Background: There is growing concern certain not-for-profithospitals are not providing enough uncompensatedcare to justify their tax exempt status. Our objective was to compare the amount of uncompensatedcareprovided by not- for-profit (NFP), for-profit (FP) and governmentownedhospitals.
Methods: We used 2005 state inpatient data (SID) for 10 states to identify patients hospitalized for three common conditions: acute myocardial infarction (AMI), coronary artery bypass grafting (CABG), or childbirth. Uncompensatedcare was measured as the proportion of each hospital's total admissions for each condition that were classified as being uninsured. Hospitals were categorized as NFP, FP, or governmentowned based upon data obtained from the American Hospital Association. We used bivariate methods to compare the proportion of uninsured patients admitted to NFP, FP and governmenthospitals for each diagnosis. We then used generalized linear mixed models to compare the percentage of uninsured in each category of hospital after adjusting for the socioeconomic status of the markets each hospital served.
Hospitals’ behavior not only reflects their objectives but also corresponds to their economic, legal and political environment. The growing similarity in capacity between nonprofit and for-profithospitals raises a conceptual obstacle for the assertion that nonprofit and for-profithospitals have intrinsically different objectives. This is especially true when, currently, for-profit and nonprofit hospitals treat a rather similar mix of patients in addition to offering and delivering comparable services. I claim that the growing similarity between for-profits and nonprofit hospitals is the result of changing market conditions, such as crowding-out of governmentownedhospitals, growing population size, and changes in policy dynamics (e.g. tax code, antitrust involvement, federal and state programs). If different behavior is the result of different objectives, then growing similarity in behavior must correspond to growing similarity in objectives. Some scholars subscribe to such a statement and claim that nonprofit hospitals “lost their way”. 62 Yet, according to Stigler and Becker (1977) the treatment of individual preferences as constant is more valuable and credible for finding an economic reason for observed market changes. 63
County not-for-profithospitals and making comparisons to the amount of uncompensatedcareprovided by these hospitals was be- yond the scope of this analysis. And we noted that investor-ownedhospitals receive no tax exemption, yet some provide charity care. 17 Tax exemption is conferred on not-for-profithospitals and other nonprofit organizations because such organizations provide benefits to the community in exchange for not paying taxes. 18 These benefits, which have recently come to be known as community benefits, are public goods provided to persons without expectation of payment and may include such services as indigent-care provision or free cancer screenings. Community benefits also benefit the community as a whole: Providing health care, regardless of one’s ability to pay, makes for healthier communities.
There are a number of issues that merit reexamination, including whether nonprofit hospitals perform sufficiently different services of benefit to the public to justify their tax exemption. To examine these hospitals’ tax- exempt status, we must look back several decades. Before 1969, the Internal Revenue Service (IRS) required hospitals to provide charity care to qualify for tax-exempt status. Since then, however, IRS has not specifically required such care for a hospital to be exempt from federal taxation and have access to tax-exempt bond financing and charitable donations, as long as the hospital provides benefits to the community in other ways. Community benefits include such services as the provision of health education and screening services to specific vulnerable populations within a community, as well as activities that benefit the greater public good, such as education for medical professionals and medical research. Nonprofit hospitals may also be exempt under state law from state and local taxes.
The current environment in the United States surrounding health care issues such as spending, costs, access, and affordability points toward a societal obligation to help provide for those who cannot pay the costs of their own care.
Hospitals are often one of the largest employers in communities, and like many other organizations, view providing charitable care as an aspect of their corporate social responsibility (CSR). This study compares the recent levels of charitable care of for-profit, not-for-profit, and governmenthospitals. The authors attempt to determine which type of hospital is the most charitable, what the relationship between CSR and profitability may be, and the differences in the relationship between CSR and profitability for various hospital types. Data from a sample of 167 short-term, general hospitals were examined and results indicated that there were significant differences in CSR for government, not-for-profit and for-profit. Higher levels of CSR did not affect firm profitability, although significant interactions were found between control and CSR for varying levels of profitability.
n “Other” activities. The reasons for in- cluding Medicare and Medicaid shortfalls, price discounts to private health insurance companies, and losses on medical education are more debatable. A Medicare or Medicaid shortfall occurs when government payments are lower than the hospital’s treatment costs. Proponents of treating such shortfalls as com- munity benefits argue that a hospital relieves the government of a financial burden when it provides care to publicly insured patients. Al- ternatively, if one believes that Medicare and Medicaid hospital payments reflect voters’ preferences for the amount of medical re- sources they wish to devote to these patients, the shortfalls should not be considered a com- munity benefit. According to this view, if soci- ety wanted hospitals to use more resources in treating Medicare and Medicaid patients, it would direct politicians to raise payment rates. The fact that Medicare and Medicaid pay less than the cost of care at some hospitals EXHIBIT 1
(1999) provide a similar result within a cohort of community hospitals but add changing professional norms as another factor that can produce turbulence in health care markets.
For this dissertation, technology, policy, regulation, and consumer perspective are identified as health care industry related factors contributing to external environment turbulence. A policy related example in health care is the recent implementation of the Affordable Care Act (ACA). The ACA is aimed at providing affordable care, improving quality of care while reducing cost and expanding health care services to the uninsured. To achieve these goals, the ACA has incentivized the formation of Accountable Care Organizations (ACOs) as one mechanism to improve coordination of care among providers and care settings for the defined population they serve. ACOs are provided global payments for managing the health of their population. Providers within these networks either assume risk for higher costs or reap benefits from under-expensed payments. As of 2013, over 400 hospitals became part of an ACO. The movement to ACOs has increased the number of networked hospitals and physicians, leading to a twenty percent increase in market consolidation (Japsen, 2013; McCarthy, 2011).
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The workshop ends with a unique two-step Assessment Methodology that not only checks the theoretical learning immediately after the workshop, but also the experiential knowledge gained over a period of time:
in Not-for-Profit Businesses
Thus far, we have focused exclusively on the financial management of investor- owned, profit-oriented firms. However, financial management is also important in not-for-profit businesses, defined as corporations that charge a fee for their services and are expected to generate enough revenues to cover costs, but that have neither outstanding stock nor stockholders. Examples of not-for-profit businesses include thousands of municipal utilities ranging from Los Angeles Power & Light and the New York Power Authority to tiny rural electric authority (REA) cooperatives; all private colleges and universities; about 85 percent of all U.S. hospitals, nursing homes, and other health care facilities; and even tourist attractions such as the Bal- timore and Tampa aquariums.
32 profitable for-profithospitals had slightly higher TPS scores than non-profithospitals.
Next I will look at which aspects of quality drive this difference in overall quality.
Once broken down into its four components, the regressions provided supports for hypotheses 2(b) and 2(c). Neither the Clinical Care nor Safety components of TPS were significantly affected by the profit status of the hospital, providing support for hypothesis 2(b). The interaction variable also did not come back statistically significant in either regression. These results indicate that for-profit and non-profithospitals do not differ in terms of Clinical Care and Safety. In the healthcare industry, this is important to note, because it tells us that profit maximization does not go so far as to affect survival rates or infection rates. Had the regressions shown a significant effect by profit status on either of these TPS components, it would be concerning to see a differing emphasis on the basic parts of healthcare based on differing management goals.
to demonstrate both service and business acumen. Government regulations require all hospitals to provide a certain level of service regardless of the business model. The interview discussions supported Chaney’s (2016) assertations and questions some of the long-held beliefs of nonprofit and for-profit healthcare organizations. In speaking with healthcare leaders, there appears to a community component in each sector; however, how each entity contributes to the community may look different. For nonprofits consider local community needs and they play a key role in determining goals, services, and priorities. Nonprofits may be more apt to provide new or unique services that meet the needs of the community regardless of their return on investment. In contrast, for-profits contribute through paying taxes and in various other ways. A leader whose organization transitioned from nonprofit to for-profit shared that after 2 years, there had not been a decrease in charity care due to being acquired by a for-profit entity. In addition to the charity care that was previously provided, the organization provided grants to meet community needs and paid taxes. However, in comparison to nonprofits that provide community benefit reports where the contribution is clear, for-profit organizations do not have the same requirement; therefore, the contributions may not be recognized by the community.
II. EXECUTIVE SUMMARY
Publicly-funded health care programs – often referred to as the health care safety-net – are intended to provide access to basic, affordable medical care to poor and low-income Americans. As health care costs continue to rise, private coverage moves farther out of financial reach for many families. Over the last ten years, average premiums for family health care coverage have increased 119 percent. 2 Public programs have stepped in to ensure access to needed health services for the most vulnerable members of society. This, in turn, has put tremendous financial pressure on federal, state and local government budgets, which are already experiencing significant annual budget shortfalls. Growing public health care costs have posed a significant fiscal problem for states like Illinois that have structural imbalances in their tax structure, meaning that annual tax revenue does not keep pace with the inflationary cost alone of providing public services. 3 Illinois’ deficit is estimated to be between $4 billion and $9 billion for this fiscal year. 4 Accordingly, it is imperative that all public dollars lawmakers dedicate to foster access to affordable health care are actually applied to that end. This should be the goal in good economic times and bad. However, it is particularly important during severe economic downturns. In difficult economic times when individuals lose their jobs and their employer-sponsored health coverage, the need for essential public services, including health care, increases. At the same time demand for public services is growing, tax revenue that supports services declines, making every available taxpayer dollar that much more important.
Falling hospital reimbursement rates coupled with uncompensatedcare and other factors such as population density, expensive medical technology, Certificate of Need (CON) laws, and reduced travel time to urban facilities has made it difficult for rural hospitals to provide adequate quality of care compared with urban-based hospitals, urban-outpatient care centers, and urban-urgent care centers (Moscovice & Rosenblatt, 2000; Berry, 2006). This problem has persisted because private patients whom have the ability to procure healthcare services either through out-of-pocket or health insurance bypass rural care for non-emergent needs because it’s cheaper, faster, and more reliable to use urban care services, while rural hospitals attract patients with Medicare/Medicaid (Lee, 2008). Uncompensatedcare has been directly associated with the uninsured that receive healthcare services. In 2008, it was estimated the U.S. government covered 75% of the uncompensatedcareprovided by hospitals, community-based providers, and private physicians (Hadley et al, 2008).
Rural hospitals provide healthcare for approximately 54 million individuals across the U.S. (AHA, 2006). In 2006, 13% of discharges were from rural hospitals, which serve roughly 21% of the U.S. population (Levit, Stranges, Ryan, & Elixhasuer 2006). The Census Bureau (2000) classified urban as all territory, population, and housing units located within an Urbanized Area (UA) or an Urban Cluster (UC). It delineates UA and UC boundaries to encompass densely settled territory, which consists of: core census block groups or blocks that have a population density of at least 1,000 people per square mile and surrounding census blocks that have an overall density of at least 500 people per square mile (US Census Bureau 2008). All other areas not meeting such criteria is defined as rural (Joubert, Prentice, Moulin, Liaw, Joubert, et al. 2008). In 2000, rural hospitals made up 46% of the total hospitals across the United States (Loux 2000). Rural hospitals can provide a wide range of services from inpatient to outpatient care as well as ER capabilities. However, rural hospitals have a much higher percentage of UCC (9.7% of net inpatient revenue) than urban hospitals (6.3%), but rural hospitals have controlled cost of patient care much better than urban resulting in breaking almost even (0.5 % profit margin ) while urban hospital had a negative margin (-1.9%) in a Medicare study of short term acute carehospitals (Schuhmann 2008).
The natural way out of this dilemma was to make others share this burden. There were only a few options for doing this. 1) The states had a constitutional responsibil- ity and funded many special needs such as investment and maintenance projects.
Although most of this money went to public and nonprofit providers, states were not always unwilling to help proprietary providers, especially if they were deemed necessary from a public health perspective. This habit developed into a funding mindset that laid the grounds for the principle of dual funding. 2) It was thought that the owners of hospitals should help to fulfill hospital needs. Nonprofits had to rely on endowments and voluntary contributions to cover capital expenses and high operating losses. Municipalities owned their own hospitals and were thus legally responsible for the losses of such facilities. As a consequence, nonprofit owners and municipalities were given the role as payers of last resort. In 1954, the federal government maintained this situation for the years ahead. Through general legislation, sickness funds ‘detracted’ such contributions from the per diem rates they were allowed to reimburse 205 . Thus, the role of the owners in the funding of the hospital sector became more formalized. 3) Private insurers and private patients paid higher rates. These were used to subsidize losses and underfunding from the statutory insurance scheme. These high fees were also the only possibil- ity to make an investment profit. Proprietary hospitals, which sought to make a profit (and many did not), specialized almost exclusively on (medical) services and amenities for private patients. In addition, from the mid 1950s onwards, profit- oriented providers could step into the growing market for rehabilitation services and preventive treatments to diversify their business.
recognized by hospital charity care application processes) but suggested that hospitals should improve their charity care/financial assistance programs and billing systems to better identify eligible patients at the start of the care process and during the billing and collection processes. After considering these arguments, the IRS acknowledged that some portion of hospital bad debt was likely attributable to careprovided to patients with an inability to pay but was unwilling to concede that all bad debt should be considered a community benefit. 3 Instead, it included a schedule in the revised Schedule H to capture information on hospital bad debt levels and asked hospitals to estimate the portion of their annual bad debt expense attributable to patients that might otherwise qualify for charity care but had not been picked up in their financial assistance programs. Hospitals were also asked to provide a narrative statement justifying their estimates. As shown in Table 4, CAHs were less likely during the 2009 tax year to report bad debt expense in accordance with HFMA Statement 15 (54.6 percent), the recognized standard for classifying and reporting charity care, other forms of uncompensatedcare, and bad debt, than other rural hospitals (60.5 percent) and urban hospitals (64.6 percent). CAHs reported greater levels of bad debt (5.6 percent) when measured as a percentage of total expenses than other rural (3.6 percent) and urban hospitals (2.8 percent). CAHs are slightly less likely than other rural hospitals (94.8 percent and 96.9 percent respectively) to have written collections policies whereas CAHs and urban hospitals are equally likely to have such policies (94.8 percent). CAHs are also somewhat less likely (78.5 percent) than other rural hospitals (81.9 percent) and significantly less likely than urban hospitals (91.4 percent) to have collection policies that contain provisions on collection practices for patients known to qualify for charity care or financial assistance.
More than 1.4 million frail and vulnerable older adults reside and/or receive care services by health care providers in the nation’s more than 15,600 diverse types of NHs (Center for Medicare and Medicaid Services [CMS], 2016) which include FP, NFP, privately owned, governmentowned, and NFPRB types. A personal working experience showed that the residents in NHs were inadequately cared for when there was inadequate staffing of nurses. Hence, staffing of an adequate number of nurses is important for the older adults’ care delivery in NHs. This frail and vulnerable population continues to experience neglect and poor care outcomes in the hands of their health care services providers, resulting from the nonadherence to minimum nurse staffing standards. Quality and safe care outcomes, a significant issue for the NH residents, were found to lag behind the expected quality care indicators (Castle & Fergusson, 2010; Dellefield, et al., 2015;
In Tarrant County, Texas, 23 hospitalsprovided acute, rehabilitative, and long-term care in their facilities during 2004. In all, 16 facilities provided acute care, and most of these facilities
belonged to three integrated health systems. Health System 1 included six hospitals and one rehabilitation facility and was the dominant healthcare organization in Tarrant County. One public hospital; one children’s center, which acted as a referral center for the public hospital; and two rehabilitation systems with five private hospitals all existed in the county. There was also one stand-alone hospital belonging to another health system not present in Tarrant County (see Table 3).
2007). Future work should include in the empirical model a case mix severity measure from the discharge data using the ICD codes.
In conclusion, despite the limitations, our study represents a comprehensive examination of competition (CON), subsidy (uncompensatedcare pool) and requirement (community benefit requirement) regulations that have the most influence on hospital uncompensatedcare provision. It overcomes the limits of previous research that focused primarily on the effect of a single regulation in a given state. The current study not only improves generalizability by examining hospitals in 17 U.S. states, it also investigates multiple policy interventions and their interactions, which are argued to be crucial in understanding the impact of the regulatory environment on hospitals provision of uncompensatedcare. In addition, the current study improves upon measures of uncompensatedcare using a more direct measure of the actual care delivered to the uninsured --- admissions for self-pay/charity patients. Findings from this study suggest that nonprofit and for-profithospitals view and respond to policy incentives differently.
Several issues have given rise to recent concerns, both in Minnesota and nationally, about the amount of uncompensatedcare and community benefits provided by hospitals. First, recent increases in the number of people who do not have health insurance have likely also increased the demand for hospital uncompensatedcare as a “safety net” for the uninsured. In addition, public attention has been called to the fact that when uninsured patients receive care at a hospital, they have often been billed at levels far above what private insurers or public insurance programs would have paid for the same services. Finally, there has been increasing scrutiny of the community benefits provided by nonprofit hospitals, and whether the benefits are comparable to the tax exemptions that these hospitals receive as a result of their nonprofit status. 1