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Tuesday / August 16.
HomemitwocentsCorporate Care: Is it a Contradiction in Terms?

Corporate Care: Is it a Contradiction in Terms?

Business consultant Michael Jacobs reflects on lessons learnt from a high profile career in optics, giving mivision his ‘two cents worth’ on the future for independent optometry, Australian-style. In this article he talks about the impact of the corporatising medical services.

Port Macquarie on the Mid North Coast of NSW has a large regional public hospital (Port Macquarie Base Hospital) which was originally purpose built as Australia’s first privately operated public hospital by a Liberal state government in the 1990s. The stated intention was to demonstrate that privately run hospitals were more efficient than public hospitals. It was patently clear, given the strong opposition at the time, that this decision was more about ideology than economics. I had some insight into the performance of the Base Hospital in the early 00s so I can say with some degree of confidence that the private management of the hospital exceeded all KPIs initially set for it and in fact was better than most if not all public hospitals in the State.

The problem was that you could make the statistics say whatever you wanted. As a result the owners of the hospital and future Labor governments could never agree on the time of day, let alone the actual performance of the hospital. Ultimately, the Labor government negotiated the return of the hospital to public ownership in 2005 where it remains to this day.

Is it a better hospital now? I cannot answer that question but I have learned a lot from observing the whole process. In a public hospital there are many functions that lend themselves to private operation (contractors) including such things as laundry, cleaning, food, security, facilities management etc. However, when it comes to clinical decisions there is substantial evidence to suggest that clinical decisions made by persons in an organisation whose sole purpose is to maximise returns to shareholders must be viewed with significant reservation.

The problem was that you could make the statistics say whatever you wanted

Health Insurers

In another personal experience, I was hospitalised while living in the US in a private not-for-profit hospital. I was covered by my company funded health insurance policy. One day after my surgery the surgeon visited me and said I would have to go home that day because the insurance company (HMO) had advised the hospital that they would only pay for one night for my particular procedure.

I was furious and remonstrated with the surgeon saying that did he, the hospital or the insurance company not remember the form I signed when I entered the hospital? The form that stated I was personally responsible for all costs regardless of how much or little the government or insurance companies paid. So surely, I explained to the surgeon, it would have been more appropriate if he had said “I recommend that you stay for one more night in hospital. Unfortunately, your insurance company has declined to pay for an additional night. Are you willing to pay for this yourself?” Even the surgeon thought he worked for the insurance company and not the patient.

Australian Private Health Insurance

Most Australian optometry practices will have had the experience of a patient calling their private health insurer from their practice to determine what rebate they may get on a frame and/or lens purchase, only to have the health insurer tell them they could save money by going to a preferred provider approved by the insurer. This practise has been brought to the attention of the ACCC, which has chosen not to act. It is reasonable to presume then, that this practise is not illegal. But is it ethical? How does the insurer benefit? Do they get a benefit from their preferred providers? I think not but they are seen as proactively supporting their members and at least giving the impression of saving their members’ money. This then leads to (supposedly) happier members who then tell others and thus grow the health insurers’ member base and thus income.

Then there is the practice of no gap arrangements with certain specialists whereby the insurer pays a higher rebate to the specialist who agrees to accept the insurer’s set fee for a specified procedure. Did the insurer select these specialists because they did a better job? No, they were chosen because they agreed to charge less for a procedure. Is this ethical? Hopefully, one day a patient will sue an insurer because the insurer, through price manipulation, drove the patient to use a particular specialist and that specialist turned out to be negligent. Only then will we see this issue resolved.


It is important to note that corporations, or institutions for that matter, are not inherently ethical or unethical. They have a responsibility to operate legally – that is all. Ethics are a choice made by individuals or groups of individuals so when we hear people talking about this organisation or that business being unethical they are really saying that the members of that organisation are unethical. When organisations are designed in such a way that their primary responsibility is to maximise returns to shareholders then there is a clear conflict of interest in making a clinical decision which is in the best interest of the patient but not in the financial interest of the organisation.

Most independent optometrists choose to be independent so they can make clinical decisions without having an organisation/boss/franchise standing behind them reminding them of their business obligations to said organisation/boss/franchise. This is the hallmark of independent optometry. It is what separates you from the rest of the crowd. This doesn’t mean that you don’t have conflicts. By definition you must make a profit to survive so you are constantly faced with decisions which may not be in your financial best interest – but when you chose to be an independent you chose to give up some of your income in order to best serve your patients. Be proud of who you are and what you do. You are unique in this increasingly corporatised world.

The U.S. Private Insurance Model

For those not familiar with the US private health insurance model, it is mostly provided by HMOs (Health Maintenance Organisations) who contract with employers to provide managed care to the company’s employees for a fixed fee per employee per year. For the employer this is a desirable arrangement because they know in advance what their costs are going to be.

The HMO carries all the risk. HMOs on the other hand are generally “for profit” entities and thus their primary goal is generating the best return for their shareholders and not necessarily the best health care options for their patients. Some would argue that there is a large incentive for the doctors to ensure that the patient returns to health as soon as possible, thus minimising the costs to the HMO, but there is little empirical evidence to suggest that this is the case. Instead financial managers make daily (clinical) decisions about how long patients should remain in hospital – not clinicians.


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