No Margins, No Mission: The Effects of Immigration on the Hospital Sector

Part of the Lubar Research Seminar Series

Speaker:  Giorgo Sertsios, University Wisconsin – Milwaukee

Nonprofit organizations dominate the U.S. hospital sector, yet their objectives and constraints are not well understood. We shed light on these issues by studying how hospitals adjust their investment and financing decisions in response to immigration.  Instrumenting for immigration inflows using historical enclaves of foreign-born nationalities, we find that a 1% increase in immigration (relative to the county’s initial population) leads to a 2.17% decline in hospital bed capacity over ten years. The effect is primarily driven by nonprofit hospitals, which are more likely to exit through closures or acquisitions. Continuing nonprofit hospitals experience a significant decline in their profit margins due to increased expenditure on uncompensated care. To cover the financial shortfalls, nonprofits curtail fixed-asset investments but do not raise additional funds. Our findings suggest that nonprofit hospitals operate under tight financing and operating constraints, underscoring a strong link between nonprofits’ ability to generate profits and their capacity to pursue “mission-driven” objectives.