Rural hospital ownership: medical service provision, market mix, and spillover effects

To test whether nonprofit, for-profit, or government hospital ownership affects medical service provision in rural hospital markets, either directly or through the spillover effects of ownership mix.

Data are from the American Hospital Association, U.S. Census, CMS Healthcare Cost Report Information System and Prospective Payment System Minimum Data File, and primary data collection for geographic coordinates. The sample includes all nonfederal, general medical, and surgical hospitals located outside of metropolitan statistical areas and within the continental United States from 1988 to 2005.

We estimate multivariate regression models to examine the effects of (1) hospital ownership and (2) hospital ownership mix within rural hospital markets on profitable versus unprofitable medical service offerings.

Rural nonprofit hospitals are more likely than for-profit hospitals to offer unprofitable services, many of which are underprovided services. Nonprofits respond less than for-profits to changes in service profitability. Nonprofits with more for-profit competitors offer more profitable services and fewer unprofitable services than those with fewer for-profit competitors.

Rural hospital ownership affects medical service provision at the hospital and market levels. Nonprofit hospital regulation should reflect both the direct and spillover effects of ownership.