Can Nonprofits Save Lives Under Financial Stress? Evidence from the Hospital Industry
Janet Gao, Tim Liu, Sara Malik, Merih Sevilir
SSRN Working Paper,
No. 4946064,
2024
Abstract
We compare the effects of external financing shocks on patient mortality at nonprofit and for-profit hospitals. Using confidential patient-level data, we find that patient mortality increases to a lesser extent at nonprofit hospitals than at for-profit ones facing exogenous, negative shocks to debt capacity. Such an effect is not driven by patient characteristics or their choices of hospitals. It is concentrated among patients without private insurance and patients with higher-risk diagnoses. Potential economic mechanisms include nonprofit hospitals' having deeper cash reserves and greater ability to maintain spending on medical staff and equipment, even at the expense of lower profitability. Overall, our evidence suggests that nonprofit organizations can better serve social interests during financially challenging times.
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