Should St. Merciful Hospital Become CorpHealth,Inc.?: Ownership and Quality in U.S. Health Care Organizations

In this article, a review of empirical research on ownership and quality of care suggests the existence of a quality gap between for‐profit and nonprofit firms in some health sectors, depending on the prevailing type of financial payment for health care. Results of a theoretical model incorporating quality of care suggest that the nondistribution constraint is a simple and powerful explanation for a higher level of patient care quality at nonprofit health care facilities when reimbursement for health services is fixed prospectively. Analysis suggests that review of future conversions of health care facilities from nonprofit to for‐profit status should take into consideration the implied effects of the conversion on patient outcomes.