Keep for-profit out of Minnesota: Lessons from Michigan

By Tara Fugate

MNA Strategic Researcher

Minnesota is a unique state in many ways. For example, the infamous “Duck Duck Gray Duck” versus “Duck Duck Goose” debate still confuses this native Michigander. The healthcare landscape in Minnesota mirrors this individuality. Unlike a vast portion of the country, Minnesota has relatively few for-profit hospitals (2 out of 145 hospitals statewide). Having experienced the impact of a for-profit takeover first-hand on my home city of Detroit, it is evident that Minnesota’s public and nonprofit hospitals are worth protecting.

In 2011, the Detroit Medical Center (DMC), a 7-hospital system in Detroit, Michigan was purchased by for-profit Vanguard Health. Two years later, Vanguard was taken over by national healthcare giant, Tenet Healthcare. The takeover of these community hospitals was presented to the Michigan Attorney General and Detroit community as the only way to save a group of safety net hospitals that had posted negative operating margins for several years. It was painted as a compromise to ensure that the low-income families of Detroit continued to have access to healthcare. While communities benefit from well-funded hospitals, what was not communicated to the public was how Vanguard and later Tenet planned on making up these deficits.

As a result of this for-profit takeover, a once trusted community-anchored group of hospitals now operates via top down directives from Tenet headquarters in Dallas, TX. They are mandated to keep high profit margins at all costs. Patient care, employee satisfaction, retention, and community involvement all come second to maintaining competitive stock prices. Tenet operates with shareholders in mind, not patients or the communities where they live. DMC and Tenet on a national level have been fraught with scandal since the takeover. DMC is in the midst of following through on a mandatory correction plan from the Center for Medicare and Medicaid services (CMS) for insufficient surgical instrument sterilization that led to delayed surgeries and other complications for patients. Tenet Healthcare at large recently settled a $514 million kickback lawsuit with the Department of Justice. It was uncovered that several of their hospitals were paying for referrals of pregnant undocumented women in order to collect emergency Medicaid money. In the wake of paying over half a billion in fines, Tenet Healthcare is cutting its workforce at hospitals around the country, including DMC, in order to keep their profit margin in the black.

Minnesota’s tradition of nonprofit healthcare delivery has been challenged in recent months. In January 2017, state legislators moved to allow for-profit healthcare companies to be licensed as health maintenance organizations (HMOs) in the state. The restriction had existed since the state first authorized HMOs in 1973. This change in legislation, as well as the on-going trend for large nonprofit healthcare systems such as Allina, Mayo, and Fairview to organize themselves in ways that generate large operating margins and provide CEOs with salaries hovering around $2 million, points to a cultural shift in Minnesota healthcare. In 2015, the Star Tribune reported on whether or not the large operating margins posted by Minnesota’s nonprofit healthcare were truly benefiting the community. The article was highly critical of the lack of accountability concerning how revenues at these nonprofit systems are spent. This move towards nonprofits operating so similarly to for-profit entities is concerning. It indicates a need for protection not only from for-profit takeovers but also from a cultural shift towards a model of healthcare delivery that is nonprofit in name (and tax exemption) only.

Let’s keep patients over profits by keeping for-profit healthcare out of Minnesota.