This piece won’t be a detailed reckoning on capitalism.
But John Mackey, cofounder of Whole Foods Market, has made a case for what he calls conscious capitalism. He argues that while free-enterprise capitalism is the greatest engine for human progress ever conceived, it’s been philosophically hijacked by critics who mistake businesses operating from a shallower consciousness for representing authentic capitalism.
Much of what passes for capitalism is actually a distortion of it. It’s either mercantilism: a zero-sum game of hoarding as much of the fixed pie of wealth as you can. Or crony capitalism: a scratch-the-back game of lobbying the government for favors to consolidate your position.
Health 1.0 and 2.0 too often operate from mercantilist and crony-capitalist positions that maximize the profits of hospitals, health care insurers, pharmaceutical companies, and (let’s face it) doctors over the well-being of the consumers of health care: our patients.
Maybe the best example of these strategies in play today is the rapid consolidation of health care providers in the U.S. You’d have to be in a fugue state not to recognize that physicians and hospitals across the country are consolidating their practices. The percentage of independent doctors nationwide is estimated to have decreased from 57% in 2000 to 33% in 2016. This is the direct response of doctors having to transition from Health 1.0 to 2.0. That transition has involved a number of factors such as reduced Medicare payments, rising information technology costs in the new world of fee-for-value, and incentives presented by the Affordable Care Act.
The top reason physicians say they’ve become employed is financial security/less risk. I will argue in future posts how misguided this reason is.
But the fact is that hospitals are buying out many of those independent physicians. As of 2015, 38% of physicians were hospital-employed. That was almost a 50% increase from just three years prior. By 2015, one in four physician practices was hospital-owned — almost double what it was in 2012.
And hospital systems themselves are merging, with more than one thousand mergers since the mid-1990s. The refrain from hospital administrators is that such mergers help achieve economies of scale, decrease redundancies in testing, and increase efficiency.
But let’s get real. The primary purpose of these mergers is to gain leverage in the distorted health care market.
Given much uncertainty in the future landscape of health care, consolidation is allowing hospital systems and doctors to raise the fees they can charge to insurers or demand preferential agreements with them. Hospitals who employ doctors can also exploit a Medicare billing structure that pays more for the same services when they are performed at a hospital rather than a doctor’s office. This structure exists in part because of the strong political lobbying power of hospitals.
According to one analysis on Medicare payment differentials, Medicare pays $2,862 for cardiac imaging over a 22-day episode at a doctor’s office. But say that doctor is bought out by a hospital, so that now her office is considered a hospital outpatient department. What does Medicare pay now? $5,148.
Same doctor. Same test. Same location. Almost double the payment.
Doctors who now serve as employees of hospitals may practice under misaligned incentives. They describe growing pressure to cater to the financial goals of the bean-counters of their new employers. And they lose productivity as they assume more shift-work roles.
Unconscious medical systems have corrupted honorable health care professionals to create government-sanctioned medical cartels, falsely perceiving that crony capitalism is necessary to survive in medicine.
Guess who ultimately bears the non-transparent costs of mercantilism and crony capitalism in health care. You do. In the form of higher insurance premiums and deductibles. Slower wage growth to compensate for the rising costs of your employer’s health benefit plans. And higher taxes to pay for Medicare and Medicaid. With little value returned to you in the form of better health.
The Medicare Payment Advisory Commission estimates that if hospital facilities charged the same as independent offices for just standard office visits alone (much less high-dollar procedures), taxpayers would save $1.6 billion per year in Medicare costs.
Read this article, among many, by Dave Chase on how our health care system is destroying the middle class.
You think capitalism has perverted health care? I think not. You think for-profit entities are the villains in health care? Almost two-thirds of U.S. hospitals are non-profit. So they pay no taxes. And of the ten most profitable U.S. hospitals, seven are “non-profits.”
Ask yourself what you and your community are truly getting in return for the hundreds of billions of dollars that your friendly neighborhood non-profit hospitals are exempt from paying in taxes.
The nuns ain’t running them anymore.
What is running amok in health care is hyperinflation. If you don’t believe me, just look where most of the construction cranes in your town are hanging out. That hyperinflation is fueled by mercantilism and crony capitalism — not free enterprise.
The hyperinflated health care market is keeping vested regions around the country afloat — at the expense of the community at large. And when that bubble pops, it won’t be pretty.
Conscious capitalism reengages capitalism through conscious intention. Its credo is that “business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity.”
According to the tenets of conscious capitalism, how do businesses become more conscious?
1) Align toward a deeper purpose.
2) Integrate stakeholders to maximize value for all of them.
3) Cultivate leaders that serve the deeper purpose.
4) Build a culture of love and care within the business.
Health 3.0 is fully in tune with the tenets of conscious capitalism.
A business would die without financial profits. But there is nothing in a system of free enterprise that equates profit with just money. Health 3.0 isn’t just about financial profit. It has a deeper purpose of helping people, unencumbered by poor health, express their unique gifts.
Health 3.0 is bored with playing the zero-sum game of pitting one stakeholder in health care against another. It wants to expand the whole pie. And a key stakeholder is the caregiver. We hear about the Triple Aim in health care: improve patient experience, improve population health, and reduce per capita cost. Health 3.0 supports the Quadruple Aim: reverse the rampant burnout among the health caregivers. That helps not only the caregivers themselves, but all stakeholders.
The leaders of Health 3.0 embody these deeper aims. The bad behavior of hospital CEOs won’t cut it anymore. Health 3.0 leaders include direct-care physicians, independent doctor groups, forward-thinking hospital administrators, self-insured employers, innovative mayors, and teacher unions tired of the status quo. Reread Dave Chase’s article. These conscious leaders aren’t a utopian pipe dream. They exist now.
They’re manifesting Health 3.0 by changing the culture in their respective territories of influence. The culture is built on transparency, trust, and love. Whether it’s in the clinic, the hospital, the company, the municipality, or the school.
Here’s the irony. For all its individualist merits, Health 1.0 has been cost-unconscious. Hospitals have consolidated in the name of Health 2.0 — but with the ulterior motives of Health 1.0. It’s only through Health 3.0 that we realize the collectivist ideals of Health 2.0.
Health 3.0 is “collectividualist.” The duality between individualism and collectivism falls away.
In the end, these labels don’t matter. Non-profit hospitals can be rapacious wealth stealers. And for-profit health care businesses can be socially conscious.
Actually, Health 3.0 businesses must be socially conscious. Perhaps this is where I go a step further than conscious capitalism.
I’ve written before that health care is neither a right nor a privilege. It’s the sacred obligation for every precious one of us to actualize. A Health 3.0 entity fulfills this sacred obligation by reinvesting profits into its community.
The notion of a sacred obligation might make the conscious capitalist uneasy. But unlike in Health 2.0, absolutely none of this is coerced. It’s purely voluntary. Just the collectivist impulse of free-thinking individuals who care about each other’s health.
That’s the enlightened stance of Health 3.0.
Critics may still want to knock capitalism because it doesn’t look out for everyone and everything on our planet, it’s not sustainable.
In the next series of posts, I will lay out what makes capitalism in health care sustainable: making health care antifragile.