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The Supply of Charity Services by Nonprofit Hospitals: Motives and Market Structure

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  • Richard G. Frank
  • David S. Salkever

Abstract

This article studies provision of charity care by private, nonprofit hospitals. We demonstrate that in the absence of large positive income effects on charity care supply, convex preferences for the nonprofit hospital imply crowding out by other private or government hospitals. Extending our model to include impure altruism (rivalry) provides a possible explanation for the previously reported empirical result that both crowding out and income effects on indigent care supply are often weak or insignificant. Empirical analysis of data for hospitals in Maryland provides evidence of rivalry on the supply of charity care.

Suggested Citation

  • Richard G. Frank & David S. Salkever, 1991. "The Supply of Charity Services by Nonprofit Hospitals: Motives and Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 430-445, Autumn.
  • Handle: RePEc:rje:randje:v:22:y:1991:i:autumn:p:430-445
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    Cited by:

    1. Rodríguez-Álvarez, Ana & Rosete-Rivero, Mayte, 2017. "Spanish public hospital waiting lists: A theoretical and empirical approach," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 11, pages 1-21.
    2. Martin Gaynor & Deborah Haas-Wilson, 1999. "Change, Consolidation, and Competition in Health Care Markets," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 141-164, Winter.
    3. Currie, Janet & Fahr, John, 2004. "Hospitals, managed care, and the charity caseload in California," Journal of Health Economics, Elsevier, vol. 23(3), pages 421-442, May.
    4. Abe, Yasumi & Watanabe, Satoshi P., 2012. "A NEW APPROACH TO ANALYZING UNIVERSITY PRESTIGE AND INTERNAL RESOURCE ALLOCATION: Geometric Interpretations and Implications," University of California at Berkeley, Center for Studies in Higher Education qt2tz763xp, Center for Studies in Higher Education, UC Berkeley.
    5. Yu-Chu Shen & Karen Eggleston & Joseph Lau & Christopher Schmid, 2005. "Hospital Ownership and Financial Performance: A Quantitative Research Review," NBER Working Papers 11662, National Bureau of Economic Research, Inc.
    6. Ge Bai, 2013. "How Do Board Size and Occupational Background of Directors Influence Social Performance in For-profit and Non-profit Organizations? Evidence from California Hospitals," Journal of Business Ethics, Springer, vol. 118(1), pages 171-187, November.
    7. Anup Malani & Tomas Philipson & Guy David, 2003. "Theories of Firm Behavior in the Nonprofit Sector. A Synthesis and Empirical Evaluation," NBER Chapters,in: The Governance of Not-for-Profit Organizations, pages 181-216 National Bureau of Economic Research, Inc.
    8. Rachel T. A. Croson, 2007. "Theories Of Commitment, Altruism And Reciprocity: Evidence From Linear Public Goods Games," Economic Inquiry, Western Economic Association International, vol. 45(2), pages 199-216, April.
    9. Paul Gertler & Jennifer Kuan, 2009. "Does It Matter Who Your Buyer Is? The Role of Nonprofit Mission in the Market for Corporate Control of Hospitals," Journal of Law and Economics, University of Chicago Press, vol. 52(2), pages 295-306, May.
    10. Jonathan Gruber, 1992. "The Effect of Price Shopping in Medical Markets: Hospital Responses to PPOs in California," NBER Working Papers 4190, National Bureau of Economic Research, Inc.
    11. Alvaro S Almeida, 2016. "The Role Of Private Non-Profit Healthcare Organizations In Nhs Systems: Implications For The Portuguese Hospital Devolution Program," FEP Working Papers 577, Universidade do Porto, Faculdade de Economia do Porto.
    12. 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.
    13. Lynk, William J, 1995. "Nonprofit Hospital Mergers and the Exercise of Market Power," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 437-461, October.

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