Event Details

Accounting and Finance, Finance seminar to be presented by Janet Gao, Georgetown University.

Janet Gao: Georgetown University

Abstract

Previously dominated by nonprofit hospitals, the U.S. hospital industry has seen a

dramatic growth of for-profit hospitals. We show that the vulnerability of for-profit

hospitals to external financing shocks can generate adverse consequences for local communities.

Using confidential patient discharge data, we show that negative shocks to

hospitals’ debt capacity lead to a greater increase in patient mortality in for-profit

hospitals than in nonprofit ones. This differential effect is not driven by differences

in patient characteristics or patient-hospital sorting. It is concentrated among vulnerable

patient populations, namely those without private insurance and greater health

risks. We elucidate a mechanism: Likely due to nondistribution laws and tax exemption,

nonprofit hospitals hold deeper cash reserves and thus can maintain spending on

medical staff and equipment during the Crises. Overall, our evidence suggests that

nonprofit hospitals are more resilient to capital market shocks and can better serve

social interests during financially challenging times.