Warehousing the Sick for Profit

Feb 15, 2010

An investigative report by the New York Times revealed another ugly secret of for-profit health care: An industry of so-called long-term acute care hospitals has developed to skim profits from Medicare.

They are called hospitals but don’t deserve the name. They don’t have full-time doctors on staff. They don’t have to have doctors on the premises. If a patient needs actual surgery or emergency care, they are transferred to actual hospitals!

But, these so-called hospitals can bill Medicare at a high rate. They generate the most profit if patients are kept exactly 25 days–no more, no less, regardless of patients’ actual condition or needs.

Over 400 such for-profit hospitals were created in the last 25 years. The newspaper’s report cited estimates that these “hospitals” will bill Medicare 4.8 billion dollars this year, for warehousing 130,000 patients.

The Select Medical Corporation owns 89 such units. Select has no doctors on its board or in management. Select’s two top executives–a father and son–own a 200 million dollar share of the company.

A “hospital” like Select can lease a floor or two from an existing hospital. It can operate there as an independent entity, and then charge Medicare whenever a patient is transferred between floors. Twenty-five days in the acute care hospital–transfer to the emergency room below–re-admit to acute care for another 25 days, and a new $40,000 payment from Medicare!

What if Medicare does find abusive or dangerous practices at these hospitals? Medicare has no legal power to fine them or to reduce payments.

Regarding patient safety, one statistic stands out. In a 2006 study, 9 of every 1000 patients in such units developed serious infections. This compares to fewer than 3 per 1000 in other hospitals.

This scandalous situation is well known to the authorities. But when profits are involved, the interests of patient and taxpayer come dead last.