Conflict of Interest Blog

Should there be an “Open Payments” Database for Healthcare Executives?

By Bill Sacks

[We are very pleased to have this guest post from Bill Sacks, Vice President, COI Management at HCCS.  He can be reached  at Bill.Sacks@healthstream.com.]

Many individuals personally involved in the healthcare industry are familiar with the “Open Payments” database published each year by the Center for Medicare and Medicaid Services (CMS). This database, sometimes referred to as the Physician “Sunshine” database, was created as a part of the Affordable Care Act in 2010, and requires that pharmaceutical companies and medical device manufacturers report payments made to physicians and teaching hospitals for services such as promotional talks, consulting, research and royalty agreements.

On June 30th this year, CMS released payment data covering the period from January 1, to December 31, 2015. Companies reported more than $7.5 billion in payments from 1,456 companies to 618,000 physicians and 1,110 Teaching Hospitals. Within two weeks, local newspapers around the country were reporting on payments to their local physicians with headlines like these:

“St. Louis area physicians dominate list of Missouri docs receiving industry money” (St. Louis Post Dispatch)

“Iowa doctors get more than $12.6 million in outside payments” (The Gazette)

“Analysis: More than 80 percent of doctors at three Arizona hospitals accept drug-company payments” (The Republic)

and

“South leads the nation in drug and device company payments to doctors” (USA Today)

The database is doing its job: It is bringing attention to payments made to physicians, giving patients the ability to take those payments into account when selecting a physician or a course of treatment, and possibly influencing whether a physician agrees to accept payments and valuable perks in the future.

However, lately I have seen some different types of headlines and stories:

“Hospital CEO in the hot seat over hefty outside board compensation

Medical Center CEO is under scrutiny for receiving $5 million in stock and cash in recent years for being a board member of companies that do business with the hospital.” (San Francisco Business Times)

and

“Conflict of interest: Academic leaders on US healthcare industry boards

Researchers looked at 279 academically affiliated directors on the boards of 442 companies in 2013. These leaders included 17 CEOs and 11 vice presidents or executive officers of health systems and hospitals, as well as 15 university presidents and eight medical school deans or presidents. On average, these leaders earned $193,000 a year and got at least 50,000 shares of stock in exchange for serving on the boards.

In total, they earned $55 million in compensation and owned roughly $60 million in stock options.” (FierceHealthcare)

 These articles reveal, on the basis of disclosures made by the executives themselves, payments from industry in the hundreds of thousands, and even millions of dollars for Board participation, consulting, and other services. These payments are made by the same companies that are required to report payments to physicians with the goal of eliminating, or at least mitigating, potential conflicts of interest. Yet there is no corresponding requirement that companies report payments to healthcare executives, who may, all things considered, have as great or greater influence on how healthcare dollars are spent.

It is highly unlikely that a mandate requiring that payments to healthcare executives be reported publicly would be proposed or acted on in an election year, but perhaps we should put the topic on the table for consideration at some point after the dust settles in November.

If Trump becomes President

In the fourth volume of his biography of Lyndon Johnson  Robert Caro describes how, once in office, the President put his extensive personal business interests into a blind trust… but also took steps to manage those interests on the sly, including having “a private line installed in the White House so he and the trustee could talk without their conversations being taped or made part of the official record.” What would a President Trump do from a conflict of interest perspective with his business interests – which are more varied and valuable than Johnson’s were?

At the outset, it should be noted that federal COI  laws do not apply to Presidents, as described in this recent Wall Street Journal article.  But, for ethical and presumably political reasons Presidents have sought to address actual, apparent and potential COIs through the use of blind trusts (or, in the case of Johnson, what might be called the appearance of a blind trust).

However, this approach doesn’t necessarily work for all types of property interests.  As noted last month in an NPR story: “A blind trust works for liquid assets: stocks, bonds, other financial instruments. Trump has plenty of those, but his biggest assets are all about the Trump brand. The golf courses, high-rises and so forth can’t be easily unloaded. Dropping the Trump name would very likely reduce their value. Bowdoin College government professor Andrew Rudalevige said, ‘To put your identity into a blind trust is a little bit difficult.’ And as Washington ethics lawyer Ken Gross said, ‘You can’t get amnesia when you put it into a trust, and forget you own it.’”

What is Trump’s view of an acceptable blind trust to address these issues? According to the LA Times, he “has said repeatedly that he would have his children manage his enterprises if he became president,…” However, “experts doubt that would be enough distance to remove suspicion. The Office of Government Ethics, which oversees conduct for the executive branch, specifically states that a blind trustee cannot be a relative, and more generally warns about government officials’ actions that could benefit the financial interests of family members.  Indeed, given that FCPA cases have been brought where the corrupt attempt to influence official conduct was hiring a government employee’s family member this does not seem like a cure at all. (The late Mayor Daley – when caught giving government business to a son  – famously said,  “If I can’t help my sons, then [my critics] can kiss my ass. I make no apologies to anyone.”  Could anyone rule out a President Trump saying something similar?)

What might the actual COIs be in a Trump presidency? One interesting possibility was identified in an article in Mother Jones last month: “the presumptive GOP nominee …has a tremendous load of debt that includes five loans each over $50 million… Two of those megaloans are held by Deutsche Bank, which is based in Germany but has US subsidiaries. And this prompts a question that no other major American presidential candidate has had to face: What are the implications of the chief executive of the US government being in hock for $100 million (or more) to a foreign entity that has tried to evade laws aimed at curtailing risky financial shenanigans, that was recently caught manipulating markets around the world, and that attempts to influence the US government?” An interesting question indeed.

Would a President Trump be influenced by this potential COI? In light of some of the statements he made during the time he was “self funding” his campaign, it is clear that he believes financial ties can influence how politicians act. Moreover, given the behavioral ethics phenomenon of “loss aversion,”  COIs arising from being in debt could be seen as potentially more impactful than are those involved with receiving contributions (although this is concededly a somewhat speculative observation).

This is just one potential COI. Others, according to the LA Times story, include “if a future Trump administration, for example, declared a parcel next to a Trump golf course as public land, causing the value of his golf property to triple; or if a President Trump had dealings with a leader of a foreign country where businessman Trump operates a casino.” And, from a story in The Real Deal: “The Trump Organization …has a 60-year lease with the federal government at a former Washington D.C. post office, where it developed and now operates the Trump International Hotel. If the hotel failed to make its lease payments or violated its lease in another way, would a federal agency be tasked with going after it and crossing the commander in chief?”

Additionally, while the federal COI statute does not, as mentioned above, apply to Presidents, other laws might be relevant to COI-type behaviors. As noted in The Real Deal: “If Trump does actually make it to the White House, one thing he’d need to examine is a little-known Constitutional provision called the Emoluments Clause. The clause — which dates back to 1787 and was meant to bar U.S. government officials and retired military personnel from accepting royal titles in foreign countries — has in recent years been interpreted far more broadly to ban accepting any kind of gift from a foreign entity. And the definition of ‘gift’ has also broadened in scope….For Trump, the provision could get him in hot water if, say, a foreign government offered a tax break to one of his overseas sites in a way that was perceived to be a gift or an act of favoritism. The GOP frontrunner owns golf courses in Ireland and Scotland (in addition to Florida, New Jersey and elsewhere), and while it’s not clear if the overseas holdings receive any tax breaks, many of his courses benefit from them stateside.”

Finally, note that I am not suggesting that this is good fodder for a political attack by the Democrats.  Hillary has too many problems of her own COI-wise.  Rather,  I write because  it certainly is interesting – and as challenging from a COI management perspective  as any set for circumstances of which I’m aware.

.

Specialty bias

A recurring theme in Doonesbury during the presidency of George W. Bush was that whatever the challenge he was faced with the President would respond by cutting taxes for the wealthy. The reason was not nefarious, according to the comic strip. Cutting taxes was simply what he knew best how to do.

In a column in Sunday’s New York Times Cornell professor Sunita Sah writes of various studies she has conducted showing that disclosure of conflicts of interest can in some instances exacerbate – rather than mitigate – the harmfulness of such conflicts. Most interesting to me in Sah’s article was the interplay of disclosure and the phenomenon of “specialty bias.” She writes:

My latest research, published last month in the Proceedings of the National Academy of Sciences, reveals that patients with localized prostate cancer (a condition that has multiple effective treatment options) who heard their surgeon disclose his or her specialty bias were nearly three times more likely to have surgery than those patients who did not hear their surgeon reveal such a bias. Rather than discounting the surgeon’s recommendation, patients reported increased trust in physicians who disclosed their specialty bias. Remarkably, I found that surgeons who disclosed their bias also behaved differently. They were more biased, not less. These surgeons gave stronger recommendations to have surgery, perhaps in an attempt to overcome any potential discounting they feared their patient would make on the recommendation as a result of the disclosure. Surgeons also gave stronger recommendations to have surgery if they discussed the opportunity for the patient to meet with a radiation oncologist. This aligns with my previous research from randomized experiments, which showed that primary advisers gave more biased advice and felt it was more ethical to do so when they knew that their advisee might seek a second opinion.

Like most behavioral ethics findings, there is logic to this seeming illogic. And for those working in the healthcare field understanding this logic is critically important to minimizing the impact of bias. This logic is presumably also important to understanding bias in the financial advisory world.

Moreover, even for C&E officers not working with companies having COIs involving professional advisors – which differ in various key respects from the types of COIs most frequently found in business organizations generally (such as hiring relatives) – gaining the broader understanding that behavioral ethics offers into how humans function on issues of right and wrong can be invaluable.

In that connection, it is interesting to consider how in many companies C&E officers’ day-to-day work has little to do with addressing biases (other than the few types that can have legal implications – such as racial bias)  or indeed fairness generally. Perhaps this will change if, as the profession matures, the ethics component of C&E becomes better appreciated by business leaders and the government.

 

 

Compliance officer pay: the government speaks

In my latest column in Compliance & Ethics Professional (page 2 of this PDF) I discuss recently articulated governmental expectations regarding  C&E officer pay – and the related issue of how “tough” C&E officers need to be.

I hope you find it useful.

Ethics on the spot: the Clinton/Lynch encounter

Perhaps the most interesting recent conflict of interest story in the US concerns the unfortunate impromptu meeting between Bill Clinton and Attorney General Loretta Lynch last week on the tarmac of an airport in Phoenix, when he – learning that she was nearby – boarded her plane to chat. Lynch has denied that there was any discussion between them of the Justice Department investigation of Hillary Clinton’s email use and both women have expressed regret from an appearance perspective that the meeting occurred at all.

As with most other postings in this blog arising from cases in the news, I’m less interested in faulting the individuals involved than in considering whether there is a broader lesson that C&E professionals can draw from these events. In particular, my interest is in what might be learned from Lynch’s involvement since, by all accounts of which I’m aware, she is highly ethical. (The same cannot be said about Bill Clinton.)

For me, the most useful learning here comes from the circumstances of the case – which, according to everything I’ve read about it, really did involve a chance encounter, at least from Lynch’s perspective. Of course, the particular circumstances are highly unusual, but viewed broadly, this sort of situation – meaning one where an individual must make an on-the-spot ethical decision with little time for reflection – is not at all uncommon. Among other settings, it can come up when an employee must decide whether to approve a questionable payment that is described by her boss as urgent, is given sensitive information  by a competitor on an unsolicited basis or is asked by senior sales personnel to confirm to a prospective customer things that aren’t true.

When these or other ethical tests present themselves with little or no warning, the best protection for the individual being tested could be having strong ethical instincts. Simply recalling what company policies are may not be enough to do the trick.

However, such instincts cannot be summoned on command. Rather, they must evolve and be sustained over time. And for this companies (and other organizations, including governmental agencies) generally need strong – and culture-based – C&E programs. Indeed, one of the core goals of a culture-based C&E program should be having ethics operate on an instinct-like level.

Of course, one could argue that some forms of wrongdoing trigger instinctive revulsion in most people, without the need for C&E assistance. In the three examples described above, the one about lying to a prospective customer is most likely to do this, since honesty has been a core human value for millennia. The picture is somewhat less clear with the antitrust example – as accepted standards of conduct there are of much more recent vintage than are honesty-based expectations. Corruption – which was both prohibited and widely accepted for many centuries – probably lies somewhere between these two. But, for all of these and other forms of wrongdoing a strong ethical culture should increase the odds of any employee making the right decision when faced with an unexpected, high-stakes choice.

And what about the type of wrongdoing at issue in the Clinton-Lynch meeting which (assuming they did not in fact talk about the email investigation) should be seen as creating the appearance, if not the substance, of a COI? While COIs themselves have been seen as wrong since the time of the Bible (man cannot serve two masters), appearances of such are less likely to have reached the point where they trigger instinct-like negative responses. Thus, having strong ethical cultures may be necessary to reduce risks of this sort too.

The shockingly low price of virtue

A wonderful bit of dialogue sometimes attributed to George Bernard Shaw and sometimes to Winston Churchill goes as follows:

Shaw: Madam, would you sleep with me for a million pounds? Actress: My goodness, Well, I’d certainly think about it. Shaw: Would you sleep with me for a pound? Actress: Certainly not! What kind of woman do you think I am?! Shaw: Madam, we’ve already established that. Now we are haggling about the price.

I thought of this when reading about a study published today in JAMA Internal Medicine: Pharmaceutical Industry–Sponsored Meals and Physician Prescribing Patterns for Medicare Beneficiaries, by Colette DeJong and others  (sent to me by friend of the blog Scott Killingsworth). As noted in the introduction, by way of background: “Physician-industry relationships—including sponsored meals and promotional speaking fees—are at the center of an international debate, intensified by recent transparency efforts in the United States and the European Union. In the United States, in the last 5 months of 2013, 4.3 million industry payments totaling $3.4 billion were made to more than 470 000 physicians and 1000 teaching hospitals. Although some argue that industry-sponsored meals and payments facilitate the discussion of novel treatments, others have raised concerns about their potential to influence prescribing behavior” (citations omitted).

The study was based on “Cross-sectional analysis of industry payment data from the federal Open Payments Program for August 1 through December 31, 2013, and prescribing data for individual physicians from Medicare Part D, for all of 2013” and the results were stunning: “As compared with the receipt of no industry-sponsored meals, we found that receipt of a single industry-sponsored meal, with a mean value of less than $20, was associated with prescription of the promoted brand-name drug at significantly higher rates to Medicare beneficiaries.”

Of course, this study has powerful ramifications for the life sciences industry. But, the implications presumably are relevant to any conflict of interest regime (as Scott noted in his email to me).

As well, these results are further proof of the oft-cited (at least in this blog) behavioral ethics learning that should be part of C&E messaging generally: we are not as ethical as we think. Indeed, there may be no better proof of it than this study.

Behavioral ethics as a driver of compliance

Ethical Systems has posted videos of the sessions at the recent conference on “Ethics by design.”

Here’s the link to the panel with Donald Langevoort of Georgetown’s law school, Carsten Tams of Bertlesmann,  Serina Vash of NYU’s program on Corporate Compliance and Enforcement and me.

And here’s a link to the conference web site, from which you can get to videos of the other sessions.

Behavioral ethics and compliance: strong and specific medicine

Last week, the Ethical Systems initiative, together with the Behavioral Science Policy Association, held a fascinating and well-received conference at NYU’s Stern School of Business on “Ethics By Design,” some of which was devoted to a favorite topic of this blog – “behavioral ethics and compliance.”  While still in its infancy, this field increasingly has the potential (in my view) to contribute significantly to society’s effort to reduce wrongdoing by business organizations, and indeed ultimately to change how we think of good citizen companies. The Ethical Systems conference provides a fitting occasion to look at this area from a big picture perspective and to consider its eco-system.

Behavioral E&C rests on three pillars: recognizing and articulating E&C needs (e.g., protecting whistleblowers);  conducting scientific research that can help companies meet  those  needs, even if the purpose of the research is not E&C focused; and using field-based knowledge to apply the scientific knowledge in an effective manner, i.e., to make it as relevant as possible to E&C. The first of these is to a large extent the realm of the government, at least the “C” part of E&C; the second is clearly the domain of scholars; and the third is the territory of E&C practitioners and also scholars,  (e.g., Behavioral Ethics, Behavioral Compliance,” by Professor Donald C. Langevoort of the Georgetown University Law Center).

To take one example, the government has for a long time indicated that not only those engaged in active wrongdoing but also supervisors who culpably failed to prevent or detect such wrongdoing should be disciplined. This need was first articulated in 1991,when the Federal Sentencing Guidelines for Organizations went into effect and has been repeated as recently as April in a pilot policy of the Fraud Division, which stated that E&C programs should include: “Appropriate discipline of employees, including those identified by the corporation as responsible for the misconduct, and a system that provides for the possibility of disciplining others with oversight of the responsible individuals, and considers how compensation is affected by both disciplinary infractions and failure to supervise adequately…” (emphasis added). The work of behavioral ethics scholars helps companies address this need through the notion of “motivated blindness.” As described by Max Bazerman and Ann Tenbrunsel in a piece from the Harvard Business Review Blog Network : “mounting research shows that we often fail to notice others’ unethical behavior if it’s in our interest not to notice. This failure of oversight — called ‘motivated blindness’ — is unconscious and common.” Note that what behavioral ethics research is doing here is not so much telling companies the specifics of how to meet the need  in question (indeed, the authors’ focus was not on disciplinary policies at all) but, rather, making a more general point which helps show that however this is done will require strong medicine. The role of E&C practitioners in this example is to identify what that medicine should be, as described in this earlier post: “To meet this important expectation, companies may wish to take the following measures: build the notion of supervisory accountability into their policies – e.g., in the managers’ duties section of a code of conduct; speak forcefully to the issue in C&E training and other communications for managers; train investigators on the notion of managerial accountability and address it in the forms they use so that they are required to determine in all inquiries if a manager’s being asleep at the switch led to the violation in question; publicize (in an appropriate way) that managers have in fact been disciplined for supervisory lapses; and have auditors take these requirements into account in their audits of investigative and disciplinary records.” Of course, companies could take these steps without the contribution of behavioral ethics, particularly as some recommended measures are obvious. But many do not because, in my view, they do not believe that they need “strong medicine.” Behavioral ethics can help E&C officers make the sale to skeptical managers.

In a somewhat different type of example behavioral ethics researchers not only identify the need for strong medicine generally but also help companies identify the specific type of medicine needed to address the government’s expectation in question. For instance, a series of experiments (briefly described in this post) helped show that having employees sign an ethics-related certification just before (rather than after) engaging in risk-related activity can help reduce the likelihood of wrongdoing, a phenomena  sometimes called “just-in-time” compliance.” But even in these sort of examples there is a role for E&C professionals in finding opportunities to extend the core behavioral insight to other settings. E.g., and as described in the above post: “Opportunities for new or enhanced just-in-time communications exist for many C&E areas including (but definitely not limited to): anti-corruption – before interactions with government officials and third-party intermediaries; competition law – before meetings with competitors (e.g., at trade association events); insider trading/Reg FD – during key transactions, before preparing earnings reports; protection of confidential information – when receiving such information from third parties pursuant to an NDA; conflicts of interest – around procurement decisions; accuracy of sales/marketing – in connection with developing advertising, making pitches; and employment law – while conducting performance reviews.”

Both the “strong medicine” and the “specific medicine” types of behavioral ethics knowledge are important to E&C programs.  Note that there are many more examples of the first type than the second.  Hopefully, through the work of Ethical Systems collaborators and others, that imbalance will begin to be addressed.

A final point about the “three pillars,” which is that in the above examples the identification and articulation of need comes from the government and the researchers and E&C practitioners are essentially in a responsive posture vis a vis such needs. But part of the promise of behavioral E&C is that the “flow” could begin to run the other way too. For instance, viewing E&C as not just about catching criminals but encouraging pro-social behavior – an important behavioral ethics idea (see sources here) – could, in my opinion, significantly improve the field. I wouldn’t expect this to happen in the short term, but as the three pillars begin to work more closely together in support of their many current common goals it certainly seems possible in the medium run. This, as much as the cases of strong and specific medicine, may be the best chance for behavioral E&C to change the world.

A 25-year experiment in ethics and compliance

In his 2008 book Experiments in Ethics, Anthony Appiah made a strong and important case that behavioral science ideas and information should be used to address ethical challenges. But for me the most compelling ethics-related experiment of modern times comes from the realm of political – rather than behavioral – science: the experiment that began in 1991 with the advent of the Federal Sentencing Guidelines for Organizations and which continues to this day.

Although we have become accustomed to living in an “Age of Compliance,” the Guidelines were initially considered “developmental,” as the then Chair of the Sentencing Commission put it. The notion of government providing businesses with incentives for C&E programs and direction on how to make such programs effective was largely new and untested at the time. Of interesting historical note to behavioral ethics aficionados: before the Sentencing Commission chose its current C&E-program-based approach to preventing corporate crime it considered applying an “Optimal Penalties” strategy.  The Commission’s ultimate rejection of that approach – which was premised on a hyper-rational (“Chicago School”) view of how business crime occurs – in favor of one that promotes strong C&E programs can be seen as an early (albeit presumably intuitive) official endorsement of the behavioral science based view of human nature.

A quarter of a century later, it is fair to ask: has the Guidelines experiment been a success?

It would be hard to prove or disprove success using traditional tools of measurement, since the Guidelines are, of course, a policy interacting with a wide range of real-world factors in an uncontrolled way, not a true self-contained experiment. But if the results were not positive to a significant degree then it is hard to imagine that other governmental bodies – in the U.S. and increasingly around the world  – would have followed suit to the significant degree that they have. While “success breeds imitation” is not an iron-clad rule, it is a pretty good description of what happens much of the time including, I think, in this instance.

Another way to think about success here is to imagine a “counterfactual” world where C&E wasn’t as important as it has become under the Guidelines approach. Would we be better off with little or no sexual harassment training or protection of whistleblowers in corporations? Would we want to work for or do business with a company that made little or no effort to prevent its employees and agents from engaging in corruption, bid rigging or fraud? Indeed, one doesn’t have to strain one’s imagination to picture these counterfactual possibilities: they are the way things used to be before the Guidelines, at least in many companies.

Looking forward, while a compliance-based strategy to business crime prevention no longer faces a serious threat from the Optimal Penalties view of the world, one does hear what are occasional critiques of the C&E approach from a behavioral science perspective (which is somewhat ironic, given the above-described history). The argument goes that C&E programs – by treating employees with suspicion, and thereby making employees resentful – can actually spawn wrongdoing.

As described in an earlier post, this does not ring true to me, at least not insofar as it concerns serious offenses. Although there is no question that some companies engage in overkill with aspects of their C&E programs, employees should not (and I think do not) feel resentful that their employers try to help keep them safe from the risk of being sent to prison and having their careers destroyed. And even if there is some resentment, that is presumably a small price to pay for preventing serious harm to company, employees and others.

Finally, I am very aware that my musings are themselves not scientific, and hope that the next 25 years  scholars and practitioners will find ways of assessing the efficacy of the many different strategies and tools for having C&E programs. There is lots of room for improvement in this area – and experimentation. At least to me, that’s much of what makes the field exciting to be part of.

But as to the basic notion of C&E  itself – I think that’s here to stay, not so much as a matter of proof but of logic. On this point I give the last word to Joe Murphy – the visionary lawyer who (together with Jay Sigler of Rutgers) first wrote about what was ultimately to become the Guidelines approach: “For those who ask ‘does compliance work,’ my response is to ask them, ‘does management work?’ One question makes as much sense as the other. C&E is a management commitment to do the right thing and management steps to make that happen. If you do not use management steps to do something in an organization, how on earth do you do so?”

 

The role of the Board

How can a board of directors (or board committee) effectively oversee a C&E program without crossing the line into program management?

In my latest column in Compliance & Ethics Professional  (see page 2 of PDF) I suggest six C&E areas on which boards should focus – to meet their fiduciary duties and leverage their power to promote program efficacy.

I hope you find it useful.