NBER Working Papers by Jill Horwitz

Roughly one half of hospitals in the U.S. are in rural areas, yet researchers have largely studied the effects of hospital ownership in the urban context. We examine differences in the provision of profitable and unprofitable medical services in rural areas across nonprofit, for-profit, and government hospitals. We also consider the effect of hospital ownership mix within rural hospital markets. We find that rural nonprofit hospitals are more likely than for-profit hospitals to offer unprofitable services, many of which are underprovided services. Nonprofits respond less than for-profits to changes in service profitability. Nonprofits with more for-profit competitors offer more profitable services and fewer unprofitable services than those with fewer for-profit competitors.

Conflicting theories of the nonprofit firm have existed for several decades yet empirical research has not resolved these debates, partly because the theories are not easily testable but also because empirical research generally considers organizations in isolation rather than in markets. Here we examine three types of hospitals – nonprofit, for-profit, and government – and their spillover effects. We look at the effect of for-profit ownership share within markets in two ways, on the provision of medical services and on operating margins at the three types of hospitals. We find that nonprofit hospitals’ medical service provision systematically varies by market mix. We find no significant effect of for-profit market share on the operating margins of nonprofit hospitals. These results f...

Three types of firms %uF818 nonprofit, for-profit, and government %uF818 own U.S. hospitals, yet we do not know whether ownership results in the specialization of medical service provision. This study of over 30 medical services in urban, general hospitals (1988-2000) shows that ownership types specialize in medical services according to the profitability of those services. The paper examines three theories to explain the differences: 1) objectives, 2) capital prices, and 3) market characteristics. The findings are best explained by differences in the objectives adopted by hospital types rather than differences in capital constraints faced by them. Preliminary evidence suggests that hospital behavior depends on the ownership form of neighboring hospitals.

Over the past twenty-five years, about 330 (7 percent) of the country's 5,000 not-for-profit hospitals have converted to for-profit form This paper explores the causes and effects of conversions through two case studies -- Wesley Medical Center in Wichita, Kansas and the Columbia/HealthOne system in Denver, Colorado. We identify two primary explanations of why hospitals convert: financial concerns and board culture-perceived mission. Financial concerns are multifaceted and include expectations about future profits, anticipated problems servicing debt, and pessimism regarding the future of government reimbursement policies. The effects of these conversions are mixed. There are some efficiencies associated with conversions such as cost-cutting, increased access to capital, and debt-burde...