Proprietary hospitals in cost containment

Abstract

Any effort to control the rise in health care costs must start with analyzing the causes, which are really quite simple. Most cost control efforts fail because they do not address the causes. The causes are large subsidies in several forms that send a false message that health care is free and should be used abundantly, and expansive reimbursement programs that reward inefficient providers with higher payments. This combination of demand stimulation and cost-plus reimbursement produced the world's most expensive health care delivery system and strident calls for reform. A long overdue change in public policy took effect October 1, 1983, when Medicare payments moved from cost-plus reimbursement to fixed, prospectively determined prices. Because it addressed one of the causes of medical inflation, this change has been effective in slowing the rise in Medicare expenditures. Sponsorship of a hospital is not a determinant of its cost-effectiveness. There are examples of efficient and inefficient hospitals in both the voluntary and the investor-owned or taxpaying hospitals. The determining factor is the will of management to keep costs under control.