Essays in health economics and productivity

Abstract

The first chapter studies how incentives drive adoption by looking at a technology that generates revenue for hospitals: the practice of submitting detailed documentation about patients. After a 2008 reform, hospitals were able to raise their total Medicare revenue over 2% by always specifying a patient's type of heart failure. I find that hospitals only captured around half of this revenue. The key barrier to take-up is a principal agent problem, since doctors supply the valuable information but are not paid for it. Exploiting the fact that many doctors practice at multiple hospitals, I find that four-fifths of the dispersion in adoption reflects differences in the ability of hospitals to extract documentation from physicians. Hospital adoption is also robustly correlated with the ability to generate survival for heart attack patients and the use of inexpensive survival-raising standards of care. My results suggest that agency conflicts may drive disparities in health care performance more generally. The second chapter (co-authored with Amitabh Chandra, Amy Finkelstein, and Chad Syverson) challenges the conventional wisdom in health economics that large differences in average productivity across hospitals are the result of idiosyncratic, institutional features of the healthcare sector which dull the role of market forces. Strikingly, we find that productivity dispersion in heart attack treatment across hospitals is, if anything, smaller than in narrowly defined manufacturing industries such as ready-mixed concrete. We also find evidence against the conventional wisdom that the healthcare sector does not operate like an industry subject to standard market forces. In particular, we find that hospitals that are more productive at treating heart attacks have higher market shares at a point in time and are more likely to expand over time. These facts suggest that the healthcare sector may have more in common with "traditional" sectors than is often assumed. The third chapter explores whether hospitals change their treatment decisions when they are paid more for certain treatment approaches. I exploit a Medicare reform that altered payment rates depending on whether patients were relatively healthy or sick. Looking at three treatment approaches for lung cancer patients, I demonstrate economically significant own-price elasticities and right-signed cross-price elasticities - though these estimates sometimes lack statistical power and should be interpreted with caution due to concerns about endogeneity. These findings indicate that payment reforms, including movements toward capitation and away from fee-for-service, may have large effects on the intensity of care that patients receive in the hospital.