Public perceptions of US for-profit, nonprofit, and public hospitals

Abstract

Abstract Nonprofit hospitals have been criticized for behaving like for-profit hospitals. One prominent defense of nonprofit hospitals is contract failure theory, which suggests that nonprofits are important in markets defined by information asymmetries. Unlike for-profits, nonprofit hospitals’ inability to distribute profits may provide patients with an important assurance that they will not be exploited in the course of receiving care. We investigated support for this theory using a sample of 2569 US adults. We assessed (1) relevance of hospital ownership status; (2) respondent preferences for nonprofit, for-profit, or public hospitals; and (3) respondent ability to correctly identify hospital ownership status. We found little evidence that hospital nonprofit status influenced Americans’ decisions about where to seek care. Ownership status was relevant for fewer than 30% of respondents and preference was greatest overall for public hospitals. Only 30–45% of respondents could correctly identify the ownership status of nationally recognized hospitals, and fewer than 30% could identify their local hospitals. These findings suggest that contract failure does not currently provide a justification of nonprofit hospitals’ value; further scrutiny of tax exemption for nonprofit hospitals is warranted.