The Case for For-Profit Hospitals: Why We Need More

With the Supreme Court expected to make a decision about Obamacare this summer it will be interesting to see how healthcare unfolds in this country.  One of the major problems is that the government has intervened so much with the practice of medicine that real free market solutions are not possible. For instance, we all see McDonalds, Starbucks, and Wal-Marts on every corner but it takes a little while to see a hospital.

The number of U.S. registered hospitals is 5,754. The number of nongovernment not for profit community hospitals is around 50% of the total. Less than 18% are for profit community hospitals. Why don’t we have more of a percentage of for profit hospitals? Why don’t we have hospitals on every corner like other for profit institutions like Wal-Mart and McDonalds. The average hospital doesn’t make any money. One of the most profitable hospitals according to Forbes is Flowers Hospital in Dothan, Alabama which brings in around $389 million in revenue with a 53% operating margin. One of the problems is that there are only a few for profit healthcare hospitals. For example, the three major companies in the industry are Health Corporation for America, Tenet, and HealthSouth. I think it is desirable to have more of the companies opening up hospitals to increase access. Also trying to move away from the third-party payer system and moving to a single-payer system (people paying out of their own pockets is always desirable). 

                As I have mentioned one of the problems with health care is that health insurance covers too many things. It would be if we bought insurance for groceries and only had a $30 co-pay every time we went to the store. As consumers we have no incentive to care about what the prices are and are encouraged to consume more.  Insurance should be for catastrophic circumstances (cancer, chronic illness, or something live threatening). The idea of insurance is to protect against unforeseen events that will cost a lot of money. Another large problem is too little competition from insurance companies. The insurance companies are regulated by states which is ridiculous. Could you imagine if the food industry was regulated by each state how many more limited choices we would get? The idea is to get away from insurance companies, Medicare, and Medicaid paying and allowing individuals to pay for their own healthcare. At the same time it would be wise to break the American Medical Association cartel of deciding who can practice medicine and allowing anyone to practice medicine including nurses. Also limiting drugs to only Phase I testing just to check the safety of a drug would dramatically bring down drug prices since in essence consumers pay indirectly for all drug companies failures when the FDA fails to allow a drug on the market. This in addition to this, I would also let anyone open a hospital without regulation. Heck there is even a trend in at home hospitalization as mentioned here. All of these things would reduce the overall costs of healthcare while at the same time increasing quality. Remember the Peter Rule: If over time prices increase while quality decreases look to government intervention as the culprit.