Posted on June 7, 2004

For-Profit Hospitals are Costlier Than Non-Profits


EMBARGOED UNTIL:Monday, June 7, 5:00 p.m. 2004
Contacts: Dr. PJ Devereaux (cell) (289) 237-3748
Dr. Steffie Woolhandler (617) 665-1032
Dr. Quentin Young (312) 782-6006

For-Profit Hospitals are Costlier Than Non-Profits, Study Finds
Evidence Against For-Profit Health Care Now Conclusive

* Please Click on the below links to access the article and editorial

Payments for care at private for-profit and private not-for-profit hospitals

The high costs of for-profit care

Charging the patient to save the system?

Investor-owned hospitals have 19% higher charges than non-profit hospitals, according to a study appearing today in the Canadian Medical Association Journal. The study, the most comprehensive analysis comparing for-profit and non-profit facilities, was carried out by a highly respected team of physicians and statisticians at McMaster University led by Dr. PJ Devereaux. That team had previously reported that investor-owned hospitals have 2% higher death rates. The researchers, though based in Canada, used data from U.S. hospitals, since for-profits are rare in Canada. The possible introduction of for-profit hospitals is expected to be a campaign issue in upcoming Canadian elections.

In an accompanying editorial, Drs. Steffie Woolhandler and David Himmelstein of Harvard Medical School calculate that converting all investor-owned hospitals (13 percent of U.S. hospitals) to non-profit ownership could have saved $6 billion of the $37 billion spent on care at investor-owned hospitals in 2001.

“Investor-owned hospitals charge outrageous prices for inferior care.” said Dr. Steffie Woolhandler. “That’s not just an opinion, it’s now a proven fact. The for-profits skimp on nurses, but spend lavishly on their executives and paper-pushers.” Previous research by Drs. Woolhandler and Himmelstetin, based on financial filings by virtually all U.S. hospitals, found that administration accounted for 24.5% of total costs at non-profit hospitals vs. 34% at for-profits, while payroll costs for clinical personnel were 7 percentage points higher at non-profits.

Dr. Woolhandler also noted that: “Previous studies have shown a consistent pattern - investor-ownership compromises care and raises costs. For-profit dialysis clinics have higher death rates. For-profit nursing homes deliver lower quality care. For profit hospices give dying patients less care. For-profit rehab facilities cost Medicare more. And for profit HMOs deliver poor quality care and have extraordinarily high overhead costs. In fact, the Congressional Budget Office has concluded that HMOs actually increases Medicare costs by at least $2 billion each year — and President Bush and the Republicans in Congress just handed them an extra $46 billion in the Medicare drug bill.” Dr. Himmelstein, Associate Professor of Medicine at Harvard commented: “For-profit hospitals milk the system for legal, but outrageous payments for executives and shareholders. And they also routinely bilk the system through fraud. Columbia/HCA — the largest hospital firm — paid a $1.7 billion settlement for overbilling Medicare last year. Tenet — the second largest — paid a half a billion dollars to settle fraud and abuse charges in the 1980’s (when the firm was known as NME) and is under investigation again for massive billing fraud, and performing hundreds of unnecessary heart operations. And HealthSouth — which dominates the rehab hospital market — just admitted to $3.4 billion in fraudulent accounting. In each case, the CEO who presided over the fraud was forced out. But only after Columbia/HCA’s got $324 million, Tenet’s received $111 million, and HealthSouth’s pocketed $112 million. In health care, crime pays handsomely.”

The researchers at McMaster are considered leading experts on research methodology. The team of 20 researchers reviewed 788 medical articles on hospital care, eventually honing in on the 8 highest quality and most relevant studies— which included a total of 350,000 patients and a median of 324 hospitals in each study. They contacted the original authors to verify the findings, then used advanced statistical techniques to combine the 8 studies. Of the 8 studies, only one showed that for-profits had lower costs. However, all of the non-profit hospitals included in this study were managed by a for-profit firm — in other words, both groups of hospitals in the study were under for-profit management.

“We can no longer afford to leave health care to the marketplace” said Dr. Quentin Young, National Coordinator of Physicians for a National Health Program. “This study demonstrates the marvelous opportunities for improved health services when the U.S. adopts a national health insurance system (single-payer) based on traditional not-for-profit care.”

“The High Costs of For-Profit Care,” Steffie Woolhandler and David U. Himmelstein. Canadian Medical Association Journal, 1814-1815, June 8, 2004.

“Payments for Care at Private For-Profit and Private Not-for-Profit Hospitals: A Systemic Review and Meta-Analysis,” P.J. Devereaux et al, Canadian Medical Association Journal, 1817-1824, June 8, 2004.

A bibliography of references on the negative impact of investor-ownership on health care is also available.


Physicians for a National Health Program ( is an organization of 12,000 physicians advocating for non-profit national health insurance. PNHP has chapters and spokespeople across the country. For contacts, call (312) 782-6006.