The "Scorpions in a Bottle" Shook Hands - A Secret Deal Between a Health Care System and a Managed Care Organization

The Boston Globe just published a series of investigative reports about a case that illustrates what went wrong with last 20 years' paradigm of health care reform. Remember how business-like management and competition were going to control health care costs (while improving quality and access)?

The reports focus on how Partners Healthcare, the health care system formed from the merger of the Massachusetts General Hospital and the Brigham and Women's Hospital, was able to use its position and prestige to improve its reimbursement. The key points from the key article:

- The merger occurred in a climate of deregulation and laissez faire, based on the theory that managed care would damp down hospital costs

Formed in an era of fervent deregulation, Partners has benefited throughout its history from remarkably limited government oversight, considering the vast impact of the merger on the medical marketplace. The administration of Governor William F. Weld never held a public hearing before approving the merger of the state's two biggest hospitals. And the state sharply curtailed regulation of hospital expansion in the 1990s, freeing Partners to dramatically expand into the suburbs, drawing patients and revenue from already struggling community hospitals.

Weld and the Legislature unleashed the forces that led to the creation of Partners when they ended the state's authority to regulate hospital rates in 1992. Beacon Hill wanted to force hospitals to jockey for contracts with savings-minded HMOs, which, at the time, sent their members only to select hospitals and doctors.

'I favor putting the scorpions in the same bottle . . . and letting them fight it out,' said Democrat Edward L. Burke, then cochairman of the Legislature's healthcare committee.

- The rationale for the 1993 hospital merger was cost control

But at the press conference announcing the deal in December 1993, leaders of the two hospitals said their alliance would only make them greater. They described twin ambitions underpinning their once unthinkable alliance: to build a high-quality healthcare system, and to save money. A lot of money.

They said their goal was to cut 20 percent out of their combined $1.2 billion annual budget, which meant saving $240 million a year.

'Put it this way,' said Dr. J. Robert Buchanan, who was then the head of Mass. General. 'We're pretty sure we've got to save 20 percent at minimum.'

The Boston Consulting Group, which helped facilitate the merger, told the hospitals that they could reduce annual costs by between 12 percent and 28 percent, according to a description of the consultants' analysis in a 1996 Harvard Business School study of the merger. Partners would not provide the consultants' recommendations to the Globe.

- But these plans soon went awry. The merged health care system did not control costs

But Partners made only a small fraction of the cuts. The company claims that the merger saved $200 million to $250 million - total - over five years.

Those savings came almost exclusively from administrative consolidation. The two hospitals have rarely collaborated on clinical operations. In fact, soon after the merger, Mass. General opened a new obstetrics unit that would compete with its sister hospital at a time of declining births in Massachusetts.

Partners' current management denies that saving such large sums was ever the intention, and argues the smaller amount they did save was a commendable achievement. Jay B. Pieper, then the Brigham's chief financial officer and now a Partners vice president, suggested there was no basis for the comments Buchanan made at the press conference.

'Everybody kind of scratched their head and said, 'Bob, what did you mean?' ' Pieper said.

According to Pieper and others, melding of medical services would not have saved much since each hospital had programs large enough to achieve economies of scale on their own. Consolidation would have inconvenienced patients and driven away top physicians, they said.

But Buchanan and other Partners founders told the Globe recently that their original intention had been the consolidation of services, at least for rare treatments, and possibly many more. The idea was "to have at least one superb major teaching hospital when all this is over," said Dr. Eugene Braunwald, Partners' former chief of research, who said that didn't happen because their finances never deteriorated to the point they had feared.

The year before his death in 1998, Partners cofounder Dr. H. Richard Nesson told the Globe that he was still looking for ways to consolidate.

'I do not believe, for example, that we should both be doing every kind of transplant,' Nesson said.

A decade later, Partners continues to offer an array of competing transplant programs, even though surgeons sometimes struggle to find enough work to keep skills sharp.

- As the merged hospital system concentrated its power, the state's biggest insurer abandoned any pretense of negotiating down its costs

It was the gentleman's agreement that accelerated a health cost crisis.

And Dr. Samuel O. Thier, chief executive of Partners HealthCare, and William C. Van Faasen, chief executive of Blue Cross Blue Shield of Massachusetts, weren't about to put it in writing.

Thier's lawyers cautioned that a written agreement between the state's biggest hospital company and its biggest health insurer that would make insurance more expensive statewide might raise legal questions about anticompetitive behavior, according to officials directly involved in the talks.

And so, in May 2000, the two simply shook hands on this: Van Faasen would give Partners doctors and hospitals the biggest insurance payment increase since Massachusetts General and Brigham and Women's hospitals agreed to join forces in 1993.

In return, Thier would protect Blue Cross from Van Faasen's biggest fear: that Partners would allow other insurers to pay less. Those who helped broker the deal say Thier promised he would push for the same or bigger payment increases for everything from X-rays to brain surgery from Van Faasen's competition, ensuring that all major insurers would face tens of millions in cost increases. Blue Cross called it a 'market covenant.

The deal, never before made public, marked the beginning of a period of rapid escalation in Massachusetts insurance prices, a Spotlight Team investigation has found, as Partners repeatedly used its clout to get rate increases and other hospitals tried to keep up. Individual insurance premiums have risen 8.9 percent a year ever since the "market covenant," state figures show, more than twice the annual rise in the late 1990s.

- Then the hospital system used its dominant position to extract higher reimbursement from other insurers

Dr. Harris Berman said he felt like he'd wandered into an ambush.

The chief executive of Tufts Health Plan thought he had been invited to the Prudential tower on Oct. 23, 2000, to continue contract talks with top Partners officials. Thier, the Partners chief, wanted a substantial increase in payments for medical services, $100 million more than Berman was willing to pay for the care of his members over three years.

But Thier was done talking. He told Berman that Tufts insurance would no longer be accepted at Partners starting April 1. It was a devastating blow to Tufts' business. Almost as soon as Berman left his office, Thier launched a million-dollar marketing campaign to drive the point home. Signs went up at Partners reception desks notifying Tufts members that their insurance would soon be denied. A new website told them how to switch insurers. A call center in Texas was set up to field questions from worried patients and doctors.

Within days, major employers and thousands of Tufts members began threatening to cancel their policies. Tufts surrendered in little more than a week.

'I finally concluded, in the middle of the night one night, that our very viability was at stake,' Berman recalled later.

The humiliation of Tufts became an object lesson for other insurers, a lesson they would not soon forget.

- The result was markedly higher health care costs, and a big premium to Partners

Blue Cross has increased the rate it pays Partners by 75 percent since 2000, far more than increases given to other teaching hospitals that mainly treat adults. Other insurers have boosted payments to Partners by a similar amount.

Ellen Zane, Partners' chief negotiator in 2000, said she didn't realize the extent to which other hospitals were not keeping up with Partners until she left to become president of Tufts Medical Center in 2004.

'It turned out that insurers didn't support all hospitals as we thought they would,' said Zane, who said her hospital won't survive if insurers don't substantially increase reimbursement rates. 'I was quite surprised by the rate disparity when I came to Tufts Medical Center. In some ways, it defied logic.'

Tufts' patients, on average, are sicker than either Mass. General's or the Brigham's, based on a standard measure of patients' average severity level. But Tufts Medical Center is paid about 35 percent less, according to confidential Blue Cross rate information obtained by the Globe.

The cozy deal between Partners and Blue Cross and Blue Shield is now the subject of a state investigation, nine years later, according to this Boston Globe article:

Governor Deval Patrick will convene a panel of top state officials Monday to look into whether a recently disclosed, eight-year-old agreement between Partners HealthCare System Inc. and Blue Cross Blue Shield of Massachusetts drove up healthcare costs, making it harder to extend healthcare insurance to all residents.

The panel will also look at current contract negotiations between Partners, the state's biggest health care provider, and healthcare insurers to see whether the negotiations might also create artificially high rates that threaten healthcare reform, officials said.

And the Globe editorialized, in a rather subdued way, that the sort of "negotiation" that occurred between Partners and the state's biggest insurer was not the best way to do things:

But this is more than a case of men and women in white jackets putting one over on the suits at Blue Cross Blue Shield of Massachusetts and the other insurers. Especially now that the state is committed to health coverage for all its residents, anything that pushes up overall costs is the state's business.

Still, the higher rates that Partners-affiliated institutions outside of Boston generally get from insurers push up the state's overall health bill each time a suburban resident has a procedure done at a Partners facility and not at a lower-cost community hospital.

In the long term, rate-setting should move away from the private contracts that providers and insurers carve out together to ones based more on performance, with the state setting an allowable range for each procedure. In the best of all worlds, such rates would be universal - covering Medicare and Medicaid as well as privately insured patients - and would thus end the systematic underpayment of hospitals like Boston Medical Center and Cambridge Health Alliance that serve more low-income patients.

During the 1980s, many "health care reformers" pushed to take control of health care away from the doctors' "guild," which was blamed for ever rising costs, and give it over to bureaucrats and managers. They would be able to fix the "market failure," and provide health care in a business-like manner. By having private entities compete and negotiate with each other, a brave new world of low cost, accessible, high quality health care would ensue. (See post here.) Or that was the idea, but then it went so wrong.

The case of the market dominance of Partners Healthcare in Massachusetts shows how health care organizations unfettered by regulation, run by businesspeople, maximized their own financial results, but simultaneously caused vigorously rising costs. Whether the brave new world improved quality or not is an open question.

But why did it all go so wrong? In this case, a key question is why did Blue Cross and Blue Shield of Massachusetts so readily surrender to Partners' demands? The only explanation provided by the Globe article was this:

As the state slashed oversight of healthcare, no private company was able and willing to moderate Partners' ambitions. Blue Cross, which now controls 60 percent of the health insurance market, was best positioned to do so but flinched at the possibility of a public tangle. As former Blue Cross executive Peter Meade said at a meeting of company executives in 2000 at which some urged a tougher stand against Partners: 'Excuse me, did anyone here save anyone's life today? We are a successful business up against people that save people's lives. It's not a fair fight.'

That doesn't make a whole lot of sense. Admittedly, Partners, composed of two very prestigious hospitals, was known for the excellence of its care. However, a "tougher stand" did not require trashing the hospitals' reputation. Partners was arguing that its two hospitals were so much more excellent than some of Boston's other excellent academic teaching hospitals that they deserved very special treatment. (Full disclosure: please note that as a medical student, I did several rotations at one of those other excellent medical centers, now the Beth Israel Deaconess Medical Center, and I did my internship and residency and another one of those excellent medical centers, now Boston University Medical Center.)

Why were Blue Cross and Blue Shield leaders unwilling to reply? And why have they continued to increase Partners' disproportionate reimbursement without second thoughts, as long as what they were doing did not see the light of day?

The fact that the deal was never put in writing, much less fought over in the media, suggests that those who signed it were uneasy about it. So why did they do it?

There are no clearer explanations, leaving only speculation. But watch Health Care Renewal for our speculation about why the "scorpions in the bottle" became best of friends.

Meanwhile, this case illustrates just some of the consequences of health care run by bureaucrats and managers operating in secrecy and unfettered by external accountability.

Post Title → The "Scorpions in a Bottle" Shook Hands - A Secret Deal Between a Health Care System and a Managed Care Organization

University of Minnesota Courts McGuire - "We Don't Really Care About the Stock Options"

We have posted quite a bit about leadership problems at one of the US biggest for-profit managed care organizations/ health care insurers, the UnitedHealth Group (UHG), most recently here.

UHG has not always been known for being particularly patient-, employer-, or physician-friendly. For example, as reported by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."

We have previously discussed how UHG promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post here); allegations that the UHG acquisition of Pacificare in California lead to a "meltdown" of its claims paying mechanisms (see post here); charges that the UHG acquisition of Sierra Health Services would give it a monopoly in Utah, and that UHG was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post here); and numerous violations of Nebraska insurance laws by UHG (see post here).

Such anecdotes conflict with the UHG mission statement, as recently revised. The company pledged to:

* Enhance the performance of the health care system, and improve the overall health and well-being of the people we serve and their communities.
* Work with health care professionals to expand access to high-quality health care so people get the care they need at an affordable price.
* Support the physician/patient relationship and empower people with the information, guidance and tools they need to make personal health choices and decisions.

One hypothesis is that UHG has trouble adhering to its idealistic mission because of the shortcomings of its leadership.The story of the fall of its recent CEO, Dr William McGuire, was strikingly instructive. As we have previously discussed, (see these posts here, here, and here from 2006 with links backward) Dr McGuire received outrageously lavish remuneration, which stood in stark contrast to the previous UHG mission's pledge to "make health care more affordable."

Controversy has swirled over the timing of huge stock option grants given to Dr McGuire (see post here), leading to his resignation in October, 2006 (see post here). More recently, McGuire agreed to pay back some of those options, although that would reportedly leave him with more than $800 million worth of options (see post here).

Most recently, as reported by Bloomberg,

UnitedHealth Group Inc.'s former chief executive officer William McGuire agreed to pay $30 million to settle a lawsuit brought against the company and individual defendants over backdated stock options.

Under the deal, which needs court approval, McGuire will also return to UnitedHealth 3.68 million shares of stock options. The class-action, or group, lawsuit was brought over options that were backdated during McGuire's tenure at the helm of the company, the largest U.S. health insurer.

The settlement may be the largest cash recovery obtained from an individual defendant in a securities class-action lawsuit, Calpers said.

The company remains under a criminal probe of backdated stock options.

But at the same time, the Minneapolis Star-Tribune reported, Dr McGuire seems to have found ways to keep busy,

The University of Minnesota is courting William McGuire, the health insurance executive who lost his job in a stock options scandal, as "executive in residence" at its business school.

Stephen Parente, director of the Medical Industry Leadership Institute in the Carlson School of Management, said the school had given him the go-ahead to explore the idea with McGuire, former chief executive of Minnetonka-based UnitedHealth Group.

'We are courting him to be an executive-in-residence at Carlson,' Parente said, adding that McGuire's immense experience in health care is what appealed to the university.

Parente said he first reached out to McGuire in August 2007, inviting him to be the keynote speaker at an invitation-only event attended by 70 to 80 guests at the Lafayette Club in Minnetonka Beach. The subject of McGuire's talk was the future of health care.

McGuire hit familiar themes during the hourlong speech, including the need for universal access to health care and the need to track the quality of care by physicians and to pay them accordingly.

Parente said his approach to McGuire was along the lines of: 'We don't really care about the stock options. You know stuff. Tell us what you think.'

Since then, McGuire has attended two seminars at the Carlson school, including one where he arrived unannounced.

There was some discussion within the school, Parente said, on whether it was appropriate to engage McGuire, given the lawsuits and investigations in which he was embroiled. The conclusion was that it was.

'It's one thing if you're bringing in a criminal to speak. But if someone's under investigation, that's fair game,' he said.

Since then, McGuire has acted as "ad hoc kitchen-cabinet adviser" to him, Parente said.

In June, when Parente presented a paper titled 'Is Consumerism at Odds with Prevention?' at the American Society of Health Economics at Duke University, he listed McGuire as one of six co-authors.

Sometimes, you just can't make this stuff up. Under CEO McGuire, UnitedHealth became a poster child for the hypocrisy of managed care, promising affordable care while stuffing the pockets of its top managers. The company was reported to have committed numerous instances of unethical behavior that contradicted its lofty ideals. It had to re-state its earnings. McGuire was forced into early retirement. Both he and the company have had to settle lawsuits, and the company is reportedly still under criminal investigation.


So then, a prominent business school is "courting" McGuire? Its leadership invites him to speak about universal health care, after he managed to steer a billion or so dollars out of the health care system into his pocket (at least for a while)? It invites him to speak about the quality of physicians' medical management, after he managed his company in stark contrast to its lofty ideals?

Its leaders "don't care about the stock options." Anyone who has not (yet) been convicted of a crime has ethics good enough for them?

That's a pretty good way for the business school to tell its students that the health care management slogan should be "take the money and run."

With business schools setting these kinds of ethical examples for their students, no wonder the business-oriented leaders of health care have turned out so bad.

ADDENDUM (18 September, 2008) - Now it appears that the University of Minnesota is disavowing any plans to make McGuire a faculty member, per the Star-Tribune.

Post Title → University of Minnesota Courts McGuire - "We Don't Really Care About the Stock Options"

Healthcare scandal-of-the-week: Merck settles Medicaid lawsuits

They come fast and furious.

It was with sadness that I saw this article in the Philadelphia Inquirer today:

Posted on Fri, Feb. 8, 2008

Merck settles Medicaid lawsuits

It will pay $671 million in alleged overcharging.

By Karl Stark, Inquirer Staff Writer

Merck & Co. Inc. agreed yesterday to pay $671 million to settle allegations that it overcharged the Medicaid program and gave doctors junkets, dinners and other inducements to promote three of its drugs.

The payments stem from two settlements, announced yesterday by U.S. attorneys in Philadelphia and New Orleans, that together show Merck executives' offering low prices to hospitals to induce them to use its drugs heavily, and then failing to acknowledge those low prices to Medicaid, the health program for the poor, as required by law.

The cases also show the company's rewarding doctors with a panoply of favors, from lavish stays in exotic locales to payments for allowing salespeople to shadow them for a day.

I used to work for this company supporting R&D. I was struggling to increase funding to fill some critical informatics gaps in support of drug discovery, clinical trials and safety monitoring to help assure the company would not one day be "trying to do doing business from an empty wagon."

However, it seems some folks in marketing had different ideas about how to conduct business.

Merck agreed to pay $399 million plus interest to settle the Philadelphia case. Because the matter involved 49 states, New Jersey will get $7.4 million and Pennsylvania will get $8.5 million.

The firm will also pay $250 million to settle similar allegations in a separate lawsuit in Louisiana involving Pepcid, the firm's heartburn drug. That suit was originally brought by a doctor, William St. John LaCorte. With interest, the two settlements come to $671 million.

The case resolved yesterday in Philadelphia started with H. Dean Steinke, a Merck district sales manager in rural Michigan, who became a whistle-blower over the firm's marketing of its withdrawn pain reliever Vioxx and the anticholesterol drug Zocor. Steinke could not be reached yesterday.

... His attorney, Mark Kleiman of Los Angeles, said his client began to doubt the company when he was asked to authorize a $75,000 payment to an HMO in 1999. The HMO complained that Zocor cost too much and threatened to remove the drug from its approved list.

Merck did not want to lower the price, because that would have lessened how much it could charge other payers, including Medicaid, Kleiman said. So, he added, the company disguised the payment as an education grant to the HMO.

After Steinke declined to authorize the payment, "his relationship with the company was never the same," Kleiman said.

In other words, he was marginalized for taking an unpopular, "unbusinesslike" stand.

All I'd asked for was an increase of a few million annually to support R&D. After a long bureaucratic battle with the former CEO of a failed computer company, who'd come into pharma at a high level while lacking experience in biomedicine and in information science, I got a third of that.

One might think some of the windfall from marketing efforts such as in this story could have been directed to R&D, but perhaps there other priorities at the time besides discovering new drugs:

Kleiman, the whistle-blower's attorney, said hospitals were also getting up to 10,000 free Zocor pills in stock bottles in the late 1990s. They were typically sent directly to hospital departments, bypassing the pharmacies, to encourage the drug's use, he maintained.

Who, exactly, was then making the decisions on drug administration? Drug reps, perhaps? If the pharmacy is not monitoring drug dispensation carefully, that is a potential source of error, such as drug-drug interaction, allergy, or ADE's. One wonders what effects this practice of bypassing pharmacy might have had on patient safety.

The federal settlement details nine techniques sales representatives used to influence doctors. One was a "preceptorship" in which a salesperson would shadow the doctor around, supposedly to learn more about medicine. The doctors would get $300 for a half-day or $500 for a full day of this work, Kleiman said.

Another big effort was "tutorials" in which doctors were paid several hundred dollars to evaluate sales presentations by the company.

Doctors could be paid $1,000 or more to speak at dinners attended by other physicians. And the biggest prescribers got rewarded with junkets to resorts, Kleiman said.

The "preceptorship" plan sounds great in practice. I've been a preceptor during my clinical years for medical students, a Mennonite minister in training, and others. However, the potential for conflict of interest in "mentoring" of drug reps are great. Who's teaching whom, and who "vetted" this practice in pharma and more importantly, in the hospitals? Further, could paying docs for evaluation of sales pitches be accurately described as "sleazy?" I'm not sure what area of biomedical science this draws upon, although it's perhaps more clearly part of "marketing science."

Steinke, who pursued this case under the False Claims Act for seven years, will receive $44.7 million from the federal share and $23.5 million from the states' share.

Considering what he probably went though as hinted in a companion article here, it sounds like he earned it the very old fashioned way - through sticking up for his beliefs in the face of potentially career ending opposition. That's perhaps America at its best.

-- SS

Post Title → Healthcare scandal-of-the-week: Merck settles Medicaid lawsuits

The Business-Think Rationale for In-Store Clinics

An urban legend that has haunted health care in the last 20 years, to its great detriment, is that the application of business-like thinking, business-think for short, to health care (not just financing health care), will yield enormous improvements.

One of the latest health care fads generated by business-think appears to be in-store clinics. We have blogged several times, (most recently here, here, here, and here) about these clinics. Such clinics are situated in retail stores, such as drug stores, staffed by nurse practitioners, but usually not doctors, and claim to treat a limited number of ailments quickly for reasonable prices. They have been touted as the latest business-like solution to the decline of primary care.

My biggest concern is that these clinics may fail to provide good care to some of their patients, particularly patients who have more serious problems masquerading as or accompanying one of the limited ailments which the clinics claim to handle.

KevinMD just put it more graphically.

I've said it before and my stance hasn't changed. In their zeal for speed, convenience, and profit, someone will screw up.

A 'bronchitis' will actually be a PE [pulmonary embolism]. Chest pain caused by an 'anxiety attack' will be an MI. The inevitable malpractice suits against a retail clinic will no-doubt put a damper on things. Bet on it.

I am afraid that the people touting in-store clinics and similar business-think based fads are too preoccupied with the brilliance of their business models to appreciate how the health care context may make the model unworkable. For example, I noted that the initial designs of the MinuteClinics proposed for Massachusetts including no plumbing in or adjacent to the clinics. No doubt eliminating plumbing would cut construction and maintenance costs. However, in an era when practitioners are urged to always wash their hands to prevent the spread of new, contagious, and treatment-resistant infectious diseases, neither practitioners nor patients in these clinics would have easily been able to wash their hands. And some of these nasty new contagious diseases could masquerade as some of the limited ailments the clinics claim to handle.

The Boston Globe just published a commentary by Steve Bailey that (probably inadvertently) disclosed some more of the fallacious thinking used to justify the concept of in-store clinics. Selective quotes from the article are below, in sequence, and I don't believe out of context,

In the business schools, the personal computer and Southwest Airlines are taught as case studies of what has come to be known as 'disruptive innovation.' Now, with CVS Corp. poised to open as many as 30 medical clinics in their stores in the Boston area alone this year, local primary care doctors and neighborhood health clinics worry they could be next. They may be right.

America spends more money per capita on healthcare than any nation, but continues to lag behind many less affluent countries when it comes to benchmarks like infant mortality and life expectancy. The problem, says Harvard Business School professor Clay Christensen, is that so much of the money goes to maintain the status quo because it is given to organizations wedded to their current solutions, including the old delivery models.

Christensen literally wrote the book on the kind of disruptive innovation that the PC and Southwest Airlines represent. His landmark 1997 book, "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail," turned Christensen into a rock star of the start-up revolution during the dotcom boom. Now in a book due out in August, Christensen and coauthor Jason Hwang examine how the disruptive innovation model can be used to cure what ails our healthcare system.

CVS's MinuteClinics get an entire chapter in the book. Physicians' associations typically oppose MinuteClinics on patient-safety grounds, Christensen and Hwang write. In about half the states, the business model is illegal because regulations mandate that doctors supervise nurse practitioners and physicians' assistants. But the regulations haven't caught up with the science, they say. Today, the diagnoses for a host of illnesses - from sore throats to ear infections to the flu - are precise and the therapies predictably effective.

'These regulations now trap care in high-cost models when there are much more affordable and accessible business models available,' they write. 'About $15 billion is spent each year in high-cost physicians' offices for the care of acute, rules-based disorders. Delivering even half of this care through a disruptive business model such as the MinuteClinic could easily save $7 billion a year. . . . A billion here and a billion there soon amounts to serious money.'

Maybe it is too snarky to being a "rock star" of the dotcom boom, which became, of course, the dotcom bust, does not seem to be a good credential to tout as a redesigner of health care.

Moreover, the commentary exposed Christensen's fallacious thinking: in-store clinics are a disruptive innovation that will improve quality and save money by using the latest cutting-edge technologies that are not available in old school physicians' offices.

His notions of the capabilities of the latest cutting-edge technologies, however, are seriously misguided. Christensen declared that the diagnoses of illnesses such as sore throats, ear infections, and influenza are "precise" and their treatments are "predictably effective." That's plain wrong.

One reason medicine is still a challenging profession is that the situation is exactly the opposite. There are no practical, quick and accurate diagnostic methods for these diseases.

Let me use sore throat as an example. Most sore throats are are self-limited, and are probably due to a variety of pathogens, most viral. Streptococcal pharyngitis ("strep throat") is caused by a specific bacteria, can last longer, and rarely can produce severe complications. There is no way to quickly and accurately diagnose strep throat. Signs and symptoms do not clearly differentiate strep. Using multiple signs and symptoms in a statistical diagnostic model (most notably the "Centor model") can categorize patients by their risk of strep, but can neither rule it in nor rule it out. The various rapid strep tests are not very accurate. The throat culture is generally thought to be specific, but it takes at least 24 hours to provide results. (References for all the above provided on request.)

Similarly, there are no quick, practical, accurate ways to diagnose bacterial ear infections There are rapid tests that can diagnose influenza, but they have variable and imperfect sensitivity and specificity.

Furthermore, there are no "predictably effective" treatments for sore throats, ear infections, or influenza. Antibiotics at best may shorten symptom duration and decrease the likelihood of complications from strep throat, but have side effects. There are no specific treatments for "viral" sore throats, or most ear infections, or "flu-like" illnesses. The newer antiviral agents for influenza can shorten symptom duration, but only on average by one day.

I'm sure such details about the imperfections of existing diagnostic and therapeutic technology might seem tedious to a "rock star" like Christensen. The sort of business-think he embraces seems to demand a big-picture view that neglects all the devils lurking in the details. But his notion that in-store clinics will bring miracle technologies to "customers," that the dinosaur physicians in their offices do not use is just nonsense, to use the most polite term.

I still hope that exposing the dubious logic and evidence underlying the in-store clinic movement will slow it down before, as KevinMD feared (see above), the malpractice suits start.

Post Title → The Business-Think Rationale for In-Store Clinics

A Business-Based Prescription for Health Care

We recently posted about the travails of the leadership of Caritas Christi Health Care System in Massachusetts, culminating in the firing of the system’s CEO for violating the regulations he, himself, had signed about sexual harassment. This weekend, the Boston Globe ran a commentary on a prescription for “Giving Caritas a healthy future.” It was a prescription that said essentially nothing about the essence of health care, taking care of patients.

The writer was Ellen Lutch Bender, CEO of Bender Strategies LLC, a “healthcare consulting firm,”whose goals are “to enhance bottom line performance and increased market position for our health care clients as they plan for the future,” and a self-proclaimed “visionary.”

She advocated “hiring a strong, visionary, business-minded CEO ... [as] crucial to Caritas's long-term stability.” She asserted that hiring such a leader would be essential to support Caritas’ “healing mission,” but “that mission must be examined for what it is: a sprawling business in a complex, increasingly competitive, capacity-strained environment.” Furthermore, “the healthcare business demands specialized leadership and an organizational structure that supports innovative thinking and fearless decisions. Hospital CEOs must seize business opportunities when they arise.” Particularly, “the next CEO must possess exceptional fiscal management skills....” So, “the challenges facing Caritas argue for a CEO search beyond the traditional physician candidates.” And, “the church, the board, and the new CEO must craft a guiding philosophy balancing religious tenets, sensible business practices, and executive independence.”

Bender’s prescription never once acknowledges the real mission of hospitals, taking care of (mainly sick) people. To her, a hospital is only a “business” in a “competitive environment.” Her description of the ideal leader of a hospital requires no knowledge of health care, nor any commitment to the values of health care. In fact, Bender warned that a sufficiently “quick and nimble” leader would not be attracted “by a constraining, bureaucratic reporting system,” presumably one that actually required that leader to conform to a code of ethics, or put patients ahead of making “bold, foundational changes.”

This commentary makes very clear what sort of thinking pervades the current leadership of health care. Health care is a business, like any other, without any particular values or ideals that set it apart from manufacturing automobiles, or hauling trash.

This thinking has been going on at least since the 1980's, when Einthoven, one of the leaders of the managed care movement, called for breaking up the “physicians guild” and putting managers and bureaucrats in charge of health care in order to constrain health care costs. (See post here.)

Doing that, of course, has not constrained costs, not improved access, and not improved quality. It has lead to a huge increase in the number of health care managers, who now out-number physicians (see post here.) It has let top health care executives make a tremendous amount of money (see post here). It has given health care a few leaders hailed as “visionaries,” some of whom have been monumental flops. (See for example the case of the “visionary” CEO of Allegheny Health Education and Research Foundation, who ended up in federal prison, and whose health care system ended in the second-largest bankruptcy at the time in US history, here on pages 5-7.)

Maybe it’s time to get health care leaders who understand something about taking care of patients, and who put the mission first (and then let them hire savvy business-people to keep the finances in order).

ADDENDUM (July 16, 2006) Ms Bender also urged Caritas to follow the example of Catholic Healthcare West, which she described as "enormously succesful." Yesterday, the San Francisco Chronicle reported that Catholic Healthcare West just settled a lawsuit which alleged that the system "charged excessive and unfair amounts to the small percentage of patients who were not covered by Medicare, Medicaid, or private insurance, and then set aggressive collection agencies on them when they couldn't pay." These practices seemed to directly contradict part of Catholic Healthcare West's stated mission: "serving and advocating for our sisters and brothers who are poor and disenfranchised." Again, what may look like an "enormously succesful" organization to a businessperson may not appear to succesful to patients and physicians. I repeat: maybe it's time to get health care leaders who understand something about taking care of patients, and who put the mission first.

Post Title → A Business-Based Prescription for Health Care

Some Themes Emerge from the Problems at the University of California

Several recent reports help our understanding of the recent problems at the University of California - Irvine (UCI) medical center, and more broadly, in the University of California (UC) system. (See recent posts on UC here, and here, and on UCI here.)

The Los Angeles Times reported that "UC Irvine is beginning program-by-program reviews of its medical center, hiring consultants and launching its search for top health care officials, recommendations made by a panel of outside experts that reviewed the university's troubled medical programs." The new Chancellor, Michael V Drake, reiterated, "there was a 'failure of leadership and accountability' and poor oversight." Concretely, UCI is starting searches for a vice chancellor for health affairs and for a health care ombudsman "to make it easier for faculty and staff at the hospital to report problems. An interim ombudsman is working part time."

Perhaps some impetus will be added to these efforts by reports that the US Federal Bureau of Investigation (FBI) is investigating UCI ( also per the LA Times.) Meanwhile, the Ocean County Register published a long review of events at UCI. It first noted, "The residue for UCI is a hospital with a damaged reputation and low morale." David Magnus of the Stanford Center for Biomedical Ethics commented, "When you get that many problems, that speaks to a problem of institutional culture. There needs to be a pretty dramatic overhaul of that culture to proceed in an ethical fashion."

The history leading to the current problems was telling.

Until the early 1990s, UCI Medical Center's primary mission was to be the hospital that served Orange County's neediest residents. That was both a practical and historical remnant of a hospital that was founded in 1912 as Orange County Hospital and Poor Farm.

'Its image remained steeped in its history as Orange County's 'hospital of last resort.' Back then, a dedicated but underappreciated faculty and staff provided care exclusively for the county's poor and underserved in a tired and drab facility.' [said former CEO Ralph Cygan]
The nation's adoption of managed care as a medical-industry standard in the early 1990s threw UCI Medical Center and other hospitals into financial and operating crisis. For a time, UC officials considered leasing or selling UCI Medical Center to a private company.

That plan was abandoned in 1997. But all UC medical centers (including UC San Diego, UC Davis and UCLA) were ordered to bring in more middle-class patients with private insurance, reducing the hospital's reliance on government payouts for indigent patients.

Partly as a way to maintain its role serving the county's poorest residents, UCI worked to develop other ways to bring in more income.

In 1999, UCI spent six months drafting a new strategic plan for the medical school and hospital that sought to increase market share and research funding, and improve medical education, yet also cut costs. The new strategy called for UCI to start investing in "high-profile clinical programs with high potential for market impact, return on investment" and referrals.

Yet, while the hospital has rapidly expanded from a small operation into a giant, multi-tentacled enterprise, questions have arisen about whether oversight has kept up with growth.

Meanwhile, the San Francisco Chronicle reported the assessment of a task force on how UC compensated its leadership across the system. It concluded, "The recent disclosures ... lead (us) to conclude that, at least as regards compensation, neither the executives who lead the university nor the regents who oversee it have done all they could or should to fulfill their respective or shared responsibilities." Former state Assembly Speaker Robert Hertzberg, co-chair of the task force, said, "In this competitive environment where you want to bring in the best and the brightest, there was just a breakdown in terms of full disclosure. But it was a significant breakdown."

Putting this all together, there seem to be some themes:

• A leadership culture that "lacked accountability" seemed to be a problem across the UC system, and at UCI in particular.
• Despite demoralization induced by this leadership culture, faculty, physicians, staff, and students generally tried to do their best in trying circumstance.
• The leadership culture may have to some extent derived from a broad impetus within society to push not-for-profit, academic institutions to "compete."
• Making things better will require major improvements in leaderships' accountabilty and transparency.

These are familiar themes on Health Care Renewal.

Post Title → Some Themes Emerge from the Problems at the University of California

Call for Transparency and Physician Input at Guidant

We have posted frequently about the troubles afflicting Guidant Inc (scheduled to be acquired by Boston Scientific). These troubles revolved around Guidant's failure to reveal defects in its implantable cardiac devices. (See posts here, here, here, here, and here.)

The New York Times has just revealed the findings of an external review that Guidant, to its credit, commissioned. Its main findings were:

• "Decisions on how to assess product defects were made by Guidant engineers rather than medical experts."
• "As a result, Guidant officials could claim a device's performance fell within engineering limits without considering the medical consequences of product failures...."
• "'There was no medical input to speak of' in the review process...." "Even the top medical officer of Guidant's cardiac device unit, Dr. Joseph Smith, acknowledged in an interview with the panel that he had not been hired to be a 'patient safety officer' but rather to interact with other physicians on educational issues."

The panel's conclusions were striking, "in addition to recommending the creation of an outside panel to monitor device performance, the panel suggested that Guidant, among other things, employ a physician whose main duty would be patient safety. The group also concluded that both Guidant and other makers of heart devices needed to significantly increase the level of data they collected about possible device failures."
More transparency, and involving physicians, not just managers and engineers, in decisions affecting patients' well being sounds just about right. (We have been saying similar things on Health Care Renewal for quite a while.)

Post Title → Call for Transparency and Physician Input at Guidant