New York hospitals cost more and have lower quality on average than the rest of the nation, a new report finds.

“Profit Potential: Revisiting New York’s Restrictive Hospital Ownership Laws” was issued by the Empire Center last week. A central mission of the nonpartisan Albany-based think tank is support of free-market principles, and a central theme of its report is that opening New York to for-profit hospital operators might help improve performance here.

The 153 New York hospitals graded by the federal Centers for Medicare & Medicaid Services Hospital Compare in December 2017 received an average rating of 2.32 stars, the lowest among the 50 states, the report notes. Government-owned hospitals skew New York’s average, with an average rating of just 1.39. But the state’s non-profits, averaging 2.44 stars, would still rank 49th on their own, the report says.

There currently are no for-profit hospitals in New York, report author Bill Hammond notes, and state law effectively precludes any from setting up shop here. Nationwide, more than a quarter of all hospitals are for-profit operations, and as a whole they outscore New York’s non-profits on quality ratings.

Hammond, the Empire Center’s director of health policy, is a former columnist for the New York Daily News and reporter for The Daily Gazette.

He said his report is not a blueprint for change. There is no bulleted list of steps to take. He readily concedes that converting an underperforming non-profit to a higher-performing for-profit — while also paying local, state and federal taxes and providing a return on investment — would be a significant undertaking.

Instead, Hammond said, the report is a suggestion that as a way of improving New York hospital performance, the for-profit model should be an option.

The report and the issues it raised were the subject of a forum the Empire Center held Thursday in Manhattan.

The Healthcare Association of New York State, an industry group representing many New York state hospitals, said for-profit status should be one of the things examined as the state tries to improve its health care industry.

“HANYS encourages dialogue on healthcare issues, including the consideration of for-profit models,” spokesman Darren Dopp told The Daily Gazette.

“There is no simple solution to the challenges facing the healthcare system, however.

“We believe that certain collaborative efforts underway may hold the key. In this regard, hospitals and health systems are making progress. (Reduced Medicaid spending per enrollee, improved outcomes in key areas, etc.)

“In fact, New York had the largest five-year improvement of all 50 states in this year’s America’s Health Rankings report. This improvement is no accident. It’s the product of close cooperation between the state and healthcare providers.”

Individual Capital Region hospitals contacted by The Gazette had no response to the report or its thesis. Albany Medical Center and Saint Peter’s hospitals deferred comment to HANYS. The CEOs of Saratoga and Ellis hospitals were unavailable for comment.

Hammond’s report identifies the following as key takeaway points:

  • Despite a concentration of world-famous institutions in Manhattan, New York’s hospitals collectively rank at the bottom of the federal government’s quality ratings and score substantially lower than the national average on other major report cards.
  • The amount of free care provided by New York’s not-for-profits in 2015 — 1.9 percent of operating revenues — was a third lower than the national averages for both not-for-profits and for-profits.
  • As of 2014, New York’s per capita spending on hospital care was 19 percent higher than the U.S. average.
  • Tax exemptions for New York’s not-for-profit hospitals likely cost federal, state and local governments about $2 billion a year.
  • In spite of high spending on hospital care and their tax-exempt status, New York’s hospitals collectively had the sixth-lowest profit margins, and the highest ratio of liabilities to assets, among the 50 states as of 2015. These factors compromise the hospitals’ ability to raise capital.
  • Hospitals are increasingly relying on government funds to finance capital projects. In just the past five years, the state has allocated $3.8 billion in capital grants to hospitals and other health care providers.

Nationwide, the report says, hospitals are 53 percent non-profit, 28 percent for profit and 20 percent government-owned. In New York, they are 86 percent non-profit and 14 percent government-owned.

Hammond notes that recent proposals to partly open New York’s hospital industry to for-profit operators have stalled in the state Legislature.

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The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

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