“Do I enjoy being king? Yes, that’s fun,” said Richard Burke in 1987. He had spent over ten years running a health care nonprofit in Minneapolis called Physicians Health Plan (PHP), and also UnitedHealth, the for-profit company that was managing it. In 1986, the nonprofit paid him $267,823; the for-profit, $418,342, not including stock options. The average income for the highest-earning doctors at the time (orthopedic surgeons) was just 16 percent of that. But Burke’s salaries weren’t what caused doctors at PHP to rebel.
In 1984, UnitedHealth used PHP to pay $600,000 toward United’s termination costs in a delayed stock offering. At the same time, PHP had quietly agreed to pay United 15 to 17 percent of its revenue for the next 25 years in exchange for future United stock. Doctors at PHP immediately protested, pointing at the conflicts introduced by interlocking boards that were both under Burke’s thumb. United went public with a shorter PHP management contract, but doctors had to pull the SEC documents to learn that, despite being salaried workers, there would be a 20 percent pay cut to cover PHP “
The regulatory failures described in this article are astonishing. I find it difficult to believe that all of the regulators involved in the multiplicity of transactions described across a wide range of healthcare businesses were asleep at the switch. This is neo-liberal economics at work, and it has been supported by the duopoly for decades.