The nature of markets

Markets are impersonal mechanisms. They are not human, nor do they have moral selves. They do what they 'gotta do' to succeed. Companies that don't will be eaten up by others and cease to exist. That human values, empathy and a humanitarian mission will flourish sounds like an illusion to me.  These things have to be imposed on it.

This page covers a number of issues, some of which I deal with in greater depth elsewhere, so there may be some repetition. These include:

  • The pressures for profits: the pressures in the market and the impact these have on advertising.
  • The power imbalance: the imbalance in power that exists between large organisations and individuals by looking at the NHS in the UK and proposals being made to address it there.
  • Illusions: a brief comment about illusions in aged care and why we so readily adopt them 

The pressures for profits

In the marketplace, success is measured in dollars and those ultimately come from an income stream.  A better income stream comes from inducing more customers to use your service than that of competitors, in charging what the market will bear and in supplying the service more cheaply.

So all providers in the market, whether for-profit ornot-for-profit, are under pressure to sell more and extract more from the services - some types of provider are under more pressure than others. 

The pressures to oversell are readily apparent on websites and in advertising.  As this website shows, this is often deceptive. PR companies employed by the providers are paid to present the best impression and this is seen as legitimate. They stretch the truth as far as possible and ignore information that might make them less competitive.

Vulnerable and trusting "consumers" are easily deceived.  In extreme cases when the deception goes too far, as happened with INTFPCompanyB, an aggressive competitor in the sector, the regulator steps in but there are seldom penalties.

An ad for INTFPCompanyB has been banned for implying that cancer patients who receive private healthcare have a higher chance of survival.

Source: INTFPCompanyB ad banned for implying private care is better for surviving cancer  - The Guardian, 1 Apr 2015

Strong pressures to extract as much profit from each service provided puts pressure on providers to provide it as cheaply as they can get away with and this impacts on care.  The better the care, the less profit.  The extent to which this has impacted on care is revealed on subsequent pages, which also show that the stronger the profit pressures the more failures in care occur.

While a variety of factors probably do have  some limited impact on this it is the presence of an informed and powerful customer that stops overselling, ensures that the community's ethical and moral values are followed, and penalises poor care so ensuring that high standards of care are more profitable than poor ones.

The power imbalance

In the market and in any organisation there is an imbalance of power between the individual and the organisation.  The individual has to resist strongly and enlist support from friends and colleagues so that they can resist exploitation by the organisation.  This is particularly difficult for individuals in health and aged care because of their increased vulnerability.

Paul Hodgkin writes about the disparities in power between organisations and patients in this instance about the NHS. He makes proposals to empower "patients organisations"  that will be in a position to counter these pressures. This is the same general approach as the proposed community aged care hub but within the health care context.

(Quotes not in order)
Corruption then becomes “the abuse of power or position to acquire an organisational benefit.” - - -  Clearly there are teams, departments and institutions within our beloved NHS that do abuse their bestowed power in order to further their own ends over and above those of patients. - - -  The problem is that the roots of this organisational corruption lie in legitimate behaviors that are required for the system to operate:

At times these pressures will drive some hospitals, wards, and teams to settle on behaviors that are corrupt — i.e. that consistently abuse patients in order to gain organisational benefits.

All corruption in healthcare arises in the gap between what the patient needs and what the clinician, team, or organisation wants. This gap is an example of a “principal-agent” problem. These occur whenever “one person or entity (the ‘agent’) is able to make decisions that impact, or on behalf of, another person or entity: the ‘principal’. The dilemma exists because sometimes the agent is motivated to act in his own best interests rather than those of the principal.”

But decades of well-meaning rhetoric about “putting the patient at the centre of care” show that when managerial push comes to financial shove, corporate and professional agendas often win the day.

If patients are going to be powerful enough as principals to be able to stop their healthcare providers settling on systematically corrupt practices then three conditions have to be met. First patients must have some real power. This means they have to be able influence how significant amounts of real money is being spent. Second that power has to be exercised away from the sick bed—expecting patients to speak truth to power whilst in their pyjamas is foolish. Finally any agency exercised by patients’ needs to operate within the context of limited resources. Not all care will be possible and other patients with other conditions have equally legitimate demands on those resources.

One way to achieve these aims would be to give the power to commission care for a particular disease to the relevant patient organisation. Within the current English NHS for example a group of Clinical Commissioning Groups (CCGs) could ask a patient organisation to work with them to commission care pathways

Source: Paul Hodgkin: Is British healthcare ever corrupt?  BMJ, 17 June 2015 by Founder of Patient Opinion

The proposed aged care community hub is intended to fill this role by addressing the power imbalance in the aged care marketplace.

Government funding the market

Giving a vulnerable market a blank cheque, without requiring them to account for how they spend the money and how well they do it is a recipe for disaster. The pressures are just too strong and if they can take more money, one eventually will and then all of the others must follow if they are to survive.

I give some recent examples in Australia on other pages, but here is another example of what happened in aged care in the USA. These corporate entities were all under intense pressure to perform in order to survive.

In 1997/8 the US government closed the blank cheque that allowed nursing homes to build vast empires by rorting the Medicare payments for step down care. These corporate entities had large loans to service and were all under intense pressure to perform in order to survive.

But they gave the corporations another blank cheque and not surprisingly, they did the same thing again. Once one did it, the others followed.

Since the introduction of the new system in 1998, nursing homes have increasingly been able to use estimates of the amount of therapy they expect to provide patients. This estimate is part of initial patient assessments on which reimbursements are based.

But GAO investigators, in looking back at estimates of therapy versus how much was actually provided, recently found a quarter of patients never got the amount of therapy they were originally assessed as needing.

"It's pretty appalling," says Toby Edelman, a Washington attorney for the Center for Medicare Advocacy, which helps Medicare beneficiaries. "If they're not giving the therapy they're being paid to provide, why should we keep giving them money?"

Source: The New Math of Old Age: Why the nursing home industry's cries of poverty don't add up, US News: Health & Medicine, 30 Sep 2002

In Australia, we have the government funding of vocational training programs and the Jobs scam, both exposed on ABC 4 Corners in 2015.  In both instances, it seems clear that the system was rorted and the people it should have been helping were exploited and harmed.  I deal with these issues later.

Aged care in Australia has had a blank cheque and no effective assessment of outcomes since 1997. When there have been allegations of fraud in aged care and elsewhere, they seem to disappear into a black hole and we hear no more of them. I give examples on other web pages.

Has our political system become so competitive that the political consequences of exposing and addressing rorting of our taxpayers and harming citizens are so prohibitive that they must be buried ... or are we really different?

What will happen to this blank cheque as competitive pressures increase. Will both the market and our politicians do what they 'gotta do' to survive?


On a subsequent page, Cultural perspectives, I will be looking at the strategies that we humans use to enable us to accommodate to, and do what we 'gotta do' to succeed wherever we find ourselves.

Philosophers, psychologists and sociologists have been deliberating, hypothesizing and explaining how and why we do irrational and harmful things for a hundred or more years. There are many studies. Humans have had to learn to accommodate to pressures for centuries to survive - its in our DNA. We all do it so its not about bad people but about all of us.

And on another section dealing with ideology and government I will say more about 'illusions'. These are the invalid assumptions that political ideologies use to support their ideas, particularly those that result in a culturopathy. Culturopathy is the term I use for a social system that harms instead of serving the community and its members.

I will be writing about several of the multiple illusionary beliefs that underpin and form the basis for our current aged care policy. I will explain why it is broken and why politicians are trapped in a straight jacket of illusions that prevents them from doing anything about our aged care system. Why they suffer from 'paradigm paralysis'.

The illusions in aged care

One of the really critical illusions underpinning aged care policy and thinking is that the market that I have just described has no impact on care. They assert, and will continue to assert, that what the media is saying in the reports on this website, what residents and their families are complaining about, and what those who put their ears to the ground over the past 19 years hear, is a media beat-up and has nothing to do with the market itself - the market I have just described.

I have had the opportunity to examine both the press reports and company documents in one of the major scandals in the USA. While the press will make the most of a story, they are always constrained by the threat of litigation, so they are careful about what they decide to report about large wealthy corporations. There are financial implications to negative reports about potential customers. What is actually happening, as indicated by internal documents, may never be reported. I saw material that was known but never became public, because the company settled without going to court.  There is usually some truth behind most stories.

Key personnel

But there is another illusion. After all, they will tell you, it is not the owners who decide how the subsidiaries, which they own, run the nursing homes that care for citizens, in order to generate the profit they need for their growth.

Importantly - it's the key personnel that owners appoint to run their subsidiaries who do so. They are approved by government's 'Approved Provider' section to do so. They have been sanitized and rendered suitable. The process of approval renders them primarily interested in caring for the frail elderly, rather than for their owner - and all by the stroke of a pen - its like a magic wand!

Each illusion requires a hierarchy of illusions to support it so that it does not look ridiculous. I will write more about this later.

Please note: The first four sections of Aged Care Analysis are published and the remaining sections will be made available as soon as possible.

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