Why Healthcare Companies Should Be(Come) Benefit Corporations

Our healthcare system is broken. Despite spending far more on healthcare per capita than any other country, health outcomes in the U.S. are relatively poor. There is a pervasive disconnect within the healthcare system between private incentives to develop and provide healthcare products and services and public health needs. Proposals for how to fix the system have focused on changes to regulation, incentive schemes, consumer behavior, and competition in healthcare markets. These proposals share the presumption that the development and provision of healthcare products and services will remain primarily in the hands of traditional corporations and, to a lesser extent, non-profit organizations.

Yet, as this article demonstrates, there is an inherent problem with relying on profit-focused corporations to drive healthcare innovation and provide healthcare services and products. Traditional corporations are structured (and, indeed, required) to focus on profits rather than tend to the public need. While this profit focus is not unusual nor considered undesirable in most markets, healthcare markets are different in ways that create a divergence between the private incentives to which corporations respond and public health needs.

In this article we suggest that a change in corporate form can be used to more closely align private incentives with public need. We propose that companies involved in the provision of healthcare products and services should be incentivized or even required to assume alternative business forms that would both enable and require them to consider the needs of a broader range of stakeholders and the public interest in addition to shareholder value. We identify benefit corporations, broadly defined, as one preferred mechanism for achieving this. We show how this approach could change corporate behavior and improve on not-for-profit performance in ways that improve healthcare outcomes.

Keywords: healthcare, incentives, benefit corporations, pharmaceuticals, public health, healthcare reform, non-profit, for profit, hybrid corporations, non for profit, business entities, corporate form

Suggested Citation: Suggested Citation

Heled, Yaniv and Vertinsky, Liza and Brewer, Cassady V., Why Healthcare Companies Should Be(Come) Benefit Corporations (February 1, 2018). 60(1) Boston College Law Review __,2019, Forthcoming, Emory Legal Studies Research Paper, Georgia State University College of Law, Legal Studies Research Paper No. 2018-15, Available at SSRN: https://ssrn.com/abstract=3179622