Rural Hospital Ownership and Competition

Jill R. Horwitz, University of Michigan Law School
Austin Nichols, urban institute


This paper asks how hospital ownership – nonprofit, for-profit, or government – affects medical service provision in the rural context. Here we consider 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. We find 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.