For-Profit Enterprise in Health Care (1986) / Chapter Skim
Currently Skimming:
10 Summary and Conclusions
10 Summary and Conclusions
Pages 182-206
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From page 182... ...
These value conflicts color people's interpretations of data and persist after all empirical studies have been reviewed. Thus, some observers believe that the rise of for-profit health care threatens the values and ideals that should guide the activities of health professionals and health care organizations and that, if realized, distinguish professional work from commerce.
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From page 183... ...
However, investor ownership can now be found in a] types of health care organizations acute care hospitals, psychiatric hospitals, lIMOs, nursing homes (which have long been predominantly for-profit)
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From page 184... ...
, most positive and negative expectations about the supposed tendencies of for-profit or not-forprofit health care organizations stem from some key legal differences.4 Not-for-profit organizations are generally exempted from fecleral, state, and local taxes and are chartered for limited purposes charitable, scientific, educational, benevolent, or religious. Their income and assets must be used for these purposes.
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From page 185... ...
Health Care Costs The committee studied the cost implications of for-profit health care by examining studies that compared for-profit and not-forprofit health care organizations. Almost all available data pertain to hospitals.
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From page 186... ...
Nursing homes, for which approximately 50 percent of payments is prospectively determined, show expenses per patient day to be higher in not-for-profit than in for-profit homes and show little difference in pricing. The growth in various types of ambulatory care, home care services, and diagnostic centers has brought about some impressive reductions in unit costs, when comparisons are made with in-hospital care and services to which full hospital overhead expenses are allocated.
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From page 187... ...
However, in nursing homes where payment by Medicaid has typically been by fixed, prospectively determined rates, forprofit homes have lower average expenses on such budget categories as food, housekeeping, and other patient care services, and higher expenses for capital costs and rent than do not-for-profit homes. Although clirect analogy to hospitals ignores many important differences in the two types of institutions (including the shortage of nursing home beds, which restricts choice and, hence, minimizes punishment by market factors)
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From page 188... ...
Uninsured patients are a reasonable, if imperfect, proxy for "patients who are unable to pay," and the OCR data provide the only national figures available on the numbers of such patients served by hospitals of different types of ownership. The AHA annual survey of hospitals provides data on the most widely used measure of uncompensated care the percentage of revenues that are accounted for by the sum of bad debt and charity care.
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From page 189... ...
The committee was unable to obtain data that might document whether there are ownership differences in the care of other patients who have difficulty securing access to nursing homes most notably "heavy care" patients who are sometimes discriminated against when reimbursement is fixed, and patients who have exhausted their funds but are not eligible for Medicaid. Finally, the committee found that the question of whether for-profit hospitals are less likely to offer unprofitable services could not be answered empirically.
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From page 190... ...
Education and Research The past lack of involvement of investorowned health care companies in health professional education and unsponsored research is documented in Chapter 8. The companies have been accused not only of unfairly benefiting from other institutions' commitment to education and research, but also of attracting away well-insured patients to an extent that makes it more difficult for teaching hospitals to generate patient revenues to subsidize education and research.
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From page 191... ...
CONCLUSIONS ABOUT INVESTOR OWNERSHIP OF HEALTH CARE FACILITIES The committee concludes that available evidence on differences between for-profit and not-for-profit health care organizations is not sufficient to justify a recommendation that investor ownership of health care organizations be either opposed or supported by public policy. Substantive goals regarding cost, quality, access, education, and research are more appropriate than a goal of creating fair competition between for-profit and not-for-prof~t health care organizations.
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From page 192... ...
The Increasing Importance of Economic Incentives Although systematic data are lacking, some observers believe that investor-owned health FOR-PROFIT ENTERPRISE IN [IEALTH CARE care organizations tend to follow economic incentives more quickly and closely than do not-for-profit organizations. Others believe that all types of health care providers are becoming more attuned to economic incentives.
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From page 193... ...
Without explicit public policy attention, an increasing number of people in need of care will suffer. The Social Responsibilities of Health Care Organizations The social acceptability of a more competitive and pluralistic health care system that includes both for-profit and not-for-profit organizations depends on the degree of social responsibility with which institutions operate.
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From page 194... ...
Performance in this regard is monitored, although sometimes more in theory than in fact, by governmental agencies, funding sources, and voluntary boards, whereas stockholders monitor the for-profit sector's bottom line of profitability. So long as the not-for-profit and public sectors act in accord with their FOR-PROFIT ENTERPRISE IN HEALTH CARE traditional values of charity, community involvement, and finding ways of meeting needs regardless of incentives, preservation of their vitality should be a major public policy concern.28 Public concern is warranted about the continued vitality and even the survival of important not-for-profit and public health care institutions particularly those that are sole community providers, those that provide large amounts of uncompensated care, and those that are valuable centers of education, research, and tertiary care.
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From page 195... ...
~ The ability of institutions to subsidize indigent care Dom other patient care revenues is now seriously Greatened. As governmental and over ~irdparty payers change payment methods and amounts to minimize their health care costs surplus patient care revenues wail decline and disappear.
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From page 196... ...
A third approach would be to give health care companies the option of providing service to indigent patients at marginal cost as a direct credit against taxes. Conversely, as was suggested earlier, more consideration should be given to ensuring that hospitals, HMOs, home health agencies, and other not-for-profit institutions that receive charitable contributions and that benefit from a tax exemption provide public goods in the form of uncompensated care, unprofitable standby capacity, unsponsored research, or institutionally subsidized educational activities.
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From page 197... ...
Failure to incorporate a reasonable factor for capital costs would harm all hospitals, but particularly those whose location or mission results in their bearing unusually high costs for indigent care or for health professionals' education. In the absence of adequate funding, such institutions may find themselves unable to compete for paying patients, doctors, and capital and may be forced to abandon important aspects of their service, teaching, or research missions.
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From page 198... ...
Where they are implemented, their use should be closely studied and monitored. Physician Influence in Medical Institutions In Chapter 9, the committee examined changes taking place in the control of health care organizations, particularly regarding physician influence.
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From page 199... ...
Ids and other trends toward vertical integration present some new incentives and challenge our ability to understand and measure implications for cost, quality, and access to serv~ces. In several chapters of this report, atten tion has been called to the need for monitoring key aspects of the performance of health care organizations: indices of quality of care, cost of care, service to patients who are unable to pay, the auspices and values of health professional education, and the fiduciary role of the physician.
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From page 200... ...
However, some important questions about the increasing scale of health care organizations are probably not answerable by aggregating data from health care institutions. For example, how and in what ways will health care organizations of in creasing size and diversity influence health care policy and public financing both nationally and at the state or local levels?
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From page 201... ...
NOTES Nor this and other reasons, the committee also sought clues from the nursing home industry, in which the incentives generated by prospectively determined rates have long characterized state Medicaid program payments. More than 75 percent of nursing homes are forprofit operations and about half of their patients are paid through Medicaid.
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From page 202... ...
Hospitals may carry a relatively small uncompensated care burden because of location (which affects not only the demographic characteristics of the surrounding population but also the generosity ofthe state Medicaid program) , the type of emergency services they offer, whether they offer services that may attract uninsured patients (e.g., obstetric services)
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From page 203... ...
As a result of public policy and their status as taxpayers, Humana hospitals do not have the responsibility to provide hospital care for the indigent except in emergencies or in those situations where reimbursement for indigent patients is provided. 28The health of the not-for-profit sector may also have spill-over effects that benefit the for-profit sector.
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From page 204... ...
Entrepreneurial Trends in Health Care Delivery: The Development of Retail Dentistry and Freestanding Ambulatory Services. Washington, D.C.: Federal Trade Commission.
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From page 205... ...
are for-profit, but a majority of nursing homes and private psychiatric hospitals are for-profit; and investor-owned businesses are expanding into other parts of the system. A substantial increase in the for-profit sector's share of the health system could 1.
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