Saving Dollars, Costing Lives : THE GREAT WHITE LIE: How America’s Hospitals Betray Our Trust and Endanger Our Lives, <i> By Walt Bogdanich (Simon & Schuster: $23.00; 296 pp.)</i>

Sometime in the past decade, the public image of hospitals in the United States slid ominously away from one of benevolent community service towards one of unseemly commercialism and, in at least a few cases, sleazy profiteering. Gone are the stories of caring candy-stripers, heroic surgeons, Florence Nightingale nurses. In their place has cropped up a new genre of war story--the tale of the $35 aspirin, the sleep-deprived intern, the addicted doctor, the half-a-million-dollar hospital bill, the gang shootings, the patient found free-basing cocaine in a big-city hospital bed.

In his eye-popping account of the upheaval in the nation’s hospitals in the 1980s, Walt Bogdanich chooses just such a sensational story as a symbol--the murder of a young physician in an office in Bellevue Hospital in Manhattan by a former psychiatric patient turned vagrant, living at Bellevue and masquerading as a doctor. To Bogdanich, the 1989 beating death of the talented, recently married and newly pregnant Dr. Kathryn Hinnant was no bizarre aberration; it was symptomatic of an entire industry “that had broken down in previously unimaginable ways.”

Bogdanich, a Wall Street Journal reporter whose Pulitzer Prize-winning 1987 stories on Pap-smear mills changed the way medical labs are regulated, sets out in “The Great White Lie” to document that breakdown of the hospital system through dozens of ghoulish stories from dozens of hospitals nationwide. At first, the cases seem like aberrations, but they pile up with disturbing force. In the end, Bogdanich contends that they are the terrible price of reforms in hospital financing that the government allowed to be subverted by greedy corporations, “the high ethical cost of competition.”

Take the case of Dillon Murphy, 33, who died after a North Carolina hospital mistakenly pumped his heart full of sugar solution--the result of a mix-up between bags of heart-cooling solution for cardiac bypass patients and glucose for patients with digestive problems. The mix-up occurred initially in the hospital pharmacy at the hands of an untrained, unlicensed, uncertified, 19-year-old technician--one of thousands like her employed by hospitals to save money during a period of cost-cutting and manpower shortages. But five other hospital workers then failed to catch the error, in what Bogdanich characterizes as a massive breakdown in quality control that ended up costing the life of a father of three.

Then there’s the one about the Florida temp agency holding nurses in a kind of modern indentured servitude, dispatching them exhausted, round-the-clock, to jobs that some were unqualified to fill; the hospitals that billed Medicare for golf tournaments, country-club dues, chartered jets and political contributions; the doctors who sold their souls, and their patients, to hospital companies in return for new office buildings, joint ventures, retired debt and outright cash.

Bogdanich traces much of what he has found to “prospective payment,” the revolutionary cost-control system introduced in the early 1980s, under which the federal government stopped paying hospitals whatever it cost them to treat elderly patients and began paying a set fee based on diagnosis. The new system created potent incentives for economizing: Hospitals made money if they treated patients for less than the set fee. Suddenly, budgets constricted and hospitals became competitive, vying for the most profitable patients and doctors--as Bogdanich puts it, “like vultures over a road kill.” Executives came to treat medical care, he argues, like just another product line.

Indeed, as Bogdanich points out, the federal government’s own inspector general concluded that “the first two years of the most celebrated cost controls in history produced some of the biggest hospital profits in history.” The old ways of “candy stripers, goodwill and aging Catholic nuns gave way to what one health-care analyst called the switchblade style of management,” Bogdanich concludes.

“The Great White Lie” is a powerful example of medical muckraking. Relying on his own reporting, government reports, court documents and other newspapers, Bogdanich penetrates a fortress often barricaded by privacy and confidentiality and makes a sickening case for how institutions to which people entrust their lives have been corrupted and plundered. One more morality tale from the 1980s, the story introduces lots of appalling new concepts--”buyers” from nursing homes trolling hospitals for potentially profitable patients; overworked cell technicians practicing “kitchen cytology” on patients’ specimens at home; “phantom bookings,” in which temporary nursing services promise hospitals nurses when they have none available; and “boarder elderly,” like the more familiar boarder babies, marooned in hospitals with no one to take them, nowhere to go.

But the book has a few of the shortcomings, as well as the strengths, of much investigative journalism. The story is presented almost entirely in black and white. Here are your hard-hearted administrators, overworked nurses, incorruptible sleuths, heroic whistle-blowers, scheming executives, weak-willed doctors, pandering public-relations people, lackadaisical government bureaucrats. There’s even the obligatory crusading newspaper publisher.

There is little gray here, little ambiguity, and in some cases little depth. The bad guys rarely answer the charges; instead, there is either a flat denial, a no comment or a could-not-be-reached-for-comment. As a result, personalities and motivation remain disappointingly unexplored. Where the reporting is relentless, the writing seems hasty. People are described as “a compact bundle of energy” and “a medical records specialist with an explosive laugh who liked to look for the good in people.”

Certainly, Bogdanich is not the first to notice the problem. Medical journals themselves now regularly publish ominous reports from hospitals nationwide. But the sheer mass of evidence Bogdanich serves up must rattle the confidence of even the most sanguine among us. Whatever vestiges of our old trust in medicine have survived the current crisis in health care, this book will go far to wipe them out.