Have procompetitive changes altered hospital provision of indigent care?

In the past decade alone there have been numerous changes in the financial and competitive environment of hospitals in the United States. Some examples include the advent of Medicare's Prospective Payment System, growth in managed care options, relaxation of states' Certificate of Need (CON) regulations, and court cases questioning the tax‐exempt status of nonprofit hospitals. In this paper we attempt to reveal how hospitals alter their provision of care to the poor in a more cost conscious and competitive environment. Using hospital data from the State of California for the fiscal years ending in 1983 and 1987, estimates explaining uncompensated care commitments are presented. In particular, this study illustrates how hospitals under different ownership control varied their provision of uncompensated care over the period studied on average and by profitability level. Other factors, such as hospital location, teaching status, medicare patient load, and contractual adjustments, are also included in the analysis. A number of interesting trends are detected. Moreover, the results are found to be compatible with a quid pro quo hypothesis which states that hospital regulators reward large uncompensated care providers with profitable CON licenses.