PUBLIC HOSPITALS: More Going Private to Compete, Survive
Public hospitals across the country are expected to privatize in the coming years, joining hundreds of others that have altered their governance status in the last decade, according to a report in the January issue of the American Hospital Association's journal Trustee. Citing growing competition, restrictive laws and politically-charged decisions that fall to county commissioners, public hospitals are increasingly forming locally controlled, private, not-for-profit corporations or are selling outright to for-profits to ensure continued quality for their communities. Remaining a public entity is unrealistic, says the CEO of formerly public Illini Hospital in Illinois, describing the entity as "a legal and political structure that's inflexible, doesn't allow for rapid responses to marketplace demands and inhibits creativity, risk-taking and businesslike decision-making." The public structure also inhibits privacy, according to some. Notes Bill Sugg, CEO of Nashville-based Sumner Regional Medical Center, "You just can't afford to have your competition learn about your board's sensitive strategic discussions by reading the front page of tomorrow's newspaper" (Dube, Trustee, Jan. issue).
All It's Cracked Up to Be?
Competition was the reason Tampa General Hospital went private in 1997 when the local hospital authority turned it into a not-for- profit corporation called Florida Health Sciences Inc, the Tampa Tribune reports. Specifically, TGH wanted "to keep its records and business-building strategy out of the hands of its competitors," something it could not do as long as its records were public. However, promises of financial viability haven't panned out: TGH is expected to post losses of $12 million for 1998, compared to the $3 million it netted in the last year it was public. Public outcry over the hospital's financial straits, compounded by a federal grand jury probe, may force the hospital to open its books anyway, thwarting its original goal (Cachere/Fechter, 1/22).
Keys to Success
While many hospital executives see privatization as a viable alternative, they caution that the "hallmark of successful privatizations" is public education, says Trustee. Those who have gone through the process also recommend making decisions early on about the size and composition of a new board of directors and determining how strategic decisions will be made and by whom. "Privatizing a public hospital isn't for the faint of heart," says one CEO, but it gives "the tools and freedom to create a more dynamic and responsive health care delivery system" (Trustee, January issue).