Healthcare giants prioritize shareholder payouts over patient care

Editor’s Note

Shareholder payouts by publicly traded healthcare companies have surged 315% since 2001, raising questions about financial priorities in the sector, according to a February 19 article in Healthcare Finance.

A research letter published in JAMA Internal Medicine and co-authored by Yale University researchers found that major healthcare corporations on the S&P 500 spent nearly all of their net income on dividends and stock buybacks rather than reinvesting in affordability, research, or patient care, the outlet reports.

Specifically, the letter highlights how shareholder payouts rose from $54 billion to $170.2 billion between 2001 and 2022, with just 19 of 92 companies accounting for over 80% of these distributions. On average, these companies allocated 95% of their net income to shareholders.

Lead author Victor Roy, assistant professor at the University of Pennsylvania, emphasized that this trend has significant implications for patients and other stakeholders. Co-author Cary Gross, professor of medicine at Yale School of Medicine, linked the findings to the increasing privatization of healthcare, which may be driving up costs without enhancing access, delivery, or research.

Authors also raise concerns about the impact on patient costs, as 70% of US healthcare spending is publicly funded through taxes and government programs. Roy noted that increasing shareholder payouts could correlate with higher prices for patients. Meanwhile, a Black Book survey revealed that 82% of healthcare supply chain executives and finance leaders expect costs to rise by at least 15% in the next six months.