Most U.S. hospitals have been run as non-profit organizations for the last 30 years, but there is a new and growing trend toward hospitals becoming for-profit entities. Is this a positive move, or a bad idea? Voices on both sides of the debate have been loud and clear.

Those who support the for-profit delivery model say that because for-profit hospitals have one goal – making a profit – they are able to make necessary tradeoffs, coordinate production and create incentives for efficiency.

Supporters also point out that researchers have been unable to demonstrate a coherent pattern of quality differences between non-profit and for-profit care.

Because for-profits operate with business objectives in mind, they supposedly will be better able to adapt to the changing hospital environment, and to reconfigure production under a new set of constraints. They appear to be better suited to handle upcoming pressures.

When naysayers complain that profiting off the infirmity of others is abhorrent, the response is that nearly all health care delivery begins with the decisions of physicians – physicians who are often running their own businesses, not just for the betterment of their patients, but also for their own families. Their decisions are also affected by profits.

Finally, say supporters, cost is the most significant challenge facing our nation’s healthcare system. If for-profit health care delivery can achieve greater efficiency, with better service at a lower cost, everyone wins.

On the other side of the aisle, advocacy groups are raising concerns about whether services are really better if consumers are taking the hit.

For example, one group alleged that the private ownership company running a group of hospitals in California admitted patients based on business strategy, not medical need. They claimed that the hospital in question was prone to admit out-of-network patients and keep them hospitalized rather than transfer them to an in-network hospital. Good for profits, bad for the patients.

There have also been complaints that the private owners have turned a profit by canceling contracts with insurance companies and renegotiating rates for various services – which again can result in hardship to consumers. For-profit hospitals do not always negotiate “in-network” agreements with the major health insurance companies. If the hospitals fail to do so, then patients may have to use these hospitals as out-of-network facilities – meaning they’ll have to pay the hospital’s rate for treatment rather than a rate pre-negotiated by their insurance company. Or they’ll just have to go to a different hospital that has a contract with their insurer, a hospital that may be farther away.

According to Rutgers School of Business professor Mahmud Hassan, the for-profit hospital trend began after 1983, when major changes were made to how hospitals could be reimbursed under Medicare. Prior to 1983, Medicare reimbursement rates were uniform, based on the ailment and the type of treatment offered. The idea was to encourage hospitals to be economically frugal in dispensing treatments. Then federal reimbursements for Medicaid dropped, along with reimbursement rates from private insurers. At the same time, medical costs skyrocketed. Once reimbursement rates were cut and no longer uniform, hospitals had “too many beds” that could no longer be sustained.

Currently, the healthcare industry is readjusting itself to these new realities. This includes fewer hospitalizations, more out-patient care and an overall downsizing of the number of hospital beds per community.

“When a hospital becomes a for-profit,” Hassan says, “what is the pay-off? The pay-off is an inflow of capital. There will be an inflow of cash by the investors and improvements made at the hospital…But what does this mean for the community and the society once the hospital’s status changes? The for-profit hospital is going to eliminate some services that are unprofitable. They will restrict indigent care…Only time will tell if this is ultimately good or bad for society.”