A new study questions whether local lawmakers should pay special attention to hospital conversions given that community benefits don't appear to be threatened when a facility switches from not-for-profit to for-profit status.
The study, published in the September/October edition of Health Affairs, found that "conversions do not, on average, have an appreciable impact on community benefits."
The community benefits a hospital provides, the study said, have more to do with local market conditions than ownership status.
The study is good news for those in the hospital industry who have long contended that for-profit takeovers are not the evil events that critics have made them out to be.
"I believe that the difference between privately owned and nonprofit (hospitals) is negligible to nonexistent," said Thomas Scully, president of the Federation of American Health Systems, a trade group that represents for-profit hospitals.
But Linda Miller, president of the Volunteer Trustees of Not-For-Profit Hospitals, said lawmakers should not back off their close scrutiny of conversion deals.
"Absolutely not," Miller said. "Nor should communities stop asking the questions."
Since 1990, more than 30 states have passed laws calling for increased public scrutiny of deals between not-for-profit and for-profit hospitals to ensure proper handling of charitable assets (April 13, 1998, p. 20).
This latest study looked at 43 hospital conversions in California, Florida and Texas between 1981 and 1995.
Those states were targeted because they had much conversion activity, and publicly available hospital cost reports made it easier to identify any post-conversion changes.
The study was conducted by two researchers affiliated with both the Boston University School of Public Health and a research and consulting arm of the U.S. Department of Veterans Affairs. Their work was financed by the Robert Wood Johnson Foundation's Changes in Health Care Financing and Organization Initiative.
The study considered four community-benefit indicators: uncompensated care, net prices, unprofitable/nonreimbursable services and community representation on hospitals' boards.
On average, hospital conversions did not reduce community benefits when it came to uncompensated care, prices or unprofitable/nonreimbursable services.
For example, before conversion, the 43 hospitals studied spent an average of 4.65% of their gross revenues on uncompensated care, compared with the 4.91% spent by a control group of 129 not-for-profit hospitals. After conversion, both the 43 hospitals and the control group increased their average spending by less than 1%, according to the study.
But in California, conversions did mean major shifts in hospital board representation, with more insiders, such as senior managers and medical staff, occupying seats once held by community representatives.
Only cost reports from California indicated governing board composition.
"Consequently, in the absence of any systematically acquired evidence that nonprofit conversions threaten community benefits, policymakers should remain open-minded about these transactions," the study concluded.