OR YOUR LIFE
Downs, Peter
YOUR MONEY BY PETER DOWNS Joe Allen Bennett lived on a fourteen-acre farm in College Grove, Tennessee, with his disabled wife. They had a combined income of $328 in 1983, and they had no health...
...Poor and chronically ill elderly patients, who often have longer lengths of stay and incur higher costs than other patients, are viewed as undesirables by hospital administrators...
...On August 7, 1984, National Medical Enterprises (NME) signed a contract to manage the public hospital in St...
...Emergency-room care has also suffered...
...She told me my bill was $ 19,000 and that I was responsible for it," recalls Pesek...
...In 1986, VHA formed a partnership with Aetna Life and Casualty called PARTNERS National Health Plans, Next, the McDRG The Reagan Administration has introduced a fundamental change in Medicare financing that is designed not to improve health care but to make it less expensive...
...secular not-for-profit hospitals enjoyed 35 per cent higher profits, while the for-profit chains boosted profits by 28 per cent...
...The Government, in a triumph of bureacracy, has classified illnesses into 468 Diagnostic Related Groups (DRGs...
...What may be worse than this harassment is the decline in care that NME has brought...
...By pursuing cost-cutting strategies, the not-for-profit hospitals have been able to boost their profits as much as or more than the for-profit hospitals...
...St...
...Herron died at home the next day of a ruptured appendix...
...Regionally, DRGs will greatly benefit sunbelt-based corporate hospital chains at the expense of older health centers of the Northeast and Midwest...
...American Medical International (AMI) is buying health-maintenance organizations and setting up its own insurance company, AMI-CARE, to funnel patients into its hospital system...
...Hospital officials had told parents they could not take their newborns home until they had paid their bills...
...For lower earnings, the bonuses are correspondingly smaller...
...Approximately 44 per cent of the company's revenues come from Medicare and Medicaid...
...This allowed NME to eliminate jobs, break the union, and cut labor costs by wiping out accrued sick leave, vacation time, and pensions...
...One year Profit-seeking hospitals don't let health get in the way later, they gave $1.8 million in such care, compared to the $30 million provided by the city's eight not-for-profit hospitals...
...After NME took over, supply shortages became really bad," recalls Judy Pa-pian, a nurse-midwife at City Hospital at the time...
...A few days later, Pesek received a telephone call from Georgia Griffith, a social worker at Children's...
...Christine Pesek .went to Regional in early 1986...
...Joe Feinglass (Joe Feinglass is project director of the Housestaff Cost Awareness Project at Northwestern Hospital in Chicago...
...Costs of treating patients have traditionally been higher in the Northeast and Midwest, with longer patient stays and higher expenditures on research...
...His family approached Legal Services attorney Gordon Bonnyman for help...
...The medically indigent had made up 52 per cent of City Hospital's patient load, but the sliding scale that City Hospital had used was abolished, and NME began charging everyone full fees...
...Pesek refused to leave her family...
...Louis, for instance, refuses to admit patients without some guarantee of payment, either from an insurance company or a patient-payment contract...
...NME would manage that hospital and the city health clinics...
...In response, the for-profit hospitals quickly moved into those areas where Federal cost controls are lax and cost pass-throughs still allowed—out-patient services, psychiatric care, new equipment, and to a lesser extent nursing homes...
...On the day he was going to file a complaint charging the company with abandonment, denial of emergency care, intentional infliction of mental distress, and extortion, HCA finally agreed to continue treatment...
...Bennett's family struggled to scrape together $500 so he could begin treatment...
...Louis's lead-poisoning rate is the highest of any city in the United States...
...From 1983 through 1985, Thomas Frisk Jr., chairman and chief executive officer of HCA, received salary and benefits totaling $4.9 million...
...When NME began managing City Hospital, the mayor transferred the lead-poisoning screening and treatment programs from the health department...
...When Bennett and his sister, Mattie Sue Owens, arrived at Park View, they were told that no treatment would be given until $500 had been paid...
...After an emergency biopsy revealed his condition in October 1983, he was referred to the Park View Hospital in Nashville...
...Jones establishes specific performance areas to gauge his hospitals' success: bad debts (which include indigent care), staffing, overtime, accounts receivable, quality, supply expense, and pre-tax earnings...
...By then, Bennett was in great pain and coughing up large amounts of blood...
...A state investigator concluded that the emergency room was poorly run and only one-fifth the size needed...
...The top eighteen HCA officers were paid $35 million during those years, and the company retained earnings of $878 million...
...HCA does not provide care to anyone without assurance of payment," Colton told them...
...In 1983 and 1985, Humana's top executives received $30 million in salaries and benefits, and from 1983 through 1985, the company retained earnings of $570 million...
...Virtually all for-profit hospitals offer discounts to insurance companies that direct patients to their facilities...
...Services provided at the for-profit hospitals are no less expensive than elsewhere...
...In March, she delivered a baby boy by Caesarean section...
...With the for-profit companies in the vanguard, hospitals around the country are refusing treatment to the indigent...
...Not-for-profit hospitals are also forming their own for-profit chains...
...But the bounty has not been evenly distributed...
...The patient load fell by half...
...The most they could come up with was $300...
...We had to start reusing ours because administration refused to buy more...
...AHS is a partnership of thirty-five regional not-for-profit systems with 500 member hospitals...
...She was seventeen, unwed, and pregnant...
...Carlos Perez, says Medicaid pays only 40 per cent of the cost of the therapy...
...All city hospital and clinic employees were discharged...
...The radiation cancer therapy department of the Washington University Medical Center, also in St...
...In July 1985, NME instituted a $25 fee for each clinic visit, whether for screening or treatment...
...That's bad news for the Joe Allen Bennetts of this world...
...Tom Nolan, a Humana public-affairs officer, acknowledges that indigent care is part of bad debt, but he claims such care is not affected by the company's bad-debt goals...
...And so the child gets brain damage...
...What's more, DRGs create strong incentives for hospitals to transfer or refuse to admit unprofitable patients whose treatment is likely to cost more than the DRG rate...
...The company would be paid $400,000 for the services of four administrators for one year, and $215,000 for physician recruitment...
...Bonnyman contacted HCA's counsel, who said the corporation "turned down people in similar circumstances every day" and would make no exception in Bennett's case...
...The DRG policy also provides physicians and hospitals with perverse financial incentives to increase the number of patient readmissions or reward the marketing of superfluous treatments...
...Hospital officials agreed to stop such practices and instead began demanding pre-admission deposits...
...We're just trying to convince her to apply for it...
...come up with the money had to travel more than 100 miles to another facility...
...Now, a hospital will receive a fixed-in-advance fee that is pegged to the patient's illness...
...It serves its member hospitals with a mass-purchasing program and a joint venture with Transamerica Occidental and Provident Life Insurance Companies...
...Humana's chairman, David Jones, received salary and benefits totaling $2.4 million for 1983 and 1985...
...Women who couldn't In today's competitive health industry, not-for-profit hospitals are coming to resemble the for-profit chains, cutting costs, slashing indigent care, and forming their own for-profit branches...
...What's more, HCA is growing fat on taxpayer money...
...Cardiac patients who undergo catheterization, pacemaker insertion, coronary-bypass surgery, or valve replacement will be reimbursed at a rate five to seven times higher than patients with the same condition who could have been treated medically instead of surgically...
...Park View, owned by the Hospital Corporation of America (HCA), was one of the few facilities in the area that provided the radiology treatment he needed...
...Roughly 18 per cent of the nation's hospitals are on the verge of bankruptcy, and 500 primarily inner-city and small rural hospitals face closure in the next few years...
...The rate remains fixed regardless of the stage of any patient's illness or the individual needs of that patient...
...VHA is owned by sixty-two large not-for-profits, including Barnes Hospital (Washington Univer-sity-St...
...AHS provides the network of hospitals and medical staff to serve patients in the health organizations the insurance companies market...
...One of the five city clinics never reopened...
...Neither her parents nor her boyfriend had insurance...
...The reimbursement rate for each DRG represents the average cost for treating common medical diagnoses or performing surgical procedures...
...Regional, which currently lacks obstetric and pediatric wards, contracts such services to Children's and three other hospitals...
...DePaul Hospital in St...
...The hospital industry as a whole has prospered under the new system...
...HCA makes money for its owners and officers by "discounts in the purchases of medical and dietary supplies and capital equipment due to our favorably priced national purchasing contracts, reductions in patient bad debts, carefully selected decreases in staffing levels, and reductions in inventory levels," its 1985 annual report states...
...most of these were from low-income families with no insurance...
...In 1984, the Humana hospital in Memphis provided no indigent care, while the public Regional Medical Center provided $25.9 million of such care...
...Dallas's Parkland Hospital and District of Columbia General have reported a 400 per cent increase in their patient transfers...
...The bonuses awarded to top Humana executives are determined by the company's earnings per share...
...The two biggest such ventures are Voluntary Hospitals of America (VHA) and American Healthcare Systems (AHS...
...The fourteen top executives were paid $ 13 million, and the company retained earnings of $149 million...
...which makes VHA hospitals the providers of choice for all Aetna-insured patients...
...Lead-based paint is the main cause of the poisoning, says Kuehnert, adding that it is a particular problem for "families living in poverty and poor housing...
...It is outrageous to insist someone pay for something that he or she might not be able to afford," says Paul Kuehnert, who was director of the city's lead-poisoning clinic until NME assumed control...
...In 1984, the profits of Catholic hospitals rose 30 per cent...
...For-profit hospitals in Tennessee routinely gave no charity care in 1984, dumping the indigent onto public facilities...
...In fact, an epidemic of "dumping" has occurred in recent years...
...They complained of taking patients into the emergency room and finding no one there to receive them...
...Patients who could not pay their bills were harassed by bill collectors...
...Charles, Missouri...
...Humana boasts that such a policy places it "in the forefront in addressing the problem of who pays for indigent care...
...When there is both a Humana hospital and a public hospital, Humana sends indigent patients to the public hospital because that's what the public hospital gets Government money for, says Nolan, and "we pay taxes...
...Louis had been tested...
...Louis, is declining to take any more Medicaid patients from the city of St...
...Paramedics reported that the emergency room was chaotic and understaffed...
...Louis until the city makes up the difference between the costs to the Center and what Medicaid pays...
...Hospitals in the United States fall into three categories: for-profit hospitals, which are in business to make money for their investors...
...She said that I should move away from my parents and go on welfare so that Medicaid would pay the bill...
...As public hospitals, urban medical centers, and small-town clinics close or cut back services, sports-medicine clinics are sprouting up at suburban shopping malls, and corporate chains of physician service centers compete to be the new medical McDonald's...
...What happened at Park View is not unique...
...Low-cost hospitals that can treat their elderly patients cheaply are earning record profits on the difference between their actual costs and the DRG reimbursement rate...
...not-for-profit hospitals, which nonethless can earn profits, and public hospitals, which are owned by the Federal, state, or local government...
...It is skimming the Government even as it skimps the public...
...Seriously ill Medicare patients are being denied admission to hospitals or catapulted out of hospital doors prematurely," says Senator John Heinz, head of the Senate Special Committee on Aging, which studied the effect of DRGs...
...A similar incentive for surgery exists in the treatment of gallbladder disorders, peptic ulcers, and lower-back pain...
...Humana and the other for-profits, Nolan adds, devote about the same percentage of their revenues to charity care as do the not-for-profits...
...Next, the company moved to raise patient fees...
...Cook County Hospital in Chicago has seen a 500 per cent increase in Emergency Room patients transferred from nonpublic hospitals...
...We had to resort to some really primitive practices...
...Since Medicare patients make up 35 per cent to 40 per cent of the business of most hospitals, DRGs have brought a dramatic switch of incentives...
...For example, every other hospital uses disposable OB packs [the obstetrical linens used when delivering a baby...
...Generous bonus plans tie their own income to company profitability...
...In the last decade, some 15,000 children in St...
...HCA, the largest for-profit hospital company, owns 230 general and psychiatric hospitals in the United States, and it manages another 196...
...Company policy remains the same," Nolan says...
...We had to wash, sterilize, fold, stack, and pack our OB packs ourselves...
...They say they'll turn it over to a collection agency if I don't pay, but there's no way that I can...
...In the process, Medicare patients are suffering...
...Other patients were told they could not leave the hospital until they paid $1,000 or signed a loan application...
...After the first year of Medicare DRGs, the industry had earned the highest profits since it began collecting such statistics two decades ago, the American Hospital Association reported...
...In such a case, the goal was to cut bad debt by 10 per cent, or to the 1983 level, whichever was higher...
...Its profit-making subsidiaries provide management services, hospital laundry and cleaning, psychiatric and alcoholism care, and capital development (with the Mellon Bank) to 550 community-based not-for-profit hospitals...
...Public-health activities evaporated as NME dropped such clinic positions as nurse-midwives, family-planning nurses, family-practice nurse-practitioners, social workers, and nutritionists...
...the $500...
...And throughout the decade, the private health-insurance industry has been taking additional steps to restrict hospital use...
...Mayor Vincent Schoemehl was moving to close City Hospital and to acquire a newer hospital, which he would turn over to a private, not-for-profit group calling itself the Regional Health Care Corporation...
...Griffith denies Pesek's story but says, "It's hard to convince parents to apply for Medicaid...
...A few days later, however, HCA upped the ante: Unless Bennett paid another $500, the treatment would be stopped...
...The highest executives receive bonuses equal to 70 per cent of their base pay for earnings per share of $2.25 or above...
...the money that used to be spent on charity care now simply goes to profit and expansion...
...Bonnyman threatened legal action...
...Conversely, higher-cost hospitals—including most public and small rural hospitals, which tend to serve poorer, more severely ill populations—are losing money...
...Bennett died of lung cancer in June 1984...
...But HCA is not alone...
...The Humana Corporation, one of the top four hospital giants, operates the same way...
...Louis, Missouri...
...No attempt was made to transfer patient records to the other clinics where patients sought care...
...Bennett suffered from lung cancer...
...Humana is establishing Humana Care Plus, with incentives to shuttle patients to Humana-affiliated doctors and hospitals...
...Even the most compassionate and committed institutions," says Senator Edward Kennedy, are being forced to choose between "rationing health care for the poor or bankruptcy for their institutions...
...The officers of HCA have a reason for their hard-nosed attitude...
...Humana hospitals do not have the responsibility to provide care for the indigent except in emergencies or in those situations where reimbursement for indigent patients is provided," the company stated on a Florida certificate-of-need application...
...They had a combined income of $328 in 1983, and they had no health insurance...
...The chief of radiation cancer therapy, Dr...
...That wasn't enough...
...his compensation for 1984 reportedly topped $ 18 million, but that could not be confirmed with the Securities and Exchange Commission...
...Research for this article was assisted by a grant from the Fund for Investigative Journalism...
...In at least one instance, the results were fatal...
...Ivory Herron had been bedridden for several days with a high temperature and flu-like symptoms...
...Pregnant women, for example, had to pay a deposit of $ 1,200 to get in the door...
...In addition, they began to make deals with insurance companies...
...In 1985, each hospital in the Humana chain was to reduce the volume of bad debt by 5 per cent, unless the result would still be greater than 1983's bad debt...
...In 1984, the Government began to phase in a prospective-payment system, which reimburses hospitals at a fixed rate for each illness rather than for what the hospital charges [see sidebar, Page 28...
...These earnings reflect the success for-profit hospitals have had in adapting to changes brought on by the Federal Government and third-party insurers...
...Almost all of its facilities are in the South, half of them in Florida, Tennessee, and Texas...
...Distressed, they talked with HCA vice president John Colton...
...Louis agreed to enter into a $7.7 million contract with NME...
...NME's chairman and chief executive officer, Richard K. Earner, received $1.3 million in salary and benefits for 1985...
...His brother drove him to Regional's emergency room but was unable to find help there...
...Every few days, I get a bill in the mail and a phone call from Children's," she says...
...He did not have Peter Downs is a free-lance writer in St...
...In April 1985, the city of St...
...other religious hospitals saw profits soar 55 per cent...
...The baby had pneumonia and was transferred to Children's Hospital...
...It is company policy to treat all indigent emergency cases and all indigent non-emergency cases where there is no public hospital available to provide indigent care...
...Four of HCA's five Nashville hospitals provided no charity care in 1980...
...And, like the for-profit chains, the not-for-profits are slashing indigent care...
...In 1983, the Kentucky attorney general's office ordered Humana's Lake Cumberland Hospital in Somerset, Kentucky, to stop holding patients hostage...
...He measures quality by asking patients to assess staff courtesy and waiting time...
...Louis), Johns Hopkins, and Yale...
...The Medicare system used to pay a hospital for whatever it cost to treat a patient...
...Other hospitals use them once and throw them away...
...Neither did his sister...
...In this competitive environment, the not-for-profit chains are coming to resemble the for-profits ever more closely...
...But since DRGs are based on national, rather than regional, averages, the highly capitalized for-profit hospitals of the South and West will stand to benefit...
Vol. 51 • January 1987 • No. 1
