Non-profit cost-adjusting with quality as a private good
Nonprofit firms that produce multiple outputs may lower service intensity for one patient group in response to lower reimbursements for another group. This is termed 'cost-adjusting' behaviour. Cost-adjusting implies a serious welfare transfer. The results of this analysis suggest that the potential for this welfare transfer exists; however, the ability of a firm to exploit this welfare transfer depends largely on the demand conditions present in the market. An empirical analysis finds evidence that nonprofit hospitals in Washington State do practise cost-adjusting.
Volume (Year): 36 (2004)
Issue (Month): 5 ()
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- Paul J. Gertler & Donald M. Waldman, 1990. "Quality Adjusted Cost Functions," NBER Working Papers 3567, National Bureau of Economic Research, Inc.
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