Article: The Effects of Ownership and Compensation Practices on Charitable Activities

Leslie Eldenburg, Fabio B. Gaertner, and Theodore H. Goodman (all from the University of Arizona) have posted The Effects of Ownership and Compensation Practices on Charitable Activitieson SSRN.  The abstract provides:

We study the association between profit-based compensation and the provision of charity care across different hospital ownership types. Recent research finds few differences in profit-based incentives between for-profit and nonprofit hospitals. Because charity care reduces profits, profit-based incentives could lead nonprofit managers to sacrifice charity care to increase profits. While this emphasis of profits over charitable activities is expected within profit maximizing hospitals, it is not clear how profit-based incentives affect the charitable activities of nonprofit hospitals. We find a negative and significant association between charity care and our proxy for profit-based incentives in for-profit hospitals, a positive and significant association in nonprofit hospitals, and no significant association in government hospitals. Our results suggest that profit-based management compensation does not lead to reductions in charity care levels within nonprofit hospitals.

LHM