For For Profit
In a recent sound bite ad for his new movie, Michael Moore advocated elimination of for profit healthcare facilities. Now, MM is right on a lot of things and has an interesting way of presenting his point of view. But he’s wrong on this. Misinformed, I think.
Many confuse for profit (FP), not for profit (NFP), and charity institutions. We can dismiss charity care as essentially non-existent today. For the other two, the distinction is partly how you do your accounting. Everybody makes a profit. Otherwise, they wouldn’t be in business the next year. The distinction is in how that profit is reported to the IRS. FPs pay tax on their profits, NFPs don’t.
For the efficiency award, I’d generally choose the FP. In the healthcare arena, payment is reasonably fixed. (Medicare actually pays NFPs more for a given procedure, but that’s another story.) The significant variable is cost--mainly supplies and personnel.
Surgeons are mobile, and the same surgeon may do the same procedure in two nearby hospitals--one FP and one NFP. Same reimbursement. Guess who’s more efficient. The FP administrator has investors--stockholders who demand a return on investment. He has to provide the same service as his NFP neighbor, but he must be more efficient in order to have something left for the investors after taxes. He can’t charge more; he has to operate more efficiently. His NFP competitor doesn’t have that same pressure and thus tends to operate less efficiently.
Here’s an actual conversation overheard in a University hospital cardiology clinic in Washington,DC, yesterday:
Patient: “It’s past my appointment time, and my doctor said I needed to be seen soon.”
Clerk: “You didn’t check in, so we can’t see you.”
Patient: “But I’m here! and I need to be seen!”
Doctor: “If she didn’t check in, we can’t see her. Send her to the back of the line or send her home.”
No profit motive here. No interest in taking care of patients. No compulsion to generate as much revenue as possible. The doctor’s salary is the same regardless of how many patients he sees or what kind of service he provides. What is his motivation to see this patient? This would never happen at a FP institution.
But it’s not all sweetness and light. Some FP centers lose sight of their mission and focus too intensely on profit. Like the song says, reach for a rose, and you may grab a thorn. Instead, focus on providing good service and pay attention to costs. Profits will follow “as the night, the day.”
So Michael, keep making movies, but be careful what you ask for. You may make matters worse.
Many confuse for profit (FP), not for profit (NFP), and charity institutions. We can dismiss charity care as essentially non-existent today. For the other two, the distinction is partly how you do your accounting. Everybody makes a profit. Otherwise, they wouldn’t be in business the next year. The distinction is in how that profit is reported to the IRS. FPs pay tax on their profits, NFPs don’t.
For the efficiency award, I’d generally choose the FP. In the healthcare arena, payment is reasonably fixed. (Medicare actually pays NFPs more for a given procedure, but that’s another story.) The significant variable is cost--mainly supplies and personnel.
Surgeons are mobile, and the same surgeon may do the same procedure in two nearby hospitals--one FP and one NFP. Same reimbursement. Guess who’s more efficient. The FP administrator has investors--stockholders who demand a return on investment. He has to provide the same service as his NFP neighbor, but he must be more efficient in order to have something left for the investors after taxes. He can’t charge more; he has to operate more efficiently. His NFP competitor doesn’t have that same pressure and thus tends to operate less efficiently.
Here’s an actual conversation overheard in a University hospital cardiology clinic in Washington,DC, yesterday:
Patient: “It’s past my appointment time, and my doctor said I needed to be seen soon.”
Clerk: “You didn’t check in, so we can’t see you.”
Patient: “But I’m here! and I need to be seen!”
Doctor: “If she didn’t check in, we can’t see her. Send her to the back of the line or send her home.”
No profit motive here. No interest in taking care of patients. No compulsion to generate as much revenue as possible. The doctor’s salary is the same regardless of how many patients he sees or what kind of service he provides. What is his motivation to see this patient? This would never happen at a FP institution.
But it’s not all sweetness and light. Some FP centers lose sight of their mission and focus too intensely on profit. Like the song says, reach for a rose, and you may grab a thorn. Instead, focus on providing good service and pay attention to costs. Profits will follow “as the night, the day.”
So Michael, keep making movies, but be careful what you ask for. You may make matters worse.
