Subsidies and Structure: The Lasting Impact of the Hill-Burton Program on the Hospital Industry
The hospital industry is one of the most important industries in the U.S., and industry structure can have profound effects on the functioning of markets. Using county-level panel data, we study the effect of public subsidies from the Hospital Survey and Construction Act of 1946, known as the Hill-Burton program, on hospital capacity, organization of the hospital industry, and utilization. We find that the program generated substantial increases in capacity and these changes were highly persistent, lasting well beyond twenty years. However the increases in capacity at non-profit and public hospitals were partially offset by reductions in capacity at for-profit hospitals. Nonetheless, we estimate that the Hill-Burton program accounted for a net increase of over 70,000 beds nationwide, which is roughly 17 percent of the total growth in hospital beds in the U.S. from 1948 to 1975. We also show that differences across counties in the number of hospital beds per capita were greatly reduced over this period. Differences between high and low income counties, rural and urban counties, and the South and the rest of the country fell substantially. We conclude that the program largely achieved its goals, and had substantial and long lasting effects on the hospital industry in the U.S..
We are grateful to Amy Finkelstein for generously providing us with the 1948-1975 AHA data, and Heidi Williams for generously providing us with the Hill-Burton project register data. We wish to thank Arie Beresteanu, Gautam Gowrisankaran, Heidi Williams, and participants at the ASSA/Health Economics Research Organization meeting, the NBER Health Economics program meeting, the UIC Institute of Government and Public Affairs seminar series, the Annual Health Economics Conference, and the Lehigh University Economics Department seminar series for their helpful comments and suggestions. None of the authors received financial support for the research nor do any of the authors have any material and relevant financial relationships. The usual caveat applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Andrea Park Chung & Martin Gaynor & Seth Richards-Shubik, 2017. "Subsidies and Structure: The Lasting Impact of the Hill-Burton Program on the Hospital Industry," The Review of Economics and Statistics, vol 99(5), pages 926-943. citation courtesy of