Financialization of Health Care: What We Can Do About It

Financialization means healthcare entities have become assets that exist to generate returns for shareholders and executive leadership rather than to provide care. It shows up as four administrative roles for every doctor, and two administrators for every person delivering direct care. CEO pay has doubled while clinician pay, doctors and nurses alike, has barely moved. And consolidation driven by these forces raises prices without improving quality, in many cases reduces access, and ultimately passes those higher costs to patients in a way that’s opaque enough that most people don’t see it.

The core fact for doctors as a group is that we’ve gone from a loose coalition of private practitioners to a workforce of employees. As of January 2024, 77.6 percent of physicians are employed by a hospital, health system, or corporate entity. In roughly the past five years, more than 44,000 practices have been acquired into larger corporate entities. We are in a totally different position than we were, and I see a few options.

First: if we’re going to be employees, we should act like employees, and the way an employed workforce advocates for itself is through unionization. You’ve seen it start in residencies, and I think it’s coming for attendings too, or certainly should. However you feel about unions politically, they’re a form of advocacy, a way to rebuild collective action and reclaim a seat at the table in the context we now find ourselves in. It’s incremental. It won’t change things overnight. But it’s the infrastructure for collective action that we need to be building.

Second: we need laws or provisions that require some share of executive leadership positions to be held by clinicians who actually work in the system. And one thing that gets overlooked: there is a provision in the Affordable Care Act that bans new physician-owned hospitals. There are literally laws against doctors running hospitals. That is an outrage, and it should be reversed immediately. Beyond that, we need rules that say it can’t be a room full of MBAs running the hospital system. There have to be doctors and nurses making those decisions.

Third: the payment system itself is a massive driver of the administrative burden, the arms race between payers and hospitals that sucks so much money out of the system. We need to end it, and part of that means finding payment approaches that sidestep insurance entirely. Insurers are a middleman that provides very little value. If we’re going to have employer-based health coverage, why not have physicians contract directly with employers instead of routing everything through a bureaucratic apparatus whose only incentive is to harvest as much money as possible?

We’ll get more specific about solutions in future episodes of Cut & Tell. For now, my hope is simpler. I want you to walk into your hospital with your eyes open. When you hear the hospital is acquiring something, understand why. When you see the shiny new lobby, understand why. Even if you work for a nonprofit that talks a big game about its clinical mission, and even though these organizations aren’t all bad, understand that at this point, all of American healthcare, for-profit and nonprofit, is driven by returns. It’s driven by making as much money as possible, because that is what every incentive is aligned to do.