Sen. Murphy: For-profit hospitals drive up healthcare costs

A report issued Friday by the office of Senator Chris Murphy (D-Conn.) finds that states where for-profit hospitals dominate spend around 3 percent more per Medicare beneficiary than states where not-for-profit hospitals dominate.

The report also notes that hospitals owned by investors tend to be more likely to offer services with high reimbursement, such as open-heart surgery, and less likely to offer unprofitable services such as emergency psychiatric care.

Because the number of hospitals operated by for-profit companies has grown from around 14 percent to around 20 percent in the past 10 years, the possible link between for-profits and higher healthcare spending needs to be monitored, Sen. Murphy said.

“It’s important for consumers and health officials to understand the impact for-profit hospitals have on federal Medicare spending,” Murphy stated in a press release accompanying the report. “As this report shows, at times for-profit hospitals are likely to prioritize their bottom line, and their mere presence in the market can pressure non-profits to prioritize revenue-generating services.”

In Connecticut, the percentage of for-profit hospitals is low. However, late last month, state regulatory filing revealed that for-profit hospital operator Tenet Healthcare Corp., based in Dallas, Texas, is prepared to spend $535 million to acquire and improve four Connecticut hospitals and related subsidiaries. According to the Hartford Business Journal’s analysis of the state filings, Tenet would spend $45 million to buy Waterbury Hospital, with an additional $55 million spent on improvements. In addition, it would pay $150 million plus an additional $85 million for capital and service improvements for Saint Mary’s Hospital. A total of $105 million would be spent on Eastern Connecticut Health Network, which includes Rockville General and Manchester Memorial hospitals. Finally, Bristol Hospital would be acquired for $50 million, plus an additional $45 million in capital improvements.

According to Sen. Murphy’s report, if per-beneficiary spending in Connecticut had been the same as that for states where for-profit hospital operators dominate, Medicare would have spend $173 million more in 2009 for Connecticut beneficiaries than it did.

The full report can be accessed here.