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Capital Markets and Medical Care: How Wall Street Invented Physician Management Companies in the 1990s

Published online by Cambridge University Press:  24 October 2024

Barbara Bridgman Perkins
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Abstract

Investment banks collaborated with health care entrepreneurs and managers in the 1990s to add a costly layer of investor-owned corporations to the US medical delivery system. In capitalizing and consolidating physician practices, publicly traded Physician Practice Management Companies (PPMCs) incorporated elements of the broader capitalist economy. Companies such as PhyCor, MedPartners, and FPA Medical Management turned to the equity and debt markets to generate shareholder profits and capital for acquisitions. Contemporary theories of financial economics reinforced their activities. PPMCs collapsed after shareholder lawsuits accused them of reporting false figures to the SEC and banks withdrew their credit. Physicians were both accomplices and victims in the process that made the medical delivery system less equitable, less effective, and more expensive. Although this experiment in medical capitalism failed, it widened the door for Wall Street to build new ways to profit from health care.

Keywords

capital marketsmedicinefinanceaccounting
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Article
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Enterprise & Society , First View , pp. 1 - 29
Copyright
© The Author(s), 2024. Published by Cambridge University Press on behalf of Business History Conference

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References

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