PNHP

Private Equity’s Path of Destruction in Health Care Continues to Spread

Private Equity’s Path of Destruction in Health Care Continues to Spread

By Eagan Kemp
Public Citizen, March 21, 2023

Introduction: Private Equity Companies Seek Big Profits in Health Care

In general, the private equity industry’s business model poses risks to the long-term sustainability of entities that the industry acquires. That is, in large part, because private equity purchases are typically financed with debt that is immediately transferred onto the books of the businesses acquired, thus leaving the acquired entities with debt burdens to manage.

Meanwhile, private equity investors seek outsize returns on an accelerated timeline, generally aiming to exit investments in three-to-five years with returns of 20%-to-30% per year.1 This objective induces them to take short-sighted steps to supercharge profits or otherwise wring capital out of the assets they acquire.

The risks posed by private equity investments in health care are particularly acute. After all, the services health care providers offer can spell the difference between life and death. Private equity has targeted segments of the health care industry since at least the 1990s, with many predictable outcomes. Among them, shocking lapses in safety have occurred, prices have risen faster than at non-private equity acquired entities and patients have been subjected to price gouging schemes.

The conflict between providers’ obligations to provide the best care and private equity investors’ insatiable appetites for maximized provides is clear. “You can’t serve two masters,” a doctor who previously worked for private equity-owned U.S. Dermatology Partners told Bloomberg. “You can’t serve patients and investors.”2

Private equity continues to move rapidly into health care. Investments rose sharply throughout the first two decades of this century, and continue to rise.3 Since the end of the financial crisis in 2009, acquisitions have steadily climbed, particularly in the last five years, according to figures published by Bain & Co., a private equity firm. [Figure 1]

The particular profitability of health care was also noted by Bain. While the rate of return for private equity in health care was approximately 18% between 2000 and 2009 (compared with 16% for all other industries), returns for 2010-2021 were significantly higher, at around 27% (compared with 21% for all other industries in those years).4 Many of the highest profile deals in the past decade have concerned hospitals, but the private equity industry has been acquiring physician practices and making incursions into other health care sectors at a rapid pace.

Private equity’s incursion into the health care sector has helped to drive two ongoing health care trends: increased consolidation and increased for-profit ownership. Researchers using a different data source than collected by Bain found that between 2000 and 2018 private equity investments in health care increased by a factor of 20.5 Those investments have only increased since then, with the number of health care deals in 2020 and 2021 being the highest in the past decade.6

Unlike acquisitions of hospitals, which typically occur under a public spotlight, the private equity industry’s acquisitions of physician practices and other health care business lines often occur with little or no disclosure or public scrutiny. This absence of transparency hinders the ability of regulators and watchdogs to monitor the effects of private equity ownership.

Though not all acquisitions are required to be reported, industry experts and watchdogs are able to piece together a picture of private equity activity through news releases, accounts in the trade press and other sources. More recently, private equity firms have increased their acquisitions so rapidly that the Private Equity Stakeholder Project (PESP), which monitors such activity, began attempting to track acquisitions consistently. Recent months’ activities show that private equity firms are increasing their holdings in specialty hospitals and chains, including behavioral health and gastroenterology, as well as buying up more diagnostic imaging and radiology practices.7

This report tabulates what we know about the latest incursions of private equity into health care.

Full Report

Download the complete 26 pg. report (as a PDF file) from the Public Citizen website at https://www.citizen.org…

References

  1. Heather Perlberg, How Private Equity Is Ruining American Health Care, BLOOMBERG (May 20, 2020), https://bloom.bg/3Y04dFw.
  2. Id.
  3. BAIN & COMPANY, GLOBAL HEALTHCARE PRIVATE EQUITY AND M&A REPORT 2022, 2022, https://bit.ly/3JfBdFx.
  4. Id.
  5. Anaeze C. Offodile II et al., Private Equity Investments in Health Care: An Overview Of Hospital And Health System Leveraged Buyouts, 2003–17, 40 HEALTH AFFAIRS 719, 719 (2021).
  6. Ryan Prete, PE Healthcare Investments Mature in an Uncertain Year for Health, PITCHBOOK (January 14, 2022), https://bit.ly/3XCGcEu.
  7. Private Equity Health Care Acquisitions – August 2022, PRIVATE EQUITY STAKEHOLDER PROJECT (January 26, 2023), https://bit.ly/3HxtYre.

UK National Health Service Woes Due to Privatization & Funding Cuts

Summary: The UK national health service has been a highly regarded and popular model of public financing and ownership of health services. That is, until the British government fostered privatization and, during Conservative rule, imposed austerity budgets. It can still be saved.

You Don’t Have to Be a Doctor to Know How Much Trouble the N.H.S. Is In, The New York Times, March 17, 2023, by Allyson Pollock and Peter Roderick

You don’t have to work in a hospital to know that Britain’s N.H.S. is in the most serious crisis of its history; you just have to be injured, or ill. And hundreds of thousands of people have had a doctor’s referral for outpatient care at a hospital rejected because there are no available appointments — they are simply bounced back to the doctor to begin the process again.

That the flagship health care service of one of the wealthiest countries in the world is in such a state is shocking, but not without explanation. Decades of marketization, 10 years of Conservative austerity and a pandemic have hollowed out the N.H.S. so much that people who can afford to, and increasingly those who can’t, are having to pay for health care.

A two-tier system with more and more in common with American health care is taking shape. It’s not working, and we’ll soon be at the point where it’s too late to do anything about it.

The damage to the N.H.S. was inflicted in three main waves.

In the late 1980s and early ’90s, a Conservative government introduced the internal market and closed long-stay hospitals — where care was free — under the euphemistic banner of “care in the community.” Private nursing homes backed by equity investors took over provision for older people, and care became chargeable and means-tested.

In the late 1990s and early 2000s, Labour, under Tony Blair, built dozens of new hospitals with money from partnerships with private investors.

In 2010, the Conservatives, back in power — alongside the Liberal Democrats until 2015 — embarked on a decade of austerity.

The cumulative effect was devastating.

But people are also tired of waiting — or not able to wait — and more and more are paying for private treatment.

People are reportedly taking out loans to pay for operations and, in a development that will be familiar to Americans but is something quite new in Britain, more and more people are turning to GoFundMe to raise money for medical treatment.

The government has done plenty to encourage this shift: In 2012, the Conservatives increased the cap on what percentage of an N.H.S. hospital’s income could come from treating private patients to 49 percent.

What we do know is Britons who want to use the N.H.S. are finding it increasingly hard to do so.

The N.H.S. as Britons have known it — accessible, free at the point of use, cherished — is becoming something else. But as long as there are still people willing to fight for it, it’s not too late to save it.

Allyson Pollock in 2014 video raising alarm on NHS privatization

Chart from The Health Foundation, “Health spending as a share of GDP remains at lowest level in a decade”

Comment:

By Don McCanne, M.D. and Jim Kahn, M.D., M.P.H.

For many decades, those of us in the policy community interested in health care justice for all have greatly admired the British National Health Service as it was founded as a cherished health care system, accessible to all, and free at the point of service.

In the meantime, we established a public insurance program for seniors – Medicare – and many of us have supported policies to improve that program and expand it to include everyone. Instead, we are well on the path to total privatization of the Medicare program as it has deteriorated. Uninsurance and underinsurance permeate our system, costs have gone up, medical debt and personal bankruptcy are increasing, many are left without the health care they should have, and the increased spending of our health care dollars has been moving into the coffers of the billionaires. The government has not been listening to us in the policy community who can provide the solutions to our health care injustices.

Today’s article tells a really sad story because we should have been learning from the British model and applying it to our system. The British, of course, had demonstrated how much more effective the government was than the private sector, whereas we increased the role of the private sector resulting in the higher costs and deterioration of our system.

A co-author of today’s article, Allyson Pollock, has been a leader in the British policy community, and has issued warnings that they should not follow privatization schemes such as we have in America. Their political leaders did not listen either. As seen in the figure above, the needed growth in health spending as % of GDP was reversed starting in 2009, starving the system. Just as in the United States, it was not just the conservatives, but it was the neoliberals as well, as they followed a path more like ours instead of us following theirs. This brief report shows what a disaster it has been.

WAKE UP AMERICA! PRIVATIZATION IS WELL ADVANCED RIGHT NOW, BUT WE CAN REVERSE IT. WE CAN HAVE HIGH QUALITY, AFFORDABLE HEALTH CARE FOR ABSOLUTELY EVERYONE. BUT WE ARE GOING TO HAVE TO BRING THE POLITICIANS IN COMPLIANCE. DARE I SAY THEY MIGHT BEGIN THEIR CONVERSATION WITH BERNIE SANDERS?

http://healthjusticemonitor.org…

Stay informed! Subscribe to the McCanne Health Justice Monitor to receive regular policy updates via email, and be sure to follow them on Twitter @HealthJustMon.

How Medicare Advantage Distorts Clinical Outcome Data

Summary: Two studies reveal how Medicare Advantage plans distort comparisons with Traditional Medicare on inpatient and emergency visit rates, which represent clinical deterioration. A study done by MA employees is biased by massive diagnostic upcoding of MA enrollees. A study by university researchers reveals how inpatient admissions fall while emergency visits rise even more. Properly examined, MA has worse outcomes.

Comparison of Care Quality Metrics in 2-Sided Risk Medicare Advantage vs Fee-for-Service Medicare Programs, JAMA Network Open, December 12, 2022, by Kenneth Cohen, et al.

Findings: In this cohort study of 316 312 individuals, physicians in a 2-sided risk Medicare Advantage model provided care of higher quality and efficiency compared with those practicing in a fee-for-service Medicare program in all 8 metrics measured. [NB – HJM doesn’t believe these findings … see comment]

Evaluation of Potentially Avoidable Acute Care Utilization Among Patients Insured by Medicare Advantage vs Traditional Medicare, JAMA Health Forum. February 24, 2023, by Adam L. Beckman, et al.

Importance: Medicare Advantage plans have strong incentives to reduce potentially wasteful health care, including costly acute care visits for ambulatory care−sensitive conditions (ACSCs). However, it remains unknown whether Medicare Advantage plans lower acute care use compared with traditional Medicare, or if it shifts patients from hospitalization to observation stays and emergency department (ED) direct discharges.

Objective: To determine whether Medicare Advantage is associated with differential utilization of hospitalizations, observations, and ED direct discharges for ACSCs compared with traditional Medicare.

Results: Medicare Advantage patients had lower risk of hospitalization for ACSCs compared with traditional Medicare patients (relative risk [RR], 0.94), primarily owing to fewer hospitalizations for acute conditions (eg, pneumonia). Medicare Advantage patients had a higher risk of ED direct discharges (RR, 1.44) and observation stays (RR, 2.38) for ACSCs vs traditional Medicare patients. Overall, Medicare Advantage patients were at higher risk of needing care for an ACSC (hospitalization, ED direct discharge, or observation stay) than traditional Medicare patients (RR, 1.30).

Comment:

By Jim Kahn, M.D., M.P.H.

I’m a huge believer in the value of “health services research”. We need formal quantitative analyses of the effects of insurance status and other factors on measures – like hospitalization – that reflect clinical and financial outcomes. And I’ve seen enough studies over the decades to know that extracting legitimate conclusions from these studies is challenging, due to the complexity of the medical world and due to the risk of shoddy (often biased) research.

Both complexity and bias are in evidence with these two studies that compare hospitalization rates in Medicare Advantage (MA) vs Traditional Medicare (TM). One, done by UnitedHealth Group employees, is profoundly biased. The other, by respected academic researchers, elucidates what’s really happening with hospital and emergency stays.

The industry study (Cohen et al) examines several inpatient and emergency outcomes. Its core problem is huge diagnostic upcoding of the MA beneficiaries. As shown in Table 1, the prevalence of recorded serious diagnoses is twice as high for MA plans as for TM – despite the fact that MA enrollees are known to be healthier than TM enrollees. Why does this matter? Because several of the key statistical analyses are adjusted for the misleading extra diagnoses. If the MA beneficiaries seem sicker than they really are, it makes MA plan outcomes look better. Thus, key results are fallacious, most strikingly for COPD and heart attack / stroke. If the MA population was properly represented as healthier than the TM population, TM would probably have looked better across the board. (The paper is also incompletely and confusingly reported, which challenges sorting out all the details.)

An important quick detour: Rick Gilfillan, Don Berwick, and others analyzed the financial implications of this huge diagnostic upcoding, finding that it would lead to a 34% overpayment to MA as compared with TM. This confirms their prior “money machine” analyses discussed here, buttressing the argument that MA is shifting public funds to private shareholders.

The academic study (Beckman et al) is a model of conceptual clarity, sophisticated statistics, and excellent reporting. It adjusts (in several ways) for diagnostic upcoding. And it finds that an apparent decrease in hospitalization rates in MA is more than offset by increases in emergency department discharges and “observation” visits. In other words, for medical conditions amenable to good ambulatory care, overall MA does worse than TM. Why would these clinical episodes shift from inpatient to emergency department only? An obvious concern is that MA plans are denying authorizations for inpatient admission. Is that inferior clinical care? Impossible to say, but that’s a real concern. In any case, this excellent research clarifies that MA claims of lower hospitalization rates are misleading at best.

When it comes to health services research (perhaps even more than medical research in general), coupled with financial interests, the adage must be, “Buyer beware”. We at HJM strive to be your docent in this world.

http://healthjusticemonitor.org…

Stay informed! Subscribe to the McCanne Health Justice Monitor to receive regular policy updates via email, and be sure to follow them on Twitter @HealthJustMon.

How Overturning Roe v. Wade Changed Match Day 2023

Abortion restrictions are a physician workforce issue

By Sarah McNeilly, Morgan S. Levy, Simone A. Bernstein, M.D., Jessi A. Gold, M.D., M.S., and Vineet Arora, M.D., M.A.P.P.
Medpage Today, March 15, 2023

For thousands of medical students, years of hard work will culminate this week as Match Day 2023 marks the end of their undergraduate medical education and the start of their residency program. Many newly minted physicians will soon pack up their belongings and move to new institutions in new cities and states across the U.S. Yet, this year’s Match is already different from years past. For the first time since 1973, Match 2023 applicants have compiled their match and rank lists with the knowledge that the U.S. no longer protects the constitutional right to abortion. Roe v. Wade is no longer the law of the land.

This devastating development came after years of accelerating threats to abortion rights and access. Even before the June 2022 Dobbs v. Jackson Women’s Health decision formally ended nearly 50 years of Roe, state legislatures had been enacting record-high numbers of abortion restrictions. Now, post-Roe, states are working to reinstate historical trigger bans and devise new laws and policies to restrict abortion at the state and national levels — including the current action to revoke the use of mifepristone (Mifeprex) for medication abortion.

Such policy trends hold far-reaching implications for the U.S. healthcare system — including consequences for the physician workforce. Namely, how will overturning Roe v. Wade impact the geographical preferences and clinical practice decisions of current and future physicians?

New Findings on Post-Roe Practice Location Preferences

Our recent study published in the Journal of General Internal Medicine begins to answer this question. In a survey of more than 2,000 current and future physicians on social media, we found that most (82.3%) would prefer to work or train in states with preserved abortion access. In fact, more than three-quarters (76.4%) of respondents would not even apply to states with legal consequences for providing abortion care. The same holds true for states with early or complete bans on abortion or Plan B. In other words, many qualified candidates would no longer even consider working or training in more than half of U.S. states.

Perhaps unsurprisingly, those who intend to provide abortion care (27.1%) generally preferred to practice in less restrictive environments. However, similar preferences persisted across other medical specialties and subspecialties, underscoring the essential truth that abortion rights and access affect the entire physician workforce and, thus, the whole healthcare system.

The reasons for physicians’ practice location preferences include, but are not limited to, patient care. While 77.8% of respondents report that their preferences are influenced by patient access to abortion care, others also prioritize preserved access for themselves or their partner (56.1%) or other family members (42.5%). This should not surprise us: physicians are human beings, too, with healthcare needs and personal lives that are not wholly defined by their career choices.

Impact on the Healthcare System

Our findings reveal alarming discrepancies between the environments physicians prefer to work in and the current political realities of most U.S. states. Yet, this is not simply about physicians’ preferences: it is about sustaining the physician workforce and protecting access to care.

Even before Dobbs, the U.S. faced a physician workforce shortage — including a shortage of abortion clinicians — that was projected to impact states unevenly. Many of the same states that now have abortion restrictions were previously predicted to be hard hit by future deficits. Placed within this context, our data suggest that abortion-restricted states may face even more severe shortages post-Dobbs if physicians follow through on these geographic preferences.

Multiple studies have demonstrated the correlation between abortion restrictions and higher maternal mortality rates, especially among women of color. The reasons for this are highly complex but attributable, in part, to the coexistence of other harmful policies like limited Medicaid coverage and fewer maternity care providers. Already, whereas 39% of counties in abortion-restricted states are considered maternity care deserts — in which access to maternity care is limited or absent — relatively fewer counties in abortion-protected states (25%) share that designation. Adding a disproportionate physician workforce shortage to this burden will compound the stress on the healthcare system in these states and, in turn, exacerbate entrenched health disparities. Thus, laws and policies that restrict abortion not only pose a serious threat to the one in every five pregnancies that end in abortion every year but also stand to harm patients seeking various types of primary and specialty care in restrictive states.

The impact of abortion restrictions will extend beyond the clinical practice decisions of reproductive healthcare providers — states will likely see an shortage of clinicians across every medical field, from orthopedic surgery to dermatology to oncology. Though future studies should explore this ripple effect further, one can imagine how a potential exodus may compound physician burnout and exacerbate countless more disparities, like the burden of chronic disease.

This data should sound the alarm. It echoes conversations and trends that have been happening within our profession since before Dobbs.

The fallout of the Dobbs decision will adversely affect our health and our patients’ lives. As physicians, we must unequivocally oppose policies that disrupt healthcare for everyone, including state bans on abortion. At the same time, we must ardently support our colleagues who are living and working in restrictive states so that they may continue accessing the training they need as physicians and the care they deserve as patients. If we do not, our current workforce shortages will only worsen, foretelling a crisis that would endanger us all.

This is a watershed moment for the U.S. healthcare system. As the current and future physician workforce, we must all take these threats seriously.

Sarah McNeilly is a medical student at the Albert Einstein College of Medicine in New York City, and a leader with Medical Students for Choice. Morgan S. Levy is a medical student in the MD and Master’s in Public Health program at the University of Miami Miller School of Medicine. Simone A. Bernstein, MD, is a resident physician at Washington University School of Medicine in St. Louis, and a co-founder of Inside the Match. Jessi A. Gold, MD, MS, is an assistant professor and director of Wellness, Engagement, and Outreach in the Department of Psychiatry at Washington University in St. Louis, and a member of the MedPage Today editorial board. Vineet Arora, MD, MAPP, is the Herbert T. Abelson professor of medicine and dean of Medical Education at the Pritzker School of Medicine at the University of Chicago.

https://www.medpagetoday.com…

Medicare for All Explained Podcast: Episode 94

Why Doesn’t the Government Provide the Same Help to People Who Are Denied Care?

March 15, 2023

Podcast host Joe Sparks considers the federal government’s swift action on behalf of depositors with Silicon Valley Bank, and wonders why similar action isn’t taken whenever a health insurance claim is denied.

“It’s time for the government to start protecting normal people who suffer … when they are denied care by health insurance companies,” he says, arguing that such denials are almost never justified—but adding that “a simpler solution would be to implement single-payer Medicare for All.”

Additional episodes will be uploaded twice monthly. Subscribe in iTunes, or access a complete archive of the podcast, below.

https://medicareforallexplained.podbean.com

Akron City Council pushes mayor to fund medical debt relief program for residents

By Doug Livingston
Akron (Ohio) Beacon Journal, March 14, 2023

[ Update: Akron leaders set aside $500,000 to pay off residents’ medical debt ]

Akron City Council unanimously and swiftly passed a resolution Monday urging the mayor to fund the proposed eradication of tens of millions of dollars in medical debt held by thousands of residents.

With Mayor Dan Horrigan on board, Akron would join a growing number of Midwestern cities partnering with RIP Medical Debt, a New York nonprofit that negotiates and buys consumer medical debt held by hospitals and other health care providers.

Unlike traditional debt collectors, RIP forgives the outstanding medical bills or late fees. The goal isn’t to make money but to provide relief. People who earn no more than 400% of the federal poverty line ($111,000 for a family of four) and carry medical debt equal to 5% or more of their annual income would get a letter in the mail without having to ask for the help.

“I want you to just close your eyes and imagine what it would be like after you’ve endured cancer treatment, after you have gone through a difficult childbirth or long-term care of a sick family member,” said Ward 1 Councilwoman Nancy Holland, who brought the idea to her colleagues on council. “Imagine the feeling of opening the letter and it says, ‘We’ve retired your medical debt.’”

For every dollar Akron invests in the plan, RIP estimates it could eliminate $100 in privately held debt, potentially stretching one-time federal pandemic money further than anything the city has done so far with its $145 million American Rescue Plan Act allocation.

By erasing medical debt, proponents argue that residents could afford basic expenses like food and shelter or make the kind of purchases that help families grow. Or they could again seek preventative and regular health care at a doctor’s office without fear of running into a bill collector.

The idea came to Holland from a group of second-year students at Northeast Ohio Medical University — Max Brockwell, Emily Huff, Michael Massey and James Moore. The leaders in their local chapter of the Students for a National Health Program sat in the front row of City Council on Monday afternoon as Holland painted a picture for her colleagues.

Akron council members quickly sign on to medical debt relief

It wasn’t a hard sell for Ward 9 Councilman Mike Freeman. As chair of council’s Budget and Finance Committee, he looked over at the students and wondered if they’ll ever help so many people in their entire medical careers.

“You’re going to have a hard time topping this one,” said Freeman. “This is huge.”

Holland first brought the plan to Council President Margo Sommerville and Vice President Jeff Fusco, who quickly signed on. Then Marco Sommerville, deputy mayor for intergovernmental relations, joined the team.

In council Monday afternoon, Shammas Malik of Ward 8 and Tara Mosley of Ward 5 gave the project their resounding endorsements. But the lawmakers still need to work with the administration on the issue of funding the popular idea.

Federal ARPA relief funds already spent for Akron

With Finance Director Steve Fricker on deck to talk about the next item on council’s agenda — the 2023 operating budget — Malik asked if there’s anything allocated for the medical debt relief program.

“In the current budget, there are not funds for this,” said Fricker. “But I think that’s part of this discussion is to see where those might fit in.”

That night, as all 12 members present prepared to vote yes on the resolution with Councilwoman Sharon Connor absent, Malik looked to the audience and asked them to come back next week to lobby their city government to follow through and put money in the budget for the medical debt relief. The city’s 2023 operating budget must be passed by March 31, per the city charter.

Other cities, including Toledo, Chicago, Pittsburgh, Columbus and Cleveland, are using federal pandemic dollars to partner with RIP. The U.S. Treasury, which set the guidelines for how cities must spend the COVID stimulus money, and Guidehouse, the firm Akron hired to help it comply with federal regulations, have approved the plan.

But Horrigan has already set his plans for Akron’s $145 million in COVID stimulus funds. Everything has been allocated, Fricker said. And Akron council has no authority to force the mayor to change course because the 13-member body voted 8-5 in 2021 to give Horrigan blanket spending authority for the full tranche of federal funds.

So, the funding may have to come from the city’s general revenue fund, which is fed mostly by income tax collections, or from a partnership with the county or a private donor.

Mosley suggested Akron reach out to its partners in Cleveland to see how the city is determining the scope of their partnership with RIP. The Ward 5 councilwoman noted that in Georgia, a political action committee controlled by two-time gubernatorial candidate Stacey Abrams donated $1.34 million, which RIP estimates will erase $212 million in medical debt owed by 108,000 residents of Georgia, Arizona, Louisiana, Mississippi and Alabama.

https://www.beaconjournal.com…

How would hospitals get paid under single payer?

By Brenda Gazzar
Code Wack Podcast, March 13, 2023

How does running a hospital like a business run counter to providing reliable and affordable healthcare? How would having Medicare for All change the way hospitals are financed and what would it mean for patients, doctors, and the hospitals themselves?

To find out, we spoke to Dr. David Himmelstein, a distinguished professor of public health at CUNY’s Hunter College and a lecturer in medicine at Harvard Medical School. He also serves as a staff physician at Montefiore Medical Center in the Bronx and is the co-founder of Physicians for a National Health Program. This is the second of a two-part series with Dr. Himmelstein (part one available HERE).

Transcript

Dispatcher: 911, what’s your emergency?

Caller: America’s healthcare system is broken and people are dying!

(ambulance siren)

Welcome to Code WACK!, where we shine a light on America’s callous healthcare system, how it hurts us and what we can do about it. I’m your host Brenda Gazzar. This time on Code WACK! How does running a hospital like a business run counter to providing reliable and affordable health care? How would having Medicare for All change the way hospitals are financed and what would it mean for patients, doctors, and the hospitals themselves?

To find out, we spoke to Dr. David Himmelstein, a distinguished professor of public health at CUNY’s Hunter College and a lecturer in medicine at Harvard Medical School. He also serves as a staff physician at Montefiore Medical Center in the Bronx and is the co-founder of the single-payer advocacy group Physicians for a National Health Program. This is the second of a two-part series with Dr. Himmelstein.

Welcome back to Code WACK!, Dr. Himmelstein.

Himmelstein: Thanks for having me.

Q: In 1987, you co-founded Physicians for National Health Program. What inspired you to do that?

Himmelstein: Well, the experiences of our healthcare system really making it so difficult to care for patients and many of my patients at public hospitals where I work, being unable to get the care they needed and deserve. At the same time, seeing that our country has ample resources to provide excellent care to everyone if they were distributed in a reasonable way and I spent some of my time during my career working at fancy private hospitals. During my residency, one or two months we rotated through a fancy private hospital and one month a year I used to be the attending physician, the staff physician on the wards at Mass General Hospital, one of Harvard’s banner teaching hospitals. So I saw excellent care that was available to privileged patients and often resources at those hospitals that went unused because the hospitals actually oftentimes had surplus resources. And (in the) meantime, the public hospitals where I spent most of my time working, patients weren’t getting the care they needed.

So my partner, Steffie Woolhandler and I looked around at what alternatives there were for how to finance health care and we saw that other countries really did it better and they had lessons to teach us about how you could construct a healthcare financing system that was both fairer, more efficient and improved health outcomes.

Q:  you give an example?

Himmelstein: We particularly looked at Canada because Canada’s health care system in many ways is very, very similar to that in the U.S. In fact, until we passed Medicare and Medicaid in the mid 1960s and Canada passed its national health insurance scheme around that same time, our healthcare systems and financing systems were almost identical. So it was easy to see how we could make a transition to national health insurance schemes like Canada, which is not perfect, but has huge advantages. So we really used that as an initial model and thought about what it would take to transition the U.S.

Q: Got it. Great. It’s no secret that hospitals, even nonprofit ones, are big businesses today in America. How are the incentives of running a business at odds with community needs for reliable access to affordable health care?

Himmelstein: Well, hospitals want to take in more money than they pay out to their staff and their suppliers. They want to make a profit at the end of the year, whether they’re nonprofit or not and that’s actually pretty much required, necessary if the hospital is going to keep going under our current financing system because in order to upgrade its facilities, stay modern, buy new equipment, renovate the rooms and wards when they get outdated, keep the ORs up to date, hospitals need to have money in the bank to pay for those new investments and the way you get money in the bank under this system is to take in more money each year than you pay out. Or the other alternative is to say, ‘well, we’ll borrow the money,’ but the only way you’re able to borrow it is if you assure the bondholders or the banks that you’ll pay them back from the surpluses from the profits you accrue in future years, so our system says to hospitals, you have to make a profit or your future is in doubt.

Q: Right. Thank you. What toll do standard business practices like mergers and acquisitions, consolidation and corporatization take on patients and doctors today?

Himmelstein: Well, increasingly the people who run hospitals have not just said, ‘well, we want to make sure our hospital can survive, but we’re going to really run up a huge surplus and become an extremely successful business and that’s going to allow me personally to be paid much more.’ So when I was first a doctor, the hospital CEO was paid like a doctor – handsomely paid. Now they’re routinely paid in the millions, sometimes tens of millions of dollars.

Oh, wow.

Himmelstein: So if you make a huge profit, you’re able to say, ‘well, I ran this business so wonderfully that the hospital is making a big profit and I deserve a huge paycheck and I can build the empire and assemble more power that way.’

Q: And what about the patients?

Himmelstein: And it impacts the care in multiple ways so increasingly the hospitals control what the doctors do. So 30, 40 years ago, the doctors were pretty much independent of the hospitals so the doctors mostly were not paid by the hospitals, they were paid directly by their patients and the hospitals didn’t rule over the doctors. Nowadays, most doctors are employees of the hospitals where they work or of group practices that are kind of a subsidiary of those hospitals. So the hospitals can really dictate to doctors much more what they need to do and they’ve really passed down many rules, regulations, surveillance about what we need to do that’s going to be profitable for them.

Q: So how do you feel knowing that that’s the case today?

Himmelstein: Well, I think most doctors are really horrified at it so that’s the root I think of a huge amount of doctor burnout and dissatisfaction. The bureaucratic stuff they’ve imposed on doctors is crushing. The average doctor is now spending, oh, something like 20%, 30% of their total time on paperwork, much of it imposed by their hospitals.

Q: Wow. That’s a lot of time.

Himmelstein: Yeah, we’ve become box checkers and our incomes in many cases depend on doing what’s profitable for the hospital. So you now have hospitals saying you can make bonuses of $30,000 or $40,000 a year if you do what’s called coding. You attach diagnoses that are profitable for the hospital to your patients.

Q: Wow. How do you think that affects the behavior of doctors?

Himmelstein: Oh, I think if you’re offered $40,000 for doing what the hospital wants, most of us try and do it.

Q: Wow. So attaching a diagnosis to somebody who you, I mean, would you say that people would do it even if they don’t think their patients have that diagnosis?

Himmelstein: Well, what they do, and I think this is routinely done, is stretch the limits. So it’s not that they don’t have that diagnosis, but there are these arcane rules about what makes money for hospitals. So if a patient had asthma 10 years ago but they no longer have any asthma symptoms, if you write down in the chart ‘asthma not active at this point,’ that counts. That’s profitable for the hospital. It’s medically not meaningful at this time. So you’re not lying, you’re not doing anything to harm the patient, but you make the hospital and maybe the insurance plan affiliated with the hospital lots of extra money and some of that’s going to trickle down to you.

Q: Interesting. Thank you. So we touched a little bit about this in the last episode, but can you explain how hospitals are financed today and how they would be paid under Medicare for All?

Himmelstein: Well, at this point, hospitals bill patients or their insurance plans for each hospital stay generally, and depending on what the insurance is, they may get more or less. So a patient with pneumonia, with insurance from a private insurance plan, generally the hospital gets paid more than the same patient if they’re covered by Medicare and much more if that patient is covered by Medicaid. And if they’re uninsured, the hospital will bill a patient themselves and try and collect from them. And sometimes hospitals get some money for uninsured patients from government funds. So there are multiple streams of payment. There’s private insurance, there’s Medicaid, there’s Medicare and patients themselves, both the uninsured and then co-payments and deductibles that patients have to pay even if they are insured in many cases. So the one impact of that is that some patients bring in more money than other patients do.

If you have private insurance, the hospital gets paid more than if you have Medicare and Medicare more than if you have Medicaid. And in most cases either of those more than if you’re uninsured. Single payer would really change that in two ways. One is everyone would have the same insurance, so there’d be no distinction among patients so there’d be no more for Sally than for Alice. And that’s one important piece. But the second is in countries like Canada where everyone has the same insurance, generally hospitals don’t bill for each patient and each time they’re admitted, they get paid one lump sum amount each month for their operation, much like a fire department gets paid in the U.S. So the Canadians and people in many other countries have said, ‘why would we bother trying to figure out how much it costs to care for Sally and how much it costs to care for Alice?’

Our concern is what does it cost to run the hospital and take care of everybody whom they take care of. So we’ll just pay the hospital a lump sum and that eliminates a huge amount of paperwork both for the hospital and for the organization doing the payer. So for the hospital, it means you don’t have to keep track of who got every bandaid and aspirin tablet, try and figure out what you can squeeze out of each patient’s care and for the payer, it means again, you don’t have to pay for that stuff and go over each of those bills in that kind of detail.

Hmm, I see.

That came home to me many years ago visiting a friend who was hospitalized at Toronto General Hospital, at that time a big really what’s called tertiary care, so a highly specialized hospital with a full range of services.

And the billing office at that hospital when we looked was three or four people whose main job seemed to be to send bills to Americans who happened to wander across the border, and when we got back to Boston where I was living at the time, we went and looked at the billing office at Massachusetts General Hospital, which was roughly the same size and same range of services and back then they had 352 full-time equivalent personnel in the billing department. Not because they were inefficient, but because that’s what they needed to do to get paid and since then, they’ve accumulated I think many more people than that. So the difference in the way a single payer system would pay for hospital care is really twofold. One is that there would be no financial distinction among patients. And the second is that you’d eliminate the need for the kind of detailed billing and paying that drives up the administrative costs and causes tremendous waste in our healthcare system.

Q: Right. I’ve heard people kind of who oppose single-payer, who have concerns about it, say things like, well, if I am willing to spend more money, if I have and I’m willing to spend more money, why wouldn’t I get the convertible, for example, instead of the Toyota Corolla? But is that really a fair analogy in the case of single payer, are they missing out on better care If it’s all one comprehensive insurance plan?

Himmelstein: Well, you know, the data actually shows that Canadians on average get better care than Americans do and even wealthy Americans have shorter life expectancies than average in most other wealthy nations. So I think the worry that Canadians or people in other countries with this kind of egalitarian national health insurance are not getting good care is misplaced. In fact, you know, it’s sort of a weird thing I guess. Rand Paul a few years ago got his hernia repaired at the Shouldice Clinic in Ontario, which is a world famous hernia repair specialty hospital and his spokesperson said, ‘well, it’s a private hospital. It’s not part of the Canadian healthcare system,’ which just isn’t true. In fact, when we looked on the website of the Shouldice Clinic – they have a provincial health insurance plan. So there are 10 different plans, I guess up there that each province has its own plan, but they’re all very similar.

Any Canadian with health insurance from their public plan can walk into the Shouldice clinic without an appointment and start their care and have their care fully covered with no co-payments, no deductibles whatsoever. So in fact, we can deliver very high quality care to the entire population if we organize and finance our care in a rational way. Now in any system, there’s a top surgeon and a surgeon who you might want to not go to quite as much and the surgeon with a better reputation is going to have a little bit longer waiting list. In fact, in New York at this point, there are surgeons with months-long waiting lists to get care. The question is whether the people at the front of the queue ought to get there because they’re wealthier or because they’re the people who need the care the most? And as a doctor, my view is, you know, it’s the people who need the care the most, who actually ought to be at the head of the queue. And to say to a kid with leukemia, you don’t deserve the top quality care because your parents aren’t rich so you’re going to die and the rich kid is going to live, that’s criminal.

Q: Right. Such a good example. Thank you. So how would having a single-payer system affect patients and doctors?

Himmelstein: It would tremendously simplify patients’ lives. So every hospital in the entire country, I mean, again following the Canadian model, would take your insurance and your insurance would be the same no matter who you are, no matter where you are. You’d have complete coverage, you would not be responsible for any of the bills. So you wouldn’t have to worry about any out-of-pocket costs. You’d have the freedom to choose any hospital. Many of us now have, particularly with private coverage, have plans that limit where we can go and that would be abolished and it would mean that there’d be no financial distinction among patients. For doctors, it would simplify our lives. It would say you don’t have to spend your time worrying about whether your patients can afford this. The amount of paperwork you have to do for billing and for the f inancial manipulations of your practice or your hospital would be tremendously cut and we’d be able to actually practice medicine without the ridiculous stuff that goes along with it today.

Q: Right. And just as doctors wouldn’t have to worry about whether their patients could afford the treatment, patients themselves also wouldn’t have to worry about that.

Himmelstein: Absolutely.

Q: And how would this affect the hospitals?

Himmelstein: Well, I would say to hospitals, first of all, you would need to transition many people in your staff who are doing useless and maybe even harmful things to doing useful work. So our estimate is that there are several hundred thousand people doing useless paperwork in hospitals today and we’d need to find different and hopefully useful work for them. And many of them could surely be deployed within hospitals to fill in the gaps that we have now andthe personnel shortages. So that’s one thing that would affect hospitals. And one of the other pieces for hospitals is that the lump sum payment, that monthly payment you get from the National Health Insurance plan, that would be to cover your work today and whatever you don’t spend on your patients that you would have to give back. So you wouldn’t be accumulating any surpluses or profits. You wouldn’t have an incentive for playing the kinds of games you have today.

Instead, if you want a new building or an upgrade of your facilities, you would apply for a grant from the National Health Insurance Program and they would judge the needs of the communities and see, you know, is this the biggest need for the billions and billions of dollars? This year some, I think $150 billion we’re going to spend on new what’s called capital investments in health care. Instead of that money being allocated based on which hospitals are profitable or not, it would go into a fund and there’d be a regional organization that would evaluate where the investments are most needed.

And again, to give you an example, you know, we have parts of New York that are really medical deserts at this point and where the hospitals are kind of run down and I said before the roofs are leaking. And those hospitals obviously ought to be at the front of the line for the new investments. On the other hand, Mass General, which is already kind of a medical palace, is building a new $2 billion building up in Boston. I’m not sure that would’ve been the highest priority in that city. So it would change hospitals’ behavior by saying to them, you’re not actually going to be run as a business because your goal is not going to be having a profit at the end of the year because you won’t be able to have a profit one way or the other.

Thank you, Dr. David Himmelstein.

Do you have a personal story you’d like to share about our wack healthcare system? Contact us through our website at heal-ca.org.

Don’t forget to subscribe to Code WACK! wherever you find your podcasts. You can also find us on ProgressiveVoices.com and on Nurse Talk Media.

Code WACK! is powered by HEAL California, uplifting the voices of those fighting for healthcare reform around the country. I’m Brenda Gazzar.

https://heal-ca.org…

Bernie Sanders Takes on Capitalism

Summary: Bernie Sanders is a beacon of clarity for the pursuit of human welfare. In his new book, Bernie highlights how very American it is to confront and change the uber-capitalism that afflicts our nation. Health care is the poster child of this struggle.

It’s OK To Be Angry About Capitalism, Crown Publishing, February 2023, by Bernie Sanders

Capitalism is the problem

Some people think that it’s “un-American” to ask hard questions about where we are as a nation, and where we’re heading. I don’t. To my view, there is nothing more American than questioning the systems that have failed us and demanding the changes we need in order to create the kind of society that we and future generations deserve.

Here is the simple, straightforward reality: The uber-capitalist economic system that has taken hold in the United States in recent years, propelled by uncontrollable greed and contempt for human decency, is not merely unjust. It is grossly immoral.

We need to confront that immorality. Boldly. Bluntly. Without apology. It is only then that we can begin to transform a system that is rigged against a vast majority of Americans and is destroying millions of lives.

Confronting that reality and mobilizing people to bring about the transformational change we need is not easy. That’s why I’ve written this book. We need not only to understand the powerful forces that hold us down today but, equally important, to have a vision as to where we want to be in the future.

Health care is a human right. Period.

I’m not talking about expanding the Affordable Care Act and providing more subsidies. To the insurance companies that maintain – and profit immensely from – an incredibly wasteful, bureaucratic, and cruel system. I’m talking about all Americans being able to walk into a doctor’s office or a hospital and get all of the health care they need with no out-of-pocket costs. I’m talking about replacing a wildly inefficient system in which we spend over $12,000 per person every year, almost twice as much as any other major country, while 85 million Americans are uninsured or underinsured and sixty thousand a year die because they don’t get to a doctor on time.

I’m talking about a Medicare For All system.

The establishment – the corporate world, the politicians, and the media – tells us that this is a “radical” idea. Totally impractical. It just can’t be done. It’s not even worth discussing – not in the halls of Congress, not on radio or TV, not in most medical schools.

Really? If this is such an impractical idea then why, in one form or another, has every other major country on earth already accomplished the goal of providing health care for all – and at a fraction of the cost that we’re paying? On a recent trip to London, I chatted with a Conservative member of Parliament who told me how proud she was of the free health care the government provided. That’s a Conservative speaking!

Will Medicare For All solve all our health care problems? Of course not. But think about the profound impact it will have when the burden of devastating health care expenses is lifted from the shoulders of working families. Think of what it will mean when no American hesitates to walk into a doctor’s office because of the cost. Think about what it will mean when no one goes bankrupt because they have a serious illness.

Real Politics Starts with Organizing

One of the important lessons I have learned from history is that real change never takes place from the top down. It always comes from the bottom up. Fundamental change is not going to happen because of fundraisers at wealthy people’s homes. It’s not going to happen because of clever TV ads or the scheming of inside-the-Beltway political consultants and pollsters. It’s going to happen when millions stand up and demand that change.

Real politics is about rejecting the establishment’s determination as to what is “possible,” “achievable,” and “acceptable.” It is about declaring, unapologetically, that we will not allow American oligarchs and their legions of publicists to shape our vision as to the kind of world we want to live in. That’s our decision.

Bernie Sanders Discusses “It’s OK To Be Angry About Capitalism” | Face the Nation (26 m) | Southbank Center (for British audience; 1 h 45 m)

Comment:

By Don McCanne, M.D. and Jim Kahn, M.D., M.P.H.

Who should not have access to health care? Many of us believe, like Bernie, everyone should be included.

In this important new book, Bernie updates and elaborates on his vision for a just and generous America, one in which we prioritize fundamental human needs – like health – over capitalist profiteering. All other wealthy countries provide comprehensive health care, spending far less than we do with our expensively convoluted system.

Let’s ask the corporate and government oligarchs who are responsible for the policies that create the barriers to care whom they believe should be left out of the system, even though we could very easily afford to cover everyone. Indeed, let’s turn the tables: invite them to negotiate the portion corporations and shareholders get in a single payer Medicare for All program. (Hint: not much!)

http://healthjusticemonitor.org…

Stay informed! Subscribe to the McCanne Health Justice Monitor to receive regular policy updates via email, and be sure to follow them on Twitter @HealthJustMon.

‘Social triage’: How patient transfers help rich hospitals stay rich

By Brenda Gazzar
Code Wack Podcast, March 6, 2023

What’s the story behind the EMTALA patient protection law of 1986, which requires hospitals to stabilize or treat patients who are in a health emergency regardless of their insurance status or ability to pay? What has this law done for patients and what does it mean for hospitals?

How does the current way hospitals are paid incentivize them to pass the buck on uninsured patients?

To find out, we spoke to Dr. David Himmelstein, a distinguished professor of public health at CUNY’s Hunter College and a lecturer in medicine at Harvard Medical School. He also serves as a staff physician at Montefiore Medical Center in the Bronx and is the co-founder of Physicians for a National Health Program. This is the first of a two-part series with Dr. Himmelstein.

Transcript

Dispatcher: 911, what’s your emergency?

Caller: America’s healthcare system is broken and people are dying!

(ambulance siren)

Welcome to Code WACK!, where we shine a light on America’s callous healthcare system, how it hurts us and what we can do about it. I’m your host, Brenda Gazzar. This time on Code WACK! What’s the story behind the EMTALA patient protection law of 1986, which requires hospitals to stabilize or treat patients who are in a health emergency regardless of their insurance status or ability to pay. What has this law done for patients and what does it mean for hospitals? To find out, we spoke to Dr. David Himmelstein, a distinguished professor of public health at CUNY’s Hunter College and a lecturer in medicine at Harvard Medical School. He also serves as a staff physician at Montefiore Medical Center in the Bronx and is the co-founder of Physicians for a National Health Program. This is the first of a two-part series with Dr. Himmelstein.

Q: Welcome to Code WACK!, Dr. Himmelstein. Tell us a little bit about yourself and how you became a Medicare for All supporter.

Himmelstein: I’m a doctor. I grew up in New York and really intended to be a doctor, taking care of poor people and contributing to the care of oppressed communities and found that the healthcare system wouldn’t let me. There were so many barriers to the adequate care of people in need that it just became impossible to do my job well under the healthcare system as it is. So I got involved in what would we need to do to fix the healthcare system.

Q: Thank you for that. We’re going to talk about hospital financing today, but we’d like to start with your 1984 study “Patient Transfers: Medical Practice as Social Triage.” It highlighted how transferring patients from private to public hospital emergency rooms can negatively affect their health and outcomes. Can you briefly tell us about that?

Himmelstein: Well, I was a resident at the public hospital in Oakland, California along with many other residents. We were disgusted at the mistreatment of our patients by private hospitals that were afraid they were going to lose money if they took care of uninsured people. So they routinely shoved patients who were coming to their emergency rooms who didn’t have insurance into ambulances to send them to us at the public hospitals and many of them were clearly worse off because of often long ambulance rides when they were gravely ill. So the group of us at the public hospital at that time decided to document what we were seeing on a routine basis and really found that there was, when we looked at it systematically, a lot of harm being done to our patients.

Q: You mentioned that many of them were uninsured. What other demographic did these patients have?

Himmelstein: Because lack of insurance is much more common among people of color, many were people of color, so a lot of them were Black people, particularly because Oakland at that time had a very large Black population and not very many Latinx folks and so they were by and large poor people, people of color, uninsured people.

Q: Wow. And so did you find that one of the main reasons that they were being transferred was because they were uninsured?

Himmelstein: Well, occasionally they would say that in the medical record openly, but more often they wouldn’t say it openly. But it was pretty obvious they were coming from fully equipped private hospitals that had doctors who were perfectly capable of caring for these patients, but they weren’t going to get paid or were afraid they weren’t going to get paid and that was the motivation.

Q: Mmm-hmmm and I imagine some of them had Medicaid as well?

Himmelstein: Some had Medicaid but far more were uninsured than had Medicaid because at that point in California, Medicaid wasn’t that bad a payer. So they would take care of Medicaid patients more readily than the uninsured.

Q: Oh, got it. Okay. Thank you. Did you come across a specific patient whose story moved you while doing this research or even before you launched the study?

Himmelstein: Well, there were a whole avalanche of patients. I guess really two come to mind. One was a young woman who was hit by a truck and taken to a fully equipped private hospital where they did x-rays and found she had multiple broken bones and a chest x-ray that showed that likely her aorta, the largest artery in the body was damaged. And they shipped her, I think it was about 30 miles across the county to us where we confirmed that in fact she did have a grave injury to that blood vessel and we didn’t actually have the capability of performing the surgery she needed because the surgical program, the specialized surgical program that could do that had been closed at our public hospital because it was a lucrative service and the private hospitals basically wanted that and didn’t want to leave it to our public hospital. So we very urgently transferred that young woman to a nearby public hospital that could do the surgery that she needed and then it would be paid for at the county’s expense.

Oh, wow.

Himmelstein: I guess another was a gentleman who was taken after an automobile accident to a hospital owned by the Kaiser Health Plan and he was apparently thought to be uninsured. That’s what the note said from Kaiser and transferred to us at Highland fairly nearby actually and when he arrived he had bone and brain literally showing through a wound in his head and we found he also had a broken neck. He miraculously was not quadriplegic but underwent emergency surgery to stabilize his head wound and his broken neck. And apparently did okay. It turned out he actually was a Kaiser member, but they hadn’t initially found him in their files when he was taken there and when they found out that he was a Kaiser member, they demanded that he be transferred back to Kaiser immediately because they didn’t want to pay for his care at the public hospital. So I guess those two cases kind of stick out in my mind.

Oh my gosh, they both sound so extreme. I’m sure these kinds of things happen much more than the general public realizes.

Himmelstein: Well we found quite a number of people who were admitted straight to the operating room or to the ICU so these were many of them very sick people.

Q: Right, right. The woman that was hit by the truck. So she was transferred two different times?

Himmelstein: Yeah, both of these were transferred two different times. Yeah.

Q: Wow. And do you happen to know how the woman who was hit by a truck fared?

Himmelstein: We were told that she did live. I don’t know more than that.

Q: Okay. Wow. Really powerful stories. Your study resulted in new legislation to protect emergency room patients who couldn’t pay for their care. Is that right?

Himmelstein: Our study and it was done again with a number of colleagues and similar studies from other public hospitals around the country – so the public hospital in Chicago and one of the public hospitals in Tennessee. The doctors there found similar things going on and we later learned that Senator Kennedy’s office became aware of these studies and was the motivation for him to propose this law that requires hospitals to stabilize patients before refusing them care. So they can still refuse care, but if you’re in a life-threatening condition or in active labor, they have to take care of you.

Q: Wow. Has that happened where they’ve actually transferred people in the midst of labor?

Himmelstein: Oh I’m sure it did.

Q: Unbelievable. And what is the name of that law?

Himmelstein: It’s the Emergency Medical Treatment and Active Labor Act. EMTALA. It’s known as E-M-T-A-L-A.

Q: Thank you for that. So let’s connect the dots to hospital financing. The EMTALA law has been controversial in part because of the cost to hospitals of caring for the uninsured. What can you tell us about that?

Himmelstein: Well, what it says to a hospital is you actually have to take care of someone if they’re in a life-threatening condition, even if you may not be getting paid for it. And some hospitals say, well that’s a money loser and it’s going to put us in financial straits. And probably they’re right for some hospitals there are grave financial problems that they’re under and caring for uninsured patients makes things worse. So on the one hand, they want to do something terrible and on the other hand, one can see why they would want to.

Q: Hmmm. Got it. Let’s shift forward and look at how hospitals fared during the COVID pandemic. We know as an NPR headline pointed out that hospitals serving the poor struggled during COVID and wealthy hospitals made millions. Why is this?

Himmelstein: Well, the hospitals got huge federal bailouts from the federal government. So they stopped – by and large – doing a lot of the elective care that’s most profitable for them. So things like joint replacements and elective surgeries of other kinds and those are the things that are most profitable and the federal government stepped in and said, well, we’ll make up the losses for you. We’ll give you what turned out to be hundreds of billions of dollars to bail you out. But most of that money went to the hospitals that were losing their lucrative business and it was not the safety net hospitals that were losing most of the lucrative business. They were already not getting a lot of that money making stuff. So less of the federal bailout money went to them and at the same time they were the ones who were most inundated with COVID patients and serving the greatest needs.

Q: Right. did the hospitals that were serving significant numbers of COVID patients, did they get funding for that?

Himmelstein: They got some, but generally not up to what was actually needed to keep them fully solvent.

Q: Oh, okay. Have you heard of any hospitals going bankrupt or having financial issues because of the COVID influx of patients?

Himmelstein: You know, it’s hard to separate the COVID influx from other causes of hospital distress, but certainly there are hundreds of hospitals around the country that are in financial distress and much of it worsened during the COVID pandemic. I mean the other thing going on frankly was there was a shortage particularly of nurses and other frontline personnel and to make up for nurses who were out because they had COVID or resigned because they didn’t want to take care of patients in that situation. Hospitals turn to what’s called registries. So these are companies that sign up nurses and say we’ll get you a temporary assignment at a hospital, but at much higher daily pay than the hospitals normally pay their nurses, so many hospitals really suffered financially because in order to take care of patients they had to rent nurses essentially at a much higher price.

Q: Wow. That’s true. How are safety net and non-safety net hospitals funded differently?

Himmelstein: Well there are a number of funding streams that come to any hospital so the backbones of hospital financing are insurance programs. So Medicare patients account for a very large share of the patients who are at any hospital because the oldest pay people who tend to be the ones most in need of hospital care are mostly covered by Medicare. So Medicare is a big payer for hospital care. Private insurance generally pays the best so hospitals that attract more privately insured patients generally fare the best because a bigger share of their patients are privately insured bringing in the biggest payments. Medicaid often pays less, it depends, varies from state to state, but Medicaid generally pays less than Medicare and certainly less than private insurance.

So hospitals that care for a lot of Medicaid patients are getting paid less per patient than those that care for Medicare and much less per patient than those that care for privately insured. And finally the uninsured and whether hospitals get paid for them or not really depends on local circumstances. So in some cities, there’s some government funding that helps defray the costs of care for uninsured patients. In others it’s just the hospital that takes the loss and that really just varies from place to place.

Got it.

Himmelstein: So safety net hospitals are really the ones that care for the biggest share of Medicaid and uninsured patients and those are the patients who bring in the least money when hospitals care for them. And as a result those hospitals get less money on average per patient than those that are caring for mainly Medicare and especially privately insured patients. But the other thing is the way our f inancing system works, two other factors come into play. One is hospitals that have a powerful reputation or that control much of the market in their area when they negotiate with private insurers can get a much higher rate than weaker hospitals or hospitals where there’s huge amounts of competition. So just to give you an example, in Boston the biggest system there and the one with probably the best reputation is called Mass General Brigham. It’s the merger of Massachusetts General Hospital and the Brigham and Women’s Hospital, two well known Harvard hospitals, and they get paid about 20% more from private insurers than the safety net hospitals that have less market power have been able to negotiate. So even from private insurers, places like Cambridge Hospital, the public hospital where I worked for many years get paid something like 20% less than Massachusetts General Hospital does.

Interesting.

Himmelstein: And the other factor besides market power that plays in here is what’s the mix of services they’re doing. As I said earlier, hospitals get the most profit from doing elaborate surgeries and much less profit from caring for pneumonia or other kinds of routine illnesses and hospitals that do large volumes of that fancy stuff tend to be paid more. So all of those things factor into how much a hospital is getting paid, both by insurance and its payer. And I guess the last factor is for most patients there’s some out of pocket costs for co-payments and deductibles that they have to pay and if you have a lot of patients who are poor, you’re probably not going to get, be able to collect from those patients for the piece that they themselves would normally be responsible for.

Q: Right. So you may have already answered this question, but I’ll ask it. How does the funding source contribute or affect the financial stability of hospitals?

Himmelstein: Well, if you have more privately insured patients, you’re likely to be doing better. If you have more uninsured patients, you’re almost certain to be doing worse. And if you have more Medicaid patients, you’re more likely to be doing worse. And if you’re a big powerful hospital that’s able to negotiate from a strong position with insurers, you’re probably getting paid more. So all of those things, the sources of funding and your market power really contribute.

Q: Mm, right. And how does this affect patients and communities?

Himmelstein: Well the result is that hospitals that care for a lot of uninsured patients or patients covered by Medicaid are on average paid much less for their care than the richer hospitals – the hospitals caring for more privately insured and Medicare patients and what that means is that their buildings are not as nice because they can’t afford to upgrade them or build fancy new buildings. They may not be able to afford to upgrade their machinery and may not be able to afford the staffing levels that richer hospitals have. And that sorts pretty closely which hospitals are rich and which are poor with the kind of communities that they take care of. So hospitals that care for poor people, generally are poor hospitals and hospitals that care for rich people are generally rich hospitals. And that also goes along with the race and ethnicity of the patients. So hospitals that care for Black and Latinx patients generally are poorer hospitals and those that care for more White patients and White non-Hispanic patients are generally richer hospitals. So it’s a way of saying our payment system structures payment to incorporate racism and oppression of communities.

Thank you Dr. Himmelstein. Tune in next week when Dr. Himmelstein talks about how hospitals will get paid when everybody has Medicare for All.

Do you have a personal story you’d like to share about our wack healthcare system? Contact us through our website at heal-ca.org.

Don’t forget to subscribe to Code WACK! wherever you find your podcasts. You can also find us on ProgressiveVoices.com and on Nurse Talk Media.

Code WACK! is powered by HEAL California, uplifting the voices of those fighting for healthcare reform around the country. I’m Brenda Gazzar.

https://heal-ca.org…