Code Blue for America’s Hospitals
When someone recently got stuck in an elevator at a New Jersey hospital, the serviceman wouldn’t make repairs until a check was hand-delivered as payment in advance.
When another New Jersey hospital completed construction of a flashy new building, it was unable to equip it because the hospital is overwhelmed by debt. The new building is sitting empty and the hospital is likely to be sold to another hospital – for nothing.
As noted here last week, there is no question that America’s health-care system is in crisis. But if you want to see where U.S. hospitals are likely to find themselves sooner rather than later, consider the number of hospitals in New Jersey that are on life support.
* The Passaic Beth Israel Regional Medical Center is so low on cash that it has been on the brink of shutting down twice. A bankruptcy judge has approved its sale to another hospital in Passaic that is in almost as bad shape.* The St. Joseph’s Healthcare System, which runs several North Jersey hospitals, has a $450 million budget, but is barely breaking even and can’t afford to replace important but aging equipment.
* The St. Barnabas Health Care System, the state’s largest hospital group, is on its knees because it has been forced to cough up $265 million to settle a federal lawsuit over billing fraud.
* Repeated scandals have rocked the state’s premier hospital — the University of Medicine and Dentistry of New Jersey and an affiliate, University Hospital in Newark — which I recently blogged about in a post entitled New Jersey’s Biggest Mob Family.
Some of these hospitals’ wounds are self inflicted, to be sure. But with occupancy rates plummeting and other trends conspiring, odds are that at least 10 New Jersey hospitals will go bankrupt in coming months and the underlying reasons are beginning to eat away at hospitals in other states like an infection that is resistant to antibiotics.
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40 Responses to “Code Blue for America’s Hospitals”
Well, the US health care system is the most expensive in the world (per capita), so why do hospitals go bankrupt? Maybe because they are left with the bills of all the uninsured they can’t simply sent away to die? One of the most compelling arguments for a new, universal health care system for the US.
Gray62:
There are many compelling reasons for a national health-insurance system, including the burden many hospitals bear in treating uninsured patients who use an ER because they cannot afford to take a colicky baby to a pediatrian, and so on and so forth.
As it is, some states including New Jersey have systems to ease the so-called indigent burden on hospitals, but in New Jersey, indigents costs have far outstripped state subsidies.
Went through a monte carlo simulation the other day that estimated health care costs to exceed $1 million per annum in forty years.
An inflation rate of 10-15% is not out of the question in health care. While some of that can be blamed on abuses of the system, a lot has to do with the symbiotic relation between hospitals, insurance companies and government agencies.
In some ways and areas, insurance is treated as a utility while hospitals and health systems are accorded not-for-profit (not non-profit, which is different) status and therefore do not pay taxes on huge parcels of land and billions in profits nationwide. This stresses a system that subsidizes a bloated industry.
One thing I find interesting is that the planning horizon for the groups that I consult with is 9-12 months. Any new technology or facillities needs to be able to pay for itself based on current reimbursement in less than a year. This is due to the ever changing CMS reimbursement rates.
Many of these hospitals made long term bets on facilities and technology without realizing the long term risks. I do not see how a single payer option is going to fix this. I also do not see how single payer would fix physicians from transferring the high margin patients to outpatient clinics and leaving the low margin patients to traditional hospitals.
“Many of these hospitals made long term bets on facilities and technology without realizing the long term risks. I do not see how a single payer option is going to fix this.”
And I do not see how the current system is going to fix this. This seems to be just mangement failures at some hospitals, not an inherent problem of any system. Apples and oranges, I’d say.
SuperDestroyer:
Boy do you make a good point, and it is one that I should have alluded to.
That is that beyond the radically changing health-care landscape, many hospitals themselves have been notably inept at long-range planning and cost containment.
I think there are a variety of reasons for this: A change-averse culture in some hospital administrations and among their board members. (“We’ve always done it this way in Nyack, why should we change now?”) Incestuous relationships with vendors. (“Why should we seek a better deal on tongue depressors when Bob’s company always takes us on those great golf outings to Hilton Head?”) Despite their crucial role, the indifference of doctors to getting involved in hospital policy unless it negatively effects their paychecks. (“If you don’t play by our rules, we’re going to pull our ER physicians group out and go elsewhere.”)
I could go on and on . . .
Um, why are we talking about the poor state of the NATION’S health system? It is in good shapre here in Texas, and Austin in particular.
It seems that New Jersey is in crisis, though.
AustinRoth:
Am I to presume that in Texas even the poorest people have access to quality health care? That even public hospitals have ample cash reserves for when occupancy rates cycle way down, which they sometimes do? That out-of-date equipment is replaced promptly? That nurses, unlike in most of the rest of the country, make a decent wage, get benefits and are not saddled with onerous patient loads? That . . .
If this is the case, please share the Texas Secret. New Jersey and other states could learn from its example.
“It is in good shapre here in Texas, and Austin in particular.”
This depends on which side you look at it, I guess. A consistent inflation rate of 10-15% doesn’t sound like ‘good shape’ nor like good prospects to me…
OK I know I could get a deserved “Get a life!” for this, but the biochemist in me can’t help it. Viruses are inmune to antibiotics, that’s part of what makes them so hard do combat. Antibiotics are used against bacteria, which do in some cases have resistance. A good compromise would be “an infection that is resistant to antibiotics”.
On to the actual issue at hand. Gee, I seem to recall that one of the main arguments against government insurance is that government would be too inept to properly administer hospitals and such(never mind that every other civilized nation manages to do it). Seems like private hospitals aren’t to good at it either.
I don’t get why people don’t question the fact that everybody has the right to a free, public, basic education, regardless of wealth, but find that the same rule shouldn’t be applied to your healthcare.
Isn’t New York CIty trying to close underused hospitals to improve the cost efficency of their system?
Polls show that most of the people in this country are in favor of a nationalized/universal health care system.
The powerful insurance lobby as well as scare labels like “communist” and “socialist” keep real change from taking place.
Lynx:
I have been shamed by many people, but never a biochemist! (Wink!) I have corrected the offending text.
“I don’t get why people don’t question the fact that everybody has the right to a free, public, basic education, regardless of wealth, but find that the same rule shouldn’t be applied to your healthcare.”
You “get” it perfectly well. The folks who don’t get it include hospital corporations and health-insurance and pharmaceutical companies whose profit-centered apple carts would be upset if some semblance of universal health care were enacted.
Not to worry, it won’t be.
Chris,
I did not see support by a majority of people for a government run healthcare system. I think people support the Mass. program of making everyone spend some of their own money for healthcare but the program is massively underfunded.
Gray62 is correct of course in one explanation (that providing health care service for those who can’t pay drives up costs), but there’s also a basic fallacy in even asking this question. Just because a product or service is expensive doesn’t mean that the providers of that product or service are reaping high profits. To be sure, some people in the healthcare industry do make money but that doesn’t meant that expensive=profitable. Expensive also means that there are high costs involved for those who are providing the services (malpractice insurance, for one notable example, and high cost of pharmaceuticals).
And we can’t ignore the fact that third party payment removes market forces, and that healthcare is a bizarre commodity in that it’s highly inelastic and we want the best (and we want to keep pushing the envelope for what “the best” means), and at the same time we want to be able to give it out for free to those who can’t pay for it themselves. I’m not disputing that these are important goals, but it’s much too simplistic to say that national healthcare would solve all of the dilemmas. If the market forces aren’t going to keep costs down, then whatever system we design has to have some way to help introduce more cost efficiency without sacrificing quality or availability.
The idea of market forces functioning effectively in health care is a joke. I wish that conservatives would just abandon that shibboleth because it just isn’t true. There just isn’t a way to effectively “shop” for health care. It isn’t a commodity like your car, a house or your groceries. By it’s very nature it will surprise you with what you need and when an unexpected need arises it is almost inevitably needed immediately, removing the ability to take your time and shop around. And these surprises make up the most expensive part of the system. Markets have limits and health care falls outside of them!
“there’s also a basic fallacy in even asking this question”
Right. But it’s a question many average are asking themselves. Kind of a paradoxon for many.
And you raise some good points. Of course, the markets regulating themselves would be preferable, but the health system is a sector where the market isn’t transparent. Only if the consumer had all necessary informations, he would be able to make the right decisions (if he doesn’t lose his nerves because of concerns about his life expectancy). Most consumers, except some insiders, don’t have those informations. That’s where corporate players, representing the citizen, show their advantages (for instance, the administration of the VA healthcare). They have the knowledge and the market force to get good deals. Of course, there will be also downsides in some special cases, but it’s much better than simply leaving all consumers alone with inscrutable choices.
C Stanley:
A most thoughtful and nuanced comment.
Pardon the pun, but you are dead on in saying that universal health care would not be a cure all.
It would only be a start, but boy do we ever need one.
It will be interesting to watch how Massachusetts (which is not to be confused with AustinRoth’s Texas), rolls out its near-universal program in the new year. The great attraction of this program for me is that it has incentives for those big bad health-care insurers to participate and penalties for individuals who choose not to participate.
Note further that this plan was a result of a bipartisan meeting of the minds between Republican Gov. Mitt Romney (yes, him) and a Democratic legislature.
Note further further that liberal voters had pretty much put a gun to the politicians’ heads and said they would force a state-wide referendum on health care insurance if they didn’t act first.
Uh, yeah, Jim, and if you reread my post you’ll see that this is precisely what I was saying. But I was also making the point that since the market can’t function in the way we need it to for this commodity, we have to figure out how to create a system that does. If we create a nationalized system without considering how to replace the market forces, the system will be ineffective.
This post is so divorced from reality that you have lost all credibility regarding any discussion of health care.
http://keyetv.com/health/local_story_326222757.html
AustinRoth, you should never, ever post about health care again because you simply do not know any facts.
Shaun,
Yes, I find Romney’s healthcare program very intriguing and if nothing else comes of his presidential campaign, I hope it at least interjects this plan as a model for a national plan.
Let me throw one more thing into the discussion here which may be a bit provocative. One reason that I distrust nationalized healthcare for the US is my belief that the US is currently subsidizing healthcare for the rest of the developed nations. For example, Canada has cheap drugs and it’s tempting to say, why don’t we do what they do? Well, because if we did, we’d end up with fewer new drugs being developed. Canada sets drug prices just above production cost, so that US consumers are the ones who provide the extra profit needed to incent investment for R&D. Likewise, I’ve seen models that show physician pay to be a huge factor in cost of US healthcare (if I’m not mistaken, I’ve seen figures that US physicians on average earn twice what European ones do). OK, so can we do what Europe does? I don’t know all of the reasons that pay is lower there, but some possibilities are that cost of medical education may be lower (but do we want to artificially lower cost here which would mean lower budgets for medical schools, or are we again providing the cutting edge for the rest of the world in this area?) And, as I previously mentioned, malpractice is a huge factor in physician salaries, because of course those costs get passed on to consumers. I don’t know figures of malpractice awards and cost of malpractice insurance in Europe, but my guess is that they are far lower than in US.
Then there’s high tech diagnostic services and therapies. Are these as readily available in Europe, and again, are the technologies being subsidized by high cost of service in US which provides the profit motivation for further R&D?
Just some things to think about. On the other hand, instead of going for nationalized health, we could look at ways of promoting efficiency in the system and promoting universal health care insurance coverage. Increase supply of physicians to drive down salaries, particularly by increasing generalists and adding more physicians assistants who could do almost all routine care. Cover indigent people for preventative care. Work at tort reform to drive down cost of malpractice insurance.
“Well, because if we did, we’d end up with fewer new drugs being developed.”
But, honestly, you have to admit that many of those drugs simply aren’t useful. And a drug that poses serious advantages would always be profitable on the market, since it would have a monopoly for some times. Not to speak of that pharmaceutical groups are global players, the world doesn’t consist only of the US market. And why subsidize drugs for foreign markets, where’s the advantage in it? That’s against all what even right wingers say the free trade stands for…
C Stanley:
Nationized health care may not be all that it’s cracked up to be for some of the very reasons you articulate. It is most definitely not a cure all.
But so long as 45 million-plus Americans, an alarming number of them children and a growing number of them from the so-called middle class, are uninsured, we’ve got a crisis on our hands.
It is my belief that the health-care crisis has so many components that feed off of each other and that there is so much money at stake for for-profit entities and Congress is so beholden to special interests that we will not see national reform anytime soon, if ever.
This is something that the states are going to have to confront individually. Romney and the Massachusetts political establishment hopefully are just the start.
Shaun,
I agree and that is what I meant when I referred to a positive effect of Romney in the presidential ring. A president or candidate can use the bully pulpit to advocate states using this approach, or even propose federal legislation that would incent the states to do so. In addition, some of the systemic remedies that I mentioned could be tackled at the national level to improve cost efficiency without sacrificing quality, availability, or innovation. Conservatives would not oppose such proposals (with exception of some small interest groups) and then it would remain to be seen whether liberals who favor nationalizing the system would get behind it as a pragmatic solution.
Gray62:
Can you name some examples? If a drug truly weren’t useful, there wouldn’t be a market for it and it wouldn’t be produced. In fact if anything, the problem is the reverse: drugs for orphan diseases (those that are rare) are not produced because they aren’t profitable enough.
But often proposals for health care reform include either shortening the time before a med goes generic, or forcing pharmaceutical companies to sell drugs at lower cost, etc, and I don’t see how a nationalized health care could possibly be affordable unless some of those measures were taken.
Yes, but my point is that the policies of many other Western nations don’t allow drug companies to make the same profit margin when selling product there, so the US system is where the higher profits are made to obtain revenue for R&D.
My point is not that we intentionally subsidize, but that the policies of nationalized health care systems in other Western nations force us (indiretly) to do so. What I’m saying is that when other nations use govt intervention to artificially keep costs down, that leaves us with the option of raising prices in order to have the revenue for health care innovation (in pharmaceutical and technological development) or to sacrifice the development of health care innovations.
Of course a separate issue is the direct, intentional subsidization of health care in third world nations, which is a humanitarian issue rather than an economic one and it’s not what I was referring to when I brought up the issue of subsidizing health care for other nations.
“Can you name some examples?”
You know how to google, don’t you? Even a most basic google search turned up this report from Germany. If you look around, you’ll find similar statements from the US, too.
“http://www.bukopharma.de/english/stop-useless-drugs.htm”
“If a drug truly weren’t useful, there wouldn’t be a market for it”
Look at the marketing budgets of the pharmaceutical industry, calculate it’s share of the total costs. Do you think this vast amount of money is needed for spreading INFORMATIONS? Most people don’t really buy a drug, they buy a certain idea or image.
“forcing pharmaceutical companies to sell drugs at lower cost”
Wrong. The proposals I know of are based on the example of the VA administration. And they simply offer the companies the lowest market price. This simply forces the companies to anadon the policy of subsidizing the drug for some markets or big resellers. Nothing wrong with that. The industry can still calculate a reasonable price for their drugs, including profits. They just can’t sell cheaper in, say, Canada than to the VA administration anymore. Do you support that US citizen should be forced to pay for Canada’sa drugs?
“What I’m saying is that when other nations use govt intervention to artificially keep costs down, that leaves us with the option of raising prices in order to have the revenue for health care innovation (in pharmaceutical and technological development) or to sacrifice the development of health care innovations.”
Again, what’s wrong with raising the prices in Canada?
Andrew – Bite me.
There are 6 major hospitals under construction in Austin right now, representing an additional total of over 1000 beds coming online in the next two years.
You don’t know shit yourself, so you should stop commenting instead.
Hmm…A quick browse of that link and others that I see when I google “useless drugs” seems to indicate discussion of pharmaceutical companies dumping outdated or obsolete drugs on third world countries. While that isn’t a very laudable practice, it’s different than what I thought you meant in regard to where R&D budgets are allocated for new drugs. On that issue, I will also concede that there are some drugs that are “useful” but not “necessary”, such as erectile dysfunction and libido enhancing drugs. And that is an area where the market doesn’t work well because to each individual consumer, the quality of his/her sex life might be more important than the overall availability of life saving medications for the world population.
On the issue of raising drug prices in Canada, I’m not really following how that would work and I guess we’re arguing about different variations of national health care proposals. Do you have a link for the VA model that you mention?
I do know shit, and it’s well known that Texas has the 1st or 2nd highest right of uninsured in the nation– nearly 25%.
40% of low income children are uninsured. And Texas has among the lowest vaccination rates for all children 19-35 months.
1000 hospital beds? I’m sure the tens of thousands of uninsured who get turned away from them feel great about it.
One study ranks Texas 37th in quality of heath care while the horrible New Jersey is 14th. Texas, 5% below the national average. Sounds really “good”!
Really, it was quite clear from your original post that you are simply not aware of very well known realities about health care, especially regarding the quality of care in Texas. I eagerly await any evidence that Texas heath care is “good” by any definition. Try to use some health indicators in context, rather than saying that there are some new hospital beds.
(Ironically, New Jersey has far more hospital beds per capita than Texas.)
Andrew and Austin Roth: You are arguing about two separate issues. Austin Roth’s comments related back to the original post which was about the relative ‘health’ of the healthcare industry (whether or not healthcare institutions are financially solvent) while Andrew, you are arguing about the quality of the healthcare system (whether or not there is adequate access for all citizens).
“Do you have a link for the VA model that you mention?”
:Sigh: I’m too tired to look for the right source now, but check this article for lots of info.
The VA is a successful role model that wouldn’t be too complicated to implement on a national basis.
On useless drugs, I found this without much efforts…
OK, I see your point more clearly now about overuse of medication, and I agree. The hyper-marketing as well as the laziness of some physicians is a problem. Also, I’d argue that a broader emphasis on holistic therapies is needed (I’m not talking crystals and incantations here, I’m speaking of evidence based methods that allow the body to heal itself rather than those that treat symptoms). And again, these are areas where the market does not serve us well in relation to healthcare: since many holistic treatments are not patentable, there is no incentive for companies to research and develop them.
I cannot think of a more pungent example in the marketplace of where doing good and making money collide than the pharmaceutical industry.
Many of us are functional, let alone alive, because of the vaccines, medications and other applications that pharmaceutical companies have spent many billions of dollars to develop, test and bring to market.
But at some point the balance has swung too far the other way and too many big pharmas have taken their eye off of the ball by shamelessly plugging new drugs of questionable worth and, worse yet, conspiring with all too willing doctors to foist them on people who arguably don’t need them.
C Stanley, you’re right about it on the face, but I think these things are fundamentally related:
If health care in Texas is solvent for individual companies, but failing to provide care for huge segments of the population, then the system is much more of a failure than a state where health care outcomes are far superior but there are financial problems for individual institutions.
The entire solvency issue is directly related to health outcomes and the corrections that need to be made. If the only way to make money is to deny care, then the system is a failure and so must be reformed.
The system in Texas is far more broken than in New Jersey. The only people who should care about individual companies are the shareholders.
“The hyper-marketing as well as the laziness of some physicians is a problem.”
Exactly. But don’t put too much blame on the docs. I can’t imagine any human is able to pick the best drugs from the overwhelming supply of the market. Plus, it must be hard to resist the bribes of the industry…
But the main point is, there’s a lot of potential for savings, without reducing the quality of health care at all.
Trust me though, they could do a much better job at discerning usefulness of drugs over hype; and I’d daresay that we in the veterinary profession do a *slightly* better job at that and this is probably because we are less beholden to the drug reps (I guess we don’t get bribed as much because the huge profits aren’t there
)
National Healthcare is the ONLY way out of this. Nationalize the hospitals NOW!
I’m getting sick of uncontrolled capitalism failure.
CS,
Your post seemed to imply that the reason that market forces fail in health care is because of third party payment systems like insurance as opposed to the core nature of how health care differs from purchasing material goods or shopping for an apartment or house. Effective market forces require a rational actor that will not only be capable of using cool logic to reach a decision but be in a position to understand all of the pluses and minuses of what they are shopping for. There are so many ways that health care doesn’t fit into that model that it isn’t even funny.
And I agree with that, Jim. I am not advocating that we let the market rule the healthcare system but whenever there are cases like this where the market doesn’t work well, it doesn’t mean that the govt can do a better job either: we should figure out how the govt can intervene to replace the market forces that are absent in the situation, not assume that these same type of forces aren’t necessary- because just as you say that the consumer can’t make choices because he/she doesn’t have all of the information necessary, a bureaucrat certainly isn’t going to have that information either (in fact, much less so).