An American Sickness

An American Sickness Plot Summary

Introduction

American healthcare has undergone a profound transformation over recent decades, evolving from a system primarily focused on patient welfare to one increasingly driven by financial incentives and profit-seeking behavior. This shift represents one of the most consequential changes in modern medicine, creating a healthcare market that consistently delivers poor value: Americans spend nearly twice as much on healthcare as citizens in other developed nations while experiencing worse health outcomes. The paradox at the heart of this system is that financial incentives designed to improve efficiency have instead created perverse motivations that undermine quality, accessibility, and affordability. What makes this situation particularly troubling is how thoroughly profit motives have infiltrated every aspect of healthcare delivery. From hospitals and insurance companies to pharmaceutical manufacturers and physician practices, financial considerations now influence—and often dominate—medical decision-making at every level. By examining how money flows through the healthcare system and shapes the behavior of its participants, we can understand why reforms focused solely on expanding coverage or tweaking payment models have failed to address the fundamental misalignment between profit incentives and patient welfare. Only by confronting this core contradiction can we develop solutions that truly serve the public interest.

Chapter 1: The Transformation of Medicine into a Business Enterprise

The American healthcare system has undergone a remarkable transformation over the past half-century, evolving from a primarily service-oriented profession into a massive profit-driven industry. This shift represents one of the most significant changes in modern medicine, yet it has occurred gradually enough that many patients and even healthcare professionals have failed to recognize its full implications. The statistics tell a striking story: healthcare now consumes nearly 20 percent of the U.S. gross domestic product—approximately $3 trillion annually—yet delivers outcomes that consistently rank below those of other developed nations that spend far less. The transformation began in the insurance sector, where Blue Cross plans originally created as nonprofit entities to help patients afford hospital care gradually converted to for-profit status in the 1980s and 1990s. This fundamental change altered their primary mission from serving patients to satisfying shareholders and investors. Today's health insurance executives receive compensation packages worth millions of dollars annually, while patients face increasingly higher premiums, deductibles, and co-payments. The industry now operates with sophisticated algorithms designed to maximize revenue while minimizing payouts—a far cry from the original concept of pooling resources to make healthcare accessible. Hospitals followed a similar trajectory, evolving from charitable institutions often run by religious organizations into sophisticated business enterprises with elaborate billing departments and strategic pricing models. Modern hospital systems employ consultants to maximize revenue through practices like "upcoding" (classifying conditions at higher severity levels) and adding facility fees to routine procedures. Many nonprofit hospitals now generate substantial "operating surpluses" while providing minimal charity care, raising questions about whether they truly deserve their tax-exempt status. Hospital administrators, once a small support staff for clinical operations, have multiplied exponentially and now often earn salaries that dwarf those of the physicians providing actual patient care. The pharmaceutical and medical device industries perhaps exemplify this profit-driven approach most clearly. Drug prices in America far exceed those in other countries, even for decades-old medications that have long since recouped their development costs. Companies extend patents through minor modifications, fight generic competition, and engage in "pay-for-delay" schemes to maintain monopoly pricing. Medical devices follow similar patterns, with implants that cost a few hundred dollars to manufacture being billed at tens of thousands. These industries routinely achieve profit margins of 20-30 percent—far higher than most other sectors of the economy. Physicians, too, have adapted to the new business model, though often reluctantly. The traditional doctor-patient relationship, where fees were often adjusted based on ability to pay, has given way to complex billing arrangements designed to maximize revenue. Doctors now form business entities, invest in surgery centers where they perform procedures, and employ "physician extenders" to increase billable services. The pressure to see more patients in less time has transformed the clinical encounter from a thoughtful consultation into a rushed transaction, with physicians spending more time documenting billable elements than listening to patients. This transformation has fundamentally altered the incentives that drive healthcare delivery. When medical decisions become business decisions, the question shifts from "What does this patient need?" to "What services can we provide that will be reimbursed?" This subtle but profound change undermines the very purpose of healthcare and explains why increased spending has failed to produce better outcomes. The business of medicine has, in many ways, superseded the practice of medicine, with consequences that extend far beyond financial costs to affect the quality and humanity of care itself.

Chapter 2: Perverse Incentives: When Financial Gain Drives Medical Decisions

The American healthcare system operates under a set of perverse incentives that actively encourage overtreatment while discouraging cost-effective care. The predominant fee-for-service payment model rewards volume rather than value—the more services provided, the more money earned. This fundamental structure creates a dangerous misalignment between financial incentives and patient wellbeing that distorts clinical decision-making at every level of the healthcare system. Consider the case of Dr. Yasser Awaad, a neurologist at Oakwood Hospital in Michigan who diagnosed hundreds of children with epilepsy and ordered frequent follow-up electroencephalography (EEG) tests. The hospital earned thousands from each test, and Dr. Awaad received substantial "productivity bonuses" tied to test ordering. The troubling reality, revealed only after years of this practice, was that most of these children didn't actually have epilepsy. Despite early suspicions from pediatricians and contradictory second opinions, hospital executives supported their rainmaker physician until investigations and lawsuits finally intervened. This case exemplifies how financial incentives can corrupt medical judgment, leading to unnecessary treatments that harm patients while generating revenue. This pattern repeats across specialties and settings. Studies consistently show that physician ownership of diagnostic equipment leads to higher utilization rates—doctors who own MRI machines order more scans than those who don't. Hospitals acquire physician practices and then add facility fees to routine office visits, sometimes doubling or tripling the cost without changing the care provided. Emergency departments use electronic health record systems programmed to suggest extensive testing based on initial complaints, regardless of clinical necessity. Each of these practices increases revenue while potentially exposing patients to unnecessary procedures, radiation, medication side effects, and financial burden. The incentive to provide more treatment extends to pharmaceutical companies, which prefer developing medications for chronic conditions requiring lifelong treatment rather than pursuing cures. When Dr. Denise Faustman discovered that an inexpensive generic vaccine might reverse type 1 diabetes, pharmaceutical companies declined to fund her research, asking, "Tell us how it will ever make us money?" Even diabetes research foundations rejected her funding requests, as many now see themselves as investors in profitable treatments rather than funders of potential cures. This reveals how deeply financial considerations have penetrated even supposedly charitable organizations within healthcare. Perhaps most troubling is how these incentives have corrupted medical decision-making at the individual level. Studies show that the rates of procedures like cataract surgery, cardiac catheterization, and hysterectomy vary dramatically based on how physicians are compensated. When doctors switch from fee-for-service to salary-based payment, procedure volumes often drop significantly. This suggests that financial considerations, rather than medical necessity, drive many treatment decisions. The problem isn't that physicians consciously prioritize income over patient welfare, but that the system creates subtle biases that influence clinical judgment in ways that favor intervention over restraint. The consequences of these perverse incentives extend beyond unnecessary care and wasted resources. Patients undergo risky procedures they don't need, take medications with serious side effects for questionable benefit, and face financial ruin from the resulting bills. Meanwhile, preventive care and less profitable interventions remain underutilized, contributing to America's poor health outcomes despite its enormous healthcare spending. Until these incentives are fundamentally restructured to align financial rewards with patient outcomes rather than service volume, the system will continue to generate more care rather than better care.

Chapter 3: Price Opacity: How Hidden Costs Undermine Market Forces

In functioning markets, consumers can compare prices, evaluate quality, and make informed choices. The American healthcare system systematically undermines these basic market mechanisms, creating an environment where prices are often unknowable, wildly variable, and disconnected from both costs and quality. This opacity represents a fundamental market failure that prevents normal competitive forces from controlling costs or improving value. When Robin Miller's uninsured brother needed an implantable defibrillator, he asked the hospital how much it would cost. Their response—"We don't know"—epitomizes the lack of transparency that characterizes healthcare pricing. Even when he contacted the manufacturer directly to inquire about the wholesale price, they refused to provide this information. This experience isn't unusual; it reflects a deliberate strategy by healthcare providers and manufacturers to keep prices hidden, allowing them to charge different amounts to different patients for identical services. Unlike virtually any other industry, healthcare routinely requires consumers to commit to payments without knowing what those payments will be. The variation in healthcare prices defies rational explanation. A vitamin D test that costs $16.70 at a commercial lab might cost $772 at a hospital lab. An MRI that costs $160 in Japan costs $3,470 at some American hospitals. A hip implant that costs about $350 to manufacture might be billed at $36,800. These price disparities exist not just between countries but within the same city or even the same facility, depending on a patient's insurance status. This variation reflects not differences in quality or cost but differences in market power and information asymmetry—providers charge what they can get away with, not what the service is worth. Hospitals maintain "chargemasters"—comprehensive price lists that bear little relationship to actual costs or market value. A single electrolyte panel, which commercial labs charge about $20 to perform, might be billed as seven separate tests at $50-$70 each on a hospital bill, totaling $350-$490. Consultants advise hospitals on "strategic pricing" to maximize revenue by raising charges on certain items while eliminating others that insurers rarely reimburse. These inflated charges serve as starting points for negotiations with insurers, who receive substantial discounts, while uninsured patients face the full, inflated prices. Even when patients attempt to research prices in advance, they encounter deliberate obstacles. Dr. Richard Hayes, a Manhattan cardiologist, described the byzantine process: "I have to check if we participate. I have to check if we're on the panel. Then you have to figure out if a particular procedure is covered and if you need authorization." When a professor at Southwestern University tried to compare prices for an MRI, he couldn't get quotes even with his orthopedist's help, ultimately paying $3,000 before discovering another provider would have charged $1,200. These experiences demonstrate how the system actively resists price transparency. The consequences of this price opacity fall hardest on the uninsured and those with high-deductible plans. Wanda Wickizer, an uninsured woman who suffered a brain hemorrhage, received bills totaling nearly $500,000 for her emergency treatment. When she researched what Medicare would have paid for the same care, she discovered it would have been between $65,000 and $80,000. Despite offering her entire $100,000 retirement account as payment, the hospital pursued aggressive collection actions, including threatening to place a lien on her house. This predatory approach to billing the most vulnerable patients reveals how thoroughly profit motives have corrupted healthcare's mission. This systematic lack of transparency creates a market where normal competitive forces cannot operate. Patients cannot shop based on price or quality, providers have no incentive to compete on either dimension, and costs continue to spiral upward, disconnected from both value and affordability. Until healthcare prices become transparent, comparable, and connected to actual costs, the market will continue to fail both patients and the broader economy.

Chapter 4: The Consolidation Crisis: Monopoly Power in Healthcare Markets

The American healthcare landscape has been dramatically reshaped by waves of consolidation that have created powerful regional monopolies and oligopolies. This concentration of market power fundamentally alters the economics of healthcare, allowing dominant providers to dictate prices and terms with limited accountability for quality or efficiency. The consolidation crisis represents one of the most significant yet underappreciated drivers of healthcare's dysfunction. Hospital mergers and acquisitions have accelerated dramatically over the past two decades, reducing the number of independent hospitals and creating massive health systems that dominate regional markets. Between 1998 and 2017, more than 1,400 hospital mergers occurred in the United States, with a particularly sharp increase following the passage of the Affordable Care Act. These consolidations are typically justified with promises of improved efficiency, coordinated care, and economies of scale. However, research consistently shows that hospital mergers lead to price increases of 20-40% without corresponding improvements in quality or patient outcomes. The effects of this consolidation are felt most directly by patients and employers in regions where a single health system dominates the market. When Partners HealthCare (now Mass General Brigham) consolidated its position in eastern Massachusetts, it gained sufficient market power to demand payment rates 30-60% higher than its competitors from commercial insurers. These insurers had little choice but to accept these terms, as excluding Partners from their networks would make their insurance products unmarketable to employers and individuals in the region. The additional costs were ultimately passed on to patients and businesses through higher premiums and reduced wages. Vertical integration—where hospitals acquire physician practices, outpatient facilities, and other parts of the care delivery system—further concentrates market power. Between 2012 and 2018, the percentage of physicians employed by hospitals or health systems increased from 26% to 44%. When hospitals acquire physician practices, they can add facility fees to previously office-based services, sometimes doubling or tripling the cost without changing the care provided. They also gain control over referral patterns, ensuring that patients stay within the system for tests, procedures, and specialist consultations regardless of cost or quality considerations. Insurance markets have experienced similar consolidation, with the five largest insurers now controlling nearly 50% of the national market and much higher percentages in many states. This concentration gives insurers significant leverage over providers in markets where hospital consolidation hasn't occurred, but more often leads to a detrimental form of countervailing power where dominant insurers and dominant hospital systems negotiate higher prices and then pass the costs on to employers and patients. The lack of meaningful competition in many insurance markets means these higher costs cannot be avoided by switching plans. The pharmaceutical and medical device industries exhibit perhaps the most extreme forms of monopoly power, protected and extended through patent laws, regulatory barriers, and strategic behavior. Four companies control over 90% of the market for insulin in the United States, allowing them to increase prices in tandem without fear of losing market share. Similar oligopolies exist for many critical medications and devices, from EpiPens to artificial joints. These companies employ various strategies to extend their monopolies beyond patent expirations, including minor reformulations, pay-for-delay agreements with generic manufacturers, and regulatory gaming. This consolidation crisis cannot be addressed through incremental reforms or market-based solutions alone. It requires robust antitrust enforcement to prevent further consolidation, potential breakup of existing monopolies, and regulatory interventions to simulate competition where it no longer exists naturally. Without addressing the fundamental problem of concentrated market power, other healthcare reforms will have limited impact on the system's affordability and performance.

Chapter 5: Technology Without Accountability: Innovation That Raises Costs

Healthcare technology presents a paradox unique among industries: while technological innovation typically reduces costs in other sectors, in healthcare it consistently drives costs higher. New medical technologies—drugs, devices, imaging systems, surgical techniques—almost invariably cost more than the standards they replace, often without delivering proportional improvements in patient outcomes. This pattern contradicts the normal economic expectation that innovation leads to greater efficiency and lower costs over time. The approval and adoption processes for new technologies contribute to this paradox. Regulatory agencies like the FDA require evidence of safety and efficacy for approval, but not cost-effectiveness compared to existing alternatives. New drugs and devices can gain market approval by demonstrating marginal benefits over placebos rather than meaningful superiority over current treatments. Once approved, these technologies are rapidly adopted based on marketing claims and theoretical benefits, often before robust evidence about their real-world effectiveness emerges. This system creates powerful incentives for manufacturers to develop marginally better products that can command premium prices rather than truly transformative innovations that might disrupt existing revenue streams. Medical device regulation exemplifies this problem. Many devices reach the market through the 510(k) clearance process, which requires only that they be "substantially equivalent" to previously approved devices rather than demonstrating independent safety and efficacy. This pathway allows manufacturers to introduce incremental modifications to existing devices and market them as innovations without rigorous clinical testing. The result is a proliferation of marginally different devices at premium prices. When problems emerge—as they did with metal-on-metal hip implants that caused severe complications in thousands of patients—the damage has already been done. The pharmaceutical industry employs similar strategies to maintain high prices despite limited innovation. Companies extend patent protection through minor modifications to existing drugs—changing delivery methods, combining existing medications, or developing extended-release formulations—that offer minimal clinical advantages but reset the patent clock. These "me-too" drugs and "evergreening" strategies maintain high prices by preventing generic competition without necessarily advancing treatment options. The industry justifies high prices as necessary for innovation, yet spends more on marketing than research and focuses increasingly on acquiring drugs developed by smaller companies rather than conducting original research. Healthcare payment systems reinforce these patterns by reimbursing new technologies at premium rates regardless of their comparative effectiveness. Medicare and private insurers typically pay more for newer treatments without demanding evidence that they outperform existing alternatives. This creates a financial incentive for providers to adopt the latest technologies even when older, less expensive options might serve patients equally well. The absence of meaningful price competition allows manufacturers to set high prices that stick, while the fragmented nature of healthcare purchasing prevents effective negotiation based on value. The consequences extend beyond financial costs to affect clinical care. The constant stream of new technologies creates pressure for physicians to adopt them quickly, sometimes before their limitations and complications are fully understood. Patients, influenced by direct-to-consumer advertising and media coverage, often demand the newest treatments, equating "newest" with "best." This technology-centric approach diverts attention and resources from less glamorous but potentially more effective interventions like preventive care, lifestyle modifications, and improved care coordination. It also contributes to the fragmentation of care, as each new technology tends to create its own specialty or subspecialty focused on its application. Creating accountability for technology would require fundamental changes in how innovations are evaluated, approved, and paid for. Requiring evidence of comparative effectiveness and cost-effectiveness before approval or premium reimbursement would shift incentives toward meaningful innovation. Implementing value-based pricing that ties payment to demonstrated benefits would reward transformative technologies while discouraging marginal improvements marketed as breakthroughs. Without such reforms, technology will continue to drive healthcare costs upward without delivering proportional improvements in health outcomes.

Chapter 6: Patient Exploitation: Vulnerability in a Profit-Driven System

When patients enter the healthcare system, they do so at their most vulnerable—sick, frightened, and lacking the specialized knowledge to evaluate their options. This vulnerability creates perfect conditions for exploitation, which has become increasingly systematic and sophisticated in American healthcare. The transformation of medicine into a business enterprise has created powerful incentives to view patients not as individuals needing care but as revenue opportunities to be maximized. The case of Olga Baker's daughter illustrates how medical urgency can be weaponized for profit. After a scan revealed a brain tumor, a neurosurgeon advised immediate surgery, creating a sense of crisis that discouraged second opinions or consideration of alternatives. Unlike most patients, Ms. Baker researched options and discovered that brain tumor removal is rarely an emergency. The surgeon, an out-of-network "subcontractor" with an exclusive hospital arrangement but no particular expertise in brain tumors, performed an unsuccessful operation that left most of the tumor intact. He then billed $97,000 for the 90-minute procedure, insisting the insurer should pay in full because it was an "emergency." As Ms. Baker observed, patients "with good insurance and money are kept in, conditioned with fear, upsold on questionable procedures in a hurry" to generate excessive bills. Even routine care offers opportunities for exploitation. Jason Makowski underwent outpatient foot surgery and returned home to find a delivery of a vibrating ice pack machine that his doctor's office had arranged without meaningful discussion of its necessity or cost. The representative assured him insurance would cover it. More than a year later, he received a collection notice for over $10,000—for a device available for purchase at about $900. Barbara Baxter, who received a recalled hip implant, not only suffered physical complications but was expected to pay thousands for follow-up tests to monitor the defective device. When she asked why she should pay to monitor a product that should never have been implanted, the hospital sent her account to collections. The elderly are particularly vulnerable targets. Pam Farris's 87-year-old father, recovering from a major stroke, was repeatedly encouraged to undergo a screening colonoscopy despite guidelines recommending against such screening in patients with limited life expectancy. A dermatology practice bused elderly priests, many with dementia, from a nursing home for biannual skin cancer checks and aggressive treatment of minor lesions that posed no threat to their health or longevity. Companies like CenseoHealth contract with Medicare Advantage plans to perform home visits to the elderly, ostensibly to check on their health but primarily to document additional diagnoses that increase the plans' risk scores and payments from Medicare. Medical necessity is routinely subordinated to financial opportunity. Healthy patients receive unnecessary tests before minor procedures. Specialists perform procedures that could be done more safely and cheaply in an office setting at surgery centers where they can charge facility fees. Pharmaceutical companies create "patient assistance programs" that cover co-payments for expensive drugs—not out of charity, but to ensure insurers continue paying the inflated prices from which manufacturers profit. Each of these practices exploits patient vulnerability, trust, or lack of information to generate revenue without providing corresponding value. Perhaps most egregious is the exploitation of the uninsured, who are charged the highest prices of all. Hospitals typically bill uninsured patients 2.5 times more than those with insurance and 3 times more than what Medicare allows. When these patients cannot pay, they face aggressive collection tactics, including lawsuits, wage garnishment, and liens on their homes. The University of Virginia Health System, affiliated with a prestigious public university founded to educate leaders in public service, pursued Wanda Wickizer for $285,507 for emergency treatment of a brain hemorrhage, refusing her offer to pay $100,000 from her retirement account. This predatory approach to billing the most vulnerable reveals how thoroughly profit motives have corrupted healthcare's mission. This systematic exploitation transforms healthcare from a healing profession into a predatory industry that views patients not as vulnerable individuals needing care but as financial opportunities to be maximized. Addressing this exploitation requires not just technical reforms but a fundamental reorientation of healthcare's purpose and values.

Chapter 7: Reclaiming Healthcare: Reforms to Realign Incentives with Patient Welfare

Meaningful healthcare reform requires addressing the fundamental misalignment of incentives that drives excessive costs and undermines quality. The fee-for-service payment model, which rewards volume rather than value, lies at the heart of many system dysfunctions. Alternative payment models that shift financial risk to providers, such as bundled payments and capitation, create incentives for efficiency and coordination. When providers receive a fixed payment for an episode of care or for managing a patient's health over time, they have reason to eliminate unnecessary services, prevent complications, and invest in high-value interventions. Early experiments with these models have shown promising results, reducing costs while maintaining or improving outcomes. Price transparency represents a necessary but insufficient step toward a more functional healthcare market. While knowing prices helps patients make better decisions, true reform requires standardized, all-inclusive pricing that eliminates the complexity and surprise bills that characterize the current system. Some innovative providers have begun offering bundled prices for common procedures, allowing patients to know their total financial responsibility upfront. This approach not only benefits patients but also forces providers to examine their own costs and eliminate inefficiencies. Regulatory requirements for standardized, transparent pricing could accelerate this transformation across the healthcare system. Addressing consolidation and monopoly power in healthcare markets must be a priority for reform. Antitrust enforcement agencies should scrutinize hospital mergers more carefully and challenge those that threaten competition. States can implement certificate of need laws that prevent unnecessary duplication of expensive facilities and equipment. And policymakers can explore regulatory approaches that simulate competition in markets where it has been eliminated, such as rate-setting systems that limit what providers can charge. Without addressing the market power that allows providers to charge whatever the market will bear, other reforms will have limited impact. Pharmaceutical and device pricing reforms are essential components of a comprehensive approach to healthcare affordability. The federal government should exercise its negotiating power on behalf of Medicare beneficiaries, as other countries do for their citizens. Patent laws should be reformed to reward true innovation while preventing abusive practices that extend monopolies. The FDA approval process should require meaningful evidence of clinical benefit compared to existing treatments, not just statistical superiority to placebo. And transparency requirements should force manufacturers to disclose their actual costs of research, development, and production to justify their pricing decisions. Consumer empowerment through better information and decision support can help patients navigate the current system while pushing for broader reforms. Shared decision-making tools that help patients understand the benefits, risks, and costs of different treatment options can reduce unnecessary care while ensuring treatments align with patient values and preferences. Price comparison tools, quality ratings, and provider performance data can help patients make more informed choices. And patient advocacy organizations can amplify individual voices to demand system-level changes that better serve patient interests. Perhaps most fundamentally, reform requires redefining the purpose of the healthcare system and the metrics by which we measure its success. Rather than focusing on revenue growth, market share, and shareholder returns, we should evaluate healthcare organizations based on their contributions to population health, patient experience, and affordability. This means creating accountability mechanisms that reward providers for keeping people healthy rather than treating preventable illness, for delivering care that aligns with patients' values and preferences, and for doing so at a cost that doesn't cause financial hardship. By reorienting the system toward these goals, we can create healthcare that truly serves patients rather than exploiting them.

Summary

The American healthcare system has evolved into a business enterprise that systematically prioritizes profit over patient welfare. This transformation has corrupted every sector—from insurance and hospitals to pharmaceuticals and medical devices—creating a dysfunctional market that delivers poor outcomes at extraordinary cost. The financial incentives throughout the system encourage overtreatment, price inflation, and exploitation of vulnerable patients, while discouraging prevention, coordination, and cost-effective care. The consequences extend beyond financial costs to affect the quality and humanity of care itself, as the healing mission of medicine becomes subordinated to revenue generation. What distinguishes this analysis is its comprehensive examination of how business principles have infiltrated and distorted healthcare at every level. The problem isn't simply greedy individuals or companies but a system designed to maximize revenue rather than health. Addressing this crisis requires more than incremental reforms; it demands fundamental restructuring of healthcare's economic foundations to realign incentives with patient welfare. Until Americans recognize healthcare as a public good rather than a profit center, they will continue paying more for less while medical businesses prosper at their expense. The path forward requires not just technical policy changes but a renewed commitment to the core values that should guide medicine: compassion, service, and the primacy of patient welfare over profit.

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Elisabeth Rosenthal

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