Study: Hospital services differ by ownership type

Nonprofit, for-profit, government facilities offer profitable care

Hospitals offer more relatively profitable services than unprofitable ones, regardless of for-profit, nonprofit or government status, according to a new study.

Meanwhile, government hospitals were most likely to offer relatively unprofitable medical and community outreach services, followed by nonprofit hospitals and for-profit hospitals, the study said.

The findings were similar to results from a comparable review that took place before passage of the federal Affordable Care Act (ACA) of 2010, the study said.

Examining services by nonprofit, for-profit and government hospitals in urban settings, the study could not conclude whether “one type of hospital offers a better level or mix of services than others,” said the study, “Hospital Service Offerings Still Differ Substantially by Ownership Type,” by Jill R. Horwitz and Austin Nichols. It was published by Health Affairs journal.

The researchers used data from the American Hospital Association (AHA) annual member surveys. Along with ownership type, they considered factors such as community demographics, hospital size, teaching status, market competition and population.

Since 2004, “the probability of a hospital offering a service was strongly related to ownership.” Nonprofit hospitals generally were larger than other types and “were more likely to offer a service, without regard to profitability, than were for-profit hospitals during our study period,” the report said.

However, they found “instances of misallocation,” with shortages of relatively unprofitable services, such as inpatient psychiatric emergency care, “and surpluses of profitable services such as invasive cardiac treatments,” regardless of ownership type.

Citing the examples of psychiatric emergency care and adult cardiac surgery, the study said the differences between profitable and nonprofitable offerings were “large and statistically significant.”

Nonprofit hospitals generally are exempt from taxes. Critics argue those hospitals do not do enough for patients or communities to justify that tax-exempt status.

The study noted that policy makers, the Internal Revenue Service and some researchers focus on free or subsidized care to measure nonprofit hospitals. The authors argued that is not the only or most important measure of the social value of nonprofit hospitals, which primarily are medical care providers.

There may be unintended consequences when nonprofit hospitals are required to provide large amounts of free care, the study said.

With small or negative margins, nonprofits may eliminate unprofitable services that benefit poor patients. Or, nonprofit hospitals could add or expand relatively profitable services that increase health care spending and cause unnecessary risks to patients, the study said.

The authors acknowledged limitations in the data.

For example, relative profitability of services was not verified. The AHA data was self-reported and about 6% of sample hospitals did not report services in a given year, the study said.

The study did not include rural hospitals or federal hospitals that serve limited populations, such as veterans, Native Americans or active duty military.