Monopolistic hospital systems now dominate the economies of many cities—and shape public policy far beyond the scope of medicine.
WASHINGTON MONTHLY
April 4, 2023
Large hospital systems like Johns Hopkins Hospital in Baltimore, Maryland have evolved into quasi–government actors practically colonizing large swaths of urban landscapes while, at the same time, often battling to avoid public scrutiny.
(AP Photo/Patrick Semansky)
On the morning I wrote this essay, I received a text message. It contained a scan of a letter written by the president of Community Hospitals and Wellness Centers, a hospital in the rural town of Bryan, Ohio. CHWC featured in my book, The Hospital: Life, Death, and Dollars in a Small American Town. Much of the tension in the book centered on whether CHWC would be able to survive as an independent community hospital in an era of stampeding consolidation
On the morning I wrote this essay, I received a text message. It contained a scan of a letter written by the president of Community Hospitals and Wellness Centers, a hospital in the rural town of Bryan, Ohio. CHWC featured in my book, The Hospital: Life, Death, and Dollars in a Small American Town. Much of the tension in the book centered on whether CHWC would be able to survive as an independent community hospital in an era of stampeding consolidation
.
Hospital City, Health Care Nation: Race, Capital, and the Costs of American Health Care by Guian A. McKee University of Pennsylvania Press, 392 pp.
For the past 20 years, CHWC, fearing the loss of local control, cuts to services, and higher costs, had been trying to stave off being gobbled up by a big health system. Could it succeed forever? In the letter, the CHWC president gave the hospital’s employees the answer to that question: No. The hospital was exploring a “relationship” with just such a system, rumored to be Parkview Health, based in Fort Wayne, Indiana.
Guian A. McKee, an associate professor of presidential studies at the University of Virginia, provides many important services in his new book, Hospital City, Health Care Nation. The most important is delivering an exquisite accumulation of detail that explains not only how the swallowing-up of small hospitals like CHWC has become inevitable, but also why it matters.
McKee’s focus is urban cities—specifically Baltimore, Maryland, home of Johns Hopkins Hospital—not rural towns like Bryan. But in both Baltimore and Bryan, as in many other American communities large and small, hospitals have become leading, if not the leading, employers. Many have also evolved into quasi–government actors practically colonizing large swaths of urban landscapes while, at the same time, often battling to avoid public scrutiny. So the fate of the hospital can dramatically affect the fate of the town or the urban neighborhood.
Johns Hopkins is based in the neighborhood of East Baltimore, which, during America’s great deindustrialization, became majority Black and majority working class and poor. In the post-World War II era, the hospital quickly became both an economic engine and a remodeler of the neighborhood. It became a health care provider and a source of low- and middle-wage jobs for neighborhood residents. As McKee shows us, Hopkins was a prime mover in local urban renewal projects, motivated to help itself, mainly, even as it said, and perhaps believed, that it was trying to help the neighborhood. Over time, it turned East Baltimore into a hospital city.
This facet of McKee’s book is often missed in discussions of hospitals and health care. Hopkins took on the roles of government, something not unique to Baltimore or Hopkins. Toledo, Ohio, has relied in part on ProMedica, a regional health care system, for urban redevelopment. In Pittsburgh, the University of Pittsburgh Medical Center is the largest landowner. The Cleveland Clinic has played the same role in Cleveland.
Behemoth health systems have usurped even more obvious government functions, too. In Fort Wayne, for example, Parkview operates a private police department with little public oversight, a trend among big health systems, and, by maintaining “nonprofit” status, it doesn’t pay property taxes.
This transformation from a mission to fix people’s sick and broken bodies to ruling a hospital city sits at the center of McKee’s book, and he’s a terrific guide through the maze. In place of manufacturing, health care has become the number one segment of the U.S. economy, at about 18 percent of GDP, representing roughly $4 trillion. There are many hospital cities and towns. Their economies depend on the high cost of medical care.
This is the result, in part, of consolidation. Big systems want to get bigger because Medicaid and Medicare, which account for about two-thirds of the revenue in a small hospital like CHWC, pay much less for many services than private insurance pays. So hospitals crave a “payer mix” that’s heavier on private payers. By grabbing market power, the systems can muscle those private insurance companies into paying more than they would if there was more competition between hospitals. Blue Cross, for example, could tell one pricey hospital system to shove off if there was another good, less expensive, hospital nearby. Naturally, this is also why insurance companies want to get bigger, too. The bigger they are, the more power they have to stand up to the hospitals. And so it goes. This combination of quasi-government power, economic importance, and often opaque governance and operation makes reining in those costs so politically fraught that they’ve become nearly untouchable.
“This was the true larger issue at the core of the hospital cost problem,” McKee writes.
In a country that during the 1970s rejected national employment policy and that since World War II had failed to develop a viable program for the revitalization of racially—and economically marginalized—cities, major health care-sector institutions such as Johns Hopkins Hospital had become a de facto jobs program.
In this metaphor, hospital costs (or insurance premiums and co-pays that are then paid to hospitals) are really taxes. And, to continue the metaphor, Americans are the most highly taxed people on the planet.
Yet American health care is a dismal failure. Despite some of the world’s best doctors, technology, and drugs, Americans pay much more for medical care than citizens of any of our peer countries. In 2021, the U.S. spent $12,318 per capita on health care compared to our next biggest spending peer, Germany, which spent $7,383. Canada spent just under $6,000. But we die younger and live sicker lives. Life expectancy among white men in the U.S. fell a full year between 2020 and 2021, from 74.8 to 73.7. Yet we go bankrupt over medical bills.
For a century, any attempt to change this absurd situation has devolved into a miasma of confusion and conflict. McKee performs the incredible feat of explaining why this has happened, step by step, policy by policy, missed opportunity by missed opportunity. (At one point, possible health care reforms drown when Fanne Foxe, stripper and paramour of the Ways and Means Committee chair Wilbur Mills, jumps into the Washington, D.C., tidal basin.)
McKee’s detailed survey sometimes makes Hospital City a wonky read. We get Baltimore politics, negotiations between Ted Kennedy and Jimmy Carter, labor union positions, and many, many payment schemes. But this is the way it happened, and why it happened, and I found myself underlining, marking, and exclaiming as one era’s policy was forced to grapple with the policies of previous eras, as politicians, labor, hospitals, community activists, and business interests all fought to protect turf and benefits.
McKee’s attention to racial discrimination is especially welcome. The largely African American district of East Baltimore was home to Johns Hopkins, but according to McKee, residents did not benefit as much as might be expected from the hospital’s medical expertise, still suffering from a dearth of basic primary care.
After World War II, Johns Hopkins became an economic engine and a remodeler of Black working-class East Baltimore. The hospital supported urban renewal, both to help itself and, it claimed, the neighborhood. Over time, it turned East Baltimore into a hospital city.
Today hospital CEOs talk about “social determinants of health.” This is, at least, a recognition that direct medical care accounts for only about 15 percent of Americans’ health. Income, education, trauma, employment, diet and food access, and family environment all have much more influence. But hospitals live in a larger social, economic, and policy environment that does not reward them for addressing needs that would ideally be the responsibility of government. As McKee explains,
In pursuing this relatively narrow, health-care-based strategy for increasing its community engagement, Hopkins had medicalized its engagement with the neighborhood’s social problems. Such medicalization formed part of a much larger pattern in the postwar United States. Health care spending far outstripped funds allocated to poverty interventions or community development, and in neighborhoods such as East Baltimore, few nonmedical options remained for addressing those issues.
The fact that health is woven into American society itself and that America’s lousy health outcomes are rooted in its vast inequality are much tougher truths to recognize. There’s no profit in resolving the problem, and American medicine runs on profit. The corporatization of hospitals is now so far along that hospitals have subsidiaries. McKee highlights the point at which Johns Hopkins created a for-profit business to “allow … joint ventures with other providers and industrial firms.” Hospitals have gone into the hotel, apartment, insurance, and even golf course businesses. They’ve bought nursing homes and founded for-profit pharmaceutical companies. And as McKee illustrates, they’ve been encouraged to do all this by misguided, if well-intentioned, policies.
Some of these policies were birthed out of America’s religious faith in “markets.” Presidents as diverse as Ronald Reagan, Bill Clinton, and Barack Obama all insisted on basing health care policies on markets. All of them wanted Americans to become wise consumers in such markets, naively assuming that Americans could behave in the black box of medical markets the way they buy cars.
They can’t. Markets have failed, over and over again. And now, there is no market anyway. Rather, we are quickly creating hospital oligopolies with oligopoly pricing power. And it’s not just hospitals, as the $70 billion merger between CVS and Aetna showed. As McKee’s title suggests, we have become a “health care nation.” About 340,000 people work for UnitedHealth Group, and that’s just one company. A scheme like “Medicare for All” would displace an awful lot of well-paid employees. So there’s not much political will to close the cash register. Recall what happened last year when Congress added money for new ships the Navy did not want as a way to keep shipbuilders busy. If, under a plan like Medicare for All, hospitals were forced to give up higher reimbursements from private insurers, resulting in layoffs, we could expect similar opposition from politicians and the hospital cities they represent. We’ve become such hostages to our health care system that killing the monster would destroy the village.
Brian Alexander is a journalist and author. His two most recent books are Glass House: The 1% Economy and the Shattering of the All-American Town and The Hospital: Life, Death, and Dollars in a Small American Town.
For the past 20 years, CHWC, fearing the loss of local control, cuts to services, and higher costs, had been trying to stave off being gobbled up by a big health system. Could it succeed forever? In the letter, the CHWC president gave the hospital’s employees the answer to that question: No. The hospital was exploring a “relationship” with just such a system, rumored to be Parkview Health, based in Fort Wayne, Indiana.
Guian A. McKee, an associate professor of presidential studies at the University of Virginia, provides many important services in his new book, Hospital City, Health Care Nation. The most important is delivering an exquisite accumulation of detail that explains not only how the swallowing-up of small hospitals like CHWC has become inevitable, but also why it matters.
McKee’s focus is urban cities—specifically Baltimore, Maryland, home of Johns Hopkins Hospital—not rural towns like Bryan. But in both Baltimore and Bryan, as in many other American communities large and small, hospitals have become leading, if not the leading, employers. Many have also evolved into quasi–government actors practically colonizing large swaths of urban landscapes while, at the same time, often battling to avoid public scrutiny. So the fate of the hospital can dramatically affect the fate of the town or the urban neighborhood.
Johns Hopkins is based in the neighborhood of East Baltimore, which, during America’s great deindustrialization, became majority Black and majority working class and poor. In the post-World War II era, the hospital quickly became both an economic engine and a remodeler of the neighborhood. It became a health care provider and a source of low- and middle-wage jobs for neighborhood residents. As McKee shows us, Hopkins was a prime mover in local urban renewal projects, motivated to help itself, mainly, even as it said, and perhaps believed, that it was trying to help the neighborhood. Over time, it turned East Baltimore into a hospital city.
This facet of McKee’s book is often missed in discussions of hospitals and health care. Hopkins took on the roles of government, something not unique to Baltimore or Hopkins. Toledo, Ohio, has relied in part on ProMedica, a regional health care system, for urban redevelopment. In Pittsburgh, the University of Pittsburgh Medical Center is the largest landowner. The Cleveland Clinic has played the same role in Cleveland.
Behemoth health systems have usurped even more obvious government functions, too. In Fort Wayne, for example, Parkview operates a private police department with little public oversight, a trend among big health systems, and, by maintaining “nonprofit” status, it doesn’t pay property taxes.
This transformation from a mission to fix people’s sick and broken bodies to ruling a hospital city sits at the center of McKee’s book, and he’s a terrific guide through the maze. In place of manufacturing, health care has become the number one segment of the U.S. economy, at about 18 percent of GDP, representing roughly $4 trillion. There are many hospital cities and towns. Their economies depend on the high cost of medical care.
This is the result, in part, of consolidation. Big systems want to get bigger because Medicaid and Medicare, which account for about two-thirds of the revenue in a small hospital like CHWC, pay much less for many services than private insurance pays. So hospitals crave a “payer mix” that’s heavier on private payers. By grabbing market power, the systems can muscle those private insurance companies into paying more than they would if there was more competition between hospitals. Blue Cross, for example, could tell one pricey hospital system to shove off if there was another good, less expensive, hospital nearby. Naturally, this is also why insurance companies want to get bigger, too. The bigger they are, the more power they have to stand up to the hospitals. And so it goes. This combination of quasi-government power, economic importance, and often opaque governance and operation makes reining in those costs so politically fraught that they’ve become nearly untouchable.
“This was the true larger issue at the core of the hospital cost problem,” McKee writes.
In a country that during the 1970s rejected national employment policy and that since World War II had failed to develop a viable program for the revitalization of racially—and economically marginalized—cities, major health care-sector institutions such as Johns Hopkins Hospital had become a de facto jobs program.
In this metaphor, hospital costs (or insurance premiums and co-pays that are then paid to hospitals) are really taxes. And, to continue the metaphor, Americans are the most highly taxed people on the planet.
Yet American health care is a dismal failure. Despite some of the world’s best doctors, technology, and drugs, Americans pay much more for medical care than citizens of any of our peer countries. In 2021, the U.S. spent $12,318 per capita on health care compared to our next biggest spending peer, Germany, which spent $7,383. Canada spent just under $6,000. But we die younger and live sicker lives. Life expectancy among white men in the U.S. fell a full year between 2020 and 2021, from 74.8 to 73.7. Yet we go bankrupt over medical bills.
For a century, any attempt to change this absurd situation has devolved into a miasma of confusion and conflict. McKee performs the incredible feat of explaining why this has happened, step by step, policy by policy, missed opportunity by missed opportunity. (At one point, possible health care reforms drown when Fanne Foxe, stripper and paramour of the Ways and Means Committee chair Wilbur Mills, jumps into the Washington, D.C., tidal basin.)
McKee’s detailed survey sometimes makes Hospital City a wonky read. We get Baltimore politics, negotiations between Ted Kennedy and Jimmy Carter, labor union positions, and many, many payment schemes. But this is the way it happened, and why it happened, and I found myself underlining, marking, and exclaiming as one era’s policy was forced to grapple with the policies of previous eras, as politicians, labor, hospitals, community activists, and business interests all fought to protect turf and benefits.
McKee’s attention to racial discrimination is especially welcome. The largely African American district of East Baltimore was home to Johns Hopkins, but according to McKee, residents did not benefit as much as might be expected from the hospital’s medical expertise, still suffering from a dearth of basic primary care.
After World War II, Johns Hopkins became an economic engine and a remodeler of Black working-class East Baltimore. The hospital supported urban renewal, both to help itself and, it claimed, the neighborhood. Over time, it turned East Baltimore into a hospital city.
Today hospital CEOs talk about “social determinants of health.” This is, at least, a recognition that direct medical care accounts for only about 15 percent of Americans’ health. Income, education, trauma, employment, diet and food access, and family environment all have much more influence. But hospitals live in a larger social, economic, and policy environment that does not reward them for addressing needs that would ideally be the responsibility of government. As McKee explains,
In pursuing this relatively narrow, health-care-based strategy for increasing its community engagement, Hopkins had medicalized its engagement with the neighborhood’s social problems. Such medicalization formed part of a much larger pattern in the postwar United States. Health care spending far outstripped funds allocated to poverty interventions or community development, and in neighborhoods such as East Baltimore, few nonmedical options remained for addressing those issues.
The fact that health is woven into American society itself and that America’s lousy health outcomes are rooted in its vast inequality are much tougher truths to recognize. There’s no profit in resolving the problem, and American medicine runs on profit. The corporatization of hospitals is now so far along that hospitals have subsidiaries. McKee highlights the point at which Johns Hopkins created a for-profit business to “allow … joint ventures with other providers and industrial firms.” Hospitals have gone into the hotel, apartment, insurance, and even golf course businesses. They’ve bought nursing homes and founded for-profit pharmaceutical companies. And as McKee illustrates, they’ve been encouraged to do all this by misguided, if well-intentioned, policies.
Some of these policies were birthed out of America’s religious faith in “markets.” Presidents as diverse as Ronald Reagan, Bill Clinton, and Barack Obama all insisted on basing health care policies on markets. All of them wanted Americans to become wise consumers in such markets, naively assuming that Americans could behave in the black box of medical markets the way they buy cars.
They can’t. Markets have failed, over and over again. And now, there is no market anyway. Rather, we are quickly creating hospital oligopolies with oligopoly pricing power. And it’s not just hospitals, as the $70 billion merger between CVS and Aetna showed. As McKee’s title suggests, we have become a “health care nation.” About 340,000 people work for UnitedHealth Group, and that’s just one company. A scheme like “Medicare for All” would displace an awful lot of well-paid employees. So there’s not much political will to close the cash register. Recall what happened last year when Congress added money for new ships the Navy did not want as a way to keep shipbuilders busy. If, under a plan like Medicare for All, hospitals were forced to give up higher reimbursements from private insurers, resulting in layoffs, we could expect similar opposition from politicians and the hospital cities they represent. We’ve become such hostages to our health care system that killing the monster would destroy the village.
Brian Alexander is a journalist and author. His two most recent books are Glass House: The 1% Economy and the Shattering of the All-American Town and The Hospital: Life, Death, and Dollars in a Small American Town.
