JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. University of Wisconsin Press andThe Board of Regents of the University of Wisconsin System are collaborating with JSTOR to digitize, preserve and extend access to The Journal of Human Resources. ABSTRACTThis study uses data on hospital closures to examine the relation between exit and inefficiency in an industry where for-profit, not-for-profit, and government firms coexist. The likelihood of hospital exit over the period 1986-91 is estimated as a function of hospital relative inefficiency, ownership type, and other factors, where hospital relative inefficiency is measured using residuals from estimation of a stochastic frontier cost function. We find that less efficient hospitals were more likely to exit when ownership was for-profit or not-for-profit, but that relative inefficiency did not have a significant effect on the probability of exit for government hospitals. This content downloaded from 169.229.32.137 on Thu, 8 May 2014 21:46:02 PM All use subject to JSTOR Terms and ConditionsDeily, McKay, and Dorner 735 firms will be more likely to exit than more efficient firms when an industry of forprofit firms contracts, and the somewhat limited empirical work on exit supports this expectation (Baden-Fuller 1989; Deily 1991; Lieberman 1990; Schary 1991). But in an industry that also includes private not-for-profit and/or government-owned firms, the exit process may not operate in the same manner. In particular, the link between exit and inefficiency may be affected by differing firm objectives associated with ownership. It may be, for example, that not-for-profit or government-owned firms would tolerate a lower rate of return before exiting than for-profit firms (Bowen 1994). The objective of this paper is to use the hospital industry to examine how exit and inefficiency are related in an industry with mixed ownership. A major complication in such a study is the possibility that a firm's level of inefficiency may be linked to its ownership type. Suppose, for example, that private notfor-profit hospitals were more efficient but also less likely to exit; we would need to distinguish the effect of a higher level of efficiency from the effect of commitment to nonprofit goals on the exit decision.1 In this paper we estimate an exit equation in which we control separately for relative inefficiency and for ownership type on the probability that a hospital will exit. Specifically, we use inefficiency residuals from a stochastic frontier cost estimation as estimates of relative hospital inefficiency.The hospital industry provides a good test case for a study of ownership effects on exit and inefficiency. First, there are an ample number of all three types of ownership: in the 1980s, about...
This study examines how ownership affected changes in hospital inefficiency
In a one-year study, thirty-two physicians' antibiotic costs decreased significantly and were lower than those in a comparison group. The quality of patient care was not adversely affected, and the hospital's overall rate of nosocomial infection decreased. The success of the program led to its being adopted throughout the hospital. The dynamics of pharmacies' implementing cost-reduction strategies with voluntary medical staffs are discussed throughout the article.
This study examines the effects of a change in Medicaid fees on the volume of physician services provided to beneficiaries. The data set includes price and volume at the procedure-level for Medicaid physician services in Texas in 1991, 1993, and 1995. The empirical analysis compares the volume of services provided to Medicaid participants before and after a 1992 change in reimbursement method. The results indicate that, over the period 1991 to 1993, the change in Texas Medicaid physician fees did not have a statistically significant effect on the volume of services provided. When measured over a longer period of time (1991-1995), however, volume increased significantly when price decreased, but, when price increased, there was no significant effect on volume. The results thus provide empirical support for the behavioural offset assumption underlying the switch to Medicare's Resource-Based Relative Value Scale (RBRVS) method of physician payment. A key policy implication is that reduced fees did not lead to a lower volume of physician services provided to Medicaid patients at least over the period of analysis. However, the new Medicaid fee schedule did not have the desired effect of controlling Medicaid expenditures on physician services.
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