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For-Profit and Non-Profit Hospitals: What are the Differences?

By recognizing the important distinction between for-profit hospitals and non-profits, a medical student can better define his/her own beliefs on how care should be administered and made available to patients. My investigation into the difference between these types of hospitals has surprised me in many ways. It also helped me address my own concerns about whether a profit should be made on providing health care. The conversations I had with Michael Halter, a CEO at the for-profit Hahnemann University Hospital and Dr. David Himmelstein, co-founder of Physicians for a National Health Program (PNHP) have brought me to the conclusion that thinking about our beliefs on for-profit hospitals is essential to being not only a good doctor, but a strong advocate for our patients.

What can you expect to see differently in the environment of the two hospitals? Interestingly, both Halter and Himmelstein seemed to emphasize that not much differs in the environment in the two types of hospitals. There is no significant variation in efficiency, administrative oversight, and quality of care that is blatantly obvious to a practicing physician. This is a reminder that the hospitals are functioning as part of a greater system that makes finding contrasts between a for-profit hospital and a non-for-profit hospital hard to do at the individual hospital level. Halter emphasized multiple times that there is no difference in the operation of either hospital. In fact, having worked in the administration of both types, he was very aware of their similarities. Both the resident and doctor I spoke with had trouble identifying any differences in the daily routines at each.

Himmesltein’s assessment of the current health care system, in which for-profits and non-for-profits function alike, underpins what he believes are some fundamental flaws in how healthcare should be approached. For Himmelstein, the main objective of the United States health care system should be to provide good care to as many people as possible. These beliefs are heavily supported by his extensive research on topics ranging from health care costs to quality of care in different types of hospitals, and knowledge of international medical systems that serve as proof for many of his statements. Halter does not lack this desire to make people healthier. In fact, as any good business man discussing his product or service, he made that specific objective of his hospital clear. Halter also placed much of the responsibility on the doctors. “At the end of the day it doesn’t matter if its for profit or not for profit hospital because physicians are going to practice the way they see fit,” he said. This statement also provides insight into where the responsibility of delivering health care lies.

According to Himmelstein, the market oriented focus of our health care is largely to blame for a struggling health care system. Take for example, advertising. Halter’s hospital actually does very little advertising as it is an inner-city hospital with a tier I trauma center where patients do not readily choose to show up for care. But, most large hospitals with comprehensive care do large amounts of advertising. Put bluntly by Himmelstein, “advertising is a useless expenditure that is basically wasting patients money.” In a market oriented system, even a non-for profit hospitals seeks to make profits. That profit may not be cashed out by investors, but will be used for advertising or other types of expenditures.

Could those overhead gains instead then be used to invest in better equipment, more staff or nicer facilities, in both for-profit and non-for profit hospitals? This is a legitimate viewpoint, but runs the risk of losing sight of the individual patient and putting more emphasis at the level of the health care institution. While there should be an objective to invest in research and the improvement of care, costs must be considered if this objective is to be carried out by hospitals. Many people can’t afford the state-of-the-art types of treatments so they might lose in a scenario where advancement of care takes precedence.

Increasing investment into advancing science and care versus providing the current care we have to those that are currently sick but lack access are the two objectives that seem to be at opposite ends of a tug-of-war. Himmelstein explained that this battle did not always exist because each of the objectives were not functioning on the same plane. He said that in the past, major scientific advancements were not the product of investors, but rather passionate scientists gaining funds from a university or national grant rather than a hospital. As general as this observation may be, the example highlights the fact that the system has not always treated providing care for the sick as a potential source of income for scientific advancement. This brings us back to the question of whether money should be made on helping sick people become healthy. Can a hospital-based source of income for scientific advancement be considered as a justification for having a health care system operating in a capitalistic manner?

Those that cringe at the thought of a for-profit hospital do so because they feel that health care should not be treated as a commodity, of which the best should be saved for those with the biggest pay checks. And those who do not cringe at that idea most likely argue that a competitive market should increase the quality of the product. Dr. Himmelstein said that unfortunately, the quality measures do not accurately reflect actual patient care because of the many ways that the measures can be manipulated. These quality measure have been shown in his research to be manipulated by both types of hospitals. Halter seems to verify this disconnect in increasing a quality rating with care when he tells me the story of a hypothetical patient. “When the patient is deciding what hospital to go to, the one with a 0% mortality rate and the 10% mortality, they are going to ask which one has free parking,” Halter said. This statement speaks to the validity and utility of indicators for quality of care. So, why then does the hospital for which Mr. Halter works boast their increasing quality rating?

Himmelstein believes the structure of the market and the the culture in hospital administration motivates hospitals to do what other hospitals are doing, despite their applicability to care. Perhaps the cumulative effect of rounding down blood pressure numbers will provide a stronger indicator of good care. But those types of administrative tweaks that are pervasive in many big city hospitals do not actually align with the care the patient will receive, Himmelstein said.  Halter echoes this idea of the culture dominating rather than the ‘good business’ support for quality measures of care. “If we don’t do good on those indicators, we just proved to everybody that we are bad guys…There’s no financial incentive on those quality indicators,” Halter said. “They used to say that if your indicators are best, people will drive business and get better rates and so forth. It hasn’t happened yet,” Halter continued. As much as quality measuring and the marketing to patients about that quality attempts to illustrate level of care, the quality of care still remains at the hands of the doctors (and the health care team they lead). It may not always matter which type of hospital a doctor practices in, but how a doctor administers the care or speaks up when he/she is unable to appropriately do so is always important.

Many medical students, myself included, run the risk of letting some less obvious factors of health care drift out of our minds. Familiarizing yourself with your core beliefs on basic principals of administering healthcare is a step to becoming not only a doctor, but an advocate. Next time you are day dreaming about what your career will look like, try to imagine in what context your care giving will be enabled. It is up to us to motivate action on our beliefs.

Corey Meador (3 Posts)

Contributing Writer

Drexel University College of Medicine

Corey is a Class of 2017 medical student at the Drexel University College of Medicine.