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Hospital Conversions to For-Profit Status

By October 30, 2014Commentary

There is legitimate concern in health care regarding whether for-profit providers deliver as good quality as non-profit ones do.  Such companies may face conflicting incentives.  On the one hand, cutting corners and stinting on care may improve margins; on the other hand delivering poor quality likely would lead to fewer patient visits and lower revenues.  A Journal of the American Medical Association looked at about 237 hospitals that converted from non-profit to for-profit status in the period 2003 to 2010.   (JAMA Article)   These hospitals were compared to a cohort of 631 hospitals that stayed non-profit.  The researchers measured financial performance, quality performance and any changes in patient population served.  The converting hospitals were more likely to be small or medium, located in the south and in a metropolitan area than were non-converting ones.  Hospitals that converted had lower total and operating margins before conversion than did the control hospitals, and after conversion, their margins improved more than did those for the controls.    This suggests that conversion was driven by poor financial performance at least in part and that becoming for-profit did help hospitals become more financially stable.  Based on standard Medicare process of care quality measures, the converting and non-converting hospitals had similar performance prior to conversion and after and showed similar rates of improvement over the study period.  Nursing staffing ratios were also similar between the cohorts and over time.  Thirty-day, risk-adjusted, all-cause mortality rates had no difference between the study groups at baseline and the rates of improvement for converting and non-converting hospitals were nearly identical.  Patient volume remained similar after conversion.  There were no differences after conversion in the proportion of patients who were Medicaid-eligible, black or hispanic.  Prior to conversion, the converting hospitals had a higher proportion of care provided to the poor and they continued that trend after conversion.  So whatever the explanation may be, it appears that converting to for-profit status was a positive event, with no adverse quality effects and greater financial stability, which likely meant more financial resources to provide better care for patients.

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