Public Hospitals:

Sales Lead to Better Facilities but Increased Patient Costs

HRD-86-60: Published: Jun 20, 1986. Publicly Released: Jun 25, 1986.

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In response to a congressional request, GAO reported on: (1) the circumstances leading to the sale or lease of public and nonprofit hospitals in the southeastern United States; (2) the effects on local communities and taxpayers; and (3) the effects on Medicare and Medicaid payments.

GAO noted that, of the 40 public and voluntary nonprofit hospitals leased or sold from 1980 to 1982 in the Department of Health and Human Services' Atlanta region, for-profit firms acquired 30 and nonprofit firms acquired 10. GAO found that: (1) 11 hospitals had financial difficulties and needed substantial renovation or modernization; (2) the hospitals' former operators were generally unable or unwilling to fund the hospitals' deficits or raise the capital necessary to improve them; and (3) the acquiring firms aggressively pursued acquisition and promised to fix the hospitals' deficiencies. GAO also found that: (1) hospital acquisitions resulted in significant increases in hospitals' capital costs, return-on-equity payments from Medicare, and administrative expenses; and (2) after the change in control, charges for ancillary services increased and Medicare costs went up.

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