Two studies of hospital economics challenge some popular notions about factors influencing hospital costs.
One survey found that for-profit hospitals were no more efficient than nonprofit. The second one found that competition actually increased hospital costs.
The first study, by researchers at Johns Hopkins University and Lewin and Associates, disputes the theory that the struggle to achieve profits for shareholders makes for-profit hospitals operate more efficiently than not-for-profit hospi- tals.
The study, based on 1980 Medicare cost reports, concluded that for-profit hospitals showed black ink on their financial statements because they charged more than nonprofits, not because of greater efficiency. For-profit hospitals constitute about a fifth of the nation's community hospitals.
The study, covering 560 hospitals, concluded that costs were basically similar at both types of hospitals, but the for-profits that were members of hospital chains charged $378 (21 percent) more per admission than nonprofit hospitals that were members of nonprofit chains and $290 more (18 percent) than free-standing nonprofits.
"From the perspective of length of stay and unit production costs, no single type of hospital appeared more efficient at delivering patient care," the study said. "There were no differences in productive efficiency that could be attributed to ownership or affiliation."
The Federation of American Hospitals, a national organization of for-profit hospitals, said part of the explanation for higher charges is that for-profits must pay taxes and therefore need to include them in their rates. In addition, a spokesman said, they often have newer facilities and therefore have higher capital costs to cover.
The other hospital study, by Dean Farley of the Department of Health and Human Services' National Center for Health Services Research, based on national data for the years 1970 to 1977, found that competition among hospitals increased costs instead of driving them down.
The study found that operating expenses of hospitals in competitive market areas were nearly 19 percent higher than expenses in single-facility areas. "Competing hospitals use an average of 10 to 30 percent more surgical and other medical procedures per diagnosis, employ 12 percent more full-time workers per admission, maintain 20 percent more diagnostic and therapeutic services, have 6 percent more excess beds and have a longer average length of stay than noncompeting hospitals," said the research center's summary.
The reason: at least during the period covered by the study, before the government started imposing charge ceilings for Medicare treatments, hospitals tended to compete by offering more services, bigger facilities and larger staff, rather than by offering lower prices.
Although the federal government is the biggest spender in the fight against acquired immune deficiency syndrome (AIDS), with more than $240 million earmarked for research and public health activities in fiscal 1986, the states have become active too, according to a report by the Intergovernmental Health Policy Project at George Washington University.
Since early 1983, the health project reported, state legislatures have appropriated an estimated $42 million to combat AIDS, and $6 million more is pending in state legislatures. About half the money is for research, most of the remaining is for education, surveillance activities, laboratory services and testing costs. California, with $27.6 million, is by far the biggest spender.
These figures do not include treatments paid for by health insurance plans. In fiscal 1985, the state Medicaid progam spent $4.5 million on AIDS patients and private insurers spent about $50 million more. The average cost per month per patient was $3,300, or $59,000 for the average 18-month life expectancy.