GMAT Reading Comprehension
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Source: PREP
Level: 3
The United States hospital industry is an unusual market in that nonprofit and for-profit producers 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. For-profit hospital managers, 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.
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.