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

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

A $400 Million Settlement

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

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

This amount was augmented by 

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

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

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

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

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

Kickbacks to Doctors who Refer Dialysis Patients


Here is how the kickbacks worked.

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

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

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

To ensure that those bought stayed bought,

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

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

No One Admitted Anything or Suffered Any Negative Consequences



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


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

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

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

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

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

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

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

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

Another Denver Post article put it even more vividly,

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

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

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

Just the Latest Settlement

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

The 2000 and 2004 Gambro Inc Settlements

The current DOJ release noted that DaVita

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

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

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

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

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

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

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

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

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

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

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

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

The 2012 DaVita Epogen Settlement

The 2014 Denver Post article included this offhand reference,

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

The 2012 Denver Post article to which it referred stated,

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

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

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

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

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

Further, while

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

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

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

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

Summary

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

The DaVita Statement of Mission and Core Values includes

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

and

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

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

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

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

New Allegations About Universal Health Services Inc - Why We Should Not be Surprised

Current Allegations of Poor Treatment and Threats to a Whistle Blower

This month, a Boston Globe article reported trouble at a local hospital,

Arbour HRI, a Brookline psychiatric hospital in recent trouble with regulators, disciplined a mental health worker for talking to the Boston Globe about problems there — an action the employees’ union is fighting.

The hospital also required all staff to sign a policy forbidding them from speaking with the media about Arbour — or risk losing their jobs, according to the union.

An article that appeared in the Globe on May 30 described findings of federal investigators that the hospital failed to provide treatment for at least four patients during a February inspection. Instead of attending group therapy, the patients, whose diagnoses included bipolar disorder and paranoid schizophrenia, spent many hours sleeping or wandering the hallways.

One Tuesday afternoon, three patients on a unit for those diagnosed with both mental illness and a substance abuse disorder were in therapy. Inspectors found eight patients in bed.

Frank Barnes, a longtime mental health worker and a union representative for 1199SEIU, was quoted in the story saying that problems at Arbour HRI reflected the culture of an administration more focused on revenue than quality of care.

But then,

 Nine days later, according to documents the SEIU provided to the Globe, a nurse executive verbally warned Barnes. A 'counseling/corrective action form' stated that the consequences for failing to follow the media policy could include termination.

The policy warns employees they 'are not to speak to any member from the media on behalf of the facility or company,' and that they must immediately refer press inquiries to the chief executive.

Arbour spokeswoman Judith Merel said that the policy is intended to protect the privacy of patients and staff. 'These processes are put in place to ensure that the hospital complies with all patient confidentiality and privacy laws as well as to safeguard the trust placed in us by our patients, employees and staff,' she said in a written statement.

But the SEIU, in a complaint against the hospital filed with the National Labor Relations Board, charged unfair retaliation against Barnes and said the 'overly-broad' media policy violates employees’ rights.

'If Universal Health Services is treating the patients under its care with dignity and respect, then why would it prevent caregivers from talking to the media?' union executive vice president Veronica Turner said in a written statement. 'It raises serious questions about what the company is trying to hide.'

So far we have allegations that insufficient or poor care was provided, and that a hospital employee who discussed the allegations with the press was threatened, apparently based on a media policy that was more like a code of silence.

It turns out these are not the first problems reflecting badly on the management of the hospital.

Arbour HRI has a recent history of problems. Massachusetts regulators prohibited the hospital from accepting any patients in November, citing unsafe conditions. They allowed admissions to gradually resume two weeks later, in early December. But then in February, inspectors for the federal Centers for Medicare & Medicaid Services found serious shortcomings in the quality of treatment at the 66-bed hospital in Brookline.

The problems at Arbour HRI should not come, however, as a big surprise.  Arbour HRI is part of

Arbour Health System [which] operates five psychiatric hospitals and 12 mental health clinics in Massachusetts. Its for-profit parent, Universal Health Services [Inc], is a publicly traded company that earned more than $500 million last year....

Although not mentioned in the current Boston Globe report, Universal Health Services Inc seems to have a sorry record.

In 2012, Settlement of Allegations of Substandard Treatment, Falsified Records

About two years ago, Universal Health Services settled somewhat similar allegations about another of its hospitals.  As announced by the Department of Justice,

Universal Health Services Inc. (UHS) and two subsidiaries have reached a settlement in a False Claims Act lawsuit with the United States and the Commonwealth of Virginia, the Justice Department announced today.   Under the settlement, UHS and its subsidiaries, Keystone Education and Youth Services LLC and Keystone Marion LLC, which did business as the Keystone Marion Youth Center, a residential facility in Marion, Va., agreed to pay $6.85 million to the United States and the commonwealth to settle allegations that they provided substandard psychiatric counseling and treatment to adolescents in violation of Medicaid requirements, falsified records and submitted false claims to the Medicaid program.  UHS closed the Marion facility earlier this year.  

The allegations, made by multiple people, were actually quite lurid.  As reported by the Huffington Post, the lawsuit involved assertions that psychological therapy was provided in hallways;  the facility lacked a required education program and clinical direct; inmates were nearly unclothed; responses to resident complaints were sometimes met with "brutal force;" the staff performed an "exorcism" on an autistic boy; and staff sexually abused residents.


Previous Allegations of Neglect, Suicide Attempts, Rape and Murder

Note furthermore that according to the Huffington Post, 

Universal Health Services Inc., a large hospital chain which racked up dozens of allegations of abuse during that time -- including everything from rape to suicide attempts allowed by neglect to murder. Over the years, states have barred children from attending UHS facilities over safety concerns and the feds have put UHS on their radar. Department of Justice lawyers have filed two lawsuits accusing the chain of fraudulent activities. 

By the way, the reason the Huffington Post gave this case extensive coverage, however, was not apparently the grievous nature of the allegations.  It was that on Universal Health Services board sat a politician who was at the time of the report a credible candidate for the Republican nomination to be President of the US.

Former Sen. Rick Santorum (R-Pa.) has become a top-tier candidate for the Republican presidential nomination in recent weeks by appealing to evangelical voters as a man steeped in family values and his Christian faith. From 2007 to 2011, however, Santorum served on the board of directors of Universal Health Services Inc.,...

In 2009, Settlement of Allegations of Kickbacks to Physicians

Finally, also mentioned in the Huffington Post, was another settlement by Universal Health Care.  As reported in Modern Healthcare,

Universal Health Services agreed to pay the federal government $27.5 million to resolve allegations that its three hospitals doing business as South Texas Health System paid kickbacks to physicians in the form of sham medical directorships and leases, the U.S. Justice Department announced.  

Note further that this settlement

also requires South Texas Health System to enter a five-year corporate integrity agreement with HHS' inspector general's office. 

Summary

So given the record public since at least2009, should it be a big surprise that Universal Health Services is again facing allegations of poor and unethical treatment of patients and employees?

This is a familiar pattern.  Now that we have been following organizational misbehavior in health care for some years, we see that organizations that get into trouble once are very likely to get into trouble again.

This may be enabled by how government regulators and law enforcement give large health care organizations such  gentle treatment.  We have talked about the march of legal settlements by such organizations before.  Allegations are usually resolved with legal settlements that involve no admissions of guilt, small monetary penalties (compared with these organizations' total revenues), and sometimes apparently toothless corporate integrity agreements.  Settlements get desultory public notice, rarely informed by previous settlements or other evidence of previous misbehavior.  No individual who may have authorized, encouraged, directed, or implemented the bad behavior is likely to suffer any negative consequences.   It does not help that while nominally public, these settlements get little press, and what coverage there is usually fails to put the whole pattern together.

So we would urge the reporters who cover the next settlements by big health care organizations at least look to see if the organizations had been involved in similar settlements in the past.

Furthermore, as we have said all to often,...   The failure of the current limp legal efforts against such corruption is evident by how many corporations have become ethical repeat offenders.  Pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction.  So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue.

Health Care Corruption, "No Dirty Little Secret," but "An Open Sore" - Lessons from India for the US

Health care corruption is widely prevalent around the globe, but remains the great unmentionable.

Introduction: Global Health Care Corruption

We have discussed health care corruption whenever we have an opportunity, but rarely does the topic appear in the English language media or in English language medical and health care journals, particularly in the US.  Some might think that this is because health care corruption is not so prevalent in the US and other "developed" countries.  However, our most read post of all time was about a Transparency International global survey that found that fully 43% of Americans believe our health care is corrupt. 

A recent editorial in the BMJ(1) opened thus,

Healthcare is a high risk sector for corruption. Best estimates are that between 10% and 25% of global spend on public procurement of health is lost through corruption. This is big bucks. Total global spend on healthcare is more than $7 trillion each year. Corruption takes many forms, depending on the country’s level of development and health financing system. The United States, for example, lost between $82bn and $272bn in 2011 to medical embezzlement, mostly related to its health insurance system. No country is exempt from corruption. Patients everywhere are harmed when money is diverted to doctors’ pockets and away from priority services. Yet this complex challenge is one that medical professionals have failed to deal with, either by choosing to enrich themselves, turning a blind eye, or considering it too difficult. Transparency International, a watchdog on these matters, defines corruption as the abuse of entrusted power for private gain, which in healthcare encompasses bribery of regulators and medical professionals, manipulation of information on drug trials, diversion of medicines and supplies, corruption in procurement, and overbilling of insurance companies. This is no dirty little secret. It is one of the biggest open sores in medicine.

When health care corruption is actually discussed in polite circles, including the scholarly literature about medicine and health care, the discussion usually refers to corruption elsewhere.  In particular, in developed countries, discussion of health care corruption usually focuses on less developed countries.
Thus, maybe it should not be a surprise that the editorial by Jain et al accompanied another BMJ article about health care corruption in India. Yet by reading between their lines, both articles have global application, and are just as relevant to those nations in which the powers that be seem to have smugly concluded that health care corruption is only a problem in benighted third world countries.

A Personal View on Health Care Corruption in India

David Berger a UK trained general practitioner (GP), discussed the corruption he found while volunteering in India.(2)  His introduction was,

'The corruption strangles everything, Sir. It’s like a cancer.' Accompanied by apologetic shrugs and half smiles, statements like this are commonly heard in India. I knew this was the case before I went to work as a volunteer physician in a small charitable hospital in the Himalayas, but what I didn’t realise was how far the corruption permeates the world of medicine and the corrosive effect it has on the doctor-patient relationship.

Berger raised several issues:

Neoliberalism and Privitization

The healthcare system itself is a model of inequity; it is one of the most privatised in the world, with out of pocket expenditure on healthcare at more than 70%, far higher even than in the United States. This phenomenon is at least partly the result of the neoliberal World Bank policies of the 1990s, which mandated a reduction in public financing of healthcare, fuelling growth of the private sector. The latest in technological medicine is available to people who can pay, albeit at a high price,...

Kickbacks to Physicians for Referrals

This is a common form of corruption in India.

all investigations attract a 10-15% kickback to the referring doctor. One day, the marketing executive for this clinic had turned up at the hospital with an envelope full of cash—the commission for investigations ordered in the past few months. The senior doctor refused it and stipulated that in future the commission was to be paid back to patients, which is why the resident had to sign the form. The country’s doctors and medical institutions live in an 'unvirtuous circle' of referral and kickback that poisons their integrity and destroys any chance of a trusting relationship with their patients.

Kickbacks from Pharmaceutical Firms

There is also widespread corruption in the pharmaceutical industry, with doctors bribed to prescribe particular drugs. Tales are common of hospital directors being given top of the range cars and other inducements when their hospitals sign contracts to prescribe particular antibiotics preferentially.

I met a former pharmaceutical sales executive who left the industry, sickened by the corrupt practices he was supposed to employ. Working for one of the largest drug companies in the country, he was expected to bribe doctors with money and luxury goods. The crunch came when a doctor demanded that the company fly him to Thailand for a holiday and then provide him with prostitutes at his home. When the company representative queried this, his manager told him to comply, and he felt he had no choice but to resign, protesting that he was 'not a pimp.'

Huge Fees Charged to Medical Students

Endemic corruption extends to medical studies themselves. In another 'unvirtuous circle,' students can have to pay very large “donations” (perhaps $200 000 or more, some 20 times the average doctor’s annual salary) to get into the rapidly increasing number of private medical colleges and to get on to sought after postgraduate training schemes. This means that doctors can have high levels of debt or family obligation when qualifying, which is a strong incentive against working as generalists in rural areas and favours them practising technological medicine for maximum profit in urban areas to try to recoup their investment.

The US Parallels

All the issues above have clear parallels in the US.  But in the US, hardly anyone talks about health care corruption as a local or national problem.  

 Neoliberalism and Privitization

The US is known for its increasingly private health care system, pushed by the ideology of "neoliberalism" or "economism."  US health insurance is mostly provided by private, for-profit corporations, not non-profits, or government agencies.  US hospitals and hospital systems are increasingly private, as are other organizations that provide direct health care, e.g., hospices.  US physicians are increasingly corporate employees.  India may be more privatized, but the US is close behind.

 Kickbacks to Physicians for Referrals

We have frequently posted about cases in which there was good evidence that physicians in the US got kickbacks, or bribes.  Most involved legal settlements of cases in which there were allegations of widespread kickbacks.  Some of them involved kickbacks for referrals (e.g., the settlement involving Omnicare in 2013, look here).  On the other hand, resolution of cases involving kickbacks to small groups of physicians for referrals are so common in the US that we rarely discuss individual examples. For example, I found the following headlines from the last few weeks:

NJ Arrests More than 12 in Alleged Kickback Scheme
Randolph Doctor Jailed for 20 Months for Role in Massive Kickback Scheme
O.C. Grand Jury Indicts 15 Doctors   

We have also written extensively about how corporate physicians are pushed to avoid "leakage," that is referral of patients to health care facilities not owned by their corporate employees (e.g., look here). 


Kickbacks from Pharmaceutical Firms

We have posted about numerous examples of widespread kickbacks given by health care corporations, particularly pharmaceutical, biotechnology, and medical device companies, to physicians to enhance their prescriptions for or use of their products.  Most recent examples include legal settlements by Pfizer about kickbacks to promote use of Neurontin (one of many by that company, look here); by Medtronic to promote use of its pacemakers and defibrillators (look here); and by Johnson and Johnson to promote use of Risperdal (look here).  Moreover, we have discussed many examples of physicians paid as "consultants" or given "honoraria" for talks by companies whose goal was to use these physicians as "key opinion leaders," actually covert marketers for their drugs or devices.  Many of the conflicts of interest we have discussed actually seemed to involve kickbacks or bribes, even though some physicians and policy-makers like to refer to them as "collaborations" with industry to increase "innovation." 

Huge Fees Charged to Medical Students

The huge tuition charged US medical students, their huge resulting debt, and their resulting tendency to pursue procedural specialties rather than cognitive specialties, particularly primary care, have become cliches.

So it seems that the US has some of the same possible risk factors for corruption as does India, that there are many cases in the US of activities that are called corruption in India, and that a near majority of US citizens feel their health care is corrupt.  But health care corruption remains a largely taboo topic in the US. 

Summary: Some General Approaches

The editorial by Jain et al that to its authors' credit emphasized that health care corruption is a global problem suggested some general approaches to corruption(2)

Good governance, transparency, and zero tolerance must form the basis of any anti-corruption strategy. Changes must be implemented in society at large for reform to be sustained. Better governance requires rigorous legislation and functioning administrative mechanisms to provide fiscal oversight. Ethical standards of conduct must be explicitly established and staff held accountable for their performance. Punitive measures should be available to serve as a deterrent. Honest behaviour must be rewarded. These policies may be ineffective, however, unless healthcare professionals are assured of a decent salary and fair opportunities for professional growth

Also

Simple and effective channels for complaints must be established, and appropriate legal support and protection provided to whistleblowers. Looking deeper, underlying issues such as education and social justice must not be forgotten if the battle against corruption is to be sustained and eventually won. Answers may also lie outside the world of medicine.

Note that we have discussed all these approaches: accountability, transparency, governance, boards of trustees, boards of directors, ethics and integrity policies , impunity, legal settlements, and education about corruption (look here). 


Not that any of them have been widely adopted.

So to repeat an ending to one of my previous posts on health care corruption....  if we really want to reform health care, in the little time we may have before our health care bubble bursts, we will need to take strong action against health care corruption.  Such action will really disturb the insiders within large health care organizations who have gotten rich from their organizations' misbehavior, and thus taking such action will require some courage.

References

1.  Jain A, Nundy S, Abbasi K. Corruption: medicine's dirty open secret.  Brit Med J 2014.  Link here. 

2.  Berger D. Corruption ruins the doctor-patient relationship in India.  Brit Med J 2014.  Link here.

Justice Delayed is Justice Denied? - Another Neurontin Settlement by Pfizer 20 Years After the Alleged Events

We have argued repeatedly against the strategy used by US government authorities to address allegations of bad behavior in health care (and elsewhere) by pursuing monetary settlements against the companies involved, rather than trying to impose penalties on the people who may have done wrong.  There are many apparent things wrong with this approach (which we will rant about again below), but one aspect that deserves more attention is its slowness.

The Latest Pfizer Settlement

For example, Bloomberg reported in early June about yet another settlement by Pfizer of allegations about the marketing of the drug Neurontin (gabapentin, made by its Parke-Davis subsidiary):

Pfizer Inc agreed to pay $325 million to settle a lawsuit brought by health-care benefit providers who claimed the drugmaker marketed the epilepsy drug Neurontin for unapproved uses.

The settlement, which needs approval from a federal judge in Boston, would end a case over claims that the company’s Parke-Davis unit schemed to market the drug for unapproved conditions as early as 1994. 

Thus this settlement occurred 20 years after the first actions were alleged to have occurred.

Officially, "Pfizer Didn't Admit Wrongdoing" Despite Allegations of Kickbacks

Otherwise, this particular settlement appears unremarkable.  As is typical, the federal authorities and the judge allowed a settlement which obscures what really happened, because,

The Boston accord will resolve 'all third-party payer claims regarding off-label promotion' and state antitrust claims over Neurontin sales, Steve Danehy, a company spokesman, said in a statement. Pfizer didn’t admit wrongdoing, he said. 

Nonetheless, the allegations were about kickbacks to physicians, a behavior that ought to concern ethical health care professionals.

The companies alleged that Parke-Davis, part of Warner-Lambert Co., paid kickbacks to doctors to encourage them to prescribe the anti-seizure drug for unapproved uses such as bipolar and panic disorders.

Pfizer acquired Warner-Lambert in 2000 and 'deliberately expanded the promotion of off-label uses,' lawyers for the benefits firms said in an amended complaint filed in 2011. 

So Why Pay $325 Million?

So Pfizer appears to have paid another $325 million to allow the company to claim again that these allegations were never proven.  Yet if these allegations were really entirely false, one might think it would have cost the company less than that to take the case to trial?

As Judge Rakoff noted in rejecting a settlement between the US Department of Justice and Citigroup of allegations of financial misbehavior (look here),

As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies.

Yet the latest Pfizer Neurontin settlement, occurring 20 years after the events in question, officially gives no indication of where the real truth lies.

No Admitted Wrongdoing, Despite Past Evidence, Including a RICO Conviction

These very late denials of admission of wrongdoing seem hollow when they are compared to the revelations that have appeared over the years from various legal actions about Neurontin marketing.  As we have discussed here, documents revealed by previous Neurontin litigation have uncovered a catalog of deceptive marketing practices, including manipulation of clinical research, including its design and the analysis and dissemination of its results,  (look here and here), the suppression of clinical research (look here), and stealth marketing campaigns, including manipulation of continuing medical education through "unrestricted educational grants," captive speakers bureaus, docile and well-paid academics and physicians on advisory boards and consultants, the use of key opinion leaders as marketers, and publications strategies including ghost writing (look here).  


Note also that this is only the latest chapter in the long saga of Neurontin, for whose mismarketing Pfizer has already shelled out a lot of money (for the most recent example look here, then see this post, and look here for the collection).  Pfizer has an amazing record of bad behavior on view here.  In fact, it has had a conviction as a Racketeering Influenced Corrupt Organization (RICO) on the basis of its previous marketing of Neurontin (look here), which was recently upheld on appeal (look here).   Yet Pfizer, convicted as a racketeering influenced corrupt organization, gets to officially deny wrong-doing once again.  And through all this, no Pfizer executive who authorized or directed any of this conduct, or who got a big bonus based on Neurontin revenues hiked by deception, has apparently had to suffer any negative consequences.

Summary: the Usual Rant

So here we go again,...  The failure of the current limp legal efforts against such corruption is evident by how many corporations have become ethical repeat offenders.  Pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction.  So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue.

True health care reform would include much more vigorous enforcement of existing laws to make sure health care organizations and their leaders actually put health, rather than personal enrichment, first. 

Fool Me Twice? - Boehringer Ingelheim, Medtronic Settle Lawsuits Alleging Deceptive Marketing

It seems like it has been really quiet on the legal settlement front in the US, but maybe corporate executives wanted to wait until things calmed down after the unofficial start of summer to let out news that some people might not think reflected well on them.  So this week it was time to announce two new legal settlements of allegations of bad behavior by corporate health were announced, as we will list in alphabetical order....

Boehringer Ingelheim Settles Suits Alleging it Hid Data About Pradaxa Harms

As per Bloomberg,

Boehringer Ingelheim GmbH, the German family-owned drugmaker, agreed to pay $650 million to settle the majority of lawsuits filed over its blood thinner Pradaxa, which has been linked to more than 500 patient deaths.

The major allegations were about deception,

 Patients and their families alleged Boehringer executives knew Pradaxa posed a deadly risk to some consumers when they brought it to the U.S. market in October 2010.

In particular, as we discussed in more detail in February, 2014,

Documents made public as part of patients’ Pradaxa suits showed Boehringer officials didn’t disclose to U.S. regulators a data analysis that indicated the blood-thinning drug may have caused more fatal bleeding after it was cleared for sale than in a study used to win approval. 

Per the New York Times, Boehringer Ingelheim executives continued to maintain

that it stood behind the safety and efficacy of Pradaxa and continued to believe that the lawsuits lacked merit, but that settling the case allowed the company to move on. 'Time and again, the benefits and safety of Pradaxa have been confirmed,' said Desiree Ralls-Morrison, senior vice president and general counsel of Boehringer Ingelheim USA.

This is typical of most legal settlements involving large health care organizations, whether they end lawsuits brought by private parties or by the US government.  The settlements often allow the parties to continue to disagree, do not establish guilt or innocence, but leave one to wonder why executives would pay so much of admittedly other peoples' money just to "move on" without upholding their or their companies' honor, especially when documents revealed and legal findings made in cases prior to settlement remain unchallenged.

So this settlement also comes after December, 2013, as we discussed here, December, when a judge

ordered Boehringer to pay a $931,000 fine in December for failing to preserve 'countless' files on Pradaxa’s development and marketing. Patients’ lawyers say Boehringer should have placed an effective 'litigation hold' on the documents, forcing employees to preserve them.

(The above per Bloomberg.)  That finding, which the settlement does not dispute, does not fill one with confidence about the openness and transparency of Boehringer Ingelheim managers.

Also the settlement does not refute documents released during this litigation which suggested that Boehringer Ingelheim personnel tried to influence, or manipulate a company sponsored research paper to prevent it from contradicting the company's official marketing message that Pradaxa administration does not require monitoring of patients with blood tests (as we discussed here).    

Note further that this case comes only a few years after a case in which Boehringer Ingelheim settled allegations of deceptive marketing of drugs other than Pradaxa, as we discussed here.

Medtronic Settles Suit Alleging Kickbacks to Physicians

The most extensive and colorful report was in the Minneapolis Star-Tribune,

Medtronic Inc. will pay the U.S. Justice Department $9.9 million to settle a whistleblower lawsuit that accused the company of paying kickbacks to doctors for using its defibrillators and pacemakers.

The alleged kickbacks, according to the newly unsealed suit, included 'gifts of wine and alcohol' and 'trips to strip clubs' paid for by the Fridley-based company. The lawsuit also says Medtronic paid to fly doctors to events in San Francisco, Las Vegas, New Orleans, New York, Minneapolis and other cities that some physicians used as 'a free vacation.'

More colorful details,

The lawsuit, whose details remained secret until Tuesday, describes Medtronic business plans with names such as 'Project Wildfire' that had sales representatives offer 'cash payments, expensive trips and meals, expensive gifts and entertainment to physicians as kickbacks in exchange for the physicians’ agreement to implant Medtronic devices.'

The lawsuit alleged that Medtronic 'funneled millions of dollars in unrestricted grant money to physicians' to get them to encourage the use of Medtronic defibrillators and pacemakers in patients whose 'mild heart failure symptoms did not meet [Food and Drug Administration] criteria for an implantable device.'

Those procedures were not only unnecessary, the suit alleged, but potentially dangerous.

The suit describes payments of thousands of dollars in speaking fees to doctors for attending dinners at which they spoke for only a few minutes, if at all. In other cases, Medtronic allegedly prepared entire presentations that physicians offered almost verbatim.

The suit talks of a plan that 'instructed sales representatives to personally review patient charts in friendly doctor’s offices' and to flag those patients the sales representative 'felt should receive an implant.'

Note that commercially supplied "unrestricted grant money" is now the lifeblood of many ostensibly academic continuing medical education (CME) programs, but this case suggests that corporate executives may believe they are paying such money to get doctors to use their products.  Note further that many physicians defend their receipt of money in payment of talks they have given on behalf of commercial firms as fair payment for providing unbiased education, but this case suggests that corporate executives may believe they are paying such money for marketing, and/or to get the supposedly unbiased physician speakers to use their products. 

Once again, the settlement did not resolve the allegations.

 Medtronic said it did not admit that any of its activities were improper or illegal and that the settlement would bring to a close a long-running review of events dating from 2001 to 2009.

Also,

 Asked to comment specifically on the strip club allegations and the accusation that it financially facilitated unnecessary implantations, Medtronic reiterated that its $9.9 million payment was not an admission that it had done anything illegal or improper.

See my comments above.  Why would executives with even the slightest ability to feel shame not contest such allegations if they were untrue?  But maybe many of today's corporate health care executives are not capable of feeling shame, and of course they get to pay off these lawsuits with other peoples' money.

By the way, this is just one of many Medtronic settlements.  As Bloomberg summarized,

 Medtronic agreed in 2007 to pay about $130 million to settle consumer suits accusing the device maker of hiding defects in its defibrillators. The company agreed to a $268 million settlement of suits in 2010 over allegations that fractured wires in another line of defibrillators caused at least 13 patient deaths.

In fact, Medtronic has provided our blog with lots of material.  We first discussed detailed and vivid allegations that Medtronic had been paying off doctors starting in 2003 here in 2006.  Medtronic has been involved in other lawsuits alleging various kinds of deception.
-  In 2011, it settled for $23.5 million two other federal lawsuits alleging it paid kickbacks to encourage physicians to implant its devices (look here).  
- In 2008, Medtronic subsidiary Kyphon settled a suit for $75 million and signed a corporate integrity agreement for allegations that it defrauded Medicare through a scheme that lead to excessive hospitalization for patients who received the company's spine surgery device (link here)
- In 2006, Medtronic subsidiary Sofamor Danek settled for $40 million allegations that it gave kickbacks to doctors in the form of sham consulting fees and lavish trips (look here).

Yet we are now writing at the end of May, 2014, and Medtronic is still settling lawsuits involving vivid allegations of payoffs to physicians, and its executives are still saying nothing to see here, move on.

Summary

These sorts of cases provide evidence that large health care corporations, including not just pharmaceutical companies, but biotechnology and medical device companies, commonly use deceptive and unethical practices to market their products.  Such marketing lets them charge high, even outrageous prices and sometimes results in patients getting expensive treatments that do them no good, or worse, that do more harm than good.  Some of the executives of these companies doubtless got large bonuses, and may have gotten millions in compensation partially because of the sales generated by these practices.  However, they get to walk away from such lawsuits without any personal accountability, just by paying out a few millions, or billions, of the company's, that is, other peoples' money.  They get do pay that money without any other explanation that it eliminates distractions and allows them to move on (with whatever they have already made).

The more this goes on, the more health care dysfunction continues, and the more the health care oligarchy prospers.  As we have written many times,

penalties that only appear to be (relatively small) costs of doing business are unlikely to deter future bad behavior. Until the people who actually authorized, directed and implemented the bad behavior have to suffer some negative consequences, expect the bad behavior to continue.  Note that each of the companies discussed above have had their previous ethical lapses discussed in previous Health Care Renewal posts.

The continuing march of settlements, and sometimes criminal convictions involving major health care organizations should be regarded merely as providing a floor to estimates of the extent of bad behavior by large health care organizations. Bad behavior may not be reported, or lead to legal action, and legal action may not lead to settlements or convictions. However, it is amazing how many organizations that were once regarded as exemplary have had to settle, or plead guilty, or been convicted.

When it comes to health care's leadership, society seems to have acceded to defining deviancy down. Until we start holding health care leaders to high standards, expect their organizations not to uphold high standards.

(That version was from 2010, posted here re Medtronic's 2010 settlement. You heard it here first.  Medtronic is still settling, and according to its most recent proxy, from 2013, the annual total compensation of its CEO was last reported to be $8,975,886.)

The Pervasiveness of Health Care Corruption as Shown by Another Roundup of Legal Settlements

Legal settlements are one way to document unethical and even corrupt behavior by large health care organizations, even if they may not deter bad behavior in the future.  It is time for another roundup of settlements by large pharmaceutical and device companies, presented in alphabetical order

Abbott Laboratories

This one goes back to late December, 2013.  As described in the Chattanoogan (from Tennessee):

Abbott Laboratories, a global healthcare company, has agreed to pay $5.475 million to settle alleged violations of the False Claims Act, and other federal laws and regulations in connection with the operation of its medical device business which manufactures, markets and supplies carotid, biliary, and peripheral vascular products.

The US Justice Department accused Abbott of kickbacks to physicians,

 As alleged in the settlement agreement, between 2005 and 2010, through its employees and a third party continuing medical education providers, Abbott offered physicians paid teaching and training assignments, consulting arrangements, speaking engagements, and/or sponsorship grants for physician conferences, for the purpose of inducing physicians to arrange for or recommend that the hospitals with which they were affiliated purchase or order Abbott’s carotid, biliary and peripheral vascular products.

Note in particular that the kickbacks were disguised as payments for consulting or speaking. 

As is usual in such cases, no individual seems to have paid any penalty or been subject to any punishment.  Because this was a legal settlement, the company did not admit wrongdoing.

Abbott's previous issues are discussed here, including a $1.6 billion settlement in 2012. 

Baxter International

This was reported in April, 2014 by Modern Healthcare,

 Baxter International agreed to pay $64 million to settle a class-action lawsuit that alleged the Deerfield, Ill.-based company and some of its competitors colluded to raise prices of plasma-based therapies.

Unlike the other cases above and below, this seemed to be a purely financial misadventure, although one that clearly increased health care costs,

Hospitals and drug distributors, saying they bought the plasma products at inflated prices, sued in 2009 Baxter; Victoria, Australia-based CSL; and the Plasma Protein Therapeutics Association, an Annapolis, Md.-based trade group.

Once more, the company admitted no wrongdoing, and no individuals seemed to be subject to any negative consequences.  

Baxter International's previous misadventures are here, including the striking case of its marketing of contaminated and sometimes deadly heparin made from Chinese pigs. 

Endo Health Solutions

This one is from February, 2014, as reported by Bloomberg

Endo Health Solutions entered a deferred-prosecution agreement and will pay $193 million to settle whistle-blower claims that it marketed the shingles drug Lidoderm for unapproved purposes, the U.S. said.
Endo will pay $20.8 million in forfeitures and $171.9 million in civil false claims settlements with the states and the U.S. government, the Justice Department said today in a statement. 

This one was all about marketing for uses not approved by the US Food an Drug Administration,

Between 2002 and 2006, Endo sales managers instructed some representatives on how to expand 'sales conversations' with doctors beyond the treatment of shingles-related pain, the U.S. said. Under the deferred-prosecution agreement, Endo admitted that it intended Lidoderm to be used for uses not approved by the U.S. Food and Drug Administration, the Justice Department said. 

Note that this case involves false claims, that is, fraud, because it is illegal to bill government programs for unapproved uses.

Again, no individual suffered any consequences, and the company offered the usual kind of statement that admitted neither responsibility nor guilt,

'We are pleased to resolve this matter and are confident that we have robust programs in place to assist us in satisfying our legal and regulatory agreements,' Endo Chief Executive Officer Rajiv De Silva said in a statement.  

One wonders, as usual, why a company would pay so much merely to avoid the legal expenses of a trial, unless of course the lawyers suspected the trail would not go well?

Hospira

This one was about hiding quality problems due to cost-cutting from investors, as reported by Reuters in March, 2014.  

Hospira Inc has agreed to pay $60 million to resolve a class action lawsuit accusing the drug maker of misleading investors about quality control problems that undermined an initiative to improve the company's margins and operations.

The details included,

As Hospira was promising to address issues raised by the U.S. Food and Drug Administration following inspections, the plaintiffs said the company was 'making the problems worse by gutting quality control efforts through cost cutting aimed at boosting short-term profitability.'

The lawsuit said those cost-cutting moves stemmed from a March 2009 initiative called 'Project Fuel' intended to increase shareholder value by eliminating underperforming and duplicative units and reducing its global workforce.

Plaintiffs contended the cuts in the budget and workforce hurt Hospira's quality control efforts, particularly at Rocky Mount, the company's largest facility.

An FDA inspection in January 2010 of the Rocky Mount facility found a number of problems with the company's quality control and drug validation processes, the lawsuit said, and the agency issued a warning letter that April.

Note that this involved quality control problems presumably in drug or device production, possibly leading to safety risks for patients.  Yet it was investors who brought the lawsuit.

Note also that this seemed to be a clear case in which cost-cutting measures meant to improve short-term corporate revenue lead to problems that could have caused such risks.  

One interesting feature of this case was that company executives were named as defendant (presumably again because it was investors, not patients or law-enforcement officials who initiated the suit.)

The lawsuit ... also named executives including Chief Executive Officer Michael Ball as defendants,...

I cannot find any information about whether these executives were personally liable for any payments, however.   

Pfizer

This is yet another settlement involving the marketing of Neurontin, as reported by Bloomberg in April, 2014,

Pfizer Inc the world’s biggest drugmaker, agreed to pay $190 million to end a lawsuit claiming it violated federal antitrust laws by delaying generic versions of its Neurontin epilepsy drug. 

Pfizer agreed to settle the class-action litigation pending in federal court in Newark, New Jersey, according to a filing today. U.S. District Judge Faith Hochberg must approve the accord, which would cover purchasers of Neurontin from December 2002 to August 2008. 

Note that this settlement, like many others, is of matter from a long time ago.  When it comes to bad behavior by big health care corporations, any form of justice is not swift.

Note also that this is only the latest chapter in the long saga of Neurontin, for whose mis-marketing Pfizer has already shelled out a lot of money (see this post to start, and here for the collection).  Pfizer has an amazing record of bad behavior on view here.  In fact, it has had a conviction as a Racketeering Influenced Corrupt Organization (RICO) on the basis of its previous marketing of Neurontin (look here).

This particular bad behavior involved included,

 improperly listing certain patents with the U.S. Food and Drug Administration, engaging in illegal promotion and sales of Neurontin for unapproved uses, filing and maintaining sham litigations with respect to certain patents, and making misrepresentations to the patent courts,

Note that while much of this was legalistic, illegal marketing was in there too.

Once more, I found nothing about any negative consequences for individuals who authorized, directed, or implemented questionable actions.

Summary

So it is all drearily familiar.  Big health care organizations seem to repeatedly engage in deceptive marketing, providing kickbacks to health professionals, fraudulent billing, anti-competitive practices, etc, etc.  These practices increase health care costs, and may risk patients' health and safety.  Many of these practices are corrupt, at least according to the Transparency International definition of corruption, "abuse of entrusted power for private gain."  Drug and device companies, for example, are entrusted to provide safe and effective products.  Deceptive marketing, kickbacks to health professionals to encourage overuse, and cutting quality control to cut costs all seem to be examples of abuse of this entrusted power.  The private gain obviously goes to any managers and executives who score bigger bonuses due to the increases in revenue that result. 

Yet there are very few examples of any individuals who gained ever being subject to any negative consequences.  Given that lack, and the lack of any requirement for corporate leaders to admit responsibility, much less guilt, is it any surprise that these practices go on and on.  The failure of current limp legal efforts against such corruption is evident by how many corporations have become ethical repeat offenders.   (Note that in fact, as noted above, one of the pharmaceutical companies above actually was convicted of being a RICO, racketeering influenced corrupt organization, yet that conviction seemed to have no real negative consequences for the organization or any of the people involved.)

As I have said again and again, pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction.

So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue.

The Implications of the CareFusion/ Dr Denham/ NQF/ Leapfrog Group Case Continue to Grow, but Remain Anechoic

The story about CareFusion, Dr Charles Denham, and the National Quality Forum certainly has legs, but continues to tread very softly. 

Background

At the time of our last post, on January 28, 2014, the basics were:
-  The case became public with an apparently routine legal settlement between CareFusion and the US Department of Justice
 -  The CareFusion settlement for $40.1 million was made in response to allegations that kickbacks were made to promote ChloraPrep, a solution meant for preoperative and other health care skin cleaning
-  The Department of Justice news release also alleged that payments were made to a corporation called Health Care Concepts to conceal kickbacks made to its owner, Dr Charles Denham
-  The implication was that Dr Denham was supposed to influence a standard writing committee run by the National Quality Forum, a well known organization that promotes quality improvement, issues authoritative practice standards, a form of clinical practice guidelines, and has contracts with the US government for quality of care activities
-  The draft of the standard to prevent surgical site infection written by the committee allegedly included the use of ChloraPrep, although mention of that specific medication was removed in a revision
-  The Department of Justice alleged that the standard was based on a journal article sponsored by Cardinal Health, from which CareFusion split, and which may have been manipulated by its sponsor
-  NQF leaders asserted that after hearing of the case from the DOJ, the organization severed ties with Dr Denham and the non-profit organization he runs,  established a policy not to accept money from funding organizations whose leaders are on its committees, reviewed all the standards set by the committee of which Dr Denham was co-chair, and twice revised its conflict of interest policy.
- Despite these efforts by the NQF to remove excess influence by Dr Denham, a specific recommendation to use ChloraPrep, specified by formula but not by name, did appear in another NQF standard, one for preventing central line infections; the NQF logo apparently appeared on at least one educational event run by Dr Denham that advocated the use of ChloraPrep; and CareFusion cited NQF support in at least one promotional brochure

Dr Denham's Previous Associates Now Have Doubts

According to an article in Health Leaders Media, Dr Denham was associated not only with the NQF, but also another well known organization that promotes patient safety, the Leapfrog Group.  Since the CareFusion settlement was made public, this association has come to an end:

Denham was appointed to Leapfrog's Safe Practices Committee as Chairman in 2006. 'The position represented a voluntary commitment with no financial or contractual relationship between Dr. Denham and Leapfrog,' says a Leapfrog statement.

On Wednesday, Denham resigned his position from the committee 'to make sure the present distraction does not impact you or the work you do.' The group accepted his resignation on Thursday.

Leapfrog's president and CEO, Leah Binder, said in an interview with HealthLeaders Media: 'We've never taken any money from him and we have no contracts with him.'

Leapfrog has asked Denham and his company, TMIT, to 'remove any language from its website implying Leapfrog endorsement of 'test beds,' as this is not authorized. Further have TMIT remove any reference to a Leapfrog Hospital Survey 'flight simulator,' as this authorization was only given in 2006 and expired in 2007.'

On Thursday, Binder issued a statement saying her board 'was concerned with Dr. Denham's failure to reveal to the National Quality Forum or Leapfrog his potentially compromising relationship with CareFusion, which demonstrated a lack of transparency inconsistent with our organization's core values and mission.'

Note that the Leapfrog group charged that Dr Denham failed to disclose his financial relationships with CareFusion to them.  The article also implied that Dr Denham was falsely claiming that the Leapfrog Group had endorsed various activities by his Texas Medical Institute of Technology.  So it appears that Dr Denham's efforts to conceal his conflict of interest - and that is likely an understatement of his relationship with CareFusion -  and to make it appear that prestigious patient safety organizations supported CareFusion products were more widespread than we initially realized. 

Furthermore, a post by Dr Robert Wachter on his blog Wachter's World noted 

In retrospect – always in retrospect – it should have been obvious that, when it came to Dr. Charles Denham, something was not quite right.

He admitted that many aspects of the National Quality Forum's and his relationship with Dr Denham were in retrospect questionable.  These included the obscurity of the sources of the lavish resources that Dr Denham's organizations commanded and the wealth that Dr Denham displayed.

 A colleague visited him at his home in Laguna Niguel, an affluent beachfront LA suburb, and reported that it was palatial – not something commonly acquired on the salary of a former radiation oncologist. About five years ago, trying not to be too obvious, I asked Chuck where his money came from. He mentioned something about his wife’s family, and that he had decided to leave clinical practice to commit his life to patient safety. On several occasions, he talked about his 'research test bed,' saying, 'We’re in more than half the hospitals in America.' It wasn’t entirely clear what this meant; having visited many hospitals over the years, I never heard of one that was using the services of TMIT, the way you hear about hospitals that work with Premier or the Advisory Board or the Governance Institute. Very little of this added up,...

Another concern in retrospect was how Dr Denham became editor of a journal on patient safety:

The Journal of Patient Safety launched early in the safety field, co-sponsored by the National Patient Safety Foundation. To me, JPS has never been very good or particularly influential, and by all accounts it struggled to make ends meet. Then in 2011, I learned that it had named a new editor. You guessed it: Denham. The change had been made so precipitously that the NPSF, a founding sponsor, claimed it had been blindsided and removed its sponsorship in protest. I looked back to see whether Denham’s pedigree could justify his being named the editor of an academic journal. A PubMed search revealed that, before 2009, he had not had a single first-author publication in a 20-year career. Since then he has had 12, 11 of them in JPS.

Finally, Dr Wachter recounted that many of his professional colleagues ended up involved with Dr Denham, often with doubts, but doubts upon which they did not act,

Over the past few years, I received at least five different calls from colleagues who had been approached by Chuck to work on one project or another – a video to improve radiology safety, an effort to reduce central line infections, and several others I can’t recall. In each case, the question posed by my colleagues was a version of, 'Is this guy for real?'  In each case I said the same thing: Yes, both he and the situation seem odd, and no, I don’t know where he gets his money. Yet he appeared to be a nice guy, good to his word, and he produced results. I told them that – despite my head scratching – I couldn’t think of a sound reason not to work with him. When I mentioned this yesterday to Peter Pronovost, the Johns Hopkins intensivist who is the world’s leading safety researcher, he told me, 'It’s not that five people didn’t understand Chuck… I don’t know anyone who did understand.'

Again, it appears that Dr Denham's deceptions may have been considerably larger than indicated by the initial reports.

Senator Grassley Now Has Questions

The redoubtable Senator (R - Iowa), who is known to be particularly vigilant about conflicts of interest in health care, has now officially stepped in.  According to an article in ProPublica, 

An influential senator is demanding copies of contracts and conflict-of-interest policies from the National Quality Forum after allegations that kickbacks were paid to influence its patient safety guidelines.

Sen. Charles Grassley cited 'serious concerns' about how the Quality Forum vets its expert advisers and suggested the group may have endorsed a drug for a use the government hasn’t approved. 

The NQF is in this hot seat because it gets extensive US government support,

In 2012, three-fourths of the Quality Forum’s $26 million in income came from the government to endorse health care quality measures and evaluate spending. It’s expected to receive about $10 million from the federal government this year under provisions of the Affordable Care Act. 

The group promised a swift reply,

Spokeswoman Ann Greiner said the Quality Forum will promptly reply to Grassley. The group already had announced a new, 30-day review of its guidelines and policies after ProPublica raised questions about ChloraPrep last month.

'As you know, we fully cooperated with the DOJ inquiry, and have our own review of NQF processes (including conflict of interest policies) related to the 2010 Safe Practices report under way,' Greiner said in an email, referring to the group’s latest patient safety guidelines.

More Questions about How Dr Denham May Have Tried to Influence the NQF to Promote ChloraPrep

The latest article by Joe Carlson for Modern Healthcare raised a question about how Dr Denham knew the results of the New England Journal of Medicine article at the time he alluded to its findings at an NQF meeting,

The NQF committee's discussion of the study took place in August 2009 (PDF), and the results of the clinical trial comparing alcohol-chlorhexidine versus traditional iodine-based surgical antiseptics didn't appear in print in the New England journal until January 2010. Journals typically prohibit release of data in peer-reviewed studies before publication.

The article also underscored a question raised by Senator Grassley

Grassley contends that CareFusion didn't even have Food and Drug Administration approval for that specific indication of ChloraPrep at the time the NQF was talking about it.

'It is concerning that a prominent expert at NQF was encouraging non-approved uses during a review of patient safety best practices while being paid millions of dollars by the manufacturer of ChloraPrep,' Grassley wrote in a letter Monday (PDF) to NQF President and CEO Dr. Christine Cassel.

The list of questions about possibly deceptive practices by Dr Denham that could have promoted his pay-master CareFusion's products continues to grow, as does the scope of the apparent influence of his actions.  While this case includes many elements familiar to Health Care Renewal readers, such individual and institutional conflicts of interest, kickbacks and other aspects of health care corruption, manipulation of clinical studies, questionable clinical practice guidelines, and deceptive marketing practices, the scope of the case is becoming extraordinary.  It now involves at least two respected non-profit organizations that promote health care safety and quality, two medical journals, many respected medical academics, and an undetermined number of hospitals. 

Summary - Where are the Echoes?


It is heartening that leaders of the NQF have responded to this case openly, and without some of the defensiveness we have often seen when questions are raised about the actions of important health care organizations.  It is also heartening that at least one US Senator has taken an interest.  Yet despite its  scope and the potential importance of these reactions to it, this case has remained relatively anechoic.

We have often, but not so much lately, discussed the anechoic effect.  Cases, issues and ideas that might raise questions about the powers that be in health care, or might offend or threaten those who profit the most from the our dysfunctional health care system often have few echoes in the mainstream media and the medical, health care and health policy literature. 

While the CareFusion/ Dr Denham/ National Quality Forum/ Leapfrog Group case seems like it ought to be very important, and many writers have now addressed it, so far it has only been covered by relatively obscure outlets.  Although initial brief coverage of the CareFusion settlement appeared in business news services like Reuters, all coverage since has been in Modern Healthcare, ProPublica, Health Leaders Media, and several blogs, including Health Care Renewal. Presumably this is the reason another blogger, in the WBUR CommonHealth blog, wrote ironically,

Paging Dr. Atul Gawande, paging Dr. Atul Gawande. Please call your assigning editor at The New Yorker to discuss the scandal around the $11 million that the company CareFusion allegedly paid to a leading figure in the patient safety field who pushed the company’s surgical antiseptic.

I confess, that’s just my fantasy, that Dr. Gawande — prominent himself in patient safety as author of 'The Checklist Manifesto' — might want to take on this assignment. 

 

So it appears the anechoic effect is still with us. When leaders of big health care organizations enjoy ever increasing pay and influence, and the organizations they lead become ever more dominant, the risk of causing them offense continues to grow.  So it is all to easy to choose to ignore what might trouble the new health care plutocracy. But if no one notices the emperor has no clothes, he will continue to march around naked. 

by Roy M Poses MD for Health Care Renewal

Our Man in the NQF? - CareFusion Settles Kickback Allegations for $40.1 Million and Government Alleges They Meant to Manipulate National Quality Forum Standards

What appeared to be yet another entry in the march of legal settlements turns out to be more interesting than it first appeared.

The Basic Story: Off-Label Marketing 

The story was initially briefly reported in the media.  A report in the Seattle Post-Intelligencer on 9 January, 2014, was perhaps the most complete,

CareFusion, a manufacturer of medical and surgical supplies and medical devices, has agreed to settle charges of illegal marketing practices and kickback payments for promoting sales of the company’s surgical preparation solution, Chloraprep.

Under the terms of the settlement with Washington, other states, and the federal government, CareFusion will pay a total of $40.1 million.

In particular,
 

When the FDA approves a surgical solution such as Chloraprep as safe and effective, its manufacturer can’t market or promote it for an 'off-label' use – any use not approved by the FDA.

Chloraprep was approved for specific inpatient hospital procedures, including the preparation of a patient’s skin prior to surgery or an injection. The FDA rejected its use for prepping the skin prior to inserting catheters into veins for administering medications, or cleaning the skin as part of closing wounds.

The lawsuit alleges that from Sept. 1, 2009 to Aug. 31, 2011, CareFusion promoted Chloraprep for improper uses. CareFusion also allegedly publicized unverified information about Chloraprep during the same time period, Ferguson said.

So this follows a template we have seen before, most recently here.  A company promotes a drug or device for "off-label" uses.  While physicians are legally allowed to prescribe a drug or use a device for reasons other than its official indications, companies are not legally allowed to promote such uses.  Sometimes it turns out that the drug has benefits that outweigh its harms when used off-label, in which case the violation could be considered technical.  In other cases, the drug might turn out to be useless or even net harmful when used off-label, so the violation indicates putting revenue ahead of patients' welfare.  

The reporting on the CareFusion Chloraprep settlement did not clearly suggest that the off-label use was harmful to patients.

Allegations of Kickbacks to Promote Off-Label Use, but How?

It gets more interesting.  The Post-Intelligencer also noted,

The states also contend that in 2008 CareFusion’s predecessor corporation entered into agreements that CareFusion assumed legal and financial responsibility for. This included payments to Health Care Concepts Inc., payments that were allegedly made to hide kickbacks to the physician-owner of HCC for promoting and influencing providers to use Chloraprep, he said. This violates federal and state anti-kickback laws.

Now the allegations also include kickbacks to the "physician-owner" of a company to facilitate off-label promotion.  So the issue goes beyond a technical violation of the law.  The Post-Intelligence report, however, did not make clear what Health Care Concepts Inc actually did to contribute to off-label promotion.

A quick attempt to find out more about this company via the web was not fruitful.  There are lots of companies/ organizations called Health Care Concepts or some variant.  The most relevant may be this one, which lists CareFusion as a "partner" on its main web-page.  What this company actually does is a bit unclear.  Its business model is described as "a private incubator of early products, services, and technologies, as well as an accelerator of mature solutions that will be taken to scale." What that has to do with off-label promotion of a product of a big established company like CareFusion is not clear.  How this company could have influenced providers is not clear, given that it is not an advertising firm, public relations firm, or medical education and communication company (MECC).

So what is going on here?  

Allegations of a $11.6 Million Payment to Manipulate the National Quality Forum Standards


Yesterday, 21 January, 2014, Modern Healthcare began to explain the mystery.   

Many healthcare companies have been accused of paying kickbacks to influence physicians' medical decisions, but one major supplier allegedly tried to steer an entire industry by influencing the recommendations of the National Quality Forum

The NQF, which reviews medical evidence and makes recommendations for improving healthcare, acknowledges that a well-known patient safety advocate is alleged to have received millions of dollars to promote a surgical sterilization product while co-chairing an NQF committee that suggested hospitals use that product. 

Federal officials say Dr. Charles Denham, co-chair of NQF's Safe Practices Committee in 2010, received $11.6 million from San Diego-based CareFusion to promote the company's ChloraPrep line of skin-preparation products. Denham's committee at the NQF also recommended surgeons use ChloraPrep products to prevent surgical infections, the NQF said.

The allegations about the role of Dr Denham in the NQF also did appear in the the official US Department of Justice press release.

Allegations of Bogus Contracts, and Non-Denial Denials

The allegations produced some non-denial denials (in the phrase found in All the President's Men).

Dr Denham responded, but through a lawyer:

A statement from Denham's attorney, Larry Gondelman of Powers Pyles Sutter & Verville in Washington, said reports that the underlying lawsuit involved Dr. Denham were 'blatantly false.'

Denham was not accused of wrong-doing in the whistleblower lawsuit, and Gondelman said Denham has and continues to cooperate with investigators in the case.

Note that while the attorney denied that Dr Denham was named in the underlying lawsuit, he did not apparently specifically deny the allegations.

The NQF also reponded,

 An NQF review committee removed the reference to the specific product before final publication of 'Safe Practices for Better Healthcare' in 2010.

'An NQF ad hoc review did not find sufficient evidence to support one skin preparation over another,' a statement from the organization said. 'The ad hoc review effectively served its role of rapidly responding when a potential issue is identified.'

Note that the NQF press release did not deny that the CareFusion money was given to Dr Denham's organization, nor that the NQF report might have promoted the use of a class of products in which CareFusion's Chloraprep resides.

A follow-up story in Modern Healthcare noted that Dr Denham confirmed the payment of the money to his company, but not its purpose,

 Renowned quality expert Dr. Charles Denham confirms that CareFusion paid his company more than $11 million, but Denham says he was surprised to see the U.S. Justice Department describe the money as kickbacks intended to influence national quality-of-care guidelines published by the National Quality Forum.

Dr Denham's lawyer confirmed the payment, but did not further explain it:

Denham's lawyer, Larry Gondelman of Powers Pyles Sutter & Verville in Washington, acknowledged that CareFusion did pay Denham's company under two contracts. 

And,

Gondelman said the $11.6 million paid to Denham's company covered 'an array of services' and that he could not elaborate.

Again, note that Mr Gondelman did not specifically deny that the money served as a kickback.

Meanwhile, the Department of Justice alleged something more elaborate, and nefarious, 

The Justice Department, though, says the contracts were written to look as though CareFusion was buying consulting, software development and strategic marketing services, as well as the completion of three unnamed projects. The value of the deals, the government alleges, far exceeded the fair-market costs of those services, and that one of the actual purposes of the deals was to conceal kickbacks to Denham while he served on the National Quality Forum.

Interval Summary

So what is clear so far is that:
-  CareFusion agreed to a $40.1 million settlement of allegations that it provided kickbacks to promote off-label use of its product.
-  CareFusion paid $11.6 million to Health Care Concepts
-  Health Care Concepts is run (and possibly owned) by Dr Charles Denham, who chaired a National Quality Forum committee that recommended use of CareFusion's product ChloraPrep in a performance standard and the final version of the NQF standard recommended use of a group of products including ChloraPrep

We have frequently discussed how health care corporations may promote goods, particularly drugs and devices and services through deceptive and unethical practices, including inducements ranging form creation of conflicts of interest to outright bribes and kickbacks.   We have also discussed the influence of individual and institutional conflicts of interest on clinical practice guidelines.  This has become an important enough problem for the US Institute of Medicine to weigh in with standards for trustworthy guidelines that markedly limit such conflicts of interest. 

This case seems notable because it may link the problems of deceptive and unethical promotion with the influencing of clinical practice guidelines.  It is particularly notable because the organization generating the guidelines in question, the National Quality Forum, has become large, influential, and authoritative.  Re the latter point, the latest Modern Healthcare article affirmed,

The NQF is a standards-setting organization for the healthcare provider industry. It holds the exclusive contract to provide Medicare and Medicaid with recommendations on a national quality-of-care strategy and the measures used to gauge improvements.

In fact, while the NQF performance standards can function as guidelines, they also may be bases for pay for performance schemes that attach real incentives to guidelines, which could become perverse if the guidelines have been manipulated.

Can the NQF Defend Against Conflicts, and If Not, Should it Remain So Authoritative?

So the big question is whether the NQF, given its unique influence, has any meaningful approach to prevent its standards from being influenced by conflicts of interest?

The NQF does have a recent conflicts of interest policy. However, according to my reading, it neither bans committee members with conflicts of interest, nor even requires public disclosure of conflicts of interest.  All it seems to require is that committee members disclose conflicts internally and voluntarily recuse themselves from deliberations which may be affected by them.  Although the policy states that conflicts of interest may be made public, I could find nothing in the report which Dr Denham co-authored about conflicts of interest or competing interests affecting any of the authors, including Dr Denham

Furthermore, a very quick look at information publicly available on the NQF web-site suggests the organization itself may have major institutional conflicts of interest.  The NQF is one of those "public-private partnerships" that have become all the rage.  Several members of its board of directors have leadership positions in large health corporations, financial firms with large health care interests, or trade associations for large health care corporations: 

- Elizabeth J. Fowler, PhD, JD, is Vice President, Global Health Policy, in the Government Affairs & Policy group at Johnson & Johnson.

- Robert Galvin, MD, is Chief Executive Officer, Equity Healthcare, at The Blackstone Group.

 - Karen Ignagni, President and Chief Executive Officer of America’s Health Insurance Plans (AHIP), is the voice of health insurance plans....

- J Mark Overhage MD, PhD,  Chief Medical Informatics Officer, Health Services, Siemens Healthcare


Thus it is conceivable that they could personally profit, and that their organizations could institutionally profit from standards that favor their organizations' interests.  

Furthermore, NQF receives funding from the US government and private foundations, but also from pharmaceutical companies and their in-house foundations:

the Bristol-Myers Squibb Foundation, the Cardinal Health Foundation, Pfizer Inc., Sanofi-aventis,...

Unless the current case leads to big changes in the prevalence of conflicts of interest among the NQF board, the continuation of its institutional conflicts of interest generated by its sources of funding, and its weak policy on conflicts affecting committee members, the question becomes whether it should continue to have such an authoritative role?

As we have said over and over, pervasive conflicts of interest affect health care decision-makers and policy makers and the organizations within which they function.  Such conflicts threaten to put various private interests way ahead of patients' and the public's health.  If we really want health care that will put patients' and the public's health first, we need to end such arrangements that favor private gain.  

 Roy M. Poses MD on Health Care Renewal

ADDENDUM (23 January, 2014) - A closer re-reading of the NQF conflict of interest policy made it clear that recusal is not voluntary, and that conflicts of interest may be revealed publicly, but that such disclosure is not mandatory.  The paragraph above dealing with these issues was revised accordingly.