Health systems ownership: can regulation preserve community benefits?

This article addresses two questions. What determines the amount of community benefit a nonprofit firm will provide? What would be the expected effect of legal rules requiring nonprofit firms to provide more community benefit than they would otherwise have chosen? The amount of community benefit provided, it is argued, depends on the desires of the donors who endow the nonprofit firm with its equity capital and control its corporate board. The effect of a law requiring the provision of community benefit depends on the degree of competition in the local market. In competitive markets, such a rule is like a hidden tax. In markets in which nonprofit firms have market power, it may divert resources from types of benefit valued highly by the board toward activities valued highly by the political process. The definition of community benefit and the future of nonprofit hospitals are also discussed.