A community’s high uninsured rate or an increasing demand for care by uninsured persons may influence decisions by a local hospital’s governing body to merge; to convert from public to private ownership status, or from private non-profit to for-profit status; or to close.

These major changes are usually prompted by a variety of factors. A hospital’s decision to convert its ownership status may be motivated by the need for funds to continue operating, either independently or as one of a group of hospitals, or by the need to raise capital (Meyer et al., 1999; Needleman, 1999). Local uninsured rates and the burden of uncompensated care costs to local and state government contributed to the conversions of three large urban public hospitals—in Milwaukee, Wisconsin, Boston, Massachusetts, and Hillsborough County, Florida—to private ownership during the 1990s (Bovbjerg et al., 2000b). The conversions were spurred by changing market conditions and political decision making, particularly localities’ interest in cutting expenses (Meyer et al., 1999; Bovbjerg et al., 2000b).

The conversion, merger, or closing of a hospital may lead to improved and less costly health services locally. It may also promote greater access to higher-quality care by making ambulatory primary care more available with the resources freed up from support of an unviable and inefficient inpatient facility (Needleman, 2000). Chapter 4 discusses such transitions in the case of rural hospitals. However, some changes bring with them the risk that the whole community will end up with less access to services or lower-quality care. For example, the loss of a physical plant and with it the relatively automatic support that a bricks-and-mortar institution commands may result in a net loss of public dollars for indigent health care (Bovbjerg et al., 2000b). A study of three public hospital closings in the 1990s finds that the basic lack of capacity to finance needed services for local underserved populations was not addressed, although the delivery of health services was better integrated through managed care arrangements that followed the closures (Bovbjerg et al., 2000b). For the most part, local public funders did not reward providers who inherited the patient base of the closed public hospitals for the cost savings and improved quality of care that came out of the conversion process, which led to a decline in local dollars for services to uninsured persons within these communities following the closings. In addition, a change in ownership status or operations can result in the relocation of a hospital from a neighborhood with a high uninsured rate to an area with a lower uninsured rate. This was the case in one Florida hospital, where, as part of its reorganization, a public hospital affiliated with a medical school shifted its base of operations to a new campus away from its inner city location and opened new outpatient facilities in more prosperous neighborhoods (Meyer et al., 1999; Bovbjerg et al, 2000b).

The proposed closing of a public hospital may be perceived by other providers in the area as threatening the financial stability of their own institutions by potentially spreading the effects of uninsurance more broadly throughout the