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Quality, Profit and Type of Provider

This page addresses the relationship between quality, profit and provider by examining assurances that quality is not compromised.


This page was stimulated by Graeme Samuel's claims about quality of care. Like Ron Williams this has been my major concern about corporate care. Samuel claims that the argument that private providers would cut corners "clearly holds little weight". "There are already numerous private providers of services in Australia's health care system" and that the operating pressures on the for profit and not for profit systems were very similar. There were no problems. Services contracted out to profit seeking providers had resulted in "very significant reductions in service costs combined with the maintenance of satisfactory levels of service quality". This page is supplementary to my shorter criticism.

Distracters from care

Once again Samuel retreats into a tightly circumscribed world barricaded from the rest of us. What we are talking about is the care of citizens and this is what it is all for. It is the raw experience of life at its most threatening by one of us. All the talk about money, efficiency, productivity is subservient to this - part of stretching what we have for the benefit of someone in difficulty - not for profit. The problem comes when these tools for the job become an end in themselves becoming the paradigms for action and so identity.

I have argued that quality is a poor word in the health care context. It lends itself to associations rather than precise arguments. Rationalisations and justifications are more easily developed.

Gaining status and identity in activities which allow care to be compromised is not isolated to the health care marketplace. It is often not intentional.

Example: - As I understand the Bristol paediatric cardiac surgery scandal professional standing and institutional status became all important considerations. Bristol was one of only a few sites selected to be centres of excellence in cardiac surgery. Concentrating the work in this way would ensure that a sufficient volume of work would ensure standards were maintained. Selection for this role brought great kudos to the surgeons and the institution. The idea of excellence became the goal - the paradigm within which identity was obtained. This became all important.

Heart surgery for small children was far from excellent and "excellence" was therefore created in words and in institutional form rather than substance. Public recognition in this way was equated with excellence. Social processes and words granted "excellence" in much the same way as Tenet/NME's financial success in psychiatry was interpreted as "quality". Being a centre of excellent was more important than being excellent.

The problems in care created a paradigm conflict. The people were not deliberately malign. They were responding like so many of us do to the situation which had been created and their position in it. As I interpret what happened "excellence", a contributory factor to good care became an all encompassing goal. It became an end in itself. A whole set of abstractions and processes were built around the idea. A parallel set of paradigm conflicts arose. Clear evidence that standards of care were in fact compromised in order to maintain the illusion of excellence was ignored and talked away. The necessary explanations were developed.

I suspect that much the same thing occurs in corporate care. The nonspecificity of the words "quality" and "excellence" facilitate self deception. "Standards" is a better word because it does not stand alone and must be grounded in context. "What standards?" follows immediately and an answer must be provided. This binds the word to the context and what happens there. Excellence and quality with all their associative meanings stand alone as an idea but do not call forth "what quality?" and "what excellence?". They can escape any discordance.

Profit pressures don't compromise care? Samuel's lofty claim that at "a theoretical level, this argument (private providers will cut corners and reduce levels of service quality) clearly holds little weight" is shown at a practical level to be simply nonsense. At a practical level this is clearly very probable. When any other sensible frame of understanding is employed then this is what would be expected.

There is no need to explore the paradigm I have suggested to understand this. Samuel's model is an attempt to stop these people from doing the obvious. It is clear that similar measures have failed elsewhere. When the pressures for profit are set against the pressures for compliance with desired outcomes it is obvious that profit will win most of the time. What Samuel suggests is a discordant distorted system which attempts to exploit paradigm conflicts to obtain desired outcomes without abandoning ideology. it would be better to eliminate paradigm conflicts.

We have the examples of psychiatry (e.g. Tenet/NME), rehabilitation, substance abuse, aged care and general hospitals (e.g. Columbia/HCA) in the USA. In Europe we have GSI's "factory care". In Australia we already have problems in aged care and failed surveillance. These are not isolated instances. The failures have been across the spectrum of the health care marketplace. The failures and abuses of care have occurred among the market leaders, the largest, the most successful, and the most credible health care corporations in the world. These matters are addressed in the pages on this www site.

Moynihan and Walton both describe the adverse impact of commercial pressures on the medical profession and this is congruent with my own experience. My experience with the profession in Australia is that they have performed better in this regard than in other countries, except perhaps those with National Health Services.

At a theoretical level Samuel's claim also fails miserably because it fails to examine the presuppositions which underpin its theoretical arguments. It assumes that a marketplace actually works in health care, that patients can operate as customers, that the sort of outcomes which would be needed to maintain good standards of care can be readily measured, that affordable surveillance processes would detect problems and that regulators could effectively enforce compliance. Experience has shown that in practice none of this is true. There are good explanations and theoretical reasons why this is so. These explanations are based on an understanding of human behaviour and the nature of health care rather than economic theory.

For profit and not for profit: - Here Samuel descends to simple deception. Like Mayne Nickless he is attempting to crawl in under the umbrella of the religious and humanitarian groups in the community. These groups have operated private hospitals for the benefit of the community in the USA and in Australia from our earliest history. To put these groups in the same basket with Tenet/NME, Columbia/HCA, Sun Healthcare, Vencor, IHS, Mayne Nickless, Alpha Healthcare and Riverside is offensive and insulting. Let's allow Samuel the benefit of the ignorance, and explain.

Not for profit:- These comprise church groups in the community whose members have dedicated their lives to the welfare of others. They also comprise community groups which have responded to the needs of the community and often to the needs of the less fortunate. They have raised funds, built facilities and set up management structures to run them for the benefit of the community.

The prime objective of both these groups is service to others. Their prime motives are humanitarian and they have adopted the ancient ethic of charging more to those who could pay to serve those who could not. They apply this principle also in raising funds for other humanitarian activities.

Without competition and a market ethic the pressures to compromise care are minimal. With the development of socialism their role in providing medical care for the poor has diminished, but some still run public hospitals. There is no incentive to misuse one group of humans in order to serve another group. money raised goes community service. Services are supplied in order to meet a need, rather than demand. The emphasis was on service to the community and on cooperation. There has until recently been little if any competition. They must now compete to survive.

For profit -- Australia: - These are groups which have entered health care for the simple purpose of making money and they are often decidedly unsavoury. Mayne Nickless was a multinational trucking company and entered health care to make money. One need only read the statements of its directors reported in the press and examine the enormous bonuses offered to senior health care administrators to understand its focus on greed and profit - its determination to make money and build a health care empire across our region. These bonuses were directly linked to profits to ensure that the attention of administrators, one of them a doctor was primarily focussed on profits. Among its previous unsavoury practices was a price fixing racket to defraud customers.

Both Mayne Nickless and Revesco have been quite open about the focus of their activities - profit. Both are now run by individuals who learned their skills with Shell, the group caught up in the political scandals in Nigeria. One is entitled to ask whether they are the right people to care for people unable to look after themselves. We can draw an analogy with Sun's Andrew Turner who learned his business skills and approach to care with NME's Richard Eamer, when Tenet/NME owned Hillhaven. Eamer was the architect of Tenet/NME's culture and its business philosophy. Hillhaven was the subject of a report "Hillhaven, Unsafe Haven"

Alpha Healthcare was a group which tried its hand at a number of business ventures. These were not successful. It then identified health care as a potential source of profits and entered this market. It willingly entered into a partnership with Sun Healthcare in spite of the clouds on the horizon.

For profit -- USA: - Tenet/NME was founded by three lawyers. Richard (Dick) Eamer was working in a health related area and saw the potential to make money out of the new medicare system. Eamer, a brilliant manic depressive was the driving force and he became chairman.

In response to restrictions placed on their financial success in general hospitals Tenet/NME entered aged care, psychiatry, substance abuse and rehabilitation where they introduced their culture and their profit making practices. They owned Hillhaven (later christened "Unsafe Haven" in a review of standards of care) one of the largest nursing home chains in the 1980's. The founders of Sun Healthcare and Horizon two of the more disturbing aged care groups were administrators trained by Hillhaven while it was run by Eamer and Tenet/NME. The profit priorities of both are reflected in their public statements and their conduct.

Columbia was one of the miracle companies founded by Scott and Rainwater, an investor and I think a lawyer. Its expansion was meteoric over 5-6 years with one takeover after another until it absorbed the giant HCA in 1994 to become the biggest hospital owner in the world. The profit priorities and the aggression with which their objectives were pursued are clear from the accounts of staff who were subjected to intense pressures.

HCA was the exception. It was founded by the late Thomas Frist senior, a surgeon. There were too few hospitals in his city and he wanted somewhere to treat his patients. His son Thomas Frist junior also trained as a surgeon but he was a very different sort of person. He was primarily a businessman. He saw the potential offered by medicare funding and developed the chain. He followed the practices of the market. The company under his direction followed many of the same practices documented in Tenet/NME. HCA was fined in Texas and its practices exposed in Nevada. The financial deception which is the subject of the current massive fraud investigation across the USA originated in HCA while Frist was chairman. He is now chairman of Columbia/HCA.

For profit conduct: - Market traded corporations have a prime responsibility to shareholders and not to patients. To survive they must make a profit and also grow. If not they will be taken over by a more successful group. The pressures from the share market are acute and continuous. They are far greater than those exerted by patients, the community, or by ineffective oversight bodies. Corporate survival depends on generating profits and the greater the competition, the greater the pressure.

It is not surprising that corporate groups indulge in practices which compromise care and then look past this or rationalise it away. Their success, even survival often depends on doing so. Care is extremely difficult to monitor and findings can always be denied and contested. Potential long term consequences are met when they arise. Samuel suggests that this will not be in their long term interests.

In practice corporations are usually happy if they are still around to deal with the long term problem when it arises. In the hurly burley of modern markets and the information overload of contemporary life memory is short. Chronic issues and deeply rooted problems impact transitorily then pass into the blur of memory. It is only when the rush is interrupted by personal tragedy or clashes with the system that citizens act.

Impact of the market on not for profit groups: - Kuttner writing in the New England Journal in 1996 described the way in which marketplace competition had compromised the mission of not for profit groups. He says "A market culture and a market idiom are becoming pervasive, even among nonprofits" and " - - big nonprofits are now defensively emulating Columbia/HCA and other for profits."

(Kuttner R- "Columbia/HCA and the resurgence of the for-profit hospital business New Eng J Med 1/8/96 p 362, 8/8/96 p 446)

Like all groups not for profits feel that their activities are worth while. they have a sense of mission and they try to survive. Originally a humanitarian response to the needs of a community, competition has now driven these groups to fight to secure and retain market share and to make profits. During the 1990's Columbia/HCA and Tenet/NME moved into their communities and tried to force them out of business. To compete they had to adopt the same practices. They were forced into joint venture arrangements with for profit groups and to introduce the sort of business practices which corporate groups used.

Many came to identify with corporate management practices. They were forced to reduce charitable services, care for the poor and services which did not pay. They have joined corporate groups in patient dumping and a number have resorted to fraud and other unethical practices. One catholic institution was caught buying patient referrals.

In addition a number of groups like Sutter Healthcare operate like for profit hospitals while retaining a not for profit designation and tax privileges. There have been concerns about the profits and where they go.

This marketplace is not congruent with the mission or the ethics of many of the not for profit community and many experience acute anguish and internal conflict. The pope spoke out condemning the provision of health care for profit. A group of catholic sisters who entered into a joint venture with Columbia/HCA were ostracised by the rest of the catholic community.

Not for profit groups in Australia :- In Australia not for profit groups have also been pressured into competing with one another rather than serving need. They have adopted corporate management practices. Public relations departments and marketing have become all important and an integral part of the not for profit "corporate mission". The threat to the underlying not for profit mission is met by an elaborate outward display of compliance with its objectives. This is manifested in ethics programs and new mission statements. The outpourings of these self affirmatory processes are displayed on the walls of the hospital to re-emphasise a commitment to something which many know in their hearts they are betraying

Those staff more able to compromise their traditional not for profit ethic become enthusiastic and are given positions in the hierarchy. Others wearily accept the inevitable and sit on the various committees in order to retain their jobs.

Some not for profit groups now behave very like for profit corporations with an ever increasing focus on profits. Not for profit groups in Australia and the USA have generally not compromised care in their search for profit. They do not have demanding shareholders.

The ethic of the not for profit services can like medical professionalism be seen to have bent and sometimes given way before the pressures of the market.

The claim that contracting health care has worked in Australia: - Samuel has clearly not watched the television documentaries nor read the critical reviews of this contracting out in Australia. It is clear there have been serious problems. Most states have now abandoned this practice. It is also far too soon to talk about quality of care. Objective data with which to evaluate care care is unavailable and comments are hearsay. I have been asked for advice by some working in corporate hospitals about speaking out. I have advised against this. The risks to career and a young family are far too high.

I am not alone in my concerns. A probity investigation of the Sun/Alpha complex by the Victorian Health Department prior to awarding it a contract in 1998 found Sun Healthcare wanting.

It is important to understand that in Australia, corporate for profit groups have not attained a strong position in hospital care. They are now swinging to radiology and pathology rather than hospitals. The medical profession has been well informed since 1993 when I spoke at a meeting of surgeons and supplied documents. They have been distrustful and ready to challenge. They are singularly unimpressed by Mayne Nickless, our largest corporate provider. They have not signed contracts.

Outside parliament and the business community corporate health care providers are not highly regarded. It is unlikely that serious breaches of care will develop until the scrutiny wears off -- until corporations dominate and feel more secure.

CLICK HERE -- for more pages about "quality"

CLICK HERE -- for more about the development and operation of the different types of "providers"

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This page created October 2000 by Michael Wynne