Hospitals As Feudal Lords - The Grim Reality Of Today's Physicians

A biting economic commentary in The Daily Economy by Richard Menger.  He posits that the ownership of physician practices amounts to feudal economics and eliminates competition, leading to a stultified medical system of physician serfdom:

https://thedailyeconomy.org/article/the-feudal-economics-of-modern-healthcare-how-regulation-turned-medicine-into-a-fiefdom/

The Feudal Economics of Modern Healthcare: How Regulation Turned Medicine into a Fiefdom
Government-created healthcare monopolies are forcing physicians into a kind of serfdom, gobbling up private practices to extract doctors’ labor.

By Richard Menger • May 19, 2026

High school history curricula often portray feudalism as a quaint medieval relic — a cautionary archetype of concentrated power, conditional rights, and extractive hierarchies that suppressed human flourishing for centuries. As ever, though, the deeper lesson of history is its recurring nature: when property rights erode and rent-seeking supplants open competition, societies reliably drift back toward feudal arrangements.

American medicine today offers a vivid illustration of this pattern, as government-created barriers sustain local monopolies, nonprofit hospital systems function as modern lords, and physicians relinquish professional autonomy in exchange for the illusory security of salaried fiefdoms. The result is contemporary serfs in white coats serving within tax-exempt citadels.

A Primer On Feudalism

In the medieval manor, a lord granted a vassal a fief — a plot of land — in exchange for loyalty, military service, and a share of the harvest. Serfs tilled the soil with little claim to its fruits. The system was rigid, hierarchical, and extractive. Today, a parallel structure has emerged in American healthcare, not through sword and oath but through certificates of need, Medicare payment rules, and tax-exempt status amidst the backdrop of massive mergers and acquisitions.

Non-profit hospital systems function as modern feudal lords. Physicians have become their vassals, granted small fiefdoms — department chairs, service-line leadership roles, or simply in employed practices — in return for allegiance to the system’s revenue machine. This is the neofeudalism of medicine, born out of crony capitalism and regulatory capture.

Feudalism’s formal titles — king, duke, baron, knight, vassal, serf — reflected a chain of reciprocal obligations rooted in land tenure. Lords owned the means of production; vassals administered justice and defense; serfs provided labor. The system endured for centuries because property rights were conditional and fragmented. Allodial title — true private ownership free of feudal dues — was rare. Markets were stifled. Innovation lagged. The decline of feudalism accelerated in the late Middle Ages and early modern period precisely because secure private property rights emerged. The rise of towns, the enclosure movement, and the commercialization of agriculture allowed individuals to own, improve, and trade land outright. Money economies replaced barter and service. The bourgeoisie accumulated capital. Centralized monarchies and later liberal states enforced contracts and reduced arbitrary exactions. As Douglass North and other institutional economists have shown, well-defined, transferable property rights unleashed entrepreneurship and growth. Serfdom withered not because of royal decree alone, but because free exchange proved more productive. Feudal ties dissolved when individuals could keep the full fruits of their labor.

Medicine’s Drift to Neo-Feudalism

Medicine once mirrored this liberalizing trend. Post-World War II, most physicians owned or partnered in independent practices. They controlled their schedules, negotiated directly with patients and insurers, and bore the risks and rewards of their craft. Private property in medical practice — autonomy over one’s office, staff, and patient relationships — fostered competition and innovation. That world is vanishing. Today, nearly 78 percent of US physicians are employees of hospitals, health systems, or corporate entities. Private practice has collapsed into a shrinking remnant.

The new lords are sprawling tax-exempt “non-profit” health systems. These entities enjoy at least $37 billion annually in federal and state tax breaks — property, income, and sales tax exemptions — while operating with margins and executive compensation packages that rival for-profit corporations. Many run massive investment portfolios and for-profit subsidiaries. Their community-benefit spending often falls short of the value of their exemptions when measured rigorously; some profitable systems deliver minimal charity care relative to their tax windfall.

Government policy supplies the moat around these castles. Rule after rule and regulation after regulation favors the big conglomerates. The regulatory reach adds to the lords’ dominion.

Certificate-of-need (CON) laws are still on the books in about 35 states plus DC, requiring regulatory approval before new hospitals, surgery centers, or even MRI machines can open. Incumbent systems predictably oppose competitors’ applications, turning state boards into tools of rent-seeking protection. Without CON, independent physicians and ambulatory centers could challenge hospital dominance. With it, local monopolies flourish.

Once entrenched, these systems wield two powerful economic weapons: the 340B Drug Pricing Program and site-of-service payment differentials. Enacted in 1992 to help safety-net providers serve low-income patients, 340B allows qualifying hospitals to purchase outpatient drugs at steep discounts — often 20-50 percent or more — then bill insurers or Medicare at full list price. In 2024, covered entities purchased $81.4 billion in 340B drugs. But studies and reports show the windfall frequently funds facility expansion, acquisitions, and executive pay rather than expanded charity care for the intended populations. Contract pharmacies amplify the arbitrage. The program has become a hidden tax on patients, employers, and manufacturers, with limited transparency on how savings reach the vulnerable.

Site-of-service differentials complete the trap. Medicare — and many commercial payers — reimburse the identical service at dramatically higher rates when performed in a hospital outpatient department (HOPD) instead of a physician’s independent office. A clinic visit, imaging study, or minor procedure in an HOPD can command 125 to 300 percent more reimbursement. Hospitals therefore acquire physician practices, rebrand them as HOPDs, and capture the facility-fee markup. Patients are sometimes seeing the same doctor in the same building but for twice as much.

Physicians are increasingly likely to be employed by these healthcare entities — not because they want to, but because the structure and rules are tilted that way.

The physician receives a salary or production bonus but loses ownership. The patient pays higher coinsurance. Independent practices cannot compete on price because the payment rules themselves favor the hospital flag. Vertical integration explodes. Horizontal mergers compound the effect. Markets once served by several competing hospitals see them consolidate into single dominant systems: one or two health systems control the entire market for inpatient care in half of American cities. Research consistently shows that such mergers raise prices five to 20 percent or more — with little or no improvement, and sometimes deterioration, in quality. Cross-market mergers demonstrate similar price effects after several years.

The physician-vassal’s daily reality reflects the bargain. A neurosurgeon or cardiologist may receive a competitive base salary, malpractice coverage, and administrative relief from his affiliation with a hospital. In return, the doctor must (directly or indirectly) refer patients only within the system, meet RVU targets that prioritize volume over value, and accept corporate dictates on electronic health records and formulary restrictions. They must accept care pathways optimized for margins, rather than patient outcomes. Dissent risks contract non-renewal, often triggering noncompete clauses.

True entrepreneurship — opening an ambulatory surgery center or cash-pay spine clinic — requires profound courage and near-inevitable litigation within the framework of CON. The independent doctor who once embodied the free professional has become a salaried cog in a revenue-extracting machine.

A Freer Alternative

Reversing neofeudalism in medicine demands restoring property rights and competition — the very forces that ended medieval feudalism. Policymakers should repeal CON laws nationwide, as several states already have with measurable price reductions and new market players. Implement full site-neutral Medicare payment for outpatient services, leveling the field so independent practices can survive. Reform 340B with transparency mandates, patient-definition tightening, and caps on windfall profits unrelated to charity care. Stop the unnecessary ban on physician-owned hospitals that provide better care at cheaper costs. Antitrust enforcement must scrutinize both horizontal and vertical mergers with renewed vigor. Tax-exempt status for hospitals should be performance-based, tied to verifiable charity care and community benefit exceeding the exemption’s dollar value.

Physicians are not serfs by nature; they are highly trained entrepreneurs stifled by regulation. Patients deserve choice, not tribute to the local castle. The same free market principles that dismantled feudalism can dismantle this one — if policymakers have the courage to let property rights and competition do their work. The alternative is a healthcare system where lords grow richer, vassals grow compliant, and everyone else pays the price.

Richard Menger MD MPA is an academic neurosurgeon and a graduate of the Harvard Kennedy School of Government. He focuses on complex spinal deformity and scoliosis surgery performing over 350 operations a year. He is a lead editor of the textbook Economics, Business, Policy of Neurosurgery. He is currently the Chief of Complex Spine Surgery at the University of South Alabama and is on the faculty of the neurosurgery and political science departments. He is a healthcare contributor to Forbes.