In recent years, there has been an extremely large increase in the number of hospitals that are now being run by individuals who have their degrees in business administration rather than medicine. Although this trend has been advantageous to hospital executives and shareholders, it has been at the direct sacrifice of patients and the quality of care that is provided.
A 2011 study on the 100 top-ranked hospitals revealed that the best hospitals are run by medical professionals and outperform hospitals run by MBAs by 25%. For hospitals specializing in cancer care, those run by physicians perform 33% higher.[1] Dr. Amanda Goodall, who conducted this study, concluded that physicians have a better understanding of how to optimize working conditions for the medical staff – therefore improving the overall quality of care patients receive. [2]
Dr. Toby Cosgrove, CEO of Cleveland Clinic, stated in a 2016 article with Harvard Business Review that the reason physicians make for better leaders in healthcare settings is because of the credibility among peers and focus on the interest of the patients. [3] Dr. Cosgrove compared the best hospitals being run by the best doctors as similar to the best sports teams being coached by its previous players – no one knows the dynamic, culture, and priorities of their “teams” better than those who have been in the same position. Despite these findings, however, physicians have not remained the primary leaders of healthcare administration.
Individuals with MBAs and experience in business administration began to infiltrate hospital management under the guise that medical professionals should be making medical decisions and caring for patients rather than focusing on administrative duties. However, oftentimes in healthcare management administrative decisions overlap and heavily influence patient care.
Unfortunately for patients, corporate greed has infiltrated and taken over the healthcare administration sector. Private equity firms, which account for over thirty percent of for-profit hospitals,[4] decrease the quality of care at the sake of economic profits. Mona Shah, Senior Director of policy and strategy at Community Catalyst has state that private equity is a “metastasizing disease” that harms the country’s healthcare system.
The National Institutes of Health discussed findings which show that hospitals run by for-profit private equity firms experience more adverse events where the hospital was at fault – for example blood infections, falls, medication errors, and other areas of medical malpractice.[5] A similar study found that hospitals show a 25% increase in hospital-acquired conditions after acquisition by a private equity firm.
The profit-driven healthcare system is expensive, inefficient, and inaccessible to those who need it most. Private equity’s growing foothold in the healthcare industry is only worsening this problem, explained Shah. This practice is also forcing hospitals into bankruptcy, only worsening medical debt and inaccessibility to care.
Thankfully, lawmakers in Massachusetts recently introduced a bill that would create criminal penalty against private equity executives whose business decisions result in patient death. The bill has been supported by various groups advocating for improved patient care and access, including the Massachusetts Nurses Association, the state’s public health commissioner, and lawmakers from other states.
Leading healthcare researchers urge the public, as taxpayers and potential patients, to be rigorous in their attention towards this trend, as it impacts every one of us. It will ultimately fall on us to urge policymakers to ban private equity firms from controlling healthcare administration. Otherwise, the quality of healthcare all of us receive will increase in price while decreasing in quality.
[1] Gunderman, Richard MD, PhD; Kanter, Steven L. MD. Perspective: Educating Physicians to Lead Hospitals. Academic Medicine 84(10):p 1348-1351, October 2009. | DOI: 10.1097/ACM.0b013e3181b6eb42.
[2] Goodall, Amanda H., Ph.D., Perspective: Physician-Leaders and Hospital Performance: Is There an Association?. IZA and Cass Business School. July 2011. | Discussion Series. Discussion Paper No. 5830.
[3] Stoller, James K. M.D., Goodall, Amanda H. Ph.D., Baker, Agnes. Why the Best Hospitals Are Managed by Doctors. Harvard Business Review. December 2016.
[4] Adams, Katie. If Passed, This New Bill Could Send PE Execs to Jail for Hospital Mismanagement. MedCity News. June 2024.
[5] Reynolds, Sharon. Infections and falls increased in private equity-owned hospitals. National Institutes of Health, U.S. Department of Health & Human Services.