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Hospital Market Structure and the Behavior of Not-for-Profit Hospitals: Evidence from Responses to California's Disproportionate Share Program

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  • Mark Duggan

Abstract

I exploit a plausibly exogenous change in hospital financial incentives to examine whether the behavior of private not-for-profit hospitals varies with the share of nearby hospitals organized as for-profit firms. My results show that not-for-profit hospitals in for-profit intensive areas are significantly more responsive to an increased incentive to treat low-income patients insured by the Medicaid program than are other not-for-profit providers. The heterogeneity in behavior is not due to differences in financial constraints but is instead likely driven by different degrees of market competitiveness in areas with one or more for-profit hospitals. The observed variation in the governing boards of not-for-profit hospitals across market areas supports the hypothesis that increased for-profit penetration makes these facilities more profit-oriented.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7966.

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Date of creation: Oct 2000
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Publication status: published as Duggan, Mark. "Hospital Market Structure And The Behavior Of Not-For-Profit Hospitals," Rand Journal of Economics, 2002, v33(3,Autumn), 433-446.
Handle: RePEc:nbr:nberwo:7966

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  1. 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.
  2. Mark Duggan, 2000. "Hospital Ownership and Public Medical Spending," NBER Working Papers 7789, National Bureau of Economic Research, Inc.
  3. Newhouse, Joseph P, 1970. "Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review, American Economic Association, American Economic Association, vol. 60(1), pages 64-74, March.
  4. Currie, Janet & Gruber, Jonathan, 1996. "Saving Babies: The Efficacy and Cost of Recent Changes in the Medicaid Eligibility of Pregnant Women," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(6), pages 1263-96, December.
  5. Tomas Philipson & Darius Lakdawalla, . "Nonprofit Production," University of Chicago - Population Research Center, Chicago - Population Research Center 97-8, Chicago - Population Research Center.
  6. Gruber, Jonathan, 1994. "The effect of competitive pressure on charity: Hospital responses to price shopping in California," Journal of Health Economics, Elsevier, Elsevier, vol. 13(2), pages 183-211, July.
  7. Feldstein, Martin S, 1971. "Hospital Cost Inflation: A Study of Nonprofit Price Dynamics," American Economic Review, American Economic Association, American Economic Association, vol. 61(5), pages 853-72, December.
  8. Edward C. Norton & Douglas O. Staiger, 1994. "How Hospital Ownership Affects Access to Care for the Uninsured," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 171-185, Spring.
  9. Elaine Silverman & Jonathan Skinner, 2001. "Are For-Profit Hospitals Really Different? Medicare Upcoding and Market Structure," NBER Working Papers 8133, National Bureau of Economic Research, Inc.
  10. Cutler, David M & Gruber, Jonathan, 1996. "Does Public Insurance Crowd Out Private Insurance?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(2), pages 391-430, May.
  11. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(2), pages 577-615, May.
  12. David M. Cutler & Jill R. Horwitz, 1998. "Converting Hospitals from Not-for-profit to For-profit Status," NBER Working Papers 6672, National Bureau of Economic Research, Inc.
  13. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
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Cited by:
  1. Gillian Currie & Cam Donaldson & Mingshan Lu, 2003. "What Does Canada Profit from the For-Profit Debate on Health Care?," Canadian Public Policy, University of Toronto Press, vol. 29(2), pages 227-251, June.
  2. Anna Aizer & Adriana Lleras-Muney & Mark Stabile, 2004. "Access to Care, Provider Choice and Racial Disparities," NBER Working Papers 10445, National Bureau of Economic Research, Inc.
  3. Karen Eggleston & Richard Zeckhauser, 2002. "Government Contracting for Health Care," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0202, Department of Economics, Tufts University.

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