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Modeling Internal Decision Making Process: An Explanation of Conflicting Empirical Results on Behavior of Non‐Profit and For‐Profit Hospitals

14 Pages Posted: 21 Sep 2011  

Kathleen A. Carroll

University of Maryland, Baltimore County (UMBC) - Department of Economics

Jane E. Ruseski

West Virginia University

Date Written: October 2011

Abstract

This article develops multiobjective models of hospital decision making that incorporate the internal decision process in both a for‐profit and a non‐profit hospital (NPH). Predicted output and quality for an NPH differ from those for a for‐profit hospital under some conditions but converge under others. Convergence may be the result of a complex internal decision structure with decision control primarily by physicians, similar objectives across different organizational forms, or differing constraints. The mechanisms underlying these outcomes provide explanations for conflicting results in empirical studies of non‐profit and for‐profit hospitals and provide a different rationale for convergence than non‐profit response to competition from for‐profit hospitals. Understanding the source of convergence is important for policies directed toward the tax treatment of NPHs.

JEL Classification: D21, D23, I11, L3, L21

Suggested Citation

Carroll, Kathleen A. and Ruseski, Jane E., Modeling Internal Decision Making Process: An Explanation of Conflicting Empirical Results on Behavior of Non‐Profit and For‐Profit Hospitals (October 2011). Contemporary Economic Policy, Vol. 29, Issue 4, pp. 510-523, 2011. Available at SSRN: https://ssrn.com/abstract=1931335 or http://dx.doi.org/10.1111/j.1465-7287.2010.00245.x

Kathleen A. Carroll (Contact Author)

University of Maryland, Baltimore County (UMBC) - Department of Economics

1000 Hilltop Circle
Baltimore, MD 21250
United States

Jane E. Ruseski

West Virginia University ( email )

PO Box 6025
Morgantown, WV 26506
United States

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