Threatening Nonprofit Hospital Tax Exemption: A Better Path Forward.

This Viewpoint discusses regulation of nonprofit hospitals in a way that will advance their charitable purposes without eliminating their tax exemption status.

Hospital Service Offerings Still Differ Substantially By Ownership Type.

Nonprofit, for-profit, and government hospitals are all more likely to offer services when they are relatively profitable than when they are relatively unprofitable. However, for-profit hospitals are considerably more likely than others to provide services based on profitability. After hospital and market characteristics are adjusted for, nonprofit hospitals offer relatively unprofitable services more than for-profit hospitals and less than government hospitals. Profitable services typically exhibit the opposite pattern. For-profit hospitals are also more likely to adopt or discontinue services consistent with changes in service profitability than are nonprofits, which in turn are more likely to do so than government hospitals. These results are similar to those we found before passage of the Affordable Care Act, when many more patients were uninsured. Policy makers and researchers tend to focus on whether nonprofit hospitals provide sufficient free care to justify tax benefits, thereby overlooking the significance of ownership for service provision, which likely has critical health and spending consequences.

The importance of data source in prescription drug monitoring program research.

OBJECTIVE: To develop a legal research protocol for identifying various measures of prescription drug monitoring program (PDMP) start dates, apply the protocol to create a useable PDMP database, and test whether the different legal databases that are meant to contain the same information produce divergent results when used in an illustrative empirical exercise. DATA SOURCES: Original research from state statutes, regulations, policy statements, and interviews; alternative PDMP data from the National Alliance for Model State Drug Laws and Prescription Drug Abuse Policy System; claims from a 40 percent random sample of Medicare beneficiaries, 2006-2014. STUDY DESIGN: Collaborative research effort among a group of lawyers to develop protocol. Legal research to produce an original database of dates state PDMP laws: (a) were enacted, (b) became operational, and (c) required query before prescribing controlled substances. Descriptive analyses characterize differences in dates of enactment, operation, and must query requirements. Regression analyses estimating, for each beneficiary annually any opioid prescription received in a calendar year, among other measures. Estimates conducted on under age 65 and full Medicare population. DATA COLLECTION/EXTRACTION METHODS: PDMP legal databases were linked to annual Medicare claims. PRINCIPAL FINDINGS: An original database differs from commonly used, publicly available data. Outcomes tested depend on the measure of PDMP date used and differ by data source. Must-query laws show the largest effects among all the laws tested. CONCLUSIONS: Data choices likely have had large consequences for study results and may explain contradictory outcomes in prior research. Researchers must understand and report protocol for dates used in PDMP research to ensure that results are internally consistent and verifiable.

Regulating Opioid Supply Through Insurance Coverage.

Responding to an opioid crisis in Canada, policy makers have implemented supply-side interventions seldom used in the US, regulating insurance reimbursement to discourage the prescribing of specified opioids. Using national databases of all opioids dispensed through provincial pharmaceutical programs and of opioid hospitalizations from January 2006 through March 2017, we found that requiring physicians to obtain prior authorization for patients to receive reimbursement for OxyContin prescriptions substantially reduced OxyContin fills, particularly among opioid-naive patients; it also reduced overall opioid prescriptions, suggesting limited substitution. "Grandfathering" OxyNeo (an abuse-resistant OxyContin variant), allowing previous OxyContin patients to obtain OxyNeo, increased OxyNeo fills but had no detectable effect on total opioid prescriptions, which points to substantial opioid substitution among chronic users of prescription opioids. We found no effects of regulatory changes on opioid-related hospitalizations. These results suggest that restrictions on pharmaceutical formularies can reduce fills of targeted opioids with the additional benefit of altering treatment of opioid-naive and other patients differently. Canadian policy makers may wish to extend such regulations to more provincial formularies and private insurers, and policy makers in the US and elsewhere could fruitfully follow suit.

Ambulance diversions following public hospital emergency department closures.

OBJECTIVE: To examine whether hospitals are more likely to temporarily close their emergency departments (EDs) to ambulances (through ambulance diversions) if neighboring diverting hospitals are public vs private. DATA SOURCES/STUDY SETTING: Ambulance diversion logs for California hospitals, discharge data, and hospital characteristics data from California's Office of Statewide Health Planning and Development and the American Hospital Association (2007). STUDY DESIGN: We match public and private (nonprofit or for-profit) hospitals by distance and size. We use random-effects models examining diversion probability and timing of private hospitals following diversions by neighboring public vs matched private hospitals. DATA COLLECTION/EXTRACTION METHODS: N/A. PRINCIPAL FINDINGS: Hospitals are 3.6 percent more likely to declare diversions if neighboring diverting hospitals are public vs private (P < 0.001). Hospitals declaring diversions have lower ED occupancy (P < 0.001) after neighboring public (vs private) hospitals divert. Hospitals have 4.2 percent shorter diversions if neighboring diverting hospitals are public vs private (P < 0.001). When the neighboring hospital ends its diversion first, hospitals terminate diversions 4.2 percent sooner if the neighboring hospital is public vs private (P = 0.022). CONCLUSIONS: Sample hospitals respond differently to diversions by neighboring public (vs private) hospitals, suggesting that these hospitals might be strategically declaring ambulance diversions to avoid treating low-paying patients served by public hospitals.

State Legal Restrictions and Prescription-Opioid Use among Disabled Adults.

BACKGROUND: In response to rising rates of opioid abuse and overdose, U.S. states enacted laws to restrict the prescribing and dispensing of controlled substances. The effect of these laws on opioid use is unclear. METHODS: We tested associations between prescription-opioid receipt and state controlled-substances laws. Using Medicare administrative data for fee-for-service disabled beneficiaries 21 to 64 years of age who were alive throughout the calendar year (8.7 million person-years from 2006 through 2012) and an original data set of laws (e.g., prescription-drug monitoring programs), we examined the annual prevalence of beneficiaries with four or more opioid prescribers, prescriptions yielding a daily morphine-equivalent dose (MED) of more than 120 mg, and treatment for nonfatal prescription-opioid overdose. We estimated how opioid outcomes varied according to eight types of laws. RESULTS: From 2006 through 2012, states added 81 controlled-substance laws. Opioid receipt and potentially hazardous prescription patterns were common. In 2012 alone, 47% of beneficiaries filled opioid prescriptions (25% in one to three calendar quarters and 22% in every calendar quarter); 8% had four or more opioid prescribers; 5% had prescriptions yielding a daily MED of more than 120 mg in any calendar quarter; and 0.3% were treated for a nonfatal prescription-opioid overdose. We observed no significant associations between opioid outcomes and specific types of laws or the number of types enacted. For example, the percentage of beneficiaries with a prescription yielding a daily MED of more than 120 mg did not decline after adoption of a prescription-drug monitoring program (0.27 percentage points; 95% confidence interval, -0.05 to 0.59). CONCLUSIONS: Adoption of controlled-substance laws was not associated with reductions in potentially hazardous use of opioids or overdose among disabled Medicare beneficiaries, a population particularly at risk. (Funded by the National Institute on Aging and others.).

Expansion of invasive cardiac services in the United States.

BACKGROUND: The number of hospitals offering invasive cardiac services (diagnostic angiography, percutaneous coronary intervention, and coronary artery bypass grafting) has expanded, yet national patterns of service diffusion and their effect on geographic access to care are unknown. METHODS AND RESULTS: This is a retrospective cohort study of all hospitals in fee-for-service Medicare, 1996 to 2008. Logistic regression identified the relationship between cardiac service adoption and the proportion of neighboring hospitals within 40 miles already offering the service. From 1996 to 2008, 397 hospitals began offering diagnostic angiography, 387 percutaneous coronary intervention, and 298 coronary artery bypass grafting (increasing the proportion with services by 3%, 11%, and 4%, respectively). This capacity increase led to little new geographic access to care; the population increase in geographic access to diagnostic angiography was 1 percentage point; percutaneous coronary intervention 5 percentage points, and coronary artery bypass grafting 4 percentage points. Controlling for hospital and market characteristics, a 10 percentage point increase in the proportion of nearby hospitals already offering the service increased the odds by 10% that a hospital would add diagnostic angiography (odds ratio, 1.102; 95% confidence interval, 1.018-1.193), increased the odds by 79% that it would add percutaneous coronary intervention (odds ratio, 1.794; 95% confidence interval, 1.288-2.498), and had no significant effect on adding coronary artery bypass grafting (odds ratio, 0.929; 95% confidence interval, 0.608-1.420). CONCLUSIONS: Hospitals are most likely to introduce new invasive cardiac services when neighboring hospitals already offer such services. Increases in the number of hospitals offering invasive cardiac services have not led to corresponding increases in geographic access.

Wellness incentives in the workplace: cost savings through cost shifting to unhealthy workers.

The Affordable Care Act encourages workplace wellness programs, chiefly by promoting programs that reward employees for changing health-related behavior or improving measurable health outcomes. Recognizing the risk that unhealthy employees might be punished rather than helped by such programs, the act also forbids health-based discrimination. We reviewed results of randomized controlled trials and identified challenges for workplace wellness programs to function as the act intends. For example, research results raise doubts that employees with health risk factors, such as obesity and tobacco use, spend more on medical care than others. Such groups may not be especially promising targets for financial incentives meant to save costs through health improvement. Although there may be other valid reasons, beyond lowering costs, to institute workplace wellness programs, we found little evidence that such programs can easily save costs through health improvement without being discriminatory. Our evidence suggests that savings to employers may come from cost shifting, with the most vulnerable employees--those from lower socioeconomic strata with the most health risks--probably bearing greater costs that in effect subsidize their healthier colleagues.

Rural hospital ownership: medical service provision, market mix, and spillover effects.

OBJECTIVE: To test whether nonprofit, for-profit, or government hospital ownership affects medical service provision in rural hospital markets, either directly or through the spillover effects of ownership mix. DATA SOURCES/STUDY SETTING: Data are from the American Hospital Association, U.S. Census, CMS Healthcare Cost Report Information System and Prospective Payment System Minimum Data File, and primary data collection for geographic coordinates. The sample includes all nonfederal, general medical, and surgical hospitals located outside of metropolitan statistical areas and within the continental United States from 1988 to 2005. STUDY DESIGN: We estimate multivariate regression models to examine the effects of (1) hospital ownership and (2) hospital ownership mix within rural hospital markets on profitable versus unprofitable medical service offerings. PRINCIPAL FINDINGS: Rural nonprofit hospitals are more likely than for-profit hospitals to offer unprofitable services, many of which are underprovided services. Nonprofits respond less than for-profits to changes in service profitability. Nonprofits with more for-profit competitors offer more profitable services and fewer unprofitable services than those with fewer for-profit competitors. CONCLUSIONS: Rural hospital ownership affects medical service provision at the hospital and market levels. Nonprofit hospital regulation should reflect both the direct and spillover effects of ownership.

Adoption and spread of new imaging technology: a case study.

Technology is a major driver of health care costs. Hospitals are rapidly acquiring one new technology in particular: 64-slice computed tomography (CT), which can be used to image coronary arteries in search of blockages. We propose that it is more likely to be adopted by hospitals that treat cardiac patients, function in competitive markets, are reimbursed for the procedure, and have favorable operating margins. We find that early adoption is related to cardiac patient volume but also to operating margins. The paucity of evidence informing this technology's role in cardiac care suggests that its adoption by cardiac-oriented hospitals is premature. Further, adoption motivated by operating margins reinforces concerns about haphazard technology acquisition.

Hospital ownership and medical services: market mix, spillover effects, and nonprofit objectives.

Hospitals operate in markets with varied demographic, competitive, and ownership characteristics, yet research on ownership tends to examine hospitals in isolation. Here we examine three hospital ownership types -- nonprofit, for-profit, and government -- and their spillover effects. We estimate the effects of for-profit market share in two ways, on the provision of medical services and on operating margins at the three types of hospitals. We find that nonprofit hospitals' medical service provision systematically varies by market mix. We find no significant effect of market mix on the operating margins of nonprofit hospitals, but find that for-profit hospitals have higher margins in markets with more for-profits. These results fit best with theories in which hospitals maximize their own output.

Nonprofit ownership, private property, and public accountability.

Mark Schlesinger and Brad Gray have summarized research comparing nonprofit and for-profit health care in a remarkably useful form. Their paper effectively demonstrates how nonprofit and for-profit health care differ. However, their proposal for community control over nonprofit health care organizations in exchange for tax exemption, like many current proposals requiring nonprofit hospitals to provide free care for indigent patients, risks undermining the purpose of the nonprofit organizations and the care they provide. These trade-offs are significant yet have not been acknowledged in policy debate.

The common law power of the legislature: insurer conversions and charitable funds.

New York's Empire Blue Cross and Blue Shield conversion from nonprofit to for-profit form has considerable legal significance. Three aspects of the conversion make the case unique: the role of the state legislature in directing the disposition of the conversion assets, the fact that it made itself the primary beneficiary of those assets, and the actions of the state attorney general defending the state rather than the public interest in the charitable assets. Drawing on several centuries of common law rejecting the legislative power to direct the disposition of charitable funds, this article argues that the legislature lacked power to control the conversion and direct the disposition of its proceeds and that its actions not only undermined the nonprofit form but also raised constitutional concerns.

Making profits and providing care: comparing nonprofit, for-profit, and government hospitals.

Three types of entities-nonprofit, for-profit, and government-own hospitals. Yet we know neither whether hospital types specialize in different medical services nor how service profitability affects specialization. In this econometric analysis of American Hospital Association data for every U.S. urban, acute care hospital (1988-2000), more than thirty services were categorized as relatively profitable, unprofitable, or variable. For-profits are most likely to offer relatively profitable medical services; government hospitals are most likely to offer relatively unprofitable services; nonprofits often fall in the middle. For-profits are also more responsive to changes in service profitability than the other two types.

Why we need the independent sector: the behavior, law, and ethics of not-for-profit hospitals.

Among the major forms of corporate ownership, the not-for-profit ownership form is distinct in its behavior, legal constraints, and moral obligations. A new empirical analysis of the American Hospital industry, using eleven years of data for all urban general hospitals in the country, shows that corporate form accounts for large differences in the provision of specific medical services. Not-for-profit hospitals systematically provide both private and public goods that are in the public interest, and that other forms fail to provide. Two hypotheses are proposed to account for the findings, one legal and one moral. While no causal claims are made, not-for-profit hospital behavior is consistent with the behavior required by law and morality. The moral argument, developed as a preliminary theory of not-for-profit ethics, also provides a potential reason to prefer not-for-profit hospitals. The findings provide a new justification for the not-for-profit tax exemption for hospitals, and also suggest new uses for ownership categories as regulatory tools.