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Hospital Ownership, Performance, and Outcomes: Assessing the State-of-the-Science

Baker, Constance M. EdD, RN; Messmer, Patricia L. BSN, RN; Gyurko, Charlene C. MPA, RN,C; Domagala, Susan E. BSN, RN, CEN; Conly, Franklin M. BSN, RN, CEN; Eads, Ted S. BSN, RN; Harshman, Karen Sue BS, RN; Layne, Michelle K. BSN, RNC

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Author Information

Constance M. Baker, EdD, RN, Professor, Nursing Administration, e-mail: cbaker1@iupui.edu, Indiana University School of Nursing, Indianapolis,

Patricia L. Messmer, BSN, RN, Director, Outpatient Satellites, Children's Hospital Medical Center, Cincinnati, Ohio

Charlene C. Gyurko, MPA, RN, C, Instructor, IvyTech State College, Gary, Indiana.

Susan E. Domagala, BSN, RN, CEN, Clinical Manager, Bloomington Hospital & Healthcare System, Indiana.

Franklin M. Conly, BSN, RN, CEN, Clinical Nurse, Emergency Department, William S. Major Hospital, Shelbyville, Indiana.

Ted S. Eads, BSN, RN, Clinical Manager, Organ Transplant Program, Indiana University Hospital-Clarian Health Partners, Indianapolis,

Karen Sue Harshman, BS, RN, MSN student, Nursing Administration, MA student, Philanthropic Studies, Indiana University, Indianapolis,

Michelle K. Layne, BSN, RNC, Case Manager, Birthing Center, Columbus Regional Hospital, Columbus, Indiana.

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Abstract

Objective: This study 1) identified the research evidence; 2) assessed the state-of-the-science surrounding hospital ownership, performance, and outcomes in acute care hospitals in the United States; and 3) identified measurable components of hospital performance and outcomes for the organization, patient, and community.

Background: As the size of the nonprofit sector decreases and the size of the for-profit sector increases, hospital ownership warrants examination. Most research has focused on either ownership and performance or ownership and outcomes, rather than the potential interaction of all three variables.

Methods: A comprehensive, computerized search of the healthcare research literature yielded 69 data-based references published between 1985 and 1999. Coding sheets were developed to abstract the articles. Analysis involved synthesizing the research evidence for each of the three major variables and their components.

Results: Hospital ownership has an impact on hospital performance in relation to system operations; costs, prices, and financial management practices; and personnel issues. Organizational outcomes are similar among hospital ownership types in relation to increasing administrative costs and overall mediocre efficiency. Organizational outcomes differ among hospital ownership types in relation to nursing staff mix and professional satisfaction. The association of hospital ownership with patient outcomes varies depending on the dimension measured. The evidence is mixed or inconclusive regarding hospital ownership and access to care, morbidity, and mortality. The association of hospital ownership and adverse events is consistently supported. Hospital ownership status has an impact on the type and magnitude of community benefits. Differences among the three hospital ownership types are minimized in a competitive market.

Conclusions: This study reinforces the position that nurse researchers need to include hospital ownership as an important structural variable in their studies of hospital-based nursing. Examining the conceptual links between ownership, performance, and outcomes requires the integration of macro-level and micro-level theory.

The Quality Health Outcomes Model challenges scholars to identify key variables that might influence healthcare delivery and outcomes.1 Building on Donabedian's linear evaluation model, Mitchell et al.1 present a dynamic interactive model composed of system characteristics, interventions, client characteristics, and outcomes. Only recently have nurse scholars considered the structural characteristic of ownership as a potential variable in health outcomes research.2 Yet, it seems reasonable to expect that the organization's legal form of ownership would influence and be related to professional interventions, client characteristics, and outcomes. For example, nonprofit community hospitals may employ professionals and serve clients who differ from the professionals employed and clients served in public county hospitals or in for-profit hospitals. Organizational and clinical outcomes could also be expected to differ.

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Nature of Hospitals

Hospitals continue to be the focal point of healthcare in the United States, despite the explosive growth of outpatient centers and managed care programs.3 Two recent changes in the hospital industry are "horizontal growth," where hospitals increase their market share by consolidating with one another,4 and "vertical integration," where hospitals expand into new service areas complementary to the core business of acute hospital care.5 The end result is a concentration of ownership, with more hospitals owned by fewer owners, whether public, private for-profit, or private nonprofit.

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Ownership Definitions

Hospitals in the United States have three basic ownership forms: public, private for-profit, and private nonprofit. Public nonprofit hospitals are owned by a governmental entity at the federal, state, or local level to serve diverse constituents, including the military, rural residents, the poor, and the uninsured. Private for-profit hospitals are owned by private investors to make profits by serving the paying patients. Private nonprofit hospitals are owned by a voluntary board of trustees to provide care for paying patients and charitable service to the poor.

Organizations apply to the Internal Revenue Service for nonprofit designation and tax-exempt status under section 501(c)(3).6 Hospitals seek nonprofit status to be exempt from taxes, be eligible for tax-exempt bonds and donations, and receive public trust. Nonprofit hospitals are prohibited from sharing profits with employees; they must comply with requirements for unrelated business activities and define and document charitable activities and community benefits.

Evolution of the hospital industry and maturation of the three ownership types have been shaped by the ongoing knowledge explosion and numerous socioeconomic and political forces.7 Despite the influence of federal legislation applicable to all three ownership types, each has distinctive characteristics, which are shown in Table 1.

Table 1
Table 1
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Demographic Characteristics

As of 1997, of the 6,097 hospitals of all types in the United States, approximately 285 were federal-owned hospitals, primarily Veterans' Administration (VA) and specialized facilities; and another 755 were primarily psychiatric or long-term care hospitals.8 The remaining 5,057 facilities represent the general, acute-care, short-term hospitals.

The largest subtype of general hospital is the private, nonprofit category, which includes independent-owned community hospitals, church-owned hospitals, and industry-owned hospitals. The second largest subtype is the state and local government category, consisting primarily of government-owned county and city hospitals. The smallest subtype is the private, for-profit hospital owned by corporations or partnerships and operated for a profit. Table 2 compares the 1997 numbers of hospitals and beds with 1990 figures and indicates an overall decline in number of hospitals and beds over these 7 years. However, in the for-profit sector, the number of hospitals increased by 6% to represent 16% of the general short-term hospital sector, and the number of beds increased by 12% to represent 13% of the sector.

Table 2
Table 2
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Need to Study Hospital Ownership

Research on the consequences of hospital ownership has been inconclusive; ownership, however, is a critical factor in studying outcomes because it affects mission, policies, finances, and operations.2 Comparing the potential impact of the distinctive characteristics of different hospital ownership types (Table 1) on outcomes warrants continuing study because policy makers depend so heavily on economic incentives when developing health reforms.9

A number of reasons are found to expect differences among the three hospital ownership sectors, beginning with ownership differences in regulatory treatment and the mandated community benefit responsibility of nonprofit hospitals.10 Because employee incentives and constraints differ in each hospital type, employee performances are expected to differ. Finally, the public's perception of services is believed to differ, so perceptions of quality and satisfaction may differ.

Hospital ownership and the relationship between the macro-level organizational context and micro-level outcomes is understudied.11 External influences blur ownership differences and contribute to organizational similarities labeled "institutional isomorphism."10 More attention is needed on the influence of governmental regulations and accreditation requirements, market share and competition, and professional norms and values.

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Methodology

To review and analyze the research evidence surrounding hospital ownership, performance and outcomes in acute care hospitals in the United States, five approaches were used to identify relevant healthcare and nursing literature. A computerized search of Cumulative Index of Nursing and Allied Health Literature, Health Infotrack, Medline, Sociofile, American Business Index, and Dissertation Abstracts was conducted using the following keywords: hospital ownership, nonprofit organizations, hospital performance, nursing administration, and outcomes. The Indiana University computerized library catalog was searched using keywords: hospital and nonprofit, hospital and for-profit, hospital and tax exempt, and hospital and policy. References in healthcare management books and research articles were pursued. Searching the World Wide Web and informal consultation yielded information from current policy organizations and government publications.

Although nearly 200 references were identified in relation to hospital ownership and hospital performance and outcomes, priority is given to the 69 data-based references published since 1985 in 27 different sources. The most frequent multidisciplinary source was Medical Care with 17 articles, followed by several health services journals with 15 articles, 8 in medicine, 7 each in health policy and management, 6 each in economics and nursing, 2 in public health, and 1 in pharmacology. Among the authors, 17 nurses were identified. The trend in the number of articles for all fields was clearly upward, from 8 articles during the 1980s, 25 articles from 1990 to 1994, and 36 articles between 1995 and mid 1999.

Data-based articles were critiqued to discern the association of hospital ownership status with performance and outcomes and to examine the interaction among hospital ownership, performance, and outcomes. The adopted framework derives from an adaptation of Donabedian's linear structure-process-outcome model into a dynamic interactive model.1 The notion of "reciprocal directions of influence" is appropriate at this stage of synthesizing the literature on the three major variables: ownership, performance, and outcomes. The components identified within the three variables come from the research literature. Figure 1 reflects the conceptual framework and the components selected to represent the three major variables and the dynamic interaction among them.

Figure 1
Figure 1
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Hospital Ownership and Performance

A landmark study of the three sectors of the hospital industry in the United States during the 20th century demonstrates that hospitals have become increasingly similar in some aspects, but important differences do prevail.5 A competitive environmental context and the market share configuration foster considerable similarity in available services among the three hospital sectors within a community,12 although the for-profit hospitals offer fewer unprofitable services.13 Current studies of pricing patterns among the three hospital sectors now focus on market share, merger, and competition. Regardless of ownership status, a hospital's market share influences the availability of services and pricing behavior.14 All hospitals increased their prices after a merger; the amount of increase is influenced by ownership and market share. Price increases were highest when two for-profit hospitals merged, followed by the merger of two nonprofit hospitals. A direct relationship is seen between the size of the hospital's market share and the size of price increases, regardless of ownership of the merging hospitals. Evidence is increasing that the greater the competition within the marketplace, the lower the price increase for all hospital ownership types.15 As competition intensifies, all hospitals become more commercial in their orientation because they compete for employer contracts and paying patients.16 Thus, the interaction of ownership and competition explains some seemingly inconsistent research findings.

Administrative structure, which is the sum total of the mechanisms designed to accomplish the organizational goals, includes centralization, formalization, specialization, complexity, and coordination.17 Despite the "dual authority structure" of hospital administration and profession norms, collaboration is required to deliver hospital care and organizational differences are blurred.18 Preparation of hospital boards for governing in a changing environment is the concern of several studies.19,20 Executives in both for-profit and nonprofit hospitals view conflict in the decision-making process as aversive; nonprofit executives claim conflict is unproductive.21 Organizational case law and statutes reveal marked differences in personnel law across the three hospital sectors; nonprofit employees are the least protected by the law.22

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System Operations and Technical Efficiency

System operations and technical efficiency have been studied to estimate the relationship between hospital ownership and performance by analyzing inputs and outputs in relation to costs. Inputs can include hospital size, labor, supply costs, and service complexity. Outputs include hospital discharges and, for some hospitals, community services. An early study of 570 Michigan hospitals with 200 or more beds attributes the higher efficiency of public hospitals relative to nonprofit hospitals to tighter government controls.23 The public sector was also found to demonstrate more technical efficiency than the other sectors in a national study of 2,246 hospitals.24 Another study of 3,000 urban hospitals report that ownership and Medicare are consistently found to be related to hospital efficiency; size helps make government hospitals more efficient and for-profit hospitals less efficient.25,26 In a study of California nonprofit hospitals, church-owned hospitals were found to be more efficient than other nonprofit hospitals.27 Each of these studies used a method called "data envelopment analysis," a tool in which linear programming is used to search for optimal combinations of inputs and outputs, based on the actual performance of hospitals.

System operations and operational efficiency was the focus of a 1989 study of 185 Texas hospitals, 75 for-profit, 75 nonprofit, and 35 public.28 Management behaviors differ across the three hospital sectors in relation to administrative expenses, administrative salaries, and operational expenses. For-profit hospitals have higher administrative expenses, but they tend to decline in competitive markets. Administrative salaries, number of employees, and operational expenses are lower in for-profit hospitals, supporting the notion of profit maximization.

Administrative delay is the dimension of operational efficiency studied in a comparison study of 252 patients with new hip fractures in a for-profit and a nonprofit hospital in Hawaii.29 Over the 2-year study period, the nonprofit hospital had significantly more administrative delays, resulting in longer lengths of stay (LOS) and higher costs.

Thus, hospital ownership is reported to influence system operations and technical efficiency in all seven studies reviewed here.

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Financial Management Among Hospitals

Most of the research on profitability, revenue, and cost differences among hospital sectors is based on data gathered before 1990 when the reimbursement system was dominated by cost-based reimbursement with few incentives for cost savings.23,24,26,28,30 Generally, these studies report that, although costs are similar, for-profit hospitals charge more for their services and are more profitable than nonprofit and public hospitals.

The Medicare Prospective Pricing System (PPS) of the mid 1980s represents a paradigm shift in reimbursement from a cost-based to a cost-containment philosophy. Two early studies assessed financial performance by ownership differences before and after PPS was implemented.31,32 Friedman and Shortell31 report no ownership differences in the cost of care and an increase in operating margins across all three sectors. The absence of ownership differences led Hultman32 to acknowledge the increased similarity between the ownership sectors in providing inpatient uncompensated care.

More recently, national Medicare data were used to compare administrative and clinical costs in 1990 and 1994 by hospital ownership.33 Administrative costs are higher in for-profit hospitals. They have increased in all three hospital ownership types and now represent 26% of total hospital costs. The higher adjusted costs per discharge were attributed to higher administrative costs. A statewide effort to compare the impact of PPS on the performance of 13 for-profit and 70 nonprofit hospitals in Virginia used 1993 state-mandated data.34 The higher profit margins in Virginia's for-profit hospitals are attributed to higher pricing and other revenue management strategies rather than to cost management strategies such as lower staffing and decreased plant maintenance. For-profit hospitals used more registered nurses as a percent of the total workforce and fewer contracted labor personnel. Efficiency and productivity results were mixed. For-profit hospitals are considered more efficient because fewer full-time equivalent employees were used per occupied bed and they appear more productive because of their longer LOS; overall, however, neither for-profit nor nonprofit hospitals was cost-efficient.

Researchers document that for-profit hospitals have consistently been more profitable than nonprofit and public hospitals, even after deducting tax expenses. Investor-owned, for-profit hospitals have financial incentives to be efficient and productive, but the consistent similarity across the hospital sectors in the costs of care suggests that costs may be more related to what PPS will reimburse than to ownership mission and administrative acumen. Evidence to support this observation was provided in 1998 by the Center for Healthcare Industry Performance Studies, which reported significantly different diagnosis-related group assignment patterns across hospital owners.35 For-profit hospitals received $3.4 million more in Medicare payments than nonprofit hospitals through their assignments in 58 diagnoses. Because the annual increase in national spending for healthcare has been below the level of inflation since 1994, less incentive is seen to address economic efficiencies across hospital ownership sectors.36,37 Thus, 9 of the 11 studies report differences by ownership in hospital costs, hospital prices, and financial management practices.

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Hospital Personnel

Studies of staffing across the three hospital sectors tend to be parts of larger studies and may not surface in computer searches of the literature. One exception is the 1989 Texas study of hospital ownership and efficiency, which claims to be the first to show differences in employees and salaries.28 For-profit hospitals employ fewer employees and fewer full-time equivalent employees and, except in competitive markets, offer lower salaries.

Very few multisite studies have been conducted of nursing care delivery models and even fewer studies across hospital ownership sectors. One exception is the magnet hospitals study, which showcases hospital-wide professional practice models characterized by increased professional autonomy and control and collaboration with physicians.38 Among the 39 magnet hospitals are 33 nonprofit, 3 for-profit, and 3 public hospitals.

Only two studies were found comparing professionals across the three hospital ownership sectors. The American Hospital Association's annual survey data from 3,456 community hospitals for years 1980-1988 are used to examine the impact of radical organizational change on hospital-based physicians, nurses, and administrators.39 Mergers increase the ratio of physicians to administrators, multihospital affiliations increase the ratio of nurses to administrators, corporate restructuring increases the ratio of nurses to physicians, and organizational decline favors administrators over nurses. No evidence suggests that administrators produce greater cost efficiency or improve quality of hospital care.

Professional groups within the hospital tend to have a primary orientation toward either clinical matters and quality improvement or administrative matters and cost management. This basic dichotomy was operationalized and tested in 601 hospitals, 449 nonprofit, 108 for-profit, and 44 VA hospitals.37 In the VA hospitals, professionals were significantly less committed to managing costs and changing delivery processes than were professionals in nonprofit and for-profit hospitals. Professionals in all three hospital sectors need to improve communication among themselves to link quality improvements with financial success.

Interprofessional collaboration was the key to effective performance in a landmark national study of 42 intensive care units in nonprofit and for-profit hospitals.18

Thus, among the five studies reviewed above, ownership is related to hospital personnel issues in three studies, and only indirectly considered in the other two studies.

Overall, the evidence from the 25 studies on some aspect of hospital performance supports the proposition that hospital ownership has an impact on hospital performance. Although all hospitals share similar regulatory environments and reimbursement sources, differences in performance are attributed to ownership status. Ownership influences can also be exhibited in producing outcomes and commitment to future clinical improvement initiatives.

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Hospital Ownership and Outcomes

Outcomes research is a multidisciplinary effort to assess the end results of health services that are deemed important to such key stakeholders as the providers, patients, and payers. Research on hospital ownership and outcomes is considered from the perspective of the hospital and the employees, the patient, and the community.

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Organizational Outcomes

Hospital outcomes are the end results of the processes involved in achieving organizational goals. Administrative costs could be a marker for how effectively the internal processes are operating. When the 1994 Medicare data for 5,201 acute care hospitals were compared with 1990 Medicare data, administrative costs accounted for an average of 26% of total hospital costs, up 1.2 percentage points from 1990.33 Using a multivariate analysis and adjusting for local wage levels and case mix, administrative costs at for-profit hospitals increased to 34% of total hospital costs compared with 24.5% at nonprofit hospitals and 23% at public hospitals. For-profit hospitals report higher inpatient and discharge costs and lower wage and salary costs. One reaction to these findings minimized their importance because during the study's time period national spending for healthcare decreased, which challenged the authors to look beyond administrative costs to comparing hospital ownership and cost per case.36 In another national comparison of costs per case, for-profit hospitals had the highest costs but no ownership differences were found in efficiency.30 An analysis of 1993 data in Virginia revealed for-profit hospitals charge more per case; the absence of differences in productivity or efficiency by ownership type is interpreted as all hospitals are equally ineffective.34

Human resource strategies are reflected in such personnel outcomes as recruitment and retention, absenteeism and sick leaves, and satisfaction and morale. The magnet hospital study demonstrated that when professional nursing is an explicit priority in an organization, nurses are attracted to and tend to remain employed there. Magnet hospitals do have a higher ratio of registered nurses (RNs) to total nursing personnel and a slightly higher nurse-to-patient ratio.40 Several studies report consistent findings that the skill mix of the hospital nursing staff is inversely related to patient LOS and mortality. Recently, a national study using 1992 Medicare data reports an inverse relationship between seven types of hospital-based professions and mortality rates and a direct relationship between the number of licensed practical nurses and administrative personnel and mortality, irrespective of ownership.41

Job satisfaction of professional staff is increasingly viewed as an organizational outcome and is being linked to clients' satisfaction. In a national study of 316 social work administrators, public sector employees were more satisfied than nonprofit employees because they were able to practice their profession, felt more professional support from their employer, and received more staff education.42 Nurses' satisfaction with their professional life influences the quality of patient care they provide43 and position turnover.18

Another perspective on hospital outcomes is external assessments and accreditation status.

Results from the latest study of the economic performance of the nation's acute care hospitals suggest that the "100 top hospitals" have achieved their maximal standards in mature managed care markets.44 This study used 1997 Medicare cost and discharge data from 3,258 acute care hospitals to judge performance on eight measures of financial management, operations, and clinical practice. Although the 100 hospitals achieved an occupancy rate of 60%, productivity and profitability declined, whereas inpatient LOS, complications, and mortality increased. Ownership status among the 100 top hospitals in 1998 is 74 nonprofit, 25 for-profit, and 1 public. Thus, organizational outcomes are similar in relation to increasing administrative costs and mediocre efficiency, and differ in relation to nursing staff mix and professional satisfaction.

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Patient Outcomes

The relationship between organizational contexts and patient outcomes is increasingly being recognized and considered in designing patient outcomes research. Considered here are studies focused on hospital ownership and patient access, morbidity, mortality, adverse events, and satisfaction. Among the four studies on hospital ownership and patient access to care are two reporting no differences by ownership are found in a competitive environment.45,46 Although the first study is based on a 1981 national study of 3,322 community hospitals, the economic model has merit for future research. Similarly, the second study is based on a 1987 to 1988 national survey of psychiatric hospitals and uses methods worthy of ongoing consideration. A third study compares California nonprofit and Catholic hospitals and reports access is easier in Catholic hospitals.47 The fourth study focuses on patient access to postacute care in 52 hospitals in three urban areas.48 Hospital ownership was significantly associated with access to postacute care when the hospital also owned the facility, regardless of type of ownership status.

The relationship between hospital ownership and morbidity has received uneven attention. Among the 12 studies considered here are 6 on obstetrics. Findings are contradictory from two studies of LOS for an uncomplicated delivery; a national study attributes LOS differences to the patient,49 and a California study reports significant LOS differences among hospitals.50 All three studies of cesarean sections were conducted in California. The first reports that repeat cesarean sections were more likely to occur in teaching hospitals,51 the second that cesarean sections occur more often in for-profit hospitals and among non-white patients,52 and the third that an increase in the patient's risk status and medical uncertainty increases similarly among hospitals.53 Using a 12-year national database, the last maternity study reports that the incidence of stroke and other complications during pregnancy are strongly associated with pregnancy-related hypertension, larger hospital size, and for-profit hospital ownership.54

Among the six other studies is one reporting that patients in for-profit hospitals are more likely to undergo renal dialysis and less likely to receive a kidney transplant than were their counterparts in nonprofit or public hospitals.55 A study of childhood asthma reports that, although the LOS for childhood asthmatics is the same across ownership types in 17 states, mean total charges were significantly higher in for-profit hospitals.56 Chart reviews in four states of more than 1,700 Medicare patients with congestive heart failure or pneumonia conclude that overall quality of care is highest in major teaching hospitals, and explicit measures of nursing care was highest in nonteaching hospitals.57 These findings are consistent with a five-state mid-1980s study that reports higher quality in teaching hospitals.58

Two studies focus on patients with myocardial infarction-one uses data from 373 California hospitals59 and the second uses Health Care Financing Administration (HCFA) and VA national data on 47,598 patients.60 In the California study, the LOS of patients with myocardial infarction was inversely related to the ratio of RN hours per patient day and investor-owned hospitals. The direct relationship between LOS and higher operating expenses is interpreted as inefficient operations. In the national study of dually eligible veterans, the Medicare hospitals used more cardiac procedures but no hospital differences in mortality were seen. Thus, hospital ownership is related to some aspects of morbidity in 9 of the 12 studies reviewed.

The relationship between hospital ownership and mortality has been consistently studied over the last decades. An early national study of 214,839 Medicare patients reported no differences in mortality rates among ownership types.61 Using the Linear Structural Relations model to analyze 1984 Medicare data for 239 hospitals, mortality rates were found to be higher in for-profit hospitals.62 A later study used 1988 mortality data for 3,782 hospitals representing all ownership types to assess short-term and longterm adjusted mortality.63 Osteopathic and public hospitals had the highest unadjusted mortality rates and private teaching hospitals had the lowest rates. Medical records of deceased patients with six different diagnoses were used to assess the quality of care in 30 northeastern Ohio hospitals.64 Although 89,851 consecutive patients provided large numbers in each of the six diagnostic categories and increased the validity of mortality data as measures of hospital quality, the findings were not conclusive. Two mortality studies focused on the practice environment and the composition of the professional staff- one reported lower mortality rates in magnet hospitals compared with 195 control hospitals,40 and the second, using national Medicare data, reported statistically significant associations between seven types of hospital personnel and mortality rates.41 Finally, in a recent literature analysis of hospital characteristics and inpatient mortality, ownership was considered as only one of the three distal contributors and five proximal contributors to mortality.65 The possibility of interaction between ownership status and the types and amounts of professional staff and the other contributors was not presented. Thus, among the seven studies reviewed, hospital ownership was related to mortality in five studies and inconclusive or not related in two studies.

In a literature synthesis article on adverse events and variations in the organization of care delivery, adverse events are suggested as a more sensitive marker of differences among organizations than is mortality rate.66 Patient characteristics influence mortality but hospital characteristics are related to failure to rescue a patient after a surgical complication.67 Only three studies were found that specifically examined hospital ownership and adverse events. In an early attempt to differentiate between adverse events as injuries resulting from medical treatment and adverse events caused by negligence, 31,000 medical records were drawn from a random sample of 51 hospitals in New York State.68,69 Adverse events resulting from negligence were not random-48% were associated with a surgical operation. The lowest rates were in primary teaching and for-profit hospitals and the highest rates were in hospitals with the lowest inpatient operating costs per hospital discharge. In a recent study of nursing staffing levels and postoperative adverse events in 589 acute care hospitals in 10 states, analysis of 1993 discharge data reveals a large significant inverse relationship between nursing staffing levels and postoperative urinary tract infections, pneumonia, thrombosis, and pulmonary compromise.70 Nonprofit hospitals had lower postoperative pneumonia and pulmonary compromise rates than did for-profit hospitals. Thus, all five studies reviewed report positive relationships between hospital ownership and adverse events.

Patient satisfaction with hospital care is an important outcome measure; most research, however, has been based in a single institution and is rarely published.71 Among the limited number of studies in multiple institutions, more attention has been given to hospital size and teaching status than to hospital ownership. In a 1994 study of maternity patient's satisfaction in 18 teaching and nonteaching hospitals in northeastern Ohio, the authors conclude that the impact of hospital characteristics on patient satisfaction is yet to be established.72 In a recent telephone interview study of 538 diabetic patients drawn from the public hospital sector, 310 patients from the VA healthcare system were more satisfied with their care than were the 228 patients from a county-funded facility.73

In a national interview study of 6,455 patients from 62 public and nonprofit hospitals, hospital ownership is "suggested" as an explanation for the more pronounced negative ratings from low income patients with poor health.74 They report that admission to public hospitals from clinics and emergency rooms inhibits trusting professional relationships despite longer LOSs. Three studies of patient satisfaction were conducted in multiple hospitals within a single hospital ownership category. In a 1989 study of 32 for-profit hospitals, differences across institutions and patients were found in a 68-item patient judgment system.75 In a 1990 survey of more than 17,000 patients from 196 hospitals in the Lutheran General Health System, patients judged their satisfaction with the quality of hospital care in eight scales: admission and billing, nursing care, physician care, courtesy, comfort and cleanliness, food service, medical outcome, and religious care.76 Telephone interviews with more than 2,000 patients discharged from 17 urban nonprofit hospitals revealed a "lack of fit" between patient characteristics and service design strategies for physical care, education, and pain management.77 Thus, among the six studies reviewed on patient satisfaction, ownership differences are confirmed in one study, suggested in a second, and are inconclusive in a third. The three multihospital, single ownership studies are included as replication possibilities across hospital ownership types.

Increasingly, patient outcomes research is including organizational context variables because of their potential influence on professional behavior and patient outcomes. In the 34 studies reviewed here, the association of hospital ownership with patient outcomes varies according to the dimension measured.

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Community Benefits

Nonprofit hospitals must demonstrate community service to retain their tax exemption status. Traditionally, such service has taken the form of caring for the poor and uninsured, but changes in the 1990s have broadened this definition and increased accountability expectations for all types of owners.78,79 In a comprehensive study of community benefits, nonprofit hospitals return more social benefits than do for-profit hospitals in the form of access to care, amount and type of health services, and involvement in professional education.80 A study of California nonprofit hospitals showed that 80% are providing sufficient community benefits and charitable service to maintain their tax exemption status.81 Another California study used 1980s hospital data to assess patterns of charity care among all hospital ownership types and reports that the nonprofit sector is the dominant provider of charity care.82 Ownership differences in specific forms of community benefits were studied among 109 utilizations review organizations.83 Nonprofit organizations provided more public information and were more "community-oriented" than for-profit organizations, but no differences were found in addressing quality and cost issues of the review process. Similarly, nonprofit nursing homes differed from for-profit nursing homes in consistently offering comprehensive education programs to patients, families, and community groups and to have ethics committees to support advance care planning.84 Thus, in all five studies reviewed, ownership was found to influence contributions to community benefits. Community benefits and tax exemption status is an ongoing issue confronting the entire hospital industry, albeit for different reasons.85

In summary, outcomes as the end result of healthcare delivery has three broad foci: organization, patient, and community. Although uneven attention has been given to the relationships between hospital ownership and outcomes, sufficient evidence found in the 44 studies reviewed warrant continuing investigation.

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Findings

An integrated review of 69 data-based references produced the following findings:

1. Hospital market share and competition minimize differences among the three hospital ownership types.

2. Hospital ownership has an impact on hospital performance in relation to system operations; costs, prices, and financial management practices; and personnel issues.

3. Organizational outcomes are similar among hospital ownership types in relation to increasing administrative costs and overall mediocre efficiency. Organizational outcomes differ among hospital ownership types in relation to nursing staff mix and professional satisfaction.

4. The association of hospital ownership with patient outcomes varies depending on the dimension measured. The evidence is mixed or inconclusive regarding hospital ownership and access to care, morbidity, and mortality. The association of hospital ownership and adverse events is consistently supported.

5. Hospital ownership status has an impact on the type and degree of community benefits.

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State-of-the-Science Discussion

This discussion evolves from the 69 evidence-based references published over the past 14 years. Given the expanding volume of this research, it is regretful that so few explicit connections were found among the research studies, contributing to fragmentation of the field rather than consolidation. Further, little comparative research has been done on the three hospital ownership types, their performances and outcomes, and much less examining the relationships within and among these three variables.

The state-of-the-science is presented in relation to the conceptualization and theoretical links of the three major variables: ownership, performance, and outcomes; methodological considerations; and stakeholder concerns.

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Conceptualization

Major concerns in research on hospital ownership, performance, and outcomes are construct clarity and specifying conceptual links among the variables. Hospital ownership is defined legally but within the three sectors are found differences in teaching status, religious affiliation, rural versus urban location, bed size, and corporate affiliation. This heterogeneity needs to be considered in designing future research studies.86 Although the legal definition may have the most rigor, addressing the unique characteristics of ownership may yield more definitive research findings.87

Hospital performance refers to the internal processes set in place to achieve institutional goals. Operational definitions may be either comprehensive with multiple factors or limited to a few, often depending on the investigator's academic discipline and research interest. The list of performance factors addressed in this paper comes from the literature and is probably incomplete. Further, the validity of these factors as indicators of performance needs to be determined, along with the conceptual issues associated with aggregating lower level units to represent a higher level construct.88 Researchers in the organization sciences have used the public or private distinction to guide the study of such dependent variables as managerial roles, strategic decision making, performance norms, and other internal processes.89 Performance comparisons within the hospital industry need a broader perspective to include the interaction of hospital mission and ongoing political and economic activity.

Analyzing the outcomes of care is in the forefront of contemporary health services research. Outcomes as the end products of the healthcare delivery processes have been primarily viewed from the perspective of patients, but outcomes need to be expanded to include organizational and community outcomes as well. Measures of outcomes must include contextual factors because of the dynamic interaction of organizational, managerial, and technical processes.90

Several authors questioned the relationships between ownership and performance and outcomes, but none of the studies reviewed here addresses the theoretical links between hospital ownership, performance, and outcomes. Nurse researchers are calling attention to the need for theory-based research on these variables.1,2 Traditionally, most nursing administration research has been focused at the microlevel of the organization, patient care units, and personnel issues. Research on ownership, performance, and outcomes requires an integration of micro-organizational theory with macro-organizational theory. Multilevel theory building could be the bridge to a greater understanding of how these three variables interact and influence each other.91 The relative importance of ownership and performance to outcomes could then be assessed.92 The interrelationship of organizational characteristics and hospital performance has intensified the commitment to understand how ownership affects performance and how outcomes influence hospital characteristics.

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Methodologic Considerations

Data-based articles on hospital ownership, performance, and outcomes are being written by investigators from multiple disciplines and are widely dispersed in the professional literature. The disciplinary frameworks, which dictate the variables and methods, influence the publication vehicle. Most attempts at theory testing come from economics and nonprofit management; most of the studies reviewed here were aimed at fact finding.

Measurement issues in multihospital research begin with standardized definitions of the variables, data availability, and consistency across hospitals.93 Little consistency exists among hospitals in maintaining detailed data on personnel and funding mixes, assessing patient satisfaction, or measuring community benefits. Cross-sectional designs prevail among the studies reviewed; very few longitudinal comparison studies are found because such studies are expensive and challenging to orchestrate.

The number of studies using national standardized data has increased since 1986 when HCFA released its annual Medicare Hospital Mortality data to the public. Many investigators develop their database by combining the HCFA data with that provided in the American Hospital Association's Abridged Guide to the Health Care Field. Consequently, numerous studies are found on risk-adjusted mortality, primarily in relation to hospital teaching status. Although national standardized data bases are population-based and relatively inexpensive, they lack the validity of randomized clinical trials and case studies. The validity of comparing research findings over time is also a concern because advancing technology has increased the sophistication of the measures and data.65 Increased regulatory and financial changes in the hospital industry require that reviewers of performance research attend to the age of the data as well as the publication dates.

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Stakeholder Concerns

A number of stakeholders are involved in examining the relationship of hospital ownership, performance, and outcomes. Because the various ownership sectors are competing for clients and market share of contracts, the results of these studies could be of considerable interest to them. In addition to fiscal outcomes, hospitals are concerned with maintaining their accreditation and maximizing patient satisfaction. Healthcare professionals also have a vested interest because of the relationships with their professional values and career development.

Evidence for ownership-related differences among hospitals is fragmented; credible explanations and legitimate reasons are seen to continue to focus on this macro-level variable.

A 20th century historical analysis of healthcare in America reveals that 1) in the developmental "life cycle" of new health services, each ownership type plays an important role in delivering care to patients; and 2) professional status and ownership form are closely linked, whether professionals are motivated by autonomy and community service in the nonprofit sector or monetary gain in the for-profit sector.94

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Conclusions and Recommendations

Although the health services literature contains a number of impressive efforts to study the relationship among hospital ownership, performance, and outcomes, the state-of-the-science is in its infancy. Hospital ownership plays a critical role in patient care delivery and outcomes in the United States. Although environmental and political forces can decrease ownership differences in hospital performance and outcomes, sufficient empirical evidence exists to require continuous research.

Priorities for future research include the following recommendations. First, continue to refine the conceptualization of ownership, performance, and outcomes and search for relevant theoretical and conceptual links relating these variables. Attend to the validity issues in relation to the factors selected to represent these three variables. Second, document the similarities and differences among the three hospital sectors. If the potential impact of the expanding for-profit sector is to be understood, we need to increase our knowledge of the unique niche of each sector. Organizational ecology theory explains natural selection where differences among legal forms of ownership reflect the division of labor within the hospital industry.95 Third, nursing studies need to integrate structural components of the nursing delivery system with specific nursing interventions and outcomes in multifacility settings. Finally, it is critical that research continue to compare hospital ownership types because policy makers use economic incentives to create major reforms. Researchers need to remind policymakers of the competitive nature of the hospital sector and advise them when statistically significant differences are also socially significant.9

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