Uncompensated care provision and the economic behavior of hospitals: the influence of the regulatory environment
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This dissertation project examines the effect of various state regulations such as Certificate-of-Need (CON) regulation, uncompensated care pools and community benefit requirement laws on hospital provision of uncompensated care and analyzes both for-profit and non-profit hospitals' responsiveness to the regulatory environment. The analysis of these regulations uses panel data econometric methods for a sample of hospitals in 17 states from 2002 to 2004. This study overcomes the limits of previous research that focused primarily on the effect of a single regulation in a given state. It uses three estimation methods: pooled Ordinary Least Squares (pooled OLS), random effects generalized least squares (GLS) and Hausman Taylor instrumental variable (HTIV) to obtain the parameter estimates. Weighing the advantages and disadvantages of each method, we interpret results based on the cross-validation of the GLS and HTIV estimates. Findings suggest that nonprofit and for-profit hospitals respond to some policy instruments similarly and others differently. For example, both nonprofit and for-profit hospitals respond to CON laws by increasing their uncompensated care provision. However, they respond to policy incentives such as community benefit requirement laws differently. Furthermore, regulatory interactions are found to significantly influence the uncompensated care provision by both nonprofit and for-profit hospitals. The dissertation helps policy makers formulate strategies to create incentives to enhance access to care for the economically disadvantaged. For example, implementing CON and providing public subsidies at the same time may offer better access to care for the uninsured than implementing either regulation alone. However, community benefit requirement laws do not appear to expand the amount of uncompensated care provided by nonprofit hospitals.