UnitedHealth's Latest Blunders Include Lax Fraud Detection, Recalled EHRs - So Why is its CEO Worth $13.9 Million, or is it $34.7 Million?

We managed to go four months since our last post about UnitedHealth, but sure enough, the company that keeps on giving... examples of poor management to contrast with ridiculous management pay... has done so again.

There were two obvious examples of poor management that recently appeared in the media.

Lax Fraud Dection

The background, as noted in a Kaiser Health News article published in September, is that it is now fashionable for American states to outsource some or most of their Medicaid health insurance programs to managed care organizations, often for-profit, as is UnitedHealth.  These programs are meant to provide insurance to the poor and disabled.  Yet once they have outsourced Medicaid, the states may be reluctant to cancel contracts, even if the outsourcing is not working:

 In Florida, a national managed care company’s former top executives were convicted in a scheme to rip off Medicaid. In Illinois, a state official concluded two Medicaid plans were providing 'abysmal' care. In Ohio, a nonprofit paid millions to settle civil fraud allegations that it failed to screen special needs children and faked data.

Despite these problems, state health agencies in these - and other states - continued to contract with the plans to provide services to patients on Medicaid, the federal-state program for the poor and disabled.

Health care experts say that’s because states are reluctant to drop Medicaid plans out of fear of leaving patients in a bind.

'You probably won’t find many examples of states flat out pulling the plug. That’s sort of the nuclear option,' said James Verdier, a senior fellow at Mathematica Policy Research, a nonpartisan think tank. 

Never mind that leaving such programs as is means taking money meant to finance care for the poor and using it to finance fraud, and reward managed care organizations for failing to find fraud.

One of the examples, but not a new one, used in the Kaiser Health News article, involved UnitedHealth:

Linda Edwards Gockel, spokeswoman for the Texas Health and Human Services Commission, said that in 2009, officials were concerned about a pilot program in the Dallas-Fort Worth area run by Evercare, a subsidiary of UnitedHealth Group. The program, which coordinated care and long-term services for elderly and disabled people, had been fined more than $600,000 for not providing proper access to care and failing to coordinate services.

Gockel said Texas decided to cancel the contract 15 months early, but continued to do business with Evercare because the problems in Dallas-Fort Worth weren’t affecting services it was providing elsewhere.

Then in July, NJ.com reported an investigation by the state of New Jersey into UnitedHealth's ability, or lack thereof, to detect fraud in the Medicaid managed care program it runs for the state.

 An HMO that earned $1.7 billion from 2009 to 2010 by providing Medicaid coverage to 350,000 low-income and disabled New Jerseyans didn't try very hard to detect fraudulent billing — identifying only $1.6 million, or one-tenth of one percent in improper payouts, according to a report the Office of the State Comptroller released today.

UnitedHealth did not even come close to fulfilling its obligations to provide sufficient resources to fight fraud:

The HMOs in the Medicaid program are required to dedicate one investigator for every 60,000 Medicaid clients. At that ratio, United's special investigations unit should have been comprised of about six employees whose sole focus is to detect fraud and abuse by medical providers and patients.

Instead, United reported it had dedicated the equivalent of two investigators during the two-year study period based on the amount of hours devoted to the unit. Upon scrutiny, the comptroller found United 'overstated' its staffing levels; the unit had one investigator, the report said. 

Note that this abject failure appeared to violate the contract UnitedHealth had with the state,

UnitedHealthcare Community Plan of New Jersey failed to hire enough investigators and train them properly, in violation of the managed care company's contract with the state, according to the report. 

Presumably, if fraud led to excess program expenses, it would be New Jersey, not UnitedHealth who ultimately had to pay them.  Again, it appears that money meant of pay for health care for the poor and disabled was diverted to fraudsters, and to revenue for UnitedHealth (partly because the latter did not see fit to spend enough money up front to detect the fraud.)  Of course, such management by UnitedHealth helped to increase its already fat revenue stream.

Faulty Electronic Health Records

In September, Bloomberg reported that UnitedHealth had to recall electronic health record software because of faults that likely increased the risk of bad patient outcomes,

UnitedHealth Group Inc has recalled software used in hospital emergency departments in more than 20 states because of an error that caused doctor’s notes about patient prescriptions to drop out of their files.

Certain versions of the software made by the largest U.S. health insurer had a bug that didn’t print information related to the medication and failed to add data to patients’ charts,according to a document filed with the U.S.Food and Drug Administration and posted July 29.

The technology is used in 35 facilities in states including California, New Jersey, and Florida, the document shows. The recall began June 21. There were no reports of patient harm and each facility was notified and received a digital fix, said Kyle Christensen, a spokesman for the UnitedHealth division that makes the Picis ED PulseCheck software that was recalled.

The incident shows how software errors can create dangers for patients at a time when digital health records are being implemented as a cornerstone of President  Barack Obams's modernization of the nation’s health-care system.

The "bug" could potentially harm patients,

 Doctor’s notes are critical for some medications, as they contain directions about diet and use. Failure to include the instructions could lead to serious injury or death, [University of Pennsylvania adjunct professor of sociology and medicine Ross] Koppel said.

It turns out that the Picis software has had other problems that could have increased the risk of harm to patients,

An online database maintained by the FDA shows that Picis Inc., a Wakefield, Massachusetts-based company that UnitedHealth acquired in 2010 for an undisclosed price, has reported six recalls involving electronic health record software since 2009.

One incident in 2011 involved anesthesia-management software sold nationwide that in one instance displayed a patient’s medical information in another patient’s file. Anotherinvolved software sold worldwide where on an unspecified number of occasions, the program failed to display the discontinued status on medication orders. Others included glitches that caused a failure to display appropriate allergy interaction warnings, the freezing of administrative controls, and other issues.

Note that it is the same Picis software that our blogger, InformaticsMD, has alleged lead to the death of his mother,

Alleged flaws in electronic health records have led to lawsuits. Scot Silverstein, a doctor and health-care informatics professor at  Drexel University, sued Abington Memorial Hospital in Pennsylvania in 2011 over the death that year of his 84-year-old mother. He blamed her death on a flaw in her electronic health record that he claims caused a critical heart medication to vanish from her file. One of the systems involved was made by Picis, according to his lawsuit. Picis is not being sued.

Linda Millevoi, a spokeswoman for Abington Memorial, declined to comment.

The latest InformaticsMD posts on this case are here and here.

Summary

These cases are just the latest in a long list of blunders and ethical missteps made by UnitedHealth and its top management.  The most significant examples of the latter about which we have posted appear in the appendix at the end.  The latest examples likely diverted money that should have supported health care for the poor, and and may have put patients' health and lives at risk.

Yet UnitedHealth is now the largest US health insurance company, and it has succeeded in making its current and former CEO fabulously wealthy.  According to filings with the US Security and Exchange Commission (SEC), its current CEO, Stephen J Hemsley, got $13.9 million in 2012, up from $13.4 million in 2011, as we posted here.  However, an analysis by the Minneapolis Star-Tribune that took into account stock gains and shares vesting suggested he got $34,721,122 in 2012, admittedly down from a breathtaking $48,075,614 in 2011. 

The previous UnitedHealth once was worth over a billion dollars due to back dated stock options, some of which he had to give back, but despite all the resulting legal actions, was still the ninth best paid CEO in the US for the first decade of the 21st century (look here).

So UnitedHealth continues to provide us with examples of how top leaders of health care organizations can become tremendously rich, despite, or perhaps because of repeated mismanagement and apparently unethical management on their watches.  Only when we make health care leaders truly accountable for their organizations, and especially for their organizations' ethics and effects on patients' and the public's health will be begin to challenge health care dysfunction.

(Note to readers recently joining us from countries other than the US - UnitedHealth is a multi-national that claims to operate in 33 countries (look here).  For example, its UK web-site is here.  So beware the export of bad management for enhanced prices.) 

 
Appendix - UnitedHealth's Ethical Lapses

 - as reported by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006."
- UnitedHalth promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post here);
- UnitedHealth's acquisition of Pacificare in California allegedly lead to a "meltdown" of its claims paying mechanisms (see post here);
- UnitedHealth's acquisition of Sierra Health Services allegedly gave it a monopoly in Utah, while the company allegedly was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post here)
- UnitedHealth frequently violated Nebraska insurance laws (see post here);
- UnitedHealth settled charges that its Ingenix subsidiaries manipulation of data lead to underpaying patients who received out-of-network care (see post here).
- UnitedHealth was accused of hiding the fact that the physicians it is now employing through its Optum subsidiary in fact work for a for-profit company, not directly for their patients (see post here).