The high costs of for-profit care.

A s we have written elsewhere, 1 some aspects of life are too precious, intimate or corruptible to entrust to the market. We prohibit selling kidneys and buying wives or judges. But the market has unquestionably gained new territory in recent years, as more and more activities previously performed by government or nonprofit agencies — including interrogating Iraqi prisoners — have been turned over to private enterprise. For ordinary citizens, the drive to privatize is most evident in health care. In the United States, investor-owned firms have come to dominate renal dialysis, nursing home care, inpatient psychiatric and rehabilitation facilities and health maintenance organizations (HMOs). They have made significant inroads among acute care hospitals (now owning about 13% of such facilities), as well as outpatient surgical centres, home care agencies and even hos-pices. Canada has lagged behind the United States, but by increments the private delivery of publically funded services increases. The for-profit barbarians are at the gates. Those who favour for-profit health care argue that the profit motive optimizes care and minimizes costs. In this issue P.J. Dev-ereaux and colleagues 2 add to the considerable evidence that this dogma has no clothes. Their meticulous meta-analysis demonstrates a pattern of higher payments for care in private, investor-owned hospitals as compared with private not-for-profit hospitals. The only significant exception was a small study comparing private for-profit hospitals with nominally not-for-profit hospitals run by a private, for-profit firm — in other words, both groups of hospitals in this study were under for-profit management. The excess payments for care in private for-profit institutions were substantial: 19%. This figure implies that the US$37 billion that Americans paid for care at investor-owned acute care hospitals in 2001 3 would have cost only US$31 billion at not-for-profit hospitals — a waste of US$6 billion. But higher acute care (and rehabilitation 4) hospital payments are not the whole story on investor-owned care. For-profit hospitals and dialysis clinics have high death rates. 5,6 Investor-owned nursing homes are more frequently cited for quality deficiencies and provide less nursing care, 7 and investor-owned hospices provide less care to the dying, 8 than non-for-profit facilities. Why does investor ownership increase costs? Investor-owned hospitals are profit maximizers, not cost minimizers. Strategies that bolster profitability often worsen efficiency and drive up costs. Columbia/HCA, the largest hospital firm in the United States, has paid the US government US$1.7 billion in settlements for fraud, the …