Cheapest care? Go to a nonprofit hospital
Are for-profit hospitals less cost-efficient?
Despite their claims, for-profit hospitals are less cost-efficient and rack up higher treatment bills than their public and not-for-profit counterparts, a recent study shows.
The March 13 issue of the New England Journal of Medicine reports that for-profit hospitals spend at least 23% more on administrative costs than the other two types of organizations.
Researchers using 1994 Medicare data from 6,227 hospitals discovered that for-profit hospitals spent 34 cents of each dollar on administration, compared to 25 cents for private not-for-profit hospitals and 23 cents for public institutions.
Those higher administrative costs were the key reason the overall cost of treating an average patient was $8,115 at for-profit hospitals compared to $7,490 at not-for-profit hospitals and $6,507 at public hospitals.
The researchers also examined how rapidly administrative costs rose in hospitals that switched their for-profit or not-for-profit status between 1990 and 1994. Of the 75 that became for-profit facilities, administrative costs rose 2.5%. Among the 105 for-profit hospitals that became not-for-profit or public facilities, the costs for administration rose only 0.4%.
The study, lead by Steffie Woolhandler, MD, and David Himmelstein, MD, of Harvard Medical School in Boston, predicts administration costs will continue to rise because the industry has related success to business skills.
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