Public hospitals: Privatization and uncompensated care

Health Affairs

Volumn 19, Issue 2, 2000, Pages 167-172

  Desai, Kamal R ^a   Lukas, Carol VanDeusen ^b,c   Young, Gary J ^b,c  

^a BOSTON UNIVERSITY SCHOOL OF PUBLIC HEALTH   (United States)

^b (111G) VA Medical Center   (United States)

^c BU School of Public Health   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; COMMUNITY CARE; COMPARATIVE STUDY; ECONOMICS; HEALTH CARE FACILITY; HEALTH SERVICES RESEARCH; HOSPITAL; HUMAN; NON PROFIT HOSPITAL; ORGANIZATION; ORGANIZATION AND MANAGEMENT; PUBLIC HOSPITAL; STATISTICS; UNITED STATES;

CALIFORNIA; FLORIDA; HEALTH FACILITY PLANNING; HEALTH SERVICES RESEARCH; HOSPITALS, PROPRIETARY; HOSPITALS, PUBLIC; HOSPITALS, VOLUNTARY; HUMANS; ORGANIZATIONAL INNOVATION; OWNERSHIP; PRIVATIZATION; TEXAS; UNCOMPENSATED CARE;

EID: 0034146643     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.19.2.167     Document Type: Article

References (30)

1. J. Needleman, D.J. Chollet, and J. Lamphere, "Hospital Conversion Trends," Health Affairs (Mar/Apr 1997): 187-195.
2. G.J. Young, K.R. Desai, and C.V. Lukas, "Does the Sale of Nonprofit Hospitals Threaten Health Care for the Poor?" Health Affairs (Jan/Feb 1997): 137-141;
3. K.R. Desai, G.J. Young, and C.V. Lukas, "Hospital Conversions from For-Profit to Non-profit Status: The Other Side of the Story," Medical Care Research and Review 55, no. 3 (1998): 298-308; Needleman et al., "Hospital Conversion Trends"; and G.J. Young and K.R. Desai, "Non-profit Hospital Conversions and Community Benefits: New Evidence from Three States," Health Affairs (Sep/Oct 1999): 146-155. Our analysis of 1995 data indicates that in California, on average, public hospitals provided 5.25 percent of their gross patient revenue as uncompensated care, whereas nonprofit hospitals provided 2.94 percent. In Florida the difference is larger, as public hospitals provided 13.91 percent of their revenue as uncompensated care, and nonprofit hospitals provided 6.02 percent of their revenue. The numbers for Texas were 10.98 percent and 7.28 percent, respectively.
4. K.R. Desai, G.J. Young, and C.V. Lukas, "Hospital Conversions from For-Profit to Non-profit Status: The Other Side of the Story," Medical Care Research and Review 55, no. 3 (1998): 298-308; Needleman et al., "Hospital Conversion Trends"; and G.J. Young and K.R. Desai, "Non-profit Hospital Conversions and Community Benefits: New Evidence from Three States," Health Affairs (Sep/Oct 1999): 146-155. Our analysis of 1995 data indicates that in California, on average, public hospitals provided 5.25 percent of their gross patient revenue as uncompensated care, whereas nonprofit hospitals provided 2.94 percent. In Florida the difference is larger, as public hospitals provided 13.91 percent of their revenue as uncompensated care, and nonprofit hospitals provided 6.02 percent of their revenue. The numbers for Texas were 10.98 percent and 7.28 percent, respectively.
5. K.R. Desai, G.J. Young, and C.V. Lukas, "Hospital Conversions from For-Profit to Non-profit Status: The Other Side of the Story," Medical Care Research and Review 55, no. 3 (1998): 298-308; Needleman et al., "Hospital Conversion Trends"; and G.J. Young and K.R. Desai, "Non-profit Hospital Conversions and Community Benefits: New Evidence from Three States," Health Affairs (Sep/Oct 1999): 146-155. Our analysis of 1995 data indicates that in California, on average, public hospitals provided 5.25 percent of their gross patient revenue as uncompensated care, whereas nonprofit hospitals provided 2.94 percent. In Florida the difference is larger, as public hospitals provided 13.91 percent of their revenue as uncompensated care, and nonprofit hospitals provided 6.02 percent of their revenue. The numbers for Texas were 10.98 percent and 7.28 percent, respectively.
6. J. Needleman, J. Lamphere, and D. Chollet, "Uncompensated Care and Hospital Conversions in Florida," Health Affairs (Jul/Aug 1999): 125-133.
7. L. Lewin, T. Eckles, and L. 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; U.S. General Accounting Office, Nonprofit Hospitals: Better Standard Needed for Tax Exemption, Pub. no. GAO/HRD-90-84 (Washington: U.S. Gov-ernment Printing Office, 1990); E. Norton and D. Staiger, "How Hospital Ownership Affects Access to Care for the Uninsured," RAND Journal of Economics 25, no. 1 (1994): 171-185; and B. Gray, ed., For-Profit Enterprise in Health Care (Washington: National Academy Press, 1986), 97-126.
8. L. Lewin, T. Eckles, and L. 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; U.S. General Accounting Office, Nonprofit Hospitals: Better Standard Needed for Tax Exemption, Pub. no. GAO/HRD-90-84 (Washington: U.S. Gov-ernment Printing Office, 1990); E. Norton and D. Staiger, "How Hospital Ownership Affects Access to Care for the Uninsured," RAND Journal of Economics 25, no. 1 (1994): 171-185; and B. Gray, ed., For-Profit Enterprise in Health Care (Washington: National Academy Press, 1986), 97-126.
9. L. Lewin, T. Eckles, and L. 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; U.S. General Accounting Office, Nonprofit Hospitals: Better Standard Needed for Tax Exemption, Pub. no. GAO/HRD-90-84 (Washington: U.S. Gov-ernment Printing Office, 1990); E. Norton and D. Staiger, "How Hospital Ownership Affects Access to Care for the Uninsured," RAND Journal of Economics 25, no. 1 (1994): 171-185; and B. Gray, ed., For-Profit Enterprise in Health Care (Washington: National Academy Press, 1986), 97-126.
10. L. Lewin, T. Eckles, and L. 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; U.S. General Accounting Office, Nonprofit Hospitals: Better Standard Needed for Tax Exemption, Pub. no. GAO/HRD-90-84 (Washington: U.S. Gov-ernment Printing Office, 1990); E. Norton and D. Staiger, "How Hospital Ownership Affects Access to Care for the Uninsured," RAND Journal of Economics 25, no. 1 (1994): 171-185; and B. Gray, ed., For-Profit Enterprise in Health Care (Washington: National Academy Press, 1986), 97-126.
11. F. Sloan, J. Valvona, and R. Mullner, "Identifying the Issues: A Statistical Profile," in Uncompensated Hospital Care Rights and Responsibilities, ed. F. Sloan, J. Blumstein, and J. Perrin (Baltimore: Johns Hopkins University Press, 1984), 16-53; Young et al., "Does the Sale of Nonprofit Hospitals Threaten Health Care for the Poor?"; and 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. Our measure of uncompensated care did not include "unreimbursed revenue" from Medicare, Medicaid, or other third-party payers. Moreover, we did not subtract gifts and subsidies received for charity care purposes from uncompensated care, as Texas and Florida cost reports do not have this information. However, very few hospitals receive these gifts. California makes these data available, but only two of twenty privatized hospitals reported any such gifts earmarked for uncompensated care. These values were minimal compared with the total uncompensated care reported by those hospitals.
12. F. Sloan, J. Valvona, and R. Mullner, "Identifying the Issues: A Statistical Profile," in Uncompensated Hospital Care Rights and Responsibilities, ed. F. Sloan, J. Blumstein, and J. Perrin (Baltimore: Johns Hopkins University Press, 1984), 16-53; Young et al., "Does the Sale of Nonprofit Hospitals Threaten Health Care for the Poor?"; and 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. Our measure of uncompensated care did not include "unreimbursed revenue" from Medicare, Medicaid, or other third-party payers. Moreover, we did not subtract gifts and subsidies received for charity care purposes from uncompensated care, as Texas and Florida cost reports do not have this information. However, very few hospitals receive these gifts. California makes these data available, but only two of twenty privatized hospitals reported any such gifts earmarked for uncompensated care. These values were minimal compared with the total uncompensated care reported by those hospitals.
13. F. Sloan, J. Valvona, and R. Mullner, "Identifying the Issues: A Statistical Profile," in Uncompensated Hospital Care Rights and Responsibilities, ed. F. Sloan, J. Blumstein, and J. Perrin (Baltimore: Johns Hopkins University Press, 1984), 16-53; Young et al., "Does the Sale of Nonprofit Hospitals Threaten Health Care for the Poor?"; and 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. Our measure of uncompensated care did not include "unreimbursed revenue" from Medicare, Medicaid, or other third-party payers. Moreover, we did not subtract gifts and subsidies received for charity care purposes from uncompensated care, as Texas and Florida cost reports do not have this information. However, very few hospitals receive these gifts. California makes these data available, but only two of twenty privatized hospitals reported any such gifts earmarked for uncompensated care. These values were minimal compared with the total uncompensated care reported by those hospitals.
14. J.S. Weissman, P. Dryfoos, and K. London, "Income Levels of Bad-Debt and Free-Care Patients in Massachusetts Hospitals," Health Affairs (Jul/Aug 1999): 156-166.
15. This eliminates bias due to different price levels across hospitals. Hospitals with higher gross prices will have higher gross revenues and vice versa.
16. J. Alexander, M. Halpern, and S. Lee, "The Short-Term Effects of Merger on Hospital Operations,"Health Services Research 30, no. 6 (1996): 827-848; and J. Kralewski et al., "The Effects of Contract Management on Hospital Performance," Health Services Research 19, no. 4 (1984): 479-498.
17. J. Alexander, M. Halpern, and S. Lee, "The Short-Term Effects of Merger on Hospital Operations,"Health Services Research 30, no. 6 (1996): 827-848; and J. Kralewski et al., "The Effects of Contract Management on Hospital Performance," Health Services Research 19, no. 4 (1984): 479-498.
18. The Office of Statewide Health Planning and Development (OSHPD) in California, the Florida Agency for Health Care Administration (FLHCA), and the Texas Department of Health (TDH) publish annual audited financial reports for their respective states.
19. District hospitals operate in a somewhat different financial and administrative environment than other types of public hospitals such as city or county hospitals. Average level of uncompensated care for nonprivatized district hospitals (9.04 percent) was lower than for nonprivatized, nondistrict public hospitals (13.70 percent) but was significantly higher than for nonprofit hospitals (4.53 percent). About 68 percent of all nonprivatized public hospitals in the sample were also organized as district hospitals.
20. For each privatization, we used all of the available years of data rather than restricting the number of pre-and postprivatization data points to those that were identical.
21. See Alexander et al., "The Short-Term Effects of Merger." They used randomly selected hospitals rather than matched hospitals. We also used a randomly selected comparison group. Our methodology is slightly different from that used by Alexander and colleagues, in the sense that we stratified the hospitals to increase the likelihood that the selected hospitals were from the same cohort as the focal privatized hospital.
22. Service area is the county in which the focal hospital is located.
23. The selection of comparison hospitals was performed without replacement.
24. The regression model controlled for factors such as time frame of the privatization, state in which the hospital was located, size of the hospital, and income level of the hospital service area. We define dummy for small hospitals as hospitals with beds below median number of beds in a given year for which the data were reported. We define hospitals located in counties below state median level income as low-income area hospitals.
25. Since Texas financial data are available from 1988 only and we require a minimum of three years of preprivatization data for privatized hospitals, we include only post-1990 privatizations in Texas.
26. In fact, on average, Florida public hospitals provided almost twice as much uncompensated care as did California public hospitals in our sample in 1980-1995 (15.08 percent in Florida versus 7.63 percent in California).
27. It is important to note that the effect of hospital size and income level of the community on uncompensated care is observed for privatized as well as nonprivatized hospitals.
28. Center for Health Policy, Law, and Management, A Guide for Communities Considering Hospital Conversion in Carolinas (Durham: Duke University, Center for Health Policy, Law, and Management, May 1998).
29. Desai et al., "Hospital Conversions"; and M. Taylor, "Changes Cause Tax Horrors for Amityville," Modern Healthcare (19 April 1999): 20-21.
30. Desai et al., "Hospital Conversions"; and M. Taylor, "Changes Cause Tax Horrors for Amityville," Modern Healthcare (19 April 1999): 20-21.