Nearly one American hospital in eight is owned not by a community or religious group dedicated to healing the sick but by a business dedicated to making a profit for investors by healing the sick.
In five to seven years, corporate-owned health systems may double or triple in size, says health industry analyst Walter McNerney.
Is this good or bad for the sick?
A 22-member national panel ended a three-year examination of this question last week by saying, in effect:
It depends. For-profit hospitals have been good in some cases and bad in others.
The poor and uninsured and underinsured, who are often far from poor by usual standards, often suffer.
Most dangerously for the future, the commercialism that is part of health care for profit is becoming a part of almost all care. Under the gun of many new "reimbursement" controls, the question a health administrator or doctor increasingly asks is, "How will I 'come out' if I take care of this patient?"
All this tells today's patients: More than ever, we had better learn all we can about our medical care-givers so we too may "come out" on top in this business-like climate. As citizens, we had better give more attention to what is going on in health care, before more and more of us become victims rather than beneficiaries of the new cost-cutting, bottom-line atmosphere.
The national panel was named by the Institute of Medicine of the National Academy of Sciences, in large part as the result of the warnings of one man -- Dr. Arnold Relman, editor of The New England Journal of Medicine -- about the new for-profit mentality pervading medicine.
The group was headed by McNerney, who for 20 years was the far-seeing head of the Blue Cross Association, later Blue Cross and Blue Shield. It included heads of investor-owned health care corporations, heads of not-for-profit hospitals and academic observers, some of them outspoken critics of for-profit medicine.
The title of their report is "For-Profit Enterprise in Health Care," but the report is mainly a look at for-profit hospitals.
Its major conclusions:
The rise in investor ownership of hospitals has increased health care costs, despite "standard economic theory which predicts greater efficiency," hence lower costs, for for-profit compared with not-for-profit enterprises.
Nationally, this amounts to some $470 million a year, about 1 percent of the nation's health bill.
For individuals, the bite can be greater. Medicare patients have been charged 8 to 15 percent more on the average than they would have been in not-for-profit hospitals; other patients, up to 24 percent more.
Why the difference, which surprised one of the group's most eminent members, Uwe Reinhardt, Princeton health economist and a defender of for-profit medicine? McNerney and study director Bradford Gray gave four reasons. The for-profit hospitals do keep some profit. Second, as part of national chains, they bear greater overhead. Third, they have spent large sums to buy, modernize and build hospitals, often giving communities more modern plants but also creating debts to pay off.
Finally -- a contribution their defenders often cite -- they pay 3 to 4 percent of their revenues in taxes, which tax-exempt, not-for-profit hospitals do not.
Despite charges that for-profit hospitals skimp on care to boost payments to stockholders, the committee could find "no overall pattern" of either inferior or better care, compared with other hospitals.
The for-profits give less "uncompensated care" to the poor and uninsured than the not-for-profits did.
This means turning away patients who can't pay, or -- if they arrive bleeding or in the throes of heart attacks -- caring for them only until they are "stabilized," and then if possible shipping them to a government-supported public hospital. Some hospitals have even closed their emergency rooms to avoid facing this problem.
Both for-profit and not-for-profit hospitals try to avoid non-paying patients, but the for-profits report that 3.1 percent of their care (measured against total revenues) is uncompensated, a quarter less than the 4.2 percent reported by not-for-profits. The not-for-profits also report more real charity care, as opposed to unintended "uncompensated care" as the result of unpaid bills.
And in five states where for-profits include 30 to 46 percent of all hospitals, only in one, California, do the for-profits give as much care as the non-profits. In Florida, Texas, Tennessee and Virginia (where cities like Richmond and Norfolk have many for-profit hospitals), not-for-profits give up to twice as much uncompensated care as for-profits.
This is far from an issue affecting the poor alone: 35 million Americans have no health insurance and millions more are underinsured.
"All health care institutions, whether for-profit or not-for-profit, have a basic moral obligation to respond to human needs," McNerney said. "For-profit institutions should not consider that paying taxes alone satisfies their social responsibilities. Nor can not-for-profit institutions expect tax-exempt status without giving society something in return."
For-profit hospitals have made only "minimal" contributions to two essential elements of good medical care in any country -- medical training and research.
Despite these and other "troubling trends," the panel saw no reason to recommend "that investor ownership of health care organizations be either opposed or supported by public policy."
It saw many reasons to pay new attention to many goals -- care for all, support for training and research, future monitoring of care "in all settings."
The reaction of the group's spiritual father -- and a committee member -- Dr. Relman?
"Mixed," he said. He finds the report "a landmark, a timely and valuable contribution to an important social problem," but still "a consensus," with conclusions "watered down" to get 22 signatures. Relman and six other members issued a brief "supplementary statement" saying investor-owned hospital chains have shown "no advantages for the public interest," while costing more, giving less free care and increasing "the drift of the health system toward commercialism and away from medicine's service orientation."
Relman believes care is better in not-for-profit than for-profit hospitals, on the average. But above all, he sees the growth of medicine as a business -- in health plans, hospitals, shopping center clinics and surgery centers, nursing homes, psychiatric hospitals and many other facilities -- as "a growing phenomenon with disturbing implications for American society." He fears that states with many for-profit hospitals giving little care to the poor foretell a future that will see "the death of the tradition of voluntarism, the ethic that hospitals exist to serve the community."
He sees this leading to "festering anger and resentment" and even a social explosion like the anti-establishment upheaval of the '60s and '70s.
Princeton's Reinhardt agrees that the sick poor cry for attention, but he calls it "unfair" to consider this a problem of for-profit hospitals alone. He says all health care is subject to the same dollar pressures, in five years the for-profit and not-for-profit systems will be "indistinguishable" and Americans must pay more in taxes to care for the sick needy.
The committee -- and Relman -- shared an additional concern: the danger that doctors, traditionally their patients' protectors, will become wholly the servants and even eager financial partners of the profit-seekers.
The group called for steps in "law and professional ethics" to declare it "unethical and unacceptable" for a doctor to have an economic interest in a hospital or other facility where he or she cares for or sends patients. Some doctors have such interests.
The committee warned about "bonus incentives" -- common in new health plans -- in which doctors may collect a share of any profits if they are sparing enough in ordering costly tests and hospital care. It called such arrangements "usually inconsistent with the physician's obligation of primary fidelity to the patient's interest."
McNerney went further. "Doctors," he said, "have always had a financial stake in the health care they provide. What has changed in recent years is the potential for a doctor's own economic interest to clash with patient health care needs . . . We believe that clear laws and professional standards should be developed that preclude doctors from benefiting financially at the expense of their patients."
If there are indeed steps in this direction, it could be this group's greatest contribution.
Editor's Note: On May 31, Victor Cohn received an honorary doctor of science degree from Georgetown University recognizing his 39 years of award-winning science and medical reporting.
The Patient's Advocate will return in July.