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Better together: Coexistence of for-profit and nonprofit firms with an application to the U.S. hospice industry

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  • Dalton, Christina Marsh
  • Bradford, W. David

Abstract

Many markets maintain a nontrivial mix of both nonprofit and for-profit firms, particularly in health care industries such as hospice, nursing homes, and home health. What are the effects of coexistence vs. dominance of one ownership type? We show how the presence of both ownership types can lead to greater diversity in consumer types served, even if both firms merely profit-maximize. This is the case where firms serve consumers for multiple consumption durations, but where donations are part of a nonprofit firm objective function and happen after services have been provided. This finding is strengthened if the good or service has value beyond immediate consumption or the direct consumer. We show these predictions empirically in the hospice industry, using data containing over 90 percent of freestanding U.S. hospices, 2000–2008. Nonprofit and for-profit providers split the patient market according to length of stay, leading to a wider range of patients being served than in the absence of this coexistence.

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  • Dalton, Christina Marsh & Bradford, W. David, 2019. "Better together: Coexistence of for-profit and nonprofit firms with an application to the U.S. hospice industry," Journal of Health Economics, Elsevier, vol. 63(C), pages 1-18.
    • Handle: RePEc:eee:jhecon:v:63:y:2019:i:c:p:1-18
    DOI: 10.1016/j.jhealeco.2018.10.001
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    References listed on IDEAS

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    1. Dalton, Christina Marsh & Warren, Patrick L., 2016. "Cost versus control: Understanding ownership through outsourcing in hospitals," Journal of Health Economics, Elsevier, vol. 48(C), pages 1-15.
    2. 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.
    3. Karen Eggleston & Yu‐Chu Shen & Joseph Lau & Christopher H. Schmid & Jia Chan, 2008. "Hospital ownership and quality of care: what explains the different results in the literature?," Health Economics, John Wiley & Sons, Ltd., vol. 17(12), pages 1345-1362, December.
    4. Chou, Shin-Yi, 2002. "Asymmetric information, ownership and quality of care: an empirical analysis of nursing homes," Journal of Health Economics, Elsevier, vol. 21(2), pages 293-311, March.
    5. Horwitz, Jill R. & Nichols, Austin, 2009. "Hospital ownership and medical services: Market mix, spillover effects, and nonprofit objectives," Journal of Health Economics, Elsevier, vol. 28(5), pages 924-937, September.
    6. Glaeser, Edward L. & Shleifer, Andrei, 2001. "Not-for-profit entrepreneurs," Journal of Public Economics, Elsevier, vol. 81(1), pages 99-115, July.
    7. Lindrooth, Richard C. & Weisbrod, Burton A., 2007. "Do religious nonprofit and for-profit organizations respond differently to financial incentives? The hospice industry," Journal of Health Economics, Elsevier, vol. 26(2), pages 342-357, March.
    8. Guy David, 2009. "The convergence between for-profit and nonprofit hospitals in the United States," International Journal of Health Economics and Management, Springer, vol. 9(4), pages 403-428, December.
    9. Bayindir, Esra Eren, 2012. "Hospital ownership type and treatment choices," Journal of Health Economics, Elsevier, vol. 31(2), pages 359-370.
    10. Lakdawalla, Darius & Philipson, Tomas, 2006. "The nonprofit sector and industry performance," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1681-1698, September.
    11. Sabina Gandhi, 2012. "Differences between non-profit and for-profit hospices: patient selection and quality," International Journal of Health Economics and Management, Springer, vol. 12(2), pages 107-127, June.
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    Cited by:

    1. Jonathan Gruber & David H. Howard & Jetson Leder-Luis & Theodore L. Caputi, 2023. "Dying or Lying? For-Profit Hospices and End of Life Care," NBER Working Papers 31035, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    L3; L2; I1; Nonprofit firm behavior; For-profit nonprofit competition; Hospice;
    All these keywords.

    JEL classification:

    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • I1 - Health, Education, and Welfare - - Health

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