How do Hospitals Respond to Negative Financial Shocks? The Impact of the 2008 Stock Market Crash

David Dranove, Craig Garthwaite and Christopher Ody

No 18853, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: I1 I11 I18 L0 L21 (search for similar items in EconPapers)
Date: 2013-02
New Economics Papers: this item is included in nep-hea
Note: EH IO PE
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Published as RAND Journal of Economics Vol. 48, No. 2, Summer 2017 pp. 485–525 How do nonprofits respond to negative wealth shocks? The impact of the 2008 stock market collapse on hospitals

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