Board Member Blows Whistle on Health Insurance Company's Accounting

We previously posted about some of the travails of for-profit health insurance company/ managed care organization Wellcare.  In August, 2009, we posted about Wellcare's "admission" that it had made numerous questionable campaign contributions.  In May, 2009 we posted about WellCare's submission to a deferred prosecution agreemeent based on charges that it defrauded state programs by inflating its expenses. In 2007, we posted about how the state of Connecticut stopped WellCare from running a plan for poor children after the company refused to reveal what it was paying physicians, and why it was failing to pay for particular services. So WellCare has been cited for three different kinds of unethical behavior in 2007-09.

Here's a story about Wellcare with a new twist in the Wall Street Journal:

A prominent director at WellCare Health Plans Inc. resigned Wednesday and raised questions about accounting practices at the Medicare and Medicaid company.

Regina Herzlinger, the head of the board's audit committee and a professor of business administration at Harvard Business School, said internal audits found WellCare overbilled the Illinois Medicaid program by $1 million in 2009 and potentially overcharged states for almost $500,000 worth of maternity care. Additionally, the Tampa, Fla., company ran afoul of Georgia's requirements that it account for each patient visit for which it paid providers, resulting in a $610,000 fine, she said.

Ms. Herzlinger said those problems, which the company corrected last year and this year after an internal auditor discovered them, are evidence of weak accounting practices. Ms. Herzlinger said she had hoped to provide oversight, as chairwoman of the audit committee, but that the board didn't renominate her for re-election at this year's annual meeting of shareholders. Ms. Herzlinger alleges that the board forced her out for asking questions about accounting problems and corporate-governance practices.

Wellcare offered the response one might expect:

WellCare said good corporate-governance practices require it to bring in new board members periodically to provide a fresh perspective. The company said the accounting errors Ms. Herzlinger identified were relatively small and the company's own internal controls identified them, indicating that its processes are working well. The company said the board chose not to renominate Ms. Herzlinger.

'At any company, you are always going to have these kinds of immaterial amounts pop up,' said Thomas Tran, WellCare's chief financial officer, who added that it is important to 'address them and document them and learn from them to change your processes.'

That might have been more convincing were Wellcare not to have the track-record discussed above.

Every now and then we have discussed cases of whistle-blowers from within health care organizations, but I cannot remember another instance in which the whistle-blower was on the board of directors.  In our post of August, 2009, we noted Prof Herzlinger's position on the Wellcare board, and urged her, as a main stream health policy expert, "to acknowledge that health care leadership may be unaccountable, opaque, dishonest, and sometimes flagrantly corrupt."  We also urged her to "pay a bit more attention to the mischief being committed by those who answer to her."  From this new story, it looked like she did just that, and hopefully made a contribution to more transparent and honest governance of health care organizations.  Good for her!

It is time for the often well-paid and not over-worked members of the board of directors of health care corporations to take some responsibility for the actions of the corporations over which they are supposed to exercise stewardship.

Sunday Settlement and Guilty Plea Roundup

Here we go again. 

AstraZeneca / Seroquel

We have posted frequently about allegations of devious marketing techniques used by AstraZeneca to promote its blockbuster atypical anti-psychotic drug Seroquel (quetiapine.)  See our posts here, here, here, here, and here.  Now, as reported by the New York Times, it is time for AZ to settle with the US government.

AstraZeneca has completed a deal to pay $520 million to settle federal investigations into marketing practices for its blockbuster schizophrenia drug, Seroquel, the Attorney General, Eric Holder, said at a news conference Tuesday afternoon.

'AstraZeneca paid kickbacks to doctors as part of an illegal scheme to market drugs for unapproved uses,' Kathleen Sebelius, secretary of health and human services, said at the event in Washington. She said the company promoted drugs for unapproved uses by children, the elderly, veterans and prisoners.

AstraZeneca agreed to sign a corporate integrity agreement with the federal government over its marketing of Seroquel for unapproved uses, but will not face criminal charges, company and federal officials said.

The company, based in London, has been accused of misleading doctors and patients by playing up favorable research and not adequately disclosing studies that show Seroquel increases the risk of diabetes.

Of course, an AZ spokesperson had a different take on it.

Glenn Engelmann, AstraZeneca’s U.S. general counsel, released a statement saying the company denies the allegations but settled the investigation with the payment.

'It is in the best interest of AstraZeneca to resolve these matters and to move forward with our business of discovering and developing important, life-changing medicines — while avoiding the delay, uncertainty, and expense of protracted litigation,' Mr. Engelmann said.

Johnson and Johnson / Topamax

On the other hand, the issue of how Johnson and Johnson marketed Topamax (topiramate), a drug approved for treating seizures, is a new one for Health Care Renewal.  Here is the story, via Bloomberg.

Two units of Johnson & Johnson will pay more than $81 million to resolve criminal and civil claims over illegal promotion of the epilepsy drug Topamax, the U.S. Justice Department said.

Ortho-McNeil Pharmaceutical LLC agreed to plead guilty to a misdemeanor and pay a $6.14 million criminal fine for misbranding the drug, the government said. Ortho-McNeil-Janssen Pharmaceuticals also will pay $75.37 million to resolve civil allegations that it illegally marketed Topamax and caused false claims to be submitted to government health programs.

While the Food and Drug Administration approved Topamax for the treatment of partial onset seizures, Ortho-McNeil Pharmaceutical promoted the drug for unapproved psychiatric uses, the government said. The company hired physicians through its 'Doctor-for-a-Day' program to join sales representatives in visiting doctors and to speak to colleagues about unapproved uses and doses, according to the government.

In this case, the company admitted wrong-doing as part of the specific plea agreement.

Under the plea agreement, Ortho-McNeil Pharmaceutical will admit that from 2001 to 2003 it promoted Topamax 'for certain uses not approved' by the FDA, according to a statement by Ortho-McNeil-Janssen.

The company 'voluntarily discontinued the program at issue before receiving the government’s first subpoena in the investigation,' according to the statement.

Ortho-McNeil-Janssen also will sign a five-year corporate integrity agreement with the U.S. Health and Human Services Department.

Summary

Once more, with feeling ....  We have discussed a series of legal settlements and criminal convictions and guilty pleas resolving cases of alleged wrong-doing by health care organizations. Almost none included any penalties for people who authorized, directed or implemented the bad behavior. None of the financial penalties were so big as to be more than another cost of doing business for the organizations involved. Corporate entities, but very rarely people have pleaded guilty or been convicted (almost always of misdemeanors), Some of the cases included gimmicks, like a subsidiary constructed only to plead guilty, that otherwise seemed to lessen accountability.

If we truly want health care that is accessible, of high quality, at a fair price, and more importantly, if we want health care that is honest and focused on patients, we need to provide health care leaders with clear, rational incentives in these directions, and make them fully accountable for their actions, and the courses of their organizations under their leadership.

ADDENDUM (2 May,2010) - See also comments on the Hooked: Ethics, Medicine, and Pharma blog by Dr Howard Brody on the AZ settlement.

Investigations, Indictments and Guilty Pleas at Famous US Teaching Hospitals

Some of the US most prestigious academic medical centers have been receiving unusual scrutiny lately.

Mount Sinai Medical Center and New York - Presbyterian Hospital.

As reported first by the Wall Street Journal,

Federal prosecutors are investigating allegations that bid rigging and fraud at Mount Sinai Medical Center and New York-Presbyterian Hospital resulted in the hospitals awarding contracts worth tens of millions of dollars to outside contractors.

Purchasing officials at the hospitals, two of the city's largest and most prestigious, are alleged to have gotten more than a million dollars in payments from companies that were then given lucrative contracts to perform work such as re-insulating pipes and removing asbestos, according to documents filed in the Southern District of New York.

Nine contractors are involved in the case. So far, eight people and three companies supplying the hospitals have pleaded guilty to charges including bid-rigging, mail fraud and tax fraud. Three more people have been indicted on similar charges.

The Federal Bureau of Investigation and Internal Revenue Service have been investigating and the Justice Department's Antitrust Division is prosecuting the allegations in the case.

Some relevant specifics:

The most recent indictment, handed up by a federal grand jury April 6, involved the alleged awarding of more than $195,000 in maintenance and insulation contracts. Mario Perciavalle, associate director of plant services at Mount Sinai, is accused of taking at least $20,500 in cash from a Long Island City company in 2004 and 2005 in exchange for the company, unnamed in documents, winning the deals.

Prosecutors also are pursuing a case involving a former official at New York-Presbyterian, Salvatore Scotto-DiVetta, a supervisor at the hospital's Facilities Operations department. He pleaded guilty in March to rigging bids for re-insulation contracts, the Department of Justice said.

The next day, the Journal reported:

Two New York-Presbyterian Hospital officials and two contractors who did business with the prestigious hospital were indicted on fraud charges Tuesday in the latest cases stemming from a federal investigation into bid-rigging and fraud.

The indictment alleges that the hospital officials—Santo Saglimbeni of Armonk, N.Y., and Emilio Figueroa, whose hometown wasn't given—received payments and gifts in exchange for awarding contracts to certain companies.

And already the box score for this investigation increased:

As a result of the investigation, a total of five hospital employees, 10 people outside the hospitals and six companies have either pleaded guilty or face charges.

The comments by hospital officials had a familiar ring to anyone who has been following the hearings in Washington on the global financial collapse. From the first article:

A Mount Sinai spokesman said the hospital notified the Justice Department 'about the possibility of impropriety immediately after it was identified in an internal audit' and is cooperating with the investigation. The spokesman said the hospital dismissed the employee under investigation and instituted tougher contracting systems.

From the second:

New York-Presbyterian was an 'unknowing victim of these alleged crimes,' a hospital spokeswoman said. She also said that the staffers named in the indictment no longer work at the hospital, and it is cooperating with the investigation.

Partners Healthcare System

Just out today in the Boston Globe:

The US Department of Justice has opened a civil investigation into possible anticompetitive behavior by Partners HealthCare System Inc., the region’s most powerful hospital and physician network.

In a letter sent to Partners and the state’s three largest health insurers on April 19, investigators from the Justice Department’s antitrust division demanded documents relating to Partners’ 'contracting and other practices in health care markets in Eastern Massachusetts.'

The letter, obtained by the Globe, said the probe sought to determine whether the practices violated the Sherman Antitrust Act, which bars companies from using their market power to limit trade or artificially raise prices.

The background is:

Boston-based Partners has been under growing scrutiny because of its market power and ability to draw high prices from insurers. The company employs about 5,500 physicians and operates a half dozen smaller hospitals, in addition to their prestigious Harvard-affiliated Boston teaching hospitals, Mass. General and the Brigham.

Earlier this year, Attorney General Martha Coakley issued a report documenting that Massachusetts insurance companies pay some hospitals and doctors, including those in the Partners network, twice as much money as others for essentially the same patient care. The report pointed to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs.

A 2008 Globe Spotlight Team series focused on the Boston market found that hospitals such as Mass. General and the Brigham typically are paid 15 to 60 percent more for essentially the same work as other hospitals.

Soon after that series, Coakley launched her investigation into whether Partners and Blue Cross-Blue Shield, the state’s largest health insurer, may have illegally colluded to increase the price of health insurance statewide over the last decade, according to several legal and government sources.

And again, the official response had a familiarly evasive ring:

Partners spokesman Rich Copp yesterday noted that the hospital network already has supplied similar information to investigators from the state attorney general’s office, which launched its own review of Partners’ contracting practices last year. He noted in Partners’ defense that it vies with other providers in the area’s 'highly competitive' health care market.

'The Department of Justice has requested the same information that we have provided to the attorney general’s office,' said Copp. 'We will continue to cooperate with both government agencies during this ongoing analysis of health care in Massachusetts.'

Summary

So there it is.  Multiple indictments for and guilty pleas to charges of bid-rigging and fraud at two New York academic medical centers, and state collusion and federal anti-trust investigations of a Massachusetts hospital system.  The issues involve four of the most prestigious teaching hospitals in the US.

Of course, not all the indictments may result in convictions, and the investigations may not result in charges.  But this involves some institutions that at one time would have appeared beyond reproach.  The lack of clear denials from the inevitable official spokespeople, and attempts to deny responsibility for the actions of employees elsewhere identified as "officials" do not provide much reassurance.

Of course, readers of Health Care Renewal would have known that questions could be raised about leadership and governance of these once-revered institutions.  Questions could be raised about the incentives implied by the huge compensation given to the top hired executives at New York - Presbyterian, awarded by a board of trustees that includes some of the leaders of the more prominent failed finance corporations involved in the global financial collapse.  Questions could be raised about the dominant presence of finance leaders and possibly conflicted individuals on the Partners board, and apparent interlocks among Partners leadership and the leadership of the largest health insurer in Massachusetts, which was willing to pay that system so much.

Maybe, instead of lecturing the more lowly among us about our responsibilities to improve health care, the leaders of our previously most august health care institutions need to introspect more about their own responsibility to address the metastasis of "greed and incompetence" in health care from the financial sector.

Grains as Food: an Update

Improperly Prepared Grain Fiber can be Harmful

Last year, I published a post on the Diet and Reinfarction trial (DART), a controlled trial that increased grain fiber intake using whole wheat bread and wheat bran supplements, and reported long-term health outcomes in people who had previously suffered a heart attack (1). The initial paper found a trend toward increased heart attacks and deaths in the grain fiber-supplemented group at two years, which was not statistically significant.

What I didn't know at the time is that a follow-up study has been published. After mathematically "adjusting" for preexisting conditions and medication use, the result reached statistical significance: people who increased their grain fiber intake had more heart attacks than people who didn't during the two years of the controlled trial. Overall mortality was higher as well, but that didn't reach statistical significance. You have to get past the abstract of the paper to realize this, but fortunately it's free access (2).

Here's a description of what not to eat if you're a Westerner with established heart disease:

Those randomised to fibre advice were encouraged to eat at least six slices of wholemeal bread per day, or an equivalent amount of cereal fibre from a mixture of wholemeal bread, high-fibre breakfast cereals and wheat bran.

Characteristics of Grain Fiber

The term 'fiber' can refer to many different things. Dietary fiber is simply defined as an edible substance that doesn't get digested by the human body. It doesn't even necessarily come from plants. If you eat a shrimp with the shell on, and the shell comes out the other end (which it will), it was fiber.

Grain fiber is a particular class of dietary fiber that has specific characteristics. It's mostly cellulose (like wood; although some grains are rich in soluble fiber as well), and it contains a number of defensive substances and storage molecules that make it more difficult to eat. These may include phytic acid, protease inhibitors, amylase inhibitors, lectins, tannins, saponins, and goitrogens (3). Grain fiber is also a rich source of vitamins and minerals, although the minerals are mostly inaccessible due to grains' high phytic acid content (4, 5, 6).

Every plant food (and some animal foods) has its chemical defense strategy, and grains are no different*. It's just that grains are particularly good at it, and also happen to be one of our staple foods in the modern world. If you don't think grains are naturally inedible for humans, try eating a heaping bowl full of dry, raw whole wheat berries.

Human Ingenuity to the Rescue

Humans are clever creatures, and we've found ways to use grains as a food source, despite not being naturally adapted to eating them**. The most important is our ability to cook. Cooking deactivates many of the harmful substances found in grains and other plant foods. However, some are not deactivated by cooking. These require other strategies to remove or deactivate.

Healthy grain-based cultures don't prepare their grains haphazardly. Throughout the world, using a number of different grains, many have arrived at similar strategies for making grains edible and nutritious. The most common approach involves most or all of these steps:

• Soaking
  
• Grinding
• Removing 50-75% of the bran
  
• Sour fermentation
• Cooking
  

But wait, didn't all healthy traditional cultures eat whole grains? The idea might make us feel warm and fuzzy inside, but it doesn't quite hit the mark. A recent conversation with Ramiel Nagel, author of the book Cure Tooth Decay, disabused me of that notion. He pointed out that in my favorite resource on grain preparation in traditional societies, the Food and Agriculture Organization publication Fermented Cereals: a Global Perspective, many of the recipes call for removing a portion of the bran (7). Some of these recipes probably haven't changed in thousands of years. It's my impression that some traditional cultures eat whole grains, while others eat them partially de-branned.

In the next post, I'll explain why these processing steps greatly improve the nutritional value of grains, and I'll describe recipes from around the world to illustrate the point.


* Including tubers. For example, sweet potatoes contain goitrogens, oxalic acid, and protease inhibitors. Potatoes contain toxic glycoalkaloids. Taro contains oxalic acid and protease inhibitors. Cassava contains highly toxic cyanogens. Some of these substances are deactivated by cooking, others are not. Each food has an associated preparation method that minimizes its toxic qualities. Potatoes are peeled, removing the majority of the glycoalkaloids. Cassava is grated and dried or fermented to inactivate cyanogens. Some cultures ferment taro.

** As opposed to mice, for example, which can survive on raw whole grains.

Grains as Food: an Update

Improperly Prepared Grain Fiber can be Harmful

Last year, I published a post on the Diet and Reinfarction trial (DART), a controlled trial that increased grain fiber intake using whole wheat bread and wheat bran supplements, and reported long-term health outcomes in people who had previously suffered a heart attack (1). The initial paper found a trend toward increased heart attacks and deaths in the grain fiber-supplemented group at two years, which was not statistically significant.

What I didn't know at the time is that a follow-up study has been published. After mathematically "adjusting" for preexisting conditions and medication use, the result reached statistical significance: people who increased their grain fiber intake had more heart attacks than people who didn't during the two years of the controlled trial. Overall mortality was higher as well, but that didn't reach statistical significance. You have to get past the abstract of the paper to realize this, but fortunately it's free access (2).

Here's a description of what not to eat if you're a Westerner with established heart disease:

Those randomised to fibre advice were encouraged to eat at least six slices of wholemeal bread per day, or an equivalent amount of cereal fibre from a mixture of wholemeal bread, high-fibre breakfast cereals and wheat bran.

Characteristics of Grain Fiber

The term 'fiber' can refer to many different things. Dietary fiber is simply defined as an edible substance that doesn't get digested by the human body. It doesn't even necessarily come from plants. If you eat a shrimp with the shell on, and the shell comes out the other end (which it will), it was fiber.

Grain fiber is a particular class of dietary fiber that has specific characteristics. It's mostly cellulose (like wood; although some grains are rich in soluble fiber as well), and it contains a number of defensive substances and storage molecules that make it more difficult to eat. These may include phytic acid, protease inhibitors, amylase inhibitors, lectins, tannins, saponins, and goitrogens (3). Grain fiber is also a rich source of vitamins and minerals, although the minerals are mostly inaccessible due to grains' high phytic acid content (4, 5, 6).

Every plant food (and some animal foods) has its chemical defense strategy, and grains are no different*. It's just that grains are particularly good at it, and also happen to be one of our staple foods in the modern world. If you don't think grains are naturally inedible for humans, try eating a heaping bowl full of dry, raw whole wheat berries.

Human Ingenuity to the Rescue

Humans are clever creatures, and we've found ways to use grains as a food source, despite not being naturally adapted to eating them**. The most important is our ability to cook. Cooking deactivates many of the harmful substances found in grains and other plant foods. However, some are not deactivated by cooking. These require other strategies to remove or deactivate.

Healthy grain-based cultures don't prepare their grains haphazardly. Throughout the world, using a number of different grains, many have arrived at similar strategies for making grains edible and nutritious. The most common approach involves most or all of these steps:

• Soaking
  
• Grinding
• Removing 50-75% of the bran
  
• Sour fermentation
• Cooking
  

But wait, didn't all healthy traditional cultures eat whole grains? The idea might make us feel warm and fuzzy inside, but it doesn't quite hit the mark. A recent conversation with Ramiel Nagel, author of the book Cure Tooth Decay, disabused me of that notion. He pointed out that in my favorite resource on grain preparation in traditional societies, the Food and Agriculture Organization publication Fermented Cereals: a Global Perspective, many of the recipes call for removing a portion of the bran (7). Some of these recipes probably haven't changed in thousands of years. It's my impression that some traditional cultures eat whole grains, while others eat them partially de-branned.

In the next post, I'll explain why these processing steps greatly improve the nutritional value of grains, and I'll describe recipes from around the world to illustrate the point.


* Including tubers. For example, sweet potatoes contain goitrogens, oxalic acid, and protease inhibitors. Potatoes contain toxic glycoalkaloids. Taro contains oxalic acid and protease inhibitors. Cassava contains highly toxic cyanogens. Some of these substances are deactivated by cooking, others are not. Each food has an associated preparation method that minimizes its toxic qualities. Potatoes are peeled, removing the majority of the glycoalkaloids. Cassava is grated and dried or fermented to inactivate cyanogens. Some cultures ferment taro.

** As opposed to mice, for example, which can survive on raw whole grains.