vol. XVII no. 1

				The Big Business of Health Care When Columbia Healthcare and Hospital Corporation of America merged in 1994, it created one of the largest for-profit hospital chains ever. At the height of its empire, Columbia/HCA was a $20 billion company with 285,000 employees, more than 350 hospitals nationwide, 145 outpatient surgery centers, 555 home care agencies and additional ancillary businesses. The chain sought to offer comprehensive services to cover all aspects of a patient's care, and with its aggressive business practices, it became known as "the Wal-Mart if health care." Outpacing the stock market, the company firmly launched for-profit hospitals as a prime growth industry attractive to investors. Then-chairman Richard Scott went so far as to declare, "We are not in the health care business. We are in the sick care business." Just three years later, Columbia/HCA's fortunes changed as the government began a massive fraud investigation. The well-known outcomes of that investigation were guilty verdicts for some company leaders, large fines, and a dismantling and repositioning of the sprawling health care venture. Despite its tarnished image, the Columbia/HCA story marked a beginning of the transition in public perception of health care. The field changed its nonprofit image to for-profit status, says John Newman, an expert on public policy decisions in the health care delivery system in the Robinson College's Institute of Health Administration, For-profit hospitals and nursing homes are alive and well. For-profit home health agencies and assisted living facilities are on the rise. Even previously nonprofit/private local Blue Cross and Blue Shield plans have moved toward for-profit status, according to Newman, former director of research and development for the national Blue Cross & Blue Shield Association. He points out that Wellpoint, which operates Blue Cross and Blue Shield of Georgia, is publicly traded on the stock exchange just the same as Aetna. "The growth of health care in the economy is big business." he says. This big business of health care has grown steadily over the decades. According to the Centers for Medicare & Medicaid Services, health care consumption has doubled from 1970 to today. A $ 1.4 trillion industry, health care accounts for some 15 percent of the GDP Projections from the Department of Health and Human Services estimate an average rate of 8 percent growth in health care spending in the United States over the next 10 years, more than doubling the overall growth of the, economy Approximately, one in 10 people in the civilian force work directly in health care, and that's not counting more who work in related industries. Whereas part of these rising costs can be attributed to ~ inflation in the economy rising costs also have resulted from the introduction of new technology. The development of new medical devices, surgical procedures, pharmaceuticals and treatments have driven costs higher, and new health technologies seem immune to the laws of supply and demand. "Once a price is established in health care, it's hard for it to go down," Newman says. Another factor contributing to increased health care cost lies in the nature of the industry itself. "Health care is a service industry," says William Custer, associate professor of risk management insurance at the Robinson College. "Labor productivity rises at a slower rate in a service industry, and this is particularly health care. We can't replace people with machines." Some economists have gone so far as to predict that health will drive the nation's economic recovery, thanks to 1 research expenditures, development of new treatment growth in new areas such as bioterrorism. Custer, however, doesn't buy the belief that health care will drive economic recovery. "Historically, health care costs and inflation are contra-cyclical," he explained. "During the recent downturn economy, for instance, health care grew faster than when the economy was booming." Top | Next Page Back to main "A Sign of Four" page.

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