By Jack E. Lohman
There are three major problems with our current hospital structures:
1) For-profit status:
They are converting taxpayer-owned non-profit hospitals to shareholder-owned for-profits. This converts taxpayer assets to shareholder assets without their paying the full price for those assets. Some shareholders pay 50% of value, sometimes only 10%, and the taxpayers lose the balance. This is “a transfer of taxpayer wealth from the many to the few.”*
(Some hospitals start out as for-profit, or they are non-profit subsidiaries of for-profit corporations so they can get better tax breaks. Then they convert later. Blue Cross Wisconsin also converted to for-profit.)
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.
Some cost reduction is good, some is unconscionable. Spending money on hospital advertising is absolutely stupid, as these costs filter down to the patient. And they aren’t even needed under a properly designed system.
2) Employment conflicts:
Hospitals are now buying up physician practices so the doctors become employees of the hospital. Where the doctors once provided the oversight on hospital quality, they now get their paychecks from them. As well, the doctors are often paid a productivity bonus. That’s effectively a sales commission the hospital rewards the doctors on how well they keep profits coming in.
The CEO casually says to Docs, “Hey, our bed utilization is low” or “our extra MRI machine isn’t getting much use” so (some) doctors admit more patients or order more MRIs, whether needed or not. The public then pays! Money that should be going to patient care now goes to shareholder profit.
As well, physicians who previously would have admitted to another hospital down the street with better technology or lower infection rates, are now obligated to their own employer. Or they may be reluctant to refer outside of their own “physician system” to a better specialist. The public cannot be better off with this sort of conflict.
Hospital B decides that they want more cash coming in. That’s profits, remember. So they build a new hospital in a suburb where Hospital A is the only one in town. Think Summit. Think Grafton.
No, that’s not “competition.” In 100% of the cases where an additional hospital has moved in, PATIENT CHARGES HAVE INCREASED! Then they buy up some of the physicians who were sending patients to the old hospital, now making it underutilized and costs and charges go up at both hospitals! Yes, economies of scale work here too.
Gee, this doesn’t sound good, why do we allow this?
Simple. Hospitals and their trade associations, via their campaign contributions, bought the politicians that make or repeal the rules. That’s our democracy. Political campaigns are funded by special interests that want favors… instead of by the public the politicians work for. Campaign reform is just one solution.
What should politicians do now?
Prohibit for-profit hospitals
- Reinstate the certificate of need
- Prohibit physician employment by hospitals
- Get rid of the wasteful insurance bureaucracy
- Prohibit hospital advertising
- Require the educating of employees on what medical fraud is, and the rewards and protections for whistleblowing.
Don’t get me wrong. Doctors, hospital CEOs and nurses should be paid well. Very well! But we don’t need the wasteful insurance bureaucracy and we don’t need profits driving patient care (or denial of care, as the case may be). Nor do we need the conflicts of interest now permitted.
I have great respect for physicians, but the worst thing they ever did was to turn their practices over to the MBAs. It is downhill from here, both for them and the public, unless the politicos get in there and fix the system. Even the hospitals themselves will suffer as medical tourism takes a bigger chunk of the elective business.
Profit almost always trumps values. Health care should not be a for-profit business.
* As David Cay Johnston would say in “Free Linch” …