During the Pandemic, Follow the Money: Hospitals and Health Care Provider Organizations Put Money Ahead of Clinician and Patient Safety, Public's Health

As the coronavirus pandemic continues its relentless course, we see many examples of selflessness and courage. They come from huge numbers of people keeping their social distance, to those in essential work, including primary care and public health professionals, facing long hours and increased risk, to first responders and hospital based doctors, nurses and other health professionals facing even longer hours, more risk, and the sorrows of sick and dying patients.  We also see economic hardships to many, including layoffs, lost wages, and closed small businesses. 

However, in the commercialized and dysfunctional US health care system, whose theme, like that of The Apprentice, should be "For the Love of Money," we see some stark contrasts. 


[For the Love of Money, the O'Jays]

So to understand why things keep going so wrong, we need to follow the money.  Let us consider some recent cases, roughly in order of when they came to light.


Hospitals Fail to Order Ventilators for Predicted Surge in Coronavirus Patients

As reported by the Washington Post on March 18, 2020, the background is now all too familiar:

Mechanical ventilators, which help patients breathe or breathe for them, are considered critical to the nation’s effort to contain the worst effects of the pandemic and avoid a crisis like the one Italy is facing. Depending on how bad the coronavirus pandemic gets in the United States, individual cities could come up thousands of ventilators short as patients flood hospitals, researchers say.

However,

Orders have not flooded in, she said, because most hospitals can’t afford to increase inventory of expensive equipment for what could turn out to be a short-term event.

'The risk is that they’ll never be used, and hospitals can’t eat the cost,' she said. 'Most hospitals in this country are not profitable.'

And why do hospitals not have any extra ventilators in case of a surge in demand?

Keeping backup ventilators is impractical for most hospitals because of the need to service and maintain them and train additional staff during rare events when they are needed, said Lewis Kaplan, a trauma surgeon at the University of Pennsylvania and president of the Society of Critical Care Medicine.

'It’s like taking military planes out of your boneyard,' he said. 'There can be a variety of economic disincentives to be prepared for the worst thing that can happen.'

Left unsaid is how the dollars saved might be balanced against any lives that could be lost were backup ventilators unavailable. Left also unsaid is whether the hospital could have bought the ventilators by using money earmarked for other purposes, like public relations, marketing, or increasing the compensation of top executives.   

Note that these comments came from early March, before US hospitals were overwhelmed.  They suggest that hospital leadership was not willing to sacrifice the short-term bottom line to be better prepared for a catastrophic event, despite, the mission of the hospital that should place the care of patients first, way ahead of short-term financial issues.

The reason is likely that most hospitals, like other health care organizations, are in the grip of managerialism.  Per an article from the June, 2015 issue of the Medical Journal of Australia (look here):
- businesses of all types are now largely run by generic managers, trained in management but not necessarily knowledgeable about the details of the particular firm's business
- this change was motivated by neoliberalism (also known as economism or market fundamentalism)
- managerialism now affects all kinds of organizations, including health care, educational and scientific organizations
- managerialism makes short-term revenue the first priority of all organizations
- managerialism undermines the health care mission and the values of health care professionals

The dangers of managerialism are becoming more apparent in this era of the pandemic.

Hospitals Still Allowing Elective Procedures, Despite Use of Resources that might be Needed for Pandemic Preparation, and Risks of Disease Transmission

An anonymous post on the KevinMD blog on March 24, 2020 suggested that hospital managers are pressuring doctors to do elective procedures, despite guidelines suggesting such procedures should be on hold during the pandemic:

Despite the guidelines issued from the American Society of Anesthesiologists, The Anesthesia Patient Safety Foundation, The American College of Surgeons, and the Center for Disease Control, many hospitals are continuing with elective cases during the COVID-19 crisis. Or worse, they are hiding behind the facade of canceling or postponing elective cases. At many hospitals, a tiered system of urgency allows leeway to surgeons or family to manipulate or distort the urgency by overplaying symptoms.

Furthermore,

For many of you, your hospital administration has forced your hand to continue operations or made examples of you if you disagree. There is pressure from your chiefs who are also likely being intimidated at the risk of losing their jobs.

The author noted that continuing elective surgery has risks, and gets in the way of pandemic preparedness

In addition to gambling on my very existence, every case you participate in that is not absolutely necessary right now is putting your community at risk. We do not have the luxury of practicing social distancing in our job. Every family that comes into the hospital is a potential vector for this virus, and we have no choice but to do the cases and then potentially spread this to our patients or our own family. We are sending mixed messages to our family by encouraging them to stay home in every aspect except this one. Every case you leave on the board requires us to use gloves, gowns, masks for all parties in the operating room. In addition, we must use anesthesia circuits, airway interventions, and medication that will be critically important in the coming days. As I alluded to earlier, even cases that do not typically require intubation might require it. In the same vein, intubation does not guarantee extubation. You must consider that your patient may need postoperative ventilation.

The implication is that the hospital managers are putting short-term revenue ahead of patient and health care professional safety, and using intimidation to do so.  Why? See the comments on managerialism above.

Within days, specific examples of the pressure by hospital management to continue performing elective procedures have appeared.

For baseball fans: on March 31, 2020, NJ.com reported:

On March 19, the Boston Red Sox learned ace Chris Sale needed Tommy John surgery. Five days later, New York Mets right-hander Noah Syndergaard found out he needed Tommy John surgery as well. Syndergaard went under the knife two days later. Sale had his operation on Monday, according to the Boston Globe.

There was no question both procedures were elective

When Red Sox chief baseball officer Chaim Bloom announced Sale’s impending surgery, he admitted the southpaw’s operation was elective. 'Obviously something we’re mindful of,'

Syndegaard's surgeon tried a little spin:

One of Syndergaard’s doctors said the right-hander’s operation was completely justified. According to the Mets, Dr. Neal ElAttrache gave Syndergaard a second opinion and defended Syndergaard going under the knife because the 27-year-old pitcher’s 'livelihood is at stake.'

The teams apparently set up the procedures to avoid hospitals and states where they were discouraged.

Each state has its own standards for medically-necessary procedures. Syndergaard went to Florida for his operation because at the time, the Sunshine State was allowing such operations whereas New York was becoming the epicenter of the coronavirus fight.

The Boston Globe reports Sale went to California for his operation because of the state’s lack of restrictions on procedures. His operation was performed by Dr. ElAttrache, who as we said, sees no problem with these surgeries.

In the modern sports world, team owners have shown they are in it for the money.  However, the physicians and doctors who collaborated to provide obviously elective surgery on wealthy, high-profile athletes also seemed to be putting money ahead of the public's health.

Some hospital systems seemed particularly cavalier about elective procedures. On April 1, USA Today reported,

This month, nearly 300 University of Pittsburgh Medical Center medical staff members – the majority of them residents and anesthesiologists – signed a seven-page letter outlining concerns about elective surgery and routine visits. It was sent to the health systems' management March 21, but some elective procedures have continued, according to two doctors who asked to remain anonymous.

Employees reported backlash from management because of the letter, one of the doctors said.

A second example,

Facilities allowing nonemergency surgeries include Steward Health Care. The more than 30-hospital chain, which operates in states including Texas and Louisiana, said in a statement that it will 'continue to support all scheduled surgeries and procedures, and we will leave the decision on whether it is appropriate to proceed now to our physicians and their patients.'

Steward said it is 'committed to preserving access to scheduled procedure time for as long as possible.' Steward did not respond to a request for comment Tuesday.

Just to reiterate,

Doctors and hospital staff 'have been put in a situation of deliberate sacrifice and are told to put our personal safety aside for monetary reasons,' said [Dr Nivedita] Lakhera, who has written two books on mental health and healing. 'When hospitals do nonemergency procedures, we see them as being OK with our death over their greed about short-term revenue. We resent that, but we are powerless, and we are forced to be there anyway.'

Note that UPMC is something of a poster child for managerialism in health care.  We have frequently discussed the hospital system management's ethical misadventures, led by a business-trained generic manager who has received outlandish compensation.  Our most recent round-up of the troubles at UPMC was in 2015.  

Furthermore, note that Steward Health Care is actually a for-profit hospital system owned by a private equity group, Cerberus Capital Management.  Thus it exemplifies another feature of the US commercialized health care system, financialization.  Steward Health Care, as run by Cerberus, was one of the earlier leaders in hiring corporate physicians, whom it pressured to avoid "leakage" of patients to other hospitals and doctors, even if some might question whether the care provided elsewhere might be better for those patients (look here).  The multimillion dollar a year CEO of Steward suggested the health care had become a commodity, objectionable to those who thought that health care should be a mission-based calling (look here). A 2016 summary of Steward's operational misadventures is here. As an aside, Steward was caught up in a dodgy scheme called World Health Networks to sell travelers quick analyses of their health via kiosks.  The scheme involved shady foreign participants, and a number of associates of ... Donald Trump (look here). 

Despite their sometimes dark pasts, both UPMC and Steward have remained major hospital systems, so maybe it should be no surprised that they are now seen as involved in ethically dubious activities that are hampering coronavirus preparedness, and possibly putting patients and health care professionals  at risk.


Hospitals Cutting Pay of Frontline Health Care Professionals Who Are at Personal Risk from Coronavirus

On March 27, 2020, the Boston Globe reported:

Emergency room doctors at Beth Israel Deaconess Medical Center have been told some of their accrued pay is being held back. More than 1,100 Atrius Health physicians and staffers are facing reduced paychecks or unpaid furloughs, while pay raises for medical staff at South Shore Health, set for April, are being delayed.

In particular, at the Beth Israel Deaconess Medical Center,

the physicians group announced that effective April 1, it is suspending employer contributions to the retirement plan for doctors in the group, as well as at an affiliated group that staffs many other hospitals in the state, Associated Physicians of Harvard Medical Faculty Physicians at BIDMC. There are 1,600 doctors in both groups, and the majority of them are affected by the cutback, according to a company spokesperson.

The physicians group also told ER doctors this week that it is withholding and deferring half of their quarterly 'bonuses' scheduled for March 30, according to another e-mail shared with the Globe. Those payments, which can reach tens of thousands of dollars per quarter, are based on extra shifts or additional patients the ER doctors took on months earlier, according to the doctors.

'The bonus is just pay we’ve earned,' [ED Doctor Matt] Bivens explained. 'It’s analogous to re-branding ‘overtime pay’ as ‘your bonus.’' Meanwhile physicians in other specialties in the group will not be receiving bonuses at all on March 30, according to the e-mail.

However,

'This is at a time when many of us have moved out to live like lepers separate from family to prevent spreading infection, and have already been working huge extra hours trying to scrape together [personal protective equipment] and otherwise brace for COVID-19,' said Dr. Matt Bivens, an ER doctor at Beth Israel Deaconess Medical Center and St. Luke’s Hospital in New Bedford.

What was the rationale? The need to preserve short-term revenue, of course:

'Like many other health care and physician organizations, the economics of the care we provide has changed quickly and dramatically,' wrote Dr. Alexa B. Kimball, chief executive of the Harvard Medical Faculty Physicians group practice at Beth Israel Deaconess Medical Center

I could find nothing in the article suggesting that the hospitals were cutting the pay of management personnel, however.  It seems particularly egregious to cut the pay of the health care professionals working the hardest and exposed to the most risk from coronavirus, while leaving the pay of already extremely well-compensated managers intact (if that is, in fact, the case).  But that's how the managerialist cookie crumbles....

Private Equity Owned Physician Staffing Company Cutting Pay of Front-Line Health Care Professionals Who Are at Personal Risk from Coronavirus

On March 31, 2020, ProPublica reported:

Most ER providers in the U.S. work for staffing companies that have contracts with hospitals. Those staffing companies are losing revenue as hospitals postpone elective procedures and non-coronavirus patients avoid emergency rooms. Health insurers are processing claims more slowly as they adapt to a remote workforce.

'Despite the risks our providers are facing, and the great work being done by our teams, the economic challenges brought forth by COVID-19 have not spared our industry,' Steve Holtzclaw, the CEO of Alteon Health, one of the largest staffing companies, wrote in a memo to employees on Monday.

The memo announced that the company would be reducing hours for clinicians, cutting pay for administrative employees by 20%, and suspending 401(k) matches, bonuses and paid time off. Holtzclaw indicated that the measures were temporary but didn’t know how long they would last.

In a follow-up memo sent to salaried physicians on Tuesday night, Alteon said it would convert them to an hourly rate, implying that they would start earning less money since the company had already said it would reduce their hours. The memo asked employees to accept the change or else contact the human resources department within five days “to discuss alternatives,” without saying what those might be. The memo said Alteon was trying to avoid laying anyone off.

'It’s completely demoralizing,' said an Alteon clinician who spoke on the condition of anonymity. 'At this time, of all times, we’re putting ourselves at risk but also putting our families at risk.'

So many ED physicians are neither private practitioners or hospital employees, but work for medical staffing companies, to whom hospitals have outsourced ED functions.  Presumably, hospital managers did this based on management dogma favoring outsourcing as a way to increase financial efficiency, thus improving the hospitals' revenue.  Here we see managerialism in action once again.

But wait, there is more.... It is not merely that the ED physicians in this case are employees of an organization led by managers with business training, but no health care background.  In fact, they work for for-profit companies owned again by private equity firms:

Private equity investors have increasingly acquired doctors’ practices in recent years, according to a study published in February in JAMA. TeamHealth was bought by Blackstone Group in 2016; another top staffing firm, Envision Healthcare, is owned by KKR. (The staffing companies have also been implicated in the controversy over 'surprise billing.')

What about Alteon?

Alteon and its private-equity backers, Frazier Healthcare Partners and New Mountain Capital, didn’t immediately respond to requests for comment.

ED clinicians now faced with pay cuts while they work harder, face more hardships, and are subject to more risks, were not happy.

'It’s completely demoralizing,' said an Alteon clinician who spoke on the condition of anonymity. 'At this time, of all times, we’re putting ourselves at risk but also putting our families at risk.'

So,

'I’ve completely lost trust with this company.'

The big question is why that clinician ever thought a private equity company would put patient care, and patient and clinician safety ahead of its own revenue?

We first discussed the perils of private equity takeovers of hospitals here in 2010, and of physicians providing direct patient care as employees of corporations owned by private equity here in 2011.   The private equity business model seems particularly unsuitable for organizations which provide patient care, as we discussed in some detail in 2012.

For a quick modern summary of why it is bad to have private equity involved in direct patient care, see Merrill Goozner writing in Modern Healthcare, September 5, 2019,

The private equity business model in healthcare parallels other industries: Use highly leveraged private capital to roll up a number of small firms into one entity, with the private equity firm providing collective management. In addition to hefty fees for arranging the transaction (generally 1% to 2% of the purchase price), the private equity firm typically demands a 20% return on its investment after paying interest on the debt.

After three to seven years, assuming all goes well in achieving the promised efficiencies, the private equity firm and its junior partners (who are the specialty physicians in this latest wave of takeovers) earn a windfall by taking the company public or flipping it to another set of private equity investors. If things don’t work out as planned, the firm cuts its losses and declares bankruptcy (most of its capital will have been recouped through the 20% annual returns).

The management company has two paths to achieve its financial targets. It can either reduce costs sharply or look for ways to increase revenue.

A private equity firm running a hospital is likely to be even more focused on putting short-term revenue ahead of all else, including patient's and the public's health, and ahead of health care professionals' safety and welfare.

Summary

We have been ranting about the perils of the US commercialized, dysfunctional health care system for a long time, unfortunately often with little effect.  But expect these perils to loom very large when the health care system and the nation's public health are under a deadly threat, like that from a pandemic.  I hope most of us will survive this pandemic.  When it is over, we have to rethink our societal devotion to neoliberalism, (or market fundamentalism) (look here).

We could start by banning the commercial practice of medicine, as we did in the past, and banning for-profit corporations from owing hospitals, or providing direct care to patients.

Until we do, we will continue to live in a dystopic version of The Apprentice.