Abstract for: Nonprofit Hospitals and the Decline of Charity Care

Nonprofit hospital systems in the United States are divesting facilities in low-income areas and acquiring facilities in affluent areas. Critics worry that this will result in less spending on “charity care,” which is medical care provided free-of-charge when authorities determine in advance to do so. We develop a dynamic hypothesis to display the systemic nature of this phenomenon. We then formulate a system dynamics model to test the hypothesis. We find that greater access to private health insurance in affluent areas drives this phenomenon. Furthermore, we find that policymakers and regulators have a limited menu from which to choose to safeguard charity care in low-income areas. They can closely monitor the nonprofit hospital systems and revoke their nonprofit status (with its attendant tax breaks) and thereby coerce them into spending a specified amount on charity care. Or they can expand Medicaid, the state-and-federal health care insurance for low-income populations, which slightly raises reimbursement to hospitals, thereby reducing the need for charity care.