What drives different treatment choices? Investigation of hospital ownership, system membership and competition

Esra Eren Bayindir,Jonas Schreyögg

doi:10.1186/s13561-021-00305-3

Abstract

BackgroundDifferences in ownership types have attracted considerable interest because of policy implications. Moreover, competition in hospital markets is promoted to reduce health care spending. However, the effects of system membership and competition on treatment choices of hospitals have not been considered in studying hospital ownership types. We examine the treatment choices of hospitals considering ownership types (not-for-profit, for-profit, and government), system membership, patient insurance status (insured, and uninsured) and hospital competition in the United States.MethodsWe estimate the probability of according the procedure as the treatment employing logistic regression. We consider all procedures accorded at hospitals, controlling for procedure type and diagnosis as well as relevant patient and hospital characteristics. Competition faced by hospitals is measured using a distance-weighted approach separately for procedural groups. Patient records are obtained from State Inpatient Databases for 11 states and hospital characteristics come from American Hospital Association Annual Survey.ResultsNot-for-profit hospitals facing low for-profit competition that are nonmembers of hospital systems, act like government hospitals, whereas not-for-profits facing high for-profit competition and system member not-for-profits facing low for-profit competition are not statistically significantly different from their for-profit counterparts in terms of treatment choices. Uninsured patients are on average 7% less likely to be accorded the procedure as the treatment at system member not-for-profit hospitals facing high for-profit competition than insured patients. System member not-for-profit hospitals, which account for over half of the observations in the analysis, are on average 16% more likely to accord the procedure as the treatment when facing high for-profit competition than low-for-profit competition.ConclusionsWe show that treatment choices of hospitals differ by system membership and the level of for-profit competition faced by the hospitals in addition to hospital ownership type and health insurance status of patients. Our results support that hospital system member not-for-profits and not-for-profits facing high for-profit competition are for-profits in disguise. Therefore, system membership is an important characteristic to consider in addition to market competitiveness when tax exemption of not-for-profits are revisited. Moreover, higher competition may lead to increasing health care costs due to more aggressive treatment choices, which should be taken into account while regulating hospital markets.

Highlights

Differences in ownership types have attracted considerable interest because of policy implications
When total competition is considered and hospital competition by ownership types are included as controls, only hospital competition faced from for-profits is statistically significantly associated with treatment choices, we mainly focus on the competition faced from for-profit hospitals in this paper
We find that treatment choices of system member not-for-profit hospitals facing both high and low for-profit competition and nonmember not-for-profit hospitals facing high forprofit hospital competition are not statistically significantly different from their for-profit counterparts, supporting that not-for-profits participating in hospital systems and nonmember not-for-profits facing high forprofit competition are for-profits in disguise as proposed by Pauly and Redisch [5]

Summary

Introduction

Differences in ownership types have attracted considerable interest because of policy implications. The effects of system membership and competition on treatment choices of hospitals have not been considered in studying hospital ownership types. We examine the treatment choices of hospitals considering ownership types (not-forprofit, for-profit, and government), system membership, patient insurance status (insured, and uninsured) and hospital competition in the United States. Many of which are notfor-profits, with more than $108 billion in cash received more than $5 billion from the first rounds of funding [1] drawing attention to whether these not-for-profits deserve the federal tax exemptions they enjoy and whether they are any different from their for-profit counterparts. Newhouse [3] claims that not-forprofits maximize own output, which is defined as a weighted average of quantity and quality of care supplied by the hospital unlike for-profit hospitals, which maximize expected profits. And Redisch [5] claim that not-for-profits and for-profits both maximize their expected profits, whereas Hirth proposes that some not-for-profits do not have the objective of maximizing profits, they are true not-for-profits whereas some of them are for-profits in disguise [6, 7]

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