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Market Forces and the Public Good: Competition Among Hospitals and Provision of Indigent Care

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  • Richard G. Frank
  • David S. Salkever
  • Jean Mitchell

Abstract

The research presented here focuses on the impact of competitive forces on the provision of social or merit goods by non-profit hospitals. We specifically examine the behavior of altruistic non-profit hospitals in the supply of charity care. The effects of competitive pressures and past charity care provision on the supply of philanthropic donations to nonprofit hospitals are also examined. Empirical models of the supply of donations and charity care are specified and estimated using data on nonprofit hospitals in Florida for the years 1980-1984. The coefficient estimates imply strong income effects in the charity care supply equations. This raises the possibility that competitive pressures and limits on hospital payments, under public insurance programs, may reduce the supply of indigent care. The results from the supply of donations models suggest that philanthropic donations will alleviate the competitive pressures to a small degree.

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  • Richard G. Frank & David S. Salkever & Jean Mitchell, 1989. "Market Forces and the Public Good: Competition Among Hospitals and Provision of Indigent Care," NBER Working Papers 3136, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3136
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    References listed on IDEAS

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    1. Pauly, Mark V, 1987. "Nonprofit Firms in Medical Markets," American Economic Review, American Economic Association, vol. 77(2), pages 257-262, May.
    2. Newhouse, Joseph P, 1970. "Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review, American Economic Association, vol. 60(1), pages 64-74, March.
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    1. Grossman, Michael & Goldman, Fred & Nesbitt, Susan W. & Mobilia, Pamela, 1993. "Determinants of interest rates on tax-exempt hospital bonds," Journal of Health Economics, Elsevier, vol. 12(4), pages 385-410, December.

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