• Follow Essays, Opinions and Curated News for the Public Health, Economics, Finance & Policy Management Space on WordPress.com
  • Member Statistics

    • 678,540 Subscribers-to-Date [Sponsored by a generous R&D grant from iMBA, Inc.]
  • Our ME-P Channels

  • ME-P Archives Silo [2006 – 2017]

  • CERTIFIED MEDICAL PLANNER® program

    New "Self-Directed" Study Option SinceJanuary 1st, 2017
  • Dr. David Marcinko [Publisher-in-Chief]

    untitled

    Distinguished Professor, Endowed Chairman and Wall Street physician executive Dr. David Edward Marcinko MBBS DPM MBA MEd BSc CMP® is originally from Loyola University MD, Temple University in Philadelphia and the Milton S. Hershey Medical Center in PA; Oglethorpe University, and Atlanta Hospital & Medical Center in GA; and Aachen City University Hospital, Koln-Germany. He is one of the most innovative global thought leaders in health care business and entrepreneurship today. Dr. Marcinko is a board certified physician, surgical fellow, hospital medical staff Vice President, public and population health advocate, and Chief Executive & Education Officer with more than 400 published papers; 5,150 op-ed pieces and over 135+ domestic/international presentations to his credit; including the top 10 biggest pharmaceutical companies and financial services firms in the nation. He is also a best-selling Amazon author with 30 published text books in four languages [National Institute of Health, Library of Congress and Library of Medicine]. Dr. Marcinko is past Editor-in-Chief of the prestigious "Journal of Health Care Finance", and a former Certified Financial Planner®, who was named "Health Economist of the Year" in 2010, by PM magazine. He is a Federal and State court approved expert witness featured in hundreds of peer reviewed medical, business, management and trade publications [AMA, ADA, APMA, AAOS, Physicians Practice, Investment Advisor, Physician's Money Digest and MD News]. As a licensed insurance agent, RIA and SEC registered affiliate, Dr. Marcinko is Founding Dean of the fiduciary focused CERTIFIED MEDICAL PLANNER® chartered designation education program; as well as Chief Editor of the HEALTH DICTIONARY SERIES® Wiki Project. His professional memberships include: ASHE, AHIMA, ACHE, ACME, ACPE, MGMA, FMMA and HIMSS. Dr. Marcinko is a MSFT Beta tester, Google Scholar, "H" Index favorite and one of LinkedIn's "Top Cited Voices". Presently, Professor Marcinko is "ex-officio" and R&D Scholar-on-Sabbatical for iMBA, Inc.

    entrepreneur

    Frontal_lobe_animation

  • www.PodiatryPrep.org

    BOARD CERTIFICATION EXAM STUDY GUIDES Lower Extremity Trauma [Click on Image to Enlarge]
  • Most Recent ME-Ps

  • ME-P Free Adverting Sales Consultation

    The "Medical Executive-Post" is about connecting doctors, health care executives and modern consulting advisors. It’s about free-enterprise, business, practice, policy, personal financial planning and wealth building capitalism. We have an attitude that's independent, outspoken, intelligent and so Next-Gen; often edgy, usually controversial. And, our consultants "got fly", just like U. Read it! Write it! Post it! "Medical Executive-Post". Call or email us for your FREE advertising and sales consultation TODAY [770.448.0769] ************************************************************************ Product Details Product Details
  • Medical & Surgical e-Consent Forms

    ePodiatryConsentForms.com
  • Hope Hetico RN MS [Managing Editor]

    Prof. Hetico
    Professor of Health Care Policy and Administration

    ME-P SYNDICATIONS:
    WSJ.com,
    CNN.com,
    Forbes.com,
    WashingtonPost.com,
    BusinessWeek.com,
    USNews.com, Reuters.com,
    TimeWarnerCable.com,
    e-How.com,
    News Alloy.com,
    and Congress.org

    Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

    Product Details

    Product Details

    Product Details

  • iMBA White Papers

    2017 Customized Industry Topics [$1,500 unlimited corporate license]March 5th, 2017
    Medical Clinic Valuations * Endowment Fund Management * Health Capital Formation * Investment Policy Statement Analysis * Provider Contracting & Negotiations * Marketplace Competition * Revenue Cycle Enhancements; and more! HEALTHCARE FINANCIAL INDUSTRIAL COMPLEX
  • Ann Miller RN MHA [Executive-Director]

    iMBA VIRTUAL OFFICES [1.770.448.0769] Atlanta, GA.
    Location doesn't matter. We welcome new long-distance clients and colleagues.

  • ME-P Publishing

  • SEEKING INDUSTRY PARTNERS?

    If you want the opportunity to work with leading health care industry insiders, innovators and watchers, the "ME-P" may be right for you? We are unbiased and operate at the nexus of theoretical and applied R&D. Collaborate with us and you’ll put your brand in front of a smart & tightly focused demographic; one at the forefront of our emerging healthcare free marketplace of informed and professional “movers and shakers.” Our Ad Rate Card is available upon request [770-448-0769].
  • Reader Comments, Quips, Opinions, News & Updates

  • Start-Up Advice for Businesses, DRs and Entrepreneurs

    ImageProxy “Providing Management, Financial and Business Solutions for Modernity”
  • Up-Trending ME-Ps

  • Capitalism and Free Enterprise Advocacy

    Whether you’re a mature CXO, physician or start-up entrepreneur in need of management, financial, HR or business planning information on free markets and competition, the "Medical Executive-Post” is the online place to meet for Capitalism 2.0 collaboration. Support our online development, and advance our onground research initiatives in free market economics, as we seek to showcase the brightest Next-Gen minds. ******************************************************************** THE ME-P DISCLAIMER: Posts, comments and all opinions do not necessarily represent iMBA, Inc.
  • OIG Fraud Warnings

    Beware of health insurance marketplace scams ================================================ OIG's Most Wanted Fugitives at oig.hhs.gov

For-Profit versus Not-For-Profit Healthcare

Join Our Mailing List

An Often Contentious Problem

[By Staff Writers]

Hospital             

In general industry, as well as in healthcare, there has been a longstanding discussion on the relative efficiencies of for-profit businesses versus not-for-profits, which concerns the very merits of competition itself.

The Studies

According to Robert James Cimasi MHA, ASA, AVA, CMP™ of Health Capital Consultants in St Louis, a number of recent studies, some more controversial than others, have investigated the effect of tax status on the relative costs and quality of services at these different types of hospitals.

For example, Bob Cimasi of www.HealthCapital.com reported that one study, published in the New England Journal of Medicine (NEJM), compared Medicare spending (adjusted for local costs, patient demographics, and the types and numbers of local healthcare providers and facilities) in markets with only non-profit hospitals, only for-profit hospitals, and those with both types.

The results for the years studied, 1989, 1992, and 1995, showed that the government spends more for every type of service studied (hospital, physician, home health, and other facility services) in those areas with only for-profit hospitals. Costs for areas with only not-for-profit hospitals were the lowest, with spending in markets with both for-profit and not-for-profit hospitals falling in the middle of the range.

This study also tracked adjusted mean per capita spending for hospitals that had a change in their tax status.

For the period of the study, 1989-1995, they found that areas where all hospitals were non-profit, and remained so, had cost increases of $866, compared with $1,295 for areas where non-profits converted to for-profit status. Areas with only for-profit hospitals had cost increases of $1,166 from 1989-1995, whereas those which changed to non-profit hospital areas had the smallest cost increases of $837.

These results may indicate that the tax status of hospitals affects the costs of health services provided by physician providers and other healthcare facilities. Further, this reported effect, if real, may be considered by many to be detrimental to the public good. In the six years examined by this study, the difference in costs between these market types was indicated to have grown from 12.7% to 16.5%. In 1995, annual Medicare spending was $732 higher per enrollee in markets with only for-profit hospitals than in non-profit markets. This difference may be extrapolated to $5.2 billion dollars in total extra annual costs to Medicare.

Even More Studies

Other studies, according to Cimasi, have examined these cost differences and have found them to result from increased administrative and ancillary services costs. For-profits appear to spend less on personnel, charity care, hired help, and length of stay than not-for-profits. Moreover, spending differences are reflected in measurements of outcomes and quality. A study of death rates has presented them to be 6-7% lower in not-for-profit hospitals as compared to for-profits and 25% lower for teaching hospitals.[1]

The fact that costs in those markets with both for-profit and not-for-profit hospitals were in the middle of the range may be interpreted as resulting from the averaging of costs from these different classifications of organizations. However, the behavior of the not-for-profit class was apparently also affected by this “competition” with for-profits in mixed markets. For example, studies have shown that charitable care by non-profits in these markets is reduced to levels similar to those provided by for-profits. 

dhimc-book

The NEHJM Editorial

A NEJM editorial, several years ago, discussing several hospital costs studies attributes these higher costs to a lack of competition (or other motivation such as charity) that might act to prevent for-profit companies from seeking to maximize their profits at the cost of the public good.

“Market medicine’s dogma, that the profit motive optimizes care and minimizes costs, seem impervious to evidence that contradicts it.” Then further, “The competitive market described in textbooks does not and cannot exist in health care for several reasons.”[2]

Thus, even if competition could improve care and lower costs, this isn’t happening because expected results from competition are missing in the healthcare markets.

Competition

An examination of hospital competition is also of interest, as many hospital markets are too small to support more than one hospital (a monopoly) or more than a very few competing organizations. The authors of the NEJM editorial went on to cite hospital monopolies and “virtual monopolies” as one of the barriers to competition, stating that roughly half of Americans live in markets too small to support medical competition and that for-profit chains have focused acquisitions on these markets.

More Barriers

The next barrier discussed is constraints on consumer demand imposed by illness. The authors point to the difficulties consumers have in comparing costs, outcomes, and quality in order to choose among competing services.

Lastly, the fact that the government makes the purchasing decisions and pays the majority of healthcare costs, rather than the consumers or employers who are using the services, is presented as a significant barrier to competition.

Assessment

Many healthcare planners find these studies to be a stark illustration of the argument that the benefits of competition for profits are lost whenever competitive market controls are absent to prevent the abuses of profiteering. As one might expect, for-profit hospital companies might point out that this is the case for both not-for-profit and for-profit dominated markets.

References:

1. Wolfe, S. M., M.D., Editor, “Hidden Rip-off in U.S. Health Care Is Unmasked In New England Journal of Medicine Articles.” Health Letter 15: 9, Public Citizen Health Research Group, (Sept. 1999):

2. Woolhandler, S. and Himmelstein, D. U. “When Money Is the Mission — The High Costs of Investor-Owned Care.” NEJM 341: 6 (Aug. 5, 1999): 444

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Product DetailsProduct DetailsProduct Details     

Advertisements

9 Responses

  1. Competitive Analysis

    More thoughts on competitive healthcare analysis can be found in the premium print journal: http://www.HealthcareFinancials.com by Robert James Cimasi, of Health Capital Consultants, LLC.

    Ann

    Like

  2. Car 54 … er … ah; I mean … American Hospital Association where are you?

    Among the ideas on Capitol Hill are taxing health benefits, cutting back tax advantages for health savings accounts, lowering the amount employees can contribute to flexible spending accounts and cutting back the itemized tax deduction for medical expenses.

    Congress may also lower or even eliminate special tax deductions for non-profit Blue plans, or impose an excise tax on non-profit hospitals that don’t meet minimum levels of charitable activity or limit charges to the uninsured and indigent.

    What do you think about that?

    Kelly

    Like

  3. Community Benefit Laws

    According to an Internal Revenue Service survey of nearly 500 not-for-profit hospitals in May 2006, only nine percent of total revenues were dedicated to community charity care. The report warned charity [Samaritan] and not-for-profit healthcare entities that attempt to set a percentage threshold for determining tax-exempt compliance may have a “disproportionate impact on hospitals, depending upon their size, where they are located their community benefit mix, and other hospital and community demographics.”

    In a follow-up, February 12, 2009, the IRS reported on executive compensation of the same tax-exempt hospitals.

    Link: http://greisguide.com/wp-content/uploads/2009/02/eo_interim_hospital_report_072007.pdf

    While the question whether tax-exempt hospitals are providing enough charity care to justify their tax exemption remains, the report failed to reach specific conclusions on whether existing community benefit standards are appropriate and if tax-exempt hospital executives are being compensated too richly. The findings, for example, also serve as a caution to long term acute care hospital [LTACH] governance and compensation committees. The CEOs and CFOs of these entities should note that a similar survey may be performed on for-profit hospitals in the near future.

    Hope Hetico; RN, MHA
    [Managing Editor]
    http://www.HealthcareFinancials.com

    Like

  4. For more on tax breaks and non-profit hospitals, visit this link:

    http://www.kevinmd.com/blog/2009/07/why-removing-the-tax-breaks-for-non-profit-hospitals-could-be-dangerous.html

    Joseph

    Like

  5. Hospital CEO Salary

    Five hospital CEOs in Georgia made more than $1 million in the fiscal year ending in 2009, the last tax records available.

    http://www.ajc.com/news/atlanta/hospital-ceo-pay-has-997155.html

    Craig

    Like

  6. Negative Outlook for Not-for-Profit Hospitals in 2012

    In the September 2011 report, “US Not-for-Profit Hospital Medians Show Resiliency Against Industry Headwinds But Challenges Still Support Negative Outlook,” Moody’s said most US not-for-profit hospitals struggled with weakening revenue growth in 2010 but still maintained stable financial performance and achieved somewhat improved balance sheet positions.

    And, in a significant trend, median growth rate of net patient revenues and total operating revenues slowed to just 4.1 percent and 4.0 percent, respectively, with continued pressure expected in FY 2011-12. Median growth rate of inpatient admissions turned negative, -0.4 percent in FY 2010, following no growth in FY 2009.

    However, on the upside, Moody’s reported that an intense focus on controlling operating spending led to improvement in key FY 2010 operating measures and improved debt coverage ratios. Total cash and investments as well as liquidity metrics also showed improvement due to stock market gains (now likely tempered), lower capital spending and moderately higher retained earnings.

    Stanford

    Like

  7. Why do non-profit hospitals compete with each other?

    While we are talking about things that drive health care costs up, this one has bothered me since I was in practice years ago.

    I am a believer in competition, I think it forces us to be creative and provide better, cheaper, more efficient products and services. But, there is the mindset of leadership at play as well.

    Are we competing to provide better patient services to improve patient care, or are we doing anything we can to take as many patients away from one health system and get them into ours?

    http://www.kevinmd.com/blog/2011/11/nonprofit-hospitals-compete.html

    Dr. Michaels

    Like

  8. Snapping Up Public Hospitals as Investments?

    Investors are starting to buy publicly traded hospital chains, expecting patient visits to rebound as the economy improves, as Baby Boomers retire and as the unemployed find jobs, MSN Money just reported.

    http://money.msn.com/business-news/article.aspx?feed=OBR&date=20120620&id=15247960

    Kennilworth

    Like

  9. For-profit emergency rooms draw patients … and anger

    These stand-alone facilities are spreading in affluent communities, but hospitals and insurance companies see them as unfair competitors.

    http://money.msn.com/now/post–for-profit-emergency-rooms-draw-patients-and-anger

    I ran an ambulatory surgery center [ASC] for almost two decades; so this new B-model caught my eye.

    Dr. David Edward Marcinko MBA
    http://www.CertifiedMedicalPlanner.org

    Like

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: