Monday, July 24, 2006

HCA and the Sin of For-Profit Health Care

It has been announced today that a group of investors is offering a leveraged buyout of HCA, the largest provider of for-profit health care in the United States – which suggests it’s the largest in the world. You can find news reports of this in the air, and certainly all over the web. You can find a news report here and a business-oriented report here.

What will this do to providing health care? I’ve had some time to observe on a (relatively) small scale what this might mean on a large scale. Several years ago HCA became the largest health care provider in my metropolitan area when it bought out itself the largest regional system in this area. HCA took on that system, and its existing debt, and took on additional debt to do so. Since that time they have consolidated services in some area where the previous system had purchased hospitals only blocks apart. They have built new facilities for the purpose in some places, and have closed facilities in others. They have also determined for their facilities that with regard to emergency services and services for the indigent that they will meet all the requirements of law – and no more. And so the number of patients in the emergency rooms and charity clinics of government and religious hospitals – services that often cost more money than can ever be recovered – have jumped.

In a larger sense, this must have some impact, even though we don’t quite know yet what it will be. After all, this is for-profit health care. Thus, the investors expect to receive a return on their investment. Since what they’ve offered is 19% over share value as of close of the market on Friday, they expect that within a reasonable period their return on investment will cover that premium price. Further, this is a leverage buyout, taking on debt to make the purchase. And in the process, they will be purchasing HCA’s existing debt. So, over some period of time investors believe they will receive sufficient return to pay those debts and still make an appropriate profit for shareholders. Now, to cover that they can try to increase revenues or to reduce expenses; most companies in buyouts try to do both. But increased charges for health care will meet resistance from insurers, both private and Medicare/Medicaid. And reducing expenses can result in challenges to reduce staff and/or services – again, all too frequently, both. Now, there will be some economies of scale and some capacity to negotiate expenses based on HCA’s sheer size. But sooner or later, I fear that something will have to give.

Now, I’m not in general offended by the concept of “profit.” All not-for-profit health care providers are also concerned with making a profit. They call it “margin,” but they still have to make it. If a hospital can’t raise salaries to meet the cost of living, or can’t provide contemporary (if not the latest) health care technology, they will lose patients to serve, and physicians and nurses and other staff to serve them. A hospital that sets some limits may serve fewer patients; but a hospital that goes out of business serves no one.

At the same time, there’s a significant difference, I think, between making a margin of 3% or 4% to keep up with inflation, and a profit that will address a 19% increase in value. There’s a difference between making a margin that gets plowed back into the institution for more staff, newer technology, and better services, and making a profit to serve the needs of external investors.

That’s why it’s been my considered opinion that for-profit health care is a sin (and as a priest I don’t use that word lightly). These investors are literally profiting on human misery; and the fact that they’re not the only investors to do so doesn’t make it right. Institutions that exist to serve patients face challenges and sometimes have to make difficult decisions; but service to the patient continues to be the telos, the end purpose. For-profit institutions may provide services to patients, but the end purpose remains to make money for investors. That certainly doesn’t square in my mind with serving “the least of these my siblings.”Now, I’m not commenting on the providers themselves. Doctors and nurses and other staff in those institutions are, I believe, providing the best care they can in the circumstances they have. There are chaplains in some HCA hospitals, and they’re caring for patients’ spiritual needs as best they can. But, then, they’re not motivated by profit, and my guess is that if the same institutions were not-for-profit they would still be there.

No, my problem is with the investors, and with the concept of health care for profit. We seem to spend little enough as a society to provide care. If things are really that tight, (and until we can find the intestinal fortitude and the political will to make changes, things will be that tight), siphoning off profits can only make things tighter. We don’t know yet what all the consequences will be of this buyout of HCA. I fear that when we do know we won’t be happy.

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