Factors Impacting Market Concentration of Not-for-Profit Hospitals
- 178 Downloads
We attempt to identify and evaluate the association between key characteristics of not-for-profit (NP) hospitals and market concentration, as measured by the Herfindahl–Hirschman Index, using data available from the American Hospital Association, the Centers for Medicare and Medicaid Services, and the Internal Revenue Service Form 990. Our goal is to provide decision support to policy makers on factors that contribute to market competitiveness, which has been linked to improvements in efficiency, costs, and access to health care. We find that contributions are positively associated with market concentration. This could indicate that well-run NP hospitals (that deliver on their mission) are rewarded both financially (through increased contributions) as well as with increased market share. We also find that a higher percentage of Medicare patients is positively correlated with market concentration (i.e., reduces the competitiveness of the NP market). This could be explained by the fact that Medicare reimbursement rates are generally lower than those paid by private insurers (approximately 80%); thus, hospitals might not necessarily choose to operate in areas with high Medicare populations. Further, median income is negatively associated with market concentration. One explanation for this effect could be the fact that a population with a higher median income is in a better position to pay for services, making them attractive to hospitals as a potential market. Finally, we find that the presence of managers with voting rights on the boards of directors has no significant impact.
KeywordsHospitals Market concentration Not-for-profit
Compliance with Ethical Standards
Conflict of interest
Jomon A. Paul, Benedikt Quosigk, Leo MacDonald declare that they have no conflict of interest.
- Baber, W. R., Visvanathan, G., & Roberts, A. A. (2001). Charitable organizations’ strategies and program-spending ratios. Accounting Horizons, 15(4), 329–343.Google Scholar
- Beaulieu-Volk, D. (2012). Patients ‘shocked’ by low Medicare reimbursements. http://www.fiercehealthcare.com/practices/patients-shocked-by-low-medicare-reimbursements. Accessed 21 September 2016.
- Bloom, N., Propper, C., Seiler, S., & Reenen, J. V. (2015). The impact of competition on management quality: Evidence from public hospitals. Review of Economic Studies, 82(2), 457–489.Google Scholar
- Bryce, H. J. (2007). The public’s trust in nonprofit organizations: The role of relationship marketing and management. California Management Review, 49(4), 112–131.Google Scholar
- Bush, R. W. (2007). Reducing waste in US healthcare systems. Journal of the American Medical Association, 297(8), 871–874.Google Scholar
- California Pan-Ethnic Health Network. (2015). SB 4: Health for all (2015–2016). http://cpehn.org/bill/sb-4-health-all-2015–2016. Accessed 12 June 2015.
- Census Bureau. (2013). Income, poverty, and health insurance in the United States. http://www.census.gov/hhes/www/income/data/incpovhlth/index.html/. Accessed 27 February 2014.
- Centers for Disease Control and Prevention. (2014a.) Health effects of cigarette smoking. http://www.cdc.gov/tobacco/data_statistics/fact_sheets/health_effects/effects_cig_smoking/. Accessed 15 May 2014.
- Centers for Disease Control and Prevention. (2014b). The health effects of overweight and obesity. http://www.cdc.gov/healthyweight/effects/. Accessed 10 November 2014.
- Centers for Disease Control and Prevention. (2014c). Fact sheets- alcohol use and your health. https://www.cdc.gov/alcohol/fact-sheets/alcohol-use.htm. Accessed 14 November 2014.
- Centers for Disease Control and Prevention. (2014d). Infant mortality. http://www.cdc.gov/reproductivehealth/MaternalInfantHealth/InfantMortality.htm. Accessed 6 October 2014.
- Chesteen, S., Helgheim, B., Randall, T., & Wardell, D. (2005). Comparing quality of care in non-profit and for-profit nursing homes: a process perspective. Journal of Operations Management, 23(2), 229–242.Google Scholar
- Coffman, J., & Rundall, T. G. (2005). The impact of hospitalists on the cost and quality of inpatient care in the United States: a research synthesis. Medical Care Research and Review, 62(4), 379–406.Google Scholar
- Congressional Budget Office. (2006). Nonprofit hospitals and the provision of community benefits. https://www.cbo.gov/sites/default/files/109th-congress-2005-2006/reports/12-06-nonprofit.pdf. Accessed 15 January 2015.
- Conover, C. J., & Sloan, F. A. (1998). Does removing certificate-of-need regulations lead to a surge in health care spending? Journal of Health Politics, Policy and Law, 23(3), 455–481.Google Scholar
- Dafny, L., Ho, K., Lee, R.S. (2016). The price effects of cross-market hospital mergers. NBER Working Paper No. 22106 (March 2016). http://www.nber.org/papers/w22106.
- Department of Justice and Federal Trade Commission. (2004). Improving health care: a dose of competition. Washington, DC: FTC/DOJ. www.usdoj.gov/atr/public/health_care/204694.htm#toc. Accessed 23 May 2014.
- Dranove, D., Stanley, M., & White, W. (1993). Price and concentration in hospital markets: the switch from patient-driven to payer-driven competition. Journal of Law and Economics, 36(1), 179–204.Google Scholar
- Eldenburg, L. G., Gaertner, F. B., & Goodman, T. H. (2015). The influence of ownership and compensation practices on charitable activities. Contemporary Accounting Research, 32(1), 169–192.Google Scholar
- Federal Trade Commission. (2016). Guide to antitrust laws. https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws. Accessed 21 September 2016.
- Ferrier, G., Leleu, H., & Valdmanis, V. (2010). The impact of CON regulation on hospital efficiency. Health Care Management Science, 13(1), 84–100.Google Scholar
- Forgione, D. A. (1987). Incentives and performance in the health care industry: the case of for/non profit multihospital systems. Doctoral dissertation. Amherst, MA: University of Massachusetts at Amherst.Google Scholar
- Gowrisankaran, G., Town, R. (2003). Competition, payers, and hospital quality. Health Services Research, 38(6, part 1), 1403–1422.Google Scholar
- Grabowski, D. C., & Hirth, R. A. (2003). Competitive spillovers across non-profit and for-profit nursing homes. Journal of Health Economics, 22(1), 1–22.Google Scholar
- Greenberg, W. (1998). Marshfield clinic, physician networks, and the exercise of monopoly power. Health Services Research, 33(5, part 2), 1461–1476.Google Scholar
- Gruber, J. (1994). The effect of competitive pressure on charity: Hospital responses to price shopping in California. Journal of Health Economics, 13(2), 183–212.Google Scholar
- Hellinger, F. J. (2009). The effect of certificate-of-need laws on hospital beds and healthcare expenditures: An empirical analysis. American Journal of Managed Care, 15(10), 737–744.Google Scholar
- Hirth, R. A. (1999). Consumer information and competition between nonprofit and for-profit nursing homes. Journal of Health Economics, 18(2), 219–240.Google Scholar
- Horwitz, J. R. (2007). Does non-profit ownership matter? Yale Journal on Regulation, 24(1), 139–204.Google Scholar
- Kaiser Family Foundation. (2015). State health facts: hospitals by ownership type. http://kff.org/other/state-indicator/hospitals-by-ownership/#. Accessed 15 October 2015.
- Kessler, D. P., & McClellan, M. B. (2000). Is hospital competition socially wasteful? Quarterly Journal of Economics, 115(2), 577–615.Google Scholar
- Kossovsky, M., Sarasin, F. P., Chopard, P., Louis-Simonet, M., Sigaud, P., Perneger, T., et al. (2002). Relationship between hospital length of stay and quality of care in patients with congestive heart failure. Quality and Safety in Health Care, 11(3), 219–223.Google Scholar
- Larkin, R. (2013). Using outcomes to measure nonprofit success. https://nonprofitquarterly.org/2013/07/02/using-outcomes-to-measure-nonprofit-success/. Accessed 29 March 2016.
- Liu, L., Jervis, K. J., Younis, M. Z., & Forgione, D. A. (2011). Hospital financial distress, recovery and closure: Managerial incentives and political costs. Journal of Public Budgeting, Accounting and Financial Management, 23(1), 31–68.Google Scholar
- Luhby, T. (2014). Medicare versus private insurance: Which costs less. http://money.cnn.com/2014/04/21/news/economy/medicare-doctors/. Accessed 21 September 2016.
- Lynk, W. J. (1995). Nonprofit hospital mergers and the exercise of market power. Journal of Law and Economics, 38(2), 437–461.Google Scholar
- Mahar, M. (2009). Does Medicare under-pay hospitals?. http://www.healthbeatblog.com/2009/08/does-medicare-underpay-hospitals/. Accessed 10 March 2016.
- Matthews, M. (2015). Doctors face a huge Medicare and Medicaid pay cut in 2015. http://www.forbes.com/sites/merrillmatthews/2015/01/05/doctors-face-a-huge-medicare-and-medicaid-pay-cut-in-2015/#1afef24f5c6d. Accessed 1 October 2016.
- Melnick, G. A., Zwanziger, J., Bamezai, A., & Pattison, R. (1992). The effect of market structure and bargaining position on hospital prices. Journal of Health Economics, 11(3), 217–233.Google Scholar
- National Center for Health Statistics. (2012). Health, United States, 2012. http://www.cdc.gov/nchs/data/hus/hus12.pdf#111. Accessed 23 September 2013.
- Nguyen Thi, P. L., Briançon, S., Empereur, F., & Guillemin, F. (2002). Factors determining inpatient satisfaction with care. Social Science and Medicine, 54(4), 493–504.Google Scholar
- Noe, K., & Forgione, D. A. (2014). Economic incentives in the hospice care setting: A comparison of for-profit and nonprofit providers. Journal of Public Budgeting, Accounting and Financial Management, 26(2), 233–270.Google Scholar
- Olson, J., Belohlav, J., & Boyer, K. (2005). Operational, economic and mission elements in not-for-profit organizations: The case of the Chicago Symphony Orchestra. Journal of Operations Management, 23(2), 125–142.Google Scholar
- Papke, L. E., & Wooldridge, J. M. (1996). Econometric methods for fractional response variables with an application to 401(k) plan participation rates. Journal of Applied Econometrics, 11(6), 619–632.Google Scholar
- Parand, A., Dopson, S., Renz, A., & Vincent, C. (2014). The role of hospital managers in quality and patient safety: A systematic review. BMJ Open, 4(9), e005055.Google Scholar
- Paul, J., & Lin, L. (2012). Models for improving patient throughput and waiting at hospital emergency departments. Journal of Emergency Medicine, 43(6), 1119–1126.Google Scholar
- Paul, J., Ni, H., & Bagchi, A. (2014). Effect of certificate of need law on emergency department quality of care. Journal of Emergency Medicine, 47(4), 453–461.Google Scholar
- Production and Operations Management Society. (2015). Call for papers: special issue of production and operations management: Not for profit operation management. http://www.poms.org/2014/07/call_for_papers_special_issue_2.html. Accessed January 10, 2015.
- Reed, D. B., Rayens, M. K., Winter, K., & Zhang, M. (2008). Health care delay of farmers 50 years and older in Kentucky and South Carolina. Journal of Agromedicine, 13(2), 71–79.Google Scholar
- Rivers, P. A., & Fotter, M. D. (2004). Do HMO penetration and hospital competition impact quality of hospital care? Health Services Management Research, 17(4), 237–248.Google Scholar
- Robinson, J. C., & Miller, K. (2014). Total expenditures per patient in hospital-owned and physician-owned physician organizations in California. Journal of the American Medical Association, 312(16), 1663–1669.Google Scholar
- Simpson, J., & Shin, R. (1998). Do nonprofit hospitals exercise market power? International Journal of the Economics of Business, 5(2), 141–157.Google Scholar
- Teisberg, E., Porter, M., & Brown, G. (1994). Making competition in health care work. Harvard Business Review, 72(4), 131–141.Google Scholar
- Thomas, J. W., Guire, K. E., & Horvat, G. G. (1997). Is patient length of stay related to quality of care? Journal of Healthcare Management, 42(4), 489–507.Google Scholar
- Tinkelman, D. (1998). Differences in sensitivity of financial statement users to joint cost allocations: The case of nonprofit organizations. Journal of Accounting, Auditing and Finance, 13(4), 377–393.Google Scholar
- Town, R., & Vistnes, G. (2001). Hospital competition in HMO networks. Journal of Health Economics, 20(5), 755–779.Google Scholar
- Vaughan-Sarrazin, M. S., Hannan, E. L., Gormley, C. J., & Rosenthal, G. E. (2002). Mortality in Medicare beneficiaries following coronary artery bypass graft surgery in states with and without certificate of need regulation. Journal of the American Medical Association, 288(15), 1859–1866.Google Scholar
- Weinick, R. M., Byron, S. C., & Bierman, A. S. (2005). Who can’t pay for health care? Journal of Internal Medicine, 20(6), 504–509.Google Scholar
- White, H. L., & Glazier, R. H. (2011). Do hospitalist physicians improve the quality of inpatient care delivery? A systematic review of process, efficiency and outcome measures. BMC Medicine, 9, 58.Google Scholar
- Williams, D., Hadley, J., & Pettengill, J. (1992). Profits, community role, and hospital closure: An urban and rural analysis. Medical Care, 30(2), 174–187.Google Scholar
- Zeta, L. M. (2008). Fundamental first steps along the road to health care reform: Eliminating the bureaucratic burdens of certificate Of need programs and embracing market competition to improve state health care systems. Creighton Law Review, 41(4), 727–762.Google Scholar