Factors Impacting Market Concentration of Not-For-Profit Hospitals
Jomon A. Paul, Benedikt Quosigk and Leo MacDonald
Journal of Business Ethics (forthcoming)
Overview To provide decision support to policymakers, we used the Herfindahl–Hirschman Index and data from the American Hospital Association, the Centers for Medicare and Medicaid Services, and Internal Revenue Service Form 990 to identify and evaluate associations among the key characteristics of not-for-profit (NP) hospitals and market concentration. Market competitiveness has been linked to improvements in efficiency, costs, and healthcare access. We found a positive association between contributions and market concentration, which could mean that well-run NP hospitals that deliver on their mission are rewarded financially through increased contributions and increased market share. We also found a positive correlation between a higher percentage of Medicare patients and market concentration; that is, it reduces NP market competitiveness. Since Medicare reimbursement rates are approximately 80% lower than those paid by private insurers, hospitals may not choose to operate where Medicare populations are high. Further, median income is negatively associated with market concentration possibly because populations with a higher median income are in a better position to pay for services, making them an attractive potential market. Finally, we found that managers with voting rights on the board of directors have no significant impact.
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