Returns on equity for not-for-profit hospitals

This study examines the circumstances in which a large third-party payer or regulator might want to set hospital prices to yield a positive rate of return on equity capital. The level of return is shown to depend on the willingness of donors to make funds available in the community relative to the (derived) demand for capital to produce output. It is shown that the appropriate price might well be set to yield a zero or below-market return, and that the return to not-for-profit firms should generally be less than that to for-profit firms, if for-profit firms are to be active in the market.