Reading list

Is Fragmented Financing Bad for Your Health? by Steven D. Pizer and John A. Gardner (Inquiry)

Americans finance health care through a variety of private insurance plans and public programs. This organizational fragmentation could threaten continuity of care and adversely affect outcomes. Using a large sample of veterans who were eligible for mixtures of Veterans Health Administration- and Medicare-financed care, we estimate a system of equations to account for simultaneity in the determination of financing configuration and the probability of hospitalization for an ambulatory care sensitive condition. We find that a change of one standard deviation in financing fragmentation increases the risk of an adverse outcome by one-fifth.

Do Hospitals Cross Subsidize?, by Guy David, Richard Lindrooth, Lorens A. Helmchen, Lawton R. Burns (NBER)

Cross-subsidies are often considered the principal mechanism through which hospitals provide unprofitable care. Yet, hospitals’ reliance on and extent of cross-subsidization are difficult to establish. We exploit entry by cardiac specialty hospitals as an exogenous shock to incumbent hospitals’ profitability and in turn to their ability to cross-subsidize unprofitable services. Using patient-level data from general short-term hospitals in Arizona and Colorado before and after entry, we find that the hospitals most exposed to entry reduced their provision of services considered to be unprofitable (psychiatric, substance- abuse, and trauma care) and expanded their admissions for neurosurgery, a highly profitable service.

Is the Foreclosure Crisis Making Us Sick?, by Janet Currie, Erdal Tekin (NBER)

We investigate the relationship between foreclosure activity and the health of residents using zip code level longitudinal data. We focus on Arizona, California, Florida, and New Jersey, four states that have been among the hardest hit by the foreclosure crisis. We combine foreclosure data for 2005 to 2009 from RealtyTrac with data on emergency room visits and hospital discharges. Our zip code level quarterly data allow us to control for many potential confounding factors through the inclusion of fixed effects for each zip code as well as for each combination of county, quarter, and year. We find that an increase in the number of foreclosures is associated with increases in medical visits for mental health (anxiety and suicide attempts), for preventable conditions (such as hypertension), and for a broad array of physical complaints that are plausibly stress-related. They are not related to visits for cancer morbidity, which arguably should not respond as rapidly to stress. Foreclosures also have a zero or negative effect on elective procedures, as one might expect. Age specific results suggest that the foreclosure crisis is having its most harmful effects on individuals 20 to 49. We also find that larger effects for African-Americans and Hispanics than for whites, consistent with the perception that minorities have been particularly hard hit.

Vertical Integration and Optimal Reimbursement Policy, by Christopher Afendulis, Daniel Kessler (NBER)

Health care providers may vertically integrate not only to facilitate coordination of care, but also for strategic reasons that may not be in patients’ best interests. Optimal Medicare reimbursement policy depends upon the extent to which each of these explanations is correct. To investigate, we compare the consequences of the 1997 adoption of prospective payment for skilled nursing facilities (SNF PPS) in geographic areas with high versus low levels of hospital/SNF integration. We find that SNF PPS decreased spending more in high integration areas, with no measurable consequences for patient health outcomes. Our findings suggest that subjecting integrated providers to higher-powered reimbursement incentives, i.e., less cost-sharing, may enhance medical productivity. More generally, we conclude that it may be efficient for purchasers of health services (and other services subject to agency problems) to consider the organizational form of their suppliers when choosing a reimbursement mechanism.

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