Healthcare’s Real Beneficiaries

If anyone out there still doesn’t think healthcare is an industry no different from any other industry and businesses in healthcare are no different from any other business, a new research letter in JAMA Internal Medicine should be the final piece of evidence to change their mind and see things as they really are.

Four researchers affiliated with the University of Pennsylvania and Yale University wanted to know how publicly traded healthcare companies spend their profits. Do the profits go to shareholders? Or do the profits go to improving products and services for their customers?

To find out, the researchers looked at 92 healthcare companies in eight healthcare sectors listed on the Standard and Poor’s 500 healthcare index over a 22-year study period, 2001 through 2022. Here’s what they found:

The companies paid out a total of $2.6 trillion to shareholders over the study period.
The annual payouts increased more than threefold from $54 billion in 2001 to $170.2 billion in 2022.
95% of the companies’ net income, or profit, went to pay shareholders.
In three of the eight healthcare sectors — facilities, distributors and pharmaceuticals — the amount paid to shareholders exceeded their net income, or profit. I’m not sure how that works, but the word greedy comes to mind.

“Shareholder payouts have critical implications for stakeholders, especially patients,” the study said. “Increasing capital distributions to shareholders of publicly traded companies may be associated with higher prices and may not be reinvested in improving access, delivery or research and development. This dynamic raises questions about healthcare spending effectiveness, efficiency and equity.”

That’s what happens when we fail to see healthcare as just another industry and healthcare companies as just other businesses. The blindness prevents us from applying traditional economic and financial incentives to make the healthcare system work better for its customers.

There’s nothing magical about healthcare. We need to incentivize what we want: better outcomes for less cost. No different from customers in any other industry.

But if we continue to treat healthcare as magical, we’ll continue to be amazed at how much we’re paying for so little.

Thanks for reading.

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

February 12, 2025

Healthcare’s Real Beneficiaries

About the Author

David Burda

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