The Financialization of U.S. Health Care: Implications for Patients' Health and Finances

The U.S. health care system has been undergoing significant changes, primarily driven by new forms of financial-sector ownership and influence. This article explores the intersection of finance and healthcare, focusing on the implications of these changes for patients' health and finances. It also raises critical questions about how these shifts, geared towards short-term profit growth, affect the quality of healthcare delivery.

The Rise of Financialization in the Health Sector

According to a study published in the New England Journal of Medicine, the U.S. health care system is increasingly characterized by the financialization of its operations. This term refers to the growing influence of financial markets, motives, institutions, and elites in the economy and society. Financialization is distinct from corporatization and privatization, and it has resulted in the remaking of the U.S. health care landscape.

Key drivers of financialization in the health sector include economy-wide shifts that occurred in the 1970s and 1980s, as well as a series of regulatory and policy changes. This trend has led to changing patterns of ownership and accumulation, with a growing number of health care entities being acquired directly by financial actors, such as private equity firms and real estate investment trusts. Moreover, health care entities like hospitals and insurance companies are increasingly behaving like financial firms, pursuing strategies such as mergers, acquisitions, and nonoperating income.

Private Equity's Increasing Role

The role of private equity (PE) firms in U.S. health care has seen a considerable rise. As reported in JAMA Cardiology, the estimated annual acquisition values of health care-related PE surged from $41.5 billion in 2010 to $119.9 billion in 2019. Specialties like cardiology have gained substantial interest from PE investors due to the high cost of cardiovascular disease and high-priced outpatient procedures. While PE provides smaller practices with capital to support operations and scale, there are concerns about adverse patient outcomes and misallocation of resources.

The Impact on Health Equity

Despite private capital's increasing involvement in health care, many argue that it may not be the solution to addressing health inequities. An article in The American Journal of Managed Care highlights the prioritization of shareholder value over patient health in the financialization of health care. It also points out the negative impacts of PE investments, such as increased costs to patients and payers, hospital closures, and a diminished focus on public health needs.

Looking Ahead

Despite a slow-down in deal volumes in 2023, the Boston Consulting Group forecasts a more robust transaction volume in the future. Dry powder held by U.S. private equity investors has reached an all-time high of some 1 trillion, indicating that the capital is there to make deals happen once confidence grows. However, it's critical to consider key market trends such as labor shortages, inflation reduction, evolving regulatory landscape, and margin pressures in healthcare investments.

Conclusion

As the financialization of the U.S. health care system continues, it's vital to critically evaluate its implications for patients' health and finances. While financial actors see opportunities for profit growth, the potential adverse impacts on patient outcomes and health equity deserve scrutiny. Policymakers and health providers must prioritize patient needs and ensure that these new forms of financial-sector ownership and influence do not compromise the quality of care delivered.