The Crisis of Market-based Healthcare
by Woodhouse, Wed Jun 28, 2006 at 11:39:52 AM EDT
(X-posted on dkos.)Last week, the New York Times reported that the IRS recently kicked off a wide-ranging investigation into the business practices of not-for-profit hospitals all over the country. Under the pressures of increased competition and market consolidation in healthcare, over the last couple of decades not-for-profit hospitals have been acting more and more like any other business, cutting overhead, building economies of scale, increasing market share, etc. The question at the heart of the IRS investigation is whether there's really much of a difference anymore between the way in which the 84% of tax-exempt acute care hospitals in the U.S. administer patient care and the way that the other 16% of investor-owned hospitals do. As Republican Senator Charles Grassly notes in the article, as it now stands, "too many do little to nothing. Too often, it seems that tax-exempt hospitals offer less charitable care and community benefit than for-profit hospitals." If the IRS concludes that there isn't much of a difference, and that non-profit hospitals are acting just like their for-profit counterparts in their provision of patient care, then the case will exist for lawmakers to bolster standards and force non-profit hospitals to earn their tax exemptions by providing more charity care.
The results were sobering. The researchers learned that patients treated at for-profit U.S. hospitals face a 2% higher risk of dying than those treated at not-for-profits - this in spite of the fact that not-for-profit hospitals attract patient populations that are sicker on average. That amounts to over 2,000 people a year killed, in effect, by the "free market."
Contrary to the conventional wisdom, for-profits also do far worse than non-profits dollar-for-dollar. The cost of delivering the same patient care at for-profits is almost 20% higher than at non-profits. In 2001, the year before the study was published, that meant nearly $6 billion. With the costs of providing healthcare services skyrocketing, that's $6 billion of inefficiency America cannot afford.
Why do for-profits spend more to provide the same level of care? Part of the story is inflated compensation packages for hospital executives. But that's not the whole story. For-profits also spend six percent more than non-profits on administrative costs, while spending far less on direct patient care. Privatization zealots insist that the market discipline engendered by competition replaces wasteful bureaucracy with streamlined productivity, but the evidence from the healthcare industry suggests otherwise: with patient outcomes taking a backseat to shareholder value as a metric of hospitals' success, these increased administrative expenses reflect the tendency of for-profits to take resources away from the nursing floors and put them into the bureaucratic administration necessary to monitor the bottom line. Under the market model of healthcare provision, short staffing is good for the bottom line, however bad it is for patient care.
Hospital workers have been feeling the crunch of profit-driven healthcare for years, and have begun to push back. In California, two unions representing nurses and ancillary staff at five for-profit hospitals owned by HCA are in the middle of a fight with their employer to hold the line against the degrading standards of patient care at their hospitals. As the Wall Street Journal reports, at HCA-owned Los Robles Hospital in Thousand Oaks, "hospital man hours per patient admission total just 107 -- almost 30% less than the 151 statewide average." SEIU United Healthcare Workers - West and SEIU Local 121RN have already engaged in a one-day "informational picket" (a picket line without a strike), and are likely to vote to authorize a strike if their demand for safe staffing isn't met. Mary Yerzyk, an RN at West Hills Hospital in Los Angeles, testified, "I am out here for safe staffing. HCA is not following ratios mandated by the state. Our patients are suffering and their basic needs aren't being met like toilet, bedding, eating, and they are not satisfied. My message to HCA is listen to us. It's not all about money. We must be there for the patients. Bottom line equals patient care." As the fight has heated up, the two unions have received support from numerous State Senators and Assembly Members, as well as Reverend Jesse Jackson.
Unfortunately, the unions' struggle for safe staffing is not restricted to the for-profit healthcare industry. As non-profit hospitals have conformed more and more to the market model, they have likewise become uninterested in listening to the entreaties of direct caregivers and the public to prioritize patient care over profit margins. Companies like Sutter Health have adopted WalMart-style practices of aggressive market consolidation, and have allowed staffing levels to dwindle by attrition even while launching multi-million dollar corporate marketing and branding campaigns. And though every non-profit hospital chain in California has signed union contracts that include the strong provisions for safe staffing that SEIU UHW and 121RN are fighting for at the five for-profit hospitals, most of them did so only after protracted fights with their employees that were every bit as bitter as the current one is shaping up to be.
While non-profit hospitals have been shown to remain somewhat better than for-profits in their responsiveness to community needs over market opportunities, the distinctions are becoming more and more subtle. The intransigence shown by HCA-owned California hospitals to union demands for better staffing is already typical of most major healthcare employers in California and elsewhere regardless of their taxation status. The fight for better staffing at five California hospitals isn't just a fight against the biggest and most profitable healthcare corporation in the world; it's a fight against the corporate restructuring of patient care felt at every community hospital in the country.