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Pricing Behavior and Incentives in Nonprofit Hospitals.
Rabih Y. Zeidan,
Texas A &.M University - Corpus Christi
ABSTRACT: This study examines whether nonprofit hospitals (NPH) overstate charity care expenses using price increases. Anecdotal evidence points to hospitals raising prices to maximize Medicare’s reimbursement for cost-outlier cases and to maximize collection from self-pay patients. This study provides empirical evidence that NPH mainly raise prices to increase the likelihood of meeting the state’s charity care requirements. The ratio of costs to charges is used to test for positive association between price increases and charity care provision by NPH. I hypothesize and find evidence that those NPH facing greater political costs in addition to tax and reimbursement regulations are more likely to choose accounting numbers which reflect a higher value of charity care spending. Results also suggest that maximizing third party reimbursements and maximizing collections from private self-pay patients are not incentives pursued by NPH.
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