Financial, Clinical Outcomes for Hospitals Converting to For-Profit Status

Converting to for-profit status has a positive influence on a hospital’s finances, but no effect on quality or mortality rates. The switch does not reduce the proportion of poor or minority patients receiving care, found researchers from the Harvard School of Public Health (HSPH) and Brigham and Women’s Hospital.

The authors studied 237 hospitals that converted from nonprofit to for-profit status between 2003 and 2007, most of which were small or medium in size and located in the south. The study was published in the Journal of the American Medical Association.

“Critics of for-profit hospitals have argued that they are worse at providing good care to patients and that therefore we should limit them,” Ashish Jha, professor of health policy and management at HSPH and senior author of the study, said in a statement. “Over the past decade, hundreds of hospitals have switched from being nonprofit to for-profit. Our study finds that if the public health goal is to improve hospital care, then focusing on things like for-profit or nonprofit status is a distraction.”

Hospitals that decided to make the conversion were struggling financially before the switch, with negative total margins. Switching status was associated with improved financial health, although it had no relationship to the quality of care provided. The authors found no clear reason for the improvement in total and operating margins; however, they speculated financial gains likely came through cost-cutting or better payment through private payers.

Despite arguments that converting to a for-profit hospital leads to better care, the authors found no support for such a claim.

However, the researchers point out that their findings differ from prior studies on hospitals that converted in the late 1980s and 1990s. Those studies found that after switching to for-profit status, hospitals typically had higher profitability, but also higher mortality rates and lower staffing.

“While issues like profit status get a lot of attention, we really need to focus our efforts on the much more important issue of why some hospitals provide good care while so many others don’t—irrespective of their ownership status,” Jha said.