Does State Community Benefits Regulation Influence Charity Care and Operational Efficiency in U.S. Non-Profit Hospitals?

59 Pages Posted: 21 Aug 2017 Last revised: 19 Sep 2019

See all articles by Melvin A. Lamboy-Ruiz

Melvin A. Lamboy-Ruiz

Iowa State University

James N. Cannon

Utah State University, School of Accountancy; Iowa State University

Olena V. Watanabe

Iowa State University - Debbie and Jerry Ivy College of Business

Date Written: November 27, 2017

Abstract

Using a comprehensive sample of U.S. non-profit hospitals from 2011 to 2015, we examine the effects of state community benefits regulation (CBR) on the amount of charity care provided by and the operational efficiency of U.S. non-profit hospitals. First, we document that, under such regulations, non-profit hospitals provide more charity care and less compensated care as a proportion of net revenue. We infer from these findings that CBR has the potential to increase both non-profit hospitals’ amount of charity care and their efficiency of operations. Second, by examining variation in CBR types, we find no differences between having provision or having reporting requirements on the amount of charity care offered. Moreover, when we consider CBR with both provision and reporting requirements, the combination of these two requirements does not incrementally enhance charity care offerings, suggesting that the requirements may serve as substitutes with comparable effect. Lastly, we show that several state-level characteristics influence the relationship between CBR and charity care: CBRs in states with a higher gross domestic product and percentage of revenue received in taxes have incrementally lower associations with charity care, while hospitals in states where populations have, on average, higher household incomes have greater associations between CBR and charity care. Our findings highlight the effects that state-enacted regulation can have on socially beneficial behavior by non-profits.

Keywords: hospitals, non-profit, regulation, social benefits, charity care

JEL Classification: I18, M48, L30

Suggested Citation

Lamboy-Ruiz, Melvin and Cannon, James N. and Watanabe, Olena V., Does State Community Benefits Regulation Influence Charity Care and Operational Efficiency in U.S. Non-Profit Hospitals? (November 27, 2017). Journal of Business Ethics, August 2019, Volume 158, Issue 2. Available at SSRN: https://ssrn.com/abstract=3020373 or http://dx.doi.org/10.2139/ssrn.3020373

Melvin Lamboy-Ruiz

Iowa State University ( email )

College of Business
Ames, IA 50011-2063
United States
5152947161 (Phone)

James N. Cannon

Utah State University, School of Accountancy ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
801-927-7718 (Phone)

Iowa State University ( email )

Ames, IA 50011-2063
United States
801-927-7718 (Phone)

Olena V. Watanabe (Contact Author)

Iowa State University - Debbie and Jerry Ivy College of Business ( email )

613 Wallace Road
Ames, IA 50011-2063
United States

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