Rx: Profit
When a motorcyclist was hit
broadside by a car on a local road, ambulance workers stabilized his neck and
back and whisked him over to the nearest facility--a suburban for-profit
hospital. The 35-year-old construction worker had multiple fractures, including
to his vertebra. Though the doctors did every X-ray and blood test in the book,
they somehow overlooked the critical step of keeping him flat to protect his
fractured spine. They did, however, figure out that his HMO preferred he be
treated at another center. So they transferred him to a local nonprofit
hospital where I sometimes work. He arrived sitting up in his stretcher,
cringing in pain and risking paralysis.
It was
probably an honest mistake. But I was disturbed that the transferring hospital
was so thorough with tests and so lax with basic care. The nurses with me
blamed the hospital's for-profit status. Driven by the almighty dollar, the
center was slick at doing billable tests but had slashed staffing to the point
that it couldn't provide good care. "I wouldn't take my cat to that hospital,"
one nurse said.
For-profit chains now own 15 percent of American hospitals.
They say they are transforming a bureaucratic industry into an efficient
provider of better quality care. But the expanding federal investigation of
$20-billion hospital giant Columbia/HCA raises concerns that the pursuit of
profits is leading to fraud and poor care.
Investigators believe the
company overstated costs and deliberately ordered unnecessary tests to increase
Medicare payments. Last month, three midlevel executives were indicted for
criminal fraud, and agents raided offices and hospitals in seven states. Rep.
Pete Stark, D-Calif., who sparked the probe, points to previous scandals as
evidence that for-profit hospitals will cheat insurers, avoid the needy, and
sacrifice quality to produce profits. A decade ago, Paracelsus Health Corp. was
forced to drop kickbacks for doctors who sent Medicare patients to its
hospitals. In the last few years, several for-profit hospitals have paid steep
fines for dumping uninsured patients on other hospitals. This February,
Medicare forced Sutter Hospital Corp. to return $1.3 million in fraudulent
billings.
In the
most outrageous case, in 1993, the government accused National Medical
Enterprises of paying "bounty hunters" to obtain patients for its psychiatric
hospitals. Its doctors then gave wrong diagnoses to increase billings and held
patients as young as 8 against their will until their insurance ran out. NME
pleaded guilty and paid $379 million in penalties. Last month, under its new
name, Tenet Healthcare Corp., it paid over $100 million to settle patient
claims. Yet, Tenet is now the nation's second-largest chain.
For-profit hospitals defend themselves
fiercely. They argue that 1) nonprofits face the same scandals, too. (Indeed,
they point out, inspectors are investigating dozens of prestigious university
hospitals for fraud. So far the University of Pennsylvania and Thomas Jefferson
University medical centers have paid over $40 million to settle charges of
double-billing Medicare.) And 2) the affluent suburban hospitals they have
bought never had much charity care in the first place, so what's with the
"dumping needy patients" charge?
On
quality of care, they ask, where's the beef? There are anecdotes, like mine, of
poor treatment, but critics admit there's no evidence that for-profit hospitals
compromise quality. One study of 214,000 patient records found no differences
in death rates between for-profit and nonprofit hospitals.
People in the for-profit hospital business are stupefied
when asked to defend profit in medicine. "It may come as a surprise to you, but
your car is made by a for-profit company. Every family is a for-profit
operation. Every doctor is for-profit," says Wall Street health-stock analyst
Ken Abramowitz. "Health care is no different from buying a car." Competition
will produce increased efficiency and better quality in health care, just as in
cars.
But health
care is not like buying a car. You can shop around for a car, but the
motorcyclist I saw couldn't choose his hospital. Also, it's much harder to
judge whether your care is good than whether your car is good. Terrible things
happen to people in hospitals all the time: infections, bleeding, and other
complications of care. Studies show a quarter of these events are avoidable,
but it is rarely obvious to patients which ones are. If the motorcyclist,
delirious with pain and a severe blow to the head, had lost sensation in his
feet, he wouldn't have known if we could have prevented it. He had to trust
with his life that making money was not our priority. (He did fine, by the way.
He'll wear a full-body brace for six weeks.)
For-profit hospitals, however, face intense
pressure to make money the top priority. They must answer to stockholders
demanding rising profits, while nonprofit hospitals answer to a charitable
board. Some boards do run hospitals like for-profits. But a board is nothing
like Wall Street. One sees you once a month and tells you to do better for your
own good. The other holds a gun to your head every day.
The ways
to make profits are limited. In theory, for-profits are equipped to do it
through greater efficiency--economies of scale, easier closure of failing
operations, and better access to capital. But hospital consultant Larry Lewin
finds no evidence for-profits are more efficient. Indeed, 58 percent of
Columbia/HCA's beds lie empty, compared with 35 percent of nonprofit beds.
Another way to generate profits is to buy up hospitals cheap--though regulation
and competition have made it harder to lowball purchase prices.
For-profits also keep billings up by avoiding the
uninsured, sticking to affluent suburbs, and avoiding obstetric, pediatric, and
emergency services. Charity care at for-profit hospitals is half that of
nonprofit hospitals. But with for-profit chains buying Tulane and George
Washington university medical centers and other big city hospitals, these
tactics won't be available much longer.
And, of course, hospitals
have squeezed as much profit as possible out of insurers, billing for
everything they can. Columbia/HCA managers had targets of 15 percent to 20
percent annual growth in charges. They even tried to make profits on blood
provided by Red Cross charities. Increasingly, however, managed-care insurers
and the government are refusing to go along.
Ultimately, that leaves one
alternative--cutting corners on care. And NME/Tenet's "bounty hunters" show how
far care providers may be willing to go.
Medicine never used to be
like this. For a long time, insurers gave doctors carte blanche to run up
charges. Some did. But the dominant professional ethic to do right by patients
kept most from exploiting the system. For-profit hospitals have no ethic beyond
making a buck. Their doctors are imbibing that spirit. That's what worries
me.
