Government Regulation, Crony Capitalism, and Public Safety

Many people believe that protecting the safety of the public is an indispensable service of the state that cannot be provided by free and private enterprise; and that the state protects safety in health care by licensing and regulating physicians, dentists and other health care providers such as hospitals. Unfortunately, government regulation does not work that way, as illustrated in the following example of federal regulation of hospitals.

At the end of this Post we set forth our view of the reasons for the failure of government regulation to protect the public from medical errors.

The United States Centers for Medicare and Medicaid Services (CMS) espouse the idea that their mission includes achieving better health care by improving safety in patient care in accordance with safety principles of the Institute of Medicine. However, as David Goldhill reports in Time magazine, it appears that CMS is cooperating with attempts of the American Hospital Association to withhold or at least limit information about preventable hospital errors. See “The Most Shocking Mistakes Hospitals Don’t Want You to Know About,” by David Goldhill,, July 31, 2014. 1

David Goldhill is vitally interested in preventing hospital medical errors, as the death of his father was caused by preventable hospital-borne infections. 2 We quote as follows from Mr. Goldhill’s article in

“. . . The American Hospital Association (AHA) [has persuaded] . . . [CMS] . . . to eliminate government disclosure of the worst medical mistakes committed by hospitals.  As of [July 2014] the Center for Medicare and Medicaid Services (CMS) has removed data on many ‘never events’ from its public website, Hospital Compare.

“‘Never events’ are just what they sound like: errors so egregious they should never happen. The term came into widespread use in 2006, when the National Quality Forum defined 28 serious healthcare errors. While CMS has never published data on all the never events, until recently it made public records of some of the worst and most preventable, such as foreign objects left in the body, air embolisms (a killer air bubble entirely preventable during surgery), giving the wrong blood type to a patient and bedsores allowed to develop into extremely painful and even deadly wounds . . .

“Never events . . . actually happen quite often. CMS’ Inspector General estimated 1 in 165 admissions of a Medicare patient involved a never event. It is estimated that foreign objects left in a patient’s body after surgery occurs once every 5,500 operations. That rate would translate into 9,345 objects left in patients in per year. . .

“[A]s the predominant funder of hospitals, CMS has always been an ambivalent regulator. And the AHA has a lot of friends in Congress, allowing them to find mouthpieces for their talking points . . .  According to Nancy Foster, the vice president for quality and patient safety policy at AHA, ‘the only thing we have insisted upon is that the measures be accurate and fair, that they represent a real picture of what’s going on in an individual hospital if you’re going to put it up on a public website.’

“The counter-example of airline regulation clearly demonstrates the self-serving nature of this line of reasoning. Can we imagine an airline executive or lobbyist arguing that the public had no right to know any piece of data about airline safety? But of course in aviation safety, we long accepted the primacy of consumer safety . . .

“In health care, [apparently the CMS and AHA] . . . believe that hospitals can kill patients as a result of errors and retain rights to confidentiality. That may help explain why the airline industry grows safer every year, and estimates of deaths from medical errors are now so high they would rank as the third-leading cause of death in America behind only cancer and heart disease.

“Let’s say we . . . published all never events data . . . [P]atients might avoid hospitals with a lot of never events. Patients who suffered a never event at a hospital might demand compensation upon discovering the particular error occurred frequently. Hospitals might be forced to respond to this patient misuse of data by improving efforts to decrease the incidence of never events.”

CMS and the Institute of Medicine hold up as a model for promoting patient safety the Seven Pillars Process adopted by the University of Illinois Hospital and Health Sciences System (UIHHSS). The following is quoted from the website of the Institute for Medicine.

“When the family of Michelle Malizzo Ballog found out that their daughter’s 2008 death had been caused by a preventable medical error, one question trumped all others: How could this have happened?

“To the family’s surprise and relief, officials at the University of Illinois Hospital and Health Sciences System (UIHHSS) in Chicago did not defer that question to their lawyers. Instead, they investigated their suspicion that a fatal error occurred during Ms. Ballog’s surgery, confirmed that information with the patient’s family once it was established, apologized, and provided a financial settlement for Ms. Ballog’s young children. Importantly, the hospital made changes in their anesthesia processes to ensure that the same error would not happen again.”

“[An] approach [to hospital safety], known as the ‘Seven Pillars,’ was adopted by UIHHSS in 2006. Seven Pillars focuses on transparency to eliminate patient harm and learn from patient safety events. It includes:

  1. Patient safety incident reporting;
  2. Investigation;
  3. Communication and disclosure;
  4. Apology and remediation, including waivers of hospital and professional fees;
  5. System process and performance improvement;
  6. Data tracking and performance evaluation; and
  7. Education and training.” 3

On its website CMS states that its mission includes achieving better health care by improving safety in patient care in accordance with safety principles of the Institute of Medicine. 4 However, as we learn from Mr. Goldhill’s article CMS cooperates with the AHA to limit such reporting.

How can the public guardians of health safety be a party to limiting public access to knowledge of medical errors occurring in hospitals? The answer lies in the very nature of political government.

Political government is a monopoly. It allows no competitors. It insists upon immunity for its actions. For those who may doubt this, an internet search of the phrase sovereign immunity will be enlightening. 5

The United States of America has no accountability and no risk in its actions. Employees of the U.S. from the President on down to the lowest levels of bureaucracy are never held personally responsible for errors or actions which harm members of the public. Or if they are held accountable in political terms, through the voting process, the accountability never translates into compensation to members of the public harmed by government incompetence or wrongdoing.

If a private company 6 undertakes to provide any service or product to the public, it is held accountable to individuals harmed by its errors and omissions to carry out its responsibilities. Responsible managers and employees of a private company can lose their jobs for their failure to fulfill the responsibilities of the company.

Andrew Galambos in his lectures emphasized that proprietary interest in one’s services, products, and business reputation are safeguards for the public. He taught that those who serve others by providing goods and services should guarantee their product. Further on in CTLR we will discuss the practical limits to the extent of guarantees in situations where it is impossible to guarantee an outcome in human affairs, so that a service provider can only offer his or her best efforts.

No such limit exists in the case of the duty of a provider of information to disclose important information that is readily available. And as David Goldhill points out, in the case of medical errors in hospitals, the U.S. through its CMS agency is actively concealing important information about those errors of which the agency is aware.

The U.S. can be as remiss in responsibility to the public when it provides medical care itself, as it does in the Veterans Administration (VA) that provides medical care for more than eight million veterans. 7 As of the years 2013-2014 it became known to the public that some of the numerous hospitals in the VA medical system had been concealing delays in providing medical care. When reports of such delays became widespread an internal investigation was launched by the VA’s Inspector General. 8

According to the Los Angeles Times, “. . . investigators found long backlogs at VA hospitals across the country and several cases of veterans who died while waiting for appointments . . .” [Consequently, Congress enacted legislation] “. . . to solve the alarming backlog for care at VA facilities by allowing veterans to see private doctors at the government’s expense . . . if they face a wait of 30 days or more or live more than 40 miles from a VA facility. Creating that new benefit would allow many more veterans to get care, but would increase [federal] spending by $10 billion.” Congress made this option available on a temporary basis as a political compromise on how to finance the new benefit. 9




  2. In its September 2009 issue The Atlantic magazine featured as its cover story an article by Mr. Goldhill entitled “How American Health Care Killed My Father,” This article was so well received that Mr. Goldhill was invited to speak on health care issues at the medical school of his alma mater, Harvard University. Subsequently Mr. Goldhill expanded his article in The Atlantic to a full-length book entitled Catastrophic Care: How American Health Care Killed My Father—and How We Can Fix It (Alfred A. Knopf, 2013). CTLR published a blog post review of this book entitled “America’s Health Care Catastrophe,” July 2, 2013, focused on Mr. Goldhill’s book. See
  3. The foregoing is reproduced from Institute of Medicine of the National Academies, “More Hospitals Begin to Apply Lessons from Seven Pillars Process,” by Caroline Clancy, Aug. 24, 2012,
  4. See Centers for Medicare and Medicaid, “Our Mission,” at
  5. See, e.g., Cornell University Law School, Legal Information Institute, Sovereign Immunity,
  6. An organization not part of political government
  7. Former members of the armed forces of the U.S.
  8. See Veterans Health Administration- Interim Report – May 28, 2014, “Review of Patient Wait Times, Scheduling Practices, and Alleged Patient Deaths at the Phoenix Health Care System,”
  9. Quotations from “Lawmakers’ costly plan to fix Veterans Affairs is temporary, or not,” by Lisa Mascaro, Los Angeles Times, August 6, 2014,
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