NCPA - National Center for Policy Analysis

Are For Profit Hospitals Good For Your Health?

May 19, 2000

Compared with similarly situated not-for-profit hospitals, for-profit hospitals have lower than average costs and lower mortality rates.

On average, for-profit hospitals have higher mortality among elderly patients with heart disease, and this difference has grown over the past decade. And on average, not-for-profit hospitals perform better with elderly patients with heart disease, even after adjustments are made for differences in hospital size, teaching status, whether the hospital is in a city, and patient demographics. However, much of this difference is due to the location of the for-profit hospitals, according to a recent study.

  • For-profits tend to locate in areas with higher costs and worse outcomes.
  • Not controlling for these area effects makes them appear to have somewhat higher costs and worse outcomes -- an error commonly made in the literature.
  • Within the areas where they locate, they tend to do a little better than average on both.

In other words, after adjusting for other differences between market areas, the mortality measure indicates that for-profit hospitals offer better quality. More striking are the differences in mortality rates within each hospital ownership type.

Source: Mark McClellan and Douglas Staiger, "The Quality of Health Care Providers," National Bureau of Economic Research, Working Paper 7327, August 1999.

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