The Federation of American Hospitals, a trade group representing investor-owned hospitals, says the results of the new study support its members' contention that they can operate hospitals more efficiently and save ones that would otherwise downsize, reduce services or close.
The retrospective analysis looked at 183 private not-for-profit hospitals and 54 publicly operated hospitals that converted to for-profit status between 2003 and 2010. Using Medicare inpatient data, Medicare cost reports and the CMS' Hospital Compare database, the researchers looked at which hospitals were more likely to convert, as well as whether or not the changes led to financial and clinical improvements or changes in patient populations.
Small hospitals (having fewer than 100 beds) and medium-size hospitals (between 100 and 399 beds) were more likely to convert, the study found. They were also more likely to be located in the South, and less likely to be teaching institutions. The converted hospitals were more likely to see financial improvements compared with hospitals of similar size, location and teaching status.
For example, hospitals that converted to for-profit status saw a 2.2% improvement in their ratio of net income to net revenue and other income (or total margin), compared with only a 0.4% improvement in the control group. Improvements had been lower before the conversion. Similarly, the hospitals that converted saw a 3.2% improvement in their net revenue from patient care (or operating margin). This aspect worsened for hospitals that did not convert.
Cost-cutting measures or an improved percentage of patients with private insurance appeared to drive most of the financial improvements at the converted hospitals. There were no differences in the number of Medicare-eligible patients and “no evidence that the improvements came through avoiding care for poor patients,” the authors wrote.
Their performance on process indicators for heart attack, congestive heart failure and pneumonia, however, was about the same as the study's control group. Both sets of hospitals improved on the measures by about 6%, although the converted hospitals improved slightly more. The converted hospitals saw no improvements in mortality rates.
FAH CEO Chip Kahn said the study “dispels the myth of naysayers.”
“We can keep the doors open and do job No. 1, which is to ensure access for patients” without any negative effect on quality, Kahn said.
Indeed, in an editorial accompanying the JAMA study, economist David Cutler said the findings could be interpreted as positive (i.e., a sign that the conversions do not lead to worse outcomes), or negative (i.e., a sign that financial gains don't necessarily result in improved quality for patients).
Rapid changes in the healthcare landscape, including consolidation and acquisitions of not-for-profit hospitals by for-profit chains, have been good for healthcare organizations, clinicians and practitioner groups, but there is little clarity on how it has affected patients, according to Cutler, an associate in Harvard's National Bureau of Economic Research.
Answering that question, Cutler said, “will be fundamental in measuring the winners and losers in the new organization of care.”
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