Does a Hospital's Profit Status Affect its Operational Scope?

Abstract

We empirically evaluate whether a hospital's organizational form (i.e., for-profit vs. not-for-profit or public) affects its operational scope (i.e., distribution of supplied medical procedures). Our results suggest that operational scope depends more heavily on demographic characteristics of local populations than on causal forces from organizational form per se. This suggestion is consistent with differences in objectives (e.g., altruistic motives) ultimately exerting a stronger influence on operational scope than does the organizational advantage of not-for-profits in producing higher levels of non-contractible quality. It also offers information about how the availability of different medical services might change if the hospital sector continues its trend toward for-profit organizational forms. Here, our evidence suggests that hospital conversions to for-profit status are less likely to alter the mix of available services than do outright exits of not-for-profits. Taken together, these results should appeal to readers who are broadly interested in the relationship between industrial organization and the real economy, and particularly interested in competition and health policy.