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Rural Hospital Ownership and Competition

This paper asks how hospital ownership - nonprofit, for-profit, or government - affects medical service provision in the rural context. It considers two distinct ownership effects: 1) the direct effect of hospital ownership and 2) the spillover effect of the market mix of hospital types on a hospital's service offerings.

It finds that ownership matters a great deal in the rural context. Nonprofit are more likely than for-profit hospitals to offer unprofitable services, many of which have previously been found to be in short supply in rural areas. Nonprofits also respond less than for-profits to a change in profitability of services. Moreover, nonprofit hospitals with more for-profit competitors act more like for-profits than other nonprofits, perhaps because they must make up for lost revenue due to cream-skimming by for-profit hospitals or because the characteristics of those markets favor that type of behavior.