Does the Influence of Competition and Compensation on Hospital Quality Vary with Ownership type?

Abstract

Institutional theory highlights differences across hospital ownership types on key dimensions related to monitoring and compensation. Using California hospital data from 2006 through 2014, we examine whether hospital ownership type moderates the determinants of patient quality outcomes. We find evidence that the effects of competition and compensation on patient quality differ by ownership type. Competition is positively associated with quality in nonprofit hospitals, while executive compensation is positively associated with quality in for-profit and district hospitals. Further analysis suggests that the role of competition in improving quality is stronger among nonprofit hospitals with weaker governance. Taken together, our results suggest that the drivers of quality vary across hospitals in ways consistent with institutional theory regarding differences in constraints and objectives across ownership types.

Keywords: Quality performance, competition, compensation, hospital quality monitoring

JEL Classification: I11, L21, L33, M11, M12