WORKING 

 PAPERS

 Hospital Competition and Charity Care

Christopher Garmon

WORKING PAPER NO. 285

October 2006

___________________________________________________________________________

FTC Bureau of Economics working papers are preliminary materials circulated to stimulate discussion

and critical comment. The analyses and conclusions set forth are those of the authors and do not

necessarily reflect the views of other members of the Bureau of Economics, other Commission staff, or

the Commission itself. Upon request, single copies of the paper will be provided. References in

publications to FTC Bureau of Economics working papers by FTC economists (other than

acknowledgment by a writer that he has access to such unpublished materials) should be cleared with the

author to protect the tentative character of these papers.

______________________________________________________________________________

BUREAU OF ECONOMICS

FEDERAL TRADE COMMISSION

WASHINGTON, DC 20580
1 The views expressed in this paper are the author’s, not necessarily those of the

Federal Trade Commission or any individual Commissioner. I would like to thank Marissa

Crawford and Michelle Kambara for their valuable research assistance on this project. I would

also like to thank Gloria Bazzoli, Denis Breen, Cory Capps, Martin Gaynor, Daniel Hosken,

participants at the American Society of Health Economists Conference, and anonymous referees

for their helpful comments and suggestions. Any remaining errors are my responsibility.

Hospital Competition and Charity Care

Christopher Garmon1

Bureau of Economics

Federal Trade Commission

Washington, DC

Draft: October 2006

Abstract: This paper explores the relationship between competition and hospital charity care by

analyzing changes in charity care associated with changes in a hospital’s competitive

environment (due to mergers and divestitures), using hospital financial and discharge data from

Florida and Texas. Despite the pervasive belief that competition impedes a hospital’s ability to

offer services to the uninsured and under-insured, I find no statistically significant evidence that

increased competition leads to reductions in charity care. In fact, I find some evidence that

reduced competition leads to higher prices for uninsured patients.
2 Rhoades (2005)

3 This is 300% of the poverty threshold in 2000.

4 Herring (2005)

5 Vladeck (2006), page 42

2

1. Introduction

In 2003, over 25 percent of the U.S. population under age 65 lacked health insurance at

some point during the year. Almost 14 percent of the U.S. population under age 65 was

uninsured for the entire year.2 For many of the uninsured, but particularly those with low incomes

and high annual health care usage, charity care by health care providers represents a large fraction

of the healthcare they receive. For the uninsured overall between 1996 and 2000, 64 percent of

their healthcare was charity care. For uninsured families of four with incomes less than $51,0003

and average annual healthcare usage greater than $10,000, 87 percent of their health care was

charity care.4

Given the relatively large number of Americans who lack health insurance and their

dependence on charity care, it is surprising how little research exists about the effect of

competition on the provision of charity care. This may be due to the widespread belief that

increased competition inhibits a provider’s ability to offer charity care because managed care

payers pay less with more provider competition. In other words, many believe that insured

patients, particularly managed care and privately insured patients, cross-subsidize a hospital’s

charity care. If a hospital must charge less to private payers due to increased competition, it will

have fewer resources to treat the uninsured. As one author recently stated: “The more the

financing of hospital care moves in the direction of a ‘perfect’ market, the less and less funding

for community service there will be.”5 Throughout the health policy literature, this view of the

inverse relationship between competition and charity care is seen as almost tautological. 

However, having market power does not imply that it will be used for philanthropy.

Certainly, there is no expectation of this with a for-profit firm, but many hospitals are non-profit

entities. The expectation is that non-profit hospitals have their community’s welfare as an
6 See Weissman (2005); By law, hospitals with emergency rooms must at least

stabilize patients before transfer regardless of ability to pay and some states and local

jurisdictions have additional access regulations, so some charity care is mandated by law.

However, for private hospitals, much charity care is at the hospital’s discretion. First and

foremost, uninsured patients are, at least initially, faced with the hospital’s “billed charges” (i.e.,

list price) for their services, not the discounted prices most insured payers face. Except in

Maryland, these charges are set by each hospital or system. In addition, hospitals set their charity

care policy (e.g., based on patient income) and its accessibility, if they have an explicit charity

care policy. Hospitals also exercise discretion in how aggressively they attempt to collect bad

debt and/or how readily they convert it to “charity care” retroactively.

7 GAO (2005)

3

objective, so they will provide free or below cost services to those in need. (In fact, previous

theoretical models of charity care model it as a direct argument of the hospital’s utility function.)

Recently, the behavior of non-profit hospitals in providing charity care has been called into

question. Several high-profile lawsuits have been filed against non-profit hospital systems

accusing them of providing too little charity care and over-charging the uninsured.6 Congress

recently convened hearings to investigate whether non-profit entities (including hospitals)

provide community benefits commensurate with their status. A GAO report prepared for those

hearings found that the difference between the average charity care provided by non-profit

hospitals and that provided by for-profit hospitals was surprisingly small and, in one of the five

states studied, was even negative. 7

It is possible that hospitals (non-profit and for-profit) treat their uninsured patients much

as recent research suggests they treat their managed care customers when obtaining market

power: by increasing the effective price or, in the case of the uninsured, reducing charity care. In

any event, the effect of competition on hospital charity care is an empirical question, one that has

received little attention, particularly in the past ten years.

The only published articles, of which I am aware, that investigate the relationship

between competition and charity care are Frank and Salkever (1991), Gruber (1994), Mann et al.

(1995), and Mann et al. (1997). Frank and Salkever’s results imply that overall charity care will

increase as the number of hospitals increase (holding overall beds constant), but their model is
8 Exhibit 2 on page 267 of Mann et al. (1995).

9 Mann et al. (1997), page 230.

4

estimated using data from Maryland, where hospital prices are regulated. Using California data,

Gruber (1994) and Mann et al. (1995) both find that charity care decreases faster in relatively

competitive markets than in relatively uncompetitive markets in response to an exogenous

reimbursement change affecting all hospitals (e.g., switch from a charge based system to a

prospective payment system for Medicare). Although closely related, these latter two findings

don’t directly address the relationship between competition and charity care. Gruber, in

particular, investigated the effect of the regime shift in California in 1983 that allowed selective

contracting by health insurers on the provision of charity care and how this varied across

competitive conditions. He found that charity care fell more in relatively competitive markets in

response to this regime change, but did not report whether it remained higher than or fell below

the charity care provided in less competitive markets. Likewise, Mann et al. (1995) investigated

the effect of Medicare and Medi-Cal reimbursement changes on charity care and its relationship

to competition. They also found that charity care fell more in competitive markets, but one table8

suggests that it remained higher than in less competitive markets. Mann et al. (1997) again report

that hospitals provide more uncompensated care in competitive markets, but also find that “the

greater the degree of HMO penetration, the lower the provision of uncompensated care relative to

the hospital’s size, with the effect being stronger in the most competitive markets.”9 None of

these papers investigate the effect of competition changes (i.e., mergers and divestitures) on

charity care. Apart from Mann et al. (1997), the previous studies used data exclusively from the

early and mid 80's, before the rise of managed care and subsequent backlash of recent years.

In this paper, I investigate the relationship between changes in competition and changes

in charity care using hospital financial and discharge data from Florida and Texas from 1999 and

2002. Florida and Texas are two of the few states that report detailed hospital financial

information including charity care, bad debt and the net revenue received from uninsured

patients. The hospital markets in Florida and Texas are not price-regulated, allowing the

possibility that a hospital could use additional market power rents from managed care customers
10 Bazzoli et al. (2005)

5

to increase charity care. In addition, both Florida and Texas have many for-profit and non-profit

hospitals, providing a means to test whether mergers and divestitures have different effects on

charity care depending on the type of ownership. However, hospitals in the two states face

different regulatory environments. Florida is a “certificate of need” state, in which hospital entry

and expansion are regulated, while Texas is not. Using the data from both states may provide

some insight on a hospital’s response to changing competitive conditions under different

regulatory systems.

Apart from data availability, the time period 1999-2002 is chosen for two reasons. First,

in both states, many mergers and divestitures occurred in 2000 and 2001 between hospitals near

one another, producing the variation in concentration necessary to study the effects of

competition on charity care. Second, this time period is distinguished by its relative lack of

hospital antitrust activity. Between 1995 and 1999, the Federal Trade Commission, the

Department of Justice, and the California Attorney General’s Office were unsuccessful in six

straight hospital merger challenges. Between 1999 and 2002, the federal antitrust agencies did

not challenge any hospital mergers. Thus, the period between 1999 and 2002 is likely one in

which hospitals felt relatively unconstrained by antitrust regulation. Inferences drawn about the

effects of hospital competition using data from this period are likely to be more accurate.

As one might suspect, the main empirical challenges to studying competition’s effect on

charity care are measuring the level of competition faced by a hospital and the charity care

provided by the hospital. Following the previous literature, I measure charity care using the

hospital’s inpatient charity care and bad debt charges multiplied by the hospital’s cost-to-charge

ratio. To more directly measure competition’s impact on uninsured patients, I also analyze the

hospital’s net inpatient revenue per admission for uninsured patients. I also analyze outpatient

charity care and bad debt costs since there is some evidence that outpatient services to the

uninsured have been declining more rapidly in recent years than inpatient services, particularly

among private hospitals.10 Competition is measured with the system-specific HerfindahlHirschman Index (SSHHI), which has been used by many researchers (such as Gruber (1994) and
11 Charity care is also sometimes provided to insured patients with high co-pays and

deductibles, but most charity care is provided to uninsured patients.

6

Capps and Dranove (2004)) to study hospital competition. 

Overall, I find some evidence that competition and charity care, if anything, are positively

related. With the exception of Texas for-profit hospitals, I find little evidence that increasing

concentration either increases or reduces charity care as measured by uncompensated inpatient

care costs. For Texas for-profit hospitals, I find evidence that increasing concentration is

associated with reduced charity care. I find some evidence, particularly strong in Texas, that

hospitals facing reduced competition increase their prices to uninsured patients. Although further

work is needed to investigate the determinants of hospital charity care, these results provide no

support to the claim made by some that hospital mergers lead to benefits for uninsured patients

through cross-subsidization from insured patients.

The paper is organized as follows. Section 2 describes the econometric model and its

theoretical basis. Section 3 describes the data and construction of the variables. Section 4

describes and discusses the results. Section 5 concludes and discusses areas for further work.

2. Model

Frank and Salkever (1991) and Gruber (1994) both model charity care as a direct

argument of a hospital’s utility function. This seems unnecessarily ad hoc in motivating an

analysis of charity care and counterintuitive as well. It would seem to suggest, for instance, that a

hospital would benefit if more of its patients were poor and uninsured, needing charity care.

Instead, I follow Gaynor and Vogt (2003) and model hospital utility as a function of profit and,

separately, quantity. The latter argument reflects the possibility that a hospital’s objective may

not coincide perfectly with profit-maximization, but may also reflect a desire to serve the

community by providing more hospital services than would maximize profit. In this context,

charity care can be seen as a means to practice price discrimination: the discount given to

uninsured patients (possibly contingent on some imperfect observation of the patient’s wealth).11

However, unlike price discrimination in other industries, charity care (as well as the discounts

given to insured patients) may be used to satisfy objectives other than pure profit-maximization. 
12 Hospitals have no say in the price they must charge to their Medicare and

Medicaid patients. Without loss of generality, it is assumed that the hospital’s profit from serving

Medicare and Medicaid patients is zero. 

7

Consider a market with N hospitals, each providing hospital services (which can be

represented with a quantity metric Q) to two types of customers: insured patients (super-scripted

with an i) and uninsured patients (super-scripted with a u). Each hospital h chooses the price to 

charge its insured patients, ph

i

, and the price to charge its uninsured patients, ph

u

, to maximize

utility subject to a break-even constraint:

(1)

where

(2)

and 

(3)

reflecting the competition faced by hospital h from the N-1 other hospitals in providing services

to the two types of patients. Hospital h’s profit is:12

(4)

Assuming the profit constraint in (1) does not bind, the hospital’s first order necessary

condition with respect to the uninsured price is:

(5)

where
13 This, of course, requires that ,

u

 < ,

i

 (i.e., > in absolute value) which is likely since

insured patients only see a small portion of any hospital price increase in their co-insurance, if

they see any of it at all. 

8

(6)

for X = A, Q. Rearranging this to solve for the uninsured price/cost margin:

(7)

where g

u

 is the price elasticity of hospital h’s residual demand from uninsured patients. Equation

(7) is, of course, just a modified version of the Lerner Index of market power. In particular, it

implies that as competition increases, which increases (in absolute value) the hospital’s elasticity

of residual demand from uninsured patients, the price charged to uninsured patients will fall. As

(7) illustrates, this effect will be smaller for hospitals with objectives apart from profitmaximization. Of course, there is also a condition analogous to (7) for insured patients.

However, the derivation of (7) assumes that the hospital’s profit constraint does not bind.

If the profit constraint binds, it is possible that the average price charged to patients is higher than

the hospital would set without the constraint (i.e., the hospital would like to lower its price to

both types of patients to provide more services to the community (i.e., more Q), but cannot

without generating a loss). If competition is reduced, particularly for insured patients, lowering

(in absolute value) the hospital’s elasticity of residual demand from insured patients, the hospital

may be able to increase the price charged to insured patients while reducing the price charged to

uninsured patients, leading to an overall increase in Q.13

Therefore, it is not clear whether reduced competition will lead to more or less charity

care. Since the effect described in the previous paragraph requires the profit constraint to be

binding and requires objectives other than profit-maximization, one would expect to most often

observe a reduction in competition lead to increased charity care for non-profit hospitals in

competitive markets. Consistent with (7), charity care reductions in response to lessening
9

competition should be more often observed from for-profit hospitals in less competitive markets

(where the profit constraint does not bind). 

Given the previous discussion, the price charged to uninsured patients by a hospital is

modeled as a function of the competition the hospital faces and other characteristics of the

hospital:

(8)

for hospital h belonging to system s at time t. COMP is the level of competition faced by the

system to which h belongs. The SSHHI (described in more detail below) will be used as a proxy

for this. X is a vector of hospital characteristics related to the cost of providing care to the

uninsured or the demand for hospital services by the uninsured that is time dependent (e.g., the

mix of uninsured patient diagnoses). Y is a vector of hospital characteristics that is not time

dependent (e.g., number of licensed beds) for the duration of the data sample. J+: is the error

term with J the fixed, hospital-specific component of the error. J can be thought of as the

aggregation of factors that affect the cost or demand of hospital services for the uninsured, but

are unobservable or difficult to measure (e.g., ease of access via public transportation). 

The presence of hospital-specific, but unmeasurable factors that affect charity care makes

the simple cross-sectional estimation of (8) potentially unreliable as some of these factors may be

correlated with the hospital’s patient flows which are used to measure the level of competition

facing the hospital. To avoid this problem, instead of estimating (8), I estimate the differenced

version of (8):

(9)

Even after differencing, two problems remain which may bias the results. First, as

hospitals constantly and imperfectly adjust to new equilibria, hospitals with lower prices may be

more likely to increase their prices and hospitals with higher prices may be more likely to lower

their prices. In addition, under-performing hospitals are more likely to be acquired, potentially by

nearby hospitals. Following Krishnan (2001), I include the residual of the base period’s cross

sectional regression as another covariate to account for this problem.

Second, since the competition measure, SSHHI, is based on market shares within sub-
14 A detailed description of the data and variables is included in Appendix A.

10

(10)

groups, which are partially determined by price, there is the potential for bias from the use of an

endogenous variable. To avoid this bias, I use the predicted change in the SSHHI based on the

base period market shares. (In other words, the 2002 shares are calculated using the 1999 data

with the 2002 system configurations.) Since some bias may remain because of the endogeniety

of price and market shares in the base period, I also calculate the SSHHI using flows for insured

patients, not uninsured patients. This has the added benefit of more directly testing the central

hypothesis that increases in market power over insured patients will lead to more charity care

through cross-subsidization.

Since theory suggests that the effect of competition on charity care and the price charged

to uninsured patients will vary with the objectives of the hospital, equation (9) is estimated

separately for for-profit and non-profit hospitals. In addition, since theory suggests that the effect

of changes in competition on changes in charity care could vary with the initial competitive

conditions, I include the base period (1999) SSHHI as an independent variable. While equation

(9) eliminates any hospital characteristic that is constant over time, it is possible that charity care

may change at a different rate at teaching hospitals and private hospitals with many public

hospitals nearby since teaching hospitals and public hospitals are the primary “safety-net”

hospitals in many communities. The number of public hospitals in the hospital’s county and a

dummy variable for teaching status are included as independent variables to account for this

possibility. Thus, the model actually estimated is:

3. Data and Variable Construction14

The primary source of data for this project is hospital financial and inpatient discharge

data from the Florida Agency for Health Care Administration, the Texas Department of Health
15 Appendix B lists the hospital acquisitions and divestitures in both states.

16 All short-term general acute-care hospitals (including cardiac, pediatric,

orthopedic, oncology, and surgery specialty hospitals) are included in the calculation of the

SSHHI, even if they did not meet the criteria above regarding uninsured patients and charity care.

17 For the outpatient analysis, private short-term general acute-care hospitals that

reported positive outpatient charity care amounts for both years were included even if the number

of inpatient cases was less than 100. There are 128 such hospitals in Florida and 128 such

hospitals in Texas.

18 The cost-to-charge ratio is applied to avoid measuring “increases” in charity care

that are only driven by increases in the hospital’s list prices. 

11

and the Texas Health Care Information Council. Data from 1999 and 2002 was used to capture

variation in competitive conditions during a time of relative hospital antitrust inactivity. In 2000

and 2001, 19 hospitals in Texas and 18 hospitals in Florida were acquired by or divested from

hospital systems, changing the competitive conditions in many markets in both states.15 Only

private short-term general acute-care hospitals that served at least 100 uninsured inpatients in

each year and reported inpatient charity care and uninsured revenue amounts for both years are

included in the inpatient analyses.16 There are 120 such hospitals in Florida and 114 such

hospitals in Texas.17

Three dependent variables are used in this analysis. As a direct measure of the price paid

by uninsured patients (and an indirect measure of the charity care provided by a hospital), I use

the net inpatient revenue per admission for self-paying patients. This price is net of charity care

and bad debt. This is denoted as the self-pay price. As a direct measure of charity care, I use total

inpatient charity care and bad debt charges multiplied by the hospital’s cost-to-charge ratio.18

This is denoted as inpatient uncompensated care cost. There are important differences between

these amounts that should be kept in mind when interpreting the results. First, the self-pay price

not only captures the price paid by uninsured patients receiving charity care and those who fail to

pay the full amount owed (i.e., bad debt), it also reflects the prices paid by uninsured patients

who paid their medical bill in full. The impact of changes in competition on these latter patients

is not measured with inpatient uncompensated care cost. Second, inpatient uncompensated care

cost not only captures the charity care and bad debt of uninsured patients, but also captures
19 For instance, see Capps et al. (2002).

12

charity care granted to insured patients (such as those with high co-pays and deductibles) and the

bad debt associated with insured patients who do not pay their full co-insurance. Thus, the two

measures provide insight into competition’s impact on slightly different patient populations. 

The third dependent variable analyzed is outpatient uncompensated care cost which is

outpatient charity care and bad debt multiplied by the hospital’s cost to charge ratio. Some have

found evidence that hospitals adjust outpatient charity care at a different rate than inpatient

charity care. This may be due to regulations that make it easier for a hospital to reduce services to

uninsured outpatients than inpatients (e.g., emergency patients must at least be stabilized before

transfer regardless of ability to pay, while non-emergency patients may be required to show proof

of insurance or post partial payment before treatment). Thus, it is possible that the effect of

competition on charity care could be stronger for outpatients than inpatients. 

Competition is measured using the system-specific Herfindahl-Hirschman Index

(SSHHI). The most common measure of hospital competition used in previous studies is the

Herfindahl-Hirschman Index (HHI): the sum of the squares of the market shares for the firms in

the market. The primary problem with the HHI is that it is obviously very sensitive to market

definition. Previous studies using the HHI have defined the market using political boundaries

(e.g., counties and MSAs) or radii from the hospital. While these market definitions are

empirically convenient, they may be a poor proxy for the competition actually faced by a

hospital, since they incorporate no information about patient preferences. The most widely used

method of market definition in hospital antitrust cases–the Elzinga-Hogarty test, which is based

on patient flows–has also been shown to be inaccurate in defining hospital markets, particularly

in large urban areas.19

Given these problems, some researchers (including Gruber (1994)) have employed a

variant of the HHI, which I will denote as the System-Specific HHI (SSHHI), to study hospital

competition. The SSHHI is calculated by first dividing patients into groups and calculating the

HHI for each group. For each hospital system, the SSHHI is then the weighted average of all of

the micro-HHIs, where the weights are based on the importance of each patient group to that
20 Despite this, the SSHHI is still based on the HHI measure of competition, which

some have argued does not accurately reflect competition in differentiated markets like that for

hospital services. Currently, some alternate measures of hospital competition are being developed

(e.g., Antwi, Gaynor, and Vogt (2006)) that are based on structural models of hospital

competition. A natural extension of the current analysis would be to use these new measures,

once developed, as a substitute for the SSHHI.

21 Group 1: DRGs with a weight $ 2; Group 2: DRGs with a weight $ 1.27 and < 2;

Group 3: DRGs with a weight $ 0.91 and < 1.27; Group 4: DRGs with a weight < 0.91. DRG

weights are defined using the contemporaneous fiscal year definitions found in the Federal

Register.

13

hospital system. This measure correctly reflects the fact that hospital systems face different levels

of competition depending on the competition they face for each of the groups of patients they

serve.20 Capps and Dranove (2004) employ the SSHHI to show that mergers of competing

hospitals often lead to higher managed care prices.

For this project, I used patient groups based on zip codes and the classifications of

Diagnosis Related Groups (DRGs) used in Town and Vistnes (2001) which reflect general

categories of resource use.21 Zip code and diagnosis-based patient groups are used to reflect the

importance of distance in a patient’s choice of hospital and the fact that patients are generally

willing to travel farther for more complex diagnoses. The four Town and Vistnes (2001) DRG

groups are used instead of the roughly 500 DRGs to insure a sufficient sample size in each

patient group.

Suppose there are M zip codes in the state. Define patient group zk as the patients from

zip code z with diagnosis in group k. Each hospital system h serves a share sh

zk of the patient’s in

this group, equal to the patients in zk who go to system h divided by the total number of patients

in zk. Of each hospital system’s patients, the share Dh

zk come from group zk. (Thus, the sum of

Dh

zk over all groups zk equals 1.) If there are N hospital systems in the state, the SSHHI for

system h is:

(10) 

A hospital system that is the sole provider in all groups from which it takes patients would have a
22 The SSHHI is a system-specific measure of competition; i.e., it is the same for all

of the hospitals in a system. Most managed care contracts that involve system hospitals are

negotiated by the system, so a system-based measure of competition is probably the most

accurate representation of competition. However, it is possible that individual hospitals within a

system may negotiate their own contracts in some cases or, more likely, that the individual

competitive strengths and weaknesses of hospitals within a system may be reflected in the prices

negotiated by the system for each hospital. A variant of the SSHHI that would capture this

possibility involves weights D that are based on the zip code/diagnosis group’s importance to

each hospital and not its importance to the system overall. (Under this variant, the shares, s,

within each zip code/diagnosis group are still calculated at the level of the system.) Using this

hospital/system variant of the HHI in the analysis of uncompensated care and the self-pay price

produces competition coefficients that are slightly smaller, but no change in the qualitative

results. I am thankful to both Gloria Bazzoli and Cory Capps for suggesting this alternate

approach. 

23 The case mix index only reflects inpatient resource use, so it is not included in the

outpatient analyses. There currently exists no outpatient classification system analogous to

DRGs, so measures of resource use analogous to the case mix index are not possible for

outpatient cases. The closest system is the Medicare Ambulatory Payment Classification (APC)

which is the basis of Medicare’s outpatient prospective payment system. It is not feasible to use

these to case mix adjust outpatient visits because an outpatient visit can have more than one

APC. In any event, visit-specific outpatient data is not available publicly, so an outpatient index

could not be constructed even if it were possible to do so. For this reason, one should interpret

the outpatient results with care. 

14

SSHHI of 1.22

In addition to the possible effect of competition, changes in the costs of treating uninsured

patients (and general hospital costs as well) can affect charity care and the price charged to

uninsured patients. To control for changes in cost associated with shifts in the mix of diagnoses

seen by the hospital, I include the change in the case mix index (i.e., the average DRG weight)

for self-paying patients as an independent variable in the inpatient regressions.23 I also use the

change in the mean hourly wage for healthcare practitioners and technical occupations (e.g.,

nurses, lab technicians, etc.) from the Bureau of Labor Statistics’ Occupational Employment

Statistics as a proxy for general changes in hospital costs.

Charity care and the price charged to uninsured patients will also change with the demand

for hospital services from uninsured patients. I use two sets of variables to capture changes in this

demand. First, I use the change in the number of people below the poverty level in the hospital’s
24 Frank and Salkever (1991)

15

county as a proxy for changes in the demand for charity care. Since those below the poverty level

usually qualify for Medicaid, this change may not closely track the change in the demand for

charity care. Therefore, I also use the change in the median household income of the hospital’s

county and the change in the county’s population as proxies for the change in the demand for

charity care. In addition, a dummy variable for teaching hospitals is included to account for the

possibility that changes in charity care may be different at these hospitals than at non-teaching

hospitals. Since public hospitals are often the primary safety net hospitals for the poor and

uninsured, with objectives that are much different than private (for or non-profit) hospitals,

public hospitals are not included in the sample. Some previous research24 suggests that private

hospitals may benefit by seeing fewer uninsured patients when they are near public hospitals, so

the number of public hospitals in the private hospital’s county is included as an independent

variable to capture this potential effect. I also include a dummy variable for hospitals that

changed their type of ownership (e.g., for-profit to non-profit) between 1999 and 2002. Table 1

presents summary statistics of the Florida data and Table 2 presents summary statistics of the

Texas data. All (non-dummy, non-count) variables are transformed into logs before differencing.

4. Results

The estimated coefficients and standard errors are presented in tables 3 through 10.

Tables 3 through 5 present the primary results for Florida. Overall, there seems to be little

relationship between competition and charity care in Florida. There is a relationship among nonprofit hospitals indicating that reduced competition is associated with higher prices for the

uninsured, but this relationship is only marginally statistically significant. (Recall, competition is

inversely proportional to the SSHHI measure.)

The relationship between competition and the price charged to uninsured patients is

stronger in Texas, as seen in table 6. Reduced competition is associated with significantly higher

prices for the uninsured. The estimated coefficients on the change in SSHHI imply that a 10%

increase in the SSHHI for a for-profit system is associated with a 46-54% increase in the
25 Appendix C contains information about the distribution of the change in the

SSHHI.

26 For-profit and non-profit hospitals were pooled for this analysis to insure

sufficient degrees of freedom.

16

uninsured price. The analogous price increase for a non-profit system is 37-44%. When inpatient

uncompensated care is used as a measure (Table 7), there is no evidence of a relationship

between competition and charity care for non-profit hospitals. Among for-profit hospitals,

reduced competition leads to reduced charity care. As in Florida, there does not seem to be a

relationship between competition and outpatient uncompensated care (Table 8).

Tables 9 and 10 focus on the hospitals that experienced significant changes in their

competitive environments between 1999 and 2002. While there were many mergers and

divestitures in both states in 2000 and 2001–creating the change in concentration needed for

estimation–there were many hospitals that experienced little change in competition.25 One could

argue that including these hospitals in the analysis could mask the effect of competition changes

on charity care, which may only be present when competition changes significantly. To

investigate this, I replicated the analysis excluding all hospitals that experienced an SSHHI

change less than 0.0025 in absolute value.26 The results for Florida are given in Table 9 and those

for Texas are given in Table 10. These results are consistent with the previous results for all

hospitals: reductions in competition lead to higher prices for the uninsured in Texas, but

otherwise, there is little relationship between competition and charity care.

Of particular note in all of these results is the complete lack of support for the “crosssubsidization hypothesis:” that hospitals use increased market power to fund more charity care

or, stated in the negative, that increased competition will harm patients who rely on charity care.

Of the 32 sets of estimates presented in Tables 3 through 10, none provide support for this

hypothesis. 

The result that reduced competition leads to higher prices for uninsured patients (which is

strongest in Texas) juxtaposed against the general lack of a relationship between competition and

uncompensated care costs may reflect the slightly different patient populations covered by these

two measures. Since the self-pay price captures the uninsured who pay their entire bill, while
27 For instance, Guterman (2006)

28 See MEDPAC (2005), Figure 1

17

uncompensated care cost captures even the insured who are granted charity care, uncompensated

care cost likely better measures the services provided to the poor. The effect of reduced hospital

competition on the uninsured who do not qualify for charity care and pay in full may be similar to

the previously studied effect of reduced competition on managed care patients.

The existence of a relationship between competition reductions, self-pay price increases,

and charity care reductions (at least among for-profit hospitals) in Texas, but largely not in

Florida is somewhat puzzling at first since Florida, and not Texas, has certificate of need

regulations restricting hospital entry. Initially, one would think that changing concentration levels

would have more of an effect on prices in states with entry restrictions as merging hospitals could

take advantage of market power with less fear of nearby entry. However, this logic may not apply

to charity care. Some have argued that the entry of specialty hospitals near general acute-care

hospitals largely shuts off the cross-subsidization mechanism supporting charity care since

specialty hospitals often siphon off the most profitable insured patients.27 No state has seen more

entry of specialty hospitals in recent years than Texas.28 Thus, it is possible that the lack of any

relationship between competition and charity care in Florida reflects the balance between the

cross-subsidization mechanism (in which increased competition leads to reduced charity care)

and the price discrimination mechanism (in which increased competition leads to lower prices to

the uninsured and increased charity care). In Texas, with the entry and presence of many

specialty hospitals, the cross-subsidization mechanism may be reduced leaving only the price

discrimination mechanism which, as theory predicts, is stronger among for-profit hospitals. 

5. Conclusions and Further Work

Overall, with the exception of Texas for-profit hospitals, there seems to be little evidence

of a relationship between competition and charity care. For Texas for-profit hospitals, increased

concentration (i.e., reduced competition) is associated with reduced charity care. There is some

evidence (strongest in Texas) that reduced competition may lead to higher prices for uninsured
18

patients. Most noticeable in all of the results is the lack of any statistically significant evidence

for the cross-subsidization hypothesis. The data provides no statistically significant evidence that

increased competition leads to reductions in charity care. The claim that hospitals will use market

power to increase services to the poor is largely unsupported by this data.

The results also highlight the need for further work to study the relationship between

competition and hospital charity care. A number of new competition measures, such as the LOCI

measure of Antwi, Gaynor, and Vogt (2006), are currently being developed and may prove to be

better measures of hospital competition than the SSHHI. A natural extension of the current

analysis would be to use these new measures, once developed, as a substitute for the SSHHI.

The difference between the Texas and Florida results highlights another potentially useful

area for further study. The speculation that the Texas results may be due to specialty hospital

entry could be explored by looking at the charity care of general acute care hospitals near newly

entered specialty hospitals and comparing this with the charity care of general acute care

hospitals unaffected by specialty hospital entry.
19

Table 1: Florida Data

Variable Mean Std. Dev. Min Max

self_pay_price99 $12,834 $5,865 $1,664 $43,731

self_pay_price02 $18,586 $7,659 $2,865 $49,676

ip_uncompensated_care_costs99 $3,778,725 $5,617,764 $424,037 $35,857,684

ip_uncompensated_care_costs02 $4,709,172 $6,279,731 $470,258 $40,291,552

op_uncompensated_care_costs99 $2,175,541 $2,515,758 $114,528 $16,358,652

op_uncompensated_care_costs02 $2,574,117 $2,925,200 $182,395 $20,382,064

self_pay_cases99 648 630 101 3,974

self_pay_cases02 738 853 102 7,658

profit 0.542 0.5 0 1

public_num 1 2 0 7

teach 0.033 0.18 0 1

type_change 0.017 0.129 0 1

rural 0.133 0.341 0 1

cmi_selfpay99 1.038 0.196 0.546 1.741

cmi_selfpay02 1.026 0.184 0.508 1.562

sshhi99 0.4167 0.072 0.2414 0.7154

sshhi02 0.4175 0.0686 0.2629 0.7133

poverty99 103,616 121,404 3,205 409,371

poverty02 113,997 131,329 3,102 441,160

medhhinc99 $36,258 $4,324 $26,869 $48,732

medhhinc02 $37,566 $5,087 $27,191 $51,587

pop99 769,806 690,606 19,467 2,220,961

pop02 809,314 722,653 19,347 2,314,547

wage99 $21.87 $1.99 $15.35 $27.92

wage02 $25.40 $1.91 $20.57 $30.46
20

Table 2: Texas Data

Variable Mean Std. Dev. Min Max

self_pay_price99 $8,739 $7,699 $327 $61,002

self_pay_price02 $10,729 $8,243 $247 $35,850

ip_uncompensated_care_costs99 $5,657,788 $5,576,786 $234,765 $27,392,992

ip_uncompensated_care_costs02 $7,170,062 $7,328,557 $263,015 $42,070,748

op_uncompensated_care_costs99 $2,402,253 $2,363,079 $121,641 $9,500,852

op_uncompensated_care_costs02 $3,304,291 $3,594,562 $85,568 $21,161,774

self_pay_cases99 712 512 104 2,606

self_pay_cases02 739 565 121 3,059

profit 0.395 0.491 0 1

public_num 1 1 0 2

teach 0.228 0.421 0 1

type_change 0.035 0.185 0 1

rural 0.158 0.366 0 1

cmi_selfpay99 1.017 0.245 0.526 1.850

cmi_selfpay02 1.051 0.264 0.283 2.200

sshhi99 0.3981 0.0722 0.2688 0.6253

sshhi02 0.3969 0.0758 0.1878 0.6254

poverty99 131,186 149,121 2,474 466,931

poverty02 148,689 169,302 2,895 520,702

medhhinc99 $37,927 $9,171 $22,746 $73,775

medhhinc02 $39,269 $9,551 $24,449 $75,866

pop99 958,205 1,100,446 21,878 3,359,671

pop02 1,009,969 1,155,106 21,892 3,540,254

wage99 $20.92 $2.05 $16.08 $25.34

wage02 $25.30 $2.10 $19.57 $28.64
21

Table 3

State: Florida

Dependent Variable: Self-Pay Price Change

------------------------------------------------------------------------------

 Variable FOR-PROFIT NON-PROFIT

------------------------------------------------------------------------------

 1999 SSHHI -0.511*** -0.421*** -0.153 -0.158 

 (0.093) (0.075) (0.170) (0.142) 

 SSHHI Change 0.062 -0.030 1.826** 1.370* 

 (0.591) (0.740) (0.777) (0.805) 

 Self-Pay CMI Change 0.327 0.219 -0.366 -0.336 

 (0.298) (0.294) (0.498) (0.510) 

 CS Residual -0.594*** -0.592*** -0.559*** -0.578*** 

 (0.138) (0.138) (0.142) (0.155) 

 Wage Change -0.030 0.085 1.143* 1.356* 

 (0.302) (0.300) (0.660) (0.776) 

 Poverty Change -0.584 -0.283 

 (0.452) (0.939) 

 Population Change 0.108 0.375 

 (0.902) (1.672) 

 Median Income Change 0.109 -2.457 

 (1.169) (2.566) 

 Teach -0.156 -0.152 

 (0.399) (0.398) 

 # of Pub. Hosp. -0.007 -0.015 0.161*** 0.147***

 (0.019) (0.019) (0.036) (0.031) 

 Type Change 0.525** 0.411* 

 (0.223) (0.221) 

------------------------------------------------------------------------------

 N 65 65 55 55

 F 36.792 30.599 19.034 20.795 

 R2 0.785 0.778 0.618 0.605 

 Adj-R2 0.759 0.747 0.543 0.518 

------------------------------------------------------------------------------

Huber-White robust standard errors in parentheses

* p<.1; ** p<.05; *** p<.01
22

Table 4

State: Florida

Dependent Variable: Inpatient Uncompensated Care Cost Change

------------------------------------------------------------------------------

 Variable FOR-PROFIT NON-PROFIT

------------------------------------------------------------------------------

 1999 SSHHI -0.215 -0.193 -0.263 -0.131 

 (0.130) (0.164) (0.165) (0.126) 

 SSHHI Change -0.299 0.092 0.581 0.259 

 (1.281) (1.193) (0.928) (1.117) 

 Self-Pay CMI Change -0.509 -0.581 -0.396 -0.311 

 (0.627) (0.623) (0.441) (0.560) 

 CS Residual -0.215*** -0.198*** -0.094 -0.099 

 (0.077) (0.072) (0.082) (0.088) 

 Wage Change 0.825 0.772 0.860 1.450** 

 (0.499) (0.536) (0.525) (0.568) 

 Poverty Change -0.088 -1.627*

 (0.689) (0.841) 

 Population Change -0.662 0.004 

 (2.550) (1.602) 

 Median Income Change 1.585 -3.423 

 (2.515) (2.349) 

 Teach -0.143 -0.112 

 (0.119) (0.159) 

 # of Pub. Hosp. 0.014 0.010 0.054 0.019 

 (0.019) (0.021) (0.054) (0.047) 

 Type Change -0.253* -0.478*** 

 (0.144) (0.175) 

------------------------------------------------------------------------------

 N 65 65 55 55 

 F 14.493 12.448 5.641 4.141 

 R2 0.519 0.518 0.424 0.436 

 Adj-R2 0.461 0.450 0.311 0.311 

------------------------------------------------------------------------------

Huber-White robust standard errors in parentheses

* p<.1; ** p<.05; *** p<.01
23

Table 5

State: Florida

Dependent Variable: Outpatient Uncompensated Care Cost Change

------------------------------------------------------------------------------

 Variable FOR-PROFIT NON-PROFIT

------------------------------------------------------------------------------

 1999 SSHHI 0.080 0.100 -0.599*** -0.578*** 

 (0.137) (0.158) (0.218) (0.214)

 SSHHI Change -2.036* -1.936 0.203 1.223 

 (1.107) (1.200) (0.993) (1.181) 

 CS Residual -0.153 -0.192* -0.211 -0.249* 

 (0.100) (0.106) (0.131) (0.134) 

 Wage Change 1.429** 1.330** -1.821* -2.215*** 

 (0.639) (0.632) (1.015) (0.812) 

 Poverty Change 0.989 -0.553 

 (0.732) (0.886) 

 Population Change 2.566 -2.206 

 (2.296) (2.754) 

 Median Income Change -0.007 4.749** 

 (1.838) (2.291) 

 Teach -0.188 -0.192* 

 (0.151) (0.109) 

 # of Pub. Hosp. -0.068** -0.063** 0.085* 0.104** 

 (0.027) (0.027) (0.050) (0.046) 

 Type Change -0.962*** -0.797*** 

 (0.202) (0.234) 

------------------------------------------------------------------------------

 N 67 67 61 61 

 F 4.691 4.066 94.325 62.639 

 R2 0.312 0.317 0.356 0.390 

 Adj-R2 0.245 0.237 0.259 0.285 

------------------------------------------------------------------------------

Huber-White robust standard errors in parentheses

* p<.1; ** p<.05; *** p<.01
24

Table 6

State: Texas

Dependent Variable: Self-Pay Price Change

------------------------------------------------------------------------------

 Variable FOR-PROFIT NON-PROFIT

------------------------------------------------------------------------------

 1999 SSHHI -0.481* -0.200 -0.153 -0.248 

 (0.246) (0.271) (0.406) (0.292) 

 SSHHI Change 4.520*** 3.978*** 3.327** 3.811*** 

 (0.636) (0.728) (1.293) (1.313) 

 Self-Pay CMI Change 1.957** 1.858* 1.047*** 1.022*** 

 (0.960) (0.925) (0.345) (0.326) 

 CS Residual -0.664*** -0.686*** -0.480*** -0.484*** 

 (0.179) (0.180) (0.140) (0.144) 

 Wage Change 0.056 -0.119 -0.174 -0.378 

 (1.161) (1.283) (1.436) (1.334) 

 Poverty Change -0.461 -0.838 

 (0.490) (1.572) 

 Population Change -0.557 -3.469 

 (0.849) (3.844) 

 Median Income Change 6.688* 0.692 

 (3.896) (4.508) 

 Teach -0.332 -0.315 -0.127 -0.154 

 (0.672) (0.664) (0.211) (0.230) 

 # of Pub. Hosp. -0.062 -0.004 -0.024 -0.032 

 (0.149) (0.155) (0.131) (0.145) 

 Type Change -0.118 -0.028 

 (0.309) (0.310) 

------------------------------------------------------------------------------

 N 45 45 69 69 

 F 82.050 65.290 5.810 5.844 

 R2 0.558 0.585 0.318 0.326 

 Adj-R2 0.447 0.466 0.228 0.224 

------------------------------------------------------------------------------

Huber-White robust standard errors in parentheses

* p<.1; ** p<.05; *** p<.01
25

Table 7

State: Texas

Dependent Variable: Inpatient Uncompensated Care Cost Change

------------------------------------------------------------------------------

 Variable FOR-PROFIT NON-PROFIT

------------------------------------------------------------------------------

 1999 SSHHI -0.535** -0.403* -0.197 -0.163 

 (0.199) (0.199) (0.246) (0.174) 

 SSHHI Change -0.656** -1.076*** 0.918 0.841 

 (0.313) (0.346) (1.325) (1.301) 

 Self-Pay CMI Change -0.232 -0.326 0.116 0.126 

 (0.391) (0.416) (0.315) (0.329) 

 CS Residual 0.026 0.030 -0.130 -0.127 

 (0.113) (0.113) (0.153) (0.156) 

 Wage Change -1.567 -1.630* -0.127 -0.128 

 (1.034) (0.823) (0.783) (0.753) 

 Poverty Change 0.710** 0.176 

 (0.335) (0.714) 

 Population Change 1.259** 1.526

 (0.617) (1.516) 

 Median Income Change 2.887 -0.459 

 (2.009) (2.502) 

 Teach -0.047 -0.014 -0.218 -0.204 

 (0.132) (0.131) (0.146) (0.154) 

 # of Pub. Hosp. 0.103* 0.155** 0.089 0.084 

 (0.060) (0.062) (0.060) (0.068) 

 Type Change 0.007 0.121 

 (0.192) (0.199) 

------------------------------------------------------------------------------

 N 45 45 69 69 

 F 1028.627 303.555 3.329 3.050 

 R2 0.670 0.699 0.208 0.207 

 Adj-R2 0.588 0.613 0.104 0.089 

------------------------------------------------------------------------------

Huber-White robust standard errors in parentheses

* p<.1; ** p<.05; *** p<.01
26

Table 8

State: Texas

Dependent Variable: Outpatient Uncompensated Care Cost Change

------------------------------------------------------------------------------

 Variable FOR-PROFIT NON-PROFIT

------------------------------------------------------------------------------

 1999 SSHHI -0.558*** -0.428** -0.025 0.085 

 (0.152) (0.166) (0.194) (0.202) 

 SSHHI Change -0.051 -0.417 0.050 -0.187 

 (0.230) (0.250) (1.697) (1.584) 

 CS Residual -0.033 -0.044 -0.205 -0.220 

 (0.084) (0.090) (0.145) (0.143) 

 Wage Change -1.109 -1.232* 1.501* 1.235 

 (0.792) (0.676) (0.897) (0.914) 

 Poverty Change 0.327 -0.282 

 (0.352) (0.774) 

 Population Change 0.446 1.636 

 (0.618) (1.662) 

 Median Income Change 3.475* 1.685 

 (1.749) (2.908) 

 Teach -0.128 -0.103 -0.161 -0.135 

 (0.149) (0.145) (0.183) (0.191) 

 # of Pub. Hosp. 0.096** 0.149** 0.049 0.046 

 (0.047) (0.057) (0.058) (0.064) 

 Type Change -0.045 0.057 

 (0.126) (0.126) 

------------------------------------------------------------------------------

 N 51 51 77 77 

 F 32.133 29.391 5.330 4.970 

 R2 0.692 0.720 0.278 0.301 

 Adj-R2 0.635 0.661 0.206 0.220 

------------------------------------------------------------------------------

Huber-White robust standard errors in parentheses

* p<.1; ** p<.05; *** p<.01
27

Table 9

State: Florida

Dependent Variables: Self-Pay Price Change & Inpatient

Uncompensated Care Cost Change

Excluding hospitals with |(SSHHI Change)*10,000|<25

------------------------------------------------------------------------------

 Variable Self-Pay Price Change IP Uncomp. Care Cost Change 

------------------------------------------------------------------------------

 1999 SSHHI -0.144 -0.077 -0.304* -0.155 

 (0.197) (0.172) (0.179) (0.166)

 SSHHI Change 0.658 -0.399 0.047 -0.243

 (0.558) (0.861) (0.802) (0.929)

 

 Self-Pay CMI Change -0.069 0.048 -0.592 -0.760 

 (0.453) (0.395) (0.467) (0.556)

 CS Residual -0.648*** -0.672*** -0.103 -0.107 

 (0.099) (0.093) (0.080) (0.087)

 Wage Change 1.553** 2.084** 0.840 1.016 

 (0.748) (0.803) (0.646) (0.750)

 Poverty Change 0.129 -1.584 

 (0.885) (0.952) 

 Population Change 2.143 -0.470 

 (1.964) (2.235)

 Median Income Change -4.700 -0.976 

 (2.941) (3.158)

 Teach -0.293 -0.242 -0.047 0.016 

 (0.524) (0.445) (0.129) (0.159)

 # of Pub. Hosp. 0.002 0.002 -0.013 -0.026 

 (0.033) (0.030) (0.025) (0.031)

 Type Change 0.244 0.050 -0.325** -0.437** 

 (0.198) (0.218) (0.152) (0.177)

 Profit 0.011 0.064 0.244* 0.265* 

 (0.110) (0.117) (0.139) (0.147)

------------------------------------------------------------------------------

 N 55 55 55 55 

 F 15.020 15.147 9.170 7.312 

 R2 0.664 0.682 0.546 0.523 

 Adj-R2 0.589 0.602 0.445 0.403 

------------------------------------------------------------------------------

Huber-White robust standard errors in parentheses

* p<.1; ** p<.05; *** p<.01
28

Table 10

State: Texas

Dependent Variables: Self-Pay Price Change & Inpatient

Uncompensated Care Cost Change

Excluding hospitals with |(SSHHI Change)*10,000|<25

------------------------------------------------------------------------------

 Variable Self-Pay Price Change IP Uncomp. Care Cost Change 

------------------------------------------------------------------------------

 1999 SSHHI -1.057** -0.533* -0.200 -0.167

 (0.397) (0.276) (0.233) (0.226)

 SSHHI Change 3.840*** 3.136*** -0.106 -0.245

 (0.978) (0.873) (0.453) (0.443)

 

 Self-Pay CMI Change 0.831*** 0.748*** -0.136 -0.151 

 (0.167) (0.145) (0.127) (0.143)

 CS Residual -0.588*** -0.635*** 0.050 0.050 

 (0.143) (0.118) (0.088) (0.101)

 Wage Change -2.815* -3.341*** -0.871 -0.808 

 (1.435) (1.114) (1.116) (1.134)

 Poverty Change -1.947* 0.635 

 (0.953) (0.376) 

 Population Change -2.716** 1.607*

 (1.258) (0.909)

 Median Income Change 12.984*** -0.330 

 (3.949) (2.273)

 Teach -0.068 0.106 -0.492** -0.460**

 (0.290) (0.247) (0.189) (0.175)

 # of Pub. Hosp. -0.141 -0.025 0.207*** 0.227***

 (0.173) (0.136) (0.066) (0.078)

 Profit 0.262 0.316 0.154 0.155 

 (0.258) (0.194) (0.102) (0.103)

------------------------------------------------------------------------------

 N 38 38 38 38 

 F 38.947 44.217 15.953 11.950 

 R2 0.763 0.818 0.580 0.594 

 Adj-R2 0.689 0.753 0.450 0.449 

------------------------------------------------------------------------------

Huber-White robust standard errors in parentheses

* p<.1; ** p<.05; *** p<.01
29 For inpatient only; see footnote 19 for outpatient hospital universe.

29

Appendix A: Data and Variable Construction

Florida:

Hospital Universe:29

All short-term general acute care (hospital type = A or D) hospitals in the state of Florida

operating between 1999 and 2002, excluding the following:

1. Hospitals in the Hill-Burton program in 1999 or 2002 (i.e., hospitals that list positive HillBurton inpatient deductions in 1999 or 2002).

2. Hospitals with fewer than 100 self-paying inpatients in 1999 or 2002.

3. Hospitals for which financial information is not available.

4. Hospitals that listed no revenue from self-paying inpatients or no bad debt or charity care for

inpatients in 1999 or 2002.

Note: All short-term general acute care hospitals are included in the calculation of the SSHHI,

even if they do not satisfy 1-4.

Variables: (XX = 99, 02)

Name Description Source

self_pay_priceXX (net inpatient revenue for self-paying

patients)/(self-paying inpatient cases)

Florida Hospital Financial

Data, Florida Agency for

Health Care

Administration (AHCA)

ip_uncompensated_care

_costsXX

(deductions for inpatient bad debt +

deductions for inpatient charity

care)*(total operating expenses/total

gross revenues)

Florida Hospital Financial

Data, AHCA

op_uncompensated_care

_costsXX

(deductions for outpatient bad debt +

deductions for outpatient charity

care)*(total operating expenses/total

gross revenues)

Florida Hospital Financial

Data, AHCA

sshhiXX weighted average HerfindahlHirschman Index for insured patients

(unique to each hospital system) 

Florida Hospital Inpatient

Data, AHCA

systemXX owner of the hospital Florida Hospital Financial

Data, AHCA and the AHA

Guide to Hospitals, 1999-

2000 and 2002-2003

editions
30

cmi_selfpayXX Case Mix Index for self-paying

patients

Florida Hospital Inpatient

Data, AHCA and the

Federal Register

profit =1 if the hospital is investor-owned

in 1999, else = 0

Florida Hospital Financial

Data, AHCA 

public_num number of public hospitals in the

hospital’s county

Florida Hospital Financial

Data, AHCA 

teach = 1 if the hospital is a teaching

hospital in 1999, else = 0

Florida Hospital Financial

Data, AHCA 

type-change = 1if the hospital’s ownership type

changed between 1999 and 2002, else

= 0

Florida Hospital Financial

Data, AHCA 

povertyXX number of persons below the poverty

level (unique to each county)

Small Area Income and

Poverty Estimates, U.S.

Census Bureau

medhhincXX median household income (unique to

each county)

Small Area Income and

Poverty Estimates, U.S.

Census Bureau

popXX population (unique to each county) U.S. Census Bureau

wageXX mean hourly wage, healthcare

practitioners and technical

occupations (unique to each MSA)

(For Ocala MSA, mean hourly wage

of registered nurses used; For rural

areas, statewide mean hourly wage

for healthcare practitioners and

technical occupations used)

Occupational Employment

Statistics, Bureau of Labor

Statistics

rural =1 if the hospital is not located in an

MSA

Florida Hospital Financial

Data, AHCA
30 For inpatient only; see footnote 19 for outpatient hospital universe.

31

Texas:

Hospital Universe:30

All short-term general acute care hospitals in the state of Texas operating between 1999 and

2002, excluding the following:

1. Hospitals with fewer than 100 self-paying inpatients in 1999 or 2002.

2. Hospitals for which financial information is not available.

3. Hospitals that listed no revenue from self-paying inpatients or no bad debt or charity care for

inpatients in 1999 or 2002.

Note: All short-term general acute care hospitals are included in the calculation of the SSHHI,

even if they do not satisfy 1-4.

Variables: (XX = 99, 02)

Name Description Source

self_pay_priceXX [(net revenue for self-paying

patients)*(inpatient gross

revenue/total gross revenue)]/(selfpaying inpatient cases)

Texas Department of

Health, Annual Survey of

Hospitals

ip_uncompensated_care

_costsXX

[(deductions for bad debt +

deductions for charity

care)*(inpatient gross revenue/total

gross revenue)]*(total operating

expenses/total gross revenues)

Texas Department of

Health, Annual Survey of

Hospitals

op_uncompensated_care

_costsXX

[(deductions for bad debt +

deductions for charity

care)*(outpatient gross revenue/total

gross revenue)]*(total operating

expenses/total gross revenues)

Texas Department of

Health, Annual Survey of

Hospitals

sshhiXX weighted average HerfindahlHirschman Index for insured patients

(unique to each hospital system) 

Texas Health Care

Information Council,

Hospital Inpatient

Discharge Public Use Data

File
32

systemXX owner of the hospital Texas Department of

Health, Annual Survey of

Hospitals and the AHA

Guide to Hospitals, 1999-

2000 and 2002-2003

editions

cmi_selfpayXX Case Mix Index for self-paying

patients

Texas Health Care

Information Council,

Hospital Inpatient

Discharge Public Use Data

File and the Federal

Register

profit =1 if the hospital is investor-owned

in 1999, else = 0

Texas Department of

Health, Annual Survey of

Hospitals

public_num number of public hospitals in the

hospital’s county

Texas Department of

Health, Annual Survey of

Hospitals

teach = 1 if the hospital is a teaching

hospital in 2002, else = 0

AHA Guide to Hospitals,

2002-2003

type-change = 1if the hospital’s ownership type

changed between 1999 and 2002, else

= 0

Texas Department of

Health, Annual Survey of

Hospitals

povertyXX number of persons below the poverty

level (unique to each county)

Small Area Income and

Poverty Estimates, U.S.

Census Bureau

medhhincXX median household income (unique to

each county)

Small Area Income and

Poverty Estimates, U.S.

Census Bureau

popXX population (unique to each county) U.S. Census Bureau
33

wageXX mean hourly wage, healthcare

practitioners and technical

occupations (unique to each MSA)

(For Victoria MSA, mean hourly

wage of registered nurses used; For

Galveston PMSA, mean hourly wage

for Houston used; For rural areas,

statewide mean hourly wage for

healthcare practitioners and technical

occupations used)

Occupational Employment

Statistics, Bureau of Labor

Statistics

rural =1 if the hospital is not located in an

MSA

Texas Department of

Health, Annual Survey of

Hospitals
34

Appendix B: Hospital Changes in Ownership in 2000 and 2001

Florida:

Texas:
31 The SSHHI has been multiplied by 10,000 for ease of interpretation.

35

Appendix C: Distribution of the Change in the SSHHI31

Florida:

-------------------------------------------------------------

 Percentiles Smallest

 1% -509.9277 -604.7535

 5% -385.5595 -509.9277

10% -258.3593 -436.2939 Obs 120

25% -19.28635 -416.8438 Sum of Wgt. 120

50% -3.669012 Mean 7.343001

 Largest Std. Dev. 226.8815

75% 4.965535 388.3898

90% 388.3898 388.3898 Variance 51475.2

95% 388.3898 532.4691 Skewness .6370806

99% 532.4691 979.685 Kurtosis 5.460507

Texas:

-------------------------------------------------------------

 Percentiles Smallest

 1% -230.3932 -1193.076

 5% -42.64409 -230.3932

10% -37.41276 -230.3932 Obs 114

25% -36.11901 -200.5257 Sum of Wgt. 114

50% -3.96751 Mean -11.90648

 Largest Std. Dev. 146.0216

75% 0 52.07337

90% 8.639013 360.1818 Variance 21322.31

95% 52.07337 360.1818 Skewness -3.322726

99% 360.1818 730.0405 Kurtosis 45.04444
36

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