For-profit Hospitals Tied to Higher Health Costs
By Richard A. Knox, Globe Staff, 08/05/99

This story ran on page A3 of the Boston Globe on 08/05/99. © Copyright 1999 Globe Newspaper Company.

When for-profit hospitals dominate a region, total health costs are higher, researchers at Dartmouth College and the White River Junction Veteran Affairs Medical Center are reporting today.

Looking at total Medicare expenditures around the nation over a six-year period, the researchers found a clear pattern of higher total costs in regions with only for-profit hospitals.

Total Medicare spending in 1995, for instance, averaged $5,172 per capita in the 208 areas where all hospitals were for-profit. In the 2,860 regions with only nonprofit institutions, total per capita spending was $4,440. Mixed areas fell in between. Total Medicare costs also grew fastest in areas with only for-profit hospitals.

An American Hospital Association official criticized the study for failing to account for some factors known to drive Medicare spending, such as regional differences in doctors' practice styles. But the researchers said they took into account differences in age, race, geography, HMO enrollment, number of physicians, and other factors besides for-profit ownership that might have affected costs. There is no evidence, they said, that for-profit hospitals provide better care.

"If all Medicare enrollees had lived in areas served by not-for-profit hospitals, we estimate that Medicare would have saved over $5 billion in 1995 alone," said Dr. Elaine Silverman, an author of the study, which appears today in the New England Journal of Medicine.

Why might areas with for-profit hospitals have higher spending for all care, not just hospitalization? "For outpatient hospital services and home health care, there are clear financial incentives to increase utilization, since both types of care have been reimbursed on a fee-for-service basis with few restrictions," the authors wrote.

Most for-profit hospitals currently are concentrated in California and the southeastern states. But Dr. Steffie Wooldhandler of Cambridge Hospital said for-profit chains may make inroads into New England. "It's definitely on the radar screen for us," she said.

This story ran on page A3 of the Boston Globe on 08/05/99. © Copyright 1999 Globe Newspaper Company.