JANUARY 1999 Privatization of Public Hospitals Prepared for The Henry J. Kaiser Family Foundation by: The Economic and Social Research Institute Privatization of Public Hospitals Prepared for The Henry J. Kaiser Family Foundation Prepared by Economic and Social Research Institute Mark W. Legnini Stephanie E. Anthony Elliot K. Wicks Jack A. Meyer Lise S. Rybowski Larry S. Stepnick January 1999 Privatization of Public Hospitals Contents About Economic and Social Research Institute ......................................................... iii Acknowledgments ...................................................................................................... iii Executive Summary ....................................................................... 1 Case Study Sites ......................................................................................................... 3 Boston Medical Center.............................................................................................. 3 Brackenridge Hospital and Children’s Hospital......................................................... 4 University Hospital ................................................................................................... 4 Sutter Medical Center of Santa Rosa......................................................................... 4 Oakwood Healthcare System.................................................................................... 4 Key Findings from the Case Studies ........................................................................... 4 Overview........................................................................................ 7 Prototypes of Conversions........................................................................................... 8 Objectives of the Study ............................................................................................. 10 Methodology.............................................................................................................. 11 Case Study Sites ....................................................................................................... 14 Boston Medical Center............................................................................................ 14 Brackenridge Hospital and Children’s Hospital....................................................... 15 University Hospital ................................................................................................. 15 Sutter Medical Center of Santa Rosa....................................................................... 16 Oakwood Healthcare System.................................................................................. 17 Overview of National Data........................................................... 19 Key Findings and Cross-Cutting Themes..................................... 25 Key Findings from the Case Studies ......................................................................... 25 Cross-Cutting Themes .............................................................................................. 27 Boston Medical Center — Boston, Massachusetts ...................... 39 Introduction .............................................................................................................. 39 Motivations for Conversion ....................................................................................... 39 Process of Conversion ............................................................................................... 41 Structure of Conversion............................................................................................ 43 Change in Governance Structure ............................................................................. 44 Effect on Hospital Operations ................................................................................... 45 Effect on the Local Community................................................................................. 51 Conclusion................................................................................................................ 53 Kaiser Family Foundation i Privatization of Public Hospitals Brackenridge Hospital — Austin, Texas ...................................... 55 Introduction .............................................................................................................. 55 Motivations and Process for Conversion ................................................................... 55 Change in Governance Structure ............................................................................. 59 Effect on Hospital Operations ................................................................................... 60 Effect on the Local Community................................................................................. 62 Conclusion................................................................................................................ 66 University Hospital — Denver, Colorado...................................... 69 Introduction .............................................................................................................. 69 Motivations for Conversion ....................................................................................... 69 Process and Structure of Conversion........................................................................ 72 Change in Governance Structure ............................................................................. 72 Effect on Hospital Operations ................................................................................... 73 Effect on the Local Community................................................................................. 80 Conclusion................................................................................................................ 83 Sutter Medical Center — Santa Rosa, California ......................... 85 Introduction .............................................................................................................. 85 Motivations for Conversion ....................................................................................... 85 Change in Governance Structure ............................................................................. 87 Effect on Hospital Operations ................................................................................... 88 Effect on the Local Community................................................................................. 93 Conclusion................................................................................................................ 95 Oakwood Healthcare System — Dearborn, Michigan .................. 97 Introduction .............................................................................................................. 97 Motivations for Conversion ....................................................................................... 97 Process of Conversion ............................................................................................... 98 Structure of Conversion............................................................................................ 99 Effect on Hospital Operations ................................................................................. 100 Effect on the Local Community............................................................................... 101 Conclusion.............................................................................................................. 104 Appendix: Additional Profiles of Public Hospital Conversions......... 105 Denver Health Medical Center — Denver, Colorado ............................................... 106 Desert Regional Medical Center — Palm Springs, California .................................. 107 Detroit Receiving Hospital — Detroit, Michigan...................................................... 108 Fairview University Medical Center — Minneapolis, Minnesota ............................. 109 John L. Doyne Hospital — Milwaukee, Wisconsin.................................................. 110 John Randolph Medical Center — Hopewell, Virginia ............................................ 111 PennState Geisinger Health System — Pennsylvania............................................. 112 Regions Hospital — St. Paul, Minnesota................................................................. 113 UCSF-Stanford Health Care — California ............................................................... 114 University Medical Center — Fresno, California ..................................................... 115 ii Kaiser Family Foundation Privatization of Public Hospitals About Economic and Social Research Institute The Economic and Social Research Institute (ESRI) is a nonprofit organization that conducts research and policy analysis in health care and in the reform of social services. ESRI specializes in studies aimed at enhancing the effectiveness of social programs, improving the way health care services are organized and delivered, and making quality health care accessible and affordable. Acknowledgments The authors would like to thank Roice Luke, Ph.D., Director and Professor at the Williamson Institute, Virginia Commonwealth University, for assisting in cleaning and organizing the data we used in the quantitative portion of our analysis. In addition, we thank all the individuals who agreed to be interviewed for this project. We are also grateful to the Henry J. Kaiser Family Foundation for their support of this