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Hospitals and Nonprofit Behavior

Hospitals and Nonprofit Behavior - Hospitals and the Role...

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1 Hospitals and the Role of Nonprofit Firms Up to this point we have focused primarily on the demand side of the industry: The demand for health, the role of uncertainty and how it gives rise to the market for insurance, the problems that insurance markets create and the role of the government and markets in resolving these problems (managed care and health savings accounts are a market response to the moral hazard problem in healthcare, the prospective payment system in Medicaid is a regulatory response to the same problem, The emergence of Medicaid and Medicare is a regulatory response to market failure). I want to continue our discussion of the role of market and government in shaping the healthcare industry by now turning to the supply side of the industry. In this section we will discuss hospitals and the role of not-for-profit firms in the industry. I. Introduction A little background Community Hospital - the dominant type of hospital in the US - “all nonfederal short-term general and other special hospitals, whose services are available to the public, currently there are around 5,000 hospitals in the US. This number declined fairly substantially in the late 1990s as there was a large merger and consolidation movement over that period. Of these hospitals about 60% are private not-for-profit, 27% are public and 14% are for profit. There is also a growing trend for “joint venturing” where a private not-for-profit and a private for-profit will together operate a facility. Also a growing trend is joint venturing between hospitals and physician group practices (more on these to follow).
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2 The original purpose of the hospital was to provide shelter to the poor and dying - many sponsored by religious orders. Medicine had not yet evolved to the point where there was much to do in a hospital so mostly it was a place to die for those who could not afford to die at home. Over the period 1870 to 1910 hospitals moved from the periphery to the center of medical education and practice - hospital were the workshops of doctors. Hill-Burton Act of 1946 designed to expand rural health facilities by providing for matching grants to NONPROFIT institutions. - major factor in accounting for the rise in per-capita hospital beds between 1947 and 1970. This helped in the non-profit model being dominant in the industry. Organizationally the US system is quite different from those in other countries. In the US the hospital board and the medical board are two separate entities - physicians gain access to hospitals without becoming employees. European hospitals, in contrast, are generally staffed by full-time, salaried medical specialists who receive patients referred by office based doctors. Advantages of the US system: 1. Unpredictable environment of treating illness - this system gives the doctor more control.
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Hospitals and Nonprofit Behavior - Hospitals and the Role...

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