
Management Papers
Document Type
Journal Article
Date of this Version
9-2014
Publication Source
Journal of Health Economics
Volume
37
Start Page
198
Last Page
218
DOI
10.1016/j.jhealeco.2014.06.007
Abstract
Despite its salience as a regulatory tool to ensure the delivery of unprofitable medical services, cross-subsidization of services within hospital systems has been notoriously difficult to detect and quantify. We use repeated shocks to a profitable service in the market for hospital-based medical care to test for cross-subsidization of unprofitable services. Using patient-level data from general short-term hospitals in Arizona and Colorado before and after entry by cardiac specialty hospitals, we study how incumbent hospitals adjusted their provision of three uncontested services that are widely considered to be unprofitable. We estimate that the hospitals most exposed to entry reduced their provision of psychiatric, substance-abuse, and trauma care services at a rate of about one uncontested-service admission for every four cardiac admissions they stood to lose. Although entry by single-specialty hospitals may adversely affect the provision of unprofitable uncontested services, these findings warrant further evaluation of service-line cross-subsidization as a means to finance them.
Copyright/Permission Statement
© 2014. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Keywords
hospital markets, cross-subsidies, specialty hospital
Recommended Citation
David, G., Lindrooth, R. C., Helmchen, L. A., & Burns, L. R. (2014). Do Hospitals Cross-Subsidize?. Journal of Health Economics, 37 198-218. http://dx.doi.org/10.1016/j.jhealeco.2014.06.007
Date Posted: 19 February 2018
This document has been peer reviewed.