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Does Managed Care Change the Management of Nonprofit Hospitals? Evidence from the Executive Labor Market

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  • Marianne Bertrand
  • Kevin F. Hallock
  • Richard Arnould

Abstract

This paper examines how the managerial labor market in nonprofit hospitals has adjusted to the financial pressures induced by HMO penetration. Using a panel of about 1,500 nonprofit hospitals over the period 1992–96, the authors find that top executive turnover increased following an increase in HMO penetration. Moreover, the increase in turnover was concentrated among the hospitals that had lower levels of economic profitability. While the link between top executive pay and for-profit performance measures was on average very weak, HMO penetration tightened that link: as HMO penetration increased, top executives were compensated more for improving the profitability of their hospitals. These results, while of limited economic magnitude, are qualitatively consistent with the view that HMO penetration has increased the weight assigned to for-profit performance in the management of not-for-profit hospitals.

Suggested Citation

  • Marianne Bertrand & Kevin F. Hallock & Richard Arnould, 2005. "Does Managed Care Change the Management of Nonprofit Hospitals? Evidence from the Executive Labor Market," ILR Review, Cornell University, ILR School, vol. 58(3), pages 494-514, April.
    • Handle: RePEc:sae:ilrrev:v:58:y:2005:i:3:p:494-514
    DOI: 10.1177/001979390505800310
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    References listed on IDEAS

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    Cited by:

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    2. DeVaro, Jed & Maxwell, Nan & Morita, Hodaka, 2016. "Compensation and Intrinsic Motivation in Nonprofit and For-Profit Organizations," CEI Working Paper Series 2015-10, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    3. Kevin F. Hallock & Felice B. Klein, 2016. "Executive Compensation in American Unions," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(2), pages 219-234, April.
    4. Timothy Besley, 2013. "What's the Good of the Market? An Essay on Michael Sandel's What Money Can't Buy," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 478-495, June.
    5. Daria Smarżewska & Wioletta Sylwia Wereda & Joanna Anna Jończyk, 2022. "Assessment of the Health Care System in Poland and Other OECD Countries Using the Hellwig Method," IJERPH, MDPI, vol. 19(24), pages 1-16, December.
    6. Chau, Nancy H. & Huysentruyt, Marieke, 2006. "Nonprofits and public good provision: A contest based on compromises," European Economic Review, Elsevier, vol. 50(8), pages 1909-1935, November.
    7. Jed Devaro & Dana Brookshire, 2007. "Promotions and Incentives in Nonprofit and for-Profit Organizations," ILR Review, Cornell University, ILR School, vol. 60(3), pages 311-339, April.

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