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Better together: Coexistence of for-profit and nonprofit firms with an application to the U.S. hospice industry

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  • Dalton, Christina Marsh
  • Bradford, W. David

Abstract

Many markets maintain a nontrivial mix of both nonprofit and for-profit firms, particularly in health care industries such as hospice, nursing homes, and home health. What are the effects of coexistence vs. dominance of one ownership type? We show how the presence of both ownership types can lead to greater diversity in consumer types served, even if both firms merely profit-maximize. This is the case where firms serve consumers for multiple consumption durations, but where donations are part of a nonprofit firm objective function and happen after services have been provided. This finding is strengthened if the good or service has value beyond immediate consumption or the direct consumer. We show these predictions empirically in the hospice industry, using data containing over 90 percent of freestanding U.S. hospices, 2000–2008. Nonprofit and for-profit providers split the patient market according to length of stay, leading to a wider range of patients being served than in the absence of this coexistence.

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  • Dalton, Christina Marsh & Bradford, W. David, 2019. "Better together: Coexistence of for-profit and nonprofit firms with an application to the U.S. hospice industry," Journal of Health Economics, Elsevier, vol. 63(C), pages 1-18.
    • Handle: RePEc:eee:jhecon:v:63:y:2019:i:c:p:1-18
    DOI: 10.1016/j.jhealeco.2018.10.001
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    References listed on IDEAS

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    1. Glaeser, Edward L. & Shleifer, Andrei, 2001. "Not-for-profit entrepreneurs," Journal of Public Economics, Elsevier, vol. 81(1), pages 99-115, July.
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    4. Sloan, Frank A. & Picone, Gabriel A. & TaylorJr., Donald H. & Chou, Shin-Yi, 2001. "Hospital ownership and cost and quality of care: is there a dime's worth of difference?," Journal of Health Economics, Elsevier, vol. 20(1), pages 1-21, January.
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    6. Chou, Shin-Yi, 2002. "Asymmetric information, ownership and quality of care: an empirical analysis of nursing homes," Journal of Health Economics, Elsevier, vol. 21(2), pages 293-311, March.
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    Cited by:

    1. Jonathan Gruber & David H. Howard & Jetson Leder-Luis & Theodore L. Caputi, 2023. "Dying or Lying? For-Profit Hospices and End of Life Care," NBER Working Papers 31035, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    L3; L2; I1; Nonprofit firm behavior; For-profit nonprofit competition; Hospice;
    All these keywords.

    JEL classification:

    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • I1 - Health, Education, and Welfare - - Health

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