The healthcare system in this country does a lot of things right, but theres one thing it does better than anything else. It makes people rich. Even the biggest critics of the industry have figured out a way to personally profit from a system that they say is at the tipping point and fundamentally flawed all the way to the bank.
We recently wrote about the latest examples of various pundits, experts and luminaries cashing in on a system they so often criticize. At the top of those recent examples is Regina Herzlinger, the well-known Harvard Business School professor and healthcare researcher. When shes not giving presentations tied to the theme of her latest book, Herzlinger can be found at the board meetings of WellCare Health Plans, where she serves as a paid board director. Thats the same WellCare managed-care company based in Tampa, Fla., that was raided by the feds in October. About two months before the raid, Herzlinger sold some 24,000 shares, or 57% of the stock she held in WellCare, for a cool $2.3 million.
Another pundit enjoying the fruit of the poisoned healthcare system tree is famed healthcare economist Stuart Altman. He sits on the boards of two publicly traded healthcare companies: Lincare Holdings, a Clearwater, Fla.-based home medical equipment provider, and VisICU, a Baltimore-based provider of remote intensive-care-unit monitoring systems. Last year, Altman enjoyed $489,894 in stock options and a $60,000 annual retainer from Lincare and $90,375 in stock options and $6,000 in compensation from VisICU.
If Herzlinger and Altman arent careful, theyre going to pass up fellow industry critic and well-known healthcare economist Uwe Reinhardt on the healthcare gravy train. Reinhardt sits on the boards of Hx Technologies, a privately held healthcare information technology company based in Philadelphia; Amerigroup Corp., the Virginia Beach, Va.-based managed-care company; and Boston Scientific Corp., the Natick, Mass.-based medical-device company. Reinhardt was a director at Triad Hospitals until July, when it was acquired by Community Health Systems for $6.4 billion. In that sale, Reinhardt earned more than $2.2 million. This American healthcare system sure is crazy.
In last weeks issue, we reported on another example of healthcare being very, very good to a prominent healthcare executive. It turns out, physician William RoperCEO of the University of North Carolina Health System in Chapel Hill, N.C., a board member of the Robert Wood Johnson Foundation in Princeton, N.J., and chairman of the Washington-based National Quality Forummakes a little money on the side as a paid director at DaVita, the El Segundo, Calif.-based renal-care provider. Little when compared with Altman, Herzlinger and Reinhardt, that is. Roper took home only $380,000 last year in total compensation, including cash, stock and option awards from DaVita. But dont weep for Roper. Hes also on the board of the Delhaize Group, a Brussels, Belgium-based food retailer. He got paid about $94,000 for that gig last year.
Perhaps the next person well be writing about is physician and famed healthcare researcher David Eddy. Eddy is the medical director and founder of Archimedes, a for-profit subsidiary of Kaiser Permanente. Archimedes product is a mathematical model that simulates real-world healthcare questions and situations. Its designers say you can use it to determine the return on investment in terms of money, clinical outcomes and quality of life for various medical treatment options and procedures. (Dear Archimedes: Is the benefit of replacing the knees of a 47-year-old male worth the expense if it improves his jump shot?) Last month, the Robert Wood Johnson Foundation gave $15.6 million to Archimedes to help bring its simulation model to market. No one will say if Eddy or any other Archimedes executives or board members own a piece of Archimedes or whether they would stand to benefit financially from Kaiser selling it off or taking it public. A healthcare system of misaligned financial incentives can be very rewarding.