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Modeling Internal Decision Making Process: An Explanation Of Conflicting Empirical Results On Behavior Of Non‐Profit And For‐Profit Hospitals

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  • KATHLEEN A. CARROLL
  • JANE E. RUSESKI

Abstract

This paper develops multiobjective models of hospital decision making that incorporate the internal decision process in both a for-profit and a nonprofit hospital. Predicted output and quality for a nonprofit hospital differ from those for a for-profit hospital under some conditions but converge under others. Convergence may be the result of a complex internal decision structure with decision control primarily by physicians; similar objectives across different organizational forms; or differing constraints. The mechanisms underlying these outcomes provide explanations for conflicting result in empirical studies of nonprofit and for-profit hospitals and provide a different rationale for convergence than nonprofit response to competition from for-profit hospitals. Understanding the source of convergence is important for policies directed toward the tax treatment of nonproift hospitals.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Contemporary Economic Policy.

Volume (Year): 29 (2011)
Issue (Month): 4 (October)
Pages: 510-523

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Handle: RePEc:bla:coecpo:v:29:y:2011:i:4:p:510-523

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References

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  1. Boadway, Robin & Marchand, Maurice & Sato, Motohiro, 2004. "An optimal contract approach to hospital financing," Journal of Health Economics, Elsevier, vol. 23(1), pages 85-110, January.
  2. David Crainich & Hervé Leleu & Ana Mauleon, 2008. "The optimality of hospital financing system: the role of physician–manager interactions," International Journal of Health Care Finance and Economics, Springer, vol. 8(4), pages 245-256, December.
  3. William M. Gentry & John Penrod, 2000. "The Tax Benefits of Not-for-Profit Hospitals," NBER Chapters, in: The Changing Hospital Industry: Comparing For-Profit and Not-for-Profit Institutions, pages 285-324 National Bureau of Economic Research, Inc.
  4. Jelovac, I. & Macho-Stadler, I., 1998. "Comparing Organizational Structures in Health Services," UFAE and IAE Working Papers 412.98, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  5. Sloan, Frank A. & Picone, Gabriel A. & Taylor, Donald H., Jr. & Chou, Shin-Yi, 2000. "Hospital Ownership and Cost and Quality of Care: Is There a Dime's Worth of Difference?," Working Papers 00-11, Duke University, Department of Economics.
  6. Mark McClellan & Douglas Staiger, 1999. "Comparing Hospital Quality at For-Profit and Not-for-Profit Hospitals," NBER Working Papers 7324, National Bureau of Economic Research, Inc.
  7. Custer, William S. & Moser, James W. & Musacchio, Robert A. & Willke, Richard J., 1990. "The production of health care services and changing hospital reimbursement : The role of hospital-medical staff relationships," Journal of Health Economics, Elsevier, vol. 9(2), pages 167-192, September.
  8. Ciliberto, Federico & Dranove, David, 2006. "The effect of physician-hospital affiliations on hospital prices in California," Journal of Health Economics, Elsevier, vol. 25(1), pages 29-38, January.
  9. Ettner, Susan L. & Hermann, Richard C., 2001. "The role of profit status under imperfect information: evidence from the treatment patterns of elderly Medicare beneficiaries hospitalized for psychiatric diagnoses," Journal of Health Economics, Elsevier, vol. 20(1), pages 23-49, January.
  10. Richard Frank & David S. Salkever, 2000. "Market Forces, Diversification of Activity, and the Mission of No t-for -Profit Hospitals," NBER Chapters, in: The Changing Hospital Industry: Comparing For-Profit and Not-for-Profit Institutions, pages 195-226 National Bureau of Economic Research, Inc.
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Cited by:
  1. Kathleen Carroll & Lisa M. Dickson & Jane E. Ruseski, 2013. "Do Faculty Matter? Effects of Faculty Participation in University Decisions," UMBC Economics Department Working Papers 13-06, UMBC Department of Economics.

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