Hospital Ownership and Financial Performance

What Explains the Different Findings in the Empirical Literature?

The hospital industry in the United States comprises three different types of ownership models: private not-for-profit, for-profit and government. Numerous studies have investigated whether these types of hospitals differ in patient outcomes, costs, provision of uncompensated care or other measures of performance. This study considers the effect of hospital ownership on financial performance. The researchers applied meta-analytic methods to review the literature on hospital ownership since 1990 examining the following financial outcomes across 40 studies: cost, revenue, profit margin and efficiency. They found that the types of research methodologies used in the various studies affected the differences found between for-profit and not-for-profit hospitals. Functional form and sample size also mattered. However, regardless of research focus, the authors discovered some consistency across findings, especially for revenue and profit margins. Studies that compared revenues all found either that for-profits earn greater revenue and higher profits or that there is no difference between for-profits and not-for-profits. The former finding is not surprising since it is the mission of for-profits to earn more profits. However, what may be more interesting is that the results showed for-profit hospitals do not necessarily operate more efficiently (i.e., at a lower cost).

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