The Healthcare Ponzi scheme



Today I was going to finish a post I created about how emergency care in the US is now at a “tipping point.” Before doing so, I scanned some of my favorite blogs. A post by Dr. Wes is so insightful and so timely that I had to incorporate it into what I was writing about.

Dr. Wes coins a new term called the “Bernie Syndrome”, named after Bernie Madoff and his giant Ponzi scheme that took down so many wealthy investors. People got caught up in his scam because no one took the time to look at how Bernie achieved his remarkable results. No one cared. Bernie’s clients just got regular portfolio statements showing how great their investments were going. Meanwhile, behind the scenes, everything was crumbling. Even though Madoff’s business model was collapsing, everyone was still happy because of the rosy statements that Madoff was sending them … that is until the market got so bad that he couldn’t maintain his charade. Suddenly there was nationwide panic as people learned that the real picture was nothing like the picture that Bernie Madoff had painted.

Dr. Wes gives a couple of examples about the “Bernie Syndrome” and healthcare, including the recent SCHIP expansion and lowering Medicare eligibility to age 55 instead of age 65. US citizens suffering from Bernie Syndrome think that the added coverage is great. After all, just like Bernie Madoff’s investors, the public is going to get even more health care – for free – regardless of what the market or the deficit is like. SCHIP expansion will cover more kids. Medicare expansion will cover more seniors. Underneath these wonderful proposals, however, the medical care system in this country is being crushed under its own weight.

Before the Madoff collapse, several industry insiders questioned the returns Bernie Madoff achieved with his investment portfolios. No one seemed to listen – they were too caught up in the grand illusion that Madoff had created.

Now, at least in emergency healthcare, the Ponzi scheme, reinforced by the Bernie Syndrome, is starting to unravel.

George Bush embodied the Madoff Mentality when he told business leaders during a 2007 speech in Cleveland

“The immediate goal is to make sure there are more people on private insurance plans. I mean, people have access to health care in America. After all, you just go to an emergency room.”

The transcript of Mr. Bush’s speech used to be here, but for some reason the White House has now removed the text of that speech from its archives.

So patients with Bernie Syndrome now go to the “emergency rooms”. The widely held belief is that if you go to the emergency department, federal law requires the emergency departments to treat you. That widely held belief is only partially true.

EMTALA laws require that every patient be screened for an emergency condition. If no emergency condition is found, the hospital has no duty under EMTALA laws to provide any further care. If an emergency medical condition is found, the hospital is required to stabilize the condition, or, if the hospital cannot provide stabilizing treatment, then the hospital must provide an “appropriate transfer” to another facility that can provide such treatment.

The Ponzi scheme in emergency medical care was working well for a while. Then shrinking reimbursements closed some hospitals. Now unfunded emergency care is taking too much of a bite out of hospital budgets. You see, EMTALA may require that hospitals provide all patients with a screening exam and treatment for an emergency condition, but EMTALA makes no provision on how providers will receive reimbursement for that care. If a patient has no insurance and is not covered any of the social programs, the government won’t be on the hook. If the patient doesn’t have any money, the patient won’t be on the hook. Who is left holding the bag? Health care providers – hospitals and doctors. Hospitals may try to transfer the costs for some of that care back to patients with insurance, but as unemployment increases and the number of insured patients decreases, that shuffling will become unsustainable.

Health care providers are now trying to mitigate their financial risk. Specialists are avoiding EMTALA requirements by refusing to participate in emergency department call schedules. If specialists aren’t on call, they aren’t bound to treat anyone under EMTALA laws. The “free” specialist care has now dried up. In some rural communities, it may require travel of several hundred miles to obtain proper “on call” specialist care.

The latest way in which the Madoff Mentality is affecting emergency medical care is when hospital emergency departments provide the minimum amount of care required under EMTALA and then refer indigent patients to community clinics for further care. If a patient does not have an emergency medical condition, the hospital has no further requirements to treat the patient under EMTALA. EMTALA defines an “emergency medical condition” as

A medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that the absence of immediate medical attention could reasonably be expected to result in
(i) placing the health of the individual (or, with respect to a pregnant woman, the health of the woman or her unborn child) in serious jeopardy,
(ii) serious impairment to bodily functions, or
(iii) serious dysfunction of any bodily organ or part …

More and more hospitals are now providing an “EMTALA screen” to patients and then referring them to an outpatient clinic if patients do not have an emergency medical condition and cannot pay for their care.

Such was the case with the University of Chicago when it sent a child home last August after the child had been “mauled” by a pit bull. The story was just published in the Chicago Tribune on Friday.

After being bitten in the lip by a stray pit bull, 12 year old Dontae Adams was screened by emergency department staff. Part of his lip was “literally gone” according to Dontae’s mother. He was given antibiotics, morphine, a tetanus shot, and then was told to follow up at the County Hospital within one week. Dontae’s mother took him immediately to Cook County Hospital where he was “quickly admitted for surgery.”

While the case has sparked outrage among the public and among some medical groups, these are the difficult decisions that are being forced by the government’s Madoff Mentality and by those with Bernie Syndrome.

Failure to provide immediate treatment to Dontae’s lip laceration did not place his health in serious jeopardy, did not result in a serious impairment to any bodily functions, and was not likely to result in a serious dysfunction to any bodily organ or part. So technically, it does not appear the University of Chicago violated any EMTALA laws when it evaluated Dontae, provided basic treatment, and referred him to a county hospital.

As the giant healthcare Ponzi scheme starts to unravel, look for more and more hospitals to provide the minimum amount of medical care required under EMTALA and then refer patients without the means to pay for their care to community clinics. Need cancer treatment? Better have a substantial down payment if you go to the ED and want to be admitted. Have a broken bone? Chances are that you’ll get splinted and that you’ll just have to follow up in an outpatient clinic. There, without insurance, you’ll have to bring a down payment as well. Most of the time runny noses and coughs will be sent home from triage unless they have insurance.

For some hospitals, this tactic may be a way to increase profits, but for many hospitals, this policy will be a means to stave off bankruptcy.

We will never have a medical system in which health care is fast, free, and quality.

If you believe otherwise, I suggest that you also be careful on how you invest your retirement funds.


The American College of Emergency Physicians issued a press release regarding the University of Chicago case.
The Chicago Tribune immediately released an article noting ACEP’s response. The comments section of the Tribune article shows many divergent opinions regarding whether exhaustive medical care should be free to all.


  1. having spent the last 2 weeks doing fast track exclusively, i long for a day when runny noses and coughs will be sent home from triage.

    as things stand now though, garbage visits like those *in the well insured population* are big money makers for the hospital. in and out in 15 minutes, and you get to tack on a giant facility fee to their bill. can you get away with selectively turning away garbage cases based on the patients’ insurance? i thought emtala was supposed to keep us from screening out people based on their ability to pay?

    i’ve often wondered if vastly reducing the reimbursement for ED visits that have no business in the ED (the level 1’s and 2’s) would then prompt the hospitals to find a way to legally “shoo” those patients away. not sure if that would ultimately be a good thing (help fight overcrowding) or a bad thing (shut down hospitals from losing a quick and easy moneymaker). hmm…

  2. Unfortunately the truth is that a capitalist society is about making money. Health care is one of those grey areas that people still want to make money in but eithical issues get in the way of doing so with unfettered enthusiasm. But making money is not just necessary for one (or one’s company’s) survival. It is required so that we do not bankrupt our country. However, we do not want to go back to Victorian England where people were just allowed to die in the streets if they could not pay for a doctor. Trying to balance these two realities is pretty much the challenge of this and all future administrations. I personally see no solution unless our country completely decides to go full bore capitalist or full bore socialist. Until then, it will provide us with lots of blogging material – we will just continue to debate it aand find issues with every little policy decision.

  3. I hate to say this. Likely I will get tarred and feathered, or at least stripped of my scrubs…but we’ve been skewered and burned by training, and the stress of in-pressing patients. Still….our hats (should we have any) need to be turned around..about faced….do a 180…..

    Instead of finding every last reason NOT to see a patient. Bring ’em on. Face it. Health care is consumer driven, and the consumers–justifiably-want the ED.

    Bill ourselves as diagnostic centers if need be, tap into the ARRA 2009 somehow to direct funds toward overcrowding relief by rewarding back-door decompression by hospitals. Fund more residencies…staff for a larger volume.

    Build it..and they will come….

    • Someone finally gets it! You’re providing a service that people want to buy. Price it accordingly! The consumers want your services, let THEM, not the govt., decide what it’s worth.

      The government gravy train you rode for 30 years is over. It was good while it lasted. Your predecessors had a great standard of living from it. But let it go before you don’t have a choice.

    • okay,.. so do you consider nonpayers to be consumers? because if you “bring em on” the hospital will run out of money and close.

      i think you’re missing the point if you think we all don’t want to see patients. the same logic could be applied to you- by suggesting means to relieve overcrowding, you are saying you want to see less patients.

      • You sue the nonpayers for what they owe. You have all their contact info.

        Here’s where you need to really spend your lobbying time. You need to lobby to set up income levels where govt support is warranted. For example, if you can afford it, you don’t get a public defender – you have to pay for it yourself. Same with healthcare.

        The problem is, and you guys are as much to blame as the public at large, is you’ve bought into the healthcare is a right line. You speak of your industry of this monolith, instead of simply people procuring services and advice from a professional on individual bases. No other professionals, except for legal services in limited situations – ie indigent criminal defendants, have clients with “rights” to access their services.

        You need to steer the national conversation to a basic level of care to the poor, and everyone else starts paying. Take credit cards, set up payment plans with your customers, and if they don’t pay, garnish their tax returns and wages. Just like any other creditor who provides goods or services to them would.

  4. sue the nonpayers. that’s an interesting solution. so you’re proposing that the time it takes to recover the money from them and the costs of hiring lawyers to file these suits will all be offset by the amount we’re actually able to collect from these people. you are also assuming that these people actually provide accurate contact info, which is pretty naive.

    i can tell you 3 things that would happen if this tactic was taken- one, the poor/uninsured would either go bankrupt trying to pay these bills or die in the streets with untreated medical problems, since the ED will no longer be a safety net for them. two, physicians and hospitals will be vilified for trying to collect money from the indigent. three, the lawyers hired by the hospitals will make a killing.

    i’d also like to address your comment that “you guys are as much to blame as the public at large.” i happen to be a physician that believes we physicians are definitely part of the problem… but before i elaborate on that, i’d like to ask you 3 questions. they are all “yes or no” questions, and you may give as lengthy a response as you’d like to each question- all i ask is that you clearly state whether your answer to each is “yes or no.”

    1. i believe that physicians, patients, insurance companies, cms (the government), hospital administrators, clipboard-wielding organizations such as JC, drug/device companies, and survey-makers like press ganey all have some responsibility and are part of the problem in the giant clusterf*** that is american health care. do you agree with me? yes or no?

    2. leaving aside who is more to blame than who, i believe that malpractice lawyers are also part of the problem, and deserve a share of the blame for the current situation we are in. do you agree with me? yes or no?

    3. are you a lawyer? yes or no?

    • Yea, this is tricky…especially with Immigration. Here is a reality I lived. I grew up on welfare, the child of a mentally ill single mother. She had 2 kids and mental illness diagnosed after her divorce at 24 years of age. In addition to all of her care all of her life, I was a very physically sick child. My brother was not. I was in and out of the hospital for various respiratory problems from 3 months old until about 12 years old. Then, luckily for me and the tax payers, I grew stronger, and have hardly ever used the medical system since. I am now 50 years old and have been self supporting since 18. A miracle for sure, I was born highly intelligent despite all the illness and discrimination in dual white america. Discrimination by teachers – white on white – for being poor. Many of them would turn away from me in class, always sitting me in the back, never paying any attention. I was small, poor, shy, and always quite ill. One teacher told me I had a learning disability – NOT!!! Any way, I worked two jobs to put myself through a state school, got a great job immediately after college in Business Administration and now make more than the average college grad my age. I have weathered every recession and continue to climb and grow. I am among the 1% now and pay plenty of taxes with additional charitable donations, even with a great accountant. What to do…what to do. I was always made to feel ashamed by my small town where everyone knew we were on welfare and treated us as such. There was little compassion. Even our physician – according to the look on his face and his demeanor – winced when we would come through the door, often. But, he never refused to care for me and my mother was never given a bill, and if you sued her or refused care, I would have surely died. I don’t have the answer, but luckily it all turned out ok and I am a very healthy adult that contributes a lot to society today.

  5. ” so you’re proposing that the time it takes. . .”

    Absolutely. That’s what businesses all over do. Including hospitals. I’m curious as to how you know exactly what will happen when you’ve apparently got no experience doing it.

    1. Yes
    2. Some, yes.
    3. Yes

  6. i’m not a hospital. why would i be the one suing the patients?
    i know what hospitals can do though, while they’re waiting for your proposed lawsuits to pan out and the lawyers take their money- just shift the cost of the lawyers onto the paying patients by making their bill higher! excellent, this will work out smashingly.

    interesting how in another thread you advocate for patients hiring lawyers to get a class action suit going against california to get their $50 back, and in this thread you advocate for hospitals to hire lawyers to go after patients who can’t pay their medical bill. guess the answer to every question is “more lawyers.”

    i guess if you’re willing to admit that “some” malpractice lawyers are part of the problem, you deserve “some” more credit then i give you though.

    anyway. another discussion proving to not be worth my time. bye.

  7. “i’m not a hospital. why would i be the one suing the patients?”

    I’m referring to any provider trying to collect. I can’t really decipher the rest of the paragraph.

    “guess the answer to every question is “more lawyers.”

    I didn’t ADVOCATE it. I just said that a class action is the most efficient way. What would you suggest they do? If they would rather represent themselves in small claims court, that doesn’t bother me.

    I don’t care if you give me credit or not. What I do care about is that healthcare is getting ready to be nationalized, and you’re fussing about something unrelated.

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