HOSPITAL MERGERS: For-Profit Conversions Play Small Role
The majority of ownership changes in California hospitals do not involve alteration of their profit status, refuting recent claims that for-profit hospitals are taking over the state's hospital system. A new Public Policy Institute of California (PPIC) study -- "Changes in Hospital Ownership in California" -- found that only 13 of the 296 ownership changes from 1986 to 1996 sparked conversions from not-for-profit to for-profit status, while 12 hospitals switched from for-profit to not-for-profit status. The majority of hospitals, 80%, retained their tax classification. Recent concerns over a perceived rise in for-profit conversions prompted the state Legislature to award hospital merger oversight to the state Attorney General. The study, which tracked a decade of ownership changes in the state's short-term general hospitals, also showed that the consolidations have changed the face of the market, as half of the state's hospitals are now affiliated with multi-site corporations, while six organizations -- Catholic Healthcare West, Tenet/OrNda, Kaiser Family Hospitals, Sutter Health, Columbia/HCA and Adventist Health -- control operations in more than one-third of California hospitals. These ownership changes have affected predominately urban areas, particularly Los Angeles and San Francisco. By 1998, 33% of Los Angeles hospital beds were controlled by the three largest firms, while the three largest corporations controlled 43% of hospital beds in San Francisco. The Sacramento market is the state's most consolidated with 82% of area hospital beds claimed by the three largest firms in the region in 1995. And in San Diego, two multi-hospital operations own more than half of the area's available beds. However, rural regions were not immune to hospital mergers, as Adventist Health, Catholic Healthcare West, Sutter Health and the Sisters of Saint Joseph of Orange collectively own half of the state's rural hospitals. The study concludes that while multi-hospital organizations may enjoy economies of scale, they may be less responsive to local needs than independent hospitals. In the next stage of the study, the authors intend to analyze the effect of ownership changes on staffing, access to care and quality of care (PPIC release, 10/99).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.