Hospital Market Structure and Access to Medical Care: The Long-Term Impact of the Hill-Burton Act

Abstract

Much of the growth in hospital capacity in the United States between World War II and the mid 1970s can be attributed to the Hill-Burton Act of 1946, designed to strengthen the nation's hospital system. Studying the evolution of the hospital industry since, I document evidence of the long-term persistence of short-term general hospitals within the U.S. I further explore the impact of construction of new hospitals under the Hill-Burton Act, finding that Hill-Burton construction significantly altered market structure today, with limited crowd-out of existing hospitals. Using new hospitals constructed using Hill-Burton funds as an exogenous source of variation in present hospital market structure, I find significant increases in the number of hospitals adopting specialized services in markets with greater hospital density, leading to reductions in the distance patients must travel to reach a hospital offering each service. My results imply that government subsidization of firm start-up costs can have significant impact on the long-term competitiveness of industries with highly persistent market structure. I also explore the effect of hospital market structure on utilization of hospital services. My results suggest that the impact of Hill-Burton construction of new hospitals on utilization of hospital services was less than 3% across a broad range of utilization measures.