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HOSPITALS: How much is too much?

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The only major hospital CEO to also be a blogger, Paul Levy at Beth Israel Deaconess, is wondering whether his salary of $1m is too much. My flip answer is, well of course it is, but would you turn it down?

Much of the issue is that salaries for high end positions are set “competitively.” In other words the compensation board of for-profit and non-profit institutions and wants to reward their CEO better than his peers. Like in Lake Woebeggon, every board in Boston and way beyond thinks it has the best CEO, so they deserve more than average—so the spiral increases. And the bigger the non-profit gets the bigger the salaries. Someone sent me a form last year with salaries for the top brass of Kaiser Permanente. I didn’t bother verifying it but I recall that it claimed that more than a dozen senior execs had total comp of over $1m.

I wrote a long article about this last year, called Overpaid Facility Managers?, looking at the salary of a decent sized community hospital in the SF Bay Area with some $300m in revenues—as opposed to Beth Israel Deaconess’ $1 billion. That CEO too was on close to $1m total comp.

The problem is that there are almost 2,000 hospitals of that size or larger. If all their CEOs get that amount, or even $500,000 a year, then the whole comparison inflation cycle goes on. And really how hard is it to run a $300 million business, where most of the income walks in the door because of location, referrals of agents (physicians) and government subsidies? I don’t know.

Paul compares himself to a sports star. But the sports stars make so much because they fill hours of TV cheaply which generates lots of advertising revenue. Would we watch the same teams with less good stars? I doubt it, and it’s for sure that the owners are not willing to risk finding out. Which is why the big stars who are measurably better in both statistics and winning percentage get so much more money than those not quite as good.  There are only so many Kobe Bryants, Ronaldinhos, Derek Jeters et al.

The question Paul needs to ask himself is not whether he works hard and does a good job relative to other big AMC CEOs. Of course he does. The real question is are there more than  couple of hundred people who could do his job roughly as well. In other words if the board changed out a .300 hitter for a .265 hitter, would the effect on Beth Israel Deaconess be noticeable the way it would be for the Lakers if Kobe was traded for a journeyman shooting guard.

My guess is that the cult of the CEO is well overblown. And that while Paul is by no means a big offender in creating it (and may be helping to knock it down), we are stuck in a cycle where no one dares take the risk the way the Oakland A’s do in baseball—get unrecognized young talent in, pay less for it and get just as good results. But it’s unlikely to change for some time.

TECH: Cisco Innovations in Healthcare IT Discussion Forum

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I am the host for a Q&A forum hosted by Cisco. It’s a follow up to this video discussion about the use of IT in health care. Like most tech companies, Cisco is increasingly targeting health care as an industry where its networking technology can make a real difference—and of course where it can sell more of it! As you know I’m in general an advocate of more IT use in health care, and I think that they’re showcasing some interesting innovations.

So please come over to the discussion forum to join in the conversation. I’ll be referencing some of the more interesting things that I saw at Cisco there and here next week.

The BerkeleyMBA Business of Healthcare Conference

The BerkeleyMBA Business of Healthcare Conference is tomorrow. It has a good line up and those of you desperate to see me in the flesh can find me on the IT panel in the morning. Also on that panel will be people from Intuit, RelayHealth, iMetrikus, and Healthline. Other interesting speakers include MaryAnn Thode, the soon to be ex-head of Kaiser Hospitals, N. Cal; Kevin Young from Gilead sciences, and J. Carl Craft, from Medicines for Malaria venture. There are several other breakout panels, including one with Arnie Milstein from Mercer on it. I believe admission is only $80.

Of course if it was the Stanford Business School Conference it would be much better, I’m sure! But when I was at Stanford our football team was better than Cal’s—times appear to have changed.

PHARMA/BLOGS: Jim Edwards torpedoes own career!

Some of the best reporting on the pharma business in the last few years has come not from the mainstream press but from Jim Edwards, a reporter buried in the marketing industry trade press at Brandweek. Given the fact that certain Manhattan-based major press publications could use to improve their pharma and health care journalism (and I’m not talking about the WSJ, think more of dogs and sores!), I was hoping and expecting to get an email one day from Jim telling me of his new gig.

But instead, he’s decided to not only stay at BrandWeek but also to commit journalistic suicide and become one of us. His new blog is called BrandweekNRX. Pity. But I look forward to reading it!

PHYSICIANS/INTERNATIONAL: GPs making hay in the UK

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My dad told me never to become a doctor. As I failed physics "O" Level and wandered off into social sciences that was probably sound counsel for me, but in general his advice may not have been correct. With the bonus payments and a bunch of other incentives, it looks like British GPs are really making out these days. Apparently average income is now north of 100K GBP, which is far in excess of income for primary care docs over here (if you take it at the $2 to 1GBP exchange rate).

And they are pretty happy about it, or as we Chelsea fans say "top of the league and having a laugh"

TECH: Health plan uses novel security solution

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A smaller Pennsylvania Blues seems to think that it’s going to be providing access to their data to its members everywhere. It’s using some interesting security tools to do it.

Diversinet Corp. (OTCBB: DVNTF), a leading provider of mobile authentication security and access solutions, today introduced MobiSecure™ Wallet and Vault, new solutions that give users secure and immediate access to a host of personal, financial, and insurance identity information, as well as other critical, privileged data. Offering both convenience and security, the new MobiSecure products give banks and other financial institutions, insurance companies, and health care providers a unique and easy-to-use solution they can use to provide individuals with fast, convenient and secure access to new applications and services via mobile phone, PDA or PC browser. Diversinet also announced today it has signed a licensing agreement with Blue Cross of Northeastern Pennsylvania (BCNEPA) for the MobiSecure Wallet and Vault.

TECH: PHR talk

Those of you who couldn’t get into the live version of the PHR webinar I was on the other day can now go to the Center for Information Therapy events web page and listen and watch for yourself. (Or I suppose if you did see it but thought it was so good you wanted to see it again, you can do that too!) It’s the first in the list of “past events.”

I had some problems getting audio in my version, so let me know if that happens to you. But it’s a fairly nifty audio and slide integration.

And yes it’s very bizarre giving a speech into a telephone when you can’t hear anything on the other end at all!

POLICY: Why Healthcare reform won’t work

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I’m up at Spot-on with a few thoughts about the current state of the healthcare reform movement. You’ll get the gist of my argument from the title. The piece is called  "Why Healthcare reform won’t work."  As usual, return to THCB to leave your comments. If you want more, go look at my last column "The Bush Health plan."

It’s taken quite a bit of the time. But the efforts by Republicans George Bush, Arnold Schwarzenegger, and Mitt Romney have finally convinced the national press that the rash of cancellations in the individual insurance market is a story worth writing. Perhaps it’s because we’re now discovering that this is a national phenomenon.

It’s somewhat older news here in California where it looks as though the state may decide that any retroactive cancellation of policies needs to be reviewed by an independent official. One Californian insurance company, Kaiser Permanente, caught with its hand in the cancellation cookie jar has already proposed something similar but it’s less likely that competitors WellPoint (Blue Cross of California’s parent), HealthNet and Blue Shield of California will be quite so thrilled.

Blue Cross of California, one of several plans being sued in California, says that it rescinds an average of 1,000 policies each year out of about 260,000 new individual enrollments — less than one-half of 1%, says spokeswoman Shannon Troughton.

WellPoint is strictly speaking right to say that less than 1% of its applications get canceled. But it’s evident from the various testimony already leaked from depositions of Blue Cross of California’s employees that the applications of any individual policyholders submitting high claims were routinely subjected to a review looking for the slightest excuse to cancel the policy. But that’s not the heart of the matter.

The issue is that we have an individual insurance market which is designed to stay away from the care of sick people. And that’s why healthcare reforms, as they are currently proposed won’t really work. Continuez …

TECH: Cisco’s briefing

A little about my day job today. I’m sitting in a video briefing hosted by Cisco for its provider clients being broadcast to 10 sites. I’m in the one in San Jose, where there are lots and lots of interested parties from a minor, local HMO which has its own small IT projects underway!

I’m telling you this because after the session is done it’ll be posted online, and then there’ll be an online discussion about the issues of installing IT in hospitals, and the possibilities of new technology.

More details later…

POLICY: California Policy Update By John Irvine

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With support apparently growing for the Schwarzenegger plan in California, opponents are already laying the groundwork for a legal challenge. The Financial Times (UK) quotes business sources as saying lawsuits are  "all but inevitable" if the plan passes in Sacramento. That could tie the effort up in court "for years" — perhaps even until after the 2008 elections. According to the newspaper, challengers are likely to use a strategy based on the one used to overturn Maryland’s "Wal-Mart law" last month. 

"Jack Bovender, chairman and chief executive of HCA, the big hospital group, underlines the legal problems faced by such state efforts. "we’re pleased that some states have recognized the gravity of the issue of the uninsured. However, a patchwork of state plans is problematic because of potential problems with ERISA (The Federal benefits law.) That 1974 statute, the Employee Retirement Income Security Act, in effect nationalized employer health plans to spare companies the cost of complying with conflicting state benefits.

"Legal challengers are (also) likely to claim that the plan imposes a disguised tax and so should require a two thirds vote of the  legislature, since California law mandates a super-majority for tax increases. Alternatively, opponents will try to use the Erisa law."

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