For-Profit Enterprise in Health Care (1986) / Chapter Skim
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13 Hospitals and Their Communities: A Report on Three Case Studies
13 Hospitals and Their Communities: A Report on Three Case Studies
Pages 458-473
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From page 458... ...
What are the effects of the introduction of for-profit providers on a community's other health care providers and on those who seek care? Other topics that flow from these two questions relate to changes in the financial status of provider organizations, changes in the cost and quality of care and in access to care, changes in the competitive environment in the communities, and changes in relationships among physicians and institutions.
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From page 459... ...
Interviews were requested with people holding key administrative and medical positions in the hospitals-chief administrator; administrators in charge of finance, marketing, and planning; chairman and members of the governing board; medical director; chief of staff; physicians who admit significant numbers of patients to the hospital; and physicians who work under contract with the hospital. In addition, contact was made with owners and operators of the major nonhospital health facilities, such as ambulatory surgery centers and urgent care centers.
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From page 460... ...
A public hospital, Sunshine County Hospital was built in the 1940s. At the time of the site visit, this 150-bed hospital was in the first year of operation under a management contract with an investor-owned management company.
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From page 461... ...
black population and a high unemployment rate that is thrusting many people into medical indigency as union health benefits expire. The major providers of health care in Center City consist of three private acute care hospitals, a psychiatric hospital, a dialysis center, three urgent care centers, a surgery center, and two diagnostic-imaging centers expected to be operational within a year.
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From page 462... ...
In another community the hospital administrators, hearing that physicians were seeking financing to establish freestanding centers, attempted to engage in joint ventures. To the dismay-of the administrators, other financiers had already concluded deals.
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From page 463... ...
If the new managers succeed in attracting more paying patients to the public hospital, the private hospitals will be the losers. In Center City and Coast Town, the investor-owned hospitals were constructed with the support of groups of discontented physicians.
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From page 464... ...
In sum, the case studies indicate that whether the introduction of an investor-owned hospital has an immediate effect on the status of competition among hospitals depends to a great extent on whether demand for hospital services can absorb additional capacity or the upgrading of existing capacity. Two of the communities studied suffered from an economic recession some years after the advent of investor ownership.
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From page 465... ...
First is the magnitude of the problem-whether a community includes such large numbers of people in need of free care that hospital administrators and trustees perceive demand to exceed the amount they are able to supply. Second is whether a public hospital is available where poor patients can seek care and to which they can be transferred by private hospitals.
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From page 466... ...
Thus, the investor-owned hospitals in the communities studied made relatively small contributions to the provision of uncompensated care because of decisions about location and range of services that ensured that the vast majority of people unable to pay for their care sought care elsewhere. Administrators of the not-for-profit and public hospitals that provided substantial amounts of uncom
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From page 467... ...
For the poor and uninsured people of the communities studied, the availability and location of hospital care was determined more by the existence and funding of a public hospital than the presence or absence of an investor-owned hospital. If there was a public hospital able to care for those in need, it was the locus of indigent care, and private hospitals provided minimal levels of uncompensated care.
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From page 468... ...
However, in the future, performance monitoring wilD be increased and local administrators given incentive compensation. Although the centralized data system allowed the corporation to review detailed financial data from individual hospitals, the only financial goals specified by the corporate office were a net margin goal and a retun~-on-equity goal.
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From page 469... ...
Investor-Owned Systems It is more difficult to describe a typical investor-owned system because the extent of central control varied widely among the three we encountered. Common to each, however, were centralized financial data systems, capital budget processes that required higher levels of company approval for higher levels of expenditures, and reiterative or negotiated budget processes to develop annual financial goals which were translated into monthly goals and broken down to determine the contribution of operating units such as the emergency room, neonatal unit, radiology, and so forth.
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From page 470... ...
The histories of the establishment of investor-owned hospitals in Coast Town and Center City illustrate how physicians can alter the configuration of hospital services. In both cities, physicians upset about what they saw as unaccommodating attitudes at the existing hospitals had negotiated with investor-owned corporations to build a new hospital.
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From page 471... ...
Clearly, even at a hospital operated by a wellcapitalized and highly centralized investorowned hospital company, the alienation of large numbers of physicians, able to control their admissions, can have a powered economic impact on the hospital. In Coast Town, a large multispecialty group of physicians committed its admissions to the new investor-owned hospital by budding their office building on the hospital campus.
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From page 472... ...
In Coast Town, the not-for-profit hospitals recruited to the community new and reputedly very good physicians and improved the quality of care in their hospitals. For physicians the advent of investor ownership often meant that the existing hospitals became much more receptive to suggestions and more responsive to physicians' needs.
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From page 473... ...
In the investor-owned hospitals, the local advisory boards included heavy physician representation, and the board's influence seemed to depend more on the history of the hospital than on corporate policy. Similarly, physician influence in the hospitals was 473 dictated not so much by hospital or system policies as by organization of the physicians and their historical role in the hospital and the competitive environment.
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