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These trends together show that healthcare and the way it is delivered has changed quickly and dramatically in the past couple decades, and can negatively affect health care access for insecure populations. While in some ways, having a massive organization with multi-practice groups can create a one-stop shop for those receiving services, small practice groups being acquired can take those providers farther away from smaller, under-served communities and into population hubs where more patients are located. If a physician does continue to operate in the same location after an acquisition, the cost of those services can increase and bar some patients from receiving the services they need even while the practice looks the same to the naked eye.
Other research supports this assertion as well.
From 2012 to 2015, Medicare costs for four healthcare services rose $3.1 billion, and patients are facing $411 million more out-of-pocket costs compared to if those services had been performed in independent physicians’ offices rather than in a hospital outpatient setting.
Healthcare providers of these organizations must be deliberate to ensuring that these rural, underserved areas are not being neglected and forgotten in this switch, but this is a hard decision to encourage and incentivize increasing access for those who have an inability to pay in a for-profit setting.
While not losing focus on the importance of health care and the role it plays in determine someone’s quality of life, healthcare is still an enormous industry that is often driven by patient choice; this is assuming the individual has the ability, knowledge and financial means to determine where to spend their money or insurance coverage.
In 2018, 18.2 percent of the gross domestic product (GDP) was expended from health care nationally. This amount has steadily risen over the decades, with only 5 percent of GDP attributed health care in 1960. As with any industry, providers adjust their business practices to ensure that customers choose to take their business there, and more importantly, keep their business there.
As a Harvard Business Review explained, the health industry must learn to grow and adapt to not only providing healthcare, but also providing services to troubleshoot other issues that affect health such as social, environmental and personal choices. With the passages of the Affordable Care Act in 2010, payment structures have moved towards a “value-based healthcare” focusing on outcomes instead of “fee-for-services provided” arrangement that has dominated the payment landscape prior. The theory behind value-based healthcare is that it will reduce costs to achieve an efficient and better outcome for patients.
In the for-profit arena over 25 percent of community hospitals are investor owned. There is significant criticism of health care entities that are for-profit , including that for-profit entities exacerbate the issue of health care access, create unfair competition to their non-profit counterparts, and overall decrease the quality of care and service. It is further argued that for-profit health care entities only provide services that will make a profit instead of services that may be needed by patients. There are organizations, such as Health Over Profit, that campaign against for-profit health care and advocate for a universal healthcare system by expanding Medicare to everyone.
Proponents of for-profit health care can be just as convincing. One author asserts that hospitals, whether nonprofit or for profit, have no differences in efficiency, administrative oversight or quality of care. While non-profit hospitals provide more care without being compensated, for-profit hospitals serve lower-income populations while their nonprofit counterparts are located in geographic areas with higher incomes and fewer uninsured patients.
While criticisms of for-profit health care entities continue, the past few years have seen various merger & acquisition deals of for-profit entities in the healthcare industry with the aim to increase, not inhibit, access as critics claim. These could be formative in laying the groundwork for how healthcare will be delivered in the future, as prominent and innovative businesses are working to combine their talents to deliver healthcare in groundbreaking ways to consumers.
In December 2017, CVS Health and Aetna, a health insurer, announced a $69 billon merger where Aetna would become a standalone unit under CVS Health. Mark Bertolini, Aetna’s Chief Operating Officer, explained that the move provided a significant amount of leverage into getting consumers affordable and convenient care that they desired. Bertolini admitted that the deal would render the insurance arm of the company not nearly as profitable, but would instead shift the profit making closer to the customer base; he explained that so long as the company as a whole is producing favorable growth and dividends to the shareholders, then the structure benefits everyone.
Likewise, the Department of Justice recently approved the merger of Cigna, a health insurance company, with Express Scripts, a pharmacy benefit manager. It is not entirely clear how this deal will improve customer satisfaction and reduce cost however. “Both companies argue that the merger will benefit consumers by allowing Cigna and Express Scripts to better manage their customers’ health by sharing information about their medical and drug expenses… but it is unclear whether the combined companies will be able to negotiate lower drug prices and better manage people with expensive diseases.”
Perhaps the deal that catches the attention of the entire industry, Amazon, Berkshire Hathaway and JPMorgan Chase have established a health venture with the goal of reducing wasteful spending in administrative costs, lower high prices and avoid improper healthcare usage, according to the new Chief Executive Officer Dr. Atul Gawande. Amazon is reportedly still considering other ways to enter into the healthcare market through the pharmaceutical business, Alexa voice assistance and sales of medical supplies.
As technological advances are providing a variety of tools to make remote access achievable, more effective and affordable, who can bridge the gap between the technology itself and those who need it the most seems to be the million dollar question since so many Americans continue to go without needed health care. The non-profit organization typically lacks the funding to develop and launch the new technology, and the for-profit organization lacks the ability to operate without financial implications at the forefront of its mind. In recent years, states have approved a new entity, the social enterprise, that has the potential to address this problem in a meaningful way without the pitfalls that other organizations face.
The non-profit organization is the bedrock of the health care industry. It not only is the entity structure that provides for $10 billion plus hospital conglomerates, but also valuable research labs developing medical and technological advances as well as and local, grassroots organizations. Powerhouse nonprofit organizations and the parts of their entity that conduct research provide a great opportunity to develop and launch new technology, but for most nonprofit organizations this is not the case. Most grassroot organizations play a vital role in distributing and using those already developed technological advances, but the effort to get new technology on the market and being used by consumers and providers is outside the purview of most of these entities due the funding limitations that most non-profit organizations must navigate each day.
Through the recent mergers, acquisitions and joint ventures that have been announced in the past two years, it is apparent that for-profit businesses are moving toward making healthcare a more efficient, cost-effective and outcome-driven industry than it has been in recent history, which lends itself to a strong pragmatic argument of letting capitalism work on the health care market. With innovations and technology providing new opportunities for increased access and better healthcare, for-profit businesses are well-equipped in the management and funding to deliver these new technological advancements to not only affluent communities, but those who are in great need of accessible healthcare. While they are well equipped, for-profit entities are bound to their shareholder’s number one concern: making a profit. While there may be some exception few and far between, investing great sums in a technological advancement tailored to individuals who are unable to pay for them is outside the realm of possibilities for most for-profits because their allegiance is tied to making money for their investors.
Social enterprises are a relatively new business structure that state legislatures have been authorizing since 2008. These were created for companies who desire to create a positive social or environmental impact, but are still a vehicle to gain profit just as a for-profit entity. These types of enterprises can be characterized as benefit corporations, low-profit limited liability companies, social purpose corporations, or benefit limited liability company; and many states have adopted some structure or another of this new type.
These types of business structures encourage making a profit and allow for investors to provide funding and capital while still allowing and encouraging that same corporation to make significant contributions to a cause that aligns with their business, cause or beliefs. A business that is innovative in the healthcare field and in the beginning stages of development can create a business entity in this form, gain capital from different sources, have private shareholders, but still have a the company work toward providing healthcare to underserved communities and populations without having profit be the entity’s only goal.
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