High Hospital Profits Hurt Medicine

Impact explored in the latest in a series of commentaries in The American Journal of Medicine

Philadelphia, PA, November 3, 2016

Is the medical profession losing the race to attract the best and the brightest? In a series of insightful commentaries on Negative Secular Trends in Medicine published in The American Journal of Medicine, Robert M. Doroghazi, MD, retired cardiologist and publisher of The Physician Investor Newsletter, explains how high hospital profits are hurting the practice of medicine.

Previously published commentaries by Dr. Doroghazi focused on other negative trends, including high student debt, high CEO salaries, long training periods, and the controversy involving Maintenance of Certification requirements and the American Board of Internal Medicine, as factors that discourage the smartest kids in the class from choosing medicine as a career. He now cites high hospital profits, even from so-called “non-profit” institutions, as one more of these negative trends.

Dr Doroghazi doesn’t believe it’s a coincidence that the first for-profit hospital in the US opened in 1967, barely two years after the passage of Medicare and Medicaid decreased the need for charity care. He suggests the only options by which for-profit hospitals generate the excess revenues to pay investors a dividend are by “cherry-picking,” minimizing the patients who can’t pay while maximizing the profitable ones, and simply to charge more. In the U.S., 49 of the 50 highest charging hospitals are for-profit. He wonders “Is it logical to operate a hospital for profit?”

“Non-profit” hospitals have become extremely profitable, with the non-profit tax exemption estimated at a whopping $24.6 billion in 2011. “In 2013, the 10 most profitable hospitals in the U.S. earned from $163.5 million to as much as $302.5 million from patient care services. The top four and seven of the top 10 are (supposedly) ‘not-for-profit’,” explains Dr. Doroghazi. He notes that Stanford’s one-year profit of $224.7 million could fund the tuition of all of their medical students — for the next decade. He also believes that the executives at “non-profit” health chains have seized some of the tax-exempt advantage for their own personal enrichment, paying themselves millions or even tens of millions of dollars in compensation. So why are such high hospital profits detrimental to medicine?

According to Dr. Doroghazi, “I believe the quest for profits between all hospitals, non-profit and for-profit, has been one of the main drivers causing our health care costs to be the highest in the world, far out-stripping inflation. There are two kinds of competition. Henry Ford was relentless in building cars that were of higher quality and less expensive. This is America at its best: all society benefitted. I believe current hospital competition has done nothing but drive up costs: new hospitals are often described by locals as a Taj Mahal, with spacious, well-appointed rooms, art work on the walls, and lobbies larger than indoor football fields. Hospitals add high-end, expensive technology that benefits few, and then unleash their Madison Avenue-size advertising budget to tell everyone they are the fourth in the area with a helicopter.”

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Notes for editors
The article is “Negative Secular Trends in Medicine: High Hospital Profits,” by Robert Doroghazi, MD (doi:10.1016/j.amjmed.2016.07.005). It appears in The American Journal of Medicine, volume 129, issue 11 (2016), published by Elsevier.

Full text of this commentary and those published previously in the Negative Secular Trends in Medicine series is available to credentialed journalists upon request. Contact Jane Grochowski at +1 215-239-3712 or ajmmedia@elsevier.com to obtain copies. Journalists who would like to interview Robert M. Doroghazi, MD, may contact him directly at +1 573-443-0893 or rdoroghazi@yahoo.com.

About The American Journal of Medicine
The American Journal of Medicine, known as the “Green Journal,” is one of the oldest and most prestigious general internal medicine journals published in the United States. It has an Impact Factor of 5.61 and is ranked #13 out of 151 General and Internal Medicine titles based on number of total citations, according to the 2015 Journal Citation Reports® published by Thomson Reuters.

AJM, the official journal of The Association of Professors of Medicine, a group comprised of chairs of departments of internal medicine at 125-plus US medical schools, publishes peer-reviewed, original scientific studies that have direct clinical significance. The information contained in this article in The American Journal of Medicine is not a substitute for medical advice or treatment, and the Journal recommends consultation with your physician or healthcare professional. AJM is published by Elsevier.

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Media contact
Jane Grochowski
Elsevier
+1 215-239-3712
ajmmedia@elsevier.com