Expert: Corporatization Is Already Harming U.S. Healthcare

Is the corporatization of healthcare intensifying in the current operational landscape? One public policy expert thinks so. Indeed, Erin C. Fuse Brown, J.D., M.P.H., a professor of health services, policy, and practice in the Department of Health Services, Policy, and Practice, in the Brown University School of Public Health in Providence, Rhode Island, argues that corporatization is already damaging healthcare delivery and access, in a June 28 “Perspectives” op-ed in The New England Journal of Medicine.

In the article, entitled “Defining Health Care ‘Corporatization,’” published on July 3, Fuse Brown writes that one author’s definition of corporatization, the transformation to “an industry dominated by huge health care conglomerates,” is actively happening now. She notes that Paul Starr, in his 1982 book The Social Transformation of American Medicine, defined corporatization as proceeding along five dimensions: “the shift from nonprofit and government organization to for-profit companies; horizontal consolidation of locally controlled entities to nationally or regionally controlled corporations; the shift from single-unit and single-market firms to conglomerate enterprises; vertical consolidation among levels of care delivery and payers; and increasing concentration, size, and scope of organizations.”

Per that, Fuse Brown walks her readers through a long list of developments, concluding that, according to Paul Starr’s definition, corporatization is already here. Among other elements, she points out that “Insurance conglomerates, such as UnitedHealthcare and CVIS-Aetna, now control physicians, home care, pharmacies, and pharmacy benefit managers (PBMs). Horizontal hospital consolidation has been pursued for the promise of economies of scale and market power. And vertical consolidation was spurred by the rise of managed care and its value-based progeny, particularly as private insurance companies have assumed a growing role in publicly financed health programs. As managed care shifted financial risk to physicians and other providers of care, the financial and technological burdens pushed them to consolidate into larger conglomerates.” Meanwhile, “Horizontal hospital consolidation has been pursued for the promise of economies of scale and market power. And vertical consolidation was spurred by the rise of managed care and its value-based progeny, particularly as private insurance companies have assumed a growing role in publicly financed health programs. As managed care shifted financial risk to physicians and other providers of care, the financial and technological burdens pushed them to consolidate into larger conglomerates.”

Confronting corporatization may require a fundamental reorientation of the industrial organization of the health system. Additional reforms could entail structurally separating (“breaking up”) conglomerates that sit on both sides of the payer–provider bargaining dyad by barring insurers from owning physician practices or PBMs from owning pharmacies, standardizing prices to limit monopoly power and financial preferencing of an organization’s related entities over competitors, expanding alternative sources of capital, and modernizing corporate-practice-of-medicine laws. Furthermore, rules for governance and ownership of health care entities might be revisited to require, for example, higher standards for nonprofit tax exemption, clinical and community representation on governing boards, fiduciary duties beyond shareholder primacy, or increased parent-company or investor liability for operational choices that harm patients or the community’s access to care.

Fuse Brown argues that corporatization has already led to damage in the healthcare delivery system, arguing, for example, that “The financial collapse of private-equity–backed hospital systems such as Steward Health Care has led to patient harms, hospital closures, and scathing congressional hearings and reports.”

Ultimately, the author states that “Confronting corporatization may require a fundamental reorientation of the industrial organization of the health system. Additional reforms could entail structurally separating (‘breaking up’) conglomerates that sit on both sides of the payer–provider bargaining dyad by barring insurers from owning physician practices or PBMs from owning pharmacies, standardizing prices to limit monopoly power and financial preferencing of an organization’s related entities over competitors, expanding alternative sources of capital, and modernizing corporate-practice-of-medicine laws.”