Corporate Medicine Is Bad Medicine
by John R. Battista, M.D.

This article was originally appeared in The Voice (Winsted, CT), in December, 1997

For-profit corporate medicine is taking over American medicine. Seventy-three percent of HMO's operate for-profit, up from 41% in 1991 and 10% in 1985. Fifteen percent of hospitals operate for-profit, up from 2% in 1985. The majority of nursing homes operate for profit. Corporate medicine is bad medicine because it compromises patient care, is administratively inefficient, and involves unethical practices. Corporate medicine compromises patient care by disrupting the continuity of care-41% of for-profit patients have been forced to change physicians. Corporate care compromises patient care by reducing staff and replacing highly trained providers with less trained providers, for example, replacing RNs with LPNs. Corporate care compromises patient care by subjecting the personal care plan recommended by physicians to impersonal protocols administered by untrained or less trained personnel. Corporate care compromises patient care by discouraging health care providers from advocating for quality care for their patients because managed care negotiations are time-consuming, frustrating and unpaid. Furthermore, corporate care intimidates health care providers from advocating for their patients because they fear being "delisted" by corporate providers as expensive or problematic providers. Seventy-one percent of physicians believe managed care compromises patient care. Eighty percent of Americans believe profit considerations compromise quality of care.

Corporate medicine is administratively inefficient. A comprehensive study of administrative costs by Woolhandler and Himmelstein published March 13 in the New England Journal of Medicine shows that the administrative costs of for-profit hospitals are 23% more than not-for-profits and 34% more than public institutions. For-profits spend more than 25% of health care premiums on administrative costs. This is shocking when we realize that Canada, under a national health insurance system, spends about 9% on administration, and that Medicare spends about 3% on administration. The Health Care Finance Administration calculates that the United States would save enough money administering our health care system through a single payer to provide health care for the 44 million uninsured, while avoiding managed care and allowing free choice of providers.

Corporate medicine results in unethical practices. "Gag clauses," now illegal in most states, require health care providers to tell their patients that the managed care plan the insurer agrees to pay for is the plan they recommend for the patient. For-profit corporations, like Oxford Health Plan, are abandoning managed care for "capitation." Capitation pays providers a fixed amount of money for a given diagnosis or a fixed amount of money for taking care of a patient for a year. This gives the health care provider an incentive to minimize care, and makes the provider and patient financial adversaries, while making them partners in the patient's health. Similar conflicts of interest occur when a corporation offers an administrator of a not-for-profit hospital a job with a salary raise, or bonus, if he/she agrees to recommend a for-profit take-over of their not-for-profit hospital.

The government's agreement to allow for-profit Medicare capitation is wasteful and unethical. The government will pay 95% of the average yearly cost of Medicare to for-profits for each Medicare beneficiary they enroll. However, since 80% of Medicare costs come from 10% of Medicare beneficiaries, corporations can make large profits by selecting healthy Medicare recipients. HCFA estimated this system costs 2 billion dollars more per year than traditional Medicare. This is particularly distressing because three times as many Medicare recipients are unhappy with for-profit Medicare than traditional Medicare. The result of this government-business agreement is that corporations make large profits, Medicare recipients get poorer care, for-profits appear to be able to offer Medicare services for less than the private sector, and politicians can claim they are saving money by "privatizing" (read "corporatizing") Medicare. This serves politicians and corporations, but people pay the price.

The root ethical problem with corporate medicine is its abandonment of the ethos of traditional medicine, in which the needs of the patient are placed above the needs of the caregiver, in favor of an ethos of profit. As a result, corporate methods of industrial competition eliminate clinical expertise and caregiving. This is not only tragic and mistaken, but also unethical and immoral.