SHOULD THE LAW PREFER NONPROFITS?
M. Gregg Bloche
Overtly profit-seeking firms are powerful players in the American medical marketplace. Investor-owned hospital chains, which have been around since the late 1960s, were joined in the 1980s and 1990s by a new generation of for-profit health care financing vehicles, including publicly-traded HMOs and reorganized Blue Cross plans. The rise of this vibrant, for-profit health sector has become a subject of bitter debate. Some laud investor-owned hospitals and health plans for their efficiency, access to capital, and responsiveness to changing market conditions. Profit-seeking investors, supporters contend, push providers to better accommodate patient preferences and make health plans more adaptive to consumers' (and employers') cost control needs. Others condemn the for-profit sector for putting shareholders ahead of patients, disregarding community concerns, and abandoning the neediest.1 High-profile scandals fed the critics' concerns in the 1990s. The nation's largest for-profit hospital chain, Columbia/HCA, faced criminal charges arising from its billing of Medicare for promotional and other activities not reimbursable under federal rules.2 The second largest chain, Tenet Healthcare, agreed in 1997 to pay $100 million to former patients who charged that the company illegally interned them against their will in psychiatric hospitals to obtain their insurance benefits.3 Conversions of Blue Cross plans to for-profit status were tainted by revelations of large, [golden parachute] financial rewards for senior plan executives.