George Washington University's decision to sell or lease its teaching hospital to a private hospital company has intensified the national debate about the role of for-profit entities in health care. Some traditionalists are concerned that our medical education system, as represented in part by GW, is being "bought" by for- profit firms more interested in the bottom line than in patient health.
Yet it is clear that GW's decision reflects the major structural revolution that is now taking place in our health care system, a revolution made inevitable by the drying up of federal funds for hospital construction and renovation, the government's squeeze on Medicare payment rates and public distaste for tax increases.
The GW trustees deliberated for more than 18 months. Although they found the university hospital to be financially sound, it became clear to them that a significant infusion of private capital was the only way to maintain its standards of medical education, research, access and care in a competitive environment.
The attentiveness of GW's trustees to health care's new realities is not unique. Their counterparts at such leading institutions as Creighton University's 539-bed St. Joseph Hospital, the 760-bed Wesley Medical Center, the Lovelace Medical Center and the Scripps Foundation hospital have already reached agreement, or indicated a desire, to be acquired or managed in whole or majority part by investor-owned (for- profit) hospital systems.
Recently, the GW Medical Center's dean for administrative affairs, Philip S. Birnbaum, explained the bind in which his institution and many others across the United States are finding themselves.
"Increasingly over the past several yeas, although an operating surplus has been maintained in the Medical Center and in the hospital as a unit of the Medical Center, we have become concerned over our decreasing ability to generate capital. While we have so far been able to replace equipment in the hospital as required, the increasing pressure on reimbursement coupled with the increasing cost of new technology threatens the ability to maintain an adequate technological base in our hospital."
Birnbaum's emphasis on the need for new capital is underscored by the hard fact that charitable contributions have decreased as a percentage of hospital income from 21 percent in 1968 to only 4 percent in 1981. Also during this period, governmental contributions dropped from 23 percent to 12 percent. At the same time, hospital debt as a percentage of income has increased from 38 percent to 69 percent.
To meet the challenge, private health systems and teaching hospitals are forging innovative contractual arrangements designed to sustain high-quality care and patient access. Principal among these are commitments to continue teaching, research and indigent care at or above present levels. In GW's case, control of the hospital board by university officials is a prerequisite.
Despite these binding commitments on the part of both investor-owned systems and their new partners at teaching facilities, some critics worry that the poor will be forgotten in the new affiliations, claiming that investor-owned hospitals do not care for the medically uninsured. But the facts do not support these claims. In 1984, for example, 4.4 percent of the gross patient revenues of taxpaying investor-owned hospitals went to charity care and bad debt -- a percentage identical to that of private not-for- profit (tax-exempt) facilities.
To provide medical care for the indigent, our society has built public hospitals, using tax dollars. But the intensely competitive spirit of the health-care revolution has forced a certain amount of businesslike activity on all hspitals, activity that has resulted in strict utilization review, shortened patient lengths of stay, staff reductions, sharing of expensive technologies and a drastic drop in the rate of hospital cost increases. The unfortunate result is that hospitals cannot provide unlimited amounts of indigent care without their services suffering adversely.
"Free" medical care is free only to those who receive it. We as a society must decide how the bill is to be paid -- whether through increased taxes to support indigent care or through higher insurance premiums to private payers.
The growing indigent care problem is only one offshoot of the national movement toward privatization of social services that is a reflection of the decreasing availability of public funds. Rather than bemoan the entry of private health systems into the void created by government's withdrawal, we should recognize that only by harnessing the strengths of the profit motive through open-market competition and innovative delivery of care -- as in the case of GW -- can we maintain our nation's commitment to quality care.
The recent headlines -- "GW to Sell Hospital to Private Corporation" -- may trouble old guard elitists who cannot (or will not) comprehend the remarkable changes now taking place in health care. I think, though, that most observers would be more deeply troubled if the headlines were to proclaim instead, "No Money Available for Quality Care, Technology, Teaching or Research; Medical Progress Ends."