Working Paper: NBER ID: w12374
Authors: Yuchu Shen
Abstract: This study examines the effect of HMO and for-profit HMO share on the survival of safety net services and profitable services in hospitals. Using data from 1990-2003 and proportional hazard models, I find that hospitals in high HMO markets started out having lower hazard of shutting down services in 1990-1994 than those in low HMO markets, but their hazard rates increase over time. By 2000-2003, hospitals in high HMO markets ended up with higher risk of shutting down profitable services than those in low HMO markets. Conditional on overall HMO penetration, markets with higher for-profit share of HMOs have higher hazard of shutting down services, and the gap in survival between high and low for-profit HMO markets is bigger in high HMO areas. Lastly, I find that the hazard rate of shutting down profitable services is comparable among not-for-profit, for-profit, and government hospitals, while the hazard of shutting down safety net services is the highest in for-profit hospitals and lowest in government hospitals.
Keywords: HMO; hospital services; for-profit expansion; healthcare
JEL Codes: I11; L30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| HMO penetration levels (I11) | risk of service shut down (G33) |
| for-profit status of HMO markets (L30) | risk of service shut down (G33) |
| higher HMO penetration (I11) | increased risk of service exit (J63) |
| presence of for-profit HMOs (I13) | exacerbated risk of service exit (J63) |
| high HMO markets (I11) | higher risk of shutting down profitable services (G32) |
| higher share of for-profit HMOs (I13) | increased hazards of service shut down (L94) |
| high for-profit HMO markets (I11) | higher hazard for inpatient substance abuse services (I12) |