Whenever Big Government and Big Business show up arm-in-arm to “help”—run.

That is a small but important part of what is happening in Health Care today. 

Hospitals are, with funds provided exclusively to them by the government, buying up private doctors’ practices all over the country.  The government gives big hospitals an extra fee advantage that no one else has.  They use this extra income to drive private doctors out of practice, resulting in fewer doctors, no competition, and higher fees for everyone. 

The hospital says to private doctors: “Sell out to us now, and become part of our system, or a year from now we’ll bring in other doctors and run you out of business.” 

And of course thanks to regulations, a hospital is a near-monopoly in a region. So a private doctors’ practice is no match for the hospital’s special ability to charge high fees for the same service, combined with its regulatory power.  The doctors have to sell, become employees, and punch a time clock. 

But there is then no actual upgrade to the service or the facilities—they are unchanged, just owned by the hospital a few miles away.  Only the fees increase. 

This linked article from The Boston Globe.is one of many about the high fees created by the change in only the ownership of the practice.

And here are two paragraphs from the analysis done by Dover Healthcare Planning: 

Hospitals are buying up doctors’ practices. They do so for several reasons, but chiefly because doing it increases their revenues. When they own an outpatient practice or clinic, they are able to take advantage of a discrepancy in Medicare’s payment system that reimburses hospitals at rates that are often 50% higher than privately-owned doctors’ practices are paid for identical outpatient treatments. 

Unfortunately, there’s no simple way for retirees to know whether an outpatient clinic is hospital based – it may be a non-descript single-story office building two miles away from the main campus but still be owned by the hospital. 

Why is this happening?  It always happens when we give big government and big business the right to work together to destroy competition and to raise prices.  Like legislating the huge amounts of corn that must be grown and harvested to turn into ethanol, instead of being used to feed us.  Great for the large corn farmers. Bad for the rest of us. 

But in the case of Hospital Facility Fees, the increase in costs has been sold to us under the outlandish promise of healthcare reform and lower costs.

Why does this always happen when government encroaches into what should be business, and thereby inevitably picks winners and losers?  Because, as is obvious from Economics 1, when market prices are not used to allocate resources, someone must make those allocations/decisions. And through that process the decision makers inevitably gain economic advantage and personal power. So big government and big business love to gang up on the rest of us to regulate, stimulate, and decide who wins and who loses. 

An extreme example of this process was the old Soviet Union, where every item had a “price” which might apply for a retail sale, but for a sale between companies the price was meaningless.  The government told your company how many widgets to make each year, and the cost of the necessary resources of labor and input were virtually irrelevant, so long as you would do as the government required.  So how did you decide from whom to purchase your raw materials?  By knowing to whom you owed a favor for some previous assistance—or wanted a favor in the future—a favor which might have nothing to do with business. 

That, by the way, is why no lower or middle level Soviet manager would dare make an important decision.  He or she first had to check at the top, to be sure that the big boss did not owe a favor to another supplier, before placing an order based on his or her own level of favors given or expected.  Spread that approach to decisions across an entire economic system, and no wonder it all collapsed.  Eventually no decision made economic sense. 

But that is where we are headed today, or really where we have already arrived.  What else is all of the lobbying of politicians and regulators about?  How do we imagine that big hospitals receive the extra government income to drive doctors out of business?  Does the local doctor have a lobbyist?  Does anyone in Washington or the state capital owe her any favors?  Probably not. 

We should be doing everything we can to increase competition and lower health care costs.  Instead we are using the Emperor’s New Clothes approach to “reduce” costs by increasing them!  Does anyone imagine that hospital owners and their lobbied regulators will lower costs once there are no pesky private doctors around to compete, offering good but lower-priced medical services? 

Remember, all of this is possible because the government is giving a special advantage to big hospitals to buy private practices, enhanced by the threat of near term destruction.  If hospitals can compete and win, fine.  But if it takes government help to insure that they win, then we will all suffer in the future. 

And the same can be said for big banks, big farms, big automakers, big unions, big anything that the government feels led to protect in the name of helping us.  How much longer will they be able to fool us with this deceitful approach?  Their real goal is to bring most economic activity under enough government control to pick winners and losers, thereby gaming the system for the elites in both camps, and literally stealing from the rest of us. 

Run if you still can.