Using Hospital Sales Prices to Test Nonprofit Efficiency

Abstract: While the theoretical literature hypothesizes that nonprofit hospitals are less efficient than for-profits, empirical cost comparisons have been confounded by difficult to measure controls like quality. We bypass this problem by comparing hospital market values measured by sales prices. We ask whether the market for corporate control views nonprofits as less efficient than for-profits? We also address concerns that nonprofit hospitals sell to for-profit chains at “too low ” a price. We find that the market for hospitals is competitive and therefore nonprofit hospitals are not sold at “too low ” a price, and that the values nonprofits as efficiently as for-profits. Acknowledgements: This paper has benefited from discussions with Bronwyn Hall, Mar