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Journal of Health Politics, Policy and Law 29.4 (2004) 869-883



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Physicians and Corporations:

A Corporate Transformation of American Medicine?

University of Chicago
The failure to rationalize medical services under public control meant that sooner or later they would be rationalized under private control. Instead of public regulation, there will be private regulation, and instead of public planning, there will be corporate planning. . . . But a trend is not necessarily fate. Images of the future are usually only caricatures of the present.
—Paul Starr, The Social Transformation of American Medicine

With these evocative words, written at a time when a brief era of anticorporate sentiment and of belief in government as a potential force for the public good was ending, Paul Starr concluded "The Coming of the Corporation," the final chapter of The Social Transformation of American Medicine (1982) (abbreviated hereafter as TSTAM). But what precisely did Starr mean by "rationalization" and by "the coming of the corporation"? Has his future—our present—turned out as he foresaw? Has physician practice in the United States undergone a corporate transformation?

It came as a surprise, on rereading TSTAM, to find that although Starr described five "dimensions" of "corporate medicine" (429) and applied them in some detail to hospitals, he made few specific statements about the corporate transformation of physician practice that he expected. So to understand Starr's thoughts about corporations in relation to physicians, [End Page 869] it is necessary not only to review what Starr did say about "corporatization" (as I will call it) in relation to physicians, but also to apply his dimensions of corporatization to the changes that have occurred during the two decades since Starr wrote. In this article I undertake these tasks. I present data showing that three-quarters of U.S. physicians do not (at least not yet) practice in corporate organizations, but that nevertheless the degree of corporate influence—of "private regulation"—on physicians is very high, as Starr predicted. I discuss three factors—quality measurement, modified risk contracting, and negotiating leverage—likely to increase the extent of corporate influence.

I also suggest that Starr did not deal directly with a critical issue raised by TSTAM: if physician professionalism alone cannot be relied on to give society high-quality care at a reasonable cost, how should "outsiders" intervene to rationalize medical practice, and who should these outsiders be? I argue that Starr obscured the inherent tension between physician autonomy and rationalization: he emphasized the deleterious effects of physician autonomy until his last chapter, where, without explanation, he suddenly became its champion, using it as a means to criticize the entry of corporations into medical care. I suggest that rationalization of medical practice is likely to increase and that medical groups large enough to invest in organized processes to improve quality, but smaller than large corporate groups, might provide a balance between physician autonomy and rationalization.

The fact that one can engage intensely with a book written twenty years ago about a rapidly changing industry suggests TSTAM's richness. I begin this article by specifying what Starr meant by corporatization in general. I then inquire whether physician practice in the United States has in fact been corporatized, using Starr's dimensions of corporatization. Next I briefly describe Starr's objections to corporate control, noting that his opposition to corporate interference with physician autonomy apparently did not extend to government and/or consumer board interference that might be necessary to bring the rationalization that he assumes is both desirable and inevitable. I discuss three key factors likely to increase the extent of corporate influence in medical care. I conclude by suggesting that physician practice in moderate- to large-sized medical groups that are rewarded for high-quality care by government and/or corporate purchasers of health care may provide a means to rationalize medical practice without excessively limiting physician autonomy. [End Page 870]

What Did Starr Mean by Corporatization?

Starr was fairly explicit about what he called the five "dimensions" of corporate control in the health...

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