Health Care for Profit – Is Government Abdicating Its Responsibility?

Investors have taken a keen interest in Urgent Care Centers. Private equity firms and venture capitalists have eagerly invested in corporations managing these centers in addition to the corporations managing the consolidation of hospitals and physician practices into large for-profit health care conglomerates. Mergers and consolidations have occurred at a rapid rate as the Affordable Care Act (ACA), which requires all to have health insurance, increases the profitability of health care services. The hope and intention of the ACA was to improve healthcare and reduce costs. But as corporations buy out hospitals, other health care facilities, and physician’s practices to create large for-profit entities, the likely result is just the opposite. 

It is an established principle that corporations are not charities. “A Corporation is organized primarily for the profit of stockholders, and the discretion of the directors is to be exercised in the choice of means to obtain that end and does not extend to the reduction of profits or the non-distribution of profits among stockholders to benefit the public, making the profits of the stockholders incidental thereto.” (Dodge et al. v. Ford Motor Company et al., Supreme Court of Michigan. February 7, 1919.) 

Hence, corporations are beholden to their shareholders, not to customers or employees. Maximizing profits implies minimizing costs of producing goods and providing services and increasing prices for products and services as demand increases. Cost is often minimized by sacrificing quality. For discretionary purchases this may not be an issue. A person can choose whether or not to purchase a product based on their ability or willingness to pay the price. However, most health care needs are not discretionary. People who are ill have an immediate need and are not in a condition to “shop for the best deal,” and even if they could, they would be constrained both by their insurers and the available facilities. 

There is no competition to control the cost and quality of healthcare, and government is giving the market free rein.  In the for-profit corporation, health care is a service expected to generate profit; patients are customers expected to provide revenue, and the goal is to maximize revenue and minimize cost. This situation guarantees neither low cost nor good quality healthcare, and it invites abuse. The products and services of the healthcare industry are examinations, tests, surgical procedures, and drugs, the need for which patients typically are not able to evaluate. They rely on recommendations of medical professionals, who as employees of these corporations are incentivized to maximize revenue. Excessive, unnecessary tests and procedures are a common result, exacerbated when corporations invest in new medical equipment and encourage their use to recoup costs. At best these excesses are simply costly; at worst they cause harm. But a patient who is harmed also becomes an additional source of revenue, unaware that the new difficulty is a result of poor-quality treatment. For-profit health care invites abuse and is the antithesis of quality, cost-effective health care.  Shouldn’t government intervene?