Charity care in nonprofit urban hospitals: analysis of the role of size and ownership type in Washington State for 2011.

Nonprofit hospitals are expected to serve their communities as charitable organizations in exchange for the tax exemption benefits they receive. With the passage into law of the Affordable Care Act, additional guidelines were generated in 2010 to ensure nonprofit hospitals are compliant. Nonetheless, the debate continues on whether nonprofit hospitals provide adequate charity care to their patient population. In this study, charity care provided by 29 Washington State nonprofit urban hospitals was examined for 2011 using financial data from the Washington State Department of Health. Charity care levels were compared to both income tax savings and gross revenues to generate two financial ratios that were analyzed according to hospital bed size and nonprofit ownership type. For the first ratio, 97% of the hospitals (28 of 29) were providing charity care in greater amounts than the tax savings they accrued. The average ratio value using total charity care and total income tax savings of all the hospitals in the study was 6.10, and the median value was 3.46. The nonparametric Kruskal-Wallis test results by bed size and nonprofit ownership type indicate that ownership type has a significant effect on charity care to gross revenue ratios (p = .020). Our analysis indicates that church-owned hospitals had higher ratios of charity care to gross revenues than did the other two ownership types--government and voluntary--in this sample. Policy implications are offered and further studies are recommended to analyze appropriate levels of charity care in nonprofit hospitals given new requirements for maintaining a hospital's tax-exempt status.

Effect of nursing home ownership on hospitalization of long-stay residents: an instrumental variables approach.

Hospitalizations among nursing home residents are frequent, expensive, and often associated with further deterioration of resident condition. The literature indicates that a substantial fraction of admissions is potentially preventable and that nonprofit nursing homes are less likely to hospitalize their residents. However, the correlation between ownership and hospitalization might reflect unobserved resident differences rather than a causal relationship. Using national minimum data set assessments linked with Medicare claims, we use a national cohort of long-stay residents who were newly admitted to nursing homes within an 18-month period spanning January 1, 2004 and June 30, 2005. After instrumenting for ownership status, we found that IV estimates of the effect of nonprofit ownership on hospitalization are at least as large as the non-instrumented effects, indicating that selection bias does not explain the observed relationship. We also found evidence suggesting the lower rate of hospitalizations among nonprofits was due to a different threshold for transfer.

Market competition, ownership, payment systems and the performance of health care providers - a panel study among Finnish occupational health services providers.

Many health care reforms rely on competition although health care differs in many respects from the assumptions of perfect competition. Finnish occupational health services provide an opportunity to study empirically competition, ownership and payment systems and the performance of providers. In these markets employers (purchasers) choose the provider and prices are market determined. The price regulation of public providers was abolished in 1995. We had data on providers from 1992, 1995, 1997, 2000 and 2004. The unbalanced panel consisted of 1145 providers and 4059 observations. Our results show that in more competitive markets providers in general offered a higher share of medical care compared to preventive services. The association between unit prices and revenues and market environment varied according to the provider type. For-profit providers had lower prices and revenues in markets with numerous providers. The public providers in more competitive regions were more sensitive to react to the abolishment of their price regulation by raising their prices. Employer governed providers had weaker association between unit prices or revenues and competition. The market share of for-profit providers was negatively associated with productivity, which was the only sign of market spillovers we found in our study.

Profit efficiency and ownership of German hospitals.

This paper investigates the cost and profit efficiency of German hospitals and their variation with ownership type. It is motivated by the empirical finding that private (for-profit) hospitals - having been shown to be less cost efficient in the past - on average earn higher profits than public hospitals. We conduct a Stochastic Frontier Analysis on a multifaceted administrative German data set combined with the balance sheets of 541 hospitals of the years 2002-2006. The results show no significant differences in cost efficiency but higher profit efficiency of private than of publicly owned hospitals.

Expansion in markets with decreasing demand-for-profits in the German hospital industry.

Over the last 20 years, acute-care hospitals in most OECD countries have built up costly overcapacities. From the perspective of economic policy, it is desirable to know how hospitals of different ownership forms respond to changes in demand and are probably best suited to deal with existing overcapacities. This article examines ownership-specific differences in the responsiveness to changes in demand for hospital services in Germany between 1996 and 2006. With respect to the speed of adaptation to increasing demand, the study finds for-profit ownership to be superior to public and nonprofit ownership. However, contrary to other ownership types, for-profits also tend to expand in markets with decreasing demand - mainly through conversions of publicly owned hospitals. Thus, in short term, the privatization of the hospital sector may slow down the reduction of excess capacities and be therefore socially wasteful.

Physician compensation.

Where physicians practice makes a difference in how hard they work and how much they're paid.

Specialty and full-service hospitals: a comparative cost analysis.

OBJECTIVE: To compare the costs of physician-owned cardiac, orthopedic, and surgical single specialty hospitals with those of full-service hospital competitors. DATA SOURCES: The primary data sources are the Medicare Cost Reports for 1998-2004 and hospital inpatient discharge data for three of the states where single specialty hospitals are most prevalent, Texas, California, and Arizona. The latter were obtained from the Texas Department of State Health Services, the California Office of Statewide Health Planning and Development, and the Agency for Healthcare Research and Quality Healthcare Cost and Utilization Project. Additional data comes from the American Hospital Association Annual Survey Database. STUDY DESIGN: We identified all physician-owned cardiac, orthopedic, and surgical specialty hospitals in these three states as well as all full-service acute care hospitals serving the same market areas, defined using Dartmouth Hospital Referral Regions. We estimated a hospital cost function using stochastic frontier regression analysis, and generated hospital specific inefficiency measures. Application of t-tests of significance compared the inefficiency measures of specialty hospitals with those of full-service hospitals to make general comparisons between these classes of hospitals. PRINCIPAL FINDINGS: Results do not provide evidence that specialty hospitals are more efficient than the full-service hospitals with whom they compete. In particular, orthopedic and surgical specialty hospitals appear to have significantly higher levels of cost inefficiency. Cardiac hospitals, however, do not appear to be different from competitors in this respect. CONCLUSIONS: Policymakers should not embrace the assumption that physician-owned specialty hospitals produce patient care more efficiently than their full-service hospital competitors.

Hospital ownership and performance: evidence from stroke and cardiac treatment in Taiwan.

This paper compares program expenditure and treatment quality of stroke and cardiac patients between 1997 and 2000 across hospitals of various ownership types in Taiwan. Because Taiwan implemented national health insurance in 1995, the analysis is immune from problems arising from the complex setting of the U.S. health care market, such as segmentation of insurance status or multiple payers. Because patients may select admitted hospitals based on their observed and unobserved characteristics, we employ instrument variable (IV) estimation to account for the endogeneity of ownership status. Results of IV estimation find that patients admitted to non-profit hospitals receive better quality care, either measured by 1- or 12-month mortality rates. In terms of treatment expenditure, our results indicate no difference between non-profits and for-profits index admission expenditures, and at most 10% higher long-term expenditure for patients admitted to non-profits than to for-profits.

Hospital characteristics and patient populations served by physician owned and non physician owned orthopedic specialty hospitals.

BACKGROUND: The emergence of physician owned specialty hospitals focusing on high margin procedures has generated significant controversy. Yet, it is unclear whether physician owned specialty hospitals differ significantly from non physician owned specialty hospitals and thus merit the additional scrutiny that has been proposed. Our objective was to assess whether physician owned specialty orthopedic hospitals and non physician owned specialty orthopedic hospitals differ with respect to hospital characteristics and patient populations served. METHODS: We conducted a descriptive study using Medicare data of beneficiaries who underwent total hip replacement (THR) (N = 10,478) and total knee replacement (TKR) (N = 15,312) in 29 physician owned and 8 non physician owned specialty orthopedic hospitals during 1999-2003. We compared hospital characteristics of physician owned and non physician owned specialty hospitals including procedural volumes of major joint replacements (THR and TKR), hospital teaching status, and for profit status. We then compared demographics and prevalence of common comorbid conditions for patients treated in physician owned and non physician owned specialty hospitals. Finally, we examined whether the socio-demographic characteristics of the neighborhoods where physician owned and non physician owned specialty hospitals differed, as measured by zip code level data. RESULTS: Physician owned specialty hospitals performed fewer major joint replacements on Medicare beneficiaries in 2003 than non physician owed specialty hospitals (64 vs. 678, P < .001), were less likely to be affiliated with a medical school (6% vs. 43%, P = .05), and were more likely to be for profit (94% vs. 28%, P = .001). Patients who underwent major joint replacement in physician owned specialty hospitals were less likely to be black than patients in non physician owned specialty hospitals (2.5% vs. 3.1% for THR, P = .15; 1.8% vs. 6.3% for TKR, P < .001), yet physician owned specialty hospitals were located in neighborhoods with a higher proportion of black residents (8.2% vs. 6.7%, P = .76). Patients in physician owned hospitals had lower rates of most common comorbid conditions including heart failure and obesity (P < .05 for both). CONCLUSION: Physician owned specialty orthopedic hospitals differ significantly from non physician owned specialty orthopedic hospitals and may warrant the additional scrutiny policy makers have proposed.

Dialysis facility ownership and epoetin dosing in patients receiving hemodialysis.

CONTEXT: Epoetin therapy for dialysis-related anemia is the single largest Medicare drug expenditure. The type of facility (profit, chain, and affiliation status) at which a patient receives dialysis might affect epoetin dosing patterns and has implications for future epoetin policies. OBJECTIVE: To examine the association between dialysis facility ownership and the dose of epoetin administered. DESIGN, SETTING, AND PARTICIPANTS: Data from the US Renal Data System were used to identify 159,522 adult Medicare-eligible, end-stage renal disease patients receiving in-center hemodialysis during November and December 2004. Regression models were used to estimate the mean epoetin dose and dose adjustment by profit, chain, and affiliation status. MAIN OUTCOME MEASURES: Weekly mean epoetin dose administered in December 2004 and the adjustment in dose between November and December 2004. RESULTS: Compared with patients in nonprofit dialysis facilities (n = 28,199), patients in large for-profit dialysis chain facilities (n = 106,116) were consistently administered the highest doses of epoetin regardless of anemia status. Compared with nonprofit facilities, for-profit facilities administered, on average, an additional 3306 U/wk of epoetin. Among the 6 large chain facilities with a similar patient case-mix, the average dose of epoetin ranged from 17,832 U/wk at chain 5 (nonprofit facilities with a mean hematocrit level of 34.6%) to 24,986 U/wk at chain 2 (for-profit facilities with a mean hematocrit level of 36.5%). Dosing adjustments also differed by type of facility. On average, compared with nonprofit facilities, for-profit facilities increased epoetin doses 3-fold for patients with hematocrit levels of less 33% and also increased the doses among patients with hematocrit levels in the recommended target of 33% to 36%, especially in the largest for-profit chain facilities. The greatest difference in dosing practice patterns between facilities was found among patients with hematocrit levels of less than 33%. CONCLUSIONS: Dialysis facility organizational status and ownership are associated with variation in epoetin dosing in the United States. Different epoetin dosing patterns suggest that large for-profit chain facilities used larger dose adjustments and targeted higher hematocrit levels.

A primer on EVA for health care providers.

Unlike accounting earnings, economic profit (EVA) is a measure of a company's true earnings because it fully "accounts" for the costs of all forms of financing, including debt and equity. In the EVA view, a company is not truly profitable unless it earns a return on capital that bests the opportunity cost of capital. That being said, the question addressed here is how to measure the economic profit of providers in the health care sector, which is largely comprised of not-for-profit organizations such as clinics, laboratories, and hospitals.

How nonprofits matter in American medicine, and what to do about it.

Skeptics question nonprofit health care on the grounds that nonprofits fail to distinguish themselves from their for-profit counterparts and do not reliably provide community benefits commensurate with their tax subsidies. Drawing on the most recent and comprehensive evidence, we assess these charges, judging them to be either wrong or incomplete. Although conventional critiques are therefore unconvincing, there are nonetheless important challenges facing the nonprofit sector in American medicine. To address these, we propose reformulating ownership-related policies to define both the appropriate forms of community benefit and the appropriate mix of ownership in terms of local markets and communities.

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.

Subsidizing health care providers through the tax code: status or conduct?

The merits of tax exemption for nonprofit health care providers have been hotly debated for decades. Mark Schlesinger and Brad Gray provide a useful, dispassionate meta-analysis of past research; they conclude that there are real differences in the performance of nonprofit and for-profit hospitals and nursing homes, although they vary along several key dimensions. Unfortunately, their findings offer no insight on whether these differences are large enough to justify a sizable subsidy and whether it makes more sense to use an undifferentiated subsidy tied to status (current practice), or a graduated subsidy tied to quantifiable and objective measures of performance.

Tax preferences for nonprofits: from per se exemption to pay-for-performance.

Defenders of tax preferences for nonprofit hospitals and health plans, including Mark Schlesinger and Brad Gray, contend that nonprofits deserve government support because they provide greater "community benefit" than their for-profit counterparts. This argument is unconvincing. There is some evidence that nonprofits deliver marginally more "community benefit" but no evidence that tax exemption is the cause. Absent proof that tax expenditures, including exemption, "buy" social benefits that are worth the cost to taxpayers, these expenditures are unjustified. The better course would be to pay nonprofits for performance, by tying tax benefits to accomplishments (beyond current achievements) in health promotion, quality, and care for the needy.

Hospital service offerings: does Catholic ownership matter?

Controlling for market and organizational characteristics, Catholic hospitals in 2001 offered more stigmatized and compassionate care services than investor-owned hospitals, and more stigmatized services than public hospitals. There were no differences between Catholic hospitals and other nonprofit hospitals, however, in the number of compassionate, stigmatized, and access services offered. This may reflect growing isomorphism in the nonprofit hospital sector.