A Healthy Bottom Line:
Profits or People?
By Claire Andre and Manuel Velasquez
In Alameda County, a private hospital turned away a woman
in labor because the hospital's computer showed that she didn't
have insurance. Hours later, her baby was born dead in a county
In San Bernardino, a hospital surgeon sent a patient who had
been stabbed in the heart to a county medical center after examining
him and declaring his condition stable. The patient arrived
at the county medical center moribund, suffered a cardiac arrest,
These two hospitals shifted these patients to county facilities
not for medical reasons, but for economic ones -- the receiving
hospitals feared they wouldn't be paid for treating the patient.
These patients simply weren't "good business."
With little public warning, a concern for "good business"
has moved to the heart of health care, a sector once relatively
insulated from the pursuit of profit that drives the rest of
the U.S. economy. Throughout our history, medical institutions
have largely been "charitable," nonprofit establishments existing
primarily to serve the community. But during the past 20 years,
the number of for-profit health care facilities, ranging from
national hospital chains affiliated with major academic institutions
to local dialysis centers, has grown at a rate exceeding even
that of the computer industry.
The ethical implications of the growing commercialization
of health care have become a matter of heated controversy. Those
favoring the trend toward health care for profit claim that
an increased role for entrepreneurs and competition in the delivery
of health care will result in a more efficient and effective
health care system. For others, the pursuit of profit is antithetical
to the values central to medicine.
Opposing the commercialization of health care are those who
base their arguments on considerations of justice. They argue
that a society as wealthy as ours has a moral obligation to
meet the basic needs of all of its members. Every American,
rich or poor, should have access to the health care he or she
needs. The escalating costs of care and a growing unwillingness
of insurance companies to cover these costs, along with government
budget cutbacks, have severely restricted access to health care
for the poor, the aged, and those with catastrophic health problems.
The rise of for-profit health care only exacerbates the growing
problem of access to care.
Studies show that the growth of for-profits decreases the
availability of health care for "unprofitable" patients. Traditionally,
non-profits have financed care for the poor by overcharging
paying patients to subsidize services for the poor. For-profits,
by refusing to serve nonpaying patients while at the same time
taking a great share of paying patients, leave non profits with
more of the poor to serve but with fewer paying patients to
subsidize their care. Furthermore, by serving only profitable
patients and offering only profitable services, for profits
are able to generate high revenues, which enables them to charge
lower prices for their services and to invest in attractive
facilities located in areas convenient to paying patients, both
of which create substantial competition for non-profits. As
a result, it has become increasingly difficult for non-profits
to continue to serve those who can't pay.
Opponents of commercialized health care also argue that for-profit
health care institutions do not contribute their "fair share"
to society. In view of the benefits health care institutions
derive from society, it is unfair for them to refuse to help
society serve those who can't afford care or are too costly
to treat. All hospitals benefit from government subsidized programs
like Medicare and Medicaid. They also profit from medical research
and medical education paid for by taxpayers' money. In fairness,
hospitals have an obligation to serve society's needy. Investor-owned
corporations that turn away patients who can't afford to pay
fail to discharge this obligation. Moreover, by not taking their
fair share of unprofitable patients, for-profits place an undue
burden on nonprofit and public hospitals. It's unjust that the
costs of serving these patients should fall more heavily on
Further, critics of health care for profit maintain that all
persons have a right to live their lives with dignity. Mixing
business with medicine will inevitably lead to abuses that violate
patient dignity. A patient is in a vulnerable position, necessarily
trusting that the doctor's decisions about his or her medical
care will be guided solely by the patient's best interests.
But in a system of for-profit health care, doctors will become
subject to the control of lay managers accountable to share-holders
whose primary aim is making a profit. Such hospitals will encourage
doctors to promote profit-producing drugs, surgeries, tests
and treatments. And, medical treatments and counseling lacking
profit potential, however effective, will be discouraged. Even
more worrisome are physicians who themselves own the facilities
they operate. Doctors owning dialysis centers, for example,
have been accused of putting patients on dialysis sooner than
necessary and putting off kidney transplants that would eliminate
the need for dialysis altogether.
In a system of for-profit health care, the opportunities for
patient manipulation and exploitation are endless. Society must
not allow the motive of economic gain to enter so directly into
the practice of medicine, placing the well-being of patients
in serious jeopardy, and undermining the trust so essential
to the physician-patient relationship.
It is also argued that commercialized medicine will harm society,
yet produce little in the way of benefits. Nonprofit hospitals
undertake costly, but needed, research and maintain services
which are not economically viable but which provide doctors
with the training experiences necessary to medical education.
Where profits rule, however, such necessary, but unprofitable,
research and services important to medical education will be
neglected. Furthermore, as for-profits come to dominate the
health care sector, society will suffer a severe shortage of
unprofitable, but critical, services, such as emergency rooms.
Meanwhile, scarce resources will be squandered to produce and
aggressively market lucrative, but unnecessary, services, such
as cosmetic surgery.
While for-profits promise to harm society, critics continue,
they fail to deliver any of the promised benefits, such as controlling
health care expenditures, reducing the costs of care, and lowering
the price of care. How will for-profits help control health
care expenditures and the overuse of health services when, by
definition, they are in the business of increasing total sales?
For-profits are also unlikely to reduce the costs of care. Studies
show that the rise of investor-owned hospitals has increased
rather than lowered costs. Moreover, studies show that the prices
charged by for-profit hospitals to paying patients, as well
as the per-day expense of providing care, are higher than those
of non-profits. The economic benefits promised by for-profits
have not been demonstrated.
Finally, some critics of for-profit health care claim that
the commercialization of medicine will lead to the abandonment
of certain virtues and ideals that are necessary to a moral
community. Most non profits continue to uphold an ideal of service
to humankind. The virtues of caring, compassion, and charity,
and a sense of community have guided their decisions about the
range of services to provide and the kinds of research or education
to support. The ideal of altruism has been perpetuated by physicians
whose primary concern has been the alleviation of human suffering
and the restoration of health. Society must not allow such important
and fragile virtues and ideals to be extinguished by the self-interest
that drives for-profit enterprise.
Those favoring the growing commercialization of health care
argue that society ought always to follow that course of action
that will bring about the greatest benefits at the least cost.
A health care system run by for profits will provide the greatest
benefits at the least cost.
First, for-profit health care will lower the costs of care.
The amount we spend on health care every year has grown from
$75 billion in 1980 to nearly $500 billion today. If this rate
continues, by the year 2020, we will be spending 40 cents of
every dollar we make on health care. Commercialized health care
is our only hope for controlling the soaring costs and over-utilization
of health services. Only the businesslike efficiency and the
discipline that accompanies the drive to maximize profits can
cure the ills of a system plagued by inefficiency and waste.
Under the present system, administrators and physicians have
no incentives to operate in a cost-efficient manner. More concerned
with institutional prestige than with the bottom line, administrators
of nonprofit organizations acquire sophisticated equipment and
highly trained personnel, without regard for their need or likely
use. Costly technologies are adopted and services added that
are only marginally beneficial. Physician's themselves are offered
little incentive to concern themselves with the cost of care,
and go about ordering treatments that yield little or no benefit.
Moreover, the nonprofit health care system is rife with costly,
under-used facilities. Cardiac operations are performed in 100
different hospitals. Millions of dollars could be saved if these
15,000 procedures could be done in 30 centers specifically built
for that purpose.
As the number of for-profit health care facilities increase,
we can expect to see an end to such gross inefficiency. Aiming
to maximize profits, for profits will invest only in the equipment
and the personnel necessary to provide services that patients
actually need. Decisions about what technologies should be adopted
will be based on whether the benefits of these technologies
outweigh their costs. The entrepreneurial spirit will give rise
to innovation in the delivery and management of services, leading
to more efficient methods of production and treatment. Doctors
will be forced to come to terms with what will really benefit
patients, resulting in fewer unnecessary hospitalizations, shorter
hospital stays, and fewer needless tests.
Lower costs also can be expected from the economies of scale
achieved by for-profit corporations. Unlike nonprofit health
care institutions which often operate independently of each
other, for-profits are often linked together as chains, allowing
for economies in financing and management, and for centralized
services and shared equipment, all resulting in lower costs.
Second, society will benefit from the enhanced access to care
promised by for-profits. Currently, 37 million people are without
the coverage needed to afford care. For-profits can pass on
savings they achieve through more cost-efficient operations
by lowering the price of care, so more people are able to afford
Third, for-profit health care enterprises produce benefits
for society because for-profits have greater and quicker access
to capital at lower costs than do non-profits. At a time when
massive investments of capital are needed to keep up with the
state of the art in medicine, non-profits are experiencing increasing
difficulty in attracting funding. For-profits, on the other
hand, can lure investors by issuing stocks, securing the money
sorely needed to build and renovate facilities and to replace
and modernize outdated equipment.
Proponents of for-profit enterprise in health care also support
their position by maintaining that all persons have a basic
right to freedom and thus a right to use their property in ways
they freely choose. They argue that owners of for-profits have
no special obligation to provide free services to the poor.
While public funds may indeed subsidize research and medical
education, it is patients and doctors who benefit from this
education and research, not the owners of hospitals. If there
is any obligation to serve the community in return for such
subsidies, it is with patients and doctors that it lies. Nor
does the possibility that hospitals have profited from an expanded
market for services generated by government-subsidized programs
oblige their owners to provide free care to the poor. Defense
contractors profit greatly from the business generated by public
funds. Yet, they are under no obligation to provide free public
services. Nor can it be said that for profits unfairly impose
a burden on non-profits by not assuming a fair share of the
costs of caring for the poor. For-profits, unlike non-profits,
pay taxes, and in doing so, can be said to pay their share in
serving the poor through tax-supported public programs. To impose
on owners of for profits a social obligation over and above
an obligation to pay taxes is to impose an obligation on them
that is not imposed on owners of other businesses.
Finally, it is argued, health care is like food, clothing
and shelter. Just as these "basic needs" are sold on the market
and distributed according to ability to pay, so too should health
care. If some cannot afford to pay for such basic needs, it
is up to the government or voluntary agencies to see that they
What is the moral response to the increasing commercialization
of health care? The arguments in favor of for-profits appeal
to the values we place on the freedom of free enterprise and
the economic benefits that may flow from a more efficient health
care system. But are we willing to uphold these values at the
cost of other important values, including a concern for justice,
the dignity of persons and a community-centered ethics that
places the needs of people before profits? What is a "healthy"
"I swear by Apollo Physician and Asclepius and Hygieia and
Panaceia and all the gods and goddesses, making them my witness,
that I will fulfill according to my ability and judgment this
oath and this covenant...I will apply...(treatment) for the
benefit of the sick according to my ability and judgment;
I will keep them from harm and injustice." -Hippocratic
For further reading:
Bradford H. Cray, ed., For-Profit Enterprise in Health
Care (Washington D.C.: National Academy Press, 1986).
Bradford H. Gray, ed., The New Health Care for Profit:
Doctors and Hospitals in a Competitive Environment (Washington,
D.C.: National Academy Press, 1986).
Arnold S. Relman, M.D. "The New Medical-Industrial Complex,"
New England Journal of Medicine, Vol. 303 (October 23,
1980), pp. 963-970.
Mark Schlesinger, "The Rise of Proprietary Health Care," Business
and Health, Vol. 2 January/February 1985), pp. 7-12.