Are for-profit hospital conversions harmful to patients and to Medicare?

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Date

2002

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Abstract

We examine how changes in hospital ownership to and from for-profit status affect quality and Medicare payments per hospital stay. We hypothesize that hospitals converting to for-profit ownership boost post acquisition profitability by reducing dimensions of quality not readily observed by patients and by raising prices. We find that 1-2 years after conversion to for-profit status, mortality of patients, which is difficult for outsiders to monitor, increases while hospital profitability rises markedly and staffing decreases. Thereafter, the decline in quality is much lower. A similar decline in quality is not observed after hospitals switch from for-profit to government or private nonprofit status.

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Scholars@Duke

Sloan

Frank A. Sloan

J. Alexander McMahon Distinguished Professor Emeritus of Health Policy and Management

Professor Sloan is interested in studying the subjects of health policy and the economics of aging, hospitals, health, pharmaceuticals, and substance abuse. He has received funding from numerous research grants that he earned for studies of which he was the principal investigator. His most recent grants were awarded by the Robert Wood Johnson Foundation, the Center for Disease Control, the Pew Charitable Trust, and the National Institute on Aging. Titles of his projects include, “Why Mature Smokers Do Not Quit,” “Legal and Economic Vulnerabilities of the Master Settlement Agreement,” “Determinants and Cost of Alcohol Abuse Among the Elderly and Near-elderly,” and “Reinsurance Markets and Public Policy.” He received the Investigator Award for his work on the project, “Reoccurring Crises in Medical Malpractice.” Some of his earlier works include the studies entitled, “Policies to Attract Nurses to Underserved Areas,” “The Impact of National Economic Conditions on the Health Care of the Poor-Access,” and “Analysis of Physician Price and Output Decisions.” Professor Sloan’s latest research continues to investigate the trends and repercussions of medical malpractice, physician behavior, and hospital behavior.


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