UnitedHealth CEO Continues to Prosper While His Company's Behavior Appears to Contradict its Mission Statement

Tis spring, the season in the US for legal settlements, government findings, and proxy statements revealing executive compensation.  Therefore, maybe there should be no surprise that we are seeing a series of cases in which health care corporate leaders continue to enrich themselves while their organizations' behavior raises ethical questions.

Following on the Amgen example, we now present the latest UnitedHealth example (in a post organized similarly.)

The CEO Gets Richer

Last week, the Associated Press (via the Washington Post) summarized UnitedHealth CEO Stephen J Hemsley's growing pile of money:

UnitedHealth Group Inc. kept CEO Stephen J. Hemsley’s salary stable in 2012 but bumped up his total compensation for a year in which the nation’s largest health insurer grew earnings and enrollment and launched a major acquisition.

The Minnetonka, Minn., insurer gave its top executive a compensation package valued at about $13.9 million last year, according to the company’s proxy statement filed with the Securities and Exchange Commission. That’s up 4 percent from the $13.4 million total he received last year.

Hemsley, 60, received a $1.3 million annual salary in 2012, like he has the past several years. He also received $7 million in stock awards, which is the same total as 2011. But his performance-based bonus climbed 7 percent to $5.3 million, and he received $287,443 in other compensation, up from $154,804 in 2011.

Other compensation included savings plan contributions and a $125,000 Hart-Scott-Rodino Antitrust Improvement Act filing fee payment UnitedHealth made on behalf of the CEO so he could maintain and increase his stock ownership in the company.

At the same time, Hemsley continued to cash in stock options which also added to his riches:
 

Outside AP’s calculation of his 2012 total compensation, Hemsley also acquired 284,836 shares that had vested with a value of $15.3 million. He also exercised options to acquire 600,000 shares and realized a value of $12.5 million. Those options and stock awards had been previously given to the executive.

The proxy said Hemsley directly owned UnitedHealth shares valued at about $140 million, as of March 1.

The Mission Promises Much but the Company Delivers Less

On one hand, the rate of rise of Hemsley's compensation at least seemed comparable to the company's financial performance:

Overall, UnitedHealth shares climbed 7 percent to close 2012 at $54.24, a smaller gain than the 13.4 percent advance from the Standard & Poor’s 500 index.

On the other hand, the largess given to the CEO ought to be contrasted with the how UnitedHealth failed to deliver what its mission promised.  

Most recently, a jury found the company failed to live up to its legal obligation (in the state of Nevada) to review the quality of the clinicians on its panel.  As reported by Bloomberg,

Two UnitedHealth Group Inc (UNH)  units must pay $24 million in damages for failing to properly monitor a doctor who gave two colonoscopy patients hepatitis C by employing substandard medical practices, a Nevada jury ruled.

Jurors in state court in Las Vegas deliberated about five hours over two days before finding officials of Health Plan of Nevada and Sierra Health Services were negligent in their oversight of Dipek Desai.  The former gastroenterologist has been blamed for infecting patients with hepatitis C by reusing vials of the anesthetic Propofol and failing to sterilize equipment.

The panel ordered the two UnitedHealth units to pay $15 million in compensatory damages to Bonnie Brunson and her husband and $9 million to Helen Meyer. The two women contend they got hepatitis during colonoscopy procedures at Desai’s clinic. Their lawyers said earlier in the case they may ask the jury to award more than $1 billion in punitive damages.

The verdict reflects 'what’s wrong with health insurance companies in the U.S.' Robert Eglet, Brunson’s lawyer, said in an interview after the verdict was announced. 'They put profit before patient safety.'

Note that the state of Nevada does explicitly hold managed care organizations accountable for the clinical quality of its health care professionals' practice,

 

Meyer and Brunson sued under a Nevada law requiring HMOs to file annual reports showing officials reviewed the quality of health services provided to their members.

The women’s lawyers argued officials of the UnitedHealth units knew Desai had a reputation for sloppy practice before giving him a contract to handle colonoscopies and then didn’t check the quality of his work. At one point, Desai was a member of Nevada's Board of Medical Examiners,  which oversees the licensing of doctors in the state.

The plaintiffs contend the insurer didn’t properly monitor Desai’s practices and procedures even though they received complaints about his practices.

During the trial, witnesses said Desai adopted a cavalier attitude toward patient safety, speeding through procedures so he could see as many as 20 patients in a three-hour period.

The women’s lawyers argued the insurers’ executives had an obligation to insure Desai was providing quality care to their HMO members and were required to vet his practices before hiring him.

Also note that managed care organizations and other health insurers often boast about the quality of their provider panels.
For example, see the UnitedHealth mission statement:

- Our mission is to help people live healthier lives. Our role is to help make health care work for everyone.
 - We seek to enhance the performance of the health system and improve the overall health and well-being of the people we serve and their communities.
- We work with health care professionals and other key partners to expand access to quality health care so people get the care they need at an affordable price.
- We support the physician/patient relationship and empower people with the information, guidance and tools they need to make personal health choices and decisions.

It seems reasonable to interpret the italicized parts above as a statement of accountability for the quality of care provided by the health care professionals within the United network.

To reinforce that accountability, a subsequent Bloomberg story added,

Two UnitedHealth Group Inc (UNH) units must pay $500 million in punitive damages for failing to oversee a doctor blamed for giving colonoscopy patients hepatitis C through shoddy medical practices, a Nevada jury found.

Jurors in state court in Las Vegas deliberated more than six hours yesterday before handing down the punitive-damages award against Health Plan of Nevada and Sierra Health Services for turning a blind eye to Dipak Desai's actions. 

Furthermore, the lofty UnitedHealth mission statement should be compared to two recent government findings.

In the state of California, as reported by the Los Angeles Times,

California Insurance Commissioner Dave Jones said the nation's largest health insurer, UnitedHealth Group Inc., is imposing unreasonable rate hikes on about 5,000 small businesses. 

Jones said Wednesday that UnitedHealth couldn't justify the average annual increase of nearly 8%, which reflects both higher premiums and a reduction in benefits. He said the rate hike, which went into effect Wednesday, affects up to 45,000 small-business employees and dependents and represents $12.5 million in higher costs.

'At a time when small businesses are struggling to survive, UnitedHealthcare's rate increase is just one more unwarranted economic burden on California's small business owners and their employees,' Jones said. 

Such behavior seems to contradict the mission statement's assurance that the company will seek to provide health care at "an affordable price."

Meanwhile, Bloomberg just published a story about how UnitedHealth has been running an insurance program for US military families.

The Pentagon rebuked UnitedHealth (UNH) Group Inc, the nation’s largest insurer, after military families began experiencing long delays getting medical-care referrals from the company. 

The backlogs occurred almost as soon as Minnetonka, Minnesota-based UnitedHealth took over a contract, valued as much as $20.5 billion, from TriWest Healthcare Alliance Corp. It assumed responsibility on April 1 for the western region of the military’s health-care system, known as Tricare.

UnitedHealth’s 'failure to meet contractor requirements' has prevented a large number of beneficiaries in one Tricare health plan from obtaining timely access to specialty care, Jonathan Woodson, assistant secretary of defense for health affairs, said in a memo yesterday to other military leaders.

Woodson, calling the situation 'extraordinary,' said the Pentagon stepped in to grant a temporary waiver so the plan’s members in the western region could get specialty care without UnitedHealth’s authorization and not incur penalties.. 

This behavior seemed to contradict the mission statement's assurance that the company seeks to "expand access to quality health care."

The Song Remains the Same 

Of course, UnitedHealth actually has a very long record of preaching about its aspirational mission, while paying its top hired managers extraordinary amounts and contradicting that mission, and at times ethical norms. Our posts on UnitedHealth are here. Recently we wrote,

 UnitedHealth would be the company whose CEO once was worth over a billion dollars due to back dated stock options, some of which he had to give back, but despite all the resulting legal actions, was still the ninth best paid CEO in the US for the first decade of the 21st century (look here). UnitedHealth would be the company whose then CEO made a cool $106 million in 2009 (look here).

Moreover, UnitedHealth would also be the company known for a string of ethical lapses:
- as reported by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."
- UnitedHalth promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post here);
- UnitedHealth's acquisition of Pacificare in California allegedly lead to a "meltdown" of its claims paying mechanisms (see post here);
- UnitedHealth's acquisition of Sierra Health Services allegedly gave it a monopoly in Utah, while the company allegedly was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post here)
- UnitedHealth frequently violated Nebraska insurance laws (see post here);
- UnitedHealth settled charges that its Ingenix subsidiaries manipulation of data lead to underpaying patients who received out-of-network care (see post here).
- UnitedHealth was accused of hiding the fact that the physicians it is now employing through its Optum subsidiary in fact work for a for-profit company, not directly for their patients (see post here).

Summary

The US dysfunctional health care system has produced a long string of big corporations that promise warm and fuzzy health care yet deliver something less, all the while mightily enriching their top hired managers. Given the deadly serious nature of the health care system, these companies' promises, marketing, public relations and mission statements cannot be dismissed as fluff and puffery. Market fundamentalists and executive apologists have touted our system as market based. If patients must act as consumers, they cannot make good consuming decisions if they are awash with deceptive marketing and advertising. It is one thing for Hollywood to advertise blockbuster movies that are duds. It is another for health care corporations to advertise quality care and deliver bad care.

As we have said far too many times, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Gentiva's Odyssey Healthcare Settles Again, Signs Yet Another Corporate Integrity Agreement

The Milwaukee Journal-Sentinel reported a legal settlement worth noting.  Here are the basics:

One of the nation's largest providers of hospice care has agreed to pay $25 million to settle a Medicare fraud case initiated after a former company nurse in Milwaukee filed a whistle-blower suit.

It was the second such settlement in six years for Odyssey Healthcare Inc., which paid the federal government $12.5 million in 2006 after another Wisconsin-based employee sued.

Also,

Medicare provides a benefit meant to cover hospice care for the terminally ill. It covers 24-hour in-home nursing service only during limited crisis periods. But from 2006 to 2009, Odyssey practiced a pattern of enrolling and recertifying non-terminal patients, and billing for continuous care that wasn't necessary or reasonable, according to the False Claims Act suit filed in 2008 but just unsealed Thursday.

As is usual in such cases, Odyssey's parent company denied that it did anything wrong:

Odyssey, which operates in 26 states, is now part of Atlanta-based Gentiva Health Services, which runs hospice offices in West Allis and Burlington. Gentiva officials declined to comment, but referred to an announcement it posted on its investor relations website last month.

'Gentiva cooperated fully with this investigation, which covered a period prior to our acquisition of Odyssey, and the settlement is consistent with our efforts to instill Gentiva's culture of compliance throughout the company,' said John Camperlengo, general counsel and chief compliance officer.

The statement said the firm is proud of the care its thousands of hospice clinicians provide, and of Gentiva's efforts to ensure strict compliance with all regulatory requirements.

The Implications of the Need for a New Corporate Integrity Agreement

However, there are some disturbing aspects of this case that require a bit more explanation. First, as noted by the Associated Press (in a story available here from the Dubuque [Iowa] Telegraph-Herald),

Besides agreeing to pay the $25 million settlement, Odyssey entered a five-year corporate integrity agreement with the federal government.

Now corporate integrity agreements are not known for their effectiveness. In fact, as we noted in this blog post, according to Gentiva's 2010 annual report, its Odyssey subsidiary had been subject to a corporate integrity agreement arising from its 2006 settlement, one which was apparently not effective in preventing its misbehavior from 2006 to 2009.

However, corporate integrity agreements do serve as markers for the need to improve the integrity of the corporations who need to make them. In this case, why would Gentiva be asked to sign such an agreement if its integrity were already beyond reproach? So Gentiva's current "culture of compliance" is open to question.

The Implications of "Enrolling and Recertifying Non-Terminal Patients"

A quick read of the Journal-Sentinel and Associate Press stories above might give the impression that what Odyssey did wrong involved a billing technicality, admittedly, one that allowed it to collect more money that that to which it would otherwise be entitled.

This story actually goes beyond the issue of fraud, and raises important concerns about patient care.

The enrollment  by a hospice of patients who are actually not terminally ill could have serious adverse effects on such patients. As we noted in this post, hospices are meant for patients with very limited life expectancies. The goal of hospice is to provide comfort and palliation, not active treatment of illnesses. So if patients who actually do not have such severely limited life expectancies are admitted to a hospice, they might be denied therapy that could actually make them feel better, or even cure acute illnesses or prolong their lives. For example, a hospice patient who developed an open wound might not get maximal wound therapy, as in an example (allegedly involving a different commercial hospice provider) in the post above.

So it is possible that Odyssey's enrolling and re-certifying of non-terminally ill patients could have lead to failure to provide some of these patients with the care they should have had. Whether this did or did not occur in individual cases, and what adverse effects may have been produced is not clear from the coverage of this case.  

Summary

As I wrote in 2011, .... There has been a lot of blather from politicians in the US about "death panels" in debates about health care reform. Many such politicians seem worried that the US government has or will have death panels under the new health care reform legislation. We have criticized that legislation for not addressing many important health care problems. No one, however, has convincingly demonstrated how its provisions would convene "death panels."


Wendell Potter argued in his book, Deadly Spin, (see this post) that for-profit insurance companies had their own "death panels." The Bloomberg article strongly suggests that for-profit hospices may also act like death panels. In search of more revenue, for-profit hospices may enroll patients who are not at the end of life, but then provide them only "comfort care," so that if they develop new conditions that are treatable, they are likely to die in the absence of treatment.

I am waiting for the politicians who so enthusiastically condemned the supposed "death panels" to be found in health care reform legislation to condemn for-profit hospices for behaving like death panels.

In my humble opinion, the case discussed above are the strongest argument yet that we need to reconsider our headlong rush to turn health care, particularly the direct care of patients, over to relatively unregulated, for-profit corporations. The cases above suggest that the pursuit of revenue ahead of patients' welfare by such organizations may lead to sick and dead patients.

I cannot see how for-profit direct patient care can be made safe for patients without intense government regulation. If any of those vocal advocates of "free market" health care (in the absence of any good explanation of how health care can ever be an ideal free market, see this post) can explain to me how for-profit hospices can be made safe for patients without such regulation, I would welcome their attempts.

Meanwhile, this just calls out for legislative and legal investigation, and urgent policy changes.
 
By the way, the case above also shows how the current approach used by the government to address misbehavior in health care does not work.  We have noted previously how these legal settlements often only lead to financial penalties imposed on companies, not individuals, which diffuses their impact, and provides no disincentives to future bad behavior by individuals.  Sometimes corporate integrity agreements are added, but as in the current case, they also seem not to deter future bad behavior.   So, I further conclude, de rigueur, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.