06/10/2016 01:34 pm ET Updated Jun 11, 2017

Corporate Social Responsibility in Health Care: No Such Thing

We have some long unanswered questions in U. S. health care--Is health care in the public interest based on medical need, not ability to pay? Is it a commodity on an unfettered for-profit, largely investor-owned corporate marketplace? Is it different from other commodities? and Who is the health care system for--providers of services or patients?

The questions have not received much public or policy debate over the last 50 years, but the answers have been solidly entrenched in the medical-industrial complex over that period. Economist Milton Friedman, the University of Chicago's guru of market capitalism, set the pattern as early as 1967 in these words:

Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their shareholders as possible. (1)

Over the years there have been serious warnings about the lack of social responsibility of health care corporations and its negative impacts upon our society. In 1988, as president of the Association of Academic Health Centers, Roger Bulger foresaw these challenges with privatized health care:

Under the deregulated, decentralized systems approach to health care evolving in the United States, the main problem will be how to guarantee a requisite level of care for the poor and underinsured. How we answer that problem will be the true measure of our values, of our national character, and of the quality of our beliefs. (2)

So what has happened on this critical subject over the last 50 years? Any progress?
These examples show only acceleration of the predictable adverse impacts upon health care getting worse, and still without relief on the horizon.

• Corporate alliance against health care reform
As the Affordable Care Act (ACA) was being debated in Congress during 2008 and 2009, at least 3,300 registered lobbyists were lobbying for their special interests, plus another 90,000 to 120,000 unregistered people working on one or another aspect of the ACA's provisions--168 influence peddlers for every member of Congress. (3)

• Private health insurers
Although insurers are required by the ACA to offer coverage without regard to pre-existing conditions, they have many ways to profit from their expanded, subsidized markets, including high-deductible plans (ranging upwards of $5,000 a year), narrow networks that exclude a majority of hospitals and physicians in an area, continued increases in premiums to what the market can bear, high- coinsurance for specialty drugs, manipulation of risk scores to get higher reimbursement, and leaving markets that are not sufficiently profitable.

• Hospital systems
Expanding hospital systems game the new system by mergers that limit competition, having wide latitude to charge what they want, shifting some services to affiliated outpatient settings that cost more, using "observation days" to count toward CMS's rules requiring a minimum of three inpatient days before follow-up nursing home care will be covered, and having very high administrative costs (25 percentof total hospital expenditures) (4).

• Pharmaceutical industry
In large part driven by intense direct-to-consumer advertising since the 1990s (banned in most advanced countries), the use of prescription drugs by Americans has reached an all-time high, with many people taking five or more medications. The industry has successfully avoided negotiated drug prices through ongoing lobbying efforts (the Veterans Administration is an exception, having for many years achieved discounted prices down to about 58 percent of what we pay). Drug manufacturers raise prices to enormous levels, make false claims for R & D costs, and frequently conduct biased research of their products' effectiveness. Pharmaceutical companies have defrauded federal and state governments by $35 billion over the last 25 years, most commonly by marketing drugs for unapproved uses.(5) We pay much more for these drugs than other industrialized countries, and the industry has long resisted cost-effectiveness research.

• Medical device industry
Prices of medical devices can vary widely from one part of the country to another without transparency. Confidentiality clauses in many of the industry's purchasing agreements prohibit hospitals from sharing prices with third parties, including physicians, insurers and patients.(6) Manufacturers often continue marketing their products after they have been found defective, gaming a regulatory loophole not requiring evidence of safety and effectiveness; one example is the all-metal ASR hip replacement of the DePuy orthopedic division of Johnson & Johnson that led to some 5,000 lawsuits against the company. (7)

• Investor-owned care
We have seen a long track record over many years that investor-owned hospitals, HMOs, dialysis centers, nursing homes, and mental health centers cost more than their not-for-profit counterparts while providing lower quality care. (8)

• Wall Street intrusion and conflicts of interest
Recent decades have seen increasing links between physicians and Wall Street, filled with conflicts of interest and devious practices. A new industry has emerged to facilitate consultation by physicians to the investment industry. These "consultations" typically relate to the conduct, status, and preliminary results of ongoing clinical trials of drugs. Some physicians have leaked critical information about their drug research to Wall Street firms (9), while some stock analysts have posed as physicians conducting a trial. (10)

In a recent analysis of "value creation" vs. "value shifting," Princeton University's economist Uwe Reinhardt showed us how corporate executives and their advisors exaggerate social value of their products and shift their costs to patients through so-called "value pricing." (11) Dr. Don McCanne, leading U. S. health policy expert, summarizes this problem:

Bringing us new beneficial health care services and products creates value, whereas extracting more revenues from the ill without providing any further health benefit shifts value, creating more wealth for the owners of capital (rent-seekers). Value shifting is pervasive throughout our health care system and has been detrimental to the health and finances of middle- and low-income individuals and families. (12)

This situation is not sustainable. Our corporatized system is failing the public interest and continues on without any semblance of social responsibility. There is a fix--single-payer national health insurance, with a larger role of government to rein in corporate abuses, coupled with a private system to deliver health care services. This will challenge our democracy vs. the ruling oligarchy as the stakes get higher every day.

John Geyman, M.D. is the author of The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans


1. Friedman, M. Capitalism and Freedom. Chicago. University of Chicago Press, 1967.

2. Bulger, RJ. Technology. Bureaucracy and healing in America: A postmodern paradigm. Iowa City, IA. University of Iowa Press, 1988.

3. Kroll, A. Lobbyists still run Washington. The Progressive Populist, October 15, 2009.

4, Himmelstein, DU, Jun, M, Busse, R et al. A comparison of hospital administrative costs in eight nations: U. S. costs exceed all others by far. Health Affairs, September 2014.

5. Almashat, S. Pharmaceutical industry continues to defraud federal, state governments. Public Citizen News, May/June 2016, p. 7.

6. Dolan, E. Price variation and confidentiality in the market for medical devices. The Health Care Blog, February 14, 2012.

7. Meier, B. Hip implants U. S. rejected sold overseas. New York Times, February 12, 2012: A1.

8. Geyman, JP. The Corporate Transformation of Health Care: Can the Public Interest Still Be Served? New York. Springer Publishing Company, 2004, p. 228.

9. Kaiser Policy Report, August 9, 2005.

10. Anand, G, Smith, R. Trial heat: biotech analysts strive to peek inside clinical tests of drugs. Wall Street Journal, August 8, 2002:A1.

11. Reinhardt, UE. 'Value creation' and 'value shifting' in health care. Health Affairs Blog, June 1, 2016.

12. McCanne, D. Uwe Reinhardt: 'value creation' and 'value shifting' in health care. Quote of the Day. June 6, 2016.