More "anecdotes" of health IT-related errors - System errors with Victoria's trouble-plagued HIT program caused more than 100 medication mix-ups at two Melbourne hospitals

There are those in the field of health IT who see every health IT-related mishap as an "anecdote" - the "anecdotalists" - and every "positive" study, no matter how weak, as "solid evidence" of the technology's beneficence and efficacy.

See "Anecdotes and Medicine, We are Actually Talking About Two Different Things" at http://hcrenewal.blogspot.com/2011/08/from-senior-clinician-down-under.html for more on the risk management/scientific method confusion it represents, from a clinician Down Under.

More "anecdotes" from Down Under to make the anecdotalists' heads explode:

Computer errors blamed for medication mix-ups
The Age.com (Australia)
October 30, 2013
Kate Hagan

System errors with Victoria's trouble-plagued health technology program have caused more than 100 medication mix-ups at two Melbourne hospitals and need to be fixed urgently, the state's Auditor-General has found.

... Auditor-General John Doyle said problems at three hospitals were putting patients at risk of missing prescribed medications or receiving incorrect doses, in a report tabled in Parliament on Wednesday. 

[Note: the full government audit report is available at http://www.audit.vic.gov.au/reports_and_publications/latest_reports/2013-14/20131030-clinical-ict-systems.aspx in fulltext and PDF.  Other risks besides medication errors were found.  The general problems it reports in the Victoria health IT program were written about here since 2004 and at my Drexel site since 1998 - poor planning and an inadequate understanding of system requirements, underestimated project scope, costs and time lines, as well as underestimations of the required clinical workflow redesign and change management efforts. More on this in a future post.]

Problems included HealthSMART recording patients as having being discharged when they had only moved within the hospital, and difficulties for doctors in recording complex medications in the system.

Mr Doyle said a voluminous medication list meant doctors sometimes [picked whatever was easy -ed.] [and] printed out an incorrect prescription and then changed it manually, resulting in an inaccurate electronic record.  

The doctors likely did this on order to be able to actually see patients and not fiddle with the computer incessantly.

He said incident reports at two hospitals had recorded "more than 100 reported incidents of missed or nearly missed medication, as well as medicines being administered at a higher dose than prescribed".

They included incidents in which "pain relief, antibiotics and other medication were given twice or not at all due to this issue".

That's a good way to injure or kill people.  Trust me, I know - personally.

... He said hospitals had put manual measures in place to mitigate risks but they were not fail-safe, created inefficiencies and did not provide a long-term solution.

Workarounds always introduce new risk.  I also remind that one should never need to work around something that's not in your way.

"As a result, there is continuing potential risk to patient safety that needs to be closely monitored by both [the Victorian Health Department] and the relevant health services," he said.

At least in Australia they state the truth, clearly, as opposed to Americans, who make excuses (see for example my Sept. 16, 2013 post "An Open Letter to David Bates, MD, Chair, ONC FDASIA Health IT Policy Committee on Recommendations Against Premarket Testing and Validation of Health IT" at http://hcrenewal.blogspot.com/2013/09/an-open-letter-to-david-bates-md-chair.html).

At least there's this:

Health Minister David Davis said this week that Victoria had "learnt the lessons from the flawed HealthSMART program" and promised that hospitals and health professionals would have more say on future projects, which would be based on sound business cases.

In my view we don't need non-clinician hospital management (including and especially the business computing personnel) to "have more say", we need the health professionals to predominantly have that role.

For those who've never completed medical/nursing school nor completed a medical internship/residency/practice, only the exceptional can comprehend the true complexities of healthcare and health IT to support it [see note 1].  As observed in "Hiding in plain sight: What Koppel et al. tell us about healthcare IT", Nemeth & Cook, Journal of Biomedical Informatics 38 (2005) 262–263 at http://www.wapatientsafety.org/downloads/article-8.pdf:

... On the surface, healthcare work seems to flow smoothly. That is because the clinicians who provide healthcare service make it so. Just beneath the apparently smooth-running operations is a complex, poorly bounded, conflicted, highly variable, uncertain, and high-tempo work domain. The technical work that clinicians perform resolves these complex and conflicting elements into a productive work domain. Occasional visitors to this setting see the smooth surface that clinicians have created and remain unaware of the conflicts that lie beneath it. The technical work that clinicians perform is hiding in plain sight.

Those who know how to do research in this domain can see through the smooth surface and understand its complex and challenging reality. Occasional visitors cannot fathom this demanding work, much less create IT systems to support it.

Unfortunately, the truly exceptional in hospital management are few and far between, despite the Lake Woebegon stories seen about them in their P.R. (See Roy Poses' post "Where No Hospital CEOs are Below Average" at http://hcrenewal.blogspot.com/2010/07/where-no-hospital-ceos-are-below.html.)

It's becoming clearer the "anecdotalists" were quite wrong about health IT and its propensity to cause or contribute to medical error, especially when done poorly, i.e., is bad health IT which is all too common.  I attribute this to conflict of interest and fairy tale views about IT.

From my teaching site:

Good Health IT ("GHIT") provides a good user experience, enhances cognitive function, puts essential information as effortlessly as possible into the physician’s hands, can be easily, substantively and cost-effectively customized to the needs of medical specialists and subspecialists, keeps eHealth information secure, protects patient privacy and facilitates better practice of medicine and better outcomes.

Bad Health IT ("BHIT") is ill-suited to purpose, hard to use, unreliable, loses data or provides incorrect data, is difficult and/or prohibitively expensive to customize to the needs of different medical specialists and subspecialists, causes cognitive overload, slows rather than facilitates users, lacks appropriate alerts, creates the need for hypervigilance (i.e., towards avoiding IT-related mishaps) that increases stress, is lacking in security, compromises patient privacy or otherwise demonstrates suboptimal design and/or implementation.  

-- SS

[1] A corollary is as seen in a comment By Bruce Landes MD here in what he calls the Landes EHR rule: "The enthusiasm for EHRs increases with the square of the distance from actual medical practice."

Getting Assistance Can Make All The Difference

For the last day of breast cancer awareness month we wanted to share some great advice for women who have undergone surgery for their breast cancer. This is to seek out a breast cancer assistance programs to help you in the next stage of your battle. Assistance programs offer useful services that can help you connect with and adhere to recommended treatment such as chemotherapy. A recent study found that when using an assistance program, 80% of participants were able to get some or all of their needs met compared to 35% of those who did seek out these services. While it has been shown that women nationwide have problems finding services after surgery for breast cancer, seeking early assistance can be the key to a full and successful recovery!

Read the full story here 

Resources:

America Breast Cancer Foundation: Breast Cancer Assistance Program

For Philadelphia locals: Cancer Support Community 

Presto Chango - UPMC Tries to Make its Employees All Disappear

This story is just in time for Halloween. 

The Lawsuit Challenging the Non-Profit Status of UPMC

Back in March, 2013, we discussed a lawsuit initiated by the then Mayor of Pittsburgh that challenged the tax-exempt, non-profit status of giant hospital system UPMC.  The suit charged that UPMC functions more like a for-profit corporation based on its large surplus (recently $1 billion), larger reserves ($3 billion), minimal commitment to charitable care, and generous executive pay (recently $5.9 million  to CEO Jeffrey Romoff, 19 executives paid more than $1 million, and ownership of a jet aircraft).  By the way, Romoff's latest total compensation was said to be $6.1 million (look here), and UPMC just bought an even fancier corporate jet, a Bombardier Global Express worth $51 million (look here).

The Employees Vanish

The Pittsburgh Post-Gazette just described UPMC's remarkable response to the lawsuit.

 For purposes of the city's payroll taxes, [an attorney representing UPMC] Mr. [William] Pietragallo explained, UPMC's subsidiaries -- like UPMC Shadyside and Western Psychiatric Institute and Clinic -- file separate forms. Employees work for those legal subsidiaries. But UPMC itself?

'We don't have employees,' Mr. Pietragallo said.

The question is central to the city's suit to strip UPMC of its status as a purely public charity. UPMC argues the city can't challenge its exemption from payroll taxes because it technically has no employees. It's a case where the legal reality may differ significantly from the one that UPMC, which on its website claims to have 55,000 employees, markets on a regular basis.

'You can't pay employment taxes unless you have employees,' Mr. Pietragallo said.

This is not the first time UPMC has made this claim in response to a legal action,

Earlier this year, when UPMC faced 80 complaints of unfair labor practices, it argued that it was only a holding company and did not technically employ those in the complaints. The complaints alleged, among other things, that UPMC employees were being punished for attempting to unionize. UPMC ultimately settled.

Obvious Contradictions

These claims of invisible employees appear to be contradicted by UPMC's own public relations,

 UPMC touts it large workforce. Its 2012 annual report, for example: 'The economic impact of UPMC is more substantial than most people realize. The organization is the largest nongovernmental employer in the Commonwealth of Pennsylvania, and more than $6.2 billion in total labor income can be attributed directly or indirectly to UPMC.'

UPMC's website and media releases say the hospital giant employs in the range of 55,000 people. And when UPMC made the top rankings of U.S. News & World Report's Best Hospitals, it did so as a conglomeration of several facilities attorneys are now arguing are separate subsidiaries.

Also,

[An attorney representing the city of Pittsburgh, Ronald]   Barber argued that even for tax purposes, UPMC has documented having employees. In a Form 990 filed for the 'UPMC Group,' the hospital network said it employed around 52,000 people.

A few days later, the Post-Gazette reported that the city responded to these UPMC claims in matter-of-fact way,

 On its website, in its annual report and in some tax filings, UPMC purports to have employees -- sometimes tens of thousands of them, the city of Pittsburgh's attorneys said in a court filing.

Furthermore,

 The city also argued that those working for subsidiaries are UPMC employees as well, pointing to UPMC's 2012 Annual Report and website, which tout the hospital system as one of the state's largest employers. Attorneys also pointed to a lawsuit in which UPMC claimed to 'extend offers of employment.'

How Complexity Benefits Bureaucrats and Managers

It is Halloween coming up, not April Fool's Day, and the claims made on behalf of UPMC do not appear to be jokes.  Instead, I believe they underline two serious problems with how large health care organizations are currently lead.

The first is that health care organizations often have exceedingly complex structures for reasons that have nothing to do with fulfilling their health care mission.  One reason may be that the complexity creates options for plausible deniability.  In particular, when such organizations are accused of bad behavior, as they now often are, subsidiaries may be set up to "take the rap."  For example, we discussed how Pfizer Inc has been using the bankruptcy filing of its Quigley subsidiary made as if that subsidiary were independent to delay resolution of claims that the subsidiary sold hazardous asbestos products.   

This tactic of having the subsidiary take the rap may be particularly useful when taking the rap may lead to a severe penalty for the organization, such as disbarring it from being paid by the government.  A disbarred subsidiary may simply be dissolved and its work transferred to other parts of the organization.  For example, in May, 2013 we discussed a settlement in which Baush and Lomb subsidiary Ista Pharmaceutical would be disbarred from participation in government programs.  However, Baush and Lomb itself would not be disbarred, and would be able to "wind down" Ista's operations and transfer its products to other parts of the larger company. 

The current example appears to be a more creative use of subsidiaries to claim deniability, although whether the arguments about disappearing employess above are even plausible is open to question.


Complex organizations also offer many opportunities to employ and enrich administrators, bureaucrats and managers, and to justify ever larger compensation for the top executives who purport to run the whole thing.  That such proliferation of management and management compensation may detract from the mission does not appear to be a big concern of the sorts of people who now run health care.

Contempt for Truth

The second problem is that the leadership of large organizations seem to have little use for the truth.  Instead, they may put lots of faith in their marketers, public relations people, and legal staff to obfuscate the truth in pursuit of ever more revenue and executive enrichment.  As management becomes less and less reality-based, however, it may be less likely to be able to respond to the very reality-based needs of patients and the public.

Conclusion

I hope that the outlandish claims now being sanctioned by UPMC leadership may raise awareness of what is going wrong with the leadership of health care organizations in general.  As we have been saying for years, health care leadership that puts its self-interest ahead of patients and the public, and which disregards the truth in service of self-interest may be the biggest cause for ever increasing health care costs, and ever declining access and regard for the health of patients and the public.  True health care reform would encourage leadership that puts the mission ahead of self-interest, and values honesty more than personal profit. It would promote regulation that holds top leadership of organizations accountable for their organizations' actions and not allow the leadership to hide behind complex organizational structures.   

Proof positive of government incompetence and recklessness in information technology - H.R.3303 - Bipartisan call for exemption of health IT from the FD&C Act

Here's proof positive of government incompetence and recklessness in information technology.

A new proposed bill that would exempt health IT from the Food, Drug & Cosmetic Act and FDA regulation.

Rep. Marsha Blackburn (R-TN) calls for exemption of healthcare software from FDA regulation with bipartisan co-sponsorship from Reps. Gene Green (D-TX), Phil Gingrey, M.D. (R-GA), Diana DeGette (D-CO), Greg Walden (R-OR) and G.K. Butterfield (D-NC).

H.R.3303 - SOFTWARE Act of 2013 - referred to House Energy & Commerce on 10/22/2013
http://beta.congress.gov/bill/113th/house-bill/3303/text

This remarkable and unprecedented regulatory accommodation is based on nebulous, speculative and largely imaginary grounds that translate to - just because:
 

... (c) Sense of Congress.--It is the sense of the Congress that--
            (1) clinical software and health software (as defined in
        section 201(tt) of the Federal Food, Drug, and Cosmetic Act, as
        added by subsection (a)) [can]--
                    (A) advance the goals of enhanced patient safety
                and continued innovation;
                    (B) hold much promise to lower costs and improve
                the health of patients; and
                    (C) can improve the quality and efficacy of health
                care provider services 

This is despite known defects and harms in-the-now (e.g., ECRI Deep Dive Study with 8 injuries and 3 possible deaths in 9 weeks from 171 health IT 'mishaps', voluntarily reported in just 36 hospitals, https://www.ecri.org/EmailResources/PSRQ/ECRI_Institute_PSO_Deep%20Dive_HIT_TOC.pdf; Emergency Department EHR dangers as at http://hcrenewal.blogspot.com/2013/10/quality-and-safety-implications-of.html; innumerable "glitches" that can kill, http://hcrenewal.blogspot.com/search/label/glitch and http://hcrenewal.blogspot.com/2011/01/maude-and-hit-risk-mother-mary-what-in.html; baby deaths, http://hcrenewal.blogspot.com/2011/06/babys-death-spotlights-safety-risks.html etc.)

Instead this group of intrepid Cybernetic Crusaders, to whom your life is valuable (as a guinea pig, it seems) call for --

"the President and the Congress [to] work together to develop and enact legislation that establishes a risk-based regulatory framework for such clinical software."

With the Obamacare/Obamaware debacle still in progress ... (see "Drudge Report, Oct. 10, 2013, 9 AM EST: All that needs to be said about government, computing and healthcare" at http://hcrenewal.blogspot.com/2013/10/drudge-report-oct-10-2013-9-am-est-all.html) ...

All I can say is:

REALLY?

-- SS

p.s. perhaps I should have entitled this post "Look, Ma, No Regulation!" (See http://hcrenewal.blogspot.com/2011/06/my-mother-passed-away.html.)

-- SS

Women's Health Seminar Series

Join us on Tuesday, November 5 for the seminar "Living With HIV: Issues for Women" presented by Dr. Amy Baranoski and invited panel members. Our guests will be sharing life experiences so this session will not be recorded. Make sure you are present for this seminar!

Over At The Health Care Blog, Aneesh Chopra Distorts IT Failure Reality

I feel sorry for President Obama.  I really do.  He's been deceived by IT hyperenthusiasts who, in addition to their hyperenthusiasm, probably heaped him a big helping of plain old lies.

I warned of this in my Feb. 18, 2009 Letter to the Editor published in the Wall Street Journal (at http://online.wsj.com/news/articles/SB123492035330205101, third letter):

Dear Wall Street Journal:

You observe that the true political goal is socialized medicine facilitated by health care information technology. You note that the public is being deceived, as the rules behind this takeover were stealthily inserted in the stimulus bill.

I have a different view on who is deceiving whom. In fact, it is the government that has been deceived by the HIT industry and its pundits. Stated directly, the administration is deluded about the true difficulty of making large-scale health IT work. The beneficiaries will largely be the IT industry and IT management consultants.

For £12.7 billion the U.K., which already has socialized medicine, still does not have a working national HIT system, but instead has a major IT quagmire, some of it caused by U.S. HIT vendors. [That project, the National Programme for IT in the NHS or NPfIT, was since abandoned - ed.]

HIT (with a few exceptions) is largely a disaster. I'm far more concerned about a mega-expensive IT misadventure than an IT-empowered takeover of medicine.

The stimulus bill, to its credit, recognizes the need for research on improving HIT. However this is a tool to facilitate clinical care, not a cybernetic miracle to revolutionize medicine. The government has bought the IT magic bullet exuberance hook, line and sinker.

I can only hope patients get something worthwhile for the $20 billion.

Now, more spin and misinformation by Aneesh Chopra, senior fellow at the Center for American Progress, and the former U.S. chief technology officer in the Obama Administration over at the Health Care Blog at a piece "What's Next For Healthcare.gov?" (http://thehealthcareblog.com/blog/2013/10/25/whats-next-for-healthcare-gov/).

Like a cybernetic Rasputin, Chopra writes:

The launch of HealthCare.gov certainly didn’t go as planned. Due to technical errors, millions of Americans were sent to the functional equivalent of a waiting room before they could enter the shopping portion of the site.

Historically, projects of such complexity and demand have encountered early problems yet still often achieve great success. While much of the commentary has focused on coding problems, the site still has the potential to spur innovation — be it public or private —  that will result in quality improvement and lower costs.

(Note the definitive "will", without evidence.  Mr. Obama's probably been hearing a lot of non-evidence-based wishful thinking about health IT in recent years.)

The statement about future success is belied, for example, by the National Programme for IT in the NHS (NPfIT) failing and going "pfffft" as just one example (http://hcrenewal.blogspot.com/2011/09/npfit-programme-going-pffft.html and other links).

More generally, there's this article by Shaun Goldfinch, formerly at the U. Otago in New Zealand:

"Pessimism, Computer Failure, and Information Systems Development in the Public Sector."  (Public Administration Review 67;5:917-929, Sept/Oct. 2007, Shaun Goldfinch, University of Otago, New Zealand). 

Unfortunately it's not freely available, but a free first-page preview is at http://www.jstor.org/discover/10.2307/4624644?uid=3739864&uid=2129&uid=2&uid=70&uid=4&uid=3739256&sid=21102828298677:

Summary:

The majority of information systems developments are unsuccessful. The larger the development, the more likely it will be unsuccessful. Despite the persistence of this problem for decades and the expenditure of vast sums of money, computer failure has received surprisingly little attention in the public administration literature. This article outlines the problems of enthusiasm and the problems of control, as well as the overwhelming complexity, that make the failure of large developments almost inevitable. Rather than the positive view found in much of the public administration literature, the author suggests a pessimism when it comes to information systems development. Aims for information technology should be modest ones, and in many cases, the risks, uncertainties, and probability of failure mean that new investments in technology are not justified. The author argues for a public official as a recalcitrant, suspicious, and skeptical adopter of IT.

Article start:

The majority of information systems (IS) developments are unsuccessfu1. The larger the development, the more likely it will be unsuccessful.

Though the exact numbers are uncertain and depend to some extent on how success is measured, something like 20 percent to 30 percent of all developments are total failures in which projects are abandoned. Around 30 percent to 60 percent are partial failures in which there are time and cost overruns or other problems. The minority are those counted as successes (Collins and Bicknell 1997; Corner and Hinton 2002; Georgiadou 2003; Heeks and Bhatnagar 1999; Heeks 2002, 2004 ; Iacovou 1999; James 1997; Korac-Boisvert and Kouzmin 1995 ; Standish Group 2001, 2004).

A U.S. survey of IS projects conducted by the Standish Group in 2001 found that success rates varied from 59 percent in the retail sector to 32 percent in the financial sector, 27 percent in manufacturing, and 18 percent in government. Overall, the success rate was 26 percent. In all, 46 percent of projects had problems, including being over budget and behind schedule or being delivered with fewer functions and features than originally specified. Another 28 percent failed altogether or were cancelled. Cost overruns averaged nearly 200 percent. Th is success rate varied dramatically by total project budget: For projects under US$750,000 the success rate was 55 percent; for those with budgets over US$10 million, no projects were successful (SIMPL/NZIER 2000).

More recent Standish Group (2004) estimates saw a success rate of 29 percent, but 53 percent of projects had problems and 18 percent failed. A New Zealand government study judged 38 percent of government projects a success, while 59 percent involved problems and 3 percent were a complete failure or were cancelled. Government success rates, at 31 percent, were slightly higher than private sector success rates. Above the NZ$10 million mark, however, the success rate for both was zero (SIMPL/ NZIER 2000). One study of hundreds of corporate software developments found that five out of six projects were considered unsuccessful, with one-third cancelled outright. Of the two-thirds that were not cancelled, price and completion times were almost twice what had originally been planned (Georgiadou 2003). The Royal Academy of Engineering and the British Computer Society (2004) found that 84 percent of public sector projects resulted in failure of some sort.

The sums involved in such projects can be staggering.  A study of IS developments in the British public sector estimated that 20 percent of expenditures were wasted, and a further 30 percent to 40 percent led to no perceivable benefits (Wilcocks 1994). In 1994, the U.S. General Accounting Office reported that spending of more than US$200 billion in the previous 12 years had led to few meaningful returns.

The article is extensively referenced, and nothing has changed since it was published.  While the article's cost from the jstor.org site is $25 (US I think), it is well worth reading for anyone involved in large public sector IT projects.

Especially, the President of the United States and his staff.

It is my belief the same actors who've misled him about health IT and the supposed ease of building a national insurance portal for 300 million+ people are going to mislead him about remediation of the latter, resulting in yet more embarrassment, and perhaps eventually patient harm and death when someone, somewhere, is denied care or has delayed care due to insurance loss.

Finally, I note this in Chopra's bio at the Health Care Blog Piece:

Aneesh Chopra is a senior advisor at The Advisory Board Company

The Advisory Board Company (http://www.advisory.com/About-Us) is:

... a performance improvement partner for 165,000+ leaders in 4,100+ organizations across health care and higher education.

The Advisory Board Company has been an advisor on hospital management and technology for decades.

Perhaps they're another piece in the puzzle as to why hospital executives are implementing bad health IT (http://cci.drexel.edu/faculty/ssilverstein/cases/) technology in droves, such as in the ED where many underprivileged people get primary and emergency care.  (See "Quality and Safety Implications of Emergency Department Information Systems: ED EHR Systems Pose Serious Concerns, Report Says" at http://hcrenewal.blogspot.com/2013/10/quality-and-safety-implications-of.html, for example.)

After all, with senior advisors to a major healthcare organization consultant in denialist roles, if the IT's bad now, it will be just great in ver. 2.0.

(See "The Denialists' Deck of Cards: An Illustrated Taxonomy of Rhetoric Used to Frustrate Consumer Protection Efforts" by Chris Jay Hoofnagle, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962462.)

The same Denialist Deck of Cards is being played, I fear, to frustrate taxpayer attempts at hemming in waste ... and to frustrate the President of the United States' efforts to leave a good legacy.

-- SS

Brewing Controversy

A Dallas beer company is receiving  much heated criticism over a slogan for the beer "Dallas Blonde" after images of the new promotion truck were circulated online. The beer displays a blonde doll and reads that it "goes down easy". While the company owner claimed that is is just a fun play on words, many are saying that it is yet another promotion of rape culture in the United States. Alcohol is often involved in many sexual assault cases and some feel that a slogan like this on a can of beer is both inappropriate and insulting.

The owner did apologize for the offense the slogan may have caused anyone and has decided to remove it from the Dallas Blonde promotion truck.

What do you think? Is the can a representation of American society saying it is okay to sexually objectify women? Or is it just fun crude humor? Let us know!

Read the full story here.

There They Go Again - Omnicare to Settle for $120 Million

The march of legal settlements seems to be on its way again.


The Latest Settlement

The details, per Reuters,

Omnicare, Inc, a leading U.S. provider of pharmacy services to the elderly, has agreed to pay the U.S. government $120 million to settle allegations the company gave nursing homes steep discounts on prescription drugs in exchange for patient referrals.

Cincinnati-based Omnicare announced the settlement on Wednesday in a filing with the U.S. Securities and Exchange Commission, but denied any wrongdoing. The lawsuit, filed in 2010 by former Omnicare employee Donald Gale, had been scheduled to go to trial on October 28.

Gale accused the company of engaging in a kickback scheme called 'swapping' in which Omnicare allegedly gave nursing homes heavily discounted prescription drugs for inpatients covered by Medicare Part A. That federal benefit program pays skilled nursing facilities a fixed fee per patient, per day, for the first 100 days of a patient's stay, according to court filings.

In exchange, the nursing homes allegedly referred their other patients, many covered by other federal benefit programs, allowing Omnicare to bill the full price of their prescription drugs and pharmacy services, the lawsuit said.

As is usually the case, 

Omnicare's vice president of investor relations, Patrick Lee, said in an emailed statement that the company did not admit liability in settling the lawsuit.

'The Company agreed to settle the matter in order to avoid continued litigation and to focus on its mission of helping to ensure the health of seniors and other patient populations in a cost-effective manner,' he said.

He did not comment on the discrepancy between the alleged kickback scheme apparently meant to increase company revenue and that bit about ensuring health in "a cost-effective manner."

Will There be Still Others?

In addition, the Cincinnati Business Courier quoted another Omnicare executive,

'This settlement is not an admission of liability, and Omnicare continues to deny that there was any wrongdoing,' Robert Kraft, chief financial officer for Omnicare, said Wednesday in a conference call with market analysts regarding the company’s third-quarter earnings. 'When we agree to settle these types of matters, we have and will continue to make decisions in the best interest of our shareholders. …'

'We operate in a highly regulated industry, and we believe additional matters will likely arise against the company in the future,' Kraft said. 'We believe the matters of which we are now aware, including the aforementioned settlement, are manageable given the company's financial position and cash-flow characteristics.'

Was that an admission that the company often violates regulations?  It is hard to tell.  However, it is clear that this is not the first settlement of allegations of bad behavior that the company has made.

The Previous Settlements

The Cincinnati Business Courier article also stated,
 

I reported in August on the settlement of a lawsuit filed on behalf of Omnicare, which had alleged that a former president and CEO as well as some other former officers or directors of the company had violated federal laws related to kickbacks and false claims.

That settlement was for a mere $16.7 million.

In addition, as we discussed in 2010, in 2009, we discussed a $98 million settlement made by Omnicare, US based corporation that manages pharmacy-benefits, of allegations that it received kickbacks from generic drug manufacturers for buying and recommending their drugs.  Omnicare had previously submitted to a corporate integrity agreement in 2006, and paid $102 million to settle allegations it defrauded Medicaid.

So the count so far is four settlements for a total of approximately $337 million, and one corporate integrity agreement.

Summary

So Omnicare is yet another of the many large health care organizations which have been subject to various legal actions suggesting diverse kinds of bad behavior.  Omnicare, like many of these, has paid penalty upon penalty, yet each settlement seems to be made in a vacuum without reference to prior events.  Furthermore,  almost no settlement, and no settlement made by Omnicare, ever either imposed a large enough penalty on the company to deter further problems, or imposed any - I repeat any - negative consequences on anyone at the company who authorized, directed, or implemented the bad behavior.  So, as obliquely stated by the Omnicare CFO in this case, expect further "matters" to be addressed in the future.

So as we said on the subject of Omnicare in 2010,

 the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior by health care organizations. Even large fines can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. 

 By Roy M. Poses on Health Care Renewal

Justice Delayed - Two Device Companies Still Settling Cases from 10 Plus Years Ago

Here we go again.  After a hiatus during which the US media and perhaps parts of the government were preoccupied with such issues as the ongoing controversy over health care reform, and a government shutdown apparently arising out of this controversy, the march of legal settlements involving big health care organizations has resumed.

In alphabetical order,...


Boston Scientific

From the Minneapolis Star-Tribune on 17 October, 2013, an account of a settlement arising from alleged misbehavior that started in 2002,

A $30 million settlement between the U.S. Department of Justice and Boston Scientific will likely end a case involving the sale of defective heart devices from 2002 through 2005 by subsidiaries Guidant, Guidant Sales and Cardiac Pacemakers.

Note that the allegations were particularly egregious since they involved a company selling products they knew to be defective in ways that could prove fatal as if they were quite safe,

The settlement closes a fraudulent-claims lawsuit that alleged Guidant knowingly sold defective implantable defibrillators to health care facilities that implanted them into thousands of Medicare patients. 

In particular,

The government’s complaint said that Guidant knew as early as April 2002 that its Prizm 2 line of devices was defective and knew in November 2003 that its Renewal 1 and 2 devices were capable of short-circuiting and delivering an electric shock that 'arcs' back onto the device instead of being directed to an irregularly beating heart.

According to Boston Scientific’s website, 83 malfunctions and nine reported deaths have been connected with the Renewal devices and 40 confirmed malfunctions and five patient deaths have been associated with the Prizm devices. About 500 Renewal devices remain implanted worldwide; about 1,400 Prizm devices remain in patients, according to the website.

Although Guidant took action to fix the defects, the government alleged that the company continued to sell its remaining stock of the old, defective versions of the devices. In fact, federal officials say that as Guidant learned about the cause of the defect, it took steps to hide the problem from patients, doctors and the Food and Drug Administration.

According to the government, Guidant did not fully disclose the problem until May 2005, when two Minneapolis doctors publicly aired their concerns about one of the defibrillators after it failed to revive a 21-year-old Grand Rapids, Minn., patient. Guidant later admitted it had known for three years that the device could short-circuit, but chose not to alert doctors or the public.

This is only the latest settlement made by Boston Scientific since 2005,

Boston Scientific paid $27.5 billion to acquire Guidant in 2006. It has been paying quite a bit since in relation to Guidant’s defective defibrillators.

In 2007, Boston Scientific paid $240 million to settle claims with thousands of patients who had sued Guidant after the defective devices were recalled. Later, in February 2010, Guidant pleaded guilty to misleading the FDA about problems with the devices and paid a fine of $296 million.

In fact, the then case of the allegedly concealed implantable cardiac defibrillators (ICD) was one of the first cases of apparently unethical health care corporate management behavior leading to bad patient outcomes we discussed on Health Care Renewal.  (Look here for a more recent summary of this case.)

Yet despite the fact that this apparently deeply unethical conduct lead to patient deaths, no individual who authorized, directed or implemented the bad behavior has suffered any negative consequences for it over the eight years since the details first became public.

One physician who helped bring this case to light was also apparently concerned about the impunity of those responsible,

 Dr. Robert Hauser, one of the doctors who went public back in 2005, criticized the settlement on Thursday.

'The $30 million should have little impact on their business,' Hauser said in an e-mail. 'I find it very disturbing that such a small settlement was accepted by the DOJ in view of the magnitude of wrongdoing by Guidant management.'

Stryker Corp

This week, MLive.com reported on another settlement involving allegations of unethical behavior by a device company dating back to 2003,

 An investigation by federal authorities found that Stryker Corp. subsidiaries in five foreign countries made illicit payments and tried for several years to bribe doctors, health care professionals and government-employed officials in order to obtain or retain business.

Stryker  has agreed to pay more than $13.2 million to settle the charges.

The SEC charged the Kalamazoo-based medical technologies company with violating the Foreign Corrupt Practices Act,  alleging that its subsidiaries in Argentina, Greece, Mexico, Poland and Romania made illicit payments totaling approximately $2.2 million 'that were incorrectly described as legitimate expenses in the company’s books and records.'

The SEC said descriptions of the payments varied from a charitable donation to consulting and service contracts, travel expenses, and commissions.

The SEC states that Stryker made about $7.5 million in illicit profits as a result of the improper payments. It did not specify during what year all of the events occurred, but indicated some as far back as 2003.

Note that the payments seemed deliberately designed to corrupt health care professionals and managers, for example,

According to the SEC’s order, Stryker’s subsidiary in Greece made a purported 'donation' of nearly $200,000 in 2007 to a public university in Greece to fund a laboratory that was a pet project of a public hospital doctor. In exchange for the payment, the doctor agreed to provide business to Stryker.

Also,

The SEC stated that its investigation also found that Stryker subsidiaries bribed foreign officials by paying their expenses for trips that lacked any legitimate business purpose.

'For example, in exchange for the promise of future business from the director of a public hospital in Poland, Stryker paid travel costs for the director and her husband in May 2004,' according to the SEC. 'This included a six-night stay at a New York City hotel, attendance at two Broadway shows, and a five-day trip to Aruba.'

As in the case above, it appears that no individual who authorized, directed or implemented the questionable payments will suffer any negative consequences.  In fact, as is usual in such cases,

 The settlement does not not require Stryker to admit or deny the allegations,...

However, an SEC official did say,

 Stryker’s misconduct involved hundreds of improper payments over a number of years during which the company’s internal controls were fatally flawed. Companies that allow corruption to occur by failing to implement robust compliance programs will not be allowed to profit from their misconduct.

While Health Care Renewal has not discussed this particular case before, it is hardly the first case of bad conduct by Stryker that we have discussed.  In the past we noted
-  In 2012, a Stryker subsidiary pleaded guilty to misbranding in response to allegations that its marketers conspired to defraud physicians in order to sell a product to promote bone growth that proved harmful to patients (look here).
-  In 2010, Stryker settled a case alleging unfair and deceptive sales practices again used for bone growth accelerators (look here).  
-  In 2009, some apparently low-level Stryker employees pleaded guilty to promoting off-label use of these same products (look here). 
- In 2007, Stryker made an agreement allowing federal supervision after charges one of its units had violated anti-kickback laws when making supposed "royalty" payments, often huge, to orthopedic surgeons in connection with its production of prosthetic hips and knees.  Several other device companies signed deferred prosecution agreements, and as a result, for a time all had to make public their payments to doctors and various non-profit organizations.  (See summary here.) 

Summary

 This recent crop of settlements has some features in common.  The settlements involved multinational device companies.  The settlements occurred at least a decade after the alleged bad behavior started.  The settlements required only small payments - at least on a corporate scale -from the companies involved, but no negative consequences for anyone who authorized, directed, or implemented the bad behavior.  Finally, the settlements were made by companies who had striking past records of previous settlements of bad behavior.

The march of legal settlements demonstrates the pervasiveness of unethical behavior, often involving harm to patients or sullying of health care professionals, involving large, rich health care corporations.  It also demonstrates the impunity of the top leaders of such corporations who often make huge amounts of money despite, or perhaps because of their companies' misconduct.  Despite intermittent threats by US government officials to get tough with unethical behavior by health care corporations, this pattern has continued for years, as we have documented. 

True health care reform would hold leaders of health care organizations accountable for their organizations' behavior, and its effects on patients and health care professionals. 

TGIF Quote of the Week

Happy Friday Everyone! 

Here is the quote of the week: 

It's a fine thing to rise above pride, but you must have pride in order to do so.

~Georges Bernanos

Have a good weekend !

New "Terms" for Term Pregnancies

For some time now 37 weeks of pregnancy and beyond has been coined "term" pregnancy meaning it is an ideal time for the baby to be born. That was up until yesterday when new designations were given to the final terms of pregnancy by the American College of Obstetrics and Gynecology and the Society for Maternal-Fetal Medicine. Beginning at 37 weeks, the new terms are as follows: 

• Early Term:  Between 37 weeks 0 days and 38 weeks 6 days
• Full Term:    Between 39 weeks 0 days and 40 weeks 6 days (Ideal)
• Late Term:   Between 41 weeks 0 days and 41 weeks 6 days
• Postterm:     Between 42 weeks 0 days and beyond

The two groups created these new terms to discourage women and doctors from deciding on elective births before 39 weeks. Studies have shown that there is a significant difference in outcomes when comparing babies born at 37 weeks with those born just 2 weeks later. They hope to prevent births before 39 weeks of gestation that are not natural or medically necessary. In the immediate future, it is possible that we will see an increase in healthy births and a gradual reduction in the expense of newborn care. Let us know what you think! Do you think these new terms will have an impact?


View the original story here: Ob-Gyns Redefine Meaning of "Term Pregnancies" 

Why Can't I Get Enough Sleep pt. II - Insomnia

If you have difficulty with falling or staying asleep which results in problems with functioning during the day, you may have insomnia. It is a common and frustrating problem that affects up to 4 out of 10 people. In addition to poor and unrefreshing sleep, insomnia has been associated with decreased quality of life, difficulty at work, heart disease, and mood disorders.

Insomnia may occur on its own (primary insomnia) or be associated with other problems, such as:

•  Psychiatric disorders, such as depression or anxiety
•  Medical conditions, including heart burn, cardiovascular disease, sleep apnea and chronic pain
• Medications or substances such as alcohol
• Poor sleeping habits (aka sleep hygiene)
• Acute life stress, such as starting or losing a job

Because many conditions affect insomnia, it is important to identify causes or contributing factors. To start the process towards managing insomnia and getting a good night of sleep, a thorough evaluation by a sleep specialist is indicated. After this, strategies to treat insomnia may be determined.

Depending on the causes or conditions associated with insomnia, treatment ranges from non-medication related therapy (implementing good sleep hygiene, bright light therapy, cognitive behavioral therapy) to the use of prescription or non-prescription drugs (melatonin).

For more information on insomnia:

http://yoursleep.aasmnet.org/Disorder.aspx?id=6

References:

Mai E, Buysse DJ. Insomnia: prevalence, impact, pathogenesis, differential diagnosis and evaluation. Sleep Medicine Clinics. 2008;3:167-174.

Former FDA Commissioner, CMS Administrator McClellan adds Johnson and Johnson Board Membership to Positions with General Atlantic LLC, Capital Royalty, Castlight Health, and AvivReit

Our latest example of the interchangeability of top insiders within corporate health care and the government agencies that are supposed to regulate corporate health care comes via an announcement from Johnson and Johnson,

Johnson & Johnson (NYSE: JNJ) announced today that Mark B. McClellan, M.D., Ph.D., Senior Fellow in Economic Studies, and Director of the Initiative on Value and Innovation in Health Care, Brookings Institution, will join the Board of Directors on October 15, 2013.  Dr. McClellan will serve on the Regulatory, Compliance & Government Affairs Committee and the Science, Technology & Sustainability Committee of the Board.

As former commissioner of the U.S. Food and Drug Administration (FDA) from 2002 to 2004, and as the former administrator of the Centers for Medicare & Medicaid Services for the U.S. Department of Health and Human Services from 2004 to 2006, Dr. McClellan has more than two decades of public service and academic research experience. From 2001 to 2002, he served as a member of the President's Council of Economic Advisers and senior director for health care policy at the White House. During President William J. Clinton's administration, Dr. McClellan held the position of deputy assistant secretary of the Treasury for economic policy.

So Dr McClellan has gone from running the US Food and Drug Administration, the primary government regulator of the pharmaceutical industry, to stewardship of one of the biggest pharmaceutical (and biotechnology and device) companies.

Not noted in that announcement was that Dr McClellan has been collecting positions in health care corporations since at least 2009.  The examples I found included in chronological order:

2009 - General Atlantic LLC

This appears to be a private equity firm which claims to be a "leading global investment firm."

From a 2010 a Mergers & Acquisitions article,

A year ago, the firm hired Dr Mark McClellan, previously a commissioner of the Food & Drug Administration, to its healthcare practice as a special advisor.

According to the firm's current website, he is still a special advisor.  

2010 - Capital Royalty LP

In a 2010 press release, this apparently private equity firm claimed to be

a market pioneer and innovator in healthcare investing with a focus on intellectual property investments in FDA-approved biopharmaceutical assets

In that release, it announced the creation of a Strategic Advisory Committee that included Dr Mark McClellan.  He still sits on that committee. 

2012 - Castlight Health

In a 2012 press release, this firm claimed to be

developer of a personalized health care shopping portal offering unbiased information about health care cost and quality

That press release announced the addition of Dr McClellan to the firm's Advisory Board, on which he still sits. 

2013 - AvivReit

This firm "specializes in the ownership and triple-net leasing of post-acute and long-term care skilled nursing facilities (SNFs)" per its website.

Dr McClellan is currently on its board of directors.  He apparently was appointed in 2013. 

Notably, I did not see anything in any of these firms' announcements about Dr McClellan or their biographies of him that noted his board or advisory committee positions with other firms.

Summary

Dr Mark McClellan rose through the ranks in the US executive branch ending with positions as FDA commissioner and administrator of the Center for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services (DHHS).  He served under two presidents, Clinton and George W Bush.  Within 3 years of exiting DHHS, he picked up his first important commercial position, at General Atlantic LLC, and then added other positions with Capital Royalty, Castlight Health, AvivReit, and now the biggest of all, Johnson and Johnson.  Meanwhile he apparently continues at the Brookings Institution.  He must be one very busy man.

This case could be lumped with those of another former FDA commissioner and Secretary of Health and Human Services who ended up as a Director of Medtronic (see this post),  another Secretary of DHHS who ended up on the boards of multiple health care corporations (see this post), a director of the National Institutes of Health (NIH) who became a Sanofi executive, etc, etc (see this post).

While some might argue whether his acquisition of a leading advisory position with a private equity firm three years after he left DHHS technically constituted a spin through the revolving door, Dr McClellan's cumulative acquisition of four more such positions within the following four years certainly demonstrates how our corporate dominated health care system and the government agencies which are supposed to be regulating it to assure the health and safety of patients, and the maintenance of the public health seem to be run by an interchangeable cast of insiders.  We have asked before whether we can trust federal regulators to put patients' and the public's health first when they know they could easily become  candidates for lucrative private positions in the companies they regulate, or which are affected by their regulations, presumably assuming they have not done too much during their time in government to offend the leaders of such companies.

We have noted that the system in which government and big corporations largely overlap in terms of their leadership and presumably goals is called corporatism.  One can argue that such systems end up being run primarily for the benefit of corporate and government insiders.

 Until we dispel the fog of corporatism that has spread over the government that was once supposed to be of the people, by the people, and for the people, expect no real health care reform, and expect continuing rising costs, declining access, and worsening patient care. Obviously, true health care reform would start with the government and its officials putting patients' and the public's health first, way ahead of the financial comfort of corporate leaders.

I would note that neither the currently controversial and now operational Affordable Care Act, nor any of its opponents schemes for alternatives addresses this issue.

by Roy M. Poses MD for Health Care Renewal 

TGIF Quote of the Week

Happy Friday everyone, have a great weekend!
Here is the quote of the week:

"An once of prevention is worth a pound of cure"
-Benjamin Franklin

Good Luck to our students with upcoming exams! Hang in there!

A Partnership Worth “Liking” – Facebook and NNEDV

The National Network to End Domestic Violence and Facebook have partnered up in an effort to keep survivors of domestic violence safe when using social media. In many stages of the domestic abuse cycle, using social media can be dangerous to the victim. Things an abuser finds online can cause further abuse, violence and stalking. Once the victim and abuser are no longer together, social media also can still allow an abuser access to the survivor’s life. 

Some say that abusers should simply stop using social media if they are worried about abusers following their activities. However, NNEDV and Facebook feel that this solution is unacceptable and isolating.  Survivors should have the same safety as anyone else when using social media. To help survivors, NNEDV and Facebook have created a guide to Facebook privacy and security settings. They hope that this guide will serve as a valuable resource for survivors who want to continue to connect with individuals who care about them. This guide could also be useful for those who are currently experiencing cyber bullying or other forms of virtual abuse.

Links:

NNEDV Privacy and Safety on Facebook : Guide for Survivorsof Abuse

Orignal NNEDV article about the guide

If you or anyone you know could benefit from reading this, please share it and help combat domestic violence! 

A new and very interesting EMR "glitch" - no warnings on stopping a medicine that diminishes the effects of a second medication

A new and very interesting EMR "glitch" from a report I received recently:

... I found a glitch with my [name redacted] EMR. It probably happens with all EMRs. I had a patient on primidone (http://en.wikipedia.org/wiki/Primidone) for essential tremor. Later, his primary care put her on warfarin [a "blood thinner" - ed.] for atrial fibrillation. Some time after that, I took her off of primidone.  Her INR jumped to 7 or 8. [High - ed.] What happens is that the EMRs warn a physician pretty well if you START a medicine that interacts with warfarin, but fails to warn if you STOP a medicine that interacts with warfarin. If you are used to relying on your EMR to warn you about drug interactions, you can fall into this trap easily, as I found out. Luckily, the patient was not harmed.

In other words, if a medication that interacts with another medication by suppressing the latter's effects to some degree is discontinued, EMRs may not warn of it.  Stopping the former can accentuate the effects of the latter, and disaster can result.  A primidone metabolite, phenobarbital, decreases INR and the anticoagulant effects of warfarin (http://www.medscape.com/viewarticle/745645_3).  Stop primidone, but continue warfarin, and ... wham.

The alert algorithms were apparently not designed with this eventuality in mind ... probably because the designers never thought of this issue.  Medicine is not as easy as it might appear to the outside, non-expert observer.

-- SS

The Mystery of the Fugitive Founder (and Longterm President of an Offshore Medical School for US Students)

We recently wrote about for-profit medical schools located offshore from the US, but catering to American students, not students from the countries in which they operate.  Now some new media reports raise further questions, if not mysteries about another set of such schools.  

Two Bloomberg articles on a trial underway focused on the alleged use of offshore accounts to avoid US taxes.  These accounts were connected to the former long-term President and founder of two offshore medical schools, and his spouse, a dean at one of the schools.  


The first Bloomberg article opened thus:

Patricia Hough, according to her lawyers, is an altruistic psychiatrist who helped her husband build two Caribbean medical schools. To prosecutors, she is a tax cheat who used offshore accounts to avoid paying taxes on millions of dollars from the schools’ sale.

Jury selection began today in federal court in Fort Myers, Florida, where Hough, 67, is accused of using accounts at UBS AG, the largest Swiss bank, and elsewhere to hide assets and income from the Internal Revenue Service, including almost $34 million she and her husband made when the schools were sold in 2007. 

The Bloomberg article asserted,

 At the heart of the case is whether she misused accounts associated with the Saba University School of Medicine Foundation.

The main question to me is not whether Dr Hough is guilty or innocent, which I cannot tell.  There are more intriguing  mysteries raised by this case.

How Did Non-Profit Medical Schools Become For-Profit?
 
According to Bloomberg,

  Hough’s lawyers say she helped [her husband, David] Fredrick build Saba University School of Medicine, on the island of Saba in the  Netherland Antilles, and the Medical University of the Americas, or MUA, on Nevis in the West Indies.

To do so,

 Through the Saba foundation, which they first funded in 1988, according to a government trial brief filed Oct. 3, the couple opened the Saba University School of Medicine in 1993. Fredrick served as president and a foundation director. Hough was associate dean for clinical medicine. 

Also,

In 1999, Fredrick and Hough began the Medical University of the Americas, a for-profit school on Nevis in the West Indies, according to the government filing.

There seems to be no question that the schools were started by a foundation based in the Netherland Antilles.  A report of a site visit of the Saba University School of Medicine by the Division of Licensing of the Medical Board of California in 2004 summarized this history,

In 1986, the government of the Netherlands Antilles proposed to a group of American educators that a medical school be established on the small island of Saba, N.A.  It was to be relatively small, of high quality and established for the dual ppurpose of benefiting the economy of the island (of only 1500 population) and attracting N.A. citizens to medical careers in the N.A.

A committee of Dutch citizens from Curacao, the seat of the N.A. government, approved the preliminary plans and the school was founded as a non-profit foundation under Dutch law....

The Saba University website still states that the school is accredited in the Netherlands,

Saba University School of Medicine’s Doctor of Medicine (M.D.) program is accredited by the NVAO (in Dutch: Nederlands-Vlaamse Accreditatieorganisatie). The NVAO is the Accreditation Organization of the Netherlands and Flanders. This organization was established by international treaty and ensures the quality of higher education in the Netherlands and Flanders.

So apparently Saba University was started as a non-profit organization meant to focus on medical education for the Netherlands Antilles, and thus accredited there.  But then, somehow,  according to Bloomberg.

Equinox Capital, a private-equity firm based in Greenwich, Connecticut, bought the Saba school and MUA for $36 million in 2007. The transaction included $34 million for land held in the name of Fredrick’s daughter from an earlier marriage, according to prosecutors.

Hough and Fredrick didn’t tell the IRS about most of the proceeds of the sale and transferred money among various undeclared accounts to buy the plane and real estate, make gifts to family members and pay personal expenses, prosecutors said.

There also seems to be no question that Equinox Capital did buy the schools.  The summary of a 2007 press release from the company stated,

 Equinox Capital III, L.P. announced that it has completed the recapitalization of Saba University School of Medicine B.V. ('Saba'). Founded in 1986, Saba is a leading for-profit university that awards four-year graduate degrees in Doctors of Medicine (M.D.). 

A statement from Prairie Capital, which is now an investor in the schools, noted that now

 R3 Education is a Massachusetts-based holding company that controls The Saba University School of Medicine ('Saba'), The Medical University of the Americas ('MUA') and St. Matthew University ("SMU").

After,

 Prairie Capital partnered with Equinox Capital to acquire the three universities.

It is enough to cause some dizziness.  Let me recap.  Mr Fredrick and Dr Hough somehow founded two medical schools apparently under the auspices of a foundation, the Saba University School of Medicine Foundation, which the couple ran.  The goal of the foundation was to attract Netherland Antilles citizens to medical careers in the NA.   However, the Saba University school became an off-shore facility for US medical students.  The two schools were later acquired by Prairie Capital and Equinox Capital, and they are now run as for-profit operations by R3 Education.

So somehow Saba University transitioned from being a non-profit meant to serve the medical education needs of the Netherlands Antilles to a for-profit owned by US private equity firms (and apparently now focused on serving Americans.)

How did that happen?  What was the rationale for the change?  Did any Dutch authorities consider the implications for their country?  Did any American organizations concerned with the quality of education and credentials of US physicians consider the implications?

Where Did the Money Go?

According to Bloomberg, US prosecutors made some striking allegations,

Both the foundation and MUA failed to tell the IRS about accounts held at UBS, Liechtenstein Landesbank and other banks, the U.S. charges.

Singenberger and Luetolf helped the foundation and MUA move money through British Virgin Islands or Hong Kong entities they controlled called Top Fast Finance Ltd., Ample Dynamic Trading Ltd., New Vanguard Holdings Ltd. and Apex Consultants Ltd., according to prosecutors.

'Hough and Fredrick were the beneficial owners of and had signatory authority over all over these accounts and owned and controlled each of them,' prosecutors said in their brief. 

The prosecution also alleged that Mr Fredrick and Dr Hough spent the money they allegedly got from selling the two medical schools rather lavishly.  Per the second Bloomberg article,

[Prosceutor] Kessler said Hough and her husband used the proceeds of the school sales to buy a $1.6 million airplane, a $1.1 million house in Asheville, North Carolina, a $590,000 house in Greenville, North Carolina, and an $800,000 condominium in Sarasota, Florida. She said they also gave money to relatives.

The prosecutors charged that the money the private equity firms paid went to Mr Fredrick and Dr Hough.  But while Mr Fredrick was President of Saba University, and apparently ran the foundation that was supposed to support it, he did not own either.  So why would the money go to him, and his wife?  If the money did not go to them, where did it go?

As the trial continued, as documented in a second Bloomberg article, Dr Hough's lawyer denied that she got the money,

Dan Saunders, an attorney for Hough, said his client never believed the money held at UBS AG (UBSN), the largest Swiss bank, and in other offshore banks belonged to her. Rather, he said, she thought it belonged to the foundation that ran the schools.

'It wasn’t her money, and she never believed it was,' Saunders said in his opening statement. 

If that is true, however, why is money that supposedly belongs to a foundation sitting quietly in a Swiss bank?

Dr Hough's lawyer said,

 Saunders said the accounts did serve a business purpose: to protect the assets of their nonprofit foundation from people attempting a hostile takeover.

Hostile takeovers of publicly held corporations do occur, of course.  However, how could a hostile takeover of a foundation occur, and who would possibly want or be able to do so?

So thus far, no one has offered a rationale explanation for how the schools were sold, why they were sold, and where the money resulting from the sale went.

Where in the World is Mr Fredrick?

So far, while the defendant is Dr Hough, the role of her husband, Mr Fredrick, apparently the President of Saba University from its founding at least until 2007, seems key.  Yet little of the coverage focused on Mr Fredrick.  The reason for that suggests the next mystery, per  the first Bloomberg article,

Fredrick vanished after the indictment, leaving Hough to face trial alone. U.S. District Judge John Steele, who is overseeing the trial, has declared Fredrick a fugitive.

So why did Mr Fredrick flea, and of course, where did he go?

Obviously, the fact that Mr Fredrick, who was the President of Saba University for many years, chose not to defend himself against charges that he hid the money he somehow obtained from the sale of that and another medical school, but rather fled, suggests that he may not have had a very good defense against those charges.  What does that say about the leadership of these medical schools?

 Summary

So the coverage of this intriguing trial, when added to some other publicly available information, suggests a wealth of mysteries about the founding, current nature, and leadership of two Caribbean medical schools which currently are run as for-profit firms and owned by US private equity firms, and whose student bodies come almost exclusively from the US.

So the really big mysteries are those about the implications for the medical education these schools provide, the students they attract, the physicians who graduate from their programs, the US patients of such physicians, and the US government which largely provides the loans which paid for these students' education (look here).

Despite the extraordinary nature of this case (again, involving the longterm president of an offshore medical school that sought to educate a substantial number of US physicians, and who is now a fugitive from justice), the only interest in it so far seems to be its implications for US prosecutions of hidden offshore accounts.

This case illustrates why we must reexamine our fascination for "market based" approaches to health care, when almost nothing about any part of health care resembles, or could resemble a free market (see this post).  We need to make health care more transparent, and shine more sunshine on the nooks and crannies, like off-shore but US corporate owned medical schools.  We need to facilitate health care leadership and governance that puts patients' and the public's health first, way ahead of the personal enrichment of the participants.  




ADDENDUM (29 October, 2013) - Dr Hough was convicted of defrauding the IRS and income tax evasion, see the Bloomberg article.  So far I see no response, certainly no apology or disavowal, by the current managers and owners of the medical school. 

Our Blog goes Pink! - Breast Cancer Awareness Month

Whep has gone pink for the second half of October in support of Breast Cancer Awareness Month! October is the one month where pink water shoots from fountains, tall city buildings display bright pink lights and NFL players trade their traditional colored gear for hot pink. And of course, you see the very popular pink ribbon more than ever on people, buildings and special merchandise.

However, it is important to remember the significant of breast cancer  not only in October but everyday of the year. In the U.S., 1/8 or 12% of women are estimated to develop breast cancer. It is the also the second leading cause of cancer deaths in women, with over 39,000 women dying every year.

For all women, and especially those who are at higher risk, it is important to screen for breast cancer. Early detection is one of the best ways to combat cancer. Women 50-79 should have a mammogram every two years. If you are younger with a family history, consult your doctor on the best time you should start having a mammogram. Clinical and self breast exams can also detect suspicious lumps. If you don't like the feel of something you find, get examined!

Today, there are over 2.8 million breast cancer survivors in America. With all the money and research going in to the cause, hopefully we will continue to see the number of survivors increase and the diagnosis and death rates fall. How will YOU support breast cancer awareness? Don't forget your pink this month!

For more information on Breast Cancer:
 http://www.nationalbreastcancer.org/
 http://www.cdc.gov/canceR/breast/

Ways to get involved:
- Many stores are now giving the option to donate when you make a purchase at the register
- Walks are being held all around the country:
Making Strides Against Breast Cancer Schedule 
Susan G. Komen 3-Day Walk
Walk with Avon

- If you would like to donate directly to any organization, simply type "Breast Cancer donation" into Google and choose an organization that you like. Remember to do your homework, as some companies take advantage of the charitable implication of the pink ribbon. Read more here.