Nonprofit organizations may predominate when output quality is difficult to
monitor. Hospital care has this characteristic. This study compared progra
m cost and quality of care for Medicare patients hospitalized following ons
et of four common conditions by hospital ownership. Payments on behalf of M
edicare patients admitted to for-profit hospitals during the first 6 months
following a health shock were higher than for those admitted to other hosp
itals. With quality measured in terms of survival, changes in functional an
d cognitive status, and living arrangements, we found no differences in out
comes by hospital ownership. (C) 2001 Elsevier Science B.V. All rights rese
rved. JEL classification: I1; L3; L8.