Public and private hospitals each have strong points

by Becky Gillette

Published: March 24,2003

Recently when a Gulfport city councilman promoted the idea of privatizing Memorial Hospital of Gulfport to help solve the city’s financial problems, the idea quickly went down in flames as employees and the public made it clear they consider this one of the city’s strongest assets.

Councilman Billy Hewes said the sale of the hospital, which is co-owned by the city and county, could have generated a $100-million windfall. Employees were concerned that the sale of the hospital would cause job losses, and that the sale would severely limit health care to poor people.

Margaret Shore, manager of emergency medical services, said the hospital treats people every day who can’t afford to go to a private hospital.

There are different advantages and disadvantages to private versus public hospital ownership, and there are two types of private ownership, for-profit and not-for-profit.

“We are a private community-owned, not-for-profit hospital,” said Jeff Barber, president and CEO, North Mississippi Medical Center (NMMC), Tupelo, the third largest hospital in the state. “The advantage to the community is that the private not-for-profits open their doors to all comers regardless of your ability to pay. In most cases that is the mission of the hospital, which is not that different from a public hospital. It is just that the ownership is different. There are tax advantages. We don’t pay property taxes. We don’t have to pay income taxes. We pay city sales tax for sales in the cafeteria to help fund projects the city has going.”

As a private not-for-profit, NMMC’s corporate structure is what is known as a member corporation as opposed to a stock corporation where the owners are the stockholders. There are no stockholders. Members are 200 individuals who live in the service area, which extends beyond just Lee County, who pay $10 per year to be a member. Then they serve on a voluntary basis with no pay. From the membership of 200, a board of 35 is elected to govern the organization to achieve its mission, which is to continuously improve the health of the people served.

“If you are for-profit, the goal is to have a return on their investment,” Barber said. “Our goal is to improve the health of the people we serve, so we invest any profits back into health education and promotion, facilities, equipment and personnel.”

Some advocate efficient private ownership of hospitals in order to reduce expenses. But Barber said studies published in the medical journals have shown that really isn’t the case.

“They don’t necessarily operate leaner or more efficient, and in many cases are not more effective,” Barber said. “If you are talking about the big chains, they usually have staffing ratios that are very appropriate. Smaller chains trying to get started may cut staffing back dangerously low. That is one of the costs they are trying to cut back on. But your biggest resources in health care delivery are technology and people. It you cut back on those, you start to cut back on the quality of the product you are delivering, and your ability to provide a safe product or service.”

Barber said what he has found from his research over the years is that the quality of care doesn’t necessarily vary from profit to not-for-profit. What calls up the variable is how management spends its money. If the profits are spent on personnel, technology and physician services, the quality of care is good. If profits are spent on dividends to stockholders, the quality suffers at that point.

“The other issue is the value of that institution to the community it serves,” Barber said. “If it is a not-for-profit versus for-profit, the not-for-profits are generally set up to take all comers whether you have insurance or don’t have insurance. In many instances, the for-profits don’t take charity care. However their justification for doing that is they pay taxes, and the public hospital should take care of indigent care because they are supported by tax funds. But in our case we are a private, non-for-profit, so we don’t receive any tax revenues.”

The largest private chain in Mississippi is Health Management Associates Inc. (HMA), which has nine hospitals located in Mississippi out of the 44 hospitals the chain owns.

“Our hospitals make vital contributions to the quality of life for many Mississippians,” said Julie Grantham, director of marketing, HMA Mississippi Division.

“About one in every five babies born in our state begins its life in an HMA-affiliated hospital. The HMA hospitals provide employment to approximately 5,000 people in our state, with an annual payroll exceeding $140 million. An extremely important contribution our hospitals make to the economic viability of our communities is through the payment of taxes. Our hospitals paid state taxes totaling nearly $21 million including sales, use, property, unemployment and income taxes in the last fiscal year.”

Grantham said as for-profit entities, another major economic benefit their hospitals bring to the marketplace is the infusion of capital. Expenditures for new buildings, advanced technology and additional jobs are multiplied in the community and greatly enhance quality of life, she said.

“Our hospitals are very generous corporate citizens, providing approximately $1 million in annual charitable contributions,” Grantham said. “Our company’s leadership champions civic and charitable involvement, strongly encouraging our hospital’s key managers to share their time and talents in the communities they serve. Our hospitals face the same challenges as the other healthcare providers in our state, but have the advantage of a corporate structure that provides strong leadership, funding for capital expenditures, and many managerial resources.”

Many hospitals in the state are publicly owned. Advocates of public hospitals say they benefit from being governed by local people.

“Because we are community owned, and operated by a governing board consisting of trustees who live and work in Jackson County, we believe that we are better able to connect with the needs of those we serve,” said Chris Anderson, CEO of Singing River Hospital System (SRHS) in Jackson County. “Our mission is solely one of service to the community, through the provision of high-quality health care services, offering of community health and wellness programs and offering charity services to those in need.”

Anderson said while most hospitals, both profit-oriented and non-profit, provide some level of uncompensated care, all funds generated by SRHS’s non-profit system are returned to the community in the form of services.

“This differs from profit-oriented hospitals, which must provide dividends to shareholders who often live outside of the community,” Anderson said. “This important difference allows us to focus solely on community needs. We believe our employees and physicians take pride in our community ownership and the value of the services we provide in Jackson County and surrounding areas.”

Allen Meadows, vice-president of business development at Forrest General Hospital (FGH), said that based on his experience in working for both not-for-profit and for-profit hospitals for the past 18 years, he would say the biggest difference is balance.

“Generally speaking I feel the not-for-profits have balance and the for-profits do not,” Meadows said. “The not-for-profits are able to balance a quality patient experience, a quality staff experience and a quality business experience. The for-profits have a quality business experience, but often times do so at the expense of the patient and staff experience. At FGH we call the ability to balance the needs of the patient, the needs of our employees and the business needs our formula for success.”

Ownership of hospitals by religious organizations is another popular type of hospital in Mississippi. For example, the Mississippi Bapti

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