Hospital ownership and medical services: Market mix, spillover effects, and nonprofit objectives

Hospitals operate in markets with varied demographic, competitive, and ownership characteristics, yet research on ownership tends to examine hospitals in isolation. Here we examine three hospital ownership types - nonprofit, for-profit, and government - and their spillover effects. We estimate the effects of for-profit market share in two ways, on the provision of medical services and on operating margins at the three types of hospitals. We find that nonprofit hospitals' medical service provision systematically varies by market mix. We find no significant effect of market mix on the operating margins of nonprofit hospitals, but find that for-profit hospitals have higher margins in markets with more for-profits. These results fit best with theories in which hospitals maximize their own output.