State Oversight of Hospital Conversions: Preserving Trust or Protecting Health?

This paper explores the recent trend of hospital conversions from not-for-profit to for-profit corporate organizational form. Hospital conversions implicate the public interest in charitable assets and affect health policy goals. The paper concludes that current and developing oversight regimes do not adequately protect these interests. The paper finds that state attorneys general are frequently the only government actors with authority to review conversions. In some states, there is no effective regulation of conversions, and/or converted assets are not accurately valued. Without adequate oversight and thorough valuations, assets meant for charitable purposes are transferred to for-profit buyers or executives of the not-for-profit sellers. Even when attorneys general are able to oversee conversion, the doctrines upon which their authority is based -- trust law and corporations law -- hinder the advancement of health policy goals. These doctrinal limitations do not constrain all attorneys general from conducting substantive health policy reviews when they oversee conversions. While conversion statutes and proposed legislation resolve some of the obstacles to oversight, they do not address the conflict between health policy goals and trust and corporations law. The data are drawn primarily from interviews with assistant attorneys general in thirty-two states.This publication is Hauser Center Working Paper No. 10. The Hauser Center Working Paper Series was launched during the summer of 2000. The Series enables the Hauser Center to share with a broad audience important works-in-progress written by Hauser Center scholars and researchers

What Do Nonprofits Maximize? Nonprofit Hospital Service Provision and Market Ownership Mix

Conflicting theories of the nonprofit firm have existed for several decades yet empirical research has not resolved these debates, partly because the theories are not easily testable but also because empirical research generally considers organizations in isolation rather than in markets. Here we examine three types of hospitals – nonprofit, for-profit, and government – and their spillover effects. We look at the effect of for-profit ownership share within markets in two ways, on the provision of medical services and on operating margins at the three types of hospitals. We find that nonprofit hospitals’ medical service provision systematically varies by market mix. We find no significant effect of for-profit market share on the operating margins of nonprofit hospitals. These results fit best with theories in which hospitals maximize their own output.

Review of Reforming Medicare: Options, Tradeoffs, and Opportunities

Medicare needs fixing. The program has its strengths; it is popular among beneficiaries, has very low administrative costs (maybe too low), and, since its inception, has greatly reduced financial risk exposure among beneficiaries. Nevertheless, it is unaffordable and inefficient. Jeanne Lambrew and Henry Aaron take up both of these challenges for Medicare reform in great detail in Reforming Medicare

The Virtues of Medicare

Most of us look forward to a heaven where people don\u27t get sick. But if they do, health care would be traded among fully informed patients and providers in perfectly competitive and frictionless markets. In that perfect world, sick citizens simply shop for doctors the way they shop for other consumer goods. The better doctors, like the most elegant hotel rooms and fanciest cars, would cost more than inferior doctors. Patients would consult their utility meters and, with appropriate attention to discounting over an infinite lifetime, choose accordingly. After each treatment, the patients would know the quality of their outcome and would accurately tell their friends in heaven whether they got a good deal on their appendectomy, bypass surgery, or what have you. Unfortunately, that\u27s not the way it works here in the corporeal world. Illness is messy. Medical treatment is complex. Knowledge is limited. Decisions need to be made quickly. And, therefore, health care markets are a muddle. Enter Professor David Hyman. Posing as Underling Demon 666, Hyman has written a book-length letter to Satan about Medicare, the federal health insurance program for people age sixty-five and older. In the letter. Hyman explains that only one thing stands in the way of having heaven\u27s health care system here on earth: big government

The Virtues of Medicare

Most of us look forward to a heaven where people don\u27t get sick. But if they do, health care would be traded among fully informed patients and providers in perfectly competitive and frictionless markets. In that perfect world, sick citizens simply shop for doctors the way they shop for other consumer goods. The better doctors, like the most elegant hotel rooms and fanciest cars, would cost more than inferior doctors. Patients would consult their utility meters and, with appropriate attention to discounting over an infinite lifetime, choose accordingly. After each treatment, the patients would know the quality of their outcome and would accurately tell their friends in heaven whether they got a good deal on their appendectomy, bypass surgery, or what have you. Unfortunately, that\u27s not the way it works here in the corporeal world. Illness is messy. Medical treatment is complex. Knowledge is limited. Decisions need to be made quickly. And, therefore, health care markets are a muddle. Enter Professor David Hyman. Posing as Underling Demon 666, Hyman has written a book-length letter to Satan about Medicare, the federal health insurance program for people age sixty-five and older. In the letter. Hyman explains that only one thing stands in the way of having heaven\u27s health care system here on earth: big government

Does Nonprofit Ownership Matter?

In recent years, policymakers have increasingly questioned whether nonprofit institutions, particularly hospitals, merit tax exemption. They argue that nonprofit hospitals differ little from their for-profit counterparts in the provision of charity care and, therefore, should either lose their tax-exempt status or adhere to new, strict, and specific requirements to provide free services for the poor. In this Article, I present evidence that hospital ownership-whether it is for-profit, nonprofit, or government owned-has a significant effect on the mix of medical services it offers. Despite notoriously weak enforcement mechanisms, nonprofit hospitals act in the public interest by providing services that are unlikely to be offered by the other types of hospitals. Imposing onerous charity requirements or limiting nonprofit tax exemptions may have severe and unintended consequences for all patients, including the well-insured

Why We Need the Independent Sector: The Behavior, Law, and Ethics of Not-for-Profit Hospitals

Among the major forms of corporate ownership, the not-for-profit ownership form is distinct in its behavior, legal constraints, and moral obligations. A new empirical analysis of the American hospital industry, using eleven years of data for all urban general hospitals in the country, shows that corporate form accounts for large differences in the provision of specific medical services. Not-for-profit hospitals systematically provide both private and public goods that are in the public interest, and that other forms fail to provide. Two hypotheses are proposed to account for the findings, one legal and one moral. While no causal claims are made, not-for-profit hospital behavior is consistent with the behavior required by law and morality. The moral argument, developed as a preliminary theory of not-for-profit ethics, also provides a potential reason to prefer not-for-profit hospitals. The findings provide a new justification for the not-for-profit tax exemption for hospitals, and also suggest new uses for ownership categories as regulatory tools

Nonprofits and Narrative: Piers Plowman, Anthony Trollope, and Charities Law

What are the narrative possibilities for understanding nonprofit law? Given the porous barriers between nonprofit law and the literature about it, there are many. Here I consider two. First, nonprofit law and nonprofit literature are each enriched and made fully explicable by reference to the other. Nonprofit law has grown in parallel with literature. It may even be that important legal texts, texts about doing and being good, were imported directly from literary sources into law. Second, in writings ranging from sensational journalism to high literature, nonprofit laws and the scandals involving their violations have captured the public imagination for centuries. That nonprofit law deals with human concerns such as faithfulness and the struggle to do good also makes nonprofit literature effective in creating the rich background against which the law can be better understood

Why We Need the Independent Sector: The Behavior, Law, & Ethics of Not-for-Profit Hospitals

Among the major forms of corporate ownership, the not-for-profit ownership form is distinct in its behavior, legal constraints, and moral obligations. A new empirical analysis of the American hospital industry, using eleven years of data for all urban general hospitals in the country, shows that corporate form accounts for large differences in the provision of specific medical services. Not-for-profit hospitals systematically provide both private and public goods that are in the public interest, and that other forms fail to provide. Two hypotheses are proposed to account for the findings, one legal and one moral. While no causal claims are made, not-for-profit hospital behavior is consistent with the behavior required by law and morality. The moral argument, developed as a preliminary theory of not-for-profit ethics, also provides a potential reason to prefer not-for-profit hospitals. The findings provide a new justification for the not-for-profit tax exemption for hospitals, and also suggest new uses for ownership categories as regulatory tools