The high cost of “for-profit” medicine


By Jack E. Lohman

Everybody has an opinion about the trend toward “for-profit” healthcare. Some say the free-market delivery of medicine will reduce costs, while others claim that the profit motive diminishes quality and increases costs. The evidence supports the latter.

Dr. John Geyman, in his heavily sourced book, The Corrosion of Medicine, points out that the for-profit hospital chain “Tenet has hospitals in California that mark up their operating room charges by 800 percent and charge more than 12 times as much for chest x-rays (two views) than public hospitals.”

So much for private being less expensive than public.

Geyman points to the quality pitfalls of investor-owned health care versus not-for-profit care:

For-profit hospital costs run 3 to 13 percent higher, with higher overhead, fewer nurses, and death rates 6 to 7 percent higher. (18-23)

For-profit HMOs have higher overhead (25 to 33 percent for some of the largest HMOs); worse scores on 14 of 14 quality indicators reported to National Committee for Quality Assurance. (24-26)

For-profit Dialysis Centers have death rates 30 percent higher, with 26 percent less use of transplants. (27-28 )

For-profit Nursing Homes have lower staffing levels and worse quality of care (30 percent committed violations that caused death or life-threatening harm to patients). (29)

In for-profit Mental Health Centers, Medicare expelled 80 programs after investigations found that 91 percent of their claims were fraudulent(30); for-profit behavioral health companies impose restrictive barriers and limits to care (e.g., premature discharge from hospitals without adequate outpatient care). (31)

So much for private being higher in quality than public. 

These stories persist across the country, and for logical reason. CEOs of for-profit hospitals, HMOs, PPOs, nursing homes and dialysis centers are, by law, required to do everything in their power to maximize profits for investors. Even without a law executives will maximize their own salaries, bonuses and stock value.

That means cutting costs, which translates to denying patient care wherever possible, either by denying costly procedures like cancer treatments and transplants, or needed tests like MRIs and nuclear scanning, or by cutting their nurse-to-patient ratios (which is driving nurses out of the industry).

Physicians can advocate on behalf of the patient, but now that they are becoming employees of the for-profit hospitals, even they are walking on thin ice.

The argument goes that politicians should not control health care because they can’t do anything right. And that’s usually true because they are bought off by special interests that want them to do everything wrong. The current healthcare system is evidence of that.

But put them and their families under the same health care system everybody else has, as Healthy Wisconsin does, and they’ll do it right. At least they can be trusted more than the private executives that are paid on the basis of how much care they can deny.

Put congressmen under Medicare and even that system will be cleaned up overnight!

Better yet, put every U.S. citizen under Medicare and let’s totally eliminate the 31% of waste caused by the insurance bureaucracy! Eliminate all of the other bureaucracies like Medicaid and BadgerCare, and let’s get this system fixed once and for all so we can move on to other major national challenges!

A Medicare-for-all system, covering even government employees, will not only reduce health care costs for us all, it’ll reduce the extra taxes we pay for public employee healthcare. How can that be argued against?

Yes, there are things that must be fixed in Medicare, like fraud and overuse. But those are far worse under the private system that does not punish offenders with jail time.

But — and you must be as tired of hearing this as I am of saying it — the politicians are being paid off by the healthcare industry to NOT fix the problems.

I’ll put my money on the special interests winning this before we do.


Sources from Dr. Geyman’s book:

18. Chen J, et al. Do “America’s Best Hospitals” perform better for acute myocardial infarction? N Engl J Med 340:286, 1999

19. Hartz A. J., et al. Hospital characteristics and mortality rates. N Engl J Med 321: 1720, 1989.

20. Kover C. & Gergen P.J. Nurse staffing levels and adverse events following surgery in U.S. hospitals. Image J Nurs Scholarship 30:315, 1998.

21. Silverman E.M., et al. The association between for-profit hospital ownership and increased Medicare spending. N Engl J Med 341:420, 1999.

22. Woolhandler S. & Himmelstein D. U. Costs of care and administration at for-profit and other hospitals in the United States. N Engl J Med 36:769, 1997.

23. Yuan Z. The association between hospital type and mortality and length of stay: A study of 16.9 million hospitalized Medicare beneficiaries, Med Care 38:231, 2000.

24. Himmelstein D. U., et al. Quality of care in investor-owned vs not-for-profit HMOs. JAMA 282:159, 1999.

25. HMO honor roll. U.S. News and World report October 23, 1997, p62.

26. Kuttner R. The American health care system: Wall Street and health care. N Engl J Med 340:664, 1999.

27. Devereaux P.J., et al. Comparison of mortality between private for-profit and private not-for-profit hemodialysis centers: A systematic review and meta-analysis. JAMA 288:2449, 2002.

28. Garg R.P., et al. Effect of the ownership of dialysis facilities on patients’ survival and referral for transplantation. N Engl J Med 341:1653, 1999.

29. Harrington C., et al. Does investor-ownership of nursing homes compromise the quality of care? Am J Public Health 91(9):1, 2001.

30. Wrich J Brief Summary of Audit Findings of Managed Behavioral Health Services. Chicago: J. Wrich & Associates, 1998.

31. Munoz R. How health care insurers avoid treating mental illness. San Diego Union Tribune, May 22, 2002.

This is an absolutely excellent book, and the above reflects perhaps .01% of its useful data. If you are serious about what’s wrong with healthcare, you’ll find the answers here.      

One Response to The high cost of “for-profit” medicine

  1. […] Once hospitals become for-profits, providing patient care is a “cost” coming off the bottom line. Where before they’d charge $100 and provide $90 in care, now they can cut their costs so $20 goes to the shareholders instead of $10 going to surplus for future spending. They do this by reducing nurse-to-patient ratios, using older technology while charging for new technology, etc.. In the process the CEO salaries and wealth escalate out of sight. […]

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