Health care profits flow to shareholders, not patient care, study finds

A new study from Yale School of Medicine (YSM) found that large U.S. health care corporations spent 95% of their net income — totaling $2.6 trillion — on shareholder payouts over the past two decades, raising questions about industry priorities and their impact on patient care and affordability. As a result, physicians and practice owners face increased overhead costs, reimbursement challenges and an increased financial burden pushed onto patients.

Published in JAMA Internal Medicine, the study examined financial reports from 92 health care companies listed in the Standard & Poor’s 500 (S&P 500) between 2001 and 2022. The analysis revealed that companies across pharmaceuticals, insurance, medical supplies and for-profit hospitals spent significant amounts of money on dividends and stock buybacks, rather than investing in research, infrastructure or workforce wages.

Profits over patients?

“Funds are being distributed back out to shareholders rather than being put back into the health care system,” said Cary Gross, MD, senior author of the study and professor of medicine at YSM.

The study determined that shareholder payouts surged 315% between 2001 and 2022, with just 19 companies responsible for 80% of the total. Pharmaceutical companies played a significant role, despite frequent industry claims that high drug prices are necessary for research and development.

Public money

Health care remains a dominant sector of the U.S. economy, accounting for 17% of the country’s gross domestic product (GDP) in 2023. Notably, the study found that roughly 70% of all U.S. health care spending is funded “in some shape or form” by taxpayers, through programs like Medicare, Medicaid and employer-insurance tax breaks.

“When shareholders expect greater payouts year in and year out, that has an impact on affordability,” said Victor Roy, MD, PhD, an assistant professor of family medicine and community health at the University of Pennsylvania, who completed the research while a fellow at YSM. “One of the ways that [health care companies] make money is to keep prices high — or raise them.”

YSM researchers suggested that health care corporations receiving public funds face regulations similar to those in other industries benefiting from government support. Potential policies could include requiring that companies reinvest a portion of their profits in workforce wages, medical research or patient care.

“Some might say, ‘these are for-profit companies, so their goal is to make a profit,’” said Gross. “[But] health care is a right, not a privilege. You can choose when to buy a car. You can’t choose to have a heart attack. As costs of care keep rising, it’s crucial to ask where our health dollars are going.”