For Profit or Non-Profit Hospitals?

Recently there was an article in Slate and an article in the Washington Monthly that declared victory for socialized medicine over private medicine. The two articles note the turn around in the quality of care at the Veterans Administration hospitals and declares that socialized medicine is the obvious solution. While, there do appear to be some positive changes at VA hospitals it isn’t clear that medical care should in general be socialized (see my post on this here and Victor’s here). At the National Bureau of Economic Research there is some new research that casts doubt on the claim that socialized medicine is the way to go for the provision of all medical care.

—- Abstract —–

This paper offers an empirical test of ownership mix efficiency in the U.S. hospital services industry. The test compares the benefits of quality assurance with the costs from the attenuation of property rights that result from an increased presence of nonprofit organizations. The empirical results suggest that too many not-for-profit and public hospitals may exist in the typical market area of the U.S. The policy implication is that more quality of care per dollar might be obtained by attracting a greater percentage of for-profit hospitals into some market areas. This conclusion, however, is tempered with several caveats. We discuss these and also make recommendations for further research.

FILED UNDER: Economics and Business, Health
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Kappiy says:

    Steve- Have you read the actual study. How do they define and measure “quality of care”? What are the caveats that they mention?

    That abstract is essentially worthless in coming to any substantive claims about the research & the NBER doesn’t make the study available without a subscription.

  2. Just Me says:

    I would like to know what VA hospitals and care centers they were, because my husband is a disabled vet, and we gave up on the VA, when we moved to NH, because it totally sucked, and he was unable to get the appropriate medications he needed.

    I shudder to think what his care would look like, if we had to depend on the VA in our area for all of his care.

  3. Steve says:

    Steve- Have you read the actual study. How do they define and measure “quality of care”? What are the caveats that they mention?

    Not yet (busy day).

    That abstract is essentially worthless in coming to any substantive claims about the research & the NBER doesn’t make the study available without a subscription.

    It is only $5.

  4. Clint Lovell says:

    These people are only presenting one facet or a many-faceted issue. Measures of so-called “Quality Of Care” are inconsistently applied to this industry.

    If you would like to see what might happen to health care in a privatization plan, please visit our corporate website and download “The Fix – For Health Care”.

    The outcomes are not even remotely comparable in terms of long-term system benefits, cost of care delivery, and patient outcomes.

    People that talk about socialized medicine ought to be ashamed of themselves. Socialized medicine is a form of wealth redistribution. Accordingly, it can only create an ever-increasing drag on the economy because it is supported by taking money directly out of the economy (thru taxes).

    This is why we have a Social Security crisis, and this is why we are facing crises in public education, Medicaid, Medicare, Housing, and the other federal entitlement programs. The ones that have been “switched over” to mandatory spending allocations provide the clearest possible demonstration of the fundamental truth of my statements.

    In 1964, mandatory spending as a share of our total federal budget was 26%.

    By 1984 it had risen to 42% of the total federal budget.

    In 2004, it had risen to an alarming 54%.

    By the time the baby boomers start retiring in droves (2018) it will be over 61% at its present rate.

    This is why the economies in Europe and north of our border are in such dire straights. From a purely abstract viewpoint or macroeconomic viewpoint, wealth redistribution plans based upon the taxation of earnings cause free market economies to falter and then eventually crash because of one thing: inflation.

    Inflation ensures that the cost of services continues to require an ever-increasing amount of spending because there is no competitive impact on these programs because they are operated outside of the constrains of the free market.

    No. The article only scratches the surface of the public health care finance entitlement program funding and services management programs in a way that is intellectually dishonest and economically unsupportable when you look at the numbers and the results to date.

  5. I think the common view on socialized medicine inevitably implies one important drawback: socialized medicine seems to be free of charge. But of course it isn’t and it can’t be so.
    But those who vote, those veterans who give their passionate views on the matter, can only see their side of things.
    And an attempt to assess the real situation on the microeconomic scale can only be made by economists and other specialists. I wish they were heard!