Selling Teaching Hospital To Investor-Owned Hospital Chains: Three Case Studies

David Blumenthal and Joel Weissman

Disclosures

Health Affairs. 2000;19(2) 

In This Article

Introduction

An increasing number of nonprofit healthcare facilities have been acquired by or converted to investor-owned organizations, which now own an estimated 15 percent of all U. S. general hospitals.[1] Although this is not a new phenomenon, questions continue to arise about the consequences for health care facilities, patients, and communities.[2]

Critics of investor ownership of healthcare facilities believe that for-profits are less likely than nonprofits are to provide charitable or unprofitable but valuable services, such as community outreach to indigent communities and uncompensated care to poor, uninsured patients. This belief reflects the view that for-profits place greater emphasis than nonprofits do on maximizing return on investment. Critics also question whether communities have been fairly compensated for the assets of nonprofit facilities.[3]

Two decades of research has failed to provide definitive empirical evidence on the differences between for-profit and nonprofit health care facilities and on the social consequences of changes in ownership.[4] In the past the subjects of such studies have mostly been community hospitals, with modest, if any, academic commitments. However, recent sales of several major teaching hospitals to investor-owned hospital chains provide new opportunities to explore questions about whether investor ownership alters the behavior of health care facilities.[5] On average, major teaching hospitals provide more indigent care than other nonprofit hospitals do.[6] In addition, teaching hospitals produce public goods in the form of teaching and research that are subsidized from lini al revenues.[7] Theory would predict that for-profit hospital chains will reduce subsidies of charitable and academic activities at academic health centers (AHCs) to maximize return on investment.

This raises two obvious questions. First, in light of such predictions, why did these organizations sell their facilities? Second, what are the actual consequences of such changes in ownership for AHCs' charitable and academic activities? We address these questions using data gathered from case studies of three teaching hospitals that have been acquired by investor-owned hospital chains.

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