"Certificate-of-Need Laws, Ownership Type, and Technological Investment in Hospital Care" (with Gary Fournier)
This study examines the effect of Certificate-of-Need (CON) regulation on technological investment in for-profit and non-profit hospitals in the United States. The hospitals analyzed are located in hospital referral regions (HRRs) such that each hospital is located within an HRR that overlaps state boundaries where CON regulation is present on only one side of the border. The regulatory effects are estimated using a measure of technology provided by Baker and Spetz (1999) that accounts for the relative rarity of each element. In addition, the effects of CON regulation on the likelihood of individual service provision is estimated using a linear probability model, and by pooling the samples for each individual service in a constrained regression model to estimate the average effect of service-specific CON laws on the probability that a given hospital provided any of the individual services. Using data from the American Hospital Association from 2011-2014, the effect of CON regulation on the technology index is found to be negative. It is also found that MRI Scanners, PET Scanners, and Swing Beds are less likely to be provided by hospitals in regulated states. For-profit hospitals have lower aggregate technology levels relative to non-profits and government-owned hospitals. These findings provide evidence that for-profit hospitals are more greatly restrained by Certificate-of-Need laws than non-profit hospitals.
"Information Disclosure and Allocation Expense Decisions in Non-Profits" (with Javier Portillo)
We investigate whether information disclosures, such as what is provided by online charity watchdogs, affect firm behavior. Using data from the National Center for Charitable Statistics (NCCS), we divide expenses into three categories: program, administrative, and fundraising expenses. We test how charities alter their expenses after being listed on Charity Navigator, a third-party website that began disclosing financial information of charities in 2002. Using the timing related to a charity's first appearance on Charity Navigator as a source of identifying variation, we estimate that being listed on Charity Navigator leads to an increase in the ratio of program to total expenses, and a decrease in the fundraising ratio. Under our main specification, the program ratio increases by approximately 1.02%, while the fundraising ratio decreases by 0.43%. We find no effect on the administrative ratio. Our results suggest that nonprofits do pay attention to these third-party ratings and react to them by reallocating their expenditures.
"The Effect of Nonprofit Overhead on Financial Success and Survival" (with Joseph Stinn)
Overhead expenditures are a divisive topic in the nonprofit sector. These expenditures are vital to the operational abilities of a nonprofit; however, there is evidence that donors dislike paying for overhead costs. In this paper we use financial data of U.S. nonprofits from the National Center for Charitable Statistics (NCCS) to study the impact of overhead on the growth and survival of nonprofit organizations. We develop a model of nonprofits involving overhead, showing how competition for donations leads to nonprofit organizations reducing the relative amount they spend on overhead expenses. Then we use financial data to test the competing hypotheses of how overhead expenditures can affect the success of nonprofit organizations. For measures of success we look at changes in contributions and assets and the survival rates of nonprofit organizations from 2007 to 2013. Using minimum wage to instrument for the ratio of overhead expenditures to total expenditures, we estimate that a 10 percent increase in the overhead ratio leads to a 1.3 percent increase in contributions. We also find that a 10 percent increase in the overhead ratio is associated with a 0.47 percent increased likelihood of survival. Our findings suggest that higher overhead ratios improve firm performance, leading to more positive outcomes for nonprofits.