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Charity Care by Non-profit Hospitals: The Price of Tax-exempt Debt

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Author Info
Mahmud Hassan, Gerard J. Wedig, Michael A. Morrisey
Abstract

In this paper, we study the effects of tax-exempt debt on the supply of charity care of non-profit hospitals. We hypothesize that hospitals using tax-exempt rather than taxable debt are forced to provide higher levels of charity care as a condition for gaining access to the tax-exempt market. The study uses a panel of 189 California non-profit hospitals. Hospital uncompensated care is regressed on the level of uncompensated care by other hospitals in the market, lagged values of tax-exempt and taxable debt and other control variables.The magnitude of the tax-exempt bond subsidy has a positive effect on the flow of charity care and varies positively with the charity care provided by other hospitals. We conclude that subsidies provided by tax-exempt debt are an effective media to increase the supply of charity care by hospitals. Regulators can use competition between non-profit hospitals in order to enforce the desired behavior.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 7 (2000)
Issue (Month): 1 (February)
Pages: 47-62
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Handle: RePEc:taf:ijecbs:v:7:y:2000:i:1:p:47-62

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Keywords: Tax-EXEMPT Charity Care;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Grossman, Michael & Goldman, Fred & Nesbitt, Susan W. & Mobilia, Pamela, 1993. "Determinants of interest rates on tax-exempt hospital bonds," Journal of Health Economics, Elsevier, vol. 12(4), pages 385-410, December. [Downloadable!] (restricted)
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  2. Wedig, Gerard, et al, 1988. " Capital Structure, Ownership, and Capital Payment Policy: The Case of Hospitals," Journal of Finance, American Finance Association, vol. 43(1), pages 21-40, March. [Downloadable!] (restricted)
  3. Gruber, Jonathan, 1994. "The effect of competitive pressure on charity: Hospital responses to price shopping in California," Journal of Health Economics, Elsevier, vol. 13(2), pages 183-211, July. [Downloadable!] (restricted)
  4. Thorpe, Kenneth E & Phelps, Charles E, 1991. "The Social Role of Not-for-Profit Organizations: Hospital Provision of Charity Care," Economic Inquiry, Oxford University Press, vol. 29(3), pages 472-84, July.
  5. Melnick, Glenn A. & Zwanziger, Jack & Bamezai, Anil & Pattison, Robert, 1992. "The effects of market structure and bargaining position on hospital prices," Journal of Health Economics, Elsevier, vol. 11(3), pages 217-233, October. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robert Rosenman & Daniel Friesner & Christopher Stevens, 2005. "Do Health Care Providers Quality Discriminate? Empirical Evidence from Primary Care Outpatient Clinics," Eastern Economic Journal, Eastern Economic Association, vol. 31(4), pages 649-670, Fall. [Downloadable!]
  2. Sujoy Chakravarty & Martin Gaynor & Steven Klepper & William B. Vogt, 2006. "Does the profit motive make Jack nimble? Ownership form and the evolution of the US hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 345-361. [Downloadable!]
    Other versions:
  3. Daniel L. Friesner & Robert Rosenman, 2002. "A Dynamic Property Rights Theory of the Firm," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 9(3), pages 311-333, November. [Downloadable!] (restricted)
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