Mark A. Hall is the Fred D. and Elizabeth L. Turnage Professor of Law at Wake Forest University. Erin C. Fuse Brown is the Catherine S. Henson Professor of Law at Georgia State University. This post is based on their article, forthcoming in the Stanford Law Review.
Six decades ago, Nobel economist Kenneth Arrow wrote a seminal article justifying various “nonmarket social institutions” that shielded health services from normal market conditions. Subsequent generations of scholars, including one of us, viewed several of Arrow’s positions as anachronistic barriers to pro-social market innovations in health. For a discussion of Arrow’s theories and evolving health care markets, see this symposium. Recent developments, however, put Arrow’s insights into new light, showing that he may have been as prescient as he was analytic.
Over the past decade, private equity investment in physician services has emerged as a driving trend toward the financialization of health care, with investors mining health services organizations to extract wealth. The primary goal of financialized health care is profit, while the quality of the patient care is a secondary concern. This obviously challenges a number of the professional and ethical norms that Arrow noted distinguish medical providers from general profit-seeking businesses. Among those is the “corporate practice of medicine” doctrine, which in many states prohibits nonphysicians from owning or controlling businesses that provide licensed clinical services.
