Public Policy Issues In Nonprofit Conversions: An Overview

PROLOGUE: The conversion of nonprofit health plans to for-profit status, or the acquisition of nonprofit hospitals by for-profit chains hungry for market share, continues to attract nationwide attention. Although the numbers are still small, the potential for more conversions and the enormous amount of money at stake demand policy attention. The authors of this overview paper offer some guidance through the morass of public opinion, legal precedent (or lack thereof), detailed financial transactions, emotional reactions, and other aspects of the topic of health plan conversions. Gary Claxton is a senior manager of The Lewin Group in Fairfax, Virginia. He joined Lewin's public policy practice after spending ten years in state and federal health policy positions, most recently in the U.S. Department of Health and Human Services. Judith Feder served as a key health reform adviser in the Clinton administration. She is a professor of public policy at Georgetown University's Institute for Health Care Research and Policy and holds a doctorate in political science from Harvard University. David Shactman is director of the Council on the Economic Impact of Health System Change at the Heller Graduate School, Brandeis University, in Waltham, Massachusetts. He holds a master of public administration degree from Harvard University. Stuart Altman is Sol C. Chaikin Professor of National Health Policy at the Heller School. He holds graduate degrees in economics from the University of California, Los Angeles. ABSTRACT: Conversions raise two critical policy questions: First, does ownership form (nonprofit or for-profit) make any difference to delivery of health care? Second, when conversions occur, how are charitable assets and purpose preserved? This paper addresses both questions, based on a review of evidence and experience. On the first question we conclude that, overall, nonprofit ownership enhances the potential for community benefit. However, that potential may be better realized by requiring nonprofits to meet minimum community benefit standards and possibly by mitigating pressure on institutions to convert. On the second question, we conclude that more states should take legislative action to establish a formal oversight process for conversions. Without public consideration of how much money to set aside and for what purpose, conversions pose the risk that communities will lose significant services and resources.