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PROTECTING HEALTH CARE ACCESSIBILITY AND QUALITY IN A PROFIT-ORIENTED MARKETPLACE

Policy Date: 1/1/1997
Policy Number: 9702

The American Public Health Association,
Long troubled by the impact of a profit motive in health care;1 and
Noting recent rapid and extensive changes in structure and control of health care delivery and insurance organizations in the United States, a large-scale experiment driven primarily by payors' demand for lower costs and a massive influx of equity capital seeking profit;2-5 and
Observing that this trend is manifested in the dominance of for-profit corporations in managed care and also in the widespread sale, lease or conversion of nonprofit health insurance companies and both public and private/voluntary hospitals to for-profit entities; and
Aware that these transformations are associated with intense competition (primarily in terms of price) for market share and competition for capital to finance expansion;6,7 and
Observing that this has caused providers operating in such environments to reduce caregiver time devoted to each patient,8.9 reduce clinical staffing and substitute less-skilled staffs in hospitals,10-12 avoid and/or displace unionized workforces, and reduce spending on supplies; and
Recognizing that for-profit corporations' primary fiduciary responsibility is to their shareholders, and that for-profit health care entities and caregivers who share in their profits have a conflict of interest; and
Recalling that nonprofit hospitals and HMOs were typically chartered with a commitment to serve a charitable purpose and thus to render a public benefit;13 and
Aware that public hospitals have a mission to serve all persons in the community, including the growing number of uninsured persons of low income as well as other high risk populations that are often shunned by for-profit HMOs and by private practitioners;14 and
Noting that for-profit entities have no obligation to provide such public goods as uncompensated care, community-oriented public health services, training of health caregivers or of allied health workers, or health research;15-18 and
Concerned about the continuing loss of public hospital capacity and of the charitable resources of nonprofit health care entities even as large cuts in funding of Medicaid and Medicare are proposed; and
Apprehensive that the system changes could proceed virtually to completion before their impact is widely understood; and
Realizing that when nonprofit corporations convert to for-profit status they are obligated by law in most states to turn over their assets to another nonprofit organization dedicated to similar purposes;19 but
Cognizant that, partly because of variations in state laws and in practices,20 numerous for-profit acquisitions and conversions have occurred without adequate steps to protect charitable assets and have been characterized by (1) gross under-valuation of their assets before transfer or by (2) failure to transfer any assets at all to a nonprofit entity concerned with health care access or affordability-and consequently have resulted in a loss to the public of billions of dollars in charitable assets and/or in inordinate levels of financial inurement to top corporate personnel;21 and
Considering that the Association has expressed concern regarding the impact of corporatization upon cost-effectiveness and accessibility of health care;22 therefore
1. Calls for urgent efforts, through legislation at the federal and state levels and through advocacy and litigation, to stem further losses of public and nonprofit health care institutions and programs whether by sale, transfer, lease, conversion or closing except when it is demonstrated in a regulatory proceeding that a proposed conversion would serve a compelling public interest and would not inure to the financial benefit of any person;
2. To that end, calls for action to require full and timely public disclosure of proposed conversion plans, analysis of their impact on accessibility, affordability and quality of services, well-advertised public hearings and provision for other modes of public comment as bases for regulatory decisions;
3. Calls for action to require that, when a conversion is permitted, the value of the converting entity's assets be assessed objectively by a public authority and equivalent resources transferred at the time of conversion to a nonprofit foundation that is fully independent of the converting entity and its successor and is dedicated to the converting entity's original charitable purposes; therefore urges
(a) to require that the proportion of its revenues that any health care entity spends directly on prevention, public health infrastructure, and health care (the care share, which excludes administration, profit, etc.) never fall below 85%;
(b) to provide for contribution by all health care entities toward care for the uninsured, either (i) by requiring that the health care entities in a state devote to free care a proportion of their expenditures on personal health services or (ii) by taxing the revenues of all private health care entities;
(c) to require continuing contribution of resources to public health systems that assure quality, access and public health status improvements, as outlined in Association policy on standards for managed care;23
(d) to require of for-profit health care entities that retained profits never exceed 10% of revenues;
5. Urges affected communities and populations, patients, caregivers and all concerned persons, to work in coalition to advance the actions proposed above; and
6. Calls for ongoing peer-reviewed studies to monitor service accessibility and the provision of uncompensated care and other community benefits and to assess outcomes-based cost effectiveness in for-profit and not-for-profit health care.

References


  1. American Public Health Association Policy Statement 7503: Effects of Profit Motives in Health Care Institutions. Washington, DC: APHA Public Policy Statements, 1948-present, cuurent volume.

  2. Bailey AL. Health care's merger mania. The Chronicle of Philanthropy, November 16, 1995. 1, 32.

  3. Fox DM, Isenberg P. Anticipating the magic moment: the public interest in health plan conversions in California. Health Affairs, 1996:15(1):202-209.

  4. Merger mania. Hospitals join forces to beat the competition. Health Letter, 1996:12(6):1-5. Washington, DC: Public Citizen Health Research Group.

  5. Ginsburg P. The RWJF community snapshots study: introduction and overview. Health Affairs, 1996:15(2):7-20.

  6. See Reference 3.

  7. Miller RH. Competition in the health system: good news and bad news. Health Affairs, 1996:15(2):107-120.

  8. Donelan K, Blendon RJ, Benson J, et al. All payer, single payer, managed care, no payer: patients' perspectives in three nations. Health Affairs, 1996: 15(2):254-265.

  9. Woolhandler S, Himmelstein DU. Annotation: patients on the auction block. Am J Public Health, 1996:86: 1699-1700.

  10. Twedt S. A question of skill. Pittsburgh Post Gazette, Feb. 11-14, 1996.

  11. O'Neil E, Riley T. Health workforce and education issues during system transition. Health Affairs, 1996:15(1): 105-112.

  12. Aiken LH, Sochalski J, Anderson GF. Downsizing the hospital nursing workforce. Health Affairs, 1996:15(4): 88-92.

  13. Bell JE. Saving their assets. How to stop plunder at Blue Cross and other nonprofits. The American Prospect, (26):60-66, May-June 1996.

  14. Andrulis DP, Acuff KL, Weiss KB, et al. Public hospitals and health care reform: choices and challenges. Am J Public Health, 1996:86:162-165.

  15. Blumenthal D, Meyer GS. The future of the academic medical center under health reform. N Engl J Med, 1993:329: 1812-1814.

  16. See Reference 14.

  17. Starfield B. Public health and primary care: a framework for proposed linkages. Am J Public Health, 1996:86: 1365-1369.

  18. Kuttner R. Columbia/HCA and the resurgence of the for-profit hospital business. (Second of two parts). N Engl J Med, 1996:335:446-451.

  19. Hamburger E, Finberg J, Alcantar L. The pot of gold: monitoring health care conversions can yield billions of dollars for health care. Clearing House Review, August-September 1995, 473-504.

  20. When Your Community Hospital Goes Up For Sale. Volunteer Trustees Foundation for Research and Education. Washington, DC. 1996.

  21. See References 13 and 19.

  22. American Public Health Association Policy Statement 9502: Toward a Comprehensive, Universal National Health Program. Washington, DC: APHA Public Policy Statements, 1948-present, current volume.

  23. Supporting National Standards of Accountability for Access and Quality in Managed Care. APHA policy statement 9615(PP).

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