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Medical Malpractice and the Corporate Control of Health Care – Yes, There Is a Connection

While the number of actual medical malpractice lawsuits has fallen in recent years, the problem has not gone away. The primary reason for the drop is “tort reform” legislation that has made it more difficult for victims to file lawsuits and receive appropriate recovery. In fact, research from Harvard University indicates that only about 12% of malpractice cases result in legal action. Meanwhile, a study published in the Journal of Patient Safety suggests that as many as 440,000 patients a year die as a result of preventable physician error. That figure makes medical malpractice the third leading cause of death in the US.

Is it all because of physician error or incompetence? Or is there a more sinister dynamic at work here? Over the past few decades, private, profit-driven corporations have been increasingly busy taking over hospitals and large-scale medical practices. It is the proverbial “elephant in the room” that few lawmakers or politicians acknowledge – but there is a direct correlation between this new profit-driven medical care and the rise in malpractice.

Steven's Case

A chapter from Making a Killing: HMOs and the Threat to Your Health provides an illustration of everything that is wrong with the commodification of health care in the US. It is a classic demonstration of how the accountants and the CEOs of these corporations who put profits over people are liable for “malpractice” more often than doctors.

A young couple had brought their two-year-old son, Steven, into the emergency room after a minor accident in which a twig had punctured his cheek and sinus. The attending physician removed the object, but shortly thereafter, the boy developed a fever.  Twice, his parents brought Steven to the hospital, only to be told there was nothing to worry about. The third time, the boy was barely conscious. His mother asked that they run a CT scan.

Under their HMO's “managed care” plan, the cost for that scan – $800 – would have been deducted from the physician and hospital's per-patient reimbursement. In essence, it was money out of their own pockets. Steven's parents were told that the CT scan was “unnecessary.”

Three days later, the boy was in a coma. Today, Steven is blind, suffers from cerebral palsy, and must take anti-seizure medications. It turned out that little Steven had an easily-treated brain abscess that could have been detected by a CT scan. If it weren't for flagrant corporate greed and its “bottom-line” mentality, Steven would be whole and healthy today.

This tragic story is only one of thousands about patients who suffer needless injury and death – all because dedicated, caring medical professionals have their hands tied by some fat cat corporate CEO sitting on his rear in some plush office, pinching pennies.

Where it Started

Concern over privatization of medical services and its effects on health care services is not a recent phenomenon. Books and articles on the topic go back to the early 1980s. Before that time, hospitals and clinics were largely decentralized and community-based. It was at that time that private corporations began integrating the disparate components of the healthcare system (hospitals, specialty clinics, pharmacies, physician practices, etc.) in order to consolidate control. At the same time, the Reagan Administration began shifting Medicare payments away from a per-diagnosis to a per-treatment basis. Private insurers soon followed the government's lead.

It wasn't long before private insurance companies started complaining that physicians were taking unfair advantage of the fee-for-service payment structure. Shortly thereafter, these corporations started the practice of making  “capitation” payments. Intended to contain the rapid rise of health care costs, capitation payments are fixed amounts paid to physicians in advance for the delivery of medical services. The formula is complex, but essentially, it is based on the number of patients the physician sees and how much time is spent with each one. By controlling the use of medical resources, the system of capitation puts the financial risk on the physician.

It doesn't take a genius to figure out the potential and motivation for abuse under such a system.

By the 1990s, health care costs were rising at twice the overall inflation rate.

The Corporate “Free Market Solution” - More Of The Same

The expansion of “managed care networks” was intended to contain health care costs and promote efficiency. Instead, by the end of the decade, 16% of Americans had no health insurance at all – and were effectively priced out of health care and medical services. The corporate takeover of health care facilities accelerated throughout the 1990s – while at the same time, public and independent non-profit community hospitals were closing their doors. Instead of lowering costs and increasing efficiency, health care privatization did just the opposite. By 1994, administrative costs at an average private, for-profit hospital consumed 34% of the operating budget – as opposed to 3% for Medicare. In some cases, cost of a hospital room at a private hospital was nearly 60% greater than it would have been at a public, non-profit facility.

As the US entered the 21st Century, health care costs were again on a steep, upward trajectory.

Consolidation and Tighter Control By Bean Counters

Over the past ten years, health insurers have been buying up physician groups as well as hospitals. Keep in mind that the purpose of a “payor” – the insurance company – is to control costs and maximize profits. The physician's priority, according to the Hippocratic Oath, is to act in the best interests of the patient.

The potential for conflict should be readily apparent. Increasingly, physicians find themselves forced to make medical decisions based not on the patient's medical needs, but on what the accountants determine is best for the corporate bottom line. In 2012, CBS 60 Minutes aired a segment investigating a Florida-based for-profit hospital chain Health Management Associates. According to employee allegations, the company was pressuring physicians to admit patients unnecessarily and make needless referrals in order to increase its profits.

How else is corporate management pressuring doctors to reduce costs, prescribe unnecessary (but profitable) treatments, and cut corners on patient treatments in the name of “efficiency”?

Malpractice and The System Today

Recently, Dr. Allen Frances, MD, writing for KevinMD.com, described the privatization of health care (and other institutions) as “a classic mismatch of wonderful theory and disastrous practice.”  It is one in which "an inefficient government monopoly is replaced by an even more inefficient private monopoly that is more expensive, wasteful and lacking in accountability or responsibility for serving the public good."

It is common knowledge that the US health care system results in poorer outcomes, yet is twice as expensive as government-run programs in other industrialized nations. While the Affordable Care Act has done some good in expanding access to medical services to those who otherwise would be unable to afford it, the federal law fails to address the problems of privatization. Furthermore, the problem is threatening to get worse, as health insurance companies are looking toward greater consolidation through mergers and acquisitions. This will further concentrate ownership and control of health care facilities and resources – to the detriment of patients.

At the same time, physicians, threatened by the possibility of malpractice suits have taken to the practice of “defensive medicine.” Essentially, this consists of ordering unnecessary tests and performing unnecessary procedures in order to cover potential liability. It is inconvenient, expensive and in some cases, potentially harmful – but it is profitable for health care companies.

The obsession over “free markets” and privatization as the solution for everything is literally killing us -  in more ways than one.  This is especially apparent when it comes to America's profit-driven health care system.  Dr. Bernard Lown, MD, writing for Physicians for a National Health Program, summed it up quite well in his 2007 article, “The Commodification of Health Care”:

Underlying the breakdown of the health care system is a far deeper phenomenon - the onrushing marketization of all human transactions. The overall impact is to denature fundamental human values and tear apart the ties that nurture communal life.

Under a system that places profits over human life itself, should we expect anything else?

 

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