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Tuesday, November 17, 2009

For-Profit Healthcare: A Conflict by Definition?

"...directors and officers of a company are bound by fiduciary duties to act in the best interest of the shareholders..."

( & other common references)

In the current debate about healthcare, there is a simple question that needs to be asked: where does the real obligation of a publicly traded heathcare provider lie, in maximizing the value to shareholders OR in providing necessary/proper care to subscribers?

In the business of running a for-profit healthcare company, the revenue comes from subscriber payments and the expenses come from providing healthcare services. Now when any of us are faced with a revenue shortfall in our own personal lives, typically one of the first things we look to do is to reduce our expenses, right? Why wouldn't the same hold true for a healthcare company? What's the roadblock that prevents such a company from denying appropriate/reasonable care simply to maximize profits?

I know, I know, the usual retort is one of "well for-profit healthcare providers earn revenue NOT by cutting back on care, but rather by becoming more efficient", which is at least partially true. However efficiency as a concept always curves, meaning that you can never continue to gleam efficiency benefits from a process at a constant rate forever. It's simply not possible, as there are only so many ways that any particular thing can be done "faster, better, cheaper" while maintaining the same rate of quality. What's left is the simple notion that the "real" money to be made in for-profit healthcare lies in finding ways to not provide services, so that the revenue which would have been spent on services is instead returned to shareholders in the form of profits. Sure, these companies can encourage people to be healthier and therefore need fewer services, but that's not nearly as easy as simply denying or cutting back on care. That's not pretty, but that's how business works. The sad part is that most people really don't want to think about this inherent conflict. Personally I've put my money where my mouth is in the issue by not selecting for-profit healthcare providers at work. I want the comfort of knowing that my provider is looking out for me first (not shareholders).

In the end, all of this is summed up in the Gospel of Luke, Chapter 16 verse 13:

"No servant can serve two masters"

More true words have never been spoken.

1 comment:

Anonymous said...

Hi Steve-

Actually I believe it is false that non-profit companies look out for you first. Look at the government. They are not for profit, yet what is their first goal? Maintaining the establishment THEN looking out for you. You think congress will take a pay cut so that the government can provide more services? You think congress will give up their perks in order that taxes won't have to go up? You think congress is going to subject themselves to the health care they want to give us?

Look at Ted Kennedy. He was a champion of government run health care- yet where was the first place he went for treatment? A private hospital with the best doctors avaliable. Would WE be given that same preference under his plan, or would be stand in line behind everyone else and hope they get to us in time? I would like to ask Nancy Pelosi- if government run health care is supposed to be so wonderful- why won't you subject yourself to what you want to "give" us? The government wants to do everything "for us" yet the first place the government runs when it needs something is the PRIVATE SECTOR!

ANY Not for profit company first goal is ALWAYS maintenance of the establishment, THEN working on what it is set up for. That is the nature of things- that is how it is, becasue if the organization does not survive it cannot look out for you. As a result- not for profit companies like for profit companies look out for themselves first.

I disagree that not for profit health care companies look out for you first. They look out for themselves first. They don't answer to shareholders, and granted they don't make money for anyone- but they still have to maintain the status quo. The FIRST goal of ANY organization, for profit or not is themselves.

Not for profit companies just like for profit companies have to worry about the bottom line, which means they also want to do things "better, faster, cheaper" and they also want to decrease expenses while increasing revenue.

Look at what they are doing at the not for profit public schools- more government funding- what do they do? Hire more administrators to "oversee" things, which creates more read tape, and thus less and less effeciency.

My approach to government, Steve, is I admit conservative. I believe less government control and more local involvement. I believe the government should stay out of our lives as much as possible and simply let us be. Don't "give" me anything if you have to raise my taxes to do it. Just let me live my life, and leave me alone.

Care to comment on my rant?

Father Dave Bechtel