Accountability through Information: What the Health Care Industry Can Learn from Securities Regulation


This report explores the relevance for the health sector of federal policy to regulate the securities industry. Regulatory policy in the health sector is the cause of considerable frustration among many health professionals, leaders of provider organizations and regulators in the states and the federal government. Advocates of regulatory reform in the health sector frequently urge attention to the information-based regulatory policy of the Securities Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB).

This report is an outgrowth of a meeting convened by the Fund and co-chaired by Carolyn Boone Lewis and William Sage. Lewis has firsthand experience with regulatory policy in both the securities and health industries. During a long career at the SEC she helped to devise policy for regulating mutual funds. During these years she was also a member and officer of a hospital and health system board and active in hospital associations. This year she chairs the board of the American Hospital Association. She joined the board of the Milbank Memorial Fund in 1998.

Lewis, Sage, and the Fund convened current and former senior officials of the SEC with state and federal officials who regulate the health sector. As a result of this meeting, Sage, a lawyer and physician who practiced securities law before joining the faculty of law at Columbia University, wrote this report. He has written extensively about both health and securities law.

Participants in the meeting that preceded this report reviewed it in draft. They are listed in the Acknowledgments. The analysis and conclusions of the report, however, are entirely Sage’s.

Sage emphasizes the differences between the securities industry and the policies that regulate it and the health sector. These differences include the nature of patients’ encounters with physicians and other health professionals and the relationships, which are often confrontational, between health care providers and the Health Care Financing Administration.

Readers in search of a regulatory panacea for the health sector will be disappointed by Sage’s conclusion that the “principal value” of the analogy between securities and health sector regulation “resides at a conceptual level, not a programmatic one.” Nevertheless, he draws practical conclusions that should stimulate reflection and debate among leaders in the health sector. In Carolyn Boone Lewis’s words, “While I agree that the principal value of the analogy is conceptual, I think that this, in itself, will inform the debate for the health care sector significantly. A panacea—no. But [this report is] a well-drawn road map through the securities/mutual fund regulatory scheme that clearly charts some fertile ground for health care, even as it dispels the notion of a ‘panacea.'”

Daniel M. Fox

Samuel L. Milbank