Public general hospitals originated in the almshouse infirmaries established as early as colonial times by local governments to care for the poor. Later, in the late eighteenth and early nineteenth centuries, the infirmary separated from the almshouse and became an independent institution supported by local tax money. At the same time, private charity hospitals began to develop. Both private and public hospitals provided mainly food and shelter for the impoverished sick, since there was little that medicine could actually do to cure illness, and the middle class was treated at home by private physicians.
Late in the nineteenth century, the private charity hospital began trying to attract middle-class patients. Although the depression of 1890 stimulated the growth of charitable institutions and an expanding urban population became dependent on assistance, there was a decline in private contributions to these organizations which forced them to look to local government for financial support. Since private institutions had also lost benefactors; they began to charge patients. In order to attract middle-class patients, private institutions provided services and amenities that distinguished between paying and non-paying patients and made the hospital a desirable place for private physicians to treat their own patients. As paying patients became more necessary to the survival of the private hospital, the public hospitals slowly became the only place for the poor to get treatment. By the end of the nineteenth century, cities were reimbursing private hospitals for their care of indigent patients and the public hospitals remained dependent on the tax dollars.
The advent of private hospital health insurance, which provided middle-class patients with the purchasing power to pay for private hospital services, guaranteed the private hospital a regular source of income. Private hospitals restricted themselves to revenue-generating patients, leaving the public hospitals to care for the poor. Although public hospitals continued to provide services for patients with communicable diseases and outpatient and emergency services, the Blue Cross plans developed around the needs of the private hospitals and the inpatients they served. Thus, reimbursement for ambulatory care has been minimal under most Blue Cross plans, and provision of outpatient care has not been a major function of the private hospital, in part because private patients can afford to pay for the services of private physicians. Additionally, since World War II, there has been a tremendous influx of federal money into private medical schools and the hospitals associated with them. Further, large private medical centers with expensive research equipment and programs have attracted the best administrators, physicians, and researchers. As a result of the greater resources available to the private medical centers, public hospitals have increasing problems attracting highly qualified research and medical personnel. With the mainstream of health care firmly established in the private medical sector, the public hospital has become a â€œdumping ground.â€