Antitrust Treatment of Nonprofits: Should Hospitals Receive Special Care?

Nonprofit hospitals receive favorable tax treatment in exchange for providing socially beneficial activities. Extending this rationale suggests that nonprofit hospital mergers should be evaluated differently than mergers of for-profit hospitals because suppression of competition may also allow nonprofits to cross-subsidize care for the poor. Using detailed California data, we find no evidence that nonprofit hospitals are more likely than for-profit hospitals to provide more charity care or offer unprofitable services in response to an increase in market power. Therefore, we find no empirical justification for different antitrust standards for nonprofit hospitals, as some courts have suggested. ________________________________________________________________________ We thank Bob Town, Marty Gaynor, Tomas Philipson, Mark Pauly and participants at the 2009 Southeastern Health Economics Study Group meeting, and the 2010 NBER Health Care Program Meeting, for helpful comments and suggestions.