Do Nonprofit Hospitals Pay Their Way?

Health Affairs

Volumn 15, Issue 4, 1996, Pages 132-144

  Morrisey, Michael A ^a   Wedig, Gerald J ^b   Hassan, Mahmud ^c  

^a UNIVERSITY OF ALABAMA AT BIRMINGHAM   (United States)

^b INDIANA UNIVERSITY   (United States)

^c Lister Hill Center

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; ECONOMICS; FINANCIAL MANAGEMENT; INFORMATION PROCESSING; NON PROFIT HOSPITAL; PUBLIC RELATIONS; REGRESSION ANALYSIS; STANDARD; STATISTICS; TAX; UNITED STATES;

CALIFORNIA; COMMUNITY-INSTITUTIONAL RELATIONS; DATA COLLECTION; FINANCING, GOVERNMENT; HOSPITALS, VOLUNTARY; REGRESSION ANALYSIS; TAX EXEMPTION;

EID: 0038661873     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.15.4.132     Document Type: Article

References (25)

1. J. Copeland and G. Rudney, "Federal Tax Subsidies for Not-for-profit Hospitals," Tax Notes (26 March 1990): 1559-1576.
2. See, for example, J.B. Simpson and S.D. Strum, "How Good a Samaritan? Federal Income Tax Exemption for Charitable Hospitals Reconsidered," University of Puget Sound Law Review (Spring 1991): 633-670; and M.A. Potter and B.B. Longest Jr., "The Divergence of Federal and State Policies on the Charitable Tax Exemption of Nonprofit Hospitals "Journal of Health Politics, Policy and Law (Summer 1994): 393-419.
3. See, for example, J.B. Simpson and S.D. Strum, "How Good a Samaritan? Federal Income Tax Exemption for Charitable Hospitals Reconsidered," University of Puget Sound Law Review (Spring 1991): 633-670; and M.A. Potter and B.B. Longest Jr., "The Divergence of Federal and State Policies on the Charitable Tax Exemption of Nonprofit Hospitals "Journal of Health Politics, Policy and Law (Summer 1994): 393-419.
4. U.S. General Accounting Office, Nonprofit Hospitals: Better Standards Needed for Tax Exemption, Pub. no. GAO/HRD-90-84 (Washington: GAO, May 1990); and D.B. Moskowitz, "Strapped Governments Eye Nonprofit Hospitals," Medicine and Health, Perspectives (2 August 1993): 1.
5. U.S. General Accounting Office, Nonprofit Hospitals: Better Standards Needed for Tax Exemption, Pub. no. GAO/HRD-90-84 (Washington: GAO, May 1990); and D.B. Moskowitz, "Strapped Governments Eye Nonprofit Hospitals," Medicine and Health, Perspectives (2 August 1993): 1.
6. Moskowitz, "Strapped Governments Eye Nonprofit Hospitals."
7. ET. Pound, G. Cohen, and P. Loeb, "Tax Exempt!" U. S. News and World Report (2 October 1995): 36-39, 42-44, 46, 51.
8. The data set was created for purposes of another analysis. See G.J. Wedig, M. Hassan, and M.A. Morrisey, "Tax-Exempt Debt and the Capital Structure of Nonprofit Organizations: An Application to Hospitals," Journal of Finance 51, no. 4 (1996): 1247-1283.
9. See, for example, F.A. Sloan, J. Valvona, and R. Muller, "Identifying the Issues: A Statistical Profile," in Uncompensated Hospital Care, ed. F.A. Sloan, J.F. Blumstein, and J. M. Perrin (Baltimore: The Johns Hopkins University Press, 1986), 16-53.
10. D. Dranove, M. Shanley, and W.D. White, "How Fast Are Hospital Prices Really Rising?" Medical Care (August 1991): 690-696.
11. G.A. Melnick et al., "The Effects of Market Structure and Bargaining Position on Hospital Prices," Journal of Health Economics (October 1992): 217-233.
12. Other tax subsidies include the exemption from sales taxes in some jurisdictions (although not California) and the deductibility of philanthropic contributions to hospitals. Copeland and Rudney, "Federal Tax Subsidies for Not-for-profit Hospitals," argue that the sales tax exclusion can have large effects. The philanthropic effect is probably small; see F.A. Sloan et al., "The Demise of Hospital Philanthropy," Economic Inquiry (October 1990): 725-743.
13. M.A. Morrisey, Cost Shifting in Health Care: Separating Evidence from Rhetoric (Washington: AEI Press, 1994).
14. D.R. Cohodes and B.M. Kinkead, Hospital Capital Formation in the 1980s (Baltimore: The Johns Hopkins University Press, 1984); and F.A. Sloan, M.A. Morrisey, and J. Valvona, "Capital Markets and the Growth of Mukihospital Systems," Advances in Health Economics and Health Services Research (1987): 83-109.
15. D.R. Cohodes and B.M. Kinkead, Hospital Capital Formation in the 1980s (Baltimore: The Johns Hopkins University Press, 1984); and F.A. Sloan, M.A. Morrisey, and J. Valvona, "Capital Markets and the Growth of Mukihospital Systems," Advances in Health Economics and Health Services Research (1987): 83-109.
16. Sloan et al., "Capital Markets and the Growth of Mukihospital Systems."
17. GAO, Nonprofit Hospitals: Better Standards Needed for Tax Exemption.
18. Wedig et al., "Tax-Exempt Debt and the Capital Structure of Nonprofit Organizations."
19. M.A. Morrisey, F.A. Sloan, and J. Valvona, "Geographic Markets for Hospital Care," Law and Contemporary Problems (Spring 1988): 165-194.
20. K.E. Thorpe and C.E. Brecher, "Improved Access for the Uninsured Poor in Large Cities: Do Public Hospitals Make a Difference?" Journal of Health Politics, Policy and Law (Summer 1987): 313-324.
21. R.G. Frank and D.S. Salkever, "The Supply of Charity Services by Nonprofit Hospitals: Motives and Market Structure," RAND Journal of Economics (Autumn 1991): 430-445.
22. We hasten to add that these measures of the demand for uncompensated care need not have a big impact on hospital shortfalls. If there is an implicit "market" for tax subsidies, a hospital with limited demand for charity care may not seek out (or be able to obtain) tax subsidies. The most obvious form of the implicit market for tax subsidies is in the tax-exempt debt market, where the state or local finance authority has the opportunity to tie community dividends to interest rate subsidies. See M. Hassan, G. J. Wedig and M.A. Morrisey, "Conditional Tax Exemption and the Output of Nonprofit Organizations: The Case of Hospital Charity Care" (Working paper, Lister Hill Center for Health Policy, University of Alabama at Birmingham, October 1995).
23. Because of this lagged dependent variable, we tested for serial correlation using Durbin's H-test. See G.S. Maddala, Introduction to Econometrics (New York: MacMillan, 1992). We did not find any evidence of autocorrelation in the estimated model.
24. It also may suggest that our imputation of the property tax subsidy may overvalue property in low-income communities.
25. E.C. Norton and D.O. Staiger, "How Hospital Ownership Affects Access to Care for the Uninsured," RAND Journal of Economics (Spring 1994): 171-185.