Nonprofit hospital conversions and community benefits: New evidence from three states

Health Affairs

Volumn 18, Issue 5, 1999, Pages 146-155

  Young, Gary J ^a,b,c,d   Desai, Akamal R ^e  

^a Department of Health Services

^b BOSTON UNIVERSITY   (United States)

^c Mgmt Decision and Research Center   (United States)

^d DEPARTMENT OF VETERANS AFFAIRS   (United States)

^e VA Mgmt Decis and Research Center   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; ECONOMICS; HEALTH CARE FACILITY; HEALTH INSURANCE; HOSPITAL; HUMAN; INFORMATION PROCESSING; NON PROFIT HOSPITAL; ORGANIZATION AND MANAGEMENT; PUBLIC RELATIONS; SOCIAL WELFARE; STATISTICS; UNITED STATES;

CALIFORNIA; CHARITIES; COMMUNITY-INSTITUTIONAL RELATIONS; DATA COLLECTION; FLORIDA; HEALTH FACILITY MERGER; HOSPITALS, PROPRIETARY; HOSPITALS, VOLUNTARY; HUMANS; MANAGED CARE PROGRAMS; OWNERSHIP; TEXAS;

EID: 0033194737     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.18.5.146     Document Type: Article

References (40)

1. LE. Singer, "The Conversion Conundrum: The State and Federal Response to Hospitals' Changes in Charitable Status," American Journal of Law and Medicine 23, nos. 2 and 3 (1997): 221-250.
2. We obtained this number by compiling data from the American Hospital Association annual survey and author sources. See J. Needleman, D.J. Chollet, and J. Lamphere, "Hospital Conversion Trends," Health Affairs (March/April 1997): 187-195. While conversion activity had been increasing through the mid-1990s, recent information points to a slowdown in the frequency of conversions. Health Care M&A (New Caanan, Conn.: Iran Levin and Associates, Inc., 1999).
3. We obtained this number by compiling data from the American Hospital Association annual survey and author sources. See J. Needleman, D.J. Chollet, and J. Lamphere, "Hospital Conversion Trends," Health Affairs (March/April 1997): 187-195. While conversion activity had been increasing through the mid-1990s, recent information points to a slowdown in the frequency of conversions. Health Care M&A (New Caanan, Conn.: Iran Levin and Associates, Inc., 1999).
4. Singer, "The Conversion Conundrum;" and J.H. Goddeeris and B.A. Weisbrod, "Conversion from Nonprofit to For-Profit Legal Status: Why Does It Happen and Should Anyone Care?" Journal of Policy Analysis and Management 17, no. 2 (1998): 215-233.
5. Singer, "The Conversion Conundrum;" and J.H. Goddeeris and B.A. Weisbrod, "Conversion from Nonprofit to For-Profit Legal Status: Why Does It Happen and Should Anyone Care?" Journal of Policy Analysis and Management 17, no. 2 (1998): 215-233.
6. B.H. Gray, The Profit Motive and Patient Care: The Changing Accountability of Doctors and Hospitals (Cambridge, Mass.: Harvard University Press, 1991).
7. U.S. General Accounting Office, Not-for-Profit Hospitals: Conversion Issues Prompt Increased State Oversight, Pub. no. GAO/HEHS-98-24 (Washington: GAO, 1997); Singer, "The Conversion Conundrum;" and B. Moore, "Nonprofit to ForProfit Hospital Transactions: All Roads Lead to the Attorney General's Office," Journal of Health Care Finance 25, no. 3 (1999): 29-36.
8. U.S. General Accounting Office, Not-for-Profit Hospitals: Conversion Issues Prompt Increased State Oversight, Pub. no. GAO/HEHS-98-24 (Washington: GAO, 1997); Singer, "The Conversion Conundrum;" and B. Moore, "Nonprofit to ForProfit Hospital Transactions: All Roads Lead to the Attorney General's Office," Journal of Health Care Finance 25, no. 3 (1999): 29-36.
9. U.S. General Accounting Office, Not-for-Profit Hospitals: Conversion Issues Prompt Increased State Oversight, Pub. no. GAO/HEHS-98-24 (Washington: GAO, 1997); Singer, "The Conversion Conundrum;" and B. Moore, "Nonprofit to ForProfit Hospital Transactions: All Roads Lead to the Attorney General's Office," Journal of Health Care Finance 25, no. 3 (1999): 29-36.
10. G.J. Young, K.R. Desai, and C. VanDeusen Lukas, "Does the Sale of Nonprofit Hospitals Threaten Health Care for the Poor?" Health Affairs (January/February 1997): 137-141.
11. The Community Impact of Hospital Mergers and Conversions (Bethesda, Md.: Project HOPE Center for Health Affairs, 1997); and Center for Health Policy, Law, and Management, A Guide for Communities Considering Hospital Conversion in the Carolinas (Durham, N.C.: Duke University, 1998).
12. The Community Impact of Hospital Mergers and Conversions (Bethesda, Md.: Project HOPE Center for Health Affairs, 1997); and Center for Health Policy, Law, and Management, A Guide for Communities Considering Hospital Conversion in the Carolinas (Durham, N.C.: Duke University, 1998).
13. Ibid.
14. T.D. Cook and D.T. Campbell, Quasi-Experimentation: Design and Analysis Issues for Field Settings (Boston: Houghton-Mifflin Company, 1979).
15. Needleman et al, "Hospital Conversion Trends."
16. J.A. Alexander, M.T. Halpern, and S.D. Lee, "The Short-Term Effects of Mergers on Hospital Operations," Health Services Research 30, no. 6 (1996): 827-847. This study used a randomly selected comparison group rather than matched hospitals to more reliably capture secular trends for variables of interest. We also used a randomly selected comparison group but one that was stratified to increase the likelihood that the selected hospitals were peers of the conversion hospitals.
17. See, for example, G. Claxton et al., "Public Policy Issues in Nonprofit Conversions: An Overview," Health Affairs (March/April 1997): 9-28.
18. F.A. Sloan, J. Valvona, and R. Mullner, "Identifying the Issues: A Statistical Profile," in Uncompensated Hospital Care; Rights as Responsibilities, ed. F.A. Sloan, J.F. Blumstein, and J.M. Perrin (Baltimore: Johns Hopkins University Press, 1986).
19. To adjust discharges for volume of outpatient care, we divided the number of discharges by the ratio of inpatient to total patient revenue.
20. We used the literature to identify services that are typically unprofitable and/or nonreimbursable. See, for example, S.M. Shortell et al., "The Effects of Hospital Ownership on Non-traditional Services," Health Affairs (Winter 1986): 97-111. These investigators defined an unprofitable service as one for which 50 percent or more of the respondents to their survey indi-cated that they lost money providing the service. See also Center for Health Policy, Law, and Management, A Guide for Communities.
21. We used the literature to identify services that are typically unprofitable and/or nonreimbursable. See, for example, S.M. Shortell et al., "The Effects of Hospital Ownership on Non-traditional Services," Health Affairs (Winter 1986): 97-111. These investigators defined an unprofitable service as one for which 50 percent or more of the respondents to their survey indi-cated that they lost money providing the service. See also Center for Health Policy, Law, and Management, A Guide for Communities.
22. Both Florida and Texas restricted the closure of emergency rooms, but not trauma services, during the study period.
23. In this index we only included services that met the following three criteria: (1) The service was uniformly reported for each year of the study period; (2) the service was defined consistently in reporting formats for each year of the study; and (3) hospitals appeared to report on the presence or absence of the service reliably (as indicated by the lack of erratic reporting).
24. The services included in the second index for each state are as follows: California includes emergency room/trauma care, neonatal intensive care, burn care, substance abuse treatment, hospice care, psychiatric outpatient care, diabetic training classes, home social services, drug reaction information, and family planning education. Florida includes emergency room/trauma care, neonatal intensive care, burn care, substance abuse treatment, psychiatric long-term care, home health services, and home dialysis. Texas includes emergency room/trauma, neonatal intensive care, burn care, substance abuse treatment, home health services, psychiatric out-patient care, patient education, and hospice.
25. G.J. Young, "Insider Representation on the Governing Boards of Nonprofit Hospitals: Trends and Implications for Charitable Care," Inquiry 33, no. 4 (1997): 352-362.
26. Young et al, "Does the Sale of Nonprofit Hospitals Threaten Health Care for the Poor?"
27. We computed the trend values or slope by regressing each community benefit indicator against time, where time was represented by the years (for example, 1991, 1992, 1993) for which the values of the community-benefit indicator corresponded. No other variables were included in the regression analysis. The trend value indicates the average annual rate of change in the community-benefit indicator during the observation period.
28. We used paired t-tests to assess whether observed changes in postconversion levels and trends were statistically significant, and the student t-test to assess whether preconversion levels and trends differed significantly from zero. Levels and trends of the conversion group were compared to those of the comparison hospitals using a two-sample t-test. To compute the two sample t-tests, we used weighted standard errors to account for differences in variance.
29. Young, "Insider Representation;" and R. Shrinkman, "'Insiders' on Hospital Boards Worrisome," Modern Healthcare (26 April 1999): 2.
30. Young, "Insider Representation;" and R. Shrinkman, "'Insiders' on Hospital Boards Worrisome," Modern Healthcare (26 April 1999): 2.
31. The tables presenting the full results of these analyses are available from the authors. Caution must be taken in interpreting certain results, since the sample sizes are much smaller than those used for the composite analyses and thus statistical power for detecting true changes is limited. Accordingly, we paid careful attention to the patterns of results (direction and magnitude of changes) as well as to statistical significance of changes.
32. R.A. Connor, R.D. Feldman, and B.E. Dowd, "The Effects of Market Concentration and Horizontal Mergers on Hospital Costs and Prices," International Journal of the Economics of Business 5, no. 2 (1998): 159-180.
33. J.R. Schwartz and H.C. Horn, Health Care Alliances and Conversions (San Francisco: Jossey-Bass, 1999).
34. See, for example, D. Shactman and S. Altman, "Hospital Conversions and Uncompensated Care," Health Affairs (May/June 1997): 270-271.
35. Both nonprofit and for-profit hospitals in California appear to provide less uncompensated care than do their counterparts in Florida and Texas. Moreover, the ownership differential appears to be much smaller in California than it is in Florida and Texas. We used 1995 hospital cost report data to examine by state the amount of uncompensated care that nonprofit and forprofit hospitals provide. In California both sectors provided, on average, uncompensated care in the amount of approximately 2.95 percent of gross patient revenue. By contrast, in both Texas and Florida the differential was greatly in favor of the nonprofits (Florida: 7.28 versus 5.30; Texas: 6.02 versus 4.39). See also LS. Lewin, T.J. Eckels, and L.B. Miller, "Setting the Record Straight: The Provision of Uncompensated Care by Not-for-Profit Hospitals," New England Journal of Medicine (5 May 1988): 1212-1215; and GAO, Nonprofit Hospitals: Better Standards Needed for Tax Exemption, Pub. no. GAO/HRD-90-84 (Washington: GAO, 1990).
36. Both nonprofit and for-profit hospitals in California appear to provide less uncompensated care than do their counterparts in Florida and Texas. Moreover, the ownership differential appears to be much smaller in California than it is in Florida and Texas. We used 1995 hospital cost report data to examine by state the amount of uncompensated care that nonprofit and forprofit hospitals provide. In California both sectors provided, on average, uncompensated care in the amount of approximately 2.95 percent of gross patient revenue. By contrast, in both Texas and Florida the differential was greatly in favor of the nonprofits (Florida: 7.28 versus 5.30; Texas: 6.02 versus 4.39). See also LS. Lewin, T.J. Eckels, and L.B. Miller, "Setting the Record Straight: The Provision of Uncompensated Care by Not-for-Profit Hospitals," New England Journal of Medicine (5 May 1988): 1212-1215; and GAO, Nonprofit Hospitals: Better Standards Needed for Tax Exemption, Pub. no. GAO/HRD-90-84 (Washington: GAO, 1990).
37. Center for Health Policy, Law, and Management, A Guide for Communities.
38. Two recent conversions of university-affiliated hospitals are George Washington University Hospital and St. Louis University Hospital.
39. Project HOPE Center for Health Affairs, The Community Impact of Hospital Mergers and Conversions.
40. T. Mark, "Analysis of the Rationale for, and Consequences of, Nonprofit and For-Profit Ownership Conversions," Health Services Research 34, no. 1 (1999): 83-102.