The Mystery of the Discharged Ebola Patient - Where is Sherlock Holmes When We Need Him?

As discussion, if not outright panic, about Ebola infections increases in the US, it is still hard to figure out what heath care professionals and the health care system need to do to protect patients and the public in a very changed world.

One pressing question is how to identify people at risk of having the infection so as to best care for them, and to protect the public from further spread of the infection, without swamping the health care system, needlessly reducing civil liberties, or spreading further panic.

To better answer question, better understanding why the first patient who was diagnosed with and then died from Ebola in the US was initially not diagnosed might help.  However, at this time, the whole thing seems mysterious. As a column published on October 7, 2014 in the Dallas Observer was entitled,


"Why Don't We Know Yet Exactly What Happened When Our Ebola Patient Zero Appeared?"
 

On this blog, InformaticsMD was the first to speculate that problems with the design and implementation of an electronic health record (EHR) might have enabled the discharge of this patient, after he presented to the emergency department with non-specific symptoms soon after returning from Liberia.  The next day, an official statement from Texas Health Resources seemed to confirm that a "flaw" in the hospital's EHR prevented adequate communication of the patient's travel history between  a nurse and a physician.  However, one day later, as InformaticsMD discussed here, the hospital reversed itself, releasing another statement that there was no "flaw" in the EHR.  That statement, however, did not explain either why the first statement came out, or anything more about the diagnostic failure.

So, as the Dallas Observer column stated,

The question of why Duncan was sent home initially instead of isolated is still the most stubborn mystery in the saga of 'Ebola Comes to Dallas.'

As columnist Jim Schultze explained, this question has implications for health care professionals and health care organizations who need to figure out how to best deal with the next patient who shows up who might or might not have Ebola.

If Duncan's dismissal from the emergency room on his first visit was a bungle, then it's reasonable to assume that everybody knows about the bungle by now and a similar goof is unlikely to happen again at any decent hospital in America. But if the handling of Duncan grew out of something more systemic, especially a business or management style or policy, then it may be less reasonable to assume the next hospital will be immune from the same issue.

In other words,

if the Eric Duncan mistake flowed from something more systemic, then we absolutely need to know what it was and how it happened so that we can look for the same problems everywhere else. If it was a non-medical problem, I can almost guarantee you it will turn out to be an issue not be unique to this hospital.

Mr Schultze is not the only one to point out the critical need to solve this mystery.  He quoted

former Boston hospital CEO, Paul Levy, called on Texas Health to open up: 'A failure by a hospital to be open about what went wrong in a major medical case such as this," Levy said, "does a major disservice to everyone else in the health care industry.'

Similarly, the editor of FierceEMR wrote,

The Texas Health situation may be setting a dangerous precedent. This is a major world health crisis for which providers worldwide are trying to prepare. If truly the mistake Texas Health made in releasing Duncan was its mistake alone, so be it.

But if there really was a design flaw, then every provider--and every vendor--needs to know about it, evaluate whether it has the same problem, and correct it.

The patients deserve no less.

So far, to date, we have heard nothing more from the managers of Texas Health Presbyterian or its parent non-profit corporation, Texas Health Resources.  It appears we need a reincarnation of Sherlock Holmes to solve this one.

Sifting a Few Clues

I am not he.  But I do believe there are some clues, however, weak, that suggest system flaws.  They can be found in an interview of the new Texas Health Resources chief operating officer (COO), Dr Jeffrey Canose, published in Healthcare Informatics a few weeks before Mr Duncan presented first to the Texas Health Presbyterian emergency department.

One of his points was that the hospital system is changing its emphasis from acute care to population health (however that may be defined),

we made the decision to become more of an integrated health system, and started to build the infrastructure for population health

Then,

The biggest challenge is to continue on our journey to increase our capabilities as a fully integrated health system; to develop the competency to be a high-performing system in the realm of population health management; to shift our focus from sick care to actually managing well-being....

Also, he referred to participation in the Pioneer ACO program as

one of our first significant efforts in shifting our focus from being acute-care-centric to being more focused on the full continuum of care

Recall Mr Schulze's point that the failure to diagnose Mr Duncan could have been due to a business management style or policy.  So maybe we have a clue that the hospital's policy to reduce emphasis on acute care, including the emergency department, might have had to do with problems in the ED leading to a diagnostic misadventure.

 In addition, Dr Canose noted,

 the electronic health record is a huge enabler to all this; the next challenge will be to enable things further, including through data mining, working with big data, and clinical and operational support

So,

around collaboration at the sharp point of redesigning patient care—... people in IT are mission-critical partners in hearing what kinds of problems we’re trying to solve, and in helping us to figure out how to drive clinical transformation and care design, and how to drive efficiency.

So maybe we have a clue that the management was very heavily intellectually invested in their health care information technology infrastructure, and perhaps thus less willing to think about how health care IT could be the cause, rather than solution of problems, such as diagnostic problems in the ED.

Finally, this may be just a hint, but Dr Canose spoke

We have a clear focus on continuing to elaborate the infrastructure we need in order to do population health management, and we’re continuing to build those capabilities over time, and explore ways we can deploy through our employed physician groups,...

This implies that many physicians who practice at Texas Health Resources hospitals are in fact its employees.  We have at times written about the perils being a corporate physician.  One is loss of autonomy, as physician employees become beholden to organizational managers.  So maybe we have a clue that physicians' loss of autonomy, perhaps the autonomy to put patients ahead of corporate policies and managerial edicts, such as those deemphasizing emergency care, could have enabled the failure to diagnose the Ebola "patient zero?"

Summary

We wrote earlier that the rise of generic managers as leaders of health care organizations degrade the US' ability to deal with Ebola.  In the mystery of the discharged Ebola patient, we seem to see the sort of managerial obfuscation that seems characteristic of many generic managers.  More transparency from the management of Texas Health Resources would surely help the US deal better with the ongoing challenge of Ebola.  In the long run, Ebola may teach us a hard lesson about the need to put health care leadership in the hands of people who understand health care, and subscribe to its mission to put patients and the public health first.   

ADDENDUM (10 October, 20140 - This post was re-posted on the Naked Capitalism blog.

Can Our Dysfunctional Health Care System Contain Ebola?

Not to bury the lede, I think it can, but it will be a lot harder than the talking heads on television predict.

I have been writing about health care dysfunction since 2003.  Lots of US politicians would have us believe we have the best health care system in the world (e.g., House of Representatives Speaker John Boehner (R-Ohio), here),   Much of the commentary on Ebola also seems based on this "best health care system in the world" notion.  For example, in an interview today (5 October, 2014) on Meet the Press, Dan Pfieffer, "senior White House adviser," said

There is no country in the world better prepared than the United States to deal with this.  We have the best public health infrastructure and the best doctors in the world.

However, at least the statistics say compared to other developed countries, US processes and outcomes are at best mediocre using the best of some admittedly flawed metrics (look here), yet our costs are much higher than those of comparable countries.  Furthermore, on Health Care Renewal we have been connecting the dots among severe problems with cost, quality and access on one hand, and huge problems with concentration and abuse of power, enabled by leadership of health care organizations that is ill-informed, incompetent, unsympathetic or hostile to health care professionals' values, self-interested, conflicted, dishonest, or even corrupt and governance that fails to foster transparency, accountability, ethics and honesty.

Thus there is reason to worry that it will be harder than many expect for the US to deal with Ebola.  There is already some evidence that some of the sorts of problems we have been discussing for years made it harder for the US to cope with even the so far limited incursion of Ebola.

Financialization of Pharmaceutical and Biotechnology Companies

George W Merck famously said,
 

We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.

In the pharmaceutical industry, the era of George W Merck is over.  The failure to have access to an effective Ebola virus vaccine exemplifies how things have changed.

If we were to have an effective Ebola virus vaccine, we could have likely used it to vaccinate health care workers and contacts of infected patients and likely thus halt the epidemic early.


A story in Modern Healthcare suggested that now many of the big experts on Ebola and public health are concluding having a vaccine available would be very helpful,

 As West Africa's Ebola outbreak continues to rage, some experts are coming to the conclusion that it may take large amounts of vaccines and maybe even drugs — all still experimental and in short supply — to bring the outbreak under control.

Specifically,

'It is conceivable that this epidemic will not turn around even if we pour resources into it. It may just keep going and going and it might require a vaccine,' Dr. Anthony Fauci, director of the U.S. National Institute for Allergy and Infectious Diseases, told The Canadian Press in an interview.

The main reason we do not yet have such a vaccine does not appear to be scientific, but economic.

Here we posted discussion of arguments that pharmaceutical and biotechnology companies up to now have been uninterested in developing Ebola vaccines because they did not anticipate that such vaccines would produce a lot of revenue.  About one month ago, the Independent ran yet another story about an Ebola expert who believed this was the main reason for the lack of effective vaccine development up to now.

The scientist leading Britain's response to the Ebola pandemic has launched a devastating attack on 'Big Pharma', accusing drugs giants including GlaxoSmithKline (GSK), Sanofi, Merck and Pfizer of failing to manufacture a vaccine, not because it was impossible, but because there was 'no business case'.

West Africa's Ebola outbreak, which has now claimed well over 2,000 lives, could have been 'nipped in the bud', if a vaccine had been developed and stockpiled sooner – a feat that would likely have been 'do-able', said Professor Adrian Hill of Oxford University.

The US health care system is now heavily commercialized.  Health care corporations, including pharmaceutical and biotechnology companies, are often lead by generic managers who subscribe to the business school dogma of the "shareholder value theory," which seems to translate into putting short-term revenues ahead of all other goals.  Thus they have been "financialized."  At least in the pharmaceutical and biotechnology sector, such financialization appears to now be global. 

It may now be too late to contain this particular Ebola virus epidemic using a vaccine.  But unless we change how decisions are made about vaccine development, and end the dominance of financialization over drug and vaccine development, we may not be able to control the next deadly epidemic using vaccines either.

Generic Management Deluded by Business School Dogma

On 2 October, 2014, InformaticsMD posted on Health Care Renewal his speculation that the Ebola patient now hospitalized in Dallas was not identified on his first emergency department visit to Texas Health Presbyterian hospital even though a nurse apparently found out he had recently traveled from Liberia because of problems with how the hospital's electronic health record (EHR) transmitted or displayed this information.  This supposition was later apparently confirmed, but then the hospital system CEO retracted this explanation, leaving the reason he was sent home from the ED, thus risking infection of more contacts, unclear (see this post).

I now speculate that the larger reason for the problems the hospital had and is having both handling this patient, and explaining how it handled the patient is hospital leadership by generic managers who do not really understand the relevant health care issues.


Mr Barclay E Berden, the CEO of Texas Health Resources, has had a long career in hospital management.  However, his most advanced degree was "a master's degree in business administration with a specialization in hospital administration from the University of Chicago Graduate School of Business."   His official biography suggests that he has no direct experience or training in medicine, health care, or biological sciences.  Nonetheless, when he became CEO this year, according to Modern HealthCare, the chairperson of the hospital system board thought he was fully qualified,

'He brings a well-rounded perspective and unique leadership strengths to the CEO position,' board Chair Anne Bass said in a news release. 'At the same time, he represents stability and continuity that will be critical to advancing our strategy as we confront the challenges of a rapidly changing healthcare environment.'

Nonetheless, the hospital systems seems to have had trouble confronting the challenges of the change in environment due to Ebola.  Also, according to a very recent story in the Dallas Morning News, there have been performance issues at Texas Health Resource hospitals, and specifically at Texas Health Presbyterian,

Texas Health Presbyterian Hospital — under fire for releasing a Liberian man who later turned out to have the Ebola virus — has lagged behind its peers on emergency room care and lost some federal funds the past three years because it had high discharge rates of patients who later had to return for treatment.

The hospital scored significantly worse than the state and national averages in five of six emergency care indicators, with emergency room wait times twice as long as the averages, according to data from the U.S. Centers for Medicare & Medicaid Services.

The hospital also was the most penalized in Dallas under a three-year program designed to reduce the number of patients readmitted for care, according to the data.

The delays in patient treatment in the emergency room, in particular, raise important questions about Presbyterian’s emergency care, said Dr. Ashish Jha, a professor at Harvard University’s School of Public Health and a practicing general internist.

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

We have frequently discussed how generic managers in charge of health care organizations may follow business-school dogma at the expense of patients' and the public's health.  In particular, they may also prioritize short-term revenue ahead of all other concerns, and hence may favor high-technology and procedural care, often performed electively, ahead of the the less glamorous and remunerative parts of health care, e.g., ED care of poor, uninsured, febrile patients.

Unfortunately, much of the country's efforts to ward off Ebola are likely to be lead by generic managers who may have little understanding of epidemiology, public health or virology, and little understanding of the state of health care at the sharp end.  So unfortunately I expect continuing "glitches," or worse.  Hopefully, the country, although not every single one of its inhabitants, will survive them.  Then we need to seriously reflect on the wisdom of handing control of health care over to generic managers, rather than health care professionals. 


Commercialization of Health Care Leading to Neglect of Routine Acute Care and Public Health 

Just as national politicians and government leaders have repeated the meme of the US health care system being "the best in the world," now that Ebola has come to Texas, state leaders have sung the same song.  For example, an editorial in the Baltimore Sun quoted the state health commissioner,

'This is not West Africa,' Texas health commissioner Dr. David Lakey said Wednesday at a news conference designed to dispel Texans' (and Americans') fear of an Ebola outbreak after a man there was diagnosed with the disease. 'This is a very sophisticated city, a very sophisticated hospital.'

The Texas Tribune ran a story produced in cooperation with Kaiser Health saying,

At a Wednesday press conference to discuss the Ebola case, Gov. Rick Perry said he was confident in the state’s preparedness. 'There are few places in the world better equipped to meet the challenge that is posed in this case,' he said. 'We have the health care professionals and the institutions that are second to none.'

However, another Dallas Morning News story recounted various problems in the public health response to the Dallas Ebola patient, including,

Delay in blood testing
After Duncan was admitted to the hospital, health officials waited nearly two days to test his blood for the Ebola virus. This may have delayed containment of people who had contact with him.
Slow containment and cleanup
Health officials left some of Duncan’s close contacts in the apartment where soiled linens and towels that he had used remained.
Failure to avoid contact with emergency workers
Ambulance workers and sheriff’s deputies are among those being monitored.

So, there is reason to suspect that the public health system in Texas may not exactly be the best in the world.  In fact, there seem to be systemic problems with public health in Texas that the Ebola scare is bringing to increased public notice.  The Texas Tribune/ Kaiser story went on to explain that in Texas, a state in which distrust of central government is great, and confidence in the private sector is high, public health is both decentralized and often poorly funded,

'We don’t really have a unifying construct for public health in Texas that’s comprehensive,' said Dr. Eduardo Sanchez, the former commissioner of the Texas Department of State Health Services (DSHS) and current chairman of the Texas Public Health Coalition. 'The system is not as connected as it could be.'

Furthermore,

But public health experts argue that the state’s response system is 'fragmented' and vulnerable to local budget cuts, which they say could hamper crisis-response efforts in the case of diseases that are more easily transmitted.

Texas’ local health departments, which provide services like immunizations and disaster response planning, operate autonomously and are funded primarily by local taxes but may be supplemented by state and federal grants. Because local health departments are not held to a single standard, their services and budgets vary tremendously around the state.

A report critical of the state’s public health system, prepared by the Sunset Advisory Commission, found that 'the roles and responsibilities of DSHS and local health departments remain undefined.' The Sunset Commission is tasked with highlighting inefficiencies at state agencies and recommending legislative action.

'A ‘local health department’ can be a few staff conducting restaurant inspections and animal control duties, or a large agency directing sophisticated disease surveillance, operating a public health laboratory and providing direct services to citizens,' according to the report.>

Some public health officials have criticized the state’s model as disjointed. Many local health departments operate independently; however, if local budget cuts to a public health department force it to discontinue a health service, DSHS is often required to step in and take responsibility for that service. The state is then left to foot the bill.

'In the event of a public health emergency ... the resources necessary to adequately respond to that are not all in the control of the health department,' Sanchez said. 'You have to have the money and the authority — whether it’s informal or formal — to actually lead a response and take care of business.'

Local entities have slashed funding for health departments in recent years, said Catherine Troisi, an epidemiologist at the University of Texas School of Public Health in Houston. Thirty-six percent of local health departments in Texas laid off staff as a result of budget cuts between 2008 and 2013, according to the National Association of County and City Health Officials.

'Public health is politics,' Troisi said.

In the US, we have pushed commercialization of health, health care and public health.  Much of our health insurance is provided by for-profit corporations.  Some of our hospitals and other organizations that provide direct patient care are for-profit.  As we noted above, most of our health care organizations are now run in a "business-like" manner by managers trained in business, but not necessarily in health care or biological science.  The thus revenue-focused health care system has emphasized procedures and high-technology, often at the expense of the basics.  So it should not be s surprise that Reuters just reported,

 Nurses, the frontline care providers in U.S. hospitals, say they are untrained and unprepared to handle patients arriving in their hospital emergency departments infected with Ebola.

Many say they have gone to hospital managers, seeking training on how to best care for patients and protect themselves and their families from contracting the deadly disease, which has so far killed at least 3,338 people in the deadliest outbreak on record.

Furthermore, using as an example Medstar Washington Hospital Center, the largest hospital in Washington, DC,

Nurses argue that inadequate preparation could increase the chances of spreading Ebola if hospital staff fail to recognize a patient coming through their doors, or if personnel are not informed about how to properly protect themselves.

At Medstar, the issue of Ebola training came up at the bargaining table during contract negotiations.

'A lot of staff feel they aren't adequately trained,' said [Emergency Department nurse Micker] Samios, whose job is to greet patients in the emergency department and do an initial assessment of their condition.

So Young Pak, a spokeswoman for the hospital, said it has been rolling out training since July 'in the Emergency Department and elsewhere, and communicating regularly with physicians, nurses and others throughout the hospital.'

Samios said she and other members of the emergency department staff were trained just last week on procedures to care for and recognize an Ebola patient, but not everyone was present for the training, and none of the other nursing or support staff were trained.

'When an Ebola patient is admitted or goes to the intensive care unit, those nurses, those tech service associates are not trained,' she said. 'The X-ray tech who comes into the room to do the portable chest X-ray is not trained. The transporter who pushes the stretcher is not trained.'

If an Ebola patient becomes sick while being transported, 'How do you clean the elevator?'

Nurses at hospitals across the country are asking similar questions.

A survey by National Nurses United of some 400 nurses in more than 200 hospitals in 25 states found that more than half (60 percent) said their hospital is not prepared to handle patients with Ebola, and more than 80 percent said their hospital has not communicated to them any policy regarding potential admission of patients infected by Ebola.

Another 30 percent said their hospital has insufficient supplies of eye protection and fluid-resistant gowns.

So up to now, it appears that in the state of Texas, and across the country, the preparedness of public health systems and of front-line hospitals to deal with Ebola is unclear.  This may be due to political cuts in funding of public agencies, a payment system that favors procedures and high-technology over basic care, and leadership by generic managers who prioritize making money short-term over less financially advantageous priorities like preparedness for epidemics.  

Summary
Thus again there is reason to fear that our commercialized health care system run by generic managers, and our neglected public health system scorned because it is not "business-like" may not be fully up to the task of containing Ebola.  Again, hopefully this too will pass, without too many casualties.  However, one, maybe the only silver lining in the dark clouds of the Ebola crisis seem to be its capacity to challenge the pompous certainty by those invested in the status quo that we have the best health care system in the world.

The Ebola crisis should, again, lead to serious reflection on true health care reform, reform that would address concentration and abuse of power, reform that would enable leadership of health care by  well-informed people who are devoted to patients' and the public's health, who are honest and ethical, who are willing to be held accountable, and would shrink the size and power of individual health care organizations to make them truly responsive to patients' health care needs and the public's health needs. 

ADDENDUM (10 October, 2014) - This post was re-posted on the Naked Capitalism blog, and on OpEdNews.com

Value Extractors, "Super-Managers," Vampires and the Decline of the US and US Health Care

Appearing during the last few weeks were a series of articles that tied the decline of the US economy to huge systemic problems with leadership and governance of large organizations.  While the articles were not focused on health care, they included some health care relevant examples, and were clearly applicable to health care as part of the larger political, social, and economic system.  The articles reiterated concerns we have expressed, about leadership of health care by generic managers, perverse executive compensation, the financialization of health care, in part enabled by regulatory capture, and the abandonment by effective stewardship by boards of directors, but with new takes on them.

The articles included "Profits Without Prosperity," by William Lazonick in the the Harvard Business Review,  "Why Have US Companies Become Such Skinflints," by Paul Roberts in the Los Angeles Times, and "How Business Leaders Turned Into Vampires," by Steve Denning in Forbes, which in turn was partially based on "The Rise (and Likely Fall) of the Talent Economy," in the Harvard Business Review.

Let me summarize the main points, and discuss some health care examples.

"Super-Managers" as Value Extractors

Steve Denning's article contrasted people who  add value to the economy versus those who extract value.  The first species of value extractor he listed was:

 ‘Super-managers’ are people who hold administrative positions in the C-suite of private-sector bureaucracies but are masquerading as entrepreneurs. They are, to use Thomas Piketty’s slyly ironic term, “super-managers.” As such, they have been able to extract extraordinary levels of compensation. They have been lavished with stock and stock options and have been able to 'manage' the share price of their firms with massive share buybacks and other financial engineering so that they receive massive bonuses. As Bill Lazonick documented in the September 2014 issue of HBR, the net effect of their activities is to extract value, rather than create value [see below]. 

Presumably, "super-managers" as health care executives are also likely to be generic managers, unlikely to have much actual knowledge of caring for patients, unsympathetic to the values of health care professionals, and hence unlikely to uphold the health care mission.

He noted that

 there is a tendency to dismiss the activities of ‘vampire talent’ as de minimis. 'That’s capitalism, right? Every man for himself. It’s no big deal if there’s an occasional bad apple in the barrel. The ‘invisible hand’ of capitalism will make everything come out right for society in the end.'

However,

 The problem today is that the super-sized executive compensation, the gambling and the toll-keeping of the financial sector aren’t tiny sideshows. They have grown exponentially and are now macro-economic in scale. They have become almost the main game of the financial sector and the main driver of executive behavior in big business. When money becomes the end, not the means, then the result is what analyst Gautam Mukunda calls 'excessive financialization' of the economy, in his article, 'The Price of Wall Street Power,' in the June 2014 issue of Harvard Business Review.

Mr Denning further asserted that the value extraction of super-managers is augmented by the value extraction of two different groups of players, hedge funds that speculate with other peoples' money, and "tollkeepers" who extract rents through the financial system.

Furthermore, Mr Denning stated that

 The growth of super-sized executive compensation is inversely related to performance. The super-managers are in effect being rewarded for doing the wrong thing.

Of course, if executives in health care, like those in other sectors, are mainly concerned with enriching themselves in the short-term, than they are not mainly concerned with patients' and the public's health, or the values of health care professionals, and hence the performance of their organizations in terms of health care processes and outcomes will suffer. 

Furthermore, the ability of commercial health care firms to actually make a positive impact on health care will be decreased as they are whipsawed by other value extractors like hedge funds and tollkeepers.

Example - Renaissance Technologies

Mr Denning's first example of tollkeepers' value extraction was:

James Simons, the founder of Renaissance Technologies, ranks fourth on Institutional Investor’s Alpha list of top hedge fund earners for 2013, with $2.2 billion in compensation. He consistently earns at that level by using sophisticated algorithms and servers hardwired to the NYSE servers to take advantage of tiny arbitrage opportunities faster than anybody else. For Renaissance, five minutes is a long holding period for a share.

In fact, as we noted here, Renaissance Technologies does not hesitate in trading health care firms.  Furthermore, that company has a noteworthy direct tie to health care.  Its current co-CEO, Peter F Brown, is married to the current Commissioner of the US Food and Drug Administration (FDA).

Value Extraction and Share Buybacks

William Lazonick's article also emphasized how corporate leadership is now focused on extracting value from their companies for their own personal benefit, rather than promoting growth, innovation, better products and services, etc.  In particular, large public for-profit companies now tend to use their surplus capital to buy back shares of their own stock, rather than invest in new facilities, equipment, employees, etc.  Perhaps we should not be surprised that this was facilitated by changes in US government regulation, that is deregulation, in this case instituted during the Reagan administration:

Companies have been allowed to repurchase their shares on the open market with virtually no regulatory limits since 1982, when the SEC instituted Rule 10b - 18 of the Securities Exchange Act.

Note that

The rule was a major departure from the agency's original mandate, laid out in the Securities Exchange Act of 1934.  The act was a reaction to a host of unscrupulous activities that had fueled speculation in the Roaring '20's, leading to the stock market crash of 1929 and the Great Depression.

Given the context, and that the deregulation was implemented by an SEC chair who was "the first Wall Street insider to lead the commission," this seems to be an example of regulatory capture in service of corporate insiders.

The issue here is that while it might make some financial sense for companies to buy back their own shares if they are priced at bargain rates, after this change they could buy shares at any price without supervision.  On one hand, such purchases could lead to short-term bumps in stock prices. On the other hand, a major reason for these buybacks appears to be that they enrich corporate insiders, particularly top hired executives, who now receive much of their pay in the form of stock and stock options, and often can get bonuses based on short-term increases in stock prices.  Lazonick wrote,

Combined with pressure from Wall Street, stock-based incentives make senior executives extremely motivated to do buybacks on a colossal and systemic scale.

Consider the 10 largest repurchasers, which spent a combined $859 billion on buybacks, an amount equal to 68% of their combined net income, from 2003 through 2012. (See the exhibit “The Top 10 Stock Repurchasers.”) During the same decade, their CEOs received, on average, a total of $168 million each in compensation. On average, 34% of their compensation was in the form of stock options and 24% in stock awards. At these companies the next four highest-paid senior executives each received, on average, $77 million in compensation during the 10 years—27% of it in stock options and 29% in stock awards. Yet since 2003 only three of the 10 largest repurchasers—Exxon Mobil, IBM, and Procter & Gamble—have outperformed the S&P 500 Index.

Example - Pfizer

Mr Lazonick's noted some potential outcomes of the frenzy of stock buybacks affecting the US pharmaceutical industry and hence the US health care system.

In response to complaints that U.S. drug prices are at least twice those in any other country, Pfizer and other U.S. pharmaceutical companies have argued that the profits from these high prices—enabled by a generous intellectual-property regime and lax price regulation— permit more R&D to be done in the United States than elsewhere. Yet from 2003 through 2012, Pfizer funneled an amount equal to 71% of its profits into buybacks, and an amount equal to 75% of its profits into dividends. In other words, it spent more on buybacks and dividends than it earned and tapped its capital reserves to help fund them. The reality is, Americans pay high drug prices so that major pharmaceutical companies can boost their stock prices and pad executive pay.

Moreover, during approximately the same period Pfizer compiled an amazing record of legal misadventures including settlements of allegations of unethical behavior, and some convictions, including one for being a racketeering influenced corrupt organization (RICO), as most recently reviewed here, and then updated here.  So while it was putting huge amounts into buybacks, it also put billions into legal fines and costs. This suggests that note only does executive compensation not correlate with "performance," it may also correlate with corporate bad behavior.

The "Shareholder Value" Dogma

In explaining how US corporate executives turned to stock buybacks to boost their own pay, at the expense of essentially everyone else, Mr Lazonick sounded some familiar themes.  One was focus on short-term revenues and short-term stock performance drive by the "share-holder value" dogma out of business schools,

the notion that the CEO's main obligation is to shareholders. It's based on a misconception of the shareholders' role in the modem corporation. The philosophical justification for giving them all excess corporate profits is that they are best positioned to allocate resources because they have the most interest in ensuring that capital generates the highest returns. This proposition is central to the 'maximizing shareholder value" (MSV) arguments espoused over the years, most notably by Michael C. Jensen. The MSV school also posits that companies' so-called free cash flow should be distributed to shareholders because only they make investments without a guaranteed return -- and hence bear risk.

But the MSV school ignores other participants in the economy who bear risk by investing without a guaranteed return. Taxpayers take on such risk through government agencies that invest in infrastructure and knowledge creation. And workers take it on by investing in the development of their capabilities at the firms that employ them. As risk bearers, taxpayers, whose dollars support business enterprises, and workers, whose efforts generate productivity improvements, have claims on profits that are at least as strong as the shareholders'.

Mr Denning similarly noted

The intellectual foundation of all this behavior is the notion that the purpose of a firm is to maximize shareholder value. Unless we do something about this intellectual foundation, the problem will remain. Changes in a few regulations or the tax code won’t make much difference. ‘Vampire talent’ will find ways around them.

Nor will change happen merely by pointing out that shareholder primacy is a very bad idea. Bad ideas don’t die just because they are bad. They hang around until a consensus forms around another idea that is better.

Mr Roberts' article "Why Have US Companies Become Such Skinflints," went at this issue from a slightly different angle, noting first

The bigger story here is what might be called the Great Narrowing of the Corporate Mind: the growing willingness by business to pursue an agenda separate from, and even entirely at odds with, the broader goals of society.

He attributed this to the notion promulgated by

conservative economists, [that] the best way for companies to help society was to ditch the idea of corporate social obligation and let business do what business does best: maximize profits.

He noted that this focus on short-term revenues has led to the decline in long-term results,

 But because management is so focused on share price and because share price depends heavily on current company earnings, strategic focus has grown ever more short term: do whatever is needed to hit next quarter's earnings target. And since cost-cutting is a quick way to boost near-term earnings, layoffs and other downsizing once regarded as emergency measures are now routine.

And here is the paradox. Companies are so obsessed with short-term performance that they are undermining their long-term self-interest. Employees have been demoralized by constant cutbacks. Investment in equipment upgrades, worker training and research — all essential to long-term profitability and competitiveness — is falling.

Of course, this is antithetical to the "innovation" that current corporate boosters proclaim as the goal of drug, biotechnology, medical device companies and other players in the brave new world of corporate health care.  


The Incestuous Mechanisms Used to Set Executive Compensation

Another explanation for the rise in value extraction, and specifically the use of share buybacks to reward top corporate hired executives, was the incestuous way in which corporations set pay for top hired executives. Mr Lazonick wrote,

Many studies have shown that large companies tend to use the same set of consultants to benchmark executive compensation, and that each consultant recommends that the client pay its CEO well above average. As a result, compensation inevitably ratchets up over time. The studies also show that even declines in stock price increase executive pay: When a company's stock price falls, the board stuffs even more options and stock awards into top executives' packages, claiming that it must ensure that they won't jump ship and will do whatever is necessary to get the stock price back up.

This is enabled by boards of directors who seem to represent the 'CEO union,' not stockholders, and certainly not other less favored employees, customers, clients or patients, or society at large,

Boards are currently dominated by other CEOs, who have a strong bias toward ratifying higher pay packages for their peers. When approving enormous distributions to shareholders and stock-based pay for top executives, these directors believe they're acting in the interests of shareholders.

Once again, this was also enabled by the dergulation that started with during the Reagan administration, and continues this day (although the specific relevant deregulatory change occurred during the Clinton administration),

 In 1991 the SEC began allowing top executives to keep the gains from immediately selling stock acquired from options. Previously, they had to hold the stock for six months or give up any 'short-swing' gains. That decision has only served to reinforce top executives' overriding personal interest in boosting stock prices. And because corporations aren't required to disclose daily buyback activity, it gives executives the opportunity to trade, undetected, on inside information about when buybacks are being done. 

Summary

Note that while all the discussion above has been about for-profit corporations, we have seen that in health care, various non-profit organizations, particularly hospitals, hospital systems, academic medical institutions, and health insurers, which all now operate in the current market fundamentalist environment, are acting more and more like for-profits.  So while non-profit corporate executives cannot do stock buybacks, they are also all too often generic managers, given huge compensation, but not often for upholding the mission, putting patients' and the public's health first, or upholding health care professionals' values.  

It is striking that we are beginning to see protests like those above not in radical publications, but in the Harvard Business Review and Forbes.  It is more striking that these protestors are beginning to fear the worst.  Mr Roberts wrote,

Sooner or later, markets punish such myopic behavior. Companies that neglect innovation run out of things to sell. Companies that demoralize workers see performance lag. 

Although Mr Denning hopefully wrote,

We are thus about to witness a vast societal drama play out. That’s because we have reached that key theatrical moment, which Aristotle famously called 'anagnorisis' or 'recognition.'  This is the moment in a drama when ignorance shifts to knowledge.  

He then warned,

As usual with anagnorisis and the shock of recognition at a disturbing, previously-hidden truth, there is a disquieting sense that the accepted coordinates of knowledge have somehow gone awry and the universe has come out of whack. This can lead to denial and a delay in action, even though the facts are staring us in the face.

If the recognition of our error comes too late, as in Shakespeare’s Lear, the result will be terrible tragedy. If the recognition comes soon enough, the drama can still have a happy ending. We are about to find out in our case which it is to be.

Let us hope that anagnorisis is really beginning, the anechoic effect is fading, and the drama may yet have a happy ending. 

ADDENDUM (29 September, 2014) - This post was re-posted on the Naked Capitalism blog. 

Merging Finance and Health Care Leadership - Robert Rubin Proteges Running DHHS, Spouse of Hedge Fund Magnate Running the FDA

Hidden between the lines of some not very prominent news stories were reminders of how close health care and financial leadership have become in these times of continuing economic unrest after the global financial collapse/ great recession.

After the events of 2008, it became more apparent that the dysfunction in academics and health care  paralleled that seen in finance.  One reason may have been the overlapping leadership of finance and health care.  For example, in 2008 we first posted about how Robert Rubin, who was then a Fellow of the Harvard Corporation, the top group responsible for the governance of that great academic and medical institution, bore responsibility for the global financial collapse/ great recession.  Mr Rubin as Treasury Secretary was a proponent of financial deregulation in the Clinton administration.  Later, he became a top leader of Citigroup, whose near collapse helped usher in the crisis of 2008 (look at our 2008 post here and our 2010 post here.  Rubin just stepped down from his Harvard position this year,)  Since 2008 we found many other links among the leadership of Wall Street and of academic medicine and of big health care corporations.  These links, if anything, seem to be getting stronger. 

From the Department of Health and Human Services to Citigroup and then back to the Department of HHS

A tiny, four sentence Reuters story noted an apparently routine appointment to upper management at the US Department of Health and Human Services.  The first three sentences were:

U.S. Health Secretary Sylvia Burwell named Citigroup Inc executive Kevin Thurm as senior counselor of the U.S. Department of Health and Human Services (HHS), which is implementing the controversial U.S. Affordable Care Act.

Thurm has served in a number of roles at Citi since joining the bank in 2001, including senior adviser for compliance and regulatory affairs and deputy general counsel.

Before joining Citi, Thurm, a former Rhodes scholar, was the deputy secretary of the U.S. Department of Health and Human Services.

Why is that significant?  First, the near bankruptcy of the huge, badly led Citigroup was widely acknowledged to be a cause of the global financial collapse.  A 2011 New Yorker article on the role of the revolving door between Washington and Wall Street ("Revolver," by Gabriel Sherman) summarized the plight of Citigroup and the role of Robert Rubin in it,

Citigroup was the most high-profile of Wall Street’s basket cases, the definitionally too-big-to-fail institution. With massive exposure to the housing crash and abysmal risk management, the firm cratered, surviving as a virtual ward of the state after the government injected billions and took a 36 percent ownership position. Along with AIG and Fannie and Freddie, Citi came to be seen as a pariah institution, felled by management dysfunction and heedless greed in pursuit of profits. Complicating matters for Citi, the wounded bank found itself tangled in the populist vortex that swirled in the crash’s wake. On the left, there were calls that Citi should be outright nationalized, stripped down, and sold off for parts. Pandit was called before irate congressional-committee members to answer for Citi’s sins, an ignominious inquisition captured on live television. In January 2009, under pressure, Citi canceled an order for a new $50 million corporate jet.

There was plenty of blame to go around at Citi. Chuck Prince, a lawyer by training who succeeded Citi’s outsize former CEO Sandy Weill, had little grasp of the complex mortgage securities Citi’s traders were gambling on. As late as the summer of 2007, when the housing market was in free fall, Prince infamously told the Financial Times that 'as long as the music is playing, you’ve got to get up and dance.'

Bob Rubin himself pushed the bank to take on more risk in order to increase its profitability, a move that Citi’s dismal risk management was ill-equipped to handle. Pandit, whom Rubin had helped to recruit in 2007 just as the economy began to unravel, was tasked with cleaning up the mess when he became CEO in December of that year, and his early tenure had a deer-in-headlights character. Eventually, he realized that the asset class Citi lacked most was human capital, of the blue-chip variety.  

The article also summarized Rubin's role in the fervor of deregulation in service of market triumphalism that lead to the financial collapse,

In tapping Rubin to run Treasury, Clinton was sanctioning a revolution in the Democratic Party, one that fundamentally redefined the party’s relationship with Wall Street. Rubin, along with Alan Greenspan and Larry Summers, believed in an enlightened capitalism, which would spread prosperity widely. This enchantment with the beneficence of markets became the dominant view in Democratic Washington, hard to argue with when the economy was booming, as it was in the second half of the nineties. Rubin recognized that derivatives posed a risk but effectively blocked efforts to regulate them and pushed for the repeal of the Glass-Steagall Act, the Depression-era legislation that prevented commercial banks from merging with investment and insurance firms (the new law essentially legalized the $70 billion merger in 1998 of Citicorp and Travelers Group that created Citigroup).

Circling back to recent events, Once he got to Citigroup, Rubin assembled a team, partially from his old associates in the Clinton administration,

He also recruited several former Clinton aides to Citi, including former Health and Human Services deputy secretary Kevin Thurm....

So Kevin Thurm became something of a Robert Rubin protege at Citigroup. In fact, he rose to an important leadership position at the same time Citigroup was getting ready to become a "basket case," in part apparently because of the advice of Robert Rubin.  According to a 2013 version of Mr Thurm's official Citigroup bio,

Kevin L. Thurm is Senior Advisor for Compliance and Regulatory Affairs at Citigroup.

Previously, Thurm served as the Chief Compliance Officer of Citi. In that role, Thurm led Global Compliance which protects Citi by helping the Firm comply with applicable laws, regulations, and other standards of conduct, and is responsible for identifying, evaluating, mitigating and reporting on compliance and reputational risks and driving a strong culture of compliance and control. Since joining Citi in 2001, Thurm has also served as Deputy General Counsel of Citi, where he led the Corporate Legal group, overseeing a number of Company-wide Legal functions and providing support on day to day matters, including issues involving the Board, senior executives, and regulators; Chief  Administrative Officer of Consumer Banking North America, where he helped lead the business group and was responsible for a variety of functions including Community Relations, Compliance, Legal and Public Affairs; Director for Administration in the Corporate Center; Chief of Staff to the President and Chief Operating Officer of Citigroup; and as the Director of Consumer Planning in the Global  Consumer Group.

To recap, Mr Kevin Thurm was a top compliance executive of Citigroup while the company was imploding, and being a protege of Robert Rubin, an architect of the financial deregulation that led to the global financial collapse, and a leader of Citigroup responsible for the risky behavior of that company that led to its near collapse, which was another precipitant of the global financial collapse or great recession.  It is not obvious that these are great qualifications to be Senior Counselor at DHHS.

Moreover, Mr Thurm's responsibilities at DHHS would not be limited to compliance or financial leadership.  According to the official DHHS press release announcing his appointment,

As a Senior Counselor, Thurm will work closely with the Department’s senior staff on a wide range of cross-cutting strategic initiatives, key policy challenges, and engagement with external partners.

Yet, there is nothing in Mr Thurm's public record to indicate that he has any actual experience in health care, medicine, public health, or biologic science.  So it is not obvious why he should be entrusted with leading "cross-cutting strategic initiatives, [and] key policy challenges."

On the other hand, Mr Thurm might be simpatico with the new Secretary of DHHS, Ms Sylvia Burwell.  According to a Washington Post article at the time of the hearings about her nomination,

despite her Washington experience, ... is not well known in health-policy circles, and, during her confirmation hearings, she gave little concrete sense of the direction in which she will take the complex department she will inherit.

This seems to be a polite way to see she also has no actual experience in health care, medicine, public health, or biologic science.   Her official biography lists no such experience.  However, she was also a Robert Rubin associate, and perhaps protege, during the Clinton administration,

During the Clinton administration, Burwell held several economic roles — as staff director of the White House National Economic Council, as chief of staff under then-Treasury Secretary Robert Rubin,...

To summarize so far, the new Secretary of the Department of Health and Human Services, and now her new Senior Counselor, were both closely associated with Robert Rubin, who seems to bear major responsibility for the global financial collapse, and the new Senior Counselor worked with Rubin at Citigroup, whose near bankruptcy helped accelerate that collapse.  On the other hand, neither of these leaders has any experience in health care, public health, medicine, or biological science. 

Hedge Funds, Tax Avoidance, and the US Food and Drug Administration

This story is even less obvious.  A July, 2014, report in Bloomberg recounted plans for a Senate hearing on tax avoidance by huge, lucrative hedge funds.  The basics were,

A Renaissance Technologies LLC hedge fund’s investors probably avoided more than $6 billion in U.S. income taxes over 14 years through transactions with Barclays Plc and Deutsche Bank AG, a Senate committee said.

The hedge fund used contracts with the banks to establish the 'fiction' that it wasn’t the owner of thousands of stocks traded each day, said Senator Carl Levin, a Michigan Democrat and chairman of the Permanent Subcommittee on Investigations. The maneuver sought to transform profits from rapid trading into long-term capital gains taxed at a lower rate, he said.

An accompanying Bloomberg/ Businessweek story described testimony at a Senate hearing by the Renaissance co-Chief Executive Officer Peter F Brown,

Renaissance was founded by the mathematician James H. Simons, whose fortune is now estimated by Bloomberg Billionaires Index at about $15.5 billion.

Brown became co-CEO with Robert L. Mercer in 2010 after Simons retired and became non-executive chairman. Before joining the firm in 1993, he was a language-recognition specialist at International Business Machines Corp.

Mr Brown testified that the company was not so much trying to avoid taxes by the complex strategy but simply to make even more money.    But, per the New York Times, Senator Levin

focused on the lucrative nature of the transactions, most of which took place using Renaissance employees’ money. Between 1999 and 2010, the fund used basket options to produce profits of more than $30 billion, Mr. Levin said. Barclays and Deutsche Bank together made more than $1 billion in revenue.

Mr Brown's firm seems, unlike Citigroup, to have a record of financial success, and no one is accusing Mr Brown or his firm of being responsible for the global financial collapse.  However, Mr Brown is certainly a very rich Wall Street insider.  Also, as we noted in 2009, his firm clearly has had major involvement in health care investments.   And the current hearings emphasize concerns that his firm has been executing questionable tax avoidance strategies.

Mr Brown has one other very major tie to health care.  As  noted in 2009 on Health Care Renewal, but apparently only parenthetically by one recent news article, (again from Bloomberg, written before the Senate hearing),

Brown lives in Washington with his wife, Margaret Hamburg, the commissioner of the U.S. Food and Drug Administration. She was appointed by President Barack Obama in 2009.

In 2009, we noted that as a condition of Dr Hamburg's leadership of the US FDA, her husband, Mr Brown, would have to divest his shares of four Renaissance funds.  However, it is obvious that he remained at and became the co-CEO of Renaissance since. 

While the current leader of the FDA clearly has medical and health care experience, she is also steeped in the culture of finance and Wall Street.

Summary

Thus we have two recent stories of how top health care leadership positions in the US government are held by people with strong ties to the world of finance, but not always with any direct health care or public health experience.  Why was the wife of a hedge fund magnate the best person to run the FDA?  Why was a person not known in "health policy [or health care] circles" the best person to run the Department of Health and Human Services?  Why was a Robert Rubin protege from Citigroup the best person to be a Senior Counselor at DHHS?  Presumably there were many plausible candidates for these government positions.  Why was it not possible to find people to fill them who were not tied to Wall Street?  Why was it not possible to find people with profound understanding of and sympathy for the values of health care and public health to fill all of them?   

The leadership of health care and finance continue to merge.  This seems to be one broad explanation for why both fields continue to be notably dysfunctional.  While Wall Street has spread around plenty of money to influence public opinion and political leaders, many still remember how its foolish and greedy leadership nearly caused another great depression.  It is likely that the influence of Wall Street culture on the leadership of health care organizations, be they governmental, academic, other non-profit, or commercial, has fostered the continuing financialization of health care, with its focus on "shareholder value," that is, putting short-term revenue ahead of patients' and the public's health.

I strongly believe health care would be better served by leadership that puts patients' and the public's health first.  Occasionally people with such values may come from a finance or economics background.  However, in an era where many people continue to believe "greed is good," we at least ought to confirm that health care leaders really are about health care first, and money a distant second.

ADDENDUM (20 August, 2014) - This was re-posted on the Naked Capitalism blog.

Money vs Mission - How Generic Managers vs Physicians Think

On Health Care Renewal, we emphasize problems in leadership and governance in large health care organizations, and how they affect health care professionals' attempts to carry out their mission, and ultimately how they affect patients' and the public's health.  Large health care organizations are increasingly led by people trained in business, not health care professionals, thus generic managers.  The stewards of these organizations, the members of their boards of directors or boards of trustees, are also increasingly current or former managers without direct health care experience. Yet all too often, health care leadership is ill-informed, incompetent, unsympathetic or hostile to health care professionals' values, self-interested, conflicted, dishonest, or even corrupt.

Recently, in an effort to "bridge the gap" between physicians and MBAs, a new article in Becker's Hospital Review by Todd Kislak discussed differences in the thinking and values among business trained health care managers and physicians.  The author, an MBA, listed nine issues on which MDs and MBAs have different views.  I have summarized below what appear to me to be the main points, somewhat reorganized from how he did it. Whether he meant to or not, Mr Kislak showed why physicians may have reason not to trust their new generic managers. 

Making Widgets vs Treating Patients

Mr Kislak wrote that MBAs see health care in terms of orderly, uniform and standardized processes, while physicians see it in terms of the complexity and variability of patients, the ambiguity of diagnosis, and the unpredictability of outcomes.  

 2. Scalability. As a rule, MBAs tend to seek solutions to problems in a way that they perceive to be scalable and replicable, trained in the belief that the capacity to perform repetitively and consistently leads to better efficiency and quality. One-off situations are by definition outliers, and as such their importance tends to be downplayed.

Also,

 3. Centralization....   MBAs, ... tend to seek centralized approaches to decision-making, often appearing in the guise of policies, programs and processes. 

So, the gist is MBAs see health care as analogous to an assembly line.  The idea is to provide uniform, consistent services that conform to the policies, programs and processes that come down from central headquarters, run by MBAs.

On the other hand, he noted that physicians think that "every case has the potential to be unique in some way," while MBAs "view the unusual case as an unwelcome break in the routine, adding cost while slowing down the efficient care of other patients."

IMHO, common sense, and a raft of epidemiological data support the MDs.  Patients differ in demographics, biopsychosocial characteristics, co-morbid conditions, histories of previous treatment, responses to therapy, etc, etc, etc.  Patients, their complaints, and their situations are complex and variable.   Furthermore, acute illnesses, complications of chronic illnesses, accidents occur unexpectedly, in unexpected ways.  Diagnosis are often unclear and ambiguous.  Patients' prognoses and responses to therapy are unpredictable.  Thus, IMHO, seeing health care like an assembly, in terms of regularity and uniformity, seems dissociated from reality.  I have a hard time believing that MBAs who actually require medical care want to be treated as if they were identical to the next 10 patients.

"You Manage What You Measure" vs Complexity, Variability, Ambiguity, and Unpredictability of Patients, Diseases, Prognoses, and Treatments 

Mr Kislak suggested that MBAs emphasize measurement, especially the measurement of physicians' performance,

5. Performance. One of the healthcare MBA's favorite analytical tools is performance rankings of the MDs. Quantifying 'results' based on pre-determined metrics, assigning them a weight for averaging purposes and reducing performance down to a number is, to the MBA, how MDs and indeed all workers should be measured. 'You manage what you measure' is the MBA's mantra.

Also,

6. Productivity. MBAs look at MDs' productivity statistics (another performance measure) and wonder why so many MDs claim they are overworked. Looking at work hour statistics supplied by the Medical Group Management Association, one would not come away convinced that most MDs are logging more hours than, say, the typical healthcare MBA or indeed any high-caliber professional service provider.

Mr Kislak noted that physicians object to pay for performance and "may viscerally react to this uniform approach to performance assessment as inappropriate and even fundamentally at odds with the practice of medicine. Too much context is lost in the numbers, and too many factors beyond their personal control bear upon the performance 'data.'"   He did explain why MBAs are unconcerned about the accuracy and meaning of the measures they manage. 

The "you manage what you measure" heuristic seems based on the concept, or better yet fallacy that everything in health care is uniform and predictable.  This seems an extended version of what has been called the streetlight effect or the drunkard's search.  (See, for example, the version from Wikipedia, attributed to David H Freedman.  (2010). Wrong: Why Experts Keep Failing Us)  It begs the question of what is practical to measure is worth measuring, that is, is accurate, reliable, and meaningful.
 
Furthermore, there is now a considerable literature in medicine and health care showing that it is extremely difficult to develop performance measures that are reliable and meaningfully predictive.  (I cannot claim to have written comprehensively on this topic, but see posts here, and here.  For some good informal writing on why pay for performance [P4P] may not work, see Dr Robert Centor's blog DBs Medical Rants)

Considerable research has also shown that P4P rarely improves performance, and may make it worse.   For example, the results of a systematic review published in 2012 [Houle SKD, McAlister FA, Jackevicius CA et al.  Does performance-based remuneration for individual health care practitioners affect patient care? - a systematic review.  Ann Intern Med 2012; 157: 889-899.  Link here.] were that

The effect of P4P targeting individual practitioners on quality of care and outcomes remains largely uncertain.

Furthermore, a 2012 analysis of pay for performance [Glasziou PP, Buchan H, Del Mar C et al.  When financial incentives do more good than harm: a checklist.  Brit Med J 2012; 345: e5047. Link here.] included the summary statement,

Current evidence on the effectiveness of financial incentives is modest and inconsistent.

Thus, it would seem that the MBAs have neither good logic nor good evidence to support their faith in their current metrics, particularly those they use to assess physicians' performance. 



Power and Money vs Patients' and the Public's Health

Mr Kislak saw himself as supporting physicians in "their mission to provide high quality and effective care to their patients."  In the conclusion to his article, he asserted that physicians and MBAs "share the same overarching goals ... - effective healthcare delivery...."  However, in the body of the article, Mr Kislak suggested that MBAs see their goals in terms of power and money...  

4. Leadership. MBAs like to think of themselves as either nascent or actual leaders. It is understood that their intention is to build a career trajectory that will move them up in their organization (or in another organization) into positions of increasing authority and control. After all, this is an important reason why they become MBAs in the first place.

Furthermore, Mr Kislak wrote

8. Language. MDs and MBAs usually work for some type of business entity, whether that entity is for-profit, nonprofit, academic, government or sole proprietorship. To the MBA, however, it is all too apparent that with few exceptions MDs have little training in the language of business that all entities speak — the language of finance and accounting.

He noted that "this is a significant disconnect and a root cause of why MDs and MBAs often find themselves talking past each other on even the most basic business issues."  However, interestingly he did not even mention that MBAs may have as little facility with the language of medicine and health care as physicians have with the language of finance or accounting.  Furthermore, he seemed unaware that it makes as little sense to say that discourse in health care should be in the language of finance as to say discourse in finance should be in the language of health care. 

Finally, Mr Kislak made it very clear that to MBAs, money comes ahead of patient care,

9. Growth. MBAs are trained to look for ways to grow the organization's revenues and profits to the long-term benefit of the owners or stewards of that organization. Improvements to quality, efficiency, profits, revenues, technology and the like are generally viewed as a means to that end of growing,

Yet he noted that

the MDs sometimes wonder what all the growth talk may be costing their own priorities, including their compensation. This issue can become rather sensitive when it implies that the MD is less concerned with the long-term health of the organization than the MBA, and can devolve into finger-wagging about lack of engagement or weak physician-hospital alignment.

It is a measure of how much generic managers have taken over that the physicians may be blamed for lack of interest in the long-term "health of the organization," while the MBAs seem totally unconcerned about what effects the organization has on the real health of patients or the public.

Thus, fundamentally, MBAs running health care organizations are mainly interested in growing their organizations so that they bring in more money.  MBAs hope to leverage their organizations' financial performance so that they personally can rise to positions of greater power and wealth.  Health care is simply a "means to that end."  Mr Kislak seems to have confirmed my worst fears that most of health care's current generic managers put short-term revenue, and their own wealth and power, ahead of patients' and the public's health. 

Summary

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


Now we have one MBA with considerable experience inside health care, and personal sympathy for the goals of high quality and effective care for patients, who. perhaps inadvertently, suggested why this managers' coup d'etat was a terrible idea, and why MBAs should not be allowed to lead health care organizations.  He corroborated our concerns that generic managers may be ill-informed and do not understand the health care context, particularly the variability and complexity of patients and their problems, the ambiguity of diagnosis, and the unpredictability of prognosis and response to therapy.  They believe in simplistic management approaches, particularly the usefulness of measurement and metrics, even in the absence of logic or evidence supporting them.  Furthermore, they may be heedless of the mission of health care, particularly of the primacy of the patient, and in fact put their own organizations' revenue ahead of patient care, and ultimately may pursue power and money rather than patients' and the public's health.  

As I have said before,  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.

ADDENDUM - This post was re-posted on the Naked Capitalism blog. 
 

To Die in Texas - Dr Mahmood's Apparently Fatal Stealth Hospital System Collapses Nearly Anechoically

I would bet that most people in the US still think our health care system is highly regulated.  Some may thus conclude that the system is basically safe, because, for example, drugs have to be proven safe and effective to be approved by the government, and hospitals must be licensed and run by competent people who are thoroughly vetted.  Of course, some people still think that the US has, or had until recently, the best health care system in the world (look here).

Furthermore, the view that less regulation is always better is no quite popular in the US and elsewhere.  For example, after the chemical spill threatened water supplies in the capitol of West Virginia, the Dallas News reviewed Texas Governor Rick Perry's consistent attacks on government regulation.   

'American business in general, and American agriculture specifically, have had enough of bureaucracy at both the federal and state levels, but especially bureaucracy out of Washington,' Perry said at a congressional hearing. 'The men and women who feed and clothe this nation are suffocating under the weight of mounting federal regulations.'

That was back in 1993, when Perry was Texas’ agriculture commissioner. Now Texas’ longest-serving governor, Perry has remained steadfast in his opposition to government regulations.

Some who take such a neoliberal stance may say the health care system is over-regulated, and thus is inefficient and not innovative, leading to our high costs and poor access.

However, an amazing case out of Governor Perry's Texas that was made public last year, and I regret I just heard about recently, suggests how little health care may be regulated, and how unregulated health care, whether or not it is efficient, may be deadly.

As reported in the Dallas News, July, 2013, in the last few years there seems to have been an epidemic of quality problems in a number of seemingly unrelated small rural Texas hospitals.  The report focused first on one hospital,

Renaissance Hospital Terrell

After for-profit hospital corporation Renaissance Healthcare declared bankruptcy in 2008 (look here), it sold its hospital in Terrell, Texas to RH Terrell Management LLC owned by one Dr Tariq Mahmood.  Almost immediately, however, there was trouble.  First Edwina Henry, the quality director, spied a doctor making questionable entries in patients' charts:

from her office, she had a clear view of doctors’ foot traffic through the medical records department.

When she saw [Dr Tariq] Mahmood jotting in patient charts, she knew he wasn’t seeing patients. Mahmood himself had not been credentialed to treat patients — a process in which management vets backgrounds and competencies of doctors. Part of Henry’s job was tracking such evaluations. She also knew it was a breach of privacy laws to review patients’ medical records.

'I immediately questioned some of the clerks and [insurance billing] coders,' she said. They were deeply concerned, saying he was altering the patients’ records to help boost reimbursements for insurance claims, Henry said.

When Ms Henry complained, things did not go well,

Henry made her confidential call to the bankruptcy court in early November 2008, alleging potential fraud and threats to patient care that were eluding government notice [Ed - note that the hospital was going through bankruptcy proceedings and had just been acquired by a new owner]. The court forwarded her complaint to the U.S. Justice Department, the Texas attorney general’s office and the state health department, officials confirmed.

Later that month, the state health department sent an inspector to the hospital. However, the visit was brief, Henry said, and the inspector didn’t interview her or seek her help in obtaining records.

Williams, the health department spokeswoman, told The News her agency’s records show the inspector was unable to substantiate violations at the time.

Henry was terminated from Renaissance as part of a 'restructuring'....

Then the hospital was cited for turning patients away from the emergency department,

At Renaissance, two women in labor, one bleeding, were refused treatment. The inspection reports don’t reveal whether the women suffered complications because of the delays.

A Renaissance employee told one of the women that if she 'could stand there and have a conversation with them then (she) wasn’t about to have a baby,' reports say.

Then there were problems with infection control,

At Renaissance, no supervision over infection control could be found. For three months in the summer of 2010, no one was in charge of tracking infectious diseases or preventing their spread.

The next year, the problem was blood transfusions

Inspectors returned to Renaissance in September 2011 to investigate a botched blood transfusion procedure. They found that a registered nurse had not supervised the patient’s care. In another case, an inspector witnessed an unsupervised vocational nurse administering blood to a patient, despite no evidence that she was competent to do so — another violation.

In 2012,

During the summer, the Texas secretary of state had revoked Renaissance’s business charter for failure to pay franchise taxes.

That office didn’t share the information with the health department; it isn’t required to do so.

In September, state health regulators notified Renaissance that they were proposing a $35,050 fine for 13 violations, including the nursing supervision failures, dating as far back as 2010.

Williams, the health department spokeswoman, could not explain why the fine process took nearly two years since the first violation. 

Finally, in 2013, patients started to die,

In January of this year, when state inspectors returned to Renaissance, they found nursing supervision failures yet again.

This time, the failures had led to three deaths: All ER patients. All with severe breathing difficulties. All receiving little to no intervention as their conditions worsened.

In particular,

[Eve] McCallum sought her own care after complaining of shortness of breath during a family dinner.

McCallum had chronic obstructive pulmonary disease. When she was admitted, nurses were ordered to monitor her vital signs and oxygen levels. Her breathing soon improved, said her niece, Lou Ann Sims.

'We were fully expecting to pick her up the next morning,' Sims said.

Instead, they watched helplessly as her condition deteriorated. On Christmas Day, a physician explained to McCallum’s family that she had to be transferred to the intensive care unit.

Later, Sims witnessed a scene she can’t let go of: Her aunt lay connected to a ventilator while a nurse stood smoking a cigarette just outside the door. The nurse had propped open the door with an IV pole.

The family immediately sought to have McCallum transferred to another hospital. But hospital officials told them 'this would be a lateral move and was not allowed,' according to a transcript of an interview the family later conducted with state officials.

McCallum died two days later.

Inspectors wrote that a licensed vocational nurse had been left in charge of her treatment, without a registered nurse’s oversight. There was no evidence an RN had assessed her condition on admission or was watching over her in the ICU.

They could find no doctor orders to place her on oxygen, no order for medications administered to her, 'nor evidence of communication with the M.D.'

Suspecting more than just care breakdowns at Renaissance, McCallum’s family reported her death to the Texas attorney general’s fraud-control unit.

So partially in response to this egregious case,

By February, the state health department had moved to revoke Renaissance’s operating license, and CMS had ordered its federal funding terminated — only the ninth time nationally in the last three years CMS had taken such a step.

Even those steps could not shut down the hospital, but city officials took that last step due to the failure to pay taxes.

Other Hospitals

Dallas News reporter Miles Moffeit found several other cases of severe problems at small hospitals owned by Dr Mahmood, with at least one patient death apparently resulting, .


Shelby Regional Medical Center

This hospital was owned by Tenet Healthcare, but was sold to another of Dr Mahmood's companies, Shelby Medical Holdings, in 2007 (look here). 

In 2009, this hospital was also cited for providing insufficient treatment in the emergency department.

In 2012, things were really falling apart,

In October 2012, inspectors were at Shelby chronicling dirty, clogged air-conditioners and failures to prevent ceiling plaster 'from falling into the patient food service line and contaminating food.' Those problems put patients’ safety in 'immediate jeopardy,' they wrote.

As inspectors roamed Shelby’s halls in December, the power suddenly went out in four buildings, though not in the main hospital facility itself. The electric bill hadn’t been paid. They found other debts stacking up, too — as much as $190,442 owed to as many as 79 service providers.

Signs of neglect were everywhere. Only three of 20 patient rooms inspected were 'fully functional for patient care,' they wrote. They found holes in walls, dirty and tattered curtains, and patients complaining of heat pouring from the faulty A/C system.

Finally, in 2013, another patient died,

On Wednesday, CMS cut off federal funding to ... Shelby Regional Medical Center in Center in East Texas after regulators said a patient rushed there by ambulance never received treatment from a doctor.

The ER physician wouldn’t leave his 'sleep room,' the inspection report said, resulting in the patient’s death. Regulators also cited the hospital for failing to vet backgrounds of doctors and nurses.

Apparently soon thereafter Dr Mahmood shut the hospital down due to "legal issues that ... [he] is facing," per the Shelby Light and Champion.


Lake Whitney Medical Center

Dr Mahmood apparently purchased this hospital from a struggling local hospital authority in 2007.  

In 2009, it was cited for inadequate care in the emergency department,

At Lake Whitney, a nurse acknowledged to inspectors that she had shredded records of a patient who was denied care following a fall, according to a report. The 'patient wasn’t going to pay anyway,' the nurse was quoted as saying in the document.

In 2010, there was evidence of major infrastructure problems,

At Lake Whitney, patients were served food on rusty 'over-the-bed tables that were a source of possible infections for open wounds.' Bulging ceiling tiles exposed pipes. Pavement outside a main hospital door was 'cracked and unlevel,' putting patients at risk of injury.

As Dr Mahmood's legal troubles mounted, the hospital was sold to Frontier Hospitals Inc (look here).


Cozby-Germany Hospital 

I have been unable to discover when Dr Mahmood purchased this hospital. 

In 2010, it became apparent that the hospital was not properly licensed,

'The administrator reported the new owner had not notified (CMS) … and has not applied for hospital licensure with the state licensing agency,' a report said. [The owner] ... also was found to have appointed his own employees to the hospital’s governing board of directors, instead of independent outsiders.

And there were more severe problems with credentialing,

At Cozby-Germany hospital, hospital inspectors discovered that the chief of staff and another doctor had expired medical licenses. There were no 'functional' nurse and doctor credentialing processes, and clinical policies had not been updated since 2008, they said. The hospital pledged reforms.

But in May 2011, records show, Cozby hired one of Texas’ most notorious doctors, Rolando Arafiles.

At the time, Arafiles had been placed on probation by the medical board for allegations of harming nine patients, overbilling and improper coding at a Winkler, Texas, facility, according the board. He also was disciplined for intimidating the Winkler nurses who blew the whistle on his practices.

In November, Arafiles would be convicted of two felonies linked to the retaliation and would surrender his license.

In 2013, two local doctors purchased the hospital.

The Vanishing Owner

What made this series of cases all the more amazing is that it was really one interlinked case.  All these hospitals, plus a few more, had the same owner.  Yet no one, especially  no one in state or federal government knew that until 2013 when the facts were uncovered by Mr Moffeit.

[Dr Tariq] Mahmood, a Pakistan-trained doctor, obtained his Texas medical license in 1978. Since 2008, he has practiced medicine only at his Central Texas Hospital in Cameron, south of Waco, records with the Texas Medical Board show. Older documentation is not available.

Over the last two decades, he has purchased at least six hospital companies and two home-health care agencies, according to filings with the Texas secretary of state. He also has invested his money outside health care, acquiring the historic Hotel Lawrence in downtown Dallas, property records show.

In addition to Renaissance, Shelby and Central Texas Hospital, Mahmood owns the Lake Whitney Medical Center in Whitney and Cozby-Germany Hospital in Grand Saline. He sold Community General Hospital in Dilley around the time of his arrest in April.

The hospitals have no common corporate identity and little or no website presence, making it difficult for anyone to know they are owned by Mahmood or are part of a chain.

However, much bout Dr Mahmood was mysterious, and the deliberate cultivation of mystery might have slowed the response to this case.

Mahmood is rarely seen in the communities where his hospitals are located, say business associates and city officials. Sometimes they catch a glimpse of him passing by in a chauffeur-driven car.

'He’s almost impossible to track down' to discuss business matters, said Tom Elliott, a director for a nonprofit company that owns the hospital building in Grand Saline. 'He lets his people do the talking.'

Mahmood is a mystery to many of his own employees. He works almost entirely behind the scenes, they say, focusing largely on the business side of his operations. He often is traveling or spending time at his 10,000-square-foot gated estate in Cedar Hill, they say.

'We see him maybe once a year,' said one of his hospital physicians. 'The employees say he doesn’t like confrontation. I say he just doesn’t like to communicate. He seems to live in a different world.'

Aftermath

 At some point, the shadowy Dr Mahmood may have to answer for all this, at least to some extent,

In April, federal authorities charged the 62-year-old Cedar Hill resident with defrauding Medicare and Medicaid programs through $1.1 million in false billings.

Mahmood is accused of directing employees at his Central Texas Hospital in Cameron to alter underlying information in insurance claims from his other hospitals. 'In many cases,' the indictment alleges, these were 'for patients he had never seen.' Mahmood pleaded not guilty, and his attorney said he denies all charges. He has declined repeated interview requests from The Dallas Morning News. 

Note, however, that these are charges of financial fraud.  They do not obviously have to do with poor quality care, risks to patients' safety, or the deaths of at least three patients as discussed above.

This case was so bad that even the current Governor of Texas, Rick Perry, a politician known for taking a small government, minimal regulation stance, at least said he was going to take some action, as reported again in the Dallas News,

The governor’s office has ordered a 'deep and comprehensive look' at health care facilities owned by Dr. Tariq Mahmood, whose chain of rural Texas hospitals avoided serious regulatory action despite years of endangering patients.

The inspector general for the state Health and Human Services Commission and one of the agencies it oversees, the state health department, will conduct separate investigations, officials said Friday.

And in February, 2014, the Dallas News reported that the chief financial officer of the Dr Mahmood's stealth hospital chain was also in hot water,

The top administrator of a chain of hospitals that collapsed under the ownership of a North Texas physician faces charges that he defrauded the federal government of nearly $800,000 in stimulus funds.

Joe White of Cameron rose from maintenance man to head administrator and chief financial officer over hospitals once owned by Dr. Tariq Mahmood. Now he joins Mahmood in facing the possibility of prison time.

Like Mahmood, who pleaded not guilty, White is accused of identify theft and bilking the federal government of health care dollars. White has yet to enter a plea.

Note that the CFO and apparently COO was not even a professional generic manager.  He was a former maintenance man  and operator of a Radio Shack store.. 

Dr Mahmood has not yet come to trial.  Many questions about the case remain unanswered:
 -  Did Mahmood the only person besides his CFO cum maintenance man in charge of all this, or did he have other backers,  cronies, associates?
-  What happened to the rigorous state investigation promised by Rick Perry?
-  Given that what went on harmed patients, and hence was not just financial manipulation, are there any civil lawsuits pending?  Are there any other criminal investigations?\

Furthermore, despite its egregious nature, this case was amazingly anechoic  The only national recognition I could find was in Paul Levy's Not Running a Hospital blog.  Seven months later, I could find nothing in the national media, nothing in medical and health care literature.  Despite the amazingly poor quality of care in evidence, despite the fact that patients died, I could find no cries of outrage from those who proclaim to support quality health care or patient safety. 


Summary

Dr Mahmood and his chief operating and financial officer collectively displayed leadership that was ill-informed (the COO/ CFO was a former maintenance man), incompetent (see the egregious health quality problems listed above), self-interested (note the size of Dr Mahmood's mansion versus how little was obviously spent on his hospitals), opaque and dishonest (note how Dr Mahmood's ownership of the hospitals was obscured), and allegedly criminal.  This leadership persisted over at least eight years until it culminated in cases of apparently needless patient deaths.  

The amazing case of the stealth for-profit hospital system run by Dr Mahmood, and how its combined problems failed for so long to get systemic regulatory notice hardly suggest that our health care system is heavily regulated, or that current regulation can be relied upon to reassure patients that all is well and that the system is safe.

In fact, in the case of Dr Mahmood, government regulators did not seem to even want to know too much about hospital ownership,

Top health regulators weren’t even aware Mahmood owned several hospitals until The News sought information about them earlier this year. Regulatory agencies aren’t set up to track problem hospital owners or hold them accountable. Nor do they look for patterns of care breakdowns inside hospital chains.

'We just don’t have that authority,' said David Wright, deputy regional administrator for CMS. The federal agency oversees the state health department’s inspections of federally funded hospitals. 'We can only address problems in stand-alone facilities.'

Furthermore, it appears that modern regulators have decided to become hospital managers' and owners' best friends,

The process allows hospitals to avoid sanctions if they cooperate. Hospitals submit “corrective action plans” to remedy failures. It can take months for state regulators to bring penalties such as fines against a facility. In the case of Renaissance, it took years.

'We want to do what’s in the best interest of the patients, and our regulatory philosophy is to get hospitals into compliance,' said Carrie Williams, spokeswoman for the Texas Department of State Health Services. 'We’re not in the business of shutting down hospitals. We will give them some leeway and work with them.'

Of course, this minimalist, light touch regulatory methodology may have made some sense in an earlier era when nearly all hospitals were small community not-for-profit organizations, non-profit academic institutions, or were run by local governments.  It seems quaint, and hopelessly out of date in an era when most hospitals are part of ever larger systems, now often owned for-profit corporations, and when hospital system CEOs who are professional, and thus generic managers, not health care professionals, in an era of financialization and "maximizing shareholder value," that is, making short-term revenue the most important outcome.

Instead, the current minimalist regulatory system seems insufficient to prevent patients from dying of poor care allowed by poor leadership of health care organizations.  Much of the content of this blog has been about bad health care leadership, i.e., leadership that is ill-informed, incompetent, unsympathetic or hostile to health care professionals' values, self-interested, conflicted, dishonest, or even corrupt.  In my humble opinion, health care regulation ought to be sufficient to promote competent, caring, unconflicted, honest leadership that is accountable for putting patients' interests ahead of self-interest.  Regulation needs to be more intense, and much smarter, geared to the reality of a health care system that is now largely for-profit in an era when management dogma puts revenue ahead of all other concerns.

Maybe the deaths of some patients in Dr Mahmood's Texas hospital will finally let the air out of the mindlessly anti-regulatory bubble, and start some discussion of intelligent regulation to improve patient safety.

However, that cannot happen if this case remains anechoic.  I regret it took me so long to find it, but now I have done my part to start some echoes.  But where are the media, where are the journal editors, and where are those who so loudly proclaim their interest in patient safety and health care quality?

In particular, there are several prominent organizations that claim to promote health care quality and patient safety.  These organizations make these claims-

Joint Commission

 For more than 60 years, The Joint Commission has been a champion of patient safety by helping health care organizations to improve the quality and safety of the care they provide.

Leapfrog Group

 The Leapfrog Group is a voluntary program aimed at mobilizing employer purchasing power to alert America’s health industry that big leaps in health care safety, quality and customer value will be recognized and rewarded.

National Quality Forum

 Transforming our healthcare system to be safe, equitable, and of the highest value will take time and the work of many, but the potential rewards are great. The National Quality Forum (NQF) is a nonprofit, nonpartisan, public service organization committed to this transformation.

Robert Wood Johnson Foundation

Our efforts focus on improving both the health of everyone in America and their health care—how it's delivered, how it's paid for, and how well it does for patients and their families.

These  organizations should the ones to start the conversation about improving rather than forever shrinking regulation.   I have not heard anything from them about the deadly hospitals of Dr Mahmood.  Are they listening now?  Will we ever hear from them?  Time will tell.... 

 Note: the entire Dallas News series on the Mahmood hospitals can be found here.