The United States hospital industry is an unusual market in that nonprofit and for-profit produce's exist simultaneously. Theoretical literature offers conflicting views on whether nonprofit hospitals are less financially efficient. Theory suggests that nonprofit hospitals are so much more interested in offering high-quality service than in making money that they frequently input more resources to provide the same output of service as for-profit hospitals. This priority might also often lead them to be less vigilant in streamlining their services—eliminating duplication between departments, for instance. Conversely, while profit motive Is thought to encourage for-profit hospitals to attain efficient production, most theorists admit that obstacles to that efficiency remain[highlight]. For-profit hospital managers[/highlight], for example, generally work independently of hospital owners and thus may not always make maximum financial efficiency their highest priority. The literature also suggests that widespread adoption of third-party payment systems may eventually eliminate any such potential differences between the two kinds of hospitals.
The same literature offers similarly conflicting views of the efficiency of nonprofit hospitals from a social welfare perspective. Newhouse (1970) contends that nonprofit hospital managers unnecessarily expand the quality and quantity of hospital care beyond the actual needs of the community, while Weisbrod (1975) argues that nonprofit firms-hospitals included—contribute efficiently to community welfare by providing public services that might be inadequately provided by government alone
1. The passage is primarily concerned with
(A) discussing the advantages of increased efficiency in a particular type of hospital
(B) assessing obstacles to efficiency in a particular type of hospital
(C) describing conflicting assessments in the theoretical literature concerning particular types of hospitals
(D) Challenging evidence used to support an argument advanced in recent theoretical literature concerning a particular type of hospital
(E)emphasizing the advantages of one particular type of hospital over another type
2. The passage suggests which of the following about the managers mentioned In the highlighted text?
(A) They have generally been motivated to streamline hospital services as a result of direct
intervention by hospital owners.
(B)They are more likely than managers of nonprofit hospitals to use unnecessary amounts of resources to provide services.
(C) Their most important self-acknowledged goal is to achieve maximum financial efficiency so that hospitals show a profit.
(D) Their decisions regarding services provided by their hospitals may not reflect hospital owners' priorities.
(E) They do not place a high priority on maximizing profits, despite their desire to achieve efficiency.
3. The author mentions duplication between departments primarily in order to
(A) illustrate an area in which nonprofit hospitals fail to provide adequate services
(B) describe the outcome of nonprofit hospitals' emphasis on maintaining managerial freedom
(C) recommend a particular change that would allow nonprofit hospitals to streamline their services
(D) suggest a way in which nonprofit hospitals may fail to achieve maximum financial efficiency
(E) explain why nonprofit hospitals may be able to provide more services than for-profit hospitals