Profit Motive by Charles Sauer

Author:Charles Sauer
Language: eng
Format: epub
ISBN: 9781590794760
Publisher: SelectBooks, Inc.
Published: 2018-02-09T16:00:00+00:00

Making Hospitals Rich and Patients Poor

Hospitals are companies, hospitals are companies, hospitals are companies! That means that they are in business to make a profit. If they aren’t functioning in a way that will make a profit, their board is not fulfilling their fiduciary duty. Even nonprofit hospitals are in business to make a profit, and their profit is tax-free, which gives them a competitive advantage over their rivals. And, since the main cost variable in a hospital are the patients, the incentive structure such as raises/promotions/time-off are usually set up to give the individual employees at the hospital even more of a reason to save money on the backs of the patients. There are lots of pieces that go into making a profit, but spending extra money on patients is not one of them. Figuring out ways to spend less money is the goal.

Profit isn’t bad, but because many in public policy view hospitals more as charities than as profit centers they often fail to understand the effects of their laws on the market. The results on the market have been that hospitals are taking over. They are becoming government-funded monopolies that are running up prices without regard for the laws of supply or demand. But the failure of hospital business practices to be regulated by market forces is merely a symptom. The disease that needs to be cured are the government laws that allow this perverse market to continue malfunctioning.

In Virginia, for instance, we have a law that limits the amount of operating tables that a surgical facility can have. The law is called Certificate of Need (CON), and hospitals love the law. First, hospitals have the majority of existing beds. Second, hospitals often have their own lobbyists to make sure that nobody else can compete with them. Third, hospitals have enough capital and control of the surgeons to pressure competitors to sell. Fourth, because of lobbying at the federal level, hospitals are often paid more for the same surgery as an outpatient surgery center would receive.

One outpatient surgery center that I know well in Virginia had to fight hard for their right to treat patients less expensively than the local hospital that they had recently separated from. The fight wasn’t about quality; most of the same surgeons were operating at both places. The fight was about the hospital guaranteeing their profit center, seeking their profit motive, because the cost of surgery at the surgery center was about 20 percent of what the hospital was charging.

Laws like CON help line the pockets of hospitals, for-profit and nonprofit alike, with money, but they also distort the system and force patients to pay more than a healthy market would allow. It makes sense that as a business hospitals would fight with government to maintain their competitive advantage. And, since the hospitals control most of the beds and employ many of the physicians, and that number is consistently increasing, it also makes sense that many doctors fail to stand against the laws.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.