A "Bag of Money," but Executive Says Don't "Give Me Any of that Ethics Cr*p" - DaVita's Latest Settlement for $400 Million

A striking story of a large recent legal settlement, with reminders of previous related settlements, quietly slipped out in the midst of the ruckus about the Ebola virus.

A $400 Million Settlement

The basics were in a news release by the US Department of Justice.

DaVita Healthcare Partners, Inc., one of the leading providers of dialysis services in the United States, has agreed to pay $350 million to resolve claims that it violated the False Claims Act by paying kickbacks to induce the referral of patients to its dialysis clinics,...

This amount was augmented by 

a Civil Forfeiture in the amount of $39 million based upon conduct related to two specific joint venture transactions entered into in Denver, Colorado.

Also, according to Ed Silverman writing on PharmaLot, it was further augmented thus

DaVita, by the way, has agreed in principle to pay another $11 million to several states that filed false claims charges, according to a document that DaVita filed with the U.S. Securities and Exchange Commission. The DaVita spokesman says the deal involves five states.

So the total cost to the company seems to be about $400 million.   The settlement also  included a corporate integrity agreement,

  DaVita has entered into a Corporate Integrity Agreement with the Office of Counsel to the Inspector General of the Department of Health and Human Services which requires it to unwind some of its business arrangements and restructure others, and includes the appointment of an Independent Monitor to prospectively review DaVita’s arrangements with nephrologists and other health care providers for compliance with the Anti-Kickback Statute.

Kickbacks to Doctors who Refer Dialysis Patients


Here is how the kickbacks worked.

First, using information gathered from numerous sources, DaVita identified physicians or physician groups that had significant patient populations suffering renal disease within a specific geographic area. DaVita would then gather specific information about the physicians or physician group to determine if they would be a 'winning practice.' In one transaction, a physician’s group was considered a “winning practice” because the physicians were 'young and in debt.'  Based on this careful vetting process, DaVita knew and expected that many, if not most, of the physicians’ patients would be referred to the joint venture dialysis clinics.

Next, DaVita would offer the targeted physician or physician group a lucrative opportunity to enter into a joint venture involving DaVita’s acquisition of an interest in dialysis clinics owned by the physicians, and/or DaVita’s sale of an interest in its dialysis clinics to the physicians. To make the transaction financially attractive to potential physician partners, DaVita would manipulate the financial models used to value the transaction.

 So these alleged kickbacks were not envelopes full of unmarked bills, but sophisticated, complex transactions that would be hard for outsiders to understand.

To ensure that those bought stayed bought,

Last, DaVita ensured future patient referrals through a series of secondary agreements with their physician partners. These included paying the physicians to serve as medical directors of the joint venture clinics, and entering into agreements in which the physicians agreed not to compete with the clinic. The non-compete agreements were structured so that they bound all physicians in a practice group, even if some of the physicians were not part of the joint venture arrangements. These agreements also included provisions prohibiting the physician partners from inducing or advising a patient to seek treatment at a competing dialysis clinic. These agreements were of such importance to DaVita that it would not conclude a joint venture transaction without them.

Note that these alleged arrangements ensured the private gains of the physicians involved, and presumably by increasing referrals, ensured the private gains of DaVita, and likely specific managers whose remuneration depended on the fees produced by referrals.  However, the arrangements steered patients to dialysis services not based on what would be best for patients but what would be best for those involved in the arrangements.  Thus these arrangements appeared to fit the Transparency International definition of corruption: "abuse of entrusted power for private gain."  The physicians were entrusted to provide the best possible care of individual patients, yet they put their and the company (and likely the company's managers) financial gain ahead of the patients' care.

No One Admitted Anything or Suffered Any Negative Consequences



Although the company paid a fine and entered into the corporate integrity agreement, apparently no individuals, be they physicians or company managers, paid any sort of penalty.


Like many other settlements we discussed, the company paid out a lot of money but denied it did so because it did anything wrong. Ed Silverman wrote on the PharmaLot blog

In a statement, DaVita says it is 'pleased to announce a civil resolution' and that 'patient care was never an issue, nor were billing or payment practices… We are proud of our commitment to compliance over our 15-year history.'

'We have worked incredibly hard to get things right and it is our belief there was no intentional wrongdoing. We believe this settlement is the right thing to do for our teammates, partners and shareholders. It allows us to move forward with heightened clarity and transparency, both with regulators and our physician partners.'

Why it was good for shareholders and "teammates and partners," presumably meaning employees to pay so much money in the absence of "intentional wrongdoing," when the money would likely come out of stock value and employees' salaries,  was not explained.  Why patient care was "not an issue" when the allegations were that patients were steered to dialysis providers because of financial inducements given to doctors, not due to any consideration of patients' needs and welfare also was not explained.

Furthermore, the whistleblower who triggered the lawsuit suggested there was wrongdoing.  Again, per Ed SIlverman on PharmaLot,

In a July 2009 e-mail cited in the whistleblower lawsuit, which was also filed in federal court in Colorado, one DaVita executive asks for suggestions on how to ensure the financial models used to value transactions pass internal standards. Another executive replies 'You mean gaming the model, right?' To which the first exec writes, 'I do.'

'I think there was a pretty wide understanding that what was going on was questionable at best,' David Barbetta, the former DaVita senior financial analyst, tells us. He says he worked at DaVita from March 2007 until August 2009, when he resigned after being disturbed by several joint venture transactions.

Barbetta, who is now an independent technology consultant, says he mentioned concerns to DaVita managers, but was ignored. 'I did raise this with someone who was a vice president, but he just said not give him any of that ethics nonsense,' he tells us. 'He was a vp and I was an analyst, so I pretty much looked at him and didn’t really push the issue any further.'

Another Denver Post article put it even more vividly,

 One vice president warned Barbetta not to 'give me any of that ethics crap,' court documents state.

And, in internal company e-mails Barbetta provided to the government, top DaVita officials boasted of 'gaming' valuation models. Barbetta also told prosecutors that another DaVita manager once explained to him the deals were used to funnel 'a bag of money' to physicians. Those doctors, in exchange, steered dialysis patients to DaVita.

Why there was no further investigation of these executives, and those to whom they reported, was also not explained.  

Just the Latest Settlement

The few media reports of this settlement suggested that this was not DaVita's first settlement.

The 2000 and 2004 Gambro Inc Settlements

The current DOJ release noted that DaVita

had previously been in a joint venture arrangement involving dialysis clinics with Gambro, Inc., a dialysis company acquired by DaVita in 2005. Prior to the acquisition, Gambro had entered into a settlement with the United States to resolve alleged kickback allegations that, among other things, required Gambro to unwind its joint venture agreements.

Actually, Gambro Inc, which became part of DaVita in 2005, had made two similar settlements.  According to a 2004 Department of Justice news release,

In 2000, Gambro Healthcare and its subsidiary, Gambro Healthcare Laboratory Services, agreed to pay $40 million to settle allegations of healthcare fraud. Gambro and another subsidiary, Dialysis Holdings Laboratory Services, Inc. (DHLSI), have agreed to pay more than $13.1 million to settle similar allegations. 

However, in 2004, a much bigger Gambro settlement was announced,

Gambro Healthcare will pay more than $350 million in criminal fines and civil penalties to settle allegations of healthcare fraud in the Medicare, Medicaid and TRICARE programs,...

Aspects of this settlement were eerily similar to those of the latest DaVita settlement,

As part of this comprehensive global resolution, Gambro Supply Corporation, a sham durable medical equipment company and a wholly owned subsidiary of Gambro Healthcare, admitted to the execution of a healthcare fraud scheme and agreed to plead guilty to criminal felony charges, pay a $25 million fine and be permanently excluded from the Medicare program.

Gambro Healthcare will also pay in excess of $310 million to resolve civil liabilities stemming from alleged kickbacks paid to physicians, false statements made to procure payment for unnecessary tests and services, and payments made to Gambro Supply. The settlement also requires Gambro to allocate an additional $15 million to resolve potential liability for the conduct resolved under the federal agreement pursuant to a preliminary understanding reached with representatives of various state Medicaid programs. Gambro Healthcare has also entered into a comprehensive Corporate Integrity Agreement.

Note that this older settlement actually involved admissions of wrongdoing, fraud, and a guilty plea by a subsidiary to federal felonies.  . 

The 2005 Settlement of Allegations of Illegal Anti Competitive Aspects of DaVita's Gambro Acquisition

DaVita's proposed acquisition of the criminal Gambro also provoked allegations by the US Federal Trade Commission of illegal anti competitive activities. In a 2005 FTC news release,

According to the Commission’s complaint, DaVita’s proposed acquisition of Gambro would be anticompetitive and in violation of Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended. DaVita and Gambro account for a significant proportion of the dialysis clinics and treatment stations in many local areas in the United States, and the acquisition, if consummated, would lessen competition for outpatient dialysis services in 35 markets nationwide.

The 2012 DaVita Epogen Settlement

The 2014 Denver Post article included this offhand reference,

The company settled another whistle-blower lawsuit in 2012 and agreed to pay $55 million for other fraud claims. In that case, a former employee of Epogen-maker Amgen alleged the company overused the anemia drug.

The 2012 Denver Post article to which it referred stated,

Kidney dialysis giant DaVita Inc. has settled a whistleblower lawsuit for the first time, agreeing to pay $55 million over allegations of drug overuse while denying any wrongdoing.

Denver-based DaVita settled fraud claims in a Texas lawsuit challenging the dialysis chain's past use of Epogen, an anemia drug whose high cost and dangers helped change how the government pays for kidney care.

Note that this case suggested actions that could have hurt patients,

 The Texas whistleblower lawsuit accused DaVita of using more Epogen than was medically necessary,...

Epogen is not without serious adverse effects, as noted above, and overdosing multiple patients with it made it likely that some were harmed.

Further, while

DaVita said it was the first time it was settling a claim over federal anti-fraud laws, but noted the government had declined to join the whistleblower' s lawsuit.

Only two years later DaVita had to settle more federal claims, this time due to a suit that the federal government had certainly joined.  And as noted above, a company which DaVita was about to acquire as a subsidiary had admitted to fraud and pleaded guilty to federal charges apparently involving fraud just before the acquisition. 

Finally, just as in 2014, in 2012 DaVita denied responsibility,

'DaVita and its affiliated physicians did nothing wrong and stand by their anemia management practices, which were always consistent with their mission of providing the best possible care for each patient,' a company statement said.

Summary

The latest settlement by DaVita was of allegations that the company gave kickbacks to physicians to get them to refer patients to DaVita facilities, regardless of the patients' best interests.  The company paid about $400 million and signed a corporate integrity agreement, but no individual who authorized, directed, or implemented the provision of kickbacks was identified, or paid any penalties.  This settlement turns out to have been only the latest settlement by DaVita or companies it acquired.  Previous settlements involved penalties of $53 million, $350 million, and $55 million (totaling more than three-quarters of a billion dollars from 2004 to 2014.  Previous settlements were for kickbacks and fraud.  One included a guilty plea to a felony.  Previous settlements involved alleged and sometimes admitted behavior that likely put patients at risk.   One earlier settlement also included a corporate integrity agreement.  However, no settlement imposed any negative consequences on any individual who authorized, directed, or implemented the bad, and sometimes criminal behavior.

The DaVita Statement of Mission and Core Values includes

Integrity
We say what we believe, and we do what we say. We are trusted because we are trustworthy. In our personal, team, and organizational values, we strive for alignment in what we say and do.

and

Accountability
We don’t say, 'It’s not my fault,' or 'It’s not my job.' We take responsibility for meeting our commitments — our personal ones as well as those of the entire organization. We take ownership of the results.

Despite the fact that the above settlements made a mockery of these lofty values, the company managers who presided over the behavior that lead to them prospered mightily during this time period.  The company' 2014 proxy statement showed the current CEO and board chairman Kent J Thiry received $17,099,257 in total compensation in 2013.  The five next best paid executives received collectively about $22 million.  Note that Mr Thiry as been CEO since 1999, and thus all the above settlements and most of the behavior that led to them occurred on his watch.

So the march of legal settlements continues in step with the same old song.  Big health care organizations preach their lofty missions and values, pay their top managers millions, and in some cases turn them into billionaires, while the organizations are accruing amazing records of bad and sometimes criminal corporate behavior.  The legal settlements only provide hints as to this behavior, but nearly every time, the management need not admit nor deny wrongdoing while merrily going on to collect their next huge paycheck which was justified by the corporate financial performance in part generated by the bad behavior.

Leadership that cares not for honesty, transparency, or accountability, and that puts short term revenue, and usually personal enrichment ahead of patients' and the public's health may be the single most important reason that US health care is so dysfunctional.  Yet hardly anyone even dares discuss the damning facts about health care leadership, much less propose solutions.  If we do not reform our health care leadership so that it is transparent, honest, accountable, unconflicted, and it puts patients' and the public's health over personal enrichment, our health care system will continue to founder.  

Shire Settles Claims of Deceptive Marketing of Multiple Drugs for $56.8 Million, No Individual Held Responsible

Here we go again.  A big drug company has settled claims of deceptive marketing, yet no individual was held accountable.  The most extensive coverage came from the Philadelphia Inquirer, presumably since the announcement came from the local US Attorney.

The basics were:

Shire Pharmaceuticals L.L.C. will pay $56.5 million to settle allegations that it inappropriately promoted the sale of ADHD medicine, among other drugs, the U.S. Attorney's Office in Philadelphia said Wednesday.

Shire is registered in the Channel Islands and headquartered in Dublin, but operates from the United States....

As is usual in such cases,

Shire admitted no wrongdoing, but also entered into a five-year Corporate Integrity Agreement with the Office of Inspector General for the Department of Health and Human Services.

The detailed allegations make for interesting reading.

The settlement resolves allegations that, between January 2004 and December 2007, Shire promoted Adderall XR for certain uses despite a lack of clinical data to support such claims and overstated the efficacy of Adderall XR, particularly relative to other ADHD drugs. Among the unsupported claims allegedly made by Shire was that Adderall XR was clinically superior to other ADHD drugs because it would 'normalize' its recipients, rendering them indistinguishable from their non-ADHD peers. Shire allegedly stated that its competitors’ products could not achieve similar results, which the Justice Department contended was not shown in the clinical data Shire collected. Shire also marketed Adderall XR based on claims that Adderall XR would prevent poor academic performance, loss of employment, criminal behavior, traffic accidents, and sexually transmitted disease. In addition, Shire promoted Adderall XR for the treatment of conduct disorder, an indication not approved by the Food and Drug Administration (FDA).

The settlement further resolves allegations that, between February 2007 and September 2010, Shire sales representatives and other agents also allegedly made false and misleading statements about the efficacy and abuse liability of Vyvanse to state Medicaid formulary committees and to individual physicians. For example, one Shire medical science liaison allegedly told a state formulary board that Vyvanse 'provides less abuse liability' than 'every other long-acting release mechanism' on the market. No study Shire conducted concluded that Vyvanse was not abusable, and, as an amphetamine product, the Vyvanse label included an FDA-mandated black box warning for its potential for misuse and abuse. Shire also made unsupported claims that treatment with Vyvanse would prevent car accidents, divorce, being arrested, and unemployment.

Additionally, the settlement resolves allegations that, from April 2006 to September 2010, Shire representatives improperly marketed Daytrana, administered through a patch, as less abusable than traditional, pill-based medications. The settlement also resolves allegations that, for part of the foregoing periods, Shire representatives improperly made phone calls and drafted letters to state Medicaid authorities to assist physicians with the prior authorization process for prescriptions to induce these physicians to prescribe Daytrana and Vyvanse.

Finally, the settlement resolves allegations that, between January 2006 and June 2010, Shire sales representatives promoted Lialda and Pentasa for off-label uses not approved by the FDA and not covered by federal healthcare programs. Specifically, the government alleged that Shire promoted Lialda off-label for the prevention of colorectal cancer.

Thus, the allegations were that Shire marketers and "agents" made false, sometimes apparently ridiculous claims about four different medicines.  Some of these claims, for example, that an amphetamine drug had no abuse potential, or that an anti-inflammatory drug would prevent cancer (in patients at risk for cancer), could conceivably have led to patients being harmed. 


According to the Wall Street Journal, the settlement was made to clean up loose ends before the big take-over of Shire,

 The pact resolves one outstanding issue ahead of Shire's planned $54 billion acquisition by AbbVie Inc.

So note that the dollar amount of the settlement is approximately one one-thousandth (0.1%) of the total value of Shire.

According to the Philadelphia Inquirer, no one admitted guilt, and no individual will pay any penalty:

'We are pleased to have reached a resolution and to put this matter behind us,' Flemming Ornskov, Shire’s chief executive officer said in a statement.

So this follows the usual formula for legal settlements in health care.  A big pharmaceutical company was alleged to have deceptively marketed multiple products.  Some of the deceptions could have lead to patient harm.  The government took the company to court, but the end result was a monetary penalty paid by the company that might appear large, but which was tiny compared to the assets of the company.  The company did not have to admit guilt.  No individual at the company paid any penalty or suffered any consequence.  While the organization had to sign a "corporate integrity agreement," it is not clear that such agreements prevent future bad behavior.

There have been many, many such settlements, as we have discussed on Health Care Renewal.  At least these settlements serve as evidence that many, many large health care organizations have behaved unethically, often in ways that not only increase health costs, but may directly harm patients.  Yet the settlements seem bent over backwards not to trouble the people who personally profited from unethical behavior. 

Individual company marketers, their supervisors, and top executive likely made more money because of the revenue brought in by the unethical practices.  However, the settlement somehow avoided identifying any of them, or even stating unequivocally that the company, or any of its employees did anything wrong.  That is absurd, since if nothing bad was done by anybody, why did the company have to pay anything?  Beyond that, if individuals who work for big drug companies, and other large health care organizations know that whatever they do in their official capacities, they will not be held personally responsible, what would deter them from taking unethical actions in the future?

Most citizens trust drug companies to provide safe effective medicines.  Marketing drugs as safer than they are, or for purposes for which they are not effective abuses the companies' entrusted power.  Doing so in order to enrich oneself thus is a manifestation of corruption.  The ongoing parade of legal settlements is thus a marker of how corrupt health care has become. 

Furthermore, the continued inability of regulators and law enforcement to do more in the face of corruption suggest moral failure, incompetence, and perhaps more corruption.

We will never achieve true health care reform, and will never really improve our vastly over-priced, ineffective health care system until we address this sort of health care corruption. 

A final note: Eric Holder, the current US Attorney General, will soon leave.  While he has been hailed for promoting human rights in some instance (that is, for LGBT individuals), he has been criticized for never making an effort to pursue the top corporate executives who were responsible for the global financial collapse of 2008 (look here) although the Department of Justice constantly goes after relatively small scale white collar criminals.  He also appears to have almost never pursued any top corporate executives involved in deceptive, unethical, illegal or corrupt health care practices, while the government constantly pursues perpetrators of relatively small scale Medicare and Medicaid fraud (look here).  One of his US Attorneys notably pursued the late Aaron Swartz for vaguely specified computer crimes which did not appear to harm anyone while she gave passes to executives at big health care corporations that settled cases of alleged actions that likely harmed patients (look here).   His failure to pursue such large scale health care corruption should be regarded as no less serious than his failure to pursue financial corruption.

Being a Health Care CEO Means Never Having to Say You Are Sorry - (Michael) Covert Edition

Physicians and other health care professionals are increasingly subject to various measures of their quality, productivity, and "value," and beholden to administrators, managers and bureaucrats.  The notion of health professionals being primarily accountable to patients and to professional standards has become old school.  Instead, the business school dogma of  "pay for performance" reigns. There is little evidence that putting health care under the control of administrators, managers and bureaucrats has been good for anyone but administrators, managers, and bureaucrats, but the burdens they have imposed seem to be a major reasons for increasing professional burn-out.

While health care professionals are thus subject to increasingly burdensome oversight by managers and administrators, it is not clear that those managers and administrators are taking their own medicine.  At best, they seem only accountable to each other.  And thus, their pay and power seem disconnected from any rational notion of their performance.

I recently stumbled upon a story illustrating how top health care managers can repeatedly get hired again and again despite major questions about previous performance.

A New CEO Position for Michael Covert

In June, 2014, the Houston Chronicle announced Mr Michael Covert as the new CEO of the Catholic Health Initiatives (CHI) St Luke's Hospital System,  and a new Senior Vice President of CHI.  It included the typical praise from top CHI leaders and stewards.

'Michael has the qualities, skill and professional background to help lead CHI through the many dramatic changes occurring today in health care,' Michael Rowan, Catholic Health Initiatives' president of health systems delivery and CEO, said in a written statement.

Leonard Tallerine, [apparently the former CEO of GoldKing Energy, which is currently in bankruptcy] chairman of the CHI St. Luke's Health board of directors, agreed.

'Michael's depth of experience has honed two key skills: communication and collaboration,' Tallerine said in a written statement.

I confess I missed that article, but I did see an article from mid-September, 2014, in the Chronicle documenting a rather uncritical interview with Mr Covert.  He did manage to boast of his previous success:

Q. What makes you the right guy ...?

A. It's because of my past experience. I've worked in an academic setting. I've worked in a Catholic hospital setting. I have run systems. I've worked for physicians. I've been doing it for a while. And I've had the fortune of some good success.

He also decried excess regulation in California ("we were so regulated");  promised to "develop relationships with our physicians that are strong"; promised "It's not going to be all about buildings"; boasted about "teams I've created"; and proclaimed "it's important for us to be strong on our quality, our finance, our patient engagement, our employee engagement."


So far, here we have yet another new top hospital system manager who seems to be a fount of excellence, at least according to those to whom he is supposed to be accountable.

However, the name Michael Covert rang a bell, and quick search of Health Care Renewal, plus Google revealed that his record is not quite as pristine as portrayed above. 


The Covert Record

Million Dollar Plus Compensation  Questionable Celebrity Endorsements, Quality Problems

Mr Covert first lit up the Health Care Renewal radar screen in 2010 because of his relatively large compensation, greater than $1 million per year, for the CEO of a not very large, nominally public hospital system, Palomar Pomerado.  At the time, the usual explanations were provided by the hospital district chairman, who happened to be a former hospital executive.  It later turned out that Mr Covert was the second most highly paid public official in the state of California.


As Mr Covert's pay became the subject of wider discussion, the hospital nurses' union weighed in with charges that Mr Covert had irresponsibly spent money on celebrity endorsements, particularly from a well known athlete who soon left California for New York. (Look here.)


Also, in 2011 the San Diego Union-Tribune reported that the two hospitals Mr Covert lead had been fined for significant errors/ quality problems in 2010, and had been fined before for such problems.

These facts did not seem aligned with the claims by the district hospital board that Mr Covert was a "phenomenal," "excellent" or "top" leader.  They also seemed to belie Mr Covert's recent discussion of being responsible about finance, employee engagement, or quality.  On the other hand, one can see why he dislikes regulation.

Alleged Obstructed Investigation of Murderous Fake Doctor in the 1980s

Later in 2011, a little big of digging on the internet suggested that Mr Covert had a long history of issues.  In 2008, the local Community Paper did an extensive investigation into his past.  We summarized it here.  First, the article charged that in the 1980s, as a top manager at the Ohio State University Hospital System, Mr Covert impeded the investigation into Michael Swango, a fake doctor working at that institution, who was ultimately convicted of murdering three patients.

At that time, Mr Covert seemed not so interest not merely in regulation, but in the laws of the land.

Illegally Revoked a Physician's Hospital Privileges in the 1990s

The Community Paper also found that the Sarasota Memorial Hospital illegally revoked a physician's privileges.  At the time, Mr Covert was CEO of that hospital.  The Community Hospital also alleged that Mr Covert's testimony at that trial was "thoroughly impeached."

What was that about strong relationships with physicians?  

Alleged Misrepresentation of Facts About Hospital Bond Issue

The Community Paper reported in 2007 that Mr Covert misrepresented facts in his advocacy for a large bond issue to support building a new hospital for the Palomar Pomerado Health District.

Responsible about finance? 

Dictatorial Management Style

The Community Paper interviewed multiple health professionals at Palomar Pomerado uncovering multiple charges that Mr Covert was a manipulative, egotistical and dictatorial leader.

Was this a way to develop wonderful teams? 

Another Lawsuit Claiming Improper Termination of a Physician's Privileges

Later in 2008, the Community Paper noted a lawsuit filed against Palomar Pomerado by a staff physician who also alleged that the hospital had improperly terminated his privileges.  I cannot find any record of how this was resolved.

Again, what was that about relationships with physicians? 

Palomar Pomerado Left in Debt

Mr Covert resigned from Palomar Pomerado in mid-2014 to head to his new position as CEO of Catholic Health Initiatives St Luke's Health System in Houston.  At that time, the San Diego Union-Tribune reported that after building an expensive new facility, Mr Covert would be leaving a hospital system deep in debt and with substantially worsening financial results.

Moody’s Investors Service, the bond rating agency that warned twice in two years of Palomar’s declining financial health, most recently in March. 'PH’s debt measures are among the weakest in Moody’s portfolio of rated public and not-for-profit health care organizations (debt measures exclude GO debt),' the agency said.

Palomar Health’s hospitals and clinics run at a loss; operating margin was negative 4.2 percent in the first half of fiscal year 2014, an improvement from minus 12.2 percent in the same period in 2013.

Worse, the district has cash problems. While improving, it’s still violating a bond covenant to keep enough cash for 80 days.

Didn't Mr Covert say something like it's not about the buildings?  Again, what happened to that emphasis on strong finance? 

And in general, looking at the whole section above, what did Mr Covert think was his "good success?"

Summary

The bureaucrats and managers to whom Mr Covert reported as CEO of Palomar Pomderado, and those to whom he will report as CEO of CHI St. Luke's thought he was brilliant.  Mr Covert proclaimed that he would engage employees, collaborate with physicians, and focus on quality and responsible finance, among other issues.  Yet Mr Covert seemed to leave in his wake as former leader of multiple hospital systems allegations of dictatorial leadership, irresponsible management of finances, deceptions, and opacity (even in the face of investigations of criminal behavior).  Mr Covert's previous hospitals paid fines for quality violations, went into severe debt, terminated physicians' privileges once allegedly improperly, and once illegally as found by a jury, and in one early case harbored a homicidal fake doctor.

Were the people who recruited and vetted Mr Covert bamboozled by his charm, to the point that they did not even bother to check the public record of his past performance?  Or were they, as managers and administrators, not apt to question a fellow member of their guild?

By the way, why did no one in the Houston media think to actually ask some hard questions about the latest star on the local health care management scene?

So why should we as health care professionals, or members of the public ever believe the managers and administrators who have taken over health care? Especially when they promise to improve quality and control costs by making everyone else responsible to them?

True health care reform would make health care leaders accountable for putting patients' and the public's health ahead of personal gain.  Generic managers following business dogma may not be the people to do this. 

ADDENDUM (29 September, 2014) - Thanks to the comment by Dr Howard Brody below, I corrected the statements about that Michael Swango was a fake doctor.  He did in fact have a real MD degree. 

Desperate, Vulnerable Research Subjects, Cost-Cutting Contract Research Organizations and Threats to the Integrity of Clinical Research

Introduction - Clinical Research Done by Contract Research Organizations

Dr Carl Elliott seems to be one of the few people willing to investigate how modern medical research may threaten vulnerable research subjects.  His book, White Coat, Black Hat, opened with a chapter on vulnerable "guinea pigs," people willing to be clinical research subjects for money.  Such people may be desperate for money, and further may be homeless, and have psychiatric problems, including psychosis or drug or alcohol problems.  Dr Elliott just wrote another important article on the plight of vulnerable research subjects. As Dr Elliott wrote,

Most people think of pharmaceutical research as a highly technical activity that takes place in world-class medical centers. The reality is somewhat different.

This is apparent in a grainy video that I watched a few years ago. It had apparently been recorded on a cell phone, and the camerawork started off wobbly. A tanned man wearing sunglasses and a necklace appeared and was introduced as Dr. Johnny Edrozo, a psychiatric researcher. His shirt was unbuttoned partway down his chest. 'The latest stimulant coming out of the market is Vyvanse, which is a Dexedrine preparation,' Edrozo told the interviewer, pausing occasionally to chew gum. For reasons that were not explained, the interview took place in a parked car.

This was my introduction to South Coast Clinical Trials, a chain of private research sites in Southern California that specializes in testing psychiatric drugs. Pharmaceutical companies now typically outsource clinical studies to contract research organizations like South Coast, which run trials faster and at lower cost than universities do. Their job is simply to follow the instructions of their sponsors.

This formula is working: The contract research industry has grown steadily since the early 1990s and may now generate over $100 billion in annual income, according to the Tufts Center for the Study of Drug Development. At the top of the heap are corporations like Quintiles, which has 28,000 employees and operates in about 100 countries. At the other end are private physicians and small companies like South Coast, which are often based in strip malls or suburban office parks.

We first wrote about contract research organizations in 2005 based on a Bloomberg report that noted research conducted in a crumbling physical plant, on poor, often drug-addicted patients who "barely read" informed consent documents, bad record keeping, supervision by poorly trained or unlicensed clinicians.  It appears the problems have only gotten worse.

Vulnerable, Desperate Research Subjects


Dr Elliott made it clear that many of the research subjects enrolled by companies like South Coast are vulnerable. He noted that the companies purposefully recruit subjects from rooming houses and homeless shelters. Here is a description of the sorts of pitches they use.

'I was tired, I was hungry, and half an hour earlier the police had treated us like crap,' Burns said. 'And this woman is saying, ‘Imagine, in 40 days you’ll have $4,000!’ The recruiter made testing drugs sound like a vacation in a five-star hotel, Burns said. 'It’s like a resort selling time shares. They talk about all the benefits first, and it sounds great, but then you start to ask: What do I have to do?' 

Dr Elliott emphasized that such research studies can endanger subjects, but that poor, homeless, drug or alcohol addicted, or psychotic people offered thousands of dollars for participation are not likely to worry about the danger. He also suggested that monitoring and protection of such subjects may not be the most intense.

Obviously, this may be very bad for such research subjects. This is why it has long been considered unethical to recruit such vulnerable subjects in such dubious circumstances. But in this day and age of "greed is good," it may be all to easy to dismiss the risks as contingent on life styles that were already full of "bad choices."

Threats to the Validity of Clinical Research

Recruiting vulnerable patients, especially the poor, homeless, drug or alcohol addicted, or psychotic, into clinical research has dangers for patients not in those trials, and for health care professionals.

Remember that the principles of evidence-based medicine suggest that health care professionals should base decisions for patients on the best clinical research evidence. The quality of these decisions determine the quality of patient care and strongly affect patient outcomes. .

Yet if an increasing proportion of clinical research is being done on vulnerable, that is poor, homeless, drug or alcohol addicted or psychotic people, the validity of that research may be badly compromised.

Consider this narrative from Dr Elliott's article,

I walked round the corner to a shelter, where I talked to an elderly white man. 'I’d say the majority of guys here take advantage of that,' he told me, 'because they get a lot of money and they’re broke as hell.'

So, for example, to qualify for a study of drug addiction treatment,

I mentioned a recruitment flyer I’d seen outside the shelter asking for subjects with 'cocaine dependency.' George nodded. He told me that a lot of people start taking drugs just so they can qualify for those studies.

'You take that s*** two days before to get it into your blood.' He mentioned that he had recently screened for a trial at a research site running addiction studies. 'There were people in the waiting room high as a kite,' he said. 'They were incoherent.'

Also,

The main ethical issues here, of course, are the competence and judgment of the prospective subjects. 'When you say ‘money,’ everything else goes out the window,' said Hanif Jackson, a former program supervisor at the Ridge Avenue shelter in Philadelphia, which recently closed down. I heard the same thing from Harvey Bass, a chaplain who has worked at the Sunday Breakfast Rescue Mission shelter for 15 years. He said drug study recruiters often park outside the shelter and approach residents on the sidewalk. Although Bass didn’t think it was his place to warn residents away from the studies, it was clear that he was not exactly a fan. 'These guys have no job, no home, and a habit, he said. 'You have people at their lowest state, and they’ll say yes to anything.' 

As someone who has reviewed innumerable reports of clinical trials and other clinical research studies for journal clubs, journals, and grant review committees, I know that on paper clinical research studies have elaborate and specific criteria to include and exclude patients, and require patients to undergo detailed study protocols. However, can one really expect patients who are so desperate for money that "they'll say yes to anything" to admit to conditions which would exclude them from a trial? Can one really expect that they will faithfully adhere to research protocols that might require, for example, complete abstinence from alcohol? Can one really expect accurate answers on surveys meant to define their clinical outcomes?  There are numerous threats to the validity of trails conducted on poor, vulnerable, often psychotic or drug or alcohol addicted patients.

Cost-Cutting CROs and Shoddy Research

However, it is unlikely that contract research organizations who recruit such patients and run such studies are really up to implementing these complex, detailed, exacting protocols. Consider this narrative by Dr Elliott,

I visited a research unit at Lourdes Medical Center of Burlington County in Willingboro, New Jersey. The unit was operated by CRI Worldwide, the same company that Burns told me he had spoken with. (The company is now known as CRI Lifetree.) Its focus was on inpatient Phase I trials, which often involve gradually increasing the dose of a drug until subjects begin to feel toxic side effects. Some Phase I studies also require painful or unpleasant invasive procedures. For these reasons, the payment to subjects in Phase I trials is usually much higher than it would be for an outpatient study.

My first thought about the CRI unit: Its appearance did not exactly suggest clinical excellence. Most of the furniture looked as if it had been rescued from a Salvation Army store. Homemade notices with titles such as 'Smoke breaks' and 'Money requests' hung on the walls. No studies seemed to be going on, but a few people were wandering around or watching television, presumably waiting to be screened or assessed.. 

It was in this unit that a patient named Walter Jorden died. Dr Elliott narrated the events that took place before his death. Note that,

according to Jeffrey Fierstein, a cardiologist retained as an expert witness by Jorden’s family, the physicians involved deviated from expected standards of care by not more seriously considering the possibility that Jorden was having a heart attack. In Fierstein’s opinion, they not only ignored classic signs of a heart attack, but also neglected to perform an EKG and missed the opportunity to give Jorden the clot-busting drugs that might have saved his life. As Fierstein points out, 'My understanding is that it [the emergency department] was around the corner; it was right there.'

In addition, a companion article by Peter Aldhous  suggested that CROs and the drug, device and biotechnology companies that employ them are willing to allow physicians with questionable backgrounds to run clinical research. He found that a not insignificant minority of physicians listed as in charge of trials in a US Food and Drug Administration (FDA) database had records of dubious conduct, including various sanctions by state medical boards. He focused on one physician who had run trials since the 1980s, starting with Lovelace Scientific Resources. His record included one-year probation for drug issues, a diagnostic omission described by the medical board as "grossly negligent," then a three-year probation for that and other clinical care problems, then a license suspension, then finally license cancellation. Throughout all the years involved he continued to run clinical trials. In general, Mr Aldhous wrote,

My trawl netted dozens of doctors selected to work on clinical trials over the past five years who had previously been censured by state medical boards. Thousands of doctors are hired each year to test experimental drugs, making this a small minority. But most doctors have clean records, so companies should have few problems finding recruits without red flags against their name. 

His conclusion was,

After spending months in the world of clinical trials, I’m left with an impression of a system that has evolved beyond the FDA’s ability to manage it. I’ve also been struck by the profound disconnect between the disciplinary system that governs everyday medicine, and the separate regulations meant to protect clinical trial volunteers.

Speed and efficiency seem to be what matters to industry, and at times these factors appear to trump concerns about the doctors who run trials. 'The whole thing is profit driven,' says Michael Carome at Public Citizen, a consumer advocacy organization in Washington, D.C. 'You can see where corners might be cut, looking the other way when there might be concerns about an investigator.'

Some experts argue that the FDA’s entire rulebook for clinical trials, with its talk of things like 'institutional' review boards, reflects the academic past of clinical research—not today’s industrial juggernaut of for-profit clinical trials firms and for-hire review boards, which oversee a workforce of doctors drawn from regular medical practice. 'They are regulations for a world that doesn’t exist anymore,' says Elizabeth Woeckner, president of Citizens for Responsible Care and Research, which campaigns for the safety of medical research volunteers.

Again, this is similar to results of previous journalistic investigations of contract research organizations (some examples are here), going back to the Bloomberg article we discussed in 2005, and what Dr Elliott wrote in White Coat, Black Hat.  Thus we need to be extremely skeptical of the validity of clinical research implemented by contract research organizations, especially when the research subjects are vulnerable. 

Summary - Another Set of Threats to the Integrity of the Clinical Research Base

So given the push to do research rapidly at the lowest cost, the lack of supervision and regulation by the FDA, the hiring of physicians with problematic backgrounds, the willingness to take vulnerable patients desperately motivated by money, can we trust that the nice, clean, detailed descriptions of clinical trials implemented by contract research organizations presented in research articles and trial registries have anything to do with the reality of what went on? If not, what then should we make of the validity of the results of such trials?

This is compounded by our inability to tell who actually implemented any given trial.  While articles in most major clinical journals will list what companies sponsored trials, and whether the official paper authors had financial relationships with these companies, the articles do not describe who actually implemented the trials, or disclose whether contract research organizations were involved.

So the first obvious reform would be to require trial reports to disclose involvement of contract research organizations, and perhaps to list the personnel who actually were most responsible for implementing studies in addition to listed authors.

We already have discussed repeatedly how clinical research sponsored by organizations with interests in the outcomes favoring their products and service may be manipulated, and may be suppressed if even such manipulation fails to produce desired results.  We usually have assumed, however, that the published trial reports are generally accurate in their descriptions of trial implementation.  If they are not accurate, particularly because vulnerable subjects may say or do anything to stay in trials that pay them, and sometimes because of poorly qualified or impaired physicians running trials, this adds another layer of questions about the validity of commercially sponsored research.  This is yet another reason to ask whether we need to take research on human subjects meant to evaluate commercial products or services out of the hands of the companies that make those products and provide those services. 

Medicare Pays $220 Million a Year for Acthar Without Any Controlled Trials that Prove it Works - While We Have No Money to Develop Ebola Vaccines or Treatment?

Introduction - No Money for Ebola Vaccine Development

While a new Ebola epidemic continues in Africa, people in developed countries are getting worried. Even the 0.1%, who may have rarely worried about our dysfunctional health care system before, are getting nervous. For example, this week, the Donald seemed panic stricken that Ebola infected American health workers might be allowed to return to the US, no matter what the precautions.  As reported by Politico,

Donald Trump has a message for the Ebola patient coming to the United States for treatment: Stay out.

'Ebola patient will be brought to the U.S. in a few days — now I know for sure that our leaders are incompetent,' Trump tweeted Thursday night. “KEEP THEM OUT OF HERE!”

Yet, as we posted here, money was the major barrier to developing treatments of vaccines that could have helped contain the epidemic in Africa, but whose availability in the US could also have reassured the Donald.  Dr John Ashton, a top public health physician in the UK, wrote in the Independent,

 

We must also tackle the scandal of the unwillingness of the pharmaceutical industry to invest in research to produce treatments and vaccines, something they refuse to do because the numbers involved are, in their terms, so small and don't justify the investment. This is the moral bankruptcy of capitalism acting in the absence of an ethical and social framework.

 

It seems that in the US and UK, our market based health care system can only cannot develop treatments for dangerous diseases when the treatments will produce huge returns on investment.   The irony is that even people (like Mr Trump) who preached market triumphalism and limiting government, presumably from doing things like developing drugs, may now fear diseases for which the market alone provides no remedy.  

 

Meanwhile, while there was no money to develop vaccines and drugs for Ebola, a story about how much money we are spending on questionable remedies has reappeared.  

 

But a Huge Increase in Money for Acthar

This week, writing in ProPublica and the New York Times, Charles Ornstein noted the huge amounts being paid by the US government for a previously obscure drug,

An obscure injectable medication made from pigs' pituitary glands has surged up the list of drugs that cost Medicare the most money, taking a growing bite out of the program's resources.

Medicare's tab for the medication, H.P. Acthar Gel, jumped twentyfold from 2008 to 2012, reaching $141.5 million, according to Medicare prescribing data requested by ProPublica. The bill for 2013 is likely to be even higher, exceeding $220 million.

Over approximately the same time course, commercial US health care insurers and the Tricare program for military dependents noted a surge in the amounts they were paying for this drug too,

 At a recent conference hosted by Sanford C. Bernstein, Dr. Ed Pazella, Aetna's national medical director for pharmacy policy and strategy, explained the shift on Acthar.

Questcor's 'combination of aggressive marketing and aggressive price increases finally caused it to become a line item that a finance guy looked at and said: 'What the hell are we paying for this? Why? What is it?' And that's when we started looking at what's our policy around this stuff,' Pazella said.

You Heard it Here First - a Huge Price Increase for an Old Unproven Drug

This problem's development took quite some time.  As we first discussed in 2007, some clever  maneuvering by corporate executives around loopholes in government rules benefited the executives, but maybe no one else.

The clinical background is that Acthar is a form of a hormone (ACTH) that stimulates the adrenal gland to produce more cortisol and other related hormones.  The formulation is made from pig pituitaries, and was developed in the 1940s.  It was approved by the US Food and Drug Administration at a time when this action did nor require proof of efficacy, that is, proof that the drug worked.  For years, the drug was only used for a rare form of infantile seizures, and occasionally for symptoms of multiple sclerosis in adults.  As noted in several reviews by the Cochrane Collaboration, there is little good evidence that the drug works for either condition, and no evidence that it is better than simpler, cheaper alternatives, like synthetic alternatives to cortisol, for the latter. (See this blog post).

The drug languished for years, but Questcor purchased the rights to it in 2001, apparently for a mere $100,000 (look here).  In 2007, the company jacked its price up in 2007 from $1650 a vial to $23,000 a vial.

A Further Price Increase, and a Big Marketing Push


As Mr Ornstein noted, its price is now $32,000 a vial.  One might expect that this huge price would quickly generate competition from generic drug manufacturers,  but, per Mr Ornstein,

Although it long ago lost patent protection, the drug is a complex biologic agent, and the manufacturing process is a trade secret. 

Furthermore, infantile spasms may be rare, but, 

Since Acthar came on the market in 1952, the rules about F.D.A. approval have changed. At the time, drug companies simply had to demonstrate that a drug was safe, rather than that it was effective. Acthar was initially authorized as a treatment for more than 50 diseases and conditions. (The list has since been cut to 19.)

Drug companies are barred by federal rules from marketing drugs for "off-label" indications, however, given the above, it was not obviously illegal when Questcor

 began marketing it for a broad menu of uses.

In addition, Medicare could not easily challenge the huge price Questcor was charging for this unproven remedy given to adults

Medicare cannot bar access to medications like Acthar, even in the face of rising expense and questions about efficacy, Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services, said in a written statement. The law mandates that Medicare's drug program, known as Part D, cover drugs for the uses authorized by the Food and Drug Administration, he said.

Questions about Questcor's Marketing

In fact, while it appears legal to promote Acthar for uses for which it has no proven efficacy, there are some questions about Questcor's marketing practices,

The company has disclosed in filings with the Securities and Exchange Commission that two United States attorney's offices and the S.E.C. are investigating its promotional practices.

A possible reason why was supplied by a companion ProPublica article, also by Charles Ornstein,

 Many of Medicare's top prescribers of the expensive specialty drug H.P. Acthar Gel have financial ties to the drug's maker.

Only 18 practitioners wrote 15 or more prescriptions for the drug in 2012. At least nine — and all of the top four — were promotional speakers, researchers or consultants for Questcor Pharmaceuticals, a ProPublica analysis shows.

Also, there are questions about whether Questcor has been concealing adverse events related to the increasing use of Acthar.  Until recently, as noted by Gretchen Morgenson in the NY Times in July, 2014,

For years, Questcor Pharmaceuticals has highlighted the potential benefits of Acthar, its immune-system drug, while saying little about its ill effects.

But as had been noted also by Gretchen Morgenson in the NY Times in June, 2014, more information about adverse events began coming out, not mainly for the benefit of patients, but apparently due to questions by investors about a pending takeover of Questcor by Mallinckrodt,

Since 2012, the events, as reported to the Food and Drug Administration’s Adverse Event Reporting System, or Faers (pronounced 'fares'), have included 20 deaths and six disabilities among patients reported to have been using Acthar and in which Acthar was recorded as 'suspect,' or the drug most likely to have been associated with the event. From January 2000 through 2011, by contrast, 13 deaths involving Acthar were reported to the F.D.A.’s system.

Although Questcor has reported some of these events to the F.D.A., as required, the company has not discussed the adverse outcomes in its financial filings. A Supreme Court ruling in 2011 concluded that reports of adverse events among patients using a drug, even if few in number, are of interest to investors weighing whether to buy or sell shares in the manufacturer.

The July, 2014 article by Gretchen Morgenson in the NY Times noted further,

according to a regulatory filing made by Questcor early Thursday, the number of patients reporting a so-called adverse event while using the drug last year represented almost 5 percent of prescriptions dispensed. The total number of events in 2013 reported by patients, who can experience multiple ill effects, was almost 14 percent of prescriptions, up from 9.1 percent in 2011.

 It was the first time Questcor, which has received a $5.6 billion takeover bid from Mallinckrodt Pharmaceuticals, had disclosed any problems experienced by Acthar patients, even though such information is of keen interest to investors.

That information might also be of interest to patients and doctors. 

Questions about Questcor's Executive Compensation

While Questcor brought in huge amounts of money from an old unproven drug using aggressive marketing that did not dwell on the drug's adverse effects, its executives have been making lots of money, sometimes in questionable ways.  For example, in February, 2014, Jesse Eisinger also reported for ProPublica that the timing of Questcor CEO Don M Bailey's stock sales has seemed unusually fortuitous,

Questcor Pharmaceuticals is a biotechnology company with a $4 billion market capitalization. Good things keep happening to Questcor in the middle of the month. Here’s what’s notable: The middle of the month just happens to be the time that the company’s chief executive, Don M. Bailey, sells stock through his regular selling plan.

The question is whether the company timed its favorable press releases to coincide with the times its CEO was known to be selling his shares?

Also, in May, a blog on The Street noted that the CEO's daughter also appears to have been quite fortunate, for no obvious reason,

As reported this morning by my colleague Herb Greenberg in his "Reality Check" newsletter (subscription required), Kirsten Fereday, a Questcor employee who also happens to be Bailey's daughter, received a huge salary bump in  in 2013, according to the compensation portion of its yet-to-be-filed proxy two days ago in an amended 10-K.

According to the filing:

Kirsten Fereday, the daughter of Don M. Bailey, our Chief Executive Officer, was employed by us during 2013 as our Senior Director, Business Analytics and Evaluation, and received total cash and equity compensation for the year ended December 31, 2013 equal to approximately $1,035,246 in cash compensation and $200,000 in restricted stock grants (value based on intrinsic value method). Ms. Fereday's employment was approved in accordance with the Related Party Transaction Policy and our Chief Executive Officer is not involved in the determination of Ms. Fereday's compensation. [Emphasis added.]

Why did her pay go up so much compared to that received in the previous year?

Furthermore, while Questcor derives a tremendous amount of revenue from the US government, a deal is in the works for it to be acquired by Mallinckrodt, now based in Ireland, which, if successful, will make top Questcor executives even richer, as Gretchen Morgenson wrote in the NY Times in June, 2014,

If the acquisition by Mallinckrodt goes through, Questcor’s top six executives could receive severance packages totaling $63.5 million under the terms of their contracts, the merger proxy shows.

Also,

During the time that adverse events involving Acthar have risen, Questcor’s top executives have been actively selling shares. So far this year, securities filings show, sales by the top five executives at the company, four of them under prearranged selling plans set up last year, have generated gains of $39 million.

Summary

As Andrew Pollack wrote in the first NY Times coverage of how Questcor used an old unproven drug to generate huge returns,

How the price of this drug rose so far, so fast is a story for these troubled times in American health care — a tale of aggressive marketing, questionable medicine and, not least, out-of-control costs.

 The sorry case of Questcor and Acthar reveal how crazy the costs of health care in the US have become, driven now by a system that itself now seems crazy.  Through clever use of regulatory loopholes, the company acquired rights to an old drug whose efficacy was unproven, hugely increased its price, began aggressive marketing even though the drug's efficacy was completely unproven, while remaining largely silent about the drug's substantial risks.  Fueled by hundreds of millions of dollars in revenue thus generated, mainly from the US government, the company richly rewarded its top hired executives, who then have decided to sell it to a company outside of the US in a deal that will make these executives millions more.  So patients received a drug whose benefits are unknown, and whose risks may be much higher than they were told, at a cost of hundreds of millions of dollars, much of it borne by US taxpayers, while company executives got rich.


Just coupling for now the story of how we spent hundreds of millions on Acthar to enrich company executives with the story that we have no money to develop vaccines or treatments for Ebola virus (look here) demonstrates the massive failure of our experiment to turn our health care system over to market triumphalists and laissez faire mercantilists.  As long as we let the health care system be run by people who put their own enrichment ahead of patients' and the public's health, things will only get crazier.  And even the rich may not be immune from the results of that craziness

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

But this sort of reform would challenge the interests of managers who are getting very rich off the current system.  So I am afraid the US may end up going far down this final common pathway before enough people manifest enough strength to make real changes.

The Price of Compassion - Commercialized Hospices and the Mistreatment of Vulnerable Patients

Introduction - Commercialized Hospices

We have occasionally written about the rise of the commercialized hospice industry, and concerns that commercialized hospices may not be providing the compassionate care they promise.  As we have discussed before, the hospice movement began with small, non-profit, community based organizations meant to provide compassionate palliative care to the terminally ill.  However, in the US, the hospice movement has been co-opted by commercial hospices, often run by large corporations, which may put profit ahead of compassion.

Several long investigative articles have appeared this year that focus largely on the commercial part of the hospice movement:
Terminal neglect? - how some hospices decline to treat the dying, Washington Post, May 3, 2014, by Peter Whoriskey and Dan Keating
How dying became a multibillion-dollar industry, Huffington Post, June 19, 2014, by Ben Hallman
Is that hospice safe? - infrequent inspections mean it may be impossible to know, Washington Post, June 26, 2014, by Peter Whoriskey.

As we have discussed before, the biggest risk of the rush to commercialize hospices is that it may lead to the enrollment of patients who are not terminally ill.  To try to achieve a dignified death in as much comfort as possible, the hospice movement emphasizes aggressive use of analgesics, including narcotics, and other psychoactive drugs.  Also, hospice patients cannot expect treatments meant to prolong life or cure acute problems, since in terminal patients these may cause unpleasant side effects and will not, by definition, work.  Therefore, a patient who is not terminal enrolled in hospice runs risks of being drugged into a stupor, and could be doomed were he or she to develop an acute illness for which treatment is available, like a bacterial pneumonia that might respond to antibiotics, because in hospice antibiotics are not given for acute infections.  Thus the whole hospice model depends on the ability of hospices to enroll only terminally ill patients.

This is difficult because prognosis is difficult to predict.  Beyond that, we discussed how commercial hospices may have financial incentives to enroll patients who are not terminally ill because they can make a lot of money from such patients.

The recent articles add more evidence that commercial hospices may enroll patients who are not terminal, and such patients may end up suffering or dying prematurely because of excess pain treatment or withholding of treatment of acute illness inherent in the hospice model.

A Long Anecdote Illustrating the Dangers of Commercialized Hospices

The Huffington Post article provided an extended anecdote about what happened to a patient enrolled in a commercial hospice despite the lack of an identified terminal condition. The patient was Mary Maples.

By the fall of 2011, her health was often poor. She ate a special diet to keep her diabetes in check and likely also suffered from COPD, a disease that often afflicts ex-smokers and makes it hard to breathe. Still, she retained her wit and sense of humor

She was hospitalized briefly for a urinary tract infection. Her family felt she needed rehabilitation, but apparently had run out of eligibility for Medicare payment for it. Then somehow the family was approached by marketers for Vitas Inc, a commercial hospice company owned by Chemed, also the parent company of Roto-Rooter.

Spry doesn’t recall exactly when she first spoke to a representative from Vitas, or how the company found out that her mother might be a candidate for hospice. But Vitas staff told HuffPost that the medical director of the Titusville rehabilitation center is also on the Vitas payroll, as a team leader.

Spry said a Vitas nurse persuaded her that hospice was the correct choice for her mother. The nurse touted the at-home care and help with other chores that had grown difficult, such as bathing her mother,

Note that what the Vitas nurse allegedly emphasized were ancillary benefits of hospice, not its key function.  The implication is that at a time of vulnerability, the Vitas marketing pitch was deceptive.

It is not clear that Ms Maples or anyone with the legal power to make decisions for her understood the implications of hospice, or consented for her enrollment.

Spry signed the admission forms, even though she did not have the legal right to do so. Dunn, Maples’ grandson, actually had power of attorney over her affairs.

'I didn’t know what I was getting us into,' Spry said.

Vitas said patients or patient representatives must sign a consent form that clearly spells out the hospice mission before they can be enrolled. Records provided to HuffPost from Maples' family, obtained from Vitas, did not include this consent form.

Also,

It’s also not clear that Maples consented to hospice treatment, at least initially. She did not sign the documents authorizing her enrollment 'due to weakness,' according to Vitas records. Yet that same day, according to other nursing notes provided by her family, she was strong enough to move about using a walker during a physical therapy session. 

Enrolling the patient without her consent, or consent from a person with legal authority over her, appears to be a serious ethical failure by Vitas. 

Hospice records did not show the patient had a terminal illness.

Maples did not have a terminal illness. Her diagnosis was 'debility, unspecified,' according to her records. This is a catch-all term for frail patients that Medicare’s regulator has said hospices are no longer allowed to use, because so many claims made under the diagnosis were later rejected or determined fraudulent. 

So the patient did not have a terminal illness and did not consent to hospital enrollment, and the hospital company apparently did not make it clear that hospice is only supposed to be for terminal patients.  Furthermore, later it turned out that the family thought Ms Maples would be a candidate for resuscitation, yet hospice care is specifically not supposed to include such aggressive attempts at life prolongation.  Again, this suggests a serious failure by hospice personnel to communicate clearly at best, and perhaps outright deception.

Maples’ records show she or her family repeatedly indicated that she was full code, meaning she wanted life-saving treatment.

Nonetheless, the patient was apparently treated with narcotics and anti-psychotics even though she did not have chronic pain.  This appears to be very bad medical practice, and potentially very dangerous.

Maples was elevated to continuous care even when she wasn’t experiencing any pain at all, her records show. By doing so, Vitas boosted its daily billing rate from the standard $146.20 a day to $853.30.

Documents shared with HuffPost show that in the Melbourne office, at least, managers were encouraged to increase continuous care counts. In the fourth quarter of 2009, for example, one of four 'management program goals' was for continuous care to average 17 patients a day. Managers said they received bonuses pegged to whether they met this and other patient count targets.

The most difficult part of Maples’ experience to evaluate concerns her medication. Her records show she was given morphine, along with Ativan, a type of sedative, and Haldol, a powerful antipsychotic drug.

All three medications are contained in the 'comfort pack' that hospices ship to a patient’s house on admission. They are typically used in the final weeks of the patient’s life, when he or she is near death. 

Ultimately, Ms Maples suffered an acute event that the hospice did not apparently treat adequately.  A relative talked to her on the telephone, and found,

Her speech was garbled and she wasn’t making any sense, he recalled.

He then called the head office of the local Vitas chapter in Melbourne, Florida, and asked that his grandmother be discharged — he wanted to quit Vitas. The receptionist said Maples’ doctor was out of town, and nothing could happen until he returned the next week, according to Dunn.

Later that day, Vitas transferred Maples from her home to its inpatient unit at Courtenay Springs Nursing Home on Merritt Island.

Maples’ records indicate she was moved for 'constipation' — often a side effect of the medications she was receiving — and 'nausea.'

Then,

An ambulance brought Maples to Cape Canaveral Hospital, where she was 'unresponsive and in respiratory failure' on arrival, according to records. She was diagnosed with septic shock — a severe blood infection that is often fatal, especially in elderly patients. 

This implied that hospice personnel failed to adequately manage a potentially fatal acute problem, septic shock, extremely poor medical practice.  However, it would make no sense to aggressively treat septic shock afflicting a patient who was terminal, but, as noted above, Ms Maples did not have a terminal condition.  Although Ms Maples survived that episode, she died weeks later.

So in this one detailed case, a patient who had chronic problems but was not terminally ill was enrolled in hospice, apparently without adequate consent, and after a marketing pitch that did not seem to explain that hospice is only for terminal care.  The patient received apparently very bad medical care, including the use of narcotics for no apparent reason, and an initially inadequate response to a severe acute medical problem, probably hastening her death.  This suggests that commercialized hospices over-selling their services to the wrong patients can hurt, and sometimes even kill patients.

Overly Aggressive and Deceptive Marketing

The Huffington Post and two Washington Post articles also contained other illustrations of these problems.  In the Huffington Post article was the general observation that

Every day, hospice marketers descend on doctor’s offices, rehab centers and hospitals. These workers have been known to rifle through patient logs at nursing stations, scramble to sign up what some in the industry call 'last gasp' patients — people with just hours left to live — and even scuffle with each other in hospital corridors over the right to sign up dying people, according to current and former hospice employees and allegations made in federal lawsuits.

Such a frenzy suggests a certain lack of care about whether the targeted patients are appropriate. Furthermore, the article included specific examples of the push to enroll more patients, no matter what.  

'The pressure was direct from operations on a daily basis,' said James Robbins, a former sales manager at AseraCare Hospice, a chain operating in 19 states. 'What are you not doing? Why are we not getting more patients? We’d have constant conference calls, meetings.'

Robbins, who lives in Atlanta, said he would 'cruise' nursing home lobbies and try to pressure medical directors at those facilities to refer directly to him. 'It's not even about patient care anymore; they’ve gone to the dark side,' he said. 'It’s all about money.'

'I’m a nurse, not a saleswoman,' said Pamela Schiffman, a hospice nurse and patient case manager in California who said she has quit four jobs in the last decade because she was ordered to keep pestering families who resisted her pitch.

Note that AseraCare is a commercial hospice system owned by Golden Living, which in turn is a privately held corporation partially owned and entirely managed by Fillmore Partners, and San Francisco based private equity group (look here). 

Also, there is evidence that marketers were pushed by management to obscure the nature of hospice, and deceive patients into thinking that they would not be denied acute care should they need it.

'One huge problem I had to deal with on a daily basis is patients not understanding they were dying and truly on a real hospice,' said a former manager at a Vitas branch in Florida, who requested anonymity for fear of losing her current job in the industry. 'The admission and marketing staff would tell them, 'This is the new hospice, we are not for dying people, the rules have changed, we can just help you.'

Note that the idea that the rules have changed and hospice is not for dying people anymore is absolute nonsense. 

Furthermore, there is evidence that once enrolled, hospices may resist discharging patients even if it becomes apparent that they are not terminally ill.

A nurse who currently works for Vitas in the same Melbourne, Florida-based location that enrolled Maples said that nurses who tried to suggest at meetings that a patient was no longer appropriate for hospice were routinely 'humiliated.'

Medical Mismanagement

In the Huffington Post article, there were several anecdotes about excess use of pain medicine,

In one example described in court filings, prosecutors allege a Vitas patient was given crushed morphine, even though she wasn’t in pain. The morphine treatment continued even after the patient showed signs of having a toxic reaction to it — even seizures, prosecutors claim. 

Also,

Mary Gubacz fell into a ditch across the street from her assisted living facility at 2 a.m. after she was prescribed the powerful antipsychotic Seroquel while under care of Odyssey Hospice in Michigan, her daughter Marilyn Little said. 

Note that Odyssey hospices are one of multiple chains of hospices owned by Gentiva.


The Washington Post article, Terminal Neglect, provided data about many hospices' inability to manage worsening symptoms (but presumably mainly for patients who were terminally ill.)  In particular, it showed that many hospices never provide what is called continuous nursing care which is usually required by patients with worsening symptoms.  For example,

One of the largest such hospices in the country is the Heartland Hospice Services in Santa Rosa, Calif., a facility owned by HCR ManorCare, a company that was turned private in 2007 by the Carlyle Group, a private equity firm.

Its hospice in Santa Rosa billed Medicare in 2012 for more than 50,000 days of routine hospice care, but no patient received continuous care or general inpatient care, according to the Medicare billing records.

A spokesman for HCR ManorCare portrayed the absence of those services as a statistical anomaly.

Note that given the size of the sample, that would have to be a pretty major statistical anomaly.  

Also,

Other records, too, indicate that many hospices offer very little nursing care in the last days of life.

For example, Medicare tracks how often a hospice sends a skilled nurse to a patient in the 48 hours preceding death.  

But at about 12 percent of hospices, more than one-third of patients die without seeing a skilled nurse in the last 48 hours of their life. Indeed, at 34 hospices, no patient saw a skilled nurse during that time.

The newer Washington Post article, Is That Hospice Safe?, documented many instances of apparently inadequate care of worsening clinical problems,

A woman dying of liver cancer, battling nausea and breathing difficulties, waited weeks for someone to drain fluid from her swelling abdomen and died still waiting, according to records. Another cancer patient had a feeding tube that oozed pus where it pierced his skin and did not actually reach his stomach. He had received no fluids from it for five days, emergency room doctors said. At the same time, a patient complaining about chest pain waited two days for a recorded visit and eventually was taken to a emergency room and diagnosed with pleurisy.

Many of these problems may go unnoticed, because the article noted that hospices are inspected very infrequently, if ever, by government agencies.

Summary

The three recent articles add to the evidence that commercial hospices often enroll patients who are not terminally ill, although hospice is meant only for the terminally ill.  There may be strong incentives for hospice employees to do so, and such enrollment may be induced by deceptive marketing and not accompanied by true informed consent.  Once in hospice, many patients may get poor medical management.  Patients who are not terminally ill may be at risk of getting inadequate care, and perhaps dying due to this lack, were they to get acutely ill, since hospice is not meant to provide life prolonging or potentially curative care for acute problems.

Note that most of the examples above concern the largest commercialized hospices, owned by large publicly held corporations (Vitas owned by Chemmed and, Odyssey owned by Gentiva), or by large corporations owned by private equity (AseraCare, owned by Golden Living, run by Fillmore Partners, and HCR ManorCare, owned by Carlyle Group).  Such large and rich organizations ought to be particularly held accountable for what they are doing to vulnerable patients. 

The US is in the midst of a great, uncontrolled experiment.  We have systematically taken medical and health care services previously lead by health care professionals and sited within community non-profit organizations and given them to for-profit firms, often huge corporations.  Meanwhile, rather than increasing regulation to account for this, we have systematically deregulated health care organizations.  There is more evidence that an increasingly commercial health care system within the framework of wild West, laissez faire capitalism is expensive and dangerous.  It is particularly dangerous for vulnerable populations especially when they are unaware that their caregivers must answer to huge corporations.

In my humble opinion, we should return control of direct patient care, especially of the most vulnerable patients, to health care professionals and if necessary small non-profit community organizations.  We ought to give strong consideration to banning corporate hospices, and banning all forms of the corporate practice of medicine and corporate health care "delivery."

Given how many insiders make so much money from the current version of laissez faire capitalism in health care, however, I would expect strong resistance should such apparently "radical," but actually conservative proposals actually get any mainstream attention.