Private or public hospital ownership: Does it really matter?

Incentives to improve hospital performance under prospective payments may come at a cost. First, there may be a strong incentive for hospitals to choose only low-severity patients. Second, hospitals may have an incentive to reduce the quality of care. I analyze the role of hospital ownership on patient selection and quality of care by comparing private nonprofit and public hospitals. The analysis is performed by using unique hospital admission data for cardiovascular procedures in Norway, covering the period from 1999 to 2006. Matching techniques are applied to control for patient heterogeneity. The econometric analyses are based on binary probit and ordinary least squares regression models. The results indicate that private nonprofit hospitals have specialized in certain procedures. These hospitals are also more likely to admit low-severity patients for some procedures. The association between quality of care and hospital ownership is mixed since private nonprofit hospitals both offer shorter waiting time and shorter length of stay.