The Medical-industrial Complex

By DAVID LAWRENCE

Multinational corporations are moving into health care in the United States. The bottom line is profits, and they are enormous. The monopolization of health care is proceeding at a furious pace. The “independent” community hospital and clinic of just a decade or two ago is being replaced by a multinational health care industry. The consequences will be more profits for the multinationals, and less care for the people:

• Costs of health care are spiralling.

• The uninsured, low-paid and indigent receive minimal care or none at all.

• Those with long-term disabilities, chronic disease and complicated illnesses or injuries (less profitable medical problems) face more difficulties finding affordable, adequate treatment.

• Lower staffing levels in health care facilities reduce the quantity and quality of patient care.

• Even emergency care is denied those unable to prove ability to pay.

• Physicians and other health care providers are pressured to provide less care to more

Patients.

• The number of individuals and families with insufficient health insurance or none at all is growing. (Reduction of health benefits is currently the second largest “giveback” demand by employers in collective bargaining situations.)

• The incentive and ability to practice preventative medicine will decrease.

A NATIONAL NEWS MAGAZINE has characterized the health care industry as “an industry bigger than defense and growing faster than computers.1 It cites the warning to health professionals by Dr. Arnold Reiman, editor of the New England Journal of Medicine, to beware of the “the new medical-industrial complex.”

In 1970, $75 billion was spent on healthcare in the U.S. By the end of 1985, this figure will have climbed to $400 billion—11 per cent of the GNP.2 For-profit hospital companies such as

Humana Corp, of America and National Medical Enterprises are out to mine this gold field.

Reagan’s probusiness policies are increasing monopolization of health care by investor owned corporations controlling chains of health care facilities.

There are an estimated 100 investor-owned hospital corporations operating at least 1,000

acute care hospitals. The gross revenues of these hospital chains are approximately $11 billion. While this currently represents only about 10 per cent of the total share of the hospital business, health care industry analysts estimate that the companies’ revenues should increase at a 25

per cent annual pace for at least the next five years.3

The Hospital Corporation of America is the largest hospital management corporation in the

United States. It owns or manages 422 health care facilities and is worth about $4.1 billion.

American Hospital Supply Corporation is the largest distributor of hospital supplies in the nation. It is worth $3.5 billion. In March of 1985 these two medical-industrial giants announced

they would merge. The merger marks a major step in the increasing monopolization of the

health care industry and heralds more to come.

RECENTLY, TESTIMONY WAS GIVEN on behalf of the 50,000-member American Public Health Association (APHA) at a public hearing sponsored by the Institute of Medicine Committee on the Implication of For-Profit Enterprise in Health Care. The testimony notes in part:

The resolution [passed by APHA membership, November 1983] deplores the recent great growth in the size and scope of for-profit health care institutions and programs because of our belief that the over-riding drive of private investment in health services is to maximize profit—a controlling operating principle which we consider inappropriate to decision-making in delivering health care. This is why we are opposed to the growth of for-profit health care institutions and programs and have called upon Congress to investigate the health, economic and political implications of recent trends through studies and research supported by the Department of Health and Human Services and other appropriate agencies. 

An administrator for Hospital Corporations of America (HCA) was asked at a public hearings in Georgia several years ago why he did not put up signs advising, “This hospital will provide free care to people who are unable to pay.” His response was, “I’ll answer that question with a question: Why don’t department stores put up signs inviting shoplifters to shoplift more?”4 

Hospital corporations owned by investors tend to concentrate in states where regulation is relatively light and unionization low, and in affluent suburbs where a high percentage of patients are covered by private insurance. Since they make the highest profits on patients who are in and out in a few days, they avoid treating burns and other chronic problems. In Louisville, Kentucky, for example, a new $80 million city hospital had originally planned to open a burn unit. However, in 1983, when the hospital was leased to Humana, a giant investor-owned hospital chain, the “unprofitable” bum unit was scrapped. The city’s firefighters protested, but Humana did not budge. A month later a woman was severely burned in an explosion in her home, and died shortly thereafter at Humana’s hospital. The incident sparked community-wide protests, led by the firefighters, eventually forcing Humana to open a bum unit.5 

Another way investor-owned hospitals maximize profits is by wholesale firing of health care workers. In 1983 there were 4.5 hospital employees per bed in the U.S.; however in 1984 alone about 100,000 were laid off. Todd Richter, a well-known industry consultant, predicts that the number will drop to 2.5 employees per bed in the next few years.6 “INDIGENT CARE IS THE OBSTACLE to making the marketplace work in health care,” arrogantly notes Michael Bromberg, Director of the Federation of American Hospitals, which represents investor-owned hospitals.7 Thus, private hospitals “dump” uninsured patients on public hospitals, a dangerous and unethical practice. Traditionally public hospitals operated by municipalities, counties and universities cared for indigents and other uninsured patients, but their load has increased enormously. In Washington, D.C., for example, 170 patients were dumped in 1981, but investor-owned hospitals will dump an estimated 1,100 patients into D.C. General Hospital in 1985.8 

Local public officials, who have received little material assistance from the Reagan Administration, are increasingly abandoning their responsibility to assure basic health services to the nation’s medically vulnerable. In 1950 approximately one-third of all hospital beds were in public hospitals. Today only about one-seventh of all hospital beds are in public hospitals, and the proportion continues to drop. Between 1979 and 1982 alone, 72 public hospitals closed. To date approximately 30 public hospitals have been sold to the hospital chains, with another 150 leased or managed by the chains.9 

By 1990 there will be still fewer public hospitals to care for the uninsured, whose numbers will have grown to an estimated 40 million. To quote Dr. Reiman again, “Health care is being converted from a social service to an economic commodity, sold in the marketplace and distributed on the basis of who can afford to pay for it.”10 

When the people organize there can be successful fightbacks against the elimination of public and community hospitals. In the South Bronx neighborhood of New York City, for example, a largely low-income and minority area, the residents waged a determined battle to keep Lincoln Hospital open. Their long struggle during the 1970s paid off. The public hospital still provides services to low-income patients. Currently a similar struggle is being waged against the closing of private Prospect Hospital.11 

THE RELATIONSHIP between hospitals and banks plays a major role in the escalation of medical costs, particularly among the investor-owned hospitals. In 1984 health care institutions borrowed over $5 billion in the tax exempt bond market in order to finance new construction. Typically, the hospital guaranteed repayment, agreed to maintain a certain level of occupancy, and frequently agreed to raise its rates. 

Medicare, Medicaid and Blue Cross allow hospitals to include payments on debts when figuring reimbursement rates. Therefore, the more a hospital owes, the more it raises its rates to pay back the loan. The cost not only shows up on patients’ bills but is passed on to all people who pay taxes and insurance premiums. There are reports of debt service obligations resulting in per patient add-ons of up to $100 per day. 

For-profits typically charge considerably more than not-for-profit hospitals. Drugs, for example, are routinely priced so that they yield a profit margin of as much as 80 per cent, versus 20 per cent at not-for-profit hospitals. A recent report by the Federal Bureau of Health Facilities found that charges at for-profit hospitals were nearly 24 per cent higher than at voluntary hospitals.

A typical example involves the Habersham County Hospital which was sold in 1977 to Hospital Corporation of America (HCA), which promised to more efficiently run the financially weak community hospital. Just seven years later, the Habersham County Superior Court grand jury found that since the HCA takeover, patient charges had risen 237 per cent, and the hospital regularly used unethical high pressure tactics to force patients to pay bills/The grand jury also found that the hospital failed to meet its federal obligation to care for the poor and there were serious deficiencies in quality of care.12

Contrary to a popularly expounded notion that insurance companies want to keep medical costs down, the reverse is true. Insurance-forprofit corporations have powerful incentives to allow medical costs to escalate. They can and do raise their premiums rates commensurately with rising medical costs. This permits their profits to outpace inflation and increases the funds they have available for investment, a matter of critical interest to them. “In fact, the interests of the insurers and those who provide health care at times coincide far more than is desirable or, in some cases, legal under antitrust laws, according to health care economists and other experts.”13 

THE EMERGING MEDICAL-INDUSTRIAL COMPLEX is dangerous to health. It must be fought by the trade unions, professional organizations and all affected communities. State and federal investigations of the consequences of hospital takeovers by the monopolies are needed. A National Health Service, free to all who need health care, must become an upfront demand. 

Notes 

1 Newsweek, October 31,1984.

2 Steven Greenhouse, “Hospital Suppliers Strike Back,” New York Times, March 31,1985. 

3 New York Times, August 9,1984. 

4 Martin Tolchin, “As Companies Buy Hospitals, Treatment of Poor is Debated,” New York Times, January 25, 1985. 

5 Ibid. 

6 Anne B. Fisher, “The New Game in Health Care: Who Will Profit?” Fortune, March 4,1985. 

7 Abigail Trafford, “Hospitals, A Sick Industry,” U.S. News & World Report, March 18,1985. 

8 Ibid. 

9 Tolchin, op. at. 

10 “What’s Happening to Health Care,” 1199 News, May 1985. 

11 “Bronx Battling Hospital Closing,” Daily World, April 17,1985. 

11 Tolchin, op. at. 12 New York Times, March 31,198