A review of the medical marketplace, fraud and corporate practices in the USA. Much of the information is drawn from the 1991-94 revelations about the activities of National Medical Enterprises-NME (now renamed Tenet Healthcare)

Contents

The corporate scene
The extent of the problems
The Medical paradigm
The corporate paradigm
Community care and a level playing field
Successful sociopathy
Stockbrokers
Corporate practices
Consequences
The groups targeted
The response of the market
The economic rationalist response
Consequences for care
The Medical Profession and corporate medicine

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Part 3: - Corporate Medicine in Australia
References - (Best opened in a separate window)

[Top] - The corporate scene- ^{1, 5, 8, 9, 50,51, 52, 141, 142, 152} Corporate medicine was born in the 1960's with the passage of Medicare and Medicaid legislation in the USA. This established a government funded medical payment scheme from which corporate profits could be generated. Its development has been characterised by enormous financial success, dysfunctional practices, the exploitation of patients and massive fraud. ^{36, 37, 38}

Health care fraud is alleged to cost US taxpayers US $100 billion each year. This is 10% of the health budget and 1.5% of the gross domestic product. ¹³³ It has replaced the drug scene as the major focus of the FBI's investigative efforts.

A check through my files ⁵⁰ reveals allegations of fraud and fraud related settlements in regard to National Medical Enterprises (now Tenet Healthcare) ¹⁵², Charter Hospitals ^33, Health Corporation of America (HCA) ^{20, 26}, Community Psychiatric Centres ²⁶, Paracelsus, Caremark International, OrNda Healthcare hospitals, Allied Clinical laboratories^133, Laboratory Corp of America¹³³, Damon Clinical Laboratories¹³³ and SmithKline Beecham³. Most have reached substantial settlement agreements, often without admitting guilt.

SmithKline Beecham is currently trying to involve itself directly in patient care in Australia⁴. It paid US $325 million recently to settle fraud related actions by US Dept. Justice but without admitting guilt. Alan D. Bersin ¹³³, a US attorney recently stated in regard to events in the USA "In addition to catastrophic financial loss, the result has been the breeding of a moral indifference. We see evidence of this brazen conduct from seedy street slums to corporate board rooms"

[Top] - The extent of the problems:- ^{9, 25, 50} It is essential to understand that the fraud settlements and convictions are only a reflection of the thought processes which now drive what was once primarily a humanitarian endeavour. They are the tip of the iceberg. Representative Fortney Pete Stark ¹¹⁴ stated "- - society thinks of the medical system not in terms of keeping patients well or helping them get better but instead as a fiercely competitive business in which survivors concentrate on making tremendous amounts of money." and "The goal isn't health care anymore - the goal has become the care of the stockholder interest."

Not all deviant and harmful practices are illegal, nor is unethical conduct, but anyone alleging that corporate conduct was deviant and unethical might be pursued through the courts. Claims to high standards of care and to impressive ethical standards are part of the public relations exercise. Financial success, legal know how, a powerful PR machine and a strong political lobby in a capitalist society have ensured success for the corporate model of care.^{103, 137}

The consequences impact on the vast majority of US citizens at some stage in their lives. Rex Dalton writing from San Diego where for profit hospitals were purchasing the last remaining not for profit hospitals wrote "In other regions where large, for-profit firms dominate the health-care market, such as the South East and in El Paso, Texas, studies have shown that the corporations increase hospital prices to boost profits."

[Top] - The Medical paradigm:- ^{9, 42, 45} The vulnerability of the patient, and the sharp conflict between the profit motive and the interests of the patient have been recognised since Hippocrates. This conflict has been managed by adherence to a set of humanitarian values, a system of ethics and social control within a professional paradigm. The prime responsibility of a health care provider is to the patient.

[Top] - The corporate paradigm:- ^{9, 42, 44, 45, 46, 49, 50} A corporations prime responsibility is to shareholders. Managers have a fiduciary duty to maximise profits for shareholders and economic theorists advise that they have no responsibility to society. Corporate executives such as John Bedrosian (founder of NME) have argued publicly with medical protagonists such as Professor Arnold Relman.⁴² Corporate managers have maintained that the medical paradigm is obsolete and that health care is no different from any other commodity to be bought and sold. It is a service to be marketed. Rational argument did not prevail against the public relations machine and economic success. Corporate medicine's ideas have come to dominate thinking in the US health scene. These ideas accurately reflect an economic rationalist ideology which sees all human endeavour through marketplace eyes.

That exactly these corporate ideas underpin Columbia/HCA's approach to the provision of care are clear from an article by Carl Ginsberg.⁵⁶ Richard Rainwater, co-founder of Columbia/HCA is reported as saying "Health care is a business like anything else." and "The day has come when somebody has to do in the hospital business what MacDonald's has done in the fast-food business and what Wal-Mart has done in the retailing business," Richard Scott, cofounder, chairman, CEO and President of Columbia/HCA said "Do we have an obligation to provide health care for everybody? Where do we draw the line? Is any fast food restaurant obliged to feed everyone who shows up?" Ginsberg concludes "What is a crime is the galloping privatisation of the nation's health resources and the rise of a competitive health care system that has less and less to do with health and access to care and everything to do with money."

[Top] - Community care and a level playing field:- ^{44, 50} In spite of the emphasis on corporate medicine, the vast bulk of health care in the USA has until recently been provided by public hospitals, by community groups, by church groups and by academic institutions. With the application of economic rationalist principles such groups are unable to compete. Consumers are not in a position to evaluate the services provided effectively. Competition is not about service, values or standards or care but about advertising, dominance, control and market share.⁹⁷

Corporations have all the advantages. Statements made by not for profit executives who found themselves crushed between the giants Columbia/HCA and Tenet Healthcare (previously NME)¹²¹ reflect their predicament as like being caught between "two 800 pound gorillas" and "I am like a flea between two elephants." In the USA costs of medicine are the highest in the world, vast sections of the community cannot afford medical attention and the overall standards of care are among the lowest in the developed world.^{33, 34}

Attempts to reform the system by government have been frustrated by the might of corporate insurers and providers. ¹⁰³ According to the a 1994 report by the non-profit Center for Public Integrity over US $25 million was given to members of congress from 1993 through the first quarter of 1994 by organisations with health related interests. ¹³⁷ "Add to that the tens of millions of dollars in television, radio and newspaper advertising, plus the untold millions of dollars spent in lobbying contracts, polling and grass roots campaigns, and the result is the largest blitz on proposed legislation in the nations history." and "- - at least 97 firms that have been hired over the past 18 months to influence the health care debate."

The report describes how members of congress, particularly those on health care related committees received millions of dollars in political contributions from health related interests. When a single payer initiative was put to Californian's in 1994, insurers and health care providers put on a US $10 million advertising blitz against the measure. ¹⁴⁰

An October 1996 editorial in the Lancet referring to Congress' attempt to "control the temptations and excesses of managed care" wrote "The health-insurance industry is resisting every step, and, with the help of their vast number of lobbyists and a mountain of dollars' worth of strategic campaign contributions, they are gaining ground." ¹⁰⁰

Attempting to address systemic deficiencies in cognition by legislating for individual dysfunctional practices in situations where individual variations are infinite and oversight almost impossible reflects the corner into which economic rationalists have painted themselves.

In an article in the Lancet Greenberg compares the service provided under managed care unfavourably with the old fashioned private care given his dog at the local vets because "Veterinary care, however, is more attentive to bodily frailty than to economics." ¹⁰¹ Another editorial in the same journal in February 1997 refers to physicians as corporate employees "who are constantly hectored to increase productivity by company efficiency experts. Their clinical judgment is also routinely challenged by company cost-containment departments." ¹⁰²

John Raulston Saul the US author makes the point that level playing fields are tightly regulated by the rules of the game and conduct is constrained by an ethic of sportsmanship. ¹¹⁷ Breaches of conduct are controlled not only by the regulations but also by the negative responses and ostracism of other players. It is essentially a social process.

Describing the jungle where corporate predators hunt their prey as a "level playing field" is only one example of the way in which economic rationalists misuse language to create false perceptions. We should not make the mistake of calling them dishonest. These forceful and dogmatic assertions illustrate the closed minded rationalisations used to underpin an irrational and fundamentally flawed ideology. Who would dare challenge an assertion about something so obvious and so fundamental to our democratic way of life?

[Top] - Successful sociopathy:- ¹⁵¹ Within a society driven only by economic considerations, closed minded groups , free of social control and able to ignore the human consequences of their financial activities would be expected to succeed and those restrained by humanitarian considerations to fail.

The competitive "level playing field" in the USA is about market share.⁵ It is about credibility and control. It is not about cost, service or care. Community, church and academic endeavours are going to the wall and corporate giants seeking control and market share are rushing to buy. The community has become alarmed at the loss of community assets and the consequences. ⁵ They are realising that the changes are irrevocable and not in the interests of the communities. The phenomenon has been likened to the "Pacman" computer game. Law makers are rushing to introduce "Pacman" legislation. ¹¹⁴

[Top] - Stockbrokers:- ⁴⁹ Corporate activities are sanctioned by the marketplace and by stockbrokers who advise investors. Economic markers of success are analysed and outcomes are measured in terms of financial indicators such as admission rate, census, length of stay, profits per patient day and type of insurance cover. Severely dysfunctional practices are advocated. These include the use of financial incentives linked to profit indicators for managers, and the use of financial incentives to induce the medical profession to support corporate practices.

[Top] - Corporate practices:- ^{8, 9, 34, 50, 141, 142, 152} While public relations exercises make claim to a medical ethic of care, internal corporate documents reflect the prime responsibility to shareholders. In 1988 administrators in NME (now Tenet) hospitals were instructed to call meetings and instruct staff. The goals for these meetings are set out.

"To Clear up misconceptions. Example. We exist as a company to provide a high quality service to our patients (and in some cases society). I have heard individuals within the company make remarks along these lines and it is absolute nonsense. Lets call a spade a spade: We are here for one reason only - to make a profit for the shareholders who put up the money so that we could exist in the first place. "

Corporate endeavours are directed to maximising the markers of financial success and plans are made to accomplish this. Objectives are set for each hospital and hospital managers are awarded bonuses on the basis of their success in meeting financial indicators. 80% of hospital CEO's in the USA receive incentive payments of one sort or another. Senior management often turn a blind eye to the methods employed to meet financial objectives.

[Top] - Consequences:- ^{8, 9, 50, 143, 152} National Medical Enterprises internal documents show how corporate objectives were met by creating a false market using misleading and scare advertising, by supposedly humanitarian public seminars, by books , by outreach programs and by crisis phone lines. These were designed to increase public anxiety and to bring people for assessment. Projects were carefully evaluated in terms of the number of admissions generated.

Assessments were often performed by non medical persons whose job was to persuade the unsuspecting into hospital. Assessors were rewarded on the basis of their "conversion rates". Diagnoses were tailored to insurance cover rather than clinical condition. Once admitted patients were persuaded to stay for the duration of their insurance cover. They were then pronounced cured. Profits were maximised by taking over from doctors and providing as much unneeded and expensive care each day as possible. Ingenious and fraudulent accounting practices were employed.

Typical closed minded rationalisations were employed to justify this. Inpatient treatment was clearly superior and people were entitled to this if they could afford it. Patients were insured and so were entitled to the full benefits of a full course of inpatient care which was obviously superior. If treatment was good for you then clearly more treatment was even better. The costs of care were higher than in other hospitals because they were providing superior care. When all else failed then this was the "American way".

[Top] - The groups targeted:- ^{9, 50, 143} Predictably the most vulnerable groups, those least able to make rational decisions were targeted by corporations. Those where the decisions were made by families whose conflicts and guilt could be exploited were particularly vulnerable. Patient groups targeted in the worst fraudulent practices have been the normally anxious, children, adolescents, the aged, psychiatric patients, substance abuse and rehabilitation, particularly head injuries. These are the groups unable to exert their rights on any sort of playing field and who depend on the medical ethic and the duty of care to protect them. It is clear that standards of care provided to these groups were sadly deficient. Internal corporate documents reveal that at a time when National Medical Enterprises (now called Tenet Healthcare) was making vast profits, standards of care in some of its hospitals were severely deficient and this was consequent on cost cutting on staff. ¹⁵²

[Top] - The response of the market:- ¹⁵² This is illustrated by the case of National Medical Enterprises. Its business practices had been enormously successful financially but by the middle of 1994 it had pleaded guilty to criminal conduct in over half of its hospitals. It has paid out somewhere in the region of $1 billion in fraud related settlements. The US Securities and Exchange Commission indicated that unless restrained the company would offend again. It obtained court injunctions. Under the terms of a very contrived negotiated criminal guilty plea and settlement the company was forced to sell about 75% of its hospitals in psychiatric care, substance abuse and rehabilitation. The company was immediately bailed out by the banks who gave it multibillion dollar loans. It changed its name to Tenet Healthcare and embarked on a buying spree to regain market share and control. It is now the second largest corporation in the USA. Columbia/HCA is the largest.

[Top] - The economic rationalist response:- The response of economic rationalists has been to regulate, to police and to use managed care, a different form of market force which seeks to make profits by restricting care. Managed care corporations are currently being more financially successful than corporate providers. Their profit for shareholders is about 30%. This is accomplished by restricting care. Powerful lobby groups combined with the manipulation of the media by corporate giants successfully derailed President Clinton's attempts to reform the US system. Vast sums were spent to accomplish this. ^{103, 137}

[Top] - Consequences for care:- ^{50, 102, 143} Predictably there has been no controlled scientific attempt to examine the consequences of these changes for standards of care. Corporations which now control the provision of care would not want this and economic rationalists would prefer not to know. The nursing profession makes claims to understaffing and to falling standards.^{29, 50,} The medical profession is silent, gagged by their employment contracts and the knowledge that they will be "delisted" if they speak out. ¹⁰⁰

Accreditation bodies such as the JCAHO are corporatised. They are largely funded by corporate medicine and accreditation has served as a useful advertisement. They have been ineffective in maintaining standards or in detecting and stopping the fraud. Representative Fortney Pete Stark has recently introduced legislation in an attempt to do something about this problem. ¹¹⁴

Congress is currently introducing piecemeal legislation to prevent managed care corporations from insisting on day care mastectomies, and 24 hour deliveries. It is legislating to set levels of required nursing and to get some public input and control over accreditation procedures. It is legislating to make the purchase of not for profit hospitals a public and accountable business. These can be seen as attempts to patch the cracks in a crumbling system, rather than address fundamental flaws in the way health care is provided.

An editorial in the Lancet in February 1997 says "But it is unlikely that a piecemeal approach to the problems of the US health-care system can succeed in creating a market that will provide health care for all."¹⁰² Americans are urged to accept "that one of the fundamental responsibilities of society is to promote and protect the health of all its citizens, rich and poor. Comprehensive health care reform, even if it means government intrusion, would assist a more equitable distribution of health-care resources, an outcome that will never be achieved by the ruthless hand of the market alone."

In evidence to a congressional committee, Dr. Linda Peeno describes how she was rewarded by a managed care corporation for withholding expensive care from a patient who died as a consequence.¹³⁸ "It brought me an improved reputation in my job and contributed to my advancement." In the same report a US physician in San Diego commented "Those people are turning a respected profession into an industry". Another doctor, Australia's minister of health asserts that health care is an industry but he sees this as desirable and part of his government's policy. ⁴⁴

Dan Wilford one of the old school of not for profit hospital administrators was awarded a gold medal by the American College of Healthcare Executives. ⁹⁹ He expressed the sort of societal values which once governed health care. He said "I really believe healthcare is a ministry" and "But for us to use our profit for the benefit of the people vested in the stock market, instead of for the community, just doesn't seem appropriate to me." Corporate medicine is not constrained by the values of the communities within which it operates.

[Top] - The Medical Profession and corporate medicine:- ^{5, 6, 7, 22, 23, 24, 35, 42, 97, 100, 102, 139, 152} The medical profession should be upholding the tradition of care. They are in a position to control corporate activities. Profit comes from activities sanctioned by doctors. Their medical degrees give them this right and corporations must secure the use of these degrees. The reality is that the profession is softened by wealth and past power. It is broken into competing factions. In a world dominated by personal aspirations rather than community values self interest has taken precedence over duty to the community.

Corporations have succeeded in dividing and conquering. The first step has been to get control of admissions and this has been accomplished by concentrating care in corporate hospitals or in corporate clinics. By advertising corporations bring patients to the doctors and so come to control their incomes. Those who adopt corporate patterns of thought become very wealthy.

Financial inducements have been seen as legitimate and have taken a variety of forms. Their use has been supported by stockbrokers.⁴⁹ Stockbrokers, corporate hospitals and insurers all see it as essential for their businesses that they have the medical profession as compliant "partners" who share corporate values and objectives. ^{45, 49, 152}

Columbia/HCA has been one of the major corporations seeking to induce doctors to refer patients to their hospitals by offering financial incentives. Doctors working in Columbia/HCA hospitals can become shareholders in the hospital at which they work. This exploits a loophole in legislation making kickbacks illegal. ⁵ Another company offering "full mergers with medical staffs" indicates that "It gives us a fully integrated delivery system and puts them on our team." ⁹⁷

Doctors who have refused to be team players have not made money and have been sanctioned and fired. Columbia/HCA has been accused of using its muscle to sanction doctors who criticised corporate practices.⁵ Peer review processes have been used to remove doctors who were "disruptive" and would not adopt corporate values. Dissenters and critics are fired and successful whistle blowers have been ruthlessly pursued. Some have been unable to find employment anywhere in the USA. A situation now exists where very few members of the medical profession dare speak out without risk.

The introduction of gag clauses, which prevent doctors from giving their patients objective and unbiased advice, into contracts with doctors is doubly disturbing. This is not only because of the consequences for patients but because of what it reveals about the corporate thought processes in managed care companies ³⁵ An October 1996 editorial in the Lancet refers to the legislation to prevent gag clauses. ¹⁰⁰ It states "Restoration of the right of freedom of speech to doctors -- and freedom of information for patients -- will still not restore another right, the freedom, for doctors, from fear of 'deselection' ". The editorial indicates that 83% of US physicians hold some form of managed-care contract. "This gives nearly omnipotent managed-care plans the power to bully individual doctors, who scurry to be included on insurers' lists."

Masek, a doctor and Cohen, chairman of a consumer advocacy group write that the "quest for profits is harming the quality of patient care in California." ¹⁴⁰ Doctors are advocates for their patients but those who do so aggressively are at risk of being 'de-listed'. One doctor commented "I cant do the patient advocacy I was able to do six months ago. I can't afford to be de-listed again." The authors comment that patient advocacy is at the very heart of the physician-patient relationship and quality care. "The tragedy is that this heart is being ripped out by blatant profiteering masked as efficiency."

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LINKS TO MAPS
Central Map ..... Initial Map ..... USA Map ..... Australian Map ..... International Map ..... Corporate Practices Map..... (to print)

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Path
Home Page .... US Corporate Page .... Access to Columbia/HCA

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Overview 1 (1997) ... Overview 2 (2000) ...Overview 3 (2003) ... Patients ... I told you ... Licenses

Columbia/HCA submission pages
Background--The USA--Australia--Business Practices--Mayne--Conclusion--References

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Last modified October 1998 J.M. Wynne
Minor changes in format August 2003