ownership-whether it is for-profit, nonprofit, or government owned-has a significant effect ..... colleges. It would be
University of Michigan Law School
University of Michigan Law School Scholarship Repository Articles
Faculty Scholarship
2007
Does Nonprofit Ownership Matter? Jill R. Horwitz UCLA School of Law,
[email protected]
Follow this and additional works at: http://repository.law.umich.edu/articles Part of the Business Organizations Law Commons, Health Law and Policy Commons, Law and Economics Commons, Nonprofit Organizations Law Commons, and the Other Law Commons Recommended Citation Horwitz, Jill R. "Does Nonprofit Ownership Matter?" Yale J. on Regulation 24, no. 1 (2007): 139-204.
This Article is brought to you for free and open access by the Faculty Scholarship at University of Michigan Law School Scholarship Repository. It has been accepted for inclusion in Articles by an authorized administrator of University of Michigan Law School Scholarship Repository. For more information, please contact
[email protected].
Does Nonprofit Ownership Matter? Jill R. Horwitz
t
In recent years, policymakers have increasingly questioned whether nonprofit institutions, particularly hospitals, merit tax exemption. They argue that nonprofit hospitals differ little from their for-profit counterparts in the provision of charity care and, therefore, should either lose their tax-exempt status or adhere to new, strict, and specific requirements to provide free services for the poor. In this Article, I present evidence that hospital ownership-whether it is for-profit, nonprofit, or government owned-has a significant effect on the mix of medical services it offers. Despite notoriously weak enforcement mechanisms, nonprofit hospitals act in the public interest by providingservices that are unlikely to be offered by the other types of hospitals. Imposing onerous charity requirements or limiting nonprofit tax exemptions may have severe and unintended consequences for all patients, including the well-insured. Introduction ...........................................................................................................
14 0 144 144 147 148 152
1.
The Nonprofit Sector: Overview and Reform Efforts ................................... A . Overview of the Sector ............................................................................. B . Nonprofit Law .......................................................................................... C . Nonprofit H ospital Law ........................................................................... D . Reform ......................................................................................................
II.
How Do Nonprofit Hospitals Behave? Theories and Evidence ..................... 156
Assistant Professor of Law, University of Michigan Law School and Faculty Research Fellow, National Bureau of Economic Research. B.A. 1988 Northwestern University; M.P.P. 1994, J.D. 1997, Ph.D. 2002, Harvard University. I thank Omri Ben-Shahar, Allan Brandt, John Colombo, Suzanne Cooper, David Cutler, Karen Eggleston, Becky Eisenberg, Phoebe Ellsworth, Marion Fremont-Smith, Bradford Gray, Don Herzog, Jim Hines, Rob Howse, Mary Beth Landrum, Kyle Logue, Barbara McNeil, Ellen Meara, Nina Mendelson, Nolan Miller, Martha Minow, Carl Morris, Joseph Newhouse, Ted Parson, Peter Seigelman, Gil Seinfeld, Jon Skinner, Richard Zeckhauser, and seminar participants at the National Bureau of Economics, Harvard University Program in Health Policy, Harvard Center for Ethics and the Professions, Hauser Center for Nonprofit Organizations, and seminars at the University of California at Berkeley Goldman School of Public Policy, Chicago-Kent College of Law, University of Michigan Law School, Michigan State Law School, and University of Pittsburgh (Public Health). Jia-Jia Ye and Austin Nichols provided excellent research assistance. I also thank Bonnie Bums from the Pusey Library map collection at Harvard University, the staff at the University of Michigan Law Library, Elizabeth Vigdor Richardson for sharing 0.000
FP/NP GOV/NFP 17.390 21.820 0.182 0.058
FP/GOV 42.600 0.000
Home Health
0.468
0.459 0.330
63.100 0.000
0.160 0.688
34.800 0.000
226.550 0.000
21.130 0.071
205.570 0.000
Home Health (1988-1993)
0.421
0.391 0.205
89.740 0.000
1.720 0.190
47.880 0.000
96.040 0.000
6.600 0.359
59.670 0.000
Home Health (1995- 1997)
0.525
0.518 0.595
7.750 0.005
40.590 0.000
61.730 0.000
11.130 0.011
1.260 0.738
7.210 0.065
Home Health (1998 -2000)
0.495
0.539 0.262
79.000 0.000
2.680 0.102
72.640 0.000
85.490 0.000
3.570 0.312
81.750 0.000
MRI
0.484
0.409 0.507
1.710 0.191
20.440 0.000
24.240 0.000
22.510 0.048
35.980 0.001
38.910 0.000
Open Heart Surgery
0.336
0.279 0.409
20.630 0.000
11.090 0.001
38.190 0.000
29.300 0.006
30.460 0.004
54.910 0.000
Psychiatric ER
0.475
0.559 0.408
12.310 0.001
20.190 0.000
41.610 0.000
16.960 0.201
34.790 0.001
47.790 0.000
Table 7: Comparison of Probability of Offering Services With Variable Profits, by Ownership Type More Profitable (1992-1996) For-profit Nonprofit
Gov.
Less Profitable (1997-2000) For-profit Nonprofit
Gov.
Home Health
+ 39.3
+ 9.7
+ 12.7
-37.6
- 7.7
- 1.5
Skilled Nursing
+ 28.1
+ 15.4
+4.9
+2.8
+4.7
+9.7
Source: Author's analysis of data American Hospital Association Annual Surveys 1988-2000. Notes: F = For-profit; N=Nonprofit, G=Government. Values are the percentage point change in probability of offering service during the years indicated.
Yale Journal on Regulation
Vol. 24:1, 2007
Table 8: Hypothesis Test for Market Effects Tests
Service Open Heart Surgery NP Hospitals
FP Market >= 20% Share Other FP 20% Chi2/Pr>ChiA2 0.32
0.374
Gov Hospitals
0.255
0.347
FP Hospitals
0.391
0.431
Psychiatric ER NP Hospitals
0.481
0.436
88-93
0.477
0.463
94-00
0.484
0.413
Gov Hospitals
0.546
0.592
FP Hospitals
0.392
0.4
Home Health NP Hospitals
0.457
0.516
0.472
0.418
0.326
0.333
88-93
0.231
0.188
94-97
0.5
0.613
Gov Hospitals FP Hospitals
5.045 0.025 7.313 0.007 1.39 0.239 3.262 0.071 0.216 0.642 18.119 0.011 1.641 0.200 0.044 0.835 4.119 0.042 1.233 0.267 0.009 0.923 1.673 0.196 8.089 0.004
