The Measure of a Man

The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.

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Thursday, April 17, 2008

Comparison of the US System to that of Canada

For-Profit Health Care:
Expensive, Inefficient and Inequitable

Dr. Arnold S. Relman, Professor Emeritus of Medicine and Social Medicine at Harvard Medical School and Emeritus Editor-in-Chief of the New England Journal of Medicine

Presentation to the Standing Senate Committee on Social Affairs, Science and Technology

February 21, 2002

Mr. Chairman, Honorable Members of the Standing Senate Committee on Social Affairs, Science and Technology :

My name is Dr. Arnold S. Relman. I am Professor Emeritus of Medicine and of Social Medicine at the Harvard Medical School and former Editor-in-Chief of the New England Journal of Medicine. I have been asked by the Canadian Health Coalition to appear before you today to testify about the U. S. experience with private, for-profit health care.

I have been studying and writing about this subject for over two decades. In 1985 and 1986 I served on a committee established by the Institute of Medicine of the U. S. National Academy of Sciences to report on "For-Profit Enterprise in Health Care." During my editorship and afterwards, the New England Journal of Medicine published many articles in this field and, since I retired from that post, my own writings have continued to focus on this topic. I am now at work on a book that surveys the present unhappy condition of the U. S. health care system, with particular attention to the role of private enterprise.

My conclusion from all of this study is that most of the current problems of the U. S. system - and they are numerous - result from the growing encroachment of private for-profit ownership and competitive markets on a sector of our economy that properly belongs in the public domain. No health care system in the industrialized world is as heavily commercialized as ours, and none is as expensive, inefficient, and inequitable -- or as unpopular. Indeed, just about the only parts of U. S. society happy with our current market-driven health care system are the owners and investors in the for-profit industries now living off the system.

The U. S. may be a world leader in medical science and technology, and its major medical centers may provide some of the best and most sophisticated care available anywhere, but taken as a whole, our health care system is failing and will need major reform very soon. We have tried private for-profit markets, first in hospitals, in ambulatory care facilities and services, and in nursing homes, and then more recently, in the ownership of insurance plans - and the experiment has failed. Private health care businesses have certainly not achieved the benefits touted by their advocates. In fact, there is now much evidence that private businesses delivering health care for profit have greatly increased the total cost of health care and damaged - not helped - their public and private nonprofit competitors.

The U. S. experience enables students of health care policy to compare the performance of nonprofit and for-profit facilities as well as the performance of insurance systems, and the results are clear for all who want to examine the evidence. For-profit hospitals were much more expensive than their nonprofit counterparts when Medicare and private insurers simply reimbursed charges. That difference disappeared when the payers began to negotiate fixed prices, but there has never been any evidence that for-profit hospitals could provide similar services at lower prices than their nonprofit competitors. However, a recent study of Medicare per capita expenditures for all health services, including hospital care, found that they were much higher in regions served exclusively by for-profit hospitals than in regions where there were fewer or no for-profit hospitals.

There is no good evidence about the relative quality of hospital services in for-profit and nonprofit facilities, because such studies are difficult to do. Quality is easier to ensure in nursing homes and kidney dialysis centers. They are largely paid through fixed, negotiated prices by public insurance, and their products are more or less standardized. Studies that have looked at objective measures of quality of service show that public and private non-profit nursing and dialysis facilities provide significantly better and safer services to patients than their for-profit counterparts. This shows that when you fix the price and the services so that there is no wiggle room, non-profits clearly provide better care.

A little over a decade ago, for-profit investor-owned businesses took over the private insurance field, and now they cover more than half of our people - mainly through employers. More than a quarter of our population is covered by Medicare and Medicaid, which are largely financed by government. Comparisons of these private and public systems are instructive. The Medicare system has administrative costs of less than 3 percent, with all the remainder of expenditures going to physicians, hospitals and other providers. The private insurers, on the other hand, have corporate and administrative costs of 15 to 30 percent, and in addition outsource many other services they use to control costs by restricting the use of expensive resources. As a result, it can be estimated that only 50 to 60 percent of the premium dollar ends up with the providers, who themselves must pay additional administrative costs to deal with the regulations of the multiple insurers they must bill. And, while the private insurers at first held down premium prices by drastically cutting utilization, they have now run out of cost-cutting options and are meeting increasing resistance from providers and the public. Recently, premium prices of private for-profit insurers have again begun to increase at double-digit rates, more rapidly than the costs of Medicare and Medicaid.

A remarkable demonstration of the failure of the commercial, HMO insurance system was seen a few years ago when senior citizens covered by Medicare were encouraged to obtain their care from private, for-profit HMOs that would be paid by the government. It soon became obvious that the costs of care under the private system were much greater and that senior citizens were dissatisfied with the care they received. A wholesale exit of senior citizens from the private system ensued. They voted with their feet for the public system.

In short, the U. S. experience has shown that private markets and commercial competition have made things worse, not better, for our health care system. That could have been predicted, because health care is clearly a public concern and a personal right of all citizens. By its very nature, it is fundamentally different from most other good and services distributed in commercial markets. Markets simply are not designed to deal effectively with the delivery of medical care - which is a social function that needs to be addressed in the public sector.

PHOTO: Taken during Dr. Arnold S. Relman's testimony before the Standing
Senate Committee on Social Affairs, Science and Technology (February 21, 2002)

We in the U. S. are belatedly learning this lesson and soon may be ready to try other options that will depend more on public action. Many of us south of the border have always believed that you Canadians had the right idea in deciding that the financing of health care is primarily a public responsibility. We still think you are right and that we ought to emulate you, rather than vice versa. I am surprised and disappointed in your Committee's Interim Report, which seems to favor policy options dependent on private market involvement in Canadian health care. Before making your final recommendations, I hope you will look more closely at the U. S. experience - which ought to convince most evidence-driven observers that markets can't solve public problems like health care - and in fact make them worse.

However, to make a publicly financed system work effectively, I believe both our countries need to begin reforming their medical care delivery systems. That is where we both ought to be looking for ways to optimize our use of resources and improve the quality of our health care.

I believe that splintering the delivery system into many different, highly specialized facilities, as has been proposed in both our countries, is not in general a sound option for improving quality and effectiveness. A much better approach would be to re-organize how physicians work together. Both our countries now depend largely on independent solo medical practitioners to provide ambulatory and hospital services on a fee-for-service basis. We should both begin to encourage physicians and other health care professionals to organize themselves into self-governing, multi-specialty and multi-disciplinary teams to deliver comprehensive care at prepaid, capitated rates. Physicians provide the best care when they work in teams, not as competitors. Furthermore, to discourage over service, they should be paid primarily for their time, and not on a piecework basis. That would reduce both fraud and the resources wasted on the processing of claims.

Finally, I want to say just a word about "consumer choice," which is now being touted in the U. S., and I gather in Canada, too, by believers in the magic of the market as a mechanism for controlling costs and improving the quality of services. While there is much to be said for making more information available to people about their health care, it is a fundamental misconception to imagine that sick patients can or should behave like ordinary consumers in commercial transactions, selecting the services and prices they want. Health care is totally different from most goods and services, and that's why we have medical insurance and why sick people need the professional and altruistic services of physicians and other providers.

I suspect most Canadians understand why health care is special and why it needs to be insured by a public system like the one you now have. I would be surprised if they want the fundamental fairness of their Medicare system to be changed by the introduction of market forces.

Thank you for your attention.

Click here for more information on Dr. Relman

Printable Copy of Dr. Arnold Relman's Speech (in PDF format)

Parliamentary Transcript of Dr. Arnold S. Relman's Testimony
to the Standing Senate Committee on Social Affairs,
Science and Technology, February 21, 2002

Click here for more info on Senator Kirby's Controversial Committee

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My Story

My Story

I have been a nurse for just over ten years. I earned my degree with the support of my wife and financial assistance for the GI bill. I was drawn to the profession of nursing after a brief exposure to an advanced course in field triage while serving in the army. I find the human body fascinating and am always learning. I also was attracted to the profession for all the usual reasons that bring people to the profession of nursing. I enjoy the reward of giving to my fellow man.

I believe that health care and the advocacy of safe care is the foundation of nursing that was started by our founders like Florence Nightingale. Our practice act calls for our profession to advocate for our patients and against practices that puts their safety in jeopardy.

The healthcare industry has for the last twenty plus years constructed an environment to maximize profits at the expense of patient safety and our profession. We as nurses have stood by fairly quit and allowed for this to happen.

Recently, I and others voiced concerns related to patient safety and working conditions at Summit Hospital a hospital owned by Healthcare Corporation of America. Our issues included the working of nurse with approximately six month of experience for more than twenty four hours straight. This particular nurse did volunteer to work these hours but in my opinion should not have been ask to do so. She is a great nurse for her limited experience but put her license and the safety of her patients at risk that night. The manager of the unit failed her and the patients in her charge. Study after study has shown that the error rate goes off the chart after twelve hours. I and fifteen other nurses also expressed to management our concerns over the floating policies that were sending unqualified nurses to our unit. We noted several instances were these nurse made errors that put the patient in potential jeopardy. We also expressed our concerns over ratios of 3 to 1 becoming the norm in the unit when 2 to 1 is considered the norm in intensive care across most of the country.

We submitted these concerns in writing and signed by sixteen nurses from our unit. Management responded by holding meetings with a group of employees that they chose and their representatives which included the director of HR, our unit manager and the director of nursing. The meetings at their start gave us some hope that our issues might be taken seriously and dealt with. It was soon apparent that would not be the case and these meetings quickly moved away from our issues to their issues. They would agree that their were problems but would not put any solutions into writing, stating that they needed to be able to remain flexible and made statements like we will try instead of we will.

At around this same time I was informed of an organization called the NNOC or National Nurses Organizing Committee, that was holding meetings in the Nashville area to organize nurses to advocate for patients and against many of the problems that I expressed above. I met with their organizer and felt that their movement was something that I could support. I became a member of the NNOC and began attending meetings on a regular basis. I also began placing invitations to attend meetings in the break room of my unit and speaking with interested coworkers, while on break, about the need to organize and advocate for our patients and our profession.

After a short period of time I was ask by my manager about my involvement with the NNOC and my desire to form a union at Summit Hospital. I did not deny my association and did not hide my opinion as to why I felt that organizing was needed. I also informed them that I had the right as outlined in the National Labor Relation Act. The nursing staff at Summit was then subjected to mandatory anti union meetings and letter sent to our homes and to our email accounts at work. I was required to attend meetings with the hospital attorney and informed that because I was a charge nurse I was considered management and could not associate with the NNOC. I contested that I was a member of management but submitted to their demands to end my association with the NNOC. I never attended another meeting or recruited for the cause after that meeting. I did however continue to operate a blog, , that advocated for reform of the healthcare system and employee rights to organize. I did not use computers at work for this endeavor and did not use my real name on the blog or use any other names that would tell a reader where I worked or who I worked for.

I was ultimately terminated from Summit Medical Center on June 11th, 2008 for what I was told was the operation of a blog. I was given no specifics of what about the blog was grounds for my termination despite my asking. I appealed my termination through the hospitals employment dispute resolution process, attempting to get clarification as to what about my blog was cause for my termination. The peer panel dispute process was a sham. The panel as outlined by the hospitals policy was to be made up of my peers, who were “not familiar with the problem or have a close relationship with any of the parties involved”. The panel was anything but and was made up of persons who had expressed an open hostility to my rights to organize and to freely associate with the NNOC in the past. Two of the panel members were charge nurses from the ER also under the supervision of my manager, who had terminated me. These two persons were also at the meeting with the hospitals attorney and expressed anti union sentiment. Another panel member was a person who was well aware of my personal views related to unions and the right to organize and had been present at private settings outside the hospital were I had expressed my opinions related to the issues that started all this. This puts three of the five panel members in clear violation of the policy. I then was refused the right to seek any clarification as to what about the blog was grounds for my termination despite that being the stated reason for the panel. I was not given the right to hear the reasons as stated by my manager and the director of HR.

I am writing this because I believe that my fundamental right to due process has been violated. This is a right to work state and right or wrong that gives Summit the right to do as the please when it comes to hiring and firing of employees but most people believe and Summit attempts to mislead their employees that they are fair and just when it comes to matters of employee issues.

If Summit is allowed to get away with this and is not challenged then patients are at risk. Health care workers need to be free to advocate for safety for their patients and if they are scared into submission then patients will suffer.

Join me in fighting for our rights to free association and to advocate for our patients as our practice act requires. Support the employee free choice act, and send a message to Summit and other corporate bullies that feel you are entitled to the rights they give you and nothing more.
Also visit sited like Leap for Safety and support petitions to mandate stronger legislation that will ensure a safer environment. Visit to get involved.

I truly believe that our healthcare system is in dire trouble and we as nurses have a responsibility to get involved. Please join the fight. Your family may one day depend on what we do today.

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