B Corporations: A Way Forward for Healthcare

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The healthcare system is broken. Healthcare costs are skyrocketing and services are diminishing.The for Benefit Corporation or B Corporation could provide a solution, if the designation came with a beneficial tax structure.

What is a B Corporation?

B Corporations represent the intersection of social good and corporate benefit.

The B corporation is a recently defined class of corporation that must create societal benefit as well as shareholder profit. It combines the dedication to social purpose ascribed to by non-profits with the for-profit and growth potential of C corporations. Proponents of the B corporation argue that act of codifying the social good requirement within the corporate charter allows companies to maintain their for-benefit or social good programs, which are often less profitable and frequently disbanded by the boards of directors in favor of higher profits.

The B corporation is a recent invention. Since its conception in 2010, 11 states have enacted legislation to recognize the B corporation, while 16 states are considering the option. At this time, the B corporation receives no special tax consideration. Maybe it should.

How Might the B Corporation Solve the Healthcare Problem?

By putting health into the corporate charter of ‘healthcare’ companies.

The healthcare system is comprised of two major players, pharmaceuticals and insurers. On both sides, profits rule over of the social good of promoting, maintaining or managing health. As C corporations, their charters demand that they maximize profits for their shareholders. And maximize they do!

The pharmaceutical and medical device industries focus on blockbuster, one-size-fits-all drugs and devices ignoring the inherent variability of human biology and the need for more personalized approaches to medicine.  Selling one pill or procedure to all indiscriminately is much more profitable than developing specialized medications for smaller populations or orphan diseases.The result is a never-ending cycle of bad drugs, adverse events and unsafe medical devices marketed heavily and often fraudulently. This cycle leads first to blockbuster profits, then to class action lawsuits and astronomical court awards and fines. The return on investment to shareholders is enormous, even with multi-billion dollar lawsuits.

The insurers, on the other hand, maximize profits increasing premiums while cutting services and denying procedures.  Health has not been in the equation for these businesses for some time, although this may change with the new healthcare regulations.

Imagine if companies playing in the healthcare space could codify in their corporate charters a dual role of providing a societal good – health – along with the goal of shareholder profits. Imagine if the mission of providing ‘health’ came with tangible, measurable outcome objectives that were transparent and verifiable. Imagine if the ‘for-benefit’ designation came with a favorable tax structure.

The business climates created by B Corporations could change the healthcare industry in ways our laws don’t currently support. The for Benefit Corporation designation could be a key towards restoring greater fairness and efficacy in our healthcare system.





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