Hospital service line variation widens care gaps, study shows

For-profit hospitals are more likely to discontinue less-profitable services than government-owned and not-for-profit hospitals, new research shows.

Government-owned hospitals were 9 percentage points and not-for-profit hospitals 6.2 percentage points more likely than comparable for-profits to offer services that are relatively unprofitable, according to an analysis of data on 2,500 urban hospitals from 2004 to 2019 published in Health Affairs Monday.

This variation has led to a dearth of less-profitable services such as psychiatric care and substance-abuse treatment and a surplus of high-margin services such as invasive heart surgeries, researchers found.

“We wanted to look at what contribution hospital ownership had on the provision of care. The answer should be nothing, once you take size and location out of the equation,” said Jill Horwitz, lead author of the study and a professor at the University of California, Los Angeles law school. “Ownership matters a surprising amount. That is not what I expected going in.”

Here are five takeaways from the study:

1. A little more than half of hospitals offered emergency psychiatric services, which tend to be quite unprofitable. But that burden disproportionately fell on not-for-profit and government hospitals. Those hospitals were significantly more likely to offer emergency psychiatric services than for-profit facilities. For-profit hospitals were also significantly less likely to offer HIV/AIDS care, substance-abuse treatment, hospice and obstetrics.
2. An equal share—49% of not-for-profits and for-profits—provided adult cardiac surgery. But overall, not-for-profits were not offering as many lucrative adult cardiac services as their for-profit peers. That may be because not-for-profit facilities lack the resources to acquire the latest equipment or hire the top clinicians, Horowitz said. “We need to be careful when we tell nonprofit hospitals to do things that cost them money because that money has to come for somewhere,” Horwitz said.
3. Not enough attention is paid to service line offerings when gauging whether not-for-profit hospitals earn their tax exemptions, the researchers wrote. Because federal policy governing not-for-profit hospitals mainly focuses on their responsibility to improve access for people with low incomes, it doesn’t account for these facilities offering a broader array of services than their taxed competitors. “The way we measure community benefit is by how much money they spend on providing free care or doing things that hospitals are ill-equipped to do, like forming housing policy,” Horwitz said.
4. The researchers didn’t find significant differences in service line offerings related to system-owned versus independent hospitals.
5. Not-for-profit and government hospitals were more likely to replicate for-profits’ service mixes when for-profit hospitals entered their markets, according to the study. The converse was not the case. “That struck me as critically important,” Horwitz said.