Sage Journals: Discover world-class research

Abstract

This article investigates the impact of hospital profit status on quality of care as measured by risk-adjusted, 30-day, inpatient readmission rates gathered by the Centers for Medicare and Medicaid Services. It also evaluates the association between inpatient readmission rates and market concentration, measured by the Herfindahl–Hirschman Index, and various hospital characteristics. It concludes that nonprofit (NP) hospitals have a statistically significant negative association with readmission rates because they can focus on their mission without intense pressure to make a profit. We find no significant association between quality of care and hospital market competitiveness nor any statistically significant evidence to reject the exogeneity assumption of NP status.

Keywords

nonprofit hospitals inpatient readmission rate market competition

Get full access to this article

View all access options for this article.

References

Agency for Healthcare Research and Quality. (2015). Mortality measures. Retrieved from http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1163010398556

HMSA (2019). HMSA Provider Resource Center: Diagnosis Related Group (DRG). Retrieved from https://hmsa.com/portal/provider/zav_pel.fh.DIA.650.htm

Andel

Davidow

S. L.

Hollander

Moreno

D. A.

(2012). The economics of health care quality and medical errors. Journal of Health Care Finance, 39, 39-50.

Arrow

K. J.

(1963). Uncertainty and the welfare economics of medical care. American Economic Review, 53, 941-973.

Barro

J. R.

Huckman

R. S.

Kessler

D. P.

(2006). The effects of cardiac specialty hospitals on the cost and quality of medical care. Journal of Health Economics, 25, 702-721.

Becker’s Hospital Review. (2016). 60 things to know about the hospital industry | 2016. Retrieved from https://www.beckershospitalreview.com/lists/50-things-to-know-about-the-hospital-industry-2016.html

Benbassat

Taragin

(2000). Hospital readmissions as a measure of quality of health care: Advantages and limitations. Archives of Internal Medicine, 160, 1074-1081.

Ben-Ner

Hamann

D. J.

Ren

(2018). Does ownership matter in the selection of service providers? Evidence from nursing home consumer surveys. Nonprofit and Voluntary Sector Quarterly, 47, 1271-1295.

Birmingham

L. E.

Oglesby

W. H.

(2018). Readmission rates in not-for-profit vs. proprietary hospitals before and after the Hospital Readmission Reduction Program implementation. BMC Health Services Research, 18, 31-37.

10.

Bloom

Propper

Seiler

Reenen

J. V.

(2015). The impact of competition on management quality: Evidence from public hospitals. Review of Economic Studies, 82, 457-489.

11.

Brown

E. G.

Bold

R. J.

(2015). Hospital readmissions: Are they preventable? Advances in Surgery, 49, 15-29.

12.

Butler

(1997). State policy issues in nonprofit conversions. Health Affairs, 16, 69-84.

13.

Centers for Medicare and Medicaid Services. (2015). Outcome measures. Retrieved https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/OutcomeMeasures.html

14.

Centers for Medicare and Medicaid Services. (2017a). Acute inpatient PPS. Retrieved from https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html

15.

Centers for Medicare and Medicaid Services. (2017b). Hospital Readmissions Reduction Program (HRRP). Retrieved from https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Readmissions-Reduction-Program.html

16.

Chesteen

Helgheim

Randall

Wardell

(2005). Comparing quality of care in non-profit and for-profit nursing homes: A process perspective. Journal of Operations Management, 23, 229-242.

17.

Clarke

(2004). Readmission to hospital: A measure of quality or outcome? BMJ Quality & Safety, 13, 10-11.

18.

Claxton

Feder

Shactman

Altman

(1997). Public policy issues in nonprofit conversions: An overview. Health Affairs, 16(2), 9-28.

19.

Collum

(2013). Hospital financial performance: A look at governance and hit strategies (Doctoral dissertation). University of Alabama at Birmingham, Birmingham, AL.

20.

Congressional Budget Office. (2006). Nonprofit hospitals and the provision of community benefits. Retrieved from https://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/76xx/doc7695/12-06-nonprofit.pdf

21.

Cooper

Gibbons

Jones

McGuire

. (2011). Does hospital competition save lives? Evidence from the English NHS patient choice reforms. The Economic Journal, 121(554), F228-F260.

22.

Desai

A. S.

Stevenson

L. W.

(2012). Rehospitalization for heart failure: Predict or prevent? Circulation, 126, 501-506.

23.

Dharmarajan

Krumholz

H. M.

(2017). Consequences of reductions in hospital readmissions—Reply. Journal of the American Medical Association, 318(19), 1934. doi:10.1001/jama.2017.14799

24.

Ding

D. X.

(2014). The effect of experience, ownership and focus on productive efficiency: A longitudinal study of U.S. hospitals. Journal of Operations Management, 32, 1-14.

25.

Dubrovinsky

Winter

R. A.

(2015). Organizational form and output quality. Canadian Journal of Economics, 48, 189-206.

26.

Eggleston

Shen

Lau

Schmid

C. H.

Chan

(2008). Hospital ownership and quality of care: What explains the different results in the literature? Health Economics, 17, 1345-1362.

27.

Ferris

J. M.

Graddy

E. A.

(1999). Structural changes in the hospital industry, charity care and the nonprofit role in health care. Nonprofit and Voluntary Sector Quarterly, 28, 18-31.

28.

Fischer

Lingsma

H. F.

Marang-van

Mheen

P. J.

Kringos

D. S.

Klazinga

N. S.

Steyerberg

E. W.

(2014). Is the readmission rate a valid quality indicator? A review of the evidence. PLoS ONE, 9(11), e112282.

29.

Frank

R. G.

Salkever

D. S.

(1994). Nonprofit organizations in the health sector. Journal of Economic Perspectives, 8, 129-144.

30.

Gaynor

(2006). What do we know about competition and quality in health care markets? (NBER Working Paper No. 12301). Retrieved from http://www.nber.org/papers/w12301

31.

Gaynor

Town

R. J.

(2012). Competition in healthcare markets. In McGuire

Pauly

M. V.

Pita Barros

(Eds.), Handbook of health economics (Vol. 2, pp. 499-638). Amsterdam, The Netherlands: Elsevier.

32.

Gilbert

Menon

Schwartz

(1990). Predicting bankruptcy for firms in financial distress. Journal of Business Finance and Accounting, 17, 161-171.

33.

Goddeeris

J. H.

Weisbrod

B. A.

(1998). Conversion from nonprofit to for-profit legal status. Journal of Policy Analysis, 17, 215-233.

34.

Gowrisankaran

Town

(2006). Causality, learning and forgetting in surgery. Retrieved from http://www.u.arizona.edu/~gowrisan/pdf_papers/learn_forget_surgery.pdf

35.

Gowrisankaran

Town

(2003). Competition, payers, and hospital quality. Health Services Research, 38, 1403-1422.

36.

Gray

B. H.

(1991). The profit motive and patient care. Cambridge, MA: Harvard University Press.

37.

Gray

B. H.

(1997a). Conversion of HMOs and hospitals: What’s at stake? (Program on Nonprofit Organizations, Working Paper No. 238). New Haven, CT: Institution for Social and Policy Studies, Yale University.

38.

Gray

B. H.

(1997b). Conversions of HMOs and hospitals: What’s at stake? Health Affairs, 16(2), 29-47.

39.

Hansmann

(1987). The nonprofit sector: Research handbook. New Haven, CT: Yale University Press.

40.

Hansmann

(1996). The ownership of enterprise. Cambridge, MA: Belknap Press of Harvard University Press.

41.

Hirsch

B. T.

Schumacher

E. J.

(2005). Classic or new monopsony? Searching for evidence in nursing labor markets. Journal of Health Economics, 24, 969-989.

42.

Hirth

R. A.

(1999). Consumer information and competition between nonprofit and for-profit nursing homes. Journal of Health Economics, 18, 219-240.

43.

Hyman

D. A.

(1998). Hospital conversions: Fact, fantasy, and regulatory follies. Journal of Corporation Law, 23, 741-778.

44.

Ibrahim

A. M.

Nathan

Thumma

J. R.

Dimick

J. B.

(2017). Impact of the Hospital Readmission Reduction Program on surgical readmissions among Medicare beneficiaries. Annals of Surgery, 266, 617-624.

45.

Joynt

K. E.

Jha

A. K.

(2011). Who has higher readmission rates for heart failure, and why? Implications for efforts to improve care using financial incentives. Circulation, 4, 53-59.

46.

Joynt

K. E.

Orav

E. J.

Jha

A. K.

(2014). Association between hospital conversions to for-profit status and clinical and economic outcomes. Journal of the American Medical Association, 312, 1644-1652.

47.

Kessler

D. P.

McClellan

M. B.

(2000). Is hospital competition socially wasteful? Quarterly Journal of Economics, 115, 577-615.

48.

Kessler

D. P.

McClellan

M. B.

(2002). The effects of hospital ownership on medical productivity. RAND Journal of Economics, 33, 488-506.

49.

Krumholz

H. M.

Wang

Lin

Dharmarajan

Horwitz

L. I.

Ross

J. S.

Normand

S.-L. T.

(2017). Hospital-readmission risk: Isolating hospital effects from patient effects. The New England Journal of Medicine, 377, 1055-1064.

50.

Leone

A. J.

Van Horn

R. L.

Wedig

G. J.

(2005). Abnormal returns and the regulation of nonprofit hospital sales and conversions. Journal of Health Economics, 24, 113-135.

51.

Liu

Jervis

K. J.

Younis

M. Z.

Forgione

D. A.

(2011). Hospital financial distress, recovery and closure: Managerial incentives and political costs. Journal of Public Budgeting, Accounting & Financial Management, 23, 31-68.

52.

Lynn

M. L.

Wertheim

(1993). Key financial ratios can foretell hospital closures. Healthcare Financial Management, 47(11), 66-70.

53.

Malani

Philipson

David

(2003). Theories of firm behavior in the nonprofit sector: A synthesis and empirical evaluation. In Glaeser

(Ed.), The governance of not-for-profit organizations (pp. 181-215). Chicago, IL: University of Chicago Press.

54.

Mark

T. L.

(1999). Analysis of the rationale for, and consequences of, nonprofit and for-profit ownership conversions. Health Services Research, 34(1 Pt. 1), 83-101.

55.

Marsteller

J. A.

Bovberg

R. R.

Nichols

L. M.

(1998). Nonprofit conversion: Theory, evidence, and state policy options. Health Services Research, 33(5 Pt. 2), 1495-1535.

56.

McClellan

M. M.

Staiger

D. O.

(2000). The changing hospital industry: Comparing not-for-profit and for-profit institutions. Chicago, IL: University of Chicago Press.

57.

McIlvennan

C. K.

Eapen

Z. J.

Allen

L. A.

(2015). Hospital Readmissions Reduction Program. Circulation, 131, 1796-1803.

58.

McKeever

B. S.

(2015). The nonprofit sector in brief 2015: Public charities, giving, and volunteering. Urban Institute. Retrieved from http://www.urban.org/sites/default/files/publication/72536/2000497-The-Nonprofit-Sector-in-Brief-2015-Public-Charities-Giving-and-Volunteering.pdf

59.

Medicare Payment Advisory Commission. (2007). Report to the Congress: Promoting greater efficiency in Medicare. Author. Retrieved from http://www.medpac.gov/documents/jun07_entirereport.pdf

60.

Medicare Payment Advisory Commission. (2013). Report to the Congress: Medicare and the health care delivery system. Retrieved from http://www.medpac.gov/docs/default-source/reports/jun13_entirereport.pdf?sfvrsn=0

61.

Mukamel

Zwanziger

Bamezai

(2002). Hospital competition, resource allocation and quality of care. BMC Health Services Research, 2, 10-18.

62.

National Centre for Health Outcomes Development. (2008). Emergency readmission rates. Available from http://nchod.uhce.ox.ac.uk/

63.

Noe

Forgione

D. A.

(2014). Economic incentives in the hospice care setting: A comparison of for-profit and nonprofit providers. Journal of Public Budgeting, Accounting & Financial Management, 26, 233-270.

64.

Norouzzadeh

Garber

Longacre

Akbar

Riebling

Clark

(2014). A modular simulation study to improve patient flow to inpatient units in the Emergency Department. Journal of Hospital Administration, 3, 205-215.

65.

Norton

E. C.

Staiger

D. O.

(1994). How hospital ownership affects access to care for the uninsured. RAND Journal of Economics, 25, 171-185.

66.

Owen

P. D.

Ryan

Weatherston

C. R.

(2007). Measuring competitive balance in professional sports using the Herfindahl-Hirschman Index. Review of Industrial Organization, 31, 289-302.

67.

Paul

Lin

(2012). Models for improving patient throughput and waiting at hospital Emergency Departments. Journal of Emergency Medicine, 43, 1119-1126.

68.

Porter

M. E.

(1996). What is strategy? Harvard Business Review, 74(6), 61-78.

69.

Ramamonjiarivelo

Weech-Maldonado

Hearld

O’Connor

Menachemi

Epané

(2015). Public hospitals in financial distress: Is privatization a strategic choice? Health Care Management Review, 40, 337-347.

70.

Relias. (2008). Consultant, more staff Lead to ED turnaround. Retrieved from https://www.ahcmedia.com/articles/10082-consultant-more-staff-lead-to-ed-turnaround

71.

Rivers

P. A.

Fotter

M. D.

(2004). Do HMO penetration and hospital competition impact quality of hospital care? Health Services Management Research, 17, 237-248.

72.

Robinson

J. C.

(2003). The curious conversion of empire Blue Cross. Health Affairs, 22, 100-118.

73.

Robinson

J. C.

Miller

(2014). Total expenditures per patient in hospital-owned and physician-owned physician organizations in California. Journal of the American Medical Association, 312, 1663-1669.

74.

Scanlon

D. P.

Swaminathan

Lee

Chernew

(2008). Does competition improve health care quality? Health Services Research, 43, 1931-1951.

75.

Schlesinger

Gray

B. H.

(2006). Nonprofit organizations and health care some paradoxes of persistent scrutiny. In Steinberg

Powell

W. W.

(Eds.), The nonprofit sector: A research handbook (2nd ed., pp. 378-414). New Haven, CT: Yale University Press.

76.

Shepherd

J. M.

(2009). Money, politics and impartial justice. Duke Law Journal, 58, 623-685.

77.

Sloan

F. A.

(1998). Commercialism in nonprofit hospitals. In Weisbrod

(Ed.), To profit or not to profit: The commercial transformation of the nonprofit sector (pp. 151-168). New York, NY: Cambridge University Press.

78.

Sloan

F. A.

(2002). Frontiers in health policy research. Cambridge, MA: MIT Press.

79.

Sloan

F. A.

Ostermann

Conover

C. J.

(2003). Antecedents of hospital ownership conversions, mergers, and closures. Inquiry, 40, 39-56.

80.

Sloan

F. A.

Picone

A. G.

Taylor

D. H.

Chou

(2001). Hospital ownership and cost and quality of care: Is there a dime’s worth of difference? Journal of Health Economics, 20, 1-21.

81.

Sloan

F. A.

Trogdon

J. G.

Curtis

L. H.

Schulman

K. A.

(2003). Does the ownership of the admitting hospital make a difference? Outcomes and process of care of Medicare beneficiaries admitted with acute myocardial infarction. Medical Care, 41, 1193-1205.

82.

Steinberg

Gray

B. H.

(1993). The role of nonprofit enterprise. Nonprofit and Voluntary Sector Quarterly, 22, 297-316.

83.

Stone

A. A.

(1999). Managed care, liability and ERISA. Psychiatric Clinics of North America, 22, 17-29.

84.

Teisberg

Porter

Brown

(1994). Making competition in health care work. Harvard Business Review, 72, 131-141.

85.

Trussel

J. M.

Greenlee

J. S.

(2004). A financial rating system for nonprofit organizations. Research in Governmental and Nonprofit Accounting, 11, 105-128.

86.

Tsai

T. C.

Joynt

K. E.

Orav

E. J.

Gawande

A. A.

Jha

A. K.

(2013). Variation in surgical-readmission rates and quality of hospital care. The New England Journal of Medicine, 369, 1134-1142.

87.

Weech-Maldonado

Neff

Mor

(2003). Does quality of care lead to better financial performance? The case of the nursing home industry. Health Care Management Review, 28, 201-216.

88.

Woolhandler

Himmelstein

D. U.

Lewontin

J. P.

(1993). Administrative costs in U.S. hospitals. The New England Journal of Medicine, 329, 400-403.

Supplementary Material

Please find the following supplemental material available below.

For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.

For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.

0.00 MB

0.16 MB

Does Hospital Status Affect Performance?

Abstract

Keywords

Get full access to this article

References

Supplementary Material