Guest Opinion

The following opinion was written by a friend, and published in the Poughkeepsie Journal newspaper.

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HMOs, THE BERGER COMMISSION, AND GOVERNOR SPITZER: How the Corporate Bulldozer Buried the Reformist Steamroller

Irwin Sperber

The actual conditions behind the crisis forcing Kingston hospital to merge with Benedictine, a Catholic hospital, have not been reported. The key to understanding the red ink in which local hospitals are drowning is that the same pattern is unfolding all across New York State and because of the very same conditions.

Over the past seven years, hospitals in New York State have piled up losses of $2.3 billion due to underpayments from Medicare, Medicaid, and health maintenance organizations. Alongside the bankruptcies facing many hospitals is the financial engorgement enjoyed by HMOs. With dedication to profit maintenance rather than health maintenance, HMOs have accumulated $3.7 billion in profits during the past six years alone. These trends are inextricably related.

For Medicaid patients, a hospital loses 76 cents for each dollar it spends. For Medicare outpatients, a hospital regularly loses 18 cents for every dollar it spends. Viewed over the span of a decade, costs for in-patient care borne by hospitals in New York have gone up by 32.4%. During this same period, Medicare reimbursement rates to them have been increased by just 14.2%. If your own household expenses and income were matched up at these incongruous levels, how long would it take you to face ruin?

Insufficient and slow reimbursement by HMOs to hospitals that have already incurred major expenses for patient care is only one means by which these companies make so much profit while hospitals are put to ruin. These companies further cut their expenses by authorizing coverage only for a short stay when patients require extended treatment and supervised convalescence in a hospital. They also deny coverage to a substantial percentage of patients in need of its medical specialists. The restrictive and cumbersome “appeal process” is heavily stacked in favor of the HMOs. These trends lead to a striking paradox. On the one hand, more people than ever before are seriously ill and in need of hospitalization; on the other hand, there are a great many “empty beds” and “underutilized facilities” going bankrupt in the mid-Hudson region and throughout New York State.

Although the Commission on Health Facilities for the 21st Century (the “Berger Commission”) is well known for its recommendations to merge or close these “inefficient” hospitals and privatize many others, the identity of Mr. Berger himself has eluded public scrutiny. Who is Stephen Berger? Whose interests does he represent? As executive vice president of GE Capital from 1990 to 1993, Berger guided his company into still another lucrative industry: he expanded General Electric’s annuity business, culminating in the 1994 acquisition of Harcourt General Insurance -- a behemoth in its own right offering health, life, and accident policies. The strategy of privatizing supposedly “mismanaged” public hospitals, which can then be purchased at fire sale prices by the HMOs themselves, flows directly from Mr. Berger’s corporate-oriented career path. HMOs appreciate this agenda, and they heartily endorse the recommendations.

Much more could and should be said about the role of Eliot Spitzer in embracing the Berger Commission’s ill-conceived recommendations. The role of HMOs in twisting and mutilating the health care priorities in the state legislature through campaign contributions and relentless lobbying also cries out for investigation. And the failure of the news media to inform the public about the forces responsible for the impending blows to New York’s already hobbled healthcare system calls for critical analysis in its own right. I hope the present letter might encourage those groups now challenging the Commission’s recommendations to expose and confront the corporate interests responsible for them in the first place.