The effect of investor-owned chain acquisitions on hospital expenses and staffing

Much concern has been raised about the effect of "corporatization" of health through the expansion of investor-owned hospital chains. One method of expansion is through hospital acquisition. At issue is the question of the effect of acquisitions on expenses and on such patient care inputs as staffing levels. In this article, we examine the effect of acquisition by one investor-owned chain on hospital costs and staffing. Subsequent to acquisition, hospital costs increase and staffing decreases, relative to competitor hospitals. However, since investor-owned hospitals not recently acquired do not have higher cost levels than their competitors, the increase in costs appears to be due to factors associated with the acquisition itself rather than factors associated with being an investor-owned hospital. Under the retrospective payment system in effect at the time, revenues also were higher for acquired hospitals. Under prospective payment, increasing revenues has been more difficult, decreasing acquisition incentives.