Covid-19, Hospitals & The Curse of Capitalism

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The idea that sickness must be profitable reaches deep into the ideological heart of neoliberalism. Ever since Hayek’s catechism of neoliberalism became the all-guiding belief-system of almost all politicians since 1980, several waves of privatization have been sweeping across all OECD countries. This includes Germany as it shaped its current Covid-19 hospital landscape. 

In the wake of the ideological takeover of neoliberalism, the proportion of private hospitals in Germany more than doubled between 1991 and 2015: from 15% to 35%. The trend continued unabated during the Merkel years (2005-2021). Especially during the sixteen years of Merkel’s reign, the increase in hospital privatization has been enormous. As set out by neoliberalism, the upsurge in private hospitals came at the expense of public hospitals. Germany’s privatization represents the largest increase in hospital privatizations in Europe. 

Studies in the USA show a significantly higher mortality in for-profit hospitals. To make sure that people do not know about this, there are no systematic studies on this for Germany, yet. However, it is known that after the privatization of hospitals in Germany, work intensification in nursing care increased by 10% to 20%. 

It is also known that the number of beds is decreasing while bed occupancy rates have increased in recent times. This is otherwise known as “bums on seats” (TV viewers) and the seat loading factor (airlines) but in hospitals it means there are virtually no spare beds in case of an emergency like the Coronavirus pandemic – thanks to decades of profit-driven privatization and neoliberalism. 

Most importantly, hospital privatizations have led to an enormous number of health employers leaving Germany’s traditional collective bargaining arrangements. This is known as Tarifflucht. As a consequence, wages have fallen by an average of 10%. This is the beauty of privatization and neoliberalism: health workers work harder for less wages.

As one might expect, there are reports that nurses are leaving the health sector even if they do not see any chance to gain an adequate job elsewhere. Neoliberal management’s justification for work intensification is a managerially invented patient-care ratio applied in private clinics. In some cases this is changed by management in such a way that only one nurse is left on a hospital ward during night shift. The result are systemic failures and downright collapses of physically exhausted and burned-out nurses. Neoliberal management also means that in some cases, patients have to take care of each other. 

Meanwhile, a Danish study showed a significantly higher mortality rate for hospital patients with high occupancy. The study also showed a higher mortality rate for patients admitted on deliberately understaffed weekends and holidays compared to those admitted on ordinary week days. Beyond that, the ratio between the number of patients to be treated per doctor or nurse and mortality in hospital is worsening. Furthermore, bed shortages and hospital infections have been scientifically proven to be a significant risk factor for patients in the hospital. 

Covered up by neoliberalism’s ideology of free market competition – which in reality leads to monopolies just as predicted by Karl Marx – Germany’s increasingly privatized health sector shows serious signs of a handful of monopolies. In recent decades, there has been an enormous concentration in Germany. For the non-expert, the smokescreen of the free market is maintained even in the health sector. It is just as the former editor of the Harvard Business Review once said,

Business executives are society’s leading champions of free markets and competition, words that, for them, evoke a world view and value system that rewards good ideas and hard work, and that fosters innovation and meritocracy. Truth be told, the competition every manager longs for is a lot closer to Microsoft’s end of the spectrum than it is to the dairy farmers. All the talk about the virtues of competition notwithstanding, the aim of business strategy is to move an enterprise away from perfect competition and in the direction of monopoly.

As outlined by Karl Marx in the 19th century and by the former Harvard Business Review editor (20th century), capitalism – especially when turbo-charged by neoliberalism – performed as expected. Today there are essentially five hospital groups in Germany and they are partly intertwined: 

  1. the Rhön Clinic (turnover: 1.2 billion euros, eleven clinics at five locations, around 16,500 employees, around 813,000 treated patients in 2016);
  2. the Schön Clinic (turnover in 2016: 0.8 billion euros, 17 clinics);
  3. the Sana Group (turnover: 2.4 billion euros, 50 clinics, 32,000 employees, 2.2 million treated patients);
  4. the Asklepios Group (turnover: 3.0 billion euros and 150 clinics; the latter holds a 15.25 percent stake in the Rhön Clinics); and finally,
  5. Helios-Fresenius (turnover: 5.5 billion euros, 117 clinics, including 40 hospitals purchased by the Rhön clinics). 

On an international scale, only relatively small shares of German hospital groups have so far been in the hands of hedge funds. Nevertheless, two of the companies mentioned above are already listed on the stock exchange. This means shareholders have replaced stakeholders once again. In some cases, there is already a hedge fund in the background via Carpio which was responsible for the disaster with the Bundesdruckerei. After the failed privatization, Germany’s Bundesdruckerei has now been re-nationalized again. Wasn’t the free enterprise system to be better?

In the USA – with the largest private hospital corporatization in the world – the Hospital Corporation of America is constantly expanding. Much of it is owned by the infamous financial services provider Merrill Lynch. In the course of 41 hospital privatizations, many were sold way below value. Now profits go elsewhere and no longer back to hospitals and patient care. The cash starved public sector cannot use these monetary proceeds from hospital sales on the cheap to provide better patient care. 

This has been replicated in Germany too. German health corporation Sana took over the Offenbach City Hospital in 2013 for the whopping sales price of just “one Euro” [€1.-]. Yet, despite the propaganda of neoliberalism and adjacent media, private hospitals remain deeply unpopular with the general public and with patients. This is even more the case when it comes to hospital staff and trade unions.

In those cases where Germany’s highly regarded system of worker-management co-determination is in place, there was a fundamental rejection of hospital privatization. Union power and workers solidarity was able to prevent the march of Managerialism and neoliberalism in some cases. Beyond company based co-determination, in a public referendum in the north German port city of Hamburg, for example, 75% voted against hospital privatization. But when it comes to neoliberalism versus the people, neoliberalism tends to win. The referendum was ignored.

Yet, in another referendum, this time in Bavaria’s Rottal in 2009, a massive 90% voted against the privatization of three hospitals. A remarkable 54% of the local population took part in the referendum. In 2008, a hospital privatization in Frankfurt was also rejected. 

Apart from outright privatizations, the legal shape of public hospitals has also been changing for years. According to Germany’s Federal Statistical Office (2017), around 305 of all German clinics were public institutions. Yet, there is also the fact that about 60% of them operate under a private legal form. This enables what one might call “as-if” Managerialism which means that hospital management, although not privatized, behaves as if it were privatized. Once believing in the ideology of Managerialism, corporate apparatchiks tend to introduce all the pathological trimmings Managerialism offers.

Despite the ideological and factual onslaught of neoliberalism, a good 20% of German hospitals are still run under public law. They are administered for the health benefits of the people and not for profits. Under Managerialism, profits are euphemistically labeled “shareholder value” which is, after all, the World’s Dumbest Idea, as even GE CEO Jack Welch acknowledged. Yet, virtually every one of the roughly 13,000 business schools around the world continues to teach the importance of the dumbest idea of the world.

Highly paid business school professors and adjacent apostles of neoliberalism and its evil twin of Managerialism will never grow tired presenting health as a marketable commodity. Perhaps the great Upton Sinclair was right when saying, it is difficult to get a man to understand something, when his salary depends upon his not understanding it!

Well paid business school professors, newspaper editors in global media corporations, well-lobbied politicians (i.e. we have the best politicians money can buy), and of course, the promoters of neoliberalism will always refuse to understand that health is a vital human service and a public good. Health is not a for-profit commodity. Yet, health is also a collective good. Sickness (i.e. the loss of health) cannot be dispensed with like individual consumer goods.

As a general rule, neither the time nor the nature and extent of benefits as a result of illness can be determined by oneself. Sick patients are not market participants. You simply cannot negotiate the cost of a recovery plan while having a heart attack. And the health demands of patients are often rather non-specific. Much of all this is defined by the competency of the medical professional – not the ever illusive free market.

However, due to the limited scientific-medical knowledge, the corporate apparatchiks of privatized hospitals have next to no discretion as to which diagnostic tools and which therapy to choose. Patients are in need of help as a result of illness. They come with a position of insecurity, weakness and dependence, often associated with fear and shame. Therefore, the function of the market just as well as the patient ratio fabricated by a hospital’s corporate apparatchik must never overrule patients’ lives.

Business-oriented healthcare is a classic example of the hallucination of the existence of a free market where there is none. It is not even what neoliberal economists like to frame as “market failure”. Yet, the imaginary free market is so blind, it cannot even see a patient’s vulnerability – nor does it want to. More, the market will always ignore the conflict and contradictions between a hospital business and macroeconomic and social considerations such a public health. 

The managerial term profitability often refers to a hospital operation. Yet, it often causes the opposite of profitability for society, i.e. social and individual pathologies. As a consequence, what can be profitable for a hospital can – and does – bring harm to society. For example, it can be profitable for a hospital to shift costs between the outpatient and inpatient in such a way that treatments with a profitable cost-income ratio are carried out in the hospital. The rest is pushed off. 

The function of business oriented hospitals and the competitive instruments of the privatized healthcare sector remain completely inadequate for the result desired by society. A hospital’s management apparatchik simply does not need to care – other than for PR reasons – about dignified, nationwide, and efficient medical care. 

In fact, ineffective and even dangerous health services can provide good profits. They can even be more profitable than useful and effective ones and create even higher profits. 

Healthcare decisions must therefore be made with society in mind – not by the free market and never by corporate apparatchiks. Governments need to be actively involved in hospital policy. Good heath is not the responsibility of the individual as neoliberal politicians like to tell us. It is the responsibility of a government. The Coronavirus pandemic has shown as much. 

Leave the Covid-19 virus or any virus (polio, Ebola, etc.) to the free market and it will pick off people one by one. The Coronavirus pandemic demands a well-funded and sufficient state even though neoliberal politicians hate it, rejecting big government outright. Yet, our common survival depends on the state and the government. It is the exact opposite of what neoliberalism advocates. One of the prime ideologues of neoliberalism – Ronald Reagan – was totally wrong when saying: government is not the problem. As the Coronavirus pandemic has shown, government is the solution to our common survival.

Yet, all too many politicians do not get the message. They fail to ensures that public health is provided when needed. They fail to support an increase in health staff salaries in privatized hospitals. Instead, they underfund the entire system of public health. 

Worse, neoliberal governments are still turning healthcare infrastructures into a gambling casino playing Russian roulette on international financial markets. Even ghastlier, Germany’s federal government has massively promoted public-private partnerships (PPPs) which offload the risk to the public and to patients while shifting the profits to private corporations. This scandal is camouflaged by using the ideology of a trickle down economy.

Germany’s government does not seem to pursue comprehensive society-based hospital policy goals. Instead, it fancies made-up goals of business, cost-benefit calculations, neoliberal economics driven by financial institutions, and a general reduction of labor costs. In addition to the classic privatization of hospitals, the public-private partnership is a rapidly growing form of stealthy privatization of Germany’s hospital sector. PPP is constantly being advocated as a solution. 

Worse, PPP tends to come into play when there is an financial shortage in a public sector as tax money is increasingly wasted (e.g. Germany’s army). PPP tends to come into play as an option for shadowy budget tactics for state households, covering up an overblown military budget that creates holes in Germany’s health budget.

Despite the hefty advocacy for PPP as the universal panacea, none of Germany’s 100%-private clinics has ever reached business contracts with a third party comparable to PPP. So, what is recommended to the public as a supposedly efficient and advantageous tool, is not what private hospitals seem to want to implement as a business model for themselves – despite all the praise by the corporate press.

In the end, the privatization of hospitals in Germany continues to be rather threatening – particularly in times of crises like the Coronavirus pandemic. This includes the outright sale as well as hospital PPPs. 

PPP is not a procurement tool, not even for hospitals. PPP is simply a sneaky means for privatization. PPPs result in the silent economization of Germany’s health sector. PPP is expensive and it weakens Germany’s public budgets at the expense of health. And, it will do so for a long time coming. 

The argument there is no money misses the point. There are those who have money in the health care system. It is just the health corporations that increasingly have the money. That money is paid out to shareholders. Much of this came to the fore during the Coronavirus pandemic.

Since our economy is organized as a capitalist economy, the basis of life and health has been downgraded to a function of two process services. These processes are needed for the smoothest possible exploitation of capital: 

  • firstly, there is the creation and continuous maintenance of a favorable political framework so that production, distribution and consumption are based on making a profit for capital; 
  • secondly, there needs to be at least a bare minimum of some sort of a preservation of a healthy basis to assure the survival of a given population. In the long run, this underwrites the permanent profitability of capital. 

Yet, this also assures that there are enough exploitable wage-earners and they remain available to capital. Because of this dual function, virtually all governments around the world have taken measures against the spread of the virus. In spite of the free market ideology of neoliberalism even the most neoliberal governments – e.g. Bojo’s let the bodies pile up high – have had to take some sort of preventative measures against the Coronavirus pandemic.

Adequate health protection for workers and consumers and the protection of profitable capital utilization represent an antagonism – an insoluble contradiction. An antagonism can therefore only be regulated. It can never be solved. In the usual economical crisis-like course of capitalism, it is an overproduction crisis or an under-consumption crisis. This is only possible with a considerable pool of wage-dependent workers and consumers. Their health and life are – partly indirectly and partly directly – threatened even in highly developed capitalist states. 

However, a crisis situation such as the one caused by the Corona virus threatens the health and life not only of wage-dependent workers, but also of freelancers, solo, small and pseudo-self-employed workers without exception – albeit in varying severity. Suddenly, the smooth continuation of the exploitation of workers in the capital process, who are exploited because they are wage-dependent, is threatened by an extra-economical force: the Coronavirus pandemic. 

Accordingly, the pandemic must be contained. However, government measures to contain the pandemic can threaten the continuation of the exploitation of capital. In this case, not because of overproduction and abundance, but because of the opposite – significant restrictions of the distribution of goods, services, and consumption are put in place.

Yet, zoonotic pathogens such as SARS-CoV-2 are most likely the result of intensive and extensive, often mono-cultural agriculture and factory farming. Beyond that, the beloved capitalist of the global food industry operates with a massive use of herbicides and pesticides. They also do so through the planned destruction of large natural systems. They annihilate highly developed diversity of flora and fauna such as the tropical rainforests as the exploitation of global capital penetrates and destroys natural diversity which no longer acts as a jumping barrier for potential pathogens from animals to humans. Caused by this, viruses will continue to hit us.

Because of the aforementioned downgrading, privatization, and thinning out of hospital systems relentlessly enforced through the ideology of neoliberalism, many countries (not only Germany) pursue a kind of mixed strategy. This can be described as a situational adaptive whereby contact restrictions are followed by a loosening of them. 

The favoring of mandatory vaccination as the best solution for the Coronavirus pandemic is held back due to the neoliberal free choice ideology. Plagued by years of Merkel’s neoliberalism, the German state hasn’t done its homework – by mid-December 2021, Germany had over 50,000 new cases per day and well over 100,000 deaths. Germany stumbles around with a back and forth of regulations, lagging behind in vaccinations. 

Asphyxiated in the ideology of neoliberalism, we cannot resolve the contradiction between profit and health. Yet, even neoliberal states need to pretend to recognize the Coronavirus pandemic. For too long, neoliberal states have subordinated health to profit. The pandemic crisis highlights our deliberately downgraded health systems, our undernourished hospitals, and our underpaid medial staff. The Coronavirus pandemic is yet another crisis of neoliberal capitalism.

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