Will the Citigroup Ruling Challenge Health Care Leaders' Impunity?

A federal judge's refusal to approve yet another cozy settlement that was supposed to resolve allegations of wrong-doing by a giant corporation has left the financial world atwitter.  It may be that this ruling will also affect the coziness between giant health care corporations and government regulators. 

Summary of the Citigroup Case

We first discussed this case twp weeks ago here.  Here is a summary of the government's (in this case, the Securities and Exchange Commision's) original allegations from the New York Times.

According to the Securities and Exchange Commission, Citigroup stuffed a $1 billion mortgage fund that it sold to investors in 2007 with securities that it believed would fail so that it could bet against its customers and profit when values declined. The fraud, the agency said, was in Citigroup’s falsely telling investors that an independent party was choosing the portfolio’s investments. Citigroup made $160 million from the deal and investors lost $700 million.

The Problems with the Proposed Settlement
Judge Jed Rakoff refused to approve the settlement because of a series of problems, listed below as summarized by the Schumpeter columnist in the Economist.

Mr Rakoff faulted the SEC for prosecuting Citigroup for negligence when a fraud prosecution was warranted; for failing to provide the court with 'any proven or admitted facts upon which to exercise even a modest degree of independent judgment'; for erroneously contending that 'public interest…is not part of [the] applicable standard of judicial review'; and for wrongly arguing that 'if the public interest must be taken into account, the SEC is the sole determiner'.

Furthermore,

Mr Rakoff also attacked a second condition of the settlement. Citigroup had agreed to operate under a court injunction if it ever violated the deal, which could lead to contempt charges. Whatever threat this carried, Mr Rackoff wrote, it was mitigated because Citigroup, as other financial firms, had been cited similarly over the past decade—and never faced any consequences.

The Parallels with Legal Settlements Made by Health Care Organizations

Several of the features of the settlement that the Judge found so objectionable are commonly also features of the settlements we have seen involving health care organizations. Government regulators often seem to make much milder charges that were warranted by the apparent facts. They make the organizations party to corporate integrity or deferred prosecution agreements, even though sometimes the same corporations were already subject to such agreements when they appeared to misbehave again. The agreements often allow the organizations to neither admit to or deny any charges, leaving the facts of the case forever in doubt.

Matt Taibi in the Rolling Stone provided some pithy comments on these commonly seen features of legal settlements.

By accepting hundred-million-dollar fines without a full public venting of the facts, the SEC is leveling seemingly significant punishments without telling the public what the defendant is being punished for. This has essentially created a parallel or secret criminal justice system, in which both crime and punishment are adjudicated behind closed doors.

This system allows for ugly consequences in both directions. Imagine if normal criminal defendants were treated this way. Say a prosecutor and street criminal come into a judge’s chamber and explain they’ve cooked up a deal, that the criminal doesn’t have to admit to anything or plead to any crime, but has to spend 18 months in house arrest nonetheless.

What sane judge would sign off on a deal like that without knowing exactly what the facts are? Did the criminal shoot up a nightclub and paralyze someone, or did he just sell a dimebag on the street? Is 18 months a tough sentence or a slap on the wrist? And how is it legally possible for someone to deserve an 18-month sentence without being guilty of anything?

Such deals are logical and legal absurdities, but judges have been signing off on settlements like this with Wall Street defendants for years.

As we have said numerous times before, (starting here in 2008) the current manner of regulation, in which organizations pay fines (and sometimes submit to corporate integrity or deferred prosecution agreements), rarely admit any guilt, but in which individuals who directed, authorized or implemented the alleged misbehavior almost never suffer any negative consequences, fails to deter future bad behavior. We have noted that the costs of the settlements are paid by the organization as a whole, and thus simply regarded as costs of doing business by executives. The leaders' impunity will allow the bad behavior to be repeated again and again.

Here is how Taibbi and Rakoff put it:

these crappy settlements have evolved into a kind of cheap payoff system, in which crimes may be committed over and over again, and the SEC’s only role is to take a bribe each time the offenders slip up and get caught.

If you never have to worry about serious punishments, or court findings of criminal guilt (which would leave you exposed to crippling lawsuits), then there’s simply no incentive to stop committing fraud. These SEC settlements simply become part of the cost of doing business, as Rakoff notes:

As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. This, indeed, is Citigroup's position in this very case.

That line, 'a cost of doing business imposed by having to maintain a working relationship with a regulatory agency,' is one of the more brutally damning things you’ll ever see a judge write. Rakoff is essentially saying that these fines are payoffs to keep the SEC off the banks’ backs. They’re like the pad that numbers-runners or drug dealers pay to urban precinct-houses every month to keep cops from making real arrests. That's what he means when he refers to 'maintaning a working relationship.' It's heavy stuff.

What the Judge appears to be saying is that the whole system stinks of regulatory capture, and that the settlements paid by the organizations are the moral equivalent of bribes paid to government officials. That is indeed "heavy stuff."

Now that Occupy Wall Street has made it socially acceptable to discuss the economic dysfunction that lead to the great recession or global financial collapse, I can only hope that this discussion will lead to a parallel discussion about health care dysfunction. It certainly seems that the regulatory capture that seems to be part of the dismantling of regulation of finance is similar to regulatory capture affecting health care. But I await someone beyond us few lonely bloggers to take up this topic.

I might as well end with this sentiment from 2009 regarding another case over which Judge Rakoff presided:
Again, in my humble opinion, until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations.

Will the Freeze of the Global Fund Finally Put Health Care Corruption on the Agenda?

In February, 2011, we posted about problems with corruption affecting the Global Fund to Fight AIDS, Tuberculosis and Malaria. At the time, the Fund promised to better detect fraud and corruption affecting its grants programs. We later posted about how after an internal debate, the Fund promised to make more information public about any losses to fraud and corruption.

Now it has made more such information public, but it also appears that further problems with corruption have lead to the freezing of the Fund.

The New Findings of Corruption

First, as reported by Bloomberg on 1 November,

A $22 billion disease-fighting fund backed by Microsoft Corp. (MSFT) founder Bill Gates found that money intended for people with life-threatening illnesses was used for home renovations in India and diverted to a person linked with money laundering and so-called blood diamonds in Nigeria.

The Global Fund to Fight AIDS, Tuberculosis and Malaria is seeking to recover as much as $19.2 million from grants in eight countries, the Geneva-based organization said in a set of reports today. As much as $1.3 million was misused by the head of a non-governmental AIDS organization in India to buy a car and renovate his apartment, one report said. In Nigeria, money was siphoned to a person arrested in 2003 for money-laundering and smuggling diamonds that are mined and sold to support war.

This amount was in addition to previous amounts disclosed before:

The organization said last year it was seeking the recovery of $44.2 million in four nations for 'grave misuse of funds.'

It is not clear how much money the Fund has lost to corruption in total. According to an AP report, via CBS News,

Earlier probes by the fund's internal watchdog, the inspector general's office, had detected about $53 million in losses, according to fund documents, some unpublished, provided by senior officials.

The fund's board chairman Simon Bland told The Associated Press it has now reviewed about one-seventh of $14 billion in grants disbursed.

Whether similar amounts of corruption affected the other six sevenths of grants is unclear.

The Freeze on Grants

This week, several reports that the Fund would stop funding new grants appeared in the media. As reported by BusinessWeek,

The world’s biggest disease-fighting fund canceled its next round of grants as the global financial crisis crimps donations and threatens its ability to curb the spread of the world’s deadliest infections.

The Global Fund to Fight AIDS, Tuberculosis and Malaria, which has spent or committed to spending $22 billion since 2002 on preventing and treating disease, will only have enough money to pay for essential services for existing programs through the end of 2013, the Geneva-based fund said in a statement today. It will not make new grants until 2014,...

The reason for this freeze on grant making was,

The fund faces 'accelerating deterioration' in its finances for the next three years because of economic distress in donor nations, combined with corruption in some of the poor countries it helps,...

A NY Times article implied that one reason for the financial shortfall was that some donor nations withheld money due to their concerns about corruption:

Several countries, including Djibouti, Mali, Mauritania and Zambia, lost their grants or had new safeguards put in place after officials were accused of stealing. The Global Fund’s own inspector general exposed the fraud and earlier this month was trying to recover about $20 million that had been stolen; that amount is less than 1 percent of the $13 billion that has been disbursed.

There have been reports of friction between Dr. Kazatchkine and the inspector general, John Parsons. They each report separately to the board.

Some major donors, including Germany and Sweden, expressed their dismay by freezing their donations.

Also, CBS News reported,

Germany, the European Commission and Denmark withheld hundreds of millions of euros in funding pending reviews of the fund's internal controls. Germany — the fund's fourth-largest donor- has since restored its funding.

Summary and Comment
In summary, the uncovering of specific instances of corruption that wasted the assets of the Global Fund, and the concerns of international donors about the effects of corruption on the Fund have been some of the causes of a freeze in funding that will preclude new initiatives at least until 2014. This is a dramatic illustration of how corruption can undermine health care.

We wondered previously whether the realization that corruption was subverting the Fund's activities would lead the Fund to actively address corruption.  In fact, the Fund seems to have investigated previous corruption affecting its work more aggressively than have many other health care organizations.  However, the Fund did not appear to have instituted any initiatives to prevent, forestall, or challenge corruption.  In that, it is typical of nearly every health care organization in the world.

Transparency International defines corruption as "abuse of entrusted power for private gain."  By that definition, many of the cases discussed on Health Care Renewal are about corruption.  For example, if a pharmaceutical company pays physicians as part of a deceptive marketing campaign that exaggerates the benefits or minimizes the harms of a drug, and that campaign increases sales and hence executive compensation, one could argue that the case involves corruption of both of physicians and of company management.  We have discussed many such cases on Health Care Renewal.  One striking example was the stealth marketing campaign for Neurontin as described in posts here, here, here and here.

Thus, there are many examples of corruption affecting health care professionals and academics, and all sorts of health care organizations, hospitals, health care insurers, pharmaceutical and device companies, health care information technology companies, medical education and communication companies, contract research organizations, etc, etc, etc  In 2006, Transparency International's Global Corruption Report asserted in its executive summary, " the scale of corruption is vast in both rich and poor countries."  As we summarized here, the report discussed the scale and diversity of health care corruption, and the severity of its adverse effects.

However, at least for a generation, there has been almost no opposition to such corruption.  In fact, as we have noted, health care corruption, and the problems and leadership and governance that lead to it, have been nearly anechoic.  Specifically, there is almost no teaching or research on corruption in health care academics (including medical and public health schools, and programs in health care research and policy.)  There is almost no mention of corruption by health care professional associations.  There are almost no initiatives to fight corruption on the part of health care charities and donors.  There is almost no interest in corruption among patient advocacy organizations.  (See previous discussion here.)

Why do they all ignore such a huge problem?  Most likely it is because of institutional and individual conflicts of interests.  Most of the these organizations are substantially funded by health care corporations, including corporations most involved in corruption, (and parenthetically, by financial firms whose corruption was likely a major cause of the global financial collapse / great recession, the other ostensible cause of the freeze of Global Fund grants.)  Many prominent health professionals and academics, and health care organizational leaders themselves have individual financial relationships with such companies.  For example, a majority of US medical school department chairs have significant financial relationships with health care corporations (see post here).  We have shown how top medical school leaders may simultaneously serve on the boards of directors of health care corporations (see post here).  People who are personally profiting from relationships with health care corporations are unlikely to question such relationships.  The leaders of organizations which depend on funding from such corporations are unlikely to question whether conflicts of interest might lead to corruption.  People whose colleagues, friends, family members, or supervisors are personally benefiting from conflicts of interest may hesitate to challenge such relationships.

So will the freeze of new grants at the Global Fund at least get health care corruption on the agenda?  One can only hope.  I personally hope that there are enough honest and unconflicted people remaining who will raise their voices above a murmur, even if that might discomfit those around them.

Of course, one reason we started Health Care Renewal was to make these issues less anechoic. So hear we go again.


PS - If anyone in our vast audience does know about any additional anti-corruption or conflict of interest, or pro-accountability, integrity, transparency, honesty and ethics initiatives, courses, meetings relevant to health care, please let me know and I will do my best to disseminate the information.

A Brief Response to Taubes's Food Reward Critique, and a Little Something Extra

It appears Gary Taubes has completed his series critiquing the food reward hypothesis of obesity (1).  I have to hand it to him, it takes some cojones to critique an entire field of research, particularly when you have no scientific background in it.

The food reward hypothesis of obesity states that the reward and palatability value of food influence body fatness, and excess reward/palatability can promote body fat accumulation.  If we want to test the hypothesis, the most direct way is to find experiments in which 1) the nutritional qualities of the experimental diet groups are kept the same or at least very similar, 2) some aspect of diet reward/palatability differs, and 3) changes in body fat/weight are measured (for example, 2, 3, 4, 5, 6, 7, 8, 9).  Taubes repeatedly stated in his series that controlled studies like these have not been conducted, apparently basing this belief on a 22-year-old review paper by Dr. Israel Ramirez and colleagues that does not contain the word 'reward' (10).  Another way to test the hypothesis is to see if people with higher food reward sensitivity (due to genetics or other factors) tend to gain more fat over time (for example, 11, 12, 13, 14, 15, 16).  In addition, studies that have examined the effect of palatability/reward on food intake in a controlled manner are relevant (17, 18, 19, 20, 21, 22), as are studies that have identified some of the mechanisms by which these effects occur (reviewed in 23).  Even if not all of the studies are perfect, at some point, one has to acknowledge that there are a lot of mutually buttressing lines of evidence here.  It is notable that very few of these studies appeared in Taubes's posts. 
Read more »

A Brief Response to Taubes's Food Reward Critique, and a Little Something Extra

It appears Gary Taubes has completed his series critiquing the food reward hypothesis of obesity (1).  I have to hand it to him, it takes some cojones to critique an entire field of research, particularly when you have no scientific background in it.

The food reward hypothesis of obesity states that the reward and palatability value of food influence body fatness, and excess reward/palatability can promote body fat accumulation.  If we want to test the hypothesis, the most direct way is to find experiments in which 1) the nutritional qualities of the experimental diet groups are kept the same or at least very similar, 2) some aspect of diet reward/palatability differs, and 3) changes in body fat/weight are measured (for example, 2, 3, 4, 5, 6, 7, 8, 9).  Taubes repeatedly stated in his series that controlled studies like these have not been conducted, apparently basing this belief on a 22-year-old review paper by Dr. Israel Ramirez and colleagues that does not contain the word 'reward' (10).  Another way to test the hypothesis is to see if people with higher food reward sensitivity (due to genetics or other factors) tend to gain more fat over time (for example, 11, 12, 13, 14, 15, 16).  In addition, studies that have examined the effect of palatability/reward on food intake in a controlled manner are relevant (17, 18, 19, 20, 21, 22), as are studies that have identified some of the mechanisms by which these effects occur (reviewed in 23).  Even if not all of the studies are perfect, at some point, one has to acknowledge that there are a lot of mutually buttressing lines of evidence here.  It is notable that very few of these studies appeared in Taubes's posts. 
Read more »

Two Opposing Views of EHR: InformaticMD vs. NextGen's Holder of "American Medical Informatics Certification for Health Information Technology"

The AMA's publication American Medical News recently quoted me following comments from IOM EHR Safety committee member Richard Cook in the Nov. 21, 2011 article "IOM calls for monitoring and probe of health IT hazards" by Kevin O'Reilly:

... Not everyone on the panel agreed with delaying FDA regulation. [Per the IOM report on health IT safety released Nov. 10, 2011, see here - ed.]

Committee member Richard I. Cook, MD, filed a dissent in the report in which he recommended that health IT systems be regulated as class III medical devices.

"It is quite remarkable that we're in this situation," said Dr. Cook, associate professor of anesthesia and critical care at the University of Chicago Pritzker School of Medicine. [Also, an expert in Medical Informatics - ed.] "It's not surprising that such adverse events are being found related to health IT, and it's not surprising that those promoting these systems have neither looked for them nor anticipated them. To make large-scale investments in these systems and only now be looking at the impact on patient safety borders on recklessness."

Scot M. Silverstein, MD, agreed.

"The bone I have to pick with the IOM report is that the action agenda is weak," said Dr. Silverstein, a consultant in medical informatics at the Drexel University College of Information Science and Technology in Pennsylvania.

It is unethical to expand health IT so dramatically without understanding the precise nature of the risks it poses to patients, Dr. Silverstein said.

Ironically, right below my statement was the following from HIT industry figure Charles Jarvis, blaming the user:

Users faulted

Leaders in the health IT industry also had their share of objections to some of the IOM panel's conclusions.

"We don't think there's a great deal of data to substantiate that there are major safety problems with the majority of electronic health records systems in use today," said Charlie Jarvis, executive committee vice chair of the EHR Assn., a trade group that represents 46 organizations that supply most of the EMR systems implemented in medical practices. "These products are safe, dependable, time-tested and display a lot of the safety features we think are necessary to prevent problems going forward."

Jarvis, also a vice president at the health IT firm NextGen, said vendors and the government should work to help physicians and other health professional users understand systems, take advantage of their safety features and avoid errors.

[Charitable translation: computers are infallible, so medical errors due to HIT are the user's fault, the Sept. 2011 National Institute of Standards and Technology (NIST) report on usability be damned. Clinicians should spend their valuable time learning to compensate for and then actually wading through mission hostile user experiences. If only those stupid doctors and nurses would use our cybernetic miracle tools the way we want, the members of the EHR Association could be making even more money. Oh, and by the way, the NIST's concept of "use error" (1) is nonsense. - ed.]

I presume the "EHR Assn." is the HIMSS EHR Association, with HIMSS itself being a gargantuan "cause-based, not-for-profit organization exclusively focused on providing global leadership for the optimal use of information technology and management systems for the betterment of healthcare":

The HIMSS Electronic Health Record (EHR) Association is a trade association of Electronic Health Record (EHR) companies, addressing national efforts to create interoperable EHRs in hospital and ambulatory care settings. The EHR Association operates on the premise that the rapid, widespread adoption of EHRs will help improve the quality of patient care as well as the productivity and sustainability of the healthcare system.

I observe that there are no conflicts of interest here that could cause Mr. Jarvis' stated opinions to be skewed towards the rights of computers and away from the rights of patients ... right?

First, Mr. Jarvis makes a logical error related to the error illustrated in my earlier post today "Magical Thinking on Health IT from ModernMedicine.com." His error is that of "proof by lack of evidence" (2). No need to actually study the issue rigorously, despite repeated risk management-relevant incident reports (as opposed to the industry's preferred and highly erroneous term "anecdotes").

Just one recent, highly alarming example of an "anecdote" affecting probably tens of thousands of patients due to programming malpractice and grossly negligent quality assurance, at both vendor and end user hospitals, is illustrated here. Since it's an "anecdote", perhaps Mr. Jarvis would agree there's nothing to see there, so we should all move along.

Here's another, first hand "anecdote" of patient harm, in the form of a sort of diary: link.

(See the Aug. 2011 post "From a Senior Clinician Down Under: Anecdotes and Medicine, We are Actually Talking About Two Different Things" which puts the misuse of the "anecdotes" label in its proper place - the garbage can.)

Not only is "proof by lack of evidence" in the face of hair-raising incident and defects reports (e.g., as in FDA's MAUDE database) a prima facie logical fallacy unfitting in medicine, and in fact alien to medical ethics, but the IOM report specifically stated in no uncertain terms that nobody really knows the magnitude of the risks. This is due in part to numerous inhibitory factors in evidence diffusion. From the IOM report:

... Several reasons health IT–related safety data are lacking include the absence of measures and a central repository (or linkages among decentralized repositories) to collect, analyze, and act on information related to safety of this technology. Another impediment to gathering safety data is contractual barriers (e.g., nondisclosure, confidentiality clauses) that can prevent users from sharing information about health IT–related adverse events. These barriers limit users’ abilities to share knowledge of risk-prone user interfaces, for instance through screenshots and descriptions of potentially unsafe processes. In addition, some vendors include language in their sales contracts and escape responsibility for errors or defects in their software (i.e., “hold harmless clauses”). The committee believes these types of contractual restrictions limit transparency, which significantly contributes to the gaps in knowledge of health IT–related patient safety risks. These barriers to generating evidence pose unacceptable risks to safety.

Imagine such a situation in, say, the pharmaceutical, automotive, aviation, or nuclear power industries. The responsible individuals would likely be hauled off to jail.

However, this all may be irrelevant. After all, who can argue with the expert personal opinion of someone who holds "the American Medical Informatics Certification for Health Information Technology?" That astonishing credential could conceivably elevate Mr. Jarvis' opinion over all others - even mine, with my meager background in the domain.

I don't know if he still claims that credential, but he did as I described in my post about prior interactions with Mr. Jarvis and NextGen (dating back to 2004) in my Feb. 2009 post "NextGen and Vendor/Doctor Dialog: Yet Another Patronizing EHR Company of Certified HIT Experts?"

I guess the fact I'd never heard of such a qualification represents my dearth of familiarity with the field of Medical Informatics and healthcare information technology.

-- SS

Notes:

[1] “Use error” is a term used very specifically by NIST to refer to user interface designs that will engender users to make errors of commission or omission. It is true that users do make errors, but many errors are due not to user error per se but due to designs that are flawed, e.g., poorly written messaging, misuse of color-coding conventions, omission of information, etc. From "NISTIR 7804: Technical Evaluation, Testing and Validation of the Usability of Electronic Health Records." It is available at http://www.nist.gov/healthcare/usability/upload/Draft_EUP_09_28_11.pdf (PDF).

[2] Example of proof by lack of evidence, courtesy Scott Adams: "I've never seen you drunk, so you must be one of those Amish people. "

More on these issues is at the site "Contemporary Issues in Medical Informatics: Common Examples of Healthcare Information Technology Difficulties."