with Partners, and has been on the board of Covidien, a medical device company. Both of these relationships he disclosed to his fellow board members, although no one seemed troubled by them.

However, while a Partners board member, Connors was also the founder, and ultimately profited very handsomely from the sale of M/C Communications. M/C Communications apparently begat M/C Holding Corporation, which in turn owns M/C Communications and Pri-Med Institute LLC. M/C Communications now describes itself as " established in 1994 and has become a leading provider of medical education event management solutions for health care professionals and others around the globe." M/C Communications runs Pri-Med, which is described thus: "Pri-Med is a platform for science and medicine that includes meetings, resources, online, and new media tools designed to meet the information and education needs of today’s practicing physician." Pri-Med markets itself to industry, presumably the pharmaceutical, biotechnology, and device industry, "Sixty percent of doctors’ offices restrict rep access, making it more challenging than ever to get in front of your customers. But with Pri-Med, you get to meet clinicians in a professional environment where they seek you out. More than 66% of attendees say they come to Pri-Med events to meet you, industry representatives." So Connors' company was a medical education and communication company (MECC), which provided what appeared to be educational programs to physicians that in fact were also sold to the health care industry as marketing opportunities.

So Partners HealthCare, which includes two of the world's most prestigious teaching hospitals, has been run by the boss of a MECC? Say it ain't so.

Not only did Connors own a company that had an exclusive contractual relationship (as described above) with the Harvard faculty who staff the main Partners HealthCare hospitals, that company was engaged in marketing the products of sponsoring drug and device companies disguised as education. Finally, Connors denied that this presented any kind of conflict of interest, because Partners HealthCare has no explicit contract, just an "affiliation" with Harvard Medical School.

Finally, just to ice the cake, Connors' latest venture is a home health care company that did business with Partners, and tried to do business with BCBS, spearheaded by Connors' direct conversations with the BCBS CEO.

Jack Connors thus seems to have just become the latest poster boy for leaders of health care organizations who put their personal financial interests ahead of their responsibilities to those organizations, and function as a power elite whose collective interests trump those of the constituents of the organizations they run.

Quoting from BoardSource, the main duties of the leader of any US not-for-profit are:

Duty of Care

The duty of care describes the level of competence that is expected of a board member, and is commonly expressed as the duty of 'care that an ordinarily prudent person would exercise in a like position and under similar circumstances.' This means that a board member owes the duty to exercise reasonable care when he or she makes a decision as a steward of the organization.

Duty of Loyalty

The duty of loyalty is a standard of faithfulness; a board member must give undivided allegiance when making decisions affecting the organization. This means that a board member can never use information obtained as a member for personal gain, but must act in the best interests of the organization.

Duty of Obedience

The duty of obedience requires board members to be faithful to the organization's mission. They are not permitted to act in a way that is inconsistent with the central goals of the organization. A basis for this rule lies in the public's trust that the organization will manage donated funds to fulfill the organization's mission.

By leading companies that did direct business with Partners and its staff, and failing to disclose that he was doing so to his fellow Partners board members, Connors appeared to have violated the Duty of Loyalty.

By running a MECC that helps drug and device companies market to physicians in the guise of education, using faculty from the academic teaching hospitals that he lead, Connors seems to have mocked the mission of the academic hospitals within Partners, and thus appeared to violate the Duty of Obedience.

This episode certainly does suggest that health care, and the organizations involved in this case, are lead by an "old-boy network," as one person interviewed for the Globe article suggested. More than just an old-boy network, they seem to be lead by chummy members of the power elite whose collective personal interests supersede the missions of the organizations they are supposed to steward. When this happens, is it any surprise that health care becomes less accessible, more expensive, and of lower quality?

Yet challenging the power elite that are increasingly revealed as controlling much of health care seems to be something that one cannot talk about when discussing health care reform. However, failing to address this problem will likely doom any effort, no matter how well intentioned, to improve health care.

Hat tip to and see comments by Alison Bass on the Alison Bass Blog.

ADDENDUM (3 June, 2009) - See also comments by Dr Daniel Carlat on the Carlat Psychiatry Blog.

11:37 AM

IRS Changes Form 990 to Make Not-for-Profit Organizations More Transparent and Accountable

In the US, many important health care organizations are not-for-profit organizations. Many US medical schools, and other health educational institutions, along with their parent universities are not-for-profit. (Essentially all the exceptions are supported by local or state government.) The majority of US hospitals and hospital systems, including academic medical centers, are not-for-profit. Some managed care organizations are not-for-profit. Medical and professional societies, health care advocacy groups, health care charities, and a variety of other groups are not-for-profit.

Not-for-profit health care organizations here have hardly been immune from leadership and governance problems. We have discussed numerous instances of ill-informed, conflicted, and even corrupt leadership of these organizations, and underlying problems with their governance, which may be unrepresentative of key constituencies, unaccountable, secretive and opaque, and not subject to clear ethical rules.

There may be some major changes coming, however, affecting leadership and governance of all US not-f0r-profit organizations, including health care organizations. The US Internal Revenue Service (IRS) has long required that not-for-profits that exceed certain minimums file and make publicly available certain information on a form 990. Relatively recent forms from most US not-for-profits are available online from Guidestar.org. The old forms provided for some minimal transparency. They displayed, for example, a list of the filing not-for-profit organization's trustees, and the salaries and retirement plans given to their five highest-paid employees.

The IRS has revised the forms starting with those to be filed in 2009, which will reflect 2008 data, so as to markedly increase organizational transparency. The actual forms can be found on this IRS web-page, and a discussion of key points can be found here on the GuideStar.org web-site.

For the first time, the forms will include information about certain aspects of leadership and governance.

Leadership Conflicts of Interest

The new form 990 will require each organization to establish the "independence" of the organizations' trustees, directors, officers, and key employees. Independent individuals would be those without any direct or indirect business relationships with the not-for-profit organization; without any relatives with such business relationships; and who were not serving as an officer, director, trustee, key employee, partner, or member of an organization doing business with the not-for-profit organization. The relationships preventing individuals from being independent would have to be documented.

It is likely that perusal of such information on the new form 990 would reveal to some extent the degree the organization's leaders are conflicted. Up to now, it has been very difficult to get information about conflicts affecting the leadership of health care organizations. We have reported numerous cases of seemingly high-level conflicts affecting leaders of not-for-profit health care organizations. It is likely that such conflicts affect the ability and inclination of leaders to uphold their organization's mission, that is, to fulfill their duty of obedience.

Leadership Compensation

The new form 990 will ask for detailed information about the total compensation given to officers, directors, and trustees, key and the five most highly paid employees, and former officers, directors, trustees, key and most highly compensated employees who continued to receive substantial amounts. This will include not only reportable and other compensation, but whether anyone received unusual compensation such as first-class or charter travel, companion travel, tax indemnification for gross-up payments, discretionary spending accounts, housing allowance or residence for personal use, payments for business use of personal residence, health or social club dues or fees, and personal services (e.g., maid, chauffeur, chef). Also, the form inquires about severance packages and supplemental non-qualified retirement plans.

Up to now, little information about the compensation of not-for-profit leaders beyond base salaries, contributions to employee benefit plans and deferred compensation, and expense allowances and the like was available. Clearly, while not reaching the stratospheric levels enjoyed by top leaders of for-profit health care corporations, some leaders of not-for-profit health care organizations have come to be paid enough to make them rich. It is possible that some now regard their positions as first a pathway to wealth, rather than a calling to improve the health of society, or to advance medical education or science. Furthermore, it is possible that some leaders have been receiving additional compensation which has made them even more wealthy, while particular "perks," like staffed houses, chauffeured cars, and first-class travel, has isolated them from the patients, clients, and/or students they are supposed to be serving.

Organizational Policies

The new form 990 will ask whether the organization has a written conflict of interest policy, and if so, how compliance is monitored and enforced, and a written policy to protect whistle blowers.

Summary

In my humble opinion, the IRS' new form 990 could make substantial improvements to the transparency and accountability of not-for-profit health care organizations. Review of form 990's filed starting this year could provide important information about conflicts of interest affecting organizational leaders, whether they have been distracted by new-found wealth, or decoyed by luxurious perks, and whether their organizations have clear policies meant to maintain certain ethical standards.

However, while the IRS will mandate that such information becomes available, it is not clear what it will do about the information so revealed. Additionally, the wealth of information that will be provided could easily bury the few watchdogs, including the Health Care Renewal bloggers, that have been trying to monitor the governance and leadership of health care organizations.

However, the new information provides an important opportunity to other people concerned about these issues. For example, perhaps some health professionals have concerns about how their alma maters are lead and governed. Maybe they will peruse the new information provided, and then try to use it to make their alma maters more accountable. It is at least possible to be optimistic.

What Is to Be Done?

If you are concerned about a particular not-for-profit health care organization, you can prepare for the availability of more information from the revised form 990 in several ways, by searching for already publicly available information. You can peruse older form 990s, which at least provides the names of trustees and officers, and officers' and key employees' salaries.

In addition, the web makes it possible to identify some conflicts of interest affecting current leadership. For example, try first entering each leader's name, surrounded by quotes, into Google, to look for biographical information that could reveal conflicts. Next, try searching on the name plus terms like "board of directors," "board of trustees," "consultant," or "advisory board," which may uncover some additional conflicts. If you find anything of concern, consider making it more public.

Remember, the best way to improve health care leadership is to hold it accountable to an activated public, preferably strongly infused with health care professionals who want to uphold their professionalism.

12:15 PM