The Cautionary Tale of Private For-Profit Hospitals

16 Aug

A sizable proportion of Americans are opposed to government involvement in health care. They think that a minimally regulated free market will promote competition, thereby reducing costs and improving quality in health care. In fact, they are quick to label anything other than that approach “socialized medicine” and start wildly misguided discussions of “death panels.” They see government as an inhibiting force, that promises to interfere with the doctor-patient relationship. In fact, that concern is what led to the managed care backlash of the 1990s. When private insurance companies started implementing utilization review, requiring preauthorization, and denying benefits, people felt that the doctor-patient relationship was being limited by a third party and they were understandably displeased (to put it mildly).

You see, it doesn’t particularly matter to us individually whether the interference comes from the public or private sector. We are simply opposed to the idea of interference. We also seem to have an amazing ability to grow accustomed to a certain amount of interference–perhaps constraints on choice is a better phrase–over time. This is the only way I can think of to explain how people can be comfortable with the idea that their employer doesn’t have to offer them coverage, can stop offering benefits at any time, decides which benefits will be available to them, and so on. We seem okay with the total lack of security that exists in our current system. In fact, we are so okay with it, that we’d prefer the risk of losing our current coverage (which we discount) to the risk of being negatively affected by health reform (which we inflate).

It’s particularly easy to do when you really have no idea how your current coverage compares to other plans or even what it covers, and you have very little to no idea about the provisions the Affordable Care Act actually contains. Of course, for many of you, it’s equally easy to discount my very words, dismissing my doctorate in health policy by labeling me “elitist.” So let me appeal to more common ground.

If you or a loved one were to get seriously ill, to the point that you had to be hospitalized, would you want those providing your care to be focused on taking care of you and restoring your health as quickly as possible, or would you prefer that they actively looked for ways to cut corners while hoping you got better, so that they could maximize their profits? Based on the enormous sums of money people throw away in ultimately futile attempts to avoid death, I’m guessing that most of you reading this would want the best care you could get, and the rest of you are lying.

And that’s the problem. Somehow, we seem to have bought into the notion that the government wants to cut corners with our health care, but that the private for-profit sector doesn’t. But if you stop and think about the motivations of each group, that logic breaks down rather immediately. The government, fortunately, is not a profit-seeking entity. If it was, we’d be in trouble, given the size of our budget deficit and national debt. The government does, however, have a vested interest in keeping society healthy and restoring the ill to health. That means that they can focus on doing the things that yield better health outcomes and they don’t have to maximize profits in the process.

For-profit health care providers, by contrast, are motivated by maximizing profits above all else. They are much less concerned, and certainly less invested, in what happens to you. Sure, one could argue that they care about health outcomes, because a lower quality hospital, for example, will not attract as many patients. The problem is, there will always be more patients, and the demand for health care is rivaled only by other basic necessities like food, water, and air. That means they can do a mediocre job and probably continue making loads of money. But they do not derive the same benefit from keeping the population healthy in the way that the government does. To see this with amazing clarity, imagine if the government and public health officials could snap their fingers and make everyone perfectly healthy. They would do it immediately. Health care providers, meanwhile, would be adamantly opposed to this, because they would go bankrupt.

If you think that I’m being too harsh on for-profit health care providers, I suggest you read this piece in the New York Times from Julie Creswell and Reed Abelson, which paints a very vivid picture of HCA (once Hospital Corporation of America) and the tactics it put in place to make as much money as it could. Apparently, some patients also received some health care in the process. Even their own doctors and nurses are speaking out against some of their practices and the negative implications they have for patients.

And don’t think that just because a hospital is non-profit it doesn’t make any money. It just means that it doesn’t have as overwhelming of an incentive to generate profits, because it isn’t accountable to shareholders. I am talking about what happens when greed meets health care. This is Our Lady of Gordon Gekko Hospital. Now, by way of a solution, I’m not suggesting a system of socialized medicine where the government owns the hospitals and salaries the physicians. While such a system has worked splendidly for England (as highlighted by the segment of the Olympic opening ceremony celebrating the National Health Service) it would never work here. On the contrary, I see promise in the words of HCA’s chief executive, Richard Bracken, who told the Times “Size and scale definitely provides an advantage in terms of lowering our cost structure and sharing best practices.” He’s referring to the benefits inherent in economies of scale, and he’s absolutely right. Perhaps if he thought about his words as I have, he’d realize that a single-payer health care system represents the ultimate embodiement of that model. But then how would he make all of his money?


Posted by on August 16, 2012 in Uncategorized


2 responses to “The Cautionary Tale of Private For-Profit Hospitals

  1. Cindy Strickland

    August 16, 2012 at 7:42 pm

    I do see the benefits of the ACA, and there are many. But sometimes I can’t help but think it’s a “gimme” to Insurance Companies. I would be all for a Single Payer System, knowing I wouldn’t have to go bankrupt if I had a Health problem. But we all know, or all should now, that a (National) single payer system would be about impossible to implement. Politicians are to beholden to the dollars pouring in the coffers. Maybe I should just move to Vermont to get sick.

  2. Amy Smith

    August 20, 2012 at 10:45 pm

    Or you could cut physician salaries to a similar level to British doctors (where a cardiologist, a family physician and an anaethesiologist all get paid <$150,000 a year) and you'd be able to pay for the ACA overnight.


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