Small Town Hospitals And The Profit Motive.

If you live in a small town, you probably have a problem obtaining quality health care.  Big cities get the big hospitals and lots of doctors practicing every medical specialty you can think of.  Small towns get what is left.  They get a small hospital, if they get any hospital at all, and not very many doctors.  If you need specialty medical care and you live in a small town, you may have to go to the big city to get it.  These problems are baked into the system and are structural.  There is not much anyone can do about it.  Things get worse, however, when the local hospital gets purchased by a group looking to make as much money as possible.

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The Wall Street Journal runs some excellent stories about the business of health care.  One of their most recent had to do with the problems of a small town in Wyoming after a firm controlled by a private equity firm bought their town hospital and merged it with another one it owned in a town 30 miles away.

There is a substantial conflict between the goals of private equity and the goals of a small town hospital.  To a certain extent, this conflict exists in all hospital settings, even when the hospital is owned by a non-profit company, but they are most pronounced in small town hospitals owned or controlled by private equity.  Fully 24% of the hospitals in the United States are owned by for-profit investors.

The goal of private equity is to make as great a return on investment as possible.  Private equity often uses debt aggressively to finance dividends and frequently sells off assets to either finance dividends or to reduce debt.  Private equity is attracted to small, rural hospitals because it perceives there is the potential to make a lot of money.  If you have to go to a small town hospital, you don’t want it to be run by someone who is trying to make as much money as possible.  You want it run by someone whose primary goal is to provide the best health care possible and who is not concerned with making a profit.

Even if you do not have to go to the hospital, you have a stake in it.  If there is a hospital in your town, it is often a major force in the local economy.  It provides good quality jobs and its presence is attractive to local employers and their employees.   It is important to the community that the hospital remain open and in good functioning order.  Private equity, on the other hand, may, and often does, close hospitals that are not making enough money.  It cuts corners and scrimps where it can and sometimes even where it cannot, if it thinks it can get away with it.

When the only hospital around closes, it has a big impact on the town and its residents.  The jobs and economic activity associated with the hospital are lost.  People have to go further to get their health care.  The effect is not just economic, of course.  According to the Journal article, research has linked higher rates of mortality due to time-sensitive conditions, such as stroke and heart attack, to hospital closures.  No surprise there.  If you have a time-sensitive condition, the longer it takes to get you to a hospital, the less chance you have of surviving your illness.

The small Wyoming town, which is the subject of the Journal article, is trying to build a new hospital to compete with what is left of its old hospital.  The old hospital lost many services when it was merged with the hospital 30 miles away.  The private equity firm which controls the two hospitals is trying to protect its investment by opposing the new hospital.  It is lobbying Wyoming’s elected officials to oppose loans to the new hospital without which it cannot be built. It claims the new hospital will not replace the lost services and that the existing hospitals are doing a good job of serving their communities.

To be perfectly frank, we in the United States of America should not even be having this discussion.  We are having it because medicine is a big business in which even the “non-profit” companies are trying to make money.  As a result, we pay more per person for health care than any other developed nation and get less for our money than anyone else.  When measured by health outcomes, we do a poor job of providing care.  We have many citizens who are uninsured and cannot afford care.  They are forced to wait until they are really sick and then they show up at the emergency room, where the doctors are legally obligated to treat them.  It is long past time that we join the rest of the developed world and provide universal health care to our citizens.

Posted in Doctors, General Health, Health Care Costs, heart attack, Hospitals, Medical Costs, medical ethics, Stroke |