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Medical decision making now is influenced by everyone from insurers and government policymakers to the administrators of corporate entities that employ physicians.
Over a century ago, most states passed laws prohibiting the corporate practice of medicine. The goal was to make sure medical decisions would be uninfluenced by the profit motive and left to the physicians caring for their patients.States were also concerned that large industries would operate their own health care services or even own their own hospitals exclusively for their employees, thereby making health care less accessible to the general population.
While still on the books in many states, these laws have been eroded and rendered unenforceable over time. Physicians who incorporated used professional corporation statutes to comply. These statutes required physician ownership but preserved the intent of the law.
The erosion of anti-corporate ownership laws started when many states exempted not-for-profit hospitals from them, leading to large-scale purchase of physician practices by health systems starting in the 1990s. Employee clinics for larger companies also became more prevalent in the 2000s.
If we fast-forward to 2021, we see that most of the goals of the laws prohibiting corporate medical practice have been lost. Medical decision making now is influenced by everyone from insurers and government policymakers to the administrators of corporate entities that employ physicians. This interference takes the shape of prior approval requirements, hospital length of stay requirements, formularies, administrative control of scope and operation of medical practices, and even includes our new value-based contracts requiring physicians to take insurance risks. No wonder physicians have signaled a deep sense of dissatisfaction with the current state of medicine and a growing disenfranchisement.
The last decade has also seen a major and accelerating shift in the basic structure of the U.S. health care system. Whether intentional or not, the opportunity for corporations to extract profits from a high cost and inefficient system is undeniable.Venture capital has entered the health care system at a historic and accelerating rate. In the first half of 2021 over $21.8 billion has been invested, up from $16.8 billion for all of 2020. Some of this increase can be traced to Covid response and the new opportunities for innovation and increased investments in telemedicine technology. However, there is also increasing venture capital investment directly into the structure and provision of primary care services. This represents a marked shift, and the implications of such a change makes it worth pointing out. How will this affect the future of the US health care system?
Venture capital and for-profit investment is nothing new in health care. But traditionally most of these investments have been in technology, medical devices, support services, insurance administration and pharmaceuticals while professional services were provided mainly by not-for-profit hospitals, physician practices and nonprofit community-based organizations.
The entrance of for-profit organizations and venture capital investors into the direct or indirect provision of physician services has accelerated as have practice acquisitions by insurance companies and other for-profit entities. Consolidation across the industry is also increasing. Massive hospital mergers and the move to vertical integration across sectors among some of the largest health care players, such as CVS’s purchase of Aetna, should give us pause.
Consider that in 2000 only 1 of the top 25 Fortune 500 companies was in health care. By 2020, 9 of the top 25 were primarily health care businesses with several others in the top 25 entering the health care space, according to Forbes.
The primary goal of for-profit corporations is returning value and profits to shareholders. The primary goal of venture capital is growth and increased value of the investment with the goal being a sale (or exit) or IPO in which the company sells shares to realize profit. Such business outcomes result in physicians suddenly working for someone new.
The newest and growing area of for-profit investment is in primary care. This potentially disruptive trend ranges from opening franchise practices aimed at specific populations, insurers and other corporations purchasing or opening primary care offices, and primary care aggregators contracting in the value-based movement.
How will these trends affect community access to primary care, particularly among the most vulnerable populations? Will they lead to greater fragmentation of care? How will the profit motive affect the mix of physician to NP/PA staffing of clinics?What will the primary care system in the US look like in 10 years? If they produce greater efficiency and better outcomes, will it really reduce the cost of health care for patients and businesses that pay for insurance coverage, or will the savings merely result in additional profits for investors?
While many of these changes may accelerate innovation in health care delivery, I believe there is a corresponding and ever-increasing need for greater transparency.Patients deserve to know who owns the practice or site where they are receiving care and what are the qualifications and motivations of those proving that care. As health care increasingly is provided by for-profit entities and becomes more consolidated, policy makers need to step back and look at the implications and unintended consequences of this move to a corporate practice of medicine that our states feared a century ago.
L. Allen Dobson Jr., MD, FAAFP, is a family physician and Editor-in-Chief of Medical Economics®.