Ownership and Taxation Dominic Montagu

Harding-Montagu-Preker Framework: Overview Distribution (equity) Efficiency Quality of Care Source: Adapted from Harding & Preker, Private Participation in Health Services, PHSA Gather available information Identify additional needs In-depth studies PHSA Gather available information Identify additional needs In-depth studies Activities Hospitals PHC Diagnostic labs Producers / Distributors Ownership For-profit corporate For-profit small business Non-profit charitable Formal/ Informal Activities Hospitals PHC Diagnostic labs Producers / Distributors Ownership For-profit corporate For-profit small business Non-profit charitable Formal/ Informal Grow Harness Convert Strategy Assessment Goal Focus Private Sector Public Sector Restrict

Harding-Montagu-Preker Framework: Overview Distribution (equity) Efficiency Quality of Care Source: Adapted from Harding & Preker, Private Participation in Health Services, PHSA Gather available information Identify additional needs In-depth studies PHSA Gather available information Identify additional needs In-depth studies Activities Hospitals PHC Diagnostic labs Producers / Distributors Ownership For-profit corporate For-profit small business Non-profit charitable Formal/ Informal Activities Hospitals PHC Diagnostic labs Producers / Distributors Ownership For-profit corporate For-profit small business Non-profit charitable Formal/ Informal Grow Convert Assessment Goal Focus Private Sector Public Sector Restrict Harness Strategy

David Camilleri, Mark O’Callaghan, (1998) "Comparing public and private hospital care service quality", International Journal of Health Care Quality Assurance, 11(4), pp DOI / Patient expectations for public and private hospital care service quality

"The line between public and private in the health sector is extremely blurry"

Public - Private Source of funding Ownership of business or activity Ownership of premise Employment Ownership of residual

For-Profit – Non-Profit Non-Profits –Non-distribution constraint

For-Profit – Non-Profit Non-Profits –Non-distribution constraint For-Profits –Investor owned –Small business

Public / Government - Owned Profits owned by treasury, public purse or the organization for internal use

Origins of not-for-profit and for- profit ownership models Trafficology.com Health care as a commodityHealth care as a social good Kidcyber.com.au

Ownership Theory For profits: competition leads to price/quality improvements Non-profits: social goal and decreased profit-motivation provides better care with less oversight

Ownership Theory 2 For profits: efficient, responsive to market demands Non-profits: constrained by Poor access to finance Inefficient or ineffective board structure

Literature Reviews Sloan, F., Picone, G., Taylor, D. & Chou, S. (2001). Hospital ownership and cost and quality of care: is there a dime’s worth of difference? Journal of Health Economics, 20:1-21. –payments made on behalf of patients admitted to for-profit hospitals were higher than for patients admitted to not-for-profit hospitals but that there was no significant difference in mortality or health outcomes by ownership model. Sloan, Frank A. (2000). Not-for-profit ownership and hospital behavior. In Culyer, A.J. & Newhouse, J.P. (Eds.), Handbook of Health Economics (pp ). Elsevier Science B.V. –private for-profit and private not-for-profit hospitals are actually similar in most aspects Devereaux, P.J., Choi, P., Lacchetti, C. et al. (May 28, 2002). A systematic review and meta-analysis of studies comparing mortality rates of private for-profit and private not-for- profit hospitals. Canadian Medical Association, 166(11): –increased relative risk of mortality in private for-profit hospitals of (confidence interval ) Devereaux, P.J., Heels-Ansdell, D., Lacchetti, C., et al. (2004). Payments for care at private for-profit and private not-for-profit hospitals: a systematic review and meta-analysis. CMAJ, 170(12): –Payments for care were 19% higher in private for-profit hospitals

Literature Reviews Schneider, E., Zaslavski, A., & Epstein, A. (2005). Quality of care in for-profit and not-for-profit health plans enrolling Medicare beneficiaries. The American Journal of Medicine, 18: –quality of care in not-for-profit hospitals is higher Eggleston, K., Shen, Y., Lau, J. et al. (Jan. 2008). Hospital Ownership and Quality of Care: What Explains the Different Results in the Literature? Health Economics, 17: DOI: /hec –This meta-analysis of 31 observational studies reveals no systematic difference in quality between private for-profit, private not-for-profit and government controlled hospitals

Literature Reviews Schneider, E., Zaslavski, A., & Epstein, A. (2005). Quality of care in for-profit and not-for-profit health plans enrolling Medicare beneficiaries. The American Journal of Medicine, 18: –quality of care in not-for-profit hospitals is higher Eggleston, K., Shen, Y., Lau, J. et al. (Jan. 2008). Hospital Ownership and Quality of Care: What Explains the Different Results in the Literature? Health Economics, 17: DOI: /hec –This meta-analysis of 31 observational studies reveals no systematic difference in quality between private for-profit, private not-for-profit and government controlled hospitals Azhary, Emil. (Dec. 2009). The portrait of Indonesian hospital business. Economic Review, 218 –private hospitals provide better care but are also more expensive Leng, C.H. (2008). Ownership, control, and contention: Challenges for the future of healthcare in Malaysia. Social Science & Medicine 66: –Possible equity challenges from private provision Tangcharoensathien, V., Bennett, S., Khongswatt, S., Supacutikul, A, & Mills, A. (1999). Patient satisfaction in Bangkok: the impact of hospital ownership and patient payment status. International Journal for Quality in Health Care, 11(4): –private not-for-profit hospitals were rated the highest for both inpatient and outpatient care Evidence from Asia

Summary of Evidence For-Profits compared to Non-Profits AreaFor Profit Efficiency + - Quality - Cost - Outcomes - Staffing -

Explanation 3 rd party payers Low responsiveness to cost / quality High information asymmetry Patients don’t know what they’re getting –For-profits can overprovide –Low risk of penalty for cutting corners

Issues Trust In situation of poor regulatory oversight, being able to assume intentions becomes increasingly significant Capital Mobilization In situation of rapidly expanding provision, for- profits are able to raise funds more rapidly and more efficiently than either non-profits or government.

Martinez, B., (July 10, 2009) Senators Consider Curtailing Hospitals' Tax Breaks. The Wall Street Journal, p.A4. Retrieved from: Issues Tax obligations Does non-profit = non-taxed? If so are non-profits less costly to society than for-profits?

Conclusions For-Profits seem to expand faster than than non-profits Non-Profits in OECD countries seem to have better quality, lower costs, and achieve more equitable coverage The Tax Law and Corporate Law structure that defines non-profit status may not be sophisticated enough to assure non-profits operate for ‘charitable purposes’ Government or SOE-owned hospitals that function like private, fee-charging, entities are likely to be the worst possible option from a regulatory perspective – falling under no clear jurisdiction.