In Tony Blair’s first term the government gave British corporations like Balfour Beatty, Amec and ISS Mediclean control of hospital buildings, but kept medical staff like nurses and doctors on the public payroll. Now the government is paying private companies from Canada, South Africa, the US and the UK to run fast-track surgery facilities called ‘Diagnostic and Treatment Centres’. The government is also hiring US firms like Kaiser Permanente (KP) and UnitedHealthcare for management advice. United, which is advising nine primary care trusts, has been fined over $7m by US regulators since 2000. Most of these fines were incurred for overcharging the US authorities for hospital charges. The ‘not-for-profit’ KP has a turnover of $13 billion.
Another organisation with experience of working with KP is the California Nurses Association (CNA), whose members have had several bruising industrial disputes with the firm. The CNA says: ‘Meaningful distinctions between private non-profits like KP and for-profit healthcare corporations have all but disappeared.’ But KP’s not-for-profit status means the firm pays less tax than conventionally defined corporations. KP chief executive George Halvorson still trousers a $900,000 salary, however; with bonuses his salary could rise to $1.5m. KP has other distinctly private-sector practices, too. This February its government affairs director Leland Wong resigned because he had improperly given $250,000 worth of sports tickets to politicians in the States. But UK health secretary John Reid said critics of Labour’s relationship with KP were just ‘frightened of abroad’. Reid claimed that there were ‘lessons we can learn from KP’, particularly with regard to ‘keeping patients out of hospital’. Let’s act on the minister’s advice and take a closer look at KP’s record in this field.
In November 2002 KP paid a fine worth $1.1m after its enthusiasm to keep people out of hospital in California led to patient Margaret Utterback’s death. The firm had employed unqualified ‘medical assistants’ to staff its helplines, paying them bonuses if they succeeded in stopping patients turning up at the hospital gates. Surely enough, Utterback could not persuade KP’s medical assistants that her pain was serious enough for an appointment. When she finally reached a KP casualty department it was too late. Her abdominal aneurysm burst, fatally flooding her entire body cavity with blood. When California health official Daniel Zingale first tried to levy the fine from KP for Utterback’s death, the firm responded by trying to prosecute him for contempt of court.
If this move had succeeded it would have put the health regulator in prison. Two months previously, KP had paid $1m to a university also in California to finance research into a rare genetic disorder called Sanfilippo syndrome. The donation was no act of charitable largesse: KP made the payment in order to settle a lawsuit brought after the firm had refused to treat two boys suffering from the condition. The same year KP was also forced to publish details of its management systems and pay an undisclosed sum to settle another lawsuit, which alleged that the firm’s slogan ‘in the hands of doctors’ was complete tosh. The lawsuit claimed that the relationship between KP and the medical corporation worked completely the other way round: the doctors did not make the decisions, but were, instead, forced to keep patients out of hospitals on financial grounds. Four years previously, KP paid a $1m fine in Texas for keeping patients out of its casualty departments there.
This was the firm’s second fine in the Lone Star state. In 1997 Texan regulators had written a report alleging, a KP spokesman claimed, that the firm was ‘creating a chilling effect on emergency room use’ by distributing a brochure to patients dissuading them from using KP’s casualty facilities. The firm tried to stop this investigation by taking out an injunction against the Texas regulator Elton Bomer. Even Texas’s governor, one George W Bush, was ‘more than troubled’ by KP’s actions. Bush complained: ‘I wish that Bomer would be able to have his say in the public arena about a health management organisation [KP] that apparently needs to be held accountable for its behaviour.’ Also in Texas in 1998 KP faced another lawsuit, this time following the death of patient Ron Henderson. The latter’s family alleged that the firm had misdiagnosed his heart condition.
While KP did not admit liability, it did settle out of court – reportedly for more than $5m. During the Henderson trial, the jury was shocked by evidence from a speech made by KP’s Texas associate director Dr John Vogt. The doctor told businesspeople that KP executives’ over-riding concern was with ‘the bottom line’. Vogt said: ‘Any time you have to balance the budget, how do you do it? You cut utilisation, drop referral rates, drop your hospitalisation. The budget balances. We all go home’. Talking, in the same speech, about KP’s casualty departments, or Urgent Care Centres (UCCs), Vogt said: ‘We basically said to the UCC doctors, “If you value your job, you won’t say anything about hospitalisation. All you’ll say is, ‘I think you need further evaluation and Dr Schmoe is going to come in and talk with you.’”’ Vogt’s speech also revealed how in 1993 KP had reacted to its own misdiagnosis of nine heart attacks by introducing a new approach to patients reporting chest pains.
The new system successfully cut the number of missed heart attacks by 90 per cent. Vogt revealed that the new system was then cut back because it allowed too many patients into hospital. The doctor said: ‘The reason we’re revising that protocol now is because our utilisation exploded.’ In its defence, KP claimed Vogt was joking. The Ecologist asked Britain’s Department of Health if it was worried about KP’s legal record. A spokesperson said: ‘We have looked into this, and if you look at every single US healthcare company they are all subject to litigation. It is a very litigious country.’ Asked if this meant it believed the court settlements KP had made were wrong, the department said: ‘No , but in the US these kind of court cases just go with the territory.’
Solomon Hughes is an investigative journalist who writes regularly for Private Eye, The Guardian and Red Pepper
This article first appeared in the Ecologist April 2004