The Restless Shade of AHERF and the Return of Merger Mania: Highmark Tries to Buy Another Insurance Company, a Hospital System, a Medical School, and Physicians' Practices

Starting in the 1990s, as US health care became more commercialized, a wave of mergers lead to super-sized hospital systems, insurance companies, and pharmaceutical companies.  Not all those mergers, especially involving hospitals, prospered.  Although the mergers were justified as drivers of increased efficiency, health care has become decreasingly accessible, increasingly expensive, and of no better quality.  However, now a whole new wave of mergers seems to be upon us. 

The Proposed Highmark Blue Cross/ West Penn Allegheny Health System Merger

The latest example to get national attention is the proposed combination of already large non-profit health insurer Highmark Inc, a Blue Cross Blue Shield plan, and non-profit hospital system Allegheny Health System.  The national attention was in a Wall Street Journal article by Anna Wilde Matthews, which described the proposed transaction:

Pittsburgh insurer Highmark Inc. struck a deal to acquire the second-largest hospital chain in its region, an ambitious, controversial step that would further blur the lines between those who pay for medical care and those who provide it.

Under the tentative plan, nonprofit Highmark will pump as much as $475 million into the five-hospital West Penn Allegheny Health System, which has been operating in the red for the past five years.

If state and federal regulators sign off on the plan, Highmark officials say the deal will allow them to move away from traditional fee models that reward providers for providing unnecessary procedures and services.

Instead they would pay salaries to doctors, offering them incentives to achieve quality and efficiency goals. The integrated model would also rely on primary-care doctors to coordinate patients' care and focus on preventive efforts.

Highmark officials said the deal is the best way to keep West Penn in business. 'It brings our expertise as an insurance company into the provider system,' said Kenneth R. Melani, Highmark's chief executive.

This deal is unusual because it would unite a health care insurance company/ managed care organization with a hospital system.

The Context: An Already Concentrated Health Care Environment

The deal appears in the context of and may be in response to an already concentrated health care environment.  Per the WSJ:

The newly combined Highmark-West Penn will face off against the University of Pittsburgh Medical Center, which is officially known by its acronym, UPMC. The prestigious $8 billion,19-hospital network employs 2,881 doctors and has about 56% of the inpatient market share in Allegheny County. It also owns a health plan with about 1.6 million members.

UPMC's current contract with Highmark runs out next June. Paul Wood, the hospital system's vice president for public relations, said the network won't sign a new one after the acquisition. 'In effect, Highmark expects UPMC to subsidize our competitor,' he said.

UPMC has had its issues, too, as discussed in posts here. 

The deal is also more extraordinary because it was accompanied by several other proposed deals that would create quite a sprawling health care entity.

The Extended Scope of the Merger

First, and as noted in the WSJ article, the proposed deal would involve physicians' practices:

Highmark may also buy or invest in other providers, including doctor practices, Dr. Melani said.

However not noted in the WSJ article, or in a contemporaneous Pittsburgh Post-Gazette article, was that since 2010 there has also been a proposal on the table for Highmark to merge with a non-profit Blue Cross Blue plan in neighboring Delaware. The latest discussion of this deal can be found on DelawareOnline, and was just noted in a Philadephia Inquirer commentary.

In Delaware, a bill that would remove a major obstacle to Highmark's proposed affiliation with Blue Cross Blue Shield of Delaware sailed through the legislature, passing the Senate unanimously Tuesday and the House, 34-5, Wednesday.

That is not all. It seems that while pursuing the merger with Highmark, West Penn Allegheny Health was also pursuing an arrangement with Temple University to set up a branch of its medical school in Western Pennsylvania. As noted by the Pittsburgh Tribune Review:

West Penn Allegheny Health System leaders expressed optimism on Friday about their partnership prospects with Highmark Inc. as they announced plans with Temple University to establish a four-year medical school campus in the North Side.

So it appears that lined up against the UPMC behemoth could be another behemoth combining a large Pennsylvania insurance company, a Delaware insurance company, a good-sized hospital system, physicians' practices, and a branch of a medical school.  So we see a new effort to divide the health care supposed "market" among a few large, vertically-integrated health care systems.

The Eerie Shadow of AHERF

Maybe all these simultaneous deals, which would apparently create a conglomerate of Highmark Blue Cross, Delaware Blue Cross Blue Shield, West Penn Allegheny Health System, Temple University Medical School, and possibly a large group of doctors' practices, were all being discussed separately because of how they could be seen as a strange shadow of the spectacularly failed Allegheny Health Education and Research Foundation (AHERF) of the late 1990s.

As discussed here, AHERF was a large integrated health care system formed out of multiple mergers.  AHERF which went bankrupt in 1998, leading to massive layoffs, hospital closures, and the near dissolution of a medical school (which ended up taken over by Drexel University). The former AHREF CEO, whose high compensation (for the time) was accompanied by an autocratic management style, ended up in the local jail on a plea bargain. Note that West Penn Allegheny Health System was formed from some of the pieces of the failed AHERF, and seems to have never fully recovered from its previous troubles.

Despite the fact that the AHERF bankruptcy was the second largest US bankruptcy up to its time, this vivid case was notably anechoic. The lack of echoes it originally produced made it prototypical of the anechoic effect.

The link to AHERF was briefly noted in the Post-Gazette article:

'They are well-capitalized, and we're not,' said David L. McClenahan, WPAHS board chairman, speaking of Highmark. 'That's putting it mildly.' In the decade since the collapse of the Allegheny Health Education and Research Foundation, whose bankruptcy eventually bore the West Penn Allegheny Health System, WPAHS has been persistently starved for capital, he said.

So far, however, the ominous implications of that previous debacle have not been publicly discussed.

How Some Executives Would Gain

Perhaps the executives rushing to make a deal are being distracted by the potential for personal gain. The DelawareOnline article noted that current executives of Delaware Blue Cross Blue Shield may be able to pull the ripcords of their golden parachutes if its proposed merger with Highmark goes through:

Seven executives at Blue Cross Blue Shield of Delaware, for example, are due a combined $6 million in severance pay -- equal to about three years of salary -- if they lose their jobs.

Details of Blue Cross severance payout packages have attracted attention recently because top executives at Delaware's largest health insurer are busy pressing for a merger with Pittsburgh-based insurer Highmark Inc., which could mean the elimination of some top positions.

Highmark has pledged that Blue Cross President and CEO Tim Constantine will keep his job after the merger's closing, if the deal is approved by state regulators. But Constantine, who has an annual salary of $420,000, would be due a $1.6 million payment if he were to lose his job.

Six other top executives, who earn between $245,000 and $330,000 annually, have potential payouts equal to about $4.3 million. Highmark has not discussed the fate of those officers, who range in position from the company's general counsel to its chief medical and financial officers.

That article further noted:

Some observers worry that the prospect of large severance payments could cloud the judgments of executives working to close the deal.

Considering the size of the Blue Cross payouts in relation to annual salaries, the payout promises deserve attention, said Ethan Rome, executive director of Health Care for America Now, a Washington consumer advocacy group. Severance agreements are typically in place to provide a cushion between jobs, he said. 'Three years is a long time,' Rome said. 'Three years is not a severance. It's a substantial payout.'

One wonders which other executives involved in these potential deals may also have prospects for either larger compensation or golden parachutes. This could include executives in particular current executives of West Penn Allegheny.  One also wonders whether the creation of this new conglomerate will produce rationales for big raises for the current executives of all the organizations involved who get to work for the new merged entity.  Perhaps someone should ask them.

Further Implications

Of course the various mergers were touted as productive of new efficiencies, as attempts to obtain increased market power usually are. As reported by the Post-Gazette:

While the short-term goal of this partnership is to preserve a 'fragile' Pittsburgh hospital system, the long term goal, said Highmark CEO and President Kenneth Melani, is the creation of a new model of health care, one that is outcomes based, with an integrated delivery and financing system.

;Health care services are becoming less affordable,' he said. 'It's important to have choice. It's important to have a second system.'

And, as we discussed here, the former CEO of AHERF pledged "new forms of organization that are more flexible, more adaptive, and more agile than ever before." But common sense and history suggests that increasing market domination will be good mainly for the market dominators, not their customers, or in this case, their patients, clients and students.

As Dr Westby Fisher asserted about how the new conglomerate will likely own physicians' practices:

So doctors lose more professional independence and autonomy and have even more chance that clinical decisions will be compromised by bureaucratic dictates. Yet ask patients who they want steering the boat when they get sick: their doctor.

It continues to be clear who the winners and losers are as health care reform unfolds. But when doctors lose autonomy, patients lose autonomy.

It’s that simple.

To argue that the only way to control the health care dollar is to bloat the bureaucratic levels of our system is a fool’s game. However, bureaucrats promote bureaucrats – it’s always been this way. Until doctors and the public speak up, there’s simply nothing to stop this train.

So I wonder if this complex merger will get more scrutiny than the many mergers that have preceded it in the last 30 years. Someone who is more likely to get answers than I am should be asking:
- What evidence is there that this merger will lead to any benefits to individual patients or to the public health?
- How will any efficiencies achieved benefit anyone other than the organizations' current and future managers?
- What sorts of management layers will the complexity of the multiple mergers proposed necessitate between current Highmark executives and current management of its new acquisitions?
- If the current problem is existing market concentration, why will these mergers be a better solution than a direct approach to that concentration?
- How will the current leaders of all the organizations involve personally benefit from this merger?

Meanwhile, increasing concentration of power in health care continues to benefit the leaders of the enlarging health care organizations, while reducing the choice of individual patients and the autonomy of health care professionals.

Healthcare Renewal Cited in Pittsburgh Post Gazette on Health IT Issues

Healthcare Renewal was cited in the Pittsburgh Post Gazette today on health IT issues.

Specifically, regarding issues I raised at my May 25, 2011 post "Transplant Team at UPMC Missed Hepatitis Result - Suspicious for Health IT Failure?"

I have several additional amplifying comments.

Doctor, nurse disciplined by UPMC
Failed to detect hepatitis C in kidney donated for transplant
Friday, May 27, 2011
By Jonathan D. Silver and Sean D. Hamill, Pittsburgh Post-Gazette

A surgeon and a nurse were disciplined by UPMC for their roles in missing a positive hepatitis C test result in a kidney donor earlier this month that might have stopped the transplant, the hospital system said Thursday.

The surgeon was demoted and the nurse suspended, though neither has been identified.

In addition, after a discussion with federal officials, the hospital system voluntarily suspended its live-donor liver program as a precaution, three days after shutting down its live-donor kidney program on May 6, following the transplant error. Both programs remain closed.

But while UPMC has taken action against the two staff members, health care technology experts say UPMC's information technology might have played a role in the incident.

"Checking for all types of hepatitis is so ingrained in the culture of doctors," said Scot Silverstein, a medical informatics expert and adjunct professor at Drexel University in Philadelphia. "If they didn't check for hepatitis C, that means they didn't check for hepatitis A or B either, and that means they didn't check for anything."

"That just isn't credible," said Dr. Silverstein, who explored the possible ways the technology played a role in the kidney transplant error in the blog Health Care Renewal.

"There are two possibilities," he said. "Either you have a dozen or more people on that transplant team who are just stupid, or, more plausibly, when they looked at the record the hepatitis C record was just not there or it was incorrect when they saw it."

The incident first came to light May 6, when UPMC notified the Centers for Medicare and Medicaid (CMS) as well as the United Network for Organ Sharing, that it had detected an error in a recent kidney transplant.

It was a living kidney transplant between a woman and a man who are a couple, sources have told the Post-Gazette. The woman did not know she was hepatitis C positive, and she was tested, but the test results were somehow missed by people on the transplant team, and the transplant went forward.

... Because of the error, UPMC had decided on its own on May 6 to shut down the living donor kidney program.

Then, on May 9, when UPMC officials were discussing the situation with the U.S. Health Resources and Services Administration, they mutually decided to shut down the living donor liver program, too, said Michele Walton, a CMS spokeswoman.

Read the entire article.

I strongly feel there is much more going on here than a careless surgeon and nurse. Closing down these transplant programs for now is a major, major step that actually endangers patients on waiting lists. As per an anonymous comment received in my aforementioned May 25 post (link to full comment):

I surely hope they get this figured out soon as there are MANY lives on the line here. A very good friend of mine is on the list there and has myself as a willing paired donor and another mutual friend of ours as a perfect match donor that has one test to be done and then it is a go. With all of the testing that we both have had to go through - and by the way, myself now a second round as it has been more than a year since the original testing and no paired match has been located as of yet, that these things are known as soon as the tests are ran. I would have to agree that this must be beyond human error.

... This needs to be addressed and corrected like YESTERDAY. We have many out their literally dying on the lists.

I was also cited as follows later in the Post Gazette article:

... Dr. Silverstein and other experts say the current electronic health records systems that highly wired hospitals like UPMC have in place routinely flag test results for everyone connected to a surgery to see.

But those systems have been known to cause the same kinds of errors they were designed to prevent over the old-fashioned paper records. [E.g., as per the FDA internal memo on HIT risk I described at this Aug. 2010 post; see tables 4 and 5 - ed.]

I do think the reliability of existing alerting systems has been over-represented. "Flagging" a test result awaiting someone to note the flag amidst a sea of screens, icons and clutter, and setting off aviation-like stall alarms and other fail-safes that nobody can miss, are two different matters.

For the hundreds of millions of dollars spent on health IT by organizations like this, and the hype proffered about this technology, events such as the post-facto discovery of a tainted transplanted organ should truly be considered "cybernetic 'never' events."

One might also wonder if the informational issues, whatever their source, occurred more than once: that is, if prior transplant recipients who participated in these programs need to be checked for tainted organs.

That the Post-Gazette article was published on the one-year-to-the-day "anniversary" of my own mother being cybernetically turned into a train wreck due to the toxic effects of HIT -- in an ED where I once worked in the paper era where I do not recall EOT mistakes of the kind that nearly killed my mother ever happening -- is ironic.

Finally:

If health IT is indeed implicated in the UPMC error, and if UPMC knew of system unreliabilities that could have caused the clinical errors, both patients and affected clinicians can likely raise charges of criminal negligence on the part of those responsible for these IT systems.

Politics and an overall 'lawlessness' (per Hoffman & Podgurski) in the health IT sector needs to be replaced with the scientific and regulatory methods of medicine, such as intensive pre-marketing evaluations, clinical trials and post marketing surveillance of these systems.

Perhaps some jail time for the cavalier would remind people these are not toys, gaming computers, or slot machines, and that the subjects of health IT systems are human beings, not lab rats.

-- SS

Addendum May 27, 2011:

A reader reminded me of my 2009 post "UPMC as Proving Ground for IT Tests On Children: Pioneers in Health IT, or Pioneers in Ignoring the Past?"

-- SS

Million Dollar Plus Hospital CEO Compensation: "It Is What It Is" or What the Board Says It Is?

Health care leaders' compensation has again been in the news. Below are highlights from stories about four medical centers, emphasizing the magnitude of executive compensation, how it is related, or not to hospital and executive performance, and whether and how the organizations' boards chose to justify it. The medical centers are in alphabetical order.

University of Pittsburgh Medical Center

Compensation
According to the Pittsburgh Post-Gazette:

In tax documents released Friday, Jeffrey Romoff, president and CEO of the University of Pittsburgh Medical Center, received $4.01 million in salary, bonuses and benefits that year.

Also,

Other top earners at UPMC include neurosurgeons Ghassan Bejjani, $2.37 million in salary and benefits, and Richard Spiro, $2.23 million; cardiothoracic surgeon James Luketich, $1.96 million and executive vice president Elizabeth Concordia, $1.88 million.

In summary, UPMC has a four plus million dollar CEO, and a nearly two million dollar executive vice president.

Hospital/ Executive Performance

None of the articles I found on these executives' pay juxtaposed information on their or their institutions' performance.

A Pittsburgh Business Times article summarized the medical center's recent financial results:

Strength in outpatient revenue, insurance premiums and hospital admissions helped drive operating income to $313 million for the third quarter at the University of Pittsburgh Medical Center, a 75 percent increase from $179 million a year earlier, according to financial results released Friday.

However,

UPMC’s operating margin still trails the 4.1 percent of other institutions with an AA bond rating....

However, there have been recent concerns about ethics and quality at the institution.

Another Post-Gazette article revealed how relatives of top leaders seem to gain well-paid positions within the system:

particularly at UPMC, gainful employment extends to other branches of the family tree.

Mr. Romoff's daughter, Rebecca Kaul, was paid $388,659 in fiscal year 2010 for her work as president of UPMC's Technology Development Center. The center "is helping develop the next generation of information technology at UPMC," said spokeswoman Susan Manko.

Ms. Kaul's salary jumped from the $264,274 reported for the fiscal year ending June 30, 2009, an increase that Ms. Manko said was the result of a sale of a computer-assisted coding product joint venture 'at a substantial return on investment at which time Ms. Kaul received certain compensation based on the terms of the sale of the company.'

She added that, 'Mr. Romoff was not involved in the decisions pertaining to this transaction.'

According to the tax document, Mr. Romoff's former son-in-law by another daughter, Scott Gilstrap, was paid $236,347. He worked with grants and services contracts before leaving UPMC in December 2009.

Kathleen Pietragallo, sister-in-law of UPMC board member and attorney William Pietragallo, received $88,646 working in a laboratory at UPMC Presbyterian Hospital. Mr. Pietragallo's brother, Louis Pietragallo, is a medical oncologist for UPMC who was paid $613,082, according to the tax return.

And Scott Cindrich, son of UPMC's former chief legal officer, Robert Cindrich, received $138,618 as legal counsel for UPMC, according to Ms. Manko.

Also listed on the UPMC return is Anna Roman ($288,696), senior vice president for the University of Pittsburgh Physicians, who is the wife of University of Pittsburgh Physicians board member and UPMC pathologist George Michalopoulos.

The University of Pittsburgh Physicians is a multispecialty practice plan that employs UPMC physicians who are on the faculty of the Pitt School of Medicine and also care for patients and train residents in UPMC facilities, Ms. Manko said.

Note that we discussed questions of favoritism towards relatives of top leaders at UPMC here.

Also, Dr Scot Silverstein just posted on a major quality problem at UPMC, the transplantation of an organ from a hepatitis C positive donor.

To summarize, the medical center is making a lot of money, but its operating margin may not be has high as some of its peers. There are questions about nepotism amongst the leadership, and there is a current serious concern about the medical center's transplant program.

The Board's Justification

There was no recent reporting on this.

Valley Medical Center

This hospital is in Renton, Washington.

Compensation

Per King5 News:

The chief executive officer of the hospital, Rich Roodman, is the highest paid public employee in the state of Washington. Last year he made a base salary of $615,000. He also collected a bonus of $201,201 for meeting performance goals. On top of that he was paid $263,335 in a retention payment.

In total, Roodman earned $1,134,837 in 2010 to run Valley Medical Center, which is part of King County Hospital District No. 1.

Note that

Roodman makes about 40 percent more than the chief executive officer of University of Washington Medicine and more than double what the executive director of the University of Washington Medical Center earns.

Also,

The reporters found it's not just the CEO, but all top managers at Valley Medical Center who pack home healthy paychecks.

Paul Hayes, the executive vice president, made $588,249 last year, which included a bonus of $154,275 for meeting performance goals.

The senior vice president of medical affairs, Kathryn Beattie, made $489,479. Those figures outpace the top boss at renowned Harborview Medical Center, which is also funded by tax dollars.

The in-house attorney for Valley Medical Center, David Smith, pulled in $352,196 in 2010, which makes him the highest paid public lawyer in the state. Smith makes about two-and-a-half times what Attorney General Rob McKenna is paid.

In summary, the CEO of a relatively small, public hospital made over $1 million, and several executives made over $350,000.

Hospital/ Executive Performance

Controversy over money isn't new to Valley Medical Center. Four years ago the Washington State Public Disclosure Commission (PDC) fined CEO Roodman $120,000 after they found the hospital illegally spent tax dollars on mailings, postage and consultants to sway voter opinion on ballot measures in 2005 and 2006.

The PDC called it the biggest case ever involving a public agency misusing taxpayer dollars for a campaign. Valley Medical Center called it a misunderstanding.

In 2009 the Washington State Auditor’s Office found Roodman collected a troubling $1.7 million retirement payment that year, on top of the $900,000 salary he earned in 2009. The auditor found the commissioners authorized this payment 'without explanation or public benefit.' The auditor also recommended Valley Medical Center should 'avoid including similar provisions in future contracts.'

State authorities have questioned the ethics and legality of actions apparently authorized by the hospital's top leadership.

The Board's Justification

Board president Sue Bowman did speak with KING 5 by telephone. She said the compensation levels are important to stay competitive. They don’t want to lose top talent to other hospitals.

'I don’t know why Rich’s [CEO] pay is an issue? Commissioner Hemstad brings it up over and over again. I told him, 'Anthony, it is what it is,'' said Bowman. 'I don’t think the five-member board needs to keep focusing on compensation. What are we doing for the community? That’s what’s important.'

Bowman also said the board carefully considers research presented to them by outside consultants and attorneys before voting on CEO compensation. Milliman, a healthcare compensation consulting firm, provides the hospital with a full analysis of market comparative data every other year. They consistently find Valley Medical Center’s pay structure is right on target.

John Hankerson, principal and strategic rewards practice leader of Milliman, wrote a memo about his findings to Roodman and Bowman dated February 9, 2011.

'We have consistently found that base pay and total cash compensation have been well aligned with [hospital goals] and that the magnitude of the incentive plan is consistent with other healthcare organizations that are striving to improve performance and quality patient care,' wrote Hankerson.

'We defined the appropriate market [comparable salaries] as ‘where VMC [Valley Medical Center] might recruit executive talent from or where it might lose executive talent to.’ In that light we have included such local organizations as Evergreen, Overlake, Virginia Mason to name just a few,' wrote Hankerson. 'In our opinion, the current levels of incentives used at VMC are appropriate and consistent with best practice as well as smart management.'

However, note that:

Senator Cheryl Pflug, the ranking minority on the Senate Health & Long-Term Care Committee, doesn’t think public hospitals should be basing salaries on what non-profit and for-profit institutions pay.

'They pick and choose who they compare themselves to. A much more appropriate comparison would be the University of Washington,' said Pflug.

Note that the chair of the hospital board first tried to give the impression that the executives' compensation was a natural phenomenon ("it is what it is,") rather than set by the board. Then it appeared that the compensation was set partially by referring to pay at clearly dissimilar institutions which generally pay more than public hospitals. Finally, although the implication was that high levels of compensation were justified by the performance of the executives, no specifics about that performance was provided, and certainly the recent questions about the ethics and legality of the executives' decisions were ignored.

Wake Forest Baptist Medical Center

Compensation

The Winston-Salem Journal reported:

Dr. John McConnell, the system's chief executive, was paid $1.68 million in total compensation for fiscal 2009-10, compared with $764,797 for fiscal 2008-09. McConnell took over as chief executive — a new position — in October 2008.

McConnell was paid $831,288 in salary for fiscal 2009-10, as well as $266,667 in bonuses and incentives, and $115,661 in other reportable compensation. He also received $441,589 in retirement and other deferred compensation.

In fiscal 2008-09, McConnell was paid $133,333 in salary, $140,000 in bonuses and incentives, $38,564 in other compensation and $440,105 in deferred compensation.

Donny Lambeth, the president of N.C. Baptist Hospital, had a 29 percent increase in total compensation to $849,521. His salary was raised 20 percent to $604,495, while his bonus and incentive compensation decreased 37 percent to $70,030. He had $136,459 in retirement and other deferred compensation.

Edward Chadwick, the system's chief financial officer, received $734,282 in total compensation, including $294,218 in salary and $350,000 in bonus and incentive compensation. He took over in his role in July 2009.

Besides McConnell, the top executives listed for Wake Forest University Health Sciences were Dr. William Applegate, president of the division and dean of its medical school; Dr. Thomas Sibert, its president and chief operating officer; and Doug Edgeton, president of the Piedmont Triad Research Park.

Applegate, who is retiring from both posts June 30 to focus on his geriatrics practice and research, received a 38 percent increase in total compensation to $996,706. His salary was raised 4 percent to $534,843 in salary, while his bonus and incentive compensation rose from $115,000 to $378,900.

Sibert received $974,188 in total compensation, including $266,654 in salary, $550,000 in bonus and incentive compensation and $112,390 in other reportable compensation. Sibert took over his role in September 2010.

Edgeton received a 44 percent increase in total compensation to $906,202. His salary was raised 7 percent to $491,391, while his bonus and incentive compensation rose from $102,200 to $361,600.

In summary, the CEO made over $1.5 million, and other leaders made from just under three-quarters to just under $1 million.

Hospital/ Executive Performance

There was nothing in the article above or in the news media about the performance of the executives or the hospital.

The Board's Justification

Per the Winston-Salem Journal:

Wake Forest Baptist said in a statement that it has a 'very rigorous system' to determine and approve its executive compensation packages. It has an external compensation consultant provide comparable data from similar health-care institutions, such as Duke University Health System, UNC Health Care and the University of Chicago Medical Center.

The Wake Forest Baptist system said that as one of 130 academic medical centers in the United States, 'there are few executives with the required skill set to manage and provide leadership for an integrated (center) such as ours.'

'Wake Forest Baptist's executive-compensation packages are fiscally responsible, appropriate for the marketplace and an essential part of the effort to recruit and retain skilled executives and visionary leaders for the medical center,' the statement said.

According to the Triad Area Business Journal:

'Recruitment and retention of the capably skilled executives is key to keeping Wake Forest Baptist fiscally sound and appropriately managed so we can continue to be a primary medical resource for patients in our community and our region,' the health system said in a prepared statement.

Again, much was made of process that compared the executives' compensation to that of other institutions. Their compensation was apparently based on the assertion that they were all "skilled and visionary," without any specifics provided to back it up.


West Penn Allegheny Health System

Compensation

Again, according to the Pittsburgh Post-Gazette

Christopher Olivia, ... at West Penn Allegheny Health System, received total compensation worth $1.91 million.

Also,

At West Penn, neurosurgeon Hae Dong Jho received $1.39 million in compensation in 2009 and Roy Santarella, executive vice president and chief administrative officer for the health system, received $1.25 million.

In summary, the CEO received nearly $2 million, and the executive vice president $1.25 million.

Hospital/ Executive Performance

Per the Pittsburgh Tribune-Review:

The region's No. 2 hospital network is losing money, but West Penn Allegheny Health System's board of directors gave its CEO a 40 percent bonus, according to tax documents released on Friday.

More specifically,

West Penn Allegheny Health System reported an operating loss of $89.9 million in the fiscal year that ended June 30. From July to December, it lost an additional $26.8 million, a drop officials attributed to $12 million in employee severance packages, extra consulting fees and falling inpatient volumes.

In a bid to improve its financial position, the system is consolidating many of its services at Allegheny General Hospital in the North Side. Last year, it shut down its emergency room at Suburban General Hospital in Bellevue and plans to do the same at West Penn Hospital in Bloomfield on Dec. 31.

The system's officials have said they expect to lay off up to 400 workers this year.

In summary, the hospital is losing a lot of money, and likely will be laying off a lot of workers.

The Board's Justification

Kelly Sorice, a hospital system spokeswoman, declined to comment on the bonus.

Summary

CEOs at even small medical centers in the US can now expect to receive more than $1 million a year in compensation.  Those at larger institutions may get several millions a year.  Other top executives can now expect proportionately high compensation.  Thus, being a top executive at a medium or large hospital now practically guarantees becoming rich. 

Worse, there seems to be no correlations among compensation and performance of the executives or the hospitals.  Executives at hospitals that are losing money, having quality problems, or criticized for unethical behavior still can make this much.

The boards that are supposed to exercise stewardship over these institutions do not seem to feel the need to justify the money they hand to executives in any detail.  They almost never seem to feel that their own executives are anything less than above average, despite facts that might cast doubt on this assumption, and almost always seem to feel that their executives are entitled to be paid at least as well as their peers.  This suggests at best a lack of critical thinking by board members, and at worst, crony capitalism.

Making hospital leaders feel entitled to make more and more regardless of their or their institutions' performance seems to be a recipe for "CEO Disease," leading to disconnected, unaccountable, self-interested leaders.  The increasing prevalence of CEO disease in health care may explain why costs keep increasing, access keeps declining, and quality and safety are stagnant. 

So, as I have said before,.... 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.

Transplant Team at UPMC Missed Hepatitis Result - Suspicious for Health IT Failure?

A story suspicious for EMR malfunction appeared in the Pittsburgh Post Gazette:

Transplant team missed hepatitis result

Kidney donor, recipient unaware of virus' presence

Saturday, May 21, 2011

By Sean D. Hamill and Jonathan D. Silver, Pittsburgh Post-Gazette

The living donor and recipient of a recently flawed kidney transplant at UPMC are a couple who did not know that the donor, a woman, was hepatitis C positive, and didn't find out until after the kidney was transplanted into the man [which stunningly implies the entire transplant team didn't know, either - ed.], sources told the Pittsburgh Post-Gazette.

The woman was tested for hepatitis C prior to surgery, and the results showed she was positive for the virus, but the two people on the transplant team who should have checked the results and stopped the transplant, failed to do so, sources also said.

[Or was the data missing? Something is not right here. What, exactly, was checked, and what, exactly, was not checked? Did they also check for other infectious diseases such as HIV, hepatitis A, B, etc., or did they "miss" them, too? See below - ed.]

On May 11, two days after the transplant became public, a board member said Elizabeth Concordia, UPMC's executive vice president, gave a 20-minute presentation to the hospital system's board of directors during its regular meeting and told them that the positive test was missed during 12 steps throughout the process.

The failure to act on the positive test was so serious that it was considered a "systemic" problem in the way the protocols failed in this one case, Ms. Concordia said, according to the board member, and that's why UPMC voluntarily shut down its living donor transplant program May 6. [A rather extreme measure - ed.] The program will remain closed until an investigation is completed and new protocols can be drawn up to prevent the error from occurring again.

The hospital system would not confirm these details or release a copy of its internal protocols that would show who on the transplant team should have reviewed the test results.

Because of the current federal, state, county and internal investigations, "I don't think it's appropriate for us to say right now what the protocols are," said UPMC spokeswoman Jennifer Yates. "But we are reviewing everything to ensure it is not a systemic problem" beyond this one case.

Ms. Yates said UPMC has done 975 living donor kidney transplants since 1988 and this is the only known case of a hepatitis C positive donor kidney being transplanted into someone who was hepatitis C negative.

The error was discovered by UPMC, which self-reported it to the Centers for Medicare and Medicaid Services (CMS), and it was not related to a review by CMS that was "coincidentally" ongoing at the time of the discovery at Children's Hospital of Pittsburgh of UPMC, a CMS spokeswoman said.

This hepatitis-C fiasco to my eye seems a likely case of IT error of omission or transmission (EOT, see Tables 4 and 5 at the FDA internal memo I cached at http://www.ischool.drexel.edu/faculty/ssilverstein/Internal-FDA-Report-on-Adverse-Events-Involving-Health-Information-IT.pdf).

It's inconceivable to me experienced transplant personnel, used to checking for data such as HIV, hepatitis status of donor and recipient, and other blood abnormalities would just miss this.

I would believe the hepatitis status, e.g., Hepatitis A, B, C, would be presented on the same screen. (If not, that's a design flaw itself.) That the Hep-C value could be missed by more than one person [possibly many people; see addendum below -ed.] seems very unlikely - even if the presentation screen(s) were cryptic and poorly organized.

A more plausible explanation to me is that a positive result simply wasn't present at the time when it was needed, e.g., due to a Laboratory Information System (LIS)-Hospital Information System (HIS) interface problem, or a HIS data erasure or misidentification error after the data was correctly received.

Another issue:

For the hundreds of millions of dollars spent on computers at this medical center, I wonder why their "system" in critical areas such as transplantation (as it would appear from the reports) is entirely dependent on two people looking at data.

After all, the IT is "supposed" to reduce error by infallibly calling attention to critical abnormalities such as this. The EMR alerting systems should have been going off like cockpit stall warnings at the data combination of "transplant" and "hepatitis C". That's not rocket science.

This further supports my hypothesis of a health IT malfunction, as does what I read about their "shutting down the living donor transplant program" for now - an extreme measure if this medical error were merely the result of a person or persons simply forgetting to check a data screen or sheet.

More generally, in a nutshell: commercial health IT from the current sellers is a fiasco. It alone among medical devices is unregulated under the FD&C Act even though FDA admits it is a medical device, it is unsafe, the literature shows its benefits grossly exaggerated, it probably cannot be made to work considering the current HIT "ecosystem" and its pathologies and incompetents, and has only captured the market through the purveyors "controlling the channel" of information and memes through their massive trade association HIMSS and political connections to HHS.

Think tobacco circa 1940's-1950's.

Yet UPMC could get away with this debacle scot-free:

Despite the way it occurred, UPMC will probably not be found in violation of any federal guidelines for the failure of the transplant team to review the positive hepatitis C test [or failure of the health IT system to properly transmit it, if that is indeed what occurred - ed.]

That's because while current guidelines from the United Network for Organ Sharing, the organization that oversees the nation's transplant centers and could suspend or shut a program down for deficiencies, do cover deceased donor transplants, they do not specifically cover living donor transplants, except in a limited way.

Emily Blumberg, an infectious disease specialist at the University of Pennsylvania, said that it is because live donations are still a relatively new medical advancement compared to cadaver donations.

"What has happened is that live donations in the United States have really taken off in the last decade, and there's only been a push to standardize live donation processes recently," said Dr. Blumberg.

In other words you're supposed to test dead people and their organs for disease before transplanting them, but live people get a pass? This is the height of absurdity.

One of the factors driving the push to finally address guidelines for living donor transplants is the rapid emergence of so-called paired kidney donation networks. In the networks, a willing living donor, who isn't a match to a friend or relative who needs a kidney, gives their kidney to someone else in the network. That recipient then has a friend or relative give a kidney to someone else, and so on.

Over the last five years, the rise of such networks have allowed hundreds of people to get kidney transplants from people they previously did not know, including a chain involving 32 donors and recipients -- 16 of whom got new kidneys -- that UPMC was part of earlier this year.

"Everybody is [testing for viruses] but it would be helpful if we could all be doing it the same way -- especially with paired donation networks," said Dr. Blumberg, who also chairs UNOS's disease transmission advisory committee.

This seems a smokescreen for this error. Missing a positive hepatitis C test has nothing to do in my mind with "everyone testing for viruses in the same way." The issue is being aware of the results.

Through that committee, UNOS is now beginning to craft new guidelines that are specific to live donation transplants. A conference in July in Baltimore that Dr. Blumberg is helping to organize will act as a public forum on the proposed new guidelines that will address everything from which viruses should be tested for, to which tests should be used, to how the results are communicated and other issues.

Non-communication of results will surely be forbidden.

The guidelines that do exist now don't spell out how information about a test is to be conveyed and confirmed by people on the transplant team, which are protocols that are left to each individual hospital to establish.

This is entirely absurd. "Protocols" are needed to check the most fundamental of tests in a mission critical medical area? Why does this process have to be "spelled out?" In other areas such as blood transfusion, isn't the precess of someone actually looking at test results very straightforward? I did it as a medical student....

Those same guidelines -- which were written for the more common deceased donor transplants -- also don't explicitly require testing of living donor organs for viruses like hepatitis C, though, as a rule, transplant centers like UPMC do so anyway. "I can tell you every transplant center in the country already screens donors for things like hepatitis C or other infections that would affect our use of that organ," Dr. Blumberg said.

That's great, as long as the information doesn't end up in '/dev/null', a.k.a. the bit bucket.

The rest of the Gazette article discusses the obvious regarding a simple issue of testing and reporting prior to sticking an organ into someone else's body.

I believe if this incident was indeed related to a computer error:

• UPMC needs to reveal this publicly ASAP per Joint Commission Safety Standards, as similar flaws could affect other medical centers (such flaws that cause intermittent data erasure are known to exist; see Dr. Jon Patrick's study here on a Cerner system, for example.)

• Repeats of episodes like this could reflect criminal negligence (not of clinicians, but of the administration for installing faulty medical devices), or may already represent criminal negligence if the health IT systems in use were known to have bugs causing intermittent data loss.

-- SS

Addendum May 25, 2011:

It occurs to me that hepatitis is a rather routine type of lab test.

Everyone who looked at the electronic chart, usually a cornucopia of people in an academic medical center, had opportunity to review tests like that. They range from medical students, to interns and residents, to fellows to attendings, nurses, and other allied health professionals, not just a few specific people on the transplant team.

In my mind the most likely explanation for so many people missing such a crucial piece of data is that it was simply not there.

-- SS

Addendum May 27, 2011:

A reader reminded me of my 2009 post "UPMC as Proving Ground for IT Tests On Children: Pioneers in Health IT, or Pioneers in Ignoring the Past?", where UPMC made claims it was a "proving ground" for experimental health IT development.

-- SS

At UPMC: Dealings with Board Members' Firms and Executives' Relatives, a $5 Million Plus CEO, and 8 $1 Million Plus Executives

Last year we noted that the US Internal Revenue Service (IRS) required more detailed reporting starting in 2009 by US not-for-profit organizations.  Many US health insurance companies/ managed care organizations, most hospitals, nearly all medical associations, nearly all disease advocacy organizations, all health care charities, and nearly all medical schools are not-for-profit organizations.  We suggested then that this reporting might lead to more transparency about the leadership and governance of these organizations.  Some of these new 990 forms are now being publicly disclosed, with some interesting findings. 

The Pittsburgh Tribune-Review just reported some interesting findings about financial ties between the University of Pittsburgh Medical Center (UPMC) and its board members and hired executives.

Health giant UPMC paid more than $10 million last year to companies and individuals with ties to its directors and high-ranking executives, newly released tax records show.

The payments include more than $3 million in salaries and contracts to relatives of UPMC CEO Jeffrey Romoff, who earned $5.16 million in fiscal 2009.

It was no surprise that a UPMC spokesman pooh-poohed the significance of these relationships.

'Given that UPMC is the largest employer in Pittsburgh and attracts talent from across the world, it's easy to understand why there are hundreds of employees with family members who also work at UPMC,' said spokesman Paul Wood.

'We seek to hire the best and brightest in every position, regardless of family relationships, and take appropriate steps to manage any conflicts that those relationships might entail.'

The specifics about payments to the relatives of top hired executives were:

Tax records show UPMC paid $264,274 to Rebecca Kaul, the CEO's daughter. Wood said UPMC then billed a contractor for her services. Kaul now works for UPMC as executive director of the Technology Development Center, Wood said.

UPMC paid $259,488 to Scott Gilstrap, who joined the health care giant before marrying Romoff's daughter. Gilstrap, now divorced, no longer works for UPMC, Wood said.

Wood said UPMC's contract for $2.48 million with Paradise Group, an advertising firm owned by the CEO's brother, Douglas Romoff, was not renewed after its March 2009 expiration.

'Jeffrey Romoff was not involved in any of the decisions pertaining to this contract,' Wood said.

In addition to Romoff's family connections, the tax records show UPMC paid Scott Cindrich, son of its chief counsel Robert J. Cindrich, $141,599.

Wood said the younger Cindrich joined UPMC before his father left a federal judgeship in 2004 to become UPMC's top lawyer. Robert Cindrich was paid $1.86 million.

Cindrich did not return telephone calls seeking comment.

The specifics about dealings between UPMC and its board members were:

Tax records show companies affiliated with board member Anne V. Lewis do the most business with UPMC. Oxford Development Company, where Lewis is board chair, received $4.84 million from UPMC.

Lewis is affiliated with Central Securities Services, which received $201,198 from UPMC, and Central Property Services, which received $457,051. Lewis did not return repeated telephone calls from the Tribune-Review.

According to the returns, the Downtown law firm of Pietragallo Gordon Alfano Bosick and Raspanti earned $348,616 in legal fees. William Pietragallo is a UPMC board member. The law firm paid $792,215 to UPMC for heath insurance.

Pietragallo said he filled out a conflict-of-interest form, as he has in past years.

'It reminds me of how much I pay for health insurance,' he said.

IGate Mastech, the tech company founded by UPMC board member Sunil Wadhwani, received $204,215 for computer services. JJ Gumberg and Co., affiliated with board member Ira Gumberg, was paid $103,521, tax records show. Neither Wadhwani nor Gumberg returned telephone calls.

Board member John R. McGinley Jr.'s law firm, Eckert Seamans Cherin and Mellott, was paid $804,414 for legal services, according to the returns. McGinley and board member Robert A. Paul and members of their families are affiliated with Pittsburgh Steelers Premium Tickets LP, which was paid $129,425, tax returns show.

McGinley said he believed the figures UMPC reported are correct. Paul did not return telephone calls.

Also, in a separate article, the Tribune-Review noted transactions between UPMC's insurance subsidiary and its board members' firms

Recent federal tax filings show companies associated with some UPMC board members also buy their employee health insurance through the health care giant's insurance arm.

The tax returns show that health insurance premiums paid by the companies affiliated with board members totaled about $8 million in the fiscal year ending June 30, 2009. Nine firms affiliated with board members purchased UPMC health insurance.

That figure includes nearly $1.8 million by Bank of New York Mellon. UPMC board member Stephen Elliott is affiliated with the bank.

Oxford Development paid $2.1 million in premiums. The development firm's chairman is Anne Lewis, a UPMC board member.

The law firm headed by UPMC board member William Pietragallo paid $792,215 in premiums, according to the returns. AMPCO-Pittsburgh, which is affiliated with UPMC board member Robert A. Paul, paid a little more than $1 million in premiums.

Of course, Mr Wood pooh-poohed that too:

UPMC spokesman Paul Wood said the premiums paid by the companies were at "market rates."

He also apparently stated that the hospital system follows "strict conflict-of-interest rules. Board members are barred from voting or acting on matters relating to their business interests...." 

The standard approach of most not-for-profit organizations to conflicts of interests involving their board members or executives is to have these people recuse themselves from votes or actions that directly affect their own or their families' business interests.  I submit that whether this prevents the conflict of interest from influencing decision making by the organizations is questionable.  I doubt that the board members are unaware of their fellow members' and executives' direct or familial business interests.  The fact that certain individuals need to step out of meetings when votes come up on particular contracts would be a good reminder that they or their relatives have business interests at issue at these times.  Board members tend to keep their seats for a long time, and tend to get to know their fellow members pretty well.  Even if an individual member cannot vote on a contract or action relating to his or her business interests, would it be any surprise that his or her buddies on the board might look favorably on such a contract?

Furthermore, would it really be that hard to find development companies, property management firms, advertising agencies, law firms, or information technology companies in a large metropolitan area that are not affiliated with board members or top executives and their families?  Instead, UPMC seems to have found quite a few vendors affiliated with board members which do not seem particularly specialized in their organizational attributes.  Can we be sure that they are run by the best and the brightest?

Maybe board members who are too cozy with each other, and too cozy with the hired executives they are supposed to supervise, would be distracted from the attentiveness required to their organization's mission by their buddies' businesses? 

Perhaps coziness among board members and hired executives might have something to do with the munificent compensation given to numerous hired leaders of UPMC.  A separate article in the Pittsburgh Post-Gazette stated:

Jeffrey Romoff, president and CEO of the University of Pittsburgh Medical Center, received $3.563 million in salary in 2009, a 24.4 percent decrease from his 2008 salary of $4.711 million.

However,

In addition to Mr. Romoff's $4.711 million in cash compensation in 2008, he received $428,214 in deferred compensation and $21,671 in nontaxable benefits, for a total package valued at $5.161 million.

In addition,

Other top UPMC earners include Elizabeth Concordia, executive vice president and president of the Hospital and Community Services Division, $2.139 million; Amin Kassam, the department of neurological surgery chair who resigned in July, $2.083 million; Robert Cindrich, senior vice president and chief legal officer, $1.869 million; neurosurgeon Ghassan Beijani, $1.798 million; neurosurgeon Adnan Abla, $1.620 million.

Also, Marshall Webster, executive vice president and chief medical officer, $1.514 million; Diane Holder, president and CEO of UPMC Health Plan, $1.485 million; James Luketich, co-director of surgical affairs at the University of Pittsburgh Cancer Institute, $1.442 million; Daniel Drawbaugh, senior vice president and chief information officer, $1.335 million; and David Farner, senior vice president and chief of staff in the office of the president, $1.253 million.

By my count, that was eight executives with yearly total compensation greater than $1 million (in addition to two very well paid neurosurgeons.)  These payments, which most people would say are sufficient to make their recipients rich, were handed out by a not-for-profit organization whose mission statement includes being "committed to providing premier health care services to our region and contributing to this community" at the end of a bog of business-speak.  I suspect most people would think "contributing to this community" means something in addition to contributing to the wealth of a few top executives, and contributing to the business income of board members and executives' relatives.  Again, are board members who have become cozy with each other and the executives they are supposed to supervise more likely to be distracted from their fiduciary duty to the not-for-profit organization by their buddies' friendships?

We often discuss conflicts of interest on this blog.  Many of these involve financial relationships among health care professionals and academics on one hand, and pharmaceutical, biotechnology, device and other health care corporations on the other.  However, I suspect that conflicts involving leadership of hospitals and local businesses and vendors may be more common.  The latter may not always have as much influence on the quality of care, teaching and research as former group of conflicts.  However, they may have more effects on the total costs of health care, and may contribute more to the coziness, sense of entitlement, and inattention to the mission that seem to characterize much of health care leadership.  They may contribute to the perception that health care, like finance, may now be about , as Prof Mintzberg said, "All this compensation madness is not about markets or talents or incentives, but rather about insiders hijacking established institutions for their personal benefit."

The new version of the IRS forms are just beginning to become public, so we expect to see many more juicy stories about the financial and family ties of leaders of health care not-for-profit organizations.  Watch your local newspapers for details about conflicts of interest at your local health care not-for-profit organizations.

Maybe as more is revealed, the need for more transparent, accountable, and ethical governance of health care organizations will become apparent.