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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
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.
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
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
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).
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
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.
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).
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
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
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
108 petitive disadvantages in being unable to provide basic services. In sum, the committee was unable to find satisfactory information about how often (and under what circumstances) it is a net finan- cial drain on an institution to offer particular services. However, although obstetrics and emergency services may sometimes provide economic rewards to an institution, it is known that these services (or at least some aspects of these services" e.g., having an emergency room open in the early morning hours) are often money losers. For-profitiNot-for-profit Differences in S. erv~ces At the committee's request the American Hospital Association's Hospital Data Center provided 1983 data showing how the facil- ities and services reported on the AHAs annual survey were distributed in hospitals of different size and ownership types. The validity of such data are often questioned, because hospitals may exaggerate their ser- vices and because a report that a hospital has a given service reveals nothing about how often it is used. Nevertheless, the AHA is the only source of national data on what services en cl facilities hospitals over. The 1983 data appear in Table 5.A.1, which is appended to this chapter. With data presented on 42 services, 5 sizes of hospitals, and 5 types of ownership, the results of the comparisons are not easily de- scnbed. However, several points can be made regarding the services offered by investor- owned chain hospitals. First, focusing on the modal-size category (100-199 beds) and larger institutions, there is a set of basic services that virtually all hospitals offer and that differ little between investor-owned chain hospitals and not-for- profit hospitals emergency rooms, post- operative recovery rooms, respiratory ther- apy, physical therapy, pharmacies. Most investor-owned chain and not-for-profit hos- pitals also have blood banks, histopathology FOR-PROFIT ENTERPRISE IN HEALTH CARE laboratories, and diagnostic radiation ser v~ces. However, there is a large group of ser- vices that are more commonly offered in not-for-profit hospitals (chain and indepen- dent) than in investor-owned chain hospitals and very few that are more common in investor-owned chain than not-for-profit hospitals. Not-for-prof~ts are more likely to have an outpatient department, premature nursery, dental services, hospice care, home care, hospital auxiliary, health promotion services, family planning services, various types of psychiatric services, radiation ther- apy, radioisotope implants, and therapeutic radioisotopes. (Some of these differences may change, in the view of some, because chang- ing payment incentives may stimulate the availability of outpatient and home health services among all types of hospitals.) More commonly available in investor-owned chain hospitals are abortion services and patient representatives; among smaller hospitals, investormwned facilities are more likely than not-for-profit institutions to over podiatric services, ultrasound, CT scanners, and di- agnostic radioisotopes. The data also show a pattern of more ser- vices being offered by investor-owned chain hospitals than by independent proprietary hospitals, suggesting that the growth of the investor~wned hospital companies may have increased the availability of a broader range of services at the hospitals they acquired. In sum, the AHA data provide some ev- idence of a narrower range of services in investor~wned hospitals, compared with not- for-profit hospitals. However, the data do not permit judgment on either of two crucial items. First, although some of the services that are found less frequently in for-profit hospitals seem unlikely to be money-makers (e.g., health promotion services, hospital auxiliaries), the extent to which the greater breadth of services provided by not-for-profit institutions includes money-Iosing services that must be cross-subsidized from other services is not clear. Second, the data do
ACCESS TO caRE not show the extent to which services not offered by hospitals are essential (or even important) services that are not otherwise available in the community. Regarding the narrower topic of emer- gency services and obstetrical services, few inferences can be drawn. Almost all hospi- tals in the AHA survey reportedly having emergency services, and the difference be- tween investor-owned and not-for-profit hospitals is only a few percentage points. (Differences in having outpatient depart- ments were slightly larger.) A study of Flor- ida nonteaching hospitals with fewer than 400 beds showed that investor-owned hos- pitals were slightly more likely than not-for- profit hospitals to have an emergency room (80 percent versus 72.5 percent) (Sloan and Vraciu, 1983~. It is likely that institutional variations in what their emergency services actually consist of and what screening pro- cedures are used before services are pro- vided are more important than the presence or absence of an emergency room in deter- mining the extent to which a facility pro- vides access, particularly to people who are unable to pay. The committee found no sources of data on for-profit/not-for-profit differences in hospitals having obstetrical services. But national data show that for-profit hospitals (both chain and independent) have signifi- cantly fewer births as a percentage of ad- missions than do not-for-profit hospitals (Watt et al., 19861. The AHA data, as well as data from Florida, which show that premature nurseries are much less common in inves- tor-owned than in not-for-profit hospitals (Sloan and Vraciu, 1983), are also sugges- tive.22 However, no means are available to determine whether this pattern reflects a strategy to minimize uncompensated care or the decision (by hospitals or planning agen- cies) not to offer services that are already being amply met in communities. 109 Closing of Hospitals Still another access-related concern about the growth of investor-owned hospital com- panies is whether they may be less willing than not-for-profit organizations to sustain a money-Iosing hospital or one that fails to attain economic goals. Although the closure of a hospital in a region with substantial ex- cess capacity is not necessarily a tragedy, the closure of hospitals on which large num- bers of uninsured patients depend or which are the only source of care in a given locale could jeopardize access to care. Because the management of investor- owned companies is responsible to share- holders to make profitable use of invested capital, and because not-for-profit hospitals have a long history of losing money on op- erations, a differential willingness to close money-Iosing facilities may seem self-evi- dent. However, the survival of a not-for- profit (or public) hospital that persistently loses money on patient care services de- pencls on its ability to obtain nonpatient rev- enues. Clearly, some are more successful than others. Nor is it evident that an inves- tor-owned company would readily walk away from a money-Iosing facility in which it had made a substantial investment without care- fillly evaluating the options that might be available. In short, the topic of hospital clo- sure and type of ownership is a complex empirical (as well as theoretical) issue. Studies of hospital closures show that for- profit hospitals are disproportionately likely to close (Sloan et al., 1986; Muliner et al., 19821. However, the long historical decline in the number of independent, proprietary for-profit hospitals and the growth of inves- tor~wned chains during the past 15-20 years suggest that it is the former that have been closing, not the latter. To assess this pos- sibility, the committee obtained data on all 540 hospitals that had ever been acquired or constructed by the six largest investor- owned companies (which owned t~ro-thirds of all investor-owned hospitals in 1984) (Hoy
110 and Gray, 1986). Of the 540 hospitals, 12 (2. 2 percent) had been closed (a number that does not include hospitals that were re- placed). In most cases, the closure of a hos- pital was associated with the addition of beds at another facility, the construction of a new facility that replaced two others, or the con- version of a facility into a different type of facility. Very few hospitals were simply closecI.24 In short, to date investor-owned hospitals have not shown a propensity to close. In- deed, in view of the likelihood that some of the hospitals they have acquired had been in serious financial trouble (Pattison, 1986), and in view of the overall Tow occupancy rates among investor-owned hospitals (Peter Kralovec, Hospital Data Center, American Hospital Association, unpublished data, 1985) a more plausible criticism, ironically, is that they have contributed to the nation's sur- plus bed capacity. Ibe available infonnation pertains to a time when most hospitals experienced relatively little trouble in maintaining economic via- bility. If increasing competition, declining occupancy rates, new governmental regu- lations, or a major economic recession erode hospital margins generally, it becomes in- creasingly likely that some hospitals of all ownership types will become financial lia- bilities. Some observers predict the closure of as many as 20 percent of the nation's hos- pital beds in the next S-10 years. More se- rious (and plausible) than concerns about investor-owned hospitals closing is the like- lihooc} that some of the hospitals that are the most vulnerable to closure are the ones that are performing a vital role in serving un- insured populations. If that is the case, as studies of financially distressed hospitals suggest, strong public policies are needed to mitigate the growing crisis created by an uninsured population of almost 35 million people in an increasingly competitive health care system. FOR-PROFIT ENTERPRISE IN HEALTH CARE ACCESS TO NURSING HOMES Whereas the major concerns regarding hospital care pertain to uninsured patients, a major access concern of nursing homes involves Tow-income patients covered by the federal/state Medicaid program. Between people who are Medicaid-eligible when they enter a nursing home and "private-pay" pa- tients who cleplete their resources until they become eligible for Medicaid, the Medicaid program has become the largest source of payment for nursing home care. However, because Medicaid payment rates are often substantially lower than the rates other pa- tients pay, nursing homes tend to prefer private-pay patients. The incentive to select non-Medicaid patients is illustrated by 1983- 1984 data showing that nursing home re- turn-on-equity in California declined as Medicaid utilization increased (Hawes and Phillips, 1986). A second major access issue involves "heavy-care" patients (e.g., with multiple medical problems) for whom pay- ment (e.g., under Medicaid) is set on a per- diem basis, but whose care is costly.25 Nursing home operators often have the option of being selective in admissions and of charging private-pay patients more than Medicaid patients. This is because the de- mand for nursing home beds greatly exceeds the supply in many states and because ad- equate alternatives do not often exist for people in need of long-term care or assis- tance. Thus, nursing homes usually have high occupancy rates and often have waiting lists, enabling operators to select private-pay or "light-care" individuals over less-remuner- ative patients. Methods used by for-profit and not-for-profit nursing homes to select the most financially advantageous patients include separate waiting lists for private-pay and Medicaid patients, discharging private- pay patients to hospitals when their financial resources are gone, holding vacant beds open until a private-pay patient becomes avail- able, requiring large pre-admission "contri- butions," and selecting "nightmare" Medicaic!
ACCESS TO CARE patients certified to be in need of skilled nursing care.26 Regarding ownership and access issues in nursing homes, among which for-profit own- ership predominates, for-profit homes ap- pear to serve a disproportionately large number of Medicaid patients. Although studies at the loch and state levels are some- what inconsistent,27 the most recent national data, from the 1977 National Nursing Home Survey, show that the percentage of Med- icaid patients in for-profit nursing homes was substantially larger than in not-for-profit homes (Table 5.7~. (The data do not differ- entiate between chain and independent homes.) Although economic incentives can discourage admission of"heavv-care" Da- tients, and although such patients do not always receive the specialized care they need, the committee found no studies that com- pare the behavior of for-profit and not-for- profit nursing homes with regard to "heavy- care" patients. ISSUES AND RECOMMENDATIONS The Measurement of Care to Patients Unable to Pay "Uncompensated care" (deductions from gross revenues for bad debt and charity care) is a seriously flawed measure of either in- stitutional performance or the extent to which the needs of those who are unable to pay are being met. (The number of uninsured patients served is a better measure, but it is less widely available.) To say that a hos- pital has a given percentage of bact debt does not reveal precisely whether it has been act- ing with generosity or whether it has been lax or ineffective in trying to collect pay- ment. Furthermore, "uncompensated care" is not a measure of an institution's real costs in providing such care, but only of what revenues would have been gained if pay- ment had been received. Finally, expressed as a percentage of gross patient revenues, "uncompensated care" does not reflect any nonpatient care revenues that may be ob- tained to subsidize uncompensated care. Nevertheless, uncompensated care as a per- centage of gross revenues is the most com- monly used measure of institutions' service to patients who are unable to pay. It is useful for comparisons across categories, but it should not be taken as a true measure of the extent to which human needs are being met. And, because not all persons seek needed care, uncompensated care (or number of un- insured patients served) is at best a partial proxy for the filet unfinanced needs of the population. TABLE 5.7 Payment Source for Nursing Home Residents by Type of Facility Ownership, 1977 (number and percent of resiclents) Proprietary Not-for-profit Government Payment Source Number % Number % Number % Private-pay 333,400 37.5 130,200 46.2 37,300 28.2 Medicaid/Medicare skilled care 178,400 20.1 52,100 18.5 30,200 22.8 Medicaid intermediate care 963,300 29.6 60,300 21.4 39,100 29.5 Other 113,700 12.8 39,200 13.9 25,900 19.5 Total 888,800 100.0 281,800 100.0 132,500 100.0 SOURCE: National Center for Health Statistics (1979).
112 The Need for Better Information Clearly, there is a need for better infor- mation about the extent to which hospitals and other health care institutions are ad- mitting and treating patients who are unable to pay or are providing services that are un- profitable, about changes in the provision of uncompensated care, and about why these changes are occurring. The committee's ability to draw conclusions about the effect of investor-owned providers on access to care has been limited by the nature of available data. However, much of the data that has been summarized in this chapter can pro- vide a baseline against which changes among providers of all types can be compared. Accordingly, the committee recommends the monitoring and study of the forgoing topics and issues: · The number of people unable to pay for care who (1) needed care but did not try to obtain it and (2) tried to obtain care but were refused for financial reasons. · The amount of uncompensated care, both absolutely and relative to gross reve- nues, provided by hospitals of different ownership types. This will enable policy- makers and others to monitor changes across all types of hospitals and differences among types of hospitals, which may change over time. Controlling for size of hospital, Toca- tion, and teaching status will help ensure that factors known to affect uncompensated care are accounted for. Breaking out data by whether hospitals are sole providers or are located near a public hospital will help in assessing the impact on access of differ- ences among hospitals in the amount of un- compensated care provided. · The types of services and the amount of each type of service providecl by hospitals of different ownership. Local-level studies and controls on whether alternative provid- ers of care will help show whether absence of a service in a particular hospital repre- sents deprivation for a community. FOR-PROFIT ENTERTRISE IN HEALTH CARE · The provision of care to the poor and medically indigent in other service settings, such as nursing homes, ambulatory surgery centers, dialysis centers, birthing centers, and outpatient diagnostic centers. · Before-and-after studies ofacquisitions of hospitals by for-profit and not-for-profit hospital systems, to examine changes in the provision of uncompensated care and the number and types of services provided. ~ An evaluation of the effects of state and local governmental programs that were de- signed to increase the resources available to those unable to pay for care. These studies should examine the extent to which differ- ences in the mix of hospital ownership (state by state) affect the kinds of programs adopted, the ways in which the programs are imple- mented, and their eventual effects. Such information will be of growing im- portance as competitive conditions make it more clifficult for institutions to finance im- portant activities. State health planning agencies, and the 141 local health planning agencies that still exist, can play an impor- tant role in obtaining and publicizing infor- mation about problems of access to health care.28 The Obligations of Health Care Institutions What are the social, moral, or legal ob- ligations of hospitals and other health care organizations to serve people who need care, but who lack the ability to pay? From whence might such an obligation derive, ant! what is its extent (e.g., to emergency situations only or to more than that)? A full analysis of such questions is beyond the scope of this study. However, it is important to keep in mind why the questions arise and to con- sider their implications for the for-profit/not- for-profit distinction. Ike questions arise partly because the care of millions of uninsured and underinsured people may depend on the willingness of
ACCESS TO CARE institutions to provide services for which they may not get paid. The question of institu- tional obligation to provide care to those who cannot pay (or to provide services that lose money) is, thus, also a question of whether institutions are obligated to raise funds for this purpose. Historically, many health care institutions were given or ac- cepted such an obligation, and it has been part of the traditional ethos of many hos- pitals, particularly not-for-profit and public institutions. However, these institutions also had access to nonpatient revenues gov- ernmental grants and appropriations, char- itable contributions, and the like. The availability of these crucially important sources of revenue has dramatically dimin- ished in proportion to need,~9 and institu- tions have long had to subsidize the care of some patients with revenues derived from charge-paying patients. Their ability to do this depends on the number of such patients that they serve and the impunity with which they can raise prices for the services they provide. The committee, like the President's Com- mission for the Study of Ethical Problems in Medicine and Biomedical and Behavioral Research (1983) and many other bodies be- fore it, believes that ensuring an adequate level of heady care is a societal obligation (for which provisions can be made in both the public and private sectors) and that gov- ernment should, and eventually must, make provisions to assure care for those whom the private sector fails. However, the committee also believes that government's failure to make such provi- sions does not relieve health care institu- tions of their moral obligation to help care for those who are unable to pay. The com- mittee believes that in the absence of fills governmental handing of health care for all those who are unable to pay, health care institutions should be expected to do what- ever they can to care for needy members of their communities. At minimum, health care institutions, because of the peculiar vuiner ~3 ability of people who need medical care but lack resources to pay and because of the traditional values that have been attached to providing health care, are morally obli- gated-and should be legally obligated to provide medical care in situations of emer- gency. (The definition of emergency and the extent of care that must be provided are slippery issues. See, for example, Relman, 1985; Annas, 1985.) Beyond this, the amount of such care that should be provided de- pends on various factors, including need in the community and the ability of the insti- tution to provide uncompensated care with- out imprudent financial strain. The Issue of Tax Status A question that arises is whether taxpay- ing and tax-exempt institutions have the same or different moral or legal obligations to pro- vide uncompensated care in other than emergency situations. Although the com- mittee had insufficient discussion on which to base strong recommendations, the matter of taxes and tax exemptions merits much additional consideration and discussion in health care. Several issues are discussed be- low. The Question of "Fair Share. `` . ,' r ~ ~ Our system ot Dearth care tor the uninsured has consisted of undefined, unorganized, and uncoordinated institutional and professional contributions, financed largely by the shift- ing of costs onto insured patients. It is, ac- cordingly, difficult even in theory to provide a standard for determining whether a par- ticular hospital has done its "fair share" of charity care or, indeed, whether the notion of"fair share" makes sense (Brock and Bu- chanan, 19861. We can examine comparative performance data, as this report has, but these data alone do not lead to conclusions about whether hospitals have satisfied their obligations, if indeecl such obligations exist. All we know for certain is that without gov- ernmental assistance, many people will not
114 get adequate medical care unless enough hospitals provide a substantial amount of un- compensated care. Obligations Attached; to Tax Exemp- tions. In the committee's New some social obligations or expectations should be at- tached to an institution's tax-exempt status. At the local level, as the Supreme Court of the State of Utah recently held, it is legit- imate for local governments recognizing the extent to which exemptions from prop- erty taxes entail a taxpayer subsidy of a health care institution to evaluate what benefits are received in exchange and to act accord- ingly (Utah County v. Intermountain Health Care, Inc., 1985~. The more health care in- stitutions behave as a commercial enterprise might be expecter} to behave for example, in not obtaining or dispensing charity care- the more problematic is the justification for property tax exemptions. Similar reasoning can be applied to federal exemptions from corporate income taxes. However, it should be remembered that the social obligation of a not-for-profit institution can be discharged in many ways (which includes offering un- profitable services and engaging in inade- quately fi~nded educational activities and unsponsored research); providing signifi- cant amounts of uncompensated care is but one. Obligations of For-profit Institutions. Do for-profit hospitals have a lesser respon- sibility to provide uncompensated care than other kinds of hospitals? The answer de- pends on values and points of view. From the standpoint of an indigent patient in need of care, but ineligible for publicly funded care, an argument that the local hospital has paid its taxes and thereby has discharged its social obligations would clearly be of little comfort. From the standpoint of a taxpaying health care organization, the argument that its taxes at least partly discharge its social obligations is more telling. Since the taxpaying (i.e., for FOR-PROFIT ENTERPRISE IN HEALTH CARE profit) institution is not afforded the benefits of a tax exemption, the argument goes, it should not be saddled win the obligations that attach thereto. Empirically, the question of whether for- profits accept as great a burden in taxes and charity care as not-for-profits accept in char- ity care alone is not answered simply. The tax data needed to make an exact compari- son are not easily available, but a rough es- timate can be made. In 1983 the four largest investor-owned multihospital companies (Hospital Corporation of America, Humana, National Medical Enterprises, and Ameri- can Medical International) paid on average 2.5 percent of gross revenues in income taxes20 (Steven C. Renn, The Center for Hospital Finance and Management, The Johns Hopkins University, personal com- munication, 1985~. If their level of uncom- pensated care is reflected In the for-profit average reported by the AHA for 1983-3.1 percent of gross revenues, as shown in Table 5.~the sum of income taxes and uncom- pensated care (5.6 percent of gross reve- nues) exceeded the 4.1 percent of gross revenues that not-for-profit hospitals ac- counted for as uncompensated care. Ac- cepting the argument that taxes are in some sense equivalent to uncompensated care, and making the somewhat problematic assump- tion that not-for-profit hospitals are doing their fair share, these four companies to- gether can claim to have done their "fair share," if such average figures are meaning- fuT given the highly variable nature of local uncompensated care problems and of the resources available to meet them. In sharp contrast is the point of view that payment of taxes is irrelevant to a health care institution's purpose and obligations. From this viewpoint, social policy should insist that hospitals be public service insti- tutions. Whether they choose to operate as not-for-profit or for-profit enterprises, hos- pitals should be made to serve public needs. There is no fundamental right to public sup- port in the operation of a hospital for private ~, . ~
ACCESS TO CARE ends whether those ends are to generate profits, create employment, or engage in educational and research activities. From this point of view, the public can, and should, set some conditions to guarantee access to the services it needs. Community support, whether financial or otherwise, should be contingent on performance in the public in- terest. This includes, of necessity, some ac- tivities that are not profit maximizing. Whether those who wish to operate the hos- pitals under these conditions want to orga- nize themselves on a for-profit or a not-for- profit basis is a matter of secondary interest. If hospitals can make a profit while perform- ing their functions to the community's sat- isfaction, however that might be expressed, everyone comes out ahead; but there is no special reason to excuse any such institution Tom public service. Although the conflicting positions just dis- cussed cannot be Filly reconciled, the com- mittee holds that all health care institutions have social obligations that flow from the needs of the communities that they serve and the ethical traditions of health care. However, taxing authorities that grant tax exemptions are entitled to expect not-for- profit organizations to continue, within rea- sonable limits, to provide some form of ser- vice in exchange for the tax exemptions, whether that service be providing uncom- pensated care, offering unprofitable ser- vices, sponsoring educational or research activities, or offering care at reduced prices. The feasibility of institutions' generating the revenues required to provide ad needed care to uninsured and underinsured patients is becoming increasingly doubtful. The Government's Obligation for Uninsured Patients Notwithstanding the committee's belief that institutions have an obligation to do whatever they can to meet the health care needs of people who are unable to pay, it is increasingly clear that new ways of provid ~5 ing financial support and encouragement for providing uncompensated care are needed. Cross-subsidization at He institutional level has never been a satisfactory or adequate method of meeting the health care needs of uninsured people. People often do not ob- tain needed care, and institutions that pro- vice large amounts of uncompensated care tend to become financially distressed (Had- ley et al., 1982; Kelly and O'Brien, 1983). Furthermore, it is apparent that institutions will find it increasingly difficult to cross-sub- sidize indigent care. Providers are under increasing pressure from third-party payers to compete on price. Institutions in such circumstances-probably only a small num- ber today, but likely many more in the fi~- ture risk their very survival if they engage in behavior that makes them noncompeti- tive on price. This being the case, in the absence of governmental intervention, the likelihood is that care for those who are un- able to pay will be increasingly jeopardized. The committee did find some evidence that hospitals of all types are attempting to diminish their uncompensated care burden. Although it is likely that some hospitals are decreasing their uncompensated care load because of financial necessity, the commit- tee is concerned that others are reacting not to financial stress, but rather to a change in the ethos of health care. Maturation of the health care market has made grown more difficult; efforts by purchasers of care to con- tro] costs are beginning to make competition a way of life; and health care increasingly is becoming commercialized. These develop- ments may be eroding the charitable atti- tude that has characterized many hospitals. Notions of responsibility for community health needs and acceptance of charitable activities as an inherent part of the provision of health care services may be disappearing. These changes in the spirit of health care may allow uncompensated care burdens to be reduced without fear of public or profes- sional opprobrium. Federal action to solve access problems
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
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
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
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. 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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.
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
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
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)
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
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])
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.
