Healthcare corporations don’t reinvest but give profits to shareholders 

Photo: Kittiphan Teerawattanakul.EyeEm/Getty Images

An analysis of publicly traded healthcare companies reveals shareholder payouts–dividends and stock buybacks–have surged more than threefold since 2001, bringing into focus the financial priorities of the healthcare sector.

The research letter, co-authored by researchers from Yale University and published in JAMA Internal Medicine earlier this month, found major healthcare corporations allocated nearly all their net income to shareholders rather than reinvesting in affordability, research, or patient care.

The research, led by Victor Roy, assistant professor at the University of Pennsylvania, examined data from publicly listed healthcare companies on the S&P 500 between 2001 and 2022.

The findings showed shareholder payouts rose 315%, from $54 billion in 2001 to $170.2 billion in 2022, with just 19 of 92 companies accounting for over 80% of total
payouts.

Additionally, S&P 500 healthcare companies allocated an average of 95% of net income to shareholders.

“Shareholder payouts have critical implications for stakeholders, especially patients,” Roy wrote in a statement.

The study highlights the growing role of for-profit companies in the healthcare sector and the financial impact of these trends.

“This is a study that ‘follows the money,'” co-author Cary Gross, professor of medicine at Yale School of Medicine, said in a statement. “There has been a great deal of concern about the ‘privatization’ of the healthcare system, with for-profit companies taking on a larger and larger role.”

WHY THIS MATTERS

The findings raise questions about how financial decisions made by healthcare giants impact costs for patients, especially as 70% of U.S. healthcare spending is publicly funded through taxes and government programs.

“Increasing capital distributions to shareholders of publicly traded companies may be associated with higher prices and may not be reinvested in improving access, delivery, or research and development,” Roy’s statement noted.

THE LARGER TREND

Meanwhile, hospitals and healthcare providers are bracing for rising costs and supply chain disruptions as uncertainty around new tariffs on Chinese imports continues.

A Black Book survey of 160 healthcare professionals, including supply chain executives and hospital finance leaders, found 82% of respondents expect hospital costs to increase by at least 15% in the next six months due to higher import expenses.

Industry groups, including the Healthcare Distribution Alliance (HDA), have warned that tariffs on pharmaceuticals and medical goods could worsen drug shortages and drive up costs for hospitals, insurers, and patients.