Killing the Goose That Laid the Golden Egg

Many hospitals, in an effort to improve economies of scale as well as increase negotiating power, have merged into behemoth hospital systems, incorporating a regional or state-wide presence with five or more hospitals combined. Others have stuck to their roots, remaining small, independent community-based institutions. More recently, a third type of hospital has emerged: the for-profit hospital, a type previously unseen but that now has taken over several different institutions in the state of New Jersey.

The variety in hospital structure has lead to a marked disparity ' almost a class system ' among the hospitals. The largest hospital systems generate enormous revenue streams, employ multiple physician groups and enjoy better reimbursement rates from the larger health insurers because of their negotiating power. Similarly, the for-profit hospitals, due to their lack of participation in most health insurance plans, are able to charge service rates significantly higher than the usual negotiated rates for “in-network” providers, likewise leading to large revenue streams. The community hospital, on the other hand, is at the whim of the insurer, often forced to accept reduced service rates, and has higher than average numbers of charity care patients, resulting in a revenue stream that is incapable of meeting or exceeding expenses.