TY - JOUR AU - Hansmann, Henry AU - Kessler, Daniel AU - McClellan, Mark TI - Ownership Form and Trapped Capital in the Hospital Industry JF - National Bureau of Economic Research Working Paper Series VL - No. 8989 PY - 2002 Y2 - June 2002 DO - 10.3386/w8989 UR - http://www.nber.org/papers/w8989 L1 - http://www.nber.org/papers/w8989.pdf N1 - Author contact info: Henry Hansmann Yale Law School 127 Wall Street P.O. Box 208215 New Haven, CT 06520-8215 Tel: (203) 432-4966 Fax: (203) 432-4177 E-Mail: henry.hansmann@yale.edu Daniel Kessler Stanford University 434 Galvez Mall Stanford, CA 94305 Tel: 650/723-0596 E-Mail: fkessler@stanford.edu Mark B. McClellan Director, Duke-Margolis Center for Health Policy Robert J. Margolis MD Professor of Business, Medicine and Policy 100 Fuqua Drive Box 90120 Durham, NC 27708 Tel: 919.660.7963 Fax: NA E-Mail: mark.mcclellan@duke.edu M1 - published as Henry Hansmann, Daniel Kessler, Mark B. McClellan. "Ownership Form and Trapped Capital in the Hospital Industry," in Edward L. Glaeser, editor, "The Governance of Not-for-Profit Organizations" University of Chicago Press (2003) AB - Over the past 20 years, demand for acute care hospital services has declined more rapidly than has hospital capacity. This paper investigates the extent to which the preponderance of the nonprofit form in this industry might account for this phenomenon. We test whether rates of exit from the hospital industry differ significantly across the different forms of ownership, and especially whether secular nonprofit hospitals reduce capacity more slowly than do other types of hospitals. We estimate the effect of population changes (a proxy for changes in demand) at the zip-code level between 1985 and 1994 on changes in the capacity of for-profit, secular nonprofit, religious nonprofit, and public hospitals over the same period, holding constant metropolitan statistical area (MSA) fixed effects and other 1985 baseline characteristics of residential zip codes. We find that for-profit hospitals are the most responsive to reductions in demand, followed in turn by public and religiously affiliated nonprofit hospitals, while secular nonprofits are distinctly the least responsive of the four ownership types. ER -