SAN FRANCISCO — From the time they arrived to the moment they laid their heads on hotel pillows, the thousands of cardiologists attending this week’s Heart Rhythm Society conference have been bombarded with pitches for drugs and medical devices.

St. Jude Medical adorns every hotel key card. Medtronic ads are splashed on buses, banners and the stairs underfoot. Logos splay across shuttle bus headrests, carpets and cellphone-charging station

At night, a drug firm gets the last word: A promo for the heart drug Multaq stood on each doctor’s nightstand Wednesday.

Who arranged this commercial barrage? The society itself, which sold access to its members and their purchasing power.

Last year’s four-day event brought in more than $5 million, including money for exhibit booths the size of mansions and company-sponsored events. This year, there are even more “promotional opportunities,” as the society describes them.

Concerns about the influence of industry money have prompted universities such as Stanford and the University of Colorado-Denver to ban drug sales representatives from the halls of their hospitals and bar doctors from paid promotional speaking.

Yet, one area of medicine still welcomes the largesse: societies that represent specialists. It’s a relationship largely hidden from public view, said David Rothman, who studies conflicts of interest in medicine as director of the Center on Medicine as a Profession at Columbia University.

Professional groups such as the Heart Rhythm Society are a logical target for the makers of drugs and medical devices. They set national guidelines for patient treatments, lobby Congress about Medicare reimbursement issues, research funding and disease awareness, and are important sources of treatment information for the public.

Dozens of such groups nationwide encompass every medical specialty from orthopedics to hypertension.

“What you’re exploring here is the subtle ways in which the companies and professional societies become partners and — wittingly or unwittingly — physicians become agents on behalf of the interests of the sponsoring company,” said Dr. Steven Nissen, chair of cardiovascular medicine at the Cleveland Clinic.

“It has a not very subtle effect on medicine,” said Nissen, an expert on the impact of industry money.

‘This is our business’

Nearly half the $16 million the heart society collected in 2010 came from makers of drugs, catheters and defibrillators used to control abnormal heart rhythms, the group’s website disclosed.

Officials of the Heart Rhythm Society say industry money does not buy influence and is essential to developing new treatments. Still, on Thursday the group unveiled a formal policy that, among other things, requires more detailed disclosure of board members’ industry ties.

“This is our business,” said Dr. Bruce Wilkoff, the incoming society president. “We either get out of the business or we manage these relationships. That’s what we've chosen to do.”

The society is one of a handful of groups that make public details about their finances. Most don’t. As non-profits, they must disclose their tax returns but not their specific sources of funding.

Sen. Charles Grassley, R-Iowa, requested the information from the Heart Rhythm Society and 32 other professional associations and groups that promote disease awareness and research.

Their responses and reporting by ProPublica showed wide disparities in money the groups accept from medical companies, what they disclose and how they manage potential conflicts of interest.

With billions of dollars at stake, companies can court entire specialties by helping to bankroll doctors’ groups. The Heart Rhythm Society’s 5,100 members represent a particularly lucrative market.

One implantable cardioverter defibrillator — a device that jolts the heart back to a normal beat — can cost more than $30,000. A single electrophysiologist, a physician specializing in heart-rhythm disorders, can implant dozens a year. World sales of the devices totaled $6.7 billion last year, according to JPMorgan.

All the defibrillator manufacturers are at this week’s conference, including market leaders Medtronic, Boston Scientific and St. Jude Medical, which together gave the society $4 million last year.

These companies and others not only provided financial support to Heart Rhythm but paid many of its board members: Twelve of 18 directors are paid speakers or consultants for the companies, one holds stock, and the outgoing president disclosed research ties, according to the society’s website, which does not specify how much they receive.

Board members at other medical societies have similar arrangements. The American Society of Hypertension does not post disclosures on its website, but records provided to Grassley show that 12 of its 14 board members had financial ties to medical companies.

Grassley, the top Republican on the Senate Judiciary Committee, said these groups commonly say the money doesn’t affect what they do, but he has doubts. “I don’t think it’s believable,” he said. “There are a lot of incestuous relationships that really bother me.”

Big Booths Boost Devices

As competition among cardiac-device makers has intensified, so have questions about whether their products are being used and marketed appropriately.

In January, a study in the Journal of the American Medical Association found that more than one in five patients who received cardiac defibrillators did not meet science-based criteria for getting them.

Weeks later, the Heart Rhythm Society disclosed it was assisting a U.S. Justice Department investigation of the issue.

Two of the society’s biggest funders — Boston Scientific and St. Jude Medical — have paid millions since 2009 to settle federal allegations that they improperly paid kickbacks to unidentified physicians to use their cardiac devices. Neither company admitted wrongdoing.

Top sponsor Medtronic also has disclosed to shareholders that the Department of Justice is investigating the advice it gave purchasers on how to bill Medicare for defibrillators and payments it made to buyers of the devices.

In a statement, Medtronic said societies play an important role in educating physicians about their devices. Boston Scientific declined to comment, and St. Jude did not respond to questions.

At this week’s conference, Medtronic is front and center with a 12,000-square-foot booth to demonstrate its products and allow physicians to examine them.

Medtronic spent $543,000 at last year’s meeting on a similar exhibit, part of $1.6 million it paid to prominently display its name around the conference and fund educational grants. The Minnesota device maker also paid unspecified speaking or consulting fees to eight of the society’s 18 board members.

The spending befits the company’s dominance of the world market for implantable defibrillators. It sold more than $3 billion worth last year.

Next booth down is the 8,100-square-foot spread of rival Boston Scientific, with $1.6 billion in defibrillator sales last year. The company spent $1.5 million on the society in 2010 and paid speaking or consulting fees to seven board members.

Physicians must traverse these and other booths to reach “Poster Town,” where the latest research findings, a big draw of the gathering, are displayed. “It’s very hard to get through there without being accosted,” said Dr. Paul D. Varosy, director of cardiac electrophysiology at the Department of Veterans Affairs’ Eastern Colorado Health Care System.

‘Tag and Release’

Through the years, groups such as the Heart Rhythm Society have expanded the range of sponsorships they offer to drug and device makers. Companies can now fund Wii game rooms or put their names on conference massage stations and on the shirts of the masseuses.

Some deals give companies more than name exposure. Last month, the American College of Cardiology attached tracking devices to doctors’ conference ID badges. Many physicians were unaware that exhibitors had paid to receive real-time data about who visited their booths, including names, job titles and how much time they spent.

Dr. Westby Fisher, an Evanston, Ill., electrophysiologist, called the practice “Tag and release.” College officials say they’ll do a better job of notifying doctors next year.

Attendees at the Rhythm Society conference also have tracking badges. Society officials say exhibitors are not getting doctors’ personal information.

Two years ago, the American Society of Hypertension teamed with its biggest donor, Daiichi Sankyo, to create a training program for drug company sales reps. The society says about 1,200 Daiichi reps have graduated — at a cost of $1,990 each — allowing them to put the “ASH Accreditation symbol” on business cards.

In fiscal 2009, Daiichi gave the society more than $3.3 million — more than 70% of its total industry funding — according to financial records it provided Grassley. Daiichi makes four hypertension drugs.

“I think it’s an obscenity,” said former ASH president Michael Alderman, professor emeritus at Albert Einstein College of Medicine in New York City. “I can see how it would play out in the doctor’s office: ‘I’m a Daiichi sales rep. But let me tell you something: The American Society of Hypertension is backing me.’”

Alderman and some other prominent members of the group quit after a dispute in 2006 about industry influence.

Current ASH President George Bakris said the training program is science-based and doesn’t focus on specific drugs. The reps “ought to know what they are talking about,” he said.

The 1,900-member group has revised its policies since 2006, he said. Financial conflicts disclosed by board members, however, are available only to members, who must request them in writing and explain why they want them, according to the group’s conflict of interest policy.

A Question of Influence

Bakris and leaders of several other professional groups say industry funding is essential for much of what they do. It reduces conference registration fees, subsidizes the cost of continuing medical education courses and provides money for disease awareness.

Dr. Jack Lewin, chief executive of the American College of Cardiology, said the money is helping build registries of cardiac procedures that track side effects and flag whether physicians are using devices in the right patients.

The “circus element” of the exhibit booths doesn’t unduly influence attendees, Lewin said. “I don’t buy a soft drink just because of the advertising… I buy it because I like it.”

Researchers say companies are not spending millions solely for altruistic reasons. “If it weren’t influencing the doctors, they wouldn’t be doing it,” said Dr. Gordon Guyatt, a health policy expert at McMaster University in Ontario.

There are fledgling efforts to push medical societies toward stricter limits on industry funding: 34 groups have signed a voluntary code of conduct calling for public disclosure of funding and limits on how many people on guideline-writing panels have industry ties.

“The general feeling is that the societies need to be independent of the influence of companies,” said Dr. Norman B. Kahn Jr., chief executive of the Council of Medical Specialty Societies, which helped draft the code.

Grassley, too, is continuing his efforts to make the groups publicly accountable. In initial responses to his December 2009 request for information, some said they planned to post financial information on their websites. This week, the senator followed up with letters to some groups, asking why they hadn’t done so.

He hopes the political pressure succeeds: “You might conclude that maybe they don’t want to give the information out because it might be embarrassing.”

ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.   This article is republished with permission under a Creative Commons license.

We've heard a lot lately about banks and brokerages giving big bonuses to retain the best and brightest. It's an article of faith that if you want good help, you pay well and give perks to keep employees happy and loyal.

At least you do if the employees are executives. Somehow that belief doesn't trickle down to the bottom-rung workers who -- until now -- have been regarded as a cost rather than a resource.

I say "until now" because a new study shows that better treatment of low-level and line workers increases profits in companies large and small, in all sectors, and around the globe.

"Do Unto Others ... " isn't just the right thing to do, it's the profitable thing to do.

The results of the six-year study surprised even its authors, Jody Heymann and Magda Berrera of McGill University in Canada. They expected to find that, yes, you could provide bottom-rung employees with benefits and still be profitable. Instead they found that you should provide such benefits because doing so increases profits.

The benefits that proved useful to both employer and employees fell into five categories, some of which are more suitable to large corporations and some of which can be implemented by even the smallest business.

1. Support employee health - Sick employees can't come in to work; if they do, they are less efficient and make others sick. Absenteeism costs money.

2. Train and provide career opportunities - When companies offered training and promoted from within, they experienced lower turnover, greater efficiency, and easier recruitment. The employees who were promoted tended to be better managers because they knew what the jobs below them required. Support for such things as learning English as a second language led to greater efficiency as workers communicated better. Everyone works harder when advancement is possible.

3. Offer incentives - Incentives may be higher pay, profit-sharing or more autonomy in their work. A small, socially responsible baking company (they donate to nonprofits and are environmentally conscious) instituted a stock-option program. In one year, the research found, sales increased by 74 percent and stock options increased in value by 40 percent.

4. Engage line workers and act on their recommendations - Offer rewards for spotting errors or good suggestions. Employee suggestions can save far more than the award program costs. The lower-level worker sees things, important things, that never come to the attention of the executive office.

5. Ensure that companies and communities grow together - A community with good schools can provide better workers: Support schools. A reputation for paying fair wages may minimize negative community reaction to new stores or factories.

The report's conclusion is, to me, riveting given the recent financial market debacles:

"When it comes to evaluating firms, Wall Street had gotten in the habit of rewarding companies that cut wages, jobs, and benefits to employees, and punishing those that make such long-term investments ... As practices on Wall Street and in firms are being rethought, along with the role of the public sector in rendering the investment process more transparent, one of the areas needing a new approach is the evaluation of and reporting on long term investments in employees."

Yes!

Geri Stengel is founder and President of Ventureneer, an online education and peer support service

In a rare public display of boardroom in-fighting, the head of the audit committee for WellCare Health Plans Inc. resigned from its board, asserting that the company’s accounting systems were in need of greater oversight and that some board members had conspired to undercut her authority and force her from the board.

The resignation came from director Regina Herzlinger, a prominent Harvard Business School professor and leading expert in health care economics.  WellCare, a managed-care insurer specializing in Medicare and Medicaid benefits, only last year paid $80 million to settle criminal and civil charges that it defrauded the federal Medicaid program and a Florida state program that provides health care to uninsured children.

In a "Dear Colleagues" resignation letter letter to fellow board members, made public by the company, Herzlinger said the board’s Nominating and Governance Committee had not re-nominated her despite the fact that “much work remains to be done to ensure that the company is governed by the highest finance and accounting standards, work that can only be done by those, like me, who not only have extensive experience in health insurance accounting but also understand the unique needs of our firm.”

She added: “It is likely that conspiring directors decided not to re-nominate me to the Board simply because of my vigorous and uncompromising pursuit of the interests of our shareholders and members.

In a response filed with the Securities and Exchange Commission, WellCare said the  “Company and the Board strongly disagree with the unsupported claims made by Dr. Herzlinger in the Resignation Letter and take exception to Dr. Herzlinger’s mischaracterization of facts and motive and her erroneous conclusions.”

The company said the board’s objective with this year’s slate of nominees “was to achieve a better balance between technical accounting and operational experience in order to continue efforts to create an organizational culture that strikes an appropriate balance among the Company’s obligations to its stockholders, members and clients.”

"Improper Motives"

Herzlinger, a member of WellCare’s board since 2003, said in her letter there was “need for continuing, knowledgeable oversight of the Firm’s finance and accounting functions.”  She said WellPoint had been fined $610,000 by the state of Georgia for violations in 2009; company auditors had also discovered that company overbilled the state of Illinois $1 million, she added.

In response, WellCare said the company “believes its internal controls over financial reporting are effective and notes, as did Dr. Herzlinger, that accounting matters identified in the Resignation Letter were discovered by the Company’s internal auditor as part of the Company’s internal audit process.”

Herzlinger said it was “painfully obvious” that some of her fellow directors “do not want me here” and that the effort stems from “improper motives.”   She quoted a transcript of a 2008 conference call involving three directors in which board chair Charles G. Berg is quoted as saying: ““I think every time Chris and Neil put aside time and get on the phone with Regi in these long calls they want to kill themselves and I think I have very little prospect that we can attract new great directors if one of the things they have to do is sit and deal with that woman.”

To which Herzlinger, in her resignation letter, said: “I have served on a number of boards and am currently considering joining others. Needless to say, I have never been dismissed as ‘that woman’ even where, as here, I am the sole female director on the board. In the pursuit of shareholder and member interests, I will ask hard questions and persist until I get satisfactory answers.”

Herzlinger is the Nancy R. McPherson Professor of Business Administration at the Harvard Business School.  According to her official biography, she was the first woman to be tenured and chaired at Harvard Business School and the first to serve on a number of corporate boards.  Her newest book, Who Killed Health Care?, was selected by the U.S. Chamber of Commerce as one of the ten books that “changed the debate in 2008.”   Among many honors, she has been the recipient of the Healthcare Financial Management Association’s Board of Directors award.

Deferred Prosecution Agreement

WellCare provides managed care services exclusively to government-sponsored health care programs, focused on Medicare and Medicaid.  The company serves about 2.3 million members, according to recent financial filings, and had 2009 revenue of $6.9 billion.

In 2007, more than 200 federal and state agents raided WellPoint’s Tampa offices armed with search warrants.  In May 2009 the company entered into a deferred prosecution agreement to settle charges by the U.S. Department of Justice and the Florida State Attorney General’s Office that it had fraudulently inflated medical expenses submitted to federal and Florida state heath care programs.

Under its deferred prosecution agreement, WellCare agreed to hire an independent monitor who would supervise its compliance activities for 18 months.  That monitor, Stan Twardy at Day Pitney LLP, in Stamford Conn., said he was aware of the issues raised in Ms. Herzlinger's resignation letter, The Wall Street Journal reported.

Medical specialists announced a new ethics code intended to address possible conflicts between physicians and private sector companies.

Thirteen medical societies including the American Academy of Pediatrics and the American College of Cardiology have already formally adopted the voluntary code and others plan to adopt it. “Many members already have rigorous policies in place that meet or exceed some of the principles in the code,” the Council of Medical Specialty Societies said.

The code provides guidance “on appropriate interactions with for-profit companies in the health care sector,” and seeks to ensure that societies’ interactions with companies “are independent and transparent.”

The 32 medical professional societies in the Council have a membership of more than 650,000 U.S. physicians.

Dr. Norman Kahn, executive vice president and CEO of the Council, said “the private sector plays a central role in developing new treatments and medical advances, and medical societies collaborate with industry in many ways that benefit medical practice. We developed this code to ensure that those relationships are appropriate, and to ensure public confidence in our objectivity and commitment to high-quality care.”

Ethical issues can arise when physicians are paid to conduct research and to test drugs, when they receive donations from for-profit companies, and when their medical advice and treatment may be tied to specific companies.

The code declares that “the public relies on us to minimize actual and perceived conflicts of interest.” (It does not address interactions with non-profit entities or entities outside the healthcare sector.) The report noted that Societies may need to tailor policies and procedures to meet individual organizational needs and structures.

The code covers issues involving conflicts of interest, financial disclosure, independent program development and independent leadership. It specifically prohibits society leaders such as presidents, CEOs and editors-in-chief of society journals from having “direct financial relationships with relevant for-profit companies in the health care sector.”

It calls on Societies to use written agreements with companies to establish the “arms length” nature of educational grants, corporate sponsorships, charitable contributions, business transactions and research support. And it calls on the groups to make conflict of interest policies public and to disclose company support.

It calls on Societies to decline charitable contributions where the donor expects to influence programs or advocacy positions, or where restrictions would influence programs or positions “in a manner that is not aligned with the Society’s mission.” And it says while donors may be recognized, such recognition shouldn’t imply donor influence over Society programs or positions.

The code seeks to avoid using company branded-materials and logos in Society presentations and materials, and encourages presenters on continuing medical education programs to use generic names in place of product trade names.

It also calls on Societies to take steps to ensure that Clinical Practice Guidelines “are free from commercial bias and Company influence.” And it calls on Societies to require that a majority of panel members developing guidelines be free of conflicts of interest on the guideline subject.

It calls on Society Journals to require all authors to disclose financial and other relationships with companies, and for Journals to prohibit submission of “ghost-written” manuscripts prepared by or on behalf of companies.

James Hyatt, a retired reporter and editor for The Wall Street Journal, has been writing about business ethics and social responsibility issues since 2005.

By Shel Horowitz

It wasn’t a story Roger Harris relished seeing on the front page of the local paper.  As communications director for a non-profit group of hospitals that prided itself on serving charity cases, he winced as he read.  Elaine Peters, an 82-year-old living on Social Security, had seen half her monthly income vanish without her permission – garnished from her checking account by the hospital’s collection agency.

In Minnespta, debt collectors were legally permitted to dip into bank accounts without filing a lawsuit or obtaining court approval, even for medical debts.  But such collections couldn’t be made from those relying on government aid.  In this case, Peters – who was uninsured – had disputed the bill years earlier, and thought she’d settled it.  Now she was talking to a reporter.  And the attorney general.

As Harris put the paper down, he turned to memos about the AG investigation underway, plus class-action lawsuits alleging harassment.  How should the health care system respond?

Ned Barnett, CEO, Barnett Marketing Communications, former hospital PR director, Las Vegas, Nev.

Having worked for hospitals for 25 years – on management boards that dealt with these kinds of problems – I would emphasize the hospital should not have a policy of going after Social Security income.

If the collections agency made a slip-up, the hospital should write off this woman’s debt.  It could also set up a donor fund (through the hospital auxiliary) to cover such bills, and might work with local churches to help boost this fund.  The hospital could work behind the scenes to help such a person file for bankruptcy, or obtain a reverse mortgage.  It can also put a lien on her estate, so it can recover from heirs.

For a hospital settled in its community, the bad image from taking such a person’s Social Security is far more costly than any money recovered.  The fact is, hospitals write off millions.  A few more would be nothing.

In this case, business ethics and being good to people coincide.  Because hospitals save lives, they need not apologize about recovering legitimate debts, especially if the alternative is throwing the burden onto taxpayers.  But there are times (this is one) when it makes sense to bite the bullet.

What Actually Happened

Like all “What Would You Do?” cases, this one is real.  Since it appeared in the press, we’re revealing that the hospital is part of Fairview Health Services in Minneapolis.  “Elaine Peters” is Elsie Iverson, one of many Fairview charity patients alleging high-pressured collection tactics.  Iverson got her money back, while other charity patients had to go to court.  The story appeared in the Minneapolis Star-Tribune, Dec. 19, 2004.

Fairview spokesperson Ryan Davenport (the fictional “Roger Harris”) said the hospital welcomed the investigation – which went beyond Fairview to affect over 80 hospitals – as an opportunity to make things right.  Fairview was reviewing each case.  It had always taken steps to assure patients in need were considered for charity care: posting policies at entryways, offering sliding fees, and working to enroll needy patients in support programs.  “We have no set limit on the amount of charity care we can provide each year.  All of our patients deserve to be treated with respect and dignity,” Davenport said.  “One of our challenges is distinguishing between those who do not have the means and those who have the means and choose not to pay.”

He added, “Two-thirds of the patients who come in without insurance go away with insurance, because we’ve helped them enroll.”  He said a federal judge dismissed a class-action against Fairview, although a state court case has yet to be heard.

How much oversight does Fairview give the collection agency?  “The agency has to operate ethically and legally,” he said.  “We have a dialogue on any outstanding accounts.”  It’s not unusual for the business office to reclaim an account or write it off.  Will pre-emptive garnishment continue?  “We’ve asked the collection agency to stop that practice while we’re reviewing,” Davenport said.

Shel Horowitz (shel@principledprofits.com) is author of Principled Profit: Marketing That Puts People First, and a Hadley, Mass., consultant in marketing who initiated the Business Ethics Pledge movement; www.principledprofits.com.

This article was originally published in the Spring 2005 edition of Business Ethics magazine.