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Hospital Market Structure and the Behavior of Not-for-Profit Hospitals: Evidence from Responses to California's Disproportionate Share Program

  • Mark Duggan

I exploit a plausibly exogenous change in hospital financial incentives to examine whether the behavior of private not-for-profit hospitals varies with the share of nearby hospitals organized as for-profit firms. My results show that not-for-profit hospitals in for-profit intensive areas are significantly more responsive to an increased incentive to treat low-income patients insured by the Medicaid program than are other not-for-profit providers. The heterogeneity in behavior is not due to differences in financial constraints but is instead likely driven by different degrees of market competitiveness in areas with one or more for-profit hospitals. The observed variation in the governing boards of not-for-profit hospitals across market areas supports the hypothesis that increased for-profit penetration makes these facilities more profit-oriented.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7966.

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Date of creation: Oct 2000
Date of revision:
Publication status: published as Duggan, Mark. "Hospital Market Structure And The Behavior Of Not-For-Profit Hospitals," Rand Journal of Economics, 2002, v33(3,Autumn), 433-446.
Handle: RePEc:nbr:nberwo:7966
Note: HC PE
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  1. Gruber, Jonathan, 1994. "The effect of competitive pressure on charity: Hospital responses to price shopping in California," Journal of Health Economics, Elsevier, vol. 13(2), pages 183-211, July.
  2. Mark B. McClellan & Douglas O. Staiger, 2000. "Comparing Hospital Quality at For-Profit and Not- for-Profit Hospitals," NBER Chapters, in: The Changing Hospital Industry: Comparing For-Profit and Not-for-Profit Institutions, pages 93-112 National Bureau of Economic Research, Inc.
  3. Currie, Janet & Gruber, Jonathan, 1996. "Saving Babies: The Efficacy and Cost of Recent Changes in the Medicaid Eligibility of Pregnant Women," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1263-96, December.
  4. Tomas Philipson & Darius Lakdawalla, . "Nonprofit Production," University of Chicago - Population Research Center 97-8, Chicago - Population Research Center.
  5. David M. Cutler & Jonathan Gruber, 1995. "Does Public Insurance Crowd Out Private Insurance?," NBER Working Papers 5082, National Bureau of Economic Research, Inc.
  6. Mark G. Duggan, 2000. "Hospital Ownership And Public Medical Spending," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1343-1373, November.
  7. David M. Cutler & Jill R. Horwitz, 1998. "Converting Hospitals from Not-for-profit to For-profit Status," NBER Working Papers 6672, National Bureau of Economic Research, Inc.
  8. Newhouse, Joseph P, 1970. "Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review, American Economic Association, vol. 60(1), pages 64-74, March.
  9. Feldstein, Martin S, 1971. "Hospital Cost Inflation: A Study of Nonprofit Price Dynamics," American Economic Review, American Economic Association, vol. 61(5), pages 853-72, December.
  10. Edward C. Norton & Douglas O. Staiger, 1994. "How Hospital Ownership Affects Access to Care for the Uninsured," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 171-185, Spring.
  11. Elaine Silverman & Jonathan Skinner, 2001. "Are For-Profit Hospitals Really Different? Medicare Upcoding and Market Structure," NBER Working Papers 8133, National Bureau of Economic Research, Inc.
  12. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  13. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 577-615, May.
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