Public relations battles erupted last week on two fronts in the ongoing holy war between the for-profit and not-for-profit hospital sectors.
In one skirmish, critics of for-profit healthcare services held high a study in the prestigious New England Journal of Medicine that said for-profit hospitals were less efficient and spent more money on overhead costs than not-for-profits did.
In the other, Inova Health System tried-with mixed results-to parlay its antitrust coup over Columbia/HCA Healthcare Corp. in northern Virginia into a national referendum on the evils of investor-owned hospital chains (See story below).
Lest anyone think the ownership debate had plateaued, a number of special-interest groups opposed to for-profit medicine broke the March 13 publication of the New England Journal in a flurry of press releases and conferences.
The article by Harvard University researchers Steffie Woolhandler, M.D., and David Himmelstein, M.D., struck a personal chord with the for-profit hospital industry, which lashed out at the publication for even allowing the researchers to print their findings.
"What is truly distressing is the New England Journal's treatment of this subject," said Thomas Scully, president of the Federation of American Health Systems, which represents for-profit hospitals. "(The authors) have a long history of a radically liberal political agenda with regards to healthcare delivery. The Journal risks tarnishing their strong reputation in the field of clinical healthcare by publishing such politically biased and poorly researched articles."
Sidney Wolfe, M.D., director of Washington-based Public Citizen's Health Research Group, had an equally expected view: "This study exposes for-profit hospitals as being more expensive and less efficient. This means higher six- and seven-figure salaries for CEOs and other top administrators, but less money for patient care. How much longer must it be before we terminate our failing experiment with market medicine?"
According to the study, for-profit hospitals of all kinds devoted 34% of their expenditures to administrative costs in 1994, compared with 24.5% at private not-for-profit hospitals and 22.9% at public hospitals. The same pattern emerged at solely acute-care hospitals, although the differences among the three types of ownership were less severe (See box).
The study is based on Medicare cost reports submitted by more than 6,200 hospitals in 1994. The reports ask hospitals to apportion costs among four categories: administrative, clinical, a mix of administrative/clinical and other.
The researchers considered overhead costs as the expenses assigned to the administrative category and a portion of the expenses assigned to the mix of administrative and clinical category.
While private not-for-profit hospitals were eager to tout the study as an indictment of for-profit hospitals, they too were outperformed by the much-maligned public hospital sector, which conventional wisdom characterizes as inefficient.
"A lot of people would be surprised at how successfully many public hospitals have adapted," said Larry Gage, president of the National Association of Public Hospitals, which represents about 100 facilities. "The majority of our members have taken a lot of steps to make themselves as competitive and as patient-centered as possible."