{"id":40,"date":"2017-01-12T01:42:30","date_gmt":"2017-01-12T01:42:30","guid":{"rendered":"http:\/\/blogs.harvard.edu\/shailin\/?p=40"},"modified":"2017-09-18T01:43:51","modified_gmt":"2017-09-18T01:43:51","slug":"maybe-for-profit-hospitals-arent-so-bad","status":"publish","type":"post","link":"https:\/\/archive.blogs.harvard.edu\/shailin\/2017\/01\/12\/maybe-for-profit-hospitals-arent-so-bad\/","title":{"rendered":"Maybe For-Profit Hospitals Aren\u2019t So Bad"},"content":{"rendered":"

Originally published on the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics\u00a0Bill of Health<\/a>\u00a0blog.<\/i><\/p>\n

For-profit hospitals have taken their fair share of\u00a0flack<\/a>\u00a0over the years. Much maligned by many in the medical community, they are seen as money-hungry corporate machines that pervert the medical profession by\u00a0putting the bottom line before patient care<\/a>. This skepticism of profit-driven hospitals feels right. Medicine has long been the purview of charitable organizations and religious institutions. It\u2019s supposed to be a calling \u2014 a public service to which practitioners are drawn \u2014 not a check to cash at the bank.<\/p>\n

As for-profit hospitals proliferated, there was research done suggesting they had quality and cost issues stemming from their profit motives. For-profit hospitals had\u00a0higher mortality rates<\/a>, employed\u00a0fewer trained professionals per bed<\/a>, and were\u00a0more expensive<\/a>\u00a0than their non-profit and government counterparts. Researchers speculated that this was the result of duties owned to shareholders by corporate leaders or compensation incentives for executives based on profitability rather than quality of care. These studies seemed to confirm what many thought they already knew: medicine and money don\u2019t mix well.<\/p>\n

More recent studies, however, suggest that for-profit hospitals may have turned over a new leaf. Since 2010,\u00a0for-profit hospitals have out-performed<\/a>\u00a0non-profits in the \u201cTop Performer\u201d evaluation carried out by The Joint Commission \u2014 an organization that accredits hospitals in the US \u2014 with a higher percentage of for-profit hospitals qualifying for the honor than\u00a0non-profits. A\u00a0study published in JAMA<\/a>\u00a0from the Harvard T.H. Chan School of Public Health found that hospitals that converted from non-profit to for-profit improved their financial position by increasing their total margins and experienced no change in mortality rates.<\/p>\n

The same researchers from Harvard\u00a0reported a preliminary analysis<\/a>\u00a0comparing non-profit and for-profit hospitals in 2012, showing that \u2014 across a number of metrics associated with quality \u2014 for-profit hospitals were comparable to non-profit ones. Interestingly, the analysis also showed that the most dangerous hospitals for patients by far were government hospitals, which underperformed in almost every quality metric when compared with both non-profit and for-profit private medical facilities. The basic takeaway\u00a0from the analysis was that there is variation in quality from hospital to hospital, but that variation it is not correlated with for-profit status.<\/p>\n

Given the strides for-profit hospitals have made, why does the perception persist that they crank out profit at the expense of patient care?<\/p>\n

Perhaps this\u00a0negative perception endures because some continue to\u00a0critique for-profit hospitals by\u00a0focusing\u00a0on the ways in which the\u00a0predominantly private health care system<\/a>\u00a0in the United States lags behind government-run programs in other developed countries. It\u2019s well established that the United States has higher costs and poorer outcomes compared to\u00a0its peer nations. The U.S. spends far more of its gross domestic product on health care than any other industrialized country, and is 37th<\/sup>\u00a0in the\u00a0World Health Organization\u2019s health system ranking<\/a>. The U.S.\u00a0strategy of having competing insurers individually negotiate with hospitals \u2014 which\u00a0are gaining\u00a0market power as they consolidate \u2014 simply doesn\u2019t make economic sense. But while\u00a0the health care system in the United States has some substantial issues, that\u2019s an indictment of the private system as a whole \u2014 not of the for-profit hospitals within that system. Conflating criticism of a non-governmental health care system with that of for-profit hospitals within it is unfair to those hospitals which \u2014 at least as of late \u2014 have been performing just as well as their non-profit counterparts, but this confusion\u00a0may explain why many still harbor negative feelings towards for-profit medical facilities.<\/p>\n

Another reason for the continued skepticism of for-profit hospitals may be connected to concern over fiduciary duties owed by directors and officers to shareholders.\u00a0As previously mentioned, some\u00a0critiques of for-profit hospitals have posited that the fiduciary duty of care\u00a0could force directors and executives to maximize profits at patients\u2019\u00a0expense. This critique, however, doesn\u2019t accurately reflect\u00a0the obligations imposed on corporate directors and officers by the duty of care.\u00a0When evaluating whether corporate management has satisfied the duty of care, courts have turned to a surprisingly deferential standard known as the business judgment rule.\u00a0See, e.g.<\/em>,\u00a0Kamin v. American Express Co.<\/em>, 383 N.Y.S.2d 807 (Sup. Ct. 1976). If\u00a0a decision satisfies the requirements of the business judgment rule, courts will generally defer and not second-guess directors. According to the American Bar Association, a decision is a business judgment when it is made by disinterested directors who have been reasonably informed, and who are acting in good faith to advance the corporation\u2019s interest.\u00a0See<\/em>\u00a0Am. Bar Ass\u2019n, Corporate Director\u2019s Guidebook (2d ed. 1994). In other words, provided\u00a0the board isn\u2019t conflicted, uninformed, or acting in bad faith, the decision will be upheld even if it ends up having detrimental impacts on the corporation or its shareholders. Thus, it\u2019s highly unlikely that shareholders could successfully use the duty of care\u00a0to prevent\u00a0measures designed to put patients\u00a0over short-term profits.<\/p>\n

This is by no means a comprehensive account or analysis of the criticisms of for-profit hospitals. It is simply meant to point out that some common concerns\u00a0may not be entirely fair or accurate. To be sure, the jury is still out on for-profit hospitals. They have made impressive strides over the past few years, but still have a history tainted by poor quality of care and \u2014 at times \u2014\u00a0outright fraud<\/a>. The intuition against them is appealing \u2014 I can sympathize with the discomfort some feel towards injecting profit motives into an area traditionally conceived of as a public service. But we should not let our biases impact our assessment of these institutions. If for-profit hospitals are delivering better or less expensive care than non-profit ones, they should get credit for that. At the end of the day, quality and cost of patient care should be the priority \u2014 wherever it\u2019s given.<\/p>\n","protected":false},"excerpt":{"rendered":"

Originally published on the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics\u00a0Bill of Health\u00a0blog. For-profit hospitals have taken their fair share of\u00a0flack\u00a0over the years. Much maligned by many in the medical community, they are seen as money-hungry corporate machines that pervert the medical profession by\u00a0putting the bottom line before patient care. This skepticism of […]<\/p>\n","protected":false},"author":8887,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-40","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/posts\/40","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/users\/8887"}],"replies":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/comments?post=40"}],"version-history":[{"count":1,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/posts\/40\/revisions"}],"predecessor-version":[{"id":41,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/posts\/40\/revisions\/41"}],"wp:attachment":[{"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/media?parent=40"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/categories?post=40"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/tags?post=40"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}