We Don't Want Investor-Owned Health Care Institutions

Above photo: Dozens of nurses and activists protest the practices of the equity firm’s health unit, Steward Health Care Systems, outside offices of Cerberus Capital on December 20, 2011 in New York City. Cerberus-Steward, a multi-billion dollar private equity firm, has come under increasing accusations of cornering the market with predatory practices and undercutting patient care with a push for profits. Spencer Platt AFP/Getty Images

This post comes from Dr. Don McCanne’s “Quote of the Day.” If you are interested in staying on top of what is happening with health care in the US, you can sign up to receive his daily brief posts by clicking here.

Hospital Chain Said to Scheme to Inflate Bills

By Julie Creswell and Reed Abelson

The New York Times, January 23, 2014

Health Management Associates, a for-profit hospital chain based in Naples, Fla., kept tabs on an internal strategy that regulators and others say was intended to increase admissions, regardless of whether a patient needed hospital care, and pressure the doctors who worked at the hospital.

This month, the Justice Department said it had joined eight separate whistle-blower lawsuits against H.M.A. in six states. The lawsuits describe a wide-ranging strategy that is said to have relied on a mix of sophisticated software systems, financial incentives and threats in an attempt to inflate the company’s payments from Medicare and Medicaid.

For H.M.A., the timing could not be worse. Shareholders recently approved the planned $7.6 billion acquisition of the company by Community Health Systems, which will create the nation’s second-largest for-profit hospital chain by revenue, with more than 200 facilities.

Federal regulators have multiple investigations into questionable hospital admissions, procedures and billings at many hospital systems, including the country’s largest, HCA. Community Health Systems, the Franklin, Tenn., company from which H.M.A. hired its former chief executive in 2008, faces similar accusations that it inappropriately increased admissions.

The practice of medicine is moving more rapidly than ever from decision-making by individual doctors toward control by corporate interests. The transformation is being fueled by the emergence of large hospital systems that include groups of physicians employed by hospitals and others, and new technologies that closely monitor care.

The last year has been particularly tumultuous for H.M.A., starting with the announced departure of Mr. Newsome (chief executive), a battle for control of the board with Glenview Capital Management, the hedge fund founded by Lawrence M. Robbins, and the announcement of the acquisition by Community Health Systems.

When H.M.A. announced the Justice Department’s involvement in the lawsuits, investors and analysts shrugged, and the stocks for both companies involved in the merger barely budged.

Sheryl R. Skolnick, who follows health care for CRT Capital, recently wrote in a note to investors, “Investors seem to think that D.O.J. investigations, qui tam suits and allegations of serious Medicare fraud are simply a cost of doing business.” Many settlements run only into the tens of millions of dollars. That’s a corporate slap on the wrist for companies whose stocks typically soar when executives push the profit envelope. Only if the penalty is at least $500 million, Ms. Skolnick said, are corporations likely to find the cost a deterrent.

http://www.nytimes.com/2014/01/24/business/hospital-chain-said-to-scheme…

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A Giant Hospital Chain Is Blazing a Profit Trail

By Julie Creswell and Reed Abelson

The New York Times, August 14, 2012

During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.

In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.

The big winners have been three private equity firms — including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate — that bought HCA in late 2006.

Among the secrets to HCA’s success: It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before.

Many doctors interviewed at various HCA facilities said they had felt increased pressure to focus on profits under the private equity ownership. “Their profits are going through the roof, but, unfortunately, it’s occurring at the expense of patients,” said Dr. Abraham Awwad, a kidney specialist in St. Petersburg, Fla.

Some of HCA’s tactics are now under scrutiny by the Justice Department (2012).

http://www.nytimes.com/2012/08/15/business/hca-giant-hospital-chain-crea…

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PRLOG

October 7, 2013

An investigation on behalf of investors in shares of HCA Holdings Inc (NYSE:HCA) was announced concerning whether certain HCA Holdings officers and directors possibly breached their fiduciary duties in connection with certain statements.

http://www.prlog.org/12222266-hca-holdings-inc-nysehca-long-term-stockho…

Comment:

By Don McCanne, M.D.

What is the primary purpose of a hospital? Isn’t it to meet the health care needs of patients that require more care than can be readily provided outside of the hospital? Not according to the expanding for-profit hospital chains. It is to make as much money as possible for the investors, even if that means using patients as economic tools to enhance revenues.

This is not a new problem. In 2003, HCA paid the largest health care fraud settlement in U.S. history – $1.7 billion. http://www.justice.gov/opa/pr/2003/June/03_civ_386.htm

This is why the PNHP model of single payer reform includes not only publicly-administered and publicly-financed health care for everyone, it also includes a conversion of the for-profit health care delivery system to nonprofit.

We need a health care system whose sole mission is to take care of patients, not investors.