"Our track record suggests that handing over responsibility for social goals to private enterprise is providing us with social goods of lower quality, distributed more inequitably and at a higher cost than if government delivered or paid for them directly."
Thirty years ago, Bonnie Svarstad and Chester Bond of the School of Pharmacy at the University of Wisconsin-Madison discovered an interesting pattern in the use of sedatives at nursing homes in the south of the state.
Patients entering church-affiliated nonprofit homes were prescribed drugs roughly as often as those entering profit-making “proprietary” institutions. But patients in proprietary homes received, on average, more than four times the dose of patients at nonprofits.
Writing about his colleagues’ research in his 1988 book “The Nonprofit Economy,” the economist Burton Weisbrod provided a straightforward explanation: “differences in the pursuit of profit.” Sedatives are cheap, Mr. Weisbrod noted. “Less expensive than, say, giving special attention to more active patients who need to be kept busy.”
This behavior was hardly surprising. Hospitals run for profit are also less likely than nonprofit and government-run institutions to offer services like home health care and psychiatric emergency care, which are not as profitable as open-heart surgery.
A shareholder might even applaud the creativity with which profit-seeking institutions go about seeking profit. But the consequences of this pursuit might not be so great for other stakeholders in the system — patients, for instance. One study found that patients’ mortality rates spiked when nonprofit hospitals switched to become profit-making, and their staff levels declined.
These profit-maximizing tactics point to a troubling conflict of interest that goes beyond the private delivery of health care. They raise a broader, more important question: How much should we rely on the private sector to satisfy broad social needs?
Read on →
See also: John Galt Kills Americans by Jim White