Monday, September 14, 2009

Without Profits There is no Efficiency or Accountability…

I have been listening to too many commentators discussing the problem with healthcare organizations, whether it is doctors, nurses, hospitals, or insurance companies, focusing on profits. There is this tone that profits are immoral, part of the problem, or simply evil.

The reality is that profits come in many ways, and without a “profit” motive there can be no efficiency or accountability. That is why politicians demonize profits. Profits are simply the rewards for providing a service the customer wants efficiently and effectively. So what are profits? In the traditional sense they are the money left over after all expenses are paid. In a “non-profit” sense (yes, non profits must produce a profit) it is the ability to pay salaries to the people that provide the product or service that the non-profit is involved in. You see many non-profit executives’ make six figure salaries. Many non-profit buildings are some of the nicest in the country. The benefits and perks are on par with any profit organization.

Non-Profit budgets can be easily manipulated to hide profits by including many expenses that might ordinarily be much leaner in a for profit organization. This can include more generous salaries, expenses, training, travel, education, etc. The good feeling people get by working for a non-profit is all emotional rather than real. If the revenue does not cover the expense, cuts must be made in a non-profit which usually means cutting jobs. So the incentive to be efficient in providing a good service is driven by people that want to continue to have a job. There is an incentive by all in the organization to remain effective, and accountable. United Way, AARP, and AAA are examples of not for profit organizations who employ many employees and provide many services at a “non” profit.

In the for-profit sector, profit is the “extra” money the company makes to spend, save, invest, or burn depending on the owners of the company. But this drive to make money after expense is an even greater incentive than a non-profit because this ability to create profit increases the ability for the company to invest, grow and create even greater profits. This means more jobs and more profits.

If a for-profit company fails to make a profit it means only two things; the company has become inefficient at providing their product or service to the market, or the product or service is no longer important to the market.

If a non-profit can no longer raise the revenue it needs to provide the product or service to the market and pay the salaries of the employees it means only two things; the company has become inefficient at providing their product or service to the market, or the product or service is no longer important to the market.

Profit is hidden in a non-profit, apparent in a for-profit, and absent in the government. If the government takes over healthcare there will be no reason to be efficient, accountable, or effective. They get their revenue from confiscation of taxes from the public. If revenues fall they print money, borrow money, or raise taxes. There is no mechanism to drive efficiency in any government organization. There is no profit motive. It is completely political and confiscatory.

Many of the proposed healthcare Bills are unconstitutional. The constitution outlines our right to contracts. The most efficient, effective and productive relationships are between two parties contractually obligated to provide a service for a price. It often includes a profit built into the agreement that provides the incentive to perform efficiently and effectively. The contract holds both parties accountable. It is the foundation of any good relationship. The government will replace and outlaw our ability to contract under the new healthcare bill.

Do you want a government outlawing your ability to contract with your doctor or hospital? Or do you want to protect our constitutional right to contract with our doctor or hospital? That is the question.

Your doctor or hospital should want to make a profit and will most likely be efficient, effective, and accountable to your health needs. Why would we give our healthcare to a government that has no motive to be efficient, effective, or a need to be accountable?

Profits are not evil, they are needed…

1 comment:

Anonymous said...

Rich, very well said. This should be common sense but unfortunately it' not. KMH