The Impact of Privatization: Evidence from the Hospital Sector / Mark Duggan, Atul Gupta, Emilie Jackson, Zachary S. Templeton.

Format:

Book

Author/Creator:

Duggan, Mark.

Contributor:

National Bureau of Economic Research.

Gupta, Atul.

Jackson, Emilie.

Templeton, Zachary S.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30824.

NBER working paper series no. w30824

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

Privatization has been shown to increase growth and profitability of public firms. However, effects on consumers are understudied. We study potential trade-offs in the US hospital sector where public control declined by 42% over 1983-2019. Private operators may improve hospitals' financial performance, but a focus on profitability may adversely affect access to care for certain patients. Using national data across all hospitals and patients, we study 258 hospital privatizations over the 2000-2018 period. Private operators improve profitability so that hospitals generate a modest surplus, primarily by increasing mean revenue per patient. However, this is partly achieved by differentially reducing the intake of low-income Medicaid patients, who are typically less profitable than other groups due to lower reimbursement rates. While other patients appear to be absorbed by neighboring hospitals, Medicaid patients experience an aggregate decline in utilization at the market-level, which we interpret as a decline in access to care. Hospital privatization therefore partially offsets the benefits of providing publicly funded health insurance through Medicaid, and our estimates imply it is quantitatively important. The aggregate decline in Medicaid volume is detected only in more concentrated hospital markets, suggesting market power is a key driver.

Notes:

Print version record

January 2023.