Parker Griffith’s Selective Memory

Posted by on Monday, Apr 12, 2010

By Pippa Abston MD, PhD, FAAP

Just got back from a day at the annual MASA (Medical Association of the State of Alabama) meeting in Huntsville. I’ll have more overall impressions later, but I had to post this before going to sleep tonight, while it is still fresh in my memory (you’ll see why in a minute).

The last session before dinner was a panel of 3 physicians, including none other than our friend Congressman Parker Griffith. He was speaking about healthcare reform, with the usual rhetoric. When I saw he was on the panel, I realized I’d have a chance to ask him a question, so I had several minutes to decide how best to word it. You know, it is an art, because politicians are good at turning questions around to suit themselves.

So when the time came, I got up and was last in a line of only 4 physicians to come to the microphone with questions. The tone of voice you should imagine me using is very sweet and sincere. I introduced myself as a general pediatrician and the physician coordinator of North Alabama Healthcare for All, a Chapter of Physicians for a National Health Program. Then I made a little joke about being MASA’s token liberal, which got a laugh. I said to Parker that I had enjoyed meeting him and talking to him several times. I reminded him of a meeting lasting over an hour that we had a little over a year ago at his Huntsville office with me, 5 other physicians and a couple of other single payer advocates. I recalled for him that he had said he thought universal single payer coverage was the best idea and that we would eventually get it, but it just wasn’t practical politically right now. We had asked him if he would be willing to sign HR 676, the Conyers single payer bill, and he said he wouldn’t– because he didn’t feel like he had enough influence yet in Congress where it would make any difference to the bill passing. After reminding him of this conversation, I said that I was not naive and realized politicians do often say things they don’t mean, because they want us to like them. But if he really had meant it, my question to him was “What would have to change to make it safe for you and other conservatives to publicly admit they support single payer?”

I noticed he was turning a little red as I was talking! His response was “selective memory is an interesting thing.” Then he proceeded to say that he had actually told us that if our country had “grown up” with single payer, we probably wouldn’t change it. He said he had told us he was for universal access but that he wouldn’t support Conyers’ bill because that would be socialized medicine.

So I did make one short response, reminding him that there were 5 other doctors in the room who had the same selective memory. Parker responded with a soliloquy about the problem in healthcare being insufficient numbers of providers, which is a true problem but not related. Then Rep. Price spoke up and rescued Parker, and I sat down.

After the session, I thought maybe I’d be getting some glares from my colleagues, but far from it! I can’t tell you how many people came up and congratulated me on my question, and said it was obvious to them all that I was telling the truth about what Parker had said. I even got hugs, and I was invited to speak at a fund-raiser for a Republican opponent of Parker (had to graciously decline). Apparently, the poor man has alienated so many docs in his conservative base that no one spoke up in his defense.

Anyway, I was grateful at the warm, friendly reception I was given as a public liberal by my MASA friends. They know we disagree on some issues, but we are able to enjoy each other’s company and conversation. And they know that, whatever our disagreements, the bottom line is that we all care about our patients. At the physician level, I really do believe there is hope for an honest dialogue and will continue to work towards that end.

Originally posted on Dr. Abston’s blog

Health care reform and children

Posted by on Friday, Apr 9, 2010

By Pippa Abston MD, PhD, FAAP

I’ve noticed you get fewer people complaining about the idea of universal coverage for children, I guess because they’re cuter and we know they can’t get a job to pay for their own healthcare. Believe it or not, there are actually some people who don’t want to pay for the children of “irresponsible” parents. A new form of eugenics?

But most people do care about children. Wait until they hit 18, however, and the compassion starts nose-diving. Folks don’t want to take any chance that they might wind up spending any money on someone who is lazy and just doesn’t deserve help, by whatever criteria they use to determine what “deserve” means.

Of course, I have an ethical problem with even that– but just suppose we take the stand that we DON’T want to help any undeserving adults. Guess who is going to suffer? Not just those adults, but our children!

Children don’t exist in a vaccuum. Providing just for their health insurance is not what they need for optimal health– they need healthy parents and communities. A sick parent may not be able to work enough hours to provide decent housing, food, and clothing. We have heard it said that the schools can’t take on all the responsibility for educating a child and that the parents must pitch in– but what if that parent is ill, works as many hours as she can and then has to crash in bed or on the sofa? How will that parent help educate her child? And even more importantly, a sick parent may not have the emotional resources to provide a child’s primary needs– love, attention and nurturing. Imagine also the emotional burden on the child, having to watch a loved parent suffer needlessly.

The same applies to other community members. A child interacts with so many people during the day– neighbors, church leaders, a schoolbus driver, the lunchroom lady, athletic coaches, etc, etc. We need these people also to give their best efforts to our nation’s children. A bus driver who can’t get health care for his diabetes could go into a coma while driving your child to school and crash.

And then there’s the problem of infection. Any adult who can’t afford care but isn’t at an emergency level of illness will usually NOT go to the ER. So there’s that adult walking around sharing his whooping cough with your infant, who is not old enough to have finished her vaccines. Or swine flu. Or in case of bioterrorism, anthrax, small pox, you name it!

I hope everyone can see from the above how short-sighted it is to exclude any of us from health care. If not for them, for the sake of our children.

Originally posted on Dr. Abston’s blog

UCSF student Eric LaMotte on single payer

Posted by on Friday, Apr 9, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Opinion: Healthcare Reform Not Found: Abort, Retry, Ignore?

By Eric LaMotte
Synapse, The UCSF Student Newspaper
April 8, 2010

Despite the intense efforts of a vocal minority, healthcare reform was enacted this year by congressional Democrats who claimed to place the needs of American citizens over those of corporations. Unfortunately, they chose to enact policies that will continue to allow a costly, complex, fragmented, for-profit insurance system to inflict damage on the rest of our healthcare system. Now, living in a post-reform world, we must decide where to go from here, and I am reminded of the error prompt that every frustrated computer user has had to answer at one point or another: Abort, Retry, Ignore?

Amidst the already loud voices in support of “Abort” and “Ignore,” we need to raise a new and thundering voice for “Retry.” The national single payer bill described above (in the full article at the link below) is already written: HR 676.

In California, we will have our own shot at enacting a statewide single payer system with SB 810. The bill passed the State Senate in January by a vote of 22-14. But it’s a long way from being enacted, and California’s idiosyncratic political system makes it unlikely that California will be the first state to enact a single payer plan. You can support real reform by joining efforts with PNHP/CaPA, CaHPSA, AMSA, CNA, or California OneCare.

http://synapse.ucsf.edu/articles/2010/April/8/opinion.html

For a picture of Eric LaMotte with Senator Arlen Specter, with the caption, “Senator Specter talks with first-year medical student Eric LaMotte, who supports single payer health insurance”:

http://today.ucsf.edu/stories/senator-specter-urges-ucsf-community-to-exert-political-power/

For a breather, today’s message is an affirmation that there is hope for the future in health care, as represented by this article by Eric LaMotte, an astute medical student at the University of California at San Francisco (my alma mater).

Thanks, Eric.

(During our travels this month, qotd messages will be sporadic to nil.)

Pennsylvania’s Blues avoid battle

Posted by on Thursday, Apr 8, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Highmark sues to block state review of Blues competition

By Emily Berry
American Medical News
April 5, 2010

Highmark Inc. has asked a state court to block the Pennsylvania Dept. of Insurance from investigating or releasing any findings about the state of competition between the state’s four BlueCross BlueShield-affiliated plans.

In a lawsuit filed March 16, the Pittsburgh-based company accused Pennsylvania Insurance Commissioner Joel Ario of planning to try to break up the Blues plans’ current licensing arrangement, set by the BlueCross BlueShield Assn.

The state’s four Blues plans split their business into distinct territories. The only overlap is in central Pennsylvania, where Highmark, which has a Blue Shield trademark, and Capital BlueCross compete.

Pennsylvania Gov. Ed Rendell criticized Highmark’s decision to block the state’s review. “I am disappointed — but not surprised — that Highmark has chosen to fight our efforts to ensure the protection of consumers and guarantee a free and fair marketplace,” he said in a statement. “Health insurance is a big business. Historically, it has operated — and especially here in Pennsylvania — with limited regulation and weak oversight.”

http://www.ama-assn.org/amednews/2010/04/05/bisb0405.htm

Pennsylvania’s four BlueCross BlueShield plans have staked out different territories, effectively eliminating market competition between the Blues. One of the reasons that the reform model was based on private health plans was that market competition was supposed to bring us higher quality insurance products at lower costs. Instead, Pennsylvania is getting higher costs at whatever quality.

What is in the recently-enacted health reform legislation that will prevent such anti-competitive practices? The state health exchanges? This is an industry that is suing to block the release of any information about anti-competitive behavior. Just because they’ve been granted a new marketing tool in the form of the exchanges doesn’t mean that they are going to change their ways. The major markets are already concentrated amongst a few insurers, and they will continue to remain so.

Since we have lost the benefit of competition, why should we spend so much more merely to keep the private insurers in control? Let’s recover the resources that they waste and use the funds for a truly universal program that actually does cover all of us. That will require new, preemptive legislation, but it’s just what we need – an improved Medicare for everyone.

Why are insurers buying back their shares?

Posted by on Wednesday, Apr 7, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Health plan profits: Relying on the market

By Emily Berry
American Medical News
April 5, 2010

Boosting earnings per share keeps Wall Street (and shareholders) happy. And in for-profit health insurance, shareholders come first.

When companies have extra cash, they think of the best way to benefit shareholders. “It is a fairly straightforward decision: they have dollars. They could potentially use those to buy new computers, hire new staff, open new markets, increase reimbursement or deliver more services, but in the for-profit world, their first obligation is returns to their owners,” said Joe Paduda, principal for the consulting firm Health Strategy Associates in Madison, Conn.

So how are they making money?

Administrative cost controls play some part. But there are other factors: First, insurers also make money from investing premium dollars, and the returns they make on those investments have stabilized since the market crash of 2008.

The other factor is plans’ billions of dollars worth of share buybacks, which affect the figure Wall Street watches most — earnings per share. Even if cash profits don’t change, per-share earnings will go up, because a company has fewer shares in the market.

Insurers’ investments and share buybacks matter, because they can indirectly affect doctors’ pay. If the market isn’t doing well and investment income drops, insurers feel even more shareholder pressure to raise premiums or cut costs, rather than risk an operating loss. That means less flexibility for doctors in negotiating reimbursements.

“They have less margin for error, because investment returns are so low,” Paduda said. If health plans see higher-than-expected spending, “or they sell a policy to folks who, God forbid, actually get sick, then they’ve got a problem.”

(Dave Shove, a New York-based senior research analyst specializing in managed care for BMO Capital Markets Equity Research Group) said share repurchases are simply a way to reward shareholders. Other options are paying dividends or buying other firms.

But health insurers historically have made very few dividend payments, he said, and “the health insurance business is pretty consolidated now. That just leaves one thing to do, and that is buy back stock, so they’re doing it.”

(Scott Harrington, PhD, professor of health care management at the Wharton School of the University of Pennsylvania) said health insurers, like other companies, have favored share repurchases over paying bigger dividends, in part because the tax code favors repurchases, but also because if shareholder dividends are increased one year then cut the next, the market interprets that as very bad news.

WellPoint Chief Financial Officer Wayne DeVeydt told investors at a March conference that the company plans to spend nearly $4 billion on share repurchases in 2010, following $2.6 billion in 2009.

Not everyone likes the way investments and stock prices drive the U.S. health care system. But short of a single-payer, government-controlled system, health system reform proposals are not aimed at changing this part of the way health insurance companies work.

“This is the world we live in,” Shove said. “These guys are for-profit, and as long as we have insurance companies, we have to live with the consequences of that.”

http://www.ama-assn.org/amednews/2010/04/05/bisa0405.htm

When some of the non-profit Blues insurers converted to for-profit status, the primary reason given for that conversion was to open access to capital markets. What does that mean?

When a shareholder-owned corporation issues new stock, it is allegedly for the purpose of raising capital to expand operations, growing the industry and increasing profits. That is what capitalism is all about.

But when a corporation buys back stock, it is not for the purpose of contracting operations, but rather it is to pump up the per share value. It is not merely a coincidence that this increases the value of the large blocks of shares held by top management and the board of directors, by increasing the percentage of ownership in the company. New stock issues dilute ownership, whereas stock repurchases concentrate ownership.

The funds used to buy back the shares could have been used instead to slow the growth in premiums or to reduce the excessive cost sharing burden created by the shift towards underinsurance products, benefiting their customers – the patients. But no. As this article states, “shareholders come first.”

As Dave Shove states, “”This is the world we live in. These guys are for-profit, and as long as we have insurance companies, we have to live with the consequences of that.”

Perhaps the most important statement in this article: “… short of a single-payer, government-controlled system, health system reform proposals are not aimed at changing this part of the way health insurance companies work.”

The obvious conclusion is that reform should not stop short of a single payer system. We have more work to do.

Hospital executives rank United HealthCare and WellPoint/Anthem as worst

Posted by on Tuesday, Apr 6, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Fourth Annual National Survey of Hospital Executives Reveals “Best” and “Worst” Among the Nation’s Insurance companies

Revive Public Relations
March 31, 2010

Revive, a national public relations firm specializing in Health Care and Healthy Living, today released the results of its fourth annual National Payor Survey of hospital executives. The only one of its kind in the country, the survey targeted hospital leaders in the industry who negotiate managed care contracts with national health insurance companies – CEOs, CFOs, and directors of managed care.

The survey gathered data on hospital leaders’ opinions on seven of the largest health insurers or insurer groups in the nation: United HealthCare, CIGNA, Aetna, Coventry, Humana, Wellpoint/Anthem, and the local state or regional independent non-profit Blue Cross or Blue Shield plan.

While all respondents tend to regard insurance companies as equally negative when it comes to business practices, each year’s survey has revealed United HealthCare as the clear outlier. For four years, United HealthCare has been consistently ranked as the worst among respondents in all survey categories and a clear trend has emerged. This year, WellPoint/Anthem saw declines that brought the company down to levels near United HealthCare.

http://www.revivepublicrelations.com/downloads/2010PayorSurveyPressRelease.pdf

Words hospitals used to describe United HealthCare:

17% – Bad/Negative
15% – Inflexible/Rigid/Unreasonable
13% – Challenging
13% – Deceptive/Dishonest/Unethical
8% – Aggressive/Bully
and
11% – Good/Fine
2% – Prompt
2% – Convenient/Easy
1% – Professional

(Similar terms were used to describe other insurers, including WellPoint/Anthem)

http://www.revivepublicrelations.com/downloads/2010PayorSurveyResults.pdf

From the perspective of hospital executives, the two worst insurers in the nation happen to be the largest – United HealthCare and WellPoint/Anthem, even though “all respondents tend to regard insurance companies as equally negative when it comes to business practices.”

And now we have reform that not only locks us into this industry, but expands it further!? It can be changed.

Gaming the individual mandate

Posted by on Monday, Apr 5, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Short-term customers boosting health costs

By Kay Lazar
The Boston Globe
April 4, 2010

Thousands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses.

In 2009 alone, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan. Their medical spending while insured was more than four times the average for consumers who buy coverage on their own and retain it in a normal fashion, according to data the state’s largest private insurer provided the Globe.

The typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month.

The problem is, it is less expensive for consumers — especially young and healthy people — to pay the monthly penalty of as much as $93 imposed under the state law for not having insurance, than to buy the coverage year-round. This is also the case under the federal health care overhaul legislation signed by the president, insurers say.

http://www.boston.com/news/health/articles/2010/04/04/short_term_customers_boosting_health_costs/?page=full

Health policy science told us ahead of time that a mandate for individuals to buy private health insurance would not work if the penalties for not doing so were quite modest. Yet Massachusetts enacted such a plan, and now very similar policies have been enacted into federal law.

The Massachusetts experience has demonstrated that health care consumers will act in their own financial interest. Individuals who perceive themselves to be in good health will elect to pay the much lower penalty for being uninsured. If they then develop expensive medical problems, they will sign up for a health plan, but then will drop their coverage after their medical needs are met. It means little to them that this drives up premiums for those who remain in the insurance pools.

There are legitimate reasons that state and federal legislators have been reluctant to assign greater penalties for not being insured. The most important is that insurance premiums are simply not affordable for moderate income individuals who do not receive adequate public or employer assistance. Even the modest penalties create a financial hardship for some. Pushing the penalties higher would compound the financial stresses that too many middle income families are already experiencing.

There are policy interventions available, but those under consideration are based on leaving the private insurance industry in charge. One suggestion is to close enrollment except for a short period of open enrollment once or twice a year. This would leave already financially strapped individuals without a safety valve should problems arise during closed enrollment periods. Another suggestion would be to reinstitute (Massachusetts) or expand (federal) the waiting period before preexisting disorders are covered, even if of very recent onset, again preventing coverage for more urgent, serious problems.

Though some might suggest that these individuals would be getting what they deserve for not being insured, the real fault is with policies inherent in the design of a financing system based on private insurance plans. Individuals are forced to choose between private insurance coverage that they may not be able to afford, or exposing themselves to the potential of greater financial insecurity by remaining uninsured. If solving problems in a system creates new problems, then we should question the system itself.

We can do this far better. We can separate the financing from the delivery of health care. With a single payer, improved Medicare for all, everyone would be automatically covered, for life. The financing of the system would not be through premiums tagged to private plans, but rather would be through progressive tax policies in which each person would pay an equitable share, and no one would face a financial hardship.

Gaming the individual mandate is not a very fun game. Let’s shut it down, and change to a system that works for everyone.

WellPoint/Empire drops four non-profit hospitals

Posted by on Friday, Apr 2, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

WellPoint Unit Drops Stellaris From Network

By Avery Johnson and Suzanne Sataline
The Wall Street Journal
April 2, 2010

A unit of WellPoint Inc. dropped Stellaris Health Network, a four-hospital chain in Westchester, N.Y., from its network after Stellaris asked for a 15% increase in reimbursement payments from the health insurer.

Stellaris says it merely wanted the insurer to pay rates consistent with what it receives from other health plans in the market. “Our non-profit community hospitals can no longer subsidize the record profits of a health-insurance conglomerate,” said Arthur A. Nizza, Stellaris’s president and chief executive, in a statement. Empire asserts charges of overall profitability aren’t relevant to this particular situation.

The decision will affect thousands of members of Empire BlueCross BlueShield, a WellPoint unit in New York, who use the hospital system. Empire has six million members in New York, and Stellaris has been one of its top 10 hospital systems in the state based on size and member utilization.

The failure to reach an agreement, which resulted in the contract being terminated late Wednesday, is the latest in a string of negotiations between hospitals and insurers that have gone hostile.

http://online.wsj.com/article/SB10001424052702303960604575158042406727102.html

It is common to hear hospital administrators complain about low reimbursement rates from Medicare, yet how many terminate their participation in the Medicare program? And of course Medicare never unilaterally terminates a provider except when appropriate in cases of criminal fraud or incompetency that constitutes a hazard to patients.

Yet what happens when a private insurer is the payer? The decision to terminate a contract is strictly a business decision made based on market conditions, having much less to do with the value, quality or necessity of the services being provided, but much more to do with the oligopolistic leverage that the insurer has in the market. The private insurer, based purely on a business decision, is quite willing to disrupt the continuity of health care services for its own customers. And WellPoint/Empire says that their profitability isn’t relevant when it makes these decisions!?

And what will the new reform legislation do to correct these blatant injustices? It will pour more taxpayer funds into the coffers of these intrusive middleman, providing them with even greater leverage in their negotiations with the health care delivery system.

Do we want a health care financing system that is designed to benefit the money managers, or do we want a financing system designed to be sure that health care is there when patients need it? If we favor the latter, then we need to dump the private insurers and adopt an improved Medicare program that takes care of everyone.

Taiwan to move towards more equitable financing

Posted by on Thursday, Apr 1, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Talk of the day — Health insurance overhaul nearly ready

By Sofia Wu
Focus Taiwan News Channel
March 30, 2010

The health insurance premium rate will be raised from the current 4.55 percent to 5.17 percent April 1, but Department of Health (DOH) Minister Yaung Chih-liang said Monday the public could end up paying less in premiums when a second-generation health care system is adopted in two years.

Earlier Monday, Yaung briefed Premier Wu Den-yih on draft amendments to the National Health Insurance Act that will pave the way for the introduction of a new generation of health care insurance.

After listening to Yaung’s briefing, Wu said the executive branch will lobby lawmakers to pass the draft package during its current session to allow for an early implementation of the second-generation system.

Under the new system, premiums will be paid by the insured, employers and the central government. At present, the government’s contribution is financed by both central and local governments.

The new system will calculate premiums based on total household income (including wages, stock dividends, rental income and other unearned income) instead of the current model that considers only the insureds’ salaries or earned income.

Yaung said the new system will be more equitable, as wealthy households whose income does not mainly rely on earned income will have to pay higher premiums.

http://focustaiwan.tw/ShowNews/WebNews_Detail.aspx?Type=aALL&ID=201003300010

Taiwan’s single payer system has been phenomenally successful, though they, like all other nations, have had to confront increases in health care costs. Under the current financing system it has become necessary to increase the percent of income paid as insurance premiums, to the displeasure of the citizens of Taiwan. That has prompted recommendations to improve the financing system.

The most important change is to shift from a premium based on a percentage of earned income to a percentage of all household income, including wages, stock dividends, rental income and other unearned income. The obvious impact of this is to make the contribution more equitable by increasing the progressive nature of the health care tax. This acknowledges the necessity of instituting a transfer not only from the healthy to the sick, but also from the wealthy to those with more modest incomes. Costs are too high to do otherwise.

Another change is to eliminate the contribution of local governments, which frequently struggle with their budgets, and to shift the full responsibility for the government contribution to the central government.

When you think about, we’ve already adopted these principles for our Medicare program. The program was established as a federally funded program, unlike Medicaid which depends on state funding as well. Also, the reconciliation bill just signed by President Obama includes a Medicare tax on the unearned income of wealthier individuals.

But there is one glaring difference between the approaches of Taiwan and the United States. Taiwan uses an exceptionally efficient single payer system that covers everyone, whereas we lose almost all of the advantages of the single payer model by limiting our Medicare program to less than 15 percent of our population.

It’s great that we’ve accepted the principle of equitable financing of health care, but wouldn’t you think that our government stewards would be smart enough to know that we also need a stable, efficient financing infrastructure, if for no other reason than to ensure that everyone benefits from equitable financing? The Taiwanese stewards have already figured that one out.

Cerberus Capital provides another Massachusetts lesson for U.S.

Posted by on Wednesday, Mar 31, 2010

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Seeking lower-cost care

By Steven Syre and Robert Gavin
The Boston Globe
March 30, 2010

The New York private equity firm that last week struck a deal to buy Caritas Christi Health Care could build the chain of six Catholic community hospitals into a competitive lower-cost provider of medical services in Massachusetts, touting it as a profitable national business model in the age of health care reform, analysts say.

Caritas, which also includes a physicians network, could become a new cost-conscious option for more patients under such a system.

Cerberus Capital Management plans to invest $830 million to acquire Caritas Christi and turn the charity into a for-profit venture. The investment, which includes money to reduce debt and invest in renovations and upgrades, would appear to be a steep price for the Caritas business as it exists today.

But the hospitals could emerge as an attractive lower-cost alternative to Boston’s big teaching hospitals as health care reform moves forward soon in Massachusetts and later across the country. And, as reforms aimed at controlling costs take effect, an increasing number of health insurance policies may well offer patients a choice: Go to a famous teaching hospital and pay more or go elsewhere and spend less.

If the ambitious plan works, it could eventually mean a sizable payoff for Cerberus and its investors, said Howard Anderson, senior lecturer at MIT’s Sloan School of Management. With a successful health care business, Cerberus could cash out by taking the company public and selling stock to investors, or by selling the chain to another for-profit health care firm.

http://www.boston.com/business/healthcare/articles/2010/03/30/caritas_christi_could_carve_out_a_lower_cost_niche_under_new_owner/

Massachusetts has been held up as a model on which our new federal health financing program is based. The purchase of Caritas Christi Health Care by Cerberus Capital Management may give us a hint as to what efforts under such a reform model might be made to slow the growth in health care costs.

Cerberus Capital Management plans to convert Caritas Christi into “an attractive lower-cost alternative” to Boston’s expensive teaching hospitals.

Their concept of lowering costs is right out of the book on the promised rewards of free markets. They are going to take a chain of low-cost charity hospitals and convert it into a for-profit venture. Then they are going to reap a “sizable payoff” by cashing out, either by taking the company public and selling stock to investors, or by selling the chain to another for-profit health care firm.

The model of reform that has just been enacted expands the lucrative health care marketplace for opportunists such as these venture capitalists. These entities will be crawling out of the woodwork to try to glom on to a share of the massive infusion of tax dollars to be redistributed by the private insurance companies. Should we really have expected anything else?

It’s not too late to regroup and do it right.

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