A Sick System

The Old Post Office

building in Washington, with its observation tower that looms over the Federal Triangle, once housed Donald Trump’s hotel, but it was converted into a Waldorf Astoria last summer. The ornate sensibility remains in its grand ballroom, where in early June, the ratio of humans to massive crystal chandeliers was unsettlingly low.

Just about every corporate representative with the slightest relationship to health care had assembled to hear from Biden administration officials, members of Congress, and industry CEO s at POLITICO’s Health Care Summit. It was fittingly co-sponsored by a pharma company whose sole organically developed drug is a blend of ibuprofen and famotidine (Pepcid AC) that retails for $2,500 a bottle, and the lead trade group for the private equity industry, whose longtime leader Drew Maloney opened the summit with a panel on “private equity’s role in improving digital and virtual health.”

Following Maloney’s lead, nearly every panelist spent some time touting the transformative potential of technology and artificial intelligence in healing patients and, not incidentally, saving money. North Carolina urologist-turned-Republican congressman Greg Murphy, beaming in from a House Ways and Means markup seven blocks east, was lavishing praise on the miraculous ability of telemedicine to provide quality Hospital at Home™ treatment to his constituents in the Outer Banks (where two of its three actual hospitals have closed over the past decade), when his Zoom stream froze for 20 seconds. Somehow, nobody laughed.

Later, after multiple panelists explained how “food is medicine”—an unwitting reference to the 2020 CMS rule enabling Medicare Advantage insurers to entice seniors with debit cards they can use to buy groceries—guests were treated to an open bar featuring artisan tequila and full-sized Belgian waffles with fudge sauce and sprinkles. In other words, the gathering exemplified much of the current American health care predicament: empty buzzwords, hysterically misplaced confidence, chronic bad habits, and wads of corporate cash.

A week later and seemingly on the other side of the universe, another health care conference transpired in decidedly less gilded fashion. The “Take Medicine Back” summit was entirely virtual and attended almost exclusively by doctors, who heard presentations about the creeping financialization of health care and the moral injury medical professionals feel from serving an investment portfolio rather than their oath to provide care.

Mitch Li, a politically progressive emergency physician based in Black Mountain, North Carolina, founded Take Medicine Back to expose the abuses of private equity buyouts of medical practices. His most reliable political ally and one of the few policymakers who spoke at the conference, North Carolina state Treasurer Dale Folwell, is a central-casting cultural conservative. The two met through Mountain Maladies, a grassroots campaign to unwind for-profit hospital behemoth HCA’s 2019 purchase of Asheville’s Mission Health, the monopoly network of western North Carolina. Both men have come to regard HCA as the apotheosis of a broader “profits over patients” mindset that has infected every corner of the health care system.

HCA doctors seem to concur. An astonishing 27 of them from 16 hospitals corroborated a sinister story about administrators employing a “vulnerability index” algorithm to identify patients who are closest to death, and charging staff with persuading their loved ones to abandon life support in favor of hospice care, often without consulting the patient’s attending physician. A tear - ful mother described how HCA clinicians barged into her 42-year-old daughter’s Austin, Texas, room to pressure her into pulling the plug on her ventilator, lest she spend the rest of her life caring for a “vegetable.” The mother refused, and her daughter, who had a virulent case of pneumonia, ultimately made a full recovery.

Since acquiring its own hospice provider two years ago, HCA’s discharge rate has jumped to roughly twice the national average, according to new research from the Service Employees International Union. Unlike hospitals, which are paid a flat fee based on a given diagnosis, hospices charge Medicare by the day regardless of whether they administer any services, so conglomerates like HCA are incentivized to convert acute patients with alacrity. And even if a patient dies immediately upon discharge, HCA frees up the hospital bed for another patient, and gets the death “off their books,” lowering the mortality metrics of the discharging hospital. Those metrics are part of the calculation for HCA executive bonuses.

While American life expectancies are in free fall, our agencies and institutions and algorithms are all nurturing an industry that has perversely taken to the promotion of death rather than treatment—which would be infuriating even if health care weren’t consuming a fifth of the GDP.

We live in an age of real innovations in medicine. During the coronavirus crisis, the mobilization of treatments and vaccines accelerated at record speed; associated technologies with mRNA could legitimately put a dent into cancer mortality; and Ozempic may have accidentally cured addiction. By the boasts of many in the field, we are on the precipice of extending lives and eliminating the worst infirmities.

The problem is, because the country essentially lacks any institutions designed to broadly improve public health, our medical advances are funneled through a veritable gauntlet of gatekeepers, distributors, middlemen, subcontractors, loopholeexploiters, conglomerates, and monopolies, all under the watchful eye of Wall Street investors. Managing a hospital or clinic today requires hiring an ever-mushrooming cadre of lobbyists, consultants, and contractors to navigate this confusing new world. The science of health care points to a bright future; the business of health care points directly backwards.

Whereas at the Waldorf, a seemingly bottomless reserve of uniformed skilled humans managed the check-in lines, replaced the coffee urns, and whisked away every dirty plate and lipsticked glass within seconds, facilities caring for our fellow citizens are chronically understaffed, as slashing labor costs raises profits. Shortages of doctors and nurses, and medical deserts that send patients scrambling to find care, have now extended to routine shortages of cheap cancer drugs and penicillin and even IVs composed of salt and water in a bag.

Where is the money for the most expensive health care system in the world going? The cut of gross national health care expenditures commanded by administrative overhead and waste has ballooned to an estimated 30 percent; the portion that pays doctors and nurses has fallen. Experts estimate that fraud comprises at least $10 of every $100 the U.S. government spends each year on health care. And how much does the government spend policing that fraud? In 2021, that figure was two cents, according to the HHS inspector general. Wealth extraction has become so normalized in American health care, it can barely be considered illegal.

For much of the 20th century, doctors were the foremost enablers of this for-profit construct, because doctors (theoretically at least) operated the cartel that controlled how medical care was financed. For decades considered the most powerful lobby in Washington, the American Medical Association and its 2,000 affiliated state and county medical societies worked tirelessly to preserve its preferred mode of financing medicine, whereby doctors set the fees for medical services and patients paid them, without “intrusion” from government or any other third party.

The AMA and its allies worked to sabotage every gesture that might get people comfortable with public options in health care, even things as obviously worthwhile as mass polio vaccination drives or rural prenatal care clinics. The principle that supposedly reconciled this reactionary opposition with the AMA’s idealistic origin fighting the “patent medicine trust” in the late 19th century was its steadfast opposition to the “Corporate Practice of Medicine.” Critics archly pointed out that the medical societies never seemed to sanction doctors who milked the system by investing in hospitals to which they also referred patients. But the cartel’s interventions did sustain medicine as an industry of small and smaller businesses.

The AMA stranglehold over medicine loosened considerably in the 1970s. A series of court rulings and an FTC investigation overturned certain antitrust exemptions. Then the 1973 HMO Act created a class of enterprise that was explicitly exempt from corporate medicine bans, which remain on the books in 33 states. By 1980, the cost of American health care had begun to decouple itself entirely from other developed-world systems. In hindsight, the difference between an industry dominated by small-business greed and corporate greed was profound.

Corporate medicine exists in symbiosis with the public sector. The government funds half of all American health care expenditures today, up from less than a third during the 1990s. But to call these programs “public” would be unnecessarily generous. Nearly 84 percent of Medicaid beneficiaries are enrolled in some form of private managed care—the updated numbers may be as high as 90 percent— and more than half of all new enrollees in the Medicare program are opting for privately provided Medicare Advantage plans, which have proven such a reliable profit generator for insurers that virtually the entire retail industry, from Amazon to Walgreens, seems to be shifting to a Medicare Advantage play. The Veterans Affairs health system, the closest thing this country has to socialized medicine, is being rapidly privatized. And when Congress was finally roused to do something about the shame of tens of millions of uninsured Americans in 2010, it offered premium support on exchanges to purchase private health insurance. The top seven insurance company CEOs made $335 million last year.

Progressives dream of vanquishing private insurance, and establishing a single-payer system. But even if they could, it’s hard to imagine “Medicare for All” in today’s America as anything other than a corporate gravy train. And the most radical opponents of that gravy train, ironically, are the same AMA members who once were predisposed to attack national health care. Those inside the system have reconciled to the fact that something is deeply wrong with the way we practice medicine.

In this Prospect special report, we look at the business of health care, the inner work- ings of the monopolies and cartels extracting ever-greater sums for ever-lousier outcomes, and the policies and protocols pushing doctors and nurses to the brink— and increasingly into labor unions.

One of the most maddening trends, as HCA’s conflict-ridden foray into the hospice business shows, is vertical integration. The HMO empire UnitedHealthcare, now the nation’s largest insurer and the largest employer of physicians, is perhaps the most vivid embodiment of a company whose structure dangerously incentivizes the neglect of patients and denial of care. We’ll explore the continued shifting of veterans into private medical care, re-examine the misunderstood saga of “Pharma Bro” Martin Shkreli, whose own practice of charging a half-million dollars a year for rare-disease drugs is fast becoming the dominant method of Big Pharma, and examine the retail-ification of health care through the unlikely pivot of Dollar General, whose rural locations are patronized by some of the sickest people in America.

We will document the growing influence of private equity in health care, epitomized by a supremely knowledgeable health policy veteran who has spent the last 20 years using private capital to exploit pieces of a system he was instrumental in creating. And we’ll meet a young, Southern family doctor (and abortion provider) at one of that private equity firm’s clinics, who recently quit her day job to join the ideologically heterodox ranks of the direct primary care movement, which aims to emancipate patients and medical professionals from the cesspool of corporate medicine in favor of a Substack-style subscription model.

Together, we hope these stories capture a reality that gets missed by a mainstream media too hopped up on trendy buzzwords and misinformed by the experts and influencers who spend more time rubbing elbows at happy hours than they do talking to frontline workers. It’s not a pretty picture. But it is an industry where we discovered an inspiring sense of solidarity among doctors and nurses, and a disarming sense of clarity about the fundamental conflict between caring for patients and delivering value to shareholders. That, if nothing else, could light a path forward to a more caring future. n