Dissertation Title:  "Corporate Form of Hospitals: Behavior and Obligations"

Despite many similarities among firms, the hospital industry consists of three types: for-profit, not-for-profit, and government firms. This dissertation explores the behavioral, moral, and legal implications of the corporate form of hospitals. It addresses three related questions: Does organizational form affect the provision of hospital services, and if so, why? Do behavioral differences justify a preference for the not-for-profit form? Why do hospitals change corporate forms and to what effect?

Chapter One is a statistical analysis of over thirty hospital services. It identifies differences in service provision among different hospital types. The paper concludes that these differences are best understood as reflecting differences in hospital goals. For-profit hospitals are more profit-seeking than the other types. Public hospitals aim to provide needed, but unprofitable, goods to a greater degree than the other types. Not-for-profit hospitals are in the middle- to some extent they pursue profitable services, to some extent they act like public institutions in providing for public need. Further, the ownership characteristics of the hospital's neighbors influence the hospital's decision to invest in particular services.

Chapter Two is a defense of the not-for-profit form. It further develops the implications of the behavioral differences described in Chapter One. It explains how not-for-profit hospitals provide private and public goods that conventional markets fail to provide. Further, the paper shows that not-for-profit hospital behavior is consistent with the behavior required by law and morality. The moral argument, which is developed as a theory of not-for-profit ethics, is also presented as a potentially independent reason for preferring not-for-profit hospitals. The chapter advances several implications of the findings for the legal debate regarding corporate form, for health policy, and for tax policy.

Chapter Three is co-authored with David Cutler. Based on case studies of two hospital conversions, it examines the reasons for and effects of hospital conversions from not-for-profit to for-profit status. It suggests two primary reasons for conversions: financial and cultural. The paper also finds that the conversions improved the financial performances of the hospitals, in part by cutting costs and increasing public sector reimbursement.