 Uncompensated Hospital Care: Charitable Mission or Profitable Business Decision?Dwayne A. Banks, Mary Paterson and Jeanne Wendel Health Economics, 1997, vol. 6, issue 2, 133-143 Abstract: Provision of hospital uncompensated care is generally assumed to be adversely affected as increased healthcare competition decreases demand for compensated hospital services. Economic theory, however, suggests the question is more complex. Non‐profit hospitals are assumed in this paper to maximize utility as a function of uncompensated care, subject to the constraint that revenues cover costs. For‐profit hospitals, in contrast, are assumed to maximize profit while recognizing that failure to meet community expectations regarding provision of uncompensated care could negatively impact profits. Therefore, for‐profit hospital supply of uncompensated care focuses on balancing the hospital's marginal costs and marginal benefits. These models predict that non‐profit hospitals will respond to increased competition by reducing the supply of uncompensated care. In contrast, for‐profit hospitals will increase the supply of uncompensated care when market demand decreases since the concurrent decrease in compensated care reduces the marginal cost of producing uncompensated care. The models also predict that for‐profit hospitals will respond to changes in community expectations regarding the provision of uncompensated care. © 1997 by John Wiley & Sons, Ltd. Date: 1997 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:6:y:1997:i:2:p:133-143 Access Statistics for this article Health Economics is currently edited by Alan Maynard, John Hutton and Andrew Jones More articles in Health Economics from John Wiley & Sons, Ltd. |
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