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How Nonprofits Matter In American Medicine, And What To Do About It

Abstract

 
Skeptics question nonprofit health care on the grounds that nonprofits fail to distinguish themselves from their for-profit counterparts and do not reliably provide community benefits commensurate with their tax subsidies. Drawing on the most recent and comprehensive evidence, we assess these charges, judging them to be either wrong or incomplete. Although conventional critiques are therefore unconvincing, there are nonetheless important challenges facing the nonprofit sector in American medicine. To address these, we propose reformulating ownership-related policies to define both the appropriate forms of community benefit and the appropriate mix of ownership in terms of local markets and communities.

These criticisms are repeated so frequently in academic and policy discourse that one might presume their accuracy. But each distorts the evidence about ownership-related differences, perhaps fostering counterproductive policy responses. After reviewing the evidence, we conclude that although the critiques of nonprofit health care contain elements of truth, each is misleading.

We seek here to clarify the real issues and offer new policy approaches that (1) separate questions regarding appropriate tax exemption policy and optimal ownership mix, (2) develop a process to more sensibly account for "community benefit" activities, and (3) promote a beneficial mix of nonprofit and for-profit ownership at the community level.

Does Ownership Matter? Variation In Nonprofit And For-Profit Health Care

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As distinct legal forms, nonprofit and for-profit ownership lead to different mixes of monetary and nonpecuniary incentives for administrators and staffs, different sources of capital, and different influences on governance. Whether these differences translate into distinctive behavior has been examined in about 275 empirical studies covering hospital care, psychiatric services, nursing home care, home health care, treatment of end-stage renal disease (ESRD), hospice care, rehabilitative services, managed care plans, preventive examinations, and various ambulatory services. For some services, for-profit ownership is dominant; in others, nonprofits predominate (Exhibit 1). Studies have examined many attributes of services: cost, quality, accessibility for indigent clients, trustworthiness of organizational practices, pricing policies, and stability of service provision over time.

Supporters and critics of nonprofit health care agree that ownership-related differences regarding cost, quality, and accessibility vary greatly across studies. For critics, variation suggests that ownership can’t count for much if it does not predict consistent differences between nonprofit and for-profit practices. As John Colombo testified in a recent congressional hearing, "Empirical studies on quality of care, costs of care, and free care for the poor show decidedly mixed results.... All we can conclude is that nonprofits in some markets in some measures outperform for-profits, and that in other markets on other measures, for-profits outperform nonprofits."⁵

This interpretation overlooks the possibility that legal form might interact (in systematic, not random ways) with other factors to affect organizational performance on activities that promote the public good. Differences might be expected between services that are well insured (such as hospice care) and services for which millions of patients lack adequate coverage (such as hospital care), between services whose benefits go beyond patients and services that help only patients or their families, and between poor and wealthy communities.

One rationale for the nonprofit sector involves its capacity to respond more flexibly than can government to variation in the types of benefits that communities value.⁶ Precisely because the public goods that are valued vary across services, among communities, and over time, a responsive nonprofit sector will produce corresponding variations in performance. It is therefore crucial to understand the nature of these variations. We examine the evidence in the sections that follow.

Variation across services. Much apparent inconsistency in the effects of ownership emerges when scholars carelessly combine findings based on different health services or performance measures. By contrast, meta-analyses that aggregate studies involving a single service and a single well-defined outcome find consistent ownership-related differences. Thus, there are higher mortality rates in for-profit hospitals and renal dialysis facilities.⁷ Higher prices are found in for-profit hospitals.⁸ There are higher rates of adverse events in for-profit nursing homes.⁹ And larger barriers to access for indigent patients are found in for-profit psychiatric facilities.¹⁰

Nonetheless, many ownership-related differences vary greatly across services. We illustrate with research comparing nonprofit and for-profit hospitals and nursing homes in terms of economic performance, quality of care, and accessibility for indigent patients. Exhibit 2 summarizes results from 162 studies that use sophisticated methods (multivariate models or matched samples) to account for confounding factors. Because some studies report multiple outcomes, we have 215 distinct comparisons, grouped by type of outcome, type of service (hospitals or nursing homes), and whether the analyses indicate a statistically significant advantage to nonprofit or for-profit providers.¹¹

Differences are equally striking for some dimensions of accessibility and quality of care. For example, although ownership seems unrelated to the propensity to treat Medicaid patients in hospitals, for-profit nursing homes are the most likely to treat Medicaid recipients. Ownership-related differences in adverse health events within facilities are far more pronounced in nursing homes than hospitals, particularly when inpatient mortality is included as an adverse event.

The pattern illustrated by our comparison of hospitals and nursing homes is a general one. Our literature review found some differences between nonprofits and for-profits regarding cost, quality, or accessibility for every service studied. However, the effects of ownership manifest in different ways for different services.

Four other attributes are related to ownership in a more consistent manner. First, for-profit organizations more aggressively mark up prices over costs and otherwise maximize revenue. This pattern has been documented among community general hospitals, nursing homes, psychiatric hospitals, drug treatment centers, rehabilitation facilities, and health plans.¹² Second, nonprofit organizations appear more trustworthy in delivering services, being less likely to make misleading claims, to have complaints lodged against them by patients, and to treat vulnerable patients differently from other clientele.¹³ Third, nonprofits are typically the incubators of innovation (for example, health maintenance organizations, or HMOs, during the 1930s or hospice three decades ago), using philanthropy and cross-subsidies to finance the development of services for which there is not yet a market.¹⁴ Fourth, nonprofit health care providers are slower to react to change, expanding capacity less quickly when demand rises and dropping services or withdrawing from markets less frequently when profitability declines.¹⁵

The first three consistent differences stand as advantages for nonprofits. In a health care system beset by increasing costs and ill-informed consumers, marking up prices and exploiting vulnerable patients are hardly desirable attributes. Pioneering new services is a vital societal function, notwithstanding concerns that innovation might further inflate costs.

The normative implications of the dynamic differences between nonprofit and for-profit behavior are less clear. Rapid adaptation to changing conditions can be an important societal benefit, when health needs change or health policies are revised. For-profit providers have a clear edge in these circumstances.¹⁶ But in other circumstances, rapid response seems a liability. Providers that constantly alter their service mix or market areas can disrupt vital relationships between patients and providers, and changing insurer practices can undermine patients’ financial security. Recent experience with private health plans in the Medicare+Choice program illustrates such concerns.¹⁷ Frequent plan withdrawals and unstable benefits—both more pronounced among for-profit plans—left millions of seniors confused, without medical care, and with uncovered expenses.

Variation across studies. Consider again Exhibit 2. Even for outcomes that show consistent ownership-related differences (for example, quality problems in nursing homes), there is variation across studies. Some of this is a consequence of using statistical significance to identify "meaningful" differences in performance. Even if ownership is related to quality, a certain number of studies will find statistically insignificant results because of imprecisely measured outcomes. At conventional levels of statistical significance, one might expect to find almost exactly the number of studies as in Exhibit 2 that do not show a quality advantage for nonprofit homes.

Some of the remaining variation reflects methodological considerations. Studies of hospital mortality with smaller sample sizes (fewer than a million cases) typically lack the statistical power to detect ownership-related differences.¹⁸ Also, comparisons of adverse events in nursing homes fail to detect ownership-related differences when they do not account for case-mix variation among homes.¹⁹ Studies also vary in the organizational characteristics that are included in the statistical models: for example, teaching, multifacility system, or religious affiliation. Although ownership-related differences remain statistically significant whether or not one controls for these other attributes, they influence the magnitude of the differences.²⁰

But some variation in findings cannot be attributed to problems of methods or measurement. For example, studies of adverse treatment events in hospitals, or costs for hospital admissions, include multiple high-quality studies that identify nonprofit hospitals as more effective, but also include multiple studies of equal quality that find either no difference in performance or a significant advantage for for-profit facilities. Are these conflicting results the result of subtle methodological differences, or might comparative performance actually vary this much?

We believe that ownership-related differences do vary greatly, responding to the context in which health care is delivered. Some studies compare organizations operating under benign conditions, others in less lucrative markets. If in poor financial health, even public-spirited organizations have limited capacity to generate community benefits.²¹ This helps explain why studies comparing organizations before and after their conversion from nonprofit to for-profit ownership often find only small differences in accessibility or quality; nonprofits that convert are typically financially stressed, prior to their sale.

The real challenge The real challenge here is understanding how context affects ownership-related differences. Evidence of these contextual effects has led some skeptics to dismiss nonprofit health care as an anachronism, no longer compatible with a market-driven health care system dominated by large corporations. This seems quite intuitive—if market pressures and corporate hierarchies constrain facility behavior, how much can ownership actually affect cost, quality, or accessibility of care?

The answer, surprisingly, is "quite a bit." Growing competition and affiliation with multi-unit systems have not reduced ownership-related differences in performance.²² In fact, the gap between nonprofit and for-profit hospitals in the provision of uncompensated care appears to grow as markets become more competitive.²³ Ownership-related differences in accessibility, quality, and trustworthiness are larger among independent than system-affiliated providers.²⁴ The major institutional transformations of American medicine over the past few decades seem not to have vitiated the distinctiveness of nonprofit ownership.

Does Ownership Matter Enough? Accountability And Reliability In Nonprofit Health Care

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The performance of nonprofits has also been evaluated in relationship to the tax advantages afforded nonprofit enterprise. Policymakers in several states have been skeptical about this, implementing laws or regulations to hold nonprofits more accountable.

Variation in the forms of community benefit. Assessing the full impact that health care organizations have on communities is difficult, because not all community-benefit activities are readily measurable. Some forms draw policymakers’ attention more than others. Caring for indigent patients falls into both categories. One can readily count numbers of uninsured patients (although not all lack the means to pay) or dollars of uncompensated care (although whether to include "bad debt" remains controversial). Before 1969, when the Internal Revenue Service (IRS) adopted the community-benefit standard, indigent care was the primary criterion for federal tax exemption.

Under this criterion, the performance of nonprofit health care appears far from adequate. For nursing homes and health plans, nonprofit ownership is not consistently associated with any propensity to treat low-income patients.²⁵ Even in many hospitals, performance could not in itself justify tax exemptions. If one does not count bad debt, the amount of uncompensated care provided by as many as three-quarters of nonprofit hospitals is less than their tax benefits.²⁶ (Although performance varies across states, even in the most charitable jurisdictions some 20–40 percent of nonprofit hospitals fail to cover the value of their tax benefits.)²⁷

However, indigent care is not the only form of community benefit or charitable activity in health care. For example, a recent study found that nonprofit health plans were significantly more likely than for-profits to support safety-net providers and contribute to community health initiatives that benefit the poor.²⁸

More generally, this study found that although nonprofit plans did not differ from for-profit plans in provision of free or subsidized services, nonprofits were significantly more involved in three other domains of community benefit. A small body of research suggests that nonprofits provide many more of these diverse forms of community benefit.²⁹ One study found that the nonprofit hospitals that were the least involved in free or subsidized treatment were the most engaged in other forms of community benefit.³⁰ Comparable research, however, is not available for other health services, so we cannot now determine whether variation in the form of community benefits is generally consistent with variation in community needs.

The real challenge. The real challenge here is to clarify expectations for all forms of community benefit. There are many ways that providers can influence the health of communities.³¹ Thus, restricting the rationale for tax exemption to indigent care, as done in some states and favored by some policy analysts, is a misguided approach to improving community health. But many other forms of community benefit can be difficult to measure or to total up the combined effects. Until we have better measures of the scope and impact of community-benefit activities, a tension will exist between accountability and flexibility in responding to community needs.

Variation among locales. Geographic variations in nonprofits’ community-benefit activities pose a second challenge to accountability. The performance of nonprofits and for-profits tends to be more similar when they are in proximity. For example, nonprofits in the same locales as for-profits deliver only marginally more uncompensated care.³² This has been interpreted as suggesting that studies that had found higher levels of uncompensated care among nonprofits had mistaken locational differences for ownership effects.³³

This interpretation overlooks one crucial consideration: For-profit firms deliberately build or purchase facilities in communities that have few uninsured or low-income residents.³⁴ Nonprofits in those communities do serve fewer uninsured patients than do nonprofits in other locales, but this is to be expected, since other community needs are of greater relative importance in these locations. When differences in the communities in which nonprofit and for-profit hospitals are located are appropriately accounted for, ownership-related differences in uncompensated care are substantial.³⁵

Recent research has revealed a second locational effect: The presence of nonprofit providers influences the behavior of for-profit organizations, and vice versa. The more for-profit hospitals in a locality, the more nonprofit hospitals (1) respond aggressively to revenue-increasing opportunities, (2) adopt profitable services, (3) discourage admissions of unprofitable patients, and (4) reduce resources devoted to treating the patients they do admit.³⁶ Conversely, the presence of nonprofits in a community is associated with increased quality of care in for-profit nursing homes, reduced mortality rates in for-profit dialysis facilities, and increased trustworthiness of for-profit health plans.³⁷

The real challenge. The real challenge here is, How much of each ownership mode is enough? Policymakers and researchers should pay more attention to cross-ownership influences. Nonprofit neighbors appear to rein in some of the less palatable practices associated with the profit motive, although the precise mechanism remains poorly defined. (It might involve patients’ sorting themselves between nonprofit and for-profit settings, providers’ adapting to local practice norms, or purchasers’ revising their expectations.) For-profit competitors have a more mixed effect on nonprofits. They can exert a positive influence by stimulating improved efficiency and greater responsiveness to changing market conditions, but their influence might also erode nonprofits’ charitable commitments.

Determining an appropriate ownership mix in communities depends in part on how sensitive each is to the other’s presence. Only a smattering of relevant evidence exists. It appears that even a small for-profit presence (a share of 10 percent or less in the local market) induces greater efficiency among nonprofit competitors.³⁸ The nonprofit presence required to induce greater trustworthiness in for-profit competitors appears to be larger—market shares of at least 20–30 percent.³⁹

Rethinking The Case For Public Policies Supportive Of Nonprofit Health Care

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A number of economists and legal scholars question policies that "protect" nonprofit health care by restricting ownership conversions and the growth of for-profit providers.⁴⁰ Their critiques rest on three claims: (1) The aggregate benefits of nonprofit ownership are inadequate, (2) alternative policies—regulations, incentives, and consumer empowerment—could improve health care more effectively, and (3) the social costs of protectionist policies are too high. We now evaluate these claims in light of the above-cited evidence on ownership-related performance and measured efficacy of alternative policies. In our assessment, these critiques offer a persuasive rationale for reformulating, but not eliminating, policies that preserve a viable nonprofit health care sector. To sort out the implications, we must separate concerns about accountability from those related to the optimal mix of nonprofit and for-profit health care entities.

Are the benefits of nonprofit ownership large enough to matter? Critics correctly note that there are only modest ownership-related differences in most organizational practices (positive and negative). Yet this does not necessarily negate the societal importance of nonprofit health care, for two reasons. First, even modest differences between facilities can translate to substantial social consequences, given the massive scale of American medicine. Consider three examples.

Uncompensated care in hospitals. Critics argue that the difference in uncompensated care between typical nonprofit and for-profit hospitals is small, particularly when compared with government-run hospitals. But facility-level comparisons ignore the relative scale of public and private nonprofit hospital sectors. If all nonprofit hospitals provided uncompensated care at the same rate as for-profit hospitals do, the burden of uncompensated care on government hospitals would double.

Adverse outcomes in hospitals. Critics consider ownership-related differences in postdischarge mortality in hospitals to be too small for policy relevance.⁴¹ These adverse events are infrequent, but aggregate effects can be substantial. Studies of postdischarge mortality following hospitalization suggest that ownership-related differences amount to only one or two deaths per thousand admissions. But this slightly higher for-profit death rate would translate into tens of thousands of additional deaths if applied to the twenty-eight million patients treated by nonprofits each year. Ownership effects at the facility level are on par with those found in teaching-affiliated hospitals. In aggregate, they are of the same order of magnitude as the impact of all medical errors on inpatient mortality.

Higher prices. Although the magnitude of the price mark-ups associated with for-profit ownership is modest—roughly 5–10 percent of average charges—because this ownership difference appears consistently for facility-based treatment, its consequences for societal spending are dramatic, given that total annual U.S. medical care costs are predicted to exceed $3 trillion by 2013.⁴²

Second, modest ownership-related differences can affect societal well-being when they consistently emerge for a large set of related practices. Access to hospital services offers an illustration. Even if one concludes that aggregate uncompensated care in nonprofit hospitals does not greatly improve access, the combined effects of nonprofits’ comparative propensity to offer unprofitable or sporadically profitable services, to locate in lower-income communities, to provide services to the poorest neighborhoods, to persist through adverse economic conditions, and to avoid policies that screen out less profitable patients can in combination powerfully shape access. The combined impact of these practices may be multiplicative, rather than additive.

Many valuable aspects of nonprofit health care cannot be readily counted. Examples include nonprofits’ comparative trustworthiness, documented above in terms of fewer misleading claims and less exploitation of vulnerable clients, as well as the spillover benefits induced by having nonprofit providers in the same community as for-profits, enhancing the latter’s quality and trustworthiness. The latter effects may be loosely captured in the findings of Exhibit 2. Arguably, ownership differences in quality are more pronounced among nursing homes than hospitals, because for-profit homes often have no local nonprofit competitors, whereas there are very few communities (none large) in which all of the hospitals are operated under for-profit auspices.

Are there preferable alternatives to ownership-preserving policies? Skeptics of nonprofits’ role contend that "proponents of government preferences for nonprofits typically advocate such preferences as rational responses to social concerns; rarely do these discussions assess alternative policy responses to the same concerns."⁴³ We agree that tax exemptions for nonprofits can hardly be as efficient as targeted payments for improving care of the uninsured, since exemptions are not proportional to the amount of care provided and apply to many organizations that are located in communities with few uninsured residents. But in practice, even seemingly promising alternative policies experience implementation problems. In promoting hospital services for indigent patients, for example, it remains unclear whether the gaming associated with the disproportionate-share hospital (DSH) payment program leads to a more or less efficient subsidy than do the tax advantages afforded nonprofit hospitals.⁴⁴

The case for alternative policies becomes even weaker as one moves to less measurable aspects of medical care. For example, differences in quality associated with ownership (even though mixed for some services) appear to be larger and more reliable than those produced by either (1) policies that provide consumers information on provider performance or (2) direct state regulatory of organizational practices.⁴⁵ Effective regulation requires sizable resources; studies suggest that few states have been willing or able to devote adequate funds to enforcement. The services for which ownership-related differences in quality are largest (for example, long-term care) are precisely those for which both regulation and consumer empowerment have proved least effective.⁴⁶

Are the costs of ownership-based policies too high? The third charge against policies supportive of nonprofits holds that they are too costly. This involves two distinct claims: first, that such policies represent "public microeconomic management" inconsistent with "the public philosophies that undergird Western market-oriented democracies," and second, that these policies would deprive the American public of the distinctive virtues of for-profit medical care, including "raising capital and responding to consumer preferences."⁴⁷ Although we agree that policies could engender either problem, these concerns call for reformulating, not abandoning, policies that help sustain a resilient nonprofit health care sector.

Accountability and a revised approach to community benefit. It would be unfortunate indeed if policies supporting the nonprofit sector undermined Western democracy. But that hardly seems likely. Observers since Alexis de Tocqueville have seen nonprofit organizations as the lifeblood of American democracy. The potential responsiveness of the nonprofit sector to community preferences seems the antithesis of "micromanagement" by government—as long as policymakers don’t try to dictate particular responses to community needs.⁴⁸ Of course, for these benefits to be realized, community preferences must influence nonprofits’ practices. Evidence suggests that community engagement is currently inconsistent—higher for long-established services such as hospitals than for newer enterprises, such as managed care plans.

There are two competing approaches to achieving accountability for nonprofit health care. The first aims to establish standard criteria against which nonprofits’ performance would be evaluated. This approach has been pursued in some states and seems to be the thrust of current congressional inquiries into nonprofit medical care. Although this approach is motivated by a reasonable desire for accountability, we believe that it is excessively inflexible, substituting decisions by state or federal policymakers or regulators for choices better made in communities.

The second approach to accountability creates mechanisms to improve communities’ ability to assess and influence the practices of nonprofit organizations. This approach is reflected in policies adopted by some states that require nonprofits to assess community needs and report publicly on their efforts to meet them. But reporting requirements are not in themselves sufficient, since reports are famous for sitting unread on shelves or in file cabinets. And communities might lack the capacity to imagine forms of community benefit that they have not experienced or to influence nonprofits’ practices. To date, this second approach has perhaps been pursued most effectively in California, where legislation required nonprofit hospitals to assess community needs and report on their performance in meeting them, and in Massachusetts, where a community-benefit initiative emerged from the attorney general’s office without explicit authorizing legislation.

In light of current experience, we argue for an approach to accountability that fosters community involvement, supported by a state-financed infrastructure. More specifically, we believe that two forms of support are essential. First, states should adopt guidelines that identify the full range of plausible community-benefit activities associated with different health services. Experience suggests that taxing agencies or legislative committees often lack deep understanding of the social determinants of health; a joint task force or committee would bring together needed expertise. Second, states should provide communities with resources to organize and deliberate about these community-benefit activities. Smaller communities might pool their capacity to gain greater influence over health care organizations that serve larger market areas.

Comparative advantage and a revised approach to preserving nonprofit health care. A second concern about policies to sustain nonprofit health care is that they might drive out for-profit involvement in medical care. Some advocates of nonprofit ownership do call for a health care system operating exclusively under nonprofit auspices.⁴⁹ By contrast, we believe that the most appropriate policy aim in this area is to foster an optimal mix of ownership in each locality.

Scholarship related to nonprofit health care has recently begun exploring notions of optimal ownership mix—to date, exclusively in national terms.⁵⁰ Because the spillover benefits of mixed ownership occur at the local level, it is there that an appropriate balance should be maintained. This contrasts dramatically with the current distribution of ownership for many services, in which many local markets are exclusively nonprofit or for-profit in character.

Too little is now known about the interactions of nonprofit and for-profit providers to specify the appropriate ownership mix with any precision. The optimal balance might vary by service, because the implications of ownership for organizational behavior differ so dramatically across services. It is also likely to depend on the proportion of consumers who have difficulty making informed choices and are at risk for exploitation.

For these reasons, the optimal ownership mix is likely to be weighted more heavily toward for-profit ownership for medical products and services that are relatively standardized, repeatedly purchased, and subject to changing consumer preferences or technological innovation. Examples include pharmaceuticals, opto-metric services, and some durable medical equipment. Conversely, where there are many consumers with limited information who need services infrequently, the optimal ownership mix is likely to be skewed toward more extensive nonprofit involvement, perhaps at the level now found among acute care hospitals (but with less regional concentration of for-profit facilities).

Judged by these criteria, the ownership mix in some parts of the U.S. health care system appears to deviate from socially beneficial levels. For example, the for-profit dominance of nursing homes seems questionable, as evident from the large ownership-related disparities in quality of care. For other services, such as health plans or dialysis centers, the optimal ownership mix remains more open to debate, because it is not yet clear how effectively policies can inform consumers so that they can make good choices. But even if the aggregate market shares for these latter services were not dramatically altered, public policy might seek to ensure that the nonprofit market share exceeds 30–40 percent in each community, to capture the spillover benefits involving trustworthy practices. This is not now the case for either health plans or dialysis centers.

The aspect of ownership mix that is least effectively understood involves the dynamic properties of the health care system. It’s clear that for-profit health care providers respond more rapidly to changing incentives and market conditions, but less clear how policymakers ought to value the relative merits of responsiveness and stability. Certainly the latter takes on increased importance for patients who would benefit from long-term relationships with providers and thus should be of greatest concern for those with chronic illness and in frail health. But it is less clear how the local health care infrastructure or community is affected by organizational dynamics. Providers that rapidly move in and out of local markets would seem less likely to invest in community relationships of infrastructure investments that could yield longer-term health benefits.

PRESERVING AN APPROPRIATE LEVEL of nonprofit involvement in health care does not require that policymakers accept all practices or policies pursued under nonprofit auspices.⁵¹ Greater nonprofit accountability is a valid policy goal, so long as it does not lead to a narrowly defined specification of community benefit. Policies could increase accountability by reinforcing nonprofits’ involvement with their communities and clarifying expectations for forms of community benefits beyond care for the uninsured. Innovations of this sort could preserve a robust nonprofit health sector, balanced appropriately with a role for for-profit enterprise as a stimulus for greater dynamism and, for some services, more efficient delivery of care.

Editor's Notes

 
Mark Schlesinger is a professor of health policy in the Department of Epidemiology and Public Health, Yale University School of Medicine, in New Haven, Connecticut. Brad Gray (bgray{at}ui.urban.org) is a principal research associate at the Urban Institute in Washington, D.C.

The authors thank both the Aspen Institute and the Century Fund for their support and encouragement in the development of this paper.

NOTES

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1. Senate Finance Committee, "Grassley Asks Non-Profit Hospitals to Account for Activities Related to Their Tax-Exempt Status," Press Release, 25 May 2005, http://finance.senate.gov/press/Gpress/2005/prg052505.pdf (accessed 13 March 2006).
2. J.R. Horwitz, "Why We Need the Independent Sector: The Behavior, Law, and Ethics of Not-for-Profit Hospitals," UCLA Law Review 50, no. 6 (2003): 1345–1411 (quote, p. 1346).
3. See, for example, T. Reeves and E. Ford, "Strategic Management and Performance Differences: Nonprofit versus For-Profit Health Organizations," Health Care Management Review 29, no. 4 (2004): 298–308.[Web of Science][Medline]
4. M. Schlesinger, S. Mitchell, and B.H. Gray, "Public Expectations of Nonprofit and For-Profit Ownership in American Medicine: Clarifications and Implications," Health Affairs 23, no. 6 (2004): 181–191.[Abstract/Free Full Text]
5. John Colombo, University of Illinois College of Law, testimony before the House Ways and Means Committee, 26 May 2005, http://waysandmeans.house.gov/hearings.asp?formmode=view&id=2713 (accessed 10 March 2006).
6. L.M. Salamon, "The Resilient Sector: The State of Nonprofit America," in The State of Nonprofit America, ed. L.M. Salamon (Washington: Brookings Institution Press, 2002), 3–61.
7. P.J. Devereaux et al., "A Systematic Review and Meta-analysis of Studies Comparing Mortality Rates of Private For-Profit and Private Not-for-Profit Hospitals," Canadian Medical Association Journal 166, no. 11 (2002): 1399–1406[Abstract/Free Full Text]; and P.J. Devereaux et al., "Comparison of Mortality between Private For-Profit and Private Not-for-Profit Hemodialysis Centers: A Systematic Review and Meta-analysis," Journal of the American Medical Association 288, no. 19 (2002): 2449–2457.[Abstract/Free Full Text]
8. P.J. Devereaux, D. Heels-Ansdell, and C. Lacchetti, "Payments for Care at Private For-Profit and Private Not-for-Profit Hospitals: A Systematic Review and Meta-analysis," Canadian Medical Association Journal 170, no. 12 (2004): 1817–1824[Abstract/Free Full Text]; and Y.-C. Shen et al., "Hospital Ownership and Financial Performance: A Quantitative Research Review," NBER Working Paper no. 11662 (Cambridge, Mass.: National Bureau of Economic Research, 2005).
9. M.P. Hillmer et al., "Nursing Home Profit Status and Quality of Care: Is There Any Evidence of an Association?" Medical Care Research and Review 62, no. 2 (2005): 139–166.[Abstract/Free Full Text]
10. P.V. Rosenau and S.H. Linder, "A Comparison of the Performance of For-Profit and Nonprofit U.S. Psychiatric Inpatient Providers since 1980," Psychiatric Services 54, no. 2 (2003): 183–187.[Abstract/Free Full Text]
11. We did not include studies examining organizations converting from one form of ownership to the other because such facilities typically are not representative of nonprofit and for-profit providers of that service.
12. Shen et al., "Hospital Ownership"; Devereaux et al., "Payments for Care"; J.P. Clement and K.L. Grazier, "HMO Penetration: Has It Hurt Public Hospitals?" Journal of Health Care Finance 28, no. 1 (2001): 25–38[Medline]; G. Melnick, E. Keeler, and J. Zwanziger, "Market Power and Hospital Pricing: Are Nonprofits Different?" Health Affairs 18, no. 3 (1999): 167–173[Abstract]; J.R. Meurer et al., "Charges for Childhood Asthma by Hospital Characteristics," Pediatrics 102, no. 6 (1998): E70–E77[CrossRef][Medline]; J. Ballou, "The Role of the Not-for-Profit Firm in the Mixed Industry: Three Empirical Analyses of the Long-Term Care and Hospital Industries" (Doctoral thesis, Northwestern University, 2000); Rosenau and Linder, "A Comparison"; B. Dickey, "A Comparison of For-Profit and Not-for-Profit Hospitals on the Cost of Mental Health Admissions," Harvard Review of Psychiatry 2, no. 2 (1994): 97–103[Web of Science][Medline]; M.J. McCue and J.P. Clement, "Relative Performance of For-Profit Psychiatric Hospitals in Investor-Owned Systems and Nonprofit Psychiatric Hospitals," American Journal of Psychiatry 150, no. 1 (1993): 77–82[Abstract/Free Full Text]; J.R. Wheeler, H. Fadel, and T.A. D’Aunno, "Ownership and Performance of Outpatient Substance Abuse Treatment Centers," American Journal of Public Health 82, no. 5 (1992): 711–718[Abstract/Free Full Text]; M.J. McCue and J.M. Thompson, "Association of Ownership and System Affiliation with the Financial Performance of Rehabilitation Hospitals," Health Services Management Research 10, no. 1 (1997): 13–23; Treo Solutions, "Costs, Commitment, and Locality: A Comparison of For-Profit and Not-for-Profit Health Plans," Inquiry 41, no. 2 (2004): 116–129[Web of Science][Medline]; and M. Schlesinger, D. Blumenthal, and E. Schlesinger, "Profits under Pressure: The Economic Performance of Investor-Owned and Nonprofit Health Maintenance Organizations," Medical Care 24, no. 7 (1986): 615–627.[Web of Science][Medline]
13. M. Schlesinger et al., "Profit-Seeking, Corporate Control, and the Trustworthiness of Health Care Organizations: Assessments of Health Plan Performance by Their Affiliated Physicians," Health Services Research 40, no. 3 (2005): 605–645[CrossRef][Web of Science][Medline]; E. Silverman and J. Skinner, "Medicare Upcoding and Hospital Ownership," Journal of Health Economics 23, no. 2 (2004): 369–389[CrossRef][Web of Science][Medline]; J.L. Troyer and H.G. Thompson, "The Impact of Litigation on Nursing Home Quality," Journal of Health Politics, Policy and Law 29, no. 1 (2004): 11–42[Abstract]; C.E. Johnson et al., "Predicting Lawsuits against Nursing Homes in the United States, 1997–2001," Health Services Research 39, no. 6, Part 1 (2006): 1713–1731; B.A Weisbrod and M. Schlesinger, "Ownership Form and Behavior in Regulated Markets with Asymmetric Information," in The Nonprofit Sector: Economic Theory and Public Policy, ed. S. Rose-Ackerman (New York: Oxford University Press, 1986), 133–151; T.L. Mark, "Psychiatric Hospital Ownership and Performance: Do Nonprofit Organizations Offer Advantages in Markets Characterized by Asymmetric Information?" Journal of Human Resources 31, no. 3 (1996): 631–649[CrossRef]; S.Y. Chou, "Asymmetric Information, Ownership, and Quality of Care: An Empirical Analysis of Nursing Homes," Journal of Health Economics 21, no. 2 (2002): 293–311[CrossRef][Web of Science][Medline]; and H.T. Tu and J.D. Reschovsky, "Assessments of Medical Care by Enrollees in For-Profit and Nonprofit Health Maintenance Organizations," New England Journal of Medicine 346, no. 17 (2002): 1288–1293.[Abstract/Free Full Text]
14. M. Schlesinger and B.H. Gray, "Nonprofit Organizations and Health Care: The Paradoxes of Persistent Attention," in The Nonprofit Sector: A Research Handbook, 2d ed., ed. W.W. Powell and R. Steinberg (New Haven, Conn.: Yale University Press, forthcoming).
15. Horwitz, "Why We Need the Independent Sector"; and A. Malani, T. Philpson, and G. David, "Theories of Firm Behavior in the Nonprofit Sector: A Synthesis and Empirical Evaluation," in The Governance of Not-for-Profit Organizations, ed. E. Glaeser (Chicago: University of Chicago Press, 2003), 181–215.
16. S. Chakravarty et al., "Does the Profit Motive Make Jack Nimble? Ownership Form and the Evolution of the U.S. Hospital Industry," Health Economics 15, no. 4 (2006): 345–361.[CrossRef][Web of Science][Medline]
17. M.P. Glavin et al., "An Examination of Factors in the Withdrawal of Managed Care Plans from the Medicare+Choice Program," Inquiry 39, no. 4 (2002/03): 341–354; and B.C. Booske, J. Lynch, and G. Riley, "Impact of Managed Care Market Withdrawal on Beneficiaries," Health Care Financing Review 24, no. 1 (2002): 95–115.[Medline]
18. Devereaux et al., "A Systematic Review."
19. Hillmer et al., "Nursing Home Profit Status."
20. Schlesinger and Gray, "Nonprofit Organizations."
21. A. Davidoff et al., "The Effect of Changing State Health Policy on Hospital Uncompensated Care," Inquiry 37, no. 3 (2000): 253–267.[Web of Science][Medline]
22. Schlesinger and Gray, "Nonprofit Organizations."
23. Davidoff et al., "The Effect of Changing State Health Policy"; J.M. Ferris and E.A. Graddy, "Structural Changes in the Hospital Industry, Charity Care, and the Nonprofit Role in Health Care," Nonprofit and Voluntary Sector Quarterly 28, no. 1 (1999): 18–31[Abstract/Free Full Text]; and R.A. Hirth, "Competition between For-Profit and Nonprofit Health Care Providers: Can It Help Achieve Social Goals?" Medical Care Research and Review 54, no. 4 (1997): 414–438.[Abstract/Free Full Text]
24. Schlesinger et al., "Profit-Seeking"; B.E. Landon et al., "Health Plan Characteristics and Consumers’ Assessments of Quality," Health Affairs 20, no. 2 (2001): 274–286[Abstract/Free Full Text]; W. Luksetich, M.E. Edwards, and T.M. Carroll, "Organizational Form and Nursing Home Behavior," Nonprofit and Voluntary Sector Quarterly 29, no. 2 (2000): 255–279[Abstract/Free Full Text]; C.M. Hughes, K.L. Lapane, and V. Mor, "Influence of Facility Characteristics on Use of Antipsychotic Medications in Nursing Homes," Medical Care 38, no. 12 (2000): 1164–1173[CrossRef][Web of Science][Medline]; and M. Schlesinger et al., "The Growth of Multi-Facility Health Care Systems and Access to Medical Services," in Advances in Health Services Research, ed. L. Rossiter and G. Wilensky (Greenwich, Conn.: JAI Press, 1986), 121–140.
25. Schlesinger and Gray, "Nonprofit Organizations."
26. Kane and Wubbenhorst, "Alternative Funding Policies"; and U.S. Government Accountability Office, Nonprofit Hospitals: Better Standards Needed for Tax Exemption, Pub. no. GAO/HRD-90-84 (Washington: GAO, 1990).
27. M.A. Morrisey, G. Wedig, and M. Hassan, "Do Nonprofit Hospitals Pay Their Way?" Health Affairs 15, no. 4 (1996): 132–144[Abstract]; and GAO, Nonprofit Hospitals.
28. M. Schlesinger, S. Mitchell, and B. Gray, "Measuring Community Benefits Provided by Nonprofit and For-Profit HMOs," Inquiry 40, no. 2 (2003): 114–132.[Web of Science][Medline]
29. Nonprofits are more likely to provide health promotion services, support safety-net providers, collaborate to meet community needs, conduct community health assessments, and work with local health departments. See G.O. Ginn and C.B. Moseley, "Community Health Orientation, Community-based Quality Improvement, and Health Promotion Services in Hospitals," Journal of Healthcare Management 49, no. 5 (2004): 293–306; Treo Solutions, "Costs, Commitment, and Locality"[Web of Science][Medline]; M. Schlesinger, B.H. Gray, and M. Gusmano, "A Broader Vision for Managed Care, Part 3: The Scope and Determinants of Community Benefits," Health Affairs 23, no. 3 (2004): 210–221[Abstract/Free Full Text]; E.J. Proenca, M.D. Rosko, and J.S. Zinn, "Correlates of Hospital Provision of Prevention and Health Promotion Services," Medical Care Research and Review 60, no. 1 (2003): 58–78[Abstract/Free Full Text]; G.P. Mays et al., "How Managed Care Plans Contribute to Public Health Practice," Inquiry 37, no. 4 (2001): 389–410[Medline]; and E.J. Proenca, M.D. Rosko, and J.S. Zinn, "Community Orientation in Hospitals: An Institutional and Resource Dependence Perspective," Health Services Research 35, no. 5, Part 1 (2000): 1011–1035.[Web of Science][Medline]
30. Kane and Wubbenhorst, "Alternative Funding Policies."
31. M. Schlesinger et al., "A Broader Vision for Managed Care, Part 2: A Typology of Community Benefits," Health Affairs 17, no. 5 (1998): 26–49.[Abstract]
32. E.C. Norton and D.O. Staiger, "How Hospital Ownership Affects Access to Care for the Uninsured," RAND Journal of Economics 25, no. 1 (1994): 171–185[CrossRef][Web of Science][Medline]; and W. Buczko, "Factors Affecting Charity Care and Bad Debt Charges in Washington Hospitals," Hospital and Health Services Administration 39, no. 2 (1994): 179–191.
33. Malani et al., "Theories of Firm Behavior"; and L.R. Mobley and W.D. Bradford, "Behavioral Differences among Hospitals: Is It Ownership, or Location?" Applied Economics 29, no. 9 (1997): 1125–1138.
34. J.P. Clement, K.R. White, and V. Valdmanis, "Charity Care: Do Not-for-Profits Influence For-Profits?" Medical Care Research and Review 59, no. 1 (2002): 59–79[Abstract/Free Full Text]; and B.H. Gray, The Profit Motive and Patient Care: The Changing Accountability of Doctors and Hospitals (Cambridge, Mass.: Harvard University Press, 1991).
35. Clement et al., "Charity Care."
36. Silverman and Skinner, "Medicare Upcoding"; J.R. Barro and M. Chu, "HMO Penetration, Ownership Status, and the Rise of Hospital Advertising," in The Governance of Not-for-Profit Organizations (Chicago: University of Chicago Press, 2003), 101–116; M. Duggan, "Hospital Market Structure and the Behavior of Not-for-Profit Hospitals," RAND Journal of Economics 33, no. 3 (2002): 433–446[Medline]; J.R. Horwitz, "Does Ownership Form Matter? Service Provision in the Hospital Industry," NBER Working Paper no. 11376 (Cambridge, Mass. NBER, 2005); R.G. Hughes and H.S. Luft, "Keeping Up with the Joneses: The Influence of Public and Proprietary Neighbours on Voluntary Hospitals," Health Services Management Research 3, no. 3 (1990): 173–181[Medline]; M. Schlesinger et al., "Competition, Ownership, and Access to Hospital Services: Evidence from Psychiatric Hospitals," Medical Care 35, no. 9 (1997): 974–992[CrossRef][Web of Science][Medline]; M. Schlesinger et al., "The Privatization of Health Care and Physicians’ Perceptions of Access to Hospital Services," Milbank Quarterly 65, no. 1 (1987): 25–58[CrossRef][Web of Science][Medline]; D. Kessler and M. McClellan, "The Effects of Hospital Ownership on Medical Productivity," NBER Working Paper no. 8537 (Cambridge, Mass.: NBER, 2001); and S.L. Ettner and R.C. Hermann, "The Role of Profit Status under Imperfect Information: Evidence from the Treatment Patterns of Elderly Medicare Beneficiaries Hospitalized for Psychiatric Diagnoses," Journal of Health Economics 20, no. 1 (2001): 23–49.[CrossRef][Web of Science][Medline]
37. D.C. Grabowski and R.A. Hirth, "Competitive Spillovers across Non-Profit and For-Profit Nursing Homes," Journal of Health Economics 22, no. 1 (2003): 1–22[CrossRef][Web of Science][Medline]; P.P. Garg et al., "Effect of Ownership of Dialysis Facilities on Patients’ Survival and Referral for Transplantation," New England Journal of Medicine 341, no. 22 (1999): 1653–1660[Abstract/Free Full Text]; and Schlesinger et al.,, "Profit-Seeking."
38. Kessler and McClellan, "The Effects of Hospital Ownership."
39. Schlesinger et al., "Profit-Seeking."
40. Colombo testimony; D.A. Hyman, "Hospital Conversions: Fact, Fantasy, and Regulatory Follies," Journal of Corporate Law 23, no. 2 (1998): 741–778; F.A. Sloan, "Commercialism in Nonprofit Hospitals," in To Profit or Not to Profit: The Commercial Transformation of the Nonprofit Sector, ed. B. Weisbrod (New York: Cambridge University Press, 1998), 151–168; M.G. Bloche, "Should Government Intervene to Protect Nonprofits?" Health Affairs 17, no. 5 (1998): 7–25[Abstract]; and R.C. Clark, "Does the Nonprofit Form Fit the Hospital Industry?" Harvard Law Review 93, no. 7 (1980): 1416–1489.[Web of Science][Medline]
41. M. McClellan and D. Staiger, "Comparing Hospital Quality at For-Profit and Not-for-Profit Hospitals," in The Changing Hospital Industry: Comparing Not-for-Profit and For-Profit Institutions, ed. D.M. Cutler (Chicago: University of Chicago Press, 2000), 93–112.
42. S. Heffler et al., "Health Spending Projections through 2013," Health Affairs 23 (2004): w79–w93 (published online 11 February 2004; 10.1377/hlthaff.w4.79).
43. Bloche, "Should Government Intervene?" 14.
44. M. Gusmano and M. Schlesinger, "The Social Roles of Medicare: Assessing Medicare’s Collateral Benefits," Journal of Health Politics, Policy and Law 26, no. 1 (2001): 37–79.[Abstract]
45. M.R. Chassin, "Achieving and Sustaining Improved Quality: Lessons from New York State and Cardiac Surgery," Health Affairs 21, no. 4 (2002): 40–51. To contrast ownership-related differences in quality for nursing homes to the mixed effects of regulation, see G.S. Winzelberg, "The Quest for Nursing Home Quality: Learning History’s Lessons," Archives of Internal Medicine 163, no. 21 (2003): 2552–2556.[Abstract/Free Full Text]
46. D.G. Stevenson, "Is a Public Reporting Approach Appropriate for Nursing Home Care?" Journal of Health Politics, Policy and Law (forthcoming).
47. Bloche, "Should Government Intervene?"
48. E. Brody, "Of Sovereignty and Subsidy: Conceptualizing the Charity Tax Exemption," Journal of Corporate Law 23, no. 4 (1998): 585–629.
49. S. Woolhandler et al., "Proposal of the Physicians’ Working Group for Single-Payer National Health Insurance," Journal of the American Medical Association 290, no. 6 (2003): 798–805.[Abstract/Free Full Text]
50. R.E. Santerre and J.A. Vernon, "Hospital Ownership Mix Efficiency in the U.S.: An Exploratory Study," NBER Working Paper no. 11192 (Cambridge, Mass.: NBER, 2005).
51. K. Barnett, The Future of Community Benefit Programming (Berkeley, Calif.: Public Health Institute, 1997).

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