News / Publications » Publications

The Rise of For-Profit Organizations

"The competition for managed care contracts is forcing hospitals into risky strategies. Not only are patients being discharged quicker, but nurses are spending more time justifying treatments and documenting outcomes than they are providing care. And while the accuity level increases, the ratio of licensed staff to patients is decreasing. Core staff are being replaced by unlicensed, assistive personnel, pool nurses, agency staff. In some cases, these 'UAPs' are intubating patients, signing or witnessing operating room consents and giving medications. Things like that should — and must — frighten the public." 

Kathy Sackman, RN,
Co-Chair of United Nurses of America
(UNA)/AFSCME

As health care becomes more of a business, and market share becomes increasingly important, for-profit chains like Columbia-HCA are buying up everything in sight to increase their market concentration. In Texas alone, Columbia-HCA now owns 71 of the approximately 500 hospitals in the state: It is the largest private employer in Florida, and the nation's tenth largest employer overall.

These chains command bulk discounts from suppliers (which may not be local), win large contracts with insurers, focus on the bottom line and overwhelm the competition — non-profit and public hospitals. They may test patient blood gases less frequently after certain operations, they may nudge doctors to discharge patients sooner, and they may seek to impose rigid standards for the provision of many types of care.

Because the average hospital occupancy rate is about 66% today, excess capacity may force the closure of 40% of the nation's hospitals. The for-profits could be in the surviving part of the market.

For-profit HMOs are aggressively competing for contracts against the non-profit groups, and most of the growth in the number of people joining HMOs occurred among for-profit companies. They are under-pricing non-profit networks and providing extra services, like longer office hours. As they take over a larger share of patients, the for-profit HMOs are forcing the rest of the system to emulate their practice to cut costs.

In addition, a growing number of non-profit managed care organizations are converting to for-profit status. One reason given for such a switch is that non-profits can only raise money through borrowing or increasing premiums. The head of Georgia's Blue Cross/Blue Shield (the state's largest health care insurer) said, "Those companies that are well-capitalized will be best able to compete," and that the company will invest the new capital in information systems to reduce costs and improve efficiency.

Another trend is private management of public hospitals, another business that Columbia/HCA, the largest for-profit hospital chain, is in. Management companies say they can save money through increased efficiency without reducing services or the quality of care provided. They also say they can use centralized bulk purchasing, sophisticated accounting and bill collection techniques and top-flight management personnel. While this may be true in some cases, AFSCME has also seen many examples where contract management firms imposed quick fixes to improve the bottom line — such as layoffs, reductions in benefits, greater use of part-time workers — that did nothing to increase the viability and occupancy rate of the public hospital. This is exactly what happened at the Shelby County Regional Medical Center in Memphis between 1992 and 1995.

State and local governments, seeking to reduce health care costs, are looking more and more to purchase care from private providers. For-profit networks can make money on Medicaid through a combination of cost efficiencies, minimizing hospital stays, preventive care — even undertreatment and fraud. They also offer to perform such public health functions as immunizations, lead screening, Medicaid enrollment and eligibility determinations — putting public employee health care jobs at risk.

Public hospitals are experiencing the national trend of lower inpatient census and fewer emergency room visits. Managed care plans often deny or limit emergency room treatment and speciality referrals. Some refuse to include public hospitals in their networks. The motivations for this avoidance include the high-cost structures, aging physical plants and "stigma" of public facilities.

Managed care depends on a tightly-controlled, integrated network. Public hospitals, with their diverse missions and constituencies, inability to turn patients away, and political governance, don't lend themselves to tight control.

Estimates vary on the impact the aforementioned trends will have on health care worker employment, at least in terms of sheer numbers. According to the U.S. Department of Labor's Bureau of Labor Statistics (BLS), for example, 3.1 million health care jobs will have been added between 1994 and 2005 — about 100,000 more than in the previous 11 years. But the growth will be very different from that which occurred during the previous decade: Despite the pressures of managed care to keep costs and salaries down, as well as the likelihood that many hospitals will close, the needs of an aging American population may well outweigh the force of managed care and lead to the creation of additional health care jobs.
Pie Chart showing Projected Change in RN Employment 1994-2000

Although hospitals account for most of the jobs in the industry today, they are not likely to be the source of most of the growth projected through 2005. Nationwide, hospitals eliminated 10,000 beds in 1994 and reduced staff for the first time in a decade, according to the American Hospital Association. A recent industry survey reported that 40% of hospitals surveyed in 1994 indicated that they were reducing their workforce; six percent expected to downsize more than 30% of their employees. This cost-cutting trend was attributed to managed care, with the percentage of hospitals participating in managed care programs almost doubling between 1993 and 1994. Employment in home health services is expected to more than double as individuals will increasingly be receiving care at home rather than hospitals or institutions. According to the BLS, hospital jobs will grow at a rate of less than one percent a year between 1994 and 2005.

Health technicians are likely to account for about half of the total growth of technician jobs in the economy as well as a large share of occupations that require an associate degree. BLS projects that seven of the 20 fastest-growing occupations will be concentrated in the health services industry — home health aides, occupational therapy assistants and aides, occupational therapists, physical therapists, medical assistants and medical records technicians.

Nursing and personal care facilities are projected to increase by 46% and add 751,000 jobs — more than any other segment of the health services industries.

Get news & updates from AFSCME