Can Nonprofits Save Lives Under Financial Stress: Evidence from the Hospital Industry

When: 25 Jun 2024, 12:45-14:00
Where: HoF E.01
Speaker: Merih Sevilir

LawFin Research Seminar joint with Finance Seminar


We compare the effects of financial constraints on patient outcomes at nonprofit and for-profit hospitals. Using confidential patient-level data and several exogenous shocks to hospitals' debt capacity, we find that patient mortality increases to a lesser extent at nonprofit hospitals than at for-profit ones under financial constraints. 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, suggesting that nonprofit hospitals provide better healthcare to more vulnerable and poorer patient populations during financial stress. Potential economic mechanisms include nonprofit hospitals' having deeper cash reserves and greater ability to retain medical staff, even at the expense of lower profitability. Overall, our evidence suggests that nonprofit organizations can better serve social interests during financially challenging times.