As the health care industry evolves, communities will be faced with the choice of ownership structure for their local hospitals. Unfortunately, the evidence concerning which structure is most efficient, proprietary or non-proprietary, is mixed (e.g., Sloan and Vraciu 1983, pp. 25–37 and Clarkson 1972, pp. 374–377). Many of these studies, however, have not adequately controlled for the scope and scale of the hospitals they have examined. In addition, there is little, if any, evidence regarding cross-sectional differences in employee salaries, a measure often used in the study of operational efficiency and managerial behavior. In our study, we compared the operating efficiency of proprietary and non-proprietary hospitals, using the level of expenses, including a separate assessment of administrative salaries as a function of ownership structure. We included variables to control for differences in scope and scale across hospitals, as well as any variation in the financial and demographic environment. As in previous studies (e.g., Pattison and Katz 1983, p. 348), we found that administrative expenses are greater for proprietary hospitals than for non-proprietary, but we do provide some evidence that these expenses decline in areas where competition is more acute. However, we found that administrative salaries, the number of employees and operational expenses are less for proprietary hospitals than other ownership structures. Our findings support public policy which encourages a competitive health care environment and does not restrict organizational form.