General Discussion

In 1970, the American Hospital Association listed 7,123 hospitals in the United States, up 247 from 1960. During this decade, however, a major shift had occurred in hospital utilization. The number of beds in federal, psychiatric, tuberculosis, and other long-term care facilities had declined, while, aided by government funding, community hospitals increased their bed capacity by 32.7 percent (Table 2). These nonfederal, short-term care institutions that were controlled by community leaders and were linked to the community’s physicians to meet community needs represented 82.3 percent of all hospitals, contained over half of all hospital beds, and had 92.1 percent of all admissions.

Community hospitals also offered more comprehensive and complex services such as open heart surgery, radioisotope procedures, social work services, and in-house psychiatric facilities. [18] The growth of these hospitals, along with the advent of new treatments and new technologies, contributed to escalating in-patient hospital costs, leading the federal government to impose wage and price controls on hospitals in 1971. Indeed, the years after 1965 and the passage of Medicare and Medicaid were pivotal for everyone in health care because of increased government regulation. Medicare incorporated a prospective payment system in 1983, with federal programs paying a preset amount for a specific diagnosis in the form of Diagnostic Related Groups, or DRGs. [19] As third party payers gained power and status, DRGs radically changed Medicare reimbursements. They also considerably altered hospital decisions, with a focus changing toward greater efficiency. [20]

The 1980s also witnessed the growth of for-profit hospital networks, resulting in increased vulnerability of smaller not-for-profit institutions. More than 600 community hospitals closed. [21] It was at this time that both for-profit and not-for-profit institutions began forming larger hospital systems, which were significant changes in the voluntary hospital arena. A system was a corporate entity that owned or operated more than one hospital. This also has come about with the advent of DRGs as single health care facilities seek to affiliate to cut down on duplication of costs.