Is the profit-seeking, chain-owned hospital -- offering health care a la McDonald's -- on the way to occupying a major, perhaps dominant, place in American medicine?
It sounds unlikely in a country that grew up with the tradition of the nonprofit community hospital. But without much notice, and virtually no public exploration of the medical, political and economic implications, corporate enterprise is moving into the hospital business. Doctor-owned, so-called proprietary hospitals have long been a part of American health care. While they have hit their high-water mark, the new and fast-growing development, dating back only a decade or so, is the investor-owned chain system and its close companion, hired-out management for community-owned hospitals.
According to the Federation of American Hospitals, the trade association for the profit-seeking institutions, 984 hospitals -- about one out of seven in the United States -- are now investor-owned, making this organizational form "the fastest growing segment of the American health-care system." In addition, the corporations that run these chains are now providing management for over 300 community hospitals. Then, too, there's a small but booming export market, which includes 34 hospitals in being or under construction abroad -- including eight in Britain, whose better-heeled citizens seem to like available-on-demand, fee-for-service American medicine.
The argument for chain-style, profit-making medicine is that it brings skilled management to a multibillion-dollar industry that has generally remained in the dark ages as far as business affairs are concerned. Federal officials report, for example, that quite a few of the financially collapsing hospitals in the inner cities have simply failed to collect reimbursements that were waiting for them.
It's also argued that modern management and large-scale enterprise -- the big chains each own or manage upward of 50 hospitals -- provide opportunities for cost-cutting purchases of supplies, sharing of expensive specialized managerial talent and various other economies of scale. The net result, it's pointed out, is that the big hospital management companies are doing well at a time when many community hospitals are leading cliff-edge existences. Wall Street likes these companies, and a look at trheir filings with the Securities and Exchange Commission shows that their top officers are in the $200,000-$300,000 a year salary range, plus lucrative stock options and other benefits. The reputation of the chains for managerial skills is such that Chicago's Cook County Hospital, the epitome of the overwhelmed city hospital, recently contracted its management to Hyatt Medical Enterprises, a subsidiary of the hotel corporation.
One key and as yet unanswered question about chain-hospital medicine concerns cost. The bulk of these hospitals are in fast-growing Sun Belt states that have turned to investor-owned hospitals rather than collecte tax funds for community facilities. As pointed out in a study last year by Pat N. Groner, president of Baptist Hospital in Pensacola, the profit-seeking chains tend to steer away from areas where insurance systems seek to hold down costs. "Strong evidence has shown," Groner wrote in a report for the National Center for Health Services Research, "that charges must be above those of public and voluntary nonprofit hospitals in order to operate effectively. Thus, proprietary chains are found in large numbers in Florida and other southeastern states where traditionally there have been few restrictions on charges."
While the entire hospital industry -- profit-seeking and nonprofit -- has lobbied hard against the Carter administration's hospital cost-containment legislation, the chain-hospital lobby is widely credited with the most zealous and effective efforts in blocking the imposition of a ceiling on hospital costs.
Allowing for the validity of the investor-owned hospitals' claims of managerial superiority, there's still the question of whether it is desirable for this abrupt departure in organizational style to become dominant in American medicine. What are the implications for putting houses of healing on a dividend-paying basis -- in terms of medical quality and fairness of access? There's been incredibly little examination of these items.
Finally, if skilled management and economy of scale are essential to the proper functioning of the contemporary hospital, why isn't more encouragement given to collaborative arrangements among community hospitals? Several nonprofit chains, embracing religious hospitals, have run up good managerial records; and some community hospitals participate in collective purchasing.
But by and large, the valuable tradition of the community hospital is being eroded by the turbulence of today's medical economics. It may well be that corporate ownership and management provide the best available answer. But before changes of this magnitude sweep over the health-care system, they ought to be carefully examined and talked about.