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Guest column| Lawrence G. Flannagan Jr.

Guest Column: How hospitals became so expensive

While nonprofit hospitals may be making healthy profits, as recently reported in the St. Petersburg Times, the hospital system in America is showing signs of sickness. It could have been prevented. Like too much candy, it was too much Medicare. I was there and watched it happen.

In 1967, seven short years after I began my career in hospital administration, the Medicare program was born and its "Cost Reimbursement Financing System" changed the health care system forever.

Payments for the ever increasing number of patients over 65, regardless of their economic need, doomed the Medicare program from the beginning. Hospitals and physicians made more income, but the increases came from the bottomless pit called Medicare.

Around this time, a for-profit company, the Hospital Corporation of America, saw the cost reimbursement system as a financial gold mine. Bad debts, which had plagued the nonprofit hospital system, could now be included in the cost reimbursement formula. HCA began buying up small for-profit hospitals around the country from the physicians who had built and operated them. The for-profits did not operate costly teaching hospitals or provide care to the indigent. These services were left to the state, county and nonprofit hospitals.

The Medicare system forced Catholic and other religious hospitals to begin paying their staff members who were clergy and had previously been paid basic stipends by their religious orders. Today, Catholic hospitals have almost no sisters in nursing roles. Shameful.

Up until Medicare took over the financing of most medical care in this country, many hospitals operated quite economically with wards. Much like intensive care units, each large room had six to 12 patients and the central nurse's station. But the American people wanted privacy. As a result, at first quite expensively, hospitals were built of rooms with two beds, and eventually, with just private rooms. Since the nurse could not see the patient, every room had to have monitoring.

Not surprisingly, it was the for-profit companies that started this trend away from wards. Eventually, in order to compete, the nonprofit hospitals had to build the same type of facilities. It's no wonder the cost of health care in this country has skyrocketed.

Now, in my retirement, I wonder "what if" the cost reimbursement were controlled? Well, the profit margin of the for-profit health care corporations would be reduced and they would probably and eventually leave the business. The health care delivery system would be operated by the voluntary nonprofits where it was and where it belongs.

So, yeah, nonprofit hospitals are making profits (which must, by law, go back into operating their hospitals). Unfortunately, that's at the expense of the average taxpayer. That should change. Alternative systems of financing and delivering health care in America need to be found.

Retiree Lawrence G. Flannagan Jr. lives in Dunedin. During his career, he was an administrator at hospitals in Washington, D.C., Pennsylvania and Florida.

Guest Column: How hospitals became so expensive 04/21/08 [Last modified: Monday, April 21, 2008 8:26pm]
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