DOCTORS ARE FIGHTING FOR-PROFIT HEALTH CARE BY UNIONIZING

The U.S. health care system has been taken over by a corporate, big business mentality where profits rather than patients are the priority. The result is a system with very high costs, poor outcomes, and widespread fraud. It’s a system that doctors increasingly find unrewarding to work in and in violation of their ability and ethical desire to deliver quality care.

This is the seventh post in a series on how the U.S. health care system has become a profit-driven system. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described the large-scale vertical integration of UnitedHealth Group and the problems and illegal behavior that have occurred with it. The sixth post focused on a particularly egregious example of illegal and unethical behavior by a nursing home operator with a small degree of vertical integration.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog is here. Click on the Subscribe Today button to receive notification of new posts.)

With the takeover of the U.S. health care system by large, corporate, for-profit providers, doctors are increasingly becoming employees, rather than small business practitioners. In 2012, only 5.6% of doctors were direct hospital employees and 60% were in physician-owned practices. By 2022, 52.1% of doctors were direct hospital employees and another 21.8% were employed by other corporate entities, [1] a complete reversal of the employment pattern in just ten years.

Furthermore, health care providers’ monopolistic concentration has left doctors with only a few employment options in many geographic areas. In 2016, 90% of all metropolitan areas had highly concentrated hospital markets. For example, in Pittsburgh, 71% of hospital beds are owned by a single company. In a quarter of metropolitan areas, more than 30% of doctors are employed by a single private equity firm. In 2021, private equity firms bought 484 physician practices. It’s estimated that private equity firms control between 25% and 40% of the staffing in emergency rooms nationwide.

As my previous posts have highlighted, monopolistic consolidation and private equity ownership in the health care system have led to higher costs, reduced access, worse health outcomes, and significant illegal behavior. In this profit-driven health care system, doctors are frequently not allowed to spend the time with patients they need to to deliver quality care. It’s not unusual for a primary care doctor to have 2,500 to 3,000 patients. With this many patients, personalized care is practically impossible and the primary care doctor’s job has largely been reduced to five-minute time slots to make a diagnosis and a referral to a specialist. Insurance typically pays only $30 to $60 for a primary care visit and the doctor typically gets just half of that. [2]

Doctors are pushing back by unionizing. Currently only 5.9% of doctors are unionized. However, the Committee of Interns and Residents (CIR), an affiliate of the Service Employees International Union (SEIU), has grown from 19,000 to 30,000 members in the last two years. It has won union recognition elections by large margins in hospitals from Boston to California. A poll in November 2022 found that 51% of clinicians would be willing to join a union. Doctors are resorting to unionization as the only way to have a voice in the for-profit health care system and to push for more patient-centered, humane health care.

Health care employers have responded just like other corporate employers: they’ve hired big name, expensive law firms that specialize in blocking unions. In addition to opposing union organizing up-front, including unionization elections, these law firms are perhaps most effective after a successful election when they challenge the vote and delay the bargaining that establishes the initial contract.

Another way doctors are pushing back is by leaving the system and starting what are called direct primary care (DPC) practices. In DPC, doctors don’t accept any insurance, including Medicare and Medicaid. Patients pay an up-front cash subscription fee of $75 to $100 per month. The doctor typically has around 600 patients and they have direct access to the doctor and hour-long appointments. The doctors often serve as their own pharmacists and link patients to needed services at low, wholesale prices (with only a small processing fee added on) to allow patients to access services with less frustration and lower costs than dealing with the mainstream health care system on their own.

The doctors with DPC practices find it a more rewarding way to practice medicine both in terms of their patients’ health outcomes and experiences, as well as their own personal, professional lives. DPC is great for patients who can afford the out-of-pocket costs.

The fact that doctors are finding that they must unionize or leave the system to have some control over their ability to deliver quality health care says a lot about how bad the for-profit health care system is. More and more doctors are supporting a public, single-payer system as the viable and better alternative to the current for-profit health care system.

A single-payer system is the only way to both ensure quality and control costs, as Don Berwick, M.D., has stated. (Berwick is the former head of the Centers for Medicare and Medicaid Services, the federal agency that oversees those public health insurance programs.)

[1] Meyerson, H., 8/4/23, “When M.D.s go union,” The American Prospect (https://prospect.org/health/2023-08-04-when-mds-go-union/)

[2] Arnold, S., M.D., & Tkacik, M., 7/31/23, “My life in corporate medicine,” The American Prospect (https://prospect.org/health/2023-07-31-my-life-in-corporate-medicine/)

VERTICAL INTEGRATION AND ILLEGAL BEHAVIOR IN HEALTH CARE

Vertical integration in our health care system creates significant conflicts of interest and opportunities for illegal behavior – even when it’s at a relatively small scale (at least when compared to UnitedHealth Group as described in my previous posts here and here). It facilitates greed and putting profits before patients.

This is the fifth post in a series on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described the large-scale vertical integration of UnitedHealth Group and the problems and illegal behavior that have occurred there.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. Please click on the Subscribe Today button to continue receiving notification of my posts.)

Nursing homes became a growth industry in the late 1960s as people lived longer and the federal government began paying billions of dollars for nursing home care through Medicare and Medicaid. With lax oversight, nursing homes became a golden opportunity for greedy entrepreneurs willing to cut corners on patient care and engaged in other questionable business practices.

For example, beginning in the late 1960s, Morris Esformes founded and built a chain of nursing homes. By the 1990s, he was among the most successful (i.e., wealthy) nursing home operators in Chicago, and also owned nursing homes in Missouri and Florida. His son, Philip, joined the family business and eventually took it over. They added skilled nursing and assisted living facilities, as well as home health providers and a small hospital to their limited set of vertically integrated health care services. [1]

Morris always seemed to be pushing boundaries – cutting corners on patient care, allegedly bribing a state official, and billing for fictitious services. Until 2016, he and Philip always managed to avoid any significant consequences.

Keeping beds occupied, and therefore generating revenue, is key to making money from the facilities they owned. To this end, Esformes’ facilities accepted a growing number of patients with mental illnesses. They also accepted homeless people and those with drug addiction, including significant numbers of ex-convicts. Eventually, the Esformeses were paying kickbacks to doctors and others who would send patients to their facilities, sometimes on fictitious grounds.

Their facilities were under-staffed and under-equipped, especially for serving the especially challenged populations they courted to keep their beds occupied and generating revenue. They also fraudulently billed Medicare and Medicaid, and set up dozens of shell companies to launder money so it appeared their facilities were barely profitable. Meanwhile, they spent lavishly on building connections to politicians and others who helped them, hosting expensive parties that sometimes included prostitutes.

Their small-scale vertical integration nonetheless allowed them to cycle patients among their various facilities. For example, a 72-hour hospital stay made patients eligible for their skilled nursing facilities, which were a particularly profitable part of their businesses. Medicare would pay for up to 100 days at a skilled nursing facility. Then, the patient could be transferred to one of their assisted living facilities and after 60 days there, the patient would be eligible for another 100 days at their skilled nursing facility. In 2004, the Esformeses settled a civil fraud case with the Justice Department for $15 million and no admission of guilt over their practice of shuttling patients between their hospital and skilled nursing facilities.

Between 2013 and 2018, the Esformes’ facilities were the subjects of more than two dozen wrongful death complaints. Most were settled without any admission of guilt. Some of their nursing homes were among the lowest on the federal quality rating system, but no meaningful sanctions were imposed. In 2009, Philip Esformes was an unindicted co-conspirator in a federal bribery and kickback conspiracy case in which another Chicago facility owner was convicted.

In 2016, Philip Esformes was arrested and charged with health care fraud, giving and getting illegal kickbacks, money laundering, obstruction of justice, and other offenses. He was convicted after an eight-week trial in 2019 and sentenced to 20 years in prison. Prosecutors described him as the central figure in the “largest single criminal health care fraud case ever brought against individuals by the Department of Justice,” citing over $1 billion in false reimbursement claims.

However, this was not the end of the story. During Philip’s prosecution, his father, Morris, from whom Philip had inherited the businesses, made a $65,000 contribution to the Aleph Institute, one of Jared Kusher’s favorite charities. In 2020, after President Trump had been voted out of office, Kushner (Trump’s son-in-law) was actively involved in the clemency decisions Trump was making. In December 2020, Trump commuted Philip’s sentence and ordered him released from prison, in a very unorthodox clemency grant. Philip’s conviction remains on his record as does an order for $44 million in restitution and penalties. (Court records listed his net assets at $78 million.)

Justice Department officials, in an unprecedented move of their own, are planning to charge and try Philip again. Although the jury convicted him on over two dozen charges, they were unable to reach a verdict on others, including the very significant charge of conspiracy to commit health care and wire fraud. The prohibition on double jeopardy, i.e., on retrying a defendant on charges they were found innocent of, does not apply to charges on which no verdict was rendered. Apparently, these charges were also not included in the grant of clemency.

This is one example, albeit a very egregious one, of illegal behavior by a nursing home and skilled nursing facility operator. A simple on-line search will find multiple examples of such illegal behavior and lawsuits. It will also find multiple sources with information about how to avoid and report this illegal behavior.

[1] Pomorski, C., Nov. / Dec. 2023, “The untouchables: Donald Trump freed a convicted Medicare fraudster. The Justice Department wants him back,” Mother Jones (https://www.motherjones.com/politics/2023/11/philip-esformes-trial-morris-medicare-fraud-prosecution-donald-trump-clemency/)

VERTICAL INTEGRATION EXACERBATES PROFITEERING IN HEALTH CARE Part 2

UnitedHealth Group is a huge corporation that owns companies in every piece of the health care system. This vertical integration creates major conflicts of interest and opportunities for monopolistic behavior. It exacerbates the incentive to put profits before patients and tends to lead to illegal behavior. However, United’s vertical integration has created what amounts to a single-payer health care system.

This is the fifth post in a series on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth post described how vertical integration creates opportunities for monopolistic behavior and exacerbates the incentive to put profits before patients.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. Please click on the Subscribe Today button to continue receiving notification of my posts.)

UnitedHealth Group (United) is a huge, vertically-integrated, health care corporation. My previous post described how this vertical integration creates opportunities for monopolistic behavior and exacerbates the incentive to put profits before patients. Vertical integration also tends to lead to illegal behavior.

In 2002, 700,000 physicians filed a class action lawsuit against United and nine other managed care insurance companies for fraud and racketeering. They claimed that these insurers systematically denied and delayed payment to physicians and profited by doing so. The lawsuit went on for years. Most insurers settled out of court, but United fought on and eventually, in 2006, got a judge to dismiss the charges. The judge ruled that the free market should be allowed to operate unless Congress stepped in to regulate the health care system. [1]

A 2011 lawsuit against United detailed how it was profiteering by gaming Medicare’s per patient payment rates. United reported that its Medicare Advantage insurees were sicker than they actually were, thereby qualifying it for higher payments. The lawsuit was based on information from a whistleblower – United’s former finance director.

Medicare also tried to control insurers’ profiteering by requiring insurers to spend 80% to 85% of premiums on patient care. However, United’s vertical integration allowed it meet this criterion by shifting money internally, increasing payments for patient care to its own health services subsidiary, Optum.

Since 2010, United’s Optum subsidiary has made 28 purchases of physicians’ group practices, including one that had 15,000 doctor’s offices. Typically, it bought small physicians’ groups one at a time to avoid requirements to report purchases to regulators. Optum’s revenue grew from $29 billion in 2011 to $183 billion in 2022.

United also bought companies that provided unbiased benchmarks on industry-wide health care billing rates, which determine how much it (and other insurers) must pay for health care services. After it acquired essentially every company that provided such billing data, it wasn’t long before the New York State Attorney General sued United for manipulating the published benchmark rates so that it (and other insurers) had to pay less than a fair rate for health services. United settled the case for $50 million and a commitment to set up a non-profit entity to provide billing data.

United’s vertical integration creates numerous conflicts of interest. For example, one lawsuit claimed that United nursing homes denied services, such as hospitalization, to patients on its Medicare Advantage insurance plan. This kept the patient and the associated revenue flowing to its nursing home, while saving its Medicare Advantage plan from having to pay for hospital care. During the lawsuit, it was revealed that its nursing home facilities and nurses received bonuses for low hospitalization rates. Nurses were also required to encourage patients to sign “do not resuscitate” agreements. A patient’s death, of course, eliminated the need for United’s Medicare Advantage insurance to pay for additional services. Clearly, profits are being put before patients’ needs and vertical integration increases the incentives for doing so.

Not only was United aggressive in the market place, its CEO was aggressive in putting money in his own pocket. In 2006, an outside review of employee stock options found that United executives were regularly and illegally backdating stock option transactions to maximize their benefits. CEO William McGuire was the chief beneficiary, having backdated most or all of his 44 million stock options over the previous decade. He also received $5 million in cash bonuses due to errors in calculating stock-based compensation. McGuire resigned in October 2006, was fined $7 million, returned $600 million of illegal gains to United, and was barred from being a director or officer of a public corporation for 10 years, but walked away with $800 million.

Nonetheless, the backdating of stock options appears to have continued at United. A shareholder lawsuit in 2008 alleged that the new CEO offered backdated options to new employees. Although United denied the allegations, it settled this subsequent case for $895 million.

United’s vertical integration has created what amounts to a single-payer health care system. Others in the health care business are emulating United’s vertical integration strategy. With strong, public utility-like regulation, these huge health care companies could become the country’s single-payer system. It might be far easier to get to a single-payer system by regulating these private entities than trying to create a Medicare for All single-payer system, especially given the significant privatization of Medicare through Medicare Advantage.

[1] Brown, K., & Sirota, S., 8/2/23, “Health care’s intertwined colossus,” The American Prospect (https://prospect.org/health/2023-08-02-health-cares-intertwined-colossus/) This post is, for the most part, a summary of this article.

VERTICAL INTEGRATION UNDERMINES QUALITY HEALTH CARE Part 1

UnitedHealth Group is a huge corporation that owns businesses in every part of the health care system. This is called vertical integration and creates major conflicts of interest along with opportunities for monopolistic behavior. It furthers the ability and incentives to put profits before patients.

This is the fourth post in a series on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms in the health care system.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. Please click on the Subscribe Today button to continue receiving notification of my posts.)

UnitedHealth Group (United) is a huge corporation that owns an insurance company, primary care and mental health clinics, surgical and urgent care centers, pharmacies and a pharmacy benefit manager, home health and hospice agencies, a bank, and much more. It is the fifth largest publicly-traded corporation in the U.S., as well as the country’s largest and most powerful health care company. Its health services division, Optum, has 103 million patients (almost a third of the U.S. population), revenue of $186 billion a year, and profits of over $28 billion. It’s the country’s largest employer of doctors – 70,000 of them – across 2,200 locations. Its health insurance business covers 50 million people. [1]

This is called vertical integration – when a company owns multiple parts of a supply chain, i.e., when a company owns companies that supply goods or services to it. United owns so many companies (i.e., subsidiaries) that one quarter of its revenue comes from its subsidiaries.

Vertical integration creates opportunities for monopolistic behavior, although the more common horizontal integration (i.e., domination of the market for a particular good or service) is what’s typically monopolistic. United’s vertical integration is designed to maximize profits via monopolistic behavior, i.e., by exerting control over patients, providers, and payers, including the government. It also creates conflicts of interest.

United began in 1974 as Charter Med. Health Maintenance Organizations (HMOs) were being created in an effort to control rapidly rising health care cost. However, they were required to be non-profit organizations run by doctors. Charter Med, a for-profit, non-doctor run company, created a loophole by contracting with non-profit HMOs to provide management services. These HMO contracts were the beginning of managed care, where the power to control health care spending is in the hands of insurance companies rather than health care providers.

In 1982, United introduced the use of a list of approved prescription drugs with tiered co-payments that its insurance would pay for. This list, called a drug formulary, was a strategy for reducing spending on drugs. Two years later it introduced a new business model where the drugs on its formulary were linked to “rebates” (aka kickbacks) from drug manufacturers. This spawned a whole new industry – and opportunity to make profits – the creation of pharmacy benefit managers (PBMs). United marketed its PBM services to HMOs.

United grew rapidly from revenue of $13 million in 1984 to $606 million in 1990. Its growth was aided by states relaxing the requirement that HMOs be non-profits, which allowed United to buy several HMOs. United also bought a large, traditional, fee-for-service insurer.

In 1990, the federal government created an exemption to anti-kickback laws to allow pharmacy benefit managers to legally get “rebates” from drug manufacturers. Higher drug prices produce bigger rebates and bigger profits for PBMs. Therefore, this business model results in higher costs for patients because PBMs get more revenue and profit from the use of expensive brand-name drugs than from cheaper generic drugs. It also tends to put private pharmacies out of business by favoring the big chain drug stores’ pharmacies. By 2022, United’s PBM, Optum Rx, had almost $100 billion in revenue.

As early as the mid-1990s, United’s size and vertical integration gave it “critical mass,” as it wrote in an SEC filing. This meant it had monopolistic power to demand lower prices from doctors and hospitals, to undercut rival insurers, and to drive out competition. United’s implementation of aggressive managed care practices and their detrimental effects on patient care led to a powerful backlash. In the late 1990s, over 400 bills regulating managed care practices were introduced in state legislatures based on evidence that United and other health plans were denying treatment for patients and incentivizing doctors to limit services.

Nonetheless, United continued its expansion through acquisitions and contracts to manage government paid health care provided under Medicare and Medicaid. By 2002, it was overseeing the care of over 1 million Medicaid enrollees and 6 million Medicare beneficiaries in its Medicare Advantage plan.

By 2020, United had the largest Medicare Advantage plan in the country with 26% of the market and roughly $80 billion in revenue. I’ve written extensively about how Medicare Advantage plans undermine Medicare and how corrupt the Medicare Advantage plan providers are. (See previous posts here, here, and here.) United and other Medicare Advantage plan providers engaged in a multi-million dollar lobbying campaign to stop the federal government from reducing excessive payments to Medicare Advantage plans, as was required by the Affordable Care Act (aka Obama Care). They succeeded, and actually got the government to increase payments to Medicare Advantage plans.

The next post in my series on the U.S. health care system will further describe the problems created by vertical integration in health care and the corruption it engendered at United. It will also suggest that these huge, vertically integrated health care system companies could be used to move the U.S. to a single-payer health care system.