TY  - JOUR
AU  - Cutler,David M.
AU  - Horwitz,Jill R.
TI  - Converting Hospitals from Not-for-profit to For-profit Status
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6672
PY  - 1998
Y2  - August 1998
UR  - http://www.nber.org/papers/w6672
L1  - http://www.nber.org/papers/w6672.pdf
N1  - Author contact info:
David M. Cutler
Department of Economics
Harvard University
1875 Cambridge Street
Cambridge, MA  02138
Tel: 617/496-5216
Fax: 617/496-8951
E-Mail: dcutler@harvard.edu

Jill Horwitz
University of Michigan Law School
625 South State Street
Ann Arbor, MI  48109-1215
Tel: 734/763-9501
Fax: 734/764-8309
E-Mail: jrhorwit@umich.edu
AB  - Over the past twenty-five years, about 330 (7 percent) of the country's 5,000 not-for-profit hospitals have converted to for-profit form This paper explores the causes and effects of conversions through two case studies -- Wesley Medical Center in Wichita, Kansas and the Columbia/HealthOne system in Denver, Colorado.  We identify two primary explanations of why hospitals convert: financial concerns and board culture-perceived mission.  Financial concerns are multifaceted and include expectations about future profits, anticipated problems servicing debt, and pessimism regarding the future of government reimbursement policies.  The effects of these conversions are mixed.  There are some efficiencies associated with conversions such as cost-cutting, increased access to capital, and debt-burden relief.  However, profits are often derived from increasing reimbursement from the public sector.  Further, conversions are likely to cause fragmentation of the hospital market between rich and poor.  The results show that not-for-profit hospitals are likely to copy the undesirable behavior of for-profit hospitals in their markets.
ER  -