: e t a b e d e r a c h t l a e h t a e r The g
38
November 2013 • Nursing Management
www.nursingmanagement.com
Copyright © 2013 Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.
t i f o r p r o f t o n . s v t i f o r p r o F
By Mari Scalesse, MSN, RN, CCRN
T
he high cost of healthcare and the uncertainty about future earnings and government reimbursements have left many not-for-profit hospitals in financial positions to consider changes of ownership to for-profit. Critics of for-profit organizations argue that these hospitals sacrifice patient care for higher financial returns. Current data on investor-owned for-profit organizations are difficult to interpret due to conflicting study results. Nurse managers are, therefore, concerned with their facility’s reputation and ability to provide charitable care while maintaining quality patient outcomes. Many question why current not-for-profit hospitals are considering change of ownership when making cuts in benefits, wages, staffing, and supplies is generating higher revenues and CEOs are bringing home larger annual salaries. The previous decade saw significant changes to healthcare organizations, but
www.nursingmanagement.com
you can gain a strategic advantage by understanding current challenges, existing data implications, and future trends.
Breaking it down Today’s public and private not-for-profit hospitals are facing declining net incomes due to the reductions in Medicare and Medicaid funding and increased uncompensated care.1-5 To reduce the deficit, the Balanced Budget Act (BBA) of 1997 was enacted. Not-for-profit hospitals are now concerned with how Medicare changes will affect their profitability and quality of care. Medicare Prospective Payment System payments have been reduced and hospitals now face more than $300 billion in reductions to Medicare through 2019 as part of these reforms.5 The change to Medicaid hospital payments is a result of the growth in the Medicaid Disproportionate Share Hospital Program payments that
Nursing Management • November 2013 39
Copyright © 2013 Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.
The great healthcare debate: For-profit vs. not-for-profit
provide additional funding to hospitals treating patients unable to pay for medical services.1 The downward economic trend and related unemployment rates have significantly increased the cost of providing care to the poor and uninsured. Unemployment has reduced the number of people covered under insurance, and those who are insured have a reduced ability to pay deductibles and copays. The number of uninsured patients increased from 35.6 million in 1990 to 48.6 million in 2011.1,6 Public and not-for-profit hospitals are now required to pay larger percentages of the cost associated with
requirements. The expense associated with acquiring skilled nursing staff, advances in medical technology, continuing education, and health information technology has resulted in many not-for-profit hospitals experiencing overall net losses.3 The Medicare Payment Advisory Commission (MedPAC) reports trends in overall hospital financial performance to Congress. MedPAC’s 2010 report indicated that in 2008 financial performance of not-forprofit hospitals had fallen to its lowest level in more than a decade.3 Hospitals with overall net losses increased from 657 in 2005 to 1,133 in 2009.3
What’s the difference between for-profit and not-for-profit hospitals? Not-for-profit hospitals aren’t required to pay taxes and aren’t allowed to distribute earnings. rising uncompensated care while maintaining high-quality care. States are also making large budget cuts that include Medicaid reimbursements to hospitals. Key provisions of the Affordable Care Act, which require U.S. citizen participation in health insurance, may reduce hospital costs; however, there’s growing concern that healthy Americans will opt to pay the penalty rather than purchase insurance they don’t need. In addition to uncompensated care costs, not-for-profit hospitals have lost billions of dollars on services directly related to patient care.3 Increased scrutiny by regulatory agencies has resulted in frequent and expensive changes in system
In years past, hospitals relied on nonpatient-care activities to offset expenses. This is no longer the case. A recent study examined the ability of not-for-profit hospitals to obtain revenue through traditional nonpatient-care activities, such as parking, meals, vending, gift shops, medical supplies, pharmacies, and individual contributions and endowments.3 Income from these nonpatient-care activities provided relief to hospitals in the past and had risen consecutively in the years before the economic decline; unfortunately, since 2008, these sources of income have dropped significantly. Despite growing expenses, private not-for-profit hospitals have
40 November 2013 • Nursing Management
still been consistently able to increase gross revenue by an average of 9% per year.3 The challenge for private not-forprofit organizations is the increased need to write off much of their contractual allowances, uncompensated care, and debts through gross revenue. Medicare’s G-3 worksheet requires hospitals to report on their net income from patient care activities, including gross revenues and expenses. In 2009, not-for-profit hospitals increased their write-off percentage to more than 65%.3
What’s the difference? Although not-for-profit hospitals are feeling the crunch, for-profit hospitals’ revenues are thriving. The largest for-profit organization in the United States is the Hospital Corporation of America (HCA), which controls 163 investor-owned hospitals and has seen a profit growth in the value of its holdings to over $100 billion.7 This could be the reason that not-for-profit hospitals are now looking at change in ownership to increase profits. At present, there are three types of hospital ownerships. Funding of all hospitals comes from private sources, primarily insurance companies, or public payment through government tax dollars. Private forprofit hospitals are owned by investors; private not-for-profit hospitals are owned by communities; and religious organizations, philanthropic groups, and public healthcare organizations are owned by the government.8 The difference between for-profit and not-for-profit hospitals is that not-for-profit hospitals aren’t required to pay taxes and aren’t allowed to distribute earnings. Not-for-profit hospitals accumulate profits, but this revenue can’t be disbursed to owners and is supposed to provide charity care to www.nursingmanagement.com
Copyright © 2013 Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.
those patients unable to pay for services. Private for-profit institutions typically have 6% higher annual expenses to account for administrative pay and bonuses.8 Both for-profit and not-for-profit institutions are required to treat uninsured patients. The increase in uncompensated care in many forprofit hospitals has resulted in some organizations refusing nonemergent care to patients in their EDs. The New York Times reported that HCA has profited significantly by requiring patients to either pay in advance or go elsewhere for treatment.7 Incidents like this have negatively affected people’s impression of forprofit hospitals.
Which is better? Of primary concern to many nurses is the lack of charity and good will for-profit healthcare organizations make to their communities. But, recent discussions have focused on whether not-for-profit hospitals are providing enough charity care to maintain their tax exemptions. A report released by the California Nurses Association/National Nurses United in August 2012 found that California not-for-profit hospitals provided minimal charity while receiving billions in tax dollars.9 Eleven states have mandated not-for-profit hospitals to provide uncompensated care at a minimum percentage.10 Of these hospitals, three quarters received more dollars in tax breaks than they spent in providing care for the uninsured. For example, in Texas, not-for-profit hospitals are required to spend a minimum of 4% of net patient revenue on charity care.10 In Texas, where charity care mandates are in place, not-for-profit hospitals are making deductions from their net revenue before calculating their 4% charity care spending.10 On average, www.nursingmanagement.com
Texas law didn’t increase not-forprofit hospitals’ charitable spending, but rather reduced their spending to the mandated 4%. In 2010, California’s not-for-profit hospitals cared for 70% of California’s patients, received $3.3 billion in state and federal tax exemptions, and spent only $1.4 billion on charity.9 Many mental health services, women’s services, and children’s services have been cut from California notfor-profit hospitals’ services or programming to further increase profit.9 National Nurses United’s spokesperson, Chuck Idelson, stated, “If you look at the level of charity care and other community benefits and pricing practices, the difference between private not-forprofit and private for-profit hospitals is very small.”9 In fact, HCA provided $2.68 billion in charity care in 2011.7 The number of for-profit hospitals in the United States has increased 14% between 2006 and 2010, with the most recent American Hospital Association figures reporting 1,025 registered investor-owned hospitals.4,11 This increase raises concern. Research has consistently shown that for-profit hospitals have practices that are incongruent with values associated with not-for-profit hospitals. Evidence indicates that for-profit hospitals focus on profit maximizing practice and not quality treatment and care. JAMA reported that for-profit hospices have a larger percentage of patients with noncancer diagnoses and longer length of stays than patients in not-for-profit hospices.12 This research implies that for-profit hospices are more concerned with the proceeds derived from longer admissions than care that reflects what’s in the best interest of their patients. The study also researched the number and types of home visits
made to hospice patients, concluding that for-profit hospice agencies provided a greater number of nonskilled visits, such as home health aides, compared with not-for-profit hospices, although both organizations provided the adequate number of skilled visits per patient day.12 It’s this perplexing information that presents challenges in defining and determining quality. The Medicare conditions of participation apply equally to all hospices, regardless of ownership. All organizations are required to accept any patient who’s eligible for hospice. Of the studies reviewed regarding for-profit organizations, the most concerning was a study performed in Ontario that evaluated more than 26,000 U.S. for-profit hospitals.9 These researchers reviewed data on 38 million patients who were admitted into for-profit hospitals from 1982 to 1996. A meta-analysis of 14 observational studies demonstrated an increased risk of death associated with private for-profit hospitals.9 This study also concluded that higher acuity and sicker patients were more frequently admitted to not-for-profit hospitals, which wouldn’t be a reason why for-profit hospitals had higher mortality.9 Additional research concluded that for-profit hospitals have 19% higher costs for patient care than not-for-profit hospitals.8 Another earlier study concluded that forprofit dialysis facilities were less likely to refer patients for kidney transplants, resulting in higher mortality and reduced quality of life for these candidates.13 These dialysis centers provided lower levels of staffing than not-for-profit facilities and engaged in unethical cost-saving practices, such as reusing dialyzers and reducing dialysis time.13 The disturbing conclusions inferred
Nursing Management • November 2013 41
Copyright © 2013 Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.
The great healthcare debate: For-profit vs. not-for-profit
by these studies on mortality, higher care costs, and poor outcomes associated with for-profit hospitals have been disputed because of the methods (empirical methods that control for confounding factors, such as managed care, hospital competition, and physician alliances) used in the studies; however, the researchers stand by their conclusions. 14-16
Arguing both sides Although few studies support the use of for-profit hospitals, one study that chose to research the quality of for-profit hospitals versus not-forprofit hospitals had a different conclusion. Based on collected Hospital Consumer Assessment of Healthcare Providers and Systems (hcahps) scores, adherence to evidence-based guidelines (EBG), mortality rates, readmission rates, and hospital
research, and patient care, have higher fixed costs than for-profit hospitals and a larger amount of uncompensated care due to the number of uninsured patients who live in crowded urban areas where most teaching hospitals are located.1 Investor-owned hospitals are less likely to be teaching hospitals due to the costs associated with medical complexity, patient acuity, research activity, higher physician salaries, and expensive medical equipment.1 Federal and state governments are currently looking into revisions in payment policies to support hospitals that disproportionately serve poor and uninsured patients; however, managed care has initiated cost containment strategies that include contracting with hospitals that offer lower fees. The costs associated with teaching hospitals
Be cognizant of your role as a financial steward of your institution while concurrently maintaining quality patient outcomes.
safety scores, it was concluded that HCA hospitals had higher hcahps scores and adherence to EBGs than non-HCA for-profit, not-for-profit, and public hospitals.16 HCA hospitals also had decreased mortality and readmission rates.16 Competing interests of the author of this study aren’t documented. The financial viability of teaching hospitals is a concern with today’s economy and government aid reform. Not-for-profit hospital missions, which include education,
are 30% to 42% higher than the costs associated with nonteaching hospitals.1 Many hospitals today are increasing revenue by incorporating a shift of services from inpatient to outpatient. In not-for-profit facilities, outpatient visits have increased by 4.3% and inpatient days have decreased by 3.9%.4 There’s evidence that for-profit hospitals provide more lucrative specialties of care, such as cardiology, rehabilitation, and plastic surgery.
42 November 2013 • Nursing Management
In 2010, a nurse employed at an HCA hospital approached HCA’s board of ethics and compliance to report unnecessary cardiac procedures being performed. An internal investigation was initiated and it was determined that HCA “made misleading statements in medical records” that led to many patients having their health put at risk by unnecessary cardiac catheterizations.7,17 In 2002, HCA was found guilty of perpetrating Medicare fraud and settled for more than $1.7 billion dollars.7,18,19 In 2008, HCA hospitals changed the billing codes of Medicare insured patients treated in their EDs to reflect that patients were being treated for more emergent and acute illnesses than were present. In 2009, this practice increased its operating earnings by nearly $100 million.7 HCA’s desire to capitalize on Medicare patients is likely the reason why 47% of hospitals in Florida, an area with a large proportion of retired Medicare users, are investor owned.20 Studies have concluded not-for-profit hospitals in the same vicinity of for-profit hospitals tend to be influenced by and exhibit similar profit maximizing behavior.2,21 Unfortunately, nurse managers employed at investor-owned hospitals work in environments where substantial evidence exists that patient safety and health are being compromised for profit.
Reaching a verdict It’s the goal of the current government that healthcare reform and the enactment of the BBA will result in higher quality patient care, and that future patients will have the freedom and ability to access hospital satisfaction scores to make more educated decisions regarding their healthcare. It’s becoming quite clear that now, more than ever, www.nursingmanagement.com
Copyright © 2013 Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.
nonfinancial measures, such as efficiency, productivity, and quality, will be the factors that affect the long-term success of hospitals.22 Nurse managers can benefit from the reform by developing strategic plans that include monitoring measurable efficiency, quality, and productivity indicators. There’s conclusive evidence that these measures impact long-term financial performance in both not-for-profit and for-profit hospitals.22 Positive hospital reputation and patient perception improve financial outlook. Nurse managers should be cognizant of their role as financial stewards in healthcare institutions while concurrently maintaining quality patient outcomes. Evidence-based research has huge implications on practice. Audits on staff members’ adherence to best practice guidelines are commonplace. Hospital accreditation is based on meeting quality and safety indicators set by The Joint Commission. Efficiency and productivity indicators are less utilized by existing healthcare facilities. Efficiency measures used in a recent study included full-time equivalent employees per occupied bed (FTE/ bed), work hours per adjusted patient day (WH/APD), and occupancy rate (ratio between total inpatient days and total bed days). Higher occupancy rates and lower WH/APD or labor intensity result in greater long-term financial performance.22 FTE/bed didn’t impact financial earnings. Despite this finding, it has been shown that increased RN staffing results in significant cost savings.22 This study determined that current productivity measures aren’t indicative of increased financial returns or future success. The nurse manager is in a unique position to educate hospital investors www.nursingmanagement.com
regarding measures that result in long-term viability and positive financial outcomes. Business is business, but nurses have ethical principles and guidelines that drive their practice. Transformational nurse managers who are intentional in their decision making while encouraging values necessary for effective leadership and healthy work environments may positively influence behavior at for-profit hospitals and improve conditions for future patients. NM REFERENCES 1. Liu LL, Forgione DA, Younis MZ. A comparative analysis of the CVP structure of nonprofit teaching and for-profit non-teaching hospitals. J Health Care Finance. 2012; 39(1):12-38. 2. Cutler DM, Horwitz JR. Converting hospitals from not-for-profit to for-profit status: why and what effects? http://www.nber.org/ papers/w6672.pdf. 3. Schuhmann TM. Can net income from non-patient-care activities continue to save hospitals? Healthc Financ Manage. 2010;64(5):74-80,82,84. 4. Selvam A. For-profits rising: not-for-profits still dominate, but rivals advance. Mod Healthc. 2012;(suppl 22). 5. Commins J. Moody’s still bearish on notfor-profit hospitals. http://www.health leadersmedia.com/page-1/FIN-288696/ Moodys-Still-Bearish-on-NotforProfitHospitals. 6. U.S. Department of Commerce, United States Census Bureau. Health insurance highlights: 2011. http://www.census.gov/ hhes/www/hlthins/data/incpovhlth/2011/ highlights.html. 7. Creswell J, Abelson R. A giant hospital chain is blazing a profit trail. New York Times. August 14, 2012. 8. Devereaux PJ, Heels-Ansdell D, Lacchetti C, et al. Payments for care at private for-profit and private not-for-profit hospitals: a systematic review and meta-analysis. CMAJ. 2004;170(12):1817-1824. 9. Devereaux PJ, Choi PT, Lacchetti C, et al. A systematic review and meta-analysis of studies comparing mortality rates of private for-profit and private not-for-profit hospitals. CMAJ. 2002;166(11):1399-1409. 10. Kennedy FA, Burney LL, Troyer JL, Stroup C. Do non-profit hospitals provide more charity care when faced with mandatory
minimum standard? Evidence from Texas. J Accounting and Public Policy. 2010;29(3): 242-258. 11. American Hospital Association. Fast facts on U.S. hospitals. http://www.aha.org/ research/rc/stat-studies/fast-facts.shtml. 12. Hospice Management Advisor. For-profit vs. not-for-profit: is one better than the other? 2011. http://www.highbeam.com/doc/ 1G1-253743585.html. 13. Garg PP, Frick KD, Diener-West M, Powe NR. Effect of the ownership of dialysis facilities on patients’ survival and referral for transplantation. N Engl J Med. 1999;341(22): 1653-1660. 14. Eggleston K, Shen YC, Lau J, Schmid CH, Chan J. Hospital ownership and quality of care: what explains the different results. http://www.nber.org/papers/w12241.pdf. 15. Shen YC, Eggleston K, Lau J, Schmid CH. Hospital ownership and financial performance: what explains the different findings in the empirical literature? Inquiry. 2007; 44(1):41-68. 16. Jha A. Profits, quality, and U.S. hospitals. http://wwwthehealthcareblog.com/ blog/2012/08/20/profits-quality-andu-s-hospitals/. 17. Abelson R, Creswell J. Hospital chain inquiry cited unnecessary cardiac work. New York Times. August 6, 2012. 18. Schneider EC, Zaslavsky AM, Epstein AM. Use of high-cost operative procedures by medicare beneficiaries enrolled in for-profit and not-for-profit health plans. N Engl J Med. 2004;350(2):143-150. 19. Silverman EM, Skinner JS, Fisher ES. The association between for-profit hospital ownership and increased medicare spending. N Engl J Med. 1999;341(6):420-426. 20. Alliance for Advancing Nonprofit Health Care. Basic facts and figures. http://www. nonprofithealthcare.org/resources/Basic FactsAndFigures-NonprofitHospitals.pdf. 21. Duggan M. Hospital market structure and the behavior of not-for-profit hospitals. Rand J Econ. 2002;33(3):433-446. 22. Vélez-González H, Pradhan R, WeechMaldonado R. The role of non-financial performance measures in predicting hospital financial performance: the case of for-profit system hospitals. J Health Care Finance. 2011;38(2):12-23. Mari Scalesse is an ICU/ED float nurse at Hartford Hospital in Hartford, Conn. The author has disclosed that she has no financial relationships related to this article. DOI-10.1097/01.NUMA.0000432220.71510.72
Nursing Management • November 2013 43
Copyright © 2013 Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.
38
November 2013 • Nursing Management
www.nursingmanagement.com
Copyright © 2013 Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.
t i f o r p r o f t o n . s v t i f o r p r o F
By Mari Scalesse, MSN, RN, CCRN
T
he high cost of healthcare and the uncertainty about future earnings and government reimbursements have left many not-for-profit hospitals in financial positions to consider changes of ownership to for-profit. Critics of for-profit organizations argue that these hospitals sacrifice patient care for higher financial returns. Current data on investor-owned for-profit organizations are difficult to interpret due to conflicting study results. Nurse managers are, therefore, concerned with their facility’s reputation and ability to provide charitable care while maintaining quality patient outcomes. Many question why current not-for-profit hospitals are considering change of ownership when making cuts in benefits, wages, staffing, and supplies is generating higher revenues and CEOs are bringing home larger annual salaries. The previous decade saw significant changes to healthcare organizations, but
www.nursingmanagement.com
you can gain a strategic advantage by understanding current challenges, existing data implications, and future trends.
Breaking it down Today’s public and private not-for-profit hospitals are facing declining net incomes due to the reductions in Medicare and Medicaid funding and increased uncompensated care.1-5 To reduce the deficit, the Balanced Budget Act (BBA) of 1997 was enacted. Not-for-profit hospitals are now concerned with how Medicare changes will affect their profitability and quality of care. Medicare Prospective Payment System payments have been reduced and hospitals now face more than $300 billion in reductions to Medicare through 2019 as part of these reforms.5 The change to Medicaid hospital payments is a result of the growth in the Medicaid Disproportionate Share Hospital Program payments that
Nursing Management • November 2013 39
Copyright © 2013 Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.
The great healthcare debate: For-profit vs. not-for-profit
provide additional funding to hospitals treating patients unable to pay for medical services.1 The downward economic trend and related unemployment rates have significantly increased the cost of providing care to the poor and uninsured. Unemployment has reduced the number of people covered under insurance, and those who are insured have a reduced ability to pay deductibles and copays. The number of uninsured patients increased from 35.6 million in 1990 to 48.6 million in 2011.1,6 Public and not-for-profit hospitals are now required to pay larger percentages of the cost associated with
requirements. The expense associated with acquiring skilled nursing staff, advances in medical technology, continuing education, and health information technology has resulted in many not-for-profit hospitals experiencing overall net losses.3 The Medicare Payment Advisory Commission (MedPAC) reports trends in overall hospital financial performance to Congress. MedPAC’s 2010 report indicated that in 2008 financial performance of not-forprofit hospitals had fallen to its lowest level in more than a decade.3 Hospitals with overall net losses increased from 657 in 2005 to 1,133 in 2009.3
What’s the difference between for-profit and not-for-profit hospitals? Not-for-profit hospitals aren’t required to pay taxes and aren’t allowed to distribute earnings. rising uncompensated care while maintaining high-quality care. States are also making large budget cuts that include Medicaid reimbursements to hospitals. Key provisions of the Affordable Care Act, which require U.S. citizen participation in health insurance, may reduce hospital costs; however, there’s growing concern that healthy Americans will opt to pay the penalty rather than purchase insurance they don’t need. In addition to uncompensated care costs, not-for-profit hospitals have lost billions of dollars on services directly related to patient care.3 Increased scrutiny by regulatory agencies has resulted in frequent and expensive changes in system
In years past, hospitals relied on nonpatient-care activities to offset expenses. This is no longer the case. A recent study examined the ability of not-for-profit hospitals to obtain revenue through traditional nonpatient-care activities, such as parking, meals, vending, gift shops, medical supplies, pharmacies, and individual contributions and endowments.3 Income from these nonpatient-care activities provided relief to hospitals in the past and had risen consecutively in the years before the economic decline; unfortunately, since 2008, these sources of income have dropped significantly. Despite growing expenses, private not-for-profit hospitals have
40 November 2013 • Nursing Management
still been consistently able to increase gross revenue by an average of 9% per year.3 The challenge for private not-forprofit organizations is the increased need to write off much of their contractual allowances, uncompensated care, and debts through gross revenue. Medicare’s G-3 worksheet requires hospitals to report on their net income from patient care activities, including gross revenues and expenses. In 2009, not-for-profit hospitals increased their write-off percentage to more than 65%.3
What’s the difference? Although not-for-profit hospitals are feeling the crunch, for-profit hospitals’ revenues are thriving. The largest for-profit organization in the United States is the Hospital Corporation of America (HCA), which controls 163 investor-owned hospitals and has seen a profit growth in the value of its holdings to over $100 billion.7 This could be the reason that not-for-profit hospitals are now looking at change in ownership to increase profits. At present, there are three types of hospital ownerships. Funding of all hospitals comes from private sources, primarily insurance companies, or public payment through government tax dollars. Private forprofit hospitals are owned by investors; private not-for-profit hospitals are owned by communities; and religious organizations, philanthropic groups, and public healthcare organizations are owned by the government.8 The difference between for-profit and not-for-profit hospitals is that not-for-profit hospitals aren’t required to pay taxes and aren’t allowed to distribute earnings. Not-for-profit hospitals accumulate profits, but this revenue can’t be disbursed to owners and is supposed to provide charity care to www.nursingmanagement.com
Copyright © 2013 Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.
those patients unable to pay for services. Private for-profit institutions typically have 6% higher annual expenses to account for administrative pay and bonuses.8 Both for-profit and not-for-profit institutions are required to treat uninsured patients. The increase in uncompensated care in many forprofit hospitals has resulted in some organizations refusing nonemergent care to patients in their EDs. The New York Times reported that HCA has profited significantly by requiring patients to either pay in advance or go elsewhere for treatment.7 Incidents like this have negatively affected people’s impression of forprofit hospitals.
Which is better? Of primary concern to many nurses is the lack of charity and good will for-profit healthcare organizations make to their communities. But, recent discussions have focused on whether not-for-profit hospitals are providing enough charity care to maintain their tax exemptions. A report released by the California Nurses Association/National Nurses United in August 2012 found that California not-for-profit hospitals provided minimal charity while receiving billions in tax dollars.9 Eleven states have mandated not-for-profit hospitals to provide uncompensated care at a minimum percentage.10 Of these hospitals, three quarters received more dollars in tax breaks than they spent in providing care for the uninsured. For example, in Texas, not-for-profit hospitals are required to spend a minimum of 4% of net patient revenue on charity care.10 In Texas, where charity care mandates are in place, not-for-profit hospitals are making deductions from their net revenue before calculating their 4% charity care spending.10 On average, www.nursingmanagement.com
Texas law didn’t increase not-forprofit hospitals’ charitable spending, but rather reduced their spending to the mandated 4%. In 2010, California’s not-for-profit hospitals cared for 70% of California’s patients, received $3.3 billion in state and federal tax exemptions, and spent only $1.4 billion on charity.9 Many mental health services, women’s services, and children’s services have been cut from California notfor-profit hospitals’ services or programming to further increase profit.9 National Nurses United’s spokesperson, Chuck Idelson, stated, “If you look at the level of charity care and other community benefits and pricing practices, the difference between private not-forprofit and private for-profit hospitals is very small.”9 In fact, HCA provided $2.68 billion in charity care in 2011.7 The number of for-profit hospitals in the United States has increased 14% between 2006 and 2010, with the most recent American Hospital Association figures reporting 1,025 registered investor-owned hospitals.4,11 This increase raises concern. Research has consistently shown that for-profit hospitals have practices that are incongruent with values associated with not-for-profit hospitals. Evidence indicates that for-profit hospitals focus on profit maximizing practice and not quality treatment and care. JAMA reported that for-profit hospices have a larger percentage of patients with noncancer diagnoses and longer length of stays than patients in not-for-profit hospices.12 This research implies that for-profit hospices are more concerned with the proceeds derived from longer admissions than care that reflects what’s in the best interest of their patients. The study also researched the number and types of home visits
made to hospice patients, concluding that for-profit hospice agencies provided a greater number of nonskilled visits, such as home health aides, compared with not-for-profit hospices, although both organizations provided the adequate number of skilled visits per patient day.12 It’s this perplexing information that presents challenges in defining and determining quality. The Medicare conditions of participation apply equally to all hospices, regardless of ownership. All organizations are required to accept any patient who’s eligible for hospice. Of the studies reviewed regarding for-profit organizations, the most concerning was a study performed in Ontario that evaluated more than 26,000 U.S. for-profit hospitals.9 These researchers reviewed data on 38 million patients who were admitted into for-profit hospitals from 1982 to 1996. A meta-analysis of 14 observational studies demonstrated an increased risk of death associated with private for-profit hospitals.9 This study also concluded that higher acuity and sicker patients were more frequently admitted to not-for-profit hospitals, which wouldn’t be a reason why for-profit hospitals had higher mortality.9 Additional research concluded that for-profit hospitals have 19% higher costs for patient care than not-for-profit hospitals.8 Another earlier study concluded that forprofit dialysis facilities were less likely to refer patients for kidney transplants, resulting in higher mortality and reduced quality of life for these candidates.13 These dialysis centers provided lower levels of staffing than not-for-profit facilities and engaged in unethical cost-saving practices, such as reusing dialyzers and reducing dialysis time.13 The disturbing conclusions inferred
Nursing Management • November 2013 41
Copyright © 2013 Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.
The great healthcare debate: For-profit vs. not-for-profit
by these studies on mortality, higher care costs, and poor outcomes associated with for-profit hospitals have been disputed because of the methods (empirical methods that control for confounding factors, such as managed care, hospital competition, and physician alliances) used in the studies; however, the researchers stand by their conclusions. 14-16
Arguing both sides Although few studies support the use of for-profit hospitals, one study that chose to research the quality of for-profit hospitals versus not-forprofit hospitals had a different conclusion. Based on collected Hospital Consumer Assessment of Healthcare Providers and Systems (hcahps) scores, adherence to evidence-based guidelines (EBG), mortality rates, readmission rates, and hospital
research, and patient care, have higher fixed costs than for-profit hospitals and a larger amount of uncompensated care due to the number of uninsured patients who live in crowded urban areas where most teaching hospitals are located.1 Investor-owned hospitals are less likely to be teaching hospitals due to the costs associated with medical complexity, patient acuity, research activity, higher physician salaries, and expensive medical equipment.1 Federal and state governments are currently looking into revisions in payment policies to support hospitals that disproportionately serve poor and uninsured patients; however, managed care has initiated cost containment strategies that include contracting with hospitals that offer lower fees. The costs associated with teaching hospitals
Be cognizant of your role as a financial steward of your institution while concurrently maintaining quality patient outcomes.
safety scores, it was concluded that HCA hospitals had higher hcahps scores and adherence to EBGs than non-HCA for-profit, not-for-profit, and public hospitals.16 HCA hospitals also had decreased mortality and readmission rates.16 Competing interests of the author of this study aren’t documented. The financial viability of teaching hospitals is a concern with today’s economy and government aid reform. Not-for-profit hospital missions, which include education,
are 30% to 42% higher than the costs associated with nonteaching hospitals.1 Many hospitals today are increasing revenue by incorporating a shift of services from inpatient to outpatient. In not-for-profit facilities, outpatient visits have increased by 4.3% and inpatient days have decreased by 3.9%.4 There’s evidence that for-profit hospitals provide more lucrative specialties of care, such as cardiology, rehabilitation, and plastic surgery.
42 November 2013 • Nursing Management
In 2010, a nurse employed at an HCA hospital approached HCA’s board of ethics and compliance to report unnecessary cardiac procedures being performed. An internal investigation was initiated and it was determined that HCA “made misleading statements in medical records” that led to many patients having their health put at risk by unnecessary cardiac catheterizations.7,17 In 2002, HCA was found guilty of perpetrating Medicare fraud and settled for more than $1.7 billion dollars.7,18,19 In 2008, HCA hospitals changed the billing codes of Medicare insured patients treated in their EDs to reflect that patients were being treated for more emergent and acute illnesses than were present. In 2009, this practice increased its operating earnings by nearly $100 million.7 HCA’s desire to capitalize on Medicare patients is likely the reason why 47% of hospitals in Florida, an area with a large proportion of retired Medicare users, are investor owned.20 Studies have concluded not-for-profit hospitals in the same vicinity of for-profit hospitals tend to be influenced by and exhibit similar profit maximizing behavior.2,21 Unfortunately, nurse managers employed at investor-owned hospitals work in environments where substantial evidence exists that patient safety and health are being compromised for profit.
Reaching a verdict It’s the goal of the current government that healthcare reform and the enactment of the BBA will result in higher quality patient care, and that future patients will have the freedom and ability to access hospital satisfaction scores to make more educated decisions regarding their healthcare. It’s becoming quite clear that now, more than ever, www.nursingmanagement.com
Copyright © 2013 Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.
nonfinancial measures, such as efficiency, productivity, and quality, will be the factors that affect the long-term success of hospitals.22 Nurse managers can benefit from the reform by developing strategic plans that include monitoring measurable efficiency, quality, and productivity indicators. There’s conclusive evidence that these measures impact long-term financial performance in both not-for-profit and for-profit hospitals.22 Positive hospital reputation and patient perception improve financial outlook. Nurse managers should be cognizant of their role as financial stewards in healthcare institutions while concurrently maintaining quality patient outcomes. Evidence-based research has huge implications on practice. Audits on staff members’ adherence to best practice guidelines are commonplace. Hospital accreditation is based on meeting quality and safety indicators set by The Joint Commission. Efficiency and productivity indicators are less utilized by existing healthcare facilities. Efficiency measures used in a recent study included full-time equivalent employees per occupied bed (FTE/ bed), work hours per adjusted patient day (WH/APD), and occupancy rate (ratio between total inpatient days and total bed days). Higher occupancy rates and lower WH/APD or labor intensity result in greater long-term financial performance.22 FTE/bed didn’t impact financial earnings. Despite this finding, it has been shown that increased RN staffing results in significant cost savings.22 This study determined that current productivity measures aren’t indicative of increased financial returns or future success. The nurse manager is in a unique position to educate hospital investors www.nursingmanagement.com
regarding measures that result in long-term viability and positive financial outcomes. Business is business, but nurses have ethical principles and guidelines that drive their practice. Transformational nurse managers who are intentional in their decision making while encouraging values necessary for effective leadership and healthy work environments may positively influence behavior at for-profit hospitals and improve conditions for future patients. NM REFERENCES 1. Liu LL, Forgione DA, Younis MZ. A comparative analysis of the CVP structure of nonprofit teaching and for-profit non-teaching hospitals. J Health Care Finance. 2012; 39(1):12-38. 2. Cutler DM, Horwitz JR. Converting hospitals from not-for-profit to for-profit status: why and what effects? http://www.nber.org/ papers/w6672.pdf. 3. Schuhmann TM. Can net income from non-patient-care activities continue to save hospitals? Healthc Financ Manage. 2010;64(5):74-80,82,84. 4. Selvam A. For-profits rising: not-for-profits still dominate, but rivals advance. Mod Healthc. 2012;(suppl 22). 5. Commins J. Moody’s still bearish on notfor-profit hospitals. http://www.health leadersmedia.com/page-1/FIN-288696/ Moodys-Still-Bearish-on-NotforProfitHospitals. 6. U.S. Department of Commerce, United States Census Bureau. Health insurance highlights: 2011. http://www.census.gov/ hhes/www/hlthins/data/incpovhlth/2011/ highlights.html. 7. Creswell J, Abelson R. A giant hospital chain is blazing a profit trail. New York Times. August 14, 2012. 8. Devereaux PJ, Heels-Ansdell D, Lacchetti C, et al. Payments for care at private for-profit and private not-for-profit hospitals: a systematic review and meta-analysis. CMAJ. 2004;170(12):1817-1824. 9. Devereaux PJ, Choi PT, Lacchetti C, et al. A systematic review and meta-analysis of studies comparing mortality rates of private for-profit and private not-for-profit hospitals. CMAJ. 2002;166(11):1399-1409. 10. Kennedy FA, Burney LL, Troyer JL, Stroup C. Do non-profit hospitals provide more charity care when faced with mandatory
minimum standard? Evidence from Texas. J Accounting and Public Policy. 2010;29(3): 242-258. 11. American Hospital Association. Fast facts on U.S. hospitals. http://www.aha.org/ research/rc/stat-studies/fast-facts.shtml. 12. Hospice Management Advisor. For-profit vs. not-for-profit: is one better than the other? 2011. http://www.highbeam.com/doc/ 1G1-253743585.html. 13. Garg PP, Frick KD, Diener-West M, Powe NR. Effect of the ownership of dialysis facilities on patients’ survival and referral for transplantation. N Engl J Med. 1999;341(22): 1653-1660. 14. Eggleston K, Shen YC, Lau J, Schmid CH, Chan J. Hospital ownership and quality of care: what explains the different results. http://www.nber.org/papers/w12241.pdf. 15. Shen YC, Eggleston K, Lau J, Schmid CH. Hospital ownership and financial performance: what explains the different findings in the empirical literature? Inquiry. 2007; 44(1):41-68. 16. Jha A. Profits, quality, and U.S. hospitals. http://wwwthehealthcareblog.com/ blog/2012/08/20/profits-quality-andu-s-hospitals/. 17. Abelson R, Creswell J. Hospital chain inquiry cited unnecessary cardiac work. New York Times. August 6, 2012. 18. Schneider EC, Zaslavsky AM, Epstein AM. Use of high-cost operative procedures by medicare beneficiaries enrolled in for-profit and not-for-profit health plans. N Engl J Med. 2004;350(2):143-150. 19. Silverman EM, Skinner JS, Fisher ES. The association between for-profit hospital ownership and increased medicare spending. N Engl J Med. 1999;341(6):420-426. 20. Alliance for Advancing Nonprofit Health Care. Basic facts and figures. http://www. nonprofithealthcare.org/resources/Basic FactsAndFigures-NonprofitHospitals.pdf. 21. Duggan M. Hospital market structure and the behavior of not-for-profit hospitals. Rand J Econ. 2002;33(3):433-446. 22. Vélez-González H, Pradhan R, WeechMaldonado R. The role of non-financial performance measures in predicting hospital financial performance: the case of for-profit system hospitals. J Health Care Finance. 2011;38(2):12-23. Mari Scalesse is an ICU/ED float nurse at Hartford Hospital in Hartford, Conn. The author has disclosed that she has no financial relationships related to this article. DOI-10.1097/01.NUMA.0000432220.71510.72
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