Is There a Future for the Not-for-Profit Hospital?

By Weckwerth, Vernon E. | Frontiers of Health Services Management, Summer 2006 | Go to article overview

Is There a Future for the Not-for-Profit Hospital?


Weckwerth, Vernon E., Frontiers of Health Services Management


SUMMARY

The issue of the future of the not-for-profit hospital is not one of not for profit versus investor owned, but of economic viability. A shift toward business practices in the not-for-profit hospital is occurring and may help explain why few studies have been able to show distinctive differences between not-for-profit and investor-owned hospitals. Although the system is set up to give not for profits special privileges for promoting a societal common good, a gradual erosion of those privileges has blurred the distinction between the two types of entities. With a process I call "competitive advantage incrementalism," investor-owned hospitals chip away at the privileges afforded their tax-exempt competitors. At the same time, the not-for-profit hospitals increasingly adopt the successful practices of the business world, and are guided by board members and executives who hold to a big-business view of healthcare. What is the future for the not-for-profit hospital? They must continue to exist, although they can expect increasing operating burdens to continue as not for profits. They and investor-owned facilities become progressively more similar in operations and structure. The not-for-profit institutions must prove that they produce a community benefit to justify not-for-profit status. That is a heavier burden than merely producing a high rate of return for investors.

Is THERE A future for the not-for-profit hospital? Not as we think we know it.

In trying to predict the future of the not-for-profit (NFP) hospital, one approach would be to list the pros and cons. This approach initiates a side-taking mentality from the beginning-as does our legal system of prosecutor versus defendantrather than an approach to gaining the benefits from both alternatives.

Painting a true picture of the future will very much depend on what we hold in our minds of what a not-for-profit hospital is, and even more importantly, what the public believes is an appropriate role for hospitals in healthcare delivery in general and NFP hospitals specifically.

One clear picture is that the typical "person on the street's" view of their local community hospital is an illogical mixture of historic remembrances, some wordof-mouth (maybe even personal) anecdotes, and an idealized myth of what the hospital should be. It is unclear whether the typical person on the street thinks at all about the local hospital unless there is a family name on it or a family member is on the board, or the person works at the facility, knows someone who works there, or is a patient. A common schizophrenic behavior is to support vocally the local hospital, but go to a distant one when one's own care is involved. In reality, does the intended purpose of the hospital make any difference? Does ownership make any difference to the patients, the doctors, or the staff? Who cares?

WHAT ARE COMMUNITY GENERAL HOSPITALS?

Of the nearly 5,000 non-federal short-term general and other specialty hospitals listed by the American Hospital Association, the majority are known as community general hospitals-these are what most people on the street identify as "their" hospital. Of that total, about 3,000 are non-governmental and NFP, and 750 are investor owned (IO). The rest are state and local government hospitals. "State and local government hospitals" is a confusing classification in itself because definitions vary from state to state. For example, in Minnesota, of the 131 community general hospitals, 42 are classified by the AHA as "state and local government." This is a reflection of their incorporation, not as 501(c)3s (NFP), but as county, city, city-county, and so forth, resulting in a classification as "government" by the AHA. In reality, these government hospitals are indistinguishable from any NFP community hospital to the person on the street and to most professionals in the field. In virtually all ways these institutions behave the same (except for taxing powers). …

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