The consumer welfare implications of the hospital ownership mix in the US: an exploratory study

This paper offers an empirical test concerning how hospital ownership mix affects consumer welfare in the US. The test compares the market benefits and costs resulting from an increased presence of nonprofit hospitals by observing empirically how the nonprofit market share impacts hospital care utilization at the margin. The empirical results suggest that too many not-for-profit and public hospitals exist in the inpatient care segment of the typical hospital services industry of the US. In contrast, the empirical findings indicate that too many for-profit hospitals operate in the outpatient care portion of the hospital services industry. The policy implication is that more quality of care per dollar might be obtained by promoting increased for-profit activity to inpatient care and more nonprofit activity to outpatient care in some market areas. This conclusion, however, is tempered with several caveats. We discuss these and also make recommendations for further research. Copyright © 2006 John Wiley & Sons, Ltd.