Events

Professor Thomas Bourveau
Associate Professor of Business
Accounting Division
Columbia Business School

We study the social costs of liquidity transparency in the context of non-profit U.S. hospitals. We find that, following a reform that mandates non-profits to disclose more information about their liquidity, hospitals with ex-ante low liquidity take actions to improve their liquidity. They do so by boosting their revenues and profit margins at the expense of service quality. Specifically, we show that these additional cash flows are generated by admitting more patients and charging higher payments. The higher payments reflect a higher propensity to overtreat patients with longer hospital stays and unnecessarily intensive diagnosis processes. These operational changes generate welfare costs such as delays in administering procedures for life-threatening diseases.