Hospital Performance and Ownership Type: A Re-Assessment of the Evidence

49 Pages Posted: 2 Aug 2018

See all articles by Robert G. Hansen

Robert G. Hansen

Tuck School of Business at Dartmouth

Anant K. Sundaram

Tuck School of Business at Dartmouth

Date Written: July 31, 2018

Abstract

Prior empirical research on US hospitals mostly concludes that ownership type – not-for-profit (NFP) versus for-profit (FP) – does not affect financial performance. This is surprising, in light of strong predictions from theories of NFP firm behavior. We revisit the issue with a comprehensive dataset covering the sixteen-year period 2000-2015, and find that ownership type matters a great deal, increasingly so over time, and in a manner consistent with theory. NFPs have higher operating expenses, broadly similar revenues and lower operating margins compared to FPs, findings that are robust to alternate specifications. The main reason for the higher costs in NFPs appears to be excess employment, especially of non-care provider staff. Further, hospitals that convert from NFP to FP status achieve lower cost and lower employment post-conversion. Quality measures and patient satisfaction scores are, however, somewhat higher for NFPs. Consistent with theory, ownership type creates a trade-off between efficiency and quality in the delivery of US hospital care.

Keywords: Non-profit, For-profit, Non-profit Hospitals, For-profit Hospitals, Hospital Performance, Hospital Productivity, Hospital Quality, Ownership Type

JEL Classification: L33, L10, I11

Suggested Citation

Hansen, Robert G. and Sundaram, Anant K., Hospital Performance and Ownership Type: A Re-Assessment of the Evidence (July 31, 2018). Tuck School of Business Working Paper No. 3223525. Available at SSRN: https://ssrn.com/abstract=3223525 or http://dx.doi.org/10.2139/ssrn.3223525

Robert G. Hansen (Contact Author)

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States
603-646 2079 (Phone)
603-646-1308 (Fax)

Anant K. Sundaram

Tuck School of Business at Dartmouth ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-8248 (Phone)
603-646-1308 (Fax)

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