The economics of for-profit and not-for-profit hospitals

This paper examines the economics of for-profit and not-for-profit hospitals through the prism of capital acquisitions. The exercise suggests that of two hospitals that are equally efficient in producing health care, the for-profit hospital would have to charge higher prices than the not-for-profit hospital would, to break even on capital acquisitions. The reasons for this divergence are (1) the typically higher cost of equity capital that for-profit hospitals face; and (2) the income taxes they must pay. The paper recommends holding tax-exempt hospitals more formally accountable for the social obligation they shoulder, in return for their tax preference.     

Uncompensated care provided by for-profit,not-for-profit,and government owned hospitals

Background  

There is growing concern certain not-for-profit hospitals are not providing enough uncompensated care to justify their tax exempt status. Our objective was to compare the amount of uncompensated care provided by not-for-profit (NFP), for-profit (FP) and government owned hospitals.     

A comparative analysis of revenue and cost-management strategies of not-for-profit and for-profit hospitals

Not-for-profit (NFP) and for-profit (FP) hospitals were compared on several performance indicators including revenues, costs, productivity/efficiency, and profitability. The indicators were adjusted, where appropriate, for outpatient activity and a case-mix index for all patients. FP hospitals had higher profit margins as well as higher gross and net revenues per case-mix adjusted admission. On the other hand, NFP hospitals had lower total cost per case-mix adjusted admission even after subtracting taxes from FP hospital costs. There were no significant differences between the two groups on efficiency and productivity indicators--paid hours per case-mix adjusted admissions, occupancy levels, and case-mix adjusted ALOS. The higher profits of FP hospitals were attributed to revenue management rather than cost and efficiency management.     

An empirical investigation of quality improvement initiatives in for-profit and not-for-profit hospitals: environmental, competitive and outcome concerns

PURPOSE: The objective of this study is to shed some light on quality improvement practices of for-profit and not-for-profit hospitals DESIGN/METHODOLOGY/APPROACH: The scope and effectiveness of several quality improvement efforts are studied for a sample of 110 hospitals. Factor analysis was utilized to analyze the data collected. FINDINGS: The results of this study tended to suggest that for-profit and not-for-profit hospitals were more similar than different with the regard to the effective utilization of quality improvement initiatives, thus underscoring the utility of quality improvement efforts despite differences in operating characteristics, strategies and operating constraints. RESEARCH LIMITATIONS/IMPLICATIONS: The sample used in this study is limited. Thus, the results should be interpreted accordingly. PRACTICAL IMPLICATIONS: This study offers decision-makers in healthcare operational settings empirical evidence of the operational and strategic effectiveness of different quality improvement efforts, thus justifying investments related to the initiation and implementation of such quality improvement efforts. ORIGINALITY/VALUE: This study represents an important step toward understanding the effective implementation of quality improvement initiatives in different operational settings.     

Cash holdings of not-for-profit hospitals

Many not-for-profit (NFP) hospitals hold substantial cash reserves. Using a national sample of 608 NFP hospitals over the period 1996-1999, we related theories of cash holdings to NFP hospitals to develop a conceptual framework for understanding cash holdings. We tested whether these hospitals differentially managed operating and strategic cash with respect to establishing target balances and investigated motivations for holding cash. NFP hospitals actively targeted levels of operating cash, but did not target strategic cash balances. Strategic cash balances were positively related to profitability and growth in assets, but negatively associated with the use of debt.     

Market share of the for-profit and not-for-profit sector from health insurance expenditures

AIM: The aim of the study is to analyze the market share of for-profit private and not-for-profit sector from the expenditures on medical services of the Hungarian National Health Insurance Fund (NHIF), to show its changes in the last years and to show on which field they can be found. DATA AND METHODS: The data derives from the financial database of the National Health Insurance Fund (NHIF) covering the period 1995-2002. The analysis includes the medical provisions (primary care, health visitors, dental care, out- and inpatient care, home care, kidney dialysis, CT-MRI). RESULTS: In 1995 only 6.91% (12.5 billions Ft) of total expenditure for medical services went to for-profit private providers. By 2002 the market share of private providers increased to 15.95% (78.5 billions Ft). During the same period we realized a dynamic increase in the market share of non-profit sector: from 1.04% in 1995 to 2.58% in 2002. The role of private providers is dominant in the case of general practitioners, dental care, transportation, kidney dialysis, CT/MRI and home care (home nursing). CONCLUSIONS: The financial data of the NHIF showed the dynamic increase of market share of for-profit private providers and non-profit sector in many field of health care, although they role in the two most important fields (out- and inpatient care) is still negligible.     

Home health nursing care: a comparison of not-for-profit and for-profit agencies

The recent rapid growth in the numbers of for-profit and not-for-profit agencies delivering home health care raises questions about whether these agencies are serving different patient populations. Not-for-profit agencies were found to serve more indigent and medicaid patients than for-profits. Nurses from both kinds of agencies participated in this study and their patient case management activities are reported and compared for differences in their practice.     

Efficiency determinants and capacity issues in Brazilian for-profit hospitals

This paper reports on the use of different approaches for assessing efficiency of a sample of major Brazilian for-profit hospitals. Starting out with the bootstrapping technique, several DEA estimates were generated, allowing the use of confidence intervals and bias correction in central estimates to test for significant differences in efficiency levels and input-decreasing/output-increasing potentials. The findings indicate that efficiency is mixed in Brazilian for-profit hospitals. Opportunities for accommodating future demand appear to be scarce and strongly dependent on particular conditions related to the accreditation and specialization of a given hospital.     

The discriminating characteristics of for-profit versus not-for-profit freestanding psychiatric inpatient facilities.

This study examines the characteristics that discriminate between ownership types among private, freestanding psychiatric inpatient facilities in the United States. Use of data from the Inventory of Mental Health Organizations (National Institute of Mental Health 1983, 1986), revealed that not-for-profits provide more services and serve more of the underinsured, while for-profits serve the better insured, concentrate primarily on inpatient services, and serve more children, adolescents, and substance abusers. A surplus bed capacity among for-profit psychiatric hospitals is presumed to contribute to lower occupancy rates and less turnover in the for-profit sector. Not-for-profit psychiatric facilities are also found to be more involved in professional training and to be more accessible through emergency services. However, the misclassification test in the discriminant procedure reveals that a significant group of not-for-profit facilities looks more like its for-profit counterpart group than like other not-for-profits. Study findings are interpreted both in terms of debates over the tax-exempt status of not-for-profit hospitals and the potential negative service effects of proprietization.     

Returns on equity for not-for-profit hospitals.

This study examines the circumstances in which a large third-party payer or regulator might want to set hospital prices to yield a positive rate of return on equity capital. The level of return is shown to depend on the willingness of donors to make funds available in the community relative to the (derived) demand for capital to produce output. It is shown that the appropriate price might well be set to yield a zero or below-market return, and that the return to not-for-profit firms should generally be less than that to for-profit firms, if for-profit firms are to be active in the market.