Standardizing community benefit between not-for-profit and investor-owned hospitals

Abstract

ABSTRACT This research investigates whether investor-owned (IO) hospitals provide equivalent charity care as not-for-profit (NFP) hospitals in a reduced uncompensated care environment (post Affordable Care Act). Gross revenues, Total Uncompensated Charges (TUC), and a new measure, Standardized Patient Service Benefits (SPSB), are computed for not-for-profit and investor-owned hospitals. The SPSB is calculated based on Diagnostic Related Groups (DRGs) for each discharge and does not allow for local hospital price manipulation. This eliminates pricing differences between hospitals for similar services when evaluating charity care. Using patient discharges classified as charity care, IO hospitals appear to provide more charity care than NFP hospitals when measuring by the TUC. When the TUC is adjusted for the corresponding DRG value (SPSB), the amount of charity care for not-for-profit hospitals exceeds investor-owned hospitals, a reversal from the TUC results. This research adds to the existing body of knowledge by introducing a new standardized measure, SPSB. This method eliminates pricing differences and may be used for ownership comparisons when hospitals charge varying amounts for similar services. Additionally, the results indicate that revenue manipulation may inflate the perceived amount of charity care and potential tax benefit.