If American healthcare administration had an IPO

By Justin Coby - Guest Columnist

What if you were lucky enough to invest $100 in Apple, Amazon, or Google stock just before they blew up Wall Street? In 1986, you would have purchased 100 shares of Apple that would be worth $22,600 today; in 1998, you would have purchased 50 shares of Amazon that would be worth $90,000 today; and, in 2004, you would have purchased 2two shares of Class A Google stock worth $2,500 today. Truly, any of those would have been an incredible invest of your $100, earning you bragging rights for life prior to even cashing out.

With this perspective, I wish to propose an imaginary investment that would have laid waste to all three of these miraculous returns combined.

Though there are many scapegoats that have been created for the reason American Healthcare costs are widely out of control, one that has been studied and found conclusively at fault is healthcare administration costs. By this, I am referring to the army of middle to upper management that provide no direct healthcare services to patients. The sometimes necessary “suits” that provide vision, strategy, and oversight of the healthcare corporations that this Country is known so well for.

Imagine with me, that all hospital/medical systems joined their administrative teams together, formed a for-profit corporation, and then took that entity public. We’ll call it the American Healthcare Administrative Corporation with stock ticker symbol “AHAC,” and we will assume that they offered there IPO back in 1970.

This may seem outlandish, but the Bureau of Labor Statistics analyzed this industry and made those numbers public. Uwe Reinhardt, a now deceased American economist, included in his book, Priced Out, a graph that demonstrates the difference between physician salary growth since 1970 as compared to the percentage growth of healthcare administration in the same time frame. Naturally, the administration end of healthcare has experienced a growth of ten times their physician counter-parts. If you are looking for the richest guy or gal working in a hospital, then I suggest you walk past the physician’s lounge and make your way over to the C-suite.

Back to the imaginary stock listed in 1970. If you took your $100 bill and slapped it down on “AHAC,” you would have purchased 100 shares that would be worth $325,000 today.

Sounds like a capitalist dream, yes?

The only issue here is that hospital systems all over the Country can incorporate as not-for-profit entities, which mean they do not have to pay any taxes on this ballooning income as long as they successfully spend it all by the end of each year.

So, the question we as a Country should be asking is, how is this revenue being spent? How are these monies invested and do they create improvement to our communities that feed into their revenues?

If healthcare costs are to be decreased in America, perhaps we stop asking the doctors how we should do it. Perhaps we better start making our way over to the C-suite for answers.


By Justin Coby

Guest Columnist

Justin Coby, PharmD, has been affiliated with Health Partners Free Clinic as a volunteer pharmacist since 2007, and was appointed executive director in 2012.

Justin Coby, PharmD, has been affiliated with Health Partners Free Clinic as a volunteer pharmacist since 2007, and was appointed executive director in 2012.