Guest Post: A Physician Rebels Against Micromanagement by "'Leadership-Trained' Management Extenders"

Health Care Renewal presents a guest post by Dr Howard Brody, John P McGovern Centennial Chair of Family Medicine, Director of the Institute for Medical Humanities at University of Texas - Medical Branch at Galveston, and blogger at Hooked: Ethics, Medicine and Pharma.

I recently heard from a physician whom I knew well in an earlier stage of her training—I’ll call her Pauline. She completed her training at one of the top children’s hospitals in the US, and served in several capacities in academic medical centers before her most recent job with a physician-owned for-profit practice. She called me to express her frustrations and to ask if the right course for her was to quit doing clinical medicine.

Pauline had become skilled in her earlier jobs in providing primary care for children with severe chronic conditions. Her reputation was such that when she was settled in her current post, pediatric subspecialists started to refer their difficult cases to her for follow-up. This patient mix did not suit her current employer for two reasons. First, these children were hard to take care of and even though they could have their visits “up-coded” to reflect their complexity, the practice much preferred to see healthy children with colds and earaches that could be moved through quickly and who did not demand much staff time and attention. Second, most of these children with special needs were on state insurance, which did not pay as well (even after up-coding) as the private insurance the practice coveted.

Pauline found herself constantly struggling with her co-workers and superiors in order to deliver all of her patients—not just the special-needs kids—the quality of care she had been trained to demand. As far as the practice was concerned, it was Pauline, and the medically complex kids she was attracting into the practice, who were the problem.

One recent incident had especially concerned Pauline. She had set up a visit to see a new medically complex patient and had blocked off 40 minutes, the amount of time she felt she needed to do a good job. The child had a complex genetic disorder, cerebral palsy, and heart, lung, and kidney problems.  Both the cardiologist and the nephrologist had called asking her to take this patient.  She agreed.  After she had scheduled the visit, a manager called her and told her that she was being allowed only 15 minutes to see that patient. After some fruitless discussion with him, Pauline finally said, “Okay, I guess that means that you’ll be seeing the patient instead of me, right?” The shocked voice at the other end of the phone line replied, “What do you mean? I don’t know how to take care of patients.” “That’s exactly my point,” Pauline put in.

Pauline explained that this manager assigned to her office is not even a college graduate. Physicians cannot access the schedule electronically and have no control over scheduling. These functions are controlled by the office manager and (amazingly) by some of the medical assistants who have received some “leadership” training. These medical assistants are even allowed to evaluate the clinical competency and skills of the physicians.

Now, at this stage, I can imagine a response from a management-trained person. Pauline is obviously one of those starry-eyed idealist physicians who believe that money grows on trees and that costs should never be a factor in caring for patients. Somebody who actually knows what it means to make a payroll and keep the lights on has to step in and rein in these physicians. There has to be somebody in the system someplace with a head for business, who can recognize the stark realities of what today’s practice demands from all parties. Physicians should get off their high horses and stop imagining that they can give orders to everyone else.

So let me add a further nugget about Pauline’s background. In one of her previous jobs, she was made the manager of a pediatric outpatient center within a county hospital caring for a largely indigent population. This center had been running in the red for a good while. Pauline took over and within 28 months she’d streamlined the place and had them running well in the black, while still administering a quality of care that Pauline and her colleagues could be proud of. In short, Pauline could probably tell the managers of her current practice a thing or two about how to optimize patient scheduling without compromising care or cost —if they’d listen.

Pauline probably has a nearly-unique skill set in her community and has put in a lot of years of training and experience to get there. Due to the present state of American medicine, and those who want to run it as if it were an industrial operation to make a profit, Pauline is thinking about leaving clinical practice altogether despite her relatively young age – and she has several colleagues, who trained in the same way that she did, who are considering this option.

Fortunately, Pauline has at least for now postponed any final decision about leaving clinical medicine entirely. Here’s what she last told me:

I am leaving the organization - I cannot remain in an organization where profit comes ahead of quality - and as a former medical director who had financial accountability/responsibilities, I know it does not HAVE to be a choice.  I do not know what my next steps will be from here.  For me, working with integrity, compassion and a desire for excellence is not negotiable.

Physicians MUST become better advocates for our profession.  For too long, we have been asleep at the wheel while insurance companies and corporations shaped the environment in which we practice.  We cannot allow this to continue.  We are professionals, not vocationally educated medical automatons  who need every moment of work day micromanaged by 'leadership-trained' management extenders who have no idea what it means to take responsibility for patients.  

Dr Howard Brody

"Why Do We Always Need to Blame Somebody?" - An Investment Banker Pushes Back Against Health Care Leadership Accountability

One of the many dramatic stories generated by the destructive Hurricane Sandy illustrated, oddly enough, the influence of big finance on American academic medicine.

Vivid video showed patients being carried down darkened stairways after flooding and a power failure at Langone Medical Center in New York (for example, see this CNN story.)  Amazingly, all the patients survived, thanks to heroic work by health care professionals and first responders.  CNN noted, "Some 1,000 staff members -- doctors, nurses, residents and medical students -- along with firefighters and police officers evacuated the patients."

The medical center suffered significant damage beyond that caused by the blackout.  A New York Times story about the problems was entitled, "A Flooded Mess that was a Medical Gem."  It noted the hospital's basement flooding destroyed major equipment like MRI machines, a linear accelerator and a gamma knife.  An animal research facility was destroyed and most of the animals died.  A renovated lecture hall and the library were ruined.

What Went Wrong?

However, soon after the debate began about why the hospital flooded and power failed.  A Bloomberg story stated,  

New York University Langone Medical Center, the 705-bed hospital in lower Manhattan that assured city officials it was ready for Hurricane Sandy, stood dark and empty a day after the storm rolled through.

That story raised questions whether hospital leadership gave adequate priority to infrastructure like generators, or put too much emphasis on spending likely to produce more rapid rewards.

Blame is being placed on the building’s outdated backup power system, which has raised concern that aging infrastructure at U.S. hospitals has created a risk for similar outages that jeopardize patient care.


'Hospitals are careful to get the latest and greatest medical equipment, but then they don’t spend on the infrastructure,' Michael Orlowicz, a principal at consulting company Lawrence Associates LLC, said....

A story on ProPublica (available on Salon) noted,

Experts say such failures are troubling but not entirely surprising. Dr. Arthur Kellermann founded the emergency department at Emory University and headed it from 1999 to 2007. Now, he’s Paul O’Neill-Alcoa Chair in Policy Analysis at RAND Corporation think tank.


The other night, as the NYU evacuation was unfolding, he tweeted, 'Hospital preparedness and well-functioning backup systems are a costly distraction from daily business, until they are needed. Like now.'


In an email interview with ProPublica, Kellermann elaborated: 'I have no doubt when the hospital assured the Mayor that their backup systems were ready, they believed they were. They were wrong. What I find most remarkable about this story is that [more than seven] years after Hurricane Katrina, major hospitals still have critical backup systems like generators in basements that are prone to flooding.'

Similarly, a Reuters story included another quote from Dr Kellermann,

'I've been asking hospitals to look at their own survivability' after a natural or manmade disaster, 'and I just can't get it on their radar screens,' said Dr. Art Kellerman,...

 
It added,

For hospital administrators trying to keep their institutions in the black, disaster-resistant infrastructure is expensive and lacks the sex appeal of robotic surgery suites and proton-beam cancer therapy to attract patients.

'People don't pick hospitals based on which one has the best generator,' Kellerman said. 

The notion that hospital leaders may put short-term revenue ahead of long-term infrastructure development, even when such development might be critical for patient safety, should not surprise Health Care Renewal readers.  Hospitals are often lead or influenced by those who believe maximizing short-term revenue should be the main goal of all management, an over-generalization of the idea promoted in business schools for a generation that business leaders should maximize "shareholder value," which has come to be defined as short-term stock price (see this post).

  Who Defended the Disaster Planning

 In response to this or anticipated criticism, leaders of Langone Medical Center deployed.  Not unexpectedly, one was Richard Cohen, the vice president for facilities, as reported by ProPublica, via the Huffington Post,  

After Hurricane Irene, officials at NYU Langone Medical Center spent several million dollars protecting its backup power system from flooding, according to Richard Cohen, vice president of facilities operations.

The hospital removed a fuel tank and a set of emergency generators at street level and chose to depend on what Cohen termed an 'extremely modern, extremely reliable' system of rooftop generators.

The hospital also built a new, flood-resistant house for pumps that draw fuel from the hospital's sealed underground tank and feed it to the generators that make electricity when New York City's power fails.

One vulnerability remained, and it proved to be the system's Achilles Heel. A portion of the hospital's power distribution circuits, which direct the generated electricity out into various areas of the hospital, were located in the hospital's basement.

'It's like what happens when you have a flood in your basement and the electrical panel is in your basement,' Cohen said.

Oops.  Why a crucial component of the system meant to protect the back up power system from threats including flooding was placed in an area at risk from flooding was not clear.   Only one story I could find (in the NY Times) included a response by the Dean of the Medical School and CEO of the Medical Center Dr Robert I Grossman.

At this point, Dr. Grossman said, he could only theorize as to why the generators had shut down. All but one generator is on a high floor, but the fuel tanks are in the basement. The flood, he said, was registered by the liquid sensors on the tanks, which then did what they were supposed to do in the event, for instance, of an oil leak. They shut down the fuel to the generators.

Oops again.  Why an effort to flood proof the hospital included an undeground fuel tank which could not be operated if water got near it was also not clear. 

The most voluble defender of the hospital's management proved to be one Mr Kenneth Langone.  As noted in a blog post in the Wall Street Journal, Mr Langone is the medical center's "board chair and benefactor."  In fact, as the NY Times reported in 2008,

Kenneth G Langone, a billionaire financier and founder of Home Depot, is giving another $100 million donation to New York University Medical Center, matching the one he made anonymously in 1999. 

In return, the university plans to name the medical center the N.Y.U. Langone Medical Center,....

The WSJ blog post asserted,

Langone said the hospital 'frequently' tested its generators and they had passed the tests, and the hospital was prepared for a 12-foot storm surge. 'We anticipated 12-foot surges, which we knew we could handle. We got 14-foot surges,' he said.


Some of the hospital generators were in the basement, which flooded. Langone acknowledged that the generators were 'not in the right location,' but that was an artifact of aging facilities undergoing an extensive upgrade. 'They’ve been there for years,' he said of the generators in the basement. As part of a $3.2 billion modernization, NYU Langone was planning on buying new generators and locating them in better locations than the basement, Langone said.

Oops one more time.  Mr Langone seemed to only offer inertia as an excuse for why some generators remained in the basement after an effort to flood proof the back up electrical system.
Langone was quoted in the CNN story mentioned above,

Kenneth Langone, the chairman of the hospital's board of trustees who also happened to be a patient there until he was discharged Tuesday morning, said that regulations require the generators to be tested regularly and that they've worked every time.


Langone said the hospital is in the midst of an 'enormous' building campaign. The generators are going to be replaced in a renovation, he said.

In a Bloomberg story, Langone was quoted again,

'We believed the machines would work, and we believed everything we were told about the scope and size of the storm,' Langone said.

 In that story, he tried to deflect attention from tha apparent infrastructure failure, and presumably the responsibility of the organization's leadership for it, to the efforts of health professionals,

'The backup generators failed, it’s that simple, but the story here is the magnificence of the effort of all of our people and what they did,' Langone, 77, said yesterday....

He also defended the relatively silent Dean and medical center CEO,

'What this dean has done is nothing short of spectacular, in every respect,' Langone said of Grossman. 'So last night God decides to give us a test and our machines failed.'

The story ended with yet another of his attempts to deflect attention to management's responsibility,

'Machines fail, airplanes take off in great shape and they have malfunctions,' Langone said. 'Why do we always need to blame somebody for something that could just have happened? Why not write a story about what people did because things happened? Let’s be a little positive once in a while.'

And in the WNYC News Blog, Langone appeared yet again with this apologia, 

He said hospital pumps failed, because they were overwhelmed by an event that was 'unprecedented' and 'an act of god.'


'The generators are on the seventh floor, and the fuel supply is in cement vaults in the basement, where they're supposed to be according to code,' Langone said. 'Moisture sensors shut down the pumps, but they did what they're supposed to do.'

Summary

Certainly the survival of all the former patients at Langone Medical Center due to brave efforts by health care professionals and first responders ought to be celebrated.  From the discussion so far, it is not clear whether the infrastructure failures were unavoidable due to the scope of a huge natural disaster, or whether the failures were the results of poor planning and insufficient attention to and investment in infrastructure.  Celebration of personal and professional dedication, however, ought not to distract from determining what lessons could be learned about making health care infrastructure safer in cases of natural disaster. 

It also ought not to distract from concerns about management accountability.  In this day and age, it is not surprising that no executive at Langone Medical Center would accept any responsibility for an effort to protect its electrical back-up power from flooding that included an underground fuel tank which would be shut down if any water affected it.  However, these executives are rewarded handsomely supposedly for their "spectacular" leadership.  (Dean Grossman received $1,744,780 in the 2010-2011 period according to the NYU Hospitals Center 2010 form 990.  That document listed four other executives who made over $1 million.)  One would think they would at least try to substantively address how their patients got put into such a precarious situation.

It is surprising that the silence from management was supplanted by the opinions of a very wealthy board chairman who paid hundreds of millions for some of the improvements to the hospital that were destroyed by the storm, but improvements that may not have included fully flood proofing the hospital's back up electrical system.  Why he may well be disappointed about the loss of what he spent so much to build, it is not clear why his opinions about technical aspects of disaster preparation should replace responses from those who were responsible for disaster preparedness.  After all, Mr Langone, while very wealthy, has no evident expertise in engineering, science, or anything pertaining to protecting infrastructure from natural disasters.  (Mr Langone's biography showed his background seems to be only in investment banking and finance.)  One wonders whether Mr Langone's prominence in the discussion suggests how influential the views of investment bankers, versus those of health care professionals, engineers and scientists, have become in the operation of health care systems.

Again, it appears that the culture of finance has intruded progressively into the cultures of health care and academics during an era in which finance has been increasingly irresponsible, as shown by the global financial collapse and our current economic woes.  Instead, true health care reform would develop leadership and governance that upholds health care professionals' values rather than worshiping short term revenue.

More Reasons to Doubt How CEOs are Chosen and Paid

Health Care Renewal is about problems with the leadership and governance of health care organizations.  Since the global financial collapse/ great recession began in 2008, it became evident that the problems we saw affecting health care leadership were similar to problems affecting other large organizations, notably financial firms.  Recently, I spotted a series of articles that raise more questions about how business leaders, and by extension, leaders of health care organizations are chosen and paid.

Doubts about Generic Managers

We have often questioned the wisdom of having health care organizations lead by people with little if any direct health care experience, little knowledge of health care on the ground, and little commitment to health care's core values.  We have called such leaders generic managers.

A New York Times article by Gretchen Morgenson from September, 2012, cited new academic work that questioned the abilities of generic managers.  The source article was Elson CM, Ferrere CK.  Executive superstars, peer groups, and overcompensation - cause, effect and solution.  Ms Morgenson summarized,

Mr. Elson and Mr. Ferrere conclude, contrary to the prevailing line, that chief executives can’t readily transfer their skills from one company to another.

Furthermore, Ms Morgenson interviewed Mr Elson, who said,

But we found that C.E.O. skills are very firm-specific. C.E.O.’s don’t move very often, but when they do, they’re flops.

Also,

But there is little evidence, according to Mr. Elson and Mr. Ferrere, that a hot market exists for interchangeable chief executives. First, they note numerous academic studies indicating that C.E.O.’s selected from within a company perform better than outsiders, especially in the creation of long-term shareholder value.

'There is no conclusive empirical evidence that outside succession leads to more favorable corporate performance, or even that good performance at one company can accurately predict success at another,' the authors conclude. 'In short, executive skills cannot pass the most basic test of generality: transferability.'

To be sure, this flies in the face of the widely held view that skilled managers have become generalists and are therefore far more interchangeable than in previous years. Proponents of this thesis argue that top managers today can accumulate a broad knowledge of economics, finance and management science, giving them the ability to manage any type of company effectively. Technological advancements also give chief executives access to untold amounts of data about a particular company that in previous times would have taken years to amass and synthesize, this view holds.

But the data on actual C.E.O. moves raises questions about just how portable C.E.O. skills really are. The Delaware paper cites several studies indicating that relatively few chief executives land new top jobs elsewhere. One study, a 2011 analysis of roughly 1,800 C.E.O. successions from 1993 to 2005, found that less than 2 percent had been public-company chief executives before their new jobs.

This data and these observations seem to broadly apply to business executives, but there is no reason to think they do not apply to executives of health care corporations.  Furthermore, given that on its face, health care is less like making automobiles than, say, the restaurant business is, there is no reason to think doubts this raises about the abilities of generic managers should not be even bigger in health care, and should apply not just to for-profit, but to not for profit corporations.  Yet the trend in health care seems to increasingly favor generic managers of not just for-profit health care corporations, but also hospitals and hospital systems, non-profit health insurers and managed care organizations, health care charities, disease advocacy groups, and even medical associations, medical schools, and their parent universities.  

Doubts about Executive Compensation

Peer-Group Benchmarking

We have often posted about amazingly generous compensation given to top leaders of health care organizations.  Health care corporate CEOs can make tens of millions of dollars, occasionally even more.  While CEOs of not for profit health care organizations make less, they still now can makes millions of dollars.  Ms Morgenson called the usual justification for these huge amounts of compensation the "pay-'em-or-lose-'em" myth.

Corporations are forever defending big executive paydays. If we don’t pay up, the argument goes, our sharpest minds will jump to our rivals.

This notion, or myth, depends on the argument that generic managers are the best managers, which appears to be largely unsubstantiated, as we noted above.

 In other words, the argument that C.E.O.’s will leave if they aren’t compensated well, perhaps even lavishly, is bogus. Using the peer-group benchmark only pushes pay up and up. 

Furthermore,

Importantly, the study disputes the notion that executive pay today is a result of an efficient bidding process for finding and retaining a scarce and valuable commodity: managerial talent. 'In essence, this process creates a model of a competitive market for executives where it otherwise does not exist,' the authors wrote. 'Through the operation of a market, it is argued, wages are bid up to an executive’s outside opportunities.'

Instead, as noted above, since the skills needed to run one sort of company or organization may not readily transfer to other companies and organizations, even seemingly similar ones, such a market does not exist. 
 
 Incentives Based on Short-Term Financial Results

We have also previously discussed (look here) how contemporary economic dogma suggest that the only measure of success of a for-profit corporation is "shareholder value," which has come to mean the stock price over the short term.  There is reason to think that this focus on short-term economic performance has also become the major measure of success of health care organizations.  Another word for this phenomenon is "financialization."  

An op-ed in the UK Independent questions this focus because of its economic effects.  Anthony Hilton wrote about the views of Andrew Smithers,

His starting point was that the economy was floundering because of inadequate demand. Personal spending is flat for obvious reasons but the real culprit is the companies who are hoarding cash and refusing to invest.

Others have noticed the cash hoarding but explain it away by saying we live in uncertain times and companies will start investing again once they become more confident about the economic outlook. Smithers disagrees fundamentally with this. He says companies are not investing because executives are bonused to deliver short-term profits. Costly spending on investment projects is therefore anathema to them. Investment may deliver long-term prosperity but by that time they will have left the company. It also depresses short-term profits while they are still there.

We have in the last two decades, under the mantra of shareholder value and aligning the interests of management with shareholders, created a new breed of management incentivised to believe that what is good for them is good for the business. They dislike investment because it reduces their bonuses .

They don't invest surplus cash. They hoard it or they use it to buy back their own company's shares.

When the majority of the managements in publicly quoted companies start behaving this way, as they now do, we have a serious problem. They are sitting on cash which is the equivalent of six per cent of GDP. This deadweight of unused resources prevents lift-off and threatens to leave the economy forever trapped in the mire.

Smithers says this behaviour by management is a structural change — meaning it is something which won't go away. It makes this down- turn different from all that have gone before.

There is no reason to think that health care corporations are not hoarding money in the sense described above.  If so, they may be failing to invest in drugs or devices that would have helped patients in the future.

Because of the limited reporting required of large health care non-profit organizations in the US, it may be very hard to tell if they are similarly hoarding money, but if they are, the effects again might be to fail to provide patients long-term benefits they might otherwise have enjoyed.

The Ultimately Self-Destructive Outcome

Meanwhile, writing in the New York Times, Chrystia Freeland, the author of Plutocrats: the Rise of the New Global Super-Rich and the Fall of Everyone Else, explained why picking the wrong leaders  and paying them too much may be bad for everyone.  We have noted that an increasing fraction of the wealthiest one percent of the US are current and former corporate executives.  Ms Freeland wrote how domination by an increasingly wealthy and powerful elite usually dooms the countries they dominate.

what separates successful states from failed ones is whether their governing institutions are inclusive or extractive. Extractive states are controlled by ruling elites whose objective is to extract as much wealth as they can from the rest of society.

So

it is the danger America faces today, as the 1 percent pulls away from everyone else and pursues an economic, political and social agenda that will increase that gap even further — ultimately destroying the open system that made America rich and allowed its 1 percent to thrive in the first place.  

Furthermore,

It is no accident that in America today the gap between the very rich and everyone else is wider than at any time since the Gilded Age. Now, as then, the titans are seeking an even greater political voice to match their economic power. Now, as then, the inevitable danger is that they will confuse their own self-interest with the common good. The irony of the political rise of the plutocrats is that, like Venice’s oligarchs, they threaten the system that created them.

So it is not merely that overcompensating generic executives has likely been one of the major reasons our health care is so expensive, inaccessible, and mediocre.  The larger problem of overpaying under skilled executives threatens to destroy our whole society.  How cheerful

Summary

The way forward seems clear.  It is just blocked by the interests of the rich and powerful elite which our current foolish policies have created.

In a health care context, leaders of organizations should only be those with clear knowledge of, experience in, and commitment to the values of health care.  Their compensation should be reasonable, and based on their ability to uphold these values first, with financial goals clearly second, and short-term financial goals probably not at all.  Pay should not be bench-marked to compensation of leaders of other organizations, especially not of vastly different kinds of organizations.

Whether there is any chance of such changes happening while corporate boards of directors, and non-profit boards of trustees are dominated by executives of other organizations is doubtful.  Thus we also need to change the governance of for-profit health care corporations to clearly reflect the long-term interests of the stockholders, who will only prosper if in the long run their companies provide products and services that help patients at a fair price and with minimal risks.   Thus we further need to need to change the governance of health care non-profits to reflect the needs of patients, their communities and other key constituencies.  That should keep us all busy for a while. 
 

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.

Duchess of WellPoint Abdicates, Likely to Escape with Much Loot

A change in the leadership of one of the biggest health care organizations reveals a little more about how such leadership has become our new corporate royalty and nobility.

The Departure of WellPoint CEO Angela Braly

The basics of the story, as reported by the Anna Wilde Matthews in the Wall Street Journal,

Under pressure from investors unhappy with the health insurer's performance and direction, WellPoint Inc. Chief Executive Angela Braly resigned Tuesday, and the company's board said it would begin a search for a permanent replacement.

The abrupt shift came as the board's leadership had been meeting with major investors in the wake of a disappointing second-quarter earnings report that sharpened concerns about Ms. Braly and the company's strategy

Note that while this change was seemingly dramatic,

In its statement, the board signaled that WellPoint's direction might not change dramatically. Ms. Ward said that the board 'continues to believe that time will prove the wisdom of potentially transformative actions taken under Angela's leadership…But now is the right time for a leadership change.' She also said the board believes 'the remaining executive team is dynamic and strong, with great potential to drive WellPoint's future success.'

In addition, the Indianapolis Star suggested that Ms Braly would be richly rewarded for her departure:

Details about her exit package were not released Tuesday, but under her contract, she is entitled to at least $7.7 million if terminated without cause.

Furthermore, recall how much the board apparently thought of Ms Braly's leadership in the immediate past, as evidenced by the compensation she received. In 2011, her total compensation was a mere $13.2 million (see this article in the Indianapolis Star), just slightly less than that in 2010, $13.4 million (see this post). Such compensation, of course is gargantuan compared to that received by mere mortals such as primary care physicians (actually, conservatively it is at least 66, and probably more like 100 times that of primary care physician, and over 250 times the median US family income) Such compensation, and the likelihood of a rich severance package, suggests that either the board applauded Ms Braly's leadership right up until now, or perhaps that Ms Braly, despite being a hired employee, actually had more power than the board, sufficient to virtually set her own pay.

Was Financialization the Reason She Had to Go?

So why get rid of her now? Aside from references to recent issues with only short-term revenue, there were few hints in the media. The WSJ article did note

a series of stumbles over the past few years, including an unexpected earnings hit last year tied largely to problems with a Medicare plan in California. In 2010, the company scaled back a proposed rate increase in California that had become a lightning rod in the policy debate over a health overhaul, leading to a loss.

A Forbes post suggested that one problem was Ms Braly supported President Obama's health care reform legislation, the Patient Protection and Affordable Care Act (PPACA, or ACA):

Many blame Braly and her team for putting The Affordable Care Act over the top in Congress after Wellpoint’s Anthem Blue Cross plan in California two years ago raised rates nearly 40 percent on individual policyholders before the increase was tamed. Many at the time say that provided President Obama and Sebelius political momentum and ammunition to tell the story of excessive rate increases by the loathed insurance industry.

However, no media report so far has raised the issue of the ethics of past WellPoint behavior. In fact, as we have discussed, (most recently here), the company has made a lengthy series of ethical missteps, to put it kindly. (The complete list appears in an appendix at the end of this post.) These problems have been going on for quite a while, and if they were not a concern before, there is no hint that they became a concern within the company recently.

So, one explanation for the sudden leadership change is the dominance of financialization of for-profit health care insurance (and likely of all health care organizations.) The notion, pushed by a few economists in the 1980s, that the only thing that should matter to corporate leadership is short-term financial results may be that powerful (see this post). Of course, that is profoundly troubling for health care organizations, since it dismisses the importance of any long-term results, especially of results that affect patients' and the public's health, and the importance of values like honesty.

Corporate Leadership as Our New Royalty and Nobility

Another explanation, which need not contradict the one above, was suggested by Charles Ferguson in Predator Nation. He wrote that the leadership of big financial corporations, which became the dominant organizations in the US and, indeed, in the world,

became corporate royalty, with all the absurd arrogance, disconnections from reality, ego poisoning, and cults of personality thereby implied.

If the leadership of big financial firms became royalty, then the leadership of big health care organizations became nobility. The issues above only would affect nobility slightly less. In that sense, the departure of Ms Braly likely resulted from personal and political battles among royalty. The good thing is that in this somewhat more enlightened age, the results are merely abdication, probably with a huge severance payment. In the old days, the results would likely have been imprisonment in the castle dungeon, if not beheading.

Nonetheless, the notion that top corporate leaders, including leaders of for-profit and non-profit health care corporations, are becoming the new royalty and nobility should be profoundly disturbing in the US, which was founded after a revolution against royalty's excess power.  They should be no less disturbing in other countries which have overthrown their former royal leaders, or instituted constitutional monarchies in which the royals and nobles have little political or real power. 

Obviously, the growing power and decreasing accountability of hired managers of large health care organizations has become a major reason, if not the major reason for health care dysfunction.  True health care reform would decrease the size and scope of health care organizations, and make their leaders accountable to ownership, when appropriate, and to the community at large for patients' and the public health. 

Appendix: WellPoint's Ethical Misadventures

• settled a RICO (racketeer influenced corrupt organization) law-suit in California over its alleged systematic attempts to withhold payments from physicians (see 2005 post here).
• subsidiary New York Empire Blue Cross and Blue Shield misplaced a computer disc containing confidential information on 75,000 policy-holders (see 2007 story here).
• California Anthem Blue Cross subsidiary cancelled individual insurance policies after their owners made large claims (a practices sometimes called rescission).  The company was ordered to pay a million dollar fine in early 2007 for this (see post here).  A state agency charged that some of these cancellations by another WellPoint subsidiary were improper (see post here).  WellPoint was alleged to have pushed physicians to look for patients' medical problems that would allow rescission (see post here).  It turned out that California never collected the 2007 fine noted above, allegedly because the state agency feared that WellPoint had become too powerful to take on (see post here). But in 2008, WellPoint agreed to pay more fines for its rescission practices (see post here).  In 2009, WellPoint executives were defiant about their continued intention to make rescission in hearings before the US congress (see post here).
• California Blue Cross subsidiary allegedly attempted to get physicians to sign contracts whose confidentiality provisions would have prevented them from consulting lawyers about the contracts (see 2007 post here).
• formerly acclaimed CFO was fired for unclear reasons, and then allegations from numerous women of what now might be called Tiger Woods-like activities surfaced (see post here).
• announced that its investment portfolio was hardly immune from the losses prevalent in late 2008 (see post here).
• was sanctioned by the US government in early 2009 for erroneously denying coverage to senior patients who subscribed to its Medicare drug plans (see 2009 post here).
• settled charges that it had used a questionable data-base (built by Ingenix, a subsidiary of ostensible WellPoint competitor UnitedHealth) to determine fees paid to physicians for out-of-network care (see 2009 post here). 
• violated state law more than 700 times over a three-year period by failing to pay medical claims on time and misrepresenting policy provisions to customers, according to the California health insurance commissioner (see 2010 post here).
• exposed confidential data from about 470,000 patients (see 2010 post here) and settled the resulting lawsuit in 2011 (see post here).
• fired a top executive who publicly apologized for the company's excessively high charges (see 2010 post here).
• California Anthem subsidiary was fined for systematically failing to make fair and timely payments to doctors and hospitals (see 2010 post here).
• management was accused of hiding the company's political contributions from the company's own stock-holders (see 2012 posts here and here).
• settled charges that its Anthem subsidiary cheated former policy-holders out of money owed when that company was converted from a mutual insurance company (see 2012 post here)