A primer on how for-profit hospitals operate

In New Jersey, where for-profit hospital operators are rapidly transforming healthcare delivery, the Bergen County Record has compiled an action list of how they operate in order to maximize their bottom lines.

First, for-profit hospital operators search for bargain properties, the "least expensive way into the market," according to the Record. It noted, for example, that Meadowlands Hospital Medical Center in Seacaucus sold for significantly less than some high-end penthouse apartments in New York City.

Once they have acquired the hospital--and secured approval from the appropriate regulators--many operators don't hesitate to sell the land and buildings to real estate investment trusts and then lease them back for long terms, sometimes approaching 100 years. Prime Healthcare Services, the California-based for-profit operator, used this strategy to obtain the cash required to expand outside of its home state.

For-profit operators are also apparently relentless penny pinchers. If they are able to obtain a property that has been closed or in bankruptcy, this provides them the option of canceling union contracts and renegotiating them on more favorable terms. They also usually have fewer layers of management than a not-for-profit hospital. And they tend to focus more attention on billing than other hospital operators, often beefing up staff in that area and carefully scrutinizing every patient code.

And they also tweak the kind of care they deliver. Meadowlands' owners exploited a loophole regarding the kind of healthcare services provided to car accident victims at outpatient centers by moving the services into the hospital, where no such cap exists, according to the Record. Billings for those procedures immediately skyrocketed. Meadowlands has come under criticism for being perhaps the most expensive hospital in the U.S., as well as balance-billing insured patients.

Some of these billing practices have received close scrutiny. Prime, for example, is under investigation for potentially overbilling at its California facilities. And insurers in New Jersey pushed for changes in the billing regulations for car accident victims. However, hospital lobbyists were able to water down some of those changes, the Bergen County Record reported.

To learn more:
- read the Bergen County Record article