Structural Changes in the Hospital Industry,Charity Care,and the Nonprofit Role in Health Care

In an effort to understand the impact of cost-containment public policies on the relative roles of the sectors, the authors examine changes in the California hospital industry during the 1980s and associated changes in the provision of charity care. Industry structure and the relative strength of the sectors change as a result of industry entry, industry exit, and conversions (ownership changes across sectors). In the face of cost-containment policies, the nonprofit sector has been the most stable, with fewer exits than the for-profit sector and fewer conversions “out” than the public sector. This stability suggests that nonprofit hospitals are more likely to continue providing services as profit margins shrink. In addition, an analysis of the charity care behavior of converters suggests a stronger relationship between ownership and charity behavior than indicated by simple comparisons of the mean levels of provision, with committed nonprofits providing more charity care than for-profit hospitals.