Can Efficiency and Community Service Be Symbiotic?

In recent years researchers have asserted that the once-salient distinctions between not-for-profit and for-profit hospitals are quickly eroding. These converging outcomes represent a striking departure from past differences. Historically, not-for-profit hospitals were larger and treated a higher proportion of seriously ill patients than for-profit hospitals. Not-for-profit hospitals also had larger medical staffs and offered greater opportunities for medical training. Researchers have vigorously debated the implications of the fading distinction between for-profit and not-for-profit hospitals. As these researchers note, numerous communities support not-for-profit hospitals with tax-payer dollars, income and property-tax exclusions and tax-free financing and contributions. Many are concerend that not-for-profit hospitals will jettison community service in an attempt to reduce operating costs. Despite such important implications this literature is full of philosophical discussions, typically employing limited empirical data, limited time frames and limited consideration of the hospital environment. This limited consideration of environmental factors (i.e. policy, supply and demand) leaves an important question unanswered: How do environmental factors combine to produce the narrowing distinction between not-for-profit and for-profit hospitals?

Potter's book examines the claims of a narrowing distinction between not-for-profit and for-profit hospitals by analyzing short-term general hospital outcomes in the 48 contiguous states over a fifteen-year period in conjunction with various environmental factors. In particular, this book analyzes the claims of a declining distinction between hospital types by focusing on both hospital efficiency and community service outcomes. It examines whether the efficiency and community service outcomes of not-for-profit and for-profit hospitals have converged, finding that hospital type was most significant in explaining the variance in hospital outcomes in the early 1980s than in the mid-1980s and early 1990s. The story is quite different when we examine community-service outcomes. In particular, Potter does not find evidence that hospitals are reducing their provision of community care in an effort to reduce expenses.