More Examples of US Hospital Market Consolidation: Connecticut and Florida

Two recent stories from two different parts of the US continue the theme of ever increasing concentration of power in our health care system.

Connecticut

The Hartford Business Journal reported on growing interest in mergers among small Connecticut hospitals.

Rising costs and reductions in government reimbursements related to health care reform could lead to consolidation among the state�s 29 acute care hospitals in the coming months and years, industry experts said.

Indeed signs of consolidation in Connecticut are already taking shape. Danbury and New Milford hospitals, for example, recently signed an affiliation agreement that will put both organizations under the control of a single corporate parent.

Meanwhile, the Central Connecticut Health Alliance, which is the parent company of the Hospital of Central Connecticut, has signed a memorandum of understanding to affiliate with Hartford Healthcare. If that deal gets federal regulatory approval, the two organizations would be integrated under the Hartford Healthcare umbrella.

Note that this story suggests the rationale has everything to do with financial issues, and little to do with patient care issues.

In some cases, deals could be fueled by the needs of cash-strapped, independent hospitals to find larger, more stable partners. In other cases, independent hospitals that have remained financially stable may look to form partnerships to gain greater access to capital markets.

'There are a lot of hospitals that are struggling financially and I think the changes that health care reform is going to bring with reimbursements could be the straw that breaks the camel�s back,' said Vincent Capece, the senior vice president and chief operating officer of Middletown-based Middlesex Hospital, which has nearly 300 beds. 'It will force hospitals to either go out of business, or find a partner.'

Mergers or partnerships allow smaller, independent hospitals to leverage the purchasing power of larger institutions � especially with insurance companies � and consolidate backroom or administrative services, among other benefits.

Note also that the recent US attempt at health care reform, later characterized as health insurance reform, is seen as driving, not preventing mergers.

Hospital officials say talks of mergers, or other types of partnerships, are likely to continue as the economy remains on shaky ground and health reform changes the landscape of how the industry does business.

Officials say reform will lead to reduced Medicare reimbursements from the federal government and require significant capital investments as hospitals prepare for larger patient loads and acquire new technology to provide more efficient care.

Florida

The Orlando Sentinel reported on increasing merger hospital merger activity in central Florida.

In health-care circles, the summer of 2010 may be remembered as the end of small, independent hospitals in Central Florida. Three community facilities here have set their course toward consolidation by joining � or announcing plans to join � large systems.

This month, Health Central, the last independent hospital in Orange County, voiced its intention to partner with a hospital chain. In July, the Wuesthoff hospital system in Brevard County was purchased by a for-profit corporation in Naples that owns 60 hospitals across the country. And on July 1, a partnership between Bert Fish Medical Center and Florida Hospital took effect, giving the system the option to buy the New Smyrna Beach facility.

The latter case could apparently lead to quite a substantial local concentration of power:

In Orlando, two major hospital chains dominate: Orlando Health, which owns all or part of eight hospitals, and Florida Hospital, which owns or operates 13 hospitals in Central Florida and 18 throughout the state.

Both are likely suitors for Health Central, which operates a 171-bed hospital, a nursing home and other health-care services in west Orange County.

Officials from Orlando Health did not respond to requests for interviews.

Florida Hospital system already is involved in a partnership with Bert Fish Medical Center that could lead to a purchase of the facility in 2015. As part of the agreement, Florida Hospital, which is owned by Winter Park-based Adventist Health System, would provide $24 million in capital improvements for Bert Fish in the next five years, pay off the hospital's debt and prop up an underfunded pension plan. In addition, residents in the hospital's taxing district were told their tax rates would go down.

The partnership cements Florida Hospital's dominance in Volusia and Flagler counties, where it already owns hospitals in DeLand, Orange City, Daytona Beach, Ormond Beach and Palm Coast. Its sole remaining competitor is Halifax Health, which owns hospitals in Daytona Beach and Port Orange.

This story contained some protestations from hospital leaders that it is all about the patients:

Florida Hospital officials say their goal is not to create health-care monopolies.

'We're a church-sponsored, church-related organization,' said Florida Hospital Vice President Richard Morrison. 'It's our mission to serve people � and if we can come to other communities and bring what we think is a distinctive approach to health care, then we'll do that.'

On the other hand,

'Hospitals today are like mom-and-pop grocery stores were 40 years ago,' said Dr. Kevin Schulman of Duke University's Fuqua School of Business. Before there was a Publix in every neighborhood, there were small grocery stores. Today, like the grocers, hospitals are joining forces or selling out to regional chains.

For the hospitals, there's strength in numbers, Schulman said. A large hospital system has more leverage when negotiating with insurance companies. Likewise, there's power in purchasing.

But these widespread hospital mergers 'have led to more market power for hospitals. Another word for that is 'monopoly,'' Schulman said.

Furthermore, just as history tells us, monopoly may be good for monopolists but not for everyone else.

A single small hospital doesn't have much clout to bargain with insurance companies. On the other hand, a hospital system that dominates a market is more likely to be able to charge higher rates to insurers � and their customers, say experts.

'There may be some efficiencies in being larger,' said Dr. Robert Berenson, a health-policy expert at the Urban Institute, a think tank in Washington. 'More to the point, however, it gives a hospital much more leverage in negotiating with health plans.'

And although there are many forces driving hospitals to join larger systems, Berenson says the results have been clear to health-care economists.

'There's some theory that [consolidation] improves quality,' he said, 'but the reality is, it drives up prices.'

While at least the folk wisdom among doctors is that the federal authorities will jump on any two doctors who informally discuss their prices, in the laissez faire, let the good times roll era of the 1980s through 2000s, there seemed to be little governmental concern about hospital (or health care in general) consolidation of power:

'Because many hospitals are not-for-profit entities, we seem to have given them a lot more latitude from an antitrust perspective, [Dr Kevin] Schulman said. 'Yet they act like the worst of the for-profit monopolies.'

Summary

As we just noted, advocates of laissez faire commercialized health care often trumpet the advantages of competitive markets as a rationale for deregulation. While there are theoretic, and possibly empiric reasons to think that competitive markets are the optimal way to distribute goods and services, we recently discussed aspects of health care that make it extremely hard for health care markets to be ideally competitive.

In the 1960s, it became recognized that physicians' professionalism, hospitals' devotion to their missions, and sometimes even (gasp) government regulation might partially compensate for distortions in the health care market. However, as supposed free market advocates became more powerful, they pushed for the commercialization of medicine and hospitals, reducing professionalism and mission support, and the hollowing out government regulation. (However, why did the people who attacked medical societies' codes of ethics as monopolistic have no interest in attacking market domination by insurers or hospital systems? Inquiring minds want to know.)

As we said last time, true health care reform would help physicians and other health care professionals uphold their traditional values, including, as the AMA once stated, "the practice of medicine should not be commercialized, nor treated as a commodity in trade." True health care reform would put health care "delivery" back in the hands of mission-focused, not-for-profit organizations, which put patients' health, safety and welfare first.

Cerner's Blitzkrieg on London: Where's the RAF?

In the Battle of Britain in WW2, the Royal Air Force (RAF) heroically repelled a foreign invasion of the UK.

The Supermarine Spitfire, key defense tool in the Battle of Britain. (Worked without major glitches.)

Now, the invasion is American, and the battlefield is healthcare...

I have often said health IT remains an experimental technology. However, the technology is being inexplicably force-fed with a vengeance to hospitals by IT companies and governments, force-fed with respect to the actual evidence of benefit.

In the case of the NPfIT in the UK, we have items such as those below from a 2009 government report "The National Programme for IT in the NHS: Progress since 2006 - Public Accounts Committee." Emphases in italics mine:

The termination of Fujitsu's contract has caused uncertainty among Trusts in the South and new deployments have stopped. One option being considered for new deployments is for Trusts to have a choice of either Lorenzo provided through CSC or the [Cerner, an American company - ed.] Millennium system provided through BT. There are, however, considerable problems with existing deployments of Millennium and serious concerns about the prospects for future deployments of Lorenzo. Before the new arrangements for the South are finalised, the Department should assess whether it would be wise for Trusts in the South to adopt these systems. Should either of the Local Service Providers take on additional commitments relating to the South, the Department should take particular care to assess the implications of the extra workload for the quality of services to Trusts in the Local Service Providers' existing areas of responsibility.

The Programme is not providing value for money at present because there have been few successful deployments of the [Cerner] Millennium system and none of Lorenzo in any Acute Trust. Trusts cannot be expected to take on the burden of deploying care records systems that do not work effectively. Unless the position on care records system deployments improves appreciably in the very near future (i.e. within the next six months), the Department should assess the financial case for allowing Trusts to put forward applications for central funding for alternative systems compatible with the objectives of the Programme.

In 2010 Londoners continue to be used as cannon fodder for the health IT experiment, which continues to rain IT bombs down upon them. The result?

Mayhem:

St George�s suffers Cerner teething pain
E-Health Insider
Jon Hoeksma
26 Aug 2010

St George�s Healthcare NHS Trust is facing teething problems with its installation of a Cerner Millennium hospital information system.

"Teething" problems? As if to imply problems with health IT are as minor as an infant's dental discomfort? That's some spin:

Health IT problems? Just baby issues; nothing a good cry can't solve ...

(The health IT baby must have serious endocrinological problems. Even after decades, it never seems to grow up, and is forever teething.)

The spin and excuses surrounding the health IT industry are simply nauseating, considering it's people's lives that are being tampered with and put at risk.

Let's translate to everyday language: the project has been a disaster.

... The trust went live with the Millennium in March, under a new local delivery model from local service provider BT.

Five months later, the trust, which is one of the largest in London, has had to second additional senior management expertise into the project team and institute an additional programme of workflow changes and training.

The trust says the new system is creating difficulties in tracking patient notes in some areas and in managing outpatient appointments; creating backlogs of work that have required extra staff to deal with.

Health IT is touted as improving clinician-clinician communication. Allow me to translate "difficulties in tracking patient notes." In King's English (as opposed to health IT political-ese and other mumbo-jumbo), this translates to "patient notes are getting lost."

That means that health IT is obstructing patient care. I'm sure the patients didn't consent to the use of unproven technology that could get them killed.

Health IT is also the supposed cure to healthcare's financial and staffing woes:

They have also had a knock-on effect on the trust�s ability to meet and report on activity. Sources familiar with the implementation say the trust was fortunate that the coalition government dropped the national requirement to meet 18-week referral to treatment time targets in the revised NHS operating framework.

The problems are understood to mainly relate to staff finding it difficult to adjust to new processes and to using the unfamiliar Cerner system.

...�Since the programme deployed some staff have found it challenging to follow the new workflows. Therefore, where appropriate, we are simplifying processes by modifying workflows and administrative procedures.�

Translation: staff are finding it difficult to perform clinical-related work according to the capricious diktats of non-clinician health IT developers. In other words, they have difficulty being coerced to work for the computer, instead of the computer working for them.

The south London trust told E-Health Insider this week that the implementation was just the beginning of a major change programme; a project it calls iCLIP.

Only the beginning? God save the King....

�Although we successfully avoided some of the major pitfalls of other deployments, the new systems have presented some challenges to staff, particularly in relation to outpatient clinics and the tracking of case notes,� said chief operating officer Patrick Mitchell in a statement.

How major could those "major pitfalls" have been? Perhaps he means, the software actually runs and no longer crashes?

He added: �We have allocated additional temporary support while the new system and processes fully embed in these areas. A further programme of training and workflow changes are also underway as we continue to support staff and prepare for the next stages of the programme.�

"Temporary?" We'll see about that. Per the recent article "Electronic Medical Records, Nurse Staffing, and Nurse-Sensitive Patient Outcomes: Evidence from California Hospitals, 1998�2007" (Health Services Research, 9 APR 2010, DOI: 10.1111/j.1475-6773.2010.01110.x), on a longitudinal analysis of 326 short-term, general acute care hospitals in California:

... Our results suggest that advanced EMR applications may increase hospital costs and nurse staffing levels, as well as increase complications and decrease mortality for some conditions. Contrary to expectation [I'm not sure whose expectation, and on what basis - ed.], we found no support for the proposition that EMR reduced length of stay or decreased the demand for nurses.

On to the issues of skills:

Julia Crawshaw, the general manager for maternity services, has now been seconded into the project team �to lead on the work looking at optimisation of workflows, operational procedures and further training.�

Will this GM for maternity be looking at workflows in, for example, neurosurgery?

The problems now being addressed occurred despite 1,600 staff being comprehensively trained prior to go-live.

"Comprehensively?" What does that mean, exactly? The results seem to belie that assertion. Or are these systems and their user experience so ill conceived, tedious, cryptic and complex that no amount of "training" is adequate? (I believe the latter.)

However, Mitchell stressed that thanks to the hard work of staff, the new information system is delivering benefits, including �real-time reporting in the A&E department and more complete monitoring of bed occupancy.�

How many millions of pounds and person-years were spent to achieve these startling results, I wonder?

Mitchell said: �Reporting in real-time requires that staff report more promptly and accurately so additional training needs are also being identified to help individual staff become more comfortable with the system.�

Perhaps the system - and its designers - should be "trained" to be more comfortable with the users?

A spokesperson for BT told EHI: �Obviously these are operational issues the trust is dealing with. It is not for BT to comment. But you would expect that on a major deployment programme of this scale there would be issues.�

This is a classic appeal to common practice. Such "issues" might be tolerable for inventory systems of widgets (perhaps Cadbury Schweppes products?), but no, in mission critical areas I would not "expect" problems such as lost clinical notes.

In the most recent trust newsletter, the chief executive said: �I do fully appreciate that iCLIP has been far from smooth sailing. However, all major projects have their ups and downs and I know that many colleagues are focused on the long-term success of this important project.�

More spin and appeal to common practice.

This voyage was smooth sailing, until a little glitch was encountered...

"Far from smooth sailing?" Why does the HMS Titanic come to mind?

... The next trust due to go live with Millennium in London is meant to be Imperial, scheduled to take the system in 2011, under Cerner�s Method M delivery model.

"Method M delivery model"? How many "models" does it take to implement information systems in mission critical healthcare environments?

In summary, the NPfIT, already by the government's admission a multi-billion pound debacle, continues to drag on. Patients and hospital workers are the fodder for this experiment, spearheaded this time by an American invasion.

The Blitz is on.

Unfortunately, this time there's no RAF in sight to repel the foreign invasion.

The upside down world of commercial health IT. Is healthcare in St. George's Trust being incernerated?

-- SS

Healthcare IT a Sacred Calling?

At my post Are computers in medicine narcotic? "Why did the National Programme for IT fail?" I observed that the healthcare IT mania/bubble is being driven in part by non-clinical hysterics who believe they will somehow "revolutionize" medicine with information technology tools that are barely able to show improvements at this point in time.

(I first heard this hysterical claim of "revolutionizing medicine" being proffered verbatim by CEO's of several large HIT vendors at a Microsoft Healthcare Users Group Meeting ca. 1997).

It may be worse.

While written with good intentions, I'm sure, now we have an evangelical article by a major medical center CIO promoting the idea that IT workers are on a holy mission (link).

... Whether we give direct care or support someone who does, we are fulfilling a sacred calling � touching human lives. Don�t discount information technology because it�s only computer stuff and nobody really knows where cyberspace is anyway. You could�ve practiced IT in any industry, yet you chose healthcare. Or perhaps healthcare chose you.

Sacred callings come in various forms. Although healthcare IT is nothing unique in itself, the element of sanctity is why I stay. If we want to live a life of significance, we must understand the depth of our calling and then perform as if our work matters. Grasp the privilege of serving humanity with your skills and talents. That is sacred.

A noble premise.

Unfortunately, the the piece then goes off the rails with extravagant commendation regarding the role of IT work in healthcare. While I agree with the overall premise, unfortunately the writer goes on to imply health IT personnel might somehow in their contributions be equal to, or even more important than clinicians:

... It is not unusual for hospitals to conduct non-denominational �Blessing of the Hands� ceremonies ... I had seen this done for clinicians at one of our hospitals and it got me thinking. What about IT? What we do is no less critical to the healing process.

[Puffery and braggadocio in the extreme? Healing has been going on for quite awhile before computers, and still goes on in the current majority of healthcare settings that don't use healthcare IT - ed.]

Our hands may not touch patients, but they do touch their lives in ways unseen. Arguably, IT is the only segment that touches the entire healthcare continuum.

As I've written many times before about healthcare IT professionals, there seems to be a blur about who are enablers of healthcare, and who are facilitators of healthcare.

Self-adulatory hysterics make an otherwise good message less credible, at least outside of health IT circles.

Finally, if health IT is a holy calling, it would be holy indeed for the health IT industry to pay less attention to the holy greenness of crisp banknotes, and heed the increasing corpus of literature showing health IT might in its present form might be devolutionary, not revolutionary. And act accordingly.

-- SS

Making a Community Health Agency into the Leaders' Private Sand-Box

As we predicted, it seems that the US Internal Revenue Service's (IRS) increased reporting requirements for not-for-profit organizations are leading to more examples of the coziness now prevalent among the top leaders of such organizations.  The latest entry in this new parade comes from a story in the Bradenton (Florida) Herald about a not-for-profit community health agency whose mission is to provide health care to the poor and disenfranchised:

Providing medical services to the indigent and uninsured in Manatee and Sarasota counties has financially benefitted some of Manatee County Rural Health Services Inc.�s officers, board members and their families, records show.

The nonprofit agency has paid nearly $2 million in recent years to businesses owned by board members, officers, employees or their relatives, according to tax documents obtained by the Bradenton Herald. And its chief executive officer, Walter �Mickey� Presha Sr., has long been the highest-paid CEO of any such agency in Florida: His salary last year was $433,000 � $140,000 more than that of his closest counterpart, records show.

The article listed multiple examples self-dealing by the top leaders of Rural Health Services.

According to tax returns filed since 2004, Rural Health has paid:

- $558,121 to John Lewis, a board member, for optometry services.

- $536,591 to The Pinnacle Group of West Coast Florida Inc. for construction, maintenance and repair work. One of its principals is Trina Presha-Rosier, Presha�s daughter.

- $344,766 to The Lawn Authority of Manatee County Inc. for lawn care maintenance at the agency�s facilities. Wardell Jackson, the agency�s vice president of support services, is a principal in the business.

- $387,673 to A to Z Complete Property Management Inc. for janitorial cleaning and maintenance services. It is owned by Chris Mullinex, the agency�s facilities director.

- $96,000 to R & L Healthcare Advisors, whose principals include Marc Lazarus, a board member, for consulting services.

- $44,242 to More Power Properties and Investments LLC, co-owned by board Chairman J. Garry Lowe, for storage of agency files and equipment and the purchase of a modular building.

Leaders of rural health offered mostly the usual explanations:

>>As long as we say it is not a conflict, it is not a conflict<<

According to a conflict of interest statement that board members are required to sign, Rural Health prohibits them, management and their families from having any 'beneficial interest or substantial obligation to' any entity engaged in business with the agency. But some have been able to bypass that prohibition because of this loophole: 'Unless it has been determined by the board, on the basis of full disclosure of facts, that such interest does not give rise to a conflict of interest.'

>>We, our relatives, and our firms are the best possible source of the services<<

Jackson, Mullinex and Presha-Rosier�s businesses won competitive bids, which are reviewed by a board committee and approved by the full board, Lazarus said. Presha said he is not involved in reviewing bids for construction projects that his daughter might seek.

The agency chose to do business with the three board members� companies because of special circumstances, agency officials said.

Lewis is one of Manatee Rural Health�s founders and has overseen its optometry services since the beginning. Lowe offered the storage space for less than what commercial storage facilities charged, then sold one of the storage buildings to Manatee Rural Health for a reduced price. And Lazarus has 36 years� experience in the health care field, including as an executive at Sarasota Memorial Hospital.

They were hired because they provide needed services at a lower cost, thus allowing the agency to spend more money on patient care, officials said.

>>Trust us, because we are wonderful people<<

'It�s always disclosed to the board, so we always have the opportunity to not do it,' said Juanine Lowery, a board member since 1984. 'It hasn�t been a problem. It�s always been competitive.'

And a slightly more coherent version of that:

'Everything�s checked out and vetted,' Lazarus said. 'The arrangements are as good as or better than what we could get on the open market.'

The explanation for the CEO's out-sized salary should come as no surprise. He got that high salary because

>>I am a wonderful CEO and I deserve it<<

Rural Health board members also defend Presha�s $433,000 salary, which makes him the highest-paid chief executive officer of any federally qualified community health center in Florida. His job performance, managerial skills and the organization�s complexity and size are all reasons he makes the top salary, board members say.

Of course, the CEO himself thinks he is a wonderful CEO and deserves it:

'I know what I do,' said Presha, who said he took a pay cut to take the Manatee Rural Health job in 1984 and has turned down job offers with higher salaries since then. 'If I could do it for free, I would do it for free. But I earn my keep.'

So here we have another case of the cozy leadership of a not-for-profit health care organization, who all think they are doing just a wonderful job, who never seem to question their own actions, and who all believe all their buddies are also doing just a wonderful job. So naturally, since they are all such wonderful people doing a wonderful job, we should not begrudge them a few dollars here and there.

Of course, if they were the leaders of a privately held company that made widgets, it would be their own money that they are spending, and maybe no on else should care.

Even if the amounts involved seem relatively small relative to some of the cases that appear on Health Care Renewal, we should care particularly about how the leaders of Manatee County Rural Health Care Services throw around money (to each other), because of the nature of the organization's mission, as described by CEO Presha himself:

MCRHS has served the poor and underserved in our communities with the mentality of a 'provider of choice.'

Our group is not only compassionate, but also innovative,....

It is truly unseemly for a not-for-profit community health care organization dedicated to serving "the poor and undeserved" lead by people so complacent about their own entitlement.

So to repeat what I have written before, in my humble opinion, this sort of coziness, this sort of fuzziness at the boundaries of institutional duties and personal interests, may be a fundamental reason that our current health care system has become so solicitous of the interests and prerogatives of its leaders, and so cold to the needs of patients and the values of professionals.


The need for more transparent, accountable leadership of health care who explicitly are subject to clear ethical rules was never more apparent.

Stay tuned as more and more cases like this appear....

Are computers in medicine narcotic? "Why did the National Programme for IT fail?"

I noted an article Why did the National Programme for IT fail? by an "ex-IT person" at the site Smart Healthcare.com in a series entitled "Patient from Hell."

Aside from the intoxicant qualities of crisp bank notes, I am beginning to suspect that computers exert a narcotic effect, like Kool Aid laced with morphine or alcohol, on many in the population.

Many people who should know better of the challenges, dangers and myths surrounding these tools are drawn in to comparisons and analogies that I would charitably call magical thinking and puerile - and absurdist and stupid when not so charitable.

This article shows the muddled thinking behind the health IT mania. My observation: when you see the word "revolutionary" in the same paragraph as health IT you're dealing with hysterics.

The "patient from hell" asks:

Why is the road to electronic healthcare so much more rocky than computerising other bits of the economy? Other professions, including bankers, accountants and lawyers, have made the jump, some 30 years after the advent of personal computers. Even musicians, poets, journalists, artists, philosophers and MPs have got up to speed.

"Even?"

Yes, and you can train a dog to fetch a stick, therefore you can train a potato to dance.

Why is the road to HIT more rocky than the road to computer poetry or art?

Perhaps because the endeavors of clinicians are not like those of a musician or poet or lawyer or banker, but just a bit more informationally, operationally, cognitively, scientifically, and socially complex?

I was amazed at the time by the irresponsibility, primarily of the consultants [i.e., physicians - ed.], who were effectively opting out of the planning process. They showed no interest in playing a part in designing a new way of working � for themselves, for nurses and all others involved in the revolutionary changes which digitalisation would bring to their working practices.

In fact, they were showing responsibility - to patients - in not being so eager to "change to new ways of working" according to the diktats of computer geeks, government and other bureaucrats and myriad non-clinicians running around like drunks, hysterically screaming "revolution!"

I fear that communication between clinician and IT has now got so contaminated that crazy solutions will come out of the deliberations of the coalition government on the future of IT in the health service. All I ask is that clinicians and IT people talk to each other. Is that so hard?

If you have the right tools on your kitchen table, shouldn't it be easy to generate nuclear fission at home?

Due to factors such as the asymmetry in responsibilities, obligations and liabilities between the two fields, of differences in knowledge and expertise, and in mindset and qualifications to attain privileges to intervene in people's lives (who qualifies IT personnel to be involved in clinical affairs?), yes, idealistic "let's all play nice in the sandbox together" dreams are "so hard."

Unfortunately, these types of comparisons and sentiments are extremely common in the Healthcare-IT-industrial complex.

The reality is:

The NPfIT failed because its purveyors and promoters hadn't a clue about the complexities and wicked problems involved in such an endeavor, problems known and described in the Medical Informatics and Social Informatics literature, among others, for decades.

It also failed because of collective ignorance of these domains among its leaders, and among those who chose the leaders. For instance, as I wrote here:

The Department of Health has announced the two long-awaited senior management appointments for the National Programme for IT ... The Department announced in February that it was recruiting the two positions as part of a revised governance structure for handling informatics in the Department of Health.

Christine Connelly will be the first Chief Information Officer for Health and will focus on developing and delivering the Department's overall information strategy and integrating leadership across the NHS and associated bodies including NHS Connecting for Health and the NHS Information Centre for Health and Social Care.Christine Connelly was previously Chief Information Officer at Cadbury Schweppes with direct control of all IT operations and projects. She also spent over 20 years at BP where her roles included Chief of Staff for Gas, Power and Renewables, and Head of IT for both the upstream and downstream business.

Martin Bellamy will be the Director of Programme and System Delivery. He will lead NHS Connecting for Health and focus on enhancing partnerships with and within the NHS. Martin Bellamy has worked for the Department for Work and Pensions since 2003. His main role has been as CIO of the Pension Service.

Excuse me. Cadbury Schweppes (candy and drink?) The Pension Service? As national leaders for healthcare IT?

Instead of sobriety, attitudes about health IT seem to universally be "sure, the experts think you shouldn�t ride a bicycle into the eye of a hurricane, but we have our own theories." (See here and here.)

The domain of health IT needs a very stiff period of detox and rock-solid sobriety before it can achieve the (non-revolutionary) benefits of which it is capable.

-- SS

Where There's Smoke? ... A University President Who Simultaneously Lead a Failed Financial Company and a Tobacco Company Which Apologized for International Bribery

A long time ago, in 2006, we first blogged about a "new species of conflict of interest" which we thought might prove to be even more important than those afflicting health care that were then starting to be discussed.  This involved health care organizational leaders who were simultaneously members of the boards of directors of for-profit health care corporations.  We posited these conflicts would be particularly important because being on the board of directors entails not just a financial incentive.  It ostensibly requires board members to "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.]   Thus, for example, the conflict posed by the president of a university, to whom a medical school and academic medical center report, who also is the director of a pharmaceutical company, would be extreme.

Since then, we noted yet another variant on this theme, university presidents who were supposedly the top leaders of failed financial firms, and then who did various dances to try to avoid accountability for these firms' fates.  That theme recently made it to the big time, a front page article on the Sunday Business section of the New York Times.

The most extreme version was the case of that of Eugene Trani, the former President of Virginia Commonwealth University ( full disclosure: I spent 7 years on the faculty of its medical school, and am still an adjunct faculty member).  Trani turned out to be on the board of a tobacco company, and soon after this was revealed, retired from the presidency (see most recent blog post here).

Now a Washington Post blogger has yet another twist on this case:

Eugene P. Trani left the presidency of Virginia Commonwealth University in 2009 after improving the school and expanding its presence in downtown Richmond. But Trani was also a director of LandAmerica Financial Group, a Richmond-area title insurer that went belly-up in 2008, taking with it millions in investors' money.

Today, Trani is on the board of Richmond-based Universal Corporation, a global tobacco marketer. Universal's subsidiaries have just agreed to pay $8.98 million in a tobacco bribery scandal that stretches from Brazil to Thailand to Africa. The firm has issued a public apology. Trani received $159,032 in total compensation for his board service.

So Trani was not only on the board of directors of a tobacco company, he was on the board of directors of a tobacco company that was forced to settle charges of international bribery and issue apologies for same, and just to ice the cake, was on the board of a failed financial company whose failure affected residents of the locality which his university served.

As the saying goes, "the fish rots from the head down."  How can academic leaders expect integrity from their faculty when they willingly take on such grotesque conflicts?  Leaders who thus try to serve two, or many masters are likely to run health care organizations that do not serve their primary constituents, patients who expect good care, learners who expect honest, competent teaching, and the public who expects important, unbiased research, well.  If we really want to reform health care, we need leaders who put the mission, not their own pocketbooks, prestige, and cronies, first.

How Oligopolists Rationalize Their Market Domination: the Examples of Sutter Health and the Carilion Clinic

Advocates of laissez faire commercialized health care often trumpet the advantages of competitive markets as a rationale for deregulation.  While there are theoretic, and possibly empiric reasons to think that competitive markets are the optimal way to distribute goods and services, we recently discussed aspects of health care that make it extremely hard for health care markets to be ideally competitive. 

Meanwhile, two news articles gave some case-based evidence about how current health care markets are hardly competitive.  

Sutter Health

A Bloomberg article focused on Sutter Health in northern and central California. Sutter Health commands a substantial part of a very large market:

Sutter Health Co., the nonprofit that owns Sutter Davis, has market power that commands prices 40 to 70 percent higher than its rivals per typical procedure -- and pacts with insurers that keep those prices secret.

Sutter can charge these prices because it has acquired more than a third of the market in the San Francisco-to-Sacramento region through more than 20 hospital takeovers in the last 30 years, according to executives of Aetna Inc., Health Net Inc. and Blue Shield of California, who asked not to be named because their agreements with Sutter ban disclosure of prices.

Also,

Operating as a nonprofit, it has $8.8 billion in revenues, 24 hospitals, 17 outpatient surgery clinics and a 3,500-doctor network, making it the largest health-care provider in an 11- county region -- from San Francisco Bay to the Sierra Nevada mountains -- where 10 million people live.

Sutter has 35 percent of the revenue and 36 percent of beds that compete for patients in the region, according to a state hospital database, including 100 percent of beds the state tracks in Placer and Amador counties east of Sacramento.

Sutter care seems to cost a lot more than care from other doctors and hospitals:

After Mark Logsdon tore a ligament in his knee skiing at Lake Tahoe in March, he returned home to suburban Sacramento and had an MRI scan at Sutter Davis Hospital.

Sutter�s price for the knee scan was $1,271, payable by Logsdon and his insurer. Exactly the same MRI at one of the local imaging centers owned by Radiological Associates of Sacramento would have cost $696 -- 45 percent less.

A few other examples of Sutter's prices compared to others;

'Instead of leveraging its system to be more cost- effective, we�ve seen Sutter leveraging its system for monopoly pricing,' said Peter V. Lee, who in June became director of health-care delivery system reform for the U.S. Department of Health and Human Services. Lee was interviewed while he worked at the Pacific Business Group on Health, a coalition that includes Chevron Corp., Walt Disney Co., General Electric Co., and Wells Fargo & Co.

In San Francisco, Aetna pays Sutter�s California Pacific Medical Center in a range with a midpoint of $4,700 for an abdominal CT scan, compared to $3,200 at St. Francis Memorial Hospital, owned by Catholic Health Care West. For colonoscopies, Aetna�s midpoint price is $3,200 at Sutter�s flagship CPMC and $2,800 at St. Francis Memorial.

In Palo Alto, Aetna pays Sutter $349 per visit for new patients to see Manju Deshpande, a family doctor in Sutter�s Palo Alto Medical Foundation clinic. Three miles away, Paul Ford�s Stanford Medical Group receives $222. If the patient needs an immunization, Aetna pays Palo Alto Medical $85, and Stanford Medical, $16. Deshpande removes wax from the ear for $175. Ford scoops it out for $104.

Down the road in Silicon Valley, when obstetrician Sarah Azad, a solo practitioner, delivers a baby for a patient covered by Aetna, the insurer pays her $2,052. When Nicole Wilcox of Sutter�s Palo Alto Medical Foundation does the same job, Aetna pays Sutter $5,890.

The doctors practice blocks apart in Mountain View, California. Performance isn�t an issue -- Azad has Aetna�s top rating for quality of care and trained Wilcox during residency.

The Sutter CEO, of course, denies there is a problem:

Sutter operates in a competitive market, Chief Executive Officer Patrick Fry, 53, said in an interview. 'I don�t see Sutter Health as having market power, given the choices that employers can make,' Fry said. 'The market has a lot of room to make a lot of decisions.'

The people who most praise competitive markets often seem to be those who have done the most to reduce the competitiveness of these markets.  The CEO also trotted out another old saw, that his organization has grown not to charge more, but to be more efficient.

While Sutter may have higher 'unit' prices than its competitors, Fry said, it is not the most costly for patients over the long run because its integration of hospitals and doctor groups allows it to provide more efficient care, cutting down on the number of procedures.

'Our mission isn�t to maximize profits,' Fry added. 'Our mission, to the extent we can, is to optimize services.' Insurers and patients have many alternatives to Sutter, according to Fry.

That is a tune would-be monopolists have been singing at least since the days of the "robber barons" and their monopolies such as Standard Oil.

Of course, he is likely to defend a system that makes so much money and pays him and his buddies in top management so much, (and, contrary to his statement above, seems to have maximized profits):

Sutter, with 48,000 employees, was among the most profitable hospital groups in the U.S. in 2009, with income of $697 million, up more than three-fold from 2008 due to large investment gains, on revenue that grew 6 percent to $8.8 billion.

Its 5.2 percent operating margin -- or operating income as a percentage of revenue -- was 73 percent higher than the median for all nonprofit hospital systems in 2009, according to Standard & Poor�s.

As of Dec. 31, Sutter had a $2.63 billion investment portfolio. Sutter paid Fry $2.8 million in 2008, according to its latest Internal Revenue Service filing. His top 14 lieutenants made between $830,000 and $1.8 million each.

The article on Sutter emphasized how the strategic use of secrecy has helped Sutter maintain its remunerative ways:

Sutter doesn�t allow its prices to be disclosed on insurers� websites because it believes the information is often misleading and doesn�t reflect the variables of each patient�s case, [Sutter spokesman William] Gleeson said.

Of course, keeping prices secret just makes the market even less like an ideally competitive one:

As Sutter�s confidentiality terms show, the actual prices that hospitals receive are often kept secret by insurers. Patients in need of hospital care, especially in emergencies, often can�t travel very far, restricting competition. And if they have health insurance, they have little incentive to price shop.

Finally, the article reminds us that the latest fad from health policy and health management circles (which seem increasingly to overlap), "accountable care organizations," may just be a pretext for even more market consolidation:

The federal Patient Protection and Affordable Care Act is looking for $500 billion in savings over the next decade to help pay for extending coverage to 32 million uninsured Americans. Yet it doesn�t address the problem of market concentration -- and may make it worse, said Robert Berenson, a physician and policy analyst at the Urban Institute in Washington D.C.

The 'unchecked' clout of hospital and physician groups in California is a 'cautionary tale for national health reform,' Berenson said in a February article in the journal Health Affairs. He warned that incentives in the new legislation to improve treatment by promoting doctor-hospital alliances -- called 'accountable care organizations' -- could backfire by strengthening providers� bargaining leverage.

Carilion Clinic
A Washington Post article discussed the example of Carilion Clinic in Virginia, whose increasing market power we had blogged about in 2008:

Railroads put this city on the map, but the king of the domain is now health care -- or rather, the Carilion Clinic.

Carilion owns the two hospitals in town and six others in the region, employs 550 doctors and has set off a bitter local debate: Is its dominance a new model for health care or a blatant attempt to corner the market?

The Carilion story emphasized again how the "accountable care organization" meme is being used to justify market consolidation, allowing health care oligopolies to appear politically correct:

Carilion says it represents an ideal envisioned by the nation's new health-care law: a network that increases efficiency by bringing more doctors and hospitals onto one team, integrating care from the doctor's office to the operating room. The name for such networks, which the new law strongly promotes with pilot programs, is accountable care organizations, or ACOs -- providers joining together to be 'accountable' for the total care of patients, with incentives from insurers to keep people healthy and costs down.

Note that this political correctness is also used to justify further consolidation of power by limiting outside referrals:

Independent doctors say Carilion is urging its employees to refer patients only to providers within the Carilion network, cloaking its expansion in the lingo of health-care reform.

Of course, the Carilion CEO also denies anything but the most altruistic intent, but he too is making a lot of money from the current system:

[Edward] Murphy, Carilion's chief executive who earned $2.3 million in 2008, acknowledges that providers holding excessive leverage over insurers is cause for concern but argues that ACOs can be a corrective.

Summary

We noted earlier this week that multiple kinds of uncertainty (e.g., about diagnosis, prognosis, and the effects of treatment), and information asymmetry make it theoretically difficult for the health care market to be truly competitive. Meanwhile, there is increasing evidence that the market is actually uncompetitive. Although there are many hospitals and health insurers across the US, in many areas there are very few insurers and very few hospitals or hospital systems from which to choose. We have previously blogged about how market dominant hospital systems seem to be able to charge more than any others.

In the 1960s, it became recognized that physicians' professionalism, hospitals' devotion to their missions, and sometimes even (gasp) government regulation might partially compensate for distortions in the health care market. However, as supposed free market advocates became more powerful, they pushed for the commercialization of medicine and hospitals, reducing professionalism and mission support, and the hollowing out government regulation. (However, why did the people who attacked medical societies' codes of ethics as monopolistic have no interest in attacking market domination by insurers or hospital systems?  Inquiring minds want to know.)

As we said last time, true health care reform would help physicians and other health care professionals uphold their traditional values, including, as the AMA once stated, "the practice of medicine should not be commercialized, nor treated as a commodity in trade." True health care reform would put health care "delivery" back in the hands of mission-focused, not-for-profit organizations, which put patients' health, safety and welfare first.

Meanwhile, these latest stories about market dominating hospital systems suggest some additional lessons.

Secrecy is the would-be monopolist's best friend. However, it is hard to think of very many kinds of information that hospitals really ought to be able to keep as proprietary secrets. As usual, sunshine is the best disinfectant.

There seems to be a strange and increasing alliance between politically- correct academic theorists and proponents of raw economic power. The theorists' notion of "accountable care organizations" seems to have become a great foil for would-be monopolists, yet the theorists have done nothing to show how their creation would really bring "power to the people." Meanwhile, maybe "ACO" should stand for "aggressive care oligopoly." Meanwhile, be extremely skeptical of the latest health care fad, especially when it is supported both by academics and CEOs.