Rural Hospital Ownership

Medical Service Provision, Market Mix, and Spillover Effects

This article examines both the direct and the spillover effects of hospital ownership on the availability of medical services in rural areas. The authors assess for-profit and nonprofit market share in rural areas and identify differences in characteristics of geographic areas, like population density. Using regression analysis, they identified the direct effects and spillover effects of rural hospital ownership and offering.

Included in this study are all nonfederal, general medical and surgical hospitals falling outside of metropolitan statistical areas (MSA); data used are from 1988 to 2005 and 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.

Key Findings:

  • Ownership affects service delivery.
  • Assuming service offerings are similar, the presence of nonprofit or for-profit hospitals can affect the services offered in a market and their distribution.
  • Unprofitable services are more likely to be offered by rural nonprofit hospitals than for-profit hospitals.
  • The more for-profit competitors, the more profitable services and few unprofitable services a nonprofit will provide.

In policy development, hospital ownership ought to be considered in broader term than their effect on nonprofit hospital behavior. Mixed-ownership markets and competition must be better understood.

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