The effect of competitive pressure on charity: Hospital responses to price shopping in California

Abstract

Since higher charges to private patients are a major source of financing for hospital care to the uninsured, increased price shopping by private payers may mean that hospitals are less able to provide such care. I study the effect of increased price shopping on California hospital markets over the 1984–1988 period. I find that there was a large fall in net private revenues and net income in the least concentrated hospital markets in the state after the advent of price shopping. Perhaps as a result, care to the uninsured fell dramatically in these markets as well, relative to more concentrated markets.