A new policy paper lays out the state of the heavily financialized health care system, identifying seven areas where financial actors and powerful industry players have exploited existing laws and regulations for private gain at the expense of patients, workers and taxpayers. The paper recommends specific policy reforms that can rein in industry profiteering.

The paper, End Profiteering in Healthcare, was written by CEPR co-director Eileen Appelbaum, Cornell University professor emeritus and CEPR senior research fellow Rosemary Batt, and Brandon Novick, CEPR’s Domestic Policy Coordinator. It is being released as part of the Game Changers series, a project of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. The Game Changers project seeks to identify bold, realistic policies across a range of economic issues – from health care and housing to the environment, labor, and trade – that defy conventional wisdom and offer a more compelling and inclusive vision. 

The End Profiteering in Healthcare paper focuses on seven areas: 

Public Infrastructure Financing

The decline of direct federal funding of construction of nonprofit hospitals and facilities leaves these healthcare organizations dependent on private financial markets. A return to a public system of loans and grants will create a more inclusive and equitable system where hospitals can put more emphasis on patients instead of the profit-seeking motives that boost their standing with financial markets. 

Stronger Rules for Tax-Exempt Hospitals

Nonprofit hospitals enjoy tax-exempt status based on vague ‘community benefits’ standards that studies show rarely yield meaningful results for local communities. A return to stronger rules that require hospitals to provide indigent care and the enforcement of the prohibition against self-enrichment would make healthcare more equitable.

Bankruptcy Debts Should Belong to the Financiers

Financial actors and investors in the healthcare system have created heightened levels of overall financial distress and higher bankruptcy rates, especially when private equity investors are involved. Existing bankruptcy rules that make it easier for these investors to saddle providers with debt linked to mergers and acquisitions must be re-written to ensure that all interested parties with a financial interest in the healthcare entity are responsible for the debts created by financial engineering. 

Stronger Staffing and Labor Rights

One of the most urgent problems facing healthcare workers and patients is understaffing, which causes hazardous and unsafe working conditions that negatively affect patient care. These staffing decisions are driven by financial calculations that boost profitability – all while CEO pay has risen dramatically. Mandated minimum staffing laws that raise nurse staffing ratios – like those in California and several other states – would improve care and bolster workers’ rights. Expanding education and training programs will help deal with staffing needs across the industry.

Hospital Chain Consolidation 

Decades of consolidation have undermined competition in local markets, leading to higher prices and reduced consumer choice. By 2022, 97 percent of metropolitan areas were defined as highly concentrated, with 47 percent having only one or two hospitals or health systems offering inpatient care. A robust antitrust enforcement agenda could prevent anticompetitive mergers and also break up companies with excessive market power.

Vertically Integrated Conglomerates

The healthcare industry has seen a wave of vertical integration, especially in the privatized Medicare Advantage program and the nursing home sector. The many subsidiaries of a health conglomerate provide services to each other at prices set by the parent or holding company. This encourages self-dealing that pads the conglomerate’s bottom line. Stronger policies to break up these conglomerates would reduce costs and increase competition. 

Replace the Patent System 

The United States spends more on prescription drugs than any other country, and the existing system of patent monopolies for prescription drugs and other medical products is the main driver. Patent monopolies not only lead to exorbitant prices, but they stifle true innovation, encourage dangerous secrecy, and promote corruption. Replacing this broken system with public funding of research through contracts and prize funds would re-orient priorities towards improving public health instead of industry profits.

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