Corporatization | gutsandgrowth

There are several insightful and concise articles that highlight the reasons for increased U.S. healthcare costs as well as challenges: corporitization of health care, private equity, and health-harming corporations.

A Mollica, AW Mathews. WSJ 4/6/26: Why the U.S. Spends So Much on Healthcare

An excerpt:

“Americans spend more on healthcare than anyone else in the world. Just insuring a family here costs nearly $27,000 a year, enough to buy a car. The main cause: Prices are far higher in the U.S. for the same medical products and services, from surgeries to drugs.

American patients have also been using more care recently, including costly hospital treatment and expensive new drugs for weight loss.”

Prescription drugs cost a lot more in the U.S.
Big hospitals can charge higher rates because of consolidation
The U.S. spends far more than other countries on administration
Labor costs are higher
Americans are using more healthcare

LP Casalino. N Engl J Med 2026;394:1249-1251. Physicians, Corporatization, and the Unmeasured Quality of Care

This article notes that historically, in economic experiments, physicians have acted more altruistically than members of the general population and this results in better outcomes for patients. However, “extreme size and corporate ownership are leading to the widgetization of care. It is difficult or impossible for a large organization, even one with well-intentioned leaders, to avoid treating its physicians and staff like interchangeable widgets whose behavior can be monitored and controlled to maximize profit….Physicians who feel like widgets are more likely to behave like widgets…there is evidence that corporatization is leading to higher prices, higher health care spending, and unchanged quality or poorer quality.”

R Yearby, M Alson. N Engl J Med 2026;394:937-940. Private Equity’s Transformation of American Medicine — Implications for Health Equity

An excerpt:

“Accumulating evidence presented in scholarly articles and government reports indicates that the proliferation of PE in health care has reduced access to care, increased costs, and compromised quality of care…PE firms often extract value using tactics that obscure a health care system’s profitability while maximizing financial returns for the firm and its investors. These tactics include sale–leaseback transactions, in which facilities are sold to entities affiliated with a firm and then leased back to the seller at inflated rates. Another strategy is dividend recapitalization, whereby fund managers take on additional debt to pay partners instead of putting money toward staff, critical maintenance, or supplies…

PE investors achieve cost savings by laying off workers, reducing salaries and the number of full-time employees, assigning services previously provided by physicians to other health care professionals, and cutting critical but low-profit services…

Cream skimming — selectively caring for healthier (i.e., lower-cost) patients — is another widely used PE practice. This tactic limits access to care for older and sicker patients, leaving them worse off after PE investment.² Despite this behavior, hospital acquisitions by PE firms have been associated with increases in emergency department deaths and deaths after emergency surgeries.^3,5“

Consortium of the Center to End Corporate Harm, University of California, San Francisco. N Engl J Med 2026;394:1231-1237. Corporate Vectors of Chronic Disease — Using Internal Industry Documents to Craft Counterstrategies

An excerpt:

“Health-harming corporations use common tactics to corrupt scientific data, including influencing research questions, attacking and discrediting independent science and scientists who do not support the industry’s position, suppressing scientific data on the health harms of their products, and sponsoring research that downplays those harms.^27,28

For example, the primary U.S. manufacturers of perfluoroalkyl and polyfluoroalkyl substances (PFAS) — DuPont and 3M — used multiple tactics to downplay evidence of PFAS toxicity, including successfully suppressing for more than 20 years internal studies showing adverse effects of PFAS…

Corporations have various tactics for influencing the public’s beliefs about their products’ benefits and harms. These include sophisticated and pervasive advertising and marketing campaigns; use of public relations companies, front groups, and think tanks; and capture of consumer groups.

For example, opioid manufacturers deployed particularly insidious advertising strategies for marketing opioids to vulnerable populations, such as recruiting youth coaches and school nurses to encourage opioid use by children, developing unbranded initiatives encouraging adolescents to ask clinicians for pain medications, promoting “safe opioids” for untreated pain in women, and distorting policy discussions of unmet needs for pain medication…

Make America Healthy Again initiative highlights the roles of toxic chemicals and pesticides, ultraprocessed foods, and corporate influence on science in harming children’s health.⁴⁷ But…the administration has appointed former lobbyists and scientists from the chemical and petroleum industries to lead EPA offices responsible for regulating air pollution, toxic chemicals, and pesticides^48,49 — and plans to eliminate regulatory and other measures, which will lead to increased exposure to toxic chemicals and air pollutants, thereby increasing child health risks.^50,51

My take: Poorly-regulated capitalism is not good for patients. Insurers, private equity, hospitals, pharmaceutical companies and many providers may prioritize profits over care.

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A Chandra, M Shepard. NEJM 2025; 393: 833-835. The Corporatization Deal — Health Care, Investors, and the Profit Priority

The authors of this article have a sanguine interpretation of the health care landscape. Here are some excerpts:

The health care industry is exceptional in the United States: it relies on private businesses operating in markets to fulfill a fundamental human need. Because of health care’s essential nature, many observers have viewed the growing influence of large companies in the industry, known as “corporatization,” as odious, akin to privatization of fire and police departments. The corporatization of health care often evokes images of rapacious companies that prioritize profits over patients, since corporations operate according to the logic of business, emphasizing efficiency and financial returns, whereas medical institutions have traditionally operated as professional or charitable enterprises…

Evaluating corporatization requires understanding why it occurs, when it can succeed, and why it can go wrong.

Corporatization represents a deal between organizations and investors. New technologies, upgraded facilities, research and development, and competitive salaries are expensive but are necessary to meet the expectations of patients, who value improvements in health more than improvements in other goods. Investors supply the capital needed to support these enhancements and, in exchange, expect a financial return on their investment….Corporatization unlocks capital in return for growth that prioritizes profits, and investors may take an ownership stake in an organization or adjust management incentives to generate the necessary profits.

But is this deal a good one?…agreements are voluntary and therefore presumably benefit the investors and medical organizations involved. But the key question for society and for policymakers is whether corporatization benefits groups that are not party to such deals: patients and payers…

But for several reasons, health care is exceptional among U.S. markets in that profits and value often don’t align.

First, patients may not be able to accurately assess the quality of medical care, so firms can make money by cutting corners, with little fear of affecting demand. Second, firms may engage in corporatization simply to build market power, which drives up prices. Third, many medical products and services are fundamentally unprofitable because people who could benefit from them cannot afford them…

Corporatization’s effects on nursing home care appear to be largely negative. After being acquired by a private equity firm, nursing homes tend to avoid sicker residents, deliver lower-quality care, and have higher resident mortality² …

The biopharmaceutical industry is an example of a sector that probably couldn’t exist without investors, since enormous amounts of funding are needed to conduct expensive clinical trials with high failure rates…

Corporatization isn’t the only tool medical firms can use to raise capital. One alternative is government funding, including subsidized loans or tax credits. But relying on public financing has downsides. Governments struggle to identify what patients want, owing to bureaucratic hurdles, a lack of incentives, and budgetary constraints. They are also subject to shifting political climates, making them unreliable funders for large or long-term investments that require steady outlays…

What steps can be taken to unlock the benefits of corporatization while limiting its harms? The guiding objective should be better aligning profits (which drive corporate decision making) with value for patients…

A second approach involves empowering regulators to enforce antitrust rules aimed at limiting market power that wasn’t sanctioned — or regulating prices when those efforts fail. But regulators already have these goals and struggle to achieve them because of tight budgets and bureaucratic limits…

Corporatization will always involve trade-offs because there is no simple or universal “fix” to align profits with value for patients. In each area of medicine, regulators will need to decide whether the deal inherent to corporatization is a worthwhile one — and whether the alternatives are any better.

My take: It is refreshing to see a different viewpoint regarding the profit-driven U.S. health care system. While this is not the system most observers would have created, it is what we have and the currently available alternatives could be worse.

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