IT’S ALL ABOUT TRANSACTION COSTS: How Obamacare and other regulations are leading to the demise of the independent doctor and the corporatization of healthcare.
Like many American physicians, my wife no longer works for herself. Under the same pressures that have forced many once-independent practices to consolidate, she was lucky enough to find a large health-care organization willing to purchase her practice and ensure continuity of care for her patients. “Is the independent doctor disappearing?” U.S. News & World Report asked earlier this summer. The answer is: yes—and to a significant extent, that’s a result of deliberate policy.
Your doctors didn’t jump out of business; they were pushed. And they were pushed by people way too convinced of their qualifications to redesign the world around them.
Just 33 percent of physicians “identify as independent practice owners or partners,” the Physicians Foundation reported in its last last survey, conducted in 2016. That’s down from 48.5 percent in 2012.
But I thought the left hated corporations? Oh, wait…
Because that’s where the money is.
If there is one bugbear that stands as paramount for the American progressive, it is the corporation. Corporations are viewed as amoral at best, immoral at worst, exploitative of their workers, dismissive of environmental or social concerns, and existing purely in the name of profit. They are routinely blamed for the great recession, global warming, and income inequality. So why are progressives and Obama’s Department of Labor pursuing policies that will lead to the creation of more and bigger corporations? Because the political Left’s paymaster, organized labor, needs corporations to exist and thrive.
Corporations grew up because entrepreneurs need to find investors to help finance their businesses. That in turn, requires them to keep transaction costs low, which requires them to hire employees rather than contract for each individual routine transaction. That’s the foundation of the corporate structure of owners, management, and workers.
For the past century, this structure has been under attack by progressive activists, who have long viewed corporations as ideological battlegrounds, with management arrayed against workers. In fact, much of the Naderite attack on corporations was based on the idea that management did not act in the owners’ interest.
Ironically, however, the National Labor Relations Act and similar Depression-era laws supported by progressives set this structure in stone, in the name of “protecting” workers against management. Certain aspects of the employment relationship were guaranteed by government enforcement — including overtime, unemployment insurance, paid time off, opportunity for union representation, and other requirements on employers.
Before the modern corporation, economies were characterized by what Adam Smith called “the system of natural liberty,” where businesses were small in scale and owners invested their personal assets into the venture and freely contracted with other businesses and individuals for services. This model lost out to the corporation because of the transaction costs related to identifying and contracting with other businesses to perform a service for you. It was far easier, and more reliable, to directly employ someone to do the job, even when required to offer the protections imposed by law. That’s why the corporation survived for most of the last century despite the increased costs of hiring.