Caring Efficiently

Kevin Lewis

June 10, 2024

The Health Costs of Cost-Sharing
Amitabh Chandra, Evan Flack & Ziad Obermeyer
Quarterly Journal of Economics, forthcoming 


What happens when patients suddenly stop their medications? We study the health consequences of drug interruptions caused by large, abrupt, and arbitrary changes in price. Medicare’s prescription drug benefit as-if-randomly assigns 65-year-olds a drug budget as a function of their birth month, beyond which out-of-pocket costs suddenly increase. Those facing smaller budgets consume fewer drugs and die more: mortality increases 0.0164 percentage points per month (13.9%) for each $100 per month budget decrease (24.4%). This estimate is robust to a range of falsification checks, and lies in the 97.8th percentile of 544 placebo estimates from similar populations that lack the same idiosyncratic budget policy. Several facts help make sense of this large effect. First, patients stop taking drugs that are both ‘high-value,’ and suspected to cause life-threatening withdrawal syndromes when stopped. Second, using machine learning, we identify patients at the highest risk of drug-preventable adverse events. Contrary to the predictions of standard economic models, high-risk patients (e.g., those most likely to have a heart attack) cut back more than low-risk patients on exactly those drugs that would benefit them the most (e.g., statins). Finally, patients appear unaware of these risks. In a survey of 65-year-olds, only one-third believe that stopping their drugs for up to a month could have any serious consequences. We conclude that, far from curbing waste, cost-sharing is itself highly inefficient, resulting in missed opportunities to buy health at very low cost (⁠$11,321 per life-year).

Estimating Nursing Home Quality with Selection
Andrew Olenski & Szymon Sacher
Review of Economics and Statistics, forthcoming 


We use variational inference (VI), a technique from the machine learning literature, to estimate a mortality-based Bayesian model of nursing home quality accounting for selection. We demonstrate how one can use VI to quickly and flexibly estimate a high-dimensional economic model with large datasets. Using our facility quality estimates, we examine the correlates of quality and find that public report cards have near-zero correlation. We then show that in contrast to prior literature, higher quality nursing homes fared better during the pandemic: a one standard deviation increase in quality corresponds to 2.5% fewer Covid-19 cases.

Pricing Innovation in Surgical Care Markets
Alice Chen et al.
NBER Working Paper, May 2024 


Technological innovation in medical services can improve health, but its ability to reach patients often depends on price signals for downstream providers, which can also be discordant across production inputs. We examine such a context when Medicare sharply revises facility fees -- while holding physician fees constant -- for advanced surgical care performed within certain outpatient settings. Industry-wide output for impacted cases increases via market expansion, and indirectly affected physicians devote more labor supply to these cases by sacrificing other outpatient and inpatient surgical volumes. Government price setting for healthcare facilities spills over onto physicians -- impacting their technology utilization and time allocations.

How power shapes behavior: Evidence from physicians
Stephen Schwab & Manasvini Singh
Science, 17 May 2024, Pages 802-808 


Power -- the asymmetric control of valued resources -- affects most human interactions. Although power is challenging to study with real-world data, a distinctive dataset allowed us to do so within the critical context of doctor-patient relationships. Using 1.5 million quasi-random assignments in US military emergency departments, we examined how power differentials between doctor and patient (measured by using differences in military ranks) affect physician behavior. Our findings indicate that power confers nontrivial advantages: “High-power” patients (who outrank their physician) receive more resources and have better outcomes than equivalently ranked “low-power” patients. Patient promotions even increase physician effort. Furthermore, low-power patients suffer if their physician concurrently cares for a high-power patient. Doctor-patient concordance on race and sex also matters. Overall, power-driven variation in behavior can harm the most vulnerable populations in health care settings.

Seeing is believing: The effects of optometrist scope of practice expansion
Kihwan Bae, Edward Timmons & Protik Nandy
Contemporary Economic Policy, forthcoming 


We examine how the emergence of optometrists as new “eye doctors” affected population eye health outcomes and optometrist earnings in the United States. Using the staggered adoption of optometrist prescription authority across states, we find suggestive evidence that optometrist scope of practice expansion reduced vision impairment and mitigated racial and ethnic disparities in eye health. We also find that the policy is associated with an increase in hourly wages among optometrists who are not self-employed. These findings imply that allowing optometrists to use medications for eye treatments effectively expanded the primary eye care workforce and therefore improved public eye health.

Giving up learning from failures? An examination of learning from one's own failures in the context of heart surgeons
Sunkee Lee & Jisoo Park
Strategic Management Journal, forthcoming 


We reassess existing theories on individual failure learning and propose an inverted-U-shaped relationship between an individual's accumulated failures and learning, based on a theoretical framework that jointly considers the opportunity, motivation, and perceived ability to learn. Using data on 307 California-based cardiothoracic surgeons who performed coronary artery bypass graft surgeries in 133 hospitals between 2003 and 2018, we find compelling evidence that individuals reach a threshold at which they discontinue learning from their own failures. We also find that this threshold is higher for surgeons who had higher perceived ability to learn. This article aims to shed new light on the relationship between individuals' failure experience and their learning, and advance our understanding of the microfoundations of organizational learning, an important basis of firm performance.

Hospital behavior over the private equity life cycle
Michael Richards & Christopher Whaley
Journal of Health Economics, forthcoming 


Private equity is an increasing presence in US healthcare, with unclear consequences. Leveraging unique data sources and difference-in-differences designs, we examine the largest private equity hospital takeover in history. The affected hospital chain sharply shifts its advertising strategy and pursues joint ventures with ambulatory surgery centers. Inpatient throughput is increased by allowing more patient transfers, and crucially, capturing more patients through the emergency department. The hospitals also manage shorter, less treatment-intensive stays for admitted patients. Outpatient surgical care volume declines, but remaining cases focus on higher complexity procedures. Importantly, behavior changes persist even after private equity divests.

The Gift of a Lifetime: The Hospital, Modern Medicine, and Mortality
Alex Hollingsworth et al.
American Economic Review, forthcoming 


We explore how access to modern hospitals and medicine affects mortality by leveraging efforts of The Duke Endowment to modernize hospitals in the early-twentieth century. The Endowment helped communities build and expand hospitals, obtain state-of-the-art medical technology, attract qualified medical personnel, and refine management practices. We find that Duke support increased the size and quality of the medical sector, fostering growth in not-for-profit hospitals and high-quality physicians. Duke funding reduced both infant mortality -- with larger effects for Black infants than White infants -- and long-run mortality. Finally, we find that communities aided by Duke benefited more from medical innovations.

Effect of patient death on referrals to cardiac specialists
Sidra Haye
Health Economics, forthcoming 


In this paper, I examine how patient death affects referrals from referring physicians to cardiac surgeons. I use Medicare data to identify pairs of referring physicians and cardiac surgeons who experience a patient death after a major surgical procedure to examine how these events affect referrals. I construct counterfactuals for affected pairs using pairs that experience a patient death but five quarters in the future. I find that there is a significant decline in the number of referrals and probability of a referral from the referring physician to the cardiac surgeon after the patient's death.


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