Hospitals converting to for-profit status show better financial health, no loss in quality

Graphic of a hospital

Hospitals switching to for-profit status improved their financial health, but their outcomes for patients did not change, the researchers found; © Murtazin

Switching from nonprofit to for-profit status appears to boost hospitals' financial health but does not appear to lower the quality of care they provide or reduce the proportion of poor or minority patients receiving care, according to a new study from Harvard School of Public Health (HSPH) and Brigham and Women's Hospital.

"Critics of for-profit hospitals have argued that they are worse at providing good care to patients and that therefore we should limit them," said Ashish Jha, professor of health policy and management at HSPH and senior author of the study. "Over the past decade, hundreds of hospitals have switched from being nonprofit to for-profit. Our study finds that if the public health goal is to improve hospital care, then focusing on things like for-profit or nonprofit status is a distraction."

Jha and his colleagues undertook the study to shed light on the growing and controversial trend of nonprofit hospitals switching to for-profit status; over the past decade, more than 200 hospitals in the U.S. have made this switch.

Supporters of such moves have argued that becoming for-profit helps hospitals bring in needed resources and experienced management, thereby allowing them to improve the quality and efficiency of their care. Critics have argued that once hospitals become for-profit, the focus will be primarily on maximizing profits while shunning disadvantaged patients and paying less attention to providing high-quality care. But there had been little recent evidence to support either contention.

Using Medicare data on 4.8 million patients, the researchers looked at 4,571 hospitals in 50 states and the District of Columbia. Over an eight-year period, from 2002 to 2010, 237 of the hospitals converted from nonprofit to for-profit status and 4,334 didn't switch. The researchers assessed the hospitals' financial performance and quality of care both before and after conversion. They looked particularly at how vulnerable populations fared when hospitals switched to for-profit status.

The researchers found that the hospitals that converted were more often small or medium in size, located in the south, in an urban or suburban location, and were less likely to be teaching hospitals than hospitals that didn't convert.

Hospitals switching to for-profit status improved their financial health, but their outcomes for patients did not change, the researchers found. Quality of care and mortality rates didn't show any noticeable change compared with control hospitals that did not switch. Likewise, the researchers found no evidence that hospitals switching to for-profit status were subsequently less likely to care for poor patients or for racial or ethnic minorities.

"While issues like profit status get a lot of attention, we really need to focus our efforts on the much more important issue of why some hospitals provide good care while so many others don't —irrespective of their ownership status," said Jha.; Source: Harvard School of Public Health