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 

Round and Round Spins the Revolving Door, Unimpeded by "Obamacare," Nor By Those Protesting "Obamacare"

On this day of government dysfunction in the US, it is time for our latest installment on the "revolving door," the interchange of insiders among government legislative offices that affect health policy and agencies that implement it, and large health care corporations and the lobbyists and attorneys who represent them.  While we have been discussing this issue since March, 2011 (look here),  it got major media attention in the form of a New York Times article two weeks ago.

We have accumulated several other relevant stories since late August, 2013, which we will group by the type of government offices and agencies affected, and within them, by the date the story first came out..

Regulatory and Law Enforcement Agencies

Health Care Antitrust Leader at the Federal Trade Commission to Arnold & Porter

 From the MainJustice.com site,

Peter J Levitas, a former senior antiturst attorney at the Federal Trade Commission, is joining Arnold & Porter LLP in Washington, D.C....

Levitas has spent the past four years as deputy director of the FTC's Bureau of Competition and oversaw investigations and litigation for mergers and conduct cases in numerous industries.  

So,

Levitas joins the firm's antitrust practice with experience3 addressing complex merger and conduct investigations, particularly in the healthcare, pharmaceutical and technology industries.

Leader of Health Care Fraud Enforcement for US Attorney New Jersey Office to Lowenstein Sandler

From the ComplianceWeek.com site,

Maureen Ruane, a former health care fraud chief at the U.S. Attorney's Office for the District of New Jersey, has rejoined the law firm Lowenstein Sandler to lead its new health care litigation, investigations and compliance practice.

The new practice will help the firm's healthcare and life science clients strengthen their regulatory and compliance programs, as well as defend corporate and individual clients who become the subjects or targets of government investigations or enforcement actions. 

Prior to rejoining Lowenstein Sandler, Ruane most recently served for more than three years as the Chief of the Health Care & Government Fraud Unit at the U.S. Attorney's Office for the District of New Jersey.

Health Policy Implementation

Counsel for Department of Health and Human Services to Sidley Austin

Per the NY Times, 

Dr. [Dora] Hughes, a former Obama administration official, has something Washington lawyers and lobbying shops covet: an insider’s understanding of the new health care law. After nearly four years as counselor to Health and Human Services Secretary Kathleen Sebelius, she left government last year to work for Sidley Austin, which represents insurers, pharmaceutical companies, device makers and others affected by the law. 

Previously,

she  began a decade ago, first as a health policy adviser to Senator Edward M. Kennedy, and later to Mr. Obama, then a senator.

Deputy Assistant Secretary of Department of Health and Human Services to Glover Park Group

Also from the NY Times,

 Elizabeth Engel, who oversaw health legislation and served as a liaison to Congress when she was a deputy assistant health secretary under Ms. Sebelius, is now advising health care clients for the Glover Park Group.

White House to Avenue Solutions

From the NY Times,

Yvette Fontenot, a mother of three who began her Washington career in 1997, analyzing Medicare for the Office of Management and Budget. Ms. Fontenot worked on the health bill as a Finance Committee aide and later moved to the White House. Four months ago she joined Avenue Solutions, a boutique lobbying shop. 

White House "Health Czar" and Deputy Chief of Staff to Consonance Capital, and CVS

While we noted this in August, 2013, the NY Times reported in September as part of its larger article, 

   Nancy-Ann DeParle, Mr. Obama’s former 'health czar' and later his deputy chief of staff, now guides health care investments as a partner in a new private equity firm, Consonance Capital, with colleagues from her pre-White House days. 

Actually, as we discussed in 2009, Ms DeParle has been oscillating back and forth through the revolving door for a while.  She  was the administrator of the Health Care Financing Administration in the Department of Health and Human Services under President Clinton from 1997-2000.  She left to become managing director of a private equity firm, CCMP Capital.  She also served on the boards of directors of Boston Scientific, Cerner, and Medco.  Then she went back to the executive branch as noted by the the Times above.

Furthermore, as reported by AP, via the Providence Journal,

Drugstore chain CVS Caremark has added to its board of directors a former top adviser to President Barack Obama on the health care overhaul.

The Woonsocket, R.I., company said Wednesday after markets closed that Nancy-Ann M. DeParle, 56, will be an independent director who serves on the board's audit committee.

White House to health care venture capital

Also from the NY Times story,

Bob Kocher, a doctor, management consultant and former member of Mr. Obama’s economics team, is a California venture capitalist, helping finance health start-ups.

Legislative Offices

Senate Finance Committee Staff, then Department of Health and Human Services Staff to Avenue Solutions

As reported by The Hill bog,

The firm Avenue Solutions, for instance, recently hired Yvette Fontenot, a former staffer for both the Senate Finance Committee, which wrote ObamaCare’s tax-related provisions, and HHS's Office of Health Reform, which is assisting the implementation.

Since her hire in April, the four-woman firm has picked up Health Care Service Corp. as a client, and Fontenot is now lobbying for the Blue Cross Blue Shield Association

Congress to Alston & Bird

In the same report,

Former Rep. Earl Pomeroy (D-N.D.) joined Alston & Bird in 2011 after dealing with healthcare and tax issues as a member of the House Ways and Means Committee.

Now Pomeroy and his one-time chief of staff, Bob Siggins, are lobbying on ObamaCare for clients such as clients such as Vision Service Plan, the National Coordinating Committee for Multiemployer Plans and Medicare — a health insurance provider.

Health Counsel for Senate Finance Committee from WellPoint, Now to Johnson & Johnson

Note that we touched on part of this story back in 2010 here.  Now from the New York Times, 

Liz Fowler, a onetime executive with WellPoint, the insurer, helped draft the legislation as the chief health counsel for the Senate Finance Committee and later joined the administration. Now she runs global health policy for Johnson & Johnson, the medical equipment and pharmaceutical giant, which strongly backed the health bill and stands to benefit from it. 

Ms. Fowler is not a registered lobbyist, but she does provide in-house advice on the bill — work that has drawn criticism from publications like the British newspaper The Guardian and the Web sites Salon and The Huffington Post, where the journalist Bill Moyers singled out Ms. Fowler, asserting that 'when push comes to shove, corporate interests will have the upper hand.'

Summary

 It's enough to make one's head spin: all that traffic through the revolving door reported just in the last five weeks.

As we have said many times before, the constant interchange of health care insiders among government offices, lobbying and legal firms, and large health care corporations certainly suggests that health care, like many other sectors, seems to be run by an amorphous group of insiders who owe allegiance neither to government nor industry.  The NY Times tried to explain this in a benign way,

Yet the progression from government to the private sector is also predictable, a window into the peculiar rhythms of life in the capital. Young aides, often fresh out of college or graduate school, acquire highly specialized knowledge but eventually settle down, build lives and long for jobs that pay more and let them see their children at night. 

While the private sector may offer good pay, is it just for these poeples' skills and expertise?  Or are these offers only for those who while in government service evinced friendship to private vested interests?  Do government workers who think longingly of higher pay and shorter hours wonder what it would take to please those that might offer such opportunities?

Yet those who work in government are supposed to be working for the people, and those who work on health care within government are supposed to be working for patients' and the public health.  If they are constantly looking over their shoulders at potential private employers who might offer big checks, who indeed are they working for?

Attempts to turn government toward private gain and away from being of the people, by the people, and for the people have no doubt been going on since the beginning of government (and since the Constitution was signed, in the case of the US).  However, true health care reform  would require curtailing the severe sorts of conflicts of interest created by the revolving door.  This might require both improving pay and working conditions for government regulators, law enforcers, and legislative staffers; and specific laws to prevent immediate transitions from being a regulator, law enforcer, or legislator to handling corporate responses to or defenses against such regulation and enforcement. 

That bit does not seem to be part of the current Affordable Care Act, yet it was hardly to enact such restrictions on conflict of interest that certain members of Congress have shut down the government.  

The Door Revolves Again: the Former White House Health Reform Czar Goes to Private Equity Firm Looking for Investments Created by Health Reform

Round and round it goes, and when it will stop, nobody knows.

Background: The Former Health Care Reform Czar's Past Career

It appears that Ms Nancy DeParle, formerly a White House Deputy Chief of Staff, and before then, from 2009 - 2011, the Director of the White House Office of Health Care Reform, has gone through the revolving door again.

We raised concerns about Ms DeParle's strong ties to the commercial side of health care at the time she was put in charge of getting health care reform legislation passed (look here.)  Specifically, her background for shepherding this legislation included being on the boards of directors of three large health care corporations, Boston Scientific, a medical device company, Cerner, a vendor of health care information technology, and Medco, and pharmacy benefits company.   She had previously been on the boards of DaVita, a commercial kidney dialysis care delivery company, and Triad Hospitals, a for-profit hospital system.  At the time, I wondered whether this set of relationships with multiple  health care corporations would lead to "health care reform" that was more about the interests of big health care corporations and their top executives than about us, the people.

As it turned out, there is a case to be made that a lot of the health care reform legislation that eventually passed was in the interests of big corporations.  It enabled for-profit health care insurance companies to continue to dominate the insurance market, and created no "public option" that could have competed with them.  It fostered the development of "accountable care organizations," (ACOs), and thus fostered a wave of consolidation in the hospital market favoring ever larger hospital systems, including for-profit ones, and the rise of the corporate physician.  It pushed the use of commercial health care information technology without requiring these devices' effects on patients to be rigorously assessed, and with no obvious concerns about the risks posed by these systems.  It did nothing to stop concentration of power in health care, nothing to support small private practices, small non-profit hospitals, or non-profit health insurance.  While it required more disclosure of conflicts of interest affecting physicians, it did nothing to reduce them, or to combat deception in health care marketing and public relations, or to reduce manipulation or suppression of clinical research to serve commercial vested interests, or even to combat blatant health care corruption.

A Brief Stop at a Think Tank

At any event, Ms DeParle left the government early this year.  She did not immediately go back to the commercial world, however.  Instead, as reported by The Hill, she went to a think tank.

Nancy-Ann DeParle, a White House deputy chief of staff and the president's point person on his signature health care law, is leaving the West Wing to join the Brookings Institution. 

Brookings president Strobe Talbott announced in a post on Twitter that the longtime Obama staffer would work as a guest scholar for the think tank.

Through the Revolving Door to Private Equity

That position did not last long, however.  A few days ago, a Wall Street Journal blog announced she was moving again,

As health care-focused private equity firms navigate the nuances of the Affordable Care Act, one such shop, Consonance Capital, has decided to go straight to the source, hiring Nancy-Ann DeParle, the former director of the White House Office of Health Reform.

So now she will be with private equity, and in particular, with a private equity firm specializing in, of course, health care:

Consonance has been out targeting between $350 million and $450 million for its debut fund.

The fundraising effort appears to have gained traction in recent months. LBO Wire reported in February that the firm had raised $30.3 million for Consonance Private Equity PV LP.  According to a person familiar with the fundraising, the vehicle has gathered as much as $200 million so far from investors including Ohio Public Employees Retirement System, Travelers Insurance and LGT Group.

The fund is earmarked for buyouts and recapitalizations of health-care providers, payors, pharmaceutical and specialty distributors and device manufacturers with between $20 million and $150 million in annual revenue.

Finally, it seems Ms DeParle will be suited to this new employment opportunity since she knows so much about how the new supposed health care reform will create investment opportunities,

 Ms. DeParle said the changing regulatory environment will give rise to a host of new investment opportunities. 'There’s a lot that’s changing in health care,' said Ms. DeParle. 'There will be millions of new customers for hospitals and health care providers, much stronger demand for health care services....'

Summary

So to recapitulate, Ms DeParle came from roles as a steward of multiple large health care corporations to lead the health care reform efforts of the executive branch.  In that capacity, she helped to create and enact legislation that she would later say created many "new investment opportunities."  Now, as the legislation is going into operation, she has spun over to private equity to take advantage of these opportunities.

This seems to be a great example of why the revolving door is bad for government, health care, and the American public.  People in responsible government positions, in which they are supposed to represent all the people, may be constantly thinking about impressing those who might employ them in the private sector when they leave government service.  What better way to impress these potential employers than to take actions which may later improve these companies'  commercial prospects, whatever effect they may have on us, the people?

I am no political scientist, but in my humble opinion, there should be multi year cooling off periods before someone who worked in the commercial world can get a job in a government agency whose work has direct effect on his or her previous employer or industry sector, and before someone who worked in a government agency whose work had direct effect on a particular economic sector can accept a job for a company in that sector.  Now that would be a real reform. 

Health Care Revolving Door Roundup

Increasingly, the regulatory and law enforcement functions of the US government in the health care sphere seem to be blending with the management of large health care organizations.  One mechanism for this is the "revolving door," the constant interchange of personnel between government agencies and corporate management. 


Here is a list of some of this year's interesting cases of people transiting the revolving door between US government agencies that are supposed to regulate health care organizations or enforce the relevant laws and the organizations subject to these regulations and laws.   Note that this list may not be complete.  It is difficult to keep track of these transitions. 

Leader of Health Care Fraud Section of Philadelphia US Attorney's Office to Teva Pharmaceuticals

Via MainJustice.org in March, 2013,

John Pease, who led the government and health care fraud section in the U.S. Attorney's Office in Philadelphia, has left the Justice Department for a job with a pharmaceutical company.

Pease, 45, is a new senior counsel at Teva Pharmaceuticals, where he oversees government investigations of the company for the Americas.  'I was just ready to try something different,' Pease said in an interview.

 Leader of US Department of Justice Fraud Section in Charge of Health Care Issues to Law Firm as Defender of Companies and Senior Executives

The initial notice again was via MainJustice.org in March, 2013

Sam Sheldon, the deputy chief in the Criminal Division's Fraud Section who oversaw health care fraud prosecutions, is leaving the Justice Department to join Quinn Emanuel Urquhart & Sullivan LLP.

Mr Sheldon's new job was made clear on the firm's website,

Sam Sheldon is head of the firm’s Health Care Practice Group.  He is a trial lawyer who represents companies and senior executives in litigation before the United States federal government including Department of Justice and Department of Health and Human Services, and other law enforcement and regulatory agencies.

FDA Deputy Commissioner for Global Regulatory Operations and Policy to Mylan

This story, in April, actually made it (briefly) to Reuters,

 Generic drugmaker Mylan Inc said on Tuesday it hired Deborah Autor, deputy commissioner for global regulatory operations and policy at the U.S. Food and Drug Administration, to help oversee its global regulatory strategy.

Leader of Health Care Fraud Enforcement of Philadelphia US Attorney's Office to Law Firm as Industry Defender

From Bloomberg, in August, 2013,

Marilyn May, a False Claims Act litigator at the U.S. Justice Department, joined Arnold & Porter LLP’s Washington office as litigation counsel with a focus on healthcare, pharmaceutical and medical device industry defense work. 

May was the head of healthcare fraud enforcement in the U.S. Attorney’s Office in the Eastern District of Pennsylvania. She coordinated healthcare fraud cases and investigations as well as handled False Claims Act cases involving pharmaceutical and medical device companies, hospitals, nursing homes and other healthcare providers, the firm said. 

The law firm's website states,

 Her litigation practice focuses on pharmaceutical, medical device and healthcare defense matters.

Summary

In each of these cases, a person with responsibility for regulation of and/or law enforcement for health care organizations went through the revolving door to either work for health care corporations subject to such regulation and/or law enforcement, or work for legal firms that specialize in defending such corporations and their leaders in regulatory and law enforcement actions.

As far as I know, none of these instances was the least bit illegal.  However, like previous examples of the revolving door, they raise the concern that people in government regulation or law enforcement who think that they may have future lucrative job prospects helping health care organizations attenuate regulation and law enforcement may not be the most enthusiastic, aggressive, or persistent regulators or law enforcers.  Why would one want to upset one's future employer?

While these cases of the revolving door are legal, they are clearly conflicts of interest in the sense that the prospect of such future employment likely may increase the risk of compromising a government official's devotion to serving the public and enforcing the law, if not in the legal sense.  In some particular case, the revolving door may actually lead to corruption according to the Transparency International definition, abuse of entrusted power for private gain, if not according to the legal definition.  Thus the continuing occurrence of government officials blithely transiting the revolving door no doubt was a reason that more than 40% of the public consider the US health care sector to be corrupt (see this post.)

True health care reform would require curtailing the severe sorts of conflicts of interest created by the revolving door.  This might require both improving pay and working conditions for government regulators and law enforcers, and specific laws to prevent immediate transitions from being a regulator/ law enforcer to handling corporate responses to or defenses of such regulation and enforcement.

Of course, I can already hear the protests of those people who decry paying more for government or increasing government regulation.  I can at least hope that the protests are not from those who personally profit from the current seemingly corrupt system.  

Another Revolving Door Variant: From Academia with Millions in Medtronic Royalties, to the White House, to the Health Care Service Corp

The revolving door spins, and where it will stop, nobody knows...

In October, 2010, we noted questions about how Dr Stephen Ondra got to be a Senior Policy Adviser for the US Department of Veterans Affairs. A veteran who was a neurosurgery professor at Northwestern University, Dr Ondra had received millions of dollars in royalties from device manufacturer Medtronic, whose CEO supported his appointment to the government position  (see this post).  As soon as he was appointed, he publicly opposed a nominee for US Surgeon General who had been critical of the medical device industry, and its financial ties to doctors.

After going to Washington, Dr Ondra apparently also served in the Executive Office of the President, in the White House, but returned to Northwestern University in 2012.  However, he did not stay there for long.

This month, a post on Forbes indicated he is moving on again, and back to the corporate side of health care.

the nation’s fourth-largest health insurance company is naming a key former health advisor to President Obama as its top doctor.

Dr. Stephen Ondra, will become senior vice president and chief medical officer at Health Care Service Corp., the Chicago-based parent company of Blue Cross plans in Illinois, Texas, Oklahoma and New Mexico. The plan has more than 13 million health plan members and is looking to grow even more, announcing last year a proposed partnership with the Blue Cross plan in Montana.

Health Care Service Corp is a mutual insurance company, that is, a company owned by its policy-holders rather than stock holders.  However, that does apparently not make it any more ascetic than a typical for-profit insurance company, at least in terms of generosity towards its top hired executives.  As Crain's Chicago Business reported in 2012,

New federal regulations intended to force health insurers to spend less on administration didn't keep the parent of Blue Cross & Blue Shield of Illinois from paying CEO Patricia Hemingway Hall more than $12.9 million in 2011, a 61 percent raise.

The Health Care Service Corp. chief executive's total compensation last year dwarfed the $8 million she received in 2010, according to a filing with the Illinois Department of Insurance. The 2011 increase was fueled by an $11.8 million bonus, which was 69 percent above her 2010 bonus of $7 million.

Ms. Hall wasn't alone in getting a big raise at Health Care Service, whose insurance business booked net income of more than $1 billion in 2011, for the second straight year.

The 10 highest-paid executives at the Chicago-based mutual company — which operates Blue Cross plans in Illinois and three other states — earned a collective $41.7 million, 65 percent more than the $25.3 million they were paid in 2010.

 If Dr Ondra's new position puts him among the latter group of executives, he too stands to make millions a year. 

So to recap Dr Ondra's career so far, in 2010 he was a medical school professor who had earned millions in royalties from Medtronic.  He then went to top leadership positions in the US Veterans Department and Executive Office of the President.  He returned briefly to Northwestern University, only to leave again for a top executive position in for-profit insurance company Health Care Service Corp, where he is likely to make millions more.

Thus Dr Ondra is our latest interesting example of the "revolving door" phenomenon in health care.  He started as an erstwhile academic physician but with a very major financial relationship with a medical device company.  He then went through the door the first time into the US government, and then a second time from the government to a for-profit insurance company, with just a brief stop-over in academia.

By the way, it appears that all of this is quite legal.  It does again raise questions about whether health care leaders in government with previous relationships with industry might still feel undue sympathy to the interests of industry, as might government leaders who can expect future jobs in industry.

Moreover, this case, like previous cases we have discussed,  indicates how leadership in academic health care, corporate health care, and the government tend to blend together.  Leaders of one type of organization have more and more in common with leaders of the other types of organizations than they do with their lesser ranked colleagues, and certainly than with other health care constituencies.  So the more the revolving door revolves, the more we wonder about the corporatism of health care, about how health care seems to be increasingly run by an amorphous group of academic/ corporate/ government leaders whose loyalties may be more to each other than to academic and professional values, patients' and the public's health, and government of, by and for the people.

How the "Revolving Door" and Other Aspects of Corporatism Benefited Amgen Just After its Settlement and Guilty Plea

At least here in these United States, our health care corporatism is bipartisan.  Here we present a sorry story of how a company that should have been shamed by dishonest behavior that likely harmed patients instead apparently was awarded special treatment through its cozy relationships with top government leaders
 
Accusations of Kickbacks and Deceptive Marketing of Aranesp 

Last month, biotechnology giant pleaded guilty to a charge of misbranding and settled civil charges with the US government for $762 million (look here).  Soon after, New York Times article described the unethical practices the company was alleged to have performed.  It opened with a vivid anecdote:

'I hope no one is taping this,' the Amgen manager remarked at a company sales meeting in 2005.

The manager then boasted of how she had given a $10,000 unrestricted grant to a pet project of a doctor who was an adviser to the local  Medicare contractor. In turn, she said, the doctor would help persuade the contractor to provide reimbursement for an unapproved use of Amgen’s anemia drug, Aranesp. 

Since that account appeared to be of a quid pro quo, it did sound like some a kickback or bribery.  In addition,

Amgen is also accused of offering kickbacks to doctors and clinics to induce them to use its drugs. These reportedly came as cash, rebates, free samples, educational and research grants, dinners and travel, and other inducements.   

Of course, since this was the usual sort of settlement we see of health care corporate wrongdoing, in which the reason the company is paying what appears to be a large fine remains ambiguous,

Except for those in the criminal count, Amgen denied the other accusations, though it did issue a statement on Wednesday acknowledging the settlement.

'The government raised important concerns in the criminal prosecution,' Cynthia M. Patton, chief compliance officer at Amgen, said in the statement. 'Amgen acknowledges that mistakes were made, and we did not live up to our standards.'

"Mistakes were made," what a handy phrase to avoid acknowledging that a real person or person made those mistakes.  Why government prosecutors did not leverage instances in which the mistakes were made by an identifiable person, for example, the manager in the anecdote above, to find out who ultimately authorized and directed the kickbacks and deceptive marketing, and then seek to indict them is a mystery.  The US Department of Justice now seems to be disinclined to ever pursue top  health care corporate executives who may have done wrong, while they exuberantly pursue fines from the companies they direct, fines which have almost no personal impact on those who authorized, directed or implemented the bad behavior.
  
The Times article also included a telling allegation that behind this apparent misbehavior was a changed corporate culture that put short-term revenue ahead of all other considerations.  

the corporate culture changed starting around 2000. That was when new management came in and Aranesp was approved, setting up a fierce marketing battle with Johnson & Johnson and its rival anemia drug, Procrit.

'It was more important to make your numbers than to follow the rules,' said [former Amgen sales representative and now whistle-blower Jill] ...Osiecki, who was based in Milwaukee and sold Aranesp. 

We have discussed how the "make your numbers" culture seems to have resulted from an over-generalization of the prevalent belief in business schools that "maximizing shareholder value," which usually seems to mean maximizing short-term revenue and/or doing whatever it takes to boost stock prices in the short-term (look here).  In companies which make potentially beneficial but also potentially hazardous drugs, the risks of "make your numbers" are obvious.

Shameful Consequences for Patients 

These were disconcerting revelations.  They showed that some unidentified employees, probably including top leaders of a major health care corporation seemed to use kickbacks and lies to deceptively market a drug just to "make their numbers," and thus most likely score healthy bonuses.  Yet this drug is clearly dangerous.  The official Aranesp label states (in a black box warning, in capital letters):

 ESAs INCREASE THE RISK OF DEATH, MYOCARDIAL INFARCTION, STROKE, VENOUS THROMBOEMBOLISM, THROMBOSIS OF VASCULAR ACCESS AND TUMOR PROGRESSION OR RECURRENCE

Thus deceptive and unethical marketing practices likely lead to overuse of the drug, and overuse of the drug likely lead to sick (via myocardial infarction [heart attack], stroke, venous thromboembolism or thrombosis of vascular access [drug clots], or tumor progression) or dead patients.

One would think that the consequences of the particular bad behavior alleged in this case would have lead to more zealous prosecution and to the pursuit of actual people who authorized, directed or implemented the bad behavior.  However, it did not.


One would also think that the nature and consequences of this bad behavior would harm the reputation of the company and its leadership.  Instead, it appears that soon after the settlement was announced, top US elected leaders were fawning over this company and its leadership, and rushing to legislate special treatment for it.

Special Treatment from Legislators

Yet soon after these disconcerting revelations that should have shamed Amgen and its leadership, it appears that the company benefited from legislation narrowly crafted mainly just for to suit its interests, and with the aid of allies from both parties within the US government.  That story was again just reported by the New York Times.  The basics are:

Just two weeks after pleading guilty in a major federal fraud case, Amgen, the world’s largest biotechnology firm, scored a largely unnoticed coup on Capitol Hill: Lawmakers inserted a paragraph into the "fiscal cliff"  bill that did not mention the company by name but strongly favored one of its drugs. 

 

The language buried in Section 632 of the law delays a set of Medicare price restraints on a class of drugs that includes Sensipar, a lucrative Amgen pill used by kidney dialysis patients.

The provision gives Amgen an additional two years to sell Sensipar without government controls. The news was so welcome that the company’s chief executive quickly relayed it to investment analysts.  But it is projected to cost Medicare up to $500 million over that period.[That would almost make up for the fine the company had to pay for illegal marketing and to settle kickback charges - Ed]

Amgen, which has a small army of 74 lobbyists in the capital, was the only company to argue aggressively for the delay, according to several Congressional aides of both parties. 

But the Times article noted that it was not just the size of its army of lobbyists that did it.  

 Amgen has deep financial and political ties to lawmakers like Senate Minority Leader Mitch McConnell, Republican of Kentucky, and Senators Max Baucus, Democrat of Montana, and Orrin G Hatch, Republican of Utah, who hold heavy sway over Medicare payment policy as the leaders of the Finance Committee. 

In particular, Amgen

has a deep bench of Washington lobbyists that includes Jeff Forbes, the former chief of staff to Mr. Baucus; Hunter Bates, the former chief of staff for Mr. McConnell; and Tony Podesta, whose fast-growing lobbying firm has unusually close ties to the White House.

Amgen’s employees and political action committee have distributed nearly $5 million in contributions to political candidates and committees since 2007, including $67,750 to Mr. Baucus, the Finance Committee chairman, and $59,000 to Mr. Hatch, the committee’s ranking Republican. They gave an additional $73,000 to Mr. McConnell, some of it at a fund-raising event for him that it helped sponsor in December while the debate over the fiscal legislation was under way. More than $141,000 has also gone from Amgen employees to President Obama’s campaigns.

What distinguishes the company’s efforts in Washington is the diversity and intensity of its public policy campaigns. Amgen and its foundation have directed hundreds of thousands of dollars in charitable contributions to influential groups like the Congressional Black Caucus and to lesser-known groups like the Utah Families Foundation, which was founded by Mr. Hatch and brings the senator positive coverage in his state’s news media.

Amgen has sent large donations to Glacier PAC, sponsored by Mr. Baucus in Montana, and OrrinPAc, a political action committee controlled by Mr. Hatch in Utah.

And when Mr. Hatch faced a rare primary challenge last year, a nonprofit group calling itself Freedom Path sponsored advertisements in Utah that attacked his opponent, an effort that tax records released in November show was financed in large part by the Pharmaceutical Research and Manufacturers of America, a trade group that includes Amgen.

In some cases, the company’s former employees have found important posts inside the Capitol. They include Dan Todd, one of Mr. Hatch’s top Finance Committee staff members on health and Medicare policy, who worked as a health policy analyst for Amgen’s government affairs office from 2005 to 2009. Mr. Todd, who joined Mr. Hatch’s staff in 2011, was directly involved in negotiating the dialysis components of the fiscal bill, and he met with 'all the stakeholders,' Mr. Hatch’s spokeswoman said, not disputing when asked that this included Amgen lobbyists.

In addition, a NY Times editorial today pointed out that Mitch McConnell, the Senate Minority Leader, (Republican - Kentucky) who "exerted great influence over the fiscal negotiations and praised the Medicare provisions" presumably including the specific provision that helped Amgen, also has "political and financial ties to Amgen."  Furthermore, Senator McConnell's willingness to use taxpayer's money to pay Amgen more seemed to contradict his "public statements [which] usually emphasize the need to cut federal spending on entitlement programs, as they did in Lexington Friday," as reported by WEKU (the National Public Radio Station at Eastern Kentucky University ).  

Can We Reform Health Care in the Corporatist States of America?  

 In summary, Amgen seems to have leveraged its use of former legislative aides affiliated with both political parties as lobbyists, and its presumed influence over former employees who are currently legislative aides, that is, to people who have transited revolving doors in both directions, to influence policy in its corporate favor.  It has also leveraged its contributions directly to politicians, to political action committees (PACs), and to non-profit advocacy groups to influence policy in its direction for this purpose.  All this leverage apparently resulted in continuing government favoritism to a company the government had just convicted of a crime, and to a company whose actions likely led to sick and dead patients.  Furthermore, legislators who publicly deplore excess government spending and enlarging government deficits supported spending more taxpayer money to favor a particular company that they ought to have shunned. 


The New York Times editorial deplored this case first as

a disheartening example of how intense lobbying and financial contributions can distort the legislative process in Washington

and second as

a classic example of the power of special interests to shape legislation and shows how hard it may be to carry out the reforms needed to cut health care costs. 

But it was really much worse than that.   This case certainly shows the ongoing coziness between big health care organizations and government (this time, mainly legislative) leaders, facilitated by the apparently very common "revolving door" interchange of influential people between corporate management and government.  Note that this coziness has now become bipartisan.  However, this was not merely expensive favoritism.  It was hypocritical expensive favoritism that benefited a corporation that ought to have been shamed and shunned for behavior that did not merely cost the government money, but likely harmed patients, sometimes even fatally. 

President Theodore Roosevelt condemned malefactors of great wealth.  Our current political leaders in both parties seem to put their ties to corporate insiders who work for executives of great wealth ahead of any consideration of what might be good for patients, public health, or the citizenry at large.  

So the US now seems to be run by a soft, informal version of corporatism, the system in which government and big corporations overlap and jointly rule the people.  Since these days big corporations are run largely without accountability by increasingly rich executives, this ends up meaning government by the oligarchs, for the oligarchs, and of the oligarchs.  President Lincoln and President Theodore Roosevelt might be rolling in their graves.  

To meaningfully reform health care, it seems like we need to meaningfully reform our entire political system, and both make leaders of health care organizations accountable, and make government again of the people, by the people, and for the people. 

The Revolving Door's Bearings Overheat - Two Examples of the Health Care Insiders Who Keep it Spinning

Two recent stories illustrate a kind of conflict of interest affecting government health care policy. Note that neither story appeared in any one media outlet, but had to be pieced together from several sources, not all contemporaneous.

The Peripetatic Architect of Health Care Reform Implementation

Here is the story of Steve Larsen's latest career move, per the Wall Street Journal,

A top official in charge of implementing the federal health-care overhaul said Friday he would step down in mid-July, shortly after the Supreme Court is expected to rule on the fate of the law.

The official, Steve Larsen, heads the office at the Centers for Medicare and Medicaid Services that oversees most of the insurance provisions in the 2010 law. Those include setting up exchanges for consumers to shop for plans and obtain subsidies for premiums, establishing rules on how much money insurers must spend on medical benefits, and administering a federal program to provide insurance for consumers with pre-existing conditions.

Mr. Larsen said in an interview that his departure was '100% for personal and family reasons,' and that he hadn't considered the timing of the court decision. He cited his need to pay tuition for his college-bound children,...

The Wall Street Journal coverage made it sound like Mr Larsen was fleeing his post to avoid dealing with how the Supreme Court's decision on the Obama administration's health care reform law might complicate future functions of his office,

Mr. Larsen's departure highlights the challenges the administration will face once the Supreme Court rules. If the court upholds the law, the administration has a 2014 deadline to put it in place, including persuading states to set up the exchanges or establishing them on states' behalf.

If the court strikes down the law's key requirement, that most individuals purchase insurance or pay a fine, federal officials will have to establish whether they can make the remaining insurance elements of the law work, which would face stiff opposition from insurance companies and from Republican lawmakers who have pledged to overturn the law.

If the court voids the law entirely, officials will have to start undoing hundreds of its requirements that are set up to take effect or are, in many cases, already in place.

It only briefly mentioned where Mr Larsen was going, ostensibly in hopes that a better salary would aid in his tuition payments,

[he] said he would be working at a health-services business unit of UnitedHealth Group, an insurer

On the other hand, a report from Bloomberg suggested that UnitedHealth thought he would be well worth his salary,

Larsen will be executive vice president at Optum, a health services and information technology company that is part of UnitedHealth Group Inc., of Minnetonka, Minn., the company confirmed. UnitedHealth Group is the parent company of UnitedHealthcare, the largest health insurer in the United States in terms of policyholders and revenues.

'We are excited to welcome Steve Larsen to Optum,' company spokesman Matthew Stearns told BNA in an email. 'Steve's extensive, broad-based experience in health care will further enhance the support Optum provides to the health system and consumers in a rapidly evolving environment.'

It is funny how that experience seemed to be about crafting the regulations under which Optum, or at least its parent corporation would have to operate.

But wait, there is more. Bloomberg also mentioned that Mr Larsen had previously gone from a state government health policy position to the insurance industry before he wound up at the CCIIO.

Prior to joining the Obama administration to implement PPACA, Larsen served in a number of capacities at Amerigroup Corp., a public managed care company serving Medicaid and Medicare beneficiaries, according to his biography on the CCIIO website. Larsen also was Maryland insurance commissioner for six years, chairman of the Maryland Public Service Commission for Gov. Martin O'Malley (D),...

To clarify, Amerigroup is a publicly-held, Fortune 500 for-profit corporation (look here).
So in summary, and in chronological order, as best as I can establish it, Mr Larsen went from a Maryland state government policy position that affected health (and other insurance) companies, to a health insurance company (Amerigroup), to a US government policy position that affected health insurance, and now to another health insurance company (UnitedHealth).

The Peripatetic Legislative Policy Director

Brett Roper moved in the opposite direction, to government from industry, and to the Republican legislative majority, not the executive branch now controlled by the Democrats. Early in June, on the Republic Report,

In late 2010, as Congressman John Boehner (R-OH) prepared to take the gavel as Speaker, he hired a lobbyist named Brett Loper as his new policy chief. Loper left his job at the Advanced Medical Technology Association, a lobby group for medical device-makers, to join Boehner.

The Association did not seem to sad to see him go,

Republic Report reviewed ethics forms disclosed filed with the House clerk’s office, and noticed that Loper actually received a $100,147 bonus in 2011 for leaving his medical device lobbying group and becoming a public servant.

But wait, there is more. Loper also previously made more than one transition between government and industry. As Politico reported in 2010, before Loper worked for the Advanced Medical Technology Association,

Loper worked in senior positions for then House Majority Leader Tom DeLay and as the House Ways and Means Committee Republican staff director under then-ranking member Rep. Jim McCrery of Louisiana

But wait, there is still more. In 2011, the Atlantic reported,

In December, Boehner hired Brett Loper to be his policy director. At the time, articles focused on Loper's previous job as a lobbyist for the Advanced Medical Technology, where Loper vigorously resisted attempts to reduce the deficit by fighting cuts in fees to his clients proposed by the Obama administration.

That is part of the story.

But missing from the pieces about Loper have been his connection to the Abramoff scandal and knowledge of how to use government money to 'nfluence'legislators.

Sometimes a picture is worth a thousand words. Here is a photo of Loper (far right), basking in the tropical sun of the Marianas Islands, with Michael Scanlon (center), Jack Abramoff's partner in crime.

What is Loper doing in the Marianas?

As a staff member for Tom Delay, Loper was part of a mission to deliver money from the "favor factory," otherwise known as the Appropriations Committee of Congress, to two legislators in the Marianas, Norm Palacios and Alejo Mendiola (between Scanlon and Loper, above). In exchange for money for their two pet projects, Palacios and Mendiola agreed to switch their votes and support Abramoff's key ally in the Marianas, Benigno Fitial, in his bid to become Speaker of the House there.

The gambit worked. Fitial won. Abramoff -- whose lobbying contract to the Marianas had been canceled -- was re-hired by the Marianas. In that capacity, Abramoff resumed lobbying for the continuation of abusive labor practices in the islands. (For more on this, see my film, 'Casino Jack and the United States of Money.') Abramoff also continued to make sure that the grateful garment factory owners flowed campaign cash to key mainland Republican legislators, including Tom Delay.

Note that according to the Washington Post web-page on the Abramoff scandal,

Former Republican lobbyist Jack Abramoff was sentenced to five years and 10 months in prison on March 29, after pleading guilty to fraud, tax evasion and conspiracy to bribe public officials in a deal that requires him to cooperate in an investigation into his relationshps with members of Congress. Sources familiar with the federal probe have told The Post that half a dozen lawmakers are under scrutiny, along with Hill aides, former business associates and government officials.

The scandal prompted Rep. Tom DeLay (R-Tex.) and Rep. Robert Ney (R-Ohio) to give up their leadership posts,...

So Mr Larsen went from Republican senior legislative staff positions, during which time he associated with the now admittedly guilty Abramoff, to an industry trade association, and then back to a Republican senior legislative staff position.

Summary

So here are two recent good examples of a particular type of conflict of interest involving government and health care corporations. Both cases are of people who have made multiple transitions through the "revolving door" between the health care corporate world, and government agencies and organizations that are involved in policies that affect that world.

These transitions' multiplicity appears to represent a conflict of interest because these peoples' frequent revolutions through the door might diminish any sense that they ever have a primary interest on behalf of any immediate employer when another employer on the other side of the supposed arms' length government-industry relationship is always beckoning. Thus the people involved appear to have become members of a peculiar class always in transition, and hence more attuned to self-interest than to promoting the health of patients and the population (which ought to have been the primary concern for government leaders.) As Matt Kelley on the Compliance Week blog wrote in response to the Larsen story,

if you ever wonder why so many Americans feel like their country is slipping away from them, the revolving door—the sense that a private club of success exists in this country, and most Americans don't get to go through it, but merely live with the dictates of those who do—is a big reason why.

As we wrote before health policy in the US, in particular, has become an insiders' game. Unless it is redirected to reflect patients' and the public's health, facilitated by the knowledge of unbiased clinical and policy experts rather than corporate public relations, expect our efforts at health care reform to just increase health care dysfunction.

Physicians, public health advocates, whatever unbiased health policy experts remain must educate the public about how health policy has been turned into a corporate sandbox. We must try to somehow activate the public to call for health care policy of the people, by the people, and for the people.

Head of Lobbying Firm with Health Care Clients Walks Through Revolving Door into Executive Branch

A Washington Post op-ed described the latest case of a revolving door frequent flier, or perhaps frequent revolver, with health care connections. I will try to piece it together chronologically.

The story revolves around one Steven Ricchetti. His earlier career trajectory was:

Blue Cross Blue Shield, then the Democratic Senatorial Campaign Committee, then the Clinton White House, then lobbying, then back to the Clinton White House, then more lobbying, this time starting Ricchetti Inc. with his brother, Jeff. (A call seeking comment from Ricchetti Inc. wasn’t returned.)

Most recently, he "was tapped to be counselor to Vice President [Joseph] Biden."

His recent clients were"Fannie Mae, General Motors, the American Hospital Association, and Eli Lilly," obviously includeingtwo prominent health care organizations.

Previously he had represented

AT&T, Reed Elsevier, Pfizer, Sanofi-Aventis, Siemens, Sirius XM, Amgen, Boston Scientific, America’s Health Insurance Plans, eBay, Dow Chemical, the U.S. Conference of Catholic Bishops, among others, according to the Center for Responsive Politics. Cumulatively, they paid Ricchetti and his firms millions.

Eli Lilly, Pfizer, Sanofi-Aventis, Amgen, and Boston Scientific are obviously "pure" health care corporations. Reed Elsevier has a publishing subsidiary with important medical titles. Siemens Healthcare is an important part of that company. The links above are to our relevant posts about these firms, some of which describe various ethically questionable behavior.

Note that Mr Ricchetti's appointment apparently circumvented the President's previous statement that "lobbyists 'will not run my White House.'" He

achieved this feat — getting around the ban on lobbyists serving in the administration — by using one of Washington’s most-honored traditions: the loophole. Just as Obama won the presidency, Ricchetti de-registered as a lobbyist for his various clients. But he remained president of the lobbying firm that continued to work for many of those same clients, as well as a few more, such as the American Bankers Association.

While Mr Ricchetti is no doubt an intelligent and hard-working man, could not someone who was not so strongly financially tied to the leadership of some of the US' most ppowerful health care corporations be found who was well-qualified for this position?

Pending the answer to that question, which I do not expect to receive, this story becomes our latest example of the coziness between political and government leadership on one hand, and the leadership of large health care organizations, and those they choose as representatives.

We have seen all sorts of permutations of revolving door stories involving people with strong ties to the largest health care organizations. The implication is that both health care's private sector and the government functions meant to provide or regulate health care do not operate at arms' length, and in fact seem to be run by a group of insiders who overlap both, and may be more attuned to their self-interest and patients' and the public's health.

Health policy in the US has become an insiders' game. Unless it is redirected to reflect patients' and the public's health, facilitated by the knowledge of unbiased clinical and policy experts rather than corporate public relations, expect our efforts at health care reform to just increase health care dysfunction.

Physicians, public health advocates, whatever unbiased health policy experts remain must educate the public about how health policy has been turned into a corporate sandbox. We must try to somehow activate the public to call for health care policy of the people, by the people, and for the people.

Three Golden Parachutes and Some Unexpected Sequels

Golden parachutes are an always fascinating aspect of executive compensation in health care.  I have collected three relatively recently revealed stories about golden parachutes given to government and non-profit hospital system CEOs, at least two of which involve unexpected, and also fascinating sequels.  They will appear in order of the apparent size of the parachutes.

Santa Clara Valley Health and Hospital System

Santa Clara Health and Hospital System is a county (government) system of moderate size in California.  Last week, the compensation given its outgoing CEO in 2010 was revealed by the San Jose Business Journal:

Former Santa Clara Valley Health and Hospital System CEO Kim Roberts walked away with an impressive chunk of change when she abruptly left the job in February 2010.

According to a city and county salary report released from the State Controllers Office, the position earned a little over $1 million that year.

A county spokeswoman confirmed that the total included accrued vacation, sick leave and other payments Roberts was entitled to.

The salary was the highest in the Bay Area for public employees in 2010.

Note that

Roberts was hired as CEO in March 2007 with a five-year contract. The agreement included a starting salary of $285,744 with annual salary adjustments, severance and other benefits.

The issue here is that Ms Roberts was the CEO of a local government run health system. Traditionally, the pay given to people in such positions is closely scrutinized by politicians and tax payers, and hence is usually less than that given out by private, non-profit hospital systems, much less for-profit ones. Nonetheless, while it appears that Ms Roberts got something more than $700,000 worth of compensation beyond her usual salary in her last year, the nature of this compensation, and the justification for it is unclear.

Erlanger Health System

The story that got my attention appeared two days ago in the Chattanooga Times-Free Press:

After more than a month of negotiations, Erlanger trustees reversed a previous vote and approved a controversial $728,000 severance package for outgoing CEO Jim Brexler.

Trustees voted 4-4 against the same severance package in December but voted 5-4 to approve it during a 30-minute meeting Monday morning.

More detail about the package:

The approved agreement provides 15 months of severance for Brexler, worth about $713,000. He also keeps his Erlanger health coverage for 18 months, paying his employee portion, a benefit worth about $15,000.

This story is actually a complex sequel. We discussed CEO compensation at Erlanger Health System, an academic medical center affiliated with the University of Tennesse, a year ago. At that time, we noted that a substantial bonus given to then CEO Jim Brexler was based on favorable financial results in the previous year, but did not apparently take into account the more recent decline in the system's finances. That bonus was justified by the typical paean to the leadership's "real expertise in health care" by one member of its board.

By last month, however, Erlanger's finances had deteriorated dramatically. A Free Press article then stated,

Erlanger hospital employees have been asked to take 12 days off in the next two months, consider voluntary buyouts and face possible layoffs as Chattanooga's only public hospital bleeds money.

The hospital has lost more $6 million in the last five months, half of that in November.

The reason for this accelerating misfortune deterioration remain unexplained. Apparently, CEO Brexler had decided to depart, for also unclear reasons, two months earlier:

In October, the hospital announced CEO Jim Brexler would retire at the end of the year.

At that time, the board had voted to give him the severance package described above, but then suddenly began to reconsider after how bad things were became clear:

The board voted earlier this month not to give Brexler a more than $700,000 severance package, but the issue may be brought back up, board members have said.

It was unclear whether the decline in Erlanger's finances had to do with its relationship with another troubled hospital, Hutcheson Medical Center, as described in another Free Press article:

Despite a new board, new management and the infusion of a $20 million line of credit, a struggling North Georgia public hospital continues to lose money.

Erlanger at Hutcheson, formerly known as Hutcheson Medical Center, lost more than $9 million in the first five months of the 2012 fiscal year, which began in July. It lost the most -- $2.7 million -- in September.

Hutcheson board Chairman Corky Jewell could not be reached for comment last week.

The hospital's administrator, Debbie Reeves, and other management personnel were not in the office the week between Christmas and New Year's, according to spokeswoman Haley Johnson.

The publicly funded hospital in Fort Oglethorpe had been losing about $1 million a month, defaulted on a $35 million bond and laid off 75 employees in fiscal year 2011.

In May, Erlanger Health System took over management of the hospital and extended up to $20 million in credit to it.

Apparently inflated compensation to Hutcheson's CEO was also a subject of one of our posts from about a year ago. At that time, we wrote, "despite a major financial loss, lay-offs and service discontinuations, and a bond default," the CEO got "bonus and incentive compensation" in 2009.

So, to summarize, despite major financial problems, Hutcheson Medical Center's CEO got a bonus and incentive compensation in 2009. As its situation got worse, it was taken over in some sense by Erlanger Health System, whose CEO also got a bonus despite increasing financial problems in 2010. Thereafter, the finances of Erlanger really declined, its CEO announced his retirement, and still will collect a golden parachute.

Thus Erlanger Health System's golden parachute for its outgoing CEO symbolizes the anti-gravitational powers of executive compensation. While lavish executive pay is often justified by short-term financial results, health care executives seem to be able to just keep collecting more and more until they have to flee. Health care seems to more and more be run for the benefit of self-interested insiders.

Also, this case demonstrates how skeptical we ought to be of the breathless praise for health care executives and managers and the uncritical touting of their latest advances and initiatives.  (By the way, we posted here, just before it became apparent how badly Erlanger's finances were collapsing, about its breathless advertisement of a "new service excellence program" for Erlanger employees run by the Ritz-Carlton hotel chain.  One wonders whether the attention to the peripheral ahead of core responsibilities this denoted could have been one reason for the system's decline.) 

And we are just working our way up to our big case....

University of Chicago Medical Center

This story actually dates back to 2009, but was first revealed briefly in late 2011, in Becker's Hospital Review,

The other three highest-paid hospital CEOs in Chicago in 2010 include the following:
• James Madara, MD, and Ken Sharigian, University of Chicago Medical Center: $7.9 million
Note: This includes severance for Dr. Madara, who resigned in Oct. 2009. Mr. Sharigian served as the interim in 2010.

A little more detail came out in a side-bar to a story on executive compensation in higher education by the Chronicle of Higher Education:

James L. Madara, dean of the school of medicine and chief executive of the medical center, U. of Chicago
Total compensation: $7,038,944
Mr. Madara’s base salary was $1.3-million, and he received $2.5-million in severance pay.

There was also a hint of why this was so interesting:

Mr. [sic] Madara stepped down after seven years as dean and three as chief executive to return to the faculty. He resigned amid controversy over his management decisions, such as a plan to redirect medical-center patients to neighboring hospitals, according to local news reports.

A little digging shows there was more to it than that. Recall our recent post that discussed the "Urban Health Initiative," a program ostensibly meant to direct some patients, allegedly mainly poor patients, to more appropriate health care venues, allegedly away from the Emergency Department of the university medical center, and again allegedly to make room for patients who need and whose insurance can pay for more lucrative services.

By February, 2009, the Wall Street Journal reported that

In February, two high-ranking doctors quit their administrative posts to protest the plan, saying it could lengthen already long waiting times for patients who visit the ER.

In particular,

The two doctors who gave up their administrative posts in Chicago were Dr. Vanden Hoek, who stepped down as interim chief of emergency medicine, and pulmonology researcher Joe G.N. Garcia, who had been chairman of medicine. The doctors still can practice medicine at the hospital.

About a dozen other doctors from the emergency room and other departments had signed a letter of protest over the hospital administration's plan to reduce the number of beds available to emergency patients in the ER and other units.

Three months later, as reported by Chicago Business,

Some University of Chicago Medical Center faculty members are accusing CEO James Madara of putting hospital finances ahead of research and teaching.

A letter delivered to Dr. Madaar last month and signed by 76 faculty members asserts that, since adding the hospital CEO title in 2006, Dr. Madara has lost focus on his role as a dean of the Hyde Park medical center's vaunted research and academic enterprise. A preocccupation with hospital profits and an 'insular management style' have 'disenfranchised' the faculty, the letter says.

By that month, according to the Wall Street Journal,

More than 190 doctors at the University of Chicago Medical Center signed a letter to trustees protesting plans to reduce the number of beds available to emergency patients as 'unnecessarily risky' and a threat to patient safety.

The plan was put on hold by the university president a few days later. Dr Madara resigned in August.

So, somewhat like the case above, this involved a hospital system CEO who got a very large golden parachute after leaving under fire, not for declining revenue, but for his role in overseeing a program of questionable ethics, one possibly bad for patients, and having lost the confidence of some important proportion of his medical faculty.

He did not, however, go off quietly into the night. His next stop was Leavitt Partners (as noted in this AMA press release), founded by former President George W Bush administration Secretary for Health and Human Services James Leavitt.

As we noted here, Leavitt Partners advertises that it "advises clients that invest in health care and food safety." It does not publicize its client list, but that list apparently includes Alliance Health Networks, whose press release noted that Leavitt Partners "will help it expand its presence in the US health industry and beyond "(look here); and Connextions, Inc, whose press release noted that it would work with Leavitt Partners to " refine existing health insurance exchange models for federal and state governments, as well as private sector organizations that are navigating health care reform law," (look here.)  Mr Leavitt joined the board of Medtronic last year (look here). 

Then, however, he got back into the CEO business.  While still maintaining a role at Leavitt, in 2011, per the AMA release,

The American Medical Association (AMA) today named James L. Madara, M.D., as its new Executive Vice President and Chief Executive Officer. Dr. Madara will assume leadership of the nation’s oldest and largest physician group on July 1.

That news release noted his past positions,

the Thompson Distinguished Service Professorship and deanship at the University of Chicago Pritzker School of Medicine, where he was the longest serving Pritzker dean in the last 35 years. Subsequently, he added the responsibility of CEO of the University of Chicago Medical Center, bringing together the university’s biomedical research, teaching and clinical activities.

Perhaps not surprisingly, it did not mention the controversies at the medical center that preceded his resignation, nor his sizable golden parachute, nor his ongoing role at Leavitt Partners.

So, the American Medical Association claims to represent all US physicians and their values. It turns out that its current Executive Vice President and CEO is a former hospital system CEO who departed under fire with a golden parachute beyond any severance package a practicing or academic physician would dream about.  He also is a former and current consultant with a firm lead by one of our better recent examples of beneficiaries of the revolving door.  We have come a long, and the wrong way since the AMA asserted, "the practice of medicine should not be commercialized, nor treated as a commodity in trade." (See this post.)

This story is not just about the ridiculous compensation given to health care executives, and how this provides perverse incentives and suggests that many health care leaders have become insiders who put their self-interest ahead of the health care mission. This story is also about the connectedness of these insiders, and how they appear to control nearly every part of health care.

The Moral of the Stories

Maybe if I write this often enough, it will get some notice.... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

Health Care Policy of the Insiders, by the Insiders, for the Insiders - the Newt Gingrich Case Files

Newt Gingrich's rise to the top of the pack of Republican contenders for the US presidency has earned him increased scrutiny.  The resulting investigative reporting has provided a revealing set of case studies showing how insiders have come to dominate US health care policy.

Below I have reorganized the information presented in a series of news articles from mid-November to mid-December, 2011.

Mr Gingrich's Consulting Empire

A general description of Mr Gingrich's health care "think tank" appeared in the Washington Post.(1)

A think tank founded by GOP presidential candidate Newt Gingrich collected at least $37 million over the past eight years from major health-care companies and industry groups, offering special access to the former House speaker and other perks, according to records and interviews.

The Center for Health Transformation, which opened in 2003, brought in dues of as much as $200,000 per year from insurers and other health-care firms, offering some of them 'access to Newt Gingrich' and 'direct Newt interaction,' according to promotional materials.

Despite its name, the CHT was for-profit. Much of its actual workings are confidential, per the Post,(1)

Susan Meyers, a center spokeswoman, declined to comment on the think tank’s income or staffing levels because it is a private-sector organization.

Despite its pretentious name, the CHT was apparently a vehicle for its wealthy corporate clients to influence health policy to favor their business interests.  A NY Times article(2) reported that:

His consultancy practice was centered around his ability to help big corporate interests speak the language of Republicans and navigate the corridors of Capitol Hill on issues vital to their businesses.

According to a Bloomberg article(3), the work was quite lucrative:

Two companies founded by Newt Gingrich announced yesterday that they had grossed $55 million between 2001 and 2010, part of an effort to quiet questions about how the former U.S. House speaker earned millions since he resigned from Congress in 1999.

That revenue supports the Center for Health Transformation and The Gingrich Group LLC, which have a staff of as many as 30 people, stage health-care policy events, and provide advice to clients, Nancy Desmond, the chairman and chief executive officer of the firms, said in a written statement.

The CHT was linked to a small corporate empire, as described by the Washington Post,(4)

Former House speaker Newt Gingrich transfigured himself from a political flameout into a thriving business conglomerate. The power of the Gingrich brand fueled a for-profit collection of enterprises that generated close to $100 million in revenue over the past decade, said his longtime attorney Randy Evans.

Among Gingrich’s moneymaking ventures: a health-care think tank financed by six-figure dues from corporations; a consulting business; a communications firm that handled his speeches of up to $60,000 a pop, media appearances and books; a historical documentary production company; a separate operation to administer the royalties for the historical fiction that Gingrich writes with two co-authors; even an in-house literary agency that has counted among its clients a presidential campaign rival, former senator Rick Santorum (R-Pa.).

Separate from all of that was his nonprofit political operation, American Solutions for Winning the Future.

Relationships with Big Health Care Corporations

The Center for Health Transformation was largely funded by big health care corporations. The Post first noted,(1)

The biggest funders, ... [included] firms such as AstraZeneca, Blue Cross Blue Shield and Novo Nordisk,...

Also,(1)

The center has listed scores of firms and industry groups as members over the years, amounting to a Who’s Who of the medical field, from GE Healthcare to the American Hospital Association to Wellpoint, the nation’s largest health insurer.

Other clients were listed in a Bloomberg article,(5)

Among the member companies were drugmaker Johnson & Johnson (JNJ) and health insurer Blue Cross and Blue Shield Association....

Also,(5)

Pfizer Inc. (PFE), the world’s largest drugmaker, had consulting contracts with Gingrich, according to two people familiar with the arrangements. Pfizer spokesman Ray Kerins didn’t respond to requests for comment.

The Pharmaceutical Research and Manufacturers of America, the industry’s trade group, was also a client. His firm 'was retained by the PhRMA general counsel’s office at one time to provide advice on a positioning project,' the group said.

In addition, as noted below, clients included important firms in the health care information technology (IT) sector, including GE, IBM, Microsoft, Allscripts, and Siemens.

Below, we present several cases in which Mr Gingrich apparently intervened on behalf of his clients to promote their business interests in the guise of promoting his views on health policy solutions.  In some cases, the views he promoted did not fit with what is generally regarded as his political philosophy, suggesting that the interests of his paying clients overrode his political views.

Case: End of Life Care

The New York Times reported,(2)

Writing on the Web site of the Washington Post, Mr Gingrich praised Gundersen Lutheran Health System of LaCrosse, Wis., for its successful efforts to persuade most patients to have 'advance directives,' saying if Medicare had followed Gundersen's lead on end-of-life care and other practices, it would 'save more than $33 billion a year.'

Note that

Gundersen was one of the paying clients of Mr. Gingrich's Center for Health Transformation....

However,

within weeks, Mr. Gingrich would find himself on the wrong end of what some Republicans labeled the 'death panel' issue.

At that point, Mr Gingrich abruptly changed his tune,

As it happens, shortly after Mr. Gingrich wrote his article praising Gundersen, he joined the conservative critics of the provision. 'You are asking us to trust turning power over to the government,' Mr Gingrich told George Stephanopoulos of ABC News that August 'when there are clearly people in America who believe in establishing euthanasia, including selective standards.'

This suggested that Mr Gingrich took up the cause of end-of-life decision making not be cause he deeply believed in it, but because it was expeditious given the wishes of his clients, despite the assertion made by his spokesperson,(2)

Mr. Hammond said that Mr. Gingrich did not take policy positions for pay; rather, he said, clients sought him out because of the views he already held and his expertise in communicating ideas.

Case: Medicare Prescription Coverage Sans Negotiations about Drug Prices

As reported by Bloomberg,(5)

When U.S. House Republican leaders in 2003 were short of votes to pass a $395 billion Medicare prescription drug benefit, they recruited former House Speaker Newt Gingrich for help.

In a hushed room on Capitol Hill, Gingrich told his former Republican colleagues that if he could endorse the measure, they should be comfortable with it, too, said two former senior House aides who attended the closed-door session.

Two days later, after a vote was held open for three hours as leaders corralled the final ayes, the measure passed and was eventually signed into law by President George W. Bush.

What Gingrich didn’t mention during the Republican caucus meeting was that he was also building a for-profit, health-care research company and seeking financing from drugmakers, which were investing $128.6 million in lobbying for passage of the new benefit for seniors.

Note that the legislation that provided Medicare drug coverage forbade the government from negotiating prices with drugmakers.  This was unprecedented, because drug coverage from the US Veterans Administration and Medicaid did not come with the obligation to pay whatever the drug-makers charged.  The inability of Medicare to negotiate the prices it paid for drugs certainly helped the companies' revenues while driving up the costs of Medicare, the federal deficit and the costs of health care in general.

Case: Promoting Expensive Diabetes Care

The Washington Post reported,(4)

Novo Nordisk, a Denmark-based drug firm that specializes in diabetes treatments.... paid a total of $1.2 million to Gingrich’s foundation over six years as a 'founding charter member.'

'It was strictly a business, nonpolitical relationship,' Novo Nordisk spokesman Ken Inchausti said. 'We admired his leadership on issues related to health-care delivery systems. We thought the CHT brought something to the table to us in terms of finding ways to help people prevent diabetes.'

Gingrich loaned his celebrity to causes that, whatever their other merits, could also be good for Novo Nordisk’s bottom line. For instance, he was the keynote speaker at Novo Nordisk’s 'diabetes summit' in 2005 and joined the company in issuing a 'call to action' to fight diabetes in Texas and Georgia.

One wonders how many of the widely promoted "summits" and other star-studded conferences on health care featuring corporate  and political leaders as speakers are just stealth health policy advocacy or stealth marketing.

Case: Irrational Exuberance for Electronic Health Records

My fellow Health Care Renewal blogger has often discussed the "irrational exuberance" for electronic health records (EHRs) despite scant information about their benefits, and increasing data suggesting their harms.  It now appears that Mr Gingrich, sponsored by copious funds from the health care IT sector, has been a major source of such exuberance. 

Mr Gingrich had a complex relationship with the health care information technology (IT) industry. It began to come out first in a NY Times story,(6)

When the center [for Health Transformation] sponsored a 'health transformation summit' at the Florida State Capitol in March 2006, lawmakers who attended Mr. Gingrich's keynote speech inside the House chamber received a booklet promoting not just ideas but also the specific services of two dozen of his clients. Executives from some of those companies sat on panels for discussions that lawmakers were encouraged to attend after Mr. Gingrich's address.

Gerard White, president of Clearwave, which paid about $50,000 to become a center member, used the occasion to pitch his company's system for managing patient data.

This had all began earlier,

Two years before the Florida 'summit,' Mr. Gingrich made a presentation to Republican lawmakers in Georgia, promoting the work of his member companies by citing specific benefits if they were hired. For example, 'VitalSpring could save the State Employee Program over $20 million a year.'

Minutes of the members-only conference call from March 2004 said the center had 'arranged joint meetings' for members to present their work on electronic health records to top federal officials, noting that Mr. Gingrich 'reported very positive feedback overall from these meetings.'

He also pressed for passage of a federal bill to increase the use of electronic health records, collaborating with one of its co-sponsors, Representative Patrick J. Kennedy of Rhode Island, and Senator Hillary Rodham Clinton of New York, both Democrats.

Furthermore,

Many of the ideas he has pushed involve the increased use of information technology, and companies specializing in that are well represented in the center's roster. They also figured prominently in an early center initiative, teaming up in 2003 with the conservative Georgia Public Policy Foundation to promote changes in health care in Mr. Gingrich's home state.

At his discussion with Georgia House Republicans in 2004, Mr. Gingrich gave examples of companies whose services could 'both improve health and start saving money,' according to the center's summary of his presentation.

And there is more,

In Washington, Mr. Gingrich's push for electronic health records illustrated how his own policy advocacy and ties to former Congressional colleagues made him a sought-out consultant for companies like Astra Zeneca and Siemens. Mr. Gingrich hailed HealthTrio, one of the center's 'founding charter members,' during a hearing held in 2003 by Senator Larry Craig, Republican of Ohio. Telling the senator that HealthTrio's chief executive had helped design the electronic records program in the United Kingdon, Mr. Gingrich said the company 'estimates we could have an electronic health record for American for about 10 cents per month, per person.'

The center later arranged for HealthTrio and I.B.M to meet with senior federal health officials and congressional leaders 'to review the U.K. approach and how it might be applied in the U.S.,' according to center records.

Some of the ideas promoted by the center found their way into the electronic health records legislation proposed by Mr. Kennedy, which was prepared with input from Mr. Gingrich.

This is especially ironic, given that the UK NHS electronic health record initiative has become a crashing failure (for example, see this post).

Even more involvement with the push for electronic health records (EHRs) appeared in a Boston Globe article,(7)

Newt Gingrich seized the TV airwaves in 2009 to bash President Obama’s stimulus package, calling it 'entirely a pork-barrel bill' that would do little to solve the recession.

Later, in a separate web video, the former House speaker stepped back from his blanket criticism. He explained that he strongly supported spending $27 billion of stimulus funds to encourage doctors and hospitals to create electronic medical records for their patients. Left unsaid was that the Gingrich Group, his consulting business in Washington, received large payments from medical technology companies that stand to profit from the federal money.

In particular,

The stimulus infusion Gingrich supported is expected to benefit health care technology companies, including those who have been clients such as GE Healthcare and Allscripts.

GE Healthcare said it pays Gingrich’s center to act as a 'collaborator and facilitator' among a diverse group of health care interests.

'We work with the Center for Health Transformation in an effort to improve the effectiveness of the health system through the use of information technology,' said GE Healthcare spokesman Corey Miller.

Allscripts spokeswoman Ariana Nikitas said the company ended its relationship with Gingrich’s center two years ago but considered the venture 'a think-tank to advance health care efforts.'

It does not stop there. Per the NY Times,(8)

Mr. Gingrich was cheering a $19 billion part of the [Obama stimulus] package that promoted the use of electronic health records, something that benefited clients of his consulting business. 'I am delighted that President Obama has picked this as a key part of the stimulus package,' he told health care executives in a January 2009 conference call.

After the bill was passed a month later, Mr. Gingrich's consultancy, the Center for Health Transformation, joined two of his clients, Allscripts and Microsoft, in an 'Electronic Health Records Stimulus Tour' that traveled the country, encouraging doctors and hospitals to buy their products with billions in federal subsidies.

We, particularly InformaticsMD, have frequently commented on how health care information technology has been promoted not just by enthusiasts in the field, and by companies that manufacture such devices, but by the government.  The bandwagon has gone down the road despite little clinical evidence that such technology is beneficial, and increasing evidence of its harms.  Now it appears that an important reason for this ruch to promote expensive, but unproven devices comes from the sort of stealth health care policy advocacy on behalf of corporate vested interests described above.
Summary

So Newt Gingrich parlayed his political track record into a lucrative "consultancy" which enthusiastically promoted the health policy objectives of its clients, who included some of the biggest US health care corporations.  Some of the policy positions the consultancy promoted seemed to run counter to Mr Gingrich's political record.  Worse, some of the initiative he successfully promoted seem to have contributed to US health care dysfunction.

These stories, some of which are many years old, only came out after Mr Gingrich became the front runner for the Republican nomination for US President.  Had he not chosen to re-enter politics, it is not clear when reporters would have had time to due the required investigations.  One wonders how many similar stories have not been made public because they do not involve prominent presidential candidates.

The bottom line seems to be that there are myriad ways corporate and political insiders push health policy agendas because of self-interest, regardless of their effects on patients' and the public's health.  Health policy in the US has become an insiders' game.  Unless it is redirected to reflect patients' and the public's health, facilitated by the knowledge of unbiased clinical and policy experts rather than corporate public relations, expect our efforts at health care reform to just increase health care dysfunction. 

Physicians, public health advocates, whatever unbiased health policy experts remain must educate the public about how health policy has been turned into a corporate sandbox.  We must try to somehow activate the public to call for health care policy of the people, by the people, and for the people.

References


1.  Eggen D. Gingrich think tank collected millions from health-care industry.  Washington Post.  November 17, 2011.  Link here.
2. Rutenberg J. Gingrich faces more scrutiny over corporate clients. NY Times, November, 17, 2011. Link here.
3. Benson C, Lerer L. Gingrich health center and group paid $55M. Bloomberg, November 22, 2011. Link here.
4. Tumulty K, Eggen D. Newt Gingrich Inc.: how the GOP hopeful went from political flameout to fortune. Washington Post, November 26, 2011. Link here.
5. Davis JH, Jensen K. Gingrich campaigning as change agent profited as an insider. Bloomberg, November 18, 2011. Link here.
6. McIntire M, Rutenberg J. Gingrich gave push to clients, not just ideas. NY Times, November 29, 2011. Link here.
7. Rowland C. Newt Gingrich supported $27 billion of President Obama's stimulus for electronic medical records, helping his consulting clients. Boston Globe, December 16, 2011. Link here.
8. Rutenberg J, McIntire M. Gingrich push on health care appears at odds with G.O.P. NY Times, December 16, 2011. Link here.