Market Forces and the Public Good: Competition Among Hospitals and Provision of Indigent Care
Richard G. Frank
David S. Salkever
The research presented here focuses on the impact of competitive forces
on the provision of social or merit goods by non-profit hospitals. We
specifically examine the behavior of altruistic non-profit hospitals in the
supply of charity care. The effects of competitive pressures and past
charity care provision on the supply of philanthropic donations to nonprofit
hospitals are also examined. Empirical models of the supply of
donations and charity care are specified and estimated using data on nonprofit
hospitals in Florida for the years 1980-1984. The coefficient
estimates imply strong income effects in the charity care supply equations.
This raises the possibility that competitive pressures and limits on
hospital payments, under public insurance programs, may reduce the supply of
indigent care. The results from the supply of donations models suggest that
philanthropic donations will alleviate the competitive pressures to a small
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