Assessing the Quality of Public Services : For-Profits, Chains, and Concentration in the Hospital Market

We examine variation in US hospital quality across ownership, chain membership, and market concentration. We use a new measure of quality derived from the penalties imposed on hospitals under the flagship Hospital Readmissions Reduction Program. We document a robust and sizable negative for-profit quality gap: for-profit hospitals are consistently of lower quality. We find that a substantial part of the gap is related to being located in less competitive markets. This reduction occurs most for hospitals that are part of large national chains. For such hospitals we find no quality gap in fully competitive markets