Summary: Competition and the growth of managed care are driving not-for-profit hospitals to sell to, or establish joint ventures with, for-profit hospitals. Between 1990 and 1996, nearly 200 of the more than 5,000 not-for-profit hospitals in the United States converted to for-profit status. In 1996 alone, more than 60 not-for-profit hospitals made the switch. Not-for-profit hospitals have traditionally provided charitable community services, including uncompensated care for the uninsured. In return, most non-for-profit hospitals have received financial breaks, such as tax exemptions and access to tax-exempt bond financing. Concerns have been raised about the potential loss of community benefits resulting from conversions as well as charitable groups' use of conversion proceeds for nonhealth-related activities. Public disclosure has also been an issue, including the extent of community involvement in the conversion transactions. This report examines several conversion issues, including the potential loss of community benefits associated with not-for-profit hospitals and how sales proceeds are targeted to charitable missions.
