Mere decades ago, ambitious college students who wanted a lucrative career dreamed of being doctors. Today, they imagine a future as venture capitalists. Over the course of the twentieth century, the medical profession in the United States aggrandized power and profit and is now watching it begin to slip away.Footnote 1 Although there is no single explanation for this meteoric rise and gradual decline, this chapter argues that one factor has been the profession’s own success. As medical science advanced, it afforded doctors increasing authority and, acting through professional associations, they used this authority to shape the law to protect their turf and their profits. And it also, I argue, had a terrible side effect. Because buried within the rise of professional autonomy and power was also the profession’s sharp decline – a decline that may hold important lessons for reformists focused on building a new era of the legal profession.
In medicine, the twentieth century ushered in scientific advances and the beginning of modern medicine and, with it, the growth of a powerful profession.Footnote 2 As Paul Starr described in his classic 1982 tome, “the profession has been able to turn its authority into social privilege, economic power, and political power. In the distribution of rewards from medicine, the medical profession, as the highest-paid occupation in our society, receives a radically disproportionate share.”Footnote 3
Led by associations, most prominently the American Medical Association (AMA), doctors worked assiduously throughout the twentieth century to concentrate their power and to maximize professional sovereignty. And it worked. Doctors wrested control over both state and federal laws and policies regulating the delivery of medicine.Footnote 4 They suppressed efforts to impose market competition in health care, which threatened to displace physician authority with consumer authority.Footnote 5 And they used their power to bend payment policies in their favor.
This aggregation of power enabled doctors to control supply, influence prices, and limit their exposure to critique and liability. And it built enduring structures that served to reproduce authority through legislative and market pressure.Footnote 6 It came, at times, at the expense of patients and taxpayers, as health care costs skyrocketed. It also produced less than ideal patient and physician experiences, including the seven-minute doctor’s office visit that we’ve all experienced, a period too short to diagnose or to manage any complex health situation.
Physicians have commanded high prices and profits. The startling irony is that the profits that physicians worked so hard to generate, accumulate, and protect have now lured in outside investors – corporate health systems, insurers, and, most recently, private equity companies – looking to extract these profits.
Early evidence suggests that this corporatization has not markedly increased access to medical care, maybe diminishing quality, and has undoubtedly changed the patient experience and the nature of the medical profession. Doctors are beginning to look like one small input into a larger medical economy, and patient care has become often impersonal. Medical doctors now operate in ways unrecognizable to doctors of a generation prior. After a century of resisting external control, they rarely run their own shops, or, increasingly, even group practices. They are more often beholden to large corporate entities. Medicine still enjoys some benefits of professionalism: high pay, respect, and job security. Yet, the practice of medicine is undoubtedly in decline, measured not only by decreasing autonomy but also by decreasing satisfaction and respect.Footnote 7
Focused on efficiency more than professionalism, the new health care economy will come to value workers who can perform tasks at lower labor costs, thereby eroding the turf and earnings that doctors worked so assiduously to defend. Advanced practice nurses, pharmacists, and others are no longer mere “physician extenders.” They are increasingly central players. Yet, all these providers have become corporatized and commodified, as the most astute observers like Paul Starr and Tim Jost predicted four decades ago at the nascence of the decline of the profession.Footnote 8
This chapter engages in a thought experiment. It asks: If doctors had pursued a different strategy, could they have retained the profits they worked so hard to earn – and would this alternative system have been better, both for physicians and their patients? This question is important in its own right and also because this inquiry holds crucial lessons for medicine’s sister profession: law. In some ways, law and medicine (or access to justice and access to care), although often analogized, may not be similar enough to compare. But some larger themes and questions might transcend these differences. This chapter considers why law has not gone the way of medicine and whether medicine’s trajectory might offer law a cautionary tale. Does gatekeeping help or hinder a profession? How might resistance of government funding and of corporate ownership be a preservation strategy and what does that mean for nascent efforts to allow corporate investors in law firms? And what does the nature of the profession mean, at the end of the day, for the people it serves?
This chapter couldn’t possibly answer all these questions. By asking them, however, it probes the importance of the link between the character of the profession and access to quality services, and it illuminates how understanding medicine might deepen, enrich, and complicate conversations about law reform.
9.1 The Profession’s Control over the Regulation and Boundaries of the Profession
9.1.1 The Rise of Associations and the Self-Regulation of Medicine
The very idea of what the medical profession is and who it includes was largely constructed by professional associations through efforts to shape regulation of the practice of medicine. The AMA, chief among medical professional associations for many decades, was founded in the 1840s when the profession was wholly unregulated.Footnote 9 The next decades brought increased reliance on doctors, who became more capable at helping patients.Footnote 10 A profession formed that, using legal tools, defined its own boundaries, sought self-protection, and set its own obligations and standards.
Physicians, represented by the AMA starting in the mid-nineteenth century and joined over the course of the twentieth century by specialty associations, led efforts to shape the face of medical regulation. Framed as necessary to protect patients and ensure good care, these efforts served also to insulate the profession from competition.Footnote 11 Four primary efforts ultimately sought to bolster and protect physicians and their earnings. The first three – licensure laws, scope-of-practice restrictions, and medical education pipeline control – suppressed the size of the profession and reserved certain domains of practice only for physicians. The final one, corporate practice of medicine laws, attempted to limit nonphysician interference with medical practice. They all have close corollaries in law.
9.1.1.1 Licensure and the Unlicensed Practice of Medicine
First, physicians sought to limit who could practice medicine with strict licensure requirements. Modern licensure laws, which emerged in the nineteenth century, are codified in state practice acts and require graduation from accredited schools and passage of examination to practice.Footnote 12 Practitioners argued that these laws would protect the public from quackery, and they did to some degree,Footnote 13 but licensure laws also became a tool to police the bounds of the profession, tamping down supply.Footnote 14
Licensure laws were developed state-by-state, based on state police powers, and their broad wording meant that many activities might constitute “medical practice,” which was reserved for physicians. In these laws’ current form, the term “medical practice” continues to encompass wide swaths of activities: One author describes these laws as constructing a “practically limitless range of activity within the exclusive power of medicine,” possibly even reaching mundane activities like ear piercing or blogging.Footnote 15 Bill Sage and Linda Aiken describe medicine as “noteworthy among modern professions for having staked out far more territory than physicians themselves can service, and for managing that territory by delegating duties to other professions who remain subject to physician control and supervision.”Footnote 16 This delegation structure later began to crumble, as discussed below.
Despite being passed in the name of high-quality care, licensure laws are rarely invoked to police poor-quality care.Footnote 17 They have, however, been used to discipline complementary or alternative medical practitioners as engaged in the illegal practice of medicine, a violation that is punishable criminally.Footnote 18 New private and public structures developed in the 1980s–90s to attempt to regulate quality more directly. Some identified this moment in time as the beginning of bureaucratic control over, or the proletarianization, of practice.Footnote 19
9.1.1.2 Depressing Supply through Medical Education
The medical profession also constrained the supply of physicians by limiting its own pipeline.Footnote 20 Toward the end of the nineteenth century, medicine was a growth industry; the number of medical schools was on the rise and women were entering medicine in increasing numbers, including through training in elite institutions where they were welcomed because they brought much-needed financial contributions.Footnote 21 In 1904, however, the AMA halted this expansion with the creation of a Council on Medical Education that began grading institutions and, in 1906, fully approved only half of the 160 medical schools in existence.Footnote 22 State licensure boards adopted the heightened requirements espoused by the AMA, including moving from a two- to a four-year course of study, pushing many medical schools out of business.Footnote 23
This standardization already underway was hastened by the 1910 Flexner Report, written for the Carnegie Foundation by Abraham Flexner, a doctor trained at Johns Hopkins University in what he characterized as the ideal of experimental science-based education.Footnote 24 He criticized the overproduction of medical schools as “private ventures, money making in sprit and object” and “wholly didactic,” instead of institutions focused on training doctors clinically.Footnote 25 He made the case that a prior college degree in fundamental sciences and language should be a prerequisite for medical education, which, itself, should be based on doing, not watching.Footnote 26
In the following decades, more than half of medical schools merged or closed, including five of seven historically Black medical schools (Howard University College of Medicine and Meharry Medical College remained).Footnote 27 Medical schools limited admissions for women, and alternative medicine was sidelined or extinguished.Footnote 28 This decline in medical training depressed medical care, exacerbating shortages in rural areas and poor areas.Footnote 29
Following this initial narrowing of admission came a second one with the creation of specialties, starting with ophthalmology in 1916.Footnote 30 A system of self-regulatory specialty boards was developed to exercise control over various specialties, and the Advisory Board for Medical Specialties was formed in 1933.Footnote 31 The division of the profession into specialties created more particularized claims to expertise and, in turn, enhanced payment. Today, and traceable to efforts by the AMA, doctor shortages persist at critical levels, especially in primary care where compensation lags behind most specialties.
9.1.1.3 Scope of Practice
After shrinking the pool of doctors, physicians preserved maximal authority by limiting the care nonphysician health care professionals could provide. Scope-of-practice laws, which both license and constrain practice, dictated who could do what among nurses, nurse practitioners, naturopathic doctors, acupuncturists, nurse midwives, and others. For example, when nurse practitioner training began, these laws determined whether nurse practitioners could diagnose conditions, prescribe medication (including controlled substances), and treat chronic conditions independent of physician supervisionFootnote 32 and also set the structure of physician supervision required.Footnote 33 The providers regulated by scope-of-practice laws were even called “physician extenders,” a term that emphasized their role, as secondary to physicians.Footnote 34 These laws have become controversial as evidence mounts that lifting these restrictions increases access to care without compromising quality,Footnote 35 but the AMA continues to resist their liberalization.Footnote 36
9.1.1.4 Corporate Practice of Medicine Restrictions
A fourth and final way that physicians tried, but ultimately failed, to retain maximal control was through state prohibitions against the “corporate practice” of medicine. Some feared that when those acting in the service of patients were controlled externally, it could infuse profitmaking into their consciousness and tarnish the profession. Common laws and statutes in most states thus restricted business and managerial control over medical practice. But as medicine began to look more like a business than a calling over the latter half of the twentieth century, corporate practice of medicine laws were circumvented, repealed, overturned, limited, or unenforced.
9.2 The Medical Profession’s Control over Prices
The emergence of modern health care financing, including the 1965 passage of Medicare and Medicaid and the growth of managed care beginning in the 1970s, threatened the imposition of external controls over medical practice. In the 1970s–80s, health care prices soared, and questions over health care quality provoked a movement toward quality management and improvement.
Having public and private insurers as powerful intermediaries could, in theory, have swiftly tempered professional influence. To the contrary, the introduction of external financing brought an infusion of spending that increased the stakes of payment policy, and the profession’s use of its political capital to shape this policy intensified. This section traces how the profession used its influence to shape insurance into a tool for profitmaking.
9.2.1 Medicare Fuels the Profession
The early to mid-twentieth century brought debates over the government’s role in financing health care, and the AMA resisted government-financed health care because of the fear that it would bring regulation along with the financing. Although the AMA contributed to the defeat of national health insurance, Medicare passed in 1965 over AMA resistance.Footnote 37
Yet, instead of Medicare bringing professional regulation, the profession has since shaped the program for its benefit. Medicare has created a steady and reliable funding stream for inpatient and outpatient care. The Medicare Act provided that outpatient care would be compensated at rates that were “reasonable” or “customary,” terms that became defined based on the amounts that doctors billed for care.Footnote 38 This squishy statutory language fanned the flames of medical inflation through the 1970s, and as doctors’ billed amounts increased, Medicare’s price tag ballooned.Footnote 39
The Medicare Act also delivered an explicit promise not to interfere with the profession. In its very first section, the statute provides:
Nothing in this subchapter shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided, or over the selection, tenure, or compensation of any officer or employee of any institution, agency, or person providing health services; or to exercise any supervision or control over the administration or operation of any such institution, agency, or person.Footnote 40
Although Medicare has undoubtedly deeply shaped health care delivery, this provision has cabined payment and quality reform. As just one example, the Affordable Care Act (ACA) created a body to study comparative cost effectiveness to pay more for higher-value care.Footnote 41 Although this Patient-Centered Outcomes Research Institute (PCORI) was formed, it was prohibited from considering the relative cost of treatments; rather it was only allowed to consider the effectiveness of treatments.Footnote 42 This means that if two treatments are both effective but they vary wildly in price, their relative prices are not allowed to factor into PCORI-funded analysis.Footnote 43
Physicians also directly influence reimbursement rates in various ways. For example, in 1992 Medicare transitioned to paying doctors based on a relative scale of how much effort goes into different categories of care.Footnote 44 Medicare sets the amount paid for a base unit, and a committee of the AMA called the RVS Update Committee (RUC) determines the multiplier for each type of encounter. The AMA Board of Trustees selects the RUC chair, and specialty societies nominate individual members. Of thirty-two current members, over two-thirds represent specialties, and in 2023 only four were women (practicing in pediatrics, geriatrics, osteopathy, and primary care).Footnote 45 This means that regulators defer to doctors – and a skewed sample of doctors, at that – to determine how much Medicare pays for a therapy session versus a surgeon’s fee for a knee replacement versus a pediatric well visit.
Primary care doctors, whose work is relatively undervalued through this process, have also accreted power through policies including so-called value-based models of care. The ACA created a Center for Medicare & Medicaid Innovation (CMMI, now called the CMS Innovation Center) within CMS to test new payment models,Footnote 46 which pay bonuses when patients achieve health outcomes within spending parameters. Primary care doctors are the lynchpin to success and profit in these models. This fact has drawn the attention of corporate investors in primary care. Over the past decade, corporate investors have begun to aggregate primary care doctors into formal or informal networks. These typically private-equity-backed entities (e.g., Oak Street Health, ChenMed, and One Medical) have, in turn, begun to change the nature of primary care practice, as discussed below.
9.2.2 Consolidation and Power over Private Insurers
The story of private insurance was much the same (until recently): Despite insurer efforts to manage cost inflation, the profession gained the upper hand by consolidating to preserve and enhance their rates. Initially, private fee-for-service insurance did not restrict the providers or medical care someone could use.Footnote 47 During the 1980s–90s, managed care gained steam as an attempt at cost control. Insurance companies created limited networks and began to push back on prices with credible threats that they would exclude providers from their networks if their prices were too high.Footnote 48
That period was short lived. Patients protested overly restrictive networks. Hospitals and doctors consolidated in ways that aggrandized their own power vis-à-vis insurers. Even when the Federal Trade Commission (FTC) attempted to slow provider consolidation, courts backed doctors and hospitals in their resistance of managed care.Footnote 49 The end result has been high prices and insurers and employers who are price takers, unable to negotiate down rates. Even large employers increasingly express frustration at their inability to control prices in employee health plans.Footnote 50
That said, the tides may be turning, as insurers like UnitedHealth Group have over the past decade sought to regain the upper hand by acquiring physician practices and steering patients toward doctors who are under their control.Footnote 51 This trend is beginning to shift the power dynamic between insurers and doctors, as discussed below.
9.3 What a Century of Aggregation of Regulatory and Market Power Produces
For a century, doctors worked on turf building and defending until they became one of the most valuable pawns in the game of health care, second perhaps only to patented drugs and medical devices in an industry that constitutes nearly one-fifth of the economy. Yet, what these efforts have produced for practicing physicians is far from what was initially envisioned. Even worse, at the macro level, it may be contributing to the erosion of high-quality and humanely delivered medical care.
9.3.1 Modern Professional Threats: Employment and Investment
9.3.1.1 Physician Employment
Physician employment has accelerated dramatically, and the form and nature of employment have become complex. Initially, doctors were either in private practice or employed by hospital systems, but practices are now owned in various forms by physicians, hospitals, and/or corporations, and corporate ownership includes insurers, private equity firms, and others.Footnote 52 By one conservative count, over half of doctors are now employees, rather than owners of their own practice, including 66 percent of doctors under age forty and nearly 60 percent in fields including family medicine and pediatrics that used to be the hallmarks of independent physician practice.Footnote 53 Another study estimated that three-quarters of physicians were employed in 2022, up from just over 60 percent three years prior.Footnote 54 Even in surgical subspecialties, which have long resisted this trend, over one-third of doctors are now employees.Footnote 55 The COVID-19 pandemic accelerated this trend.Footnote 56
One early factor that led to increasing physician employment, at first mostly by hospitals and health systems, was the promise of data – especially big data – to drive better or more efficient care in institutional settings.Footnote 57 Some arguments for employment are still based on the hope that patient care can be better managed in more integrated settings.
A more skeptical take, though, is that doctors are now subject to an extremely complicated system of reimbursement, and lay managers can better navigate it.Footnote 58 When for-profit corporations take over nonprofit hospitals, for example, billing goes up even if there are no changes in the actual care provided.Footnote 59
9.3.1.2 United Is No Longer Just an Insurer
Meanwhile, it’s not just the share of physicians who are employed that is changing; it’s also who employs them. Although most physician employment is still by hospitals, the fastest-growing segment is by corporate groups, including insurers and private equity firms.Footnote 60 In 2021, UnitedHealth Group, under its OptumHealth Unit, employed or controlled (in whole or part) over 53,000 doctors, about 5 percent of US physicians, more than the largest US health systems (Ascension, HCA Healthcare, and Kaiser Permanente).Footnote 61 This piece of United’s overall business is expanding quickly, tripling its revenue from 2015 to 2020.Footnote 62 Other insurers including Humana Corp. and CVS Health Corp., which owns Aetna, are also expanding into health care delivery.
These insurers often pay doctors through value-based arrangements, and recent acquisitions focus on primary care doctors who are gatekeepers to the health care system. This strategy is especially important for Medicare Advantage business, which is the private health plan option for Medicare enrollees. In Medicare Advantage, health plans are paid a fixed amount per month per enrollee who selects their plans, but this amount can be adjusted upward through a risk-adjustment payment if the enrollee is identified by a provider as higher risk.Footnote 63 Corporations game risk-adjustment payments and increase reimbursement, in part by encouraging doctors to indicate that patients are sicker.Footnote 64
Now, over half of Medicare’s sixty-five million enrollees select a private plan and, eventually, it is likely all will.Footnote 65 The top players in Medicare Advantage, measured by share of enrollees,Footnote 66 are among the most active physician practice acquirers, focusing on those physicians who are in a position to influence risk-adjustment payments.
9.3.1.3 The Entrance of Private Equity
Other outside investors, including private equity firms, have been the most recent and aggressive entrants. Private equity firms will extract at least some of the wealth the medical profession labored to create as they seek profit. Regulators are taking notice, slowly.Footnote 67
In some sectors, the influx of private equity capital might be beneficial, but in health care (and other fields like law where labor intensity produces value), it is harder to see the promise. As one report put it, private equity is “focused on short-term revenue generation and consolidation and not on the long-term wellbeing of patients. This in turn leads to pressure to prioritize revenue over quality of care, to overburden health care companies with debt, strip their assets, and put them at risk of long-term failure.”Footnote 68
A major problem is that corporate investors can profit without improving patient care.Footnote 69 Private equity firms have a short investment lifespan of generally ten or fewer years, during which the best way to achieve a higher sales price is through consolidation, which produces two benefits. First, larger networks of providers have more bargaining power to demand higher prices. Second, larger companies earn a higher multiplier when sold, just on account of being larger.Footnote 70
Private equity investment in health care has accelerated dramatically over the past decade. Although it can be difficult to estimate because not all deals are reported, one source estimates that annual deals increased from $45 billion in 2010 to nearly $120 billion in 2019.Footnote 71 Health care accounted for nearly 20 percent of reported private equity deals in 2020, making it the second-largest sector for investment.Footnote 72 A large majority of private equity buyouts are of clinics and outpatient care, followed by elder and disabled care.Footnote 73
Private equity is driving consolidation in outpatient care, rolling smaller physician groups into large national companies.Footnote 74 One target has been physician staffing services that themselves aggregate physicians and contract with hospitals that need hospitalists, emergency medicine doctors, and anesthesiologists.Footnote 75
Consider one example featured in a recent report.Footnote 76 Advanced Dermatology and Cosmetic Surgery (ADCS), founded in Florida in 1989, is a physician practice management firm that began to buy up physician practices in 2009. Private equity firm Audax acquired ADCS and added dozens of additional physician practices.Footnote 77 ADCS is now the largest dermatology practice across 12 states with 145 physician partners and 1.5 million patient visits a year.Footnote 78 Audax sold to another private equity firm, and likely made money simply by growing ADCS’ revenue, even with no improvements in care.Footnote 79 For patients, this type of consolidation often makes health care less personal and more expensive.
Private-equity-driven consolidation is pervading primary care too. In Medicare Advantage, the private equity-funded aggregators described above gather physicians into networks. They are then acquired, often by Medicare Advantage organizations. For example, Oak Street’s was acquired in February 2023 by CVS Health for $10.6 billion and One Medical by Amazon for $3.9 billion as part of a possible strategy of entering Medicare Advantage.Footnote 80 The companies can use these relationships to steer patients from public Medicare to their private Medicare Advantage plans where doctors become a key to profitmaking through risk adjustment, as discussed above.Footnote 81
9.3.2 Change Emerges: Possibly Too Little Too Late
In recent years, physicians and their priorities have noticeably shifted. Physicians are trying to regroup and regain control over their professional lives through labor efforts including unionization. And laws aimed at turf protection have begun to recede, hastened by the COVID-19 pandemic. These efforts may be too late, however, to redirect the trajectory of the profession.
So far, this chapter has portrayed doctors and the profession as monolithic, which was untrue even in the days when most doctors were male, white, politically conservative members of the AMA, and the AMA spoke on their behalf on policy. In recent decades, doctors have become much more heterogeneous.Footnote 82 Doctors are seeking more varied ends out of medical practice. They are more than ever prioritizing work-life balance more than or co-equal to other career goals.Footnote 83 The AMA’s power and membership has declined, evident during ACA debates when new groups like Doctors for America spoke on behalf of an emerging progressive and public health-oriented wing of the profession.Footnote 84 And even the AMA seeks to evolve. In June 2019, the AMA nearly passed a proposal to eschew opposition to single-payer health care reform.Footnote 85
The COVID-19 pandemic hastened health policy reforms, undoing many of the overly restrictive laws that produced a glaring shortage of primary care doctors in many communities. For example, all fifty states temporarily waived in-state licensure requirements, which allowed providers to cross state boundaries to practice, and all but one applied this waiver to telehealth too.Footnote 86 Most states with restrictive scope-of-practice laws allowed nonphysician providers to do increasingly more, practicing to the top of their training and ability, rather than to an artificially set boundary.Footnote 87 Some, although a small minority of, states made these expansions to scope-of-practice permanent.Footnote 88
The boundaries of medical practice continue to shift after the pandemic. In the first months of 2023, state lawmakers introduced 200 bills that would, for example, allow pharmacists to administer vaccines or prescribe hormonal contraceptives and that would allow optometrists to inject local anesthesia for minor procedures.Footnote 89 Likewise, both the federal and the state governments relaxed laws on telemedicine.Footnote 90 And some states, and Medicare, created parity rules for reimbursing telehealth and in-person visits the same amounts.Footnote 91
But rebuilding the profession with a more capacious vision of who is part of it may prove impossible after the effects of over a century of protectionism. Nurses are leaving the profession, and nursing shortages are increasingly acute.Footnote 92 In turn, private equity is buying up travel nursing agencies that place nurses in high-need areas across the country at a premium.Footnote 93 It seems that current efforts to increase access to care and redefine the bounds of the profession may be limited by a path set in motion a century prior.
9.3.3 The Impact of the Fall of the Medical Profession on Patients
This chapter focuses on the medical profession and its regulation, but anyone who has been a patient knows who loses in the end when regulation is motivated by factors other than access to high-quality care. It has been evident for some time that the profession depressed supply and access to care in harmful ways, especially in low-income and rural areas, and efforts to turn the tide are likely insufficient to make up for a century of contraction.
What is more recently surfacing is that the increasing corporatization of health care delivery is also bad for our health. Physicians report pressure to provide more care by reducing the time with each patient, detracting from the quality of care in some cases.Footnote 94 The rise of the corporatization of health care has led to providers feeling they must fit more “billable” patients into shorter increments of time, resulting in care that they feel is insufficient or even unethical and increasing cynicism among providers.Footnote 95
Subjective patient experience suffers. Data from the Harris Poll indicates that more than 70 percent of adults feel the health care system is failing to meet their needs in at least one way.Footnote 96 Examples of this failure include the length of waiting time to schedule an appointment, coordinating across several providers, and not understanding recommendations from health care providers.Footnote 97
Meanwhile, the United States has fallen farther behind peers in common health metrics such as life expectancy at birth and infant mortality.Footnote 98 Disease burden, which takes into account both premature death and years of living with disability, is higher in the United States than elsewhere.Footnote 99 The United States also ranks last among its peer countries in measures of health access and quality, negatively impacting population health.Footnote 100 The United States has among the lowest rates of physician visits and lowest number of hospital beds in the world, yet its health care spending is the world’s highest.Footnote 101
Specific evidence on corporate ownership is not encouraging either. Medicare Advantage plans are driving up the cost of Medicare without adding concomitant value. These private plans profited early on by enrolling healthier populations.Footnote 102 Most have been accused of fraud by whistleblowers and/or the government.Footnote 103 They fail to serve patients with complex health needs,Footnote 104 and their enrollees are more likely to enter lower-quality nursing home facilities.Footnote 105 Evidence suggests that Medicare Advantage plans are wrongly denying care in as much as one-fifth of cases, threatening the viability of rural hospitals.Footnote 106
As another example, early evidence on private equity investment in physician practices suggests that patients may end up paying more or getting unnecessary care. A Kaiser Health News investigation of private-equity-owned outpatient care reported $500 million in False Claims Act settlements for overbilling, and a series of articles uncovered stories of unnecessary and poor-quality care, including of a two-year-old who died after a private-equity-owned dental clinic performed unnecessary root canals and placed crowns on baby teeth.Footnote 107 A study in JAMA of 578 private equity-acquired physician practices in dermatology, gastroenterology, and ophthalmology showed increases in health care spending and use.Footnote 108 In the case of dermatology and ADCS, noted above, after private equity investment, dermatology practices refocused on the sale of retail skincare products and self-pay elective procedures, and employees reported that the company cut back on essential supplies and provided care with questionable value and safety.Footnote 109 Research suggests that nursing homes with private equity ownership produce lower quality of care – including increased emergency department visits and hospitalizations for patients – at higher prices.Footnote 110 And a shocking recent study revealed a 25 percent increase in preventable hospital-acquired injuries – like falls and central line or surgical site infections – after private equity hospital acquisitions.Footnote 111
In the end, patients suffer as medicine overly focuses on profits. When profit seeking is imposed through external controls and management, it becomes increasingly difficult for doctors and others to provide any counterbalance, regardless of their own intentions or motivations.
9.4 Thoughts for the Legal Profession
How does the legal profession avoid the fate of the medical profession? Initially, law and medicine progressed in step. Over the past century, law has used many of the same tools as medicine to protect profits and bolster professional standing: restrictive supply requirements with accreditation limiting the pool of lawyers, which, like the supply restrictions in medicine, had a disproportionate effect on women and underrepresented minorities; licensure laws for turf protection; bans on corporate ownership; and strict supervision requirements for lawyer extenders such as legal assistants and paralegals. The American Bar Association (ABA) sought control in the same way the AMA did, with only one letter’s difference.
Yet, today’s legal profession looks very different from medicine. Lawyers are still the only ones who can practice law. Law has largely resisted entry of outside investors like private equity, and, although insurance also plays a key role in modern legal practice, it is as a client to firms, not as an owner of them. Many lawyers are not employees, and those who are employed tend to be employed by their fellow lawyers, organized under a partnership model or by cities, states, or the federal government.
Still, in law, many are advocating for the abolition of Rules 5.4(b) and (d), which prevent fee-sharing and nonlawyer ownership. The forward-looking question is this: How does the legal profession improve access to legal services without opening the portals that devoured the medical profession? Since I come to this volume as an interloper in the access-to-justice conversation, I end with loosely formed thoughts on how the arc of the medical profession might frame some hard questions for the legal one about practice authority and capital. These are intended as beginning questions, not as answers.
9.4.1 Who Can Practice? Questioning the Boundaries of the Profession
One hypothesis running through this chapter is that the medical profession was too restrictive when shaping the bounds of practice authority. Contraction of medical education and narrow practice rules might have rooted out some bad practices of medicine, but when people can’t see a doctor, it can quickly become a crisis.Footnote 112
To address shortages, the profession allowed “physician extenders,” assuming that they would never be a good substitute for a doctor and that physicians could control them. Yet, as evidence emerged that an advanced practice nurse can provide good care, independent of a doctor, justifications for control dissipated.
Maybe law has not yet found the tipping point of an access crisis, but if it hasn’t, it may be nearing one. The number of people who have unmet need for legal assistance has surged.Footnote 113 At this pivotal moment, the legal profession and the ABA can still help to shape a solution that thoughtfully considers the role of paraprofessionals, nonlawyer professionals, and technology including artificial intelligence, rather than being an impediment to it.
Medicine suggests that holding on too tight to the boundaries of practice might lead to a short-term boon but a long-term unraveling. So, a first reflection is: If the legal profession embraces a more capacious model of legal services, can broader practice authority be part of the solution, rather than an impediment to be overcome?
9.4.2 How to Fund Access to Legal Services
Even if more people could offer legal services in various forms, the harder challenge is an external one of how to fund legal services for people who cannot afford them (which is most people). And perhaps the lesson of medicine in this space is that there is no easy answer.
Legal aid societies have existed since the mid-nineteenth century, shifting through various models and funding sources over time.Footnote 114 By 1965, most major cities in the United States had some formal, local legal aid program.Footnote 115 Most adopted a traditional model of charitable, individualized, case-by-case assistance.Footnote 116
The Economic Opportunity Act of 1964 (EOA) marked the first time Congress provided federal funding for legal aid.Footnote 117 The Act created the Office of Economic Opportunity (OEO) to administer EOA funds,Footnote 118 which relied on local community action agencies to disburse these funds. Private attorneys opposed OEO models on several grounds, including that with federal funding might come the specter of greater regulation of the legal profession.Footnote 119
In 1971, an ABA committee recommended the creation of a private, nonprofit corporation that would replace OEO.Footnote 120 And a 1974 law succeeded with the creation of the Legal Services Corporation (LSC), a nonprofit corporation headed by an independent, bipartisan board.Footnote 121 After a brief rise, however, Congress began to limit the use of LSC funding, culminating in the election of Ronald Reagan in 1980 who proposed its complete elimination.Footnote 122 President Reagan failed to achieve this vision, but LSC has been on a funding roller coaster since.Footnote 123
Some bar associations endorsed an alternative, middle-ground proposal for federally funded legal aid: Judicare.Footnote 124 Judicare would have used federal funds to pay for poor clients to seek private services, like Medicare and Medicaid.Footnote 125 But John Robb, the then-Chairman of the Standing Committee on Legal Aid and Indigent Defendants of the American Bar Association, rejected following the path of medicine, arguing presciently in 1967 that doctors may “have paid too high a price for what may well prove to be a short lived prosperity.”Footnote 126 Despite some testing of Judicare models, it never took hold in more than very limited ways.Footnote 127
Instead of one, central funding model, various decentralized ones have emerged. On the criminal side, states and cities help to fund defense attorneys. On the civil side, for example, programs funded through interest on lawyers’ trust accounts (IOLTA), the second-largest source of legal aid funding after LSC, pay for legal services using interest accrued from trust accounts in which lawyers hold client funds.Footnote 128 These programs were created by state rules of professional conduct, state legislatures, or state supreme courts, and have existed in every state and the District of Columbia since 1997.Footnote 129
The United States spent over $4.5 trillion on health care in 2022, including over $1 trillion on professional services, such as physician and clinical services.Footnote 130 In contrast, the entire legal services market is not even $400 billion. And total legal aid funding including LSC and IOLTA was just $2.8 billion in 2021, barely a drop in the bucket.Footnote 131
Although the lack of federal funding impedes access to justice, lessons from medicine suggest it also avoids traps. Medicare and Medicaid brought an infusion of federal money into health care and, with it, a host of problems including steep health care cost inflation, which regulators have lacked the reach and the will to curb. Instead, they turn to market competition with hopes that it will do so, handing over program administration to corporate participants in those markets. With some exceptions, these efforts have failed to save money or improve care quality; in fact, they’ve done the opposite.Footnote 132
Maybe uniform federal funding would have avoided these traps. If, in 1965, Congress had passed a national health insurance system, we might see more coherent price regulation where the greatest friction occurs between regulators, on one hand, and doctors and hospitals, on the other, over reimbursement rates. The medical profession (ironically, considering the AMA’s deep resistance to such an approach) might have fared better in that alternative world. But a partial solution in health care has accelerated the undermining of the profession.
This lesson from medicine suggests that the challenge for the law is how to get to funding levels that approach the need for legal services while resisting the problems that powerful, yet fragmented federal programs can create. This challenge is obviously formidable.
9.4.3 Whether to Resist Corporatization
A related question is whether to allow corporate money to fill shortfalls. Here, medicine’s trajectory suggests the legal profession “proceed with caution.” Had corporate practice of medicine prohibitions stayed in place and been enforced, corporate interests likely wouldn’t have been excluded wholly, as evinced by the many workarounds of these laws. But at the same time, there likely would have been stronger legal teeth to resist dramatic corporatization.Footnote 133
Prohibitions on corporate ownership in the law, in contrast, have been in place and effective for nearly a century. Every state bar association, except the District of Columbia, adopted ABA Rule 5.4, which prohibits nonlawyer ownership of law firms, despite having faced resistance among firms.Footnote 134
Yet, recently, a few states have adopted reforms permitting nonlawyers to own law firms. Arizona eliminated Rule 5.4 on a permanent basis, whereas Utah began a two-year pilot period to experiment with allowing law firm ownership by nonlawyers.Footnote 135 In their wake, California and North Carolina established committees to investigate similar reforms.Footnote 136
Law firms see eliminating Rule 5.4 as enabling new ways for them to access capital, which under the rule is only possible if equity partners invest more in the firm or through a bank loan.Footnote 137 Without Rule 5.4, external investors can buy equity in the firm, producing capital without debt.Footnote 138 Eliminating Rule 5.4 could also institutionalize adjacent legal competencies outside of law firms,Footnote 139 or allow marketing, tax planning, or wealth management entities to obtain ownership interest in legal services.Footnote 140
Some thoughtful scholars and other stakeholders suggest that the elimination of Rule 5.4 could benefit lawyers and promote access to justice.Footnote 141 They highlight potential increases in consumer access to services and innovation in the legal market, and some early experimentation affirms this possibility.Footnote 142
Yet, medicine offers a cautionary tale about lifting such barriers whole cloth, especially without monitoring which corporate interests can enter and how. Corporate investment in health care illustrates the unintended consequences that could follow if states are not careful about keeping a close eye on the precise form diversification takes. It might be that such reforms open the floodgates but, without sufficient consumer protections and regulations, do not meaningfully expand access to justice.
9.5 Conclusion
We may never know exactly what factor or factors caused the medical profession’s decline. Maybe what lawyers should learn most is that working to preserve one’s own turf and earnings, rather than focusing on what is best for clients, harms the core values that make something a profession. It matters less whether it was the medical profession’s aggressive self-regulation or its defeat of national health insurance or its exertion of control over reimbursement. When a profession works to aggrandize power and wealth and, in the process, loses sight of why it was accorded professional respect in the first place, it has become less a profession and more a business. There is certainly a lesson there for lawyers.
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