Compared to their nonprofit and government counterparts, for-profit urban hospitals are significantly less likely to offer and pursue care services that don’t turn a profit, according to newly published study data.
Similarly, these for-profits were more likely to offer profitable care service lines than facilities with nonprofit or government ownership were, although all three groups, on average, were more likely to offer any given profitable service than an unprofitable service, researchers wrote in Health Affairs.
They also noted that nonprofit and government hospitals alike were more likely to offer any given service, on average, due to their larger size.
“Our findings demonstrate that although all types of hospitals respond to relative profitability in choosing which services to offer, for-profits are more responsive than comparable nonprofits, which in turn are more responsive than comparable government hospitals,” they wrote in Health Affairs. “Overall, these findings are consistent with our previous research from earlier periods.”
The analysis reviewed the self-reported services of tens of thousands of urban hospitals, the majority of which were nonprofits, from 2004 to 2019. A secondary analysis extending the window back an additional decade also found similar ownership tendencies, suggesting major policy changes such as the Affordable Care Act did not upend ownership-based service offering trends.
The findings add an extra wrinkle to the debate over whether nonprofit hospitals are doing enough to earn their tax credits. These conversations often focus on charitable or uncompensated patient care, such as in a recent JAMA Network Open study that found nonprofits shouldered a similar amount of unreimbursed Medicaid costs as for-profits.
As policymakers mull potential interventions, the researchers warned that requiring nonprofits to provide greater quantities of such care could unintentionally lead these organizations to shutter unprofitable services, such as inpatient psychiatric emergency care, in favor of more profitable services.
“Because most nonprofits have small or negative margins, onerous free-care requirements may force them to eliminate relatively unprofitable services that disproportionately benefit poor patients, as they did in response to the 2008 stock market collapse,” the researchers wrote. “Alternatively, nonprofits might raise revenues by expanding relatively profitable but unnecessary services by offering a new service line or more of an existing service, thereby increasing health care spending and causing unnecessary risks to patients.”
Changes in hospital ownership have also been shown to impact service line offerings. In Health Affairs’ November issue, for instance, researchers found that hospitals recently acquired by private equity firms adopt profitable new services and technologies more quickly than non-acquired nonprofits.