The Effects of HMO and its For-Profit Expansion on the Survival of Specialized Hospital Services

51 Pages Posted: 24 Jul 2006 Last revised: 26 Oct 2022

See all articles by Yu-Chu Shen

Yu-Chu Shen

U.S. Graduate School of Business and Public Policy; National Bureau of Economic Research (NBER)

Date Written: July 2006

Abstract

This study examines the effect of HMO and for-profit HMO share on the survival of safety net services and profitable services in hospitals. Using data from 1990-2003 and proportional hazard models, I find that hospitals in high HMO markets started out having lower hazard of shutting down services in 1990-1994 than those in low HMO markets, but their hazard rates increase over time. By 2000-2003, hospitals in high HMO markets ended up with higher risk of shutting down profitable services than those in low HMO markets. Conditional on overall HMO penetration, markets with higher for-profit share of HMOs have higher hazard of shutting down services, and the gap in survival between high and low for-profit HMO markets is bigger in high HMO areas. Lastly, I find that the hazard rate of shutting down profitable services is comparable among not-for-profit, for-profit, and government hospitals, while the hazard of shutting down safety net services is the highest in for-profit hospitals and lowest in government hospitals.

Suggested Citation

Shen, Yu-Chu, The Effects of HMO and its For-Profit Expansion on the Survival of Specialized Hospital Services (July 2006). NBER Working Paper No. w12374, Available at SSRN: https://ssrn.com/abstract=918972

Yu-Chu Shen (Contact Author)

U.S. Graduate School of Business and Public Policy ( email )

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Monterey, CA 93943
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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