Dr. Byron Schlomach is an economist and works as the Director of the Center for Economic Prosperity at the Goldwater Institute. He has 15 years of experience working in and around state government. He has researched and written on tax and spending policy in two states in addition to studying transportation, health care, and education policy. Byron’s writings have appeared in National Review Online, Business Week online and numerous Texas and Arizona newspapers. He is a graduate of Texas A&M University.
Nonprofits in Health Care: Are They More Efficient and Effective?by Byron Schlomach
With the possible exception of education, perhaps nowhere is the notion of profit more
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Too often “profit” is equated with “greed.” The word implies to many an unrelenting seeking of gain, even at the expense and suffering of others. This reasoning implies that one man’s profit is derived from another man’s loss.
With the possible exception of education, perhaps nowhere is the notion of profit more widely condemned than in health care. The argument against profit in health care is that a profit-making hospital or other entity is in business to make money rather than to cure people. Consequently, the pursuit of profit would seem to encourage health providers to avoid treating those with low incomes and those who are sickest. Some of President Obama’s remarks in town halls on health care appear to question if doctors interested in profit have their patients’ best interests in mind at all.
These views lead some to conclude that enterprises providing health services should be organized as nonprofits. A proposal being floated in the corridors of the Arizona capitol would require that Regional Behavioral Health Authorities (companies contracted with the state as health maintenance organizations specializing in behavioral health) be nonprofits. After all, it can be reasoned, the law requires that nonprofits provide some type of “community benefit.” Without the bottom line of profit, nonprofits can pursue other goals such as “concern for justice, the dignity of persons and a community-centered ethics that places the needs of people before profits.”
However, sophisticated econometric studies indicate that nonprofit nursing facilities are less efficient than for- profit ones. Based on the limited research contrasting for profit and nonprofit performance, there is no reason to presume greater net benefits from nonprofits than from for profits. In fact, it is not only possible but likely that for profit enterprises are more accountable than are nonprofits that compete with the for profit world.
Government policy should, therefore, remain neutral toward nonprofits and for profits competing in the market place for government contracts. There should be no restrictions against for profit companies competing for government contracts. Issues of accountability should be completely contained in contracts, not left to vague idealistic images of what nonprofits ought to be.
- Goldwater Institute
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