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OCR for page 209
For-Profit Enterprise ire Health Care. 1986.
National Academy Press, Washington, D.C.
An Exchange on
For-Profit Health Care
Arnold S. Relman and Uwe Reinhardt
Professor Uwe E. Reinhardt
Woodrow Wilson School of Public
and International Affairs
Princeton University
Princeton, N] 08544
Dear Uwe:
August 23, 1984 say that the public shouldn't be concerned about
the "remuneration ranging from good to ex
cellent" now being earned by people and in
stitutions in the health-care "industry."
"Somehow they expect health-care providers
to behave differently from the purveyors of
other goods and services."
Why shouldn't the public expect health-care
providers to be different from other "pur
veyors"? Do you really see no difference be
tween physicians and hospitals on the one hand,
and "purveyors of other goods and services"
on the other? Do you regard the health care
system as just another industry, and physicians
as just another group of businessmen? Where
does the professional commitment to service
fit into your view of medical care? Do hospitals
have no responsibility to serve the commu
nity, or do you reserve that obligation only for
the public tax-supported hospitals?
It seems to me that this issue goes to the
heart of the matter we have been discussing
in the IOM [Institute of Medicine] committee.
As a physician, I believe the medical profes
sion's first responsibility is to serve as a trusted
agent and adviser for patients. Physicians should
be adequately compensated for their time and
effort, but not as businessmen. Unfortunately,
too many physicians nowadays are succumbing
to the lure of easy profits, and are becoming
entrepreneurs. The investor-owned hospital
corporations obviously are businesses and tend
to think of health care as a business. It is also
true that many voluntary hospitals are becom
ing more businesslike in their orientation to
wards sales, marketing, cost control and so
forth. But does this mean that the health-care
system really is fundamentally the same as any
other business, or that we should encourage
it to become so?
As an economist, you may not see any dis
tinction between the practice of medicine and
I have just read your entertaining piece in
the July 23 issue of Medical Economics, de-
bunking the "cost-crisis" in health care, and I
wanted to make a brief comment.
In general, I agree with your argument-
which has the usual Reinhardt style and pa-
nache that as a nation, we could spend much
more on health care if we wanted to (partic-
ularly in the public sector). But it seems to me
that you ignore the crisis caused by the mal-
distribution ofthe burden ofthe cost. We have
a crisis in the private sector because employers
can't continue adding the rising costs of their
employees' health insurance to the price of
their products without becoming non-com-
petitive in world markets. And we have a crisis
in the public sector because the government,
having made a commitment to provide care
for the poor and the elderly, is no longer will-
ing to pay the bills, and local taxpayers are
unwilling to pick up the slack. So, I don't think
you help the public understanding of our di-
lemma by asserting that there is no "crisis."
The problem is that we want to have our cake
and eat it too. We want more and better health
care, but we don't have a system of paying for
it that distributes the cost equitably or assures
equal access for all citizens. That is what I
would call a real "crisis."
Turning to another aspect of your article: I
was puzzled by your comment about the eco-
nomic behavior of"health-care providers." You
209
OCR for page 210
210
a business, but that point of view would be
strongly contested by many people outside of
economics, including the great majority of
health professionals. It would also be con-
tested by almost anyone who has had a major
personal encounter with medical care. Sick or
frightened patients do not regard their phy-
sicians as Hey would "purveyors of other goods
and services," nor do they think of the hospital
where they go for treatment as simply another
department store.
In any event, this is an issue that needs to
be discussed in more depth at our committee
meetings, and certainly deserves thoughtfi~1
consideration in our final report.
With kindest regards.
Sincerely yours,
Arnold S. Relman, M. D.
September 6, 1984
Arnold S. Relman, M.D.
Editor
New England Journal of Medicine
10 Shattuck Street
Boston, MA 02115
Dear Bud:
Many thanks for your letter of August 23rd
concerning my recent piece in Medical Eco-
nomics. For starters, let me mention that
the piece was actually written by one oftheir
editors, after an interview that, in turn, was
based upon my paper entitled, "What Per-
centage of its GNP Should a Nation Spend
on Health Care?".
Be that as it may, the thrust of the article
is certainly mine, and I am willing to defend
it. You register two criticisms against the
piece: (a) that I mislead the public by ar-
guing that cost is not Me essence of our
health care crisis, and (b) Mat I do not expect
physicians' behavior to be deferent Dom that
of "purveyors of other goods and services."
Let me respond to both criticisms in turn,
with emphasis on Me seconcl, because it bears
on the matter before our IOM committee.
FOR-PROFIT ENTERPRISE IN HEALTH CARE
It is my sense that you misread the intent
of my remarks on costs. Because you are an
astute reader, other readers may have mis-
read it as well. Thus, I plead mea culpa for
inadequate communication.
Let me draw your attention to a sentence
in the piece that really constitutes the heart
of the argument:
All I'm saying is that we're dodging the real issue
when we pretend that God has spoken from on high
and told us: "Sorry: folks, you can't spend any more
on health care or you'll be running around naked!"
lhe real issue and it's tough enough is how much
we want to spend on health care, and how to ap-
portion the cost ito individual members of society. ]
Unfortunately, the editors eliminated the section
in brackets from Me draft I had approved.]
I do not believe, as you apparently do, that
premiums for employee health insurance have
rendered American business noncompetitive.
In Europe and (I believe) in Japan, the bulk
of health care is typically payroll financed. Col-
lectively, German and French business firms
bear a larger share of the nation's total health
bill than do American firms. There are more
compelling reasons why American business
firms find it hard to compete abroad.
Nor do I believe that our public sector could
not absorb additional expenditures on health
care. Let me not dwell on the $400 hammers
we have no difficulty buying from our defense
contractors. In 1983, we spent $22 billion on
farm support programs expenditures de-
signed to pay farmers not to grow food or to
grow surplus food the government must store
in its warehouses. A nation that can do this
year after year has no case arguing that it can-
not afford additional public health care expen-
ditures.
In sum, I stand by the argument that ref-
erences to the percent of GNP [gross national
product] we spend on health care, to the plight
of business or of David Stockman, or to phy
. . · . .
slclans average Income are smoke screens to
hide the true dimension of the crisis before
us: an apparent unwillingness of society's well-
to-do to pay for the economic and medical
maintenance of the poor. It is not an externally
imposed economic or cost crisis; it is a moral
crisis. That is what I meant by the statement
that "the real issue is how to apportion the
OCR for page 211
AN EXCHANGE ON FOR-PROFIT [IEALTH CARE
cost of our health care to individual members
of society." And, as you mention, you agree.
Let me now come to the more important
part of your letter. In it you argue that the
American public should expect health care
providers to be different from the "purveyors
of other goods and services," and you wonder
why I think otherwise. Furthermore, you ar-
gue that this question goes to the heart of the
matter before our IOM committee.
In view of the central role you have played
on the committee, I think that it is only fair
to take your question head-on. Unfortunately,
I shall not be able to attend the next two meet-
ings. Permit me, therefore, to respond to your
question with a commentary that goes much
beyond the customary length of a letter. My
ultimate objective will be to extract from you:
(a) a positive definition of the kind of health
care system you would find acceptable on eth-
ical grounds, and (by a statement explaining
precisely in what sense American physicians
differ from other "purveyors of goods and ser-
vices"-purveyors you do not seem to hold in
high regard. I shall proceed with a series of
pointed questions.
Do I understand you to imply that you would
like to see the U.S. health care system con-
verted to something akin to the Swedish sys-
tem? In Sweden, comprehensive health care
is the responsibility of the county govern-
ments. Most Swedish doctors are salaried em-
ployees of the counties, that is, they are truly
not-for-profit providers of health care. Only 5
percent of Swedish physicians are private, for-
profit practitioners on the U. S. model. Are you
not ultimately asking that such a system be
introduced in the United States as well? Of
course, in such a system physicians and others
working in it would have to be paid the "good
to excellent" wages earned by other "pur-
veyors" in the economy, because the health
sector must compete with other industries for
the available pool of manpower. The time is
long past when as vast and technically complex
a sector as the health care sector could be run
by missionaries and candy-stripers. It is a real
industry now, whether we like it or not, and
it must pay wages competitive with other in-
dustries.
Actually, I have never heard you make that
plea for the Swedish system before our com
271
mittee, nor have I seen you make it in print.
Let me therefore assume, in what follows, that
you do not advocate the Swedish model out-
right, but merely wish us to revert to the U. S.
status quo circa 1970, that is, to the world as
it was before the for-profit institutions ap-
peared on the scene. It was a world in which
physicians had the right to organize their prac-
tice as private entrepreneurs on a for-profit or
for-income or for-honorarium or for-whatever-
you-want-to call-it basis, and in which they were
supported by non-profit institutions that were
financed by someone else, but freely available
to physicians as their workshops. If this is the
world to which you would have us return, then
I must confront you with yet another set of
questions, some of which may not be alto-
gether tactful. These questions will center
strictly on physicians and not on other parts
of the health care industry. I would like to
explore with you what role model your own
profession has been to other purveyors of health
care.
Let me, then, turn your question around
and ask: What, in the history of the American
medical profession, aside from that profes-
sion's own rhetoric, should lead a thoughtful
person to expect from physicians a conduct
significantly distinct from the conduct of other
purveyors of goods and services? I do not deny
that there have been grand and noble physi-
cians among the lot, just as there have been
grand and noble financiers, lawyers, and even
economists. Rather, I am referring here to
central tendencies, to the mainstream of
American medicine as it has revealed itself
through the ages to a paying public. What
then, in the conduct of mainstream American
medicine should have led a thoughtful person
to expect from physicians a conduct distinct
from other ordinary mortals who sell their goods
and services for a price? And what in the his-
tory of mainstream American medicine would
you have serve as a role model for the emerg-
ing for-profit institutions deliv~nn~ health car_
. ~
VlCeS r
~_ = ~ _ _ _^ HA ~_ _ ^
Surely you will agree that it has been one
of American medicine's more hallowed tenets
that piece-rate compensation is the sine qua
non of high quality medical care. Think about
this tenet. We have here a profession that
openly professes that its members are unlikely
OCR for page 212
212
to do their best unless they are rewarded in
cold cash for every little ministration rendered
their patients. If an economist made that as-
sertion, one might write it off as one more of
that profession's kooky beliefs. But physicians
are saying itt
Ordinary mortals, not blessed by profes-
sional courtesy, experience the application of
this piece-rate principle whenever they pass
the physician's.cashier on the way out: one is
asked to pay, on the spot, with cash or valid
check. Indeed, it is not uncommon that one
makes a down payment or even a complete
prepayment for obstetrical care or surgery-
"cash on the barrelhead," as lesser mortals
would put it. Why would patients who un-
dergo this routine not think of the physician
as a regular business person? If you do not like
the imagery, perhaps you object to fee-for-
service compensation. Again, if you object to
fee-for-service medicine, why have you not
made this clear to our IOM committee?
You will recall that, for many decades, our
nation has been plagued by a maldistribution
of physicians. Careful empirical research has
established scientifically what was known to
any cab driver all along: physicians, like ev-
eryone else, like to locate in pleasant areas
where there is money to be had. Thus, our
favorite areas have been said to be vastly ov-
erdoctored, while other areas, notably the in-
ner cities, have been sorely underserved. As
a nation we have been able to solve this prob-
lem only through the importation of thousands
of FMGs [foreign medical graduates]. (Let us
thank them one and all!) Because I do not think
ill of ordinary mortals, and because I think of
physicians as ordinary mortals, I would not
look down upon physicians for their locational
preferences. They have simply behaved like
certain Ivy League professors who lavish their
pedagogic skills on the offspring of America's
well-to-do instead of teaching students who
really need them. But how does someone im-
puting a more lofty social role to physicians
reconcile the physicians' locational choices with
the lofty ideal? Do you really believe that phy-
sicians are more civic in their behavior than
the rest of us? Do you think they could come
even close to members of the voluntary fire
brigade? Let me put the question to you even
more bluntly: Do you sincerely believe that
FOR-PROFIT ENTERPRISE IN HEALTH CARE
our for-profit hospitals will leave in their wake
as much neglect of uninsured, sick Americans
as American physicians have, collectively, in
the past and are likely to leave in the future?
You ask me whether hospitals have no re-
sponsibility to serve the community, and
whether I reserve that obligation only for the
public tax-supported hospitals. This question
involves principles of law and principles of eth-
ics, and I am neither a law yer nor an ethicist-
just a little country economist from rural New
Jersey. But perhaps I can make some headway
by seeking guidance in your own profession's
code of ethics. After all, the human capital of
physicians (their training) has traditionally been
largely tax-financed. Let us examine, then, what
obligation for community service physicians
believe they have shouldered in return for a
largely tax-financed education. From that ethos
we might derive some clues on the social ob-
ligation of a hospital that is wholly investor-
financed and not tax-financed. Specifically, if
physicians believe they owe no community
service for their public subsidies, can we le-
gitimately saddle investor-owned hospitals with
such an obligation?
According to a recent article in Medical Eco-
nomics Jack E. Horsley, I. D., "Who Can Sue
You for not Rendering Care?" August 20, 1984),
the AMA [American Medical Association]
Principles of Medical Ethics include the fol-
lowing tenet: Physicians are free to choose
whom they will serve. Further on in the piece
the author opines that "an AMA legal analysis
states that 'a physician is not required to accept
as patients all who apply to him for treatment.
He may arbitrarily refuse to accept any person
as patient, even though no other physician is
available.'" (Italics added.) Finally, the au-
thor advises the reader, "You have a perfect
right to refilse patients who are not insured or
on welfare." As we all know, many American
physicians have acted on these ethical pre-
cepts. They have refused to accept Medicaid
patients because they considered the cash yield
for treating such patients inadequate. They have
"skimmed the cream," so to speak.
You and some of your colleagues seem trou-
bled now by the thought that for-profit hos-
pitals may "skim the cream" and refuse to treat
uninsured, poor patients. You have made much
of this point in our committee meetings. Here
OCR for page 213
AN EXCHANGE ON FOR-PROFIT HEALTH CARE
comes yet another question for you: Given that
the medical profession, in its own code of eth-
ics, actually has laid the moral and legal foun-
dation for such refusals, have you at any time
prior to the emergence of for-profit hospitals
ever railed against your own profession's code
of ethics?* If so, I would love to see that lit-
erature. If not, why have you not?
You may have noted in our committee's
public hearing last fall that the representative
of the ASIA steadfastly refused to be goaded
into saying something negative about for-profit
hospitals, particularly on this issue. That was
very decent of him, and very appropriate, too,
because people in glass houses should not throw
stones, as the old saw goes.
My own thoughts on the matter, for what
they are worth, are these. Society should not
expect private physicians or private hospitals
(for-profit or not) to absorb the cost of whatever
social pathos washes onto their shores. We as
a society have a moral duty to compensate the
providers of health care for treating the poor.
If providers do give some charity care, our
thanks to them. Ultimately, however, it is the
responsibility of the citizenry at large to pay
for the economic and medical maintenance of
their less fortunate peers.
It follows that I do not consider it sensible
to nit-pick over how much charity care for-
profit hospitals do or do not give. Our com-
mittee has wasted too much time on that ir-
relevant question. In any event, to the extent
that they refuse to render such care, they can
point to the medical code of ethics as a moral
justification for their policy, and they can but-
tress their case by pointing to the neglect your
profession has traditionally visited upon low
*Incidentally, I am not saying that the medical
profession departs from He celebrated Hippocratic Oath
our medical graduates swear. As I read that oath, I see
no reference in it to charity care. It is merely required
that physicians do the utmost, without corruption, for
patients whose house they do (choose to) enter. There
is the added promise that "you will be loyal to the
profession and just and generous to its members," and
there is the wish that "prosperity and good repute be
ever yours." I saw nothing explicit about charity care
in the version I reviewed. Maybe there is a longer one
that does make reference to it. If so, I stand to be
enlightened.
213
income Americans. Examine, if you will, the
data presented in the graph's overleaf. Would
you interpret the sudden upswing in the phy-
sician care received by America s poor since
the mid 1960s as: (a) a massive attack of un-
requited noblesse oblige seizing members of
your profession shortly after 1964, or (b) a sud-
den decrease in the health status of America's
hitherto unusually robust and healthy poor, or
(c) the emergence of federal financing of phy-
sician care for America's poor, many of whom
were sick all along?
My money is on (c). If I am correct, the
graphs are not exactly monuments to the
beneficence of American medicine, are they?
And, if I am correct, other "purveyors" prob-
ably would have traced out similar graphs un-
der similar circumstances, would you not agree?
Real estate developers are one example that
comes to mind; they have done much for the
poor since federal funds began to pay them for
it. If we pay the for-profit hospitals for treating
the uninsured poor, they will treat them, too,
as many American physicians (though not all)
did in response to the onset of federal financ-
ing. *
And what of the profits the investor-owned
hospitals will reap in the process? You will
recall that you and I have had quite a few
exchanges on the level of these profits. As you
probably know, economists decompose a phy-
sician's income into at least three parts: (a) a
rate of remuneration for hours of work, (b) a
rate of return to the investment in fixed facil-
ities (the practice), and (c) a rate of return to
the investment the physician has made in his
or her own training. Research has shown the
latter rate to be certainly on par with the rate-
of-return to shareholders' equity earned in in-
dustry, the hospital industry included.
Recently I read that over 70 percent of all
cataract extractions in this country are covered
by Medicare. If you look up the prevailing
charges for that operation and relate these to
the time it takes to perform a cataract extrac-
tion, you will arrive at a quite handsome hourly
*I do not deny that even prior to Medicaid, some
American physicians did treat some of our poor on a
charity basis. It is also true that our fior-profit hospitals
now do treat some uninsured poor on a charity basis.
OCR for page 214
l
214
rate of physician remuneration for that kind of
work. Properly viewed, it implies quite a
handsome rate of return to the investments
made by ophthalmologists in their training.
My legendary inbred tact stops me from dwell-
ing on the rates of return our nephrologists
have been able to extract from taxpayers via
the Medicare program. But let me raise the
following question: If it is all right for physi-
cians to earn a handsome rate of return on their
investments, what is so evil about paying a
handsome rate of return also to the non-M. D. s
who have let their savings be used for the brick
and mortar of health care facilities against
nothing more than the piece of hope-and-prayer
paper lawyers refer to as a"common stock
certificate?" Do you think that, in its final re-
port, our committee can fairly get into the
issue ofthe rates of return earned by the share-
holders of investor-owned hospitals without
exploring also the rates of return physicians
earn on their investments? Might you not agree
that we had best drop that entire issue as well?
So far, I have argued that, as individuals,
American physicians have traditionally con-
ducted themselves in a style that casts them
into the role of a regular purveyor of a service.
I do not judge it to be a style ordinary mortals
need behold with awe. It is tempting to but-
tress the case further with reference to the
activities of organized American medicine. I
shall refrain from reciting that history, how-
ever, because Clark Havighurst of Duke Uni-
versity has already done so quite effectively
before our committee. Suffice it to say that
one would be hard put to distinguish organized
American medicine from the trade association
of any other group of purveyors of goods and
services. Would you not agree with that as
well?
In this connection, you may also wish to read
Paul Feldstein's chapter"The Political Econ-
omy of Health Care" in his book Health Eco-
no7rucs. * In that chapter he demonstrates rather
persuasively that the political activities of or-
ganized medicine are best explained with a
simple mode] of economic self-interest. Feld-
stein asks, inter alla, why a profession that
professes to be deeply concerned over the
*New York: John Wiley and Sons, 1979.
FOR-PROFIT ENTERPRISE IN HEALTH CARE
quality of health care has been opposed so long
to strict, effective periodic relicensing on the
model of, say, periodic relicensing of airline
pilots, all the while invoking the issue of qual-
ity in the defense of restrictive licensure laws
that exclude would-be competitors from the
primary health care market. Economists are
neither shocked nor surprised by such a pos-
ture nor, however, does it persuade them that
physicians stand much apart from the rest of
mankind.
You might argue that all I have said about
American physicians is perfectly true, but be-
side the point you wish to make: that such
things just should not be true. But then I must
repeat my earlier question, to wit: do you not
really ask for a health system something like
the Swedish one? I raise the issue again be-
cause nothing short of such a revolution will
rid our health system of the conflicts of interest
you seem to deplore. At a minimum, you should
want our system to be converted totally to
nonprofit HMOs that pay physicians a salary
and do not I repeat, do not distribute to
physicians any year-end bonuses based on the
HMO's economic performance. Is that your
plea?
You suggest that, when people are sick, they
are often frightened and can, thus, be easily
exploited by a for-profit provider. Is that true
only when the provider is a for-profit institu-
tion, but not true when the provider is a fee-
for-service (i.e., for-profit) practitioner? Do you
really believe that the executives of a for-profit
hospital naturally lack the decency and integ-
rity self-employed physicians naturally have?
Let me ask you this question in yet another
way. It is well known that the hourly remu-
neration physicians earn for inpatient physi-
cian services exceeds that for ambulatory
physician care. Would you not agree that, given
the entrepreneurial practice setup American
physicians have always preferred, and given
the pressure on physician incomes likely to
come from a physician surplus, this disparity
in hourly remuneration may lead to needless
testing, hospitalization, and length of stay, even
if all hospitals in our country were not-for-
profit?
I put to you the proposition that this ques-
tion goes to the heart of our debate. Whatever
the ownership of the hospitals in which Amer
OCR for page 215
AN EXCHANGE ON FOR-PROFIT HEALTH CARE
lean physicians work, the ethical standards by
which our health care sector operates will ul-
timately be driven by the ethical standards of
our physicians. To make the case you have
sought to make to our committee uncon-
vincingly, in my view-you must present us
at least with a testable theory according to
which the ethical standards of essentially un-
supervised, self-employed, fee-for-service
physicians affiliated with nonprofit hospitals
can withstand even the severest economic
pressure (mortgage, kids in college, alimony,
lovers with expensive tastes, and so on) in the
face of ample opportunity to be venal, while
the ethical standards of physicians affiliated
with for-profit hospitals, or employed at a sal-
ary by the latter, will wilt at the mere sug-
gestion by some corporate officer to set aside
medical ethics for the sake of corporate profits
that do not even accrue, dollar for allegedly
corrupt dollar, to the allegedly corrupt M. D. ?
Make that case convincingly, and you will walk
away with our committee.
Until you do make that case convincingly,
I shall continue to subscribe to the theory that,
whatever erosion in medical ethics we shall
observe in the future will be the product of
excess capacity all around. When a nation de-
cides to finance the operation of, say, only 90
percent of the human and material health care
capacity it has put into place, there will be a
scramble for the health~are dollar among health
care providers. In that scramble, medical eth-
ics may be bent. I hold to the proposition that
it matters little if those who scramble for health
care dollars define what they grab as "honor-
aria," "income," or "profits." These are se-
mantic differences of little practical import for,
when faced with economic extinction, non-
profit enterprises are unlikely to fight nicely
nor, I suspect, will unsupervised, self-em-
ployed, fee-for-service physicians.
Let me assure you that all of us on the com-
mittee appreciate and, indeed, share your con-
cern over the quality of American health care.
Unfortunately, you seem to be shooting at the
wrong target. The AMIs, HCAs, and NMEs*
*The acronyms refer to American Medical Inter-
national, Hospital Corporation of America (HCA), and
National Medical Enterprises (NME).
215
of the world strike me as nothing other than
the logical end product of a trend originally
nutured by none other than this country's
medical profession. To be sure, it is a devel-
opment which, from the profession's perspec-
five, went out of control. But your profession
nourished it along; physicians served as the
role models. For better or for worse, we must
now expect the for-profit corporations in health
care to follow in your profession's tracks.
Throughout this century, American medi-
cine has prided itself on its rugged inilividu-
alism. If one looked for die-hard champions of
free enterprise and libertarian thought, one
could always find them among our physicians.
As Clark Havighurst remarked before our
committee, American medicine fought val-
iantly to defend its right to entrepreneurship
in health care, and it fought just as valiantly
to deny almost everyone else that right. It was
a seductive strategy, but, alas, a dangerous
one. Somewhere along the way the profes-
sion's erstwhile, tight control over the distri-
bution of entrepreneurial rights in health care
slipped out of its hands. My guess is that the
tension between the profession's claim for an
exalted social position and its earthy fight for
an exclusive entrepreneurial franchise ulti-
mately strained the credulity and patience even
of medicine's friends. And, thus, the individ-
ual American physician finds him- or herself
today reduced somewhat in stature, though
not in wealth, almost a mere peer among an
ever-increasing number of profit-oriented pur-
veyors of health care, each competing vigor-
ously for the health care dollar.
If you deplore this outcome, you should have
started writing eons ago. By now, as Paul E11-
wood has put it, the targets you ought to want
to hit are already much beyond our reach. We
are left with the search for incentives that make
our for-profit or for-income or for-honorarium
providers of health care do good by doing well.
It probably can be done, although I cannot
guarantee it. We shall see.
David Rogers once told me that I seem to
be one of the few social scientists who does
not hate physicians. He is right. I really do
not hate physicians, nor do I begrudge them
their income. I like them and respect them
just about as much as I do other Americans
(business people included) most of whom are
OCR for page 216
216
very decent folk. This has not always been so.
During my student days at Yale I did develop
a certain disdain for physicians, but I write
that off as a lack of maturity. You see, until
those days I had thought of physicians as peo-
ple somehow apart and above the rest of us.
Naively, I had accepted the imagery physi-
cians like to project of themselves. It was the
dissonance between this imagery and the em-
pirical record all around me that pained me
enough to lash out in anger at your profession.
Now I have mellowed. Years of both casual
and careful empiricism have persuaded me that
physicians really are not very different from
other "purveyors. " If one accepts them on that
level, they come across as truly fine pur-
veyors expensive, to tee sure but truly fine,
nevertheless. By and large, I like what they
sell, and I like them, too.
Write me off as an economist or, alterna-
tively, call me a realist. But it so happens that
I am more comfortable dealing with a well-
trained, competitive, self-professed profes-
sional entrepreneur who drives a Lincoln than
I am with a well-trained, competitive, self-
professed saint who insists on driving a Cad-
illac. Chacun a son gout, I suppose.
Until we meet again, with my best wishes,
Sincerely,
Uwe E. Reinhardt
September 25, 1984
To: Professor Uwe E. Reinhardt
Dear Uwe:
Thanks for taking the time to give such a
detailed and thoughtful response to my letter.
For someone who declares that he really
likes and respects physicians, you certainly have
managed to roast the medical profession to a
crisp. I shudder to contemplate the fate of a
debating adversary you didn't like!
The questions I was trying to raise with you
concern broad issues of public policy and social
philosophy. Does the concept of a profession,
as applied to physicians and other health care
professionals, have any meaning in our society
and, if so, does that meaning imply ethical
FOR-PROFIT ENTERPRISE IN HEALTH CARE
obligations for health professionals that do not
apply with equal force to businessmen? Are
there differences between health care and other
services that would justify different public ex-
pectations for the behavior of health care in-
stitutions and business firms?
My purpose in writing to you was simply to
solicit your views on these questions, because
I consider them to be at the very heart of the
problem our IOM committee is wrestling with.
Some members of the committee apparently
believe that there basically is no difference
between health care and other goods and ser-
vices, or between physicians (as they are, or
ought to be) and businessmen. It, therefore,
would be logical for them to conclude that the
investor-owned health industry is a pseudo-
problem. Others, starting from the opposite
assumption, think that it is self-evident there
is a problem which needs looking into. Oddly
enough, our committee has so far devoted vir-
tually no attention to this matter, despite its
crucial importance for our deliberations. That
is why I was hoping you would respond di-
rectly to my questions and help generate some
interest among our colleagues in giving Farther
consideration to the issue.
Unfortunately, you have avoided a direct
answer by inveighing against the moral hy-
pocrisy of the medical profession. You seem
to be saying that since there are so many profit-
oriented entrepreneurial physicians out there,
and since "the ethical standards by which our
health care sector operates will ultimately be
driven by the ethical standards of our physi
,, ~ . .
clans, low can 1, as a p ~yslclan, even raise
questions about the ethics and social value of
selling health care in a commercial market?
Suppose I were not a physician and were
asl~g the same questions about investor-owrled
health care. Would your response be the same?
Would you say that physicians will have to
discipline themselves more effectively, or
change their economic owclus operandi before
we can even look into the for-profit industry?
You have also dodged my questions by ask-
ing a lot of your own. There isn't time for me
to deal here with all the questions you have
raised about my personal views, even if they
were germane to our committee agenda-which
they are not. Perhaps we can continue the
dialogue on another occasion. However, some
OCR for page 217
AN EXCHANGE ON FOR-PROFIT HEALTH CARE
of my opinions are already on record. I enclose
a copy of an article I wrote in Health Affairs
("The Future of^\ledical Practice") in case you
haven't seen it. It summarizes many of my
views about the fee-for-service system and en-
trepreneurial health care, and it outlines some
of the reforms I think physicians can and should
institute. I haven't yet written about my con-
cept of the "ideal" health care system because
I am not at all sure I know what that is. I do,
however, have pretty definite and well-known
views about the ethical obligations of physi-
cians, whatever the economic environment.
I happen to believe that your description of
physicians as "almost a mere peer among an
ever-increasing number of profit-oriented pur-
veyors of health care" is exaggerated. It has
some truth, but it overlooks the basic element
in our health care system, which is the relation
between doctor and patient. That relation is
based on trust by the patient and a commit-
ment by the doctor to serve the patient's in-
terest first. The fact that most doctors are also
interested in being well paid for their services,
whether by salary or on a fee-for-service basis,
doesn't change the primacy of their ethical
commitment to the patient. This commitment
is unfortunately being more and more eroded
by new economic forces, but it is still there,
and it is one of the several reasons why health
care is different from other economic goods
and services. Other reasons include the vir-
tually total dependence of the consumer on
the advice of the physician, and the often in-
timate and immediate relation of health care
to the quality and quantity of life. You will
probably attribute such views to the hubris of
doctors, but I believe they are correct. Do you
challenge these statements? If so, I hope you
will tell the committee why.
In my view, these ethical considerations
ought to be part of our committee's agenda.
They boil down to the question of whether
there is something special about health care
which makes distribution of health services in
a commercial marketplace problematic and in-
appropriate. A second issue (or set of issues)
for our committee is whether there is in fact
any empirical evidence of differences between
not-for-profit and investor-owned health care
in terms of process, product or broader social
consequences. In my opinion, it would be as
217
serious an omission to avoid discussion of the
first issue as it would be to assume, without
objective examination of all the available evi-
dence, that we know the answers to the sec-
ond.
With kindest regards.
Sincerely yours,
Arnold S. Relman, M.D.
October 16, 1984
To: Arnold S. Relman, M. D.
Dear Bud:
Many thanks for your letter of September
25 concerning the issues before the IOM Com-
mittee on For-Profit Health Care. Your letter,
and especially your paper on "The Future of
Medical Practice" enclosed with that letter,
finally put to us concisely the central question
that appears to have troubled you all along. I
take it to be the following question:
What revisions in the medical profession's code of
ethics need to be made to minimize the conflicts of
interest inherent in the transformation of health care
from a labor-intensive to a more capital-intensive
activity?
This question is rather distinct from (al-
though not totally unrelated to) the question
we seem to have pursued during the past year,
namely:
Relative to health cone delivered by not-for-profit
institutions, what eEect does Me for-profit motive
have on (a) the quality of care, (b) the cost of care,
and (c) access by Me poor to the care rendered by
investor-owned institutions?
The second question is obviously interesting
in its own right and thus worth pursuing. But
it is at best tangential to the first question
which you now declare to lie at the heart of
. .
Our Inquiry.
You seem to argue now that the primary
focus of our inquiry should have been the phy-
sician and not the hospital. If that is so, then
you surely bear a good part of the blame for
our straying from the course. After all, you
have rather consistently oriented the commit-
tee toward the for-prof~t hospital as the quin
OCR for page 218
218
"essential threat to the quality and fairness of
American health care. In your comments and
letters to the committee, you have drawn our
attention to the relative markups for-profit and
nonprofit hospitals charge on ancillary ser-
vices, to the relative ratios of total charges to
total costs, to relative profit rates, and to rel-
ative rates of charity care. None of these issues
is really central to the issue you raise in your
paper on "The Future of Medical Practice."
In that paper the focus is squarely on the phy-
sician. It is not clear to me whether the com-
mittee will be able to shift so late in the game
to zero in on the focus you now propose.
In your paper you speak of the "commer-
cialization" of health care, just as Eli Ginzberg
in his well-known paper speaks of the "mo-
netarization" of health care. These phenomena
are, of course, American adaptations to an un-
derlying change in the technology of health
care: the increasing reliance of modem med-
icine on sophisticated and expensive capital
equipment. One need not be a confirmed
Marxian economic determinist to believe that
this underlying technological change lies at the
heart of the changes you and Eli deplore.
The shift from labor-intensive to more cap-
ital-intensive medicine confronts society with
two distinct questions:
1. Who should finance, own, and control
the equipment and structures used in modern
health care?
2. Should physicians ever be among the
owners?
Some societies for example, Canada and
most European nations-appear to have de-
cided that the capital used in health care should
be financed and owned primarily by the public
sector. In these societies, health-care capital
is rarely owned by private investors, and not
even by physicians. West Germany furnishes
the only major exception to this pattern. (A1-
though hospital care in that country is given
almost exclusively by salaried physicians, some
physicians do own small hospitals. Fur~er-
more, the physicians in ambulatory care 611
their private offices with all sorts of laboratory
and therapeutic equipment. NIany of Hem earn
money simply by blowing hot air on patients'
heads or by performing similarly weird capital
FOR-PROFIT ENTERPRISE IN HEALTH CARE
intensive procedures. More and more, West
German physicians have become capitalists.)
In the United States, we have increasingly
looked to private capital markets as sources of
financing health-care capital, ancl physicians
rank prominently among the investors. We have
answered both ofthe two questions raised above
with a definite yes. Presumably, we believe
that patients are competent enough to cope
with whatever economic conflicts of interest
physicians as capitalists face under this ar-
rangement.
In your paper you take issue with premises
underlying the emerging pattern of capitalist
medical practice in this country. As I interpret
your policy recommendation on pages 17-18,
you argue that physicians should not enter joint
ventures with other entities in the ownership
of health-care capital and, presumably, that
they should not own expensive medical equip-
ment as sole proprietors either. In making that
recommendation you tacitly accept, do you not,
that the physician's professional ethics are apt
to be malleable that a physician who must
worry about the break-even volume of an
X-ray machine, laboratory, or treadmill exer-
ciser is unlikely to be impervious to such eco-
nomic pressures in composing treatments for
patients. I am persuaded by that argument,
particularly because I view physicians as reg-
ular-issue human beings. Perhaps other mem-
bers of the committee will be persuaded as
well. You should press the argument at the
next meeting, if only to test the waters.
But suppose the committee agreed on the
recommendation that, wherever it is techni-
cally feasible, physicians should minimize the
conflict of interest they already face under fee-
for-service compensation by avoiding direct or
indirect ownership of health-care capital. Would
it necessarily follow from this recommendation
that health-care capital should then also not
be owned by other private laypersons? If you
are prepared to make that argument, you should
develop your case carefully. At this time I am
still of the view that investor-owned hospitals,
for example, are quite compatible with the
strict code of medical ethics you espouse. As
long as physicians can keep their noses clean
of economic conflicts of interest in their role
as the patients' agents, they should be able to
act as their patients' powerful ombudsmen in
OCR for page 219
AN EXCHANGE ON FOR-PROFIT HEALTH CARE
dealing with investor-owned institutions. * That
was the central thrust of the argument in my
earlier letter of September 6. Do you have a
problem with that line of reasoning? If so, voice
it loudly and explicitly. It is my sense that our
committee will arrive at some sucll proposition
in its final report.
It is my sense that at least some of the for-
profit hospitals might go along with the strict
code of ethics you would impose on physicians.
In a paper he prepared for last year's Duke
University Private Sector Conference on Health
Care, for example, PICA chairman Don
MacNaughton argued explicitly against joint
cooperative economic arrangements between
hospitals and physicians. Don seemed worried
that, in the long run, such joint ventures might
impair the image of the hospital industry. I
think he is nght. It may not be good for the
patient's fiscal and physical health to have both
the physician's and the hospital's economic in-
centives aligned in the same direction, namely,
against the patient. Of course, if one throws
this argument against joint ventures between
fee-for-service physicians and hospitals, one
should be prepared also to lob it with equal
force against HMOs thealth maintenance or-
ganizations]. One unfortunate feature of an
H.MO is that, by "meshing" the physician's
and the HMO's incentives in one direction,
the physician may lose independence in his/
her role as the patient's ombudsman. That is
precisely why the champions of the poor tend
to be so alarmed whenever it is proposed to
force the poor into H^MOs. Profit-sharing or
bonus-giving HMOs are joint ventures.
You mention in your letter that you have
not yet developed your own conception of an
ideal health care system one that minimizes
the economic conflict of interest faced by phy-
sicians. It is time that you work on the artic-
ulation of such a system, lest your commentary
be written off es destructive criticism. Perhaps
you might begin by listing all of the arrange-
ments to which you object. By a process of
elimination you might then arrive at the set of
acceptable arrangements. That set may in
*I realize that a physician may have to please the
hospital to enjoy privileges there. But that applies with
equal force to nonprofit hospitals as well.
219
elude only "salaried medical practice." It might
also include, however, the relatively more
harmless fee-for-service system used in Can-
ada in conjunction with essentially publicly
owned or controlled hospitals. (Physicians in
Canada own little capital.) If you wish the com-
mittee to be responsive to your thinking, you
cannot go on forever without offering more
constructive criticism of our present system.
Let me now come to some ofthe other ques-
tions in your recent letter. Although you have
chosen not to answer any of the pointed ques-
tions I put to you in my previous letter-which
is a pity I shall nevertheless try to answer
yours. I am that nice of a guy.
You ask me again whether I truly see no
differences between physicians and other pur-
veyors of goods and services. Honestly, I don't.
Physicians are not the only purveyors whose
work I am not technically competent to judge.
The craftsmen who repair our cars and homes
perform a similar agency role. Although we
read of corrupt repairmen, just as we read
about doctors who run Medicaid mills or push
pills for profit, I have always been struck by
the integrity of most of the craftsmen and busi-
nessmen in whose ethics I must necessarily
trust. Physicians really should not be offended
when one-likens them to such "purveyors."
You and Dr. Donald M. Nutter, in a recent
piece in your journal, contrast the presumably
venal "business ethic" with your profession's
presumably more lofty code of ethics. If you
ever sat in on the board meetings of large cor-
porations, you would be surprised to learn how
often business people forego easy profits for
the sake of ethical standards. And you would
be surprised to learn what they could get away
with, if they were as venal as is implied in your
use of the term "business ethic." I honestly
believe that a corporation has as much concern
over the decency with which it treats its cus-
tomers as physicians have over their patients.
In short, I stand by the conception of physi-
cians I expressed in my letter of September
6. They are as decent as other human beings,
and just as frail under severe economic pres-
sure.
Franldy, I remain a little puzzled by your
own views on medical ethics. Sometimes you
seem to suggest that physicians are endowed
with a strong commitment to ethical conduct.
OCR for page 220
220
If that is true, why do you worry so? At other
times you lament the erosion of medical ethics
in the face of capitalist medicine. If medical
ethics erode so easily, what then does set phy-
sicians apart from "other purveyors?"
You ask me in your letter whether we (the
IOM) shall have to wait for the medical profes-
sion to clean up its act before we can even look
into the for-profit hospital industry. The an-
swer is: No, we don't have to wait, and we did
not wait. After all, our committee is looking
into the behavior offor-profit hospitals without
even looking at the behavior of physicians. Un-
fortunately, no major policy recommendations
are likely to emerge from such a study. Be-
sides, our inquiry into this facet misses the
central question you raise, for reasons indi-
cated above.
Finally, you ask me whether there is some-
thing special about health care which makes
it problematic to distribute it through the mar-
ketplace. The answer to that question depends
on two issues. First, what distributional ethics
do we wish to impose on health care? And,
second, quite aside from the distributional
ethics, do the consumers of health care possess
sufficient consumer sovereignty to fend for
themselves in the market for health care?
The first of these questions involves social
values. Most societies treat health care not as
a consumer good, but as a community service
that is to be distributed on an egalitarian basis,
on the basis of medical need. While that lofty
goal may not always be attained, it is at least
espoused. It is my sense that Americans have
now decided to treat health care as essentially
a private consumer good of which the poor
might be guaranteed a basic package, but which
is otherwise to be distributed more and more
on the basis of ability to pay. Mat I personally
think about this ethic is uninteresting. In
thinking about policy recommendations for the
United States, I must take the prevailing ethic
as a state of nature. For better or for worse,
it now points to two-cIass medicine.
The second question is a purely empirical
one. The champions of free markets in health
care obviously are persuaded that individual
patients can muster adequate countervailing
power even against systems in which the phy-
sician's and the hospital's economic incentives
are fully aligned against the patient. Paul Ell
FOR-PROFIT ENTERPRISE IN HEALTH CARE
wood seems to be in this school of thought.
Frankly, I harbor some doubts on this point.
I am not aware of any conclusive empirical
research on the ability of patients with differ-
ent health status and from different socioeco-
nomic and demographic groups to muster
elective countervailing power in the health
care market. In this area we seem to proceed
on preconceived notions, as any debate on the
subject in our committee is apt to reveal. We
certainly should discuss the issue, if only to
bare our preconceptions.
Until we meet again, Bud, keep on trucking.
I salute you for having the courage to propose
for your brethren a strict code of ethics on the
ownership of health care capital. Unfortu-
nately, you propose this code just at a time
when your brethren have come increasingly
to look upon the ownership of capital as a sub-
stitute source of income, in the face of declin-
ing patient-physician ratios. You propose to
kill the goose expected to lay your brethren's
future golden eggs. It takes guts to go to their
fiscal jugular in this fashion. As to the success
of your campaign, I can only sencl you that old
Navajo salute: Mazeltov,
With my best regards,
Cordially,
Uwe E. Reinhardt
To: Professor Uwe E. Reinhardt
Dear Uwe:
December 3, 1984
I am afraid you misunderstood the point I
was trying to make in my last (September 25th)
letter. I never said, nor even implied, that the
committee should abandon its analysis of
investor-owned health care institutions in fa-
vor of a new focus on the ethics of the medical
profession. All I proposed was that we include
in our report some discussion of the under-
lying ethical and social questions (as they apply
to both health care institutions and physi-
cians). I believe that public policy choices de-
pend at least as much on these underlying
questions as on the empirical and historical
OCR for page 221
AN EXCHANGE ON FOR-PROFIT HEALTH CARE
questions to which we have devoted most of
our attention so far.
Clearly, it is of the utmost importance for
us to marshal! and evaluate all the available
evidence on the characteristics and behavior
of for-profit hospitals and other investor-owned
health care facilities. It is essential that we try
to determine whether the type of ownership
of health care services makes any difference
to their cost, efficiency, quality, availability,
and responsiveness to community need. We
also should consider how the growing pres-
ence offor-profit facilities has affected, and will
affect, the viability of public and voluntary fa-
cilities in the same community. These ques-
tions have been high on our committee's
agenda, as they should be, but I believe that
our report should also recognize that there are
other important considerations that the public
and the government ought to be thinking about
as they consider future policy on health care.
Is there something special about health care
that makes it socially undesirable for facilities
to be owned by private investors, or for phy-
sicians to be entrepreneurial businessmen?
What will be the social consequences of the
growing commercialization of our health care
system? If we are to do a thorough job of eval-
uating the for-profit phenomenon, I believe
we should discuss these kinds of questions along
with the other topics we have been consid-
ering. I recognize that there may be no clearly
right or wrong answers to such questions, and
that we are not likely to get a committee con-
sensus. Nevertheless, it would be a useful ex-
ercise to at least lay out the issues. Our report
will be widely read and quoted, and it seems
to me that we would do a public service by at
least pointing out the questions that need to
be addressed and the arguments pro and con.
I suspect that many committee members,
whatever their opinions about for-profit health
care, would agree with me on this point, and
I hope you will too. We still have several months
in which to prepare the first draft of our report,
and I see no reason why it shouldn't be pos-
sible to include some of this kind of analysis
and still meet our deadline.
I now want to comment on some of the views
you express in the remainder of your letter:
1. You say that in the United States (as op
227
posed to Canada and most European nations),
we have decided that "private capital markets"
and physicians should "own and control the
equipment and structures used in modern
health care." I can't agree. Certainly, it is true
that much private capital has recently been
invested in health care, and the trend is grow-
ing. That is what our report is all about. I see
no evidence, however, that a political decision
has been made to rely on this method of fi-
nancing health care or that the implications
of such a decision have even been explored or
publicly discussed. As I see it, our report is
one of the first steps in the process of exam-
ining and debating public policy on this sub-
ject. The growth of the investor-owned health
care industry, and the extent of any future
involvement of the medical profession in this
industry, will depend on decisions yet to be
made. Our report could influence those de-
clslons.
2. Yes, you interpret me correctly. I do ad-
vocate that physicians should neither enter joint
business ventures with health care facilities
(for-profit or not-for-profit) nor hold any equity
interest in health care businesses. You raise
the interesting question of physician owner-
ship of expensive medical equipment. Exactly
where the line should be drawn between per-
missible, relatively inexpensive items of office
equipment and impermissible, more expen-
sive equipment in the office or elsewhere, is
a difficult question that I cannot answer, but
I recognize the problem. You may be inter-
ested to know that the Judicial Committee of
the AMA is currently studying conflicts of in-
terest in physician ownership of health care
capital and will shortly offer some quidelines.
3. You say that you believe physicians should
avoid direct or indirect ownership of health-
care capital, but you do not believe this stric-
ture needs to be extended to other private
investors. You think that investor-owned hos-
pitals are compatible with the strict code of
medical ethics I espouse because "as long as
physicians can keep their noses clean of eco-
nomic conflicts of interest in their role as the
patients' agents, they should be able to act as
their patients' powerful ombudsman in dealing
with institutions."
I agree that physicians must avoid con-
flicts of interest if they are to represent their
OCR for page 222
222
patients and protect them against exploitation
by investor-owned health care businesses, and
have urged this policy on many occasions. I
am not convinced, however, that such a policy
will be sufficient. Much depends upon how
much authority and independence the medical
profession will have in a system that may be
increasingly dominated by for-prof~t corpora-
tions and by business managers who focus pri-
marily on the bottom line. For example, how
effectively will doctors be able to represent
their patients' interests when the doctors are
employed by for-profit institutions, or when a
for-profit hospital chain is the only game in
town?
Be that as it may, I find your position on
this issue to be puzzling. You say that physi-
cians need to be ombudsmen for their pa-
tients, and yet you also insist that there are
"no differences between physicians and other
purveyors of goods and services." How could
that be? Are salesmen and other commercial
purveyors also supposed to be ombudsmen for
their customers?
4. In defending your claim of no difference
between doctors and businessmen, you say that
"physicians are not the only purveyors whose
work I am not technically competent to judge.
The craftsmen who repair our cars and homes
perform a similar agency role." And a little
later, you say that businessmen and corpora-
tions deal with their customers just as ethically
as physicians do with their patients.
I think you avoid the main issue here. Of
course there are many services which, like
medical care, consumers are technically in-
competent to judge. And, of course, physi-
cians are not inherently more virtuous or honest
than business people, or maybe even than cor-
porations. But I would maintain that there is
something unique about the doctor-patient re-
lation which clearly distinguishes it from the
relation between a car mechanic, a home re-
pairman, or any other commercial purveyor
and his customer.
It is not~that- there aren't experts other
than doctors on whom clients or customers
have to depend for technical advice. It is sim-
ply that a sick patient is dependent upon his
doctor in a peculiarly critical and intimate way
that isn't matched by any commercial rela
FOR-PROFIT ENTERPRISE IN HEALTH CARE
tionship. Up to now, at least, society has rec-
ognized this special relation by surrounding it
with a network of legal and ethical constraints
on the behavior of physicians which make it
very clear that physicians are not to be re-
garded simply as purveyors of expert services
in a commercial market. The ethical obliga-
tions of a car mechanic or any other purveyor
are to be honest in his business dealings, and
to over a good product or service, if the cus-
tomer wants it enough to pay the price.
An ethical physician's obligations to his
patient go far beyond that. The sick patient
must rely on the physician to ensure that he
gets the services he needs, and to make choices
for him, upon which the quality and quantity
of his life may depend. Financial considera-
tions are secondary. There are some superfi-
cial resemblances, but no one who has ever
been really sick would take your analogy be-
tween a car mechanic and a physician very
seriously. Some authors, in attempting to un-
derstand how medical services differ from those
ordinarily provided in a commercial market,
draw the distinction between needs and wants.
This strikes me as a useful and illuminating
insight. Markets are driven by customers' wants;
the medical care system is supposed to con-
sider health needs.
Maybe in the future, society will want to
change this special relationship between doc-
tor and patient by "deregulation" of the prac-
tice of medicine, as .\Iilton Friedman and other
Wee market zealots suggest. I doubt that very
much, however, because most people under-
stand how dangerous to health that radical step
would be.
5. You suggest "Americans have now de-
cided to treat health care as essentially a pri-
vate consumer good of which the poor might
be guaranteed a basic package, but which is
otherwise to be distributed more and more on
the basis of ability to pay." I can't agree. As
with your earlier opinion about the role of pri-
vate capital markets and physician entrepre-
neurial ownership of health care facilities (page
2), I believe the issue hasn't been discussed
or analyzed sufficiently to say what the Amer-
ican people really do believe. It is certainly
true that we have been drifting towards a mar-
ketplace mechanism for distribution of health
OCR for page 223
AN EXCHANGE ON FOR-PROFIT HEALTH CARE
care, but the public hasn't given its approval
of that trend, and many people haven't even
thought about it.
There are strong egalitarian feelings about
health care in this country. I doubt that a two-
tier system, such as would inevitably develop
with market-determined distribution of health
care, would be politically acceptable. In any
event, I believe the issue is still open. One of
our responsibilities in this study is to discuss
the probable effects of an expanding for-profit
sector on the distribution of care, so that in-
telligent policy decisions can be made. Vol-
untarism and cross-subsidization in our not-
for-profit institutions formerly accounted for a
large share of free care. If we replace these
institutions with investor-ownership we will
either require much larger tax subsidies for
the poor, or we will have to deny the poor
access to services. Given the choice, the public
may decide that new policies favoring the pres-
ervation of the voluntary system may be pref-
erable to either of these outcomes. It is also
conceivable that within 5 or 10 years, perhaps
in a new political climate, a tax-supported na-
tional health insurance system might be seen
as a viable option again.
6. Finally, I want to respond to your com-
ments where you urge me to offer my own
version of the "ideal" health care system, lest
my objections to the marketplace approach be
written off as simply destructive criticism. In
the first place, I don't see that the committee's
report needs to be concerned with my per-
sonal views or with anyone else's, for that
matter. We are supposed to be analyzing the
implications of investor-owned health care, not
expressing any particular view of the "ideal"
system. If there are cogent reasons to be con
223
corned about the for-pro~t approach, as I be-
lieve there are, I don't see why those criticisms
should be set aside simply because they are
not coupled with a blueprint for the solution
to all our health care problems.
In criticizing the for-pro~t system, I fully
recognize the limitations of the system it seems
to be replacing. And in decrying entrepre-
neurialism in investor-owned hospitals, I also
decry similar behavior by voluntary hospitals
and among physicians. I am frank to admit,
however, that I am not sure what the best
alternative would be. I do believe that we will
need considerable reform in the present fee-
for-service practice of medicine, and that we
will also need more, not less, public regulation
and subsidization of health care. But I still
don't have a clear idea of what the "ideal"
system for the United States would look like.
All I am sure about at the moment is that a
commercial marketplace isn't the answer.
I apologize for the length of this missive,
but your last letter was so interesting that I
couldn't resist trying to set my own thoughts
straight on the many provocative points you
raised. I think that I have now said all that I
should. If you choose to reply as I hope you
will-I promise I will not attempt another re-
buttal. You can have the last word. I have
learned a lot from this exchange and have en-
joyed it enormously. Thanks for staying with
it.
I will be looking forward to seeing you at
one of our next committee meetings.
With best regards.
Sincerely yours,
Arnold S. Relman, M.D.
Representative terms from entire chapter:
medical ethics
