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HMO Whisteblower Dr. Linda Peeno on the Subordination of Healthcare to a For-Profit System

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A decade ago Dr. Linda Peeno made headlines when she told Congress about her work as a medical reviewer for the giant HMO Humana, where she says she denied a man life-saving medical care in order to boost company profits. She would go on to become one of the country’s best-known whistleblowers about HMOs and the healthcare industry. [includes rush transcript]

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This is a rush transcript. Copy may not be in its final form.

JUAN GONZALEZ: Our next guest is also featured in Michael Moore’s new documentary SiCKO. A decade ago, Dr. Linda Peeno made headlines when she appeared before Congress to talk about her work as a medical reviewer for the giant HMO Humana. Michael Moore replays part of that testimony in his new film.

DR. LINDA PEENO: I am here primarily today to make a public confession. In the spring of 1987, as a physician, I denied a man a necessary operation that would have saved his life and thus caused his death. No person and no group has held me accountable for this, because, in fact, what I did was I saved a company a half a million dollars for this.

AMY GOODMAN: Dr. Linda Peeno, testifying 11 years ago. Following her appearance in Congress, she would go on to become one of the country’s best-known whistleblowers about HMOs and the healthcare industry. Dr. Linda Peeno joins us now also from Washington, D.C., where she also attended the premiere last night of Michael Moore’s film SiCKO, along with many legislators. Dr. Peeno, tell us your story. How did you work for Humana? What was your job? How did it change? What did you do?

DR. LINDA PEENO: Well, I started when I graduated from medical school. I took some time off out of my residency to take care of my children, and I had started working at a hospital doing something called utilization review. And one thing led to another, and I was able to get this part-time job working for Humana. And I was told it was an insurance company and that I would be doing something similar, and I would be reviewing patient charts and requests and helping make good medical decisions about them.

When I actually went to interview, I was asked if I could be tough, because I was going to be telling doctors that they couldn’t do things and that I would be expected to keep a 10 percent denial rate. So I didn’t really even really understand what that meant.

And then I started working, and requests started coming in. And basically what I did in that particular job was reviewed hospital requests for admission. And basically our job was to keep people out of the hospital, because, the late 1980s, that’s where the focus was. That’s where most of the dollars were being spent.

I lasted at Humana only about nine months, because I suddenly realized that my medical expertise was being used to justify economic decisions, and I also had that ethical epiphany that was the source of the testimony and was dramatized in the movie that they did about my work, where I had denied the man the heart transplant and then just within a day or so saw a sculpture being installed in the rotunda and was told at that time that it had cost about the same as the heart transplant that we had denied. And that’s when I realized that, wait a minute, the savings that we’re extracting from these denials, many of which were not legitimate and I felt that they were not legitimate, was not going to help patients. By the way, I later found out that that sculpture cost $3.8 million, so it was equivalent to eight heart transplants.

But I left Humana, and I went to a nonprofit HMO that was owned by hospitals, thinking that things would be different, that it would be more patient-centered. And it’s interesting, in the movie SiCKO, there’s actually an account of a young man who was denied, and it was through the employer, which was a hospital. And so, that was the beginning of my education about just the way in which managed care worked, that you made money to the extent that you denied, limited, substituted or obstructed care. And it wasn’t patient-centered.

So it didn’t make any difference whether you were in a for-profit setting or a nonprofit setting. And I just began to find that that was unconscionable as a physician to be doing that and to be, you know, sitting distantly at a desk, never making eye contact with a patient, never really experiencing the impact of the consequences of the decisions. So I eventually left in the early ’90s and decided to focus on trying to educate the public and protect patients.

AMY GOODMAN: Your salary skyrocketed as you spent those months at Humana. Could you explain what happened, what your salary was proportional to or, you know, how it was affected by the number of “no” decisions that you gave out?

DR. LINDA PEENO: Well, it didn’t actually skyrocket while I was at Humana, because I quit before it did, but I started out as — you know, medical reviewers were often paid, as I was at Humana, on an hourly basis. And I think I started at like $50 an hour. And there were a team of physicians, and we worked shifts, and depending on how many hours a week you worked, you got paid.

But as a result of that experience, when I went to the nonprofit HMO, they were thrilled that I had been trained by Humana, which was seen as kind of the pinnacle of the industry at that time. So then I moved into an executive position as a medical director and began actually, you know, making increasingly higher six-figure salaries. So it was — my increase in income was directly related to — you know, back to that original interview question: how tough I could be and how much money I could save.

Now, I did quit Humana just before they had implemented a system, and we were told that the medical reviewer that had the highest denial rate was going to receive a bonus at Christmas. I quit, I think, in November, before that happened. And in subsequent knowledge that I have about how the program developed afterwards, medical directors there did get bonuses that were related to their performance. I just left before I received one.

JUAN GONZALEZ: Well, and you subsequently, obviously, became a whistleblower and chief critic of the HMO industry. But I’m especially interested by your comments about there not being very much difference between the for-profit insurance companies and the nonprofit medical care companies. What then, in your viewpoint, is the fundamental or structural contradiction then? If it’s not just a drive for profit to give to shareholders, that a for-profit company would have, what then involves having the nonprofits also participate in the same kind of abusive system?

DR. LINDA PEENO: Well, I think it becomes — the whole managed care practices and strategies become a way in which to either save or make money, whichever term you use. So in a nonprofit setting, I mean, you think about Medicaid HMOs, for example, who are trying to manage a state budget. The way in which they save money is to spend it, you know, prudently and make good decisions. The problem is, is that these strategies can take on a life of their own, and so it is so easy to slip from making legitimate medical decisions that have legitimate savings to decisions in which you’re making — you’re attempting to produce more money, you know, for whatever purposes.

So in the nonprofit setting in which we were, you know, there were lots of other expenditures — I mean, physicians were being paid to be on the board; salaries, you know, for the executive employees. So you didn’t necessarily have stock that you were working toward, but there were other things. And we know that from things that — from analyses that have been done by some of the nonprofit health plans, perks that were given to executives and ways in which the resources are spent for non-medical reasons.

So the fundamental structural problem is that you — you know, the whole managed care process acts like a huge funnel. You pour the money in at the top, and you want as little money to go out at the bottom, and so you create these filters. And depending on how fair, unfair, legitimate or illegitimate those filters are, I think, is what directly impacts patients’ lives.

JUAN GONZALEZ: And we’ve been having many reports in recent months about physicians who are actually getting kickbacks, in essence, from pharmaceutical companies for prescribing certain kinds of — or certain drugs of those drug companies. Is there a sense, on your part, not only that there are structural problems, but that the entire healthcare system in America has become increasingly corrupted?

DR. LINDA PEENO: Well, I’m really glad you asked that question, because I think that, you know, this isn’t about one company, and it’s not about just the insurance industry. I think it’s about the entire corporatization of healthcare, the fact that money is driving everything. And whether it’s kickbacks to physicians for prescribing certain drugs or even decisions about how physicians organize their offices and what contracts they enter into — you know, it was interesting coming here. I sat in front, on the plane, of a physician and, from what I gathered, you know, voyeuristically listening to this conversation, some sort of executive PR person. And they were talking about how to set up this clinic in which they were going to be doing specialized surgery. And if you didn’t listen carefully, you would never have guessed that they were talking about patient care. I mean, the whole thing was centered around investment and return on investment and marketing and, you know, how many units they could produce a day. And it was as far removed from the care of patients as you could possibly get. And that shouldn’t exist in medicine.

AMY GOODMAN: We’re talking to Dr. Linda Peeno, former medical reviewer for the HMO company Humana, went on to work for a so-called nonprofit HMO, now is a physician in Louisville, Kentucky — in Washington, D.C., for the premiere of Michael Moore’s film SiCKO. This is a movie that’s supposed to launch a movement all over this country. California Nurses Association involved, MoveOn involved. Oprah is going to be doing a town hall after getting people’s stories through the summer. YouTube is asking people to post their healthcare horror stories. It goes to the issue of what can be. In Michael’s film, he shows us Britain, Canada, France, Cuba. And ultimately, he’s talking about single payer, the idea of the government being the provider of healthcare, as in these other countries, and not having the middle man, the insurance company. Dr. Linda Peeno, you’ve worked for these insurance companies, do you agree with that assessment?

DR. LINDA PEENO: Absolutely. I mean, I can see — you know, and I’ve been at this 20 years — I can see absolutely nothing that insurance companies are providing that is a benefit at this point. I mean, it’s an ingenious system that’s been devised between the money that is being spent and the care that’s being delivered that’s nothing but obstructive and even cruel, ultimately, in the way it plays out in patient lives. So however we organize it, or ultimately when we radically reform the healthcare system, I think we need to rethink seriously the whole concept of insurance in the delivery of healthcare.

AMY GOODMAN: You’re in the doctor community. Michael talks to a doctor in Britain who says, yes, you know, he has, I think it was an Audi car. He has a million-dollar home. And he says, sure, he doesn’t have two or three of those homes, but he’s quite happy, doing very well, even as he’s in the National Health Service in Britain. What about the attitudes of doctors? They are your peers.

DR. LINDA PEENO: Well, I have to admit that I don’t know directly, because, you know, most of the physicians with whom I have some association, an ongoing association, are struggling physicians who are barely holding their practices together, because they’re pediatricians and family physicians who genuinely want to practice good medicine. And I think they would be satisfied with being able to pay their mortgage and, you know, take care of their children and get their med school loans paid off.

I think the British doctor they interviewed was right. You know, there are certainly physicians currently in our system who are doing financially extremely well, and I’m not sure that they would support any kind of change. But I thought it was interesting yesterday, one of the medical students who spoke at John Conyers’s hearings said, you know, these physicians that are focused on the economics, their own personal economics, only have a few years, because there is a rising groundswell, I think, in medical students who have a different opinion about how to practice medicine and how to care for patients and what their measure of success is going to be. And I don’t think it’s going to be big houses and nice cars.

JUAN GONZALEZ: Let me ask you about the whole issue of single payer. Obviously, there are critics, conservative critics, as well as many people who are more politically moderate, who shudder at the idea of a centralized government bureaucracy that would handle health insurance. There are certainly all kinds of horror stories about Medicaid abuse and Medicaid mills and the exploitation of the Medicaid system. What’s your response to those critics?

DR. LINDA PEENO: Well, first of all, I think I’d tell them to see Michael’s film, because I think he does a wonderful job of sort of demythologizing some of the criticisms and the accusations that are made about other countries. And the single payer, I mean, you know, it’s become the S-word that’s equivalent with socialized medicine, and that’s supposed to send chills through everyone. And, you know, as he aptly points out, I mean, we socialize a lot of things in this country: our police departments, our fire departments, education. And the point that I would make, you know, based upon my experience and having seen inside the way in which insurance companies work —

AMY GOODMAN: We have 10 seconds.

DR. LINDA PEENO: — is that at least with the government we have transparency and we can change the practices. Right now, we have no control over the corporations.

AMY GOODMAN: Dr. Linda Peeno, we want to thank you very much, known around the country as a leading HMO whistleblower, now a physician in Louisville, Kentucky, speaking to us from Washington, D.C., where SiCKO just premiered last night.

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