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HOSPITALS: Overpaid facility managers?

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A long while ago (1995?) I was with Ian Morrison trying to sell something to an exec Mt Sinai Hospital in New York. Wondering by the exec’s office was Jack Rowe, lately of Aetna, but then the CEO of Mt Sinai. Ian was due to talk to their board; Jack noticed him and said something similar to, "don’t use your line about hospital CEO’s being overpaid facilities managers". It was half joking full serious.

Recently close to my neck of the woods there’s been a little fuss about salaries at El Camino Hospital–a district hospital in Mountain View, CA in the heart of Silicon Valley. (A district hospital is a weird California beast–basically a typical non-profit with some relatively minor tax support from the locale).

Back in the 1990s like many hospitals, El Camino was bleeding money. But the ship got righted. Now it makes a pretty decent profit with around $21m in income on something over $300m revenue. Still there was a big spat about whether or not the hospital (which does after all get some tax payer support) should tell the world about how much its CEO gets. Eventually they were forced to reveal all

El Camino Hospital’s chief executive officer earned a base salary of $492,291 in 2004, according to IRS Form 990, released by the hospital last week. In addition, CEO Lee Domanico received a bonus of $173,306, $9,000 in expenses and allowances and $249,127 in deferred compensation and contributions to his benefit plan. In 2002, the hospital lent the CEO $850,000 at 6 percent simple interest on a 10-year loan. Annual interest forgiveness is treated as additional compensation. In 2004, $19,380 in interest was forgiven.The typical salary of a CEO of an independent hospital with more than $200 million in annual revenue was $426,000 in 2004, according to Sullivan, Cotter and Associates, which prepared the comparison sheet the hospital released with the Form 990. The independent El Camino Hospital’s revenue is more than $300 million a year, Friedenberg said.

But actually it was rather more than that for the CEO, the scurrilous local rag the Mt View Voice reported

Tax documents released this week show El Camino Hospital CEO Lee Domanico received more than $900,000 in total compensation in the fiscal year ending June 30, and five other members of the hospital’s management team earned more than $300,000 during the period.

Compared to that the new guy, who starts Aug 7 but is going to have to scrape by:

Graham’s base salary is $543,000, which ranks him near the top of
his Bay Area counterparts. Washington Hospital in Fremont, also a
community district facility, pays CEO Nancy Farber a $424,557 base
salary. Domanico’s base was $500,000. Domanico’s contract also offered him a bonus of up to 40 to 45
percent of his base salary; Graham’s incentive pay will be capped at 30
percent of his base.

Now I know that living in Silicon Valley is expensive, but even so half a million bucks a year for running a community hospital seems like a pretty decent salary. Yet apparently they’re happy to believe that it’s par for the course–and it more or less is. USA Today had a piece on hospital CEO salaries a while back, but it really focused on the bigger non-profit systems which all pay a million or two. But there are roughly 2000 hospitals bigger than 200 beds but smaller than the giants. And if El Camino paying its execs that amount isn’t so out of line with other large community hospitals as their compensation excuse maker says–well perhaps running a hospital is just much harder than we cynics suppose it is. At any rate there are therefore some 2,000-ish CEOs making a prett decent whack.

Who knows, maybe the surgeons make the CEO pick up the tab.

TECH: Will Silicon Valley invade health care? by Andy Kessler

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Andy Kessler is a finance guy who’s worked on Wall Street and ran a hedge fund. And like a rich-man’s Michael Lewis, he’s written a couple of books about Wall Street and the money world, and, following down the path that Maggie Mahar’s taken, he’s moving onto health care (presumably before he finds something more interesting like baseball! His book is called The End of Medicine: How Silicon Valley (and Naked Mice) Will Reboot Your Doctor. Andy saw my recent talk  at PARC and decided that I ought to know about his views, and they’re at the least provocative. So here’s a taster:

Will Silicon Valley invade health care?

By ANDY KESSLER

What the heck is a tech and finance guy like me doing sniffing around medicine? Well, I think IKessler_good_1 figured out that the way to save the $2 trillion healthcare industry – it’s for people to not get sick by getting doctors out of medicine. After spending the last few years following doctors and radiologists around, visiting cancer centers and spending time watching mice get poked and prodded, I’ve realized it is time to embed the expertise of doctors in silicon and software. Why have radiologists read mammograms to find 1 in 200 that have breast cancer? Today, a third of mammograms now have their second read done by computer, computer aided detection from companies like R2 and iCad, and for $29, much less than a radiologist, and perhaps more accurate. For me, that’s just a start. But I was astounded to learn that CT scans are on the same learning curve as PCs and iPods and cell phones. One slice per rotation moved to 4 slice, 16 slice, 64 slice and soon 256 slice CT scanners. Instead of film, the output is a high res color 3D model. Beats a blood pressure reading and cholesterol number, which is all that physicians can manage. They are flying blind.So I started running the numbers. State of the art scans are still close to $1000. Say 1% of adults have heart attacks every year. A stent procedure runs about $15,000 just for the stent, with the hospital stay and bandaids, you are in for closer to $20-30,000, let alone lost wages and productivity. Heart scans today are around $1000. So if you screen 100 people, it costs $100,000, certainly more than treating the 1 in 100 heart attack patient. So,…, Blue Cross won’t pay for scans. It is better for them if nature does their screening for them, you or I actually having a heart attack – ding, ding, ding, we found our 1 in 100.They probably still wouldn’t pay if the scans were $500. But they might at $200. And they certainly would pay at $100, because it would be cheaper to screen than to pay for care. Because it is on the silicon learning curve (down 30% every year, 50% every two years), it is pretty easy to see $100 scans within five years, probably less. Heart attacks and stroke may become a thing of the past.And cancer, the third member of the Big Three in healthcare spending? Structural CT scans will transition to molecular imaging to find cancer early. I can see biomarkers on antibody chips that can eventually sell for $1 or maybe even 10 cents can detect unique cancer proteins in blood and flag cancer early enough for much cheaper treatment, beating symptoms by five years.Doctors can’t do that. In the end, I believe that Silicon Valley will do to doctors what ATMs did to tellers.

QUALITY: Performance measures only have a little of the answer

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(Hat-tip to Modern Healthcare for spotting this one). While there was lots of fuss about the IHI 1OOK lives campaign recently and whether it did or didn’t meet its target—and the NY Times gave it a pat on the back this morning in the Editorial section—there’s perhaps even more important news from a study published in JAMA today. A large multi-center team looked at the Medicare data for performance measures on post-heart attack patients with regard to how improved processes related to outcomes. These measures are the bedrock of the “we know what to do, but we don’t know how to do it” meme of IHI and the quality movement. In other words, the theory is that if we just did it all as well as the literature says we should, then there is potential for vast improvement. Unfortunately the outcomes are sobering for those of us who believe that if you apply relatively simple industrial processes to medicine it can markedly improve outcomes (and lower costs too).

We found moderately strong correlations (correlation coefficients ≥0.40; P values <.001) for all pairwise comparisons between beta-blocker use at admission and discharge, aspirin use at admission and discharge, and angiotensin-converting enzyme inhibitor use, and weaker, but statistically significant, correlations between these medication measures and smoking cessation counseling and time to reperfusion therapy measures (correlation coefficients <0.40; P values <.001). Some process measures were significantly correlated with risk-standardized, 30-day mortality rates (P values <.001) but together explained only 6.0% of hospital-level variation in risk-standardized, 30-day mortality rates for patients with AMI.

In other words, even when the hospitals did well on the performance measures, it only explained a small fraction of the overall variation in outcomes. So there are to my mind only two possible conclusions. Either performance measurements and controlling process variation don’t matter too much, or we actually—in this case at least—don’t know what works. Neither one is a particularly satisfying explanation.

TECH: Medical Manager as described by non-fans

Two very interesting pieces. First MrHISTalk has an interesting interview with the CEO of MediNotes, which sells an EMR aimed at the small physician practice market. There are some interesting remarks about the future viability of Emdeon’s Medical Manager product. Fred Trotter is an open source and therefore not entirely unbiased advocate, but take a look at his history of Medical Manager which somewhat dovetails with the MediNotes view.

 

QUALITY: Quiet welcome to new sponsor

It’s a quiet return around here from the prolonged July 4th weekend. Meanwhile, there’s a new sponsor at THCB. This time it’s a  book called “On Track To Quality” by James Todd, a pediatrician at Children’s Hospital in Denver. The book is a philosophical investigation into quality, involving not a motorcycle trip, but a train journey.  Interesting stuff, and a longer review will be forthcoming shortly.

HOSPITALS: HCA’s Californication problem

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Not all is well with HCA in California. The SEIU has been trying to start a fight with HCA over staffing for some time.. Apparently three Southern Calif hospitals are threatening to go on strike and in Northern California something similar is going on at HCA’s Good Samaritan Hospital in San Jose. The union employees have been negotiating with HCA and working without a contract for months now. They voted on Weds overwhelmingly with 90% approval to go on strike sometime in the near future, possibly this week.

BLOGS/QUALITY: Big themes and signing off from FierceHealthcare

Here’s my last ever FierceHealthcare editorial. The FierceMarkets team is taking the editorializing of FierceHealthcare back in-house and I wish them luck. It’s been fun for me (and John Irvine who’s supported me all the way) to work on this over the past couple of years, but I’m happy to get away from the deadline grind and concentrate on THCB and my consulting work. And hopefully I’ll find the time to start working on that book I’ve been threatening you all with. Anyway my last editorial is about the two biggest themes in health care—fixing process and fixing insurance.

Perhaps the dominant theme of the decade in healthcare has been patient safety. Since the 1999 IOM report, hospitals and doctors have focused on improving the medical error situation. Last week, Don Berwick’s IHI announced that a precise number of lives (123,000 and change) had been saved since the voluntary 100,000 Lives Campaign started. This week, the carping started with The Wall Street Journal suggesting that the IHI numbers were inaccurate. Commenters also started down the path of whether saving the "life" of a severely ill patient who was going to likely die soon anyway was all that important–or at least as important of saving the life of an otherwise young healthy patient.

But beyond questions about the data, there are two crucial related points we must hold onto. First, medical errors are symptoms of poorly designed medical processes, and we know that reducing "muda"–waste in medical care–is an achievable goal. Second, patients are not just vulnerable to physical harm from interacting with the healthcare system, they’re also extremely vulnerable to financial harm caused by that "muda" and facilitated by our dog’s breakfast of an insurance and financing system. These are two sides of the same coin, and efforts like the 100,000 Lives Campaign should be applauded for focusing on at least part of the problem. It would be nice if there was a similar system-wide commitment to concentrate on the whole of the cost and care crisis rather than just one part.

DISEASE MANAGEMENT BOSTON JULY 30 – AUG 2At a three day conference in Boston MA, scheduled between July 31 and Aug 2, industry leaders from managed care companies, employer groups purchasing healthcare services, providers, third party administrators, physicians, healthcare technology players, nursing and pharmacy practitioners, disease management experts will meet at the 4th Annual Disease Management Conference. The event is posted online at www.srinstitute.com/ch142
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