Another Story of Unaccountable Leadership from UC-Davis: "World Famous" Neurosurgeon Banned from Research, but Still Department Chair

The University of California - Davis just keeps supplying us with lessons about problems with leadership and governance in major health care organizations.

Our latest example comes from a story in the Sacramento (CA) Bee.

A Bizarre Series of Surgical Experiments

It started with two neurosurgeons who embarked on an extremely unorthodox treatment program,

Documents show the surgeons got the consent of three terminally ill patients with malignant brain tumors to introduce bacteria into their open head wounds, under the theory that postoperative infections might prolong their lives. Two of the patients developed sepsis and died, the university later determined.

First,

In 2008, the doctors proposed treating a glioblastoma patient with bacteria applied to an open wound to 'attack the tumor,' then later withholding antibiotics and letting the bacteria do its work.

The FDA responded that animal studies would have to be done before any human research could be considered. Apparently the surgeons intended to do some animal research, but what they did, and what its results were remain unclear. Nevertheless,

Between October 2010 and March 2011, the physicians went forward with three procedures on humans with malignant brain tumors, surgically introducing probiotics into their open head wounds.

One surgeon did get

IRB permission to move forward on Patient No. 1 with a 'one-time procedure' that was 'not associated with any research aim,' the letter states.

University documents show that the physicians believed they had been given the go-ahead for all three surgeries, but officials later determined that they had been misinformed or were misunderstood by the doctors.

No patient lived very long. Two developed sepsis before they died. After hearing that the surgeons were then planning to do the procedure on five more patients,

The university threw on the brakes.

On March 17, 2011, the IRB director ordered the doctors to immediately stop their probiotic treatments, according to university documents.

I should point out that deliberately introducing bacteria into an otherwise sterile surgical site is a very radical and seemingly periolous step. Furthermore, a blog post in Nature News suggests that the reasoning used by the surgeons to support this approach was based on extremely weak evidence,

researchers at the Catholic University of Rome examined the records of 197 patients treated for glioblastoma between 2001 and 2008, of which ten developed pathogenic infections after surgery. Those patients had a median survival rate of 30 months, whereas patients who did not become infected had a median survival rate of 16 months. However, the authors concluded that the association was 'not definitive'. [De Bonis, P. et al. Neurosurgery 69, 864–868 (2011). Link here. ]

A 2009 report considered 382 patients with malignant brain cancer, 18 of whom developed infections. Infected patients lived longer on average, but the difference was not statistically significant. What’s more, the researchers reasoned that infection may correlate with longer survival not because infection prolongs survival but because patients who live longer are more likely to develop infections. [Bohman, L. E. et al. Neurosurgery 64, 828–834 (2009). Link here. ]

The University Investigation

Then,

The internal investigation began.

Six months later, the university concluded its probe – ordering the doctors to halt all human research activity 'except as necessary to protect the safety and welfare of research participants.'

In the case of Patient No. 1, the investigation found, ... [one surgeon] had made an 'incorrect statement' about restrictions on the bacteria's use, leading IRB staff to incorrectly conclude that such review was not necessary, Lewin told the FDA.

As for Patients 2 and 3, the university found that treating them with an 'unapproved biologic' amounted to human-subjects research – and thus required prior review and approval.

The junior neurosurgeon defended their conduct by claiming

We believed that this was innovative treatment, not research, and that IRB approval was not needed

The senior surgeon asserted that he

believed the FDA gave its permission early on, if the doctors thought the treatment was 'beneficial to the patients.' He described the research ban as an "overreaction" by the university.

'And I understand it,' he said. There are people who blatantly break the rules that endanger all of their research programs. We certainly didn't blatantly trample any rules.'

However,

A renowned U.S. bioethicist, describing the alleged violations as 'a major penalty,' said the university's IRB was right to intervene – and quickly.

Arthur Caplan, director of medical ethics at New York University's Langone Medical Center, said that desperate people are especially vulnerable and need added protections.

'If you're dying, you're kind of like reaching out to anything that anybody throws in front of you,' said Caplan

Furthermore, per a Sacramento Bee follow-up article, Elizabeth Woeckner, founder and director of Citizens for Responsible Care and Research, or CIRCARE, said the surgeons' "experiment" was

the worst thing I've seen in my 12 years with CIRCARE

An Overreaction, or an Under reaction?

So far, this story seems different from many of those discussed on Health Care Renewal. The questionable conduct it describes, after all, appears to have resulted in serious negative consequences. Furthermore, it seems to have been conduct by two loose cannons, rather than to be a sign of systemic problems with leadership or governance. However, there is more to the story.

First, the senior surgeon held a substantial leadership position at the time the events in question occurred. He is

[Dr J Paul] Muizelaar, 65, who has been a department chairman at the School of Medicine since 1997

He is pretty well paid, earning

more than $800,000 a year as chairman of the department of neurological surgery

In fact, a companion article in the Sacremento Bee noted,

In 2010 – the same year Dr. J. Paul Muizelaar first performed an experimental treatment on a dying brain cancer patient at UC Davis Medical Center – the neurosurgeon made more money than 99.9 percent of all employees in the University of California system.

With a total compensation package of $801,841 in 2010, he was the 35th highest earner, behind 27 other physicians, four athletic coaches and three executives, according to the most recent UC salary data.

More importantly, even though the university's internal investigation was done in the fall of 2011, and at that time Dr Muizelaar was immediately banned from human research, he did not lose his leadership position. Instead, according to the first Sacramento Bee article,

Despite the disciplinary action imposed last fall, Muizelaar was honored this spring with an additional academic role at UC Davis. He was named the first holder of the Julian R. Youmans endowed chair in the department of neurological surgery, according to an April 19 news release from the UCD School of Medicine.

It is not the first time he has received special treatment. The companion article noted that Dr Muizelaar was able to attain and keep his position even though he never obtained a state medical license,

Muizelaar, who previously was a professor of neurosurgery at Wayne State University in Detroit, was hired directly into the top post at UC Davis – even though he lacked a California medical license.

A native of the Netherlands, where he was educated, Muizelaar was brought into the UC Davis School of Medicine under a 'special faculty permit' issued by the Medical Board of California.

The provisional permit allows a foreign doctor who has been recognized as 'academically eminent' in a specific field to practice at a sponsoring California medical school and its formally affiliated hospitals.

Currently, only 15 doctors at six of California's eight medical schools eligible to receive them hold special faculty permits.

When asked why he never bothered to obtain a California medical license

Muizelaar said he has not gotten a California license because he already works 80 to 100 hours a week and the step is 'not necessary.'

'I'll be frank with you, I'm world famous, so they gave me the license to practice here,' he said. 'I can go sit for the exams, but why would I do that?'

Although Dr Muizelaar continued as department chair and in his endowed professorship for approximately 10 months after he was banned from human research, things happened fast after the stories appeared in the local media. Again according to the Sacramento Bee, three days later, the CEO of the UC-Davis campus, Chancellor Linda P B Katehi

ordered a top campus official to conduct a 'comprehensive review' of accusations that two university neurosurgeons conducted unauthorized research on dying brain cancer patients, as reported in Sunday's Bee.

Ralph J. Hexter, the provost and executive vice chancellor, will lead another investigation into the actions of Dr. J. Paul Muizelaar, the longtime chairman of the department of neurological surgery, and his colleague, Dr. Rudolph J. Schrot, according to a university spokesman.

A day after that, the Sacramento Bee reported,

A UC Davis neurosurgeon accused of performing unauthorized research on humans has 'temporarily relinquished' his position as chairman of the department of neurological surgery, the university confirmed Friday.

However, do not expect to hear much more about this,

A spokeswoman for UC Davis Health System said 'there will be no further system statement on this or other personnel actions.'

Summary: A Culture of Unaccountable Leadership

To sum up, the highly paid chair of neurosurgery at UC-Davis performed bizarre, and potentially dangerous experiments on three patients with terminal cancer, all of whom died, without obtaining permission from the institutional review board. After internal investigation, the chair was banned from performing further human research, but kept his well-paid position, and was given a new endowed professorship.  He only was forced to temporarily step down about nine months later, after reports of the affair appeared in the media. 

So, a la George Orwelll's Animal Farm, doctors may think themselves as equals, but doctors who are health care leaders are more equal than others. After conduct that would likely lead to the dismissal of more ordinary doctors, those who are also in high management positions may just collect more honors.  Then again, Dr Muizelaar considered himself to be "world famous," so why should be be expected to play by the rules under which the common folk labor?

This story also suggests a more general culture of unaccountable leadership at University of California - Davis. Note that the Chancellor who let the neurosurgeon continue in his leadership role despite his strange research conduct and the consequent research ban has appeared in Health Care Renewal before. Specifically, she attained some notoriety last year after campus police who report to her pepper-sprayed unarmed and apparently non-violent students at her own institution who were protesting as part of the "occupy" movement at that time. (See post here.) A later investigation of the incident blamed Chancellor Katehi and her subordinates for "poor decision making," and some editorialists concluded that she showed "incompetence," or worse. Yet Chancellor Katehi retains her top leadership position.

We have discussed how leaders of other health care organizations are rarely held accountable for bad behavior by their organizations. At times, this bad behavior has been criminal, and the leaders' unaccountability has seemed more like impunity.  This seems to parallel a larger phenomenon in society.  Increasingly the wealthy and powerful seem unrestricted by the rules that us common folk are expected to follow.  As Charles Fergusson famously noted on receiving his Oscar,

three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail and that’s wrong

Health care, particularly in the US, continues to be increasingly expensive and inaccessible, yet its quality appears increasingly dubious. True health care reform would hold health care leaders accountable for upholding the health care mission.

The Case of the Vanishing Graduate Medical Education Funds

While primary care falters in the US, those who teach it seem to feel increasingly poverty stricken.  Now it appears that one reason for this is an amazing example of multiple failures of transparency and accountability.  Let me work through it, begging your pardon for a little bit of "inside baseball," medical education style.  The results suggest how we desperately need some medical disciples of Sherlock Holmes.

Background

My personal experience and increasing data suggests that most medical school faculty believe that their teaching is not valued by their institutions because teaching brings in no external funds.  In 2004, Dr Catherine DeAngelis, then the editor of JAMA, wrote "few medical schools provide adequate, if any, reimbursement for teaching time."(1)  (See this 2005 post.)   This seems absurd on its face, since what are medical schools for if it is not to provide teaching. 

However, there is evidence of this mission-hostile behavior.  In 2007, we quoted from a revealing interview with Dr Lee Goldman, Executive Vice President for Health and Biomedical Sciences at Columbia University,(2) who stated that "taxpayers," faculty who "generate more [money] than they cost," are valued most, and implied that faculty who focus on teaching are regarded as "welfare recipients," who bring in less external funding, and are valued least.  In 2010, we noted the results of a large-scale survey presented by Dr Linda Pololi in which 51% of faculty felt that the administration only valued them for the money that they brought in, and half felt that their institutions did not value teaching.(3)

Yet while faculty seem to believe that educational institutions receive little if any money to pay for teaching, it is not clear why the believe something so counter intuitive, and it is less clear what money actually goes to pay for medical education.

US Government Funding for Graduate Medical Education

However, several recent publications affirm that actually a lot of money goes towards one important form of medical education, yet the specifics of the money flows are shrouded in secrecy.  In the May, 2012, SGIM Forum, Dr Mark Liebow and colleagues summarized some of what is known about federal support of graduate medical education, that is, education of interns, residents, and other house officers.(4)  There are two streams of money that flow from Medicare to US hospitals:

Direct GME (DGME) payments help hospitals pay the salaries of residents, teaching faculty, and support staff. DGME is the product of three numbers: a per resident amount that varies by hospital, adjusted annually for inflation; the number of residents in the hospital (capped for each hospital at 1997 levels); and the fraction of discharges from the hospital that are Medicare beneficiaries. The Indirect Medical Education (IME) payment is a percentage amount added on to each DRG payment. The percentage is calculated via a complex formula (the only US statute containing an exponent!), where the key factor is the ratio of interns/residents to beds (IRB ratio).

These two streams are of considerable size:

Of the $9.2 billion Medicare paid for GME in 2010, $3 billion was for DGME and $6.2 billion for IME. The money is paid to hospitals sponsoring training programs rather than to the training programs or other hospitals where training occurs. While about 1,100 hospitals receive GME payments, 66% goes to the 200 hospitals that have the largest numbers of residents.

So, the 200 largest hospitals get about $2 billion in direct GME money (and presumably about another $4 billion in indirect money). This averages then to about $10 million DGME and $20 million indirect GME per hospital.

Thus, teaching, at least the teaching of interns, residents, and other house-staff does pay, and much more than trivial amounts. (Note that these amounts are not for teaching of medical students, which ought to be supported by other funding streams.)

Why then do faculty think that teaching does not bring in any money?

The GME Money Vanishes

An article by Dr Saima I Chaudhry and colleagues in the American Journal of Medicine begins to explain, although the explanations are found between the lines.(5)

First of all, while the graduate medical education money is paid by the government to the hospitals, the government does not publish what it pays to individual hospitals:

It has been previously reported that the amount of GME funding individual hospitals receive is not publicly reported by the Centers for Medicare and Medicaid Services,....

The government also does not hold the hospitals accountable for how they spend this money, nor for the quantity or quality of education they supply in exchange for it.

Remarkably, Chaudhry et al imply that that the people who run graduate medical education teaching programs also may not know how much money their hospitals receive from the government to fund their programs. The introduction to their article noted:

It is unclear how much program directors know about the amount and flow of DME funds to their programs. Program directors' beliefs about the transparency of funding to their programs, or their desire to influence how funds are distributed to them, also are unknown.

The article reported on a survey of internal medicine residency program directors which asked about "their knowledge of D[G]ME funding for their programs, the transparency with which funds are distributed to them, and their desire to influence this disbursement." The researchers sent surveys to 372 member programs, representing 97.1% of all US internal medicine residencies. They got 268 responses, a 72.0% response rate.

The main results were that only 159/268 (59.3%) of program directors had tried to find out how much DGME money their programs received, and of those, only 84 (52.8% of those enquiring, but only 31.3% of all respondents) actually knew how much money their programs got.

Of the 92 program directors who did not even try to discover how much money their programs received, approximately 21% said that "no one would tell me," 21% said that the "information would be inaccurate," 14% said they "don't know who to ask," and 2% were "afraid to ask."

Summary

US medical school faculty, especially those in primary care, increasingly feel pressured to perform activities that they perceive brings in money from external sources. They tend to believe that their own teaching somehow does not bring in any money, and that their careers will fail if they do not put more emphasis on other activities that the institution views as more profitable.

However, literally billions of US government dollars go to support the education of house staff, including the salaries of faculty who teach interns and residents, who probably are the majority of physician faculty. Faculty probably do not know this, because the government does not publish the amounts given to individual hospitals, nor demand of the hospitals any accountability for how they spend the money they receive.

Presumably, the top executives of each hospital know how much money the government gives them. Nonetheless, the majority of physician leaders of residency programs are never told these amounts, apparently because their hospital executives kept the amounts secret. Many of those educators who have tried to find out the figures were unsuccessful. Some did not even try to find out based on beliefs that their attempts would be unsuccessful, any amounts they discovered would be inaccurate, the people who knew the amounts were hidden, or that it would be dangerous to their careers to even try.

Thus billions of dollars of money flowing from the government to fund graduate medical education seems to have vanished in an amazing example of widespread deficiencies in accountability and transparency.

There are many people who blame government for many social ills. In this case, one can blame the US Congress for not writing a law that makes the money flows transparent and hospitals accountable for providing good educational value for the money provided. One can also blame the executive branch, particularly the Center for Medicare and Medicaid Services (CMS) of the US Department of Health and Human Services (DHHS) for not making the money flows and the values received for them transparent.

There are a few people, including this author, who also blame the leadership of health care organizations for many of the problems besetting health care. In this case, one can blame top leadership, presumably CEOs and chief financial officers (CFOs) of hospitals for hiding the amounts of money they receive from Medicare to finance graduate medical education. One can also blame the physician leaders of residency programs for not insisting that they know the true sources of financial support for their programs, obtain budgets that reflect this support, and recognition that their faculty really do bring in external funds for their teaching of house staff (and are thus valuable "taxpayers" in Dr Goldman's parlance.)

It is amazing that such amounts of money have been flowing for years mostly in secret. The secrecy has fueled incorrect, and in retrospect, bizarre ideas about the funding of medical education, and the value of medical educators to their institutions. This secrecy, in turn, has helped suppress the morale of medical educators, support the control of managers of health care professionals, and distort the flow of money within academic institutions and to compensation for certain favored individuals.

Would our dysfunctional health care system not be better off if we demanded transparency and accountability from its leaders?  In particular, the US government should make payments to hospitals for graduate medical education completely transparent, and develop a system to hold these hospitals accountable for how they spend the money.  Meanwhile, top leaders of hospitals receiving this money should make the amounts transparent, first to the people who are supposed to be doing the education that the money pays for, and to the public at large.  This would allow those running the relevant educational programs to develop reasonable and realistic budgets, to treat their faculty with respect, and to demonstrate what value they provide for the money received. 
The ongoing anechoic effect, and related deception and secrecy fostered by leaders in health care are major reasons our health care system is so dysfunctional, that costs are so high, and access and quality so poor.  True health care reform would ensure health care leaders put the mission before their personal enrichment, and act ethically with accountability, transparency, and honesty. 
References
1.   DeAngelis CD. Professors not professing. JAMA 2004; 292: 1060-1.  Link here.
2.  Goldman L, Halm EA.  A view from the top: general internal medicine from the perspective of a chair and dean.  SGIM Forum, April, 2007.  Link here.
3.  Pololi L, Ash A, Krupat E.  Faculty Values in the Culture of Academic Medicine: Findings of a National Faculty Survey. Link here.
4.  Liebow M, Jaeger J, Schwartz MD. How does Medicare pay for graduate medical education? SGIM Forum, May, 2012.  Link here.
5. Chaudhry SI, Khanijo S, Halvorsen AJ, McDonald FS,Patel K. Accountability and transparency in graduate medical education expenditures. Am J Med 2012; 125: 517-522. Link here.

The CEO as False Messiah

Why is the leadership of health care organizations so bad?  An important explanation of one part of the puzzle appears on InformationWeek's Brainyard blog written by Venkatesh Rao. 

The Visionary, Charismatic, or Messianic Leader

In "The Fall of the Messiah Leader," Rao described the rise of the concept of "visionary" leadership:

we'll look at the rise in the 1980s and impending fall of the idea of 'Leadership' as a pop business construct. The role of visionary leader emerged to make up for the apparent failure of the manager mind, but it evolved into something very different, illustrated in the picture below: a role dedicated mainly to creating and maintaining an illusion of control in the markets interspersed with occasional Big Bold crisis management moves that generally fail.

Rao suggested that the first example of the messianic organizational leader was former General Electric CEO Jack Welch:

Welch was the first modern example of 'charismatic leadership,' and his was the first widely recognized business name since the robber barons. I challenge you to name, off the top of your head, one "celebrity" business name between Rockefeller and Welch that the average man on the street would have recognized.

Rao described the charismatic, or visionary leader in truly messianic terms:

one savant-like figure can intuitively read market conditions, spot brilliant strategic opportunities, create clarity of purpose in pursuit of that opportunity, and steer by an innate sense of True North, without a compass.

Oh yeah, and while performing this miracle routinely, the leader also models virtues and values that would put saints to shame. This idealized leader sparks a pursuit of corporate greatness with a brilliant strategic insight every few years, and he ensures that the pursuit is conducted in accordance with values so noble you feel like writing epic poems in his honor.

These charismatic figures are supposed to be capable of intuitively cutting through complexity and producing visionary decisions that make the managers' jobs tractable again.

In case this description of supposedly messianic leaders of recent years sounds far-fetched, recall the example of the failed, then eventually jailed CEO of what was once the Allegheny Health Education and Research Foundation (AHERF), one of the largest vertically integrated health care systems of the 1990s. (Currently, we call such organizations accountable care organizations, or ACOs.) Abdelhak was described in an American College of Physicians publication as a "visionary." (See the summary beginning on p 5 here.) Abdelhak had previously been called a "visionary" or a "genius" in the media. [Gaul GM. Creator of a cross-state health system despite personal and financial questions, Sherif Abdelhak has boldly expanded from Pittsburgh to Philadelphia. Philadelphia Inquirer, March 4, 1991. P. D1. Gaul GM. The new prescription for health care: Hahnemann’s merger dwarfs - and frightens - many local rivals. Philadelphia Inquirer, November 21, 1993. P. E1.]  For more recent examples of how health care leaders may be described in messianic terms, look here, here, and here.

The False Messiahs

Just as Abdelhak proved to be not a messiah, but a criminal, most messianic leaders are anything but. As Rao put it,

Do these Messiahs actually do the job required of them--relieve beleaguered mere-mortal managers and steer the company toward greatness? Nine out of 10 times, they do nothing of the sort. What they do is convince people that they're in control.

His main point is that the "messiahs" are just people playing at that role, supported by public relations, if not propaganda and disinformation:

Heroic, charismatic leadership in the context of large public companies is mostly a myth. What makes it a myth isn't that such figures don't exist (there have been a handful, such as Welch himself, Jobs, and Bezos), but the idea that the phenomenon can be studied in general terms, codified, and turned into a teachable skill.

True leaders are born, not manufactured. And they're quite rare. What the leadership cottage industry can manufacture are false leaders: People who can act like leaders. That theater has two audiences: the media and Wall Street.

The psychological allure of 'leadership' as a concept is almost entirely due to its profitability as a business-writing cottage industry, which in turn is based almost entirely on appealing to the vanities of wannabe-Messiahs. On the other side, there's an entire shadow world devoted to manufacturing perceptions of Messianic capabilities, by 'proving' claims to charismatic leadership using hagiographic narratives.

Rao claimed that the rise of such falsely messianic leadership was due to the ability of such leaders to bewitch investors:

The de facto job of a leader is to manage perceptions on Wall Street and thereby manage the stock price. Projecting an image of charismatic leadership is the easiest way to do that. Managers fight fires out of sight, creating a perception of corporate normalcy and control, and the Glorious Leader uses that blank canvas of apparent normalcy to spin tales that mesmerize Wall Street.

Who Else Benefits

Rao wrote mainly in the context of understanding the stresses and challenges of managers (who he sees as distinct from leaders in the context above). Thus he may not have written about other factors in the etiology of falsely messianic leaders.

I hypothesize that such leaders are not only good at bewitching investors, but bewitching other constituencies and stakeholders. Most health care organization now must deal with government agencies. Non-profit health organizations must deal with groups that are interested in their ostensibly charitable missions. Having a apparently messianic leader makes it possible to bewitch these groups.

Furthermore, I hypothesize that falsely messianic leaders greatly benefit two groups within their organizations. The first is obviously their apostles, often the top layers of organizational executives just below the CEO. Such positions are now almost as personally remunerative as are CEO positions. The second is obviously the spin-doctors, that is mainly the public relations and sometimes the marketing people who help produce the theatre that creates the perception of messianic qualities.

The Final Common Pathway

Rao suggests that falsely messianic leaders are likely to lead their organizations to a bad end, even if they themselves may escape the consequences:

Charismatic theater-leadership is about to die a messy death, like Qadaffi, because the sheer amount of chaos converging in a bottom-up torrent to the CEO's office will become unmanageable very soon. The theater will become increasingly hard to sustain.

Leaders fail when their managers fail to keep up with the fire-fighting. Once the fires become visible externally, the apparent normalcy necessary for the leader to manage perceptions is gone.

At this point, the leader is an impossible situation, but the theater must continue. And so we're treated to the grand finale of the tenure of a CEO: the Big Bold Move, the Bet The Company moment.

The Big Bold Move is usually a Big Dumb Move--deciding to go after large new markets, taking on bold new product initiatives costing hundreds of millions of dollars, making major acquisitions. It's a high-stakes game with a billion-dollar ante.

And usually these moves fail because charismatic leaders are forced to make them at terrible times, with bad data, when growth has stagnated or is plummeting, and there's a need for an 11th hour business model shift to replace hundreds of millions of dollars of collapsing revenue streams. A case of too much, too late.

The leaders who fail are sacked, land safely with golden parachutes, and proceed to loudly blame 'culture' (read: 'incompetent middle management') for the failure.

Rao is writing for a general business audience. The outcomes of such failures when the falsely messianic leader is in charge of a health care organization can obviously be even worse, leading to rising health care costs, declining access and quality, and threats to patients' and the public's health.

Summary

We have seen many health care leaders praised for their brilliance and paid royally despite leadership resulting in financial distress, threats to the organizations' health care missions, poor patient care, unethical behavior, or even crime. (The most recent example as of the time this was written was here. For other examples look here.)   Yet health care CEOs are just people, sometimes smart, but almost never brilliant.  Promoting them as messianic to bewitch key constituencies, justify the remuneration of other top managers, and the hiring of more public relations flacks is likely to lead to the sort of organizational disasters and system-wide dysfunction we discuss on Health Care Renewal.  The rise of the falsely messianic leader may allow the entry of the most dangerous false messiahs, the psychopathic ones.  (We discussed the likelihood that some health care leaders are actually psychopaths here.)

Rao's theory of falsely messianic leadership (and related, and also religiously allusional theories of the "divine rights of CEOs," look here and here), suggest that the better paid the CEO, and the more expansive the descriptions of the CEOs talents, the more skeptical we ought to be. 

In the secular occupation of health care, we ought not to yearn for messiahs, but hope for reasonable leadership that draws on the collective knowledge and values of health care professionals rather than dubious "visions," and that show accountability, integrity, transparency, honesty, and ethics.

The Spoils of a "Scorched-Earth Defense" - Merck CEO Got $13.3 Million in 2011

Last week, Bloomberg reminded us of the legal baggage that pharmaceutical giant Merck is carrying. The company had announced yet another settlement of legal actions pertaining to its ill-starred but very profitable sales of now withdrawn Vioxx (rofecoxib) in 2011 (see post here). Now the settlement, including a guilty plea was accepted by a judge.

A unit of Merck & Co. (MRK), the second- largest U.S. drugmaker, pleaded guilty to a criminal misdemeanor charge as part of a $950 million settlement of a U.S. government probe of its illegal marketing of the painkiller Vioxx.

An official of Merck Sharp & Dohme said today that the company agreed to plead guilty to one count of misbranding Vioxx. U.S. District Judge Patti Saris in Boston accepted the plea as part of the drugmaker’s agreement to pay a $321.6 million criminal fine and $628.3 million to resolve civil claims that it sold Vioxx for unapproved uses and improperly touted its safety.

'I’m certainly going to accept this agreement because I think it’s in the public interest,' Saris said from the bench. 'I hope the size of this settlement and the fact that all these cases are being pressed by the federal and state governments -- the 44 states’ attorneys general -- will be a signal that this isn’t acceptable conduct.'

But unacceptable conduct can lead to a great deal of revenue. As Bloomberg noted,

Approved by the Food and Drug Administration in 1999, Vioxx became Merck’s third-largest-selling drug by 2003, generating $2.5 billion in annual sales. The company pulled Vioxx off the market in 2004 after a study found it posed an increased risk of heart attacks and strokes.

It can also lead to a great deal of personal profit for those at the company tasked with defending such "unacceptable conduct," and what has now been found to be criminal behavior. Writing in Slate, Snigdha Prakash, who wrote All the Justice Money Can Buy about the legal aftermath of Vioxx, identified the current Merck CEO and board chairman as the architect of the defense of Vioxx, as

best known for his phenomenal success in defending a sordid chapter in Merck’s recent past—its years-long silence about the safety problems of the popular painkiller Vioxx.

Furthermore, she wrote,

As he showed with the Vioxx litigation, Frazier is adept at mounting a scorched-earth defense that minimizes payouts to potential plaintiffs.

Tens of thousands of former Vioxx users sued Merck after it withdrew the drug, alleging Vioxx had caused them to suffer heart attacks and strokes. Frazier, then the company’s general counsel, declared Merck had done nothing wrong and refused to settle. 'We’ll fight every case,' he declared, and hired top-flight law firms in several East Coast cities, in the South, in Chicago, and Los Angeles, as well as a prominent New York firm to coordinate the overall strategy. It took three years and $2 billion in legal expenses for Frazier’s hard-nosed tactics to pay off. Merck settled in late 2007 for a relative pittance, resolving some 50,000 Vioxx cases for just under $5 billion. It was a far cry from the $25 billion to $50 billion in liability that analysts had predicted when Merck withdrew the drug.

So it appears that Mr Frazier is now reaping his rewards. The Dow Jones News Service reported earlier in April,

Merck & Co.'s (MRK) leader received compensation valued at $13.3 million for 2011, up 41% from the year before, reflecting his ascension to the drug maker's top post and Merck's ability to exceed certain internal performance targets.

Kenneth Frazier, 57, became Merck's chief executive at the beginning of 2011 and chairman of the board in December. He was previously head of Merck's human health business.

In a proxy statement filed Thursday with the U.S. Securities and Exchange Commission, Merck said certain elements of Frazier's compensation reflected growth in Merck's sales and adjusted earnings for 2011.

In addition, Merck's board considered 'his performance, leadership, planning and oversight during a time of continued economic, regulatory and political challenges for the healthcare industry.'

Earlier this year, Frazier acknowledged that Merck had a tough 2011. The company endured setbacks including negative clinical data for a once-promising heart drug, vorapaxar. Merck's full-year stock price performance lagged behind most of its large-pharmaceutical peers.

But Merck of Whitehouse Station, N.J., continued to cut costs and was able to raise its dividend for the first time in seven years in 2011. Frazier said in January he was optimistic about 2012.

Frazier's total compensation included: $1.5 million in salary, $3.1 million in stock awards, $3 million in option awards, $3.1 million in non-equity incentive plan compensation, and $2.6 million change in pension value and non-qualified deferred compensation earnings.

So somehow a "tough 2011" for Merck's stockholders (Merck's stock price rose a mere 3.9%, from 36.29 to 37.70 through 2011) resulted in a cornucopia of riches for Mr Frazier. So rather than being rewarded for "maximizing shareholder value," (see post here) maybe Mr Frazier was rewarded for, as Ms Prakash put it, "burying monumental corporate failures at Merck."

Here is the latest version of how top health care organizational insiders manage to make even more money no matter what, in this case, no matter what happens to the fortunes of the nominal owners of the company, no matter what happens to the company's once proud reputation, and particularly no matter what happened to the patients unfortunate enough to suffer adverse effects from its drug.

We will not be able to truly reform health care, to really improve outcomes, improve access, and control costs, until we hold the leaders of health care organizations accountable.

Will the UC-Davis Chancellor be Held Accountable for "Systemic and Repeated Failures?"

During the brief Occupy Wall Street etc campaign last year, the pepper spraying of unarmed protesters on the University of California - Davis campus became a symbol for some of what the powers that be thought of those who challenge the political economic status quo.  We discussed this incident (here and here) on Health Care Renewal as an example of how the privileged hired leaders of big organizations, including health care organizations, may put their own interests ahead of the organizations' missions.  Note that this case is relevant to Health Care Renewal since UC- Davis has a medical school and academic medical center.

The Task Force Report

Now, five months later, an internal investigation of the case has been made public, and it seems to support our concerns about the leadership of large organizations.  The AP described the resulting report (via the Seattle Post-Intelligencer).  In summary,

a UC Davis task force said the decision to douse seated Occupy protesters with the eye-stinging chemical was 'objectively unreasonable' and not authorized by campus policy.

'The pepper-spraying incident that took place on Nov. 18, 2011, should and could have been prevented,' concluded the task force created to investigate the confrontation.

The report concluded that the Chancellor (functionally, the CEO) of UC-Davis, Linda Katehi had substantial responsibility for the incident:

The task force blamed the the incident on poor planning, communication and decision-making at all levels of the school administration, from Katehi to Police Chief Annette Spicuzza to Lt. John Pike, the main officer seen in the online videos.

Furthermore,

The task force blamed the chancellor for not clearly communicating to her subordinates that police should avoid physical force on the protesters. It also said she was responsible for the decision to deploy police on a Friday afternoon, rather than wait until early morning as Spicuzza recommended.

An editorial in the Merced Sun-Star focused more vividly on Katehi's poor leadership.

The independent assessment of events leading up to the infamous Nov. 18 pepper-spraying incident at the University of California at Davis provides a devastating indictment of the leadership of Chancellor Linda P.B. Katehi and key vice chancellors -- and of the operations of the campus Police Department.

Katehi showed either extreme naivete or incompetence in weighing a response to protesters camping in the Quad. The report of the task force, led by former California Supreme Court Associate Justice Cruz Reynoso, revealed a deeply flawed structure for decision-making. Little or no consideration of alternatives. Failing to record and adequately communicate key decisions, so that ambiguity and uncertainty ruled.

The command and leadership structure of the campus Police Department, the report concluded, is 'very dysfunctional.' Lieutenants, the report stated, don't 'follow directives of the Chief.' This department needs a top-to-bottom review to bring it into line with best practices in policing for a university campus.

Campus leaders had been dealing with protests since 2009 and were well aware of events that November in Oakland and at UC Berkeley.

But instead of deliberate preparations, those events, according to the report, sparked alarmist fears among Katehi and other administrators that if any encampment was not removed immediately, older non-students might assault young female students.

Katehi said she was worried about 'the use of drugs and sex and other things, and you know here we have very young students ... we were worried especially about having very young girls and other students with older people who come from the outside without any knowledge of their record ... .'

But the report suggests Katehi and her leadership team did little or nothing to verify whether these fears were well-founded, ignoring evidence from student affairs staff that protesters were students and faculty. The report concludes that Katehi's fears were 'not supported by any evidence' obtained by the Kroll Inc. investigators.

Worse, even if the concerns were real, Katehi and her leadership team did not consider alternatives to immediate removal of the encampment -- or learn anything from the experience of other places. This rush to action resulted in ad hoc decision-making, apparently with no one having a clear understanding of what was supposed to happen.

Katehi did make one thing clear: She wanted the tents removed at 3 p.m. -- though it was never certain what legal authority police had to remove tents during the day in order to implement a policy against overnight camping. Subordinates, the report says, took her statement as an executive order and tactical decision.

The report also notes that Katehi 'failed to express in any meaningful way her expectation' that campus police would use no force. There is no indication what Katehi thought police should do if protesters refused a request to take down tents.

Furthermore, an article in the Atlantic suggested that Katehi was not truthful in her dealing with the investigation:

at face value ... [the report's] findings are also very damaging to the still-serving Chancellor of UC Davis, Linda Katehi. For instance, the Kroll report says about a letter asking the demonstrators to disperse:

Chancellor Katehi told Kroll investigators that Student Affairs wrote the letter and that she did not review it before it went out. The record contradicts both of these statements, as detailed below. Katehi did review the letter, provided an editorial change and approved it. Student Affairs did not write the letter...

Will Leadership be Held Accountable?
So, in summary, the report on the pepper-spraying incident portrays the Chancellor of UC-Davis as presiding over a dysfunctional police department, hastily responding to rumors rather than evidence, making decisions without considering alternatives, poorly communicating decisions and their rationale, and not always being honest.  This is not the portrait of a capable leader.  This a a portrait of someone totally out of her depth.

So why is she paid the big bucks?  As we have discussed endlessly, the top hired leaders of big health care (and other related) organizations seem to be almost universally lauded by their boards of trustees, not to mention fawning public relations departments, as brilliant.  That brilliance is used as a rationale for the leaders' compensation and benefits, and for deflecting their accountability.

Yet often on close examination top hired leaders prove to be bumblers at best.  Again and again their leadership has been shown to subvert the mission of their own organizations.  Yet the structure that has been erected to protect them, to put them into a "CEO bubble," keeps them unaccountable.

Even after this report, will Chancellor Katehi be held accountable?  Once again, I am not holding my breath.  The strength of her protective bubble was demonstrated in an article in the Sacramento Bee,

Cruz Reynoso, the former state Supreme Court justice whose task force blamed 'systemic and repeated failures' of UC Davis' leadership for the pepper-spraying of students last fall, said Thursday that Chancellor Linda P.B. Katehi should stay on the job and enact reforms to prevent a recurrence.

'She should not resign. The balance is that she has done a lot of good despite this drastic poor judgment,' Reynoso said, a day after releasing an investigative report that faulted the chancellor for failing to make clear to campus police she wanted no force used in dispersing protesters and taking down an Occupy encampment on Nov. 18.

Reynoso said he was impressed by the chancellor's response: a written statement Wednesday vowing to protect students' 'safety and free speech' as the university learns 'from the difficult events.'

What an example of cognitive dissonance this was. "Systematic and repeated failures," and "drastic poor judgment," which resulted in injuries to students and clear violation of the university mission is not reason enough to fire a CEO (as long as she writes a contrite letter promising to uphold the mission in the future)? There is no way to understand this other than as a manifestation of belief in the "divine right of CEOs" (look here and here).

So my response is that we will not solve the problem of health care dysfunction, and our society's larger political economic problems until we resolve to hold our leaders accountable for the missions they are supposed to uphold.

Why Health Care Leaders Remain Unaccountable: How the Family Invisibly Promoted the "Divine Right of CEOs"

We have frequently discussed the lack of accountability of health care leaders, which we sometimes have described as CEO exceptionalism. We have noted how health care leaders almost never seem to need to take responsibility for their organizations' misbehavior and its outcomes, (look here) and in fact can command ever increasing compensation, no matter how badly they or their organizations do. 

Some of the more recent examples of this phenomenon were:

• William Weldon, soon to retire as CEO of Johnson and Johnson, has commanded eight-figure yearly compensation despite severe manufacturing problems leading to 30 product recalls since 2009, and multiple ethical lapses leading to legal settlements and guilty pleas (see this post).
• Non-profit hospital system CEOs got bonuses and raises, or departed with golden parachutes as their systems faced financial losses and laid off employees, or after their medical staff questioned their management (see this post).
• A non-profit hospital CEO got a golden parachute ostensibly because he engineered a successful merger.  However, the merger never took place (see this post.)

Others examples can be found here.  Moreover, such executive compensation is almost never justified with anything approaching evidence or logic.  When health care organizations can be bothered to try to explain executive compensation, they revert to rote compliments (executives are called "brilliant" or "visionary") without further explanation, e.g., look here and here and here), or even fall back to logical fallacies (e.g.look here).

Why Does Unaccountable Leadership Persist Unchallenged?

Why this absurd state of affairs persists and is getting worse, and why it is so little noticed outside of this blog, is a real question.  One explanation we just raised is that society has gotten used to "the divine rights of CEOs," partially because of the success of an ideology that has been called "economism," that in turn is based on some old and now rarely accepted religious teachings that have somehow infiltrated what is supposed to be a science.

The Family as a Supporter of the "Divine Right of CEOs"

A related explanation comes from The Family, published in 2008, written by Jeff Sharlet.  It suggests that such outmoded beliefs have been promoted by an extreme, nearly invisible, but influential religious sect called "The Family" that has been around since the 1930s.  The Family has powerfully promoted its fringe religious beliefs to influence policy and politics.  I strongly recommend reading the book for further details, or at least a summary article, Jesus Plus Nothing, Shalet published in 2003 in Harpers.

Let me summarize the relevant points.  Because many will seem far-fetched, I will provide quotes from the book to back each up, with page references from the Harper Paperback edition.  Italics were added for emphasis.

Secrecy

The Family, formerly the Fellowship, is secretive, and functions behind a variety of front organizations.

The family has operated under many guises, some active, some defunct: National Committee for Christian Leadership, International Christian Leadership, National Leadership Council, the Fellowship Foundation, the International Foundation. (P 20-21)

Extreme Theology
While nominally Christian, the Family is at the far extreme of the spectrum, and embraces beliefs that many would find far-fetched, or worse.

It discounts the Bible and the Holy Trinity, and hence is hardly fundamentalist in the usual sense of the word.

The Family’s

origins lie not in the New Testament, which is ultimately little more than a fabric from which the Family constructs contemporary realities....” (P 61)

Not Jesus plus scripture, since scripture, after all, contains a great deal besides Jesus. No burning bush, no voice in the whirlwind, no Daniel, no lions. (P 252).

It discounts the Holy Trinity.

[Current Family leader Douglas] Coe and his inner circle do believe in the trinity; a Washington fundamentalist activist told me,’ but they’ll given the Father and the Holy Ghost the weekend off. Because they clutter the conversation. Jesus is so easily presented. (P 252)

Some call it a dominionist sect, that is, one that seeks a return to the very earliest Christianity, before any organized churches.  

The Family’s beliefs appear closer to a more marginal set of theologies sometimes gathered under the umbrella term of dominionism, characterized ... by William Martin, a religious historian at Rice University, and Billy Graham’s official biographer.... Dominionist theologies hold the Bible to be a guide to every decision, high and low, from whom God wants you to marry to whether God thinks should buy a new lawn mower. Unlike neo-evangelicals, who concern themselves chiefly with getting good with Jesus, dominionists want to reconstruct early Christian society, which they believe was ruled by God alone. (P 44)

(Note, however, that the emphasis on the Bible as guide appears to contradict the discounting of scripture above.)

Links to the Powerful

The Family has had ties to numerous powerful politicians.

The Family is in its own words an ‘invisible’ association, although it has always been organized around public men. Senator Sam Brownback (R., Kansas), chair of a weekly off-the-record meeting of religious right groups called the Values Action Team (VAT) is an active member, as is Representative Joe Pitts (R., Pennsylvania),... Others referred to as members include senators Jim DeMint of South Carolina,...; Pete Dominici of New Mexico...; Chuck Grassley (R., Iowa); James Inhofe (R., Oklahoma); Tom Coburn (R., Oklahoma); John Thune (R., South Dakota); Mike Enzi (R., Wyoming); and John Ensign.... ‘Faith-based Democrats’ Bill Nelson of Florida and Mark Pryor of Arkansas,... are members.... (P18)

Many other politicians, some very well known, from both major parties appear as Family members or friends in the book.

Since the 1950s, the Family has supported the National Prayer Breakfast. (P 195). 

The "Divine Right" of Leaders

The Family believe that those who are powerful are those chosen by God to be powerful, and hence must obeyed.

Family founder Abraham Vereide, better known as Abram

“would become an exponent of religion for the elite - the ‘up and out,’ as he called them.... He termed this trickle-down faith the Idea, and it was really the only idea he ever had - the only one, he believed, God gave him. In one sense, it was nothing more than a defense of the status quo. It neither challenged power nor asked for anything from the powerful but their good intentions. ( P 91)

“Power lies in things as they are. God has already chosen the powerful, his key men. ( P 96)

‘We work with power where we can, build new power where we can’t.’ The words belong to Doug Coe, who seized the Fellowship’s top spot in a succession struggle following Abram’s death in 1969 and began transforming it into what I eventually encountered as the Family. ( P 121.)

The "Divinely Chosen" Leaders Need Not be Accountable to Any Man

The powerful, because they are chosen by God and are instruments of God’s will, need not be accountable, at least to any other humans.

This, Abram decided, was what it meant to die to the self: to turn all responsibility over to God. That such a transfer meant the abdication of any accountability for one’s actions, that it provided justification for any ambition, did not occur to him. (P 125)

A Fellowship tract titled Studies for Public Men, 10,000 of which were printed up by a Chevron Oil executive, claimed that such abuses [refers to an Army General who worked with Coe and was subsequently jailed for selling surplus weapons to 'Third World gangs'] are inevitable, but not attributable to the piety with which such men cloaked their misdeeds. When pious men committed crimes, went the thinking, godlessness was to blame - ‘secularism in its worst form!’ In a Section titled ‘Accountablity,’ the tract explained why the Fellowship should not be held accountable for the actions of its individual members.... ‘Persisting in the accusation of collective guilt immobilizes a society,’ advised the tract. Perhaps, but the Fellowship denied the very concept of guilt for the powerful. That was a legalistic notion, an encroachment on God’s sovereignty.... (P 220)

We’re all sinners, and thus shouldn’t judge those whom God places in authority. (P 241)

The "Divine Right" Extends Even to Dictators

The Family’s support of powerful, unaccountable leadership is suggested by how it tolerated, and sometimes supported vicious dictatorships.

Understand Abram’s weirdly ambivalent relationship with fascism.... (P 124)

In Frankfurt, Abram claimed, God personally revealed to Abram a key man to quietly help manage the internal affairs of Germany’s elite: Dr Otto Fricke, an austere German churchman with an uncomfortable past. ‘You are God’s man for this hour in Germany,’ Abram told him. Had Abram asked about Fricke’s role in Germany’s previous hour, Fricke would have begged off explaining his activities during the Third Reich. As a radio preacher, he’d been recruited by Goebbels to propagandize,.... (P 159)

Coe counseled a Haitian senator and then Haiti’s ambassador to the United States, easing both into commitments to a Christ-led nation, with the understanding the Christ Coe preached led not toward the socialism that tempts any bitterly poor people but toward an economics of ‘key men’ who would share their wealth as God instructed them. Senators Frank Carlson and Homer Capehart, both members of the Foreign Relations Committee, did the follow-up work, leading a Fellowship delegation of twelve businessmen to instruct the Haitian parliament in prayer cell politics. Francois ‘Papa Doc’ Duvalier, who would declare himself president for life but also the nation’s official ‘Maximum Chief of the Revolution’ and ‘Electrifier of Souls’ - he was the weirdest and most vicious dictator in the Western Hemisphere - impressed the senators with his spirituality.

Not only did South Korea hold a prayer breakfast, but its dictator, General Park Chung Hee, tried to use the Fellowship to channel illegal funding to congressional candidate’s of [President Richard] Nixon’s selection. (P 216)

In 1968, Abram declared [Indonesian dictator] Suharto’s coup a ‘spiritual revolution,’ and Indonesia under his rule an especially promising nation, hope for the future in Abram’s later years. (P 245)

The family also had cordial relationships with South Vietnamese leader General Nguyen Van Thieu (P 248) and Filipino dictator Ferdinand Marcos (P 249)
 
Summary
 
Sharlet's book suggests how the Family's increasing influence has led to the infiltration into the general society of the notion that all current leaders, including and particularly corporate CEOs, have a "divine right," and can thus not be held accountable by mortal men, even though that notion, if expressed this clearly, would seem ridiculous to a vast majority of the population.  It is possible that the major reason that most health care leaders have become unaccountable is some sort of subconscious acquiescence to the notions of economism (as discussed here), and promulgated by the Family.  However, this acquiescence then is largely by people who would likely reject the bizarre religious beliefs that underpin these notions if those beliefs and their origin were made clear.
 
All those who do not believe that all earthly leaders are divinely chosen need to challenge the leaders chosen by human to be accountable to humans. 
 
As a society we need to wake up from our dazed acquiescence to ideas that border on crazy.  We need to challenge rote justifications and talking points for that which makes no sense, but serve to make the powerful more powerful.

The Golden Calf Explains How Economism Lead to the Divine Right of CEOs

Our fellow blogger (on Hooked: Ethics, Medicine and Pharma), family physician and bioethicist Dr Howard Brody, has written a book on economic ideology that helps explain some of the issues we frequently discuss.

Dr Brody's book, The Golden Calf, is about how the social science of economics has been taken over by an ideology he and others call "economism." 

Economism

Economism consists of these major ideas:

• "'The economy' is a separate and distinct sphere of society."  This means that economic planning can be independent of consideration of the rest of society.
• "Even if only a part of society, the economy is the primary part."  Thus economic planning, thinking, policies etc take precedence over other planning, thinking, policies, etc.
• "People are, at core, economic beings.  The laws of the marketplace describe virtually asll of their behavior and the reasons for it.  People are beings of economic exchange, driven first to make money and then to spend on the goods obtainable in the marketplace."  So all other human thought, values, emotions, etc are less important.  The answer to the question, "what does love have to do with it?" is nothing.  Neither does honesty, morality, or ethics have to do with it.
• "Economic calculation is the best way to understand, value, and manage human life.  It is appropriate that every aspect of our lives be thought of and analyzed in terms of economic calculations."  This essentially asserts that economists, economic thinking, and the marketplace should rule the world. 
• "The economy, above all else, must be managed solely with an eye towards its own technical requirements - that is, what economists study.  There ought to be no interference from politicians, or policymakers, or moralists, or anyone else."  Thus, not only should greed be considered good, but greed ought to be enacted into law. 

Economism's Prescription for Health Care

Stated so baldly, economism may seem absurd.  However, it is easy to see its influence.  For example, Dr Brody explained how economism would state:

what sort of health system the U.S. ought to have. It would be one that is governed by the laws of the market, and that treats all aspects of health care as consumer goods. How much any person 'needs' health care would be determined by one thing only - what that person is willing to pay on the open market. Anything else would be denounced as illegitimate interference with the market by politicians, policymakers, and other do-gooders.

This, of course, corresponds very well with a lot that is said about health care by its current leaders. How often have we heard about the health care market, and how the only way to improve health care is market-based reforms? (Look here).  How often have we heard leaders of hospitals refer to their "industry?" How often have we heard of patients as consumers, and doctors as providers? The list can go on.

The problems are that economism does not provide good tools for prediction or management of the economy. Worse,

If we want to live in a society that reflects basic human values, including acceptable moral rules, economism is a very poor guide. Yet economism is blind to its own deficiencies. it claims to be able to tell us the definitive answer to any problem in any aspect of human life, and accuse us of being irrational if we disagree with its proposals. If a powerful elite takes over control of a society, wedded to economism as their belief system, then the results for that society could be disastrous.

The origins of economism provide an explanation for a phenomenon we have often seen in health care, the lack of accountability of health care leaders, which we sometimes have described as CEO exceptionalism. We have noted how health care leaders almost never seem to need to take responsibility for their organizations' misbehavior and its outcomes, (look here) and in fact can command ever increasing compensation, no matter how badly they or their organizations do.

The Religious Origins of Economism
To understand this explanation, first note that Dr Brody suggested that economism is not a science. It did not arise out of an effort to use logic and reason to explain evidence. Instead, it seems to have come from two strains of religious thought that got translated into economic terms.  Dr Brody suggest that while it may make sense to think of economism as an ideology, it functions more like a religion, so that viewing economics ruled by economism as a social science would be a very big mistake.

The first strain was the Protestant evangelism found in England in the 18th century. Evangelicals of that time

regarded poverty as part of a divine program. Evangelicals interpreted the mental anguish of poverty and debt, and the physical agony of hunger or cold, as natural spurs to prick the conscience of sinners. They believed that the suffering of the poor would provoke remorse, reflection, and ultimately the conversion that would change their fate [in the afterlife]. In other words, poor people were poor for a reason, and helping them out of poverty would endanger their mortal souls.

Thus, people who fail in the marketplace of life are sinners. Markets should not be regulated to prevent such failure, because doing so would prevent their still possible salvation.

On the other hand, the Puritanism of the 17th and 18th centuries, and its 19th century evolution in the US

was creeping up on the idea, not only that material wealth and worldly success was a good thing in the eyes of God, but that seeing oneself become successful and wealthy was the strongest possible sign of God's grace and one's status among the Elect.

Things then got more extreme.

The moderate idea that those who enjoy material wealth in the earthly life may have been especially favored by God seems gradually to have morphed into the extreme idea that God wishes us to bestow on the super-rich our adulation and unquestioning allegiance.

So,

For example, Reverend Russell Cornwell's lecture called 'Acres of Diamonds' proved so popular after he first wrote it in 1870 that he was called upon to give it six thousand times over the next quarter century. He preached: 'I say you ought to get rich, and it is your duty to get rich.'

Thus,

We have been conditioned to believe that wealth is an infallible sign of God's favor.

Here is the religion behind CEO exceptionalism, lack of CEO accountability, outrageous CEO compensation, the imperial CEO. CEOs can become extremely wealthy, and "wealth is an infallible sign of God's favor," generating the notion of the divine right of CEOs.

Summary

No wonder that we have yet to see any logic or evidence to support CEO exceptionalism. Instead, we have seen logical fallacies used to support lack of CEO accountability and immense CEO compensation. The wealth of our leaders cannot be addressed with logic and evidence if it is a sign of God's favor.

Thus, anyone whose religious beliefs are perfectly compatible with 18th century English evangelism and 17th through 19th century British and American Puritanism and its aftermath might be happy with the divine right of CEOs, and with economism in general.

However, Dr Brody makes the powerful point that economism functions like a religion, and at best is an ideology, not scientific paradigm. Anyone who is uncomfortable with the religious beliefs that underlie it ought to be very uncomfortable with its precepts, as should anyone who believes that economics or health care should be based on evidence and logic.

Specifically, in health care and in the larger economy, anyone who does not believe that rich CEOs are especially favored by God should question why they should be so rich, and why they should be so unaccountable.

Dr Brody has written a powerful and important book which goes a long way to explain the irrationality that has infected health care. People of all, or of no religious beliefs should pay attention.

Merck Admits Little While Settling the Vioxx Case

A week ago, another legal settlement with some noteworthy aspects came marching along.  As reported by the Wall Street Journal, here are the details.

A Guilty Plea to "Misbranding"

First, there was a guilty plea (to a misdemeanor):

Merck & Co. agreed to pay $950 million and plead guilty to a criminal misdemeanor charge to resolve government allegations that the company illegally promoted its former painkiller Vioxx and deceived the government about the drug's safety.

In particular,

The Justice Department said Merck illegally promoted Vioxx for rheumatoid arthritis before that use was approved by the Food and Drug Administration in 2002. The drug was initially approved in 1999 to treat certain types of pain. Drug companies are barred from promoting drugs for unauthorized, or 'off label,' uses, though doctors may prescribe off-label uses.

Merck agreed to plead guilty to introducing a 'misbranded' Vioxx into interstate commerce, which is a misdemeanor violation of the Food, Drug and Cosmetic Act, and to pay a $321.6 million criminal fine.

So the company actually admitted to violating the law in the form of a misdemeanor, selling a drug for unapproved uses. The importance of this sort of activity has been frequently challenged, especially by those who claim that corporations have free speech rights that allow them to promote practically anything they want.

However, this was not the only issue apparently resolved.

A Civil Settlement

The company agreed to pay $628.4 million to settle civil allegations.

What were these allegations?

The government also made allegations against Merck in parallel civil litigation related to Vioxx in addition to the criminal charges.

According to the government, Merck representatives made inaccurate, unsupported or misleading statements about Vioxx's cardiovascular safety, in order to increase sales of the drug. The government also said Merck made false statements to state Medicaid agencies about the drug's safety.

However,

Merck isn't admitting liability or wrongdoing in the civil aspect of the settlement. Mr. Rogers said Merck expressly denies the civil allegations.

'We believe that Merck acted responsibly and in good faith in connection with the conduct at issue in these civil settlement agreements, including activities concerning the safety profile of Vioxx,' said Merck General Counsel Bruce Kuhlik in a statement.

So this is yet another example of a legal settlement made by a health care organization involving that organization paying a fine, but not admitting it did anything wrong.

The Parallel with the Citigroup Settlement

Last week, we wrote about how one US federal judge refused to accept a settlement (in a case of alleged financial misbehavior involving Citigroup) which did not require the company to admit wrongdoing. The judge noted that this presented the logically incomprehensible situation of a company apparently being punished for a reason that is unknown. At that point, one (admittedly outspoken) critic wrote, "This has essentially created a parallel or secret criminal justice system, in which both crime and punishment are adjudicated behind closed doors." Furthermore, these

settlements have evolved into a kind of cheap payoff system, in which crimes may be committed over and over again, and the ... [government'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....

What No One Had to Admit
In the case of the current Merck settlement, we do know something about the activities that lead to the settlement.  The settlement arose out of what was called the "Vioxx scandal." In summary, Vioxx (rofecoxib, Merck) a Cox-2 inhibitor non-steroidal anti-inflammatory drug used for pain, and touted for its ostensibly low risk of gastrointestinal side-effects, was withdrawn from the market in 2004 because of its cardiac risks.  The Vioxx case is flush with examples of how the company used deception to market a very profitable drug without regard to its risks to patients. 

There is evidence is that the company knew about these effects since 2000, but suppressed the clinical research evidence until 2003.(1)  In particular, in 2005, the editors of the New England Journal of Medicine raised concerns that an article published in that journal in 2000 about the results of the VIGOR study of rofecoxib sponsored by Merck failed to report data that would have suggested that the drug caused excess cardiovascular risks.(2) In 2007, the company paid more than $4.9 billion to settle patient lawsuits alleging harm due to Vioxx.(3)  Also in 2008, the company made a $58 million settlement of claims its advertising of Vioxx deceptively minimized its risks.(4) In 2008, it became clear that at least one apparently clinical trial of Vioxx, the ADVANTAGE trial, was merely a "seeding trial,' that is, a marketing exercise.(5)

On Health Care Renewal, we starting writing about Vioxx in 2005, including,
- here about ghost-writing of a Vioxx research publication;
- here, and here about allegations that Merck executives tried to intimidate Vioxx critics;
- here about how advocates of an extreme laissez faire approach to regulation of health care corporations used illogical arguments about the Vioxx case;
- here about the ADVANTAGE "seeding trial," that is, a study really meant to recruit supposed physician-researchers as prescribers; and
- here about how one once prominent Vioxx researcher pleaded guilty to fraud in connection with his research on other drugs.
-  here about how in settling a shareholder lawsuit Merck vowed to improve its scientific and academic integrity, and refrain from manipulating and suppressing clinical research.

In 2010, we summarized the Vioxx case thus, " the Vioxx case provides a good lesson about some of the tactics used to deceptively and unethically promote health care products (pharmaceuticals in this case)." 

In case there are any doubts about the harms patients suffered as a result of using Vioxx as a pain reliever, in 2004, a cumulative meta-analysis of published trials of Vioxx known by then estimated the risk of myocardial infarction (heart attack) due to Vioxx compared with placebo or other non-steroidal anti-inflammatory drugs was 2.3 times the baseline rate.(6)  That analysis suggested that there was data by 2000 that Vioxx increased the risk of bad cardiovascular events.  A cumulative meta-analysis from 2009 suggested that the risk of death due to Vioxx was 1.7 times the baseline rate.(7)   That analysis suggested there was data by 2001 that Vioxx increased the risk of bad cardiovascular events.  Graham and colleagues' nested case-control study of Vioxx use in a large managed care organization lead them to estimate that "88 000 - 140 000 excess cases of serious coronary heart disease probably occurred in the USA over the market-life of rofecoxib."(8)

Yet despite all the evidence of deceptive practices used to market Vioxx as a first-line pain reliever, and all the evidence that Vioxx may have lead to a large number of myocardial infarctions and premature deaths, the US government's settlement with the maker of Vioxx allowed it to deny that its marketers concealed the dangers of the drug.  This shows that the US regulation of health care organizations has been reduced to Kabuki theatre, detached from reality, and in this case, from what appears to be very clear clinical epidemiological evidence. 

As noted above, and by us frequently in the past, as long as the only punishments for bad behavior are fines (paid by the entire organization, not those who authorized, directed or implemented the bad behavior), such "punishments" only modestly add to the cost of doing business, and do not deter future bad behavior.  The continuing bad behavior, indicated in part in the parade of legal settlements we have documented, doubtless leads to much of our health care problems, particularly high costs, poor access, poor quality, and demoralized health care professionals.

Like a broken record (for anyone who remembers what that means), I repeat...   to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.


References


1. Topol EJ. Failing the public health - rofecoxib, Merck and the FDA. N Engl J Med 2004; 351: 1707-1709.  Link here.
2. Curfman GD, Morrisey S, Drazen JM et al.  Expression of concern reaffirmed. N Engl J Med 2006; 354:1193. Link here.
3. Charatan F. Merck to pay $5bn in rofecoxib claims. Brit Med J 2007; 335: 1011. Link here.
4. Charatan F. Merck to pay $58m in settlements over rofecoxib advertising. Brit Med J 2008; 336: 1208-1209. Link here.
5. Hill KP, Ross JS, Egilman DS, Krumholz HM. The ADVANTAGE seeding trial: a review of internal documents. Ann Int Med 2008; 149: 251-258. Link here.
6.  Juni P, Nartey L, Reichenbach S et al. Risk of cardiovascular events and rofecoxib: cumulative meta-analysis.  Lancet 2004; 364: 2021-2029.  Link here.
7.  Ross JS, Madigan D, Hill KP et al.  Pooled analysis of rofecoxib placebo-controlled clinical trial data: lessons for postmarket pharmaceutical safety surveillance.  Arch Intern Med 2009; 169: 1976-1984.  Link here.
8.  Graham DM, Campen D, Hui R et al.  Risk of acute myocardial infarction and sudden cardiac death in patients treated with cyclo-oxygenase 2 selective and non-selective non-steroidal anti-inflammatory drugs: nested case-control study.  Lancet 2005; 365: 475-481.  Link here.

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.