December 2, 2003

Money and Medicine                            

By Dan Tyler

A recent headline in the local daily caught my attention: “Flu Outbreak May Be Shot In The Arm For Hospital Profits.”   The article appeared on the business page and thus had a pro-business slant, as in, the more people get sick and the sicker they get the more money for HCA, the world’s largest for-profit hospital chain and one of Nashville’s biggest employers.                                             

According to the reporter, hopes are high in the business community that this year’s flu season will be a doozey.  An especially nasty bug is on the way sure to cause much suffering and to generate increased hospitalizations.  Yippee.  The story didn’t mention the hundreds of elderly who might meet their maker in the process. 

It was in my hometown of Nashville, Tennessee, that four “visionary” businessmen seized upon the notion that big money could be made owning and operating for-profit hospitals.  They realized that two programs born in the progressive 60’s, Medicare and Medicaid, represented vast pools of money waiting to be tapped by enterprising capitalists, like themselves.   So, in the mid 70’s they went to the crossroads and cut a deal.                      

John Jay Hooker, a lawyer-entrepreneur and perennially unsuccessful candidate for high office, claims it was his idea.  I don’t doubt it; he has a vivid imagination.  The concept of getting rich off sick people was, if nothing else, original.  Mr. Hooker has stated, in print, that the other three took his brilliant insight, cut him out of the action and, within a decade, became billionaires.  Poor guy.  By all accounts, he’s broke and his friends got rich – with his idea! 

The identities of the other men is instructive; Jack Massey, who made a fortune franchising Kentucky Fried Chicken, Dr. Thomas Frist, Sr., and his son, Dr. Tommy Frist, Jr.  Does the name Frist ring a bell, as in, Senator Bill Frist?  He’s the clever fellow who just pushed through the Republican’s version of a drug benefit for our senior citizens.  The Congress passed a bill 1200 pages long, so there’s plenty of fine print.  And, like they say, the devil is in the details.         

In time, HCA would earn the dubious distinction of pleading guilty to one of the largest frauds in American business history, ripping off Medicare and Medicaid to the tune of a billion or so, and paying a similar sum to settle the case.  A couple of lower echelon accountants took the fall and went to prison, for a little while.  Who says “white coat” crime doesn’t pay?

I mostly blame Wall Street and its “greed is good” ethic for the low crimes and misdemeanors I have described.  When hospitals were owned and operated by non-profit organizations, whether churches, cities, counties or consortia of physicians, there was not the constant pressure to increase profits in order to justify a rising stock price.  There was not the opportunity for quick riches for people who never held a stethoscope or cleaned a bedpan.  The vulture capitalists who took over the hospital industry made enormous fortunes when the companies they founded went “public” (I use that term loosely) and share prices soared.

A personal anecdote will illustrate my point.  A long time ago, I practiced law with a business firm in Nashville.  During the late 70’s, I represented a new corporation (not HCA, but modeled on HCA), which borrowed big bucks from investment banks in New York, acquired non-profit hospitals, and converted them to moneymakers.  I assisted the company on one deal in particular, buying a doctor owned women’s hospital.  My client’s generous offer would make the founding doctors multi-millionaires.                                                              

My job was to reassure the doctors that my client would continue to offer the same level of services without firing too many employees or unreasonably raising rates.  The doctors knew my background and trusted me.  Essentially, I was functioning more like a public relations operative than a lawyer.  But I was young and eager to please, and, I confess, a tad naive.  We closed the deal with smiles all around and toasted the future with champagne from crystal glasses.                                                                           

On the flight back to Nashville aboard the company jet, I was studying the final figures when it became obvious to me that my client had grossly overpaid for the hospital.  I asked the CEO how he could possibly expect to make money, having made such a bad deal. He replied, “Easy, Tyler, tomorrow we double the rates!”  He laughed like Lucifer and I knew I had been had, along with the good doctors.  Maybe the doctors knew the real deal all along and just wanted the money.  Still, the CEO’s admission was the opposite of what I had told the doctors and, in effect, he had made a liar out of me.  Within three months I left the practice of law, never to return.   Within three years, my client sold the hospitals it had acquired to a bigger fish and the CEO became a very wealthy man.  I’m talking big money. 

The profit motive has perverted the healthcare industry and brought dishonor to one of our most esteemed professions, medicine.  Once upon a time, I believe the service motive was dominant in the healing professions.  Can the two motives co-exist?  I’m sure they can and do, most of the time.  But, eventually, the “bottom-line” is invoked and nothing, but nothing, trumps the bottom-line.

My advice: get your flu shot.  I did, at the public health center for ten bucks.  In my book, that’s a bargain.

Copyright 2003, Dan Tyler 
Dan Tyler is the author of the novel Music City Confidential.