State policy issues in nonprofit conversions

Abnormal returns and the regulation of nonprofit hospital sales and conversions

During the 1990s, concerns that nonprofit (NP) hospitals were being sold at below-market prices to investor-owned (IO) chains helped to prompt the widespread adoption of state laws regulating the sale and conversion of nonprofits. In this paper, we provide a simple test of under-pricing using the IO acquirer's abnormal stock market returns at the time of the acquisition. Prior to regulation, we find that IO chains did not earn abnormal returns from their acquisitions of NPs and earned greater returns from purchasing other IO and privately owned hospitals. In states that subsequently adopted regulations, acquisition activity slowed significantly and acquirer returns became negative. Efficient markets theory suggests that, absent regulation, expected merger synergies were already being transferred to the NP target and that regulation may have reduced expected synergies or increased the costs of acquiring NP hospitals.

Nurse Staffing and Hospital Ownership in California

OBJECTIVE

The purpose of this study is to describe the relationship between nurse staffing and owner type or specific corporate owner in California acute care hospitals.

BACKGROUND

Little empirical data exist regarding nurse staffing as it relates to owner type or specific corporate owner. With minimum staffing ratios scheduled to be implemented in January 2004, this study provides baseline data for evaluating the impact of minimum staffing ratios in California.

METHODS

The study design is descriptive and cross-sectional. Data used in this study are for short-term general hospitals that reported to the California Office of Statewide Health Planning and Development database for fiscal years ending in 1997 through 1999. Six regression models were estimated using pooled data from the 3 years of data.

RESULTS

The most consistent significant findings are: increased patient days or patient discharges predict increased registered nurse (RN) hours; lower RN wages predict increased RN hours; higher technology scores predict increased RN hours; and in 1998 there was an across-the-board decrease in RN hours. Other significant findings include that for-profit hospitals and for-profit systems had fewer RN productive hours for medical-surgical nursing, and select corporate owners, unrelated to profit status, had consistently fewer RN productive hours for medical-surgical nursing.

CONCLUSIONS/IMPLICATIONS

For-profit hospitals and systems behaved differently in the healthcare market environment of the late 1990s. Select nonprofit systems were also using significantly less RN staffing. Other findings support the implication that as technology sophistication increases, there will be a need for increased RN hours to manage the advanced technology. This runs counter to the argument that increasing technology will decrease the need for RN hours. Finally, as discharges go up, the need for RN hours increases.

Mass screening in low-income populations: the challenges of securing diagnostic and treatment services in a national cancer screening program

Funding for many mass screening programs for low-income and uninsured populations provides resources for screening tests, yet only rarely does it provide coverage for necessary follow-up diagnostic and treatment services. The National Breast and Cervical Cancer Early Detection Program (NBCCEDP), a federally funded initiative that provides cancer screening to low-income uninsured and underinsured women, covers some diagnostic follow-up tests and no treatment services. We conducted in-depth case studies of seven state programs participating in the NBCCEDP to investigate the strategies and approaches being used to secure diagnostic and treatment services. The results suggest that the program relies on a patchwork of resources--at state and local levels--to provide diagnostic and treatment services. This includes a number of components of local safety nets, all of which are unstable and have uncertain futures. Public health disease-screening initiatives need to reconsider the feasibility of continued reliance on case-by-case appeals to the local safety net for diagnostic follow-up and treatment services.

Nonprofit to for-profit conversions by hospitals, health insurers, and health plans

Conversion of hospitals, health insurers, and health plans from nonprofit to for-profit ownership has become a focus of national debate. The author examines why nonprofit ownership has been dominant in the US health system and assesses the strength of the argument that nonprofits provide community benefits that would be threatened by for-profit conversion. The author concludes that many of the specific community benefits offered by nonprofits, such as care for the poor, could be maintained or replaced by adequate funding of public programs and that quality and fairness in treatment can be better assured through clear standards of care and adequate monitoring systems. As health care becomes increasingly commercialized, the most difficult parts of nonprofits' historic mission to preserve are the community orientation, leadership role, and innovation that nonprofit hospitals and health plans have provided out of their commitment to a community beyond those to whom they sell services.

Should government intervene to protect nonprofits?

The emergence of investor-owned firms as major actors in U.S. health care financing and delivery has led to calls for federal and state intervention to protect nonprofits and to stem the for-profit sector's growth. High-profile scandals involving some of these firms have lent urgency to such proposals. This paper considers the case for government intervention to protect the nonprofit health sector. The controversy over the comparative merits of nonprofits and for-profits is reformed as a debate over the potential and limits of government action, and the case for a general presumption favoring protection for nonprofits is found to be unpersuasive.

Fiduciary responsibilities in nonprofit health care conversions

Conversions of nonprofit hospitals to for-profit status have been controversial because of concerns that community interests are not represented in the deals. As a result, several states have either passed or are considering conversion legislation. However, dramatic variability among states in approaching conversions remains, including the extent of attorney general intervention. Federal or state legislation could standardize rules for nonprofit conversions, but such comprehensive legislation is unlikely. Instead, this article argues that CEOs and trustees of nonprofit organizations undergoing conversions must honor their fiduciary duties to ensure that a conversion represents community interests.