Working Paper: NBER ID: w18853
Authors: David Dranove; Craig Garthwaite; Christopher Ody
Abstract: The theory of cost-shifting posits that nonprofit hospitals respond to negative financial shocks by raising prices for privately insured patients. We examine how hospitals responded to the sharp reductions in their endowments caused by the 2008 stock market collapse. We find that the average hospital did not engage in cost-shifting, but average hospitals that likely have substantial market power did cost-shift. Investigating further how hospitals responded to the financial setback, we found no evidence of reductions in treatment costs. However, hospitals with large endowment losses delayed purchases of health information technology and curtailed the offering of unprofitable services.
Keywords: cost-shifting; financial shocks; hospital behavior; healthcare policy
JEL Codes: I11; I18; L21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Financial shock (2008 stock market crash) (G01) | Endowment losses (G22) |
| Market power (L11) | Cost-shifting behavior (H22) |
| Endowment losses (G22) | Pricing strategies (D49) |
| Endowment losses (G22) | Service offerings (L84) |
| Endowment losses (G22) | Delay in investments in health information technology (H51) |
| Endowment losses (G22) | Elimination of unprofitable services (L33) |