Investor-owned, profit-making hospitals, the dominant hospitals in some parts of the nation, charge patients more and increase health care costs, according to surveys cited in today's New England Journal of Medicine.
The hospitals examined charged 15 to 24 percent more per patient, said Dr. Arnold Relman, the journal's editor, despite the fact that these fast-growing, usually corporation-owned hospitals claim to be more efficient and cost-effective than non-profit community and public hospitals.
"Judged not as businesses" intended to make money, "but as hospitals . . . supposed to serve the public interest, they have been less cost-effective" for the public, Relman charged in one of the strongest indictments of profit-making hospitals ever printed in a major medical journal.
Michael D. Bromberg, executive director of the Federation of American Hospitals, the investor-owned hospitals' main group, called Relman's facts "flawed."
Many public and other non-profit hospitals are deteriorating for lack of adequate financing, he maintained, while "We're making an effort to make sure the hospital system doesn't end up like the highways."
Bromberg said a California study cited by Relman as well as other studies fail to compare truly comparable hospitals in size, age and other aspects. Many investor hospitals are new and new hospitals always have higher starting costs, he added.
Once rare, for-profit hospitals are now the fastest growing of all hospitals, mainly because they attract growth capital from investors. Especially powerful in the South, Southwest and in California, they number 1,015 with 120,000 beds, about 15 percent of all hospitals.
The hospital corporations also operate 283 non-profit and public hospitals, mainly by contracts signed by officials or boards who found their hospital a financial drain.
Two years ago Lawrence J. Hogan, then Prince George's county executive, agreed to give the Hospital Corp. of America (HCA) a 21-year lease on two county hospitals, but was overruled by his council.
Investors own five Washington area general-care hospitals--Circle Terrace, Jefferson Memorial and Northern Virginia Doctors in Virginia and Prince George's Doctors' and Southern Maryland Hospital in Maryland--as well as several psychiatric hospitals.
Five corporations--HCA, Humana Inc., American Medical International, National Medical Enterprises and Lifemark--control two-thirds of general-care investor hospitals. HCA and Humana have been competing to build a new Reston area hospital, but neither has won government approval.
Relman based his editorial on a new study of 280 California hospitals, a fifth of them units in corporate chains, plus a 1980 study of all 82 non-profit and all 72 for-profit hospitals in Florida and a 1981 study of 53 chain-owned and 53 non-profit hospitals in California, Florida and Texas.
By and large, he said, the California hospitals ordered more tests and supplies per admission. "Despite their centralized management," much praised in business journals, "investor-owned hospitals have not reduced their operating expenses below those of comparable not-for-profit hospitals, and they have been more costly to those who must pay," Relman said.
They may have generated income for owners, he added, "but only by virtue of charging more . . . , not by operating less expensively."