Ownership and Exit Behavior: Evidence from the Home Health Care Market

Orsini Chiara ()
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Orsini Chiara: London School of Economics and Political Science, UK

The B.E. Journal of Economic Analysis & Policy, 2016, vol. 16, issue 1, 289-320

Abstract: In the US health care system a high fraction of suppliers are not-for-profit companies. Some argue that non-profits are “for-profits in disguise” and I test this proposition in a quasi-experimental way by examining the exit behavior of home health care firms after a legislative change considerably reduced reimbursed visits per patient. The change allows me to construct a cross provider measure of restriction in reimbursement and to use this measure and time-series variation due to the passage of the law in my estimates. I find that exits among for-profit firms are higher than those of not-for-profit firms, rejecting the null that these sectors responded to the legislation in similar ways. In addition, my results expand the view that “not-for-profit” firms are a form of “trapped capital.” There is little capital investment in the home health care market, so the higher exit rates of for-profit firms after the law change indicate the possible role of labor inputs in generating differences in exit behavior across sectors.

Keywords: long-term care; government restriction in Financing; not-for-profit (search for similar items in EconPapers)
JEL-codes: H32 I11 L31 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1515/bejeap-2014-0044

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