The nation's for-profit hospitals provide care that is just as good as that of nonprofit hospitals but have higher costs, give less free care to the poor, and conduct less research and training, an Institute of Medicine panel reported yesterday after a three-year study of the for-profit health sector.
Walter J. McNerney, a professor of hospital management at Northwestern University who headed the 22-member study panel assembled by the institute, a part of the National Academy of Sciences, told a news conference that the findings shatter popular assumptions that for-profit hospitals give low-quality care or are more efficient than nonprofit hospitals.
The panel found that based on measures ranging from staffing to post-operative mortality rates, "investor-owned hospitals are similar in quality to not-for-profit hospitals."
But it also found that for-profit hospitals have costs ranging up to 10 percent higher than nonprofit hospitals, and generally charge from 8 percent to 24 percent more, adding $470 million a year -- or 1 percent -- to the nation's hospital bill. McNerney ascribed the higher costs to taxes, returns to investors, recent capital investments and overhead costs for hospital-chain central offices.
The report found that in 1983, the costs to for-profits of uncompensated care for the poor equaled only 3.1 percent of their gross patient revenues. The comparable figure for private nonprofit hospitals was 4.2 percent.
In Virginia and three other states, where for-profit hospitals represent up to 40 percent of local hospitals, triple the norm, there were much bigger free-care differentials between for-profits and nonprofits.
The study found that only 2 percent of for-profit hospitals were affiliated with medical schools and had residency programs in 1983, compared to about 25 percent of nonprofit hospitals. However, it noted that for-profit chains like Humana and Hospital Corporation of America are becoming teaching institutions.
McNerney said that for-profit hospitals, which represent about 13 percent of the market, might double their share within the next five to 10 years, but they are not likely to become a majority.
The report concluded that overall, "the differences between for-profit and not-for-profit health care organizations are not sufficient to justify a recommendation that investor ownership of health care organizations be either opposed or supported by public policy."
But seven panel members, including New England Journal of Medicine Editor Arnold S. Relman, issued a supplementary statement saying that because for-profits charge more and give less free care, "We would have little to gain and much to lose if for-profit corporations came to dominate our health care system." They noted that while for-profits are now a small portion of the hospitals, they make up about four-fifths of nursing homes and half of private psychiatric hospitals.
The panel said pressure to cut costs is so great that no hospital can give much free care to needy people, so the government should "take steps to insure adequate financing of health care" for 35 million Americans without health insurance.