Venue: The Fuqua School of Business, Duke University, 1 Towerview Drive, Durham, NC 27708-0120
Presentation
The Impact of Health Policy and Market Structure on Hospitals? Uncompensated Care
This paper empirically examines hospitals' provision of uncompensated care in response to health policy changes. Unlike previous studies, we consider a role of hospital market structure in policy impact analysis, particularly a distribution of uncompensated care across hospitals in a market. The policy impact on uncompensated care could be heterogeneous across hospitals because of the differences in market structure and hospital attributes. That is, hospitals in the market where every hospital evenly shares indigent care burden might respond differently from those in the market where only few hospitals disproportionately bear indigent care burden. Using a Florida hospital discharge data set along with the hospital financial data, we estimate a hospital fixed-effect model to analyze two health policies: the Medicaid expansion in 1992 and the Balanced Budget Act (BBA) in 1997.
The decrease in government payments after the BBA combined with the intensifying price competition in managed care market was the source of financial distress that reduced hospitals' ability and willingness to provide uncompensated care. Our findings suggest that hospitals reduced uncompensated care, but the degree of reduction in indigent care was larger for those operating in the market with an equal indigent care burden. On the other hand, public hospitals who were one of few indigent care providers in the market found it difficult to reduce uncompensated care against the financial blow.
Medicaid expansion, however, eased financial pressure on hospitals because of the payments received for treating the poor, who otherwise would have demanded uncompensated care. We found that hospitals decreased indigent care, but not very significantly. In the market with an equal contribution of uncompensated care across hospitals, the indigent care burden was transferred from for-profit to public or not-for-profit hospitals. However, in the market with few hospitals carrying a heavy burden of indigent care, Medicaid expansion actually encouraged more hospitals to provide uncompensated care.