Hospitals Supply of Medical Services

Does ownership status impact the services that hospitals offer?

That is the question asked by Horwitz and Nichols (2022) in their paper out this week in Health Affairs. I summarize their paper below.


The authors use data from 2014-2019 American Hospital Association (AHA) annual member surveys among all acute care hospitals (both general medical and surgical) located within urban metropolitan statistical areas (MSAs) in the US. The analysis compared differences in service composition between nonprofit (secular and religious), for-profit (shareholder and privately held), and government hospitals.  [Note: Federal hospitals run by the Veterans Affairs, Department of Justice, the military and Bureau of Indian Affairs were excluded due to the narrower patient population they serve.]


The authors categorized the relative profitability of each major medical service offered by acute care hospitals to examine whether the service composition varied by ownership status. The authors control for differences in the areas the hospitals service based on a distance-weighted means of census tract-level socioeconomic status variables identified from the American Community Survey (ACS). The authors also included a sensitivity analysis with hospital-level controls including hospital size, teaching status and market-level controls such as the Herfindahl-Hirschman Index (HHI). To estimate the relationship between hospital ownership and services offered, the authors used an individual, multivariate-probit models with standard errors clustered at the hospital level to account for serial correlation of unobserved hospital- and year-specific factors over time.


Between 2004 and 2018, the nonprofit share of hospitals increased slightly (67.5% to 69.8%), with small declines in for-profit (20.4% to 19.4%) and government (12.1% to 10.9%) shares of hospitals, with the results being even more heavily concentrated in non-profit (75.3% in 2018) hospitals once the results were admissions weighted. As non-profit hospitals were larger, they were more likely to offer all services regardless of the profitability of the service.

Nonprofit hospitals were more likely than for-profit hospitals and less likely than government hospitals to offer relatively unprofitable medical and community outreach services. For example, for-profits were less likely than nonprofits, which were less likely than government hospitals, to offer psychiatric emergency services…

Despite this trend, the real-world is messier than thinking that for-profits only offer profitable services and non-profits and government offer non-profit services.  For instance, relatively profitable cardiac care services increased more in government and non-profit hospitals than in for-profit hospitals over this time period.

…for-profits were not the most likely to offer every relatively profitable service, especially those that were offered by a very high percentage of all hospitals.

Perhaps the broader finding—and one that is the least surprising—is that all hospitals regardless of ownership status are more likely to offer profitable hospital services.

…we found strong evidence that ownership was associated with offering services based on their profitability. All three types were more likely to offer a profitable service, on average, than an unprofitable service. In our base model, nonprofits were 27.3 percent more likely, for-profits were 31.5 percent more likely, and government hospitals were 22.2 percent more likely to offer profitable than unprofitable services

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