Competition, Subsidy and Requirement

Regulations

-Effects of State Policies and their Interactions on Hospital Uncompensated Care Provision

LEI ZHANG

Andrew Young School of Policy StudiesGeorgia State University

June 10, 2008

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Motivation

• Increasing demand for hospital uncompensated care

• Decreasing hospital ability to supply• State policies

– Community benefit requirement laws (requirement)

– Uncompensated care pools (subsidy) – Certificate-of-Need (competition)

• Focus: – Policy interactions– New IRS rulings

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Research Questions

• Do regulatory interactions among states affect hospital uncompensated care provision?

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Empirical Model and Estimation

• An instrumental variable approach: Hausman-Taylor– More efficient than fixed effects– Allows to estimate time invariant variables

• Random Effects GLS– Adjusts for cluster correlated errors

• Test for endogeneity: Hausman test

UCit = β0 + β1Hospitalit + β2Marketit + β3Regulationit+β4Year + β5State + εit

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Data• Data Sources:

– American Hospital Association (AHA) Annual Survey of Hospitals

– Area Resource File (ARF)– State Inpatient Database (SID) from Healthcare

Cost and Utilization Project (HCUP)

• Sample: – 2,235 nonprofit and 295 for-profit observations– 2002-2004– 17 states

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Study States and Regulatory Variations

Among the 17 study (Green) states: – 5 states have community benefit requirement laws– 8 states have uncompensated care pools– 12 states have CON laws

Texas

Montana

Utah

Idaho

California

Nevada

Arizona

Oregon

Iowa

Colorado

Wyoming

Kansas

New Mexico

Minnesota

Illinois Ohio

Nebraska

Missouri

Flor ida

Georgia

Oklahoma

Washington

South Dakota

North Dakota

Maine

Wisconsin

Alabama

Arkansas

New York

Virginia

Indiana

Michigan

Louisiana

Kentucky

Mississippi

Tennessee

Pennsylvania

North Carolina

South Carolina

West Virginia

Vermont

Maryland

New Jersey

New Hampshire

MassachusettsConnecticut

Puerto R ico

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Key Variables

• Dependent Variable– Number of admissions for self-pay/charity patients– Percent of admissions for self-pay/charity patients

• Regulatory Variables– CON, Pool, Community Benefit Requirement, and their

interactions

• Control Variables– Hospital: teaching status, public hospitals, hospital size,

network/system members, ER, technology intensity – Market: Hirschman-Herfindahl Index (HHI), HMO

market penetration, the percentage of population aged 65+, per capita income, insurance coverage, and rural/urban

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Comparing Results With and Without Policy Interactions

Table I: Nonprofit Hospital Uncompensated Care Provision

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Comparing Results With and Without Policy Interactions

(cont.)

Table II: For-profit Hospital Uncompensated Care Provision

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Results

• Uncompensated care pools and CON laws are compliments

• Nonprofit and for-profit hospitals respond to community benefit requirement laws differently– For-profit hospitals respond to requirement

regulations by increasing their uncompensated care provision

– Nonprofit hospitals may already be providing higher levels of uncompensated care than what the requirement regulations require

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Summary

• The combined effects of a regulation bundle are sometimes different from those of a single regulation

• Community benefit requirement laws may limit the need for hospitals to seek support from the uncompensated care pools or cross-subsidization of services

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Policy Implications

• Regulation bundle such as providing public subsidies and CON may improve access to care for the uninsured

• Requirement regulations may be an effective policy option to improve health of the uninsured

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Acknowledgement

• The author thanks the following institutions for providing data for the analysis: – Georgia Health Policy Center, Andrew Young School of

Policy Studies, Georgia State University– Department of Health Administration, Robinson School

of Business, Georgia State University– William Miller

• And the following individuals for their comments:– Paul Farnham, Patricia Ketsche, William Custer,

Shiferaw Gurmu, Karen Minyard, Doug Noonan– Richard Lindrooth, Myles Maxfield