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Modeling Internal Decision Making Process: An Explanation of Conflicting Empirical Results on Behavior of Nonprofit and For-Profit Hospitals

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Author Info
Carroll, Kathleen () (UMBC Department of Economics)
Ruseski, Jane () (University of Alberta, Department of Economics)

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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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File URL: http://www.uofaweb.ualberta.ca/economics2/pdfs/WP2009-23-Ruseski.pdf
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Publisher Info
Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2009-23.

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Length: 24 pages
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:ris:albaec:2009_023

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Related research
Keywords: hospital behavior; hospital ownership; internal decision making; physician-hospital relations;

Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General

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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. Jeffrey E. Harris, 1977. "The Internal Organization of Hospitals: Some Economic Implications," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 467-482, Autumn. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
    Other versions:
  3. 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. [Downloadable!]
  4. Jelovac, Izabela & Macho-Stadler, Ines, 2002. "Comparing organizational structures in health services," Journal of Economic Behavior & Organization, Elsevier, vol. 49(4), pages 501-522, December. [Downloadable!] (restricted)
    Other versions:
  5. 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. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. Mark B. McClellan & Douglas O. Staiger, 2000. "Comparing Hospital Quality at For-Profit and Not- for-Profit Hospitals," NBER Chapters, in: The Changing Hospital Industry: Comparing For-Profit and Not-for-Profit Institutions, pages 93-112 National Bureau of Economic Research, Inc. [Downloadable!]
  8. Sloan, Frank A. & Picone, Gabriel A. & TaylorJr., Donald H. & Chou, Shin-Yi, 2001. "Hospital ownership and cost and quality of care: is there a dime's worth of difference?," Journal of Health Economics, Elsevier, vol. 20(1), pages 1-21, January. [Downloadable!] (restricted)
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  9. 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. [Downloadable!] (restricted)
    Other versions:
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