Editor's Corner

The nonprofit hospital world has been in the news lately, and this week a study of all the studies ever done on the nonprofit/for-profit contrast came out in Health Affairs. The well-known study confirmed that nonprofit hospitals offer a little more charity care and have slightly lower costs than for-profits. But then again, there are three factors that make those results a little less than great. First, location matters, and the nonprofit category includes a great number of hospitals that are in unfavorable locations, like inner-city areas and poor rural counties. Second, the behavior of their for-profit competitors over the years has been on the border between scandalous and criminal. And far too many nonprofits have been imitating that behavior, such as New Jersey's St. Barnabas, which settled with the government for as much as it could afford for apparently overcharging Medicare by over $500 million. Third, for-profits have stayed at around 15% of hospital beds for decades and aren't expanding their market share much. So the main issue is, how do hospitals overall behave?

The truth is, whatever the label put on an organization, in an environment where doing more and charging more brings more profit/margin, there will always be institutions and people within them that will be tempted to take the easy (and fraudulent) way to more money. Proponents of self-reform may point to the improvements in quality brought about with no financial incentives which were reported by IHI last week, but until we create incentives for organizations to do well by doing the right thing, the label will be largely irrelevant.
- Matthew