The recent slew of mergers and acquisitions is part of a larger corporate transformation that is remaking American healthcare – for the worse
By Adam Gaffney for The Guardian
A golden age of corporate medicine may be dawning. A slew of mergers and acquisitions looks set to transform American healthcare, drawing health insurance giants, pharmacy benefit managers, physicians’ practices, drugstores, surgical centers and “retail clinics” in pharmacies and supermarkets together into giant corporate healthcare blobs. Whether you view this as a positive development may depend on your stock portfolio: good for industry profits, perhaps, but almost certainly detrimental to the public’s health.
Last week, health insurance giant Humana bought a large physicians’ group based in Florida, which comes on the heels of recent news that retail behemoth Walmart may be angling to buy Humana. Meanwhile, drugstore giant CVS, which already runs a pharmaceutical benefits program and the nation’s largest chain of retail clinics, is buying insurer Aetna for $69bn even as it expands into the dialysis game. And health insurer UnitedHealth Group has been gobbling up physicians’ practices from coast to coast, building a powerful “army of tens of thousands of physicians”, as Bloomberg puts it, alongside more than 200 surgical facilities and 230 urgent care centers.
Some contend that assembling different healthcare enterprises under one roof might sometimes deliver value to “consumers”. By buying Aetna and “more closely aligning management of drug benefits and other types of benefits in one organization”, health policy expert Austin Frakt noted in the New York Times, “CVS could be acting in ways that ultimately benefit consumers”. And as Craig Garthwaite, professor of strategy at Northwestern University’s Kellogg School of Management, said of another deal to Bloomberg: “You can see the strategy by which they could make investments that make people healthier for a patient that’s both a Humana enrollee and a Walmart customer.”
But whatever the purported efficiencies of vertical integration may be, these deals should be seen as part of a larger corporate transformation that is remaking American healthcare – for the worse.
Consider corporate medicine’s track record. Dialysis is dominated by corporations – the two largest are DaVita and Fresenius – that do a comparatively poor job keeping their patients alive. A 2011 study in Health Services Research found that for-profit chains had 13% higher risk of mortality than not-for-profits. DaVita, meanwhile, has paid out hundreds of millions in recent years to settle claims including Medicare fraud and overuse of a potentially harmful medication.
Evidence of corporate medicine’s paltry performance goes beyond dialysis. A 2014 study found that although there were gaps in the literature, for-profit providers overall achieved inferior outcomes, while a 2002 meta-analysis found that patients at for-profit hospitals had a higher risk of death as compared with not-for-profits.
Why? The investigators of the latter study offer one theory. For-profit institutions have unique expenses (eg profits and high executive salaries) but receive similar reimbursements, which creates a challenge: “They must achieve the same outcomes … while devoting fewer resources to patient care.” Not surprisingly, they often fail.
Corporate providers also seem prone to unsavory behavior. A decade and a half ago, the Hospital Corporation of America (HCA), the nation’s largest for-profit hospital chain, reached settlements with the federal government totaling $1.7bn for what the Department of Justice called the “largest health care fraud case in US history”. And a 2012 New York Times investigation found that HCA has more recently shaved costs by deciding “not to treat patients who came in [to the emergency room] with nonurgent conditions, like a cold or the flu or even a sprained wrist, unless those patients paid in advance”.
The comparative performance of physicians’ practices operating under new corporate roofs, “retail clinics” sprouting up in pharmacies and supermarkets and for-profit free-standing emergency rooms and urgent care centers is not yet entirely clear. However, there is reason to believe that they are increasing costs (such as by inducing excess healthcare use where it may not be needed), while doing little to increase healthcare access. A 2016 study in Health Affairs, for instance, found that retail clinics increased spending for “low-acuity conditions”, like colds, by 21%. And both free-standing ERs and retail clinics are disproportionately located in high-income areas, where new healthcare facilities are least needed.
It’s still too early to know if these new, vertically integrated corporate healthcare ventures will succeed financially. Squeezing profits from sick people is, after all, a tricky business.
But whatever their financial future, the advancing corporatization of American healthcare will fail for a more fundamental reason: cutthroat corporate profiteering and the humane provision of healthcare don’t mix. As healthcare reform returns to the national political discussion, we should be talking about cutting corporate America out of the healthcare system altogether – not welcoming them in.