Hugh nonprofit system feels pressure to cut costs, merge and get bigger

National Catholic Reporter, June 16, 1995 by Arthur Jones

* Medicare -- health care for the poor -- meant a guaranteed source of income for medical institutions prepared to take its recipients, and much of the billing was "cost-plus," the government was charged the cost plus a profit for the institution.

* Medicaid invented a new industry: the nursing home industry, which did not exist for middle-income or poor people who, up until then, grew old and died at home or in county hospitals or residences.

* New drugs and high-technology equipment became important -- and frequently extremely expensive -- tools in the battle against disease and in the fight to prolong life.

* Americans became, if not precisely health conscious, at least more prepared to fight off old age and early death, and the health care field responded with high-tech diagnostic devices as doctors increasingly specialized.

* Notable gains were made in the battle against disease and infirmities, from invasive techniques to combat previously lethal cancers, to almost routine cataract surgery.

* Either because of the above, or for other dietary and preventive care reasons, Americans began to live longer and needed more intensive or extended care in later years. And the health insurance companies ran their fingers over the cash register keys and saw that corporations would pay even more for coverage to satisfy workers.

As costs escalated and health care -- public and private -- grew as a major portion of the nation's economy, the industry started privatizing to produce profits. As a result, the issues of coverage and costs deteriorated to the point that national health care reform became the nation's major domestic preoccupation early in the Clinton administration. Attempts to reform or transform got mired in political disagreements.

The profit push has led to smaller staffs with fewer skills (firing nurses and replacing them with aides), shorter hospital stays, more posthospital care for patients' families and a decline in health care standards.

And still more than 40 million Americans lack coverage. The megamergers are a reaction to a health care industry power shift from providers to payers: to insurance companies, to large employer cooperatives, to government employee health units and to health and welfare trusts, such as unions and state employee benefit funds.

A burst of profitability in the early 1990s has enabled nonprofit corporations to amass the wealth to increase their market share. In effect, health care cartels are forming around the nation to dominate geographic markets.

Within all this change and turmoil, the Catholic health care industry has taken on all the attributes of a competitive industry. While Catholic systems have attempted to maintain some level of charitable care and community involvement commensurate with their mission, they otherwise are as cost-conscious and dollar-driven as their secular counterparts.

The pressure to merge and increase in size seems unremitting. By 1993, the American Hospital Association has reported, 306 national health care systems, profit and nonprofit, controlled 2,864 of the nation's 6,634 hospitals.