Millions to Health Insurance CEOs, But Blame Everyone Else for Rising Health Care Costs

The revelations about the huge golden parachute given the outgoing CEO of ostensibly non-profit Massachusetts Blue Cross Blue Shield induced some public discussion about the disconnect between executive compensation and the mission of health care organization (see most recent post here).  Several other recent stories should generate more discussion on these issues. 

First, new proxy statements revealed the compensation of executives of two large for-profit health care insurers/ managed care companies.  In alphabetical order,

Cigna

As reported by the AP, via ABC news, the CEO got a big raise:

Cigna Corp. CEO David M. Cordani's total compensation more than doubled in 2010, his first year as leader of the nation's fourth-largest health insurer, and a period in which the company's earnings, revenue and enrollment all climb.

Cordani, 45, received compensation valued at $15.1 million last year from the Philadelphia managed-care company, according to an Associated Press analysis of a regulatory filing Friday.

That included a $1 million salary, a performance-related bonus totaling more than $7.3 million and stock and option awards adding up to $6.7 million.

In 2009, Cordani's compensation was $6.5 million, but he did not serve for the entire year. Note that according to the 2009 proxy, the previous CEO, H Edward Hanway, received $12,236,740 in total compensation in 2008, his last year as CEO.

What was the rationale for the huge rise in Cordani's compensation from 2009 to 2010? (And implicitly, the fairly large increase compared to Hanway's compensation in his last year?)

The company said in its proxy statement filed with the Securities and Exchange Commission that Cigna 'effectively executed on its growth strategy under Cordani's leadership last year.

'Revenue rose significantly in 2010, reflecting strong premium growth in (Cigna's) ongoing business segments,' the proxy said.

Cigna earned about $1.35 billion, or $4.89 per share, on $21.25 billion in revenue in 2010. That was up from $1.3 billion, or $4.73 per share, on $18.41 billion in revenue in 2009. The insurer's medical membership climbed 4 percent to 11.4 million people compared to the final quarter of 2009, when it fell more than 5 percent. That helped raise premiums and fees in health care, the insurer's largest segment.

Also,

Cigna shares climbed 4 percent to close 2010 at $36.66, while the Standard & Poor's 500 index rose 12.8 percent.

So to recap, Cigna's current CEO's total compensation doubled in a year while earnings and the stock price rose about 4%.

WellPoint

Also reported by AP, via the Washington Post, the CEO got a small raise (but ended up with compensation similar to Mr Cordani's above):

The president and CEO of health insurer WellPoint Inc. received a 3 percent boost in total compensation in 2010 even as the company�s profit and enrollment numbers slipped during a transitional year for U.S. health care companies.

The Indianapolis-based insurer awarded Angela Braly a total pay package worth $13.4 million up from $13.1 million in 2009. Wellpoint disclosed the compensation � which includes salary, bonus and other awards � in a filing with federal financial regulators late Friday.

On the other hand, the company did not do so well financially:

The insurer�s profit fell sharply last year compared with 2009, when the sale of its NextRx subsidiary contributed $2.2 billion in after-tax income. Medical enrollment also slid 1 percent last year to 33.3 million members.

So what was the rationale for even a small raise (over an already huge compensation package)?

In the company�s filing, Wellpoint�s board of directors highlighted accomplishments by management, including reducing general expenses by 3 percent.

Also,

A Wellpoint spokeswoman stressed Friday that the company�s pay formula rewards executives for improving enrollee health, boosting share prices and meeting other pre-set goals.

'For the CEO, almost 90 percent of total target compensation is based on company performance and is tied to meeting established goals,' Kristin Binns said in a statement.

So while Cigna did slightly better financially than last year, its CEO's total compensation doubled to well over $10 million, and while WellPoint did slightly worse financially than last year, its CEO's total compensation increased, again remaining well over $10 million.  It seems that the leaders of top health care organizations will continue to get richer, no matter how well their organizations performed financially, let alone what effect they had on patients' and the public's health.
So What Drives Up Health Care Costs?

Just to distract from CEOs getting increases in their already huge compensation that seem disproportionate to any reasonable measure of their companies' financial performance, health care insurers continued to deny any responsibility for the rise in health care costs.

For example, the San Francisco Chronicle published a story entitled, "Insurer Wants Focus on What Drives Up Health Costs," which had a familiar ring:

When health insurers notify members that rates are going up - often in the punishing double-digits - they typically blame rising medical costs.

They say the problem really isn't theirs; it's all the other pieces of the health-care puzzle that drive up costs that must be passed on to customers.

Don't blame you, don't blame me, blame that fella behind the tree.
It went on to name all the usual suspects (color-coded for comparison below):

Insurers say their costs grow in part because of new medical technologies and the rising price of pharmaceutical products and medical equipment.

The consolidation of hospitals and doctors into large networks also makes it hard to keep prices low, as do waste, fraud and malpractice, they say. The system also lacks incentives for hospitals and doctors to curb costs. For example, they can charge twice by repeating tests and procedures, and by readmitting patients.

Insurers also say they lose money with policies people buy on their own, as opposed to group coverage from employers. Because the individual policies are more expensive, healthier people tend to avoid them, leaving insurers with a sicker pool.

Poor reimbursement from government programs such as Medi-Cal also forces insurers to raise private insurance prices to make up the slack, they say.

Finally, as people get older and fatter, they gobble up more health care resources.

'When you're looking at growth in premiums, the largest engine of that growth are those medical costs,' said Charles Bacchi, executive vice president of the California Association of Health Plans, which represents health insurers. He said critics who claim that insurers raise prices to increase profits and pad executive salaries are wrong, and that insurers' average profit margin has remained at 3 to 5 percent for years.

First, note that the executive compensation, the administrative costs, the marketing, public relations and lobbying costs all come off the top of revenues before any profits are generated, and before any possible dividends get paid to stock-holders.   I suspect that the insurance industry spokespeople immediately switch the topic to profits and investors' results to distract from those who really make money from health insurance companies, the top executives, and all those managers, bureaucrats, marketers, public relations people, and lobbyists who never touch patients and never deliver any care.  As Wendell Potter has written, many people like to blame government bureaucrats for health care's problems. They may deserve some blame, but not any more, and perhaps less than corporate bureaucrats and executives.

Recall further what Wendell Potter described in Deadly Spin. All those health insurance corporate public relations people were earning good salaries in part based on their ability to distract the public and policy-makers from the insurance companies' roles in health care dysfunction. Potter wrote (p. 110):

Rather than admit responsibility for the failures, insurance executives pointed the finger of blame at their customers, the 'consumers' of health care, and, of course, the providers of care. In introducing the concept of their new silver bullet - consumer driven health care - insurance executives claimed that the 'real drivers of health care costs' (one of my CEO's favorite expressions) were the people who sought care when they really didn't need it and the doctors and hospitals who were all too willing to provide this unnecessary care. Sure, the aging population and expensive new technology were also factors, but the main culprits were people who just didn't realize how expensive health care had become.

Note the similarities among the "real drivers of health care costs" promulgated by the corporate PR people and the defense of the health insurers' role mounted above (some of the more obvious color-coded). Note that the defenses never explain why the insurance companies seem unable to negotiate prices down, and why they all use the physician payment schedule derived from the recommendations of the secretive RUC.

For some final irony, the Chronicle found an academic who was not too hard on the health insurance companies:

Glenn Melnick, a health economist at the University of Southern California, sympathizes with many of the insurers' arguments.

He blamed rising costs mainly on higher prices charged by hospitals and doctors, which account for the largest portion of health care spending.

The reporter did not note Prof Melnick's full title, Professor and Blue Cross of California Chair in Health Care Finance. Oops.

So in summary, health care costs continue rising, access keeps declining, and there is no evidence of improvements in quality. Large health care organizations blame each other for the problems, but nearly all of them continue to make their top executives extremely rich. Although the amounts diverted to these executives cannot solely account for the rise in health care costs, the perverse incentives given those who lead health care are likely a major cause of the problems. A health care system run by leaders who are comfortable becoming extremely rich while the health care crisis worsens is a likely recipe for dysfunction.

We now know commercial health insurers deploy well paid public relations departments to use stealthy if not downright deceptive means to distract those who want to address what really causes health care dysfunction (see this post.) It is likely that all large health care organizations use similar stealth advocacy strategies. These strategies have successfully distracted the conversation away from problems with health care leadership and governance, at least until now.

As we have said before, far too often the leaders of not-for-profit health care institutions seem more interested in padding their own bottom lines than upholding the institutions' missions. They often seem entirely unaware of their duty to put those missions ahead of their own self-interest. Like the financial services sector in the era of "greed is good," health care too often seems run by "insiders hijacking established institutions for their personal benefit." True health care reform would encourage leadership of health care who understand health care and care about its mission, rather than those who see a quick way to make a small fortune.

Furthermore, we need an open discussion of the real issues related to health care dysfunction, not one stifled by the anechoic effect, spun by corporate PR, and dominated by "third parties" whose conflicts of interest are hidden. 

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Some Dare Call It "Corruption" - the Massachusetts Blue Cross Blue Shield Golden Parachute Scandal Continues

We have discussed many cases of health care organizations' leaders reaping rewards disproportionate to any concept of their performance, and especially to any concept of the effect of their conduct on patients' or the public's health.  Most of these cases have been pretty anechoic, but for some reason, the case of the huge golden parachute given to the outgoing CEO of Massachusetts Blue Cross Blue Shield despite a tenure  marked by financial losses and no particularly brilliant advances in patients' care or outcomes, (see this post) continues to generate responses. 

One editorial suggested that should the non-profit health insurance company continue to pay so lavishly, it should lose its tax exemption.  Another noted that the company should start putting its stakeholders, defined as its policy-holders "first and its funding of overly generous compensation packages to board members and outgoing CEOs somewhere far below."  Finally, an editorial in the local Providence Journal used the "c" word, "corruption," to define the company's and its CEO's behavior.

So it should not be surprising that defenders of the company have appeared.  The Boston Globe published an article which featured attempts to minimize the importance of the CEO's golden parachute. Further analysis of the points are in order.

Executive Salaries are a Minimal Component of Cost

The article quoted an expert who asserted executive salaries are not themselves a big component of cost:

The outcry grew big enough to force Blue Cross board members to vote to suspend their own payments and to lead the insurer to make promises to curb excessive payouts to executives. There�s just one problem: Those steps will do little to fix soaring health care costs.

'I have the same outrage,' Stuart H. Altman, a national health policy professor at Brandeis University, said about Blue Cross�s payments. But, 'We need to put executive pay and board salaries in perspective. It is not the major force, or even close to the major force, in driving up health care costs.'

My comment is that just because administrative costs are not the largest component of health care costs does not mean they do not drive health care costs.

As I have argued before, the biggest problem created by excess compensation for health care organizations' leaders is not the amount of money they get, per se.  The problem is the effect of the perverse incentives created by the money.  One concern is that people paid that much may make decisions that support their pay in the short-term, but damage the organizations' mission in the long-term.  Another is that the sorts of people attracted by the possibility of big pay packages are those least likely to uphold the mission in the first place.  Another is that the huge disparity between the pay of the top leaders and of everybody else is demoralizing for the relatively poorly paid staff who actually must do the work.

Finally, it may be worth quoting the former President of Princeton University, just interviewed about what academic leadership was like in the days before giant pay packages:

I�m not a fan of huge salaries for presidents of academic institutions. These are hard jobs. But people don�t really do them for the money. What kind of message do you really want to convey concerning the nature of the institution and its leadership? I always thought that it was important to convey a message of we�re all in this together. If you as president earn so much more than everyone else, it�s hard to argue that we�re all in this together.

Focusing on Executive Compensation Distracts from the Real Issues

The final argument in the Boston Globe piece was that huge executive compensation just is a distraction from the real issues:

Yet [current Massachusetts Blue Cross Blue Shield CEO Andrew] Dreyfus said he is concerned that the focus on executive and director pay will distract insurers, providers, and policy makers from addressing factors driving health care costs higher. Those factors range from an aging population to increases in obesity to expensive tests, drugs, and treatments that cure diseases and prolong lives.

'If you had a dozen health economists sitting in this room and you asked them what�s driving health care [costs], you know executive and board compensation wouldn�t be at the top of the list,' he said. 'It would be chronic illness and prices of hospitals and doctors and medical advances and discoveries and technology.'

That list of the "real" drivers of health care costs sounds very familiar.

Wendell Potter's Deadly Spin, is an expose of how how insurance and managed care corporations' public relations departments used deception, propaganda, and outright disinformation campaigns to make sure health policy supported the companies' interests.

Potter wrote (p.110) about how PR campaigns were designed to distract the public and policy makers from the industry's responsibility for health care dysfunction:

Rather than admit responsibility for the failures, insurance executives pointed the finger of blame at their customers, the 'consumers' of health care, and, of course, the providers of care. In introducing the concept of their new silver bullet - consumer driven health care - insurance executives claimed that the 'real drivers of health care costs' (one of my CEO's favorite expressions) were the people who sought care when they really didn't need it and the doctors and hospitals who were all too willing to provide this unnecessary care. Sure, the aging population and expensive new technology were also factors, but the main culprits were people who just didn't realize how expensive health care had become.

I color coded the factors listed by the current Blue Cross CEO as the real "drivers" of health care using the same colors with which I coded Mr Potter's list the specific distractors created by insurance company executives to deflect attention from the companies' inability (and probable) disinclination to control costs.
So it appears that Andrew Dreyfus is working from the same playbook that Wendell Potter described, down to the "drivers of health care costs" terminology. 

Summary

The Massachusetts Blue Cross Blue Shield kerfuffle seems to be enlarging into a good case to teach about what health care dysfunction is really all about.  It shows how the leaders of large health care organizations seem to be putting their self-interest ahead of the missions they are supposed to uphold.  Without governance structures that hold them accountable for upholding these missions, they have set up perverse incentives to pay themselves very well regardless of the effects of their actions on patients' or the public's health. 

So it appears, as the Providence Journal editorial asserted, that the leadership of health care organizations is increasingly corrupt, at least using the Transparency International definition of corruption, abuse of entrusted power for private gain. 

True health care reform would make leaders of health care organizations accountable for upholding their missions, and for patients' and the public's health.  Leaders of health care organizations ought to get reasonable incentives for improving health, but not incentives so large as to demoralize the people who actually do the work and take care of the patients. 

Post Script: More Undisclosed Conflicts of Interest

It is obvious why Andrew Dreyfus, the new CEO of Massachusetts Blue Cross Blue Shield might quote the health insurance industry public relations party line about drivers of health care costs that conveniently do not include insurance company practices and executive compensation. 

It was not obvious when reading the Boston Globe article why Professor Altman might be susceptible to that party line.  Perhaps his conclusions were only based on his scholarship.

However, the Boston Globe article failed to disclose Prof Altman's part-time jobs.  As per this 2010 proxy statement, he is a member of the board of directors of Lincare, a company that provides respiratory care services, including disease management, and of Aveta Inc, a privately held health insurance company.  Prof Altman's total compensation from Lincare in 2009 (per the latest proxy statement available, i.e., that issued in 2010), was over $1.7 million.   Note that corporate directors, as we have discussed previously, have a fiduciary duty to exhibit "unyielding loyalty" to the stockholders of the company and their interests  [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.].  Given Prof Altman's membership in the board of directors of a health insurance company, and his towering compensation as a director of a health care company that may need to maintain good relationships with health care insurers, it would seem that he has multiple financial relationships that could lead to sympathy with the health insurance industry's public relations party line.

So it seems that regardless of the intent of the reporter who wrote it, the latest Boston Globe article about the Massachustts Blue Cross Blue Shield CEO golden parachute scandal ended up being an apologia for excess compensation of health care insurance executives that followed the script written years ago by health care insurance corporate public relations.

So I need to add another conclusion.  The discussion of health care policy needs to be informed by disclosure of the financial interests of those participating, particularly those participating as experts in the media.   True health care reform would lead to such disclosure.  However, in our currently dysfunctional health care environment, be very skeptical about the interests of "health policy experts" who seem eager to support the powers that be.

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The Rise of the Corporate Physician - the End of the (Health Care) World As We Know It?

In discussing how concentration and abuse of power threatens health care professionals' values and professionalism, we have discussed how ostensibly academic institutions value faculty more for their earning power than their academic abilities.  We have discussed how financial relationships between physicians and drug, biotechnology, device and other companies risk abuse of entrusted power.  But up to now, I have been comforted by the hope that physicians in small independent practices who do not have such conflicts of interest are trying to uphold their professional values, even as they were buffeted by the perverse incentives imposed by managed care organizations/ health insurance companies and government insurance (e.g., US Medicare whose payments are controlled by the RUC).

However, a recent article in SmartMoney suggests that the end of the independent physician is nigh:

Remember the solo family doctor? In places like Springfield, it has become increasingly likely that she's collecting a paycheck from a large regional hospital�and practicing medicine according to the hospital's strict playbook. The experience in Springfield is just a needle prick compared with what's going on nationwide. At least one in six doctors�more than 150,000 nationwide�now works as an employee of a hospital system. And with about half of recent medical school graduates deciding to work for hospitals and many established doctors looking to unload their practices amid the tough economic climate, what was a trickle of change has turned into a torrent. Jim Pizzo, a Chicago-area hospital consultant, says the blistering pace of these mergers is leading some colleagues to joke that there are two types of physicians today: 'Those employed by hospitals and those about to be.'

So we are seeing physicians who practiced solo or in physician-lead, physician-run group practices becoming employees of large health care organizations. And here on Health Care Renewal, we know how most large health care organizations are run.

This appears to be an unintended consequence of our recent US health care "reform" law:

But hospital executives also believe that buying doctors' practices could yield a big payday, thanks to a different provision in the health care law. The law will encourage doctors and hospitals to share some payments when treating each patient; as collaborative teams, they could earn bonuses for holding down costs and meeting quality markers. 'The real question for everyone is how that pie�that money�is going to get split up,' Goertz says; hospitals think they'll have the upper hand if they employ the doctors that they're sharing their banana cr�me with. And that's touched off a flurry of mergers everywhere�from Seattle to Roanoke, Va.

The name of these supposedly collaborative organizations, which are turning out to simply be hospital systems which have purchased physicians' practices and now employ physicians, is "accountable care organizations," which now appears ironic at least.

The article detailed some of the adverse effects to be expected when accountable care organizations become hospital systems with employed physicians providing patient care.

Increased Costs with Decreased Care

Ruth Taylor, a 44-year-old woman in Bozeman, Mont., started seeing Robert Hathaway as her doctor during college, and she stuck with him through everything from routine blood tests to a kidney transplant. Taylor, a professional nurse with warm blue eyes, describes Hathaway as a 'classic small-town doctor' who knew all his patients by name and socialized with them at local basketball games; he was accessible and thorough�even catching a health problem of hers that other doctors had missed. But after Hathaway sold his practice to the local hospital, Taylor says, things began to sour. She was more likely to be assigned to see the physician assistant rather than Hathaway himself. And when she went in for a comprehensive physical (also run by the assistant) in late 2008, she was charged $360, more than double what she'd paid for a workup in previous years.

Imposition of Dysfunctional Health Care Information Technology

On this blog, Dr Scot Silverstein frequently posts about how poorly designed and implemented commercial health care information technology may have harms that outweigh any benefits, and how these systems are rarely objectively evaluated. Employed physicians are likely to be required by their new executive overlords to use commercial health care IT that benefits the managers and their strategies, but may not benefit patient care:

Last spring Hospital Sisters tried to shift all of its Springfield medical offices to electronic medical records simultaneously. But there wasn't enough tech support to deal with all the problems physicians ran into on day one, and wait times spiked at the system's walk-in locations. Nenaber, a soft-spoken 64-year-old with wire-rim glasses, sounds acquiescent about the situation. 'We're getting the hang of these things,' he says slowly, sitting at his desk overlooking a gas station and a strip-mall parking lot. But his practice is still waiting for its electronic payoff

Increasing Prices by Providing Care in the Hospital

Now that the acquisition spree is in full swing, some experts worry that price increases could become the dominant narrative for patients. When hospitals run medical practices, federal law allows them to add substantial 'facility fees' to patients' bills to cover overhead expenses. The new bosses also often rip equipment like X-ray machines and MRIs out of the physician's office, preferring to have patients get those tests from radiologists at the hospital. That, too, can cost patients. A consumer with a high-deductible Aetna plan, for instance, would pay up to $1,400 for an MRI of her back at the University Medical Center at Princeton, N.J., according to data that the insurer makes available to its members. The same scan would cost about a third as much at nearby Radiology Affiliates of New Jersey, a nonhospital facility. Based on a review of insurance databases and state regulatory records, that's a fairly typical price gap

Increasing Prices by Market Domination

Price increases also have the potential to bleed outward�affecting not only the patients of the absorbed doctor, but also the cost of health care citywide. That's because when hospitals sit down at the bargaining table with insurers, they're almost always able to negotiate higher payment rates for their big groups of doctors than a lone physician with little bargaining power

Despite the usual spin provided by the would-be monopolists:

Fast-growing hospital systems, including Hospital Sisters and Bozeman Deaconess, say that their growth will eventually make care more efficient and bring costs back down, since they'll be able to cut back on unnecessary care and duplicate tests

I am sure that the 19th century robber barons made the same pitch about increasing efficiency. Of course, the efficiency mainly benefits the insider managers.

By the way, of course, the hospital systems own public relations machines and lobbyists are now busy attacking any restrictions on such concentrations of power, while the hospital managers figure out how to game the system to increase their market domination before the regulators notice:

As more patients face such disruptions, regulators are taking notice. In October, the Federal Trade Commission and the Department of Health and Human Services met with doctors, insurers and other health officials to discuss the referral and pricing problems that could arise from 'accountable-care organizations'� those new groups of hospitals and doctors that will share financial incentives. The Federal Trade Commission will offer guidelines on what's permissible by midyear. But hospitals are already lobbying for accountable-care groups to be exempt from antitrust and antifraud rules, even as they scoop up more and more medical practices. Under current regulations, officials in Washington must green-light all mergers involving companies valued at more than $63 million. But by buying up tiny medical practices one at a time, critics say, hospitals stay below the threshold and avoid getting much attention. And by the time regulators settle on more-formal legal guidelines, those mergers may be hard to undo, says Cory Capps, a Washington economist specializing in health care antitrust issues.

Excess and Unnecessary Utilization via "Leakage Control"

With big hospital systems now owning physician practices, and practicing physicians directly answering to executives, the push will be on to maximize use of the most lucrative services. Once the hospital systems have made employees out of the physicians, it is easy to pressure their own employed physicians to refer patients to the hospital units that can bill most lucratively:

By their own admission, most hospitals are eager to keep patient referrals under the same corporate umbrella, to save on costs and share medical records but also to boost revenue. The hospitals say they wouldn't force an internist, for example, to refer a patient with heart problems to their own cardiologists, but critics say there's certainly financial pressure. Under a little-noticed regulation that took effect in 2007, hospitals are allowed to pay doctors less if they don't do enough internal referrals.

Doctors in Bozeman and Springfield who granted interviews said they didn't feel pressure to be 'team players' with referrals. But some of those who've left large health systems tell a different story, including Mark Callenberger, an orthopedist in Merritt Island, Fla. Callenberger says that the hospital group where he used to work urged him to direct more patients to the MRI machine owned by the hospital. The doctor preferred a more advanced machine at a private practice that he says offered clearer pictures. But after he ignored the recommendations, Callenberger says, the hospital told his office manager to schedule patients at the hospital's MRI anyway, leaving him to perform surgery using 'crummy images.' (The hospital declined to comment on Callenberger's case but says its doctors can use whatever facilities they choose.) Patients may never know about these power struggles, because doctors aren't required to disclose how they choose specialists. And while patients who ask can always see a specialist outside the network, in practice few are likely to challenge their doctors' judgment, says Bruce A. Johnson, a Denver health care lawyer. 'Face it, when we're really sick,' says Johnson, 'if the doctor tells us to jump off a roof, we'll probably consider doing it.'

Note that we discussed (here and here) the example of a for-profit hospital system with a large number of physician employees pushed to choke off "leakage" of patient referrals outside the system.

Summary

The overarching problem is that employed physicians now must answer to managers and executives who may put financial goals, and their own enrichment, ahead of physicians' values, and specifically will choose increased revenue over providing the best possible care to individual patients:

. Executives here are also hoping to push the needle further�standardizing everything from how long patients wait on hold to the ease of parking at the doctor's office (valets, luxury-restaurant style, are one solution under consideration).

Still, Mikell acknowledges, 'doctors don't want follow-the-directions, cookbook medicine.' And for many physicians, the idea of following new rules triggers a much larger unease at giving up their independence�a feeling of loss, both for the businesses they built and for their patients. Back in Bozeman, Blair Erb, the sole cardiologist in town, is a picture of resignation as he prepares to sign a contract with Deaconess. 'I feel defeated,' Erb says, looking around at the office furniture he and his wife, Liz, chose from a catalog years ago. The weathered ranchers and bundled-up women that come through his door mostly express disbelief when they hear that this frank-talking Tennessee native will sell his practice. His staffers say they're not looking forward to the questions the hospital's medical records system will soon prompt them to ask patients. (Do you wear a bike helmet regularly? Do you have a smoke detector?) 'We'll try to retain as much professional independence as possible,' Erb says, gazing at the hospital building, whose bulk he can see through his window. 'But the fact of the matter is, we'll have a new master.'

So I for one do not welcome our new executive overlords.

We have posted about numerous examples of health care organizational leaders who put their own enrichment ahead of the mission. Now even ostensibly non-profit hospital systems are increasingly competing against for-profit systems. We have seen, as noted above, an example of a for-profit system that seems to betting everything on a business strategy to reduce "leakage" of patient referrals.  We can expect that non-profit hospital systems will have to act more like for-profit systems, and the perverse financial incentives given the managers of all hospital systems will lead to pressure on physicians to forgo their responsibilities to provide the best care to individual patients in favor of actions that will bring in the most money in the shortest time.

We seem to be witnessing the rise of the corporate physician, the rise of a physician who must first answer to managers who never committed to putting patient care first, who may have no sympathy for physicians' core values, who may receive huge incentives to maximize short-term revenue no matter what. Such a rise of corporate physicians would be unprecedented in the US, and I believe in any developed country.

The rise of the corporate physician would require patients to put their trust in corporations, rather than individual doctors, in the era of the global financial collapse, in the new gilded age.

We may be seeing the end of health care world as we know it. The upcoming brave new world of health care may be worse that we can imagine.

What is to be done? - I rarely have ventured into specific policy suggestions, but I think that the consequences of the well-intended "accountable care organization" blunder may be so severe that I must so venture now. We must derail the movement towards "accountable care organizations." Any movement to make organizations more accountable cannot do so by making most professionals into employees answering to the sorts of ill-informed, incompetent, self-interested, conflicted or even corrupt leaders that we have been writing about for more than six years on Health Care Renewal.  We need to make it impossible for for-profit companies to employ physicians to take care of patients.  Maybe we need to think about making it impossible for for-profit companies to provide patient care at all, and for for-profit companies to sell health insurance.  Meanwhile, we need to ensure the accountability, integrity, transparency, and honesty of leaders of health care organizations.

If we do not reverse the current trends, anyone who wants good health care may have to look for it somewhere other than in the US.

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Wendell Potter's "Deadly Spin"

We recently discussed how Wendell Potter, author of Deadly Spin, has provided a chilling picture of health care corporate disinformation campaigns and the tactics used therein.  I finally had a chance to read the whole book, which should be read by anyone interested in concentration and abuse of power in health care.

Let me summarize some of its main points.

The Unholy History of Public Relations

Mr Potter set "PR" in its historical context, and noted parallels among the modern deceptions he recounts and how the father of PR white-washed tobacco companies, and with the propaganda and disinformation used by 20th century totalitarian states to cement their rule.

How Deceptive PR Changed the Course of Health Care

As noted earlier, Mr Potter recounted how deceptive PR campaigns subverted the health care reform plans of US President Bill Clinton, reduced the impact of Michael Moore's movie, "Sicko," and helped to remodel the recent health care reform bill to reduce its threat to commercial health insurers.  He further noted how PR distracted public attention from the growing faults of a health care system based on commercial health insurance, and how practical and legal safeguards against abuses by insurance companies were eroded. 

Making More by Providing Less Care

Mr Potter catalogued the tactics insurance companies use to reduce care and increase revenue, such as rescision, elimination of coverage for groups with high costs, the use of high deductibles disguised as "consumer choice," etc.

The Tactics of Stealth Health Policy Advocacy

As noted in our earlier post, Mr Potter described "charm offensives;" the deliberate creation of distractions, including the planting of memes for short-term goals that went on to have long-term adverse effects; fear mongering; the use of front groups, including "astroturf," (faux disease advocacy and/or grass roots organizations), public policy advocacy groups, and tame (and conflicted) scientific/professional groups; and intelligence gathering.  He provided some practical advice for detecting such tactics. For example, be very suspicious of policy advocacy by groups with no apparent address or an address identical to that of a PR firm, or with anonymous leaders and/or anonymous financial backing.

Why Good People Do Bad Things

Mr Potter provides some insight into the rationalization and compartmentalization that allow apparently upstanding people to peddle deceptive PR.

Memes Metastasizing

Mr Potter noted how memes are created to fit short term goals.  My observation is that these memes may then acquire lives of their own that then may have long term adverse effects.  Think about "the best health care system in the world," fears of "government bureaucrats," but not corporate bureaucrats running health care, to what the label "junk science" may be applied, and where fears of the "nanny state" came from.

Summary

Mr Potter seems to be the only known example of a defector from the ranks of the leadership of modern corporate health care prompted by conscience.  Anyone who finds this blog useful should find his book at least equally useful.  (To those from outside the US:  although most of Mr Potter's experience was with the US system, the role of PR in society here is likely not that different from its role in other developed countries.)

I hope to return to some of the issues he raises in more detail from time to time.

Bravo, Wendell Potter, for returning from the "dark side."

 Note that I have added Mr Potter's blog to our blog-roll.

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Health Care Corporate Disinformation Campaigns: Wendell Potter's "Deadly Spin"

I wish I had gotten to this earlier....  In 2009, Wendell Potter, a mild-mannered former chief of public relations for for-profit health care insurance company Cigna, testified before Congress about how insurance companies manipulated public opinion to support corporate vested interests. 

insurance companies make promises that they have no intention of keeping, how they flout regulations designed to protect consumers . . . and how they �purge� small businesses when their employees� medical claims exceed what underwriters expected
[Kendall]

In November, 2010, he published a book entitled Deadly Spin on this topic.  Starting then, a series of op-ed pieces by Potter, reviews of his book, and interviews with him provided a chilling picture about how corporate health care uses disinformation to support its interests, regardless of the public's interests.  I am sure there is much more in the book, which I will endeavor to purchase and read forthwith.  Meanwhile, pieced together from these articles are examples of insurance industry disinformation campaigns, and some observations about how their disinformation machine works.

Stifling the Clinton Administration's Health Care Reform

He took part in the planning for the 'Harry and Louise advertising blitz that helped derail the Clinton health-care initiative and used to bandy about catchphrases that have resonated in more recent campaigns.
[Wilemon]

Discrediting Michael Moore's Movie Sicko

I described the meticulously planned and deception-based strategy the health insurance industry developed and carried out -- with help from one of Washington's biggest PR firms -- to discredit documentary maker Michael Moore and his 2007 movie, Sicko. Because the movie laid much of the blame for the seemingly intractable problems of the American health care system on insurers, the industry I used to work for spent a big chunk of policyholders' premiums on a behind-the-scenes campaign to demonize Moore and to misinform Americans about the health-care systems in Canada and Europe that -- as Moore explained in the movie -- provide coverage for all their citizens and provide high quality care for them at much lower costs than we do in the U.S.
[Potter, Huffington Post]

Quieting the Furor After a Denied Liver Transplant

In 2007, Cigna initially denied payment for a liver transplant for a 17-year old girl named Nataline Sarkisyan, creating a national uproar.

We learn that executives at Cigna worried that Nataline�s situation would only add fire to the growing public discontent with a health care system anchored by private insurance. As the case drew more national attention, the threat of a legislative overhaul that would ban for-profit insurers became real, and Mr. Potter found himself working on the biggest P.R. campaign of his career.[Chen]

As busy as they might have felt in the days leading up to Nataline�s death, he and his staff were inundated with calls from the news media immediately afterward. To bolster what was seen as a fight for its survival, Cigna hired a large international law firm and a P.R. firm already well known to them from previous work aimed at discrediting Michael Moore and his film 'Sicko.'
[Chen]

Twisting "Obamacare" to Benefit the Insurance Industry

Mr Potter himself wrote about how "Obamacare" was twisted into a win for the insurance industry in an op-ed entitled "Repeal and Replace?":

Despite all the attacks on 'Obamacare,' the new law props up the employer-based system that insurers and large corporations benefit from so greatly. It also guarantees that private insurers will get billions of dollars in new revenue. And the insurers won�t have to share a penny of that windfall with a government-run public option the president once said was necessary 'to keep insurers honest.'
[Potter, Newsweek]

On one hand, the goal of the insurance industry was the "individual mandate," the requirement that all Americans MUST purchase insurance, which for most means insurance provided by for-profit health insurance companies:

Although I was ashamed of many of the things I did during my career, I didn�t plan to speak out about the industry�s devious practices until I saw Karen Ignagni, president of America�s Health Insurance Plans, tell President Obama at the end of his March 2009 White House Forum on Health Reform, 'You have our commitment to play, to contribute, and to help pass health-care reform this year.' Then I knew the industry�s disingenuous charm offensive had begun. Soon after that I read that, Aetna chairman and CEO Ron Williams, the driving force behind the industry�s effort to get the individual mandate enacted, had met with the president half a dozen times. I knew Williams was trying to persuade the president to drop his insistence on the public option and to embrace the individual mandate. Sure enough, Williams got his wish.
[Potter, Newsweek]

In fact,

For months before I left my job, I worked closely with my counterparts at the other big insurers to develop the list of must-haves our well-connected army of lobbyists would take to Capitol Hill when lawmakers began drafting reform legislation. Despite their public statements to the contrary, insurance companies really liked much of what was in both House and Senate versions of the bill�big chunks of which they actually wrote behind the scenes�especially the requirement that all Americans buy insurance if they�re not eligible for an existing public program like Medic-aid or Medicare.
[Potter, Newsweek]

On the other hand, the industry wanted to make sure that the law did not regulate them too tightly, or otherwise inconvenience them or cost them too much money:

During the reform debate, the industry�s deception-based PR strategy had two active fronts. One was a highly visible charm offensive designed to create an image of the industry as an advocate for reform and a good-faith partner with the president and lawmakers in achieving it. The second was a secret fearmongering campaign using shadowy 'AstroTurf' groups and business and political allies as shills to disseminate misinformation and lies�like the one about the creation of 'death panels'�with the sole intent of killing any reform that might hurt the bottom line.
[Potter, Newsweek]

Tactic: Front Groups

This seems right out of the old KGB playbook, as described by Mr Potter in an interview about the campaign to discredit Michael Moore's Sicko:

one key component was to fund a front group, and that is something that I write about quite a bit in the book, about how special interests, and the insurance industry, in particular, will use premium dollars to funnel thousands and thousands, if not millions, of dollars to big PR firms to set up fake grassroots organizations�astroturf, as we call it�and front groups. And in this case, there was a front group that was set up called Health Care America, and the sole purpose for it to be set up was to attack Michael Moore and to attack the notion of a single-payer system in this country.
[Goodman]

Note that this particular tactic was never previously exposed:

I�ve done a search recently just to find out how they were covered, and they were never exposed.
[Goodman]

But it was quite influential:

They were quoted extensively. They sent out press releases. And they were given status as a legitimate organization, even by the New York Times.
[Goodman]

Tactic: Third Parties (Useful Idiots?)

An example from Potter's account of how insurers manipulated the Obama administration's health care reform:

He contends that the insurance industry used 'third parties,' such as sympathetic congressmen, 'to kill key elements of the president�s plan, if not all of it, by scaring and lying to the public.'
[Weiss]

Here is another version used in the campaign to quell the furor over the denial of the liver transplant:

the aggressive placement of articles with friendly 'third party' reporters, editors and producers who would 'disabuse the media, politicians and the public of the notion that Nataline would have gotten the transplant if she had lived in Canada or France or England or any other developed country.'
[Chen]

Tactic: Spies

This really is out of the espionage playbook:

A 'spy' was dispatched to Nataline�s funeral; and when the Sarkisyan family filed a lawsuit against the insurer, a team of lawyers was assigned to keep track of actions and comments by the family�s lawyer.
[Chen]

Tactic: Distractions to Make Important Issues Anechoic

We have often discussed how some of the issues we discuss on Health Care Renewal are anechoic, generating almost no discussion, polite or otherwise in the medical and health care research and policy literature, and sometimes even in the main-stream media. Part of the anechoic effect may be due to deliberate distraction, as Potter discussed in reference to the campaign to manipulate "Obamacare":

Potter shows then-Cigna chairman Edward Hanway's leading role in "a multi-milllion-dollar public relations and advertising campaign" in the run-up to the 2008 presidential election, designed to 'divert the public's and the media's attention' away from the central fact of millions of uninsured and underinsured sick people, toward other problems that were harder to blame on insurers: aging Americans, extravagant doctors, expensive technology, and consumers demanding costly operations they don't need.
[DiStefano]

Note that the usual dogma one sees in the medical and health care research/ policy literature about the causes of US health care's excess costs, declining access and poor quality are just as listed above: an aging population, high doctors' fees and excessive utilization, technology that appears to be ever costlier (unlike technology everywhere but health care), and patients' unreasonable demands.

Tactic: Message Discipline

As discussed by Potter in terms of the campaign to align "Obamacare" with the insurance industry's interests:

It's incredible message discipline, and it's based on an understanding of ideology. The health insurers know that they need to be allied with big, well-researched organizations like the Chamber of Commerce. They want to be associated with people who can convince us that the way to go for health care is market-based. You're going to be hearing in the weeks to come, as we revisit health care, from Republicans and big business and those in the industry that what we need are 'common-sense, market-based solutions.' Those are carefully crafted words, just as what we have now was a 'government takeover of the health care system.' They spend enormous amounts of money very carefully selecting words and putting them together in a way that will elicit an emotional response. The people who are saying this believe their own talking points because they don't have an understanding of how the system is working or not working. If they are conservative, they think, 'I'm supposed to believe this.' They're supposed to believe that the market should work well in health care. They just simply have their blinders on and won't take them down to see the reality.
[Whitaker]

Tactic: Entrapment (Double-Think?)

Finally, Potter discussed how public relations leaders keep their own people in line:

There's an entrapment that's part of the problem here. I was paid very well, but I wasn't independently wealthy, and I had to consider my own ability to make the house payments and the car payments and putting the kids through school. You also find that your ego and what you do for a living, you let it define you. How much money you make, what neighborhood you're able to live in, where you're able to send your kids to school, it all becomes part of your shell and your own self-identity. To do anything that will potentially destroy that is too frightening for people. It was certainly something I had to deal with, and I had to come to terms with the fact that I could lose all of that, whatever I had. I came to feel, well, I could lose it but what have I lost? A good friend of mine said, 'Well, you can at least push a broom, can't you?' I didn't think I was going to end up pushing a broom, but I didn't have to have all of that stuff. But people are afraid of losing all that stuff because they're afraid of losing part of their identity. So, financially and psychologically and from an ego point of view, it's hard to separate yourself from something you've been involved in.
[Whitaker]

Summary

In Mr Potter's own words, the for-profit health insurance industry's public relations machine, and by extension, the public relations machines of all the big health care corporate players

onslaught drastically weakened health-care reform and how it plays an insidious and often invisible role in our political process anywhere that corporate profits are at stake, from climate change to defense policy.
[Potter, Huffington Post]

So,

The onslaughts of spin will not stop, the distortions will not diminish, and the spin will not slow down. To the contrary, spin begets spin, as the successes of corporate PR functionaries increase the revenues of their employers, further funding their employers' efforts to create a more hospitable climate for their business interests. Americans are thus being faced with increasingly subtle but effective assaults on their beliefs and perceptions. Their best defense right now is to understand and to recognize the sophisticated tactics of the spinners trying to manipulate them.

Most important is a singular mandate: Be skeptical.
[Potter, Huffington Post]

I hope that summarizing some of Mr Potter's amazing points will help us all to be much more skeptical.

Note that Mr Potter has his own blog here, which will be added soon to our blog roll.

References


Chen P. When insurers put profits between doctor and patient. New York Times, January 6, 2011. Link here.
DiStefano JN. Potter vs Hanway: Cigna rebel tells all in book. Philadelphia Inquirer, January 20, 2011. Link here.
Goodman A. "Push Michael Moore off a cliff." Democracy Now, November 17, 2010. Link here.
Kendall J. An insider dissects the health insurance industry. Boston Globe, November 22, 2010. Link here.
Potter W. Repeal and replace? Newsweek, November 5, 2010.  Link here. 
Potter W. Why I will stay far away from cliffs from now on. Huffington Post, November 9, 2010. Link here.
Weiss G. Spin doctor reveals all. Portfolio.com, December 21, 2010. Link here.
Whitaker R. The insurance industry scam. Austin Chronicle, January 21, 2011. Link here.
Wilemon T. 3 events led 'Deadly Spin' author to turn on health insurance industry. Tennessean, January 13, 2011. Link here.

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A Source of the Anechoic Effect Discovered: the Public Relations Person in the Room

A series of posts in journalism blogs last month revealed a mechanism used by health care organizational leaders to shape discussion of the issues that affect their interests, but one that is probably unfamiliar to most health care professionals and the public at large.  Let me provide the key quotes in chronological order.

First, from the Covering Health blog of the Association for Health Care Journalism (10 June, 2010):

Have you recently tried to get information from the federal government or arrange an interview with a federal official?

AHCJ�s Right-to-Know Committee is calling on journalists to report their experiences, as part of a continuing effort to pry open the doors of the federal government. We�re looking for recent anecdotes about journalists� experiences with public information officers, especially at the Department of Health and Human Services and any of the agencies that are part of it (e.g., CDC, FDA, CMS etc.).

Please write to Felice J. Freyer, Right-to-Know Committee chair, at felice.freyer@cox.net, about problems you have encountered, including mandates to clear interviews with the press office, slow responses, refused interviews, burdensome requirements (such as written questions and answers only), extreme time limitations on interviews, PIOs listening in on your conversations, or anything else that made it hard for you to get the information and quotes that you needed in time.

The implication here, of course, is that the committee was concerned that journalists attempting to interview employees and officials of US government health agencies may encounter a variety of problems, including public information officers "listening in on your conversation."

Of course, just because the committee was concerned about a possible problem does not mean the problem exists, or is if it exists, is important.

However, a week later this post appeared in the Covering Health blog (17 June, 2010):

MedPage Today, an online breaking-news service for physicians, today instituted a rule requiring reporters to inform readers whenever a press officer has listened in on an interview.

'If a source�s comments are monitored by a press officer, then the person may not have been speaking freely,' said Peggy Peck, vice president and executive editor. 'That�s information readers should have.'

Peck instructed her staff to use phrases like 'said in a telephone interview that was monitored by a public information officer' whenever using quotes from such an interview.

Peck emphasized that a reporter�s goal should be to avoid having a press officer listening to calls or attending face-to-face interviews. 'But if that is the only way a researcher will talk, we need to let our readers know that,' said Peck�s memo to eight reporters.

Peck is a member of AHCJ�s Right-to-Know Committee, and the rule sprang from the committee�s work to end interference by public information officers in newsgathering, especially in the federal government.

'I applaud MedPage Today for taking this step and encourage reporters and editors everywhere to follow suit,' said Felice J. Freyer, chair of the Right-to-Know Committee and a member of AHCJ�s Board of Directors.

'Reporters have come to accept the presence of public relations people at interviews, but it�s really not acceptable. We all know that such eavesdropping hinders the free flow of information � and we need to let our readers know that this is happening.'

Now this is much more clear. Apparently some, maybe most of the information obtained by journalists from interviews of officials and employees of government health care agencies was monitored by public relations people, presumably to keep the interviewees "on message," and remind them not to say anything that did not fit the party line.  Furthermore, such monitoring was not often disclosed by the reports when they wrote about the interview. 

In addition, Paul Raeburn posted this on the Knight Science Journalism Tracker blog:

I�ve long been troubled by the insistence of some 'public' information officers (they are paid to work for their institutions, not the public, although the interests of the two can sometimes coincide) to listen in or sit in on interviews. Even if they don�t say a word, their presence inevitably changes the interview.

Imagine telling colleagues about the last story you wrote, and what you had to do to get it. Now imagine the same conversation with your colleagues while your editor�on whom your livelihood depends�listens in. I don�t imagine myself dissembling in either set of circumstances, but I can certainly imagine myself telling the story a little differently in each case.

The point is not that information officers are always trying to limit or shape the interview, although that clearly happens. The point is not to challenge the integrity of information officers, although, like reporters, some are better at what they do than are others. The point is that the presence of an institutional representative changes the interview. And we owe it to out readers to conduct interviews without that presence whenever possible.

Mr Raeburn seemed to make an effort to be exquisitely polite, but still managed to affirm that the public relations person in the room is a real and important phenomenon in reporting about health care.
This reinforces the notion that monitoring of interviews with journalists by public relations people is common practice, but one heretofore not discussed publicly.  It seems obvious that the point of this practice was to keep the interviewee on message, and to restrain any discussion that might not fit with the public relations persons' bosses interests.

If we did not know about the practice of keeping a public relations person in the room for interviews with people working for the government, it seems likely that we also did not know about similar practices affecting interviews with people in other kinds of health care organizations, e.g., for-profit corporations, and not-for-profit organizations.

We have frequently discussed the "anechoic effect," how important cases, stories, and data about the negative effects of concentration and abuse of power in health care, and about ill-informed, incompetent, self-interested, conflicted, or even corrupt leadership of health care organizations, and the unaccountable, unrepresentative, opaque, and often unethical governance that enables it are often just not discussed, and when discussed, produce few echoes.  Now we see another mechanism that maintains this effect.  Large health care organizations deploy substantial money and personnel to market their products and massage their messages.  These people apparently use a variety of tactics to control the flow of information to journalists.  While journalists seem to be provide much more information about the problems in health care we discuss on Health Care Renewal than professional and academic publications and meetings, we now see one more mechanism that has impeded them from doing so openly and fully.

In my humble opinion, disclosing that interviews were monitored by public relations personnel is one small, but important step in beginning free enquiry into what has gone wrong with health care.  Bravo to the people who have stood up for it. 

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