Investor-Owned and Not-For-Profit Hospitals: Addressing Some Issues

Abstract

Prologue: Interest in the comparative economic performance of for-profit hospitals and not-for-profit hospitals has intensified in recent years as these institutions have increasingly come to compete for patients, patient care services, and, in some cases, even for physicians. The article that follows strives to shed light on how these hospitals compare on selected, but nonetheless important, factors. Frank A. Sloan, a professor of economics at Vanderbilt University and director of the Health Policy Center there, has developed a respected reputation as an economist with impressive analytic talents. Robert A. Vraciu is vice-president for strategic planning and research at Hospital Corporation of America, the largest of the investor-owned hospital management companies. By comparing information available on Florida hospitals, Sloan and Vraciu strive to prove that hospitals do not behave differently simply because they are structured on a for-profit or not-for-profit basis. Regardless of the type of ownership, Sloan and Vraciu maintain, hospitals must balance their financial needs with the social responsibilities in which they are invested by society. A particularly striking finding is that the community costs of the for-profit and not-for profit hospitals—all of which are nonteaching institutions in this study —are quite similar. Investor-owned system hospitals and not-for profit hospitals are virtually identical in terms of after-tax profit margins, percentages of Medicare and Medicaid patient days, the dollar value of charity care, and bad debt adjustments to revenue. There are some differences in the services offered by the two groups of hospitals, but there is no pattern with regard to “profitable versus nonprofitable services. ”