Vanguard Health Systems Sample Essay

The Blackstone Group is a private equity house that acquired a bulk equity interest in Vanguard Health Systems with a $ 1. 75 billion dollar investing in 2004.

Harmonizing to Josh Kosman. concern newsman for the New York Post. private equity houses purchase concerns through leveraged buy-outs in which the bulk of the money for the acquisition comes from lading the purchased company down with debt. Kosman states that Vanguard really borrowed the money to fund its buyout by the Blackstone Group. and “for the twelvemonth stoping June 30. 2008. Vanguard spent 122 million on debt payments which contribute to a 4 million dollar loss from go oning operations. If something doesn’t alteration. Vanguard may non be able to pay its involvement and surely won’t be able to pay its rule. which is due in September of 2011. ” 1 But harmonizing to a recent article in The New York Times. ( October 28. 2010 ) Blackstone is bettering its investing portfolio by sharply refinancing the debt of companies under its direction. “More than 50 per centum of the debt carried by Blackstone companies has either been refinanced at a lower cost or modified with better footings. ” 2 ( “Debt Fuels Private Equity Revival. ” by Peter Lattman and Michael J. de la Merced. Accessible online at World Wide Web. nytimes. com/2010/10/29/business/29blackstone. hypertext markup language )

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Harmonizing to a survey that appeared in the Canadian Medical Association Journal. investor-owned infirmaries have about 20 % higher charges than non-profit infirmaries. The research workers although based in Canada. conducted their survey based on informations from infirmaries located throughout the United States. Dr. Steffie Woolhandler. says that for-profit infirmaries show a inclination to bear down higher monetary values for inferior attention. and to scant on nurses while passing extravagantly on executives and paper-pushers. Dr. Woolhander went on to state that surveies show a form that for-profit dialysis clinics have higher decease rates. that for-profit infirmary have lower quality nursing attention and that they perform 100s of unneeded bosom operations. And Harvard Professor. Dr. David Himmelstein who is a steadfast advocator against for-profit infirmaries said that there is 2 per centum higher decease rate in for-profit infirmaries compared to non-profit infirmaries.

A imperativeness release issued by the American Federation of State. County and Municipal Employees assert that Vanguard’s commanding equity house ( the Blackstone Group ) has significant retentions that have been negatively affected by the current economic downswing. The imperativeness release goes on to state. “In Phoenix. Vanguard acquired and so closed a community infirmary functioning a low-income country while spread outing in an upper-income suburban country. In California the system spun-off three infirmaries to another for-profit after several old ages of fiscal losingss. maintaining merely the more profitable surgical centres and net incomes from the sale of the medical edifice on the infirmary campus. ”

Reporter Josh Kosman claims to hold visited Vanguard infirmaries in Chicago ( Louis A. Weis Memorial and McNeil ) and reported them to be desiring. And the Joint Commission which works on raising the degree of attention at infirmaries surmised that in certain types of intervention when bosom onslaught patients have to hold their arterias opened. seven of 11 Vanguard infirmaries inspected in 2008 performed below norm. “With so many force per unit areas on the U. S. health-care system. including nursing deficits. high costs for malpractice insurance. and the demand to supply attention for 1000000s of indigent and uninsured patients. the fiscal jobs of infirmaries can non be blamed chiefly on private-equity proprietors. ” said Kosman. “Many of the infirmaries that private-equity houses acquired have been available for acquisition exactly because they were holding fiscal troubles. Yet there are few indicants that the direction actions of private-equity houses have improved attention or decreased costs to patients. and there is much more grounds that private equity is doing an already unstable health-care system even more unsafe. ”

Kosman has besides been cited for slanting the information he uses in his book. and of holding a personal blood feud against private equity houses because of losing a occupation to one as a immature newsman when he was laid off in a cost economy step. In Kosman’s book. entitled The Buyout of America. he alleges that private equity houses make immense net incomes by leveraging selected companies with immense loans. so cutting costs. casting assets and finally depriving the companies down and selling them. But surveies have shown that private-equity owned houses outperform comparable publically traded companies in growing. profitableness and productiveness. And that most of their net incomes and growing root from concern and gross enlargement.

Furthermore. private equity-owned companies tend to be better managed with stronger operational direction patterns than companies with other operational constructions. And contrary to the dire scenario that Kosman pigments of private equity-owned companies firing workers to ratchet-up net incomes. surveies indicate that in 2007 private equity- owned houses increased employment by five per centum during their ownership compared to a two per centum addition by public companies. What’s more. Kosman’s claim that private-equity houses are a bad stake for investors and pension financess are refuted by statistics compiled from 2007 thru 2008 that show net net incomes distributed to investors were $ 1. 12 trillion and which indicate that between 1980 and 2005 private equity houses reaped 39 per centum on mean one-year net returns. crushing out the S & A ; P 500 and other fiscal indices.

Research indicates that Vanguard infirmaries have remained stable and have fortified several infirmaries that might hold either closed or moved elsewhere had Vanguard non purchased them.

One of the most publicised resistances to Vanguard’s command to get infirmaries is launched in Illinois by the American Federation of State. County and Municipal Employees ( AFSCME Council 31 ) and they have challenged the proposed Vanguard buy-out of two Chicago country infirmaries. Westlake and West Suburban. The brotherhood is concerned about whether Vanguard will maintain the infirmary unfastened. maintain staff. and go on the infirmaries committednesss to the indigent which is what non-profit infirmaries are required to make in order qualify for non-tax position. Union representatives want a 10 twelvemonth pledge of charity attention for the hapless and uninsured similar to the 1 that has been made by Vanguard to the Detroit Medical Center ( DMC ) .

Critics of Vanguard are besides concerned about its hard currency flow and what they describe as its immense debt burden. and they wonder if it can remain afloat in the coming old ages. Yet harmonizing to a recent New Market Report and research from Datamonitor. Vanguard employs some 19. 000 people and had grosss of approximately 3. 2 billion during the 2009 financial twelvemonth ( an addition of 14. 7 % over the old twelvemonth ) . And the company had an operating net income of 43. 7 million during financial twelvemonth 2009 and a net net income of $ 28. 6 million.

Furthermore. concerns about for-profit infirmaries cutting attention for the hapless and the uninsured is unsubstantiated by independent surveies and studies. It besides does non take into history the fact that infirmaries that are classified as non-profit have frequently shown a inclination to either abandon the hapless by shuting infirmaries in urban countries. or to supply meager charity services to the hapless compared to the entire grosss earned. ( See “Nonprofit infirmaries abandon the poor”-Barbara Martinez- 10. 14. 2008 ) .

In April of 2008. Senate finance commission Chairman Max Baucus. D-Mont and superior member Chuck Grassley. R-Iowa. released a proposal for wellness attention reform “which would necessitate non-profit-making infirmaries to keep minimum degrees of charitable activity. bound aggressive aggregations. and restrict charges to the uninsured and indigent. ” And those infirmaries that claim non-profit-making position yet are non supplying a important or significant community charity wellness benefit for the hapless would lose their revenue enhancement suspensions and tax-exempt position.

Harmonizing to an article by Zachary F. Miesel and Jesse M. Pines ( See “Tax Breaks under the Microscope. ” June 19. 2009 ) research reveals that some non-profit-making infirmaries are identical from for-profit infirmaries and in some instances even worse. A non-profit-making infirmary in Connecticut placed liens on the places of aged patients that had owed hospital measures. And non-profit infirmaries in Chicago were accused of reassigning uninsured patients to the county exigency room. And there is concern that some non-profit-making infirmaries merely charade as such and lend a bantam per centum of their resources to handle the indigent since there is no set sum that a non-profit-making infirmary is lawfully required to allow for the hapless. In fact. in a recent determination the Illinois Supreme Court decided to revoke the revenue enhancement exempt position of the Catholic owned Provena Covenant Medical Center.

And in New York City another Catholic non-profit infirmary. St Vincent’s. is in danger of folding because it is $ 700 million in debt. “Tax-exempt infirmaries. many of them sponsored by spiritual groups. are under onslaught as ne’er before. accused of bewraying their assumptive mission of functioning the hapless. ” writes research worker. Phillip Matera. “The assault is coming from many waies. More than 500 infirmaries are being investigated by the Internal Revenue Service to find whether they are supplying plenty community benefits to warrant maintaining their freedom. Last month. the Senate finance Committee held a hearing during which infirmaries were raked over the coals. Even before the informants testifies. Committee Chairman Charles Grassley. an Iowa Republican. set out a statement stating ‘non-profit doesn’t needfully intend pro-poor patient’ and proposing their record ‘calls into inquiry whether non-profit infirmaries deserve the one million millions of dollars in revenue enhancement interruptions they deserve. ’ 8 ( “Uncharitable Charities. ” by Phillip Mattera. Accessible online at World Wide Web. corp-research. org/archives/esep-oct06. htm )

In Michigan. tonss of non-profit-making infirmaries have either relocated from urban centres to suburban 1s or closed down wholly. go forthing the occupants in the unstable place of holding to fend for themselves. Detroit’s Riverview Hospital is a recent illustration. 9 “Nonprofit Hospitals Flee Cities for Suburbs. ” by Sarah Rubenstein-WSJ online ) . “The evaluation bureaus remind us that the mentality for the nation’s non-profit infirmaries is at best debatable. ” writes finance professor. Eric W. Hayden. “The perpetrators include weak patient volume ; worsening governmental and non-governmental reimbursements ; mounting disbursals. particularly labour turning bad debt costs ( the latter reflecting the push toward consumer-driven attention ) : additions in the uninsured population ; competition from physician-owned diagnostic and intervention centres and roll uping unfunded capital demands. This portends progressively hard entree to recognition markets at a clip of important capital demands. ” 7 ( “Non-profit Hospitals Face Structural and Financial Challenges-by Eric W Hayden. Professor of Finance. University of Massachusetts )

Vanguard Health Systems have indicated that they are committed to turn this about. “Vanguard has systematically demonstrated our committedness to working with community boards and resources to guarantee the best possible result for patients. ” said Trip Pilgrim. Vanguard senior frailty president. “We have the chance to go on this tradition in Detroit and we believe that with the entree to capital Vanguard brings. the bing direction squad will turn DMC into one of the leading infirmary systems in America. ”

Even so. many wellness attention experts and professionals cringe at for-profit entities having and supplying wellness attention services. “In a field every bit equivocal as wellness attention. where the field is so limited as to what works and what doesn’t work. the chance for ethical mischievousness at the border is reasonably significant. ” said Dr. David Lawrence. CEO of Kaiser Permanente. “The chance to happen ways to shave attention is really great. The criterions of what works and what doesn’t work are excessively weak to transport that sort of ethical load. ” Others have voiced concern over the fiscal outlooks of stockholders and how this can impact the quality of patient attention. Yet executives from the private infirmary concatenation Columbia/HCA disagree. “I warrant you there is no 1 in this organisation who runs around worrying about the stock monetary value. ’ says hospital executive. Vic Campbell. The stockholder is no different from the bondholder for a tax-free organization—and the bondholder has more power. the power to prehend the plus if the bond goes into default. For-profit or non. I believe that if you live up to your values and rules. you will go on to be in concern. ”

Large for-profit infirmary companies like Vanguard Health Systems and Columbia/HCA may besides hold advantages over non-profits in cut downing infirmary costs by the immense graduated table of their purchasing power and the ability to tap into a web of sophisticated information systems every bit good as having significant price reductions on supplies by purchasing in immense majority measures. And although for-profits are criticized for cutting budgets and maintaining an oculus on the bottom line. not-for-profit infirmaries are besides expected to stay in the black and they frequently must control disbursement to make so. ( See-Health Care Business News-April 28. 2010 ) . In fact the differences between most non-profit and for net income infirmaries are fringy at best. And the lines of limit and criterions that were ab initio a portion of their mission have blurred. “Historically. most infirmaries in America have been recognized as charitable organisations exempt from revenue enhancements under 501 ( degree Celsius ) ( 3 ) of the US revenue enhancement codification. ” writes John Carreyrou.

“But after Medicare and Medicaid were created in 1965. the infirmary industry contended that there would no longer be adequate charity attention to fulfill the IRS revenue enhancement freedom criterions. Most Americans. it argued. would be covered by the new authorities plan for the hapless and aged or by private wellness insurance. The industry pushed for a more flexible freedom criterion that became known as the ‘community benefit’ standard. The IRS adopted it in1969. Today. about 60 per centum of the 3. 400 infirmaries in the US are non-profit. About 23 per centum are for-profit. and another 17 per centum are run by counties. provinces or the federal authorities. 11 “Once you go for-profit. you can pretty much make whatever you want. ” harmonizing to Dr. Quentin Young. national coordinator and CEO for doctors for a national wellness program. “You can restrict services. you can except people. non in exigencies. but you can specify your patient burden. ”

The Emergency Medical Treatment and Active Labor Act were passed in 1986 to restrict the pattern of hospitals-whether under for-profit or non-profit status- from making whatever they want.

The federal jurisprudence “requires infirmaries and ambulance services to supply attention to anyone necessitating exigency medical intervention regardless of citizenship. legal position or ability to pay.

As a consequence of this act. patients necessitating exigency intervention can be discharged merely under their ain informed consent or when their status requires transfer to a infirmary better equipped to administrate the intervention. ” 12 The Emergency Medical Treatment and Active Labor Act. ” Retrieved from Wikipedia )

Sadly. virtually all infirmaries ( even those designated as authorities. county or public infirmaries and which were specifically established to handle the hapless. the indigent and the uninsured ) are sometimes guilty of supplying cheapjack wellness attention to the homeless and the tragically hapless. and dispatching them from exigency infirmary beds with small concern if they have been stabilized. or even if they have a safe topographic point to remain. This atrocious and conscienceless pattern of “patient dumping” has been documented by eyewitnesses every bit good as picture cameras. and made national intelligence when it was reported a few old ages ago in California and Illinois.

It is besides reported to be on the addition across the state as infirmaries struggle to remain afloat. “In forcing to go more efficient. non-profit-making infirmaries decrease their charity attention. ” writes Jack Burns. in the Journal of Corporation Law. “Public infirmaries so assume the attention of the indigents. Local authoritiess that support public infirmaries are detecting the increased wellness attention costs. They are besides detecting an addition in the sum of patient dumping. or the transferring of patients into the exigency suites of the public infirmaries. ” 13 ( “Are Nonprofit Hospitals Really Charitable? ” by Jack Burns- April 1. 2004/ Retrieved from Allbusiness. com ) .

It should be emphasized that all three infirmary types ( for-profit. non-profit and public ) must be cognizant of their budget and grosss. Hospital attention is highly expensive and if the economic worlds are non systematically taken into history. the infirmary will either hold to drastically cut services. seek new investors. or shut its doors. Furthermore. although statistics indicate that overall for-profit infirmaries are more inclined to offer more expensive wellness services such as cardiac surgery. all infirmaries are lawfully and morally obligated to supply the best attention available to any patient that enters its premises. How it carries out these duties is less a affair of its for-profit or non-profit-making position as the competency and committedness of the specific infirmary involved. “Two tierces of all U. S infirmaries are non-profit-making. with the balance split between for-profit and authorities ownership. ” writes Jill Horwitz. professor of jurisprudence at the University of Michigan.

“These infirmaries types operate under different legal regulations. For-profits may administer accounting net incomes to stockholders. whereas authorities and non-profit infirmaries enjoy income and belongings revenue enhancement freedoms. However. there is ground to anticipate all infirmaries to supply a similar array of medical services. Generally. infirmaries all dainty patients with a mix of demands. contract with the same insurance companies and authorities remunerators. run under the same wellness ordinances. and employ staff with the same preparation and ethical duties. Consequently. it is non surprising that much of the empirical literature on corporate ownership finds small difference among hospital types. ” 14 ( “Making Net incomes and Supplying Care: Comparison Nonprofit. for –Profit. and Government Hospitals. ” by Jill R. Horwitz. Accesible online at: hypertext transfer protocol: //content. healthaffairs. org/cgi/content/full/24/3/790

Unlike they were when established across America in record Numberss in the 1800’s and functioned chiefly as charity wards for the really hapless. infirmaries have in the last 70 old ages become highly proficient and expensive entities. And so has wellness attention as a whole. “The ( wellness ) systems most obvious jobs. rising prices. and unavailability of medical attention in the United States. ” writes E. Richard Brown. “Far more of society’s resources now go into medical outgos than of all time earlier. We pay for these costs through our revenue enhancements. wellness insurance premiums. and straight out-of-pocket payments. ( And ) Despite a overplus of new diagnostic processs. drugs and surgical techniques. we are non every bit healthy as we believed these medical admirations would do us. ” 12 ( E. Rrichard Brown. “Rockefeller Medicine Work force: Medicine & A ; Capitalism in America. ” )

The public presentation of infirmaries instantly before. during and after Hurricane Katrina besides seem to formalize surveies that the public presentation of infirmaries has less to make with whether they are for-profit. non-profit or public. and more related to the peculiar infirmary and its competency and devotedness to its patients and to the community.

It is. of class. common cognition that the federal authorities was improbably unqualified during the Gulf seashore catastrophe in the summer of 2005. And Charity Hospital ( a public entity ) performed miserably. neglecting to evacuate patients. or to supply them with the supplies and resources they so urgently needed. As a consequence tonss of patients that were entrusted to them for attention lost their lives.

In contrast to the public presentation of Charity Hospital. the for-profit Tulane Hospital performed much better. Owned by the investor infirmary company HCA. it held hurricane readying and planning meetings good in progress. Taking lessons from old hurricanes. HCA purchased back up generators. satellite phones. window shutters every bit good as telling excess nutrient and medical supplies. They besides leased 20 choppers to be used to airlift patients out in the event of a catastrophe. 13 ( “Public and Private Responses to Katrina: What Can We Learn? ” by Mary L. G. Theroux. Oct. 20. 2005 ) .

The public presentation of local. province and federal authorities showed no such planning and readiness. Mary Theroux of the Independence Institute writes:

“The mayor’s office set up operations in the in private owned and operated Hyatt hotel. ( which was ) judged the safest base. They were equipped with old field-type phones that couldn’t be recharged. Both the governor and city manager claimed they were paralyzed by deficiency of communicating. and pointed the finger at the feds’ failure to come to the deliverance. The full governmental response. from top to bottom. was beset by a deficiency of leading. action. and perfectly no coordination between any two bureaus. ” 15 Ibid )

Yet non all for-profit infirmaries in New Orleans performed every bit good as Tulane during the catastrophe. Tenet infirmary. a for-profit. was unprepared and unqualified during the crisis. giving farther credibleness to the perceptual experience that a infirmaries public presentation is non be predicated on its categorical position.

The Pharmaceutical Industry

It is impossible to show a survey of infirmaries without including the pharmaceutical industry which is an built-in portion of how hospitals-through its medical staff –diagnose and dainty patients and how they run their wellness systems.

Although drug shops can be traced back to the Middle Ages. the precursors of today’s big drug companies were established in the late 1800’s and early 1900’s. By the 1980’s partnerships were formed between biotechnology houses and influential pharmaceutical giants. This paved the manner for a practical monopoly of the industry by a few companies that industry and administer medical specialties to assorted clinics. infirmaries. pharmaceuticss. nursing places and other establishments. By the 1990’s the pharmaceutical industry had ballooned to a multibillion dollar concern. 16 ( Wikipedia )

In the United States entirely the usage and distribution of prescription medicine has skyrocketed in the last 10 old ages by over 61 per centum. Retail gross revenues have increased by 250 per centum from 72 billion to 250 billion. And the mean cost of prescription drugs has more than doubled in monetary value. “There is a job. nevertheless. with the new American manner. ” writes Melody Petersen in her groundbreaking book. Our Daily Meds. “One that the drug companies and physicians ordering the medical specialties do non like to speak about. Experts estimate that more than a 100 thousand Americans die each twelvemonth non from unwellness but from their prescription drugs. Those deceases. happening softly. about without notice in infirmaries. exigency suites. and places. do medicines one of the prima causes of decease in the United States.

Doctors prescribe one drug merely to make new jobs for the patient with the pills side effects. Rather than recognize the medical specialty is doing them ill. patients believe they are merely acquiring old and ask for even more pills. It is estimated that the state may now pay every bit much to care for patients who have were harmed by their prescriptions as it spends on those medical specialties in the first topographic point. ” 17 ( Melody Petersen. “Our Daily Meds. ” Sarah Crichton Books. 2008 p. p. 6. 7 )