Hospital Mission and Cost Differences

Abstract

The results show no significant differences on average length of stay, cost per patient day, or cost per admission among non-profit, government, and for-profit hospitals when controlling for bed capacities, occupancy rates, number of Medicare/Medicaid days, and hospitals without nurseries. For-profit hospital manhours per patient day were significantly lower than non-profit and government hospitals. This is an important finding because patient-care delivery is labor-intensive. A majority of for-profit hospitals do not have nurseries, which means that they should have more manhours per patient day. As indicated earlier, the manhours for hospitals with nurseries are higher than those for hospitals without nurseries. This indicates cost-cutting behavior on the part of a majority of for-profit hospitals. This method of limiting expenditures by decreasing labor costs associated with certain services is consistent with profit-maximization. The findings of this study with regard to cost differences among non-profit and for-profit hospitals contradict previous research. However, a recent study by Kralewski, Gifford and Porter (1988) noted that whereas ownership, when considered alone, differentiates hospitals, when evaluated within each community, most of the investor-owned and non-for-profit hospital differences disappear. Similar questions have been raised as to whether non-profit hospitals truly differ from for-profit hospitals (Pauly 1987). Caution needs to be exercised in attempting to extrapolate the findings of this study, because of the dynamic health care environment. Hospital ownership changes over time, reimbursement rules affect behavior, and internal factors in organizational operation affect outcomes. These should be considered in future studies exploring organizational mission and cost differences.