|
Items in cart [0] |
Questions? Call 888-624-8373 |
| Copyright © 2009. National Academy of Sciences. All rights reserved. Terms of Use and Privacy Statement |
Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 97
Access to Care and
Investor-Own~ Providers
Probably the most commonly expressed
concern about the emergence and growth
of investor-owned health care organizations
is the belief that their pursuit of profitability
goals wit! limit or preclude them from serv-
ing patients who are unable to pay or from
offering needed services that cannot be pro-
vided at a profit. Implicit in this concern is
the value premise which some dispute and
which is not typical of business-that health
care institutions (whether for-profit or not-
for-profit) have certain social responsibilities
to meet individual and community needs,
even needs that cannot be met profitably.
Implicit also is the assumption that for-profit
and not-for-profit institutions will behave
differently in this regard.
Behind these concerns lies one of the most
serious problems in our patchwork system
of financing health care: the 35 million peo-
ple who lack adequate private health insur-
ance coverage and who are not eligible for
public programs, particularly Medicare and
Medicaid.2 The care of these ant] many un-
derinsured people is now largely dependent
on the ability and willingness of health care
institutions ant} individual physicians to pro-
vide uncompensated care.
Although this chapter is primarily con-
cerned with questions of access in econom-
ically unrewarding circumstances, it should
be recognized at the outset that the overall
impact of for-profit providers on access to
97
care includes their effect on access to care
for people who can pay. Such access has
undoubtedly been enhanced by for-profit
providers purchasing facilities that are in fi-
nancial trouble and Mat might otherwise have
closed, renovating and modernizing faciTi-
ties and attracting new physicians as a re-
sult, investing in new services and facilities
where there is demand, and responding to
patients' desires for convenient hours and
locations. For-profit providers also pay taxes,
which are used for such purposes as poli-
cymakers may determine. Although some
tax money finances care for the indigent,
plainly most federal tax revenues are used
for other purposes.
This chapter deals with four negative al-
legations regarding the behavior offor-profit
providers: that they will not serve those who
cannot pay; that their ability to attract pay-
ing patients will make it increasingly diffi-
cult for other type institutions to care for
those who cannot pay; that they will offer
only profitable services, regardless of the
community's need for other services; and
that they will be more likely to close hos-
pitals that fad! to achieve economic goals.
The questions of whether the traditional ex-
pectation that health care institutions con-
tribute to the care of those unable to pay is
the proper mechanism for solving access
problems, and whether for-profit and not-
for-probt providers should be expected to
OCR for page 98
98
contribute equally are discussed later in this
chapter.
THE PROBLEM OF CARE FOR THOSE
UNABLE TO PAY
A basic paradox or ambivalence in Amer-
ican health policy is that despite the absence
of a public commitment to the availability
of financing to assure access to health care
for all who need it, a widespread expectation
exists that hospitals will provide needed care
for the millions of Americans who are unable
to pay part or all of their medical bills. The
expectation that hospitals will do what neecis
to be done and will find a way to pay for it
is no doubt a residue of the history of hos-
pitals as public or charitable institutions.
Hospitals provide a substantial, if inade-
quate, amount of uncompensated care. Al-
though there are wide variations among
hospitals, uncompensated care (the sum of
charity care and bad debts) amounted to 5.4
percent of the gross revenues of the average
U. S. hospital in 1983, a total of $7.8 billion
(American Hospital Association, 1985~.
Nevertheless, in a 1982 national survey, 15
percent of uninsured families reported that
they hac] not obtained needed medical care
during the previous year, and 4 percent re-
ported that they had been refused care for
financial reasons (Robert Wood Johnson
Foundation, 1983~.
To what extent, if any, does the for-profit
presence exacerbate these problems? A fills
answer to this question would require data
on the number of persons who needed ser-
vices but lacked the means to pay (1) who
didn't believe they could obtain services so
did not try, (2) who sought care but were
turned away, (3) who were given emergency
care and transferred to another institution;
or (4) who were cared for with the provider
(hospital, nursing home, HMO, ambulatory
care center, etc.) absorbing the costs in full
or in part. Unfortunately, such data are largely
lacking. Existing evidence is limited mostly
to hospitals. Even then, it is limited to (1)
FOR-PROFIT ENTERPRISE IN HEALTH CARE
survey data on the number of uninsured
people treated and (2) the dollar value of
uncompensated care provided. Further-
more, the measure "uncompensated care"
(charity care and bad debt as a percentage
of revenues) includes the uncollected charges
from people who were admitted as paying
patients but whose insurance clid not cover
full costs, and from people who were known
at the time of admission to be unable to pay.
In short, available data are fragmentary and
are, at best, suggestive of the true extent to
which people who are unable to pay are
served.
The legal responsibilities of institutions
toward people who are unable to pay for
their care vary, but are generally limited.
Case law, accreditation requirements, and
some state statutes require treatment of pa-
tients in immediately life-threatening cir-
cumstances, but this is very different from
extending the full resources of a hospital to
all who need care. Many public hospitals
are legally obligated to care for all residents
in their area. Some voluntary hospitals are
supposed to provide a set amount of free
care annually because of earlier receipt of
Hill-Burton construction funds, but the
amount of care required is limited and ap-
plies to a decreasing number of hospitals.
Obligations to provide free care as a con-
dition of the tax-exempt status of not-for-
profit institutions have largely disappeared
insofar as federal income taxes are con-
cerned,2 although a 1985 Utah Supreme
Court decision tied hospital exemptions Tom
local property taxes to several criteria, in-
cluding provision of charity care. Other not-
for-profit hospitals that are not statutorily
responsible for caring for the needy of the
community nevertheless see maintaining an
"open door" as a fundamental value.
The Financing of Uncompensated Care
Institutions that provide uncompensated
care and unprofitable services must recover
the costs elsewhere. The choices are few.
OCR for page 99
ACCESS TO CARE
The costs can be subsidized out of revenues
from paving patients, a practice that has been
facilitated by third-party payers who pay
hospital charges set high enough to allow
such subsidization. (Bad debts for non-\Ied-
icare patients were never an allowable cost
under Medicare's cost-based reimburse-
ment rules.) However, private third-party
payers (including self-insuring companies)
are becoming much less willing to pay for
costs incurred in the care of patients that
they do not insure. Changes in the reim-
bursement environment most notably in
the growth of negotiated rates and price
competition are making cross-subsidiza-
tion increasingly problematic. As these
changes continue to happen, institutions that
provide uncompensated care will increas-
ingly have to finance such care in one of two
ways by cannibalizing themselves (using
money that should go for fixture capital needs,
deferring maintenance, cutting costs exces-
sively, having operating deficits) or by rais-
ing money from nonpatient care sources.
Obtaining nonpatient revenues has long
been essential to the sound operation of hos-
pitals. Indeed, until recent years, the av-
erage U. S. hospital would have had a negative
margin (i. e., more expenses than revenues)
if it had not obtained revenues from sources
other than patient care as Table 5.1 shows.
Sources of nonpatient revenues include gov-
ernmental appropriations; charitable con-
tributions; interest; and income Tom gift
shops, parking facilities, and other subsid-
iary organizations. As Table 5.2 shows, the
magnitude of nonpatient revenues vanes
across hospital types, comprising 15 percent
of the total revenues of public hospitals in
1983, 5 percent of the total revenues of not-
for-profit hospitals, and less than 2 percent
of the total revenues of for-profit hospitals.
Governmental grants and appropriations are
available mainly to public hospitals. Chari-
table contributions are available to not-for-
profit ant! public institutions, but now are
less than 1 percent of hospital revenues.
Nevertheless, because of past public pol
99
TABLE 5.1 Revenue Margins for U. S.
Community Hospitals, 1963-1984
Year
Net Patient Total Net
Margins Margin
1963
1964
1965
1966
196/
1968
1969
1970
1971
1972
1973
1974
1970
1976
1977
1978
1979
1980
1981
1982
1983
1984
-6.0
-4.8
-5.1
-3.8
-4.6
-3.0
-3.9
-3.4
-3.2
-3.7
-4.4
~ _
-A. /
-3.0
~ _
-1.O
-0.6
-0.8
-0.6
0.3
0.2
0.7
1.0
2.0
2.5%
3.0
2.3
3.7
2.6
3.2
2.4
2.1
2.3
1.8
1.2
2.1
2.3
3.1
3.5
3.6
3.9
4.6
4.7
5.1
5.1
6.2
SOURCE: National Hospital Panel Survey
copyright 1980 by the American Hospital Asso-
ciation.
icies particularly the public sector's un-
willingness to use tax revenues to finance
care for those who are unable to pay access
to medical care for millions of people de-
pends on the policies, practices, and re-
sources of health care providers. It is in this
context that concern about the behavior of
for-profit organizations has developed.
THE PROVIDERS OF
UNCOMPENSATED CARE
In assessing the relationship between type
of ownership and service to patients who are
unable to pay, the committee examined na-
tional data and data from five states in which
for-profit hospitals have a relatively large
market share. All data sources show that
public hospitals provide a disproportion-
ately large amount of uncompensated care
OCR for page 100
100
FOR-PROFIT ENTERPRISE IN HEALTH CARE
TABLE 5.2 Sources of Revenue, Community Hospitals by
Ownership, 1983 (millions of dollars)
State/Local
Not-for-prorDt For-prof~t Government
$ % $ %
89,632.6 100.0 10,231.2 100.0 22,050.4 100.0
84,955.3 94.8 10,070.5 98.4 18,813.8 85.3
2,623.5 2.9
53.1 a
2,570.4
$ %
Total net revenue
Net patient revenue
Other operating
revenue
Tax appropriations
Other
Nonoperating
124.8 1.2
0.0
124.8 1.2
2,402.S
1,931.9
470.6
10.9
8.8
2.1
revenue2,053.8 2.3 35.9 0.4 834.1 3.8
Contnbutior~s370.9 0.4 1.1 a 220.5 1.0
Grants160.8 0.2 0.0 92.2 0.4
Interest1,155.4 1.3 12.6 0.1 212.0 1.0
Other366.7 0.4 22.2 0.2 309.5 1.4
aLess Earl 0.1 percent.
SOURCE: Peter Kralovec, Hospital Data Center, American Hospital Associ-
ation, unpublished data, 1985.
relative to their gross patient revenues. But
since the data are generally not adjusted to
reflect the governmental appropriations that
such institutions receive, data from public
hospitals are not strictly comparable to pri-
vate institutions. A similar point pertains to
comparisons of for-profit and not-for-proEt
hospitals: to the extent that not-for-profit
hospitals receive more nonpatient care rev-
enues (via philanthropy, governmental
grants, or other sources) than do for-profit
hospitals, provision of uncompensated care
requires less subsidization from patient care
revenues.
The most recent national data on who pro-
vides uncompensated care come from two
sources: a 1981 survey conducted by the
Office for Civil Rights (OCR) in the De-
partment of Health and Human Services,
and annual American Hospital Association
(AMA) surveys of hospitals in 1982 and 1983.
These national data show some differences
between for-profit and not-for-profit hospi-
tals.
OCR Data
The OCR survey sought data from all hos-
pitals on admissions of uninsured patients
during two weeks in 1981 (Rowland, 1984~.3
Table 5.3 displays data on uninsured ad-
missions as a proportion of total admissions
in each type of hospital. Public hospitals ac-
cepted the greatest burden of uninsured pa-
tients 16.8 percent of their admissions-
followed by not-for-profit hospitals (includ-
ing teaching hospitals) with 7.9 percent, and
for-profit hospitals with 6 percent.
Analysis of variations within ownership
groups shows a consistent picture (Table 5.4).
A slightly higher percentage of not-for-profit
than for-profit hospitals (4.1 percent versus
3.1 percent) reported that more than 25 per-
cent of the patients they admitted were un-
insured. (The comparable number for public
hospitals was 10.7 percent.) Conversely, a
higher percentage of for-profit than not-for-
profit hospitals (58.6 percent versus 44.5
percent) reported that less than 5 percent
of the patients they admitted were unin-
sured. Since data are so often reduced to
OCR for page 101
ACCESS TO CARE
TABLE 5.3 Inpatient Admissions by Source of Payment and Type of Hospital
Ownership, United States, 1981 (millions of admissions)
101
Total Uninsured Medicaid Medicare
Type of
Hospital Number % Number
-
% Number
% Number
Private and Other
% Number
%
For-profit 3.4 100.0 0.2 6.0 0.3 8.7 1.0 30.7 1.9 54.6
Not-for-pro~t 27.2 100.0 2.1 7.9 2.5 9.4 7.8 28.S 14.7 54.2
Public 7.6 100.0 1.3 16.8 0.9 11.9 2.0 27.0 3.4 44.3
Total 38.2 100.0 3.6 9.5 3.7 9.8 10.9 28.5 20.0 52.2
NOTE: Columns and rows may not add to totals due to rounding. The number of admissions is an annual
number projected from data for a 2-week period in January 1981.
SOURCE: Office for Civil Edicts, DHHS. Data reported in Rowland (1984~.
averages, these data on variability within
categories are notable.
On one measure, the OCR data showed
no difference between for-profit and not-for-
profit hospitals: 22 percent of emergency
room visits were accounted for by uninsured
patients in both types of hospitals. (The fig-
ure for public hospitals was 34 percent.)
However, on another measure, for-profit
hospitals saw relatively fewer emergency
room patients than did not-for-profit hos-
pitals: 1.4 versus 1.8 emergency room visits
per hospital admission (Rowland, 19841.
In sum, for-profit and not-for-profit hos-
pitals differ somewhat in the care of the vul-
nerable category of uninsured people,
although the difference is relatively small.
Furthermore, the fact that 6 percent of the
patients admitted to for-profit hospitals are
uninsured does not conform to the stereo
type. Methodological questions arise be-
cause of the magnitude of the effort that was
required of responding institutions and be-
cause of the limited (2-week) sampling pe-
riod. Nevertheless, the OCR data are based
on a very large sample (almost 5,800 hos-
pitals) because they were collected as part
of mandatory civil rights compliance efforts.
No other source of national data exists on
hospital services to uninsured patients, a
plausible proxy for patients who are unable
to pay for care.
AHA Data
The American Hospital Association's an-
nual survey of hospitals includes information
on bad debt and charity care as a percentage
of hospital charges (i.e., the amount hos-
pitals charge for the services provided over
TABLE 5.4 Hospitals with a High or Low Volume of
Uninsured Admissions, by Type of Ownership, United States,
1981
Hospitals with Less Hospitals with More
Than 5 Percent Than 25 Percent
Number of Uninsured Uninsured
Type of Hospital Hospitals Admissions (%) Admissions (%)
For-profit732 58.6 3.1
Not-for-profit3,324 44.5 4.1
Public1,641 29.8 10.7
All hospitals5,697 42.1 5.8
SOURCE: Office for Civil Rights, DHHS. Data reported in Rowland (1984).
OCR for page 102
102
a period of time, in contrast to the amount
they collect).4 The data are self-reported and
are subject to bias because of low response
rates, particularly on financial items. The
1982 data reported below are based on a 40
percent response rate; the nonresponse
problem was greater among the for-profits
than not-for-profits. The use of bad debt and
charity dollars as a measure of uncompen-
sated care itself presents problems. Al-
though conceptually distinct and reported
separately by hospitals, it is recognized that
bact debt and charity care are neither gen-
erally nor consistently distinguished from
each other for hospital accounting purposes.
The distinction is probably made mostly by
hospitals that have a positive reason to do
so for example, to demonstrate that they
are meeting Elill-Burton "free care" obli-
gations or to maximize reimbursement from
those Blue Cross plans that include charity
care (but not bad debt) as a reimbursable
cost. Thus, although "bad debt and charity
as a percentage of charges" reflects the vigor
of debt-collection efforts, as well as willing-
ness to serve patients who cannot nav. it is
the most widely used measure of uncom-
pensated care, and the AHA annual survey
is the only national data source.
Data from the 1983 AHA survey (Table
5.5) show uncompensated care as 4.2 per-
cex~t of the gross patient revenues in not-
for-profit hospitals, but only 3.1 percent in
for-profit hospitals (differences that are re-
markably similar to the OCR data). (Both
contrast sharply with public hospitals.) The
1982 AHA survey showed no clear differ-
ence between for-profits and not-for-profits
(Table 5.51. In metropolitan areas, not-for-
profit hospitals provicled slightly more un-
compensatecl care than did for-profit hos-
pitals; the opposite was true in non-
metropolitan areas. (No breakdown of in-
dependent and chain hospitals was avail-
able.) A regression analysis that included
such variables as size, region, and teaching
status, showed no statistically significant dif-
ference between not-for-profit and for-profit
FOR-PROFIT ENTERPRISE IN HEALTlI CARE
TABLE 5.5 Uncompensated Care as a
Percentage of Charges, by Ownership and
Location, United States, 1982 and 1983
Non
Type of Hospital
Metro- metro
politan politan
Areas a Areas a
1982 1982
u.s,,b
1983
For-pro~t
Not-for-profit
Teaching
Nonteaching
Government
Teaching
Nonteachirlg
Total
3.0 4.2
3.7 4.0
(4.6)
(3.6)
8.6
15.0)
(7.2)
4.4
3.lc
4.2
s.3 11.5
a Sloan et al. (1986~.
bAmerican Hospital Association. News Release,
February 6, 1985.
CThe Federation of American Hospitals, We associ-
ation of for-pro~t hospitals, reported on the basis of its
own survey that its members' deductions from gross
revenue for charity and bad debt averaged 4.4 percent
in 1983 (Federation of American Hospitals, no date).
hospitals (Sloan et al. 19861; however, this
analysis also controlled for "payer mix," a
variable that appears to be closely associated
win some types of uncompensated care (i.e.,
self-pay patients). Nevertheless, the lack of
a clear difference between for-profit and not-
for-profit hospitals in 1982 is apparent.
Overall, the national data from AHA surveys
provide weak support for the hypothesis that
for-profit hospitals do less than not-for-profit
hospitals to meet the needs of patients who
are unable to pay.
State Data
Data from several states show a different
picture. The committee sought data on un-
compensated care in states where for-profit
chain hospitals are an important presence.
Data were obtained for five such states-
California, Florida, Tennessee, Virginia, and
Texas. The Texas data are from a special
survey (response rate 80 percent) conducted
OCR for page 103
ACCESS TO CARE
by the Texas Hospital Association (1985) in
connection with the activities of a state com-
mission on the indigent care problem (Kent
Stevens, Texas Hospital Association, per-
sonal communication, 19851. Data from the
other four states are from state agencies to
which hospitals are required to submit data.
Except for the California data (which in-
cluded only hospitals with 7~250 beds), these
state data do not control for size, rural-urban
differences, or teaching status. The data also
do not indicate the presence or absence of
nearby public providers-another factor that
can influence the provision of uncompen-
sated care in private hospitals.5
Table 5.6 shows bad debt and charity care
as a percent of gross revenues in these five
states. In California, which had a well-fi~nc-
tioning system of public hospitals during the
study years, the data show no difference be-
tween for-profit and not-for-profit hospitals.
A different picture is seen in the other four
states, where because of the characteristics
of the Medicaid programs anti the ~emo-
graphic makeup of the states, hospitals of all
103
types provide higher levels of uncompen-
satec! care than is typical nationally. In Flor-
ida, Tennessee, Virginia, and Texas, for-profit
hospitals have substantially lower bad debt
and charity care deductions from gross rev-
enues than do not-for-profit hospitals. Not-
for-profit hospitals provide from 50 to over
150 percent more uncompensated care as a
percentage of revenues in these states. Ta-
ble 5.6 also shows that in the two states
where data distinguish between chain and
independent hospitals-Tennessee and
California He chain for-profit hospitals have
lower charity care and bad debt rates than
do independent for-profits.
These data and the data showing differ-
ences between metropolitan and nonmet-
ropolitan areas indicate that location plays a
role in the amount of uncompensated care
that hospitals provide. Since poor people
and nonwhite people are more likely than
others to be uninsured and unable to pay
for care, some would expect for-profit hos-
pitals to avoid counties with relatively high
poverty or nonwhite populations. A national
TABLE 5.6 Hospital Uncompensated Care as Percentage of
Gross Patient Revenues, Various States, 1981-1983
Type of Californiaa Flondab TennesseeC Texas Virginiae
Ownership 1981-1982 1982 1983 1983 1982
21.5
Public
Not-for-profit chain 2
Not-for-profit
independent
Investor-owned chain 2 3.8
Proprietary
(in dep en dent) 3
7 12.1
6.6
18.7
9.0
8.7
3.4
4.6
32.4
6.5
3.5 3.5
aRobert V. Pattison (1986) Response to Financial Incentives Among Investor-
Owned and Not-for-profit Hospitals: An Analysis Based on California Data, 1978-
1982. This volume.
b State of Florida (1984) Hospital Cost Containment Board, 198~1984 Annual
Report. Tallahassee, Fla.
C State of Tennessee, Department of Health and Environment, Nashville, Tenn.
Unpulished data.
Texas Hospital Association, Survey of Uncompensated Care in Hospitals,
published in '`THA Statement of Fair Share Formula for Financing Care for the
Medically Indigent, 1985.'
eVirginia Health Services Cost Review Commission, Richmond, Va. Unpub-
lished data.
OCR for page 104
104
study showed that this was not the case at
the county level (Watt et al., 1986~. More
for-profit hospitals located in counties with
slightly higher rates of poverty and non-
white populations than did not-for-nro~t
hospitals, but the differences were not sta-
tistically significant when controlled for cen-
sus regions. On the other hand, for-profit
hospitals chain and independent are more
likely to be located outside of central cities
than their not-for-profit counterparts, many
of which of course made location decisions
during an earlier period.
REDUCING UNCOMPENSATED CAM
Numerous strategies are available to both
for-profit and not-for-profit hospitals that seek
to minimize provision of uncompensated care.
Transferring or "dumping" undesired pa-
tients has received considerable attention in
the media. No available data indicate whether
for-profit or not-for-profit hospitals are more
likely to transfer patients for "economic rea-
sons," or the extent to which health or lives
are being endangered by such practices.
However, there are concerns that in the face
of a changing payment system and price
competition, both for-profit and not-for-profit
hospitals are increasingly "dumping" un-
wantecI patients. There are also fears that
"dumping" will create serious financial stress
on recipient hospitads. Chicago's Cook County
Hospital reportedly receives 6,000 inpa-
tients per year from Chicago's private hos-
pitals and an estimated 25,O00-75, 000
outpatients, all described as "dumped"
(Schist, 1985~. One major public hospital,
Parkland Memorial Hospital in Dallas, whose
budget had been strained by transfers of
out-o£county indigent patients for whom the
hospital is not legally responsible, has in-
stituted a "hot-line" to be used by referring
hospitals. This is an attempt to ensure that
medically unstable patients receive treat-
ment before transfer and that "economic"
reasons are not the only reason for transfer.
Taking action to deflect uninsured patients
FOR-PROFIT ENTERPRI SE IN HEALTH CARE
is not unique to that hospital. In 1981 and
1982 alone, 15 percent of ah hospitals adopted
explicit limits on the amount of charity care
they would provide. (Sloan et al., 19861.
Case studies conducted by the committee
in three cities where for-profit chain, not-
for-profit chain, independent not-for-profit,
and public hospitals competed, showed that
all types of hospitals have intentionally or
unintentionally taken steps that can dimin-
ish their chances of providing indigent care
(Townsend, 1986~. The location of a hospital
in relation to Tow-income populations and
to other hospitals can heavily influence
whether patients who are unable to pay will
seek access, a factor that affected the siting
decision of an investor-owned hospital in one
of the cities. Other actions taken by for-
profit, not-for-profit, or public hospitals in
just these three cities include
~ locating in neighborhoods with well-in-
sured populations (for-profit and not-for-
profit);
O having an emergency room that is not
equipped for trauma, so that such cases
(which produce disproportionate numbers
of bad debts) are taken elsewhere by am-
bulance drivers (for-profit);
~ refusing admission of uninsured pa-
tients and referring them to a public hos-
pital, sometimes as much as two hours away
(this strategy was sometimes defeated by
uninsured pregnant women, who would wait
in the parking lot until they were in late
stages of labor before entering the emer-
gency room) (for-profit and not-for-profit);
· deciding not to provide (for-profit) or
to stop providing (not-for-profit) obstetric
services a service that often produces dis-
proportionate numbers of bad debts;
~ screening for financial status before ad-
mitting and admitting only urgent cases,
which are then transferred to a public hos-
pital after stabilization (for-profit and not-
for-profit);
O requiring preadmission deposits (for-
profit and not-for-profit).
OCR for page 105
ACCESS TO CARE
The case studies also showed that Me most
dramatic action taken to reduce uncompen-
sated care was the public hospital that closed
its emergency room so it could shift unin-
sured patients to two nearby religiously af-
filiated hospitals. This example shows that
hospitals of all types may act to reduce the
amount of uncompensated care that they
provide.
This brief list of strategies used by hos-
pitals to deflect nonpaying patients suggests
that it is difficult to avoid providing some
uncompensated care. Case law, some state
statutes, and accreditation standards all hold
hospitals responsible for providing services
in medical emergencies (although it is often
not clear what constitutes an emergency or
what services are required). The case stud-
ies showed several other reasons why hos-
pitals would accept some level of
uncompensated care as the price of doing
business. Maintenance of good medical staff
relations may sometimes require hospitals
to allow physicians to admit a few patients
who lack means to pay. Also, some services
that attract indigent patients may also draw
enough paying patients to result in a net
revenue gain. Moreover, it may not be pos-
sible to reduce bad debt below a certain
minimum in any service industry that can-
not operate on a cash-and-carry basis. Data
on bad debts do not by themselves reveal
how assicluously institutions tried to mini-
mize the provision of uncompensated care.
The Impact of For-profit Acquisition
lye acquisition (and construction) activ-
ities of investor-owned hospital companies
could, in theory, have both positive and
negative impacts on access to care. The pos-
itive hypothesis, largely undocumented, is
that Weir investments may at minimum make
services more convenient to the people they
serve. The growth of investor-owned hos-
pitals in areas of relatively high population
growth supports this idea, their relatively
low hospital occupancy rates notwithstand
~,
105
ing. Anecdotes suggest that some acquisi-
tions may have prevented the closure of
hospitals, a notion supported by data show-
ing that hospitals purchased by for-profit
chains in California were unprofitable prior
to acquisition (Pattison, 1986~. However, in
few cases are for-profit hospitals the only
source of care available to populations; fewer
than a dozen of the 365 hospitals on the
Health Care Financing Administration's list
of"sole community hospitals" are for-profit.6
The negative hypothesis is that acquisi-
tions by investor-owned companies will re-
duce the amount of services provided to
patients who are unable to pay. Two studies
conducted for the committee, which ex-
amined data on small numbers of hospitals
before and after acquisition, 7 provide some
support for this concern. One study de-
scribes for-profit chain acquisitions between
1979 and 1981 in Florida; the other exam-
ines acquisitions in California between 1977
and 1981 (Brown and Klosterman, 1986;
Pattison, 1986~. Because most acquired hos-
pitals were previously for-profit, the changes
observed cannot be attributed to a change
from not-for-profit to for-profit ownership
but, rather, to changes in goals and strate-
gies.8
At hospitals purchased by investor-owned
corporations in Florida, the percentage of
total patient revenues for charity care and
bad debt declined between 14 and 35 per-
cent in three years, while hospitals that had
not changed ownership showed an average
5 percent increase in the same measure of
uncompensated care (Brown and Kloster-
man, 19861. In California, hospitals acquired
by for-profit chains reportedly reduced bad
debt from 2.7 percent to 0.2 percent of
charges within four years of acquisition (Pat-
tison, 19861. At least some of the reduction
in uncompensated care may result from ini-
tiation of more effective collection proce-
dures by the new owners.
This evidence on reduced uncompen-
sated care after hospital acquisitions by
investor~wned companies is based on a small
OCR for page 106
106
. .
number of cases and a problematic measure
(bad debt and charity care as a percentage
of gross patient revenues). Yet, there may
be reason for concern, particularly because
acquisitions in the 1980s began to include
more public and not-for-profit hospitals than
in earlier years (Hoy and Gray, 1986~. Some
protective mechanisms are available for
communities that fear a reduction in indi-
gent care after an investor-owned purchase
of a hospital, some protective mechanisms
are available, particularly if a local govern-
ment hospital is bought. For instance, the
money paid for the hospital may be placed
in a fund devoted to payment for indigent
care, the purchase agreement may require
provision of some amount of charity care, or
a buy-back clause may be inserted in the
purchase agreement that will enable the lo-
cal authority to regain control of the hospital
if it is not satisfied with the administration
of the facility.
Cross-Subsidies and Uncompensated
Care
Although some hospitals have significant
nonpatient care revenue sources (Table 5.2),
revenues from paying patients are key to the
economic health of many institutions that
provide substantial amounts of uncompen-
sated care. HadIey et al. (1982) found that
in 1980, one-third of the hospitals providing
a high volume of care to poor people (i.e.,
with more than 24 percent of charges going
to Medicaid, charity care, and bad debt) were
financially "stressed," having deficits on op-
erating and total accounts. Among hospitals
that provided high amounts of uncompen-
sated care, the main factor imposing finan-
cial stress was a relative lack of revenues
from charge-paying, commercially insured
patients from which to subsidize uncom-
pensated care.
A frequently stated concern is that the
success of for-profit hospitals in attracting
paying patients could erode the ability of
other hospitals in their communities to sub
FOR-PROFIT ENTERPRISE IN HEALTH CARE
sidize indigent care. However, it is obvious
that any hospital that attracts paying pa-
tients and serves few indigent patients could
have this effect on hospitals that attempt to
cross-subsidize indigent cared Although these
problems and concerns are very real, the
committee found no systematic data on the
impact of investor-owned hospitals on other
hospitals that cross-subsidize uncompen-
sated care.l°
Other For-profit Providers
Perhaps a more serious threat to the abil-
ity of institutions to cross-subsidize uncom-
pensated care is in the growth of freestanding
alternative sites that provide such services
as urgent care, certain surgical procedures,
radiological procedures, and the like. These
centers tend to be for-profit, whether they
are owned by physicians, investor-owned
corporations, or not-for-profit hospitals. The
services are usually designed to offer more
convenient locations and hours, and lower
charges than those found at traditional sites,
such as hospitals and physicians' offices. Ibus,
they undoubtedly enhance access in some
respects. However, although systematic data
are not available, it appears that many-
perhaps most of the new alternative sites
provide little uncompensated care; typi-
cally, cash, credit card, or evidence of work-
men's compensation eligibility is demanded
at the time of service.
Such freestanding providers attract pay-
ing patients needing those services on which
many hospitals have generated surpluses that
could be used to make up Tosses on uncom-
pensated care. Thus, although We new pro-
viders may improve access to care for certain
segments of the population, the segment that
experiences major financial barriers-the
poor and uninsured-could be hurt if hos-
pitals respond to the revenue Toss by re-
ducing uncompensated care. While
systematic documentation is lacking on this
effect, the emergence of freestanding pro-
viders is clearly one of several factors mak
OCR for page 107
ACCESS TO CARE
ing it more difficult for hospitals to cross-
subsidize uncompensated care.
Types of Services in Various Hospitals
It is widely agreed that hospitals lose
money on some types of services either be-
cause of difficulty in charging patients for
full costs (services that are infrequently used
may present this problem) or because the
service attracts an unusually large propor-
tion of uninsured patients. It has frequently
been alleged that for-profit institutions are
more likely than not-for-profits to confine
their operations to profitable services, which
either deprives the community of access to
certain services or throws an extra burden
on institutions that do offer the services.
Thus, the committee sought information on
which services are unprofitable for institu-
tions and which services for-profit institu-
tions tend to offer or not to offer. Data are
more readily available on the latter ques-
tion.
Which Hospital Services Lose Money?
Unfortunately, only scattered and unsat-
isfactory data are available in answer to this
question. Several types of services have been
identified for which at least some hospitals
are less likely to receive fills payment. In
one tertiary care institution, services that
utilize Tow- or mid-level technology were
more likely to be uncompensated than were
such procedures as coronary bypass, hip re-
placement, and peripheral vascular surged,
perhaps because it was both feasible and
important to obtain assurance of payment
before such elective surgery was performed.
National Discharge Survey data show that
maternity and accident cases are heavily
represented among "self-pay" patients, which
are a primary source of bad debts (Sloan et
al., 19861. Estimates derived from the Cen-
sus Bureau's 1984 Current Population Sur-
vey show that 25 percent of women in the
prime childbearing years of 18-24-when 40
107
percent of births occur had no health in-
surance (Gold and Kenney, 19851. At Van-
derbilt Hospital, a regional neonatal care
center, the treatment of newborns ac-
counted for 27 percent of the entire insti-
tution's uncompensated charges (Sloan et al.,
19861. More inferential evidence comes from
regression analysis of national data, which
show that margins per case (revenues less
expenses) for an entire institution are neg-
a.tively related to the volume of births therein
(Watt et al., 19861.
Such data suggest why obstetrical services
(along with emergency rooms, to which come
trauma victims, who are often uninsured are
often identified as services that generate dis-
proportionate amounts of uncompensated
care. This is undoubtedly true at some in-
stitutions, but not all of them. Depending
on a variety of factors having to do with
controlling bad debt and with stimulating
other services (emergency rooms being a
major source of admissions), obstetrical ser-
vices and emergency departments can con-
tribute to an institution's bottom line. For
example, analyses of hospital operating
statements suggest that public hospitals and
large not-for-profit teaching hospitals in ma-
jor metropolitan areas suffer large outpa-
tient clinic Tosses and often admit unfinanced
patients for essential inpatient services. In
contrast, not-for-profit and investor-owned
hospitals in economically advantaged areas
usually earn surpluses on outpatient diag-
nostic and treatment services. Similarly,
whether obstetrics is a money-Iosing service
depends on such factors as institutional To-
cation ancl admitting policies. It is signifi-
cant that in some cities, well-publicized
amenities (champagne and gourmet meals)
are used to attract obstetrical patients (well-
financed ones, presumably) and that one of
the most profitable of the investor-owned
hospital companies, Humana, Inc., owns
several women's hospitals. Furthermore,
with the trend toward vertical integration
and institutional marketing of a complete
array of services, there may be serious com
OCR for page 116
116
for the poor is not imminent, but there is
an encouraging and growing movement
among state and local governments to en-
hance access to care for people who lack a
source offunds. A variety of financing mech-
anisms are possible; evaluation of efforts
now under way at the state level is needed.
How states choose to approach the problems
of financing care for those who are unable
to pay will depend on political circumstan-
ces, and the access problems will have to
be identified. In the committee's view, pro-
vid~ng medical care to the nation's 35 million
uninsured people is a challenge that should
be very high on the nation's public policy
agenda.
CONCLUSION
The major access issue in the United States
concerns patients who are unable to pay for
care and who are dependent on the willing-
ness of hospitals to provide services. Two
measures of such willingness were examined
in this chapter: admissions of uninsured pa-
tients to hospitals and provision of uncom-
pensated care by hospitals. Ibe perfo~ance
of not-for-profit hospitals was more favor-
able on both measures, although when mea-
sured as percentages of total admissions or
total revenues, the national differences were
not large. Small percentage differences,
however, can translate into large numbers
of patients, particularly if institutions that
provide comparatively small amounts of un-
compensated care comprise a relatively large
proportion of the market. Data from four of
five states about which the committee ob-
tained data showed that not-for-profit hos-
pitals provided two or three times as much
uncompensated care, on average, than did
for-profit hospitals. (Both types provided less
such care than Odin public hospitals.) Be-
cause revenues from paying patients are key
to the ability of many institutions to provide
uncompensated care, and because the
amount of revenue needed depends on the
amount of uncompensated care provided,
FOR-PROFIT ENTERPRISE IN HEALTH CARE
the for-profit presence in such circumstan-
ces may make it more difficult for other hos-
pitals to provide uncompensated care.
Freestanding ambulatory care centers
(which tend to be for-profit) have a similar
effect. However, little direct evidence is
available on the question of how some in-
stitutions impact on other institutions. The
question of whether for-profit hospitals es-
chew nonprofitable services also could not
be answered satisfactorily. Although larger
percentages of many services are offered in
not-for-profit than for-profit hospitals of sim-
ilar size, satisfactory evidence is not avail-
able on which services are unprofitable.
In the view of the committee, traditional
values of health care institutions remain im-
portant, meaning that health care institu-
tions should do whatever they can to meet
the needs of uninsured patients. Ike com-
mittee also concluded that tax-exempt in-
stitutions should be reasonably expected to
accept a heavier responsibility for actions
that depart from profit-maximizing behav
ior.
Finally, the committee concluded that He
problem of access for uninsured patients
cannot be dealt with adequately by health
care institutions, and that the expectation
that Hey will do so is a major public policy
failure. A variety of options are available to
address this problem, but as our health care
system becomes more competitive and price
sensitive, the resulting impact on uninsured
patients is a major problem that should no
longer be ignored.
NOTES
Estimates of the number of people who are unable
to pay for medical care vary. National sample surveys
in 1977 and 1982 showed that approximately 9 percent
of the population almost 20 million people had nei-
ther health insurance nor eligibility for public pro-
grams, and as many as 9 percent ofthe insured population
reported having been without insurance at some time
during the previous year (Farley, 1985a; Robert Wood
Johnson Foundation, 1983~. More recent estimates of
the uninsured population range as high as 15 percent
OCR for page 117
ACCESS TO CARE
of the population or 35 million people (Katherine Swartz,
The Urban Institute, personal communication, 1985;
U.S. Bureau of the Census, 1985~. In addition, there
are millions of underinsured people, whose limited in-
surance puts them at substantial risk of having out-of-
pocket expenses upwards of 10 percent of their total
income. The best data on this topic, the government's
1977 National Medical Care Expenditure Survey, found
that depending on the definition used, from 5 to 18
percent of the population under age 65 was underin-
sured (Farley, 1985b).
2A 1956 Internal Revenue Code Ruling held that for
tax-exemption purposes, not-for-profit hospitals had to
accommodate patients who were unable to pay, to the
extent of their financial abilities. By 1983 that require-
ment had been dropped, as had another requirement
for the operation of a full-time emergency department
open to all patients, without financial prerequisites. A
1983 Internal Revenue Code Ruling (83-157) held that
a hospital could maintain its tax exempt status in the
absence of an emergency room if a state planning au-
thority had determined that an emergency department
would duplicate existing services. In that event, how-
ever, the hospital must as community service ac-
cept Medicaid and Medicare patients, reinvest surplus
revenue into capital improvements or health services,
maintain an open medical staff, and appoint a governing
board representative of the composition of the area
(Bernstein, 1984~. Other legal obligations flow from
state and local interventions to ensure that hospitals
offer some care for poor people. For example, under
Texas law, hospital districts are responsible for their
"needy," and public district and county hospitals are
responsible for the "indigent sick." Furthermore, the
Texas Property Tax Code states that to be tax-exempt,
hospitals must be organized to perform a charitable
purpose, generally by providing medical care without
regard to the ability of the beneficiaries to pay. The
only requirement that applies to for-profit as well as
not-for-profit hospitals in Texas is an obligation to pro-
vide emergency care in life- or limb-threatening cir-
cumstances.
3Uninsured is defined as self-pay, reduced pay, Hill-
Burton, or no charge.
4 although bad debt and charity are conceptually dif-
ferent, the way they are accounted for and reported
by hospitals is influenced less by conceptual distinc-
tions than by reimbursement rules, Hill-Burton obli-
gations, and other factors. Thus, the two figures have
been combined in the commiKee's analyses reported
herein. Deductions from revenue for bad debt and
charity care exaggerate the cost to institutions of pro-
vidina uncompensated care, because such cost is mea-
sured in terms of charges for services rather than the
marginal cost of providing the services.
sFor example, the Hospital Corporation of America
(HCA) reports that uncompensated care amounts to 3
~7
percent of revenues in areas of Kentucky where public
facilities exist, but is 4.8 percent of revenues in areas
where the PICA hospital is a sole provider (Vraciu and
Virgil, 1986~.
6Only 11 for-profit hospitals listed in the Federation
of American Hospital's 1985 directory appear among
the 365 hospitals on the Health Care Financing Ad-
ministration's (HCFA's) list of sole community hospitals
as of July 17, 1985. Two of these institutions were
independent. It should be noted that the HCFA def-
inition of sole community provider is partly designed
to minimize the number of such institutions, and that
people in a larger number of communities may view
their own hospital as the only one that is reasonably
convenient and available.
7No data are available describing changes that occur
when hospitals are acquired by not-for-profit multi-
hospital systems.
8Hoy and Gray (1986) found that 80 percent of the
hospitals owned by the largest six investor-owned hos-
pital companies were either acquired from previous for-
profit owners or were newly constructed Acquisition
of public or not-for-profit hospitals has become more
common in recent years.
9A design for a systematic study was recently ex-
plored by Jack Hadley and Judith Feder ofthe George-
town University Center for Health Policy Studies. Their
approach was to use data from American Hospital As-
sociation surveys between 1977 and 1981 and to focus
on hospitals' (1) deductions from Moss revenues for
charity care and bad debt and (2) revenue from pri-
vately insured patients. The study was to focus on trends
of these measures before and after the entry into a
community of an investor-owned hospital or an existing
hospital becoming part of an investor-owned or not-
for-profit multihospital system. Unfortunately, the data
proved to be inadequate, and the study could not be
done.
2°Case examples illuminate the dynamics of such
interactions among the hospitals in a service area. One
such case study is the Public Broadcasting System's
"Crisis at General Hospital," which describes the forced
reduction in uncompensated care at a public hospital-
Tampa General Hospital in Florida, owing to the hos-
pital's loss of revenue-producing patients to for-profit
and not-for-profit hospitals.
The committee's case studies (Townsend, 1986) also
show what the loss of substantial numbers of paying
patients can mean to hospitals committed to providing
care to the poor and uninsured of their communities.
Two of the case studies were conducted in cities that
had particularly difficult indigent care problems. In
both cities religiously Foliated hospitals that made se-
nous efforts to provide uncompensated care had been
affected by the construction of investor-owned hospi-
tals that provided very modest amounts of uncompen-
sated care. In one case the investor-owned hospital had
OCR for page 118
118
only moderate success in drawing patients away from
the existing two hospitals. Although the stronger of the
existing hospitals felt relatively little impact from the
addition of a new hospital (and continued its provision
of uncompensated care and construction and renova-
tion projects while maintaining a healthy surplus), the
weaker existing hospital- developed a deficit and closed
its obstetrical unit because of lack of paying maternity
cases. Whether these changes were due to competition
from the investor-owned hospital or to other factors
was not clear. However, the key role of surplus rev-
enues to cross-subsidize uncompensated care is well
illustrated by the contrast between the two hospitals.
The second case study illustrated more clearly how
a new investor-owned hospital, if successful at drawing
paying patients, can affect the existing providers. In
this case two well-established religious hospitals ex-
perienced substantial census declines after an investor-
owned hospital opened. The hospitals suffered a period
of financial and management stress while rebuilding
the census an effort helped by a growing local pop-
ulation. Continued cross-subsidization of uncompen-
sated care was undoubtedly helped by the existing
hospitals raising their prices substantially, bringing them
more closely in line with the new investor-owned hos-
pital. Such options will become less feasible if more
price competition develops.
Adhere are many reasons other than profitability
why an institution Night not offer obstetrical services.
It hardly makes sense for all hospitals to offer obstetrical
services, particularly with birth rates having declined.
Furthermore, because a significant portion of investor-
owned hospitals are new facilities constructed after the
implementation of health planning and certificate-of-
need programs, some investor-owned hospitals may
not have been allowed to offer obstetrical services be-
cause of the availability of such services at other hos-
pitals.
~2This comparison does not indicate the size of pre-
mature nurseries. Some hospitals may have very small
premature nurseries for temporary care of babies prior
to transfer.
23The SLY chains are Hospital Corporation of Amer-
ica; Humana, Inc.; American Medical International,
Inc.; National Medical Enterprises; Charter Medical
Corporation; and Republic Health Corporation.
~4 Lending support to the interpretation that it is the
proprietary, rather than the investor-owned, for-profit
hospitals that account for most for-profit hospital clo-
sures is the fact that while Sloan et al. (1986) found
that 50 "for-profit" hospitals had closed dunog the pe-
nod 198~1982, Hoy and Gray (1986) found that only
two hospitals owned by the six largest investor-owned
hospital chains had closed during that penod.
Coursing homes are generally paid a per-diem rate,
regardless of the cost of caring for individual patients.
A few states have attempted to improve access for heavy
FOR-PROFIT ENTE~SE IN HEALTH CAM
care patients by paying a higher rate for patients need-
ing more intensive care, but in general there is a dis-
incentive to admit heavy care patients. In Illinois, where
"points" are awarded for a patient's disabilities, there
are fears that nursing homes have "gamed" the system
by making patients appear to be more sick than they
really are.
26Some states have acted to discourage such schemes.
For example, Minnesota prohibits charging higher rates
to private-pay patients. Massachusetts prohibits the re-
fiisal of a Medicaid patient when a bed is available.
Connecticut requires admission on a first-come, first-
served basis.
27For example, a study in Washington State found
no difference by ownership type in the use of nursing
homes by Medicaid patients (Wine, 1974), while a study
in the Cleveland metropolitan area showed that for-
profit homes served a higher proportion of Medicaid
patients than did not-for-profit homes (Brooks and
Hoffman, 1978~.
26Health planning agencies, established under the
National Health Planning and Resources Development
Act of 1974, have in the past done important work in
assessing the adequacy of access to care at the state
and local levels. Although these agencies have under-
gone severe funding cuts, all states have a planning
agency today and 141 local agencies still exist (Terry
Shannon, Director of Field Services and Private Sector
Programs, American Health Planning Association, per-
sonal communication, 1985). In principle, planning
agencies at the state amd local levels are well situated
to provide important forums of discussion and infor-
mation collection and dissemination regarding issues
of access to care.
29Table s.a shows that contributions amount to 0.4
percent of the revenues of not-for-profit hospitals and
1.0 percent of the revenues of public hospitals. How-
ever, even these numbers can be misleading. A recent
American Hospital Association (unpublished data, 1983)
survey of sources of working capital found that only 42
percent of responding hospitals reportedly received
philanthropic support and that the median amount of
support for these hospitals was $43,700. (The mean
amount was more than $700,000. Ibe wide gap be-
tween mean and median is due to the influence of very
large philanthropic contributions received by a rela-
tively few institutions. Thus, the median provides a
better indicator of what the typical institution migint
have received.) An earlier American Hospital Associ-
ation (1979) survey showed that 71 percent of the re-
spondents received charitable donations-the mean
amount was just over $200,000. (Unfortunately, no me-
dian figure was available.) Neither of the above surveys
shows the amount of philanthropy available for general
operating purposes, which is where money to subsidize
uncompensated care would presumably come from.
However, a 1984 survey conducted by the National
OCR for page 119
ACCESS TO CARE
Association for Hospital Development suggests that only
a small amount of the charitable contributions received
by hospitals is available for general operating purposes
(AAFRC, 1985~. The Association's 1,500 individual
members at 1,200 hospitals (presumably the bulk of
institutions that have an organized fund-raising appa-
ratus) reported that they had raised just over $1 billion
in 1984, and that 12.7 percent of this money, a mean
of $108,000 per institution, was for general operating
purposes. (Funds for construction and renovation com-
prise 25 percent of the total; spending for equipment,
17 percent; and research and education, 9 percent.)
Given that the average hospital's total net revenues in
1983 were in excess of $21 million (American Hospital
Association, 1984) and the hospitals that had formal
fund-raising activities were presumably larger than the
average-charitable contributions for general operat-
ing purposes averaged less than 1 percent of hospital
operating revenues. Given the fact that relatively few
hospitals benefit from very large charitable contribu-
tions, charity for general operating purposes would ap-
pear to be less than 1 percent of revenues at most
institutions, a conclusion that is supported less infer-
entially by Table 5.2.
20There was substantial variation among the four
companies from 1.1 percent for National Medical En-
terprises to 4.4 percent for Humana. For-profit hos-
pitals pay property taxes in addition to income tax. It
is not known how much property tax is paid, although
an industry source estimates it at roughly 20 percent
of income taxes (Samuel Mitchell, Federation of Amer-
ican Hospitals, personal communication, 1985~. This
would inflate the tax burden above the figures shown
in Table 3.7 in Chapter 3.
22 Actions that can be taken to enhance access to care
for disadvantaged people (some of which are being con-
sidered or are being acted on in various states) include
creating a funding pool with which hospital care can
be financed. A pool can be created by taxing all hos-
pitals, or only those hospitals that fail to provide a
specified amount of uncompensated care. Florida has
established a pool through a contribution from state
general revenues and an assessment on the net oper-
ating revenues of hospitals. Tying a hospital's assess-
ment to the amount of uncompensated care provided
reduces the incentive to "dump" patients, as do pro-
posals requiring hospitals to devote a specified per-
centage of revenues to indigent care.
Some states (including Maryland, New Jersey, and
Massachusetts), with all-payer rate setting, include
charity or bad debt allowances in payments to hospitals.
Other states create funding pools through a tax on health
insurance premiums or by earmarking certain portions
of general sales or other taxes. States have the option
of using pooled money to finance care for all "medically
needy" people or of targeting funds for especially vul-
nerable populations. Flonda may use its funds to pro
~9
vice care for specific groups that are not covered by
Medicaid.
Groups can also be targeted through direct govern-
mental payments to certain teaching hospitals or gov-
ernmen~1 hospitals (Colorado, Virginia, Norm Carolina)
or through an expansion of state Medicaid programs.
In 1984, South Carolina extended Medicaid coverage
to low-income pregnant women, regardless of marital
status, and to children under 18, regardless of the mar-
ital status of their parents. Some states developed in-
surance programs to cover "catastrophic" episodes of
sickness, unemployed people, and those unable to ob-
tain conventional insurance. Finally, to spread the bur-
den of uncompensated care more evenly among
providers, licensure or certificates of need could be
contingent on providing certain amounts of uncom-
pensated care. Each approach differs in terms of who
pays (e.g., hospitals, insurers, taxpayers), who benefits
(e.g., people with specific medical needs such as preg-
nancy care, groups defined by income, groups defined
by gaps in insurance), and the incentive to providers
(e.g., to provide care for targeted Soups, to provide
uncompensated care generally, or reduce "dumping".
In seeking to reduce the number of people who are
unable to find care, an option that might be considered
is the use of tax credits or waivers to encourage for-
profit health care institutions to provide more care to
people who are unable to pay or to provide services
that may be needed in a community, but that cannot
be provided profitably. Tlie use of the federal tax law
to encourage private corporations to act in a way that
advances some important public policy goal is hardly
unprecedented, and local taxes are frequently waived
or adjusted to encourage corporations to locate in a
given area. However, little attention has been given
to the possible use of taxing power to encourage insti-
tutions to meet public purposes.
REFERENCES
American Association of Fund Raising Counsel, Inc.
(AAFRC) (198'5) Giving USA: A Compilation of Facts
and Trends on American Philanthropy for the Year
1984. Ned York: American Association of Fund Raising
Counsel, Inc.
American Hospital Association (1984) Hospital Sta-
tistics. Chicago, Ill.: American Hospital Association.
American Hospital Association (1985) Economic
Trends 1.
Annas, George J. (1985) Adam Smith in the Emer-
gency Room. Hastings Center Report 15(August):16-
18.
Bernstein, Arthur H. (1984) Guidelines Issued for
Preserving Tax-exempt Status. Hospitals 58(May 1~:102.
Brock, Dan W., and Allen Buchanan (1986) Ethical
Issues in For-Profit Health Care. This volume.
Brooks, Charles H., and John H. Hoffinan (1978)
OCR for page 120
120
Type of Ownership and Medicaid Use of Nursing Care
Beds. Journal of Community Health 3(Spring):236-244.
Brown, Kathleen J., and Richard E. Klosterman (1986)
Hospital Acquisitions and Their Effects: Florida, 1979-
1982. This volume.
Parley, Pamela J. (1985a)PrivateInsuranceandPub-
lic Programs: Coverage of Health Services. Data Pre-
view 20, National Health Care Expenditures Study.
Rockville, Md.: National Center for Health Services
Research and Health Care Technology.
Parley, Pamela J. (1985b) Who Are the Under-in-
sured? Milbank Memorial Fund Quarterly
63(Summer):476-503.
Feder, Judith, Jack Hadley, and Ross Mullner (1983)
PoorPeople and Poor Hospitals: Implicationsfor Public
Policy. Worldng Paper 3179-06. Washington, D.C.:
Urban Institute.
Federation of American Hospitals (no date) Statis-
tical Prof le of the Investor-Owned Hospital Industry
1983. Washington, D.C.: Federation of American Hos-
pitals.
Gold, Rachel B., and Asta M. Kenney (1985) Paying
for Maternity Care. Family Planning Perspectives
17(May/June) :103-1 10.
Hadley, Jack, Ross M. Mullner, and Judith Feder
(1982) The Financially Distressed Hospital. The New
England Journal of Medicine 307(November 11~:1283-
1287.
Hawes, Catherine, and Charles D. Phillips (1986)
The Changing Structure of the Nursing Home Industry
and the Impact of Ownership on Quality, Cost, and
Access. This volume.
Hay, Elizabeth, and Bradford H. Gray (1986) Trends
in the Growth of the Major Investor-Owned Hospital
Companies. This volume.
Kelly, Joyce V., and John J. O'Brien (1983) Char-
acteristics of Financially Distressed Hospitals Cost and
Utilization Project. Research Note 3. Rockville, Md.:
National Center for Health Services Research.
Mullner, Ross M., Calvin S. Byre, Paul Levy, and
Joseph D. Kubal (1982) Closure Among U.S. Com-
munity Hospitals, 197~1980: A Descriptive and a Pre-
dictive Model. Medical Care 20July):699-709.
National Center for Health Statistics (1979) The Na-
tional Nursing Home Survey: 1977 Summary for the
United States. Vital and Health Statistics, Series 13,
No. 43. Washington, D.C.: U.S. Government Printing
Office.
Pattison, Robert V. (1986) Response to Financial In-
centives Among Investor-Owned and Not-for-Profit
Hospitals: An Analysis Based on California Data, 1978-
1982. This volume.
President's Commission for the Study of Ethical
Problems in Medicine and Biomedical and Behavioral
FOR-PROFIT ENTERPRISE IN HEALTH CARE
Research (1983) Securing Access to Health Care. Vol.
1: Report. Washington, D.C.: U.S. Government Print-
ing Office.
Relman, Arnold S. (1985) Economic Considerations
in Emergency Care: What Are Hospitals For; The New
England Journal of Medicine 312(February 7~:372-373.
Robert Wood Johnson Foundation (1983) Updated
Report on Access to Health Care for the American
People. Princeton, N.J.: The Robert Wood Johnson
Foundation.
Rowland, Diane (1984) Hospital Care for the Un-
insured: An Analysis of the Role of Proprietary Hos-
pitals. Paper prepared for the Annual Meeting of the
American Public Health Association, Anaheim, Cali-
fornia.
Schill, Gordon (1985) Letter to the Editor. The New
England Journal of Medicine 312(~une 6~:1522.
Sloan, Frank A., Joseph Valvona, and Ross Mullner
(1986) Identifying the Issues: A Statistical Profile. In
Frank A. Sloan, James F. Blumstein, and James M.
Pernn (eds.) Uncompensated Hospital Care: Rights and
Responsibilities. Baltimore, Md.: Johns Hopkins Uni-
versity Press.
Sloan, Frank A., and Robert A. Vraciu (1983) Inves-
tor-Owned and Not-For-Profit Hospitals: Addressing
Some Issues. Health Affairs 2(Spring):2~37.
Texas Hospital Association (1985) Table from a THA
Survey of Uncompensated Care in Hospitals, pub-
lished with 'THE Statement of Fair Share Formula for
Financing Care for the Medically Indigent."
Townsend, Jessica (1986) Hospitals and Their Com-
munities: A Report of Three Case Studies. This vol-
ume.
U.S. Bureau of the Census (1985) Econom* Char-
acteristics of Households in the United States: Fourth
Quarter 1983. Current Population Reports, P-70-83-
4. Washington, D.C.: U.S. Government Printing Of-
fice.
Vraciu, Robert A., and Phyllis M. Virgil (1986) The
Impact of Investor-Owned Hospitals on Access to Health
Care. Paper presented at the Hirsch Symposium, The
George Washington University, and published in War-
ren Greenberg and Richard M. F. Southby (eds.) For-
Profit Hospitals: Access, Quality, Teaching, Research.
Columbus, Ohio: Battelle Press.
Watt, J. Michael, Steven C. Renn, James S. Hahn,
Robert A. Derzon, and Carl J. Schra~nm (1986) The
Effects of Ownership and Multihospital System Mem-
bership on Hospital Functional Strategies and Eco-
nomic Performance. This volume.
Winn, Sharon (1974) Analysis of Selected Charac-
teristics of a Matched Sample of Nonprofit and Pro-
pnetary Nursing Homes in the State of Washington.
Medical Care 12(March):221-228.
OCR for page 121
APPENDIX TO CHAPTER 5
Data on Hospice Services and Facilities
TABLE S.A.1 Percent of Hospitals with Various Services and Facilities, by Type of
Ownership and Selected Bed Size Categories, 1983
Investor-Owned Not-for-profit Not-for-profit State and Local
Chain Proprietary Chain Independent Government
(N = 440) (N = 172) (N = 1,083) (N = 2,165) (N = 1,540)
Specialized Services
Premature nursery
25- 49 6.5 5.3 1.5 3.4 3.8
50- 99 6.3 5.4 11.2 13.5 11.2
100-199 13.6 2.8 29.0 26.0 27.0
200-299 23.5 22.2 40.3 46.5 55.6
300499 28.0 * 63.0 66.3 68.1
Ambulatory surgery services
25- 49 67.7 66.7 78.0 76.5 69.9
50- 99 88.3 81.1 87.3 88.1 80.0
100-199 94.6 86.1 96.4 93.5 87.4
200-299 97.1 88.9 100.0 98.5 98.0
300499 100.0 * 99.0 97.3 93.6
Dental services
25- 49 32.3 24.6 31.8 34.9 23.3
50- 99 32.0 21.6 37.1 41.5 33.7
100-199 40.2 41.7 48.8 52.2 52.9
200-299 45.6 27.8 54.0 67.1 58.6
300-499 40.0 * 67.0 72.0 80.9
Podiatric services
25- 49 51.6 17.5 19.7 25.2 12.0
50- 99 40.6 35.1 31.5 32.1 19.0
100-199 34.2 55.6 32.1 44.4 28.1
200-299 41.2 27.8 43.2 47.1 46.5
300~99 20.0 * 46.5 47.2 40.4
Abortion services
25- 49 22.6 8.8 10.6 9.7 10.1
50- 99 19.5 27.0 10.7 19.5 12.5
100-199 28.8 30.6 22.2 28.9 20.5
200-299 47.1 33.3 16.5 43.5 47.5
300~99 60.0 * 20.5 55.5 60.6
Hospice
25- 49 0.0 0.0 0.8 2.1 3.3
50- 99 0.8 2.7 7.1 5.7 2.9
100-199 1.6 0.0 13.9 11.3 5.0
200-299 1.5 0.0 13.1 17.9 8.1
300-Js99 0.0 * 30.5 18.9 9.6
(Continued)
121
OCR for page 122
22
TABLE 5.A. 1 Continued
FOR-PROFIT ENTERPRISE IN HEALTH CARE
Investor-Owned Not-for-profit Not-for-profit State and Local
Chain Proprietary Chain Independent Government
Bed Size (N = 440) (N = 172) (N = 1,083) (N = 2,165) (N = 1,540)
Community Services
Emergency department
25- 49 83.9 77.2 90.2 89.1 95.1
50- 99 91.4 75.7 93.4 90.6 97.8
100-199 94.6 72.2 96.0 93.7 97.1
200-299 92.6 100.0 99.4 95.9 98.0
300499 96.0 * 99.5 98.9 93.6
Outpatient department
25- 49 12.9 24.6 28.8 39.1 24.9
50- 99 29.7 29.7 36.5 36.9 27.4
100-199 36.4 33.3 47.6 45.5 36.3
200-299 48.5 50.0 57.4 62.4 55.6
300499 64.0 * 76.0 72.5 69.1
Home care program
25- 49 6.5 7.0 15.2 8.4 8.2
50- 99 7.8 2.7 11.7 9.6 8.2
100-199 11.4 5.6 19.8 13.6 13.3
20~299 13.2 11. 1 16.5 20.6 13. 1
300 499 8.0 * 30.0 27.5 13.8
Volunteer services department
25- 49 25.8 17.5 38.6 37.4 25.6
50- 99 70.3 37.8 62.4 55.0 49.1
100-199 74.5 69.4 85.3 79.4 65.5
200-299 89.7 72.2 91.5 90.3 82.8
300-499 100.0 * 99.5 97.0 92.6
Patient representative
25- 49 16.1 22.8 27.3 25.6 18.8
59- 99 57.0 45.9 41.6 39.7 31.7
100-199 64.7 55.6 59.9 51.1 47.1
200-299 72.1 66.7 65.9 62.4 64.6
300-499 88.0 * 73.5 69.8 69.1
Social work services
25- 49 64.5 29.8 45.5 51.3 32.5
50- 99 84.4 73.0 78.7 78.7 63.4
10~199 89.7 86.1 95.6 91.6 88.1
200-299 92.9 94.4 98.9 97.9 93.9
300-499 88.0 * 99.5 99.5 95.7
Hospital auxiliary
25- 49 61.3 38.6 82.6 78.6 71.8
59- 99 63.3 45.9 88.8 86.9 86.7
100-199 7Js.5 47.2 89.7 91.4 87.1
20~299 64.7 44.4 92.6 94.1 92.9
300 499 56.0 * 95.0 97.3 86.2
Heals promotion
2~ 49 6.5 12.3 17.4 23.1 16.7
50- 99 30.5 13.5 36.5 27.8 18.2
100-199 36.4 30.6 54.8 45.3 28.1
200-299 38.2 16.7 58.5 59.4 41.4
300-499 52.0 * 73.5 69.3 48.9
OCR for page 123
ACCESS TO CARE
TABLE 5.A. 1 Continued
723
Investor-Owned Not-for-profit Not-for-profit State and Local
Chain Proprietary Chain Independent Government
Bed Size (N = 440) (N = 172) (N = 1,083) (N = 2,165) (N = 1,540)
Family planning services
25- 49 3.2 3.5 3.0 5.9 1.9
50- 99 3.1 2.7 5.6 3.9 2.0
100-199 1.6 8.3 7.9 5.6 3.6
200-299 0.0 0.0 14.8 15.6 12.1
300-~499 0.0 * 31.0 22.9 34.0
Capital-lntensive Therapies
Open-heart surgery facility
25- 49 3.2 0.0 0.0 0.0 0.0
50- 99 0.8 0.0 0.0 0.2 0.2
100-199 4.3 2.8 4.4 4.5 0.4
200-299 16.2 5.6 18.8 8.8 12.1
300~99 32.0 * 41.0 27.0 42.6
Hemodialysis
25- 49 3.2 0.0 0.8 0.0 0.7
50- 99 6.3 16.2 6.1 3.4 3.7
100-199 25.0 19.4 20.6 14.2 11.2
200-299 50.0 11.1 51.1 39.1 46.5
300-499 26.0 * 63.5 67.1 67.0
Organ transplant
25- 49 3.2 0.0 1.5 0.8 0.7
50- 99 2.3 0.0 0.5 0.5 0.2
100-199 1.6 2.8 2.4 3.4 0.4
200-299 2.9 0.0 8.5 2.6 4.0
300-499 0.0 * 5.5 9.2 19.1
CT scanner
25- 49 0.0 3.5 2.3 2.9 0.9
50- 99 23.4 21.6 10.2 11.9 8.4
100-199 53.8 33.3 39.3 34.2 25.9
200-299 73.5 66.7 75.6 70.9 72.7
300-499 92.0 * 92.0 92.2 86.2
X-ray radiation therapy
25- 49 0.0 3.5 0.0 1.7 0.9
50- 99 0.8 0.0 3.0 0.5 2.0
100-199 7.6 2.8 11.5 10.4 6.8
200-299 11.8 16.7 26.7 27.1 36.4
300-499 24.0 * 52.0 51.8 55.3
Megavoltage radiation therapy
25- 49 0.0 0.0 0.0 0.4 0.2
50- 99 0.0 0.0 1.5 0.5 1.4
100-199 5.4 2.8 8.7 8.2 5.8
200-299 7.4 16.7 23.3 23.8 31.3
30~499 24.0 * 51.0 49.6 51.1
Radioactive implants
2S- 49 6.5 0.0 0.8 0.8 0.5
50- 99 4.7 5.4 4.1 3.9 3.1
100 199 14.7 11.1 25.8 13.6 12.2
200-299 32.4 33.3 39.2 35.3 39.4
300~99 48.0 * 67.0 62.8 68.1
(Continued)
OCR for page 124
124
TABLE 5.A.1 Continued
FOR-PROFIT ENTERPRISE IN HEALTH CARE
Investor-Owned Not-for-profit Not-for-profit State and Local
Chain Proprietary Chain Independent Government
(N = 440) (N = 172) (N = 1,083) (N = 2,165) (N = 1,540)
Therapeutic radioisotope facility
25- 49 3.2 0.0 0.8 1.3 0.7
50- 99 1.6 2.7 4.1 2.3 2.9
100-199 12.5 8.3 24.6 15.8 14.0
200-299 32.4 38.9 41.5 39.7 ' 52.5
300-499 40.0 * 68.5 66.8 69.1
Labor-lntensive Therapies
Psychiatric partial hospitalization program
25- 49 0.0 0.0 0.8 2.1 3.3
50- 99 2.3 2.7 3.0 4.6 3.3
100-199 3.8 5.6 9.5 10.9 6.1
200-299 4.4 5.6 10.2 15.9 18.2
300-499 8.0 * 28.0 21.3 29.8
Psychiatric outpatient services
25- 49 0.0 0.0 0.8 5.0 3.3
50- 99 1.6 0.0 4.1 3.7 2.9
100-199 4.3 11.1 10.7 12.5 7.2
200-299 2.9 11.1 19.9 24.7 15.2
300499 0.0 * 40.0 33.2 48.9
Psychiatric emergency services
25- 49 0.0 8.8 7.6 8.4 8.9
50- 99 7.8 10.8 9.6 14.2 11.7
100-199 15.2 22.2 36.1 31.7 21.2
200-299 23.5 22.2 50.0 50.6 53.5
300-499 40.0 * 61.0 59.8 70.2
Psychiatric foster andlor home care program
25- 49 0.0 0.0 0.0 0.0 0.0
50- 99 0.0 0.0 0.0 0.2 0.2
100-199 0.5 0.0 0.0 1.4 0.4
200-299 0.0 0.0 2.8 1.2 0.0
300~99 0.0 * 3.5 4.0 3.2
Psychiatric consultation and education services
25- 49 3.2 5.3 1.5 7.1 5.2
50- 99 7.8 10.8 7.1 11.0 5.5
100-199 14.1 19.4 25.4 23.5 10.4
200-299 22.1 22.2 33.5 37.6 33.3
300499 28.0 * 54.5 51.5 58.5
Clinical psychology services
25- 49 3.2 0.0 6.8 8.4 6.8
50- 99 9.4 13.5 13.7 16.5 6.5
100-199 18.5 30.6 27.0 24.4 14.0
200-299 25.0 16.7 38.6 40.3 45.5
300499 16.0 * 59.5 52.3 63.8
Substance abuse/rehabilitation
25- 49 3.2 3.5 1.5 7.1 3.8
50- 99 3.1 5.4 5.1 8.3 3.7
100-199 8.7 19.4 19.4 11.1 7.2
20~299 11.8 11.1 13.6 20.6 13.1
300-499 0.0 * 32.0 27.8 23.4
OCR for page 125
ACCESS TO CARE
TABLE 5.A.1 Continued
125
Investor-Owned Not-for-profit Not-for-profit State and Local
Chain Proprietary Chain Independent Government
Bed Size (N = 440) (N = 172) (N = 1,083) (N = 2,165) (N = 1,540)
Genetic counseling
25- 49 0.0 1.8 0.8 0.8 0.9
50- 99 1.6 0.0 2.0 1.8 0.6
100-199 1.6 5.6 5.2 5.6 3.2
200-299 1.5 5.6 5.1 10.0 10.1
300-499 0.0 * 12.0 18.1 27.7
Occupational therapy services
25- 49 6.5 1.8 15.2 15.1 9.2
50- 99 14.8 10.8 18.8 21.6 10.2
100-199 28.3 27.8 45.6 38.0 20.9
200-299 50.0 38.9 64.2 60.6 54.5
300~99 64.0 * 84.5 78.1 77.7
Speech pathology
25- 49 19.4 5.3 13.6 17.2 12.7
50- 99 21.9 10.8 25.9 31.2 18.8
100-199 31.0 30.6 50.8 44.8 33.5
200-299 38.2 44.4 58.0 66.2 44.4
300-499 40.0 * 76.5 73.6 68.1
Rehabilitation outpatient services
25- 49 9.7 3.5 12.1 15.5 7.8
50- 99 12.5 16.2 23.4 23.6 11.9
100-199 25.0 19.4 38.5 31.2 21.9
200-299 42.6 44.4 54.5 58.5 45.5
300-499 56.0 * 70.0 69.0 60.6
Respiratory therapy services
25- 49 90.3 82.5 88.6 77.3 ~ 80.5
50- 99 94.5 81.1 89.8 92.2 89.6
100-199 98.4 97.2 97.2 96.6 94.2
200-299 100.0 100.0 100.0 99.7 99.0
300-499 100.0 * 100.0 99.7 96.8
Physical therapy services
25- 49 80.6 52.6 75.8 80.7 66.4
50- 99 89.1 89.2 90.4 93.3 84.0
100-199 95.7 97.2 96.4 95.9 90.3
200-299 95.6 100.0 97.7 98.2 98.0
300-499 96.0 * 100.0 99.2 98.9
Ancillaries
Pharmacy
2~ 49 96.8 89.5 84.8 85.7 86.4
50- 99 96.1 94.6 95.4 95.9 95.1
100-199 98.4 91.7 98.0 98.7 98.9
20~299 100.0 100.0 100.0 100.0 99.0
300-499 100.0 * 100.0 99.7 100.0
Ultrasound
2S- 49 45.2 50.9 49.2 43.7 46.6
50- 99 80.5 64.9 64.5 66.5 73.4
100-199 96.2 83.3 89.3 88.0 85.6
200-299 95.6 100.0 97.7 97.6 96.0
300 - 499 100.0 100.0 98.1 95.,
(Continue])
OCR for page 126
126
TABLE 5.A.1 Continued
FOR-PROFIT ENTERPRISE IN HEALTH CARE
Investor-Owned Not-for-profit Not-for-profit State and Local
Chain Proprietary Chain Independent Government
Bed Size (N - 440) (N = 172) (N = 1,083) (N = 2,165) (N = 1,S40)
Histopathology laboratory
2S- 49 3S.S 35.1 22.7 27.3 22.1
S0- 99 S3.9 51.4 43.1 S0.9 37.0
100-199 83.7 83.3 83 3 83.3 72.3
200-299 98.5 94.4 96.0 95.0 96.0
300-499 96.0 * 99.5 98.1 97.9
Cardiac cathetenzabon
25- 49 0.0 0.0 0.0 0.4 0.2
50- 99 0.8 2.7 1.0 0.7 0.4
100-199 10.3 8.3 7.9 7.0 2.5
200-299 29.4 22.2 28.4 21.5 29.3
300499 52.0 * 56.5 44.5 60.6
Blood bank
25- 49 S8.1 56.1 53.8 57.1 51.1
50- 99 71.1 62.2 66.0 63.5 6S.0
100-199 73.9 77.8 76.2 76.0 76.3
200-299 83.8 88.9 87.5 87.4 83.8
300~99 96.0 * 88.0 89.5 83.0
Diagnostic radioisotope facility
25- 49 29.0 43.9 24.2 26.9 21.6
50- 99 71.1 48.6 4S.2 51.8 49.9
100-199 85.9 63.9 81.0 81.9 69.1
200-299 92.6 88.9 97.2 93.2 94.9
300-499 96.0 * 99.0 97.6 9S.7
Total Hospitals Reporting
6- 24 3 19 30 49 91
25- 49 31 57 132 238 425
50- 99 128 37 197 436 489
100-199 184 36 2S2 SS8 278
20~299 68 18 176 340 99
300-399 17 2 117 232 61
400 499 8 3 83 139 33
500+ 1 96 173 64
TOTAL 440 172 1,083 2,165 1,540
*Too few cases reporting to determine percentages.
SOURCE: Compiled from data provided by Hospital Data Center, American Hospital Association, Chicago,
Illinois, 1985.
Representative terms from entire chapter:
charity care
