Wayne O’Leary

On the Road to Corporate Health Care

It’s been a full year since the inauspicious formal launch of the Affordable Care Act (ACA), or Obamacare, and the outlines of what implementation means for the future of American health care are becoming clearer. There are both winners and losers among medical professionals and the general public, but for one interested party at least, there is no question that the impact has been overwhelmingly positive. What is now known as the “health-care industry” sees nothing but good times ahead as a result of the 2010 reform.

Nowhere is this more evident than in the hospital sector, and no better illustration exists than the enhanced fortunes of Dallas-based Tenet Healthcare Corp., the giant, for-profit hospital chain notable for having Republican presidential aspirant Jeb Bush on its board of directors. Until his politically motivated year-end resignation, Bush, personally opposed to Obamacare as an unwarranted government intrusion into the private market, nevertheless approved Tenet’s active and enthusiastic support of the law as being “best for the company.” And why not? Tenet, an $11 billion firm with 80 hospitals in 14 states, realized a $100 million revenue windfall from the reform legislation in 2014 alone, and Bush, who has earned $2 million as a paid board member, not counting stock holdings, received a nice chunk of it.

Dr. Howard Dean, casting a jaundiced eye toward the ACA as a “Rube Goldberg” contraption, told MSNBC’s Lawrence O’Donnell in November 2014 that business interests essentially wrote the law for their own benefit inside the secretive Senate Finance Committee chaired by former Sen. Max Baucus (D-Mont.); the Obama administration, anxious to keep health care within the private sector, raised no objections and, in fact, encouraged the process. Four years on, the ramifications are startlingly disconcerting.

Rather than maintaining the existing systemic framework (the original intention), in order to minimize upsetting dislocations and the inevitable right-wing resistance a government-run, Medicare-like program would have generated, the ACA has actually spurred change, change of an unanticipated nature — the establishment not of “socialized medicine,” but of corporate health care.

One of the prominent stakeholders in the room when Obamacare was finalized (in addition to the insurance, pharmaceutical, and medical-device industries) was the increasingly corporatized hospital sector, one of the prime beneficiaries of “reform” as it turns out. The ACA rewards hospitals in the same way it rewards insurers — by providing more paying customers (several million more) through the individual mandate and the expansion of Medicaid.

Hospitals get an added bonus, however. Uninsured patients, traditionally treated as charity cases, can now in good conscience be denied free hospitalization and forced into subsidized health-exchange plans. In 2014, the industry savings by doing so amounted to $5.7 billion, money formerly expended on “uncompensated costs” that can now be devoted to accelerated expansion and buying up the competition. Indirect public support of private hospitals through the ACA has therefore reinforced a trend already under way, corporate consolidation and the acquisition of doctors’ practices and clinics. (The days of old Doc Adams hanging out a shingle are all but gone; physicians are now mostly salaried employees.)

The current wave of mergers, the greatest since the 1990s, allows integrated hospitals to cut overhead, maximize market share, improve their negotiating position vis-à-vis health insurers, and indulge their endless appetite for new medical technology. It also provides spare funds to convert to electronic records, a questionable expense arbitrarily required by the ACA and something small “stand-alone” hospitals struggle to afford.

This is all good for hospital chains, but bad for the public and the health system as a whole. Concentrated market power and reduced competition are leading to higher prices; charges for medical procedures rose at four times the rate of inflation in 2012. In addition, hospital CEO pay is soaring, starting from an average level of $475,000 a year and reaching as high as $4 to $6 million in some cases.

The FTC has taken note of the price gouging, rejecting spurious hospital claims that such behavior is necessary for survival under the ACA and laying the blame instead on a desire to use inflated charges to fund further mergers. Federal regulators have several ongoing investigations and lawsuits involving fraudulent billing at hospital chains in the midst of merger and acquisition deals.

The increasing ranks of investor-owned companies, which comprise well over a fifth of all US hospitals (nearly a third in southern and southwestern states), are the biggest offenders in terms of manipulative revenue enhancement. Tenet Healthcare of Texas announced a 173% increase in profits for the fourth quarter of 2014, ninth best on the S&P 500. A Tennessee for-profit chain, Lifepoint, was up 17% in overall revenue in the second quarter of the year (44% in states expanding Medicaid).

Naturally, Wall Street has responded; the largest for-profit chain, HCA (Hospital Corp. of America), of Rick Scott Medicare-fraud fame, saw its share price balloon over 50% in 2013. As USA Today’s investment columnist enthused recently, “Obamacare is one of the best things to happen to hospitals in quite some time.”

But not all hospitals. Nonprofits, traditionally the bedrock of the American health-care system, have been taking it in the neck; their average revenues, once a stable 7% per year, fell to under 4% in 2013 as private insurers and the Medicare program became less willing to pay for hospital care in a recessionary and reform-driven environment. This has led financially distressed nonprofits to pursue mergers, most often with for-profits, producing a dramatic upsurge in prices charged under new, profit-oriented management.

Worst of all, perhaps, is the impact on small, independent rural nonprofits, 43 of which have gone under or been bought up and then closed by large chains since 2010. The losers in this case are the former patients, typically impoverished Medicare and Medicaid recipients afflicted with chronic problems and now forced to travel long distances for care.

There are other corporate interests capitalizing on the ACA’s marketplace tilt and perverse system of incentives, the health-insurance companies and the pharmaceutical firms, in particular. But it’s the hospital sector, through its lobby the American Hospital Association ($1 million annually in political donations), that is presently setting the tone and paving the yellow brick road to an institutionalized corporate health-care system. Thanks, ACA.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy.

From The Progressive Populist, March 1, 2015

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