The investor-owned hospital sector broke its truce with not-for-profit hospitals recently, firing volleys of statistics and rhetoric that intensified the national debate on the merits of both kinds of ownership.
The actions came less than six weeks after the American Hospital Association convened a summit of top hospital executives in an attempt to stop the sniping between the ownership sectors on which provides more community benefits (March 27, p. 2).
The AHA fears the rhetoric may undermine what's supposed to be a united industry fight against proposed reductions in budgeted Medicare and Medi-caid spending. And it's worried that the infighting may prompt some lawmakers to link the tax exemptions of not-for-profit hospitals to charity-care levels.
Despite the AHA's effort, executives of Columbia/HCA Healthcare Corp., the nation's largest investor-owned hospital chain, and the Federation of American Health Systems, a trade group that represents for-profit hospitals, recently blasted away at the not-for-profit sector in an attack aimed to draw national attention.
In a letter published in the April 23 Washington Post, Thomas Scully, FAHS' president and chief executive officer, responded to a guest column written by Linda Miller, executive director of Volunteer Trustees of Not-For-Profit Hospitals, a Washington-based membership group.
In her April 9 piece, Miller blasted alleged plans by two Washington universities to sell their teaching hospitals to Columbia. She said, "Columbia's mission is making money for stockholders. Healthcare decisions are driven by stock price, not community need."
In his response, Scully called Miller's column "hysterical. Shareholders make the world go round, and whether as employers who pay the bills or as providers, they are the No. 1 force driving the competition that is reshaping the healthcare system."
Scully told MODERN HEALTHCARE that his group has made an effort to put the ownership debate on the back burner, but Miller's "cheap shot" forced him to respond. A commentary in the Washington Post, which he described as "health policy central," was too much to ignore, he said.
"We would have never initiated this," he said, "but my members would expect me to respond."
In his retort, Scully upped the ante by proclaiming that "no evidence exists that investor-owned hospitals provide less charity care than nonprofits."
In citing a number of markets in which for-profit teaching hospitals do their fair share for the poor, Richmond, Va., topped Scully's list.
Community benefits provided by for-profit hospitals in Virginia were the focus of a presentation the next day by a top Columbia executive at a national tax conference of the American Academy of Hospital Attorneys.
David Colby, the chain's senior vice president and chief financial officer, based his remarks on a report published last fall by the Virginia Health Services Cost Review Council. The council, an independent state data commission, ranked 88 acute-care hospitals in Virginia by 18 different productivity and efficiency variables based on 1993 financial and utilization data.
The most controversial variable was one called "community support," which attempted to measure community benefits provided by each hospital.
The community-support variable was expressed as a percentage of a hospital's total expenses spent on charity care, bad debt and all taxes, including federal and state income taxes, sales taxes, property taxes and local business taxes.
Including taxes pushed for-profits up the community-benefits ladder past most of their not-for-profit peers, which are tax-exempt.
After making the Virginia report the main evidence for his argument that for-profits provide significant community benefits, Colby acknowledged, when asked by a conference attendee, that the data included taxes paid.
At deadline, Colby was unavailable for comment, but an analysis of the data by the Virginia Hospital Association confirmed Columbia's report.
"There's no question that when you give for-profit hospitals credit for all the taxes they pay, their numbers will look better," said Laurens Sartoris, president of the association, which represents both for-profits and not-for-profits.
In its analysis, the association aggregated the state's hospital-specific figures by ownership sector, excluding two state-supported university hospitals.
It found that the 13 for-profit hospitals in the sample devoted 14.0% of their operating expenses to community support in 1993. By comparison, the 73 not-for-profit hospitals in the sample devoted just 7.7% of their expenses in 1993 to community support.
But the inclusion of taxes makes a world of difference in the outcome.
For example, the association's analysis showed Virginia not-for-profits spent 2.5% of their operating expenses on charity care, compared with just 0.7% for the for-profits. Not-for-profits also outpaced for-profits in the bad debt category by a score of 5.2% to 4.2%, the group found.
Scully's assertions aside, the tax-excluded results of the Virginia study mirror similar findings of a MODERN HEALTHCARE analysis of uncompensated care in Tennessee (April 24, p. 70).
An illustration of how the inclusion of taxes can affect the perceived generosity of hospitals can be found in the Richmond, Va., market, which was cited by Scully in his Washington Post letter and is the home of three Columbia hospitals.
Columbia owns Henrico Doctor's Hospital, Johnston-Willis Hospital and Chippenham Medical Center in Richmond. Its effort to buy at least two other hospitals in the 12-hospital market has attracted antitrust investigators from the Federal Trade Commission (March 6, p. 34).
When taxes paid are included, Columbia's three hospitals rank second, third and fourth, behind only the Medical College of Virginia Hospitals in terms of community support, as measured by the state (See chart, p.28).
But the same hospitals finish seventh, 10th and 11th when hospitals are ranked by the percentage of total expenses devoted to charity care and bad debt, according to an analysis of the state data by MODERN HEALTHCARE.
Sartoris said the association has no position on the inclusion of taxes as a measure of community benefits.
Representatives of the for-profit sector say taxes should be included because that money goes to support local communities as well as the Medicare and Medicaid programs.
Not-for-profit sector representatives say the inclusion of taxes is misleading because most of the taxes are state and federal income taxes, which may or may not be used for local healthcare programs.