[Experimentalist]

What wrong with a for-profit system? There should be MORE profit, not less.

High profits attract entrepreneurs to compete for customers by offering lower prices and innovating - consumers benefit.

The current system is the exact opposite - there is relatively little and uncertain profit (and high barriers to entry) in insurance and hospitals, and a ton of government interference and regulation. Few entrepreneurs want to get involved, which reduces competition and innovation and keeps prices higher.

"Plunging revenues from investments have forced median profit margins for U.S. hospitals to zero, according to a Thomson Reuters analysis of hospital finances published on Monday.

And half of the more than 400 hospitals studied are losing money, the analysis found."

http://www.reuters.com/article/2009/03/02/us-hospitals-usa-i...

[mgkimsal]

"What wrong with a for-profit system? There should be MORE profit, not less. High profits attract entrepreneurs to compete for customers by offering lower prices and innovating - consumers benefit."

That ideal doesn't exist, and probably can't, in the real world. In most situations, the easiest/fastest/cheapest way to 'profit' is by getting more customers' money, and spending less of it. When 'spending less' means customers get less care (the easiest way to spend less) then people will suffer.

The 'innovations' and such... well... I've no doubt some would/will happen, but how much 'innovation' can there be in insurance? We saw a lot of 'innovation' in the financial insurance markets (CDOs and such) and that wasn't a resounding success.

The bigger problem with your premise assumes that people are smart with respect to choosing between multiple private insurers each offering 'innovations' of their own. Most people wouldn't be on day 1 switching away from their current system, and it's not something that you can easily learn from or experiment with. With consumer items, I can buy them, try them, and recommend them to my friends if I like them or not. It's a lot harder to try out various insurance programs for multiple surgeries to see how each one fares in your particular situation.

Hospitals are often losing money because they're covering the cost of procedures for people who can't pay.

Long and short, hospitals and medical entities exist to help people with their most basic needs - health and life. People generally go to hospitals when they are sick or dying. Seeing 'for profit' companies making a profit from misery, illness, sickness and death isn't something that is going to sit well with most people.

[Experimentalist]

> That ideal doesn't exist, and probably can't, in the real world.

Yes it does, and it's a reality throughout the economy not just an ideal.

> Hospitals are often losing money because they're covering the cost of procedures for people who can't pay.

No, that's not true. The costs of unpaid bills is very low and not a major cost.

> When 'spending less' means customers get less care

That's not the case. Look at the horrible reputation of the VAs and government medical facilities vs. privately run.

My grandfather had free VA due to his military service, but bought additional medical insurance so he could go to a non-VA hospital instead-- the reputation of VA hospitals has been horrible.

Also there are many top-quality for-profit hospitals, some of the most respected in my area are for-profit hospitals. But also many doctors in practice for themselves provide excellent services as a for-profit practice.

> Long and short, hospitals and medical entities exist to help people with their most basic needs

That's why profitability is important, because it drives down costs and encourages innovation, as opposed to lack of profitability.

> Seeing 'for profit' companies making a profit from misery, illness, sickness and death isn't something that is going to sit well with most people.

Profitable companies help people every day, they make a profit providing a valuable service which is complex and requires a lot of investment and expertise.

They provide advanced medical services and pharmaceuticals and they save millions of people's lives. If you claim otherwise then you are simply clueless.

Profit is what lowers costs and drives innovation and investment. I don't know why you would be on an entrepreneur forum if you think profit is bad-- without profit there would be no entrepreneurship.

[natrius]

What evidence is there that few entrepreneurs want to get involved in hospitals? Here's some evidence to the contrary:

http://www.bizjournals.com/houston/news/2011/01/18/emerus-ho...

http://www.emerus.com/

[Experimentalist]

That's one example. There are 5,500+ hospitals in the US, so one example is hardly representative. There would be many more investments if it was more profitable.

As the link I posted states - many are not profitable and many have a very low profit margin. Higher profits would bring more entrepreneurs and investment.

[natrius]

You are assuming that because the industry has many unprofitable participants, there must be few new entrants. You're guessing. You haven't shown that there are indeed few new entrants, nor have you shown that low profit margins are the main factor that discourages them. Any industry that is as capital intensive as hospitals are will have relatively few new entrants, so a convincing argument of the causal relationship you're claiming will be difficult to make.

I mostly agree with you that healthy profits are desirable if we want to have an effective healthcare system, but I don't think hospital profit has much to do with it. The profit that healthcare technology companies and actual care providers make seems more important.

[Experimentalist]

Investors/entrepreneurs are attracted to businesses that show promise to be profitable, and turn away from making investment in unprofitable businesses.

This is a basic economics principle - I'm not assuming anything. I cited hospitals as an example to illustrate this, because there are many stats, such as what I posted (not an assumption, but a study), which show it's not a very profitable business (relative other businesses) - and btw, neither is health insurance.

If you disagree, then look it up in a basic economics or finance textbook, here are a few explanatons of the relationship of investment, profitability and ROI:

"In other words, profit-seeking businesses operating in the private sector of the economy will be prepared to go ahead with an investment if they believe that the project will over its projected lifetime yield a real rate of return greater than if the money tied up in an investment project had been invested in the next best alternative way."

Macroeconomics - Capital Investment http://tutor2u.net/economics/revision-notes/a2-macro-capital...

"The owners of a company and the company’s creditors share a similar goal: to increase wealth. They are thus very concerned about profitability in all phases of operations.

Creditors are specifically concerned that the company use its resources profitably so that it can pay interest and principal on its debt. Owners are concerned that the company be profitable so that stock values will increase. Company managers must show they can manage the owners’ investment and produce the profits that owners and creditors demand. Because top management must meet the profit expectations of company owners, it passes down to the lower levels of management those profitability goals, which are then spread throughout the company. All managers, therefore, are expected to meet profitability goals, which are often increased and tightened as each level of management seeks a margin of safety."

PDF - The Importance of Return on Investment: ROI http://media.wiley.com/product_data/excerpt/50/04712037/0471...