Working Papers

Is the US Health Care System Wasteful and Inefficient? A Review of the Evidence (with Sherry Glied – Journal of Health Politics, Policy and Law, October 2018; Ungated Download) Show AbstractThis review critically evaluates perspectives on waste in the US health care sector. The conventional discussion of waste is often imprecise and blames factors outside the purview of the health care system. Taking an economic perspective, we propose that productive inefficiency is a more tractable concept than waste. We then review the literature on the efficiency of health providers. We discuss the evidence on whether supply- and demand-side policies, such as value-based payment and cost sharing, can raise efficiency, finding that many of these policies have effects that are meaningful but small. We then turn to the literature on variations, where we argue that the body of evidence suggests there are large efficiency gaps, though these gaps are smaller than the initial eye-catching results that began this strand of research. Ultimately, these findings provide a potential roadmap for efficiency gains, a process in which a diverse array of policies compound, over time, to bring the US system closer to the efficiency frontier.

[+] Adoption and Learning Across Hospitals: The Case of a Revenue-Generating Practice (Updated April 1, 2018)
Performance-raising practices tend to diffuse slowly in the health care sector. To understand how incentives drive adoption, I study a practice that generates revenue for hospitals: submitting detailed documentation about patients. After a 2008 reform, hospitals could raise their Medicare revenue over 2% by always specifying a patient’s type of heart failure. Hospitals only captured around half of this revenue, indicating that large frictions impeded takeup. 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 robustly correlated with generating survival for heart attack patients and using inexpensive survival-raising standards of care. Hospital-physician integration and electronic medical records also influence adoption. These findings highlight the potential for institution-level frictions, including agency conflicts, to explain variations in health care performance across providers.
[+] Healthcare Exceptionalism? Productivity and Allocation in the U.S. Healthcare Sector (with Amitabh Chandra, Amy Finkelstein, and Chad Syverson)
The conventional wisdom in health economics is 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, however, 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. While this fact admits multiple interpretations, 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. For example, a 10 percent increase in hospital productivity today is associated with about 4 percent more patients in 5 years. Taken together, these facts suggest that the healthcare sector may have more in common with “traditional” sectors than is often assumed.