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The Supply of Uncompensated Care in Pennsylvania Hospitals: Motives and Financial Consequences

Abstract: The need for uncompensated care has increased during a period in which hospitals are confronted with public and private-sector fiscal pressures. Using a panel design (1995-1998) on Pennsylvania private, not-for-profit general hospitals, we found the provision of uncompensated care is positively associated with financial surpluses, the provision of uncompensated care by neighboring hospitals, bed capacity, proportion of outpatient visits that are emergency, and the unemployment rate (a proxy for need for uncompensated care). Other analysis found that the provision of uncompensated care was not associated with operating surplus, except in hospitals that provide very large amounts of uncompensated care. Provision of services to Medicaid patients and HMO penetration had a negative impact on profitability.