Correspondence

The New Health Care Game

N Engl J Med 1997; 336:72-73January 2, 1997

Article

To the Editor:

Your portentous parable (Aug. 8 issue)1 of the Panglossian, albeit Procrustean, practices of health maintenance organizations (HMOs) did not include one important element of the game — mergers. When two HMOs merge, each terminates business. Accordingly, executives and directors of both entities are entitled to termination benefits (golden parachutes). Since the same people are induced to assume identical positions in the new HMO, they receive initiation benefits. Termination and initiation packages include cash bonuses, large salaries, stock options, and other rewards worth millions of dollars.

The relevant issue is not whether these organizations can afford to merge but whether they can afford not to.

Joseph Fermaglich, M.D.
3301 New Mexico Ave., Washington, DC 20016-3622

1 References

1. 1

   Kassirer JP. The new health care game. N Engl J Med 1996;335:433-433
   Full Text | Web of Science | Medline

To the Editor:

I work for a nonprofit that has never put physicians at financial risk for referring patients to non–primary care specialists. Our organization has had to compete with the for-profit entities. It is difficult to stay open for business in the face of such competition and still carry out medicine's noble mission: caring for the sick and improving the health of as many people as possible. More cogently than anyone else has yet done, you exposed the heart of the for-profit HMOs. Indeed, your essay shows where the real charade is. Bravo!

Brian Budenholzer, M.D.
Group Health Northwest, Spokane, WA 99210

To the Editor:

I would add one postscript to your piece: This is no joke. The public has only the vaguest idea of what is being perpetrated in the name of profit. Salespeople have taken over health care. “The New Health Care Game” should be widely publicized as fact, not fiction. The name of the game is greed.

Samuel A. Brody, M.D.
1450 Coolidge Ave., Baldwin, NY 11510

To the Editor:

In your article, you have created the SimCity of the so-called health care revolution but left out how the fuel of this new game has frequently been kickbacks, payola, bribes, and fraud, which help to win the game.

When, for example, National Medical Enterprises was accused of “. . . one of the most massive and pernicious health care scandals of all time,”1 it paid $375 million to settle the charges2 — on top of the $125 million it had previously paid to settle fraud charges brought by insurance companies.3 The first payment was in 1993, the second in 1994. Yet in 1995 National Medical Enterprises successfully completed a $1 billion “junk-bond” offering sold through Donaldson, Lufkin, and Jenrette Securities so that it could purchase American Medical Holdings, among other things, and create a still larger enterprise.4 Talk about the rewards of fraud. Now Tenet, as the new company is called, is doing just fine and has won the favor of Wall Street. Is it alone? Hardly.

In 1995 Caremark was accused of giving bribes and kickbacks, pleaded guilty, paid a large fine, and proceeded to gain even more favor. Recently sold to the company Med Partners, Caremark received $2.5 billion.5 Columbia/HCA, one of the nation's largest companies, has been sued for allegedly giving massive kickbacks.6 In 1992 National Health Laboratories paid a fine of $110 million for overcharging Medicare. Professional Care, a health care company based in Plainview, New York, pleaded guilty to Medicare fraud in 1988 and paid a large fine; it is now on the “comeback track.” The list goes on, and physicians and honest companies are increasingly being driven from a marketplace fueled by fraud, kickbacks, and payola. And to add another element to the game, 25 of 43 recent settlements bar the prosecution from publicizing the agreements, holding press conferences, issuing press releases, or offering any public comment.7

Recent estimates from the Government Accounting Office put the cost of health care fraud at between $80 billion and $100 billion per year.8 And what of the companies that are caught? They win the market game — as do the companies that are doing similar things but are not caught. The corporate practice of medicine, though illegal in many states, has caught the fancy of investors, and the big bull market rolls over and tramples honesty and integrity in the name of benefiting shareholders.

SimCity indeed. More like Sin City, with the rewards chasing the money.

George R. Schwartz, M.D.
257 Hyde Park Estates, Santa Fe, NM 87501

8 References

1. 1

   Complaint 3-92 CV 1868-P. Aetna Life Insurance Company and Metropolitan Life Insurance Company v. National Medical Enterprises et al. United States District Court for the Northern District of Texas:2.
   

2. 2

   NME settles three suits by insurers. Reuters News Service. September 30, 1993.
   

3. 3

   Reeves S. FBI probing National Medical: company says settlement reached. Dow Jones News Service. June 3, 1994.
   

4. 4

   Market awaits big junk bond deal next week. Dow Jones News Service. February 17, 1995.
   

5. 5

   Lowes RL. Will low tide for coastal leave doctors beached? Med Econ 1996;73:30-46
   Medline

6. 6

   James M. Thompson (Plaintiff) v. Columbia Healthcare Company. United States District Court, Southern District of Texas. Civil Action No. C-95-0110.
   

7. 7

   Burda D. Watchdog gets tough on Medicare fraud. Modern Healthcare. April 8, 1991:32.
   

8. 8

   McCampbell RG. Healthcare fraud enforcement in 1995. J Okla State Med Assoc 1995;88:68-68
   Medline