HARTFORD – Today, in response to the dramatic increase in number of for-profit healthcare providers throughout the United States, U.S. Senator Chris Murphy (D-Conn.) released a report on the differences between for-profit and non-profit health care providers, and how those differences impact Medicare spending. Over the last decade, the United States has seen a national trend towards converting existing hospitals into for-profit entities. Connecticut has largely been immune to this trend. However, in recent years, for-profit hospital chains have attempted to convert nearly one-quarter of Connecticut’s hospitals to investor owned, for-profit models.

Murphy’s report shows that there are a number of differences between for-profit hospitals and non-profit hospitals that consumers and state officials should be aware of. For example, research has found that for-profit hospitals are more likely to offer services that are financially profitable, therefore charging federal health care programs like Medicare more per patient than a non-profit hospital. Additionally, research has found that as more for-profit hospitals move into a certain area, non-profit hospitals tend to prioritize revenue-generating services in order to keep up with the for-profit hospital.

“It’s important for consumers and health officials to understand the impact for-profit hospitals have on federal Medicare spending,” said Murphy. “As this report shows, at times for-profit hospitals are likely to prioritize their bottom line, and their mere presence in the market can pressure non-profits to prioritize revenue-generating services. I hope this report helps inform the debate about the future of Connecticut hospitals.”

Below are the key findings of Murphy’s report:

  • The number of for-profit hospitals is growing. Ten years ago, only 14 percent of all hospitals in the United States were for-profit. Today, one in five community hospitals are investor-owned.
  • For-profit hospitals are more likely to offer financially profitable services. For example, for-profits were 7 percent more likely to provide open-heart surgery than non-profits and 8 percent less likely to offer psychiatric emergency services.  Tests for more than 30 other services yielded similar results.
  • States with higher percentages of for-profit hospitals spend more per Medicare beneficiary than states with high percentages of non-profit hospitals.  For-profit dominant states typically spend approximately 3 percent more per Medicare enrollee than non-profit dominant states. 
  • If per-Medicare enrollee spending was at the same rate in the top non-profit states as in the top for-profit states, the Medicare program would have spent nearly $2 billion more in 2009. If Connecticut’s per-enrollee spending was the same as for-profit spending, Medicare would have spent $173 million more in that same year for Connecticut beneficiaries.  
  • The number of for-profit long-term care hospitals (LTCHs) is growing, predominantly in states that already had specialized hospitals. On average, Medicare accounts for two-thirds of all LTCH discharges and pays these hospitals almost $39,000 per case.  From 2003-2011, there was a 60 percent increase in for-profit long-term care hospitals, which corresponded with a 46 percent increase in total spending for these hospitals.
  • Non-profit hospital behavior changes when for-profits are in the same market. Research has found that when there are more for-profit hospitals in a city, non-profit hospitals in that area (1) respond aggressively to revenue-increasing opportunities, (2) adopt profitable services, (3) discourage admissions of unprofitable patients, and (4) reduce resources devoted to treating the patients they do admit. This “spill-over” effect could be problematic for the existing network of non-profit hospitals in Connecticut that plan to stay non-profit. 

The full report can be accessed here.