In a Harvard Business Review (1987) article, Herzlinger and Krasker suggested
that not-for-profit hospitals do not return more benefit to society than do for profit
hospitals, and the authors questioned the legitimacy of social subsidization of
not-for-profits. Our article reports findings from an empirical reconsideration of
the question, "Who profits from nonprofits?' We used hospital data from the same
time period (1982) as that used by Herzlinger and Krasker; however, our investigation
analyzed a larger data set (including both system and nonsystem hospitals)
and used a different statistical technique (discriminant analysis). Our findings
suggest that not-for-profits return more social benefit (e.g., in the areas of services
provided, access to care, and involvement in professional education) than do for profits.
Like Herzlinger and Krasker, we find that for-profit hospitals may be
more efficient than not-for-profits. We caution that public policy regarding social
subsidization of not-for-profit hospitals should be made only after more intensive
study and thoughtful consideration.