CONVERSION OF HMOS AND HOSPITALS - WHATS AT STAKE

Because for-profit conversions of nonprofit organizations are regulate d under trust law at the state level, their health policy implications have generally not been part of the process. This paper provides a he alth policy framework for assessing conversions of hospitals and healt h maintenance organizations (HMOs). It begins with basic differences i n ownership forms and identifies considerations on both sides of the c onversion question. The analysis turns on the extent of the social ben efits of nonprofits: the regulatory tool provided by tax exemptions, t rustworthiness in the presence of informational asymmetries, and commu nity benefit activities. The analysis and the evidence suggest that th e nonprofit form continues to hold significant advantages in health ca re that bear consideration by policymakers faced with conversion propo sals.