For-Profit Hospitals

Readers’ comments online regarding The New York Times article, “A Giant Hospital Chain Is Blazing a Profit Trail” (Creswell and Abelson) express disgust at HCA’s prioritization of financial gain. However, given that all health care facilities struggle with the often competing demands of serving patients and generating revenue, I’d like to dedicate this post to examining more closely just what I find problematic with HCA’s approach and how it compares to the other hospitals' practices.

First, there’s the concern that profit-seeking will continually come at the expense of patient care. Patients have been wrongly screened out; those who are admitted have been treated inappropriately as doctors make decisions based on what will generate hospital profits (e.g. ordering unnecessary cardiac surgeries); and these instances have given people reason to question HCA’s priorities. HCA appears to be giving improper attention to customers presumed to not be “profitable,” and is willing to cut corners, safe in the knowledge that even if negative outcomes result the money lost in settlements will be more than repaid in profits. Both of these problems have been true of businesses in other industries as well. When I’m at a restaurant, waiters often notice my age (and my standard “just water for now”) and proceed to be inattentive to me for the remainder of the meal, seeking out their big tips elsewhere. (My friends and acquaintances have described similar treatment, which anecdotally suggests that I don’t just happen to frequent snooty restaurants or to have a particularly unfortunate rapport with waiters.) And Walmart has been a frequent recipient of allegations regarding bribery, corruption, discrimination, employing illegal immigrants, overtime, gender bias, and destruction of evidence. Though having an inattentive waiter isn’t life-threatening, having an inattentive nurse is. And though Walmart’s unethical actions have had a negative impact on thousands of employees, they haven’t led to significant physical damage or death. Government officials can attempt to hold businesses accountable, but if their attempts come too late in the case of HCA people’s lives are at stake in a way that is unparalleled in other industries.

Then there’s the added problem of HCA leadership associating success with instating effective regulations, requiring its employees to move away from making independent judgments in favor of compliance. HCA leadership consists of members of the Board of Directors, whose members also serve on the Audit & Compliance, Compensation, Nominating & Corporate Governance, and Patient Safety & Quality Committees respectively, and only one of whom holds an M.D. (Stockholders also get to approve how these Committees are structured.) Regulations are inherent in the legal framework that dominates the health care industry, and most hospitals are governed by an administration of non-M.D.s. However, at HCA the policies are more clearly aimed at efficiency and profit gain: they have used a successful ad campaign to increase their number of clientele, serve only those who can pay, and keep operating costs to a minimum. From the perspective of these board members, further success depends upon emergency room doctors following screening policies more consistently rather than overriding them; nurses increasing their efficiency in order to meet quality expectations with minimal staffing; and all employees working toward meeting hospital-defined targets. Patients too will have to give up their desire to be treated as unique individuals in favor of being lumped into categories based on diagnosis. These measures appear practical, but frustrate health care professionals who want to treat patients their way (a way often based on knowledge and varying amounts of personal experience) and patients who want personalized treatment. Some may equate these frustrations with self-centered stubbornness on the part of physicians, and excessive neediness in patients. But health care is complicated, and it’s hard to trust that all its nuances can be appropriately responded to by following protocols.

A related problem is the business model: HCA’s decisions are made without input from its employees, and its large profits aren’t felt equally by all its employees either.

In the December 2011 edition of Harvard Business Review, the cover article was about Morning Star, a large producer of the canned diced tomatoes and tomato paste found in cafeterias, schools, and businesses across the United States. Written by Gary Hamel, “First, Let’s Fire All the Managers” describes how the company has achieved success not despite but rather because of its lack of top-down administration. He writes of the inefficiency of a “top-heavy management model that is both cumbersome and costly,” describing how hierarchy “systematically disempowers lower-level employees,” shrinking their “incentive to dream, imagine, and contribute,” (4). At Morning Star, every employee writes a personal mission statement that outlines how he or she will contribute to the company, and negotiates Colleague Letter of Understandings (CLOU) annually with associates who are most affected by his or her work. Though this organization may appear disorderly, it has led to a flexible organization that better reflects the needs of the company—while fostering the personal engagement of employees. Additionally, all employees can issue a purchase order (though colleagues buying similar items meet to maximize buying power) and colleagues are responsible for hiring new staff when they feel overworked. At the end of the year, every employee gives and receives feedback from colleagues and every unit of the business explains its performance to the rest of the businesses; individual pay is dictated by how much value you add to the company. The result is a company with inventive, collaborative employees who take initiative and hold each other accountable, making well-informed and timely decisions that are rarely unilateral.

Hamel’s critique of businesses with a hierarchy of managers is an attack of HCA’s business model—and those of all large hospitals where physicians’ practices are increasingly regulated by hospital administrators. And his description of the “risk of large, calamitous decisions” for businesses with a management hierarchy is particularly significant as it relates to HCA, whose top management includes stockholders like Bain Capital. Morning Star’s business model sounds like a better fit. The medical community has already recognized the importance of collaboration, and doctors are increasingly working as members of teams alongside nurse practitioners, physician assistants, nurses, physical therapists, and social workers. But without an equal stake in the outcomes, and with others dictating protocols and standards of care, there is less incentive for personal investment in the quality of care delivered.

These problems—a lack of focus on quality patient care, overemphasis on adherence to hospital policies, and a top-down administration—aren’t unique to HCA. In a recent article in The New York Times, “Rationing Healthcare More Fairly,” Eduardo Porter described a recent study of hospital emergency rooms in Wisconsin that found that “victims of severe traffic accidents without health insurance got 20 percent less care… [and] the uninsured were 40 percent more likely to die from their injuries,” suggesting that linking hospital services with patients’ ability to pay is not unique to HCA. While at the Brigham and Women’s Hospital this week, I overheard nurses and doctors discussing whether or not to follow a hospital protocol that they deemed unnecessary (they opted not to). And in another recent Times article entitled “Should Hospitals Be Run by Doctors?” Tara Parker-Pope writes: “Among the nearly 6,500 hospitals in the United States, only 235 are run by physician administrators,” despite the fact that findings in the journal of Social Science & Medicine last year found that “overall hospital quality scores were about 25 percent higher when doctors ran the hospital, compared with other hospitals; For cancer care, doctor-run hospitals posted scores 33 percent higher.” I wonder how much higher the same quality scores would be if hospitals were run equally by all members of health care teams.

Questioning HCA’s practices is appropriate and warranted. But the concerns raised cannot be confined to HCA hospitals alone.