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The Legitimacy of Nonprofit Enterprise in Regulated Industries: Specifying and Testing a Theory of Differential Regulatory Compliance

February 25, 2009

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This research project, a collaboration of researchers at Yale University, Baruch College (CUNY) and the Urban Institute, explored the relationship between the mix of nonprofit and for-profit ownership in health care and the government regulations deployed to improve health system performance. Two findings emerged that suggest that there may well be an important relationship between ownership mix and the regulatory environment under which services are delivered. First, between 1985 and 2000, states with more extensive for-profit ownership of managed care plans were significantly more likely to adopt regulations, controlling for the influence of interest groups, the state’s prevailing political ideology and other relevant characteristics of its health care system. Second, the extent of state regulation was related to ownership-related differences in the experiences that patients and clinicians reported regarding their health plans, albeit in a more complex manner than initially hypothesized. Regulations designed to make referrals easier were associated with a convergence of nonprofit and for-profit performance, whereas regulations intended to make the utilization review process more transparent, efficient or equitable were associated with divergences in ownership-related performance.