Consolidated Health Care, Inc.

The brave new world of corporate-controlled health care

One of the articles in Good Medicine (IC#39)
Originally published in Fall 1994 on page 43
Copyright (c)1994, 1997 by Context Institute

Steffie Woolhandler, M.D. and David U. Himmelstein, M.D. practice and teach medicine at the Cambridge Hospital/Harvard Medical School and are co-founders of Physicians for a National Health Program. Their latest book is The National Health Program Book (Common Courage). This article is a reprint from the September 19, 1994 issue of The Nation.

The Washington health reform hoopla turns out to be a mere sideshow to the Clinton era’s main event: the accelerating corporate takeover of health care. Patients’ care and caregivers’ working lives will be poorer in 1995 than in 1985, and this will be the case even if Congress manages to squeeze out a me-too variant of managed competition. The extinction of both professionalism and medical altruism, and the depersonalization of care, not the legislative details of a paltry reform, define the medical context for this decade.

When, early on, Bill Clinton signaled that health care investors were safe on his watch – that for-profit HMOs, private insurers and other health care businesses wouldn’t just linger but flourish – he unleashed an unprecedented torrent of mergers and acquisitions. Never has control of so vast an industry shifted so rapidly from a dispersed array of small- and medium-scale producers – in this case, doctors and local hospitals – to a few huge corporations whose leveraged financial clout is their only qualification for health care leadership.

Each week now, thousands of physicians are forced into a bizarre variant of musical chairs: Sell your practice on the terms offered, or be left out for good as your patients are herded into restrictive managed care plans. In Springfield, Missouri, St. John’s Hospital gave doctors until August 1 to sell out and sign on as employees of a new plan. Once doctors committed, their contracts called for a $1,000-a-day penalty if they quit and practiced medicine within 25 miles of town.

The doctors’ dilemma, in Springfield as elsewhere, is caused by the likely crash of medical practice outside the realm of managed care. HMOs typically employ one physician for every 800 enrollees, but the United States has one doctor for every 400 people. Hence HMO expansion absorbs many patients but relatively few physicians. When half the patients in a given region have signed on to managed care, only 250 patients per non-HMO physician remain, too few even to pay practice overhead. Congressional guarantees of free choice in a fee-for-service option are meaningless; market forces insure that non-HMO practice will shrivel, maintained only for an elite few able to afford astronomical fees. For most of us, the choice will be restricted to giant corporate HMO "A" or giant corporate HMO "B."

By 1993 ten firms controlled 70 percent of the HMO market; two of them, Met Life and Travellers, have since merged. Bowing to marketplace necessities, Blue Cross is going for-profit, so it can sell stock to raise the billions it needs to buy hospitals and clinics for its own managed care networks. Pharmaceutical giants Merck, SmithKline, and Eli Lilly paid $13 billion this year for firms that "manage" drug benefits, presaging the death of marketing through so-called drug detailing, whereby drug companies provide free trinkets and intensive miseducation to physicians. In its place: drug choices made directly by subsidiaries of the drug makers, with sales commissions (aka bribes) for pharmacists who lure patients to the desired brand.

The top ten for-profit hospital chains have been coupling like rabbits (though, unlike rabbits, each liaison leaves fewer firms, not more). In September of last year, Columbia swallowed Galen; in February, HCA; in July, it proposed the takeover of Medical Care America. Quorum acquired part of Charter last October, growing to 32,000 beds. American Healthcare Management and Ornda merged in April. Healthtrust bought Epic in May. And in most big cities, the non-chain hospitals are consolidating into a few giant groups. Under the guise of competition we’ve galloped toward oligopoly.

Meanwhile, as Congress debates coverage for the uninsured, the care of the insured is being transformed. The patient/doctor relationship is giving way to the employer/health plan contract. Managed care plans often force physicians and therapists to consult the plan’s "utilization reviewers" (the insurers’ representatives assigned to cut costs by limiting care) before discussing therapy with the patient, and then forbid disclosure of compromises on quality. GE employees in Boston are now forbidden to call their doctors for an appointment; instead, they must call a company reviewer, who filters requests. In California, Kaiser has told its primary care doctors that their patient caseloads have been increased to 2,000 (roughly double the typical number). The seven-minute doctor’s visit becomes the norm, while health planners fret that there will soon be 165,000 unemployed doctors. Health plan administrators demand industrial "efficiency" at the level of each doctor/patient encounter, producing chaotic inefficiency for the health care system as a whole.

The new health care powers know finance, insurance, perhaps law – not medicine, or nursing, or cleaning bed pans, or patienthood. The new structure of care aims at profit; its new leaders are experts in that field. Why should doctors and nurses manage care; do chefs run McDonald’s?

The Washington process that produced the Clintons’ health plan is emblematic of the new structure. The policy experts and health management leaders have no medical or nursing knowledge, no clinical experience, no intimate encounter with illness. Hillary Rodham Clinton’s task force of 500 included only a handful of people who had ever been to a hospital ward out- side of visiting hours; most were too young and healthy even to have served as patients. It’s no wonder they followed a script written by the Jackson Hole Group – a ménage funded by insurers, convened by Nixon’s health policy guru, Paul Ellwood, and guided by Alain Enthoven, Robert MacNamara’s Pentagon protégé who went on to a senior position at the military-contracting Litton Industries before sinking his teeth into health policy. The result, as Ellwood forecast: conversion to larger units of production, substitution of capital for labor and "profitability as the mandatory condition of survival" – a nightmare vision of for-profit, corporate medicine, utterly indifferent to the human experience of care.

For its part, the American Medical Association, having long ago abandoned patients’ interests, has been so distracted by its fear of government that it barely noticed insurance company shackles snapping shut on its profession. The surgeons, quick to clamp a bleeder, were the first in organized medicine to react. The 53,000-member College of Surgeons endorsed a single-payer system this past winter; it’s the only way to preserve their autonomy, and even jobs, as managed care plans whittle their specialist rosters. The conservative surgeons are strange bedfellows for the progressive docs who’ve rallied 6,000 strong to Physicians for a National Health Program, the Chicago-based group that put single-payer on the American medical map in 1989.

Soon the legislative details of whatever emerges from the bowels of Congress will fade to insignificance. Tens of millions will remain uninsured as promised savings from competition and managed care evaporate, and as government subsidies fall prey to budget-cutting. In Massachusetts (which is a world leader in both HMO membership and health costs) more people are uninsured today than when Governor Michael Dukakis’s "pay-or-play" plan, with its employer mandates, became law in 1988. Like the Democrats’ 1994 versions, Massachusetts’ universal health care bill coupled a rosy promise of future coverage with a green light to health care corporations. As costs soared, universality was indefinitely delayed.

As in Massachusetts, Congress’s promises of full coverage are ephemeral, but the corporate advance toward a medical system dominated by a few giant, vertically integrated firms continues apace. Insurers will own hospitals, surgicenters and home care agencies; employ doctors and the rest of the medical work force; and perhaps merge with drug firms. For the insured, care will be defined by a deal struck between a corporate-care purchaser (i.e., your employer) and a corporate-care deliverer.

In such a context, whither real health care reform?

In many areas of the country small-scale, fee-for-service practice is already dead or dying, foreclosing a purely Canadian-style reform for America. Once most doctors have become HMO and hospital employees, breaking up these institutional arrangements would severely disrupt care. Resurrecting the Atlantis of mid-twentieth-century medicine is impossible.

An anticorporate, antimarket focus for reform is ever more germane. Corporate competitive imperatives are the palpable force destroying care. The managers and financiers who increasingly dominate care are not bad people (if so, we’d need only replace them); they’re just responding appropriately to a system that demands misbehavior: Put profits before patients or go under.

Mere opposition to corporate HMOs is insufficient. We must devise their transformation.

  • We need control by patients and caregivers, not stockholders, managers and employers.
  • We need medical integration, so that health care in communities is not carved up among
    ostensibly competing organizations, each avoiding financially unrewarding tasks and patients, and shunning community-wide cooperation.
  • We must scale care to a human size, so patients and providers can know one another and receive the care that is needed, not act as interchangeable corporate cogs.

Unless HMO physicians, workers, and patients are centrally involved in planning this transformation, and in the movement for reform, it will surely fail. Recapturing the rational service orientation that characterized the original prepaid group practices (e.g., Group Health Cooperative of Puget Sound, a consumer-controlled cooperative, and even the early Kaiser, with its altruistic leadership and physician corps) can be revitalizing.

A public single-payer system can evolve from HMOs and corporate care – if there’s sufficient political pressure from a mass movement. Such a reform may share features with a national health service – salaried practice in integrated systems of care, with accountability to an electorate rather than to a corporate bureaucracy shaped by market forces.

The struggle over health care’s future will continue. Immediately, attention will turn to the states, particularly California, where a binding single-payer referendum is on the ballot this November. And even DC won’t be quiescent for long. The immiseration of care and caring touches a widening circle of patients, doctors and other health workers, including groups that have been quite powerful until recently. Top-class care will be reserved for an ever smaller aristocracy, with 98 percent of us relegated to factory-style medicine or worse. Even the local elites that have heretofore controlled local hospitals will be force-fed bitter pills, as national hospital chains and managed care plans take over. The constituency for opposition will necessarily broaden.

The strength of the single-payer movement has been, and must remain, a clear vision of health care that is kind to patients, satisfying for caregivers and fiscally conservative. In contrast, Clinton’s plan, even before all the compromises, was a prescription for corporate takeover. Few could, or should, rally to this banner. Clinton didn’t try and fail. He refused to try.

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