Do hospitals behave like consumers? An analysis of expenditures and revenues

Hospitals adjust expenditures to be a constant proportion of their revenues. An unexpected 10-percent change in hospital revenue generates a 3.5-4.8 percent expenditure change (in the same direction) the year it occurs, with declining changes thereafter (10 percent in total). Non-profit and government hospitals adjust expenditures about 80 percent of the way toward their longrun change near the end of the third year of the revenue change; for-profit hospitals do this at the end of the fourth year. Hospitals with revenue increases make an 80-percent adjustment toward the end of the third year; those with revenue declines do so near the end of the fourth year.