Do Hospitals Harm Patients for Profit?

June 8, 2008

On the Massachusetts border that joins with Connecticut and Rhode Island, the green woods and blue waters of Lake Chaubunagungamaug shimmer in the summer breeze. Turning northeast along Sutton Road, it’s easy to see why America’s first colonists settled in these gently rolling hills and tilled its fields. In the fall, the thick green forests turn into a kaleidoscope of rusty yellows, reds, and browns before the first snow falls. At Nipmuck Pond, you won’t notice that Sutton Road has become Cliff Road until it changes again to Joe Jenny Road.

Five generations of the Whittier Family have farmed in this part of America. Their prized Holsteins have grown to a herd of 350, and their milk is driven daily a few miles north to their processing plant in Shrewsbury, where it is bottled and sold fresh at their milk store. From cow to cup, the process takes two days, which means “farm fresh milk” to their loyal customers. The fruits, berries, and vegetables from the farm are used to make jams, jellies, and relishes that they sell during the summer months. Todd, Wayne, and Janice Whittier have good reason to be proud. What could be more American?

Last September, Boston doctors found listeria in a woman who arrived to deliver her baby. They notified the state health department, which added her name to a list of four area residents who had also been sickened. Of those listed, two died in June and October and a third died in November. Another pregnant woman miscarried but survived, as did the mother and her new baby.

Once investigators identified Whittier Farms as the source, the health department closed their Shrewsbury operation until investigators could find and remove the source of contamination.

If not for the independence of government funded health departments, it’s not hard to imagine the dangers we would face without them. One can also imagine the risks posed if businesses like these (and their lawyers) policed themselves.

In the case of hospitals, there is no such independent oversight. And unlike Whittier Farms, hospitals actually profit when they injure or kill patients.

In 2005, Harvard Professor Lucian L. Leape, M.D reported:

“In most industries, defects cost money and generate warrantee claims. In healthcare, perversely… physicians and hospitals can bill for the additional services that are needed when patients are injured by their mistakes.”

Harming patients isn’t the only way hospitals profit. The National Center for Policy Analysis estimates that Medicare and Medicaid fraud costs taxpayers $33 billion annually. In 2005, the Florida Attorney General filed civil racketeering charges against Tenet Healthcare to recover $1 billion. Although some individuals have been convicted, legislators are primarily responsible for forcing hospitals to treat indigent, uninsured, and illegal alien patients for votes. And when those hospitals compensate with alternative revenue streams, politicians feign disdain (if they show any interest at all).

In this video, the corporate director of this Florida hospital explains why hospitals must rely on creative ways to keep their hospitals open:

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In 2001, we had an illegal alien as a patient in our hospital. He was there from 2001 through 2003. He had over $1.5 million in healthcare services. We forcibly returned him to his home country of Guatemala at our own cost of $30,000… That case is not over. We have spent…$250,000 in legal fees because his family here in the United States is suing us because they think it was inappropriate for us to return this illegal patient to his home country.

(We) have a patient from Mexico who has been in my hospital for 760 days. He has severe brain damage. He has no family, no friends… His charges to date for almost two years is $1.5 million… we have contacted the Mexican Consulate four times, we have contacted immigration and nobody will help us return this patient to Mexico. We’re even willing to spend our own $30,000 to return this patient…

In 2007, the Florida Hospital Association estimates that there was $100 million in costs for illegal patient care… right now I have six patients, illegal, undocumented patients, that we are seeing every three days for renal dialysis, for all of this… we have received no reimbursement… our healthcare costs are severely affected by this… A large percentage of the babies born at our facility are from illegal parents… we have tried repeatedly (to report illegal aliens to the authorities) and have been told they are only interested if a crime has been committed.

While fraud leaves a paper trail, it’s much more difficult to prove that physicians deliberately or recklessly harmed patients.

For example, if Dr. Smith successfully treats you for a small cut, he might legitimately charge your insurance company $500. But if Dr. Smith uses improperly sterilized equipment (like those routinely used at this Tenant hospital), the subsequent infections, IV antibiotics, intensive care, and related costs permit hospitals to charge much more whether the patient survives or not. Essentially, the sicker a well-insured patient gets, the more hospitals can charge.

Tenet Healthcare’s Garden Grove Hospital knowingly used defective sterilizers for many months. “Flash” sterilizers are used to clean surgical instruments soiled during operations. These had repeatedly failed to kill resilient spores during repeated routine test runs. When hospital administrators instructed surgeon Charles Rosen how to explain the situation to federal inspectors, Rosen resigned and went straight to federal authorities.

“This information was being withheld from the very surgeons entrusted with care of the surgical patients,” Rosen complained in a 2000 resignation letter to then-hospital-CEO Mark Meyers. “Such behavior is beyond belief. I feel it is a deliberate attempt at cover-up for financial reasons.”

When LA’s Cedar Sinai Medical Center almost killed Dennis Quaid’s children last year, the hospital’s chief medical officer admitted the “preventable error.” The unprecedented admission had more to do with Quaid’s celebrity than the spokesman’s candor. Had Dennis Smith’s children been injured, the medical records would have likely disappeared into a lawyer’s briefcase until a settlement (with a solid non-disclosure statement attached) had been signed.

Although he has sued the drug company, Quaid has not yet sued Cedars. Whether he sues or not, malpractice lawsuits in California are capped too low to worry most California hospitals. The California Department of Public Health fined Cedars $25,000 which is, coincidentally, what the hospital typically charges insurance companies for two babies who spend one day in intensive care – a pittance designed to make Californians believe the agency performs any oversight.

Quaid has since created The Quaid Foundation to give patients a place to report medical errors. Unfortunately, non-disclosure statements prevent many disclosures. If Quaid partnered with physicians of Semmelweis Society International or the Alliance for Patient Safety, he would team with physicians who aren’t afraid of protecting patient rights.

After reviewing 37 million Medicare patients’ medical records, (e.g. patients over 65), Healthgrades reported that medical errors in hospitals kill 200,000 patients each year. They did not report what happened to patients younger than 65.


When restaurants poison diners, the local or state health department closes the business until the problems are fixed. But when hospitals harm patients, they close ranks, investigate themselves, and destroy physicians and nurses who talk.

This isn’t a new problem. When patients sued for unnecessary errors and complications before 1986, many assumed that former patients and their lawyers were maliciously shaking down hospitals for millions of dollars.

To protect healthcare managers, their own lawyers drafted legislation called the Health Care Quality Improvement Act (HCQIA) in 1986. HCQIA’s flaw (pronounced Hick-Wa) stems from the fundamental conflict of interest between the bill’s co-authors, corporate hospital attorneys Horty & Springer, and the patients they ostensibly protect. Predictably, the same lawyers rendered HCQIA unenforceable by inserting this subsection:

42 U.S.C. §11112 (b) (3): A professional review body’s failure to meet the conditions described in this subsection shall not, in itself, constitute failure to meet the standards of subsection (a) (3) of this section. (See page 20)

This section indemnifies hospitals and their own peer review boards from being liable for their own rules. So, for example, when Dr. Gil Mileikowsky agreed to assist a patient whose healthy fallopian tubes were removed by another physician without her consent, the hospital staged what many physicians call a “sham peer review.” By characterizing Dr. Mileikowsky as disruptive, the hospital suspended his clinical privileges and reported their decision to the National Practitioners Data Bank (NPDB), which effectively prevents physicians whose licenses have been suspended in one state from practicing in others.

Regrettably, the Act is ineffective because it relies on corporate hospital executives to report errors and complications that they profit from.

For example, two physicians in one small Tenet facility generated $40 million/year in revenues from patients they subjected to unnecessary cardiac procedures. As in all cases, the protections that patients relied on depended upon; 1) the hospital executives who profit financially from unnecessary procedures, errors and complications, and 2) the physicians who were responsible for such misconduct.

Examples of failures to fulfill HCQIA’s intent by corporate hospital executives have been reported by CBS News, The Street, the Pittsburg Post Gazette and AMA Voice.

Examples of failures to fulfill the HCQIA’s intent by physicians are found in Medical Economics, the Pittsburg Post Gazette, Time, and the Journal of the American College of Cardiology.

Although small businesses and entrepreneurs have been the driving force behind the growth of the US economy, the US healthcare system has regressed into one that does not permit competition.

Because competition tends to reduce consumer costs, Dr. Mileikowsky reports that hospital law firms consider staff physicians who compete as “problem physicians.” Horty Springer’s hostility toward independent private physicians is demonstrated throughout their seminars, courses, and audiotapes that can be purchased on their website.

Hospital lawyers have developed a methodology and vernacular for controlling physicians, patients, and other advocates who report incidents to outside agencies or agree to testify on behalf of patients/victims of medical negligence. Their preferred strategy is to destroy the physician by discrediting him or her as disruptive, crazy, impaired, incompetent, or an imminent danger. Horty Springer also trains hospital administrators how to protect themselves from physicians who report dangerous conditions or patients who are killed or injured by recklessness or incompetence (whistleblowers).

Harvard economist Kip Viscusi estimates that the value of one human life is somewhere between four- and nine million dollars. If multiplied by Healthgrade’s “200,000 patients who die each year”, the loss to the US economy can be estimated somewhere between $800 billion and $1.8 trillion, annually.

Based on 152 published peer review articles, the Nutrition Institute of America, concludes that medical mistakes kill 784,000 people annually.

In 2006, the Association of American Physicians and Surgeons unanimously passed resolutions to correct these issues. The time for US legislators to correct these mistakes is long overdue.

If you do not want your hospital to harm you or your loved ones for profit, call your local representatives and demand their support of the Whistleblower Protection Act.

You can also sign this petition to modify HCQIA.

(More info here, here, here and here)