This paper examines two interconnected theses about the development of American medical care across the twentieth century. The first argues that medicine progressively incorporated elements of business organization — including labor specialization, standardization, and capital accumulation — into its foundational structure. The second argues that these economic structures directly shaped clinical content and practice, meaning that business and science in medicine are deeply intertwined rather than separate. Drawing on the frameworks of scholars such as Avedis Donabedian and historical examples ranging from the 1927 Committee on the Costs of Medical Care to late-century managed care consolidation, the paper challenges both market-reform narratives and purely scientific accounts of medical development.
This paper demonstrates the use of a dual-thesis structure, where the second thesis is explicitly built on the first. This technique is useful in academic writing when a more complex claim requires a validated foundation before it can be introduced. The author signals this structure clearly ("the second thesis builds on the first"), making the argumentative logic transparent to the reader.
The paper opens with a historical framing section that contextualizes the corporate turn in medicine. It then develops the first thesis — that medicine incorporated business organizational models — followed by the second thesis linking economic organization to clinical content. A middle section examines capitalism and market reform as analytical frameworks. The conclusion qualifies the profit-motive argument and affirms that business elements had real clinical consequences regardless of institutional intentions.
The United States was in an uproar in the late twentieth century over whether medical care was or ought to be a business. The prestigious New England Journal of Medicine made the Health Policy Advisory Center's earlier warning about the rise of a "medical-industrial complex" a mainstream concern (Relman, 1980). Political scientist James Morone advised that medicine was suddenly and rapidly becoming a "corporate enterprise organized and run along business principles" (Morone, 1997). Group practices, promoted for decades as progressive reform, took on a new business identity as health maintenance organizations (HMOs) in what sociologist Donald Light called perhaps the "greatest rhetorical reversal in the history of American health care" (Light, pp. 46–63). HMO and other managed care supporters declared that the cottage industry of medicine was finally having its industrial revolution (Eisenberg & Kabcenell, 1988).
Identifying cottage industry as the problem mandated an industrial and corporate development as the solution. So-called market reformers sought to transform medicine into a "modern corporate system, featuring the sophisticated financial and managerial controls associated with big business" (Battistella, 1985). They argued that such a system offered economies of scale and scope through mass-production manufacturing techniques. Critics pugnaciously described the same developments as an "invasion of commerce into medical care" and an epic clash of cultures between commercial and professional traditions. Medical care did reproduce industrial, corporate, and commercial models of organization, but the transformation was not so sudden. Ray Lyman Wilbur defined medicine as an industry when he was chairman of the 1927–1932 Committee on the Costs of Medical Care (CCMC). That committee defined its purview in terms of reforming the economic organization of medicine — specifically, the methods of producing and financing medical services.
In rejecting the hypothesis that doctors at that time looked to business for their organizational strategies, historian Donald Madison held that the immediate commercial interests of medical practitioners steered them on an opposing course, leading them toward individualistic rather than bureaucratic organization. This patently successful continuation of individual entrepreneurial practice led historian Thomas Goebel to reject the pertinence of organizational synthesis to medicine, even as he acknowledged that the rise of specialties and bureaucratically managed, large-scale institutions reconfigured American medicine.
Conventional medical as well as historical explanations of medical care organization and its therapeutics have assumed that both are driven by scientific and/or technological development. Two spectacularly successful approaches to fighting disease — immunization and antibiotics — supported a positive view of scientific and technological progress in medicine. Investigators increasingly questioned, however, the extent to which medicine was a structure shaped by an inexorable and laudable accretion of scientific insight, as historian Charles Rosenberg put it. Much that twentieth-century medicine had to offer was not nearly so effective as immunization and antibiotics. Experts acknowledged the inadequacy of evidence to support existing intervention levels, and the evidence that was available sometimes contradicted practice patterns. Joseph Califano, former secretary of the U.S. Department of Health, Education, and Welfare, answered "certainly" to his 1988 query: "Is it possible that in this era of high-tech medicine we just don't know with any precision whether many procedures truly affect the medical outcome?" (Califano, 1988).
A new kind of enterprise boomed in the American economy in the late nineteenth and early twentieth centuries, creating organizational changes that some would call a second industrial revolution. This new enterprise changed the workplace, the nature of work, and its products. Its productive features included concentration in large plants, labor specialization, process standardization, monopoly of technology, and professional management. Extending the division of labor of Adam Smith's pin factory, Frederick Winslow Taylor further subdivided and managed labor processes, publishing The Principles of Scientific Management in 1911. Incorporating such a labor division, managers designed production processes to achieve the most efficient and intensive use of their highly capitalized facilities.
The first thesis proposed here is that many medical care developments and reforms throughout the twentieth century applied contemporary elements of economic organization to the structure of medical care. In examining this thesis, health administration scholar Avedis Donabedian's framework is used, defining structure in terms of the characteristics of medical providers, their tools, and their organizational settings. The thesis does not merely draw an analogy between business and medicine; it examines how medical occupations and institutions incorporated elements of business organization into the foundation of medical care. This process created institution-based specialties, academic medical centers, and (somewhat later) multi-hospital regional systems. Medicine did not exactly "escape" the corporation prior to 1965, as Paul Starr maintained in The Social Transformation of American Medicine, using the prevalence of organized groups as his measure — medicine became the corporation. This first thesis stands alone: medicine did apply business models. The second thesis builds on the first.
The second thesis links the economic organization of medicine to its clinical content, practice, or what Donabedian called "process" — the sets of diagnostic, treatment, and interpersonal interventions that providers use on patients. The business elements built into medical care had a powerful impact on shaping its clinical interventions. Without denying that clinical process development also entailed many other factors, this thesis holds that the economic organization of medicine shaped the clinical activities and the theories that we know as twentieth-century medicine. It means that business elements are not neutral tools that merely enhance efficiency without impinging on medical science itself; rather, the science, the practice, and the business of medicine are intertwined at the most fundamental level.
You’re 64% through this paper. Sign up to read the remaining 2 sections.
Sign Up Now — Instant Access Already a member? Log inAlways verify citation format against your institution’s current style guide requirements.