Local markets dominated by for-profit hospitals cost Medicare substantially more on a per-capita basis than markets dominated by not-for-profits, according to a study published in last week's New England Journal of Medicine.
In 1995 Medicare spent an average $5,172 per beneficiary in for-profit hospital regions, $4,440 in not-for-profit regions and $4,899 in mixed regions.
An editorial accompanying the study extrapolates those numbers to say Medicare bore $5.2 billion in extra expense in 1995 because of for-profit hospitals.
The study, and the editorial by Steffie Woolhandler, M.D., and David Himmelstein, M.D., are the latest episode in healthcare's longest-running dramatic series: to profit or not to profit.
The Physicians for a National Health Program hailed the study, saying it demonstrated conclusively "that marketplace medicine is a failed experiment." But the Federation of American Health Systems blasted the study, calling it "fatally flawed" and without statistical merit.
Physicians for a National Health Program supports a Canadian-style single-payer healthcare program for the U.S. Woolhandler and Himmelstein are co-founders of the group. They published a study in 1997 that said for-profit hospitals spent more on overhead than not-for-profits.
The federation represents investor-owned hospitals. It sponsored a study released in 1997 that concluded not-for-profit hospitals that convert to for-profit status don't substantially change their financial or staffing patterns.
The new study's authors, Elaine Silverman, M.D., of the Veterans Affairs Outcomes Group in White River Junction, Vt., and Dartmouth Medical School's Elliott Fisher, M.D., and Jonathan Skinner, used the Dartmouth Atlas' definition of hospital regions.
Of 3,421 regions, the authors identified 256 as exclusively for-profit, 2,944 as exclusively not-for-profit and 221 as mixed. The for-profit regions tended to be in California and the Southeast.
The authors culled Medicare data from three years-1989, 1992 and 1995-and found that per-capita spending was always higher in for-profit regions. Furthermore, prices escalated faster in those time periods in for-profit regions.
Thomas Scully, president of the federation, said the study's "underlying assumptions are not at all rational to anybody who understands health policy." The authors should have used per-discharge data, as did the Medicare Payment Advisory Commission when it found that for-profit hospitals charged $1,010 less per discharge in 1995 than voluntary not-for-profits, he said.
"I do think the New England Journal of Medicine has a political agenda," Scully said. "They spent 100 years building up a reputation. Now every three months they come out with a strafing run against investor-owned nursing homes, investor-owned hospitals, investor-owned anything."