Commercialism in nonprofit hospitals

The private nonprofit hospital is the dominant organizational form in the U.S. hospital industry. Various reasons have been advanced for its high market share. As hospitals undergo massive changes due in large part to changes in payment practices, there is widespread concern that nonprofit hospitals may become less committed to noncommercial activities. This may even be more likely when such hospitals convert to for‐profit status. The empirical evidence indicates that, on average, hospitals of nonprofit and for‐profit ownership are similar in the provision of uncompensated care, the quality of care, and the adoption of technology. Conversion of a nonprofit to for‐profit status does not adversely affect the provision of uncompensated care on average. However, for‐profits are more likely to be located in areas where consumers have the ability to pay for care. As hospital markets become more competitive and the opportunity for cross‐subsidizing more unprofitable, collective‐good activities will become increasingly difficult. Support for such activities, if they are to exist, will have to come from explicit public subsidies.