Price management in nonprofit hospitals

Abstract

This study examines whether nonprofit hospitals (NPHs) use price increases to overstate reported charity care spending. Anecdotal evidence points to hospitals raising prices to maximize Medicare's supplemental reimbursement and to maximize collection from self-pay and uninsured patients. This study provides empirical evidence that NPHs raise prices in part to satisfy the state's charity care requirements and to substitute real care with price-valued charity care. The ratio of charges to costs (RCC), price standardized by cost - a measure for comparing revenues generated to estimate costs allocations, is used to test the association between price increases and charity care reporting by NPHs. We hypothesize and find evidence that NPHs facing financial and political pressures in addition to charity care regulations are more likely to report a higher value of charity care.

Citation

Zeidan, R. and Khumawala, S. (2014), "Price management in nonprofit hospitals", Journal of Public Budgeting, Accounting & Financial Management, Vol. 26 No. 1, pp. 50-80. https://doi.org/10.1108/JPBAFM-26-01-2014-B002