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Ownership and exit behavior: evidence from the home health care market

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  • Orsini, Chiara

Abstract

In the US health care system a high fraction of suppliers are not-for-profit companies. Some argue that non-profits are “for-profits in disguise” and I test this proposition in a quasi-experimental way by examining the exit behavior of home health care firms after a legislative change considerably reduced reimbursed visits per patient. The change allows me to construct a cross provider measure of restriction in reimbursement and to use this measure and time-series variation due to the passage of the law in my estimates. I find that exits among for-profit firms are higher than those of not-for-profit firms, rejecting the null that these sectors responded to the legislation in similar ways. In addition, my results expand the view that “not-for-profit” firms are a form of “trapped capital.” There is little capital investment in the home health care market, so the higher exit rates of for-profit firms after the law change indicate the possible role of labor inputs in generating differences in exit behavior across sectors.

Suggested Citation

  • Orsini, Chiara, 2016. "Ownership and exit behavior: evidence from the home health care market," LSE Research Online Documents on Economics 65292, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:65292
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    File URL: http://eprints.lse.ac.uk/65292/
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    References listed on IDEAS

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    More about this item

    Keywords

    long-term care; government restriction in financing; not-for-profit;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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