Today, healthcare is a major sector of activity throughout the world. In 2015, health expenditures amounted to 16.9% of the GDP in the United States, 11.2% in Japan, and between 8 and 12% in Western Europe. 1 Moreover, considering the aging populations in Western and East Asian countries and growing income levels in emerging countries, many consider the healthcare industry to have immense potential for growth. According to the consulting firm Deloitte, global healthcare expenditures should rise to 8.7 billion USD in 2020, relative to just 2.6 billion in 1995 and 7.1 billion in 2015. 2 Health, one could easily argue, is one of the largest industries of the early twenty-first century.
Another characteristic of the healthcare industry is the rapid growth that it experienced during the twentieth century. While the databases of the Organization for Economic Cooperation and Development (OECD) and World Health Organization (WHO) do not include the years prior to the 1960s, making it nearly impossible to construct a global overview of this development, works by several economists and economic historians in the United States and Europe provide some evidence at the national level. Examining the United States, Melissa Thomasson estimated healthcare expenditures at about 2% of the total GDP in 1900 and 3–4% during the 1950s. 3 As for France, Sandrine Michel and Delphine Vallade put the expenditures at about 1% of the GDP in 1900 and around 3% in 1950. 4
The causes of this continuous growth—especially since the 1960s—have caught the attention of numerous health economists, who have built models to highlight the impact of several factors. The literature discusses three main causes. The first set of factors comprises increasing life expectancy levels and aging populations. As more people get older, the demand for healthcare increases. 5 Most scholars generally share a consensus on this basic relationship. The second factor, technological change, prompts much more discussion. 6 Some economists have argued that certain innovations can also decrease costs, provided that the technologies improve the quality of patient life and thereby reduce the consumption of healthcare. 7 Gelijns and Rosenberg emphasized that the nature of the impact on costs depends on the type of innovation (new infrastructure vs. cost-saving technology). 8 In cases where there is a positive influence on rising costs, the level of national income is related to the speed of the adoption of new technology. Technological change is, in this case, an investment that requires sufficient capital. 9 Finally, the third factor centers on healthcare market organization and funding. Getzen argued, for example, that the main reason behind cost growth in the United States from 1960 to 1980 was “the system we have constructed.” 10 “Physician-induced demand,” or the use of diagnostic devices and other health services by doctors, usually grows when the number and density of practitioners increase. 11 Webster, a sociologist, maintained that “in market-based systems […] new technologies have been much more quickly taken up in part because professional care is fee-based and specialist, and where patients are ‘clients’ with private health insurance, a physician competes with others in part through what state-of-the-art medicine they have to offer.” 12 There are, however, some contradictions between studies emphasizing doctors’ roles as patient agents (adapting health-service consumption to patients’ needs and financial means, for instance) and physicians’ self-interests. 13 Finally, for some authors like Michael Porter, healthcare systems based on the principle of a competitive market economy are the most effective organizations for providing good treatments at affordable prices. 14
Consequently, health economists have emphasized that aging populations, new technology, and market organization all have an important impact in driving healthcare expenditures up. However, they have not focused on a more fundamental problem: why, when, and how medicine and healthcare transformed into a business. Until the late nineteenth century, medicine was essentially a charitable activity; the healthcare market was very limited, restricted to a social niche, while the overwhelming majority of the population used self-medication. Thus, the objective of this book is to understand the process of medicine’s transformation into a business. In particular, it discusses the roles that technology and market structure played in the development. As the metamorphosis of the medical sphere since the nineteenth century has attracted the interest of numerous historians, the book builds on the broad base of literature discussing the history of medicine.
Until the 1990s, research on medical history was essentially dominated by medical doctors who wanted to study the past of their discipline. They followed a positivist and deterministic approach, focusing on the advances of medical science and the roles of “great men.” George Rosen , himself a medical doctor, was one of the first to argue (in 1941) that medicine was a social science and, consequently, that examinations of its history needed to adhere to a social-science perspective. 15 It was several decades later when scholars finally took to observing the social history of medicine, with the influence of Michel Foucault and the “Ecole des Annales” driving the new approach. 16 While the history of medicine developed in an innovative and multidisciplinary field, the business and economic dimensions remain largely underdeveloped. For example, the main handbooks on the history of medicine published after 2000 have tackled a wide variety of themes—but not business. 17 Still, some works have focused on specific aspects of the history of medicine and contributed to a better understanding of how healthcare has transformed into a growing industry. The studies generally fall into five categories.
First, there are works on the business and economic history of hospitals. As hospitals established themselves as bastions of contemporary healthcare systems, many scholars have analyzed their historical development, mostly from the perspectives of social and cultural history. The economic dimension has pulled the discourse in two main directions. On the one hand, some research has focused on the issue of hospital funding, especially in the United Kingdom and United States 18 and recently in France. 19 Scholars have discussed the impact of declining philanthropy on finances, the increases in support from the state and health insurance providers, and the opening of hospitals to wealthy patients. On the other hand, some works have focused more on the issue of the organization and the management of hospitals. 20 The influence of Alfred Chandler is clearly evident in these works—and sometimes, the authors make explicit reference to Chandlerian concepts. The most important work in this category is undoubtedly the seminal book on the hospitals of Philadelphia and New York by Joel Howell , who showed how diagnostic equipment and laboratories changed the very nature of hospitals and supported their mutation toward bureaucratic organizations whose management draws primarily on scientific data and statistics. 21 Most of these hospital-centric works do not attempt to connect financial and technological issues. Historians focusing on hospital funding do not discuss the influence of new technology on hospital budgets, first of all, while their colleagues analyzing the impact of technology on hospital organization ignore the financial dimension of technology.
Second, some scholars have studied the organization and regulation of healthcare systems at the national, regional, or local level. Following a macroeconomic perspective, their analyses focus on the intervention of various actors (philanthropists, local and central governments, church, labor unions, and insurance providers, etc.) and the general dynamics of hospital development in specific spaces. 22 The works treat hospital development in its broad context, including demographic, social, and political dimensions. However, these works tend to be descriptive and avoid tackling major issues pertaining to healthcare business, such as the regulation of the market itself or the impact of new medical technology.
Works in the third category address the professionalization of medical doctors and the emergence of medical specialization. Researchers generally see specialization as a mere and direct consequence of the advances in medical science, which led doctors to focus on specific domains of medicine—as it had become impossible to master all aspects of healthcare, doctors naturally chose more exclusive fields. 23 As Rosemary Stevens asserted in a study on the British case, however, specialization may have been “an inevitable and desirable accompaniment of scientific advance”—but it occurred in a particular, formative context (given the growth of private specialized hospitals, development of health insurance providers, and birth of new medical associations, among other factors). 24 In a major comparative work on specialization in Germany, France, the United Kingdom, and the United States, George Weisz stressed the role of academic and professional associations of doctors, which adopted different types of certification for specialists. 25 He showed that special...