Governance Structure and Exit: Evidence from California Hospitals
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Most inpatient and emergency health care services in the U.S. are delivered by non-profit organizations. To understand the impact of policies that are designed to affect competitive outcomes in hospital markets, it’s important to understand whether the “non-profit” structure changes the behavior and competitive conduct of firms. Given the complexity of the product space within which hospitals operate, we focus on more easily interpreted decisions within the hospital market: entry and exit. Using comprehensive administrative data for the universe of California hospitals from 1980 to 2013, we document the observed entry and exit behavior. We estimate flexible exit policy functions and demonstrate a difference in behavior between for-profit and non-profit firms that exists after accounting for several observable characteristics of hospitals. We find differences in observed behavior: this is a finding that strongly suggests that there are differences in the underlying objective function of the various firms.
KeywordsHospitals Exit Governance structure Policy functions Non-profit
The authors gratefully acknowledge the staff of the California Office of Statewide Health Planning and Development for their help in procuring and organizing the data, as well as one anonymous referee and the editors Chris Snyder and Larry White, who provided very helpful comments on an earlier draft.
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