[Congressional Record Volume 141, Number 41 (Monday, March 6, 1995)]
[Senate]
[Pages S3543-S3545]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                CARDINAL JOSEPH BERNARDIN ON HEALTH CARE

 Mr. SIMON. Mr. President, when I think of individuals who 
speak for our societal conscience from a spiritual perspective, I know 
of no other more qualified or appropriate than my good friend Cardinal 
Joseph Bernardin, the Archbishop of Chicago. He recently addressed the 
Harvard Business School Club of Chicago regarding his concerns with the 
rapid commercialization of our health care delivery system. I ask that 
his speech be printed in the Record at the end of my remarks.
  Whether we agree with it or not, there is a wave of fundamental 
change underway in our health delivery system. It is the transformation 
or assimilation of nonprofit hospitals and health providers into for-
profit health delivery systems. Almost every day, you will read in the 
business section about how many hospitals are being purchased by large 
investor-owned companies.
  Let me be clear, I am not opposed to the idea of encouraging private 
enterprise and industry innovation in our health care system. Indeed, 
our health care system, which is the best in the world for those who 
have access to it, was largely built on the foundation of cutting-edge 
medical technology and research conducted by for-profit pharmaceutical 
and medial equipment companies.
  What I would like for us to reflect upon, however, is whether the 
rapid unrestrained commercialization of the health care delivery system 
is in the best long-term interests of our country. Cardinal Bernardin 
wisely states in his speech that, ``* * * there is a fundamental 
difference between the provision of medical care and the production and 
distribution of commodities * * *'' and that ``* * * the primary * * * 
purpose of medical care delivery should be a cured patient * * * and a 
healthier community, not to earn a profit * * *.''
  As we work together toward reforming portions of our health care 
system this year, I hope all of us will take some time out to reflect 
upon the fundamental changes that are taking place in the health care 
system today and ask whether they are in the best interests of our 
society tomorrow. As you do so, I hope that you will have Cardinal 
Bernardin's advice in mind.
  The speech follows:
             Making the Case for Not-for-Profit Healthcare

       Good afternoon. It is a privilege to address the Harvard 
     Business School Club of Chicago on the critical, but often 
     conflicted issue of healthcare. Because of its central 
     importance to human dignity, to the quality of our community 
     life, and to the Church's mission in the world, I have felt a 
     special responsibility to devote a considerable amount of 
     attention to healthcare at both the local and national 
     levels.
       In the last year, I have spoken at the National Press Club 
     on the need to ensure access to adequate healthcare for all; 
     I have issued a Protocol to help ensure the future presence 
     of a strong, institutional healthcare ministry in the 
     Archdiocese of Chicago; and in order to be more in touch with 
     ongoing developments in the field, I have joined the Board of 
     Trustees of the Catholic Health Association of the United 
     States--the national organization that represents more than 
     900 Catholic acute and long-term care facilities.
       In the interest of full disclosure, I must warn you that 
     this considerable activity does not qualify me as a 
     healthcare expert. Healthcare policy is challenging and 
     extraordinarily complicated, and in this area I am every bit 
     the layman. But because of its central importance in our 
     lives--socially, economically, ethically, and personally--we 
     ``non-experts'' avoid the healthcare challenge at our peril.
       I come before you today in several capacities. First, as 
     the Catholic Archbishop of Chicago who has pastoral 
     responsibility for numerous Catholic healthcare institutions 
     in the archdiocese--though each is legally and financially 
     independent. Second, as a community leader who cares
      deeply about the quality and availability of healthcare 
     services throughout metropolitan Chicago and the United 
     States. And third, as an individual who, like you, will 
     undoubtedly one day become sick and vulnerable and require 
     the services of competent and caring medical professionals 
     and hospitals.


            the growing threat to not-for-profit healthcare

       In each role I am becoming increasingly concerned that our 
     healthcare delivery system is rapidly commercializing itself, 
     and in the process is abandoning core values that should 
     always be at the heart of healthcare. These developments have 
     potentially deleterious consequences for patients and society 
     as a whole. This afternoon, I will focus on one important 
     aspect of this problem: the future vitality and integrity of 
     not-for-profit hospitals.
       Not-for-profit hospitals constitute the overwhelming 
     majority of Chicagoland hospitals. They represent more than 
     three quarters of the nonpublic acute-care general hospitals 
     in the country. Not-for-profit hospitals are the core of this 
     nation's private, voluntary healthcare delivery system, but 
     are in jeopardy of becoming for-profit enterprises.
       Not-for-profit hospitals began as philanthropic social 
     institutions, with the primary purpose of serving the 
     healthcare needs of their communities. In recent decades, 
     they have become important non-governmental ``safety net'' 
     institutions, taking care of the growing numbers of uninsured 
     and underinsured persons. Indeed, most not-for-profit 
     hospitals regard the provisions of community benefit as their 
     principal mission. Unfortunately, this historic and still 
     necessary role is being compromised by changing economic 
     circumstances in healthcare, and by an ideological challenge 
     to the very notion of not-for-profit healthcare.
       Both an excess supply of hospital beds and cost-conscious 
     choices by employers, insurers, and government have forced 
     not-for-profits into new levels of competition for paying 
     patients. They are competing with one another, with investor-
     owned hospitals, and with for-profit ambulatory facilities. 
     In their struggle for economic survival, a growing number of 
     not-for-profits are sacrificing altruistic concerns for the 
     bottom line.
       The not-for-profit presence in healthcare delivery is also 
     threatened by a body of opinion that contends there is no 
     fundamental distinction between medical care and a commodity 
     exchanged for profit. It is argued that healthcare delivery 
     is like other necessary economic goods such as food, 
     clothing, and shelter and should be subject to unbridled 
     market competition.
       According to this view, economic competition in healthcare 
     delivery is proposed as a welcome development with claims 
     that it is the surest way to eliminate excess hospital and 
     physician capacity, reduce healthcare prices, and assure the 
     ``industry's'' long-term efficiency. Many proponents of this 
     view question the need for not-for-profit hospitals since 
     they believe investor-owned institutions operate more 
     efficiently than their not-for-profit counterparts and can 
     better attract needed capital. Thus, they attack the not-for-
     profit hospital tax exemption as an archaic and unwarranted 
     subsidy that distorts the healthcare market by providing 
     exempt institutions an unfair competitive advantage.
       This afternoon, I will make three arguments: First, that 
     there is a fundamental difference between the provision of 
     medical care and the
      production and distribution of commodities; second, that the 
     not-for-profit structure is better aligned with the 
     essential mission of healthcare delivery than is the 
     investor-owned model; and third, that leaders in both the 
     private and public sector have a responsibility to find 
     ways to preserve and strengthen the not-for-profit 
     hospital and healthcare delivery system in the United 
     [[Page S3544]] States. Before making these arguments I need 
     to clarify an important point.


            the advantages of capitalism and free enterprise

       In drawing the distinction between medical care and other 
     commodities on the one hand, and not-for-profit and investor-
     owned institutions on the other, I am not expressing any 
     general bias against capitalism or the American free 
     enterprise system. We are all beneficiaries of the genius of 
     that system. To paraphrase Pope John Paul II: If by 
     capitalism is meant an economic system that recognizes the 
     fundamental and positive role of business, the market, 
     private property, and the resulting responsibility for the 
     means for production--as well as free human creativity in the 
     economic sector--then its contribution to American society 
     has been most beneficial.
       As a key element of the free enterprise system, the 
     American business corporation has proved itself to be an 
     efficient mechanism for encouraging and minimizing commercial 
     risk. It has enabled individuals to engage in commercial 
     activities that none of them could manage alone. In this 
     regard, the purpose of the business corporation is specific: 
     to earn a growing profit and a reasonable rate of return for 
     the individuals who
      have created it. The essential element here is a reasonable 
     rate of return, for without it the commercial corporation 
     cannot exist.


                      society's non-economic goods

       That being said, it is important to recognize that not all 
     of society's institutions have as their essential purpose 
     earning a reasonable rate of return on capital. For example, 
     the purpose of the family is to provide a protective and 
     nurturing environment in which to raise children. The purpose 
     of education at all levels is to produce knowledgeable and 
     productive citizens. And the primary purpose of social 
     services is to produce shelter, counseling, food, and other 
     programs for people and communities in need. Generally 
     speaking, each of these organizations has as its essential 
     purpose a non-economic goal: the advancement of human 
     dignity.
       And this is as it should be. While economics is indeed 
     important, most of us would agree that the value of human 
     life and the quality of the human condition are seriously 
     diminished when reduced to purely economic considerations. 
     Again, to quote Pope John Paul II, the idea that the entirety 
     of social life is to be determined by market exchanges is to 
     run ``the risk of an `idolatry' of the market, an idolatry 
     which ignores the existence of goods which by their nature 
     are not and cannot be mere commodities.'' (Emphasis added.)
       This understanding is consistent with the American 
     experience. In the belief that the non-economic ends of the 
     family, social services, and education are essential to the 
     advancement of human dignity and to the quality of our social 
     and economic life, we have treated them quite differently 
     from most other goods and services. Specifically, we have not 
     made their allocation dependent solely on a person's ability 
     to afford them. For example, we recognize that individual 
     human dignity is enhanced through a good education,
      and that we all benefit by having an educated society; so we 
     make an elementary and secondary education available to 
     everyone, and heavily subsidize it thereafter. By 
     contrast, we think it quite appropriate that hair spray, 
     compact disks, and automobiles be allocated entirely by 
     their affordability.


                   healthcare: not simply a commodity

       Now it is my contention that healthcare delivery is one of 
     those ``goods which by their nature are not and cannot be 
     mere commodities.'' I say this because healthcare involves 
     one of the most intimate aspects of our lives--our bodies 
     and, in many ways, our minds and spirits as well. The quality 
     of our life, our capacity to participate in social and 
     economic activities, and very often life itself are at stake 
     in each serious encounter with the medical care system. This 
     is why we expect healthcare delivery to be a competent and a 
     caring response to the broken human condition--to human 
     vulnerability.
       To be sure, we expect our physician to earn a good living 
     and our hospital to be economically viable, but when it comes 
     to our case we do not expect them to be motivated mainly by 
     economic self-interest. When it comes to our coronary bypass 
     or our hip replacement or our child's cancer treatment, we 
     expect them to be professional in the original sense of that 
     term--motivated primarily by patient need, not economic self-
     interest. We have no comparable expectation--nor should we--
     of General Motors of Wal-Mart. When we are sick, vulnerable, 
     and preoccupied with worry we depend on our physician to be 
     our confidant, our advocate, our guide and agent in an 
     environment that is bewildering for most of us, and where 
     matters of great importance are at stake.
       The availability of good healthcare is also vital to the 
     character of community life. We would not think well of 
     ourselves if we permitted healthcare
      institutions to let the uninsured sick and injured go 
     untreated. We endeavor to take care of the poor and the 
     sick as much for our benefit as for theirs. Accordingly, 
     most Americans believe society should provide everyone 
     access to adequate healthcare services just as it ensures 
     everyone an education through grade twelve. There is a 
     practical aspect to this aspiration as well because, like 
     education, healthcare entails community-wide needs which 
     it impacts in various ways: We all benefit from a healthy 
     community; and we all suffer from a lack of health, 
     especially with respect to communicable disease.
       Finally, healthcare is particularly subject to what 
     economists call market failure. Most healthcare ``purchases'' 
     are not predictable, nor do medical services come in 
     standardized packages and different grades, suitable to 
     comparison shopping and selection--most are specific to 
     individual need. Moreover, it would be wrong to suggest that 
     seriously ill patients defer their healthcare purchases while 
     they shop around for the best price. Nor do we expect people 
     to pay the full cost of catastrophic, financially devastating 
     illnesses. This is why most developed nations spread the risk 
     of these high-cost episodes through public and/or private 
     health insurance. And due to the prevalence of health 
     insurance, or third-party payment, most of us do not pay for 
     our healthcare at the time it is delivered. Thus, we are 
     inclined to demand an infinite amount of the very best care 
     available. In short, healthcare does not lend itself to 
     market discipline in the same way as most other goods and 
     services.
       So healthcare--like the family, education, and social 
     services--is special. It is fundamentally different
      from most other goods because it is essential to human 
     dignity and the character of our communities. It is, to 
     repeat, one of those ``goods which by their nature are not 
     and cannot be mere commodities.'' Given this special 
     status, the primary end or essential purpose of medical 
     care delivery should be a cured patient, a comforted 
     patient, and a healthier community, not to earn a profit 
     or a return on capital for shareholders. This 
     understanding has long been a central ethical tenet of 
     medicine. The International Code of the World Health 
     Organization, for example, states that doctors must 
     practice their profession ``uninfluenced by motives of 
     profit.''


             The advantages of not-for-profit institutions

       This leads me to my second point, that the primary non-
     economic ends of healthcare delivery are best advanced in a 
     predominantly not-for-profit delivery system.
       Before making this argument, however, I need to be very 
     clear about what I am not saying: I am not saying that not-
     for-profit healthcare organizations and systems should be 
     shielded from all competition. I believe properly structured 
     competition is good for most not-for-profits. For example, I 
     have long contended that the quality of elementary and 
     secondary education would benefit greatly from the use of 
     vouchers and expanded parental choice in the selection of 
     schools; similarly, the Catholic Health Association's 
     proposal for
      healthcare reform envisions organized, economically 
     disciplined healthcare systems competing with one another 
     for enrollees.
       Second, I am not saying that all not-for-profit hospitals 
     and healthcare systems act appropriately, some do not. But 
     the answer to this problem is greater accountability in their 
     governance and operation, not the extreme measure of 
     abandoning the not-for-profit structure in healthcare.
       What I am saying is that the not-for-profit structure is 
     the preferred model for delivering healthcare services. This 
     is so because the not-for-profit institution is uniquely 
     designed to provide essential human services. Management 
     expert Peter Drucker reminds us that the distinguishing 
     feature of not-for-profit organizations is not that they are 
     non-profit, but that they do something very different from 
     either business or government. He notes that a business has 
     ``discharged its task when the customer buys the product, 
     pays for it, and is satisfied with it,'' and that government 
     has done so when its ``policies are effective.'' On the other 
     hand, he writes:
       ``The `non-profit' institution neither supplies goods or 
     services nor controls (through regulation). Its `product' is 
     neither a pair of shoes nor an effective regulation. Its 
     product is a changed human being. The non-profit institutions 
     are human change agents. Their `product' is a cured patient, 
     a child that learns, a young man or woman grown into a self-
     respecting adult; a changed human life altogether.''
       In other words, the purpose of not-for-profit organizations 
     is to improve the human condition, that is, to advance 
     important non-economic,
      non-regulatory functions that cannot be as well served by 
     either the business corporation or government. Business 
     corporations describe success as consistently providing 
     shareholders with a reasonable return on equity. Not-for-
     profit organizations never properly define their success 
     in terms of profit; those that do have lost their sense of 
     purpose.
       This difference between not-for-profits and businesses is 
     most clearly seen in the organizations' different approaches 
     to decision making. The primary question in an investor-owned 
     organization is: ``How do we ensure a reasonable return to 
     our shareholders?'' Other questions may be asked about 
     quality and the impact on the community, but always in the 
     context of their effect on profit. A properly focused not-
     for-profit always begins with a different set of questions:
       What is best for the person who is served?
       What is best for the community?
       How can the organization ensure a prudent use of resources 
     for the whole community, as well as for its immediate 
     customers?


                 HEALTHCARE'S ESSENTIAL CHARACTERISTICS

       I believe there are four essential characteristics of 
     healthcare delivery that are especially compatible with the 
     non-for-profit structure, but much less likely to occur 
     [[Page S3545]] when healthcare decision making is driven 
     predominantly by the need to provide a return on equity. 
     These four essential characteristics are:
       Access.
       Medicine's patient-first ethic.
       Attention to community-wide needs.
       Volunteerism.
       Let me discuss each.
       First, there is the need for access. Given healthcare's 
     essential relationship to human dignity, society should 
     ensure everyone access to an adequate level of healthcare 
     services. This is why the United States Catholic Conference 
     and I argued strongly last year for universal insurance 
     coverage. This element of healthcare reform remains a moral 
     imperative.
       But even if this nation had universal insurance, I would 
     maintain that a strong not-for-profit sector is still 
     critical to access. With primary accountability to 
     shareholders, investor-owned organizations have a powerful 
     incentive to avoid not only the uninsured and underinsured, 
     but also vulnerable and hard-to-serve populations, high-cost 
     populations, undesirable geographic areas, and many low-
     density rural areas. To be sure, not-for-profits also face 
     pressure to avoid these groups, but not with the added 
     requirement of generating a return of equity.
       Second, not-for-profit healthcare organizations are better 
     suited than their investor-owned counterparts to support the 
     patient-first ethic in medicine. This is all the more 
     important as society moves away from fee-for-service medicine 
     and cost-based reimbursement toward capitation. (By 
     ``capitation'' I mean paying providers in advance a fixed 
     amount per person regardless of the services required by any 
     specific individual.)
       Whatever their economic disadvantages, fee-for-service 
     medicine and cost-based reimbursement shielded the physician 
     and the hospital from the economic consequences of patient-
     first ethic in American medicine. Few insured patients were
      ever undertreated, though some were inevitably overtreated. 
     Now we face a movement to a fully capitated healthcare 
     system that shifts the financial risk in healthcare from 
     the payers of care to the providers.
       This development raises a critically important question: 
     ``When the providers is at financial risk for treatment 
     decisions who is the patient's advocate?'' How can we 
     continue to put the patient first in this new arrangement? 
     This challenge will become especially daunting as we move 
     into an intensely price competitive market where provider 
     economic survival is on the line every day. In such an 
     environment the temptation to undertreat could be 
     significant. Again, not-for-profits will face similar 
     economic pressure but not with the added requirement of 
     producing a reasonable return on shareholder equity. Part of 
     the answer here, I believe, is to ensure that the nation not 
     convert to a predominantly investor-owned delivery system.
       Third, in healthcare there are a host of community-wide 
     needs that are generally unprofitable, and therefore unlikely 
     to be addressed by investor-owned organizations. In some 
     cases, this entails particular services needed by the 
     community but unlikely to earn a return on investment, such 
     as expensive burn units, neonatal intensive care, or 
     immunization programs for economically deprived populations. 
     Also important are the teaching and research functions needed 
     to renew and advance healthcare.
       The community also has a need for continuity and stability 
     of health services. Because the primary purpose of not-for-
     profits is to serve patients
      and communities, they tend to be deeply rooted in the fabric 
     of the community and are more likely to remain--if they 
     are needed--during periods of economic stagnation and 
     loss. Investor-owned organizations must, on the other 
     hand, either leave the community or change their product 
     line when return-on-equity becomes inadequate.
       Fourth, volunteerism and philanthropy are important 
     components of healthcare that thrives best in a non-for-
     profit setting. As Peter Drucker has noted, volunteerism in 
     not-for-profit organizations is capable of generating a 
     powerful countercurrent to the contemporary dissolution of 
     families and loss of community values. At a time in our 
     history when it is absolutely necessary to strengthen our 
     sense of civic responsibility, volunteerism in healthcare is 
     more important than ever. From the boards of trustees of our 
     premier healthcare organizations to the hands-on delivery of 
     services, volunteers in healthcare can make a difference in 
     peoples' lives and ``forge new bonds to community, a new 
     commitment to active citizenship, to social responsibility, 
     to values.''


                     role of mediating institutions

       In addition to my belief that the not-for-profit structure 
     is especially well aligned with the central purpose of 
     healthcare, let me suggest one more reason why each of us 
     should be concerned that not-for-profits remain a vibrant 
     part of the nation's healthcare delivery system: They are 
     important mediating institutions.
       The notion of mediating structures is deeply rooted in the 
     American experience: On the one hand, these institutions 
     stand between the individual and the state; on the other, 
     they mediate against the rougher edges of capitalism's 
     inclination toward excessive individualism. Mediating 
     structures such as family, church, education, and healthcare 
     are the institutions closest to the control and aspirations 
     of most Americans.
       The need for mediating institutions in healthcare is great. 
     Private sector failure to provide adequately for essential 
     human services such as healthcare invites government 
     intervention. While government has an obligation to ensure 
     the availability of and access to essential services, it 
     generally does a poor job of delivering them. Wherever 
     possible we prefer that government work through and with 
     institutions that are closer and more responsive to the 
     people and communities being served. This role is best played 
     by not-for-profit hospitals. Neither public nor private, they 
     are the heart of the voluntary sector in healthcare.
       Earlier, I identified several reasons why I believe 
     investor-owned organizations are not well suited to meeting 
     all of society's needs and expectations regarding healthcare. 
     Should the investor-owned entity ever become the predominant 
     form of healthcare delivery, I believe that our country will 
     inevitably experience a sizeable and substantial growth in 
     government intervention and control.
       Until now, I have made two arguments: first, that 
     healthcare is more than a commodity--it is a service 
     essential to human dignity and to the quality of community 
     life; and second, that the not-for-
      profit structure is best aligned with this understanding of 
     healthcare's primary mission. My concluding argument is 
     that private and public sector leaders have an urgent 
     civic responsibility to preserve and strengthen our 
     nation's predominantly not-for-profit healthcare delivery 
     system.
       This is a pressing obligation because the not-for-profit 
     sector in healthcare may already be eroding as a result of 
     today's extremely turbulent competitive environment in 
     healthcare. The problem, let me be clear, is not competition 
     per se, but the kind of competition that undermines 
     healthcare's essential mission and violates the very 
     character of the not-for-profit organization by encouraging 
     it--even requiring it--to behave like a commercial 
     enterprise.
       Contemporary healthcare markets are characterized by 
     hospital overcapacity and competition for scare primary care 
     physicians, but also, and more ominously, by shrinking health 
     insurance coverage and growing risk selection in private 
     health insurance markets. These latter two features encourage 
     healthcare providers to compete by becoming very efficient at 
     avoiding the uninsured and high risk populations, and by 
     reducing necessary but unprofitable community services--
     behavior that strikes at the heart of the not-for-profit 
     mission in healthcare. Moreover, the environment leads some 
     healthcare leaders to conclude that the best way to survive 
     is to become for-profit or to create for-profit subsidiaries. 
     The existence of not-for-profits is further threatened by the 
     aggressive efforts of some investor-owned chains to expand 
     their market share by purchasing not-for-profit hospitals and 
     by publicly challenging the continuing need for not-for-
     profit organizations in healthcare.


            advancing the not-for-profit healthcare mission

       Each of us and our communities have much to lose if we 
     allow unstructured market forces to
      continue to erode the necessary and valuable presence of 
     not-for-profit healthcare organizations. It is imperative, 
     therefore, that we immediately begin to find ways to 
     protect and strengthen them.
       How can we do this? Without going into specifics, I believe 
     it will require a combination of private sector and 
     governmental initiatives. Voluntary hospital board members 
     and executives must renew their institutions' commitment to 
     the essential mission of not-for-profit healthcare. 
     Simultaneously, government must reform health insurance 
     markets to prevent ``redlining'' and assure everyone 
     reasonable access to adequate healthcare services. Finally, 
     government should review its tax policies to ensure that 
     existing laws and regulations are not putting not-for-profits 
     at an inappropriate competitive disadvantage, but are holding 
     them strictly accountable for their tax exempt status.
       Let me conclude by simply reiterating the thesis I made at 
     the beginning of this talk. Healthcare is fundamentally 
     different from most other goods and services. It is about the 
     most human and intimate needs of people, their families, and 
     communities. It is because of this critical difference that 
     each of us should work to preserve the predominantly not-for-
     profit character of our healthcare delivery in Chicago and 
     throughout the country.
     

                          ____________________