$275 Billion in Annual Subsidies. $29 Million in Lobbying. $33 Million CEO Pay. This Is "Good at Business."
The skills rewarded in American healthcare have nothing to do with innovation. They have everything to do with regulatory capture.
$275 billion in annual subsidies.
$29 million in AHA lobbying.
$33.2 million CEO paydays.
This is what “good at business” looks like in American healthcare.
Not innovation.
Not service.
Rule capture.
IN TODAY’S ARTICLE:
The three numbers that explain American healthcare: $275B, $29M, $33.2M
Why do the largest nonprofit hospital systems pay their CEOs more than Fortune 500 companies
The revolving door: 55% of hospital lobbyists are former government officials
What independent physicians are actually competing against
Glossary at the bottom of today’s article.
THE THEORY
In 1982, George Stigler won the Nobel Prize in Economics. His contribution was a field guide to how power actually works. Stigler studied what happens when governments regulate industries. The textbook story says regulation protects consumers from corporate excess.
Stigler found something different.
“As a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.” The companies being regulated don’t fight the regulators. They capture them. They staff the agencies. They write the rules. They use complexity as a moat.
Stigler called it regulatory capture.
The result? Regulation doesn’t constrain incumbents.
It protects them. From competition. From innovation. From you.
Bill Gurley, the venture capitalist behind Uber, Zillow, and Grubhub, put it more bluntly in his 2023 All-In Summit talk:
“Regulation is the friend of the incumbent.”
I was in the third row when Gurley delivered this talk, sitting with my friend and business savant, Larry Goldberg.
Gurley wasn’t talking about tech. He was talking about healthcare.
THE EVIDENCE
If regulatory capture is the theory, American healthcare is the proof.
The total systematic advantage enjoyed by large health systems is $275 billion annually. That’s not a typo. That’s a 120% increase from the $125 billion we documented in 2025. Better data. New programs. The moat keeps growing.
Here’s how it breaks down:
Medicaid Supplemental Payments: $90.1 billion. DSH, UPL, and other payments flow only to hospitals, funded by complex provider tax schemes independent practices can’t access.
340B Drug Pricing Program: $81.4 billion. Hospitals buy drugs at 20-50% discounts, bill insurers at full price, pocket the spread. Grew 23% in one year. Independent practices are excluded.
Nonprofit Tax Exemptions: $37.4 billion. Federal, state, and local tax exemptions. 55% comes from state and local levels.
Medicare Advantage Overpayments: $15-20 billion. System-owned health plans benefit from favorable selection and upcoding.
Graduate Medical Education: $16.2 billion. Medicare funds flow exclusively to teaching hospitals. Independent practices train residents, too. They get nothing.
Site-Neutral Payment Violations: $14.1 billion. Medicare pays hospitals 145% more than physician offices for identical services.
Rural Health Transformation Program: $10 billion. A new program providing $10 billion annually to states. Hospitals are the primary beneficiaries.
HRSA & Federal Grants: $5-10 billion. Hospitals capture the lion’s share of discretionary federal grants.
Nonprofit hospitals aren’t bad at charity. They’re good at business. Very good. The question is whether you understand the business they’re in.
