Published in CommPRO.biz 2013.08.22

Greedy Hospitals

Nothing illustrates the runaway cost of medical care in America quite as starkly as the rush to build proton therapy centers. Hospitals and even private entities are racing to build these facilities that run better than $200 million bucks, $100+ million on the cheap. While it is true that for some cancers proton therapy shows real promise, the number of patients who might benefit is tiny. None are in need of this treatment at the emergency room level.

So why are hospitals across the land rushing to invest this kind of money when it doesn’t serve many patients? Well, it turns out that while there are only a few that can really benefit, there are lots of patients who can be convinced that this latest most-up-to-date medical gadget will help them. Patients that impartial studies show can be as effectively treated on existing proton radiation equipment at half the cost.

There is certainly a need for proton therapy. Studies show it is “Promising” for youngsters with rare tumors in their brain and on their spine. Its focused beam is not as likely as standard radiation to damage their tiny developing organs near the cancer. Beyond that, proton therapy has not been shown to be better than proton radiation. That has not stopped hospitals across America from rushing to sink hundreds of millions into proton therapy centers.

Nothing illustrates better why America spends more on healthcare than anybody and we still rank way down the list in almost every measurable. According to the World Health Organization we rank first in expenditures per-capita and 38^th in outcomes. The latest (2008) per-capita number comes in at $7,538.00 and rising; close to double in the eight years following 2000. Growth in healthcare costs has slowed over the last two years; some see the effects of the Affordable Care Act -others see the recession. In either case we are still spending tons of money and not getting our money’s worth.

The proton therapy issue illustrates the cause perfectly. The Washington, DC – Baltimore area has three proton therapy centers on track at a cost of well over a half billion dollars. One in Baltimore is already under construction, a football field sized dome that will house a 90-ton machine. The docs there have offered to share their proton therapy monster with the docs in the Washington area just 40 miles away. Not a chance. Why? Could it be the estimate by one of the hospitals in DC that their proton center will generate nearly $16 million dollars a year in profits by the end of this decade?

Take a look at NY City; with a vastly larger population base they will have one proton therapy center, more than enough to meet the need. There, the NY State Hospital Review and Planning Council held the region to a single unit. In the Washington area two hospitals three miles apart and 40 miles from the proton therapy center in Baltimore, are adding unneeded and unnecessary treatment equipment. Disgusting! Ethically inexcusable.

Published in CommPRO.Biz 2013.08.16

 

Jamie’s Bad, Bad Month

Poor Jamie Dimon. These are defiantly not “Happy Days” for the Chase Bank chief and Fonzie wannabe with his 1970s retro ducktail hairstyle. With the cloud of the bank’s huge loss known as the “London Whale” looming over him and federal authorities issuing arrest warrants against two bank underlings involved in that loss – a loss much more likely the result of the culture of risk and greed Dimon has installed in the bank’s DNA –  it was bad enough.

Then an insider publication, Bank Director Magazine, released its 2013 “Bank Performance Scorecard.” The magazine has an outside independent organization rank banks on a broad scale of markers for its target audience as “An information resource for senior executives and directors of financial institutions.” It would have been an interesting “fly-on-the-wall” moment to see Dimon’s reaction when told that America’s biggest bank – his bank – came in 14^th among all banks with assets north of $50 billion dollars.

You would think it would shake even an ego the size of Dimon’s to discover that his gargantuan bank came in way down a list with two regional banks a fraction of the size of Chase in the #1 & #2 slots. And Chase didn’t just lose in some of the markers, they lost in all of them. Actually almost all of the monster banks looked pretty anemic given the advantages they enjoy. With tons of free money from the Fed to gamble on anything they please, you would think they could trounce those regional banks. Makes you wonder what members of the monster bank boards of directors who read Bank Director are thinking. More important, what of the regulators we entrust to protect us against the economic impact of these too-big-to-fail banks, what are they thinking?

This study puts the lie to Eric Holder’s thinking that criminal charges against the top executives of these monster banks could threaten their stability and therefore our economy. It seems obvious that the executives of the smaller banks that led the Performance study outperformed the monsters; and that all these banks have executives in place who could easily replace those above them.

It is also obvious that it’s past time to literally cut these monsters down to size. It is past time to return the controls installed early in the 1930s that the bank lobby conned the Congress into removing; the controls that would have prevented the current recession. The monster banks are engaged in exactly the same nonsense that triggered this recession. Nonsense that threatens our economy and that the Bank Director study indicates is of little benefit to the bank’s shareholders.

The monster banks are a looming threat to every American. Arrogant bankers epitomized by Jamie Dimon lecturing members of Congress, flashing cufflinks with the Presidential seal, secure in the knowledge that his lobbyists have bought and paid for their support. It’s time to put an end to this ethically challenged era.

Published in CommPro.biz 2013.08.08

Anything Goes

The Monster Banks’ best investment over the last few decades has been the tens of millions they poured into the pockets of the Congress through their “K” Street lobbyists. It paid off, billions in profits that come right out of the pockets of every American. The bankers’ big score was the Financial Services Modernization Act of 1999, AKA the Gramm–Leach–Bliley Act (GLB) named for three members of our Congress who giggled all the way to their banks.

GLB gutted the Glass/Steagall Act; legislation written in the early 1930s limiting banks to the business of banking: taking deposits, making loans, supporting our economy. As a reward we agreed to insure the money of the bank’s depositors, so that should the bank go bust, the money you had in the bank would be safe (up to $10,000). GLB took down the fences, but left the taxpayers on the hook should the banks fail.

That and another gift from Congress, a law exempting Wall Street from gambling laws, opened the door to the crazy stuff that drove our economy off the cliff. The Monster Banks could use your deposits to bet on almost anything, always backed by America’s taxpayers. There are less than a dozen banks in this arena, the To-Big-To-Fail (TBTF) banks that we bailed out when the derivative fueled house of cards they created collapsed. Your corner neighborhood bank didn’t play this game. Unfortunately they suffered along with the rest of us, worse because the TBTF banks buoyed by gambling profits held a competitive edge. 

The TBTF Monster Banks are right back at it. Taking zero interest bucks from the Fed to gamble instead of investing in our economy. There’s a new game in town, commodities. Ten years ago the TBTF Banks got the Federal Reserve to set up a “Temporary” ruling allowing them to deal in commodities. When their mortgage game evaporated, the Monster Banks jumped into this marketplace. With all the free money at their disposal they bought grain and oil, even oil wells and tankers. They are into power, manipulating your electric bill, Enron redux.

Metals -steel, aluminum, copper- all commodity markets they can manipulate; a buck on a new car, a few pennies on a cell phone, a tenth of a penny on your soft drink can. Goldman Sachs, the mother of all TBTF Monster Banks, owns a couple dozen warehouses in Detroit full of aluminum bars. They shuffle them around from one warehouse to another in a dance that allows them to circumvent the law and jack up the cost of aluminum. Anything goes, ethics walks the plank.

The “Temporary” commodity games regulations expire next month. The Monster Banks are working hard to extend it. It better not happen. More important, we must get these banks out of the other gambling halls we have allowed them to create. We have to stop this nonsense and cut these big banks -quite literally- down to size. If we fail, it’s just a matter of time until we have to bail them out again.

Published CommPRO.biz 2013.08.01

Gaming The Farmer

Farming is no place for rubes. Most who produce our food are sophisticated way beyond anything their forefathers could have imagined. Farmers always had to have a wide range of skills to survive. Sadly that’s about all many did; it took just about everything they had just to survive. Today they are mostly well educated, hard-working folks; and like their forebearers, mixing common sense and a wide range of skills.

We recently read of a resourceful farmer who built a drone and equipped it to fly over his land mapping out the soil and crop conditions and feeding the data into his computer. He put it all together for less than the fee he had been paying for a single trip by a fixed-wing plane to scope out his farm. Better yet, he got instant info instead of waiting days for data from the aerial surveillance service.

It seems a shame that all this ingenuity and skill is being trumped when it comes to what farmers get for their crops. Commodity futures have long been how the producers and users of everything from rare metals to foodstuffs have protected themselves against flux in the market. It’s where the term “hedge” came from. In recent times the commodity markets have been invaded by the monster bankers and algorithmic traders. The combination that made a joke of the stock markets.

The monster banks take the interest-free money we give them to invest in the economy and speculate in commodities, derivatives and anything else where they can turn a quick buck. The algorithmic traders are doing the greatest harm to our farmers and jacking up the price of food we put on our tables. They have turned commodity markets into the same gambling halls stock markets have become.

In every gambling hall there are sure winners and sure losers. In commodities it’s the high-speed algorithmic traders and the monster banks who collect every time. It’s the farmers, the end users and the consumers who lose. A role of government is to act as a referee in situations like this. In a similar situation at the turn of the last century, 1905, a minor commodity scandal triggered a quick response. Teddy Roosevelt ordered a full investigation. The Congress passed laws to jail those who gamed the market. The Secretary of Agriculture declared, “We have no favorites.”

Hardly the case today. The monster banks have bought and paid for the Congress. Anything they want they get. The farmers and other commodity producers get the shaft, as do the end users and the consumers. There is an easy fix for this chaotic nightmare. There is no reason for anyone to be in these markets other than the producers and end users. Return the market structure to fit the needs of those for whom they were created. Boot the speculators. Do what government is there for. Do what’s fair, it’s the right thing to do, it’s “Ethics 101.”

Published in CommPRO.biz 2013.07.24

The Teeter-Totter

The Cystic Fibrosis Foundation finds itself running back and forth on a seesaw of its own making. It runs to the one end to care for those stricken by a horror story disease. But then it does a swivel and heads for the other end to collect its share of $307,000.00 some of those dealing with the coughing, wheezing and gasping desperately for breath pay every year to ease their suffering. The Foundation put up $75 million dollars to develop Kalydeco, the $307,000.00 a year drug sold by Vertex Pharmaceuticals. A drug based on NIH (National Institutes of Health) research funded by our taxes.

Vertex is quick to insist they have invested over five billion in R&D since going into business in 1989, with a “significant” amount on cystic fibrosis. It would be hard for them to be any less transparent than that. Given the formula the Pharma companies use to calculate their R&D costs, this doubletalk leads us to believe Vertex invested little or none of their own money directly into Kalydeco. Vertex priced it, “based on how well it worked in patients and the cost of developing it.” What? In other words, whatever the market will bear.

The Cystic Fibrosis Foundation’s share of the booty is secret. Best guess? Under 10% of the $307,000.00 Vertex collects each year from each and every suffering patient that needs this drug. And what are they doing with their share? Is it given to help folks pay for the drug? No, the Foundation is too busy looking for ways to invest in other new drugs. Did it ever occur to them to demand the right to look at Vertex’s books? To limit the cost to patients? Those seem like minimal demands for a $75 million dollar investment.

Oh no, no, that’s a “deal breaker.” What deal? They got no deal. Just hand Vertex most of the bucks they need to bring the drug to market for a paltry share of the revenue? Here’s a deal. Take their $75 million, add it to the NIH break-through and watch dozens of drug companies hungry for a winner jump for it. Anyone could craft a better deal than Vertex gave the Cystic Fibrosis Foundation.

Speaking of deals, America deserves a better deal on drugs. Canada has 10% of our population –less than the State of California– yet they pay a fraction of what we pay for drugs. Why? They negotiate lower prices; an option Congress denies us. Big Pharma pours a few million in the pockets of our representatives in the Congress for a deal allowing then to reap billions. Ethically, morally, there is no excuse for this insanity. No excuse for the Pharma sector to drive up the cost of health insurance, our taxes and out-of-pocket costs for drugs. There’s no excuse for the Congress to license the drug companies to rip off every American.  

Published in CommPRO.biz 2013.07.18

Chasing the Bucks

If we are to believe the most successful investor of our time, the most important goal for any company is long-term growth. Why then do the directors of company after company follow a short-term path? Why would anyone focus on quarterly results? How many Americans watch the stocks in their 401Ks or other market packages rise and fall quarter to quarter? Why? Unless you are almost ready to hang up your spurs and retire, why do quarterly numbers even interest you? It’s the long term results that will support you one day, that’s the Warren Buffett way.

The only people who benefit from the quarterly rat race are those who collect fees from every trade. Trades and fees that reduce your nest egg, how does that make sense? This madness extends to the outrageous compensation levels “C Suite” occupants score these days. This, in spite of evidence that sky-high pay does not focus executives on the long-term health of a company; it focuses them on their paycheck and ways to fatten it up. Management guru Jim Collins pointed out in a USA Today piece a decade ago that leaders do not create great companies for a paycheck; they create great companies because they can. True then, true today.

A recent New York Times article on “C Suite” compensation notes that three Oracle executive’s compensation ranks them among the top five CEO paychecks. Among the top 200 CEOs the software company founder Larry Ellison is number one. His two Co-Presidents Safra Catz and Mark Hurd both have earnings that would put them into the top five if they were CEOs. Hurd, ousted from Hewlett Packard where he carried on the slash and burn route to profitability that his predecessor Carly Fiorina established. She was canned when her ham-handed style dragged this once great company down. Hurd collected over twelve million dollars on his way out the door for his role in destroying HP. For his leadership at Oracle Ellison saw his pay jump by a quarter last year. However, his shareholders suffered an almost equal decline. How does that make sense?

“C Suiters” should be well compensated, compensated for long-term strategies like research and development and real growth. Oracle Co-President Safra Catz lists 85 acquisitions completed within five years as an accomplishment. That is a strategy often followed by those looking to improve their quarterly gains. While acquisitions make sense when they fit, often they do not and can lead -as they did under Carly Fiorina at HP- to chaos and corporate decline. 

Flashy, pricy, “C Suiters” do not make companies great. Anytime their pay scale runs more than forty times the wage of the lowest paid worker in the company it’s way high. Today we have “C Suiters” routinely collecting a hundred, even as much as a thousand times their lowest paid worker’s take home. That’s just outrageous. It makes no sense as a business plan and it is ethically disgusting.

Published in CommPRO.biz 2013.07.08

Ethical Marketing

 

Marketing genius Seth Godin brought us up sharp with an on-the-mark blog post. He pointed out that many marketers blithely peddle goods or services that they know – or should know – are anything but good for those they entice into using them. It’s easy to look askance at those who market tobacco and other well known threats to our well-being. Godin zeros in on fast food, actually food in general, and our obesity epidemic along with the array of woes it brings with it.

It’s too easy to point out that the occasional burger and fries, or pile of pancakes with maple syrup does not make one obese. Nor that some individuals find it a lot harder to control their weight than others. Neither of those points amounts to a whole lot when we all know that there’s no way to limit what a food maker offers unless we do it, unless we show them a better and more profitable option.

There is another face on this coin, health insurance. Or more accurately benefits, since this sector veered from the insurance model years ago. No one expects a life insurance company to offer a policy to those in their nineties; in fact most policies cut off well before the applicant turns eighty. Nor is it expected that a life policy will be issued to an individual with severe health issues. While we as a people are not going to deny health benefits to those who do not act to care for themselves, some boundaries need to be established by the underwriters, the government and the medical community; the doctors and healthcare facilities.

Godin makes the point that marketing is one of the few professions that does not have boundaries. Law, medicine, real estate, retailing, even food manufacturing all have boundaries. The only fence surrounding the marketing world is a truth in advertising rule. Of course many marketers have ethical boundaries. They won’t work for companies who do not adhere to high ethical standards. But even those individuals and agencies might not feel that a food manufacturer presents an ethical issue.

On the contrary such a company might present an opportunity, an opportunity to create a set of boundaries. Boundaries that never show oversized portions; that offer only healthy recipes and serving suggestions. Boundaries that limit the potential for harm from legitimate efforts to create revenue for the company. There is reason to believe that this is a solid marketing concept. Consumers are moving more and more to products that offer healthy options. So rather than selling more to a limited number of customers, create more customers.

Beyond marketing, medicine and government have work to do on the obesity front. And marketing needs recognize that food and obesity are but a single color on its palette. There’s hardly a company that does not present ethical issues when it comes to creating their sales messaging. We owe Godin thanks for reminding us of our responsibility to follow the ethical model whatever we peddle.