TY  - JOUR
AU  - David,Guy
AU  - Lindrooth,Richard
AU  - Helmchen,Lorens A.
AU  - Burns,Lawton R.
TI  - Do Hospitals Cross Subsidize?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17300
PY  - 2011
Y2  - August 2011
UR  - http://www.nber.org/papers/w17300
L1  - http://www.nber.org/papers/w17300.pdf
N1  - Author contact info:
Guy David
The Wharton School
University of Pennsylvania
202 Colonial Penn Center
3641 Locust Walk
Philadelphia, PA 19104-6218
Tel: 215/573-5780
Fax: 215/573-2157
E-Mail: gdavid2@wharton.upenn.edu

Richard Lindrooth
University of Colorado Denver
Room E3313, Third Floor Building 500
13001 E. 17th Place
Aurora, CO 80045
E-Mail: richard.lindrooth@ucdenver.edu

Lorens Helmchen
Department of Health Administration and Policy
George Mason University
4400 University Drive - MS 1J3
Northeast Module I, 121
Fairfax, VA 22030 
Tel: (703) 993-9734 
Fax: (703) 993-1953 
E-Mail: lhelmche@gmu.edu

Lawton Burns
Health Care Systems Department
The Wharton School
University of Pennsylvania
203 Colonial Penn Center
641 Locust Walk
Philadelphia, PA 19104-6218
E-Mail: burnsl@wharton.upenn.edu
AB  - 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.
ER  -