The Economic Performance of For-Profit and Not-for-Profit Hospitals

Investor-owned hospital systems have grown rapidly in the 1970s and 1980s. Policy-makers are concerned about the changes in the access to and quality of hospital care that may be caused by this development. These concerns are predicated on the belief that for-profit hospitals perform differently than not-for-profit hospitals. This research examines the economic performance of for-profit and not-for-profit hospitals. Panel data containing 573 observations of not-for-profit and for-profit hospitals in the State of Florida for 1984 through 1987 are used in a random-effects regression model with endogenous for-profit status. The results differ significantly from those of prior studies: When the endogeneity of for-profit status is taken into account, neither for-profit status nor system membership are significantly associated with changes in average expenditure, average revenue, or average net revenue per hospital admission.