Public-Goods Provision in the Hospital Industry: Does Ownership Form Affect Provision of Charity Care, Research, and Education? (WP-08-09)
Burton A. WeisbrodState and local legislatures are increasingly questioning what the public is getting back for its property tax and sales tax exemptions of nonprofit hospitals. While the focus has generally been on a particular public-type service, charity care, this paper also examines two other forms of public-good outputs--research and education--to determine whether the subsidized nonprofit hospitals provide more than do for-profit hospitals. Utilizing data reported to the State of California by all hospitals in the State, over time, the paper also distinguishes between the reported provision of charity care and bad debt, a distinction that provides hospitals with some measure of reporting discretion. A major finding is that the effect of ownership form on public good provision is strongly associated with the differential sizes of hospitals, for-profits averaging far fewer beds per hospital.
Burton A. Weisbrod, John Evans Professor of Economics, Northwestern University