Are for-profit hospital conversions harmful to patients and to Medicare?

Journal Article

We examine how changes in hospital ownership to and from for-profit status affect quality and Medicare payments per hospital stay. We hypothesize that hospitals converting to for-profit ownership boost postacquisition profitability by reducing dimensions of quality not readily observed by patients and by raising prices. We find that 1-2 years after conversion to for-profit status, mortality of patients, which is difficult for outsiders to monitor, increases while hospital profitability rises markedly and staffing decreases. Thereafter, the decline in quality is much lower. A similar decline in quality is not observed after hospitals switch from for-profit to government or private nonprofit status.

Full Text

Duke Authors

Cited Authors

  • Picone, G; Chou, SY; Sloan, F

Published Date

  • 2002

Published In

  • Rand Journal of Economics

Volume / Issue

  • 33 / 3

Start / End Page

  • 507 - 523

PubMed ID

  • 12585305