For-Profit Hospitals Act Generously, New Evidence Shows. Here’s Why

Source: Foundation for Economic Education
by Peter Jacobsen

“One of the major critiques of free markets is that certain industries, like healthcare, are ‘too important’ to be left to the self-interested forces of the market. Critics of a free market in healthcare argue that for-profit healthcare businesses will tend to ignore patients who have higher costs unless those patients are willing to pay significantly more. However, a recent working paper from the National Bureau of Economic Research (NBER) provides evidence that this may not be the case. The paper … explores whether for-profit hospitals engage in a practice called ‘cream-skimming’ more often than non-profit hospitals. As the paper notes, cream-skimming is, ‘the behavior of hospitals to select patients, not based on their needs, but by their expected profitability — less ill patients with lower costs are preferred over sicker patients for treatments.'” (05/29/24)