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The Structure of American Health Care

Adapted and updated from “Your Health Care in Crisis,” a Health/PAC special report, 4th printing, November, 1972.

‘Science for the People’ Vol. 8, No. 2, March 1976, p. 17–20

The healthcare system seems so chaotic, so unplanned, so uncoordinated, that many people call it a nonsystem. To cure the healthcare crisis, they conclude, we must turn it into a system. Specifically, they argue, some form of national health insurance would provide financially shaky hospitals with a stable income. Doctors should be encouraged to form group practices to increase efficiency—the equivalent of comer grocers banding together to open a supermarket. And hospitals and medical schools should be linked together into regional networks which would be able efficiently and rationally to plan for the medical needs of an entire region. More money, more planning, more coordination- that is the standard prescription for the ailing American health system. 

But careful examination of the structure of health care indicates that, in fact, there is a healthcare system; it is not totally chaotic and unplanned. It seems chaotic only from the point of view of the person seeking health care, but in fact it has become highly systematized. Years ago, the doctors did dominate and control health care; but now health care is dominated by institutions—hospitals, medical schools, research laboratories, drug companies, health-insurance companies, health-planning agencies, and many others. Many people don’t even have a private doctor any more; the hospital clinic and emergency room have become their doctor. Less than 20 percent of the nation’s health expenditures now go for private doctors; most of the rest goes to institutions. And, more than nine out of ten health workers these days are not doctors at all, but workers employed by health-care institutions—nurses, dietians, X-ray technicians, orderlies, laboratory technicians, etc. The health institutions are big and growing rapidly; as they grow they are becoming more and more interconnected to form a system. 

There are three major components to the existing American health-care system: medical empires, the financing-planning complex and the health-care profiteers, especially the medical-industrial complex.

Medical Empires

Medical empires are the primary units. They are privately controlled medical complexes, usually but not always organized with a medical school at the hub. From these centers, radiating out like spokes on a wheel, are a network of affiliations to smaller private hospitals, city hospitals, state mental hospitals, neighborhood health centers and subspecialty programs such as alcoholism, rehabilitation, or prison health. To each of these affiliated programs the medical center provides professional personnel in return for health rake-offs of the affiliated programs’ resources. In fact, the benefits of such arrangements are often so highly weighted in favor of the medical center that exploitation is the only fair description of the relationship—thus the term “empires.” These networks of medical centers with their far-reaching affiliations resemble a mother country’s relationship to its colonies. This resemblance has been exacerbated by the fact that many of the affiliation relationships are with hospitals, neighborhood centers and special programs in poor communities, most often populated by Blacks, Puerto Ricans. Chicanos, Asians or Appalachians. 

The empires have their own priorities. Some of these are related to expansion and profit-making, others are related to research and teaching, and still others are concerned with control—influencing policy both locally and nationally. How much any of these priorities relate to patient care is the critical question. The answer is complicated and in many instances not yet fully understood. On balance, however, these priorities are the basis for the exploitative relationship between the medical center and its affiliates. 

For example, take Einstein College of Medicine (a medical school) and Montefiore Hospital and Medical Center (a close ally). Together they have come to control most of the medical resources in the Bronx, New York. Through affiliation contracts, Einstein/Montefiore monopolizes care at three out of the four city hospitals in the Bronx, the only state mental hospital in the borough, several neighborhood health centers, prison health services, several private voluntary hospitals and numerous nursing homes. Of the 6,670 beds in general-care hospitals in the Bronx, 4,500 are controlled by Einstein/Montefiore; most doctors practicing in the Bronx are affiliated with Einstein/Montefiore.

What has this arrangement meant for patients? Perhaps, and this has not been proved, the technical-scientific management of hospitalized patients has improved. But the price for this questionable improvement—questionable both in terms of money and in terms of distorted priorities—is enormous:

• In sheer dollars, the affiliation of the city hospitals to Einstein/Montefiore has increased the money coming into those hospitals by over $37 million a year.
• In the outpatient departments of the affiliated hospitals, sub-specialty clinics have proliferated—in some cases to more than 100 in number. Patients have found their care fragmented, with no single doctor taking responsibility. On the one hand, the patient has no one to see for a common cold; on the other hand, when he or she has a more complicated illness, it takes a visit to three or four separate clinics before a diagnosis can be made, and even then a different doctor may supervise the patient’s treatment each visit.
• In the inpatient services, (i.e., hospitalized patients), all of the hospitals were converted through affiliations into teaching institutions. Patients frequently find themselves subjected to unnecessary and occasionally dangerous procedures. Liver biopsies (removal of tissue from the liver), for example, are performed primarily to teach interns how to do the procedure; Caesarian sections and hysterectomies are performed when their medical necessity is questionable at best, so that the residents can gain more experience in performing these operations.
• In research, the affiliations have brought more academic interest to affiliated hospitals, but not necessarily more patient-oriented controls. In one such hospital, patients admitted for a routine tubal ligation (sterilization) were given medication prior to the operation and then had their ovaries biopsied to determine the effect of the medication on the ovaries. The patients were not asked for their informed consent. Moreover, it turned out that no research proposal had been submitted, as required, to the hospital’s research committee.

Besides elevating the medical center’s priorities with regard for patients’ priorities, medical empires tend to institutionalize the unequal relationship between the mother-medical center and the colony-affiliated hospital. This is done in overt ways, with the medical center extracting natural resources from the affiliated hospital. Patients with interesting or rare diseases are taken from the affiliated hospital and brought to the medical center, while patients with mundane medical problems are “dumped” by the medical center onto its affiliates. Likewise, talented medical teachers and researchers located in the affiliated hospitals are asked to spend unpaid teaching time at the medical center. This means that their talents are utilized by the medical center while their salary continues to be paid out of the affiliated hospital’s budget. When the affiliated hospital, on the other hand, wants the expertise of a researcher at the medical center, it has to pay handsomely for a lecture or consultation.

In addition to such overt discrimination, there are more subtle ways in which inequalities within a medical empire are institutionalized. Patients being referred from the affiliated hospital to the medical center for some specialized procedure, such as cardiac catheterization or cobalt therapy, may end up on waiting lists for months. The scheduling priorities are explicit: private patients come first, clinic patients from the medical center come second and the affiliated hospital’s patients come third. Another example is the fact that pension programs and other fringe benefits for the professional personnel on the medical center’s staff are significantly more generous than those for the affiliated hospital’s staff. The list could go on and on.

Some people may minimize the importance of medical empires. “It hasn’t happened here,” they will say, “The county medical society is still the strongest force in town.” While such an observation may be accurate in many rural and some suburban communities, the nationwide trend is very clear. In Cleveland, Case Western Reserve Medical School controls many of the medical resources. In Baltimore, it’s Johns Hopkins Medical School; in Seattle, it’s the University of Washington; in North Carolina, it’s Duke University and the University of North Carolina. In Boston, it’s divided between the Harvard Medical School, the Tufts Medical School, and the Boston University Medical School. And everywhere the results are the same: the structure of health care is organized around the institutional priorities of the medical center and not the health-care needs of the patient. And that disparity of priorities is most accentuated when the individual is not an affluent private patient at the medical center but a poor or uninsured ward or clinic patient at one of its affiliated institutions. 

The Financing-Planning Complex

The second main part of the health-care system is the financing-planning complex. The most important part of this complex is the multibillion dollar Blue Cross operation, whose insurance plans cover 80 million people, four of every 10 Americans. Through the publicly funded Medicare and Medicaid programs, Blue Cross administers insurance benefits for an additional 32 million people. Altogether, Blue Cross disburses about half of all hospital revenues.

Because it is by far the nation’s largest single health insurer, Blue Cross also plays a very important role in setting health policy: its leaders sit on governmental advisory committees, advise congressional committees, and, together with representatives of the big private hospitals, set up and run area-wide comprehensive health planning agencies.

Blue Cross is closely allied with the big hospitals. It was set up during the Depression by financially starved hospitals to provide them a guaranteed income, and it continues to be dominated by the major hospitals. Nearly half of the members of the boards of directors of local Blue Cross plans (Blue Cross operates in 74 localities) are hospital representatives. Needless to say, hospitals and health consumers often have very different interests. Consumers want high-quality, low-cost, relevant health care; hospitals, on the other hand, are often more interested in institutional expansion and the prestige gained through the acquisition of well-known researchers, fancy medical equipment and new and larger buildings. This is why the hospital-dominated Blue Cross has consistently failed to support consumer concerns such as cost and quality control.

The Health-Care Profiteers

The third part of the health system are the health-care profiteers, especially the medical-industrial complex. An alliance exists between the providers of health care (doctors, hospitals, medical schools and the like) and the companies that make money from people’s sickness (drug companies, hospital supply companies, hospital construction companies, commercial insurance companies, and even companies that provide medical services for profit—profit-making proprietary hospitals, chains of nursing homes for old people, laboratories, etc.). Health care is one of the biggest businesses around, and one of the fastest-growing.

The magnitude of the medical-industrial complex is hard to believe. For example, in 1969 drug companies (Abbott, Upjohn, Merck, etc.) had after-tax profits of about $600 million. The drug industry rated first, second, or third in profitability among all U.S. industries during the 1960’s, causing Forbes Magazine, financial journal, to call it “one of the biggest crap games in U.S. industry.”

Hospital-supply companies (Becton-Dickinson, American Hospital Supply, etc.), which sell hospitals and doctors  very thing from sheets and towels and bedpans to surgical instruments, X-ray machines and heart-lung machines, had after tax profits of $400 million in 1969. Proprietary (profit-making) hospitals and nursing homes earned nearly $200 million. (There are even nationwide chains of hospitals and nursing homes run by such businesses as Holiday Inns).

The commercial insurance companies and the construction firms which build hospitals make additional millions, and, of course, the doctors themselves are still the highest paid people around. Even the banks are getting in on the act, with loans to hospitals both for building and for operating expenses. The patient at one of New York’s prestigious hospitals, for example, finds that $3 a day of his hospital bill doesn’t go for services at all; it goes to the banks for interest payments.

The System in Health

And not only do all of these empires, insurance people, financiers, business people and doctors make a lot of money from people’s bad health, they do it with togetherness. Their mutual needs coincide: Prestigious medical empires require the manufacture of expensive equipment and the presence of large construction companies; and, of course, only large institutions can afford the expensive products of the medical equipment and drug manufacturers. And all of these groups require the stable, lenient financing of Blue Cross, Medicare and Medicaid and other medical insurers. Their growing interdependence is evident. Increasingly drug and medical-equipment executives, banking and real-estate/construction-company executives sit on boards of trustees at academic medical centers. Meanwhile, hospital and medical-school professionals moonlight as consultants to drug and hospital supply companies and sometimes sit on their boards of trustees.

The best thing about the health business is that the profits are sure (as long as you’re not a patient or taxpayer, that is). Blue Cross, Medicare and Medicaid hand the doctors and hospitals a virtual blank check. The hospital, in effect, simply tells Blue Cross how much its expenses are and Blue Cross pays the bill. In the boom years of the 1960’s there was no cost control to speak of. The inflation in healthcare costs that resulted has led to some belt-tightening more recently. But the accepted definition of a necessary health-care cost remains very generous.

Some costs, of course, may be necessary for better patient care. But they also may be “necessary” for the purchase of seldom-used and expensive equipment that is available in another hospital across the street; for plush offices and high salaries for doctors and hospital administrators; for expenses incurred in fighting off attempts by unions to organize hospital workers; or for hiring public-relations firms to clean up the hospital’s poor image in the community. The health industry and the doctors get rich; the consumer and the taxpayer pay the bill.

Even the so-called non-profit hospitals get in on the fun. All that “nonprofit” means is that such hospitals don’t have to pay out their excess income to stockholders. They also don’t have to pay it back to their patients in the form of cheaper rates. Instead, they use it to grow; to buy more fancy (even if unnecessary) equipment, more plush offices, more public relations; to pay staff doctors even higher salaries; to buy up real estate, tear down poor people’s housing, and build new pavilions for private patients.

There is, then, a health-care system. Its components are, in addition to the doctors, the vast network of healthcare resources that make up the medical empires; the financing and planning complex of agencies dominated by Blue Cross; and the medical-industrial complex. But if American health care is provided by such a big, well-organized, interconnected, business-like system, why is it so poor? The answer is that health care is not the aim of the health-care system. The health-care system exists to ‘ serve its own ends. The aims of big medical centers are teaching and research. The hospitals and medical schools seek to expand their real estate and financial holdings. And everyone, from hospitals and doctors to drug companies and insurance companies, wants to make profits. Health care for patients is a means to these ends but is not the end in itself. And so the patient sees a system which is expensive, which is fragmented into dozens of specialties, which has no time to treat him in a dignified way, and which doesn’t even take care of him very well. 

— Adapted and updated from “Your Health Care in Crisis,” a Health/PAC special report, 4th printing, November, 1972.

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