Researcher: Corporatization Is Shifting the Incentives Across Healthcare

With more than 1,000 hospital mergers having occurred since 2008, one healthcare policy researcher believes that patient access to healthcare services is becoming endangered, as corporatization advances in an increasingly consolidated healthcare delivery and operational environment. What could—and should—be done?

Yashaswini Singh, Ph.D., M.P.A., argues in her Perspectives op-ed article, “The Antitrust Antidote to Hospital and Nursing Home Corporatization—Promises and Pitfalls,” published on November 1 online in The New England Journal of Medicine, that the issues are complex, and that there are no easy answers to the set of problems she frames. Singh is an assistant professor at Brown University in Providence, and notes in her online bio that “My areas of research and expertise include competition, consolidation, and vertical integration in health care markets. My primary research examines how acquisitions of physician practices by private equity funds change physician practice patterns, including strategic referral behavior, and the downstream effects on patient welfare.”

Citing that figure of more than 1,000 hospital and health system mergers since 2008, Singh writes that, “Although proponents often justify consolidation on the basis of its promise of greater efficiency — or even simply financial survival — empirical evidence tells a more sobering story: rising prices, mixed effects on care quality, and labor-market concentration that can suppress health care workers’ wages and mobility. Some degree of consolidation may offer benefits in the form of economies of scale, but unchecked consolidation risks undermining competition and access, particularly for vulnerable populations. An appropriate policy objective, therefore, is not to reject corporatization outright, but to ensure that it advances the interests of patients, workers, and communities — not just investors.”

What kinds of risks? Singh notes that, “Beyond price effects, corporatization of hospitals has raised concerns about access, especially in vulnerable communities. In Philadelphia, the closure of Hahnemann University Hospital — following its acquisition by a PE firm — left a medically underserved area without one of its largest safety-net institutions. Similarly, the financial unraveling of PE-backed Steward Health Care in Massachusetts and, more recently, Crozer-Chester Medical Center in Pennsylvania provides additional examples of corporatization destabilizing community access to care.”

Singh notes that, among other things, the “nonhorizontal mergers” of hospitals acquiring physician practices, and health systems merging across multiple healthcare markets, are recent enough that “The tools for assessing these types of transactions are relatively new and untested, which makes antitrust enforcement in such situations extremely challenging for regulators.”

Indeed, an area of particular concern, Singh writes, is the “reshaping” of physician employment. She notes that, “As of 2024, three in four U.S. physicians were employed by hospitals, health insurers, or investor-owned companies, a trend that was exacerbated by the Covid-19 pandemic. A recent FTC study identified 2000 physician-group mergers in 15 states between 2015 and 2020, driven largely by vertical acquisitions of physician groups by hospitals and serial acquisitions that evade federal review because each one is small on its own.” That full-bore shift into physician employment by “corporate entities,” she asserts, raises concerns over professional autonomy, citing “the growing pressures to align clinical decisions with financial incentives by prioritizing high-revenue procedures or limiting care that doesn’t generate profit for investors.”

A key contention that Singh puts forward is that standard U.S. antitrust policy, which invokes a “consumer-welfare standard,” meaning a focus on potential price increases or restrictions on consumer choice, does not encompass an understanding of some of the emerging trends, including the growing activity involving private equity firms investing in health care, particularly on the physician group practice. Such trends are very much worth monitoring and addressing, she argues. She gives the following concrete example, writing that, “In some parts of the health system, profitability strategies are tied less to market power than to sophisticated financial structures. In hospitals, for example, PE firms drive profitability not by raising prices, but by entering real estate leaseback arrangements. In these arrangements, a hospital sells its land to a REIT for up-front capital, typically benefiting its financial backer, but is then responsible for paying rent to the trust. This process is rarely captured by merger reviews and competition analysis.”

The longer-term danger is clear, Singh writes: a healthcare system whose incentives are becoming increasingly tied to the maximization of financial return. Because of all of that, she writes, “Policymakers must recognize the intended purpose and limits of competition law and pursue complementary strategies that center health—not shareholder value—as the ultimate metric of system performance.”