When it comes to providing the best medical care, how that care is funded can have a massive impact on its quality and availability. In a recent paper published in the New England Journal of Medicine, Amitabh Chandra, the Zimmerman Wiener Professor of Public Policy, director of the Harvard Healthcare Policy Program at the Mossavar-Rahmani Center for Business and Government and faculty director of the Malcolm Wiener Center for Social Policy at HKS, and Mark Shepard, associate professor of public policy, parse the pros and cons of different healthcare economic models to confront common attitudes about how healthcare systems ought to work in light of increased corporate influence and what effects those choices have on patients and care. (Chandra also discusses this research in the journal's podcast.)
Healthcare is a service that everyone needs. As such, it fulfills a fundamental task in a functioning society. For this reason, a segment of the population see the increased corporatization of healthcare as a negative trend as it places corporate aims, like profit, efficiency, and financial viability over the essential care of patients. However, this belief lacks nuance and may not in all cases be true, as Chandra and Shepard explore. Chandra and Shepard write, “Evaluating corporatization requires understanding why it occurs, when it can succeed, and why it can go wrong.”
The authors contend that corporatization is a response to patients’ demands for innovation and improvement in their care. When deciding to invest in improvements to facilities, medicines, and more, investors seek a return for the outlay of resources they provide and the risk they face in the process. If the investments needed for improvements to provide a high standard of care are small or even moderate, conventional forms of investment can be leveraged in ways that do not inherently affect care standards or priorities. However, not all needed investments are small or moderate; some are quite large. Chandra and Shepard write, “The key question for society and for policymakers is whether corporatization benefits groups not party to such deals: patients and payer.”
“Evaluating corporatization requires understanding why it occurs, when it can succeed, and why it can go wrong.”
Amitabh and Chandra contend this is because healthcare is unique in the U.S. market as demand does not waver in most cases with the quality or scope of the healthcare provided or available. Profitability can be achieved by taking financially efficient shortcuts, consolidating market share, or avoiding providing care options that are expensive. This can lead to an environment in which profits and value do not have to align.
This is why, the authors argue, cases like the fertility treatment industry and its patients benefit from corporatization as service improvements driven by demand improve options. Yet in contrast, for nursing home care, where profitability increases patient costs and reduces care and/or services, corporatization has a very different negative effect on care costs and options.
The biomedical research arms of pharmaceutical companies are also unique in benefiting patients through corporatization with new and innovative treatment options. However, corporate aims “may distort the direction of innovation” as corporations seek to address more-common diseases while allowing rarer ones to languish with lesser or no attention. Corporations may also harm care options by influencing which ones are available or affordable, including guarding intellectual property in ways that are potentially profitable but that stifle other innovations and research.
Understanding why corporatization has happened—and what its positive aspects may be—is powerful, particularly as private fundraising is not the only option for healthcare finance. Public options are potentially viable, including public and non-profit options. These options raise their own challenges such as political volatility, budgetary constraints, and motivational problems in innovation.
The authors tackle whether a balance between these options can unlock the potential value of each in healthcare. Chandra and Shepard state that if corporations can orient toward patient value, patient demand may drive better quality services. They further state that regulators can use anti-trust and other regulatory tools to cap pricing or prevent unintended market constriction. Such practices are likely to be “imperfect,” the authors write, but they can help address present issues.
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