NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Lawton Burns

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Working Papers

August 2011Do Hospitals Cross Subsidize?
with Guy David, Richard Lindrooth, Lorens A. Helmchen: w17300
Cross-subsidies are often considered the principal mechanism through which hospitals provide unprofitable care. Yet, hospitals' reliance on and extent of cross-subsidization are difficult to establish. We exploit entry by cardiac specialty hospitals as an exogenous shock to incumbent hospitals' profitability and in turn to their ability to cross-subsidize unprofitable services. Using patient-level data from general short-term hospitals in Arizona and Colorado before and after entry, we find that the hospitals most exposed to entry reduced their provision of services considered to be unprofitable (psychiatric, substance- abuse, and trauma care) and expanded their admissions for neurosurgery, a highly profitable service.

Published: David, Guy & Lindrooth, Richard C. & Helmchen, Lorens A. & Burns, Lawton R., 2014. "Do hospitals cross-subsidize?," Journal of Health Economics, Elsevier, vol. 37(C), pages 198-218. citation courtesy of

May 2006The Welfare Consequences of Hospital Mergers
with Robert Town, Douglas Wholey, Roger Feldman: w12244
In the 1990s the US hospital industry consolidated. This paper estimates the impact of the wave of hospital mergers on welfare focusing on the impact on consumer surplus for the under-65 population. For the purposes of quantifying the price impact of consolidations, hospitals are modeled as an input to the production of health insurance for the under-65 population. The estimates indicate that the aggregate magnitude of the impact of hospital mergers is modest but not trivial. In 2001, average HMO premiums are estimated to be 3.2% higher than they would have been absent any hospital merger activity during the 1990s. In 2003, we estimate that because of hospital mergers private insurance rolls declined by approximately .3 percentage points or approximately 695,000 lives with the vast majorit...
January 2005Did the HMO Revolution Cause Hospital Consolidation?
with Robert Town, Douglas Wholey, Roger Feldman: w11087
During the 1990s US healthcare markets underwent a significant transformation. Managed care rose to become the dominant form of insurance in the private sector. Also, a wave of hospital consolidation occurred. In 1990, the mean population-weighted hospital Herfindahl-Hirschman Index (HHI) in a Health Services Area (HSA) was .19. By 2000, the HHI had risen to .26. This paper explores whether the rise in managed care caused the increase in hospital concentration. We use an instrumental variables approach with 10-year differences to identify the relationship between managed care penetration and hospital consolidation. Our results strongly imply that the rise of managed care did not cause the hospital consolidation wave. This finding is robust to a number of different specifications.

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