CESifo Economic Studies

What is the impact of private for-profit (PfP) hospital ownership on costs and quality of care? In light of a substantial and increasing share of PfP hospitals in many hospital markets like the USA or Germany, this is an important question. We estimate the effect of PfP ownership on hospital 30-day- and 1-year-mortality outcomes and hospital costs by focusing on heart attacks and pneumonia, two very common conditions in healthcare markets. We use rich administrative hospital data from Germany for the years 2006–2015. Applying differential distance as instrument for hospital choice, we imitate randomization of patients into PfP hospitals. Our results suggest that PfP hospitals have no higher mortality rates for heart attack treatment than public ones. For pneumonia patients, we even find lower 30-day-mortality rates of PfP hospitals compared to public hospitals. Finally, we show that PfP hospitals have higher hospital costs than public or private not-for-profit hospitals for both conditions.