CONVERSIONS: Texas Study Faults For-Profit Hospitals Buying Nonprofits
The sale of nonprofit hospitals to for-profit corporations often is not in the public's best interest, according to a recently released Consumers Union study. Based on a review of five hospitals' conversion to for-profit status "in which $444 million in assets changed hands," the report highlights several problems. First, state regulators are not notified of pending conversions. Second, secret sales negotiations make it "impossible to determine whether purchasers paid a fair price for the hospitals" and preclude public input. Third, "charitable foundations established from the proceeds of conversions" fail to care for the poor.
Texas law does not require hospitals "to notify the attorney general's office or obtain regulatory approval for conversions," according to Lisa McGiffert, a senior policy analyst at Consumers Union. Elsewhere, 14 states have passed laws regulating for-profit hospital conversions in the past two years, and Consumers Union recommends that Texas join them by insisting that hospitals "notify the state's attorney general and the public about the proposed conversion plan." Additionally, the group says a more open process should include "an independent analysis of the hospital's fair market value." The group also advised Texas to solicit public input regarding the use of charitable funds derived from the conversions. The Consumers Union report cites several examples where charitable funds were not spent to provide "direct health care services" to the public. In one case, proceeds from the $130 million charitable foundation established following the 1995 sale of El Paso's last nonprofit hospital to Tenet Healthcare were spent on health care education, rather than directly on care for the poor as originally intended.
A National Trend
American Medical News notes that for-profit hospital conversions are continuing at a fast pace: 54% more hospitals abandoned their nonprofit status in the past five years than in the ten years between 1980 and 1990. Fueling this trend are hospital administrators' beliefs that nonprofit hospitals cannot "compete in a managed care environment" and fears of "serious financial problems if they [do] not convert" (Jacob, August 24-31 issue). Click here to read a press release on the Consumers Union study. Or call Consumers Union's Southwest Regional Office at (512) 477-4431 to request more information