Take the Medical Profession and Healthcare Back from Corporate Interests

Shot an email off to Kip Sullivan to see what he was up to with Medicare. He returned my email with a copy of a letter he wrote Much going on in this letter I was not aware of and am assuming many other are not aware of either. Still they persist in corporatizing Medicare and private practices into commercialized medicine such as Medicare Advantage. Kip’s message back to me . . .


I’ve been very busy monitoring and commenting on four studies authorized by the 2023 session of the MN legislature and monitoring CA’s new Health Care Affordability Board. I’m monitoring the CA board because a MN legislator introduced a bill in the MN legislature modeled on the 2022 law that created the CA board. The MN bill almost became law, and was watered down at the last minute. We suspect that the agency that was created by the watered-down bill will, despite not being given the authority the CA board has, will act as if it did.

I discuss the CA board in this email to Take Medicine Back, a new group of mostly doctors focused on the invasion of medicine by private equity. I have paid my $50 to participate in a “summit” sponsored by TMB this weekend. No word yet from TMB in response to my email.


[My letter to TMB (Take Medicine Back) mailed yesterday]

Dear Friends,

I enjoyed reading The Corporate Practice of Medicine: A Call to Action to Take the Profession Back from Corporate Interests. The paper discusses the corporate takeover of medicine, an issue that has received far too little attention from policy makers and health policy analysts over the last half century. I’m writing to praise the paper’s thorough discussion of the role that weak enforcement of antitrust laws has played in the corporate takeover of medicine, and to call your attention to a significant deficit: The near total absence of any discussion of the role HMOs and the ideology promoted by HMO proponents have played. That ideology, which came to be called “managed care” circa 1985 and now often goes by “value-based payment,” has been the single most important factor in the usurpation of physician authority by corporations.

To illustrate the problem this inattention to the role managed care ideology has played, I will end this letter with a challenge: Can you tell me how your proposed reforms would prevent CMS from forcing all Medicare beneficiaries into Medicare Advantage plans or ACOs by 2030, or alternatively, how your proposed reforms would prevent the California Health Care Affordability Board from forcing the vast majority of California doctors and residents into insurance companies, or ACOs and other so-called “alternative payment models,” that use managed care tactics?

My preliminary assessment of your proposed reforms is that they could reduce the size of the corporations that have taken over medicine, but they won’t prevent those corporations from continuing to practice medicine.

No discussion of the role managed care ideology has played

I refer to the diagnosis of the American health care crisis promoted by HMO proponents and their solution as “ideology” because neither their diagnosis (greedy doctors succumbing to the fee-for-service incentive to order services patients don’t need) nor their solution (HMOs and other devices to split premiums or otherwise shift risk onto doctors and hospitals) was supported by evidence, and their solution posed obvious risks of harm to patients and doctors. The primary harms inflicted by the spread of managed-care cost-control tactics were (1) the shifting of control over medical decision-making from doctors and patients to HMOs and other corporations, and (2) massive consolidation of the entire health care sector.

To keep this letter short, I’m going to offer only these two quotations from the relevant literature to document my assertion that the spread of managed care ideology provoked consolidation.

“We find that higher levels of local managed-care penetration are associated with substantial increases in consolidation in hospital and physician markets. In the average market … between 1981 and 1994 … [t]his is equivalent to moving from 10.4 equal-sized hospitals to 6.5…. In the physician market, … [t]his implies a decrease in the percentage of doctors in solo practice from 38 percent in 1986 to 24 percent by 1995.” (David Dranove et al., “Is managed care leading to consolidation in health-care markets?” Health Services Research 2002;37;573-594)

“[HMOs] negotiated deep discounts – 30 to 50 percent discounts in many cases. These discounts cut health plan costs to the point that most plans could significantly underprice the old pre-HMO traditional insurance products.” (p. 63) “The one-sided price negotiations turned providers into enemies…. An even longer-range problem was that the deep discounts strongly encouraged providers to consolidate into larger organizations to create their own negotiations leverage.” (p. 69) (George Halvorson and George Isham, Epidemic of Care, San Francisco, Jossey-Bass, 2003)

Note that the second quote is from a book by two HMO executives, one of whom served as CEO of Kaiser Permanente.

Yet, with the exception of one or two sentences, The Corporate Practice of Medicine makes no mention of HMOs and managed care ideology. Here is the only reference in your paper to the role managed care ideology played in the corporate takeover of medicine:

“According to Health Policy Professor Carl Ameringer, ‘The medical establishment weakly resisted the formation of large-scale physician and NPP [non-physician practitioner] networks and the integration of insurance products and delivery systems, known as health maintenance organizations or HMOs.’” (p 15) I was hoping to see some discussion of managed care ideology in the section on hospital consolidation; in the section entitled “Breakdown of societal trust of physicians,” and in the section entitled “Legal mechanisms of skirting prohibitions on the corporate practice of medicine” (the HMO was the granddaddy of all such mechanisms). But there was none.

Test of your proposals

To check the sufficiency of your proposals, you might ask whether they will prevent:

  • CMS from completely privatizing Medicare by continuing to overpay Medicare Advantage (MA) plans and subjecting physicians to financial pressure to join ACOs, and;
  • the California Health Care Affordability Board from forcing the great majority of California doctors into corporations that use managed care tactics to control doctors and patients.

I believe you’re familiar with the research demonstrating that MA plans and Medicare ACOs exert substantial control over physicians, so I won’t take your time here documenting that problem. I’ll only offer a quote from a 2021 CMS document describing CMS’s goal: “The CMS Innovation Center has set the goal of having every Medicare FFS beneficiary in an accountable care relationship by 2030 and will set interim targets to measure progress towards that goal.” (p 14 Innovation Center Strategy Refresh, CMS). From the context, we may infer CMS means they intend to push every Medicare beneficiary into an MA plan or a Medicare “alternative payment model” (the ACO being the leading example) by 2030. CMS defines APM as an ACO, a medical home, or a bundled payment (Alternative Payment Models in the Quality Payment Program as of December 2022).

A more stringent test of your proposed reforms would be to ask what impact they will have on the California Health Care Affordability Board, an agency created by SB 184, a bill signed into law in 2022. SB 184 authorized both desirable and undesirable policy. The desirable policy:

The board is authorized to prevent mergers that could adversely affect competition, a long overdue reform that is consistent with TMB’s recommendations. The undesirable: SB 184 also authorizes the board to subject the vast majority of “health care entities,” defined as all payers and providers, to micro-management by the board and financial incentives to deny services, which will in turn incentivize the managers of the “entities” to own and control physicians.

Specifically, SB 184 authorizes the board to set crudely calculated limits on per capita spending by health care entities effective in 2025; to subject those “entities” to extensive reporting requirements to facilitate crude measurement of cost, “quality” and “equity”; to force entities that exceed their spending caps to file “performance improvement plans” with the all-knowing board; and most astonishingly, from their perches miles away from the entities, to advise entities that exceed their crudely calculated spending caps on what they’re doing “wrong,” and to punish them financially if, even after receiving the wise counsel of the board, they cannot figure out how to spend under their cap.

Here are three alarming provisions from Section 127500.5 of SB 184 that document what I just said:

(f) It is the intent of the Legislature to facilitate increased adoption of alternative payment models that reward high-quality and cost-efficient care, including strategies for shared savings and downside risk arrangements and population-based payments.

(l) It is the intent of the Legislature in enacting this chapter that the setting of health care cost targets distinguish between health care entities that deliver cost-efficient, high-quality care and those that deliver high-cost care without commensurate improvements in overall quality.

(m) It is the intent of the Legislature in enacting this chapter that enforcement actions to address growth in per capita total health care expenditures are implemented in a progressive manner, such that health care entities are assisted to come into compliance with cost targets, including through technical assistance and performance improvement plans, before assessing administrative penalties
. . . Bill Text – SB-184 Health. (ca.gov).

The minutes of board meetings and staff presentations indicate the board has deluded itself into thinking measurement of cost and quality is accurate enough that the board will be able not only to “distinguish between health care entities that deliver cost-efficient, high-quality care and those that deliver high-cost care without commensurate improvements in overall quality,” but will also be able to advise entities and their doctors on why they are “inefficient” or “low quality.” This would be a delusion even if the board were using a diagnosis-based risk adjuster as inaccurate as the one CMS uses to adjust premium payments to Medicare Advantage plans and “benchmarks” (spending caps) for ACOs. But late last year the board deliberately decided, over the objection of several members of its advisory committee, to use a risk adjuster that measures only age and sex. Analysts have known for decades that risk adjusters relying only on age and sex can explain very little (about 1 percent) of the variation in spending between enrollees or assignees. CMS’s current diagnosis-based risk adjuster explains just 13 percent of the variation in spending on individual Medicare beneficiaries. The California Affordability Board’s rationale for relying solely on age and sex is that using diagnoses encourages upcoding. That is true. But that lose-lose tradeoff comes with all managed-care proposals that shift risk onto insurance companies and providers. There is no good solution. The only solution is not to insert insurance companies into public programs like Medicare, and not to authorize government agencies like CMS and the California Affordability Board to shift risk onto providers.


TMB is performing a valuable service for doctors and patients everywhere by publicizing the extent to which corporations have taken over our health care system. Your call for more rigorous enforcement of antitrust laws is excellent policy. But if your goal is not only to reverse consolidation but to remove corporations from the practice of medicine, you must go beyond a reliance on antitrust laws and address the ideology that leads Congress and state legislatures to create programs like MA, the Medicare Shared Savings Program, and the California Health Care Affordability Board. To take medicine back from corporations, we must do more than constrain or reduce the size of corporations that seek to meddle in the doctor-patient relationship. We must debunk the ideology that justifies sabotaging what’s left of the prohibition on the corporate practice of medicine.

I have registered for TMB’s summit this weekend. Looking forward to it. Let me know if I can help you.

Kip Sullivan, JD