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The Effects of HMO and Its For-Profit Expansion on the Survival of Specialized Hospital Services


  • Yu-Chu Shen


This study examines the effect of HMO and for-profit HMO share on the survival of safety net services and profitable services in hospitals. Using data from 1990-2003 and proportional hazard models, I find that hospitals in high HMO markets started out having lower hazard of shutting down services in 1990-1994 than those in low HMO markets, but their hazard rates increase over time. By 2000-2003, hospitals in high HMO markets ended up with higher risk of shutting down profitable services than those in low HMO markets. Conditional on overall HMO penetration, markets with higher for-profit share of HMOs have higher hazard of shutting down services, and the gap in survival between high and low for-profit HMO markets is bigger in high HMO areas. Lastly, I find that the hazard rate of shutting down profitable services is comparable among not-for-profit, for-profit, and government hospitals, while the hazard of shutting down safety net services is the highest in for-profit hospitals and lowest in government hospitals.

Suggested Citation

  • Yu-Chu Shen, 2006. "The Effects of HMO and Its For-Profit Expansion on the Survival of Specialized Hospital Services," NBER Working Papers 12374, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12374
    Note: HC

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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General

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