A comparison of contract-managed and traditionally managed nonprofit hospitals

During the past five years, contract management of nonprofit hospitals by for-profit corporations has increased markedly. However, while a number of studies have been conducted on investor-owned hospitals and proprietary hospital systems, contract-managed hospitals have not been evaluated systematically. This paper reports a pilot study which compares a sample of 32 nonprofit hospitals under management contracts with matched hospitals uneder traditional in-house management. Although few major differences were found between the study hospitals, the findings indicate that contract-managed hospitals tend to offer a somewhat broader range of services, especially in the outpatient area, younger, more highly educated administrators, and show lower cost per patient stay largely due to somewhat lower employee-to-bed and payroll-to-total expense ratios and shorter lengths of stay.