The Weekend Economists travel the Yellow Brick Road, November 14-15.

[Demeter]

28. The Illusions of the Leaders of Large Health Organizations, as Illustrated by Medtronic’s Founder

http://hcrenewal.blogspot.com/2015/11/dreaming-on-illusions-of-leaders-of.html

By Roy Poses, MD, Clinical Associate Professor of Medicine at Brown University, and the President of FIRM – the Foundation for Integrity and Responsibility in Medicine.

On Health Care Renewal, we have posted story after story about amazingly well paid leaders of big organizations presiding over amazingly bad organizational behavior (including subversion of mission, conflicts of interest, deception, fraud, kickbacks, various other crimes and outright corruption). Yet the leaders often seem curiously disconnected from what occurs on their watches, while they are sometimes hailed as “visionaries,” and at times exude messianic confidence.

Medtronic’s Founder on its Sacred Mission

A recent article appearing in an unexpected place provides an example of leaders’ excess confidence in their own righteousness. In the IEEE (Institute of Electrical and Electronics Engineers) Institute was a commentary by Earl Bakken, the founder of medical device/ biotechnology giant Medtronic, modestly proclaiming the “secrets of corporate success.” Keep in mind that while Mr Bakken founded the company. At age 91, while no longer its leader, he proclaimed, ” I stay involved with my company.” As such, he remains proud of its mission statement:

In 1960, when corporate mission statements were rare, I wrote one that has never changed. It remains the company’s guiding principle. There are six tenets, but the first one is the most important: To contribute to human welfare by application of biomedical engineering in the research, design, manufacture, and sale of instruments or appliances that alleviate pain, restore health, and extend life.

Starting in the 1970s, I met with all new employees, explained our history and mission, and in each of their hands I placed a medallion imprinted with the mission statement. I encouraged them to live by it—at work and at home.

Note that the official mission also includes:

To strive without reserve for the greatest possible reliability and quality in our products; to be the unsurpassed standard of comparison and to be recognized as a company of dedication, honesty, integrity, and service. (ital added)

Apparently, he believes that under the “visionary leadership” and “astute direction” of the current, this mission remains central to the organization.

At Medtronic, we live our mission. It’s the basis for how we behave in relationship to our stakeholders, each other, our communities, and the world. But it also guides our relationships with ourselves. We live the Medtronic Mission every day in truly genuine ways by serving others. I am proud to have a mission that is so deeply woven into the fabric of this company that improves millions of lives throughout the world.

Here’s to dreaming on.

Honesty? Integrity? – the Company’s 10 Year Track Record

I hate to disillusion a 91-year old, but in light of the company’s last 10 year track record, as discussed on Health Care Renewal, he does appear to be in a dream world. Medtronic has provided our blog with lots of material, including some amazing stories about conflicts of interest (starting in 2006, here, here, here, here, here, here, here, here, and here,) and revolving doors (here, here, here, and here). SEE OP FOR LINKS

The company has also made a series of legal settlements of various allegations of infamous behavior, in chronological order:

2006

– We discussed detailed and vivid allegations that Medtronic had been paying off doctors starting in 2003.

– Medtronic subsidiary Sofamor Danek settled for $40 million allegations that it gave kickbacks to doctors in the form of sham consulting fees and lavish trips (look here).

2007

As Bloomberg summarized in 2014,

Medtronic agreed in 2007 to pay about $130 million to settle consumer suits accusing the device maker of hiding defects in its defibrillators.

2008

– Medtronic subsidiary Kyphon settled a suit for $75 million and signed a corporate integrity agreement for allegations that it defrauded Medicare through a scheme that lead to excessive hospitalization for patients who received the company’s spine surgery device (link here)

2010

Per the Bloomberg 2014 summary again,

The company agreed to a $268 million settlement of suits in 2010 over allegations that fractured wires in another line of defibrillators caused at least 13 patient deaths.

2011

– Medtronic settled for $23.5 million two other federal lawsuits alleging it paid kickbacks to encourage physicians to implant its devices (look here).

2014

In June, we discussed a settlement Medtronic made of allegations that Medtronic gave kickbacks (that is, bribes) to doctors to get them to use its cardiac devices.

2015

In April, 2015 we discussed three settlements made by Medtronic:

– Its subsidiary EV3 settled old allegations that it coached hospitals how to overbill the US government for procedures using its products

– The company settled allegations it gave kickbacks to physicians to induce them to use its neuromodulation devices.

– The company settled allegations it lied to the US military about US origins of its devices.

(And by the way, we will not belabor the contrast between the statement’s commitment to “recognize the personal worth of employees,” and the gargantuan payments made to certain employees, that is, the top managers, all who got over $3.5 million in 2014, and the “visionary” CEO, who got over $12 million, look here.)

Summary

Someone needs to wake up Mr Bakken. He may still believe in the mission statement, and wish that it is central to his company. However, the track record seems to suggest that the mission statement has been honored often in the breach...Perhaps the problem is that Mr Bakken is really much more detached from the company he founded than he now admits. However, I worry that this immensely positive spin suggests that he, like many other health care oragnizational leaders, live in some sort of bubble into which no negative karma is allowed to penetrate. Thus convinced of their own innate goodness, they can provide no check on continuing manifestations of corporate greed, most likely with the solace of the own fortunes they build up.

IMHO, we need to break up these huge health care organizations which have become so big that those who run them cannot be in touch with what really goes on. We need to reestablish the accountability of leaders, and no longer allow them to get credit for all the good that happens, and dodge responsibility for all the bad. True health care reform would entirely transform health care leadership, so that it can become well-informed, supportive of the mission, unconflicted, less self-interested, honest, and certainly law abiding.