OBJECTIVE: The authors analyzed the differences in operational and
financial performance between 42 matched pairs of for-profit psychiatric
hospitals belonging to multifacility organizations and nonprofit
psychiatric hospitals for the fiscal years ending in 1986 through 1990.
METHOD: The pairs of short-term hospitals were matched according to
location, standard metropolitan statistical area, or wage index. Analyses
were based on data on these hospitals from the Health Care Financing
Administration. The groups of variables studied included the hospitals'
operational performance and productivity, profitability and payer mix,
revenue and expenses, and capital structure. Differences in the mean values
of the variables for the for-profit hospitals and the nonprofit hospitals
were analyzed by pairwise t tests. RESULTS: The for-profit organization
hospitals had significantly higher net revenue, lower salary expenses, and
higher profits than the nonprofit hospitals. Patients in the for-profit
hospitals had longer stays, and these hospitals had fewer full-time
employees per adjusted inpatient day and per adjusted discharge.
CONCLUSIONS: The higher prices and operating margins of the for-profit
hospitals belonging to investor-owned systems reflect the profit-maximizing
goal of these facilities. The ability of for-profit organization hospitals
to achieve economies of scale in expenses, however, was not evident except
in the case of salary expenses.