Hospital Ownership and Financial
Performance: An Integrative Research
Review
Academy Health Annual Research Meeting
Boston, June 28, 2005
Yu-Chu Shen
Naval Postgraduate School and NBER
Karen Eggleston, Joseph Lau, Christopher Schmid
Tufts University
Funded by grant #050953 under the Robert Wood Johnson Foundation’s
Changes in Health Care Financing and Organization (HCFO) Initiative
Research Objective
• Does ownership affect hospital financial
performance (cost, revenue, profit,
efficiency)?
• Competing theories with contrasting
•
predictions
Hundreds of empirical studies to date with
conflicting findings
•
•
policymakers have little clear evidence
economics of ownership and behavior
imperfectly understood
Scope of the Integrative Review
 Synthesize the main findings of the
empirical literature between January 1990
and July 2004 on hospital ownership and
performance (published or unpublished)
 Examine multivariate empirical studies of
US acute general short stay hospitals;
 Examine studies that compare differences
between for-profits and nonprofits, between
nonprofits and government, or both.
Scope of the Integrative Review
 We start with 1434 potentially relevant
studies, and end up with 141 studies for
the integrative review.
 Focus on four broad categories of performance
measures:
 financial performance (cost, revenue, profit, and
efficiency)
 quality / patient outcomes
 uncompensated care or community benefits
 Staffing
Presentation Is Focused On Four
Financial Measures
Number of
studies
analyzed the
outcome
Number of
articles with
usable
information
Outcomes Reviewed
Operating cost
Patient revenue and returns
on assets
22
19
14
11
Profit margin
17
14
Cost and technical efficiency
19
15
Integrative Review Research
Questions
1. What is the magnitude of the
difference between NFP and FP—
what is the effect size?
2. How precise or reliable is this
estimated effect size?
3. How do differences in analytic
methods and other study features
affect the estimates of effect size?
Categorizing Analytical Methods
 Three types of methodology rigor
 Type 3: if a study meets both of the
following conditions:
(a) uses panel estimation or explicitly
accounts for potential selection problem
(b) includes two of the following three
sets of controls: patient level, hospital
level, market level
 Type 2: if meets EITHER (a) or (b)
 Type 1: if meets NEITHER (a) nor (b)
Cost: Summary of N-F Effect Size By Method
Types
Effect size
(95% CI)
Study
method_level==0
gautam1996
Method Type 1
% Weight
0.11 ( 0.04, 0.18)
5.3
wang2001
0.23 ( 0.01, 0.45)
1.6
shukla1997
0.27 ( 0.05, 0.49)
1.6
0.16 ( 0.06, 0.25)
8.5
campbell1990
-0.23 (-0.38,-0.08)
2.7
goes1995
-0.08 (-0.12,-0.04)
6.3
-0.03 (-0.08, 0.02)
6.0
Subtotal
method_level==1
fournier1997
connor1998
Method Type 2
-0.01 (-0.03, 0.02)
6.8
becker2002
0.04 ( 0.01, 0.06)
6.7
clement1997
0.04 ( 0.00, 0.08)
6.3
lawrence1990
0.12 ( 0.03, 0.20)
4.6
-0.01 (-0.05, 0.04)
39.4
shen2003b
-0.06 (-0.08,-0.04)
6.8
wilcox-gok2002
-0.05 (-0.10, 0.00)
6.1
-0.04 (-0.05,-0.02)
6.9
0.00 (-0.02, 0.03)
6.8
mark1999
0.02 ( 0.01, 0.03)
7.0
zeckhauser1995
0.05 (-0.00, 0.11)
5.8
bazzoli2000
0.08 ( 0.02, 0.14)
5.7
potter2001
Subtotal
method_level==2
carey2000
carey1997
Method Type 3
0.11 ( 0.10, 0.13)
6.9
Subtotal
0.01 (-0.03, 0.06)
52.0
Overall
0.02 (-0.01, 0.05)
100.0
FP is less costly
-.48845
0
Effect size
FP is more costly
.488456
Revenue: Summary of N-F Effect Size
By Method Type
Study
Effect size
(95% CI)
method_level==0
molinari1993
shukla1997
wang2001
Subtotal
0.21 ( 0.06, 0.36)
0.28 ( 0.06, 0.50)
0.35 ( 0.14, 0.57)
0.26 ( 0.16, 0.37)
4.5
2.4
2.4
9.3
0.04 ( 0.02, 0.06)
0.07 ( 0.04, 0.11)
0.08 (-0.07, 0.23)
0.12 ( 0.10, 0.14)
0.08 ( 0.03, 0.13)
13.1
12.0
4.2
13.1
42.4
-0.02 (-0.04, 0.00)
0.00 (-0.06, 0.06)
0.02 ( 0.01, 0.03)
0.04 (-0.01, 0.09)
0.01 (-0.02, 0.03)
13.2
10.3
13.6
11.2
48.3
0.06 ( 0.03, 0.10)
100.0
method_level==1
connor1998
clement1997
gapenski1993
younis2001
Subtotal
method_level==2
shen2003b
bazzoli2000
mark1999
wilcox-gok2002
Subtotal
Method Type 1
Method Type 2
Method Type 3
Overall
FP-.57406
generates less
revenue
0
Effect size
FP generates
more
.574063
revenue
% Weight
Revenue: Summary of N-F Effect Size
By Covered Region
Study
Effect size
(95% CI)
national==0
wilcox-gok2002
gapenski1993 Single state
molinari1993 sample
shukla1997
wang2001
Subtotal
0.04 (-0.01, 0.09)
0.08 (-0.07, 0.23)
0.21 ( 0.06, 0.36)
0.28 ( 0.06, 0.50)
0.35 ( 0.14, 0.57)
0.17 ( 0.05, 0.29)
11.2
4.2
4.5
2.4
2.4
24.8
national==1
shen2003b
bazzoli2000
mark1999
connor1998
clement1997
younis2001
Subtotal
-0.02 (-0.04, 0.00)
0.00 (-0.06, 0.06)
0.02 ( 0.01, 0.03)
0.04 ( 0.02, 0.06)
0.07 ( 0.04, 0.11)
0.12 ( 0.10, 0.14)
0.04 (-0.00, 0.08)
13.2
10.3
13.6
13.1
12.0
13.1
75.2
0.06 ( 0.03, 0.10)
100.0
National
sample
Overall
FP-.57406
generates less
revenue
0
Effect size
FP generates
more
.574063
revenue
% Weight
Profit Margin: Summary of N-F Effect
Size By Method Type
Effect size
(95% CI)
Study
method_level==0
molinari1993
shukla1997
wang2001
Subtotal
method_level==1
gapenski1993
goes1995
picone2002
clement1997
connor1998
thorpe2001
Subtotal
method_level==2
bazzoli2000
mark1999
wilcox-gok2002
shen2003b
zeckhauser1995
Subtotal
Method Type 1
Method Type 2
Method Type 3
Overall
FP earns
lower profit
-.49741
0
Effect size
% Weight
0.20 ( 0.06, 0.35)
0.22 ( 0.00, 0.44)
0.28 ( 0.06, 0.50)
0.23 ( 0.12, 0.33)
3.5
1.9
1.9
7.4
-0.09 (-0.24, 0.06)
-0.03 (-0.07, 0.00)
0.02 ( 0.02, 0.03)
0.04 ( 0.00, 0.08)
0.06 ( 0.03, 0.08)
0.28 ( 0.25, 0.32)
0.06 (-0.02, 0.13)
3.3
8.8
9.9
8.8
9.5
9.0
49.2
0.01 (-0.05, 0.07)
0.02 ( 0.00, 0.03)
0.02 (-0.02, 0.07)
0.02 ( 0.00, 0.04)
0.05 (-0.01, 0.10)
0.02 ( 0.01, 0.03)
7.7
9.9
8.3
9.6
8.0
43.4
0.06 ( 0.02, 0.09)
100.0
FP earns higher
profit
.497418
Profit Margin: Summary of N-F Effect
Size By Covered Region
Study
Effect size
(95% CI)
national==0
gapenski1993
goes1995
wilcox-gok2002
zeckhauser1995
molinari1993
Single state
shukla1997
wang2001
sample
Subtotal
-0.09 (-0.24, 0.06)
-0.03 (-0.07, 0.00)
0.02 (-0.02, 0.07)
0.05 (-0.01, 0.10)
0.20 ( 0.06, 0.35)
0.22 ( 0.00, 0.44)
0.28 ( 0.06, 0.50)
0.05 (-0.01, 0.12)
3.3
8.8
8.3
8.0
3.5
1.9
1.9
35.7
national==1
bazzoli2000
mark1999
shen2003b
picone2002
clement1997
connor1998
thorpe2001
Subtotal
0.01 (-0.05, 0.07)
0.02 ( 0.00, 0.03)
0.02 ( 0.00, 0.04)
0.02 ( 0.02, 0.03)
0.04 ( 0.00, 0.08)
0.06 ( 0.03, 0.08)
0.28 ( 0.25, 0.32)
0.06 ( 0.02, 0.11)
7.7
9.9
9.6
9.9
8.8
9.5
9.0
64.3
0.06 ( 0.02, 0.09)
100.0
National
sample
Overall
FP earns
-.49741lower profit
0
Effect size
FP earns higher
.497418 profit
% Weight
Efficiency: Summary of N-F Effect
Size By Covered Region
Study
Effect size
(95% CI)
national==0
li2001
chirikos2000
chirikos1994
ferrier1996
sari2003
Subtotal
0.09 (-0.00, 0.18)
0.11 ( 0.07, 0.15)
0.12 (-0.03, 0.26)
0.19 ( 0.11, 0.26)
0.30 ( 0.24, 0.37)
0.16 ( 0.08, 0.25)
6.5
7.4
5.4
6.9
7.0
33.3
-0.17 (-0.20,-0.14)
-0.12 (-0.16,-0.07)
-0.11 (-0.13,-0.09)
-0.07 (-0.10,-0.04)
-0.06 (-0.11,-0.02)
-0.06 (-0.10,-0.02)
-0.06 (-0.11,-0.01)
0.08 ( 0.05, 0.11)
0.12 ( 0.08, 0.17)
-0.05 (-0.11, 0.01)
7.5
7.3
7.6
7.5
7.3
7.4
7.3
7.5
7.3
66.7
0.02 (-0.04, 0.08)
100.0
national==1
rosko1999
brown2003
rosko2001b
folland2001
koop1997
ozcan1992
zuckerman1994
burgess1996
rosko2001a
Subtotal
Single state
sample
National
sample
Overall
FP is less
efficient
-.37047
0
Effect size
FP is more efficient
.370474
% Weight
What Do We Learn? (1)
 Evidence is pretty conclusive regarding
revenue and profit margins
 Most studies find for-Profits earn more
revenue (per admission) and have higher
profit margins
 There is little evidence of any difference
in cost between FP and NFP hospitals
 Evidence is mixed regarding efficiency.
 Single state (Florida) analyses find FP
more efficient, national analyses tend to
find FP less efficient.
What Do We Learn? (2)
 Functional forms and analytical
methods matter
 Weaker methods and functional forms
tend to predict larger differences
between not-for-profits and for-profits
 National samples tend to produce
more conservative estimates of effect
size than single state analyses