THCB

Let’s Stop Bashing Profits and Business In Healthcare

I’m tired of profit-bashing and business-bashing in healthcare.  And every American should be, too!

Well-run, profitable businesses, along with our sense of decency, democratic institutions, education and free enterprise systems, and adherence to the rule of law, have made the United States the most extraordinary nation in recorded history.  Together they have unleashed the talents, creativity and productivity of our people, generated enormous sums of capital, and created unheard of social, economic, scientific and political advances.

Is there anything nobler than providing the environment and opportunity for people to fulfill their potential and achieve their dreams, and for providing the goods and services that enable people to raise their standard of living?  Not even the practice of medicine can do so much good for so many people. But that’s precisely what businesses do.  (That also may explain why far more Americans today are interested in job creation than restructuring healthcare.)

In our system, an individual has an idea, attracts capital, and hires people to build a product or provide a service. When they meet a need, they prosper – and attract more capital and hire more people. Everybody wins.  If they fail, they alone suffer the consequences.  That’s what capitalism is all about and that’s what has made America great.

Sure, there are ups and downs.  Some caused by business cycles, some by global competition, some by excesses on the part of companies and individuals. Unfettered competition can be terribly harmful and that’s where government comes in.  Government must ensure there is a level playing field so businesses and individuals have equal opportunity and can compete fairly.  Additionally, government should protect against harmful excesses, and apply monetary and fiscal policies to moderate the ups and downs.

The last thing we should do, however, is abandon the very values and forces that have made America great.  We should improve not destroy them, so let’s stop bashing businesses and profits.

For example, many think it crass and wrong for insurers, pharma or other healthcare vendors to earn a profit — so they want to get rid of profits.  But where will capital to support these activities and innovation come from if investors (who include Wall Street and Main Street investors alike) can’t earn a return on their capital?   From the government?  Hardly.  The government today doesn’t have reserves to fund the $37± trillion in future Medicare liabilities or our massive deficits.  Our children and grandchildren will have to meet them.  And how much in additional liabilities can our economy carry before our cost to borrow capital becomes prohibitive and we default on our debt?  At least the insurance companies have reserves to back their obligations – so shouldn’t we force them to compete fairly rather than disband the concept of private insurance?

Similarly, many docs who consider the pursuit of their calling as noble and the pursuit of profit unseemly, apparently don’t understand that they are just as driven to earn a profit and return on their investment as profit-focused companies are – only they use different words to describe what they do.  They claim they provide a noble service and therefore are entitled to large incomes because they have invested years of their lives and lots in tuition to develop their expertise.  Described in other terms, isn’t their expertise their trade, and aren’t their practices really small businesses?  In truth, aren’t they demanding a return on their investment – just like all businesses do?  (If they don’t, their practices won’t survive.)  And how much income does one have to earn before part of it is recognized as a return on investment?

Don’t misunderstand.  I recognize that all businesses, like all doctors, aren’t noble, and I don’t support the power of insurers today to dictate what they will pay doctors for their services, or most of the other distortions in our healthcare system.  But let’s stop the profit and business bashing.  Properly directed, the pursuit of profits just might solve our healthcare problems.

Merle Bushkin is Founder, President and CEO of Health Record Corporation, creator of the MedKaz®, a unique, patient-focused medical record system supported by a unique business model, that aggregates a patient’s lifetime health record on a device the patient owns, controls and carries on a key chain, and is updated by care providers.  A career investment banker and financial executive, he is an Incorporator of Mt. Ascutney Hospital and Health Center in Windsor, VT.

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restaurant jobs in los angelesGary LampmanBill CarewDan SpinatoMassage Therapy NYC Recent comment authors
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Guest

I have nothing to comment on it.

Gary Lampman
Guest
Gary Lampman

Health Insurance is a cruel Joke that became a exhorbinent Money Pit that puts the lemon nickel and dime automotive expense as loose change. The reason that many of Us Bash Profits is Because the product is inferior to the expense. Medicare would not have been established if it were not for the Fact that Private Industry wanted NO PART IN ELDERLY CARE! As they only wanted Healthy Patients! Putting profits first has absolutely driven Health Care from 1st among 40 Industrialized countries to 38th . Your Point on Profits has traded true Health Care as a Facade of providing… Read more »

Nate Ogden
Guest
Nate Ogden

Sorry Gary your not spreading your ignorant BS today. “The reason that many of Us Bash Profits is Because the product is inferior to the expense. Medicare would not have been established if it were not for the Fact that Private Industry wanted NO PART IN ELDERLY CARE!” NOTHING in history supports this. You bash profit becuase your an ignorant propogandist that doesn’t know anything. There are tomes of history that tells us exactly why Medicare was passed and exactly what it did. Medicare was passed so Grandma wouldn’t lose the shirt off her back. 13% of seniors had trouble… Read more »

Bill Carew
Guest

There are a lot of problems with the current system, and the PPACA does little to fix them. But you make 2 really powerful points: “For example, many think it crass and wrong for insurers, pharma or other healthcare vendors to earn a profit — so they want to get rid of profits. But where will capital to support these activities and innovation come from if investors (who include Wall Street and Main Street investors alike) can’t earn a return on their capital? From the government? Hardly. ” And the BEST one: “The government today doesn’t have reserves to fund… Read more »

Dan Spinato
Guest

Wow, I have to say the statistics and comments for this post is extremely overwhelming!

Massage Therapy NYC
Guest

I’ll stop bashing when the so-called “health care” system becomes about real health. In other words, when it becomes focused on prevention. Oops, I forgot there might not be any profit in that.
Let just call the industry what it is – The Disease Care system.

Denise H. Williams
Licensed Massage Therapist

Barry Carol
Guest
Barry Carol

Margalit and Nate – To clarify my earlier point regarding the pricing of medical devices, it’s the large teaching hospitals that can command the best prices from device manufacturers because of both their size and their influence as the surgeons trained at these hospitals fan out around the country to enter practice. Such a hospital may pay $4,000 each for a certain type of device while a relatively small community hospital that also offers the type of surgery that would use that device might pay as much as $11,000 for an admittedly smaller quantity per year. The rub is that… Read more »

Margalit Gur-Arie
Guest

Merle, The funny thing about primary care is that, by definition, they cannot specialize. I agree with most of Dr. Gawande’s writings, but not all. Another pet peeve of mine is the purpose use of incorrect terminology hoping that if we use it often enough it will become a reality. There is no such thing as providers. This term lumps together physicians and corporate entities that are in the medical care business, presuming that they all have the same interests and the same qualities. They don’t. Education has professors and students, the law has attorney and client, culinary establishments have… Read more »

Nate Ogden
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Nate Ogden

“I expect nothing from the current administration. Nothing at all.” Great news Margalit, it might be to early to give up all hope n change. It appears the Clown in Chief is ready to admit another critical mistake in ObamaCare and even more surprising is willing to consider fixing it! “Lawmakers in the House and Senate introduced bipartisan legislation Thursday to remove restrictions on tax-exempt health spending accounts, the latest provision of the healthcare reform law to come under attack by Democrats.” “The bill would nix a provision that since January has required a prescription for buying over-the-counter medicines with… Read more »

Nate Ogden
Guest
Nate Ogden

Another great but unfortunant example happened where I live in Vegas. This wasn’t some big evil corporation but one ? I don’t know what would lead a person to do what he did, doctor. I can think of far more bad physicians then I can corporations. “LAS VEGAS (AP) — Nearly 40,000 people learned this week that a trip to the doctor may have made them sick. In a type of scandal more often associated with Third World countries, a Las Vegas clinic was found to be reusing syringes and vials of medication for nearly four years. The shoddy practices… Read more »

Margalit Gur-Arie
Guest

Nate, those who put profit ahead of ethics are outliers amongst physicians. Those who put ethics ahead of profits are outliers amongst large corporations.

Nate Ogden
Guest
Nate Ogden

wow, no unfounded bias there, and this is based on what Margalit?

Margalit Gur-Arie
Guest

Based on the definition of the profession of medicine for umpteen thousand years, and based on the fiduciary responsibility implicit in corporations responsibility to shareholders.

Merle Bushkin
Guest

Margalit, the suggestion that the explosion of medical information and the increasing pressure to keep up are driving doctors – consciously or unconsciously — to specialize and join forces with other providers, comes from Dr, Atul Gawande, not from me. I agree that all doctors, but especially PCPs, are catching the brunt of the pressure to reduce healthcare costs. They typically lack the political and economic clout of hospitals, insurers, vendors and government to shift the burden to the other guy. Ans sadly, these other guys aren’t solving our healthcare problems. They merely are rearranging their chairs on the Titanic… Read more »

Nate Ogden
Guest
Nate Ogden

There is an easy way around the hospital medical equipement supplier BS, insurance can write their policy in most cases to pay cost plus or some amount based on the invoice/actual cost, if the provider wants paid they are forced to provide it.

Barry Carol
Guest
Barry Carol

“Re: competition at the level of care delivery: it has largely been ignored, and the attention given to insurance has largely sucked the air out of discussions about how to assemble and publish competitive performance and cost information. We’ve got to raise its importance and get it done!” Merle – We also need to outlaw the confidentiality agreements that currently preclude the disclosure of actual commercial contract reimbursement rates and, in the case of device manufacturers, the prices hospitals pay to the manufacturers which can vary widely among hospitals based on their volume, power and influence. How are patients or… Read more »

Margalit Gur-Arie
Guest

Merle, I am not a gambling person, but I would be willing to bet that you will not fine even one doctor citing inability to keep up with his/her profession as a reason for selling out to a hospital. Physicians in small practice, particularly PCPs are being terrorized into giving up private practice. With SGR cuts being threatened at least 3 or 4 time every year, and with unfair competition from large systems, and with misinformation regarding price and complexity of technology being rampant (see my post here from today), what else are they supposed to do? And I agree… Read more »

Merle Bushkin
Guest

First, I’d like to thank all of you who have posted an extraordinary number of comments to this blog. You have cited many facts and provided extensive information many of us didn’t know. So from all the heat, I think a lot of light has been generated. I know it has for me. Special thanks to Steve, Barry, Nate, Peter, rbaer and Margalit, Margalit, “Unfortunately I don’t see how capital, investments, profits, and such have anything to do with direct delivery of medical care.” They are the life-blood of any business, and at the end of the day, the practice… Read more »

Peter
Guest
Peter

Margalit,

Why would any physician practice medicine if they don’t make money?

Margalit Gur-Arie
Guest

Of course they should make money, and primary care should make double what they make now. The question here is whether they should have the ability to be independent and pay themselves, or should they all be forced to become employees and be paid by the non-clinical bosses. I prefer the former. As to the question that if they are so efficient, why don’t they flourish, this is because we constantly stack the deck against them. Small practices are placed at a major disadvantage by the current Darwinian system of negotiating contracts with payers, so they get paid a fraction… Read more »

MD as HELL
Guest
MD as HELL

Why only double? Is that arbitrary factor more pallitable than 5 times what they make now?

Margalit Gur-Arie
Guest

It’s more in line with what sub-specialists make now, accounting for the pains and tribulations of specialization.

Peter
Guest
Peter

“Thus, our first challenge is to provide the information people need to be able to select the “best” — and probably the lowest-cost – provider.” Who is going to fund, collect, analyze and publish this “information”? Why would the lowest cost be the best? I would argue that perception is the higher the cost determines the best. What you want is a value quotient, who will make that determination – Consumer Reports? “When this competitive information is available, patients will be able to make informed choices.” Are they? Based on what, with what expertise? “I submit that following your approach… Read more »

Barry Carol
Guest
Barry Carol

“I don’t see how capital, investments, profits, and such have anything to do with direct delivery of medical care.” Margalit – For commercial insurers, roundly 40% of their medical claims costs are for care delivered in a hospital setting – inpatient + outpatient with emergency room care counting as part of outpatient. For Medicare, Part A (hospital claims) account for approximately 45% of its costs. Hospitals are enormously capital intensive as well as labor intensive. In major cities like NYC and Boston, it costs at least $600 per square foot to build new hospital space excluding the expensive equipment required.… Read more »

Margalit Gur-Arie
Guest

I would choose the best alternative available. Unfortunately I don’t see how capital, investments, profits, and such have anything to do with direct delivery of medical care. I agree that pharma and device should be for profit and concentrate on these things. I agree that hospitals and large medical groups need professionals to manage the money. However, the overriding concern should be the practice of medicine, not the making of money. Medicine should not be the means by which money is made. Instead, money should be an outcome (good or bad) of practicing good medicine. So basically, the best interest… Read more »

Nate Ogden
Guest
Nate Ogden

“small and solo private practices are currently the leanest and meanest organizations in health care; the most efficient and the most preferred by patients. Why on earth are we trying to destroy this efficiency in favor of unproven, untested and largely delusional “economies of scale” supposedly available in health care factories?” Self funded plans ran by TPAs are the leanest, most efficient, and much better service then huge government insurance companies and Democrats have been hell bent on eliminating them for 15 years or longer. I think there are two main possiblites on why Liberals insist and destroying what works.… Read more »

Jonathan halvorson
Guest
Jonathan halvorson

Nate, you remain full of it on TPAs and never do acknowledge a basic truth: TPAs and ASOs are privileged in the market by ERISA, which greatly reduces administrative burdens and benefit requirements for self-insured plans compared to fully-insured plans. This advantage grew, rather than shrank, with the recent ACA legislation.

I don’t have a firm view on whether the best way to deal with this is to make insurance (fully-insured) regulations national like self-insured, or keep the national vs state regulation discrepancy but just stop mandating benefits at the national level for fully insured while self insured is exempt.

Nate Ogden
Guest
Nate Ogden

“TPAs and ASOs are privileged in the market by ERISA,” What is this privilege? If we make mistakes we personally go to federal prison instead of non ERISA plans where the company is liable? Can you name any administrative burden that is lessoned under ERISA? We have been doing ERISA and Fully Insured administration since 1980 but maybe I have been doing it wrong all these years? Our start was actually with the check book of fully insured carriers that was all we did then moved into ERISA. I’m sure you will get us straitened out though Jonathan. So laws… Read more »