Too many not-for-profit and public hospitals may drive up healthcare costs in some U.S. cities, said two University of Connecticut economists in a National Bureau of Economic Research paper. Using 1999 data from 90 metropolitan areas, the researchers compared markets with a low and high for-profit presence by emergency room visits, admissions, inpatient days, surgeries, outpatient visits and capacity. The researchers said they found lower inpatient volumes in markets with few for-profit hospitals, potentially indicating that not-for-profit hospitals in those markets had unnecessarily high costs.
The analysis did not pinpoint an ideal ratio of not-for-profit versus for-profit hospitals. "What we want to see is a mixture," said co-author Rexford Santerre, a University of Connecticut finance professor. For-profit hospitals face pressure to create profit by delivering cost-effective care, but that may come at the cost of quality, Santerre said. Not-for-profits face no such demand from investors, inviting waste but eliminating incentive to put profit before care. "Both ownership forms challenge each other to improve what they don't do right," Santerre said. The study is available for purchase at nber.org. -- by Melanie Evans