Relative Productivity of For-Profit Hospitals: A Big or a Little Deal?

Abstract

This study asks: Does the empirical evidence support the conclusion that for-profit (FP) hospitals are more productive or efficient than private not-for-profit (NFP) hospitals or non-federal public (PUB) hospitals? Alternative theories of NFP behavior are described. Our review of individual empirical hospital studies of quality, service mix, community benefit, and cost/efficiency in the United States published since 2000 indicates that no systematic difference exists in cost/efficiency, provision of uncompensated care, and quality of care. But FPs are more likely to provide profitable services, higher service intensity, have lower shares of uninsured and Medicaid patients, and are more responsive to external financial incentives. That FP hospitals are not more efficient runs counter to property rights theory, but their relative responsiveness to financial incentives supports it. There is little evidence that FP market presence changes NFP behaviors. Observed differences between FP and NFP hospitals are mostly a "little deal."

Keywords: Medicaid; hospital efficiency; hospital ownership; hospital productivity; hospital quality; uncompensated care.